Global Logistics expands with $2.8bn European acquisition

BY Richard Summerfield

Global Logistics Properties, which manages around $39bn of logistics assets in Asia-Pacific and the Americas, has expanded into the European logistics market by acquiring Gazeley for around $2.8bn from Brookfield Asset Management. The transaction is expected to be funded by about $1.6bn of equity and $1.2bn of long-term, low-cost debt.

Global Logistics itself is in the process of being taken over for $11.8bn by a leading Chinese private equity consortium which includes Hillhouse Capital and the Hopu Investment Management Company, and is backed by senior executives from Global Logistics. The consortium, which is known as Nesta, will take Global Logistics private in Asia's largest private equity buyout of the year. According to Global Logistics, the deal for Gazeley is not expected to impact the timeline for the company’s privatisation.

In a statement announcing the Gazeley deal, Ming Z. Mei, co-founder and chief executive of GLP, said: “We have been looking to expand to Europe and this portfolio presents an attractive entry point given the quality and location of the assets. This transaction adds a premier operational and development platform for us in Europe and is part of our long-term strategy to expand our fund management business.”

Gazeley’s existing management team, as well as the company’s brand, are both expected to be retained when the deal has been completed.

Global Logistics will be acquiring a considerable asset portfolio in the deal. The company will gain around 32 million square feet of property currently owned by Gazeley, which is concentrated in Europe’s key logistics markets, with 57 percent in the United Kingdom, 25 percent in Germany, 14 percent in France and the remainder in the Netherlands, according to Global Logistics. Europe has long been a focus for Global Logistics; indeed, the company has been talking about expanding into the market for more than 18 months.

The company, much like the wider logistics industry, has seen a rising demand for facilities, driven by a boom in e-commerce. Earlier this year, private equity group Blackstone agreed to sell European warehouse firm Logicor to China Investment Corp for $14.4bn in a deal which further reinforces the burgeoning interest in the global logistics sector.

News: Global Logistic Properties buys European logistics firm for $2.8 billion

EU queries proposed $54bn eyewear merger

BY Richard Summerfield

European competition regulators have launched an in-depth investigation into the proposed $54bn merger between eyewear maker Luxottica and lens manufacturer Essilor, amid concerns the move could stifle competition.

If approved, the deal, which was announced in January, would create a global eyewear powerhouse with a combined current market value of around €45bn, combined sales of about €15bn and staff of more than 140,000. The merged company could have a dramatic impact on the growing global eyewear industry. Luxottica, is the world’s leading consumer eyewear group and owner of Ray-Ban, Oakley and Sunglass Hut, while Essilor is the biggest manufacturer of lenses in the world.

The companies had hoped to have the deal completed by the end of 2017, but this now seems unlikely as the European Commission has until 12 February 2018 to approve or reject the proposed merger.

According to a statement announcing the probe, the Commission's initial market investigation raised several issues relating to the combination of Essilor's strong market position in lenses and Luxottica's strong market position in eyewear. The Commission is concerned that the combined organisation may “use Luxottica's powerful brands to convince opticians to buy Essilor lenses and exclude other lens suppliers from the markets, through practices such as bundling or tying. The Commission will investigate whether such conduct could lead to, adverse effects on competition, such as limiting purchase choices or increasing prices".

Margrethe Vestager, EU competition commissioner said: “Half of Europeans wear glasses and almost all of us will need vision correction one day. Therefore we need to carefully assess whether the proposed merger would lead to higher prices or reduced choices for opticians and ultimately consumers.”

Neither Luxottica nor Essilor opted to offer concessions to allay any of the EU’s competition concerns prior to the investigation annoucement. The companies had until 19 September to offer concessions to the European Commission after initial concerns were voiced by the EU about the deal.

Both Luxottica and Essilor declined to comment on the EU’s concerns. Competition regulators in the US are also examining the deal, which has already won approval from authorities in Russia, India, Colombia, Japan, Morocco, New Zealand, South Africa and South Korea.

News: EU to investigate $54 bln Luxottica, Essilor deal

M&A rebound predicted

BY Richard Summerfield

For a number of reasons, the first half of 2017 saw fairly constrained levels of M&A activity, according to a new report from Clifford Chance. However, despite this relative paucity, a flurry of M&A activity in the final half of the year could be on the way.

The report, 'A Global Shift: September 2017', cites a 42 percent drop in outbound Chinese dealmaking, increased antitrust deal scrutiny and a ‘wait and see’ approach being adopted by many multinationals in the face of heightening global geopolitical chaos as the largest roadblocks holding up progress in H1 2017.

Chinese restrictions on capital outflows, designed to limit “irrational” acquisitions overseas in certain industries including real estate, hotels, movie studios, entertainment and sports clubs, were announced in August as the government published outbound investment guidelines. These guidelines have had a butterfly effect in overseas markets where sellers have become increasingly wary of Chinese bidders and their ability to close transactions. As a result, there has been a sharp decrease in Chinese outbound activity.

Heightened antitrust concerns in certain key markets have been equally damaging. With competition authorities in Europe and Asia toughening their stance on dealmaking, particularly when there is a large data element to deals. There has been a focus on procedural infringements throughout 2017 with authorities increasingly willing to levy significant fines.

“Globally, we are seeing increasing proliferation of inconsistent merger control procedures and greater scrutiny of foreign takeovers on non-competition grounds. Navigating these complexities requires careful planning, understanding of local sensitivities and early identification of remedies,” said Nelson Jung, an antitrust partner at Clifford Chance.

However, there are reasons to be cheerful. An overabundance of dry powder in the private equity industry is driving activity as investors look to capitalise on the upheaval caused by global geopolitical uncertainty.

There are also a number of surging industries. The consumer, retail and leisure sector has seen considerable activity, with larger deals driving a 9 percent rise in the industry's share of dealmaking compared to 2016. The real estate and healthcare industries also recorded a notable uptick.

US M&A in the first half of the year is more or less flat from H1 2016; however, M&A activity in Europe has been healthy, with an 8 percent increase compared to H2 2016. Europe has benefited from investment from the US, as well as intra-European investment.

Report: A Global Shift: September 2017

Sempra and Oncor agree merger

BY Richard Summerfield

Sempra Energy is to acquire Oncor Electric Delivery Co for $18.8bn, including existing, outstanding debt of around $9.45bn, the companies have announced in a statement.

Sempra will pay cash for the company and the deal is expected to be financed by a combination of Sempra's own debt and equity, third-party equity and $3bn of expected investment-grade debt.

"Both Sempra Energy and Oncor share more than 100 years of experience operating utilities that deliver safe, reliable energy to millions of customers," said Debra L. Reed, chairman, president and CEO of Sempra Energy. "With its strong management team and long, distinguished history as Texas' leading electric provider, Oncor is an excellent strategic fit for our portfolio of utility and energy infrastructure businesses. We believe our agreement with Energy Future will help ensure that Texas utility customers continue to receive the outstanding electric service they have come to expect from Oncor and provide stability to Oncor's nearly 4000 employees."

Elliott Management is the largest creditor of bankrupt Energy Future Holdings, the majority owner of Oncor, and Elliott have backed Sempra’s bid to take over the company, spurning a rival takeover attempt by Warren Buffett. In July, Mr Buffett’s Berkshire Hathaway made a rival $18bn offer for Oncor which was rejected by the company, as well as Elliott, who argued that the offer was too low and not in creditors’ interest. 

Under the terms of the deal, Sempra Energy has committed to support Oncor's plan to invest $7.5bn of capital over a five-year period to expand and reinforce its transmission and distribution network.

Once the deal has been completed, Bob Shapard, Oncor's CEO, will become executive chairman of the Oncor board of directors and Allen Nye, currently Oncor's general counsel, will succeed Mr Shapard as Oncor's CEO. Both are set to serve on the Oncor board, which will consist of 13 directors, including seven independent directors from Texas, two from existing equity holders and two from the new Sempra Energy-led holding company.

Elliott had tried to put together its own $9.3bn bid to buy Oncor but ultimately decided to back the Sempra deal, which a spokesman said "provides substantially greater recoveries to all creditors of Energy Future than the proposed Berkshire transaction." Elliott acquired a specific class of debt worth about $60m from Fidelity Investments that gave it the power to block Berkshire’s offer.

News: Sempra Energy to buy Oncor for $9.45 billion in blow to Berkshire

Source: http://www.reuters.com/article/us-oncor-m-a-sempraenergy-idUSKCN1B1041

Vantiv and Worldpay in $10.4bn merger

BY Richard Summerfield

US credit card payment processing company Vantiv Inc has agreed to acquire its UK rival Worldpay in a deal worth $10.4bn, a move which will create a $29bn global payments giant.

Under the terms of the deal, Vantiv shareholders will own 57 percent of the newly combined group while Worldpay investors will hold the remaining 43 percent. Vantiv has offered 55 pence in cash, 0.0672 of a new Vantiv share, an interim dividend of 0.8 pence per Worldpay share and a special 4.2 pence dividend, for WorldPay.

The combined company will be led by Vantiv CEO Charles Drucker as executive chairman and co-CEO. Current Worldpay CEO Philip Jansen will be co-CEO of the joint group. Vantiv CFO Stephanie Ferris, will continue as CFO of the combined group. The board will consist of five Worldpay and eight Vantiv directors.

“Our combined company will have unparalleled scale, a comprehensive suite of solutions, and the worldwide reach to make us the payments industry global partner of choice," said Mr Drucker in a statement announcing the deal.

“The growth of e-commerce and the way consumers expect to transact is increasing complexity for businesses around the world,” Mr Jansen said, adding that the “combination of scale, innovation, technology and global presence will mean that we can offer more payment solutions to businesses, whether large or small, global or local".

Vantiv expects the deal to result in annual recurring pretax cost synergies of about $200m by the end of the third year following completion of the merger. It expects to incur one-off integration and restructuring costs of about $330m, most by the end of the second year.

The two firms initially announced their intention to merge in July, however given the scale and complexity of the deal, it has taken a number of weeks for management of both companies to reach an agreement on certain conditions, including guaranteeing a London listing for the newly merged company.

The deal is the latest in a number of mergers in the evolving payments processing industry. Consumer trends are changing, and as more people turn away from cash transactions and utilise smart devices and mobile payments in the future, the industry is likely to look very different in the coming years.

News: U.S. card firm Vantiv clinches $10 billion deal to buy Worldpay