Linde and Praxair announce $65bn merger

BY Richard Summerfield

Multinational chemical company Linde AG and US rival Praxair, Inc have announced a $65bn merger of equals via an all-stock transaction. Under the terms of the merger, existing Linde and Praxair shareholders would each own about 50 percent of the newly combined company, according to a joint statement announcing the deal.

Merger talks between the two companies had collapsed earlier this year; however they were revived following the dismissal of Linde’s finance director Georg Denoke. The merger, like many of the industry consolidation deals announce in 2016, is expected to encounter some tough regulatory scrutiny.

The two companies have pursued a merger in order to create a new industry leader from two regional giants. Linde’s business focuses primarily on Europe and Asia, while Praxair is more dominant in the US and Latin America. Linde is currently the industry’s second biggest specialty gas provider; Praxair is the third biggest. According to data from the companies, a combined Linde-Praxair combination would generate around $30bn in annual sales before divestitures.

The companies have also identified considerable cost savings as being a key driver behind the deal, targeting annual cost savings of around $1bn.

"The strategic combination between Linde and Praxair would leverage the complementary strengths of each across a larger global footprint and create a more resilient portfolio with increased exposure to long-term macro growth trends," said Steve Angel, Praxair’s chairman and chief executive. "We consider this to be a true strategic merger, as it brings together the capabilities, talented people and best-in-class processes of both companies, creating a unique and compelling opportunity for all of our stakeholders."

"Under the Linde brand, we want to combine our companies’ business and technology capabilities and form a global industrial gas leader. Beyond the strategic fit, the compelling, value-creating combination would achieve a robust balance sheet and cash flow and generate financial flexibility to invest in our future," said Professor Dr. Aldo Belloni, chief executive of Linde.

Mr Angel will become chief executive of the new company. Linde’s chairman Wolfgang Reitzle will continue in that role. The new board will have equal representation from both companies.

News: Linde, Praxair agree $65 billion merger outline, ambitious cost savings

Unicredit unit sold to Amundi

BY Richard Summerfield

Italy’s biggest bank, UniCredit SpA, has announced that it is to sell asset manager Pioneer to French fund management firm Amundi in a deal worth $3.75bn.

According to the terms of the deal, Amundi will finance the acquisition through a combination of a €1.4bn capital increase, around €600m of senior subordinated debt and about €1.5bn in existing capital. UniCredit will also receive an extraordinary dividend of €315m from Pioneer before the deal is completed. The dividend will take the total value of the transaction to around $4.10bn. The deal is expected to close in the first half of 2017.

"Thanks to a long term distribution agreement, UniCredit's customers will have access to an extended range of quality products and services whilst the Group will reap the benefit of additional fee income from expected increased sales," UniCredit chief executive Jean Pierre Mustier said in a statement. "The transaction means Italy becomes Amundi's second largest domestic market and Amundi will turn Milan into one of its core investment hubs, creating new jobs and ensuring close proximity to UniCredit, our teams and clients."

The sale of the Amundi unit is the latest in a series of moves by UniCredit to divest some of its holdings, and to shore up its balance sheet.  In July, the company agreed to sell its 32.8 percent stake in Pekao bank in Poland to state-owned insurance group PZU for around $2.6bn. UniCredit also sold a 30 percent stake in FinecoBank SpA in October for around £2bn.

UniCredit, under the leadership of the new chief executive Jean Pierre Mustier, is expected to launch a new share sale this week, with the hope of raising around €13bn. UniCredit’s recent financial difficulties are allegorical of the wider Italian banking sector, which has been experiencing considerable difficulty for some time.

Through the acquisition of Pioneer, which manages around £186bn worth of assets, Amundi expects to generate around €150m in full-year cost synergies within three years as it merges investment platforms and streamlines support functions. The company also expects the acquisition to boost its revenue by €30m.

News: France's Amundi to buy Pioneer from UniCredit for 3.6 billion euros

Digital disruption driving deals

BY Richard Summerfield

2017 is likely to see increased mergers and acquisitions (M&A) activity in the media and entertainment (M&E) sector, according to EY’s latest Media & Entertainment Capital Confidence Barometer, released earlier this week.

Much of the dealmaking activity in the M&E space in the coming year will be likely be driven, in part, by digital disruption and convergence. The emergence of digital disruption and sector blurring in particular has proved a key driver of recent dealmaking in the M&E space, with 31 percent of the executives surveyed by EY citing convergence as the biggest disrupter in the industry of late. Increasingly, companies are expanding into previously uncharted territory. Sixty-seven percent saw digital disruption as the main catalyst for deal aking in the coming year.

In a statement announcing the report, John Harrison, EY's Global Media & Entertainment Leader, Transaction Advisory Services, said, “Unprecedented, unrelenting advances in technology and the swift emergence of new platforms and services are driving change in consumer behaviours, upending long-standing media ecosystems and blurring sector lines. Companies are aggressively seeking the innovation needed to position for future success and are looking to acquisitions, alliances and joint ventures to catalyse transformation.”

Despite the political and economic uncertainty permeating the globe, there is an underlying confidence in the M&E industry, particularly when it comes to dealmaking. In spite of persistent macroeconomic challenges, 73 percent of respondents perceived the global economy as stable or improving.

From a dealmaking perspective, 85 percent of respondents expressed confidence in the quality of acquisition opportunities available to M&E companies in the year to come. Furthermore, 94 percent of respondents claimed they had stable to positive confidence in the likelihood of closing a deal in 2017. More than half of respondents (56 percent) claimed that they expect their company to actively pursue an acquisition in the next 12 months, up from 46 percent in July 2016. Forty-eight percent said they have five or more deals in the pipeline.

Cross-border dealmaking is likely to be particularly prevalent in 2017, with 42 percent of executives claiming that their companies will be targeting a cross-border acquisition in the coming year. The US, France, the UK, Germany and China are the top five most likely destinations. The UK was the most sought after investment destination in EY’s previous report.

Report: Media & Entertainment Capital Confidence Barometer

KKR to buy Calsonic in $4.5bn deal

BY Richard Summerfield

Private equity firm KKR & Co has agreed to acquire auto parts maker Calsonic Kansei Corp from the company’s majority shareholder Nissan, for around $4.5bn. The deal represents KKR’s biggest ever deal in Japan.

According to a statement announcing the deal, KKR will pay 1860 yen per Calsonic share held - a 28.3 percent premium over the company’s closing price on Tuesday, the day before the deal was announced. The firm beat competition from a number of other rival private equity firms, including Bain Capital and MBK Partners.

Calsonic’s main customer is Nissan, Japan’s second largest car maker, which accounts for 85 percent of its business. However, the company also supplies parts to a number of other car manufacturers including Renault, Isuzu, Daimler and General Motors.

Yasuhiro Yamauchi, chief competitive officer of Nissan, said in a statement: "This agreement was reached because we share common interests and goals. Nissan is hoping to further increase the competitiveness of Calsonic Kansei – one of our most important partners – and KKR recognises the company's potential. This is also the best choice for Calsonic Kansei and its shareholders."

The acquisition of Calsonic will come from KKR Asian Fund II. The firm has been active in Japan through its pan-regional private equity funds since 2010. Though the country has been a key market for KKR, the deal for Calsonic is a rare one in Japan. Multibillion dollar deals in Japan have been hard to come by in recent years; many Japanese companies often unwilling to divest their units through drastic restructuring.

Once the deal for Calsonic is complete, it will become the fourth KKR owned firm operating in Japan. The firm has previously acquired human resources services company Intelligence Ltd, Pioneer DJ, the DJ equipment business which Pioneer Corporation divested in early 2015, and Panasonic Healthcare, which was carved-out of the Panasonic Corporation for $1.67bn in 2013.

Hiro Hirano, a member of KKR and CEO of KKR Japan, said: "Calsonic Kansei is a best-in-class auto-parts manufacturer that supplies high-quality products to the world's largest automotive brands. As a partner to Calsonic Kansei's management team, we aim to assist the company in achieving its growth ambitions and make available our international network and industry expertise to continue Calsonic Kansei's success globally."

News: KKR to buy Nissan-backed supplier Calsonic for up to $4.5 billion

Cyber safety: Symantec to acquire Lifelock for $2.3bn

BY Fraser Tennant

In a combination that will form the world’s largest digital safety platform for consumers and families, Symantec Corp. has announced that it is to acquire LifeLock, Inc. – a transaction with an enterprise value of $2.3bn.

The definitive agreement between cyber security company Symantec (the maker of Norton antivirus software) and LifeLock, a provider of proactive identity theft protection services, is expected to be financed by Symantec via cash on the balance sheet and $750m of new debt.

Once Symantec’s acquisition of LifeLock (for $24 per share) is complete, two business leaders, one in consumer security and the other in identity protection and remediation services, will have been brought together to create the world’s largest consumer security business with over $2.3bn in annual revenue (based on last fiscal year revenues for both companies).

Symantec’s board of directors has also confirmed that it has increased the company’s share repurchase authorisation from approximately $800m to $1.3bn, with up to $500m in repurchases targeted by the end of fiscal 2017.

“As we all know, consumer cyber crime has reached crisis levels,” said Greg Clark, CEO of Symantec. “LifeLock is a leading provider of identity and fraud protection services, with over 4.4 million highly-satisfied members and growing. This acquisition marks the transformation of the consumer security industry from malware protection to the broader category of digital safety for consumers.”

Illustrating the “crisis levels” referenced by Mr Clark is data showing that, in the last year, one third of American citizens and over 650 million people globally were the victims of cyber crime. As a consequence, more and more consumers are becoming concerned about digital safety.

“After a thorough review of a broad range of alternatives, our board of directors unanimously concluded that Symantec is the ideal strategic partner for LifeLock and offers our shareholders a significant premium for their investment, at closing,” said Hilary Schneider, CEO of LifeLock. “Together with Symantec we can deploy enhanced technology and analytics to provide our customers with unparalleled information and identity protection services. We are very pleased to have reached an outcome that serves the best interests of all LifeLock stakeholders.”

The Symantec/LifeLock transaction has been approved by the boards of directors of both companies and is expected to close in the first calendar quarter of 2017, subject to customary closing conditions (including LifeLock stockholder approval).

Mr Clark concluded: “With this combination we will be able to deliver comprehensive cyber defence for consumers.”

News: Symantec to acquire LifeLock for $2.3 billion