Global deal volume reaches $705bn

BY Richard Summerfield

Global mergers & acquisitions activity has been on the up, according to Dealogic, with consecutive year-on-year increases for the last four years. And 2017 may prove to be even busier. There have been $705bn worth of deals announced in the year to date, marking the first time since the onset of the financial crisis that the $700bn mark had been surpassed in same YTD period.

One of the major forces driving activity has been firms pursuing cross-border deals. Such transactions reached $288.4bn in 2017 YTD, up from $144.9bn in 2012 and the highest YTD level since the $324.7bn recorded in 2007. The US accounted for $95.8bn worth of overseas acquisitions, the highest YTD level on record. The $31.4bn offer for Swiss biotech company Actelion by American healthcare group Johnson & Johnson is the largest announced deal o date.

From a sectoral perspective, the oil & gas industry saw the most activity, with a record $96.7bn worth of announced deals to date. Of this total, $52.4bn and $9.4bn occurred in the domestic sectors of the US and Canada respectively.

The second most targeted industry was the healthcare sector, with $95.9bn,and technology was third with $87.1bn.

Morgan Stanley topped the adviser rankings in the YTD. Though the firm’s share of total deals fell from 22.0 percent to 20.2 percent, it was involved in $142.7bn of deals, far outstripping Bank of America Merrill Lynch, which had an 18.5 percent share – up from 14.4 percent in 2016 – and a total deal value of $130.3bn. Citi Bank advised on 17.6 percent of transactions YTD, up from 13.2 percent in 2016 for a total value of $123.9bn. Goldman Sachs, which topped the global advisory rankings this time last year, suffered the most in the early part of 2017. Last year the firm advised on nearly a third of deals; this year, however, it fell to fourth place, with its share of deals nearly halved to 16.7 percent, having been engaged on $118.2bn of transactions in the YTD.

Report: Dealogic M&A StatShot

EU to introduce measures to block "politically-motivated" foreign investment

BY James Williams

Due to concerns over “politically-motivated” takeovers, the European Union (EU) has proposed a range of measures that it says will require foreign investors to rethink their investments in Europe.

The EU action is designed to address takeovers in sectors that three countries – Germany, France and Italy – have said could harm Europe's strategic interests, with concerns arising that technological proficiency is ‘leaking abroad’.

The proposals by the EU, which already has the power to block takeovers on antitrust grounds, would give the EU further powers to scrutinise investments in the US if they are deemed to be of strategic importance, from both an economic and a security perspective.

According to the European Commission's (EC) industry department, investments in sectors such as defence and transport infrastructure, as well as sectors which utilise critical and cutting-edge technologies, will be under the microscope. The EC department has also said that deals which it feels could conceivably risk “economic prosperity” will also be closely scrutinised.

Furthermore, the proposals would give the EU the power to block takeovers by any company whose motivation is considered to be "just for the purpose of disposing its overcapacity" – a determination which could well apply to sectors such as steel production which, for a number of years, has seen Europe accuse China, for example, of dumping under-priced goods.

Such a blocking mechanism may also apply to takeovers of EU companies by an EU-based subsidiary of a foreign firm, says the EU, or even in cases of "infiltration of the management with individuals from non-EU countries" who have the means to access data and technology.

Among the recent deals which have raised concerns and prompted the EU’s intervention is the $5bn acquisition of the German robotics maker Kuka by China’s Midea. Other German companies, such as Kion, Putzmeister and KraussMaffei , have also come under Chinese ownership in recent years.

“A growing number of non-EU investors were buying up European technologies for the strategic objectives of their home country”, said the economy ministers of France and Germany and Italy's industry minister this week. This is despite the barriers investors face when trying to lay their hands on assets in other countries.

For the proposals to get the go-ahead, all departments within the EC would need to give their approval. However, at a time of relentless euroscepticism, the proposals suggest that the EU “would maintain the right to allow or deny a takeover even after EU vetting”.

News: EU plans measures to block foreign takeovers of strategic firms

Driverless tech the catalyst for Intel’s $15.3bn acquisition

BY Richard Summerfield

Intel Corp announced yesterday that it was to acquire Israeli driverless technology company Mobileye in a deal worth $15.3bn. The deal is another show of confidence in the nascent driverless automobile space.

According to a statement announcing the deal, Mobileye’s shareholders will receive $63.54 per share in cash, making the deal the biggest ever acquisition of an Israeli technology company. The deal is expected to close in the next nine months, pending regulatory approval and certain other closing conditions. Mobileye’s shares closed at $47.27 on Friday in New York.

Once the merger has been complete, Mobileye’s current chief technology officer and co-founder, Professor Amnon Shashua, will lead Intel’s autonomous driving division, which will be based in Israel. Doug Davis, Intel’s senior vice president will oversee how Mobileye and Intel work together across the whole company and will report to Professor Shashua going forward.

Intel estimates the vehicle systems, data and services market will be worth as much as $70bn by 2030. The deal for Mobileye will allow them to position themselves at the forefront of the emerging – and disruptive – driverless technology.

Intel, synonymous with personal computers, has seen its standing negatively impacted by the proliferation of smart devices, which have overtaken PCs in popularity and usage.

“This acquisition is a great step forward for our shareholders, the automotive industry and consumers,” said Brian Krzanich, Intel's chief executive. “Intel provides critical foundational technologies for autonomous driving including plotting the car’s path and making real-time driving decisions. Mobileye brings the industry’s best automotive-grade computer vision and strong momentum with automakers and suppliers. Together, we can accelerate the future of autonomous driving with improved performance in a cloud-to-car solution at a lower cost for automakers.”

The acquisition of Mobileye comes after a period of cooperation between the two companies; Intel – along with Delphi Autmotive – began working on an affordable driverless car with Mobileye in November 2016.

“We expect the growth towards autonomous driving to be transformative. It will provide consumers with safer, more flexible, and less costly transportation options, and provide incremental business model opportunities for our automaker customers,” said Ziv Aviram, co-founder, president and chief executive of Mobileye . “By pooling together our infrastructure and resources, we can enhance and accelerate our combined know-how in the areas of mapping, virtual driving, simulators, development tool chains, hardware, data centers and high-performance computing platforms. Together, we will provide an attractive value proposition for the automotive industry.”

News: Intel's $15 billion purchase of Mobileye shakes up driverless car sector

Standard Life and Aberdeen Asset Management in £11bn merger agreement

BY Fraser Tennant

In a deal that will lead to the creation of a world class investment group, Standard Life plc and Aberdeen Asset Management PLC, two of the UK’s biggest investment companies, have reached agreement on the terms of an all-share merger valued in the region of £11bn.

Described as having a compelling strategic and financial rationale due to the complementary strengths of the two firms (which oversee assets worth £660bn), the merger, once complete, will see Standard Life shareholders own 66.7 percent of the combined entity while Aberdeen shareholders will own 33.3 percent.

The boards of Standard Life and Aberdeen believe the merger will: (i) create an investment group with strong brands, leading institutional and wholesale distribution franchises, market leading platforms and access to longstanding, strategic partnerships globally; (ii) deliver through increased diversification an enhanced revenue, cash flow and earnings profile and strong balance sheet that is expected to be capable of generating attractive and sustainable returns for shareholders, including dividends; and (iii) result in material earnings accretion for both sets of shareholders, reflecting the significant synergy potential of the merger.

"We believe this merger is excellent for our clients, bringing together the strong and highly complementary investment capabilities of each firm with a breadth and depth of talent unrivalled amongst UK active managers and positioning the business to meet the evolving needs of clients and customers”, said Gilbert, chief executive of Aberdeen Asset Management PLC. “This merger brings financial strength, diversity of customer base and global reach to ensure that the enlarged business can compete effectively on the global stage."

To be headquartered in Scotland, the combined company will be branded to incorporate the names of both Standard Life and Aberdeen Asset Management.

"This merger brings together two fine companies and I'm greatly honoured to be asked to chair the combination”, said Sir Gerry Grimstone, chairman of Standard Life. “I look forward to welcoming our new colleagues. We will be successful as long as we continue to put our clients, customers, employees and good governance at the heart of what we do."

In addition, the merger is expected to harness Standard Life's and Aberdeen's complementary, market leading investment and savings capabilities which would deliver a compelling and comprehensive product offering for clients covering developed and emerging market equities and fixed income, multi-asset, real estate and alternatives.

Simon Troughton, chairman of Aberdeen, concluded: "The strategic fit is compelling and will facilitate significant investment in the business to support growth, innovation and a drive for greater operational efficiency.”

The Standard Life/Aberdeen deal is subject to a number of conditions, including shareholder approvals.

News: Standard Life and Aberdeen agree merger

Deutsche Börse deal dead

BY Richard Summerfield

The proposed $30.1bn merger of equals between the London Stock Exchange (LSE) and Deutsche Börse, a deal which would have created Europe’s biggest stock exchange, is seemingly dead after coming under intense antitrust scrutiny.

According to the LSE, any merger between the two rivals should now be considered “highly unlikely” given that the company will be unable to meet antitrust conditions set by the European Commission. As a result, it seems that the on again, off again merger, which failed to get off the ground in both 2000 and 2005, will again end unsuccessfully.

The LSE was unable to commit to the divestiture of its majority stake in the Milan stock exchange, which the European Commission had stipulated had to happen in order to win regulatory approval.

In a statement, the LSE said: “The LSE board believes it is highly unlikely that a sale of MTS could be satisfactorily achieved, even if LSE were to give the commitment. Moreover, the LSE board believes the offer of such a remedy would jeopardise LSE’s critically important relationships with these regulators [in Italy] and be detrimental to LSE’s ongoing businesses in Italy and the combined group, were the merger to complete.”

The LSE had previously agreed to sell part of its clearing business, LCH, to satisfy competition concerns before the Commission demand the sale of its MTS shareholding earlier in February. The LCH business was sold to the company’s European rival Euronext for €510m.

The proposed merger between Deutsche Börse and the LSE has been controversial from the outset. A merged Deutsche Börse/LSE could easily compete with the Chicago Mercantile Exchange and ICE in the US, as well as the Hong Kong stock exchange in Asia. However, European scepticism around the deal has been fierce. The proposed union has drawn yelps of derision from a host of other European countries, including France, Belgium, Portugal and the Netherlands, many of which are fearful for their own stock exchanges owned by Euronext.

News: LSE scuppers Deutsche Boerse merger hopes by rejecting EU demand