Mergers/Acquisitions

Verizon to acquire Yahoo business for $4.83bn

BY Richard Summerfield

The future of one time internet giant Yahoo! Inc, has finally been settled with news that the company’s core operating business is to be sold to Verizon Communications Inc in a $4.83bn all-cash deal.

The acquisition of Yahoo is the latest deal for a major internet based brand to be completed by Verizon since it concluded a deal with AOL in 2015 for around $4.4bn. Under the terms of the deal, AOL will absorb a number of high profile Yahoo assets, including the company’s ad technology tools, BrightRoll and Flurry, as well as a number of other valuable assets: search, mail and messenger.

Since AOL came under the Verizon banner, the company has invested in and nurtured a number of other internet brands, notably The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com. The company hopes a revitalised Yahoo will help to develop the AOL portfolio moving forward. In a statement announcing the deal, Lowell McAdam, chairman and chief executive of Verizon, said, “Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers. The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”

Yahoo and its CEO Marissa Mayer have been under the magnifying glass for some time, and though Ms Mayer has claimed she would like to remain with Yahoo moving forward it, the makeup of Yahoo’s future leadership is yet to be decided.

“Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL,” Ms Mayer noted in a statement. “The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo. This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social.”

The sale of the company’s core business does not include Yahoo’s cash, its shares in Alibaba, its shares in Yahoo Japan, Yahoo’s convertible notes, certain minority investments and Yahoo’s non-core patents. These Asian assets will be held by Yahoo in a company currently known as RemainCo. Once the deal has been completed, the company will change its name and become a registered, publicly traded investment company.

The deal is expected to close in early 2017. In the meantime, Yahoo will continue to operate as an independent organisation until the deal receives the customary shareholder and regulatory approval.

News: Verizon to buy Yahoo's core business for $4.8 billion in digital ad push

SoftBank to acquire ARM in £24bn tech deal

BY Fraser Tennant

In a deal depicted as two companies with a shared vision coming together to push the limits of technology, Japanese multinational telecommunications and internet corporation SoftBank is to acquire UK technology firm ARM Holdings plc in a transaction worth £24bn.

Under the all-cash acquisition, SoftBank, one of the world's biggest technology companies, will pay £17 per ARM share – a 41.1 percent premium to its 15 July closing price. The deal is to be funded by Softbank's own cash reserves as well as a long-term loan from Japan's Mizuho Bank.

“We have long admired ARM as a world renowned and highly respected technology company that is by some distance the market-leader in its field,” said Masayoshi Son, chairman and CEO of SoftBank. “ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the “Internet of Things (IoT).”

The acquisition of ARM, which analysts consider to be central to the tech industry's move to the IoT, is a major step in fulfilling Mr Son’s intention to transform SoftBank into a “tech investment powerhouse".

For ARM, the transaction means that the firm will continue to be able to play a key role in developing new technology in future, in addition to being a great endorsement for the UK tech industry as a whole.

“It is the view of the Board that this is a compelling offer for ARM Shareholders, which secures the delivery of future value today and in cash,” said Stuart Chambers, chairman of ARM. “The Board believes that by accessing all the resources that SoftBank has to offer, ARM will be able to further accelerate the use of ARM-based technology wherever computing happens.”

SoftBank has also provided assurances that it will double ARM employee headcount in the UK (estimated to be over 1500 jobs) over the next five years, as well as increasing staff numbers outside the UK, again over five years.

Furthermore, the Japanese conglomerate has pledged that the successful partnership business model, culture and brand of Cambridge-based ARM - which employs more than 3000 people - will remain unchanged.

Mr Son concluded: “This is one of the most important acquisitions we have ever made, and I expect ARM to be a key pillar of SoftBank’s growth strategy going forward.”

News: SoftBank to buy UK chip designer ARM in $32bn cash deal

Global M&A value in 1H 2016 hits $1.71 trillion

BY Fraser Tennant

In its ‘Global M&A Review: First Half 2016’, Dealogic reveals that the total M&A value seen in the first half (1H) of 2016 was $1.71 trillion – an impressive figure in itself, although it represents an 18 percent year-on-year drop, from $2.09 trillion.

In terms of the key regional headline data, US targeted M&A volume was $748.5bn – down 18 percent year-on-year. Looking to Europe, the Middle East and Africa (EMEA), targeted M&A volume was $428.4bn, down 14 percent year-on-year and the lowest 1H total since 2011 ($67.1bn).

As far as global cross-border M&A volume is concerned, the review found that cross-border activity in 1H 2016 is valued at $580.9bn, down 6.6 percent year-on-year from $616.4bn. Furthermore, the US was the leading target accounting for 35 percent of volume ($205.8bn), up 39 percent year-on-year ($148.4bn) and the highest 1H volume on record.

In terms of Asia Pacific M&A, China accounted for 54 percent of targeted volume with $243.9bn – its highest 1H share on record and a record 21 percent share as an acquiring nation.

Leading the M&A adviser rankings is Goldman Sachs with transactions totalling $438.7bn, followed by Morgan Stanley on $330.0bn and Bank of America Merrill Lynch on $299.1bn.

Technology was the top sector with a total of $294.8bn, which was the second highest 1H volume on record (trailing the $304.6bn 1H volume seen in 2000). Conversely, the Telecom sector saw the biggest year-on-year drop among the top 10 sectors in 1H M&A deal volume – down some 70 percent from the $200.5bn seen in 1H 2015 to $60.7bn.

The Dealogic review also showcases the ‘Top 10 Announced M&A Transactions 1H 2016’ with Bayer’s $62.0bn bid for Monsanto in May 2016 top of the list.

Second on the list is the $48bn acquisition of Syngenta by China National Chemical Corp (ChemChina) in February 2016, the largest ever cross-border transaction by a Chinese acquirer. In third place is the April 2016 deal which saw Abbot Laboratories acquire St Jude Medical for $30.6bn.

Finally, the Dealogic data confirms that the total value of withdrawn M&A in 1H 2016, at $606.4bn, was more than double the same period in 2015 at $233.3bn. These withdrawn deals include the aborted transactions involving Energy Transfer Equity/Williams Companies in June 2016 and Pfizer/Allergan in April 2016.

Marriott and Starwood deal finally wins European approval

BY Richard Summerfield

The European Commission has finally acquiesced and granted unconditional antitrust approval to US hotel chain Marriott International’s $12.1bn cash and share purchase of Starwood Hotels and Resorts Worldwide Inc. Under the terms of the original Marriott/Starwood merger, Starwood shareholders will receive 0.8 shares of Marriott common stock plus $21.00 in cash.

Marriot had initially moved to acquire Starwood in March after the Chinese insurance company Anbang unexpectedly decided to abandon is $14bn all-cash offer for Starwood. Marriott and Anbang had been embroiled in a three week bidding war for Starwood, however the US firm is inching closer to being able complete the deal and combine its brands – which include the Ritz-Carlton – with Starwood’s own Sheraton and Westin properties.

Marriott currently operates more than 4500 hotels in 85 countries. Starwood, by comparison, manages around 1300 hotels in nearly 100 countries. As a result of the merger, Marriott will become the largest hotel company in the world. It is also believed that the firm will benefit from synergies of around $200m a year across the combined firm’s 29 hotel chains.

In a statement announcing the Commission’s decision, EU Competition Commissioner Margrethe Vestager said: “This is an important merger for the hotel industry and its customers. Our investigation confirmed that the hotel sector will remain competitive for customers in Europe following the merger.”

The Commission investigated the impact of the planned takeover in Barcelona, Milan, Venice, Vienna and Warsaw, where both brands have a strong presence. The investigation indicated that the merger would have little impact in any of these cities, given the strong offering from competing hotels in each location.

Though the deal has won European approval, the transaction is not yet confirmed. Chinese antitrust clearance is still required before the merger can be completed. Both parties have confirmed that they expect final clearance to arrive in the next month or so, meaning the deal will close in July at the earliest.

However, like much of the global economy, the threat posed by Brexit may yet have an impact on the completion of the deal. Immediately following the 'Leave' vote by the UK, stock prices for many hotel companies, including Marriott, fell dramatically. Though the decline has no direct impact on the relationship of the merger agreement, it could potentially impact the amount of money owed to Starwood’s shareholders.

News: EU clears Marriott's purchase of Starwood Hotels

 

Tesla makes “no-brainer” $2.8bn offer to acquire SolarCity

BY Fraser Tennant

In an attempt to create a renewable-energy giant, electric car maker Tesla Motors has made an offer, believed to be in the region of $2.8bn, to acquire solar panel company SolarCity.

According to a statement and a letter to the SolarCity board of directors on the Tesla website, the acquisition proposal consists of an offer to acquire all of the outstanding shares of common stock of SolarCity in exchange for Tesla common shares. 

Furthermore, subject to the completion of due diligence, Tesla proposes an exchange ratio of 0.122x to 0.131x shares of Tesla common stock for each share of SolarCity common stock. 

Tesla’s proposal represents a value of $26.50 to $28.50 per share, or a premium of approximately 21 percent to 30 percent over the closing price of SolarCity’s shares - based on the closing price (Wednesday 22 June) of SolarCity’s shares and the 5-day volume weighted average price of Tesla shares.

“We believe that our proposal offers fair and compelling value for SolarCity and its stockholders, while also giving SolarCity’s stockholders the opportunity to receive Tesla common stock at a premium exchange ratio and the opportunity to participate in the success of the combined company through their ongoing ownership of Tesla stock”, said Tesla.

Explaining the offer to acquire SolarCity, Tesla said that its mission has always been tied to sustainability, having launched, in March 2015, Tesla Energy, a battery system that allows homeowners, business owners and utilities the opportunity to benefit from renewable energy storage (via its Powerwall and Powerpack home battery solutions).

“It’s now time to complete the picture”, continued Tesla in its statement. “Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that’s available: the sun.”

The acquisition of SolarCity, if completed, is expected to yield significant benefits for Tesla’s shareholders, customers and employees.  

“Culturally, this is a great fit. Both companies are driven by a mission of sustainability, innovation, and overcoming any challenges that stand in the way of progress. The offer to acquire SolarCity is only the first step toward a successful combination of Tesla and SolarCity”, concluded the Tesla statement.

Entrepreneur Elon Musk, chairman of SolarCity and chief executive of Tesla, this week described the deal as “logical, obvious and a no-brainer.”

News: Elon Musk Aims to Shore Up SolarCity by Having Tesla Buy It

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