Freescale and NXP to form $40bn firm

BY Richard Summerfield       

NXP Semiconductors N.V. and Freescale Semiconductor Ltd this week announced a $16.7bn merger, including the assumption of debt, which will create a firm with a total enterprise value of $40bn.

Under the terms of the deal, NXP will pay $6.25 in cash and 0.3521 shares of NXP stock for each share of Freescale stock. In a statement announcing the transaction, NXP confirmed that the deal will be funded with $1bn in cash and a $1bn debt offering, in addition to around 115 million new NXP shares.

“Today’s announcement is a transformative step in our objective to become the industry leader in high performance mixed signal solutions. The combination of NXP and Freescale creates an industry powerhouse focused on the high growth opportunities in the Smarter World. We fully expect to continue to significantly out-grow the overall market, drive world-class profitability and generate even more cash, which taken together will maximize value for both Freescale and NXP shareholders,” said Richard Clemmer, NXP’s chief executive officer in a statement announcing the deal.

The deal will create an industry heavyweight with about $10bn in annual sales. The largest producer of analogue chips, microcontrollers and other types of semiconductors, Texas Instruments, had sales of around $13.05bn in 2014.

Although the deal has been unanimously approved by the boards of directors of both companies, it is still subject to regulatory approvals in various jurisdictions and customary closing conditions. The deal, expected to close in the second half of 2015, must also be approved by shareholders. Once the merger has been completed, Freescale’s shareholders will own around 32 percent of the new firm. NXP’s stockholders will hold the remaining 68 percent.

The transaction will see a conglomerate of private equity investors, including Permira, Blackstone, Carlyle and TPG Capital, complete a partial exit of Freescale, acquired by the consortium in 2006 for $17.6bn. The group currently owns 64 percent share of Freescale. Once the deal has been finalised, the private equity firms will still hold around 19.1 percent of the merged company.

News: NXP to buy Freescale Semiconductor to create $40 billion co

M&A activity in 2015 to yield continued growth for utilities and financial investors

BY Fraser Tennant

M&A activity throughout 2015 will yield continued growth for utilities and financial investors according to the latest Power and Transactions Trends report published by EY.

As well as predicting another robust year for the M&A transactional landscape, EY’s report – ‘Power transactions and trends: global power and utilities transactions review’ also takes a look back at 2014 – a pivotal year for the global power and utilities (P&U) sector.

EY expects M&A activity throughout 2015 to be shaped by the following criteria: (i) low power prices have made unregulated generation unprofitable for some diversified utilities - this, along with the recent price recovery, coupled with the resulting declining reserve margins in the near term in many regions, points to an active IPP market; (ii) large diversified utilities are streamlining operations by focusing on stable regulated assets, as well as consolidating positions through acquisitions in high-growth regions;  (iii) in a bid to hedge against commodity price volatility, utilities are likely to shift some investment focus towards vertical integration by acquiring midstream and upstream assets; (iv) as more countries implement policies in support of renewable energy, this will lead to heightened M&A activity in this space across all regions; (v) the urgent need for increased levels of electrification will see emerging markets, such as Africa, Mexico, India, Chile and Brazil, present significant opportunities for global investors; and (vi) financial buyers, including pension funds, are increasingly investing in the P&U sector, particularly in infrastructure fund investments.

The EY report also projects that market reforms will drive activity in Japan, Mexico and Africa during 2015, attracting many of the world’s biggest power and utilities investors.

“In 2015, we expect to see Japan and Mexico grow further, and we are calling out Africa as the next area of growth, as governments alter structural arrangements to welcome new entrants,” said Matt Rennie, EY’s global TAS power & utilities leader. “Africa faces tremendous challenges and opportunities in its quest for greater levels of electrification, and, in turn, economic prosperity.

“As always, we expect consortia based entry strategies will best navigate local business and legislative regimes, a tactic which offers opportunities for both inbound and domestic utilities.”

Report: Power transactions and trends: global power and utilities transactions review

Axis Capital & PartnerRe Ltd agree $11bn merger

BY Richard Summerfield

Axis Capital Holdings Ltd and PartnerRe Ltd announced on 25 January that the two firms had agreed to an $11bn merger which will reshape the reinsurance market by creating the world’s fifth largest global reinsurer.

As a result of the deal, the amalgamation of the two firms will create a speciality insurer and reinsurer with more than $7bn in combined gross premiums written and over $14bn in available capital. The firm will also have a speciality insurance arm with around $2.5bn in gross premiums.

The transaction, which is being treated as a merger of equals, has been unanimously approved by the boards of both Axis and PartnerRe, and is expected to close in the second half of 2015, pending the approval of the two company’s shareholders. In a statement announcing the deal, it was confirmed that PartnerRe and Axis Capital’s shareholders will own approximately 51.6 percent and 48.4 percent of the combined company, respectively.

The combined firm will be headquartered in Bermuda, where Axis and ParterRe are already based. The new firm will maintain a presence across five continents, including offices across 39 different locations employing around 2300. As a result of the merger, the newly combined firm expects to achieve considerable annual cost savings of around $200m in the first 18 months of operations. With duplicate offices in various locations including New York, Bermuda and Ireland, there will likely be a number of job losses, though how many are at risk has not been disclosed.

Axis’ incumbent chief executive Albert Benchimol will take up the same post with the newly combined company. PartnerRe’s chairman Jean-Paul L. Montupet will serve as non-executive chairman, while current Axis chairman Michael Butt will serve as the new company’s chairman emeritus.

In a statement, Mr Benchimol expressed his pleasure at having agreed the considerable merger. “This transformational combination will leverage the complementary strengths of both companies and create an organisation with the size and breadth to enhance product and service offerings, maximise growth opportunities, optimize portfolios, and deliver both economies of scale and capital efficiencies” said Mr Benchimol. “The combined company will have three strongly positioned businesses – a top-five global reinsurer, a $2.5bn speciality insurance underwriting business, and a highly successful and growing life, accident and health franchise – all with increased strategic flexibility.  As a top five global reinsurer with leading positions in a number of specialty lines, we will be strongly positioned to turn the challenges presented by the structural changes in the reinsurance market into opportunities.”

News: Two Big Reinsurers, PartnerRe and Axis Capital, Merge in $11 Billion Deal

$3.6bn M&A deal sees Thoma Bravo and TPC acquire Riverbed

BY Fraser Tennant

Private investors Thoma Bravo LLC and Canada’s Teachers' Private Capital (TPC) have announced the acquisition of Riverbed Technologies for $3.6bn.

The definitive agreement between leading private equity investment firm Thoma Bravo, network performance specialist Riverbed, and the pension administrator Teachers' Private Capital is expected to close in the first half of 2015.

The deal represents the largest undertaken in Thoma Bravo’s 30-year history.

"Riverbed’s strong product portfolio provides unmatched optimisation, visibility and control across the hybrid enterprise, which has positioned the Company extremely well in a rapidly-changing landscape,” said Orlando Bravo, a managing partner at Thoma Bravo. 

“We look forward to working with the talented team at Riverbed to strengthen their leadership position and the value they deliver to customers. All of us at Thoma Bravo are excited to help Riverbed reach its full potential."

According to Riverbed’s management team, the change in ownership will not have an overly noticeable impact on the company’s product range nor its relationship with its customers.

An enthused Jerry Kennelly, chairman and chief executive of Riverbed, who will remain with the company in the same capacity post-transaction, said “Having undertaken a thorough strategic review, during which we assessed a wide variety of options to maximise value, the Board unanimously concluded that partnering with Thoma Bravo was the best choice for Riverbed, as this transaction will provide our stockholders with significant and immediate cash value."

"We are extremely pleased with this transaction, which we believe will be a winning proposition for all of our stakeholders."

The transaction, which is subject to approval by Riverbed stockholders, regulatory approvals, including antitrust review in the US, Germany and Taiwan, and review and clearance by the Committee on Foreign Investment in the US, will, upon completion, see Riverbed stockholders receive $21 per share in cash.

Commenting on the deal, a forward-looking Karl Campbell, Riverbed’s recently appointed vice president for the UK and South Africa, said “I think it’s a very good thing for Riverbed, it gives us an opportunity to reset our strategy for the next ten years."

News: Riverbed sold to investors for $3.6bn

$6.1bn M&A deal sees LabCorp buy Covance

BY Richard Summerfield

A $6.1bn M&A deal which has seen Laboratory Corporation of America Holdings (LabCorp) agree to buy Covance Inc  will result in a major new company providing services to physicians, pharmaceutical companies and patients.

The deal will see LabCorp’s current chief executive officer, David King, lead the newly combined company, while Covance’s chairman and chief executive , Joe Herring, will continue to operate Covance as a division of LabCorp.

LabCorp and Covance are headquartered in North Carolina and Princeton respectively.

“As a combined company, we will be well positioned to respond to and benefit from the fundamental forces of change in our business, including payment for outcomes, pharmaceutical outsourcing, global trial support, trends in pharmaceutical R&D spending, personalised medicine, and big data and informatics,” said Mr King.

Mr King believes that the acquisition of Covance will result in cost reductions of around $100m annually within three years of closure, positioning LabCorp as the world’s leading healthcare diagnostics company.

Covance’s Joe Herring is equally sure as to the solidity of the deal. He said “Covance generates more safety and efficacy data for the approval of innovative medicines than any other company in the world, and LabCorp has longitudinal diagnostic data from more than 75 million patients.

“This combination leads the way to more cost-effective healthcare by improving the safety and efficacy of drug therapies, enabling accurate patient diagnostics, and advancing evidence-based medicines which will enable our clients to substantiate the value of their products and services to patients and payors.”

The deal, however, has attracted criticism from some analysts with the apparent incompatibility of the two firm’s businesses being a bone of contention: LabCorp’s core business entails the processing of patient samples for doctors and hospitals while Covance assists drug manufacturers with the running of clinical trials for their new products.

Although still subject to various approvals, the transaction is expected to close in the first quarter of 2015.