Abbott to sell medical optics unit for $4.325bn

BY Richard Summerfield

Abbott Laboratories has announced plans to divest its ophthalmic unit, Abbott Medical Optics, to Johnson & Johnson in an all cash deal worth $4.325bn.

The transaction is expected to close in the first quarter of 2017 and is subject to customary closing conditions, including regulatory approvals, the companies confirmed in a statement.

“We've been actively and strategically shaping our portfolio, which has recently focused on developing leadership positions in cardiovascular devices and expanding diagnostics," said Miles D. White, chairman and chief executive of Abbott. "Our vision care business will be well-positioned for continued success and advancement with Johnson & Johnson, and I'd like to thank our employees for building a successful business."

Abbott Medical Optics produces lasers and other equipment used for cataract surgeries and laser vision correction procedures, and also makes eye drops and cleaners for contact lenses. The division posted sales of $1.1bn last year.

The acquisition of Abbott Medical Optics will provide a significant boost to Johnson & Johnson’s cataract business. At present the company is the number two global business in cataract surgeries. As a result of the deal, Johnson & Johnson will boast an $8bn global market which, according to data from the company, is growing at a rate of 5 percent a year.

"Eye health is one of the largest, fastest growing and most underserved segments in health care today," said Ashley McEvoy, company group chairman responsible for Johnson & Johnson's Vision Care Companies. "With the acquisition of Abbott Medical Optics' strong and differentiated surgical ophthalmic portfolio, coupled with our world-leading ACUVUE contact lens business, we will become a more broad-based leader in vision care. Importantly, with this acquisition we will enter cataract surgery – one of the most commonly performed surgeries and the number one cause of preventable blindness."

Abbott acquired the unit in 2009 for around $2.8bn when it was known as Advanced Medical Optics. However, Abbott moved to divest the business after deciding to refocus on heart devices and expanding diagnostics.

News: Abbott to sell its eye care business to J&J for about $4.33 billion

Crop giant springs from $36bn Agrium/PotashCorp merger

BY Fraser Tennant

In an agreement that it is said will result in a world-class integrated global supplier of crop units, Agrium Inc and Potash Corporation of Saskatchewan Inc have announced that they are to merge in a deal with an enterprise value of $36bn.

This merger of equals between Agrium, the largest crop nutrient company in the world, and Potash, the third largest natural resource company in Canada, will, following the close of the transaction, see Potash shareholders own approximately 52 percent of the new company, while Agrium shareholders will own approximately 48 percent on a fully diluted basis. 

The new company – with 20,000 employees and operations and investments in 18 countries – will combine low-cost, world-class potash and high-quality nitrogen and phosphate production assets with a premier agricultural retail network to forge an integrated crop inputs platform.

“Our merger creates a new premier Canadian-headquartered company that reflects our shared commitment to creating value and unlocking growth potential for shareholders”, said Jochen Tilk, president and chief executive of Potash. “The integrated platform established through our combination will greatly benefit customers and suppliers, and support even greater career development opportunities for employees.”

Mr Tilk, part of a proven team that reflects the strengths and capabilities of both companies, will serve as the new entities’ executive chairman, while Chuck Magro, currently Agrium’s chief executive , will retain that role in the new set up. Both will report to the new board of directors.

“This is a transformational merger that creates benefits and growth opportunities that neither company could achieve alone," said Mr Magro.  “Combining our complementary assets will enable us to serve our customers more efficiently, deliver significant operating synergies and improve our cash flows to provide capital returns and invest in growth.”

The name of the new company, which will have its registered head office in Saskatoon, with Canadian corporate offices in both Calgary and Saskatoon, will be announced prior to the closing of the transaction.

Mr Tilk concluded: “Our workforce and the communities in which we operate are critical to both PotashCorp and Agrium, and we intend to carry forward best practices from both companies in corporate social responsibility, including commitments to employees, operating communities and the environment.”

News: Agrium and Potash Corp. to Merge, Creating Fertilizer Giant

Enbridge/Spectra Energy join forces to create global energy infrastructure leader

BY Fraser Tennant

In a combination that will create a “true North American and global energy infrastructure leader”, Enbridge and Spectra Energy are to join forces in a deal with an enterprise value of C$37bn (US$28bn). 

Under the terms of the definitive merger agreement, which creates the largest energy infrastructure company in North America and one of the largest globally, Spectra Energy shareholders will receive 0.984 shares of the combined company for each share of Spectra Energy common stock they own.

The combined company will control a diverse set of best-in-class assets comprised of crude oil, liquids and natural gas pipelines, terminal and midstream operations, a regulated utility portfolio and renewable power generation.

“Over the last two years, we’ve been focused on identifying opportunities that would extend and diversify our asset base and sources of growth beyond 2019,” said Al Monaco, president and chief executive of Enbridge Inc. “We are accomplishing that goal by combining with the premier natural gas infrastructure company to create a true North American and global energy infrastructure leader.  This transaction is transformational for both companies and results in unmatched scale, diversity and financial flexibility with multiple platforms for organic growth.”

The combined company will be called Enbridge Inc.

“The combination of Enbridge and Spectra Energy creates what we believe will be the best, most diversified energy infrastructure company in North America, if not the world," said Greg Ebel, president and chief executive of Spectra Energy, who will become chairman of Enbridge following the closing of the transaction.

He added: “This is an incredible opportunity for both companies and we at Spectra Energy could not be more excited about what it means going forward. Together, the merged company will have what we believe is the finest platform for serving customers in every region of North America and providing investors with the opportunity for superior shareholder returns.”

The Enbridge/Spectra Energy transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the first quarter of 2017 - subject to shareholder and certain regulatory approvals, as well as other customary conditions.

Mr Monaco concluded: “Bringing Enbridge and Spectra Energy together makes strong strategic and financial sense, and the all-stock nature of the transaction provides shareholders of both companies with the opportunity to participate in the significant upside potential of the combined company.”

News: Enbridge buying Spectra in $28 billion deal

Dealmaking drives shareholder returns

BY Richard Summerfield

Organisations that regularly buy and sell companies as part of their wider corporate strategy often outperform less active acquirers in terms of shareholder returns, according to a new report from the Boston Consulting Group (BCG).

According to the firm's 2016 M&A report 'Masters of the Corporate Portfolio', over a 25 year period up to 2015, the average annual shareholder return for companies that make at least five acquisitions or divestitures in a five-year period was 10.5 percent. One time dealmakers, however, saw returns of just 5.3 percent.

"Portfolio masters use active portfolio management via M&A to boost shareholder return," said Jens Kengelbach, BCG's global head of M&A and co-author of the report. "These companies buy and sell in order to fine-tune, refocus, or diversify their portfolios. They understand that growth is the primary driver of TSR, almost regardless of whether growth is organic or inorganic. They estimate synergies and postmerger integration costs accurately, and they deliver on their projections. They create value."

The report compares three types of dealmakers: ‘portfolio masters’, ‘strategic shifters’ and ‘one-timers’. The company’s data shows that portfolio masters accounted for just 6 percent of the 1339 companies surveyed, but were responsible for around 25 percent of global deal volume since 1991. In that time, portfolio masters completed nearly 14,000 transactions. By comparison, so called ‘one-timers’ made, on average, one acquisition or divestiture each over a five-year period. But, with a combined count of 18,891 deals since 1991, they represent 35 percent of total M&A deals globally.

"Investors like one-time dealmakers -- at least in the short term," said Georg Keienburg, a BCG principal and report co-author. "Capital markets tend to buy into the story of a once-in-a-lifetime opportunity for acquirers. They are also appreciative when a company sheds a noncore asset that it may have held onto for too long. As a result, the initial capital market reaction in a narrow time window around the transaction is distinctly more positive (an average increase of 5.5 percent) for one-time dealmakers than for their more active counterparts."

Companies can improve their shareholder returns by improving their standing in the M&A market, according to BCG. Indeed, the classifications of companies can be fluid, and by evolving from being considered a one-timer to strategic shifter or portfolio master, companies can drive shareholder value.

Report: The 2016 M& Report – Masters of the Corporate Portfolio

ChemChina’s $43bn Syngenta acquisition gets US clearance

BY Fraser Tennant

China National Chemical Corporation (ChemChina) and Swiss pesticides and seeds group Syngenta announced that have received clearance from a US regulator on their proposed $43bn transaction.

The acquisition of Syngenta by ChemChina – which, once complete, will be the biggest ever foreign acquisition by a Chinese company – was given the go-ahead by the Committee on Foreign Investment in the United States (CFIUS), a body tasked with ensuring that deals do not have national security implications (a quarter of the Swiss firm’s sales are in North America).

The decision by CFIUS to approve the deal is being viewed as the clearing of a significant hurdle, with shares in Syngenta – a Basel-based company employing 28,000 people in more than 90 countries – jumping 10 percent following the US committee’s accord.  

A joint statement issued by ChemChina and Syngenta stated: “In addition to CFIUS clearance, the closing of the transaction is subject to anti-trust review by numerous regulators around the world and other customary closing conditions. Both companies are working closely with the regulatory agencies involved and discussions remain constructive. The proposed transaction is expected to close by the end of the year."

Originally announced in February 2016, with ChemChina offering $465 per share for Syngenta, the transaction ran into problems when concerns arose that CFIUS could potentially block the deal. At this stage, Syngenta shares had fallen by approximately 20 percent.

Syngenta's chairman Michel Demaré, while stating that he was “convinced there was no security issue to be concerned about” in ChemChina’s bid for his company, also opined that the Chinese company “has a very ambitious vision of the industry in the future".

Headquartered in Beijing, state-owned ChemChina is the largest chemical corporation in China, and occupies the 234th position among the Fortune 500. The company’s main businesses include materials science, life sciences, high-end manufacturing and basic chemicals.

In addition to its current activities, ChemChina also has an impressive track record of acquisitions, having procured nine leading industrial companies in France, the United Kingdom, Israel, Italy and Germany, among others.

Although characterised as a mega deal in the chemicals industry, the ChemChina/Syngenta transaction is significantly smaller than last year’s $130bn Dow Chemical-DuPont merger in December 2015, itself the subject of an investigation, by the European Commission in Brussels, into whether or not the merger of the US chemical giant could adversely impact farmers in Europe.

News: Powerful U.S. Panel Clears Chinese Takeover of Syngenta