Mergers/Acquisitions

Marsh & McLennan to buy JLT for $5.7bn

BY Richard Summerfield

Marsh & McLennan, one of the world’s largest insurance brokers, has agreed to acquire British rival Jardine Lloyd Thompson Group (JLT) for around $5.7bn. The deal, the latest in a series of mergers in the insurance sector, is expected to close in spring 2019, subject to customary antitrust and regulatory approvals, and the approval of JLT’s shareholders.

Under the terms of the deal, holders of JLT's common shares will receive a cash consideration of £19.15 for every JLT share held, a 38 percent premium on the average price of JLT’s shares over the past three months. The total cash consideration equates to $5.6bn in fully diluted equity value, or an estimated enterprise value of $6.4bn. The transaction will be funded by a combination of cash on hand and proceeds from debt financing.

"The acquisition of Jardine Lloyd Thompson creates a compelling value proposition for our clients, our colleagues and our shareholders,” said Dan Glaser, president and chief executive of Marsh & McLennan. “The complementary fit between our companies creates a platform to deliver exceptional service to clients and opportunities for our colleagues. On a personal level, I have come to know, and respect, Dominic Burke and his management team from my time both at MMC and as an underwriter. I am confident that with the addition of the talented colleagues of JLT, Marsh & McLennan will be an even stronger and more dynamic company,” he added.

The deal is expected to achieve annual cost synergies of around $250m within three years of completion, according to Marsh & McLennan, though the realisation of these cost synergies will likely result in one-time integration costs of approximately $375m. In total, Marsh & McLennan expects to cut 2 to 5 percent of the combined company’s jobs. Savings are also expected in real estate and IT operations. Annual revenue is expected to rise to $17bn after the deal closes.

The insurance space has seen a spate of consolidation deals announced this year as the industry grows accustomed to tougher regulations and more attractive prices. In March, AXA agreed to acquire XL Group for $15.3bn, around a month after American International Group said it would buy reinsurer Validus for around $5.6bn.

News: Marsh & McLennan to pay £4.3 billion for British insurance broker JLT

Energy M&A dominates market – EY report

BY Richard Summerfield

Global M&A activity in the power and utilities sector reached a record high of $180bn in the first half of 2018, according to EY’s ‘Power transactions and trends Q2 2018’ report.

Renewables were responsible for nearly half of all deals announced in the second quarter, with 63 contracts totalling $12.9bn announced.

Despite the all-time high in M&A activity, there was a 14 percent decline, quarter-on-quarter, in deal value to $83bn, however.

Momentum also began to gather in the clear energy space .The European Union’s landmark agreement to achieve 32 percent renewable energy consumption by 2030 was particularly noteworthy. Equally, three other renewables deals in the US were announced, totalling $3.8bn.

Developing markets also emerged as an investment destination for traditional M&A. Thailand and India saw $5.3bn and $3.2bn worth of deals respectively. In Estonia,  deals by both domestic and foreign investors reached $600m.

European activity was strong, particularly in the second quarter, with $45.7bn worth of deals recorded, representing 55 percent of total power and utility global deal value. Asia-Pacific saw a 78 percent quarter-on-quarter increase in deal value to $10.3bn. Renewables were the driving force behind this increase, with 25 clean energy deals worth a total of $3.8bn announced during the period.

The majority of transactions in Q2 were in the US, which generated 75 percent of the total deal value for the quarter, of which $21.1bn or 78 percent were domestic deals. Consolidation was a major driving force. For example, Center Point Energy bid $8.1bn for Vectren and NextEra Energy's bid $5.8bn bid for Gulf Power.

“The first half of 2018 reflects a complex deal environment characterised by a changing generation mix and a growing appetite for renewables investment, which will continue to drive the deal agenda into the second half of the year,” said Miles Huq, EY global power & utilities transactions leader.

He added: “Around the world, we are also seeing utilities companies increasingly exploring new technologies, including battery storage, electric vehicle infrastructure and digital grid technologies. With sector convergence on the rise, we are also seeing more non-conventional competitors emerge as the power and utilities landscape continues to undergo transformation.”

Global outbound deal activity was led by China, which accounted for $31.2bn of cross-border energy deals, including the largest deal of the quarter: the $27.4bn takeover bid of Portugal's EDP by China Three Gorges.

Report: Power transactions and trends Q2 2018

TPG and Vodafone Australia combine in merger of equals

BY Fraser Tennant

In a combination that will establish a leading challenger full-service telecommunications provider in Australia, TPG Telecom Ltd and Vodafone Hutchison Australia (VHA) are to merge in a transaction with a pro forma enterprise value of approximately $15bn.  

The merger – a Scheme Implementation Deed (SID) – combines two highly complementary businesses to create a leading integrated, full-service telecommunications company, with a comprehensive portfolio of fixed and mobile products for consumers and enterprises.

It is also envisaged that the merger of TPG, which has Australia’s second largest fixed line residential subscriber base, and VHA, the country’s third largest mobile operator, will create a more effective challenger to Optus and Telstra – the two biggest mobile companies in Australia, with a combined market share of more than 80 percent.

Upon completion, TPG shareholders will own 49.9 percent of the merged group with VHA shareholders owning the remaining 51.1 percent. The merger of TPG and VHA has been unanimously recommended by the board of TPG.

“The merger with VHA represents an exciting step-change in TPG’s evolution, and will benefit both our shareholders and Australian consumers alike," said David Teoh, chairman and chief executive of TPG. “Together TPG and VHA will own the infrastructure required to deliver faster services and more competitive value propositions.” Mr Teoh will be chairman of the merged group while Iñaki Berroeta, currently chief executive of VHA, will be managing director.

“We are joining with TPG from a position of strength and momentum," said Mr Berroeta. “VHA has a track record of reliability, stability and a fantastic customer experience, which has seen the business prosper. Together, TPG and VHA will provide stronger competition in the market and greater choice for Australian consumers and enterprises across fixed broadband and mobile.”

Alongside the merger agreement, TPG and VHA have signed a separate joint venture (JV) agreement to acquire, hold and licence 3.6 GHz spectrum. The JV will not terminate if the merger fails to proceed.

Mr Berroeta concluded: “The combination of TPG and VHA will create an organisation with the necessary scale, breadth and financial strength for the future. The equal terms of the combination preserves the competitive strengths of the two businesses.”

News: Vodafone in $11bn Australian merger

Apollo agrees $2.6bn Aspen deal

BY Richard Summerfield

Investment funds associated with Apollo Global Management have agreed to acquire Aspen Insurance Holdings Ltd in an all-cash transaction valued at $2.6bn.

The deal, which has been approved by Aspen’s board of directors, will see the Apollo Funds acquire all of the outstanding shares of Aspen for $42.75 per share in cash. The transaction is expected to close in the first half of 2019, subject to the approval of regulators and Aspen’s shareholders, as well as the satisfaction of other closing conditions. The funds are paying around a 7 percent premium to Aspen’s closing share price on the day before the deal was announced.

“We are tremendously excited for the Apollo Funds to acquire Aspen,” said Alex Humphreys, a partner at Apollo. “We believe that Aspen benefits from strong underwriting talent, specialized expertise and longstanding client relationships which makes them well positioned in the market. We look forward to working with Aspen to build on the existing high quality specialty insurance and reinsurance business and we aim to leverage Apollo’s resources and deep expertise in financial services to support the company as it embarks on its next chapter.”

“We are delighted to have reached this agreement with the Apollo Funds,” said Glyn Jones, chairman of Aspen’s board of directors. “This transaction, which is the outcome of a thorough strategic review by Aspen’s board of directors, provides shareholders with immediate value and will allow Aspen to work with an investor that has substantial expertise and a successful track record in the (re)insurance industry.”

“This transaction is a testament to the strength of Aspen’s franchise, the quality of our business and the talent and expertise of our people,” said Chris O’Kane, Aspen’s chief executive. “Under the ownership of the Apollo Funds, Aspen will have additional scale and access to Apollo’s investment and strategic guidance, which will help us to accelerate our strategy and take Aspen to the next level. We are excited about the future as we embark on a new chapter in our history with a partner that understands our strengths, culture and customer-centric philosophy.”

Aspen has been up for sale for some time and Apollo has long been touted as a potential acquirer for the company. Aspen reported a loss of about $15m in the second quarter of 2018, continuing its run of poor financial returns. The company has suffered losses in three out of the last four quarters, having been adversely affected by hurricanes, wildfires and earthquakes.

News: Apollo Agrees to Acquire Aspen Insurance for $2.6 Billion

Santos to acquire Quadrant for $2.15bn

BY Richard Summerfield

Santos Ltd, Australia’s second largest independent oil & gas producer, is to acquire privately held Quadrant Energy for at least $2.15bn.

The deal will provide Santos with a strong boost to its domestic natural gas offering as it will gain access to Quadrant’s 80 percent stake in the Dorado oil field, which Quadrant’s partner Carnarvon Petroleum recently called a “truly incredible” oil discovery. The field has been found to have around 171 million barrels of oil, making it one of the biggest discoveries in the region for around 30 years as well as one of the largest oil resources ever found on the North West Shelf.

Under the terms of the deal, Santos has agreed a $2.15bn base price for Quadrant; however, the company has agreed to pay $50m for certified resources of 100 million barrels for the Dorado field, and then $2 a barrel extra for reserves of between 100 million and 125 million barrels, and $2.50 a barrel for reserves above 125 million.

“This acquisition delivers increased ownership and operatorship of a high-quality portfolio of low cost, long-life conventional Western Australian natural gas assets which are well known to Santos, and importantly significantly strengthens Santos’ offshore operating capability,” said Kevin Gallagher, managing director of Santos. “It is materially value-accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier.”

“We have delivered operational excellence, outstanding results in our exploration program and successfully integrated an entire new business model throughout the company,” said Brett Darley, chief executive of Quadrant. “All of this has been achieved with a strong focus on the environment, and the commitment to the health and safety of our people.

“On behalf of Quadrant Energy I would like to say how pleased I am to be part of this agreement with Santos and our business and people are well placed for this exciting new chapter as part of a national and international oil and gas producer.”

The deal for Quadrant, which is 36 percent owned by Brookfield Asset Management Inc and 22 percent by Macquarie Group Ltd, will be funded via existing cash resources and new debt facilities.

According to a statement from Santos, the two companies’ assets overlap in Western Australia, providing synergies estimated at $30m to $50m a year.

News: Australia's Santos expands with $2.15 billion Quadrant buy after spurning takeover

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