Murdoch turns back on Time Warner

BY Matt Atkins

In an uncharacteristic move, Rupert Murdoch, the 81-year old chairman and CEO of Twenty-First Century Fox (Fox) has abandoned plans to buy Time Warner Inc for $80bn. A Fox statement has blamed Time Warner for the deal's implosion, saying the media giant "refused to engage with us to explore an offer which was highly compelling".

A merger between the two would have created one of the world's largest media conglomerates, significantly altering the media landscape in the US. The acquisition offer was seen as a way for Fox to stay competitive as other industry players begin to accelerate their M&A strategies.

The deal, however, has not been popular among Fox shareholders ­– the firm's share price has declined by 11 percent since the potential deal was announced – and many suspect a desire to retain shareholder approval nixed the proposal. Investors sent shares soaring by over 7 percent after Fox authorised a $6bn share repurchase programme in the wake of the deal's failure.

On the other side of the transaction, shares in Time Warner dropped by more than 11 percent after news of the withdrawal was made known. The company's board remains defiant. "Time Warner's Board and management team are committed to enhancing long-term value and we look forward to continuing to deliver substantial and sustainable returns for all stockholders," said a Time Warner statement.

Mr Murdoch's decision to walk away has shocked many. The success of the merger would have proved a career-capping masterstroke on the part of the media mogul. “We viewed a combination with Time Warner as a unique opportunity to bring together two great companies, each with celebrated content and brands," said Mr Murdoch in a statement. "Our proposal had significant strategic merit and compelling financial rationale and our approach had always been friendly.”

However, whether the deal is firmly in the grave is up for debate. Some still suspect the decision to walk is part of an attempt to drive down Time Warner's stock, before a renewed takeover attempt at a future date.

Press Release: 21st Century Fox withdraws its proposal to acquire Time Warner Inc

Portugal fights bank collapse

BY Matt Atkins

To the relief of anxious investors, Portugal’s central bank has announced measures to prevent the collapse of one of its biggest lenders, Banco Espirito Santo (BES). On Sunday 3 August, the board of directors at Banco de Portugal laid out plans for the €5bn rescue of BES, pulling it back from the brink and easing fears of contagion across Europe’s banking sector. The announcement comes days after the Banco de Portugal offered assurances that BES could raise enough money from private investors to recover from a first-half loss of €3.58bn.

The plan will see BES split into two. Problem assets will be held by the ‘bad bank’ BES. The remaining assets will be held by a ‘good bank’ – the newly formed Novo Banco, run under the supervision of Banco de Portugal. Novo Banco will be made up of BES’s core business of taking deposits and lending to home-buyers and companies. The bank will be receive an initial €4.9bn cash injection from Portugal’s bailout fund and eventually be sold off, with the proceeds used to pay back the loan.

As yet, it is unclear what will happen to the ‘bad bank’, most of which relates to other businesses in the Espirito Santo Group, including tourism, health and agriculture. Shareholders and creditors have been warned, however, that they may stand to lose all of their money.

Banco de Portugal has said customers of BES will be able to conduct transactions normally, and employees will be transferred to the new entity, which will retain the company logo.

“For our customers and staff only one thing has changed — their bank is now stronger and safer than it was before,” said Victor Bento, who will head Novo Banco. “The key uncertainties that have been hanging over the institution for some time have now been removed.”

Press Release: The application of a resolution measure to Banco Espírito Santo, S.A.

Tax concerns secondary in medical mega-deal

BY Matt Atkins

The latest in a string of healthcare mega-deals has been driven by potential synergies rather than tax considerations, according to executives behind the transaction.

On 15 June, US medical device maker Medtronic Inc announced it had agreed to acquire Ireland’s Covidien Plc for $42.9bn in cash and stock. The purchase will see Medtronic move its executive base to Ireland, reducing its overall tax burden. However, a complimentary strategy with Covidien on medical technology has motivated the deal, rather than tax savings, says Medronic CEO, Omar Ishrak. “This acquisition will allow Medtronic to reach more patients, in more ways and in more places. Our expertise and portfolio of services will allow us to serve our customers more efficiently and better address the demands of the current healthcare marketplace.”

The acquisition of Covidien will significantly advance Medtronic’s position as a leader in medical technology and services. The combined company will have a comprehensive product portfolio, a diversified growth profile and broad geographic reach, with 87,000 employees in more than 150 countries. The deal will create a close competitor in size to the medical device business of industry leader Johnson & Johnson Co.

The deal has raised concerns surrounding the number of US firms striking deals that slash their tax bills. While historically quite rare, the acquisition of companies aimed at lowering corporate tax rates is becoming increasingly common. Pfizer’s recently failed bid for AstraZeneca, for instance, has served to refocus attention on so called ‘inversions’. Currently, two Congress bills, along with a White House proposal, are aiming to make the practice more difficult, though neither has gained much traction. This could change if further US firms try to exploit the loophole.

While the deal has sparked debate for all the wrong reasons, it has been welcomed by the Irish firm. “Covidien and Medtronic, when combined, will provide patients, physicians and hospitals with a compelling portfolio of offerings that will help improve care and surgical performance,” said José E. Almeida, Covidien's chairman, president and chief executive. “This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organisation.”

The transaction has been approved by the boards of both companies.

Press release: Medtronic to Acquire Covidien for $42.9 billion in Cash and Stock

Expansion expected in Healthcare BPO

BY Matt Atkins

According to a new report published by MarketsandMarkets, the global healthcare business process outsourcing (BPO) market is expected to see rapid growth in the next five years, doubling in size by 2018. Presently valued at an estimated $92.3bn, the market is poised to grow at a CAGR of 10.8 percent to reach approximately $188.9bn before the decade is out.

BPO is the contracting of specific business tasks such as payroll to third party services. Usually, BPO is implemented as a means of outsourcing  tasks that a company requires but does not depend upon to maintain its position in the marketplace.

The healthcare BPO market is spread across the payer, provider and pharmaceutical sectors, of which pharmaceuticals has the largest share, accounting for close to 80 percent of the market in 2013. Cost reduction is the main driver for outsourcing business functions which include HR services, finance and accounts, claims processing, medical billing and contract research. Healthcare reforms introduced by the Obama administration are also driving the market.

Healthcare BPO is divided into source and destination geographies. The US accounts for the largest share of the market, followed by Europe. The most preferred destination is India, which has the advantage of a high number of healthcare professionals, affordable cost of living, a large patient pool, and decreased time and costs for recruitment.

Overall, the healthcare BPO market is highly fragmented with many small players competing for their share, particularly in India and China, where many entrepreneurs have entered the market. The major players include Accenture, GeBBS Healthcare, Omega Healthcare, Parexel and Boehringer Ingelheim.

In recent years, the market has come under scrutiny by regulatory bodies, and regulatory change in key regions such as the US and Europe is expected to result in increased requirements for payer and provider outsourcing services.

Press Release: Healthcare BPO Market worth $188,856.5 Million by 2018

UK hedge fund managers defy Europe slowdown

BY Matt Atkins

The majority of European hedge funds to set up business in recent years have done so in the UK, according to a Preqin's Hedge Fund Analyst factsheet. The UK accounted for 50 percent of European hedge fund launches in the past 12 months.

Europe decelerates

While hedge fund managers in France, Spain and Germany saw a net decrease in assets under management (AUM) between January 2013 and April 2014, UK-based fund managers witnessed an increase of approximately $57bn. “Europe is experiencing a slowdown in terms of new hedge fund managers setting up business in contrast to North America, which has seen an increase in the number of new fund managers coming into market in recent years,” says Amy Bensted, head of Hedge Funds Products at Preqin. “This can be partially attributed to the AIFMD regulation within Europe, which is deterring some prospective new firms setting up a hedge fund business in the region. However, one country within Europe shows no signs of sluggishness – the UK.” Firms with headquarters in the UK now account for $423bn in hedge fund assets – over 10 times the amount of any of its European neighbours.

Prolific 2013

Last year proved particularly prolific for hedge fund manager launches in the UK. Thirty-eight new groups set up business in the country, compared to 17 throughout the rest of Europe. Despite this, the number of hedge fund launches in each region has remained broadly similar, with 91 in the UK, compared to Europe’s 90. But while the UK far outstrips all other European countries in terms of AUM, it is a Sweden headquartered fund manager that has had the most success in fundraising new vehicles: Brummer & Partners’ Canosa fund has amassed over $1bn in assets since its March 2013 launch.

Expected developments

Going forward, the continued growth of UK hedge funds is likely, while continental Europe must do more to attract business, says Ms Bensted. “Over the course of the rest of 2014 it will be interesting to see if UK continues to see increasing volumes of new manager launches and if regulation and other hurdles continue to hinder start-ups in the rest of Europe.”

Press Release: UK Hedge Fund Industry Booms Despite a Wider Slowdown in Europe