Texas Capital and Independent Bank abort $5.5bn merger

BY Fraser Tennant

Citing the volatile economic conditions caused by coronavirus (COVID-19), Texas Capital Bancshares and Independent Bank Group have mutually agreed to terminate their $5.5bn merger agreement.

The termination was approved by both companies’ boards of directors after careful consideration of the significant impact of COVID-19 on global markets and on the companies’ ability to fully realise the benefits they expected to achieve through the merger.

“Due to the unprecedented impact of the COVID-19 pandemic, both companies’ boards of directors believe it is in the best interests of our employees, clients and all of our shareholders to focus on managing our business during this time,” said Larry Helm, chairman of Texas Capital Bancshares. “With the talent and depth of our team and strong organic growth model, Texas Capital Bank has built a resilient business with lasting client relationships and a record of value creation through changing market dynamics and economic pressures.”

Neither party will pay any termination fee as a result of the mutual decision to terminate the merger agreement.

“While both companies believed in the benefits of the proposed transaction, it would not be prudent to continue to pursue the combination and integration of our companies at this time,” said David R. Brooks, group chairman and chief executive of Independent Bank Group. “I am confident this is the right decision for our company and our customers, employees, shareholders and other stakeholders. This decision allows us to dedicate our focus and resources toward ensuring the strength of our business, serving the interests of our customers and protecting the health and safety of our employees during these unprecedented times.”

Coinciding with the termination of the merger, Texas Capital Bank president and chief executive Keith Cargill announced that he had stepped down from both roles with immediate effect.

Mr Helm concluded: “Our dedicated team, whose tireless efforts to enhance our clients’ experience and the communities where we operate, will continue to guide Texas Capital Bank’s purpose and success.”

News: Texas banks call off merger, citing coronavirus impact

Covéa’s $9bn deal to acquire PartnerRe called off

BY Fraser Tennant

Citing market dislocation caused by the coronavirus (COVID-19) pandemic, French insurer Covéa has abandoned a $9bn deal to purchase PartnerRe, a Bermuda-based reinsurer owned by investment holding company Exor.

The deal to acquire PartnerRe is the biggest involving a European buyer to collapse due to the COVID-19 pandemic, which has made it increasingly difficult for bidders to close pre-crisis transactions due to drops in share price.

“In view of the unprecedented current conditions and the significant uncertainties weighing on the global economic outlook, we have told Exor that the context does not allow the proposed acquisition of PartnerRe to be carried out on the terms initially envisaged,” explained Covéa in a statement.

In response, Exor, the holding firm of Italy’s Agnelli family, acknowledged the French insurer’s notice that it will not honour its commitment to acquire PartnerRe in accordance with the terms of the Memorandum of Understanding (MOU) announced on 3 March 2020. Furthermore, the Exor board of directors expressed its strong belief that a sale of PartnerRe on terms inferior to those established in the MOU fails to reflect the value of the reinsurer.

“In attempting to renegotiate the agreed deal terms, Covéa has never suggested the existence of a material adverse change, including pandemic risk, or any other issues at PartnerRe that would explain its refusal to honour its commitments under the MOU and we believe that no such basis exists,” said Exor in a separate statement.

The Exor board also stated that PartnerRe, which enjoys one of the highest capital and liquidity ratios in the global reinsurance industry, is not expected to be significantly affected by the COVID-19 outbreak.

An Exor spokesperson said that Covéa is required to pay an indemnity, although the amount due is confidential. However, the MoU between Covéa and Exor stipulated a $175m penalty should Covéa pull out of the deal.

News: France's Covea backs out of $9 billion purchase of Exor's PartnerRe

Mirae Asset pulls plug on $5.8bn US hotels deal

BY Fraser Tennant

Citing a breach of contract obligations, global investments company Mirae Asset has pulled out of a $5.8bn deal to acquire 15 US-located luxury hotels from Chinese insurer AnBang Insurance Group.

The South Korea-based Mirae said that Anbang – one of the largest insurance groups in China with a global network of over 30 million customers – had failed to remedy breaches of certain obligations regarding the acquisition, resulting in the termination of the transaction. AnBang bought the hotels for $6.5bn in March 2016 from US private equity firm Blackstone.

In September 2019, a consortium led by Mirae agreed to buy the hotels in New York, San Francisco, Los Angeles and other locations, from Anbang, which had been selling some of its overseas assets. The Chinese government took control of the insurer in 2018 after it took on too much debt. Chinese authorities also sentenced AnBang chairman Wu Xiaohui to 18 years in prison for fraud.

The transaction, in which Mirae placed a 10 percent deposit, had originally been scheduled to close on 17 April 2020.

“Among other things, AnBang had failed to timely disclose and discharge various material encumbrances and liabilities impairing the hotels and failed to continue the operation of the hotels in accordance with contractual requirements,” explained Mirae in a statement. “Mirae Asset will protect its rights vigorously in accordance with the terms of the agreement.”

For its part, AnBang has filed litigation against Mirae and affiliated entities in the US, claiming that Mirae’s decision to terminate the transaction is itself a violation of the deal and that AnBang did not breach any contractual obligations, a claim the asset manager denies. In its lawsuit filing, AnBang stated that it “seeks an order forcing defendants to specifically perform their obligations under a sale and purchase agreement and certain equity commitment letters”.

The collapse of the Mirae/AnBang deal is the latest M&A transaction to be impacted by the coronavirus (COVID-19) pandemic. The travel and tourism industries have been hit particularly hard, with hotels in affected regions seeing sharp declines in bookings.

News: Mirae Asset scraps $5.8 billion deal to buy U.S. hotels from China's Anbang

Boeing terminates $4.2bn Embraer deal

BY Richard Summerfield

Boeing Co announced it has abandoned a deal to buy 80 percent of the commercial airline business of Embraer, saying the Brazilian company had failed to satisfy necessary conditions of the agreement.

On Saturday, Boeing terminated its Master Transaction Agreement (MTA) with Embraer. Under the terms of the agreement, Boeing had an option to terminate the agreement until 24 April, subject to extension by either party if certain conditions were met. Boeing did not disclose what the unmet conditions were and declined to comment on the specifics. The company will pay a termination fee of $75m to Embraer.

In response to the termination, Embraer said Boeing was making false claims to back out of the transaction due to its “own financial condition and 737 Max and other business and reputational problems”. Embraer also said that it would “pursue all remedies”.

“Boeing has worked diligently over more than two years to finalise its transaction with Embraer,” said Marc Allen, president of Embraer Partnership & Group Operations. “Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”

In 2018, Boeing and Embraer said they expected to close the deal by late 2019, pending regulatory approval. The deal faced an antitrust probe from the European Union. Boeing said that all regulatory authorities had approved the deal, except for the European Commission.

For Boeing, the deal a would have strengthened its position in the smaller jet market, adding the E-Jet-E2 to its portfolio.

Going forward, the two companies have confirmed that they will maintain their existing MTA, originally signed in 2012 and expanded in 2016, to jointly market and support the C-390 Millennium military aircraft.

News: Boeing Backs Out of $4.2 Billion Embraer Joint Venture Deal

Couche-Tard drops Caltex bid for now

BY Richard Summerfield

The proposed $5.6bn merger between Canadian convenience store Alimentation Couche-Tard and fuel retailer Caltex Australia has been shelved as the repercussions of the COVID-19 outbreak continue to be felt around the world.

In a statement, Couche-Tard confirmed that while it still believes that Caltex is a good fit for its expansion into Asia, and would be willing to re-engage once coronavirus-related uncertainty subsides, in the short-term it plans to prioritise safeguarding its own business.

“We remain convinced of the long-term financial and strategic merits of an acquisition of Caltex and all the benefits it would offer to the shareholders of both companies,” said Brian Hannasch, president and chief executive of Couche-Tard. “Despite the COVID-19 situation, we have worked to complete due diligence on schedule through a significant investment of time and money. Our current plan would be to reengage the process once there is sufficient clarity as to the global outlook, and the work done to date should mean that we will be able to quickly formalize our proposal at that time.”

He added: “Couche-Tard is focused on managing its own business through this period and prioritizing the health, safety and well-being of its employees, customers and the communities it serves.”

For Caltex, the collapse of the deal comes as oil prices go into freefall. US crude oil prices turned negative as drops in global fuel demand impacted storage capacity and sales. OPEC has agreed to cut production by an initial 9.7 billion barrels per day yet to flow on to the market. In response, Caltex has brought forward a planned maintenance shutdown of its Brisbane refinery in a bid to soften the economic hit.

Steven Gregg, chairman of Caltex, said in a separate statement: “We remain confident in the strength of Caltex as an independent business, and should we receive an approach in the future would be willing to consider it on its merits.”

News: Couche-Tard shelves $5.6 billion Caltex Australia buyout as deal becomes latest virus victim