Newell Rubbermaid and Jarden combine to create $16bn consumer goods giant

BY Fraser Tennant

Consumer goods giants Newell Rubbermaid Inc. and Jarden Corporation have announced their intention to join forces to create a new $16bn company: Newell Brands.

Newell Rubbermaid, an S&P 500 company, is a global marketer of consumer and commercial products with 2014 sales of $5.7bn and a strong portfolio of leading brands. Jarden Corporation, a diversified, global consumer products company, has an extensive portfolio of over 120 trusted and authentic brands.

The combination of the two companies’ portfolios is expected to accelerate existing business plans in food & beverage, baby products, commercial products, kitchenware & appliances across large, growing and unconsolidated global markets that exceed $100bn.

Under the terms of the agreement, Jarden shareholders will receive $21 in cash for each Jarden share and 0.862 of a share in Newell Rubbermaid stock at closing. Once the transaction is complete, Newell Rubbermaid shareholders will own approximately 55 percent of the company.

Additionally, Newell Rubbermaid anticipates incremental annualised cost synergies of approximately $500m over four years, driven by efficiencies of scale and new efficiencies in procurement, cost to serve and infrastructure.

 “The combination of these two great companies creates a $16bn consumer goods company with incredible potential to grow and create value,” said Michael B. Polk, current president and chief executive of Newell Rubbermaid, who will lead Newell Brands upon the closing of the transaction. “The scale of our combined businesses in key categories, channels and geographies creates a much broader canvas on which to leverage our advantaged set of brand development and commercial capabilities for accelerated growth and margin expansion.”

The transaction, expected to close in the second quarter of 2016, is subject to approval by shareholders of both Newell Rubbermaid and Jarden, receipt of regulatory approvals and other customary closing conditions.

“I am delighted that we are to play a part in bringing together these two winning companies," said Martin E. Franklin, executive chairman and founder of Jarden. “The combination offers significant value for our shareholders and the opportunity to participate in the combined company’s long-term value creation potential as shareholders in Newell Brands.”

Eyeing the opportunities ahead, Mr Polk said: “I look forward to working with Martin as we drive the new Newell Brands towards its aspiration of becoming one of the preeminent consumer goods companies in the world.”

News: Newell Rubbermaid to Acquire Jarden for $15 Billion

RiskMap 2016: navigating the ‘contours of risk and opportunity’ in a volatile world

BY Fraser Tennant

“Risk is a necessary precondition for opportunity”, according to a new report – ‘RiskMap 2016’ – which examines the key risks, opportunities and trends that businesses are likely to face in 2016.

The report, compiled annually by Control Risks, forecasts that 2016 will be a challenging year for businesses as they are forced to navigate escalating security and political risks.

Among the risks highlighted in the report, which claims that the security and political risk outlook appears worse than at any point in the past 10 years, are concerns pertaining to terrorism, Middle Eastern instability, cyber risk, a Chinese economy in transition, and European financial and political uncertainties.

 All in all, RiskMap 2016 paints a picture of a more volatile world in 2016.

Yet the report does make clear that there are causes for optimism including: (i) the possibility of further successes of multilateral diplomacy following the landmark Iranian nuclear deal and the restoration of US ties with Cuba; (ii) stable growth in most western economies; (iii) the possibility of a gradual rise in commodity prices as the decade continues; and (iv) indications by governments that they are willing to cooperate on environmental issues.

“These risks - and many others - will continue to threaten unprepared businesses”, says Richard Fenning, CEO of Control Risks. “Whether it is the see-sawing balance of economic power between the East and the West, uncertainty about the future of commodities prices, the disconcerting metastasis of IS, the ramifications of China’s adjustment to its new economic reality, or an explosion in the frequency and severity of criminal cyber-attacks, successful businesses will need to prepare themselves to face tough challenges on a number of fronts.”

Furthermore, believes Fenning, these political and security concerns need not translate into major obstacles for businesses as he expects the relative political stability of Western democracies to give their economies a “renewed competitive advantage” over developing economies that are faced with stagnant growth and political unrest (such as China and India).

Continued Mr Fenning: “It would be easy to think the world has never been more unsettled, or unpredictable, than now. But businesses and investors would do well to remember that, despite the many risks and challenges that 2016 will present, the world has always been a shifting and unpredictable place.”

Report: RiskMap Report 2016

A year in PE review

BY Richard Summerfield

Preqin's 'Private Equity Spotlight' report, released in December, highlights a number of the biggest trends in the PE space over the last 12 months.

One of the most notable features of the last year has been the drop in average holding periods for portfolio companies, from 5.9 years in 2014 to 5.5 this year. Back in 2008 it was 4.1 years. The year-on-year reduction in holding periods reflects the favourable exit conditions which have evolved.  To date, there have been 1595 PE exits valued at $426bn, compared to $457bn in 2014, a record year for PE exits.

The alternative assets space has become a prominent sector in recent years. The industry had around $7.1 trillion worth of assets under management in Q1 2015, up from $5.5 trillion in 2012. Given its increased size and importance, it is essential that investors and fund managers understand industry trends, according to Preqin. as a result, key metric analysis is a vital tool.

Sovereign wealth funds have also grown over the last 12 months. In March, Preqin reported that their global AUM had risen more than $900bn to reach $6.3 trillion. This stunning level of growth has come in spite of increasing volatility in the oil and commodity sectors.

Report: Private Equity Spotlight: 2015 in Review

Digital disruption drives deals – EY

BY Richard Summerfield

The digital revolution of the last few years has had a significant impact on almost all facets of our daily life. Smart phones, cloud computing and Big Data have integrated into our daily routines almost seamlessly, and it is for that reason that the digital transformation of businesses has become such a valuable development.

This emerging reliance of mobile, cloud and Big Data technology is significant for many reasons, not least of which is the manner in which it is helping to drive mergers and acquisitions in the technology space. According to a new report from EY, 'Capital Confidence Barometer – Technology', companies are turning to cloud and mobile technology as they look to remain relevant in an increasingly competitive and demanding industry. EY’s data suggests that to the end of October the value of tech related M&A deals was $396.4bn; as such, the record of $412.4bn worth of tech deals announced in 2000 is likely to have been exceeded by the end of the year.

The impressive pace of M&A driven deals is also unlikely to slow going forward, according to EY. Forty-five percent of the technology executives surveyed for the report noted that they intend to pursue deals in 2016; this number is higher than in the last three surveys carried out by EY in the third quarter of the year.

Thirty-four percent of respondents will look outside of their own sector. Thirty-seven percent believe that ‘digital future’ – EY’s term to describe the disruption of all areas of enterprise caused by technology – is the most important driver in M&A deals today.

Jeff Liu, Global Technology Industry Leader, Transaction Advisory Services at EY, said, "As the overall M&A market hits its stride, the technology sector has continued to shatter M&A records from one quarter to the next. While digital disruption is not a new story, we have clearly entered a new chapter in its impact on M&A. It is one in which the customer is becoming a more digitally empowered protagonist. Changing customer behaviour is driving technology company acquisitions of non-technology companies — and vice versa."

Given the increasing confidence in the global economy, tech companies are feeling bullish about completing further deals in the year ahead. Though many tech executives are concerned about lingering geopolitical difficulties and their effect on the wider global economy, they will not be put off pursuing deals. With companies willing to commit 60 percent of their available capital to growth in 2016, the deals will keep coming.

Report: Capital Confidence Barometer — Technology

Austerity-extending 2016 budget approved by Greek parliament

BY Fraser Tennant

Austerity measures in the billions is the harsh outlook for Greece in 2016 following its parliament’s approval of a budget steeped in spending cuts, pension reforms, tax rises and a less than favourable GDP growth forecast.

The austerity measures, narrowly approved in the Greek parliament by a margin of eight (153 votes to 145), offer up a stringent €5.7bn in spending cuts, encompassing €1.8bn being seized from pensions and €500m from defence. Additionally, the 2016 budget contains tax increases of around €2bn.

Yet despite these measures, Greek debt is still forecast to grow to €327.6bn in 2016.

Furthermore, in terms of gross domestic product (GDP), the government’s budget plan states an expectation of zero GDP growth in 2015 (compared to the 2.3 percent contraction earlier forecast) and the projection of a 0.7 percent drop in GDP (compared to a 1.3 percent contraction prediction). 

“Almost all opposition parties are absorbed with internal issues so the vote process was easy for the government”, observes Dimitris Rapidis, a political analyst and director of the think-tank, Bridging Europe. “The New Democracy party has an upcoming leadership race, the socialists and the communists are out of space, the River party had nothing to offer to the debate, whereas Centrists Union and Golden Dawn are becoming increasingly populist."

Well aware of his government’s need to make good on previous anti-austerity pledges (as well as satisfying the demands of international lenders), prime minister Alexis Tsipras called the 2016 budget, the first to be put before the Greek parliament by the Syriza-led government, “a difficult task for a government that wants to leave its mark with social justice".

Also featuring in the 2016 budget is detail on the three-year €86bn rescue package, in return for which Athens is requested to pass at least 60 'prior action' bills through parliament (including tax hikes and pension reforms), the government’s privatisation of €50bn of national assets to help pay off its debts, and €25bn in new capital that is required to keep the banking system afloat.

A further budget revelation is the admission that Greece is scheduled to be paying off its creditors for the next 42 years, at least.

Looking back, 2015 has been a turbulent year for Greece, with the Syriza government winning national elections in January and September; a much-derided €86bn EU bailout in July; and the country becoming the first ever developed nation to default on the International Monetary Fund (IMF) in June - and all this against a backdrop of a battered economy, immense pressure from international creditors and the continuing spectre of a ‘Grexit.’

On a more positive note, representatives of the eurozone, the European Central Bank and the International Monetary Fund are in Greece this week to continue talks on the pending reforms of the pension and tax systems, as well as public administration issues.

News: Greek parliament approves austere budget for 2016