T-Mobile and Sprint agree $26bn mega-merger

BY Fraser Tennant

In a combination set to create thousands of American jobs and boost US economic growth, mobile carrier rivals T-Mobile US and Sprint Corporation have agreed to merge in an all-stock transaction valued at $26bn. 

The deal, which follows months of negotiation between T-Mobile's parent, Deutsche Telekom, and Japan's SoftBank, parent of Sprint, is expected to create more competition and unmatched value for customers across the US, with existing T-Mobile and Sprint customers benefiting from increased speeds, coverage and performance.

The combined company will have a market value of $146bn and be named T-Mobile.

Moreover, the new company will have the network capacity to create a nationwide 5G network in the critical first years of the 5G innovation cycle – the years that will determine if US firms lead, as they did in 4G, or follow in the 5G digital economy.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation and a second-to-none network experience – and do it all so much faster than either company could on its own,” said John Legere, current president and chief executive of T-Mobile US. “As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.”

Mr Legere will serve as chief executive of the new entity while Marcelo Claure, the current chief executive of Sprint, will serve on the board.

“The combination of these two dynamic companies can only benefit the US consumer," said Mr Claure. “Both Sprint and T-Mobile have similar DNA, and we intend to build the world’s best 5G network that will make the US a hotbed for innovation and redefine the way consumers live and work.”

The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close no later than the first half of 2019.

Mr Claure concluded: “I am confident this combination will spur job creation and ensure opportunities as part of a larger, stronger combined organisation. As we do this, we will force our competitors to follow suit, as they always do, which will benefit the entire country.”

News: T-Mobile agrees $26bn mega-merger with Sprint

Takeda proposes to acquire Shire in $65bn deal

BY Fraser Tennant

In a deal that could spark a new wave of big pharma deals, Japan’s Takeda Pharmaceutical Company Limited has made a $65bn offer to acquire Jersey-based rare disease drugmaker Shire Plc.

The deal, if completed, would be the biggest acquisition of a drug company this year.

Earlier this week, the board of Shire confirmed that it would recommend the offer to its shareholders, subject to satisfactory resolution of the other terms of the possible offer, including completion of reciprocal due diligence by Shire on Takeda.

With the deal in a preliminary phase, and Takeda having the right to make a lower offer or walk away should Shire receive a higher rival bid, the Japanese company, under UK takeover rules, is required to make its intentions known by 8 May 2018.

Long seen as a likely target for a takeover, Shire was almost acquired by US drugmaker AbbVie Inc in 2014, until reforms to US tax rules scuppered the deal. In addition, Shire was the subject of an aborted acquisition attempt by Botox-maker Allergan Plc last week.

A firm offer by Takeda for Shire is subject to the following conditions: (i) satisfactory completion of a confirmatory due diligence review by Takeda; (ii) the unanimous and unconditional recommendation of the board of Shire; and (iii) final approval by the board of Takeda.

If the deal gets the go-ahead, it would be the largest overseas acquisition by a Japanese company and make Takeda one of the world’s leading drugmakers. The offer to acquire Shire is the fifth to have been made by Takeda in recent months. This proposal is worth 49.01 pounds per share, comprised of 27.26 pounds per share in new Takeda shares and 21.75 pounds per share in cash.

At completion, Shire shareholders would own approximately 50 percent of the enlarged Takeda and the new Takeda shares will be listed in Japan and in the US through an American Depositary Receipt (ADR) programme.

A global leader in serving patients with rare diseases, Shire develops best-in-class therapies across a core of rare disease areas, including hematology, immunology, genetic diseases, neuroscience and internal medicine, with growing therapeutic areas in ophthalmics and oncology. The firm reaches patients in more than 100 countries.

However, the firm has been struggling with debt and sold its oncology business to a French drugmaker for $2.4bn earlier this month.

News: Shire willing to back $64 billion Takeda bid, market signals doubts

Global M&A value hit record high in Q1 2018, reveals new report

BY Fraser Tennant

The dramatic surge in dealmaking activity at the tail end of 2017 has continued into 2018, with the value of global M&A reaching a record Q1 value, according to a new report by Mergermarket.

In its ‘Global & Regional M&A Report Q1 2018’, the M&A data and intelligence provider notes that: (i) global M&A reached record levels as corporates pursue innovation through M&A; (ii) private equity (PE) activity recorded its fourth consecutive $100bn figure quarter for buyouts; and (iii) Q1 2018 deal value is up 18 percent on Q1 2017’s value, recording $890.7bn (across 3774 deals).

In addition, while large tech companies have looked to diversify their offering through M&A, more traditional firms also had to react to newer, more innovative firms, with many looking towards defensive consolidation. Recent trade disputes between China and the US have served to boost these defensive strategies further.

Furthermore, global PE activity remained remarkably high, with many investors pursuing larger targets as the mid-market became saturated. In Q1 2018 there were 699 buyouts worth a total of $113.6bn, representing the strongest start to the year since 2007. Q1 2018 is also the fourth consecutive quarter in which buyout activity has reached the $100bn figure.

“The extraordinary surge in dealmaking seen at the end of 2017 has carried through into 2018,” said Jonathan Klonowski, EMEA research editor at Mergermarket. “Global M&A hit its highest Q1 value on record as pressure from investors and the search for innovation continues to push corporates towards M&A. PE activity also rebounded to pre-financial crash highs.”

In addition, the report reveals that 14 deals which breached the $10bn mark have been recorded so far this year, including the $67.9bn deal between Cigna and Express Scripts and the $46.6bn transaction which will see German utility Eon acquire Innogy, a subsidiary of German energy company RWE. 

Mr Klonowski added: “Following on from the trend seen in 2017, intra-European dealmaking has once again been active across the continent in the first quarter with the top three deals all being conducted between European companies.”

Report: Global & Regional M&A Report Q1 2018

Novartis agrees AveXis acquisition

BY Richard Summerfield               

Swiss drug manufacturer Novartis AG has agreed to acquire boutique gene-therapy company AveXis Inc for $8.7bn.

The deal will see Novartis pay $218 in cash for each AveXis share held, a 72 percent premium to AveXis’s 30-day volume-weighted average stock price. The deal is expected to close in mid-2018.

“The commitment, drive and expertise of the entire AveXis team has created significant stockholder value, and we are pleased that Novartis recognizes that value in the potential of AVXS-101, our first in class manufacturing capabilities and our gene therapy pipeline, all of which serve to transform the lives of people devastated by rare and life threatening neurological diseases such as SMA, Rett syndrome and genetic ALS,” said Sean Nolan, president and chief executive of AveXis. “With worldwide reach and extensive resources, Novartis should expedite our shared vision of bringing gene therapy to these patient communities across the globe as quickly and safely as possible.”

Since Mr Narasimhan became CEO of Novartis International, the company has refocused its efforts on expanding into new areas. Focused medicines and gene therapy have become key areas for the company. Earlier this year Novartis made a $170m deal with Spark for rights to use its blindness treatment, Luxturna, outside the US.

According to a statement announcing the deal, AveXis has several ongoing clinical studies for the treatment of SMA, an inherited neurodegenerative disease caused by a defect in a single gene.

“The proposed acquisition of AveXis offers an extraordinary opportunity to transform the care of SMA. We believe AVXS-101 could create a lifetime of possibilities for the children and families impacted by this devastating condition,” said Mr Narasimhan. “The acquisition would also accelerate our strategy to pursue high-efficacy, first-in-class therapies and broaden our leadership in neuroscience. We would gain with the team at AveXis another gene therapy platform, in addition to our CAR-T platform for cancer, to advance a growing pipeline of gene therapies across therapeutic areas. We look forward on the closing of the deal to a smooth transition for AveXis employees and welcoming them to Novartis.”

Paul Hudson, chief executive of Novartis Pharmaceuticals, said: “Bringing AveXis on board would support both our ambition to be a leader in neurodegenerative diseases and our Neuroscience franchise priorities to strengthen our position in devastating pediatric neurological diseases such as SMA. We relish the opportunity to leverage our expertise, our 70-plus year heritage in neuroscience and our global footprint to help AVXS-101 benefit high-need SMA patients around the world.”

Novartis will likely fund the deal through the $13bn it recouped for selling its stake in a consumer healthcare joint venture with its partner GlaxoSmithKline. The deal, which was announced in late March, saw GSK take control of a number of products, including Sensodyne toothpaste, Panadol headache tablets, muscle gel Voltaren and Nicotinell patches.

News: Novartis bets big on gene therapy with $8.7 billion AveXis deal

Oil giants Concho and RSP merge in $9.5bn deal

BY Fraser Tennant

In a deal which creates the largest crude oil and natural gas producer from unconventional shale in the Permian Basin, Concho Resources Inc. is to acquire RSP Permian, Inc. in a transaction valued at approximately $9.5bn.

Under the terms of the definitive merger agreement, shareholders of RSP will receive 0.320 shares of Concho common stock in exchange for each share of RSP common stock. Upon closing of the transaction, Concho shareholders will own approximately 74.5 percent of the combined company and RSP shareholders will own approximately 25.5 percent.

The deal is also expected to: (i) expand Concho’s strategic portfolio in the Permian Basin to approximately 640,000 net acres; (ii) drive significant operational synergies through development optimisation, shared infrastructure and capital efficiencies, with a present value of more than $2bn; (iii) realise over $60m in annual corporate level savings; (iv) enhance Concho’s three-year annualised production growth outlook within cash flow from operations; and (v) reinforce Concho’s leadership position as the premier Permian pure-play company.

The transaction has been unanimously approved by the board of directors of each company.

“I am extremely proud of the RSP team and the high-quality position we built in the Permian Basin,” said Steve Gray, chief executive of RSP. “As RSP has grown and we have seen the resource play develop in the Permian, we have come to recognise that combining with a company with the scale, investment grade balance sheet and operational excellence of Concho will unlock even more value for shareholders. The combined company will have the vision and necessary financial strength to efficiently develop the tremendous resource potential of these assets with large-scale projects.”

Expected to be completed in the third quarter of 2018, the transaction is subject to the approval of both Concho and RSP shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions. Upon closing, Concho’s board will be expanded to 11 directors and will include one independent member of the RSP board.

Concho will continue to be headquartered in Midland, Texas.

Tim Leach, chairman and chief executive of Concho, said: “This combination allows us to consolidate premier assets that seamlessly fold into our drilling programme, enhance our scale advantage and reinforce our leadership position in the Permian Basin, all while strengthening our platform for delivering predictable growth and returns.”

News: Oil producer Concho to buy rival RSP in Permian push