LKQ seals Stahlgruber deal

BY Richard Summerfield

American auto parts company LKQ Corporation is to acquire Stahlgruber GmbH from Stahlgruber Otto Gruber AG in a $1.77bn deal, the companies have announced in a statement.

Chicago-based LKQ will fund the deal from planned debt offerings, borrowings under its current credit facility and direct issuance of 8.06 million newly issued LKQ shares to Stahlgruber's owner. The deal is expected to close in the second quarter of 2018.

The acquisition will greatly improve LKQ’s standing in Europe where Stahlgruber is a leading wholesale distributor of aftermarket spare parts for passenger cars, tools, capital equipment and accessories. LKQ will also gain access to Stahlgruber’s extensive sales and manufacturing infrastructure within Europe. Stahlgruber’s facilities include 228 sales centres, six warehouses and an approximately 128,000 square metre advanced logistics centre. The deal is the latest in a string of acquisitions made by LKQ; in 2015, it completed a $1.14bn deal for Rhiag-Inter Auto Parts Italia S.p.A.

“This transformative acquisition solidifies LKQ as a leading Pan-European aftermarket mechanical parts distributor, and further enhances our global diversification strategy,” said Dominick Zarcone, president and chief executive of LKQ. “Stahlgruber has a history of delivering above-market growth and its stellar industry reputation is an ideal fit with our culture; we are extremely proud to welcome the approximately 6600 Stahlgruber employees to the LKQ family. Importantly, we believe that our combined efforts will create tremendous long-term value for our customers and stockholders and growth opportunities for our collective team members.”

John S. Quinn, chief executive and managing director of LKQ Europe, said: “Stahlgruber will create a contiguous footprint and serve as an additional strategic hub for our European operations, allowing for continued improvement in procurement, logistics and infrastructure optimisation. The LKQ Europe management team and I look forward to working with Stahlgruber’s management team and leveraging our combined best practices to maximise the benefits of scale across the continent.”

Heinz Reiner Reiff, chief executive of Stahlgruber, said: “This combination is a natural fit for both LKQ and Stahlgruber. I am very excited about the meaningful benefits that will occur by combining our complementary cultures and industry leading management, which together position Stahlgruber to achieve the continued growth of its European businesses. Our acceptance of LKQ shares as part of the consideration emphasises our belief in the value of this combination.”

The automotive parts sector has seen considerable activity recently, which may have spurred LKQ into action. In September, the firm’s largest rival, Genuine Parts, entered a definitive agreement to acquire the Alliance Automotive Group for $2bn.

News: LKQ to buy German car parts retailer Stahlgruber in $1.8 billion deal

Dealmaking deluge due – Deloitte

BY Richard Summerfield

Domestic mergers and acquisitions (M&A) activity in the US is expected to pick up in 2018, following a fairly subdued 2017, according to a new report from Deloitte.

Deal activity in 2017 has been largely stymied by economic, political and regulatory uncertainty, as well as market volatility, and unrealistic valuations. However, according to respondents to Deloitte’s fifth M&A trends survey, many of these fears will begin to diminish moving forward, resulting in increased dealmaking activity and increased deal values.

Both in the number of deals and the size of transactions, Deloitte expects 2018 to be a bumper year for M&A. Of the 1000 US corporate dealmakers and private equity firms surveyed for ‘The State of the Deal: M&A Trends 2018’ report, around 68 percent of corporate executives and 76 percent of private equity leaders expect to see an increase in deal volume over the next 12 months. Additionally, most respondents believe deal size will either increase or stay the same in 2018, compared with deals brokered in 2017.

Technology-based dealmaking was recognised as the biggest potential driver of corporate M&A transactions, rising from 6 percent in the spring 2016 survey to 20 percent in this survey.

"There are strong signals that corporations and private equity firms are targeting bigger deals and anticipating brisker activity in 2018," said Russell Thomson, managing partner of Deloitte's US M&A services practice. "The appetite for technologies like machine learning, robotics, artificial intelligence and advanced analytics is large and growing. We're seeing some organisations buy smaller tech companies to enable strategic growth and others — typically companies well outside of the tech sector — actively looking to converge their businesses with tech companies to achieve marked transformation."

Away from the tech space, expanding customer bases in existing markets, and expanding and diversifying products and services, are set to be leading drivers of M&A deals. Among other positive factors, the Deloitte report notes that cash reserves are up significantly for potential acquirers, and that the primary intended use of that cash is for acquisitions.

Divestitures should also be a major focus in 2018. Seventy percent of survey respondents noted that their company plans to divest businesses next year. This rush of unit shedding will be driven by financing needs and strategy shifts.

Report: The state of the deal: M&A trends 2018

Toys R Us to close 26 UK stores putting 800 jobs at risk

BY Fraser Tennant

In another blow for the beleaguered toy retailer giant, Toys R Us has announced that it is to close 26 stores in the UK as part of a process to transform the business and make it fit to meet the evolving needs of customers in today’s UK retail market.

Under the UK Company Voluntary Arrangement (CVA) process, the toy chain has submitted a comprehensive operational and financial restructuring plan to its creditors and will solicit their approval of this plan over the coming weeks. 

If approved, the CVA would substantially reduce the UK company’s rental obligations and allow the company to move to a new, viable business model. The store closures, which may put more than 800 jobs at risk, are expected to commence in Spring 2018.

The toy retailer giant currently employs 3200 people in the UK.

The CVA process will not impact any Toys R Us entities or stakeholders outside the UK, including employees, vendors and customers. The company's approximately 1600 stores around the world, including all stores in the UK, are currently open for business and continuing to operate as usual.

“All of our stores across the UK remain open for business as normal through Christmas and well into the New Year,” said Steve Knights, managing director of Toys R Us UK. “Customers can also continue to shop online and there will be no changes to our returns policies or gift cards across this period.”

During 2018, the plan is for Toys R Us to make changes to the store estate as it moves to a new business model for future growth and profitability.

Mr Knights continued: “Our newer, smaller, more interactive stores are in the right shopping locations and are trading well, while our new website has generated significant growth in online and click-and-collect sales. But the warehouse style stores we opened in the 1980s and 1990s, while successful in the early days, are too big and expensive to run in the current retail environment.”

As a result of a heavy debt load and a consumer switch toward online shopping, in September 2017, Toys R Us voluntarily filed for Chapter 11 bankruptcy protection in the US and Canada.

Dave Brandon, chairman and chief executive of Toys R Us, concluded: “As we continued to work through the financial restructuring process, we hope to receive authorisation to restructure our UK lease obligations so that we will be better able to invest in our UK business.”

News: Toys R Us to shut 'at least' 26 UK stores

Wallet watchers: consumer spending under the spotlight in new report

BY Fraser Tennant

Providing businesses with deeper insights into consumer behaviour across the globe and pinpointing the drivers of choice that open and close the customer wallet is a new report released by KPMG.

In the inaugural ‘Me, My Life, My Wallet’ report, KPMG  analyses how the seismic influences of sociopolitical and economic shifts, accelerated mass adoption of new technologies and mobility are upending fundamental beliefs around what drives consumer behaviour.

The KPMG report also unveils a new customer engagement framework designed to help businesses understand the increasingly complex and multidimensional forces that influence decision making and preferences of today's and tomorrow's consumer. 

The framework is based on what KPMG calls the ‘Five Mys’ (which focus on five behavioural drivers – My Motivation, My Attention, My Connection, My Watch and My Wallet), Customer Wallet (fresh thinking on our changing relationship with money) and Generational Surfing (a new perspective on how those life event drifts can help businesses anticipate changing needs and preferences). The customer engagement framework goes deeper than just the analysis of data through a single lens.

From millennials to baby boomers, the framework helps businesses to assess the drivers of consumer decision making by looking at the multiple factors that influence people's everyday lives. Together, the three dimensions of the framework – behavioural, financial and demographic ─ help deliver a more comprehensive, 360-degree view of a consumer.

“Every day, new influences impact consumer motivation, behaviour and consumption and these forces are upending the conventional predictors of when, why and for what the customer wallet opens,” said Willy Kruh, global chair of KPMG's consumer and retail practice, and a partner with KPMG in Canada. “Transactional data, traditional market research and demographic profiles alone are proving inadequate to explain not just what customers are doing, but why.”

The report is based on a survey of 10,000 people across the US, UK, India and China,  using comprehensive, customer-focused research methodology.

Mr Kruh concluded: “It is time for an industry reset that re-orients us to understand what drives consumer engagement today. This calls for a new, intelligent, multi-dimensional model that uses predictive insights to help companies understand the customer journey and who their customers truly are.”

Report: Me, My Life, My Wallet

Time has come for Meredith

BY Richard Summerfield

After a number of failed attempts to complete a deal for the company, American media conglomerate Meredith Corporation has announced that it is to acquire Time Inc. in an all cash deal worth $2.8bn, including the assumption of debt and net of cash acquired.

Under the terms of the deal, Meredith will pay around $18.50 per Time share to acquire the company. The $18.50 per share price represents a 46 percent premium over Meredith’s closing price on 15 November 2017, the day prior to media reports about the transaction, and a 66 percent premium over the company’s 10-day volume weighted average trading price ending on that day.

Meredith had made a number of attempts to acquire Time Inc over the last four years but was unable to complete the deal, until now. Pending the customary closing conditions and regulatory approval, the transaction is expected to complete during the first quarter of 2018.

"We are creating a premier media company serving nearly 200 million American consumers across industry-leading digital, television, print, video, mobile, and social platforms positioned for growth," said Meredith chairman and chief executive Stephen M. Lacy. "We are adding the rich content-creation capabilities of some of the media industry’s strongest national brands to a powerful local television business that is generating record earnings, offering advertisers and marketers unparalleled reach to American adults. We are also creating a powerful digital media business with 170 million monthly unique visitors in the US and over 10 billion annual video views, enhancing Meredith’s leadership position in reaching millennials."

John Fahey, chairman of Time, said, "Time Inc.’s board of directors has unanimously determined that this all-cash transaction, and the immediate, certain value it provides, is in the best interests of the company and its shareholders. On behalf of the entire board, I thank Rich Battista for his strong and exemplary leadership. We also thank the management team and all Time Inc. employees, who together have made significant progress transforming one of the world’s most iconic and historically significant publishing companies into a leading multiplatform media enterprise."

The deal will be partly financed by a $650m investment by Koch Equity Development. Meredith will also be using $3.55bn in financing commitments obtained from a variety of lenders, the company said in a statement.

News: Meredith to buy U.S. publisher Time in Koch-backed deal

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