Johnson & Johnson to acquire Vogue International for $3.3bn

BY Richard Summerfield

American multinational Johnson & Johnson has announced that it is to acquire haircare company Vogue International in a $3.3bn all cash deal.

The deal, which is subject to customary closing conditions, is expected to close in the third quarter of 2016 and is Johnson & Johnson’s biggest deal for four years. In 2012 the company paid $18bn for Synthes Inc - a deal which represented the company’s largest ever transaction.

Private equity firm Carlyle Group, which owns a 49 percent stake in Vogue (a holding which it acquired for $400m in 2014) is set to quadruple its initial stake through the deal. Vogue’s founder, Todd Christopher, who owns the remaining 51 percent stake in the company, will become a billionaire as a result of the sale.

Sandra Horbach, Carlyle managing director and head of the company’s consumer & retail team, said in a statement: “It has been a privilege to partner with Todd and to support his efforts to develop and launch innovative products, strengthen and grow the organisation, advance sustainability practices, and reach new customers all around the world with the OGX brand. Johnson & Johnson Consumer Inc. will be a great new home for Vogue.”

The deal, once completed, will add a number leading haircare brands, such as OGX shampoos and FX hair styling products, to Johnson & Johnson’s consumer portfolio that already includes globally recognisable brands, including Neutrogena and Clean & Clear. Though the company is perhaps best known for its sales of drugs and medical devices, Johnson & Johnson’s consumer brands are also a key part of its offering. Indeed, Johnson & Johnson has been revamping its consumer division of late. Consumer products accounted for around 19 percent of the company’s sales last year.

Given that Vogue’s estimated annual sales are in the $300m range, the acquisition could be a notable one for Johnson & Johnson. “Our acquisition of Vogue International's full line of leading advanced hair care products sold in the US and in 38 countries will strengthen our global presence in this important category. Vogue International's commitment to quality, innovation, and consumer preference complement our Consumer portfolio, while also presenting attractive hair care category growth opportunities for Johnson & Johnson," said Jorge Mesquita, worldwide chairman of consumer goods at Johnson & Johnson.

News: J&J to buy hair care products maker Vogue for $3.3 billion

Bayer launches $62bn Monsanto bid

BY Richard Summerfield

German pharmaceutical and chemical powerhouse Bayer AG has launched a $62bn all cash takeover bid for US seeds firm Monsanto Co. A merger between the two would create a “global agriculture leader”, Bayer announced in a statement.

According to Bayer, the $122 per share cash offer for Monsanto represents a 37 percent premium over the company’s closing price on 9 May, the day before rumours of Bayer’s interest in the firm emerged. Under the terms of the proposal, the deal would be funded by a combination of debt and equity, with about 25 percent of the enterprise value coming from selling shares to existing investors.

However, the likelihood of the offer being accepted by Monsanto’s shareholders remains unknown. Last week, a Monsanto shareholder was keen to dismiss Bayer’s interest in a deal as nothing more than "arrogant empire-building".

In the statement announcing its interest in the firm, Bayer’s chief executive Werner Baumman said, “We have long respected Monsanto’s business and share their vision to create an integrated business that we believe is capable of generating substantial value for both companies’ shareholders. Together we would draw on the collective expertise of both companies to build a leading agriculture player with exceptional innovation capabilities to the benefit of farmers, consumers, our employees and the communities in which we operate.”

According to Bayer, a deal for Monsanto would add to core earnings per share by a mid-single-digit percentage in the first full year after completion of the transaction. It would also provide a double-digit percentage moving forward. The company’s earnings would also be bolstered by savings of about $1.5bn from the fourth year following the deal.

Should the deal win the approval of Monsanto’s shareholders it would be the biggest corporate takeover ever completed by a German firm and a clear signal of intent from Mr Baumann, who has been Bayer’s CEO for less than a month. Furthermore, the transaction would be a departure for Monsanto, which has been a keen acquirer itself of late. In August 2015, the company was forced to abandon a $43.7bn bid for Swiss pesticide manufacturer Syngenta AG when the firm refused to agree to a deal.

Syngenta was subsequently acquired by China National Chemical Corp for around $43bn. DuPont Co and Dow Chemical Co have also recently announced plans to merge and then carve out a new crop-science unit in another transaction in the fast moving crop and seed industry.

News: Bayer announces $62 billion cash offer for Monsanto

Halliburton and Baker Hughes announce termination of $28bn merger

BY Fraser Tennant

Oilfield services giants Halliburton Company and Baker Hughes Incorporated have terminated their $28bn merger agreement following a far-reaching regulatory review.

The review, which involved both US and European antitrust regulators, culminated in the US Department of Justice (DOJ) stating last month that it intended to block the deal.

In a statement, the DOJ explained that the deal would have resulted in just two dominant entities in this business: the newly formed company (Halliburton and Baker Hughes) and Schlumberger, the world's largest oil services company.

"The companies' decision to abandon this transaction — which would have left many oilfield service markets in the hands of a duopoly — is a victory for the US economy and for all Americans," said US attorney general Loretta E. Lynch.

The DOJ statement also opines that the merger would have "raised prices, decreased output and lessened innovation in at least 23 oilfield products and services critical to the nation's energy supply".

The merger, originally valued at $34.6bn, was first announced in November 2014.

“While both companies expected the proposed merger to result in compelling benefits to shareholders, customers and other stakeholders, challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action,” said Dave Lesar, chairman and chief executive of Halliburton, one of the world's largest providers of products and services to the energy industry.

As part of the termination of the merger agreement, Halliburton is to pay Baker Hughes a termination fee of $3.5bn by Wednesday 4 May 2016.

“Today’s outcome is disappointing because of our strong belief in the vast potential of the business combination to deliver benefits for shareholders, customers and both companies’ employees,” said Martin Craighead, chairman and chief executive of Baker Hughes, a leading supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas industry.

Continued Mr Craighead: “This was an extremely complex, global transaction and, ultimately, a solution could not be found to satisfy the antitrust concerns of regulators, both in the United States and abroad.”

News: Halliburton and Baker Hughes scrap $28bn merger

Tax changes scupper record deal

BY Richard Summerfield

After several years of bluster and two rounds of legislative measures, the Obama administration had, until very recently, failed wholly to put a stop to tax ‘inversions’. Indeed, the number of US companies inverting has been rising, with 2015 bearing witness to a record number of corporate inversions.

A typical inversion sees US companies acquiring an overseas rival, redomiciling to that company's country and adopting its lower-tax level. The practice has drawn the ire of both sides of the aisle in Washington and has been decried as one of the “most insidious tax loopholes out there” by President Obama.

However, this week the US Treasury finally announced a third tranche of measures which may actually curb inversion transactions. To that end, the new measures have already claimed a major scalp, causing the cancellation of the $160bn merger between US pharmaceutical manufacturer Pfizer Inc and Irish firm Allergan Plc.

“Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies,” said Ian Read, chairman and chief executive of Pfizer. “We remain focused on continuing to enhance the value of our innovative and established businesses. Our most recent product launches, including Prevnar 13 in Adults, Ibrance, Eliquis and Xeljanz, have been well-received in the market, and we believe our late stage pipeline has several attractive commercial opportunities with high potential across several therapeutic areas. We also maintain the financial strength and flexibility to pursue attractive business development and other shareholder friendly capital allocation opportunities.”

Pfizer would have stood to cut its tax bill by around $1bn annually by redomiciling in Ireland; however, now that the controversial merger has collapsed it will be required to pay Allergan $150m to reimburse the firm for expenses incurred during the transaction.

The Treasury hopes its measures tackle what it calls “serial inverters”, or foreign companies that have rapidly acquired multiple US companies. It will do this by limiting companies’ ability to participate in an inversion deal if they have taken part in one in the previous three years. Allergan, for the record, has been party to a number of inversion deals in that time period. The Treasury has also set out to reduce the tax advantages of inversions by curbing 'earnings stripping' — the use of intercompany loans to reduce US tax bills.

Now that the Allergan deal is dead in the water, Pfizer said 2016 will be a year of reflection. The company is contemplating spinning off its multitude of generic medicines into a separate businesses. Though the Allergan deal was due to delay that decision until 2019, the collapse of the merger will hasten Pfizer.

“We plan to make a decision about whether to pursue a potential separation of our innovative and established businesses by no later than the end of 2016, consistent with our original timeframe for the decision prior to the announcement of the potential Allergan transaction,” added Mr Read. “As always, we remain committed to enhancing shareholder value.”

News: Pfizer Announces Termination Of Proposed Combination With Allergan

Global M&A 1Q 2016 preliminary figures released

BY Fraser Tennant

Developments and trends in the global M&A space for the first quarter of 2016 are at the heart of a preliminary report published this week by Dealogic.

In ‘Global M&A Review: First Quarter 2016’, Dealogic reveals that the total M&A value seen in 1Q 2016 was $701.5bn – a 25 percent year-on-year drop on the previous three quarters which saw $1 trillion volume.

In terms of the key regional headline data, the Dealogic review of global M&A in 1Q 2016 reports that US targeted M&A volume was $248.2bn (accounting for 36 percent of global M&A volume) – down 40 percent year-on-year and the lowest 1Q share since the 30 percent seen in 2012. Turning to Europe, the Middle East and Africa (EMEA), targeted M&A volume was $217.9bn – 31 percent of global M&A and the highest quarterly share since 2Q 2013.

Cross-border activity accounted for a quarterly record high of 43 percent share of global M&A, some $302.6bn, falling just short of the record $314.6bn seen in 1Q 2015. China outbound M&A volume was $104.3bn, again, just short of the annual record high of $106.4bn set last year.

Leading the M&A advisor rankings is Goldman Sachs with transactions totalling £214.2bn, followed by JPMorgan on $153.1bn and UBS with $98.7bn.

Technology was the top sector with a total of $100.3bn, the second highest 1Q volume on record behind 1Q 2000 ($190.8bn). Conversely, the healthcare sector saw the biggest drop among the top five sectors in 1Q M&A volume, down 56 percent year-on-year to $58.7bn. 

The top 10 announced M&A transactions in the quarter were led by China National Chemical Corp’s  $48bn acquisition of Syngenta in February. This was the largest agribusiness deal and China outbound M&A deal on record. A distant second on the list is the $16.6bn acquisition of Tyco International by Johnson Controls, the largest telecom deal in the US since the Time Warner/Charter Communications transaction in May 2015.

The final 1Q 2016 M&A figures are scheduled to be released by Dealogic in early April.

Report: Global M&A Review - First Quarter 2016