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Markross121_ January 9, 2019 No Comments

First impressions from CES: Crypto optimism, sleeptech and the internet of anything

Did you just say bitcoin?

It’s 2019, and there is still plenty of attention around crypto, even though the space has seen a significant decrease in total market capitalization during the past 12 months. The bullish consensus here at CES is that all new technologies have historically gone through a bubble phase before reaching wide-scale adoption— such as railroads, the internet and so forth—and that crypto will follow the same path.

“Crypto is alive and well”

—Matthew Roszak, co-founder and chairman of Bloq, at CES

Aside from sideline speculation, the technology still faces many challenges, like regulation, security, scalability and latency. With tempered expectations for crypto, companies like Devvio, which just announced its new blockchain protocol Devv, are developing solutions to help solve these blockchain technology issues. Regardless of the roller-coaster development within the crypto space, bitcoin is still a great accomplishment, in which a white paper released 10 years ago has achieved over a $70 billion valuation based on market capitalization.

The internet of ANYthing

At CES Unveiled, Wilkinson Baking Company showed off its fully automated breadmaking machine, The BreadBot. This machine takes in raw ingredients such as flour and yeast to produce direct-to-consumer fresh bread. The pitch here is that The BreadBot will be placed in grocery stores and can produce fresh bread on demand, without preservatives, in a much smaller footprint than a typical in-store bakery.

I need to get some sleep

If there has ever been a city that never reminds you to sleep, it’s Las Vegas. Coincidentally (or perhaps not?), I have been reminded to get some good sleep everywhere I walk here at CES. I recently read “Why We Sleep” by Matthew Walker, in which the author expressed concern that society’s general lack of sleep has become a major health epidemic.

Innovators here at CES have also caught on to the latest health trend of getting awesome sleep. From rocking beds to pillows that detect and stop snoring, there is no shortage of new and creative ways to improve overall sleep health. And it’s not only for adults as well: At CES, LA-based Miku launched a baby monitor designed to analyze a baby’s sleeping and breathing pattern to provide parents with a status of their baby’s sleep health. And PE-backed SleepScore Labs, which provides an app and other products to enable improved sleep, just announced a venture partnership with Dr. Oz, SleepScore Ventures. The venture aims to invest solely in companies and products focused on sleep improvement.

UK M&A value soars by more than a quarter in 2018 as number of mega-deals increases

Deal activity reached a three year high in 2018, while M&A activity involving UK firms hit £359.9bn which is 28 per cent more than the value recorded in 2017, according to data from Refinitiv.

Activity spiked in the first half of the year, with eight deals valued at over £5bn announced in the first six months of 2018 and two revealed in the second half. The largest acquisition of the year was Comcast’s £37bn offer for Sky.

A total of 71 mergers and acquisitions involving a British company and valued at £1bn or more were announced last year, which is the highest number in 17 years.

“M&A activity involving UK companies increased 28 per cent last year. The growth, driven by flurry of mega deals during the first half of the year, saw deal activity reach a 3-year high and a level only exceeded once in the last decade,” said Lucille Jones, deals intelligence analyst at Refinitiv.

“The last six months of 2018 saw a marked slowdown in dealmaking from the pace seen at the start of the year. Whether political uncertainty dampens corporate confidence and affects deal making into 2019 remains to be seen.”

The UK was the third most targeted country by value after the US and China and UK firms were the fourth most acquisitive globally in 2018, after the US, China and Japan.

CMC Markets analyst David Madden said: “2018 saw some major deals, but now as global stock markets are off their highs, and there are some concerns about global growth, 2019 is likely to start off on a softer note.

“The landscape has changed greatly in the past 12 months as political uncertainty in Italy, strained trade relations between the US and China, Brexit, and the odd whisper about a possible recession in the US, have dampened the previously bullish sentiment.

“Many deals are paid for with debt, and companies might be cautious about loading up on debt for fear we are heading into economically cooler times.”

Eli Lilly buys cancer drug specialist Loxo Oncology for $8bn

Pharmaceuticals giant Eli Lilly has bought Loxo Oncology for $8bn (£6.27bn), marking the second multibillion dollar US drug merger since the start of the new year.

In a sign of the fast-growing market for cancer drugs, Eli Lilly said this afternoon that it has acquired Loxo as it looks to bolster its treatment portfolio.

Today’s purchase, which marks Lilly’s biggest takeover ever, means Loxo shareholders will get $235 per share in cash, according to a joint statement from the companies.

The deal comes just several days after New York-based Bristol-Myers Squibb struck one of the largest pharma deals in history after buying Celgene for roughly $74bn, with the merged company set to have nine products with more than $1bn in annual sales.

Such mergers have sparked expectations for another seismic year of healthcare mergers and acquisitions, coming weeks after FTSE 100 constituent GlaxosmithKleine also revealed its intentions to buy oncology-focused US firm Tesaro for the sum of $5.1bn.

Eli Lilly has been ramping up its focus around oncology for several years, with its cancer treatment Alimta becoming one of its top-selling products.

In May the drugmaker also revealed plans to buy Armo Biosciences for $1.6bn as part of its cancer drug portfolio ambitions.

Today’s deal is expected to close by the end of the first quarter.

Deutsche Bank is Lilly’s financial adviser and Weil, Gotshal & Manges LLP is its legal adviser. Goldman Sachs & Co LLC is the financial adviser, while Fenwick & West LLP is legal adviser to Loxo.

Apollo nears Arconic mega-deal

In June 2017, a malfunctioning refrigerator sparked a fire at the Grenfell Tower apartment building in London. The blaze quickly engulfed the 24-story structure, ultimately resulting in 72 deaths and one of the largest residential disasters in recent British history.

Later government investigation attributed the rapid spread of the flames to the building’s poorly made cladding, a type of siding, which later tests showed was so combustible that it essentially turned the apartment into one giant, deadly tinderbox. The company that made that cladding was Arconic.

It perhaps wasn’t a surprise when, less than a year later, Arconic announced a strategic review, with reports indicating that it could sell the building products unit that made the aluminum panels involved in the Grenfell Tower disaster. Within months, prompted in part by continuing activist pressure from Elliott Management, talk turned to a wholesale takeover of the company.

It perhaps also wasn’t a surprise that several private equity firms showed interest—despite a number of looming lawsuits, criminal investigations and potential liabilities that could hamstring the business in the future.

Blackstone, The Carlyle Group and KKR were among the heavyweights to sniff around the building products unit, with Arconic describing the potential mega-deal as an effort to refocus its operations on building aluminum components for aerospace and auto companies rather than the construction market. But when the subject changed to a full buyout, Apollo Global Management emerged as the front-runner, with a potential price tag reported to be some $11 billion (or up to $20 billion including debt).

While Arconic’s direct involvement in a tragic, avoidable disaster that cost dozens of innocent lives is almost surely one factor behind the sale, another very obvious one is the presence of Elliott. The hedge fund won representation on Arconic’s board in early 2017 after a pitched battle and the ouster of former CEO Klaus Kleinfeld. The aluminum company’s stock price has continued to slide throughout 2018, which in Elliott’s mind seems to only cement the need for a complete leadership overhaul.

Apollo’s management thought a deal with Arconic could have been signed as soon as December, according to a New York Post report from the final day of 2018. But the buyout’s final hurdle is proving to be the continued tightening of global debt markets, raising doubt as to whether banks would be able to finance a deal as large as what Apollo and Arconic have in mind. Apollo is also believed to be considering a $40 billion move on the GE’s aviation leasing business, an even larger deal that will surely encounter similar concerns. A lack of available funding could very well endanger prospective Apollo deals worth $60 billion in total.

The role Arconic’s shoddy products played in the horrific events at Grenfell Tower make it painfully clear that major changes of some sort are needed at the company. Whether a private equity firm is the correct group to make those changes could be a matter for debate. But if the debt markets cooperate, then Leon Black and Apollo seem poised to be the ones navigating the transformations, lawsuits and reckonings that are almost surely ahead.

Swisscom to buy directories biz for €194M

Telecommunications provider Swisscom will buy the 31% stake in Swisscom Directories it does not own from Tamedia for 220 million Swiss francs (around €194 million). The company, in which Tamedia has held an interest since 2015, has more than 800 employees and operates two of Switzerland’s biggest directory platforms, local.ch and search.ch.