Barrick Gold and Randgold Resources agree $6.5bn deal

BY Richard Summerfield

Barrick Gold Corporation, the world’s largest gold mining company, has agreed to acquire Randgold Resources for $6.5bn in an all-share deal, securing the biggest deal in the gold mining space for over three years.

The two companies expect the deal to close by the first quarter of 2019, pending customary closing conditions and shareholder approval. Once completed, Barrick, which will be listed in both New York and Toronto, will own five of the world’s 10 lowest-cost gold mines. The majority of the company’s focus will be on Africa and the Americas.

Barrick’s shareholders will own about two-thirds of the new business and Randgold investors the rest. Under the terms of the deal, each Randgold shareholder will receive 6.1280 new Barrick shares for each share of the Randgold, the companies said.

In a statement announcing the deal, John L. Thornton, executive chairman of Barrick, said: “The combination of Barrick and Randgold will create a new champion for value creation in the gold mining industry, bringing together the world’s largest collection of Tier One Gold Assets, with a proven management team that has consistently delivered among the best shareholder returns in the gold sector over the past decade. Our overriding measure of success will be the returns we generate and not the number of ounces we produce, balancing boldness and prudence to deliver consistent and growing returns to our fellow owners, a truly simple but radical and achievable concept. There are no premiums in the merger because we strongly believe in the opportunity to add significant value for our shareholders from the disciplined management of our combined asset base and a focus on truly profitable growth.”

“Our industry has been criticised for its short-term focus, undisciplined growth and poor returns on invested capital,” said Mark Bristow, chief executive of Randgold. “The merged company will be very different. Its goal will be to deliver sector leading returns, and in order to achieve this, we will need to take a very critical view of our asset base and how we run our business, and be prepared to make tough decisions. By employing a strategy similar to the one that proved very successful at Randgold, but on a larger scale, the New Barrick Group will leverage some of the world’s best mines and talent to create real value for all stakeholders.”

2018 has been a challenging year for the industry. The price of gold has fallen more than 8 percent and the shares of both Barrick and Randgold have declined more than 30 percent. The companies hope that the merger will enable them to cut costs and drive profitability.

News: Canada's Barrick Gold to buy Randgold for $6.5 billion

Marsh & McLennan to buy JLT for $5.7bn

BY Richard Summerfield

Marsh & McLennan, one of the world’s largest insurance brokers, has agreed to acquire British rival Jardine Lloyd Thompson Group (JLT) for around $5.7bn. The deal, the latest in a series of mergers in the insurance sector, is expected to close in spring 2019, subject to customary antitrust and regulatory approvals, and the approval of JLT’s shareholders.

Under the terms of the deal, holders of JLT's common shares will receive a cash consideration of £19.15 for every JLT share held, a 38 percent premium on the average price of JLT’s shares over the past three months. The total cash consideration equates to $5.6bn in fully diluted equity value, or an estimated enterprise value of $6.4bn. The transaction will be funded by a combination of cash on hand and proceeds from debt financing.

"The acquisition of Jardine Lloyd Thompson creates a compelling value proposition for our clients, our colleagues and our shareholders,” said Dan Glaser, president and chief executive of Marsh & McLennan. “The complementary fit between our companies creates a platform to deliver exceptional service to clients and opportunities for our colleagues. On a personal level, I have come to know, and respect, Dominic Burke and his management team from my time both at MMC and as an underwriter. I am confident that with the addition of the talented colleagues of JLT, Marsh & McLennan will be an even stronger and more dynamic company,” he added.

The deal is expected to achieve annual cost synergies of around $250m within three years of completion, according to Marsh & McLennan, though the realisation of these cost synergies will likely result in one-time integration costs of approximately $375m. In total, Marsh & McLennan expects to cut 2 to 5 percent of the combined company’s jobs. Savings are also expected in real estate and IT operations. Annual revenue is expected to rise to $17bn after the deal closes.

The insurance space has seen a spate of consolidation deals announced this year as the industry grows accustomed to tougher regulations and more attractive prices. In March, AXA agreed to acquire XL Group for $15.3bn, around a month after American International Group said it would buy reinsurer Validus for around $5.6bn.

News: Marsh & McLennan to pay £4.3 billion for British insurance broker JLT

Energy M&A dominates market – EY report

BY Richard Summerfield

Global M&A activity in the power and utilities sector reached a record high of $180bn in the first half of 2018, according to EY’s ‘Power transactions and trends Q2 2018’ report.

Renewables were responsible for nearly half of all deals announced in the second quarter, with 63 contracts totalling $12.9bn announced.

Despite the all-time high in M&A activity, there was a 14 percent decline, quarter-on-quarter, in deal value to $83bn, however.

Momentum also began to gather in the clear energy space .The European Union’s landmark agreement to achieve 32 percent renewable energy consumption by 2030 was particularly noteworthy. Equally, three other renewables deals in the US were announced, totalling $3.8bn.

Developing markets also emerged as an investment destination for traditional M&A. Thailand and India saw $5.3bn and $3.2bn worth of deals respectively. In Estonia,  deals by both domestic and foreign investors reached $600m.

European activity was strong, particularly in the second quarter, with $45.7bn worth of deals recorded, representing 55 percent of total power and utility global deal value. Asia-Pacific saw a 78 percent quarter-on-quarter increase in deal value to $10.3bn. Renewables were the driving force behind this increase, with 25 clean energy deals worth a total of $3.8bn announced during the period.

The majority of transactions in Q2 were in the US, which generated 75 percent of the total deal value for the quarter, of which $21.1bn or 78 percent were domestic deals. Consolidation was a major driving force. For example, Center Point Energy bid $8.1bn for Vectren and NextEra Energy's bid $5.8bn bid for Gulf Power.

“The first half of 2018 reflects a complex deal environment characterised by a changing generation mix and a growing appetite for renewables investment, which will continue to drive the deal agenda into the second half of the year,” said Miles Huq, EY global power & utilities transactions leader.

He added: “Around the world, we are also seeing utilities companies increasingly exploring new technologies, including battery storage, electric vehicle infrastructure and digital grid technologies. With sector convergence on the rise, we are also seeing more non-conventional competitors emerge as the power and utilities landscape continues to undergo transformation.”

Global outbound deal activity was led by China, which accounted for $31.2bn of cross-border energy deals, including the largest deal of the quarter: the $27.4bn takeover bid of Portugal's EDP by China Three Gorges.

Report: Power transactions and trends Q2 2018

TPG and Vodafone Australia combine in merger of equals

BY Fraser Tennant

In a combination that will establish a leading challenger full-service telecommunications provider in Australia, TPG Telecom Ltd and Vodafone Hutchison Australia (VHA) are to merge in a transaction with a pro forma enterprise value of approximately $15bn.  

The merger – a Scheme Implementation Deed (SID) – combines two highly complementary businesses to create a leading integrated, full-service telecommunications company, with a comprehensive portfolio of fixed and mobile products for consumers and enterprises.

It is also envisaged that the merger of TPG, which has Australia’s second largest fixed line residential subscriber base, and VHA, the country’s third largest mobile operator, will create a more effective challenger to Optus and Telstra – the two biggest mobile companies in Australia, with a combined market share of more than 80 percent.

Upon completion, TPG shareholders will own 49.9 percent of the merged group with VHA shareholders owning the remaining 51.1 percent. The merger of TPG and VHA has been unanimously recommended by the board of TPG.

“The merger with VHA represents an exciting step-change in TPG’s evolution, and will benefit both our shareholders and Australian consumers alike," said David Teoh, chairman and chief executive of TPG. “Together TPG and VHA will own the infrastructure required to deliver faster services and more competitive value propositions.” Mr Teoh will be chairman of the merged group while Iñaki Berroeta, currently chief executive of VHA, will be managing director.

“We are joining with TPG from a position of strength and momentum," said Mr Berroeta. “VHA has a track record of reliability, stability and a fantastic customer experience, which has seen the business prosper. Together, TPG and VHA will provide stronger competition in the market and greater choice for Australian consumers and enterprises across fixed broadband and mobile.”

Alongside the merger agreement, TPG and VHA have signed a separate joint venture (JV) agreement to acquire, hold and licence 3.6 GHz spectrum. The JV will not terminate if the merger fails to proceed.

Mr Berroeta concluded: “The combination of TPG and VHA will create an organisation with the necessary scale, breadth and financial strength for the future. The equal terms of the combination preserves the competitive strengths of the two businesses.”

News: Vodafone in $11bn Australian merger

Apollo agrees $2.6bn Aspen deal

BY Richard Summerfield

Investment funds associated with Apollo Global Management have agreed to acquire Aspen Insurance Holdings Ltd in an all-cash transaction valued at $2.6bn.

The deal, which has been approved by Aspen’s board of directors, will see the Apollo Funds acquire all of the outstanding shares of Aspen for $42.75 per share in cash. The transaction is expected to close in the first half of 2019, subject to the approval of regulators and Aspen’s shareholders, as well as the satisfaction of other closing conditions. The funds are paying around a 7 percent premium to Aspen’s closing share price on the day before the deal was announced.

“We are tremendously excited for the Apollo Funds to acquire Aspen,” said Alex Humphreys, a partner at Apollo. “We believe that Aspen benefits from strong underwriting talent, specialized expertise and longstanding client relationships which makes them well positioned in the market. We look forward to working with Aspen to build on the existing high quality specialty insurance and reinsurance business and we aim to leverage Apollo’s resources and deep expertise in financial services to support the company as it embarks on its next chapter.”

“We are delighted to have reached this agreement with the Apollo Funds,” said Glyn Jones, chairman of Aspen’s board of directors. “This transaction, which is the outcome of a thorough strategic review by Aspen’s board of directors, provides shareholders with immediate value and will allow Aspen to work with an investor that has substantial expertise and a successful track record in the (re)insurance industry.”

“This transaction is a testament to the strength of Aspen’s franchise, the quality of our business and the talent and expertise of our people,” said Chris O’Kane, Aspen’s chief executive. “Under the ownership of the Apollo Funds, Aspen will have additional scale and access to Apollo’s investment and strategic guidance, which will help us to accelerate our strategy and take Aspen to the next level. We are excited about the future as we embark on a new chapter in our history with a partner that understands our strengths, culture and customer-centric philosophy.”

Aspen has been up for sale for some time and Apollo has long been touted as a potential acquirer for the company. Aspen reported a loss of about $15m in the second quarter of 2018, continuing its run of poor financial returns. The company has suffered losses in three out of the last four quarters, having been adversely affected by hurricanes, wildfires and earthquakes.

News: Apollo Agrees to Acquire Aspen Insurance for $2.6 Billion