M&A deal flow to be “flat” in 2017 predicts new report

BY Fraser Tennant

The recent levelling off of the global M&A market will lead to a “flat year ahead” for deal flow, according to a new survey by Dykema.

In its "M&A Forecast: 2016 M&A Outlook Survey", Dykema reveals that 47 percent of respondents stated that they expected to see “no significant change” in the global M&A market over the next 12 months - up 43 percent in comparison to last year’s survey.

The survey also found that many executives had major concerns about the effects that corporate tax increases, increased federal regulation and taxation of carried interest could have on M&A in the coming year. Conversely, M&A dealmakers opined that the disruption caused by global events such as the fallout from Brexit and the US presidential election are likely to have a “negligible” effect on deals in 2017.

Moreover, in the case of the US election, survey respondents (by a 2-to-1 margin) indicated that they felt Donald Trump would be more supportive of the US M&A market than Hillary Clinton. However, a plurality of respondents stated that both candidates would have a neutralising effect on US M&A next year.

“When it comes to M&A in 2017, the biggest determining factor is likely the fate of the US economy,” said Thomas Vaughn, co-leader of Dykema’s M&A practice. “It’s not surprising that respondents – seeing a decline in 2016 deal volume after several years of strong growth – are taking a wait-and-see approach.”

Additional findings in the survey include the continued rise in inbound M&A activity to the US due to increased investment from China. In contrast, US outbound activity in China has remained low for the second consecutive year.

“On the international front, the pace of outbound acquisitions by Chinese companies, particularly in the US and Europe, does not appear to be slowing down anytime soon,” said Jeff Gifford, co-leader of Dykema’s M&A practice. “This trend is in large part due to an increasing level of comfort navigating Chinese regulatory bodies and growing confidence that these deals will go through successfully.”

While overall the survey does suggest a subdued outlook for the global M&A market in 2017, respondents also displayed a fair degree of optimism in relation to certain segments of the market, such as the energy, healthcare and technology sectors, which they say are grabbing increasing attention from M&A practitioners.

Report: M&A Forecast 2016 M&A Outlook Survey Summary

AT&T to acquire Time Warner in $86bn deal

BY Fraser Tennant

“A new company with complementary strengths to lead the next wave of innovation in converging media and communications industry”, is how the $86bn AT&T Inc. acquisition of Time Warner Inc. is being presented to the world.

The definitive agreement that will see the creation of a media-telecom giant is a stock-and-cash transaction valued at $107.50 per share. Time Warner shareholders will receive $53.75 per share in cash and $53.75 per share in AT&T stock.

AT&T expects to achieve $1bn in savings within years of the deal closing.

The combination of AT&T, which has unmatched direct-to-customer distribution across TV, mobile and broadband in the US, mobile in Mexico and TV in Latin America, with Time Warner, a global leader in creating premium content (which owns CNN and HBO), has been positioned to give customers unmatched choice, quality, value and experiences that will define the future of media and communications.

The transaction has been unanimously approved by the boards of directors of both companies.

“This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers,” said Randall Stephenson, AT&T chairman and CEO. “Premium content always wins. It has been true on the big screen, the TV screen and now it’s proving true on the mobile screen. We’ll have the world’s best premium content with the networks to deliver it to every screen.”

The transaction will see Time Warner's vast library of content (which includes film franchises Harry Potter & DC Comics, as well as the Big Bang Theory and Gotham TV series) and ability to create new premium content, with AT&T's extensive customer relationships, world’s largest pay TV subscriber base and leading scale in TV, mobile and broadband distribution.

“This is a great day for Time Warner and its shareholders,” said Jeff Bewkes, chairman and CEO of Time Warner. “Combining with AT&T dramatically accelerates our ability to deliver our great brands and premium content to consumers on a multiplatform basis and to capitalize on the tremendous opportunities created by the growing demand for video content."

Expected to close before year-end 2017, the merger of AT&T and Time Warner is subject to approval by Time Warner Inc. shareholders and a review by the US Department of Justice. 

Bewkes concluded: “My senior management team and I are looking forward to working closely with Randall and our new colleagues as we begin to capture the tremendous opportunities this creates to make our content even more powerful, engaging and valuable for global audiences.”

Since the announcement of the deal, presidential candidates Hilary Clinton and Donald Trump, as well as US lawmakers, have raised queries. Furthermore, it has been announced that a Senate subcommittee will be held in November to consider the transaction.

News: AT&T to pay $85 billion for Time Warner, create telecom-media giant

Global M&A volume down 22 percent YOY, reveals nine months review

BY Fraser Tennant

Mergers & acquisitions (M&A) activity during the first nine months of 2016 is the topic of a new report released this week by Dealogic.

Among the headline figures contained in ‘Global M&A Review: Nine Months 2016’ is the 22 percent year-on-year (YOY) drop in M&A volume, down to $2.55 trillion from $3.27 trillion.  

In terms of key regional headline data, the report reveals that US targeted M&A volume was down 30 percent YOY. Furthermore, domestic US M&A volume fell 38 percent to $771.3bn.

Looking to M&A volume in Europe, the UK reached $62.1bn by the end of 3Q 2016, its highest recorded 3Q figure since 2008.

As far as global cross-border M&A volume is concerned, activity in the first nine months of 2016 was valued at $899.5bn, down 9 percent YOY. Furthermore, US inbound M&A was $327.9bn, only slightly behind the all time record of $330.6bn set in 2015.

In terms of M&A in the Asia Pacific region, China and Japan were the top acquiring Asian nations of US targets. Chinese acquisitions reached an annual record high for both volume and activity, with $35.7bn via 124 deals. Japan announced 132 deals worth $17.4bn, down 39 percent YOY.

Leading the M&A advisor rankings is Goldman Sachs with transactions totalling $613.3bn, followed by Morgan Stanley on $476.3bn and JPMorgan on $459.9bn.

Technology was the top sector (replacing healthcare) with a total of $475.4bn, just ahead of its previous record of $446.1bn in 2015. Conversely, healthcare, which also hit an annual record high in 2015, was down 48 percent YOY to $255.4bn.

The report also showcases the ‘Top 10 Announced M&A Transactions First Nine Months 2016’ with Bayer’s $66.3bn acquisition of Monsanto, announced in May 2016, top of the list. Second is the $46.7bn 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 September 2016 deal which saw Enbridge Inc acquire Spectra Energy Corp for $43bn, in the largest Canadian outbound deal on record and the fifth largest utility & energy deal on record.

Finally, Dealogic confirms that the total of withdrawn M&A in the first nine months of 2016 was $752.8bn. This includes the $28.9bn Praxair/Linde deal and the $25.4bn Mondelez International/Hershey transaction.

Report: Dealogic – ‘Global M&A Review: First Nine Months 2016’

Bass Pros Shops catches Cabela’s in $5.5bn deal

BY Richard Summerfield

Fishing and hunting chain Cabela’s Inc. has agreed to be sold to rival Bass Pro Shops in a deal worth $5.5bn.

Under the terms of the deal announced on Monday, Bass Pro Shops has agreed to pay Cabela’s shareholders $65.50 per share held. The price represents a 19.2 percent premium to Cabela's most recent closing price on Friday. According to a joint statement released by the firms, the deal is expected to close in the first half of 2017.

In a separate deal, Capital One Financial Corp. has announced that it will be acquiring Cabela’s credit card business for an undisclosed amount. The sale of the credit card business will create a 10 year agreement which will allow Bass Pro Shops to issue credit cards to Cabela's customers.

News of the deal for Cabela’s has been welcomed not only by the company’s shareholders but also the markets. Indeed, Nebraska based Cabela’s, which has been in business since 1961, has endured a difficult few years which have seen the company’s larger stores outmanoeuvred by smaller, more dynamic rivals, including online retailers. The company’s difficulties have been reflected in its declining share price.

In light of the increased competition from a variety of sources, Cabela’s has experienced falling sales of apparel and footwear and has seen same-store sales growth in only one quarter in more than three years. The company had also been under pressure from activist hedge fund Elliott Associates LP, which revealed an 11.1 percent stake in the company a year ago.

Since rumours of a potential sale began to circle in December 2015 the company’s stock has risen 17 percent.

"Cabela’s is pleased to have found the ideal partner in Bass Pro Shops," said Tommy Millner, Cabela’s chief executive . "Having undertaken a thorough strategic review, during which we assessed a wide variety of options to maximise value, the Board unanimously concluded that this combination with Bass Pro Shops is the best path forward for Cabela’s, its shareholders, outfitters and customers. In addition to providing significant immediate value to our shareholders, this partnership provides a unique platform from which our brand will be extremely well positioned to continue to serve outdoor enthusiasts worldwide for generations to come."

The newly combined company will own more than 180 stores across the US and Canada.

“Today's announcement marks an exceptional opportunity to bring together three special companies with an abiding love for the outdoors and a passion for serving sportsmen and sportswomen," said Johnny Morris, founder and CEO of Bass Pro Shops. "The story of each of these companies could only have happened in America, made possible by our uniquely American free enterprise system. We have enormous admiration for Cabela’s, its founders and outfitters, and its loyal base of customers. We look forward to continuing to celebrate and grow the Cabela’s brand alongside Bass Pro Shops and White River as one unified outdoor family.”

News: Cabela’s Agrees to Buyout by Bass Pro in $5.5 Billion Deal

Lanxess to acquire Chemtura in $2.7bn cash transaction

BY Fraser Tennant

In a €2.4bn ($2.7bn) transaction that ranks as its largest ever takeover deal, German speciality chemicals company Lanxess AG has announced that it is to acquire US-based Chemtura Corporation, a global provider of high-quality flame retardant and lubricant additives.   

Under the terms of the definitive acquisition agreement, which will significantly expand Lanxess’ footprint in North America where approximately 45 percent of Chemtura’s revenue is generated, Chemtura shareholders will receive $33.50 per share in cash for each outstanding share of common stock held.

Furthermore, for Lanxess, the acquisition of Chemtura will be accretive to earnings per share in the first fiscal year and will be financed mainly through senior and hybrid bonds, as well as from existing liquidity.

“With this acquisition, we are forming a champion in the field of additives and are strengthening our already profitable portfolio,” said Matthias Zachert, chairman of Lanxess. “Through the acquisition, we are further implementing our strategy to become a more resilient and profitable chemical company, as well as significantly building on our competitive positioning in medium-sized markets.”

Once the transaction is complete, Lanxess, which currently has approximately 16,700 employees in 29 countries, will have built on its Rhein Chemie Additives business unit by adding Chemtura’s two additive segments to form a new performance additives with expected annual synergies of €100m by 2020.

Headquartered in Philadelphia, Pennsylvania, Chemtura encompasses 20 sites in 11 countries and approximately 2500 employees worldwide. In the last four quarters the firm reported sales of around €1.5bn.

“The transaction provides premium value to our shareholders and benefits our customers and employees by making Chemtura part of a much larger, stronger global enterprise with the resources to fully support a more diverse suite of specialty chemicals products and services,” said Craig A. Rogerson, president, chief executive and chairman of Chemtura.

The transaction,  expected to close around mid-2017, is subject to approval by Chemtura shareholders, required regulatory approvals and certain other customary closing conditions.

Recognising that his firm is set to become one of the world’s major actors in a growing market, Mr Zachert concluded: “Lanxess is taking a next and major step forward on its growth path.”

News: Germany's Lanxess to buy U.S. chemical firm Chemtura for $2.7 billion