DS Smith to acquire Europac in $2.2bn deal

BY Richard Summerfield

British packaging firm DS Smith is to acquire European rival Papeles y Cartones de Europa, also known as Europac, for $2.2bn, including debt.

The merger will see FTSE 100-listed DS Smith pay €16.80 per Europac share to acquire the company. On Friday 1 June, the last day of trading before the deal was announced, Europac’s shares closed at €15.58.

DS Smith will finance the acquisition by raising $1.3bn from a new share issue, which is expected to launch in June, following the publication of the company’s full-year results. DS Smith will also benefit from a new debt facility of €740m.

The acquisition will be an “exceptional scale opportunity”, according to DS Smith, which will allow the company to enhance its customer offer in a key packaging growth region, as well as strengthen its global supply chain.

Expected pre-tax synergies of €50m have been identified by the company. According to a statement, in 2017 Europac delivered revenue of €868m and posted earnings before interest, tax, depreciation and amortisation of €158m.

Miles Roberts, group chief executive of DS Smith, said: “The acquisition of Europac is a very exciting development for DS Smith, strengthening our position as a leading global supplier of sustainable packaging solutions.  We have a long-standing relationship with Europac, which is a company we have long admired, given the quality of their assets, employees and customers. This acquisition will enhance our customer offer in Western Europe, a key packaging growth region, and help us meet the rising demand for our high-quality packaging and sustainable products. It will also strengthen our global supply chain and means we can serve our, and Europac’s, customers better.”

José Miguel Isidro Rincón, executive chairman of Europac, said: “Europac is a great company, well structured, strongly positioned with its customers and has a great management team. Iberia is the third largest packaging market in Europe and has great growth potential. In my capacity as shareholder, I believe that the offer submitted by DS Smith, which upon implementation would result in a combination with Europac, would deliver important operating and commercial synergies for both companies.”

As there is little overlap between the operations of the two companies, DS Smith expects the deal to win regulatory approval.

News: DS Smith to buy Europac for $2.2 billion as paper deals accelerate

Sony remains “number one” with $2.3bn acquisition

BY Fraser Tennant

In a $2.3bn deal which the multinational conglomerate says represents its commitment to its writers and artists, as well as to the music business as a whole, Sony Corporation has acquired a controlling stake in EMI Music Publishing – one of the world’s largest music publishing companies.

Once complete, the transaction will see Sony, which already holds the publishing rights to The Beatles, among many others, obtain a catalogue of more than two million songs, including hits by Queen, Kanye West, Alicia Keys, Drake, Sam Smith, Pink, Pharrell Williams and Calvin Harris.

“We are thrilled to bring EMI Music Publishing fully into the Sony family and maintain our number one position in the music publishing industry,” said Kenichiro Yoshida, president and chief executive of Sony Corporation. “I would also like to convey my gratitude to Mubadala, our equity partner in EMI Music Publishing, for sharing our long-term perspective on the potential success of music publishing and their support as we grew the business.”

Over the past six years, Mubadala Capital – the financial investment arm of Mubadala – and Sony have worked together as partners to create value alongside Sony/ATV, Sony’s music publishing arm. 

“EMI Music Publishing has been a successful investment for Mubadala,” said Hani Barhoush, head of Mubadala Capital. “I would like to personally extend my appreciation to the leadership at Sony and Sony/ATV, who have been instrumental in administering the EMI Music Publishing catalogue, as well as shaping the music landscape on a global basis. They have been tremendous partners to us.”

The Sony/Mubadala partnership, coupled with the global rise of streaming and paid streaming services, have led to an appreciation in value of the EMI Music Publishing catalogue as millions of new consumers have been provided access to innovative distribution channels. “The sale of our consortium’s interest in EMI represents a milestone for Mubadala and our private equity business,” added Adib Mattar, head of private equity for Mubadala Capital and chairman of EMI Music Publishing.

Mr Yoshida concluded: “In the entertainment space, we are focusing on building a strong intellectual property (IP) portfolio, and I believe this acquisition will be a particularly significant milestone for our long-term growth.”

News: Sony takes controlling stake in EMI Music Publishing

Vodafone strikes €18.4bn deal for Liberty Global’s European operations

BY Fraser Tennant

In an €18.4bn deal which expands its mobile, TV and broadband services in Europe, multinational telecommunications conglomerate Vodafone has agreed to acquire US firm Liberty Global’s operations in Germany, the Czech Republic, Hungary and Romania.

The total enterprise value of the transaction is expected to comprise approximately €10.8bn of cash consideration paid to Liberty Global and €7.6bn of existing Liberty debt, subject to completion adjustments. Once complete, Vodafone will become the leading next generation network (NGN) owner in Europe, with 54 million cable/fibre homes ‘on-net’ and a total NGN reach of 110 million homes and businesses.

In Germany, the combination of Vodafone and Unitymedia (which runs Liberty Global's operations in Germany as well as being the country’s second largest cable operator) will bring Gigabit connections to around 25 million German households by 2022. In Central and Eastern European (CEE) markets, the transaction will accelerate the availability of converged fixed, mobile and TV services.

“This transaction will create the first truly converged pan-European champion of competition,” said Vodafone Group chief executive Vittorio Colao. “It represents a step change in Europe’s transition to a Gigabit Society and a transformative combination for Vodafone. We are committed to accelerating and deepening investment in next generation mobile and fixed networks, building on Vodafone’s track record of ensuring that customers benefit from the choice of a strong and sustainable challenger to dominant incumbent operators.”

Vodafone has also said that management and employees of the acquired Liberty Global businesses will have the opportunity to play an integral role within the combined company in each country and across the wider Vodafone Group.

“We have a rich history at Liberty Global of successfully developing and reshaping our business to drive innovation, advance customer services and create significant value for shareholders,” said Mike Fries, chief executive of Liberty Global. “This is one of those moments. Now more than ever, Europe needs strong competition from scaled national challengers willing and able to invest in next-generation wireless, video and broadband services.”

The Vodafone/Liberty Global transaction is subject to regulatory approval by the European Commission and is anticipated to be completed in mid-2019.

Mr Fries added: “This is also an important and exciting transaction for our customers and employees. In each of these markets, the combination of Liberty Global and Vodafone’s businesses will transform the competitive landscape and bring a new level of convergence to customers.”

News: Vodafone makes €18bn swoop on Liberty Global cable networks

Takeda and Shire agree $62bn merger

BY Richard Summerfield

Following four unsuccessful offers, Takeda Pharmaceuticals is to acquire drug manufacturer Shire for $61.5bn after raising the amount of cash it offered for the company.

The agreement came on the last day Takeda was able to make a firm bid for Shire. The Japanese firm’s previous offers were rebuffed due to price concerns and the fact that Takeda was proposing to pay too much of the acquisition in stock. However, the transaction has now been approved by both companies’ boards of directors, and is expected to close in the first half of 2019.

Under the terms of the agreement, Shire investors will receive $30.33 in cash and either 0.839 new Takeda shares or 1.678 Takeda American depositary shares for each share, the companies said, valuing the offer at £48.17 a share.

While the firms had been due to conclude their merger in April, Shire conditionally agreed to Takeda’s fifth offer as the deadline approached, but managed to get an extension to today in order to finalise some other details of the deal. Takeda and Shire have agreed that up to three Shire directors will join the board of the newly-combined business.

“Over the last 30 years, Shire has become the global leader in treating rare diseases, delivering innovative products that transform patients’ lives,” said Shire's chairman, Susan Kilsby, in a statement. “We firmly believe that this combination recognises the strong growth potential of our leading products and innovative pipeline and is in the best interests of our shareholders, our patients and the communities we serve.”

To help fund the cash portion of the deal, Takeda has secured a bridge loan facility of $31bn with JPMorgan Chase Bank NA, Sumitomo Mitsui Banking Corp. and MUFG Bank Ltd., among others.

Takeda expects the deal to save around $600m in research and development costs. Overall, the merger is expected to generate savings of around $1.4bn by the third year.

“Since its inception, Takeda has transformed into an agile, R&D-driven global pharmaceutical company that is well-positioned to deliver innovative and transformative care to patients around the world,” said Christophe Weber, president and chief executive officer of Takeda.

He added: “Shire’s highly complementary product portfolio and pipeline, as well as experienced employees, will accelerate our transformation for a stronger Takeda. Together, we will be a leader in providing targeted treatments in gastroenterology, neuroscience, oncology, rare diseases and plasma-derived therapies. We are looking forward to the benefits this combination will bring to patients worldwide, the opportunities it will bring for our employees and the returns it will deliver for our shareholders.”

The deal, once completed, will be the biggest in the pharmaceuticals sector since 2000.

News: Japan's Takeda clinches $62 billion deal to buy drugmaker Shire

Sainsbury’s shops at ASDA

BY Richard Summerfield

The UK’s second biggest food retailer, J Sainsbury’s, has agreed to acquire Walmart subsidiary Asda in a deal valued at £7.3bn.

The deal, which came as a shock to many, will likely generate a number of competition concerns, since it would create a new grocery superpower accounting for nearly £1 in every £3 spent on groceries on the UK high street.

The deal for Asda, the number three ranked UK supermarket chain, will see Walmart get nearly £3bn in cash and 42 percent of the newly-combined business. Walmart paid £6.7bn for Asda in 1999.

“We believe that the combination of Sainsbury’s and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues,” said David Tyler, chairman of Sainsbury’s. “As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy. The proposal will bring together two of the most experienced and talented management teams in retail at a time when the industry is undergoing rapid change. We welcome Walmart as a significant shareholder and look forward to working closely with them.”

The companies have confirmed that both the Sainsbury’s and Asda brands will be maintained and there are no planned store closures or disposals as a result of the combination. However, given that the combined company would have a workforce of around 360,000, there are significant concerns about an emerging duopoly in the sector. The UK’s Competition and Markets Authority has stated that it is likely to review the combination, which could have consequences for the workforce.

Joe Clarke, the acting national officer of the Unite union, noted that the deal could have implications for thousands of jobs. “Staff are already facing uncertainty through restructuring and changes to contracts at [Sainsbury’s]. Sainsbury’s bosses need to give workers clarity over what the future could hold and assurances over jobs as matter of urgency,” he said.

Roger Burnley, chief executive of Asda, said: “The combination of Asda and Sainsbury’s into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice. Asda will continue to be Asda, but by coming together with Sainsbury’s, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive.”

News: Sainsbury's to top Britain's Tesco with £7.3 billion swoop on Walmart's Asda