Norwegian Energy agrees $1.9bn Shell deal

BY Richard Summerfield

Norwegian Energy (Noreco) has agreed to acquire Royal Dutch Shell’s Danish upstream business – Shell Olieog Gasudvinding Danmark B.V. (SOGU) – in a deal worth $1.9bn, making it the second largest oil & gas producer in Denmark, adding output of 67,000 barrels of oil equivalents per day.

The sale includes SOGU’s 36.8 percent ownership stake in the Danish Underground Consortium (DUC), which leads much of the exploration and development of the Danish portion of the North Sea. The DUC, which started production in 1972, has assets in around 15 offshore fields and accounts for around 90 percent of the country’s oil & gas production. The deal also includes SOGU’s portion of the Tyra gas field redevelopment project including the redevelopment and around $1.1bn in decommissioning costs associated with the assets. In a statement, Norco added that it “…expects to maintain strong production in the years to come. As the Tyra hub is being redeveloped, the portfolio will be revitalised and offer improved economics accompanied by prolonged field life.”

For Shell, the divestment of the business is the latest step in the company’s three year, $30bn divestment plan, which started in 2015 following its purchase of BG Group. To date, Shell has divested large portfolios in the British North Sea, Gabon, Thailand and Canada. Under the terms of the agreement, Shell Trading and Supply and Shell Energy Europe Limited will continue to have oil & gas lifting rights from the SOGU assets for a period after completion.

“Today’s announcement is consistent with Shell’s strategy to simplify its portfolio through a $30bn divestment programme and contributes to our goal of reshaping the company into a world-class investment case,” said Andy Brown, Shell’s upstream director.

Noreco said the deal comprised proven and probable reserves of 209 million barrels of oil equivalents at the end of last year, 65 percent of which were liquids. The company said that funding for the Shell deal would be provided by a private placement of new shares and a convertible bond, as well as a $900m loan from BMO Capital Markets, Deutsche Bank and Natixis.

As the transaction is a ‘share sale’, local SOGU staff primarily dedicated to DUC will continue employment with their current company, which Noreco will own upon completion.

The deal, subject to customary closing conditions and shareholder approval, is expected to complete in H1 2019.

News: Shell sells Danish upstream assets to Norwegian Energy in $1.9 billion deal

Another US retailer on the ropes as Sears files for bankruptcy

BY Fraser Tennant

In a further body blow to the US retail industry, Sears Holdings Corporation has filed for Chapter 11 bankruptcy protection – yet another retail giant struggling with mounting debt and the increasing shift in consumer behaviour toward shopping online.

Through the Chapter 11 process, Sears – which also owns Kmart – and certain of its subsidiaries are seeking to establish a sustainable capital structure, continue streamlining its operating model and grow profitably for the long term. The company listed more than $10bn in debts and more than $1bn in assets in its filing.

The company hopes to move through the restructuring process as smoothly and expeditiously as possible, and is committed to pursuing a plan of reorganisation as it continues negotiations with major stakeholders.

“The Chapter 11 process will give Sears the flexibility to strengthen its balance sheet, enabling the company to accelerate its strategic transformation, continue right sizing its operating model and return to profitability,” said Edward S. Lampert, chairman of Sears Holdings. “Our goal is to achieve a comprehensive restructuring as efficiently as possible, working closely with our creditors and other debtholders, and be better positioned to execute on our strategy and key priorities."

To this end, Sears intends to continue paying employee wages and benefits, honour member programmes, and pay vendors and suppliers in the ordinary course for all goods and services provided on or after the Chapter 11 filing date.

"Over the last several years, we have worked hard to transform our business and unlock the value of our assets," said Mr Lampert. "While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company's immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer.”

Sears has received commitments for $300m in senior priming debtor-in-possession (DIP) financing from its senior secured asset-based revolving lenders, and is negotiating a $300m subordinated DIP financing with ESL Investments, Inc – its largest stockholder and creditor.

Subject to court approval, the DIP financing is expected to improve Sears’ financial position immediately and support its operations during the financial restructuring process.

Mr Lampert concluded: "As we look toward the holiday season, Sears and Kmart stores remain open for business and our dedicated associates look forward to serving our members and customers. We thank our vendors for their continuing support through the upcoming season and beyond.”

News: US retail giant Sears files for bankruptcy

700 stores to close as Mattress Firm files for Chapter 11 protection

BY Fraser Tennant

Due to what it describes as “significant operational challenges”, specialty mattress retailer Mattress Firm has filed for Chapter 11 bankruptcy protection in order to strengthen its balance sheet and optimise its store footprint.

The filing at the US Bankruptcy Court in Delaware gives the company access to new financing to support the business, establishes an efficient and orderly process for closing certain economically inefficient store locations, and provides for all trade creditors to continue being paid in full for goods and services provided.

Court documents reveal that Mattress Firm is projected to lose approximately $150m in fiscal year 2018. The company also has more than $1bn in liabilities and more than 50,000 creditors, with Atlanta-based mattress maker Simmons Manufacturing Co. its largest creditor at almost $65m.

“The process we have initiated will allow us to strengthen our balance sheet and accelerate the optimisation of our store portfolio,” said Steve Stagner, executive chairman, president and chief executive of Mattress Firm. “Leading up to the holiday shopping season, we will exit up to 700 stores in certain markets where we have too many locations in close proximity to each other.”

In conjunction with its restructuring plan, Mattress Firm has received commitments for approximately $250m in debtor-in-possession (DIP) financing, which, subject to court approval, will be available to support its ongoing operations during the Chapter 11 proceedings.

“We intend to use the additional liquidity from these actions to improve our product offering, provide greater value to our customers, open new stores in new markets, and strategically expand in existing markets where we see the greatest opportunities to serve our customers,” added Mr Stanger.

The company expects to complete the Chapter 11 restructuring process within two months and has announced commitments for $525m of senior secured credit facilities to fund its emergence from bankruptcy.

Founded in 1986, Mattress Firm has grown to be the largest specialty mattress retailer in the US, with stores in 49 states across the country. In 2016, the company was acquired by Steinhoff International Holdings, N.V.

Mr Stagner concluded: “We thank our suppliers and partners for their continued support. We will continue to provide unmatched value to our customers by offering the best quality beds at prices that fit any budget today, tomorrow and into the future.”

News: Steinhoff's Mattress Firm files for bankruptcy protection, closes stores

M&A appetite declines amid global uncertainty

BY Richard Summerfield

As fears of an escalating US-China trade war and uncertainty over Brexit abound, globally, companies’ appetite for M&A has fallen to a four-year low, according to EY’s biannual ‘Global Capital Confidence Barometer’ report.

Forty-six percent of global executives say that they plan to buy other firms in the next 12 months, a 10 percent decline from the previous year, according to EY. A further 46 percent of respondents to a survey of more than 2600 executives across 45 countries also said they saw regulation and geopolitical uncertainty as the biggest risk to dealmaking activity over the next year.

“Geopolitical, trade and tariff uncertainties have finally caused some dealmakers to hit the pause button,” said Steve Krouskos, EY Global Vice Chair, Transaction Advisory Services. “Despite stronger-than-anticipated first-half earnings and the undeniable strategic imperative for deals, we can expect this year to finish with much weaker M&A than how it started. The good news is that companies will likely take the break in action as an opportunity to focus on integrating the many deals undertaken over the past 12 months. This is likely to be just a pause, not a complete stop. Fundamentals and the strategic rationale for deals remain strong, and the appetite to acquire will likely grow toward the second half of 2019.”

The escalation of tension between the US and China has already led to an increase in tariffs, Brexit too could drive a tariff increase, though the outcome of the Brexit negotiations is still unknown, despite the close proximity of the UK’s March 2019 exit date. The outcome of the Brexit negotiations is causing some consternation and is a key focus for those executives surveyed. Forty-one percent of respondents would prefer the UK to enter an Economic Free Trade Agreement similar to Switzerland, while 22 percent would prefer a Free-Trade Agreement model similar to that between the EU and Canada. Five percent of executives globally prefer a second referendum of the UK’s EU membership, and 6 percent would prefer a World Trade Organisation rules-based outcome.

Despite the increased uncertainty and decline in global dealmaking appetites, confidence in the M&A market remains high. Ninety percent of respondents expect the market to improve over the next 12 months. For some companies, the coming year will enable them to focus on integrating the deals they have completed over the last few years.

Indeed, some companies intend to use M&A to overcome the ongoing global instability. Twenty percent of executives noted that they are focusing more on international opportunities, including within the UK, which is the number two M&A destination of choice for executives globally, up from fifth position in the April 2018 survey.

Report: Global Capital Confidence Barometer 19th edition

The evolving threat

BY Richard Summerfield

While cyber security threats are gaining in exposure and media coverage, many companies remain unprepared for a breach — a fact which is particularly worrying when one considers that cyber attackers are gaining vastly greater scale through new techniques, such as killchain compression and attack automation, according to Alert Logic’s ‘Critical Watch Report: The State of Threat Detection 2018’.

The report, which was completed following the analysis of more than 1 billion security anomalies, 7 million events and over 250,000 verified incidents, found that the traditional killchain has evolved. Today, 88 percent of killchain attacks are gaining efficiency and speed by combining what was formerly identified as the first five phases of such an attack — recon, weaponisation, delivery, exploitation and installation — into a single action. As a result, the new killchain is capable of creating near-instantaneous attacks that bypass many established security practices.

Automation has also emerged as an important and effective tool for cyber criminals who are able to launch random and recursive attacks which force organisations to alter the ways they asses risk. Cryptojacking has also become a major concern for organisations. Eighty-eight percent of recent WebLogic attacks were cryptojacking attempts. Worryingly, as cryptojacking attacks are highly automated and hit small, medium and enterprise-sized organisations indiscriminately and at similar rates, industry and size may no longer be reliable predictors of threat risk.

The report also found that web application attacks remain the most frequent and dominant type, with SQL injection attempts comprising 43 percent of all attacks observed.

“It’s no secret that attackers push the envelope and innovate attacks to abuse weaknesses anywhere they find them—in cloud and hybrid deployments, containerised environments, and on-premises systems,” said Rohit Dhamankar, vice president of Threat Intelligence Products at Alert Logic. “What is troublesome is the use of force-multipliers like automation to scale attacks for increased financial gain. This report demonstrates that attackers are gaining increasing sophistication in their ability to weaponise trusted techniques to exploit common vulnerabilities and misconfigurations for purposes such as cryptomining.”

Report: Critical Watch Report: State of Threat Detection 2018