Steinhoff and Mattress Firm get into bed together

BY Richard Summerfield

South African retailer Steinhoff International Holdings has taken its first tentative steps into the US market following the announcement that it will acquire Mattress Firm Holding Corp in a deal worth $3.8bn including debt.

Steinhoff has agreed to pay Mattress Firm shareholders $64.00 per share in cash for a total equity value of approximately $2.4bn, The company’s existing debt will see Steinhoff pay an enterprise value for Mattress Firm of approximately $3.8bn. The acquisition price represents a premium of 115 percent on Mattress Firm’s closing price of $29.74 per share at the close of trading on 5 August.

The deal is expected to close in the third quarter of 2016, the companies said. The transaction has been unanimously approved by the board of directors of Mattress Firm and the management and supervisory boards of Steinhoff.

Markus Jooste, CEO of Steinhoff said: “The boards of Steinhoff and its management team are enthusiastic about the opportunities this transaction creates. This transaction will allow Steinhoff to not only enter the U.S. market with an industry leading partner and a national supply chain, but it will also expand Steinhoff’s global market reach in the core product category of mattresses. The Mattress Firm brand and speciality retail concept are a strong complement to the Steinhoff group retail brand portfolio in the many geographies where the group operates.”

Steinhoff’s move for Mattress Firm is the latest in a series of deals completed by the company (in July, it agreed to pay nearly $800m for British discount chain Poundland), and will give the firm a footing in the US, with Steinhoff controlling around 25 percent of the country’s retail market for specialty mattresses. The company is already the world’s largest bed retailer. In Europe, Steinhoff already owns European home furnishings retailers Bensons for Beds and Conforama, a significant US operation of franchised and operated stores in 48 states. Mattress Firm has over 3500 retail outlets across the US as well as 75 distribution centres. The company generated $3.5bn in pro-forma sales last year.

In February, Mattress Firm reinforced its position as a leader in the US mattress retail market by completing a $780m merger with HMK Mattress Holdings LLC, the holding company of Sleepy's. Sleepy's was the second largest specialty mattress retailer in the US with over 1050 stores.

News: Steinhoff to buy Mattress Firm for $3.8 billion including debt

Didi Chuxing to acquire Uber China in $35bn deal

BY Fraser Tennant

In a move that will bring to an end an intense rivalry in the ride-hailing market in China, transportation company Didi Chuxing is to acquire the business of taxi-booking app firm Uber Technology Inc in a $35bn deal.   

Once the transaction is complete, Uber China (owned by US-based Uber and the Chinese web services company Baidu Inc) will hold a 20 percent stake in the new company.  

Although the two firms have been rivals in the ride-hailing market for years, Didi Chuxing, which has the backing of Chinese internet giants Tencent and Alibaba, is the dominant force, with an 87 percent market share in China (around 14 million journeys every day).  

Beijing-based Didi Chuxing also has the backing of Apple, which invested $1bn in the firm in May 2016.

Conversely, and despite the support provided by internet giant Baidu, Uber China has been less successful, having failed to make a profit since its launch in 2014. Indeed, Uber revealed in February 2016 that it has been losing $1bn a year on account of its operations in China.  

"Funding their China dreams was becoming too expensive for Uber,” said Duncan Clark, chairman of Beijing-based consultancy BDA, in an interview with the BBC. “One thing to watch carefully is how quickly consumers feel the impact as subsidies are withdrawn."

The subsidies referred to by Clark, which are believed to be considerable, are a product of the rivalry between the two firms. Now that the acquisition has been announced, these subsidies are likely to be much less prevalent.

Coincidentally, the Didi Chuxing/Uber deal comes just days after the introduction of a new legal framework in China for taxi-ordering apps. Welcomed by both ride-hailing firms, the decision seeks to address a grey area which saw the business of normal taxi operators undermined due to the popularity of taxi-booking apps.  

The new rules, expected to take effect on 1 November 2016, are also likely to prevent ride-hailing firms operating below cost and to restrict the extent of the aforementioned subsidies.

Despite Uber’s decision to merge its China operations with Didi Chuxing, the firm has aggressive plans for expansion elsewhere, including a $500m investment in developing its own mapping system and the launch of its UberEats project in Australia and London.

News: Uber to Sell China Business to Rival Didi After Losing Billions

Analog Devices buys Linear Technology in $14.8bn deal

BY Fraser Tennant

In a move which will result in the creation of a major analogue technology company, Analog Devices Inc has announced that it is to buy Linear Technology Corporation in a deal valued at $14.8bn.

Under the terms of the definitive agreement, Analog Devices will acquire Linear Technology in a cash and stock transaction that will see Linear Technology shareholders receive $46.00 per share in cash and 0.2321 of a share of Analog Devices common stock for each share of Linear Technology common stock.

Analog Devices intends to fund the transaction with approximately 58 million new shares of Analog Devices common stock, approximately $7.3bn of new long-term debt and the remainder from the combined company’s balance sheet cash.

Upon completion of the acquisition (expected by the end of the first half of calendar year 2017), Analog Devices will be an industry leader across data converters, power management, amplifiers, interface and RF and microwave products.

“The combination of Analog Devices and Linear Technology brings together two of the strongest business and technology franchises in the semiconductor industry,” said Vincent Roche, president and chief executive of Analog Devices. “Our shared focus on engineering excellence and our highly complementary portfolios of industry-leading products will enable us to solve our customers’ biggest and most complex challenges at the intersection of the physical and digital worlds.”

The combined company will use the name Analog Devices, Inc.  and both Analog Devices and Linear Technology anticipate a combined company leadership team, with strong representation from both companies across all functions.

“For 35 years, Linear Technology has had great success by growing its business organically,” said Bob Swanson, executive chairman and co-founder of Linear Technology. “However, this combination of Linear Technology and Analog Devices has the potential to create a combination where one plus one truly exceeds two. As a result, the Linear Technology Board concluded that this is a compelling transaction that delivers substantial value to our shareholders, and the opportunity for additional upside through stock in the combined company.”

The transaction has been unanimously approved by the boards of directors of both companies and is subject to regulatory approvals in various jurisdictions, the approval of Linear Technology’s shareholders, and other customary closing conditions.

Mr Roche concluded: “I have no doubt that the combination of our two companies will create a trusted leader in our industry, capable of generating tremendous value for all of our stakeholders."

News: Semiconductor Industry Shrinks Some More With Latest Deal

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