Clariant and Huntsman clinch merger of equals

BY Richard Summerfield

Clariant and Huntsman Corporation have announced a merger of equals which will create a leading global speciality chemical company with an enterprise value of approximately $20bn, including debt.

Under the terms of the all-stock deal, Huntsman holders will get 1.2196 shares in the new company for each share they own. Clariant shareholders will have a 52 percent stake in the combined company, which will be known as HuntsmanClariant.

According to a statement announcing the deal, the two companies expect the merger to generate more than $400m in annual cost savings, leading to $3.5bn in value creation.

"This is the perfect deal at the right time. Clariant and Huntsman are joining forces to gain much broader global reach, create more sustained innovation power and achieve new growth opportunities,” said Hariolf Kottmann, CEO of Clariant. “This is in the best interest of all of our stakeholders. Peter Huntsman and I share the same strategic vision and I look forward to working with him.”

Peter R. Huntsman, president and CEO of Huntsman, who is expected to hold the same title at the combined group, said: “I could not be more enthusiastic about this merger and look forward to working closely with Hariolf Kottmann, a man I have admired and trusted for the past decade. We also look forward to a close association with his immensely talented colleagues around the world. Together, we will create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility.”

Dr Kottmann will serve as HuntsmanClariant’s chairman. The firm, once merged, will operate in more than 100 countries and employ around 32,000 people. HuntsmanClariant will have a global headquarters in Pratteln, Switzerland, and an operational headquarters in The Woodlands, Texas.

Rumours of a merger between the two companies have circulated for some time. Indeed, Clariant and Huntsman are believed to have ended merger talks in late 2016 over a disagreement about which firm would play the lead role. The two companies have been on friendly terms for a while, and their respective CEOs are said to have had a professional and personal friendship for around the last eight years.

The deal is expected to close by the end of 2017, pending shareholder and regulatory approval.

News: Clariant to Buy Huntsman for $6.4 Billion as M&A Surges

Industry leaders agree $3.1bn deal to accelerate 5G deployment

BY Fraser Tennant

In a deal designed to scale and accelerate the deployment of next-generation broadband services throughout the US, Verizon Communications Inc. has announced it has signed an agreement to acquire Straight Path Communications Inc., a holder of millimeter wave spectrum configured for 5G wireless services.

The definitive agreement will see Verizon purchase Straight Path for $184 per share, or a total consideration of $3.1bn, in an all-stock transaction. The deal has been approved by the boards of directors of both Straight Path and Verizon.

Concurrently, Verizon is to pay (on behalf of Straight Path) a termination fee of $38m to the US multinational telecommunications conglomerate AT&T. Announced in April 2017, the previous definitive agreement between AT&T and Straight Path was cancelled after the Straight Path board of directors determined, following consultation with its financial advisers and outside legal advisers, that the transaction with Verizon constituted a superior proposal.

Based in Virginia, US, Straight Path holds millimeter wave spectrum licences configured for 5G services, including 39 GHz licences that serve the entire country and 28 GHz assets in major markets. A proposed telecom standard that will succeed the current 4G standards, 5G is expected to provide wireless internet speeds 40 times faster than at present.

Once complete, Verizon’s acquisition of Straight Path will give the wireless giant a significant nationwide portfolio of millimeter-wave spectrum, which is viewed as being particularly important for the deployment of the next generation of wireless services.

"Verizon now has all of the pieces in place to quickly accelerate the deployment of 5G," said Hans Vestberg, executive vice president and president of global network and technology at Verizon. "Combined with our recent transactions with Corning Incorporated, XO Communications, and Prysmian Group, this is another step to build the next-generation network for our customers."

Acting as legal counsel to Verizon in connection with the transaction is Debevoise & Plimpton LLP. For Straight Path, Evercore served as exclusive financial adviser while Weil, Gotshal & Manges LLP served as company counsel.

The Verizon/Straight Path transaction is anticipated to close within nine months and is subject to review by the Federal Communication Commission (FCC).

News: Verizon beats AT&T to buy spectrum holder Straight Path

Coach and Kate Spade agree $2.4bn deal

BY Richard Summerfield

Following months of speculation, handbag manufacturer Coach Inc has agreed to acquire rival Kate Spade & Co in a deal worth $2.4bn.

The deal, announced on Monday, will see Kate Spade shareholders receive $18.50 per share in cash, a 27.5 percent premium to the closing price of Kate Spade's shares as of 27 December 2016, the last trading day prior to media reporting of a potential transaction. According to Coach, the deal will be half funded by a combination of senior notes, bank term loans and approximately $1.2bn of excess cash, a portion of which will be used to repay an expected $800m six-month term loan.

By acquiring its smaller rival, Coach is making a concerted effort to appeal to a younger demographic. Kate Spade’s consumers generally skew younger than Coach’s, thanks to the company’s quirkier product line and lower price point. The company has also recently introduced other products, which have appealed to consumers, including kitchen utensils.

Victor Luis, chief executive of Coach, Inc. said, "Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials. Through this acquisition, we will create the first New York-based house of modern luxury lifestyle brands, defined by authentic, distinctive products and fashion innovation. In addition, we believe Coach's extensive experience in opening and operating specialty retail stores globally, and brand building in international markets, can unlock Kate Spade's largely untapped global growth potential. We are confident that this combination will strengthen our overall platform and provide an additional vehicle for driving long-term, sustainable growth."

Craig A. Leavitt, chief executive of Kate Spade & Company, said, "Following a thorough review of strategic alternatives, reaching an agreement to join Coach's portfolio of global brands will maximise value for our shareholders and positions Kate Spade for long-term success as we continue our evolution into a powerful, global, multi-channel lifestyle brand. We look forward to working with Coach's leadership team to leverage their expertise across the business as we continue to innovate and build long-term loyalty with consumers and expand across our product category and geographic axes of growth."

The deal, expected to close in the third quarter of 2017, is a strong result for Kate Spade activist investor Caerus Investors, which had pushed the company to put itself up for sale for some time. The investment firm said that though Kate Spade was generating solid growth, it is in need of better management to help boost its profit margins.

News: With eye on millennials, Coach buys Kate Spade

Air Methods sold to American Securities in $2.5bn deal

BY James Williams

Air medical transport provider Air Methods Corporation and leading US private equity firm American Securities LLC announced that the $2.5bn (including debt) acquisition of Air Methods by American Securities has closed.

As well as being the largest domestic air medical transport provider in the $5bn air medical market (serving 48 states with over 300 bases of operations), Air Methods also operates a leading air tourism business and employs more than 5000 people – including over 1000 retired and active duty military veterans.

With one of the youngest fleets in its industry, which includes its airborne intensive care units (ICUs) dedicated to emergency air medical services, Air Methods provided more than 70,000 patients with lifesaving care last year.

“As a private company, Air Methods will have greater flexibility to execute our strategy and pursue long-term growth,” said Aaron Todd, chief executive of Air Methods. “We look forward to partnering with American Securities to strengthen our market position in air medical transportation and air tourism.”

Acquirer American Securities, based in New York with an office in Shanghai, invests in market-leading North American companies with annual revenues generally ranging from $200m to $2bn and/or $50m to $300m of earnings before interest, tax, depreciation and amortisation (EBITDA). The firm and its affiliates have approximately $15bn under management.

“We have strong admiration for the men and women at Air Methods and their commitment to providing critical access to care for patients and communities served,” commented Marc Saiontz, managing director of American Securities. “The Air Methods team has a paramount focus on clinical care and aviation safety, and on providing hospitals and local communities with the highest quality air ambulance services available. We are excited to assist the company in this critical mission.”

Financial advisers to Air Methods are Goldman Sachs and Centerview Partners LLC, while Paul, Weiss, Rifkind, Wharton & Garrison LLP and Holland & Hart LLP are the company’s legal advisers. Legal adviser to Americana Securities is Weil, Gotshal & Manges LLP.

The Air Methods/American Securities transaction is expected to close by the end of the second quarter of 2017.

News: American Securities completes purchase of medical transport provider Air Methods

Geopolitical uncertainty and buoyant M&A can coexist, says new report

BY Fraser Tennant

Despite ongoing geopolitical uncertainties, companies are continuing to greenlight mergers & acquisitions (M&A) deals in the search for growth, according to EY’s new Global Capital Confidence Barometer.

The Barometer, while recognising that geopolitical concerns are a mainstay feature of the boardroom, notes that such issues are being overshadowed by more immediate and pressing risks and opportunities, with boards increasingly focusing on countermeasures against technological disruption and seizing new routes to growth - countermeasures that often involve M&A transactions.

As a consequence of this focus, the M&A market is currently a healthy environment, with dealmakers expecting further activity in the year ahead.

Among the Barometer’s key findings: (i) 56 percent of companies intend to acquire in the next year; (ii) 73 percent have increased the frequency of the portfolio review process; (iii) 69 percent cite a broad range of geopolitical or emerging policy concerns as the greatest risk to business; (iv) 79 percent of US executives actively plan to pursue deals; (v) 64 percent are looking at cross-border deals to secure market access and grow their customer base; and (vi) 90 percent expect their pipeline to increase or remain stable.

EY also reveals that 97 percent of senior executives expect corporate earnings to accelerate or remain stable, while 64 percent believe that the global economy will improve, despite today’s heightened geopolitical uncertainties.

“While technology and digital disruption are major drivers of the current market, other considerations are also spurring deal activity,” said Steve Krouskos, global vice chair of transaction advisory services at EY. “Geographical expansion to secure supply chains and increase customer reach will accelerate cross-border M&A. Private equity is returning to replenishing mode. Lastly, corporates are increasingly reassessing and reshaping their portfolios, creating a natural pipeline of deal opportunities.”

Sceptics, however, maintain that heightened levels of deal activity are leading to too many bad deals being pursued, a claim that Mr Krouskos dismisses, stating that this is not the case in today’s M&A market. “Companies are using advanced analytics, combined with data-driven diligence and integration, to target the right deals and integrate them in the right way,” he says.

So, can heightened geopolitical uncertainties and buoyant M&A coexist? The answer, says EY, is a resounding yes.

Report: Global Capital Confidence Barometer - Can complex geopolitical uncertainty and record M&A coexist?