Canadian National and Kansas City Southern to combine in $33.6bn deal

BY Fraser Tennant

In a merger intended to create a premier railway for the 21st century, railway company Canadian National and transportation holding company Kansas City Southern are to combine in a deal valued at $33.6bn.

Under the terms of the definitive agreement, Kansas City Southern shareholders will receive $200 in cash and 1.129 shares of Canadian National common stock for each Kansas City Southern common share, with Kansas City Southern shareholders expected to own 12.6 percent of the combined company.

The combination will further accelerate Canadian National’s industry-leading growth profile by connecting North America’s industrial corridor to create new options for shippers. The combined company will substantially help realise the many benefits of the United States-Mexico-Canada Agreement (USMCA), bringing it to life in a meaningful way.

Although Canadian National's offer to buy Kansas City Southern upended a $29bn deal with its competitor Canadian Pacific, the rival bidder has stated that it is willing to re-engage with Kansas City Southern should the deal run into regulatory difficulties with the US Surface Transportation Board (STB), the regulator that oversees railroad companies.

“We are thrilled that Kansas City Southern has agreed to combine with Canadian National to create the premier railway for the 21st century,” said Jean-Jacques Ruest, president and chief executive of Canadian National. “I would like to thank the numerous stakeholders of both companies who have demonstrated overwhelming support for this compelling combination, and we look forward to delivering the many benefits of this pro-competitive transaction to them.”

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

“As North America’s most customer-focused transportation provider, we are excited about this combination, which will provide customers access to new single-line transportation services at the best value for their transportation dollar and increase competition,” said Patrick J. Ottensmeyer, president and chief executive of Kansas City Southern. “Our companies’ cultures are strongly aligned, and we share a commitment to environmental stewardship, safe operations, reliable service and outstanding performance.”

Both companies are confident that they will obtain all necessary regulatory approvals, including from the STB, as well as the Federal Economic Competition Commission and Federal Telecommunications Institute in Mexico.

Robert Pace, chair of the board of Canadian National, concluded: “We are confident in our ability to gain the necessary regulatory approvals and complete the combination with Kansas City Southern, and we look forward to combining to create new opportunities, more choice and a stronger company.”

News: Kansas City Southern sticks to Canadian National after Canadian Pacific fails to raise bid

AT&T and Discovery combine media brands in $43bn deal

BY Fraser Tennant

In a deal that creates one of the largest global streaming players, US telecoms giant AT&T is to combine its WarnerMedia premium entertainment, sports and news assets with streaming service Discovery's nonfiction and international entertainment and sports businesses.  

Under the terms of the definitive agreement, which is structured as an all-stock, Reverse Morris Trust transaction, AT&T will receive $43bn in a combination of cash, debt securities and WarnerMedia’s retention of certain debt. AT&T’s shareholders will receive stock representing 71 percent of the new company, while Discovery shareholders will own 29 percent.  

Once the transaction is complete, the new company will compete globally in the fast-growing direct-to-consumer business, bringing compelling content to direct-to-consumer subscribers across its portfolio, including HBO Max and the recently launched discovery+.

In addition, the transaction will combine WarnerMedia’s storied content library of popular and valuable intellectual property with Discovery’s global footprint, trove of local-language content and deep regional expertise across more than 200 countries and territories.

“This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms,” said John Stankey, chief executive of AT&T. “It will support fantastic growth and create efficiencies which can be re-invested in producing great content to give consumers what they want.”

Moreover, Discovery president and chief executive David Zaslav will lead the proposed new company, with a management team and operational and creative leadership drawn from both companies.

“It is exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity,” said Mr Zaslav. “We will build a new chapter together with the creative and talented WarnerMedia team and these incredible assets built on a nearly 100-year legacy of the most wonderful storytelling in the world.”

The boards of directors of both AT&T and Discovery have approved the transaction, which is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals.

Mr Stankey concluded: “This is an opportunity to unlock value and be one of the best capitalised broadband companies – a global media leader that can build one of the top streaming platforms in the world.”

News: AT&T set to end media voyage with $43 bln Discovery deal

Crown turns down Blackstone bid

BY Richard Summerfield

Private equity giant Blackstone has had a $6.5bn offer for troubled Australian casino operator Crown Resorts rejected.

“The board has unanimously concluded that the revised (Blackstone) proposal undervalues Crown, and is not in the best interests of Crown’s shareholders,” Crown said in a statement.

The company noted that Blackstone’s offer of A$12.35 per share, or A$8.4bn, did not consider the full value of its assets, a potential jump in earnings once the COVID-19 pandemic eases and plans to pay down a significant amount of debt. The Blackstone offer also created some uncertainty about the timing of any deal, Crown noted.

Star Entertainment Group, which owns and operates casinos and hotels across Australia, most notably in New South Wales and Queensland, has also made an all-stock offer for Crown. In a separate statement, Crown said it had not yet formed a view on the merits of the Star merger proposal but had requested certain information to better understand preliminary matters. The Star proposal is expected to attract antitrust scrutiny, which could create difficulties going forward.

Crown has endured a considerable adversity of late. In addition to a slump in profits due to the coronavirus pandemic, the company has also faced increased regulatory scrutiny, lost its licence to operate a flagship new casino on Sydney’s waterfront amid allegations of money laundering and links to organised crime, and also faces inquiries in the other two Australian states where it is licensed to operate. Furthermore, the company is facing two civil lawsuits accusing it of failing to disclose risks which led to share price declines.

Blackstone initially offered $11.85 a share for Crown, representing a 19 percent premium to the volume-weighted average price of Crown shares since the release of its first half results for the financial year 2021. Blackstone, which owns around 10 percent of Crown shares, increased its previous offer in April. The modified deal included conditions designed to safeguard Blackstone against an adverse recommendation like the cancellation or suspension of Crown’s Western Australia or Victorian licences by either inquiry before the deal is approved by courts.

Rival private equity firm Oaktree Capital Group has also expressed an interest in Crown, offering a “structured instrument” to help Crown buy back the 37 percent stake held in the company by founder James Packer.

News: Crown Resorts rejects Blackstone’s proposal and keeps Star under review

Driverless truck start-up Plus goes public in $3bn SPAC deal

BY Fraser Tennant

In a $3.3bn deal that will make it a publicly traded company, self-driving truck technology start-up Plus is to merge with special purpose acquisition company (SPAC) Hennessy Capital Investment Corp. V (HCIC V).

Under the terms of the definitive agreement, Plus’s existing shareholders will convert 100 percent of their ownership stakes into the combined company and are expected to own approximately 80 percent of the post-combination company at close.

Furthermore, the merger is expected to deliver up to approximately $500m in gross proceeds at closing, including approximately $345m of cash held in HCIC V’s trust account from its initial public offering (IPO) in January 2021.

“This transaction enables us to continue growing our business globally, so that fleets and drivers can benefit from our revolutionary technology and usher in a new generation of innovation,” said David Liu, chief executive and co-founder of Plus. “At the same time, the transaction introduces a partner that shares our focus on sustainable technology and infrastructure, is aligned on our growth and value creation objectives, and recognises the challenges trucking companies face today.”

To meet these challenges, Plus plans to roll out its Supervised Level 4 PlusDrive solution in 2021 and accelerate the development of its Level 4 fully autonomous system by the end of 2024.

“We are excited to partner with Plus on their mission to make long-haul trucking safer, cheaper and better for the environment,” said Daniel J. Hennessy, chairman and chief executive of HCIC V. “We look forward to collaborating with experts in automotive safety, self-driving technology, artificial intelligence, robotics, cyber security and product development, as Plus transforms the global freight market with a safe self-driving trucking system.”

The merger has been unanimously approved by the boards of directors of both Plus and HCIC V and is expected to close in the third quarter of 2021, subject to the satisfaction of the necessary regulatory approvals and customary closing conditions, including approval by HCIC V’s shareholders.

Mr Liu concluded: ”We look forward to working closely with the HCIC V team as we move to commercial deployment and deliver value for drivers, customers and shareholders.”

News: Self-driving truck startup Plus to go public through $3.3 bln SPAC deal

Verizon Media sold for $5bn

BY Richard Summerfield

Verizon Communications has sold its Verizon Media assets, including AOL and Yahoo, to private equity giant Apollo Global Management in a deal worth $5bn.

Under the terms of the deal, Verizon will receive $4.25bn in cash from Apollo, along with preferred interests of $750m and a 10 percent stake in the unit. Verizon originally paid nearly $9bn for the pair. The divested unit, which was previously named Oath and renamed Verizon Media in 2018 when Verizon wrote off around half of the unit’s value, will now be called Yahoo when the deal closes, which is expected to be in the second half of 2021.

Verizon has been making moves to refocus its attention on its wireless networks and other internet provider businesses of late and has been selling off its media properties. Last year, the company sold HuffPost to BuzzFeed. It also recently sold off or shut down other media properties like Tumblr and Yahoo Answers.

“We are excited to be joining forces with Apollo,” said Guru Gowrappan, chief executive of Verizon Media. “The past two quarters of double-digit growth have demonstrated our ability to transform our media ecosystem. With Apollo’s sector expertise and strategic insight, Yahoo will be well positioned to capitalize on market opportunities, media and transaction experience and continue to grow our full stack digital advertising platform. This transition will help to accelerate our growth for the long- term success of the company.”

“We are big believers in the growth prospects of Yahoo and the macro tailwinds driving growth in digital media, advertising technology and consumer internet platforms,” said David Sambur, senior partner and co-head of private equity at Apollo. “Apollo has a long track record of investing in technology and media companies and we look forward to drawing on that experience to help Yahoo continue to thrive.”

“Verizon Media has done an incredible job turning the business around over the past two and a half years and the growth potential is enormous,” said Hans Vestberg, chief executive of Verizon. “The next iteration requires full investment and the right resources. During the strategic review process, Apollo delivered the strongest vision and strategy for the next phase of Verizon Media. I have full confidence that Yahoo will take off in its new home.”

Apollo has engaged in a number of transactions in recent months, announcing deals to acquire Michaels, a chain of crafting stores in the US, and the Venetian Resort in Las Vegas.

News: Verizon to offload Yahoo, AOL for $5 billion