Acquisitions Archives

Markross121_ July 24, 2019 No Comments

Hospital megamergers continue to drive near-historic M&A activity

Health system megamergers continue to push deal activity to near-historic levels, evidenced by the fact that the amount of revenue tied up in such deals was nearly four times higher in the second quarter of 2019 compared with the prior-year period.

That’s according to Kaufman Hall’s latest healthcare M&A report, which tallied $11.3 billion in total transacted revenue in the recently ended quarter. That also approaches 2017’s historically high figure of $12.6 billion in the second quarter, the report said.

Despite the eye-popping revenue figures, the number of hospital and health system transactions—19—wasn’t far from the 21 transactions announced in the prior-year period. The 46 transactions announced so far this year closely track the 50 announced at the halfway point of 2018, Kaufman Hall found.

Etsy to acquire Reverb

Etsy (ETSY +2.5%) to acquire Reverb Holdings, Inc., a privately held marketplace for new, used and vintage music gear for $275M in cash.

The transaction is currently expected to close in late 3Q19 or early 4Q19.

Etsy plans to provide financial guidance following the completion of the transaction.

www.seekingalpha.com

Markross121_ July 18, 2019 No Comments

Bombardier: is Northern Ireland sale linked to Brexit?

Canadian aerospace firm’s sudden decision comes at a sensitive time for UK and Northern Irish politics

The Canadian aerospace firm Bombardier is putting its wing-making operation in Northern Ireland up for sale, sparking concern among trade unions and MPs about the impact on highly-skilled jobs and fuelling fears that uncertainty around Brexit is holding back the economy.

The company plans to sell factories in Northern Ireland and Morocco as part of a strategy to consolidate “all aerospace assets into a single, streamlined and fully integrated business” in North America.

The “decision will be seen by unions and political leaders in the North as a massive blow for the economy and will cast serious doubts over the future security of the 4,000 jobs at Bombardier and thousands more in their extensive supply chain in the North”, says The Irish Times.

A spokesman for the prime minister said the government did not expect jobs to be affected but the trade union Unite said it was seeking stronger assurances from the government and the company.

“Bombardier is Northern Ireland’s largest employer and a focus of intense political interest,” says the Daily Telegraph. Two years ago Theresa May personally intervened when the US threatened 300% trade tariffs on Bombardier’s C-Series airliners, asking President Trump to veto the levies, which had been demanded by US rival Boeing in response to what it claimed were state subsidies given to Bombardier.

The sale “comes at a sensitive time for the UK”, says Financial Times, “which is grappling with the impact Brexit will have on Northern Ireland”.

The company had previously warned of “serious consequences” from a hard Brexit for its operations in Belfast.

“Although Bombardier made no reference to Brexit in its statement, efforts to find a buyer for the plant could be hampered by uncertainty about tariffs and customs arrangements between the UK and the EU,” says The Guardian. “Airbus, which might have been seen as a potential buyer of the site, has voiced grave concern about the impact of Brexit on its investment in the UK.”

The Business Secretary, Greg Clark, who has been monitoring the situation closely all week, is said to be optimistic that a buyer can be found.

However, “arriving on the same day as the local elections in Northern Ireland, the announcement comes as a blow for the region’s Democratic Unionist party”, says the FT.

The Guardian says Bombardier’s decision “will add more pressure on Northern Ireland’s politicians to restore the power-sharing executive and assembly at Stormont which collapsed in 2017 amid acrimony between Sinn Fein and the DUP”.

The assembly had discussed a plan to lower corporate tax to attract and retain industries before its collapse says University of Liverpool politics professor Jon Tonge. “The fact there is no fiscal autonomy in place – that’s where some of the blame may fall,” he said.

Is Thomas Cook about to collapse?

A leading analyst has cast doubt over whether Thomas Cook’s £750m rescue plan, announced at the end of last week, will work.

Citigroup’s James Ainley suggested the package, which would put Chinese conglomerate Fosun in control of the 178-year-old tour operator, could be blocked by its bondholders.

So how has it come to this and should holidaymakers be concerned?

What has happened to Thomas Cook?

The travel company, which employs 21,000 staff around the world and operates more than 560 stores in the UK, has “suffered as customers shifted from the high street to the internet, threatening its ability to service a £1.6bn debt pile”, says the Financial Times. It came close to collapse eight years ago and took on large loans to survive.

“Tough trading conditions have been exacerbated by Brexit uncertainty,” adds the FT.

Last Friday, the embattled company confirmed that it was in “advanced discussions” to secure new funding from its banks and Fosun, which owns the holiday resort chain Club Med. The £750m deal would hand control of its package holiday business to the Shanghai-based investor in return for a cash injection. Meanwhile, banks and bondholders would take a majority stake in its airline and a minority stake in the holiday unit.

The extra cash “is designed to see the company through the winter, when holiday bookings are at their lowest, affording it time to cut costs and raise money by selling its airline division”, explains The Guardian.

Will the deal go ahead?

Citigroup analyst James Ainley, described by The Daily Telegraph as “one of Thomas Cook’s most vocal critics”, has calculated that shares would be worth just 3p if the plan goes ahead.

“The uncertainties are significant and the risk of the process stalling seems high,” said Ainley, who sent shares in the company plunging in May by downgrading its stock to zero pence.

For the package to work, Thomas Cook needs a “strong turnaround plan, about which little detail has yet been given”, he added.

A spokesman for Thomas Cook said: “The board is clear in its view that it is in the best interests of all the group’s stakeholders, including bondholders, to pursue a full re-capitalisation supported by new investment into the business. It is a pragmatic and responsible solution which provides the means to secure the future of Thomas Cook.”

Should holidaymakers be worried?

On Friday, Peter Fankhauser, Thomas Cook’s chief executive, said there would be “no impact from today’s announcement on our holidays or our flights”.

Meanwhile, holidays booked through Thomas Cook are Atol-protected, meaning any customer would be entitled to a full refund or replacement holiday should the tour operator collapse before their scheduled departure time.

The Civil Aviation Authority would also protect package holidays and cover arrangements to return customers if the operator collapsed while they were on holiday.

However, some holidaymakers could be caught out if they have booked on Thomas Cook’s airline, which is separate from the tour operator, and sells flight-only trips, some of which are not Atol-protected.

‘Grave concern’ for car industry as hybrid sales hit reverse gear

The SMMT says it is crucial that incentives are in place if its work to deliver a zero-emission future are to meet expectations.

Sales of alternatively-fuelled cars have fallen in the UK for the first time in 26 months as the industry works towards an electric car future.

The Society of Motor Manufacturers and Traders (SMMT) said total sales of new cars continued to decline, for the fourth consecutive month, in June.

It reported falling demand in all sectors – with a 4.8% drop in consumers picking up a new model. Business registrations fell 37%.

It meant, the body said, that overall year-on-year demand was down by almost 5% in the month, with just 223,421 cars being ordered.

The weak performance meant sales were 3.4% down in the first half of the year compared to the same period in 2018.

The SMMT blamed continuing “confusion over low emission zones and diesel, the removal of key ultra low emission vehicle incentives and an overall decline in buyer confidence”.

It pointed to growth in June for petrol and battery-powered vehicles.

Botox maker Allergan bought by US drug giant for $63bn

Irish firm snapped up by Chicago-based AbbVie in one of biggest ever pharmaceutical deals

The US drug company AbbVie is to buy Allergan, the Irish-based maker of Botox, for $63bn (£49bn), in one of the biggest deals in the global pharmaceutical industry.

Chicago-based AbbVie, which makes the world’s best-selling prescription drug Humira, for rheumatoid arthritis and other inflammatory diseases, said it would pay $120.30 in cash and a portion of AbbVie stock for each Allergan share. This amounts to $188.24 per share.

The deal will create a company with revenues of $48bn. Dublin-based Allergan specialises in medical aesthetics and eye care, both fast-growing areas, as well as stomach drugs and treatments for the central nervous system. Its treatments include frown-line smoothing, eyelash lengthening and double-chin removal.

AbbVie said the purchase would give it a more diversified product portfolio. Its bestseller Humira will lose patent protection in 2023, which means other drugmakers can make cheaper generic versions.

AbbVie shareholders will own 83% of the enlarged company, while Allergan shareholders will own 17%. It will have its headquarters in Chicago and will be led by the AbbVie boss, Richard Gonzalez, as chairman and chief executive.

Two members of Allergan’s board, including its chief executive, Brent Saunders, will join the board when the deal is completed, expected early next year. Allergan shareholders and regulators have yet to approve the deal.

AbbVie expects to reap at least $2bn in annual cost savings in the third year after the acquisition, but vowed to leave investments in key growth areas untouched. It wants to pay down its debts by $15bn to $18bn by the end of 2021.

This day in buyout history: Meals, monopolies and a $7.1B club deal

On July 3, 2007, private equity firms KKR and Clayton, Dubilier and Rice finalized a $7.1 billion acquisition of US Foods, a foodservice powerhouse that traces its roots back to well before the Civil War.

It was a mega-deal inked during the final months before the global economy entered a crisis. So as you might expect, it led to a relationship that involved its fair share of drama—including plans for a headline-grabbing exit that were thwarted by regulatory fears. In the end, KKR and CD&R waited nearly a decade to realize their investments, eventually doing so in one of the largest PE-backed IPOs of 2016.

KKR and CD&R first announced their pending acquisition of US Foods (known at the time as US Foodservice) in May 2007, agreeing to hand over $7.1 billion to purchase the company from Dutch retail giant Royal Ahold, almost twice the price Ahold had paid for the business seven years prior. The two firms were equal partners in the deal.

With annual revenue of more than $19 billion at the time , US Foods was one of the most powerful names in foodservice distribution, which involves supplying ingredients and meals to caterers, cafeterias, restaurants and other entities that sell food directly to hungry customers. The company is an amalgamation of several older provisioners, including Reid, Murdoch & Company, which was founded way back in 1853.

It was mostly a quiet rest of the decade for US Foods. In 2011, though, the business embarked on an add-on spree, acquiring fellow food distributors with a more local focus such as Ritter Food Service, Vesuvio Foods and Midway Produce. The changes continued later in 2011, when US Foodservice officially changed its name to US Foods.

With some inorganic growth complete, KKR and CD&R began searching for an exit. They thought they found it two years later. But government watchdogs had different ideas.

The firms agreed to sell US Foods in December 2013 to Sysco in an eyebrow-raising $8.2 billion deal, with the fellow foodservice giant set to pay $3.5 billion for US Foods’ equity and assume a further $4.7 billion of its rival’s debt. The deal called for US Foods’ prior backers to assume a 13% stake in Sysco, with KKR and CD&R both assuming spots on the newly combined company’s board.

It was a move that would have merged the two largest foodservice distributors in the US. Which, as you might imagine, drew the attention of the US Federal Trade Commission. The FTC filed an objection to the merger in February 2015, more than a year after it was first announced, seeking an injunction against the move on the grounds it would reduce competition and drive up food prices for hospitals, schools and other customers across the country. That June, the companies officially abandoned the planned deal.

And so KKR and CD&R were left looking for another exit route. This time, they opted for a move to the public market. US Foods filed for an IPO in February 2016, and it completed the listing that May, pricing an offering of 44.4 million shares at $23 each to raise $1.02 billion, larger than any other traditional PE-backed public offering in the US that year, according to the PitchBook Platform.

In its early days as a public company, US Foods had a market cap of a little over $5 billion—a far cry from the $7.1 billion price KKR and CD&R had paid nearly 10 years before. In the ensuing three years, however, the company’s valuation has ticked steadily up. As of June 28, the final trading day of 1H, stock in US Foods was trading at $35.76, for a market cap of $7.81 billion.

The market’s showing sparks of life with recent mergers, acquisitions

While Main Street investors had some trepidation over their portfolios during the six-week-long pullback in the stock market, the pros see many positives.

Sell-offs are a common corrective action, which is needed in order to move higher.

The fact is, the stock market just rallied 1,200 points in the first two weeks of June. Much of that is due to the Federal Reserve admitting it went too far in raising rates.

Another positive sign is the quality of the current initial public offerings, and the volume of mergers and acquisitions.

There are some very good indications that this bull market may not be as fragile as the pessimists say.

The IPO market has been strong, with 14 offerings this year — up more than 50 percent from last year. And these aren’t hope-and-a-prayer companies, as in the dot-com era.

Today’s IPOs are coming out — in some cases — with billions in revenues and well-established business models in high-growth areas.

Sure, some are better than others in terms of stock performance. The biggest ones, Uber and Lyft, both got a flat reception and remain underwater from their IPO price. Their issues were valuation and offering size. But they are each credible, established businesses.

Jungle Creations in talks to merge with influencer marketing agency Goat

Social media publisher Jungle Creations and influencer marketing outfit Goat Agency are in talks to merge into a media and marketing powerhouse, according to sources close to the deal in each company.

Execs from both London-based companies are currently at Cannes Lions and are still thrashing out the terms of the merger, The Drum can reveal. Last year, Goat and Jungle both bid for cash-strapped Unilad – but were defeated by LadBible. They have since changed course and believe merging a media firm with an influencer network would forge an attractive and dynamic proposition for brands.

Jungle Creations is the owner of viral social media verticals like VT (26 million followers across Facebook, Instagram, and YouTube) and food channel Twisted (16 million on Facebook) and also runs six London food delivery kitchens. The company boasts 110 million followers across all of its verticals. Additional channels include Four Nine (female facing), Level Fitness, World Unknown (travel and adventure), Four Nine (DIY) and Craft Factory (craft).

Goat, which currently boasts 120 staff, would power up Jungle’s campaigns with “data-led influencer marketing”. It currently has relationships with Formula E, Malibu, and Lidl (Dream Big with the FA). It has additional offices in New York and Singapore and would almost double Jungle’s 130-strong team. Furthermore, Goat snapped up Social Media Agency/Team of the Year at The Drum Social Buzz Awards in 2018.

One source said: “The media landscape is changing with social becoming a core focus for brands to spread their message and story. The coming together of two major players in the social media industry to create a full offering to clients is an obvious and strategic move to further investment in these areas.”

The source said the merger offers significant expansion opportunities in the US and Asia for a combined entity. Together they would boast annual revenue figures of over £40m.

In the last year, Jungle has been on the talent acquisition path, hiring Dylan Davenport, managing partner at Adam&EveDDB, to lead its new agency The Wild which launched in March. It also secured its first chief marketing officer in 2018 in The Guardian’s Charlotte Emmerson.

Leveraging Jungle’s scale, Wild can identify and tap into social media trends for a client roster which currently includes Diageo, Kraft Heinz and The National Lottery. It works with partners across creative, content, strategy and distribution and Wild’s first creative work, ‘Project Celt’ for The National Lottery, landed in April.

Earlier this year Jungle won the B2C Branded Content Team of the Year gong at The Drum Online Media Awards, showing it has been effective in quickly scaling up its creative proposition for brands.

Oilfield services firms Keane Group, C&J Energy to merge

Keane Group Inc and C&J Energy Services Inc are set to merge in an all-stock deal that will create a new U.S. oilfield services company worth around $1.5 billion (£1.2 billion), three people familiar with the matter said on Monday.

The deal underscores the consolidation under way in the oil and gas industry, as exploration and production companies cut back on spending on new projects to return more money to their shareholders. This puts pressure on services providers to gain scale, so that they have more negotiating power and can save on costs by eliminating overlap.

The transaction between Keane and C&J, which will be presented to investors as a merger of equals, is set to be unveiled later on Monday, the sources said, asking not to be identified ahead of the official announcement. Keane and C&J could not be reached for comment outside normal business hours.

U.S. oil and gas producers are reluctant to commission new projects, preferring to instead return that cash to shareholders, which, in turn, is weighing on services firms such as Keane and C&J.

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