$18bn merger sees Willis Group and Towers Watson become one

BY Fraser Tennant

Willis Group Holdings and Tower Watson have announced that they are to merge in an $18bn transaction that will create a major integrated global advisory, broking and solutions provider.

The signing of a definitive merger agreement between the pair - two highly complementary businesses combining in an all-stock merger of equals transaction – will, they say, "create an integrated global platform to drive long-term growth and market share gain in traditional and new businesses".

Upon completion of the merger, Willis shareholders will own approximately 50.1 percent and Towers Watson shareholders will own approximately 49.9 percent of the combined company on a fully diluted basis. The combined company will be named Willis Towers Watson.

The combination is also expected to result in a $100-125m cost saving within three years of closing – due mainly to increased efficiencies and the elimination of duplicate corporate costs and economies.

“These are two companies with world-class brands and shared values," said Dominic Casserley, CEO of Willis. “The rationale for the merger is powerful – at one stroke, the combination fast-tracks each company’s growth strategy and offers a truly compelling value proposition to our clients. Together we will help our clients achieve superior performance through effective risk, people and financial management. We will advise over 80 percent of the world’s top-1000 companies, as well as having a significant presence with mid-market and smaller employers around the world.”

Unanimously approved by both the board of directors of both companies, the combined entity will have approximately 39,000 employees in over 120 countries. 

“Our organisations share a client-first mentality and a focus on providing services and solutions that consistently exceed clients’ expectations," said John Haley, chairman and chief executive of Towers Watson. “As we bring these two companies together, we are confident associates across both organisations will enjoy increased development opportunities as part of a stronger and more global growth company.”

In terms of the leadership structure of Willis Towers Watson, James McCann (previously non-executive chairman of the Willis board) will become chairman; John Haley will be chief executive and Dominic Casserley will be president and deputy CEO. The board will consist of 12 directors in total: six nominated by Willis and six by Towers Watson.

Mr Casserley said: “We look forward to bringing Towers Watson’s innovative solutions to our clients alongside our broking and advisory services. The opportunity to deliver significant savings to our growing middle market client base with Towers Watson’s market-leading private exchange platform is particularly attractive.”

News: Willis Group and Towers Watson merge in $18bn deal

CPPIB to acquire Antares from GE Capital in $12bn deal

BY Fraser Tennant

In a major transaction within the US lending sector, the Canada Pension Plan Investment Board (CPPIB) has agreed to acquire 100 percent of Antares Capital - the sponsor lending portfolio of GE Capital - in a deal worth in the region of $12bn.

The move to acquire Chicago-based Antares Capital, the leading lender to middle market private equity sponsors in the US (provider of more than $123bn in financing over the last five years), is being seen as a highly strategic, long-term platform investment for CPPIB Principal Credit Investments (PCI) group.

With a focus on providing financing solutions both globally and across the capital structure, CPPIB’s PCI group makes direct primary and secondary investments in leveraged loans, high yield bonds, mezzanine, intellectual property and other solutions.

“This acquisition exemplifies our strategy to achieve scale in key sectors through platform investments," explained Mark Wiseman, president & CEO of CPPIB. “It secures a market-leading business that is exceptionally well positioned to deliver value-building investment flows. In doing so, we are advancing the prudent diversification of our investment portfolio, strengthening the Fund even further.”

Upon the closure of the transaction, Antares Capital will operate as a standalone, independent business governed by its own board of directors, effectively retaining the brand that has built up a long and impressive track record in the US middle market lending sector.

“We are excited to partner with CPPIB," said delighted David Brackett, a managing partner at Antares Capital. “We couldn't imagine a better outcome to the sale process for our team or our customers. CPPIB brings deep understanding and knowledge of our market and permanent capital, which will allow us to serve our customers in both good and challenging times.”

The acquisition of Antares Capital, along with the retention of its managing partners, David Brackett and John Martin, will expand and complement CPPIB’s existing Principal Credit Investments portfolio, according to Mark Jenkins, senior managing director & global head of private investments at CPPIB. He said: “With this single transaction, we immediately acquire turn-key scale and a long-term partnership with the best, most experienced management team in the market.”

The Antares Capital transaction, subject to the customary regulatory approvals and closing conditions, is expected to complete during the third quarter of 2015.

News: General Electric to exit banking sector with $12bn sale of finance business

Divestments key to capital strategy, growth

BY Richard Summerfield

In 2014 divestments became one of the most important weapons in the arsenal of corporates. By getting smaller, many firms gave themselves the room, and the financial muscle, to grow.

Increasingly, leading companies are utilising divestments to further their capital strategy and facilitate growth. According to EY’s latest Global Corporate Divestment Study, many more companies are waking up to the benefits of divestitures, with more than half of those firms surveyed - some 71 percent - expected to join the swelling ranks of strategic sellers over the next 12 months.

Much of the renewed interest in divestments as a corporate strategy has been predicated on the return of M&A to the corporate agenda. 2014 saw the level of M&A activity across the global economy achieve pre-financial crisis levels as firms adapt to the shifting sands of modern corporate life, with its complex compliance obligations and rising costs.

Activist investors are also having a significant impact on corporates and their willingness to divest assets. Forty-five percent of executives noted that shareholder activism influenced their decision to divest some of their assets. A unit’s weak performance, position in the market can also trigger a divestment, as can a unit no longer being part of a company’s core business or a need to generate cash.

For those companies that have decided to take the plunge and divest a unit, the process represents an excellent opportunity for growth. Seventy-four percent of respondents said they are using divestitures to fund corporate growth, while 66 percent said they saw an increased valuation multiple in the remaining business after their last divestment.

When undertaking a divestiture, organisation and planning can play a pivotal role in increasing shareholder value. Fifty percent of respondents noted that by starting the preparatory work behind the deal at an early stage, they were able to complete their transaction on time. Taking shortcuts in deal preparation only elongates diligence work, and delays closure times. For divesting firms, speed is the key.

Report: Global Corporate Divestment Study 2015

Strong UK/US axis helps drive resurgence in UK deals market in Q1

BY Fraser Tennant

The UK deals market is experiencing a major resurgence, with Q1 deal volumes up 50 percent on Q1 2014 and total deal values increasing by 96 percent, according to a new deals index published by PwC this week.

The PwC Deals Index, a survey of 103 c-suite private equity and corporate respondents, tracks global deals over £25m involving a UK asset or acquirer. Much of the resurgence in UK deal activity, claims PwC, is due to the number of 'mega deals' and the ongoing availability of capital.

Key findings presented by PwC include the disclosure that although corporate activity was the main driver of growth in terms of deal numbers – accounting for 70 percent growth compared to growth of just 2 percent in private equity led deal numbers – private equity has turned its attention to much larger deals, with average deal sizes rapidly increasing from £97m to £235m in Q1 2015.  

As far as average corporate deal values are concerned, the Index finds them remaining steady at £153m in Q1 - up from £142m in the previous quarter.

“Although headline numbers across all deal sizes showed a decline in this quarter, the market for larger deals was significantly more positive driven by the improving macroeconomic environment, increased market confidence, favourable debt markets and a strong UK/US deals axis," commented Stuart McKee, PwC's head of corporate finance in the firm’s UK deals business.

Despite the positive outlook for the UK deals market highlighted by PwC, many survey respondents stated that they believe the rapid increase in UK M&A activity seen in Q1 will begin to slow later in the year, but that the outlook for Q2 remains positive. In terms of Q2 deals, 36 percent of corporate respondents said that they are likely to make an acquisition in Q2 2015, while 85 percent of private equity respondents made a similar claim.

“Embedded in these statistics are a number of transformational deals led by private equity,” explains John Dwyer, PwC’s global head of deal business. “Our latest research indicates that our survey panel expect deal activity to remain strong for the next six months before tailing off towards the end of 2015.”

Report: PwC Deals Index Q1 2015

CVS and Omnicare in $12bn deal

BY Richard Summerfield

CVS Health Corporation has agreed to acquire Omnicare Inc for a total enterprise value of approximately $12.7bn, including $2.3bn in existing debt. The deal will see CVS pay around $10.4bn, or around $98 per share, in cash. The agreed price represented a 4 percent premium over the company’s closing price on 20 May, the day before the deal was announced.

The two companies expect the deal to be completed near the end of 2015, subject to approval by the holders of Omnicare's common stock, as well as other customary closing conditions, including applicable regulatory approvals.

Omnicare has a burgeoning reputation in the pharmaceutical sector and is a rising firm in the business of prescription fulfilment for diseases including cancer and multiple sclerosis. The firm is also the largest provider of prescription medication to nursing, assisted living and other healthcare facilities in the US.

"The acquisition of Omnicare significantly expands our business, providing CVS Health access into a new pharmacy dispensing channel," said CVS Health's president and chief executive Larry Merlo, in a statement announcing the deal. "It also creates new opportunities for us to extend our high-quality, innovative pharmacy programs to a broader population of seniors and chronic care patients as they transition across the care continuum. We have been impressed by the Omnicare team and what they have created for the patients they serve."

CVS intends to complete the transaction by utilising $13bn of fully committed unsecured bridge financing which has been secured from Barclays Bank. The company also expects to put in place permanent financing in the form of senior notes and/or term loans prior to the closing of the transaction.

The rapidly ageing US population has made the long term care segment of the healthcare system an extremely attractive proposition. As such, CVS’ play for Omnicare positions the company nicely for the future, as healthcare for the elderly is likely to be a considerable growth area moving forward.

News: CVS to expand pharmacy business with $10.1 billion Omnicare buy