$13.3bn “transformational event” sees ConocoPhillips asset sale to Cenovus

BY Fraser Tennant

In what has been described as a “truly transformational event”, Canadian oil company Cenovus Energy Inc. has agreed to the £13.3bn acquisition of the 50 percent interest held by multinational energy corporation ConocoPhillips in the Foster Creek Christina Lake (FCCL) Partnership – the companies’ jointly owned oil sands venture operated by Cenovus.

Once complete, the transaction, which also includes the majority of ConocoPhillips’s western Canada Deep Basin gas assets, will immediately make Cenovus Canada’s largest thermal oil sands producer and one of the country’s largest oil and gas producers.

“This is a significant, win-win opportunity for ConocoPhillips and Cenovus,” said ConocoPhillips chairman and chief executive Ryan Lance. “ConocoPhillips Canada will now focus exclusively on our Surmont oil sands and the liquids-rich Blueberry-Montney unconventional asset. Cenovus will assume sole ownership of FCCL and assume operations in the Deep Basin assets. This is truly a transformational event for both companies.”

With operations and activities in 17 countries, $90bn of total assets and approximately 13,300 employees, ConocoPhillips is the world's largest independent exploration and production company based on production and proved reserves. The transaction is expected to make an immediate and significant impact on ConocoPhillip’s value proposition by allowing it to rapidly reduce debt to $20bn and double share repurchase authorisation to $6bn.

“This means we will not only accelerate, but exceed, the three-year plan we laid out in November 2016,” continued Mr Lance. “The transaction is accretive to our cash margins and lowers the average cost of supply of our portfolio, with no impact to our estimate of cash provided by operating activities at $50 per barrel Brent price. We will retain upside to future oil price increases through our equity stake in Cenovus and an uncapped, five-year contingent payment.”

With a continued focus on total shareholder return, Cenovus intends to consider the optimal level of its dividend once the company’s divestiture of non-core assets is substantially complete – taking into account future production growth, realised cost reductions and sustained margin improvements.

“This transformational acquisition allows us to take full control of our best-in-class oil sands projects and to add a second growth platform across the prolific Deep Basin that provides complementary short-cycle development opportunities,” said Brian Ferguson, president and chief executive of Cenovus. “The purchase of these assets is consistent with Cenovus’s existing strategy and core and I am confident this transaction will create substantial shareholder value for years to come.”

News: ConocoPhillips sells oil and gas assets to Cenovus for $13.3 billion

Dow and DuPont win EU regulatory approval

BY Richard Summerfield

The controversial $130bn ‘merger of equals’ between Dow Chemical and DuPont finally won approval from the European Union (EU) yesterday as they agreed to divest certain assets in order to get the deal done.

The combined company, which will be known as DowDuPont following the proposed merger, will split into three independent companies within two years of completion. The three businesses will focus on agriculture, materials and speciality products.

"We always look at what a merger would change not just today but also tomorrow," EU Competition Commissioner Margrethe Vestager told reporters at a Brussels press conference announcing the approval. "It is just as important to make sure mergers don’t reduce innovation for new and better products."

In a statement following the approval, Dow and DuPont said: “Longer term, the intended three-way split is expected to unlock even greater value for shareholders and customers and more opportunity for employees as each company will be a leader in attractive segments where global challenges are driving demand for their distinctive offerings."

DuPont has agreed to sell off its crop protection business, along with its associated research and development division. Dow has agreed to divest its acid copolymers and ionomers business.

According to Ms Vestager, the choice of buyer for the companies’ assets was up to Dow and DuPont, however, a potential purchaser would need to have the necessary resources to make the new business viable without triggering new antitrust concerns.

EU antitrust authorities were initially reluctant to approve the deal as they were concerned that competition and innovation in the European agriculture industry would be negatively impacted.

Though the EU’s approval is an important step in the approval process, the deal is still being examined by antitrust bodies in the US, Canada and Brazil. "The companies continue to work constructively with regulators in the remaining relevant jurisdictions to obtain clearance for the merger, which they are confident will be achieved," the Dow and DuPont statement continued.

News: EU antitrust regulators clear $130 billion Dow, DuPont merger

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