Telecoms giants Orange and Bouygues in $10bn merger talks

BY Fraser Tennant

Following months of speculation, France-based telecommunications giants Orange and Bouygues Telecom have confirmed discussions surrounding a potential merger – a combination that, if it goes ahead, would account for approximately 50 percent of the French mobile and fixed telecoms market.

Although there has been no official statement made as to what a deal may be worth, according reports by MarketWatch earlier this week, Orange has made an offer totalling €10bn ($10.9bn), a submission comprising €8bn in shares and €2bn in cash.

A confidentiality agreement between Orange and Bouygues means that detailed comment from either party has thus far been thin on the ground, but in a statement an Orange spokesperson said that “discussions are not limited by any particular calendar and hold no commitment to any particular predefined outcome".

Furthermore, Orange indicated that it was “exploring the opportunities available within the French telecoms market, while keeping in mind that its investments and its solid position afford it a total independence in its approach".

In an equally sparse statement, Bouygues related that it was “interested in opportunities that would enable it to bolster its long-term presence in the telecoms sector” and would “invest momentum” within a sector which it believes must remain strong to serve the best interests of the consumer.

Much of the merger talk is believed to be due to the disruptive effects of a price war sparked by the entry of a fourth mobile operator – Free Mobile (owned by Iliad SA) – into the French market in 2012. Orange, by way of acquiring Bouygues, hopes to reduce competition, allowing it to invest in high-speed mobile and cable networks and compete with their counterparts in the US and Japan.

However, within a highly fragmented European cellphone market, any attempt at a merger by Orange (the biggest operator in France with 28 million customers) and Bouygues (the third biggest operator with 14 million customers) will require the approval of antitrust authorities and involve the disposal of significant assets.

Should the move by Orange to acquire Bouygues come to pass, analysts believe that the combined company’s market capitalisation could reach €50bn – around 20 percent more than the current value of Orange.

Keeping its cards close to its chest, Orange also stated that it will act solely in the interests of its shareholders, its employees and its customers and be particularly vigilant with regards to the value created through any resulting project.

News: Orange in Talks to Acquire Bouygues Telecom

Mega deals dominate in 2015

BY Richard Summerfield

2015 was the year of the mega deal. Last year there were more than 67 announced deals valued at $10bn and above for a combined total in excess of $1.86 trillion, according to Dealogic.

2015’s mega deal volume more than doubled 2014's $803.4bn total. Furthermore, the number of such deals surpassed the previous record of 48 set in 2006. Transactions valued at $50bn or more in 2015 totalled around $730bn.

Many of the mega deals completed last year were the largest ever deals in their particular sector, including the tie up between Dow Chemical and DuPont. Pfizer's $160bn merger with Allergan is the largest healthcare deal in history, and the second-largest deal of any type on record.

The revival of the mega deal was part of a larger resurgence in general M&A activity over the last 12 months. Indeed, 2015 was a bumper year for deal making, with more than $4 trillion worth of announced deals.

The Americas was the most fertile region for mega deal activity, with around 50 deals announced in the region for a total value of $1.40 trillion. This is even more remarkable considering the region's previous record, set in 2014, of 19 mega deals for a total value of $512.1bn. Elsewhere EMEA and the Asia Pacific regions saw nine and eight deals respectively, for combined totals of $301.2bn and $171.8bn.

Global M&A volume has been on an upward trajectory since 2012, however the increase seen between 2014 and 2015 was remarkable.

It is not just the firms involved that have benefitted from the resurgence in mega deals; investment banks also enjoyed a bumper 2015. Fees from completed M&A advisory increased globally. According to Dealogic, Goldman Sachs led the global M&A advisor ranking in 2015 with $1.76 trillion. Morgan Stanley and JPMorgan also enjoyed a successful year with $1.50 trillion and $1.49 trillion respectively.

Report: Dealogic – M&A Statshot

Record breaking year for M&A

BY Richard Summerfield

2015 was a momentous year for M&A activity, with mega-deals once again a key feature of the corporate landscape.

New data from Thomson Reuters suggests that M&A activity totalled $4.2 trillion in 2015, breaking the all time annual record thanks to a 42 percent increase over 2014’s record. Mega deals were undoubtedly the driving force behind the impressive figures recorded this year.

"It's the most prolific year that we've ever seen since we began tracking M&A in 1980," said Matthew Toole, Thomson Reuters’ Director of Deals Intelligence. "Companies are looking for revenue growth, they're also looking to streamline and get rid of businesses that are non-core.

"And as companies consolidate at the top, it filters down to other companies looking to see what do we need to do to compete in this landscape," he added.

According to Thomson Reuters, the $191.5bn merger of Pfizer and Allergan was the deal which pushed 2015 past 2007’s record of $4.1 trillion. The healthcare and pharmaceutical sectors were two of the most prolific for deal activity, seeing $649.4bn and $415.6bn worth of deal activity respectively.

In the context of recent years, 2015 was a show stopping year for both industries. The $649.4bn worth of deals recorded in the healthcare space equates to more than the previous two full years worth of deals combined. For the pharma sector, 2015 exceeded the combination of the last three full years combined.

Financial engineering played a significant role in the success of some of the bigger deals in the pharma and healthcare spaces. Inversion deals, which have angered politicians on both sides of the aisle in the US, have continued to be a major factor in US deal making. Pfizer took advantage of an inversion to relocate to Ireland, and substantially reduce its tax bill.

Away from the pharma and healthcare industries, there were a number of other impressive deal making hauls. Though the number of announced deals globally declined from 2014 by 2.1 percent to 39,687, there was record M&A activity in five sectors: healthcare, consumer products, retail, technology and industrials.

Furthermore, for the first time ever, there were three consecutive trillion-dollar-plus quarters in 2015, thanks to large deals including the Pfizer/Allergan tie up and Anheuser-Busch InBev's planned $120.8bn merger with SABMiller.

However, 2016 is likely to be a more challenging year. With political uncertainty likely and further interest rate increases expected, we may see a drop in deal making.

Report: Thomson Reuters Deals Insight M&A 2015

Qihoo 360 to go private in $9.3bn deal

BY Richard Summerfield

Chinese internet company Qihoo 360 Technology Co. Ltd has announced that it has agreed a $9.3bn all cash deal to be taken private by a group of investors led by the firm’s chairman Hongyi Zhou. The deal for the company, which is expected to close in H1 2016, includes around $1.6bn worth of debt. The investor’s offer for the company has already won the approval of Qihoo’s board of directors; however the transaction is still subject to the customary closing conditions.

The company will become the latest in a number of US listed Chinese tech firms to have been taken private, which has become a feature of 2015. Indeed, as of mid November 2015 around 33 mainland Chinese companies listed on US exchanges had announced more than $40bn worth of privatisation and de-listing deals. Chinese firms including Shanda Games Ltd and medical R&D services provider WuXi PharmaTech have been among those de-listing in the US. For Chinese executives and investors it is considerably easier to target US listed companies as they tend to be cheaper than Chinese traded businesses.

The deal was first mooted in June 2015 by Mr Zhou and will see an investor group including Citic Guoan Group, Golden Brick Silk Road Capital, Sequoia Capital China, Taikang Life Insurance, the Ping An Insurance Group, Sunshine Insurance, New China Capital, Huatai Ruilian, and Huasheng Capital take control of the company.

Under the terms of the offer each class A and class B share in China will be exchanged for $1.33 in cash, and each American depositary share will be exchanged for $77. The price offered for the company represents a 16.6 percent premium on the closing price of Qihoo’s American depositary shares and a 32.7 percent premium to the average closing price of the company’s depository shares in the 30 days before the proposal.

The consortium has announced that it intends to finance the deal using contributions from the investors, as well as a committed term loan of up to $3bn, as well as a bridge loan of $400m. For the investor group to have raised the cash that it has, the Chinese economy is a particularly impressive feat. Stock market volatility has been considerable in 2015.

However Qihoo’s brand in China is strong, and for the investor group the company’s is an extremely attractive proposition. Over the course of the last eight quarters the company has met or exceeded each of its revenue and earnings estimates. Equally Qihoo’s stock has climbed 27.5 percent throughout 2015.

NEWS: Qihoo 360 to be taken private in $9.3bn deal

SOURCE: http://in.reuters.com/article/qihoo-360-ma-idINL3N1473SM20151218

Newell Rubbermaid and Jarden combine to create $16bn consumer goods giant

BY Fraser Tennant

Consumer goods giants Newell Rubbermaid Inc. and Jarden Corporation have announced their intention to join forces to create a new $16bn company: Newell Brands.

Newell Rubbermaid, an S&P 500 company, is a global marketer of consumer and commercial products with 2014 sales of $5.7bn and a strong portfolio of leading brands. Jarden Corporation, a diversified, global consumer products company, has an extensive portfolio of over 120 trusted and authentic brands.

The combination of the two companies’ portfolios is expected to accelerate existing business plans in food & beverage, baby products, commercial products, kitchenware & appliances across large, growing and unconsolidated global markets that exceed $100bn.

Under the terms of the agreement, Jarden shareholders will receive $21 in cash for each Jarden share and 0.862 of a share in Newell Rubbermaid stock at closing. Once the transaction is complete, Newell Rubbermaid shareholders will own approximately 55 percent of the company.

Additionally, Newell Rubbermaid anticipates incremental annualised cost synergies of approximately $500m over four years, driven by efficiencies of scale and new efficiencies in procurement, cost to serve and infrastructure.

 “The combination of these two great companies creates a $16bn consumer goods company with incredible potential to grow and create value,” said Michael B. Polk, current president and chief executive of Newell Rubbermaid, who will lead Newell Brands upon the closing of the transaction. “The scale of our combined businesses in key categories, channels and geographies creates a much broader canvas on which to leverage our advantaged set of brand development and commercial capabilities for accelerated growth and margin expansion.”

The transaction, expected to close in the second quarter of 2016, is subject to approval by shareholders of both Newell Rubbermaid and Jarden, receipt of regulatory approvals and other customary closing conditions.

“I am delighted that we are to play a part in bringing together these two winning companies," said Martin E. Franklin, executive chairman and founder of Jarden. “The combination offers significant value for our shareholders and the opportunity to participate in the combined company’s long-term value creation potential as shareholders in Newell Brands.”

Eyeing the opportunities ahead, Mr Polk said: “I look forward to working with Martin as we drive the new Newell Brands towards its aspiration of becoming one of the preeminent consumer goods companies in the world.”

News: Newell Rubbermaid to Acquire Jarden for $15 Billion