Schlumberger and Cameron agree $14.8bn merger

BY Richard Summerfield

Given the current volatility in commodities, it is little surprise that we are beginning to see more M&A activity in the oil and gas space. To that end, Schlumberger Ltd announced this week its agreement to acquire Cameron International Corp in a deal worth around $14.8bn, including the assumption of debt.

Under the terms of the deal, Cameron shareholders will receive 0.716 Schlumberger shares and a cash payment of $14.44. According to a statement released by the two firms, the agreement places a value of $66.36 per Cameron share, a premium of 37 percent to Cameron’s 20 day volume weighted average price of $48.45 per share. The deal has been approved by the board of directors at both firms. Pending shareholder, regulatory and other closing conditions, the transaction is expected to close in the first quarter of 2016.

Regulatory approval could pose an issue for the two companies. In November, Schlumberger's two closest rivals - Halliburton Co and Baker Hughes Inc - agreed to merge in an effort to lower costs in a pressurised market, but the deal was blocked by antitrust authorities in the US. However, the fact that there is little crossover between the services offered by Schlumberger and Cameron may allay any regulatory concerns.

The acquisition of Cameron is an important one for Schlumberger, given the company’s standing as one of the world’s largest producers of energy equipment. In the statement, Paal Kibsgaard, chairman and chief executive of Schlumberger, noted, “This agreement with Cameron opens new and broader opportunities for Schlumberger. At our investor conference in June 2014, we highlighted how the E&P industry must transform to deliver increased performance at a time of range-bound commodity prices. With oil prices now at lower levels, oilfield services companies that deliver innovative technology and greater integration while improving efficiency, which our customers increasingly demand, will outperform the market.”

The proposed merger of the two companies is not the first time they have been associated. In 2012 the firms established a joint venture – OneSubsea - to target the deepwater industry. OneSubsea is a supplier of heavy duty machinery which allows Big Oil firms to control the flows of oil and gas they find and bring it to the surface.

The acquisition of Cameron is expected to help Schlumberger achieve significant synergies, by lowering operating costs, streamlining supply chains and improving manufacturing processes.

Jack Moore, chairman and chief executive of Cameron, said, “This exciting transaction builds on our successful partnership with Schlumberger on OneSubsea and will position Cameron for its next phase of growth. For our shareholders, this combination provides significant value, while also enabling them to own a meaningful share of Schlumberger. Together, we will create a premier oilfield equipment and service company with an integrated and expanded platform to drive accelerated growth. By bringing together Cameron and Schlumberger, we will be uniting two great companies with successful track records, performance and value creation.  We look forward to working closely with Schlumberger to achieve a seamless post-closing integration and long term value for all of our stakeholders.”

News: Schlumberger to buy oilfield gear maker Cameron in $14.8bn deal

Teva to buy Allergan Generics in $40.5bn deal

BY Fraser Tennant

Teva Pharmaceutical Industries Ltd has announced that it has signed a definitive agreement to acquire Allergan Generics in a $40.5bn transaction.

The acquisition - which some analysts are describing as the largest carried out by an Israeli company - brings together two leading generics businesses with complementary strengths, brands and cultures, and will provide patients with greater access to affordable, quality medicines.

Once the acquisition is complete, Teva, which reported net revenues of $20.3bn in 2014, will become one of the largest drug manufacturers in the world.

To be financed through a combination of new equity, debt financing and cash on hand, upon closing, Allergan will receive $33.75bn in cash and shares of Teva valued today at $6.75bn – an estimated under 10 percent ownership stake in Teva.

“This transaction delivers on Teva’s strategic objectives in both generics and specialty,” said Erez Vigodman, president and CEO of Teva. “Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products – both in generics and specialty as well as the intersection of the two."

In sharing a commitment to patient safety and quality, Teva and Allergan aim to create a company which will transform the global generics space all over the world.

"This transaction will accelerate Allergan's evolution into a branded Growth Pharma leader, enable a sharpened focus on expanding and enhancing our global branded pharmaceutical business and strengthen our financial position to build on our proven track-record of value creation led by effective capital deployment," said Brent Saunders, CEO and President of the Dublin-based Allergan.

“We will have the potential to add scale in existing therapeutic areas, expand into new therapeutic areas and geographies and evaluate strategic transformational deals as we continue to build on our position as the most dynamic branded growth pharma company.”

The financial advisers for Teva during the transaction were Barclays and Greenhill & Co, while Sullivan & Cromwell LLP and Tulchinsky Stern Marciano Cohen Levitski & Co served as legal counsel. For Allergen, J.P. Morgan is acting as sole financial adviser and Latham & Watkins LLP is serving as lead legal adviser.

The Teva/Allergan transaction has been unanimously approved by the board of directors of both companies and is expected to close in the first quarter of 2016.

Mr Vigodman concluded: “We look forward to delivering the benefits of this transaction to our stockholders, and better serving patients, customers and healthcare systems throughout the world.”

News: Teva to buy Allergan generic business for $40.5 billion, drops Mylan bid

Anthem poised to acquire Cigna in $54.2bn insurance industry megadeal

BY Fraser Tennant

Anthem Inc. and Cigna Corporation have announced that they have entered into a definitive agreement whereby Anthem will acquire all Cigna’s outstanding shares in a transaction valued at $54.2bn - the largest deal ever seen in the history of the insurance industry.

The combined health services company will cover approximately 53 million medical members with well positioned commercial, government, consumer and specialty businesses, along with a market-leading international franchise.

“We are very pleased to announce an agreement that will deliver meaningful value to consumers and shareholders through expanded provider collaboration, enhanced affordability and cost of care management capabilities, and superior innovations that deliver a high quality health care experience for consumers," said Joseph Swedish, president and chief executive of Anthem.

Expected to become an industry leader due to enhanced diversification capabilities, the united companies will utilise their complementary strengths, including Anthem’s Blue Cross and Blue Shield footprint in 14 states (and Medicaid footprint via its Amerigroup brand in 19 states) with Cigna’s US and global portfolio of health and protection services.

Mr Swedish continued: “We believe that this transaction will allow us to enhance our competitive position and be better positioned to apply the insights and access of a broad network and dedicated local presence to the health care challenges of the increasingly diverse markets, membership, and communities we serve.”

Upon close of the transaction, Mr Swedish will serve as chairman and chief executive of the new entity. David Cordani, currently Cigna’s president and chief executive, will take on the role of president and chief operating officer. Additionally, and effective upon close of the transaction, the Anthem board of directors will be expanded to 14 members with Mr Cordani and four independent directors from Cigna’s current board joining Anthem’s.

“Our companies share proud histories and an even brighter future," said Mr Cordani. “Going forward our new company will deliver an acceleration of innovative and affordable health and protection benefits solutions that help address our health system's challenges and provide supplemental insurance protection, and health care security to consumers, their families, and the communities we share with them.”

Cigna’s financial and legal advisers for the transaction are Morgan Stanley and Cravath, Swaine & Moore LLP, respectively. For Anthem, the financial advisers were UBS Investment Bank and Credit Suisse with White & Case LLP serving as legal adviser.

Although the transaction is expected to close in the second half of 2016, regulatory scrutiny may delay consummation of the deal for a year at least. Adding to concerns is Anthem and Cigna’s lower opening on the New York Stock Exchange following the announcement of the transaction - lost ground which both companies may struggle to regain.

News: Anthem to buy Cigna for $54B in mega insurance merger

Lockheed to buy Sikorsky for $9bn

BY Richard Summerfield

Lockheed Martin Corp announced this week that it had agreed to acquire military and commercial rotary-wing aircraft manufacturer Sikorsky Aircraft from United Technologies Corporation in a deal worth $9bn. The price of the deal will effectively be reduced to around $7.1bn once the tax benefit resulting from the transaction is taken into account.

The transaction, which is subject to the customary closing conditions including regulatory approval, is expected to be completed in Q4 2015 or Q1 2016. “Sikorsky is a natural fit for Lockheed Martin and complements our broad portfolio of world-class aerospace and defence products and technologies,” said Marillyn Hewson, Lockheed Martin’s chairman, president and chief executive in a statement announcing the deal. “I’m confident this acquisition will help us extend our core business into the growing areas of helicopter production and sustainment. Together, we’ll offer a strong portfolio of helicopter solutions to our global customers and accelerate the pace of innovation and new technology development.”

By completing a deal for Sikorsky, Lockheed - the Pentagon’s largest arms supplier - has secured its position as the world’s largest defence company, overshadowing rivals including the defence business of Boeing Co and Northrop Grumman Corp.

Sikorsky manufactures a range of military helicopters, including the Black Hawk, which is utilised by 25 nations for multi-mission support, and the Seahawk, used in marine operations. The company also makes commercial helicopters and fixed-wing aircraft for surveillance and transport missions.

“Exiting the helicopter business will allow UTC to better focus on providing high-technology systems and services to the aerospace and building industries, and to deliver improved and sustained value to our customers and shareowners,” United Technologies president and chief executive Gregory Hayes said in a separate statement.

In addition to the Sikorsky deal, Lockheed also announced a better than expected 4.5 percent rise in quarterly profit this week. The company also said it could spin off or sell its government IT and technical services businesses going forward.

News: Lockheed to buy Black Hawk maker Sikorsky for $9 billion

Celgene and Receptos agree $7.2bn merger

BY Richard Summerfield

On 14 July, Celgene Corp announced that it had agreed to acquire Receptos Inc in a deal worth approximately $7.2bn. The deal continues the trend of major M&A deals in the healthcare sector which has seen more than $250bn worth of M&A since January.

According to the terms of the deal, Celgene will pay $232 per share to acquire Receptos. The agreed price represents a 12 percent premium to the company’s closing price on the day the deal was announced. The transaction was made public after the markets had closed.

By acquiring Receptos, Celgene has gained access to the company’s valuable pipeline of products, most notably its treatment for multiple sclerosis and ulcerative colitis, ozanimod. The drug is currently in late-stage clinical trials with approval possible in 2018 for multiple sclerosis and the following year for ulcerative colitis. According to data from Celgene, ozanimod could generate peak sales of around $6bn annually.

“The Receptos acquisition provides a transformational opportunity for Celgene to impact multiple therapeutic areas,” said Robert J. Hugin, chief executive of Celgene, in a statement announcing the deal.

Celgene too has an impressive portfolio of products, the most prominent of which is the company’s blockbuster cancer treatment Revlimid.

As a result of deal speculation, Receptos has seen its market value nearly double since the turn of the year. AstraZeneca, Gilead Sciences and Teva were all rumoured to be interested in acquiring the company, although none were able to agree a deal.

For Celgene, the acquisition represents business as usual. The company has developed a reputation for M&A transactions to buy up smaller companies or licence their product lines. In 2014, the firm paid $710m to Irish firm Nogra Pharma to gain access to GED-03010, a treatment for Crohn’s disease. In June, the company invested $1bn in Juno Therapeutics, an organisation which manufactures experimental cancer medication.

According to Celgene’s statement, the deal for Receptos will impact the company’s earnings per share up to and including 2017. It will be neutral to earnings per share the following year and add to earnings from 2019 onwards. Celgene intends to finance the deal via a combination of existing cash on hand and new debt. The company intends to raise around $5bn in a bond offering in August.

The deal is expected to close in the second half of 2015.

News: Celgene to buy Receptos for $7.2bn; gains promising drug