AbbVie wins Pharmacyclics race

BY Richard Summerfield

Biotech company Pharmacyclics has agreed to be acquired by Chicago based rival AbbVie in a deal worth around $21bn.

Under the terms of the deal, Pharmacyclics shareholders will receive $261.25 per share of the company held. The offer is comprised of a mix of cash and AbbVie equity, and the transaction is expected to close by mid-2015.

AbbVie was a late entrant to the race to acquire Pharmacyclics, beating out competition from Johnson & Johnson and a third, unnamed party to secure the deal. The three way contest for Pharmacylics was driven by interest in the company’s crown jewel – Imbruvica – a cancer drug which could make an important impact on the oncology sector. The company expects US sales of Imbruvica to hit $1bn in 2015, however by 2020 worldwide sales are forecast to reach $5.8bn.

"Team Pharmacyclics is honoured and enthusiastic to join the AbbVie organisation. We share a common purpose. Together and as one, our focus remains to create a remarkable difference for patient betterment around the world," said Bob Duggan, chairman and chief executive of Pharmacyclics, in a statement announcing the deal.

"The acquisition of Pharmacyclics is a strategically compelling opportunity. The addition of Pharmacyclics' talented and innovative team will add enormous value to AbbVie," said Richard Gonzalez, chairman and chief executive of AbbVie. "Its flagship product, Imbruvica, is not only complementary to AbbVie's oncology pipeline, it has demonstrated strong clinical efficacy across a broad range of hematologic malignancies and raised the standard of care for patients."

The deal continues the trend of significant M&A transactions in the pharma and biotech sectors in 2015 to date. With announced deals including Pfizer’s purchase of Hospira for $17bn, Valeant’s acquisition of gastrointestinal drugmaker Salix for $14.5bn, and Shire's $5.2bn deal for NPS Pharma, M&A in the pharma and biotech  reached $70bn by the beginning of March - more than double the level of activity seen in the same period last year.

News: AbbVie to Pay $21 Billion for Pharmacyclics, Maker of a Promising Cancer Drug

Freescale and NXP to form $40bn firm

BY Richard Summerfield       

NXP Semiconductors N.V. and Freescale Semiconductor Ltd this week announced a $16.7bn merger, including the assumption of debt, which will create a firm with a total enterprise value of $40bn.

Under the terms of the deal, NXP will pay $6.25 in cash and 0.3521 shares of NXP stock for each share of Freescale stock. In a statement announcing the transaction, NXP confirmed that the deal will be funded with $1bn in cash and a $1bn debt offering, in addition to around 115 million new NXP shares.

“Today’s announcement is a transformative step in our objective to become the industry leader in high performance mixed signal solutions. The combination of NXP and Freescale creates an industry powerhouse focused on the high growth opportunities in the Smarter World. We fully expect to continue to significantly out-grow the overall market, drive world-class profitability and generate even more cash, which taken together will maximize value for both Freescale and NXP shareholders,” said Richard Clemmer, NXP’s chief executive officer in a statement announcing the deal.

The deal will create an industry heavyweight with about $10bn in annual sales. The largest producer of analogue chips, microcontrollers and other types of semiconductors, Texas Instruments, had sales of around $13.05bn in 2014.

Although the deal has been unanimously approved by the boards of directors of both companies, it is still subject to regulatory approvals in various jurisdictions and customary closing conditions. The deal, expected to close in the second half of 2015, must also be approved by shareholders. Once the merger has been completed, Freescale’s shareholders will own around 32 percent of the new firm. NXP’s stockholders will hold the remaining 68 percent.

The transaction will see a conglomerate of private equity investors, including Permira, Blackstone, Carlyle and TPG Capital, complete a partial exit of Freescale, acquired by the consortium in 2006 for $17.6bn. The group currently owns 64 percent share of Freescale. Once the deal has been finalised, the private equity firms will still hold around 19.1 percent of the merged company.

News: NXP to buy Freescale Semiconductor to create $40 billion co

M&A activity in 2015 to yield continued growth for utilities and financial investors

BY Fraser Tennant

M&A activity throughout 2015 will yield continued growth for utilities and financial investors according to the latest Power and Transactions Trends report published by EY.

As well as predicting another robust year for the M&A transactional landscape, EY’s report – ‘Power transactions and trends: global power and utilities transactions review’ also takes a look back at 2014 – a pivotal year for the global power and utilities (P&U) sector.

EY expects M&A activity throughout 2015 to be shaped by the following criteria: (i) low power prices have made unregulated generation unprofitable for some diversified utilities - this, along with the recent price recovery, coupled with the resulting declining reserve margins in the near term in many regions, points to an active IPP market; (ii) large diversified utilities are streamlining operations by focusing on stable regulated assets, as well as consolidating positions through acquisitions in high-growth regions;  (iii) in a bid to hedge against commodity price volatility, utilities are likely to shift some investment focus towards vertical integration by acquiring midstream and upstream assets; (iv) as more countries implement policies in support of renewable energy, this will lead to heightened M&A activity in this space across all regions; (v) the urgent need for increased levels of electrification will see emerging markets, such as Africa, Mexico, India, Chile and Brazil, present significant opportunities for global investors; and (vi) financial buyers, including pension funds, are increasingly investing in the P&U sector, particularly in infrastructure fund investments.

The EY report also projects that market reforms will drive activity in Japan, Mexico and Africa during 2015, attracting many of the world’s biggest power and utilities investors.

“In 2015, we expect to see Japan and Mexico grow further, and we are calling out Africa as the next area of growth, as governments alter structural arrangements to welcome new entrants,” said Matt Rennie, EY’s global TAS power & utilities leader. “Africa faces tremendous challenges and opportunities in its quest for greater levels of electrification, and, in turn, economic prosperity.

“As always, we expect consortia based entry strategies will best navigate local business and legislative regimes, a tactic which offers opportunities for both inbound and domestic utilities.”

Report: Power transactions and trends: global power and utilities transactions review

Over-regulation and cyber risk top list of banking & capital markets CEO concerns

BY Fraser Tennant

Over-regulation and cyber risk are the two major threats to banking & capital markets (BCM), according to a new PwC report 'Achieving Success While Managing Disruption'.

The report, which showcases the views of 175 BCM CEOs across 54 countries, contends that over-regulation concerns have increased from 80 percent in 2014 to 89 percent in 2015 with CEOs particularly fearful over the impact of regulatory change.

“The ability to meet current and future regulation is hampered by lingering uncertainty over regulatory details and the potential for reactive and piecemeal implementation,” said Kevin Burrowes, PwC’s UK financial services leader. “It is vital for organisations to develop a proactive approach to regulation, headed by a regulatory leader responsible for liaising with regulators, assessing the strategic impact and co-ordinating the response.”

In terms of the risk of cyber attack, 79 percent of CEOs consider this to be likely and a potential barrier to business growth, although 92 percent still felt optimistic as to the prospects for growth of their own organisations.

Further survey findings include: (i) 86 percent of BCM CEOs recognise the importance of the CEO being the champion of digital technologies in helping to make the most of their bank’s digital investments; (ii) 93 percent of BCM CEOs see mobile technologies as being critical; (iii) 89 percent view data mining and analysis as important not only to gaining a better understanding of customer needs, but also in driving operational efficiency and effectiveness throughout the organisation; (iv) more than 40 percent of BCM CEOs see joint ventures, strategic alliances and informal collaborations as an opportunity to strengthen innovation and gain access to new customers and new/emerging technologies; and (v) 63 percent of BCM CEOs have a strategy to broaden talent diversity and inclusiveness or plan to promote one.

Report: A marketplace without boundaries?: Responding to disruption

France pushes through economic reform bill

BY Richard Summerfield     

Facing continued stagnation in the national economy, French prime minister Manuel Valls was forced to take decisive action last week. Utilising emergency constitutional powers, he pushed through an omnibus bill which will implement a number of labour market reforms. Though the prime minister felt that his bill would likely pass a parliamentary vote, he was unwilling to leave it to chance.

The reform bill is made up various measures which appear quite inconsequential in isolation, but their sum, the government hopes, will reinvigorate the national economy. The bill proposes to extend shopping hours on a Sunday, sell between €5bn and €10bn of state shareholdings, liberalise the country’s inter-city coach industry, and deregulate a number of professions. Should the reforms have their intended purpose, they could prove vital for the economy, which is entering its third year of stagnation and near zero growth.

However, implementation of the so-called ‘Loi Macron’ bill (named for French economy minister Emmanuel Macron) by emergency decree required the government to pass a vote of no confidence. The government succeeded by just 55 votes. The Macron bill has encountered opposition from both the left and right wings of the French political spectrum. A number of government ministers, suggesting the reforms were too pro-business, had announced they would move to block the bill if it went to a vote. Despite some political reluctance, recent polls point to strong public support for the reforms.

The decision to bypass regular parliamentary procedure has served to further emphasise the commitment of the Valls/Hollande government to modernisation. "There was probably a majority for this bill but it was not sure so I decided to take no chances - I couldn't risk seeing a plan so crucial to our economy be rejected," said Mr Valls. "Nothing will make us give up, nothing will make us retreat - the national interest of the French people requires it."

News: French govt to pass controversial economic reform bill by decree