Hong Kong abandons LSEG offer

BY Richard Summerfield

Hong Kong Exchange and Clearing (HKEX) has pulled the plug on its unsolicited $39bn offer for the London Stock Exchange Group (LSEG) after it became clear that it had failed to convince LSEG’s investors and management of the benefits of a merger between the two.

HKEX, the world’s largest capital-raising venue in five of the past 10 years, had made an £83.61 per share offer for LSEG which would have required LSEG to abandon its agreed $27bn deal to buy the data and trading group Refinitiv.

HKEX’s offer was flatly rejected by LSEG, which said that HKEX’s offer fell “substantially short” of an appropriate valuation. In a published letter to HKEX, LSEG said there was “no merit in further engagement”. As a result, the Hong Kong bourse withdrew its offer.

Following its initial approach , under UK takeover rules HKEX had until Wednesday 9 October to make a binding offer for LSEG, but having withdrawn its offer is now unable to pursue a renewed deal for at least six months.

“The board of HKEX continues to believe that a combination of [LSEG] and HKEX is strategically compelling and would create a world-leading market infrastructure group,” HKEX said in a regulatory statement. “Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal.”

At the weekend, reports emerged which suggested that HKEX had been told by LSEG’s shareholders to increase its takeover offer to £90 a share, a 22 percent premium on LSE’s recent share price of £73.80.

In a statement, LSEG said it remained “committed to and continues to make good progress on its proposed acquisition of Refinitiv”. LSEG’s shareholders will vote on the Refinitiv deal in November, with the deal expected to close in the second half of 2020.

News: Hong Kong bourse pulls plug on $39 billion play for London Stock Exchange

M&A deal leaks plummet, reveals new report

BY Fraser Tennant

The number of M&A deal leaks has fallen for two years running, a decline driven entirely by the Asia-Pacific (APAC) region, according to a new Intralinks report.

The ‘2019 M&A Leaks Report’, a study carried out annually by Intralinks in association with the M&A Research Centre at the University of London’s Cass Business School, found that, after peaking at around 9 percent of announced M&A transactions in 2013, worldwide deal leaks have declined in recent years.

The report also notes that the decline in M&A deal leaks has occurred at the same time as increased regulations and enforcement actions by financial regulators against different forms of market abuse, including deal leaks – and there is undoubtedly a connection between increased regulatory attention and the decline in leaks.

Among the report’s other key findings, worldwide, the rate of M&A deal leaks fell in 2018 for the second consecutive year, and 7.4 percent of deals in 2018 involved a leak of the deal prior to its public announcement, compared to 7.9 percent in 2017 and 8.6 percent in 2016.

The fall in the overall worldwide rate of deal leaks in 2018 was driven solely by the APAC region, where leaked deals declined to 7.9 percent from 10.8 percent the previous year.

Furthermore, both the Americas and the Europe, Middle East and Africa (EMEA) regions saw increases in the rate of deal leaks in 2018 of 0.5 and 0.4 percentage points, respectively. APAC remains the region with the highest rate of deal leaks, followed by the Americas at 7.6 percent and EMEA at 5.8 percent.

“Deal leaking is down, but the stakes remain high,” said Philip Whitchelo, vice president of Intralinks. “In 2018, the difference in the median target takeover premium for leaked deals compared to non-leaked deals was an average of an extra $68.1m accrued to the shareholders of the targets in deals that leaked. This was the highest ‘leak premium’ difference for three years.”

Finally, for the 10 regions with the most M&A activity, the top three for deal leaks in 2018 were Hong Kong, Japan and the US. The bottom three countries for deal leaks in 2018 were the UK, Australia and France.

Report: 2019 M&A Leaks Report

Dream deal for Blackstone

BY Richard Summerfield

Funds managed by Blackstone Group have agreed to acquire Dream Global Real Estate Investment Trust for $4.7bn.

The deal will see Dream stockholders receive C$16.79 in cash for each share they hold, a premium of 18.5 percent to Friday’s closing stock price. The deal is expected to close by December.

The deal needs at least 66.67 percent approval from Dream Global’s shareholders. Its board of trustees unanimously approved the deal and recommended the shareholders vote in favour of it.

“This transaction is the culmination of the tremendous growth that Dream Global has achieved since its 2011 IPO,” said Detlef Bierbaum, chairman of Dream Global’s board of trustees. “At a time when the Western European real estate market is becoming increasingly competitive, this transaction provides premium value to unitholders. Upon completion of the Transaction, Dream Global will have increased its equity market capitalisation by nearly eight times and will have delivered total annualised returns of 15 percent to our unitholders, since inception, which exceed both the Canadian and European REIT benchmarks by approximately 60 percent and are competitive against the best managed real estate private equity funds and pension funds globally, over the same time period.”

“Today’s announcement can be attributed to Dream Global’s high-quality portfolio of properties located in key markets in Western Europe and the strength of our property management platform, as evidenced by our strong relationships with tenants, partners and lenders,” said Jane Gavan, president and chief executive of Dream Global. “By combining a disciplined approach to capital allocation with active asset management, we have established Dream as one of the most respected brands for investing in Western European office properties.”

“We are delighted to be acquiring Dream Global, a high-quality and diversified portfolio of office and logistics assets in Western Europe, which has been created by Dream over the last eight years,” said James Seppala, head of Blackstone Real Estate Europe. “This transaction is an exciting opportunity for Blackstone to expand its existing office and logistics portfolios in some of the largest and most important markets in the region.”

Canadian REIT Dream Global, which was formerly known as Dundee International REIT, started out by acquiring properties leased to Deutsche Post, Germany’s post office. Today the firm owns over 200 office and industrial properties in key markets in Western Europe with a particular focus on Germany and the Netherlands.

News: Dream Global REIT to be bought by Blackstone funds in $4.7 billion deal

Prudential acquires personal and financial health platform in $2.35bn deal

BY Fraser Tennant

In a transaction valued at $2.35bn, Prudential Financial is to acquire Assurance IQ – a direct-to-consumer platform that transforms the buying experience for individuals seeking personalised health and financial wellness solutions.

Prudential plans to use a combination of its current cash, debt financing and equity to fund the acquisition, which is expected to close early in the fourth quarter of 2019.

A financial wellness leader and premier active global investment manager with more than $1 trillion in assets under management, Prudential has operations in the US, Asia, Europe and Latin America. Its board of directors has unanimously approved the deal to acquire Assurance’s technology-driven, on-demand service platform.

“Assurance was founded to protect and improve the personal and financial health of every individual,” said Michael Rowell, co-founder and chief executive of Assurance. “Prudential’s shared vision, coupled with the strength of its offering and capabilities, make it the ideal partner with which to begin our next chapter. We are excited to create an ecosystem that reaches more people and new markets with a more expansive suite of products to drive our combined growth.”

Launched in 2016, Assurance uses advanced data analytics to match buyers with customised solutions spanning life, health, Medicare and auto insurance, giving them options to purchase entirely online or with the help of a technology-assisted live agent.

Assurance also matches consumers with the live agent or specific sales process that is best suited to their needs, resulting in better customer outcomes that drive higher levels of engagement and conversion.

“Assurance accelerates the strategy and growth potential of Prudential’s financial wellness businesses, bringing us closer to more people across the entire socio-economic spectrum to better serve the full picture of their needs,” said Charles Lowrey, chairman and chief executive of Prudential. “We look forward to working with Mike Rowell and his entire team to grow the Assurance business in the U.S., and, over time, to extend its unique approach to customers around the world.”

In addition to enhancing the growth of Prudential’s financial wellness businesses, the acquisition of Assurance is expected to generate cost savings of $50m to $100m.

News: Prudential buys Assurance IQ for $2.35 billion in new tech bet

J2 acquires APi in $2.9bn transaction

BY Fraser Tennant

In a $2.9bn deal it describes as an “excellent fit”, investment vehicle J2 Acquisition Limited is to acquire commercial life safety solutions and industrial specialty services provider APi Group, Inc.   

A publicly-listed acquisition company that listed in October 2017, J2’s definitive agreement to acquire APi is its debut transaction.

Operating in over 200 locations across the US, Canada, and the UK, APi is the leading independent life safety services provider and a top-five specialty services contractor.  Once the acquisition is complete, J2 plans to continue to build on APi's operating strengths with a focus on expanding the service portion of the business across its portfolio.

"The J2 team's decades of leadership experience operating large diverse businesses, broad industrial knowledge, and disciplined acquisition strategy – that they have employed successfully at previous companies and ventures – will be instrumental in further growing APi's inherent value and innovative, customer-centric approach over the long-term,” said Russell A. Becker, president and chief executive of APi .

The transaction is expected to close in the fourth quarter of 2019, subject to customary closing conditions. Following closing, APi's existing management team will remain in place.

"We were immediately impressed by APi's management team, its strong culture and its commitment to leadership development, combined with consistent delivery of margins and cash flow at the high-end of its peer group over the years,” said James E. Lillie, co-founder of J2. “The business operates in resilient and dynamic markets with attractive growth drivers and we believe that, with the current management team, we can drive shareholder value by guiding the business to even better levels of performance and growth.”

Sir Martin E. Franklin, co-founder of J2, concluded: “We believe APi is an excellent foundation for J2's initial investment and is solidly in line with our disciplined investment criteria. We look forward to working with APi and to the strong growth opportunities ahead.”

News: Franklin's J2 blank check company buys APi Group for $2.9 billion