Bain buys 60 percent stake in Kantar

BY Richard Summerfield

Bain Capital is to acquire a 60 percent stake in data analytics firm Kantar from debt-laden British multinational advertising and public relations company WPP.

The deal values Kantar at about $4bn. The sale will give WPP agencies, including Ogilvy and Wunderman Thompson, an infusion of funds to reduce their debt and rebuild. WPP said it will use about 60 percent of the proceeds of the sale to cut its net debt to the low end of a targeted range of 1.5-1.75 times core earnings for 2020. The rest of the money will be returned to shareholders. The deal is expected to close in early 2020, subjected to approval from WPP shareholder and regulatory approval.

Private equity giant Bain was engaged in an auction for Kantar and is believed to have overcome Apollo Global Management, Platinum Equity and Vista Equity Partners in the final round of bidding.

“Kantar is a great business and we look forward to working with Bain Capital to unlock its full potential,” said Mark Read, chief executive of WPP. “As a strategic partner and shareholder in Kantar, WPP will continue to benefit from its future growth while our clients continue to benefit from its services and capabilities. I would like to thank Eric Salama, his team and everyone at Kantar for their tremendous contribution to WPP – a contribution that will continue as we develop the business together. This transaction creates value for WPP shareholders and further simplifies our company. With a much stronger balance sheet and a return of approximately 8 percent of our current market value to shareholders planned, we are making good progress with our transformation.”

“Kantar is a market leader in many areas and we are excited to be partnering with its management team and WPP to build on this remarkable platform for growth,” said Luca Bassi, a managing director at Bain Capital Private Equity. “We see many opportunities for expansion and will invest in technology to expand the company’s capabilities and reinforce its global leading position.”

“Our new ownership structure presents a great opportunity for Kantar, our employees and our clients,” said Eric Salama, chief executive of Kantar. “In Bain Capital we have a partner who shares our ambition, brings relevant expertise and – with WPP – can help us accelerate our growth and impact for clients. We are focused on delivering ‘human understanding at scale and speed’ and the ‘best of Kantar’ more consistently. We will do so by investing more in talent and by becoming a more technology-driven solutions provider.”

News: Bain Buys Huge Stake in Market Research Business for $4 Billion

British Airways faces record GDPR fine

BY Richard Summerfield

British Airways is to be fined £183.39m by the UK’s Information Commissioner’s Office (ICO) for data protection breaches.

The fine, as set forth by the ICO, will be the largest penalty handed down since the implementation of the European Union’s (EU’s) General Data Protection Regulation (GDPR). The regulator said the company will have a chance to contest the proposed fine, which is roughly 1.5 percent of airline’s annual revenue of £11.6bn worldwide in 2018, well below the maximum rate of 4 percent that can be applied under the GDPR.

According to the ICO, weak security on the airline’s website allowed users to be diverted away to a fraudulent page, starting in June 2018. The ICO’s investigation found that the incident involved customer details including login, payment card, name, address and travel booking information of around 500,000 users had been harvested.

“People’s personal data is just that – personal,” said Information Commissioner Elizabeth Denham. “When an organisation fails to protect it from loss, damage or theft it is more than an inconvenience. That’s why the law is clear – when you are entrusted with personal data you must look after it. Those that don’t will face scrutiny from my office to check they have taken appropriate steps to protect fundamental privacy rights.”

British Airways, which has subsequently improved its security protocols, has said it will fight the ruling. The airline can appeal against the findings and scale of the fine before a final decision by the ICO. “We are surprised and disappointed in this initial finding from the ICO,” said Alex Cruz, the chair and chief executive of British Airways. “British Airways responded quickly to a criminal act to steal customers’ data. We have found no evidence of fraud/fraudulent activity on accounts linked to the theft. We apologise to our customers for any inconvenience this event caused.”

The ICO noted: “British Airways has cooperated with the ICO investigation and has made improvements to its security arrangements since these events came to light. The company will now have opportunity to make representations to the ICO as to the proposed findings and sanction.”

News: British Airways faces record 183.4 million pounds fine over data theft

CFOs fear Brexit will hit business in long-term, claims new survey

BY Fraser Tennant

A challenging and uncertain macroeconomic environment caused by Brexit fears is weighing on UK companies and their job creation and investment plans, according to a new Deloitte survey.

In its ‘CFO Survey: 2019 Q2’ – which features the views of 79 chief financial officers (CFOs) from 48 FTSE 350 companies –  Deloitte reveals that 83 percent of company chief financial officers (CFOs) say they expect the long-term business environment to deteriorate as a result of the UK leaving the European Union (EU). Furthermore, only 4 percent believe the time is right to take greater risk onto their balance sheets.

In terms of the short-term effects of Brexit, pessimism remains elevated, states the report, with 62 percent of CFOs expected to reduce hiring – the highest level in three years – and 25 percent likely to cut their M&A activity. The survey findings also show a drop in confidence among CFOs, with only 9 percent saying they are more optimistic about the prospects for their company than they were three months ago.

“Events in the last three years, and recent news suggesting the economy shrank in the second quarter, have added to worries about the impact of Brexit,” said Ian Stewart, chief economist at Deloitte. “This is not solely a question of the long-term outlook. Brexit has not happened, but it is acting as a drag on corporate sentiment and spending.”

According to the survey, almost two thirds (62 percent) of CFOs expect to reduce hiring in the next three years as a result of Brexit and almost half (47 percent) expect to reduce capital spending, suggesting a cautious approach from businesses.

“Ironically, risk appetite in the corporate sector has slumped just as it has taken off in the equity market,” added Mr Stewart. “Measures of financial market volatility have declined, even though a majority of CFOs rate uncertainty as being at high or very high levels.”

Furthermore, the survey found that UK companies remain focused on defensive strategies with 52 percent citing cost control as a strong priority. Increasing cash flow is also a strong priority for 43 percent of CFOs, down from 52 percent in Q1.

Richard Houston, senior partner and chief executive of Deloitte North and South Europe, concluded: “Companies are looking for more certainty around our country’s economic future, as they prepare themselves for a post-Brexit environment.”

Report: Deloitte CFO Survey: 2019 Q2

Oil and natural gas firm Exco emerges from Chapter 11

BY Fraser Tennant

With enhanced financial flexibility to support long-term growth, US oil and natural gas exploration firm Exco Resources has successfully completed its financial restructuring and emerged from Chapter 11.

As a result of the Chapter 11 process, the company has reduced its leverage by more than $1.1bn and is moving forward with approximately $325m in committed exit financing from a new credit facility.

Exco originally filed for Chapter 11 in January 2018 due to a sustained downturn in commodity prices and uncertainty in the energy market.

“This is an exciting day for Exco and marks the beginning of the next chapter as an even stronger, more competitive company,” said Hal Hickey, chief executive and president of Exco. “Through the restructuring process, we have significantly improved our capital structure and reduced our debt, and our operations have progressed uninterrupted.”

Headquartered in Dallas, Exco’s principal operations are located in Texas, North Louisiana and the Appalachia region. Following its emergence from Chapter 11, the firm has stated that it will now continue to engage in the exploration, acquisition, development and production of onshore US oil and natural gas properties.

“Our successful emergence from this process is a testament to our former board and talented employees, whose continued focus on our operational initiatives enabled us to execute on our drilling and completion activities while maintaining an exemplary safety record throughout this process,” added Mr Hickey. “I also want to thank our customers, business partners and lenders for their ongoing support. I am honoured to be part of this team and confident our new board will be an asset to Exco as we enter our next stage of business development.”

Now privately-owned, Exco’s shares are no longer available for trading on a public exchange. In accordance with the restructuring plan, Exco’s new five-member board includes representatives from the holders of the firm’s newly issued common stock. The current management team remains in place.

Serving as Exco’s legal adviser during the Chapter 11 process was Kirkland & Ellis LLP. Alvarez & Marsal North America, LLC served as restructuring adviser, with PJT Partners LP serving as financial adviser.

Mr Hickey concluded: “Exco is now better positioned to capitalise on our strong asset base and operational expertise, as we continue enhancing our business and serving our customers, partners and other stakeholders.”

News: US firm Exco Resources emerges from Chapter 11 bankruptcy

Merlin goes private

BY Richard Summerfield

A consortium including private equity giant Blackstone, the Canada Pension Plan Investment Board (CPPIB) and KIRKBI, an investment vehicle controlled by the founding family of the Lego brand, have agreed a deal to acquire Merlin Entertainments for around $7.5bn.

The deal, which will take Merlin off the stock market, is one of the biggest European private equity deals in recent years, and will allow the company to invest more in its assets and deliver on growth plans.

The 455 pence per share offer is the third attempt by the group led by KIRKBI to take Merlin – the theme park operator which runs the Legoland attraction, Madame Tussauds and the London Eye – private, having unsuccessfully proposed a price of 425 pence.

Once the deal has been completed, KIRKBI will own 50 percent of Merlin, while the other half will be jointly owned by Blackstone and CPPIB. The deal will see the consortium assume $1.1bn of Merlin’s outstanding debt.

Shares in Merlin have suffered in recent years; falling below their IPO price following a 2015 accident on a rollercoaster at the firm’s Alton Towers theme park and the 2017 terrorist attacks in London. In May, activist investor ValueAct Capital called on Merlin to take itself private given the level of investment needed in the company. Those calls appear to have been heeded.

For Blackstone and KIRKBI, the deal to acquire Merlin is something of a homecoming. In 2005, Blackstone paid $105m to acquire the company, with KIRKBI also taking a stake in the firm. The company launched a $5.6bn IPO in 2013 which saw Blackstone’s stake in the company valued at over $1bn.

“As the long-term owner of the Lego brand and as a strategic shareholder in Merlin since 2005, we have great pride and passion for this amazing company, its management team and its employees,” said Søren Thorup Sørensen, chief executive at KIRKBI. “With a shared understanding of the business and its culture, we believe that this group of investors has the unique collective resources necessary to equip Merlin, including the Legoland Parks and Legoland Discovery Centres, for their next phase of growth. We are committed to ensuring Legoland and the other activities in Merlin reach their full potential, which we believe is best pursued under private ownership, in order to deliver fantastic experiences to visitors of all ages around the world.”

“We are pleased to partner with KIRKBI and CPPIB to acquire a business we know very well,” said Joe Baratta, global head of private equity at Blackstone. “We are prepared to commit the substantial resources required to support the long-term objectives of Merlin, which will require significant investment to ensure its long-term success. We believe we are uniquely placed through our Core private equity strategy to make this investment alongside our partners at KIRKBI and CPPIB. We look forward to backing Nick Varney and his strong management team in driving Merlin into the future.”

News: Lego family, Blackstone take Merlin private in $7.5 billion deal

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