Merger Archives

Markross121_ February 27, 2019 No Comments

Sainsbury’s shares dive after Asda merger put in doubt

Sainsbury’s shares have dived 15% after the UK’s competition watchdog cast doubt on its plan to buy Asda.

Customers could see higher prices and less choice if the two grocers combined, the Competition and Markets Authority (CMA) said.

It said it could block the deal or force the sale of a large number of stores or even one of the brand names.

However, it also said it was “likely to be difficult” for the chains to “address the concerns”.

Sainsbury’s boss said the findings were “outrageous”.

In its provisional report on the proposed merger, the CMA also said the merger could lead to a “poorer shopping experience”.

Stuart McIntosh, chair of the CMA’s independent inquiry group, said it had found “very significant competition concerns in a number of areas – they are to do with grocery shopping in supermarkets, grocery shopping online and the companies’ petrol stations”.

“However, if one recognises that the competition concerns are quite broadly based… putting together a package of measures which addresses those concerns is likely to be complex and quite challenging,” he said.

But Sainsbury’s chief executive Mike Coupe described the CMA’s analysis as “fundamentally flawed” and said the firm would be making “very strong representations” to it about its “inaccuracy and lack of objectivity”.

“They have fundamentally moved the goalposts, changed the shape of the ball and chosen a different playing field,” he told the BBC.

“This is totally outrageous.”

Merger growth drives Grant Thornton International to record £4.3bn revenues

Grant Thornton International reported record revenues of $5.45bn (£4.28bn), lifted by income expansion from international mergers, and strong growth in its tax and advisory arms.

The figure is up $450m on last year, representing an average growth of 9.4 per cent across the whole organisation – slightly behind the 10.7 per cent global growth at BDO, one of its chief mid-market rivals.

Peter Bodin, chief executive of the professional services firm’s international network, headquartered in the UK, said: “Our success this year is the result of a deliberate strategic focus on our core mid-market client base, and our key strategic growth markets where we want to be successful.

“Being clear on where we need to develop our capabilities, and focusing on quality in those core markets, has underpinned this performance.”

Strong mergers and acquisitions activity underpinned much of Grant Thornton International’s growth, with the firm making 24 deals with 10 other companies. Mergers in Japan and South Africa drove revenue increases of 18.7 per cent and 54.7 per cent in Asia and Africa respectively. Average growth in Europe stood at 7.7 per cent.

The US remained its biggest market, generating $2.5bn in fee income, followed by $1.5bn in Europe.

“It’s great to see our firms from markets across the globe flourishing as we continue to build a sustainable next-generation professional services organisation,” said Bodin.

Across its service lines, tax grew by 14.8 per cent, and advisory by 10.4 per cent.

Full results for Grant Thornton’s UK operations have not yet been released. The firm is currently the UK’s fifth-largest auditor – behind global giants the Big Four – Deloitte, EY, KPMG and PwC – but is set to lose that title after the impending merger of sixth-place BDO UK with Moore Stephens.

Visa to buy British payments firm Earthport for £198m

Visa has made a £198m takeover bid for British payments company Earthport.

Shares in the firm rocketed by 270 per cent on Thursday after the offer was announced to the London Stock Exchange.

Earthport specialises in cross-border payments, with clients including Bank of America Merrill Lynch, Ripple and TransferWise.

The company was founded in 1997 and employs more than 200 people across offices in London, New York, Miami, Dubai and Singapore.

Its chair, Sunil Sabharwal, said the firm saw the offer as an “opportunity for shareholders to realise an immediate and attractive cash value in Earthport”.

The deal values Earthport at a 250 per cent premium to its average share price in the six months to 24 December.

Mr Sabharwal added: “Visa shares our vision of growth and expansion for Earthport and, as such, we believe it is a suitable and appropriate partner for our employees, partners, customers and other stakeholders.”

Amanda Mesler, chief executive of Earthport, said: “Having been appointed as Earthport’s CEO in July, my focus following a full strategic review has been to rapidly implement a transformational growth strategy. Whilst I believe Earthport is well positioned to deliver the potential it has always possessed, the all-cash offer from Visa represents a very attractive and immediate return for our shareholders.”

Competition watchdog clears SSE-Npower merger

A merger between SSE and Npower’s retail operations has been cleared by the UK’s competition watchdog.

The Competition and Markets Authority (CMA) said it had given final clearance to the deal after concluding households would still have “plenty of choice” on standard variable tariffs (SVTs).

It found the two providers were “not close rivals” on the tariffs, which offer the most expensive deals.

The merger will create the UK’s second biggest energy supplier.

The CMA launched a full inquiry into the merger in May after its initial probe found the tie-up could reduce competition, potentially leading to higher prices for households.

It provisionally cleared the deal in August.

Anne Lambert, chairwoman of the inquiry group examining the deal, said: “With many energy companies out there, people switching away from expensive standard variable tariffs (SVT) will still have plenty of choice when they shop around after this merger.

“But we know that the energy market still isn’t working well for many people who don’t switch, so we looked carefully at how the merger would affect SVT prices.

“Following a thorough investigation and consultation, we are confident that SSE and Npower are not close rivals for these customers and so the deal will not change how they set SVT prices.”

Fujifilm-Xerox merger back on track?

Japan’s Fujifilm has won an appeal in a legal fight with Xerox that had halted a planned merger between the firms.

Fujifilm now plans to push ahead with talks on the $6.1bn (£4.6bn) merger with the US printer maker, according to Japan’s Kyodo news agency.

In May, Xerox ended its controversial sale to Fujifilm after reaching a settlement with activist investors Carl Icahn and Darwin Deason.

But Fujifilm says its original deal remains the best option for shareholders in both companies.

“(The) Court’s decision will allow us to discuss with Xerox the fulfillment of the original agreement. All Xerox shareholders ought to be able to decide for themselves the operational, financial, and strategic merits of the transaction to combine Fuji Xerox and Xerox,” it said.

Markross121_ November 7, 2018 No Comments

Retail Mergers and Acquisitions Rise by 15% as Businesses Try to Combat Falling Sales

The number of retail sector mergers and acquisitions has grown by 15 per cent in the last year as companies try to make up for struggling sales, a new study reveals.

Figures compiled by law firm RPC show there have been 37 retail mergers and acquisitions (M&A) deals in the year to 31 March, compared with 32 in 2016-17.

RPC said the recently announced Asda and Sainsbury’s merger was a good example of the recent trend for businesses in the food side of the retail sector to “add economies of scale to make up for slowing organic sales growth”.

Firms are also favouring M&A over flotations, due to weak demand from investors. Selling up to a competitor is seen as a more secure way for existing investors to exit a smaller retailer than an IPO which could be cancelled at any point “due to short-term volatility or poor sentiment towards the sector”.

“Through mergers such as Asda and Sainsbury’s, market leaders are looking beyond all the hype about the ‘meltdown of the high street’ and getting on with building breadth of offering and scale,” said RPC corporate partner Karen Hendy.

However, while the number of deals has jumped, the overall value of those transactions has fallen 16 per cent to £3.7bn, from £4.3bn the year before. Ms Hendy said: “It is important that sellers and creditors are sensible over the prices they are expecting from M&A deals in the current climate.”

Meanwhile, RPC said there is still interest in buying distressed retailers’ assets but buyers are looking for substantial discounts, and the number of retailers entering insolvency has risen by 7 per cent in the last year.

UK M&A deals announced in 2017-18 include:

The Co-op’s approach for Nisa, valued at £143m
Tesco Opticians’ acquisition by Vision Express owner Grandvision
Multiyork Furniture’s acquisition by DFS

Asda says 2,500 jobs at risk before Sainsbury’s merger

Asda has said 2,500 jobs are at risk as the supermarket giant embarks on a fresh round of cost-cutting ahead of its proposed merger with rival Sainsbury’s.

The Walmart-owned grocer is looking to reduce costs across its store operations, with staff working in its bakeries, petrol stations and back office among those under scrutiny. The retailer is also considering closing counters used by customers to return items from its George clothing ranges.

“In a competitive retail market, where customers rightly expect great value and ease of service, we must always look at how we can work more quickly and efficiently for them – and inevitably, that means we need to consider changing the roles we need our colleagues to do or the hours needed in particular parts of our stores,” said Asda in a statement.

The proposals are thought to include combining back office functions such as administration, making some its petrol stations self-service, and reducing the hours of bakery staff and those employed as “front-end hosts”. No redundancies are expected before Christmas.

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