Acquisitions Archives

Markross121_ May 8, 2019 No Comments

Rentokil set to continue acquisition spree while organic growth continues

Pest control expert Rentokil Initial said this morning it is planning to continue an acquisition-heavy strategy and is likely to spend between £200m and £250m on takeovers this year.

The firm showed 4.9 per cent growth from takeovers in the first three months of the year, while organic revenue grew at four per cent.It signed eight deals in the quarter – four in pest control and four in its hygiene business sectors – adding combined revenues of around £29m.

“We are encouraged about our prospects for further mergers and acquisitions this year and our pipeline of value-enhancing opportunities is strong,” the company said in a statement to shareholders this morning.

Revenue in the firm’s pest control segment grew 12 per cent including acquisitions but subtracting disposals or closed businesses. Hygiene, meanwhile, rose 7.2 per cent, while the protect and enhance market stayed in line with the first quarter of 2018.

“We have had a good start to 2019 and I’m pleased with our performance in the first three months of this year. I am confident of another year of successful growth for the company, in line with market expectations,” said chief executive Andy Ransom.

Shares were up around 1.3 per cent this morning to 373p.

Last week Rentokil was told it might face an investigation from the Competition and Markets Authority (CMA) over its takeover of Mitie’s pest control arm late last year.

The firm has been given until 23 April to tell the CMA how it will ensure that competition is not severely reduced by the acquisition.

It said last week that the acquisition was small and in line with its strategy to buy “high quality pest control businesses in growth and emerging markets.”

Brewery openings stall as multinationals move in

A boom in new brewery sites has slowed down dramatically in the last 12 months as multinational firms muscle in on the growing demand for craft beer.

Growing competition from large businesses has hindered smaller brewers from setting up new outlets, causing the growth in openings to hit a five-year low.

The total number of breweries increased by just eight in 2018, marking a sharp slowdown from 390 openings in the previous year.

According to accountancy firm UHY Hacker Young, which produced the data, the craft beer market has become difficult for new entrants as “multinational brewers continue to buy and invest the more successful craft breweries.”

Among the high profile mergers and acquisitions involving multinational businesses in the craft beer sector is the Fullers deal for Dark Star, a craft beer business in West Sussex, and Heineken’s acquisition of stakes in Beavertown Brewery, Lagunitas and Brixton Brewery.”We’re not saying that the market is shrinking just the number of players is consolidating and sales growth is going to be harder to come buy,” said James Simmonds, partner at UHY Hacker Young.

He added: “Craft breweries need to ensure their business model is s sustainable and profitable at an earlier stage and not just rely on the idea they’ll constantly be able to grow their way out of trouble.”

The total number of UK breweries reached 2,274 at the end of 2018, rising from 1,352 five years ago.

Debenhams on the brink as it rejects £150m Mike Ashley rescue deal

Debenhams is on the brink of falling into the hands of its lenders in a move that will wipe out shareholders after the company and its financial backers rejected a £150m cash injection from Mike Ashley’s Sports Direct.

A pre-pack administration deal is expected to be announced on Tuesday morning that would affect Debenhams’ holding company only, meaning its 165 stores would continue to trade. However, shareholders’ stakes will be rendered worthless, including Sports Direct’s near 30% stake, which cost about £150m to build up.

The retailer’s banks and bondholders also want Debenhams to close about 50 stores via an insolvency process known as a company voluntary arrangement, which is likely to follow within weeks. Landlords will hold a vote on whether to approve the deal, expected to involve stores closing after Christmas and putting thousands of jobs at risk.

Sports Direct said Debenhams had turned down its offer of a £150m rescue package, in the form of a fully underwritten rights issue, in a deal it hoped would keep the company in the hands of shareholders. In a stock market announcement on Monday afternoon after that deal was rejected, Ashley’s retail group said it was still considering making a fully funded takeover bid instead, but no offer had emerged by a 5pm deadline.

With the deadline missed, the most likely outcome for the chain, which has 165 stores and employs 25,000 people, is that lenders will take control of Debenhams. They have lined up administrators to organise a pre-arranged deal under which Debenhams’ listed holding company will go into administration. The group’s operating companies, which run its stores, will then be sold to a new entity controlled by the lenders in return for reducing the group’s £640m debt pile.

Dr Pepper Snapple merges with Keurig Green Mountain

US soft drink maker Dr Pepper Snapple is to merge with coffee company Keurig Green Mountain to form Keurig Dr Pepper.

The new beverage giant will bring together well-known brands such as Dr Pepper, Orangina, Schweppes and Sunkist with Green Mountain Coffee Roasters.

Keurig Dr Pepper will have a combined annual revenue of $11bn (£7.8bn).

Under the terms of the agreement, Dr Pepper Snapple shareholders will retain 13% of the combined company.

Dr Pepper Snapple shareholders will also receive $103.75 per share in a special cash dividend.

The firms said that the merger would enable Keurig Dr Pepper to have “unrivalled distribution capability to reach virtually every point-of-sale in North America”.

River Island family takes control of Mint Velvet in £100m deal

Lewis family says investment reflects high confidence in the business, brand and people.

The family behind the River Island clothing chain has taken control of Mint Velvet, the fashion label founded by three former Principles executives, in a deal understood to value the company in excess of £100m.

The co-founders Peter Davies, Liz Houghton and Lisa Agar-Rea will share a multimillion-pound payout from the deal with the Lewis Trust Group (LTG).

It is a second fashion fortune for Davies, who previously rescued and sold Principles and Warehouse, making nearly £40m in three years.

LTG, which also owns stakes in the Everyman cinema chain and the San Francisco-based fast fashion label Dolls Kill, first bought a stake in Mint Velvet in 2015. It is understood to have exercised an option to take control of the company last week.

Mint Velvet, which specialises in “relaxed glamour” for the over 30s, was started from Houghton’s kitchen table in 2009 and launched with concessions in House of Fraser.

Advent eyes $1B fund as PE continues its push into tech

Advent International has launched its first tech-focused vehicle with a target of $1 billion, according to Buyouts, becoming the latest major private equity firm to indicate an increasing appetite for tech deals.

The news comes about seven weeks after Bryan Taylor joined Advent as a managing partner and leader of the firm’s tech investment team. Taylor’s hiring coincided with the opening of a new office in the Bay Area, part of what an Advent press release at the time described as the firm “deepening its commitment to the technology sector.” Most recently, Taylor was the co-head of the tech group at TPG Capital, where he helped lead a team of 20; Advent’s tech group currently has more than a dozen employees across North America and Europe.

Reports of the debut tech vehicle also come as Advent is in the midst of another major fundraising effort. Public LP documents from earlier this month showed the firm has begun gathering commitments for its ninth flagship buyout fund, which reports from last autumn indicated could target at least $13 billion. That would equal the sum Advent raised for its prior flagship fund, which hit a $13 billion hard cap in 2016.

Earlier this week, another private equity investor formed a new fund focused on the tech space, albeit a very specific slice of it: Caisse de dépôt et placement du Québec unveiled its CDPQ-AI Fund, a $250 million pool that will be put to use backing companies from Québec with “a proven track record in artificial intelligence.”

Across the entire private equity landscape, firms are raising more cash for tech investments. At the end of January, buyout giant The Carlyle Group closed its latest European tech fund—which will also be deployed in the US—on €1.35 billion (about $1.5 billion), a serious increase from a 2015 predecessor that brought in €656.5 million. Carlyle’s close came a mere two days after Thoma Bravo, a longtime specialist in the tech space, wrapped up a $12.6 billion mega-fund, one of the largest vehicles ever that will mainly target tech companies.

In each of the past four years, there has been an increase in the percentage of overall PE investments in the US and Europe taking place in the IT space. During 2019, though, the numbers are full-on booming. More than 22% of completed deals so far this year have been in IT, per the PitchBook Platform, a major jump from last year’s 18% rate and a whole different universe from the 13% clip logged as recently as 2015. For years, the B2C space ranked second only to B2B in drawing the most PE deals; now, it seems IT has clearly overtaken B2C as the No. 2 choice.

And while Advent may be among those contributing to that change, tech deals are far from the Boston-based firm’s only focus. In March alone, Advent has been linked to a dizzying array of potential billion-dollar deals. The firm agreed to buy German chemicals company Evonik for €3 billion, while a potential €1.8 billion buyout of Italian debt provider Cerved fell apart after news of ongoing negotiations leaked to the press. Advent has also been among a host of firms named as possible buyers in a handful of very expensive auctions, including ongoing sale processes for Bayer‘s animal health unit, the skin health unit of Nestlé, and Kantar, a data analysis business owned by WPP.

Italian investment firm to buy Morgan Motor Company

Investindustrial to take over one of last remaining British-owned carmakers in April

Morgan Motor Company, one of the last remaining British-owned carmakers, is to be bought by an Italian investment firm.

The 110-year-old classic sports car firm, based in Malvern, Worcestershire, said it had sold a majority holding to Italy’s Investindustrial, which owns stakes in a broad range of auto brands, including Aston Martin and the motorbike maker Ducati.

It did not disclose the value of the takeover, announced after the unveiling of its Plus Six model at the Geneva Motor Show on Tuesday but managers and the workforce will have a stake in the business.

The Morgan family will continue to represent the brand and retain a minority stake after the scheduled completion of the deal in April.

Founded in 1909, Morgan is one of the last car companies still under British ownership. It sells about 700 handmade sports cars , with buyers sometimes forced to join a waiting list that can last six months. It reported revenues of £33.8m in 2018 and an after-tax profit of £3.2m.

Andrea Bonomi, the chair of Investindustrial, said: “Morgan’s handmade British sports cars are true icons of the industry. We have followed the company and seen its progress for some time, and see significant potential for Morgan to develop internationally while retaining its hand-built heritage, which is at the heart of the Morgan Motor Company.

“We share with the Morgan family the belief that British engineering and brands are unique and have an important place in the world.”

Vodafone to receive EU warning over $22 billion Liberty deal

Vodafone will receive a warning from EU regulators about possible anti-competitive effects from its $22 billion deal to buy Liberty Global’s German and eastern European assets, two people familiar with the matter said on Wednesday.

The warning, via a statement of objections setting out the European Commission’s concerns, is expected to be conveyed to the companies shortly, the sources said, ahead of a June 3 deadline for the EU executive’s regulatory approval.

The world’s second-largest mobile operator and U.S. cable pioneer John Malone’s Liberty announced the deal in May last year in a move that would help Vodafone to compete with rival Deutsche Telekom in its home market.

The EU antitrust enforcer opened a full-scale investigation in December last year, saying that the deal could hurt competition in Germany and the Czech Republic.

Vodafone is expected to offer concessions to address EU concerns about the deal.

Ophir agrees to be bought by Indonesia’s Medco in a sweetened bid

Ophir Energy Plc said on Wednesday it agreed to be bought by Indonesian oil and gas group Medco for a sweetened cash bid of 408.4 million pounds ($539 million) after previously agreeing to a lower offer.

Under the terms, Ophir shareholders will receive 57.5 pence per share in cash, the companies said in a joint statement. That is up from the previously agreed 55 pence per share.

The increased offer comes after the Financial Times reported that hedge fund Petrus Advisers, which owns 3.94 percent of Ophir, planned to vote against Medco’s bid because it undervalued the company.

Petrus in February had called for alternatives to Medco’s buyout offer and asked the company to put Petrus-backed directors in charge of overseeing the proposed changes.

Ophir, which explores and produces oil and gas in Asia and Africa, and Medco were not immediately available to comment on the Financial Times report.

Ophir also received an offer earlier this month from Coro Energy plc, according to which Ophir shareholders would receive 40 pence in cash, and in addition, shares in Coro for each Ophir Share, resulting in an ownership by Ophir shareholders of between 85 per cent. and 95 percent of the enlarged company.

Ophir said on Wednesday that Coro does not intend to proceed with its proposal after the deal between Ophir and Medco.

Medco said its offer of 57.5 pence per share is final and would not be increased. Ophir’s directors recommended that the shareholders vote in favor of the deal, it said.

A meeting in connection with the increased offer will be held on March 25, Ophir added.

Lawsuit alleges ‘conspiracy’ behind founding of VC-backed AAF

An entrepreneur and VC veteran named Robert Vanech has filed a lawsuit alleging Charlie Ebersol stole the idea for the newly launched Alliance of American Football, claiming Vanech and Ebersol were actually co-creators of the league and that Vanech is owed a 50% ownership stake.

The suit was filed last Friday, just a few days after the AAF received a $250 million commitment from Tom Dundon, a subprime lending tycoon and the owner of the NHL’s Carolina Hurricanes. Dundon is also the creator of Dundon Capital Partners, a Dallas-based firm that invests in private equity and credit.

The AAF didn’t immediately respond to a request for comment. The league issued a statement to other media outlets saying “Mr. Vanech’s claim is without merit,” and that “[t]here was never any agreement, oral or written, between Mr. Vanech and Mr. Ebersol relating to The Alliance.”

Since the announcement of its formation last year, the AAF has pitched itself as the brainchild of Ebersol (the son of famed NBC Sports executive Dick Ebersol) and Bill Polian, a longtime presence in NFL front offices. But Vanech’s lawsuit presents a different story, claiming Vanech approached Charlie Ebersol with the idea for a new football league in February 2017 and that the two had a handshake agreement to evenly divide the league’s equity. The document claims that Vanech is responsible for many of the AAF’s notable innovations, including the idea of assigning former college stars to local AAF teams, an emphasis on Big Data and the league’s focus on an in-game app.

The suit goes on to paint a picture of the AAF’s early days, with Ebersol and Vanech both seemingly caught up in the heady rush of creating a new sports league from scratch. The suit includes a screenshot dated March 2017 that allegedly shows a proposed a cap table for the AAF that includes a 50/50 split of equity between Vanech and Ebersol, as well as documents supposedly shared with possible investors that list Vanech as the league’s CFO and COO.

Vanech alleges that everything started to change in May 2017, when Ebersol met with Keith Rabois of Khosla Ventures about investing in the AAF. Ebersol allegedly told Vanech that any money from Rabois would come “with certain conditions,” including that Rabois might take over the COO position, and that Rabois wanted to re-allocate some of Vanech’s equity. Vanech believed the talks were in good faith at the time, but the suit now calls them evidence “that a conspiracy had been formed to oust Vanech.” By July 2017, per the suit, Ebersol was denying the existence of any agreement with Vanech, claiming they’d had only “exploratory conversations” and “high-level discussions.”

It’s worth noting that Rabois, who has since announced plans to leave Khosla Ventures for Founders Fund, is listed on the AAF’s website as a member of its board of directors. Kevin Freedman, who was a partner at Khosla Ventures alongside Rabois from 2015 to 2017, is now the AAF’s COO.

Rabois is named in Vanech’s lawsuit as a “co-conspirator.”

Vanech is currently the CFO at Trebel Music, an on-demand music startup that was valued at $27 million in 2017. From 2012 to 2014, he was a venture advisor at AITV, which has since rebranded as Sway Ventures.

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