Perrigo to acquire Omega in $4.5bn M&A deal

BY Fraser Tennant

A major new pharmaceutical M&A deal will see Perrigo acquire Belgian firm Omega Pharma for $4.5bn – a deal which will transform the US consumer healthcare company into a top five global OTC company.

The deal between Perrigo, a leading global provider of quality affordable healthcare products, and Omega Pharma, one of the largest OTC healthcare companies in Europe, is being funded through a combination of cash, debt and equity. It is expected to significantly expand Perrigo’s international presence and provide the Dublin-based manufacturer with a much larger slice of the European over-the-counter healthcare sector.

No stranger to M&A, Perrigo bought the biotechnology company Elan in July 2013 for $8.6bn.

"The combination of these two great companies accelerates Perrigo's international growth strategy, substantially diversifies our business streams and establishes a durable leadership position in the European OTC marketplace," said Perrigo chairman, president and chief executive, Joseph C. Papa.

The Perrigo boss is confident that the deal will: (i) accelerate Perrigo's strategy to expand internationally; (ii) combine Perrigo's supply chain and operational excellence with Omega's OTC branding and regulatory expertise; (iii) create multiple opportunities to cross-sell Perrigo products in diverse new channels; (iv) position Perrigo to capture additional share of the $30bn European OTC market; (v) add approximately 2500 employees, including a large sales team of approximately 1100 individuals; and (vi) provide leadership position in a durable, European OTC cash pay market.

Mr Papa continued "Our strong financial performance and operational structure have enabled the continued growth and globalisation of our business model with Ireland as our gateway for this expansion. Together, our combined company will have an even larger product portfolio, broader geographic reach, and enhanced scale.”

“This is an exciting time in the history of our company,” added Omega Pharma founder and chief executive Marc Coucke. “My continued ownership investment demonstrates my confidence in the potential for the combined company. Together, we will have a substantially broader product portfolio with established global platforms and commercial channels to better serve our customers and patients."

The Perrigo/Omega Pharma deal is expected to close in the first quarter of next year.

Oil & gas M&A market awash with ‘cautious optimism’

BY Fraser Tennant

The oil and gas M&A market is awash with ‘cautious optimism’ according to EY’s new Capital Confidence Barometer. 

The Barometer, EY’s 11th, paints a picture of an increasingly stable global economy which, although still recovering and relatively modest in scale, will lead to an increase in oil & gas M&A activity.

“The issues surrounding the oil & gas M&A landscape are primarily uncertainty and volatility,” said Andy Brogan, global oil & gas transaction Leader at EY. “While the broader economy is increasingly seen as stable, growth is anemic, and has notably slowed oil demand growth.

EY’s survey found that the number of oil & gas executives who believe that the global economy is more secure has doubled in the last 12 months. Executives are now positioning themselves to respond to a market which, although still sluggish, is once again beginning to stir.

“This means more oil & gas assets on the market now than in many past years, but in the buyer’s market, deals are taking longer to close,” believes Mr Brogan. “But as oil prices adjust to a slower global economy, we do see some cautious optimism for deal-making, which is supported by the resilience the market has historically shown.”

Key findings in the Capital Confidence Barometer include:  (i) 94 percent (of oil & gas executives) expect the global economy to improve or at least be stable over the next 12 months; (ii) 53 percent are expecting the oil and gas deal market to improve over the next 12 months; (iii) 68 percent expect that their deal pipeline will increase over the next 12 months, almost double compared to expectations six months ago; and (iv) 53 percent see increased geopolitical instability as the greatest economic risk over the next 12 months, up sharply from six months ago.

Sluggish and uncertain the market may be, but for many oil & gas companies, dealmaking prospects are firmly on an upward trajectory.

Report: Cautious optimism to fuel M&A rebound

Another twist in HP's Autonomy dispute

Hewlett Packard (HP) has revealed its intention to sue the UK arm of accountancy firm Deloitte over its role in HP’s acquisition of British software company Autonomy Plc nearly three years ago.

HP made the announcement during the latest hearing in its protracted and bitter legal dispute with Autonomy’s former executives. The firm’s decision to pursue a case against Deloitte emerged as US Judge Charles Breyer refused to approve part of a settlement reached between HP and the shareholder group which is suing it over the Autonomy acquisition. According to Judge Breyer, HP’s attempt to pay the investors’ lawyers was a "potentially fatal" clause which meant he was not able to agree to the settlement.

A spokesman for HP noted that the company “will continue to work to hold the former executives of Autonomy as well as Autonomy’s auditor, Deloitte UK, responsible for the wrongdoing that occurred.”

Computing giant HP acquired Autonomy in an $11bn deal in 2011, but less than one year later was forced to make an $8.8bn write down on the transaction. HP alleges that the November 2012 write down came as a direct result of a number of accounting improprieties, misrepresentations and disclosure failures carried out by Autonomy and its executives during the acquisition process.

Following an extensive internal audit, HP dramatically revised Autonomy’s 2010 performance and noted that it had discovered “extensive errors – including misstatements” in Autonomy’s accounts, which were audited by Deloitte.

Deloitte has refuted HP’s claims, saying that any case brought against the firm would be “utterly without merit”. Deloitte has noted that neither HP nor Autonomy enlisted its services to carry out due diligence during the sale of Autonomy and that the firm merely served as an auditor to Autonomy at the time of the transaction.

Former Autonomy executives have claimed that the dramatic decline in the unit’s value was a result of poor integration planning on HP’s part, as well as in-fighting within the company’s wider organisation. Autonomy’s founder, Dr Mike Lynch, has also denied any wrongdoing, claiming that the company’s accounts were legitimate as they had been signed off by Deloitte.

News: http://www.cbronline.com/news/hp-to-sue-deloitte-uk-over-autonomy-deal-4354838

Deal completion fails to match M&A appetite

BY Mark Williams

The world’s largest companies are expected to maintain a healthy appetite for M&A over the next six months, according to KPMG’s M&A Predictor, released in August 2014.

Price-to-earnings ratios have climbed 16 percent during the last year. At the same time, corporates are continuing to pay down debt and have an increasing amount of cash with which to fund deals. Although these factors create a fertile environment for dealmaking, appetite and increasing capacity are yet to result in the expected level of deal completions, says KPMG.

Despite the increase in announced deals through Q1 2014, which signals the return of a strong appetite for M&A, deal completions remains static, and the value of these deals continues to fall. Part of this is due to political interference in the deal market, evidenced by the proposed Pfizer deal in the UK and the GE deal in France.

That said, KPMG believes the overall the picture is a positive one. “Appetite remains strong, capacity is going up and we are starting to see an increasing number of deals being announced,” says Tom Franks, KPMG’s Global Head of Corporate Finance. “There is a danger, though, that domestic protectionism, certainly in markets like the UK, France and Canada, could damage the recovery. Furthermore, whilst increasing political instability in North America, the Middle East and Ukraine has not yet appeared to impact sentiment it remains a very real threat,” he added.

Report: KPMG M&A Predictor August 2014

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