KKR to buy Calsonic in $4.5bn deal

BY Richard Summerfield

Private equity firm KKR & Co has agreed to acquire auto parts maker Calsonic Kansei Corp from the company’s majority shareholder Nissan, for around $4.5bn. The deal represents KKR’s biggest ever deal in Japan.

According to a statement announcing the deal, KKR will pay 1860 yen per Calsonic share held - a 28.3 percent premium over the company’s closing price on Tuesday, the day before the deal was announced. The firm beat competition from a number of other rival private equity firms, including Bain Capital and MBK Partners.

Calsonic’s main customer is Nissan, Japan’s second largest car maker, which accounts for 85 percent of its business. However, the company also supplies parts to a number of other car manufacturers including Renault, Isuzu, Daimler and General Motors.

Yasuhiro Yamauchi, chief competitive officer of Nissan, said in a statement: "This agreement was reached because we share common interests and goals. Nissan is hoping to further increase the competitiveness of Calsonic Kansei – one of our most important partners – and KKR recognises the company's potential. This is also the best choice for Calsonic Kansei and its shareholders."

The acquisition of Calsonic will come from KKR Asian Fund II. The firm has been active in Japan through its pan-regional private equity funds since 2010. Though the country has been a key market for KKR, the deal for Calsonic is a rare one in Japan. Multibillion dollar deals in Japan have been hard to come by in recent years; many Japanese companies often unwilling to divest their units through drastic restructuring.

Once the deal for Calsonic is complete, it will become the fourth KKR owned firm operating in Japan. The firm has previously acquired human resources services company Intelligence Ltd, Pioneer DJ, the DJ equipment business which Pioneer Corporation divested in early 2015, and Panasonic Healthcare, which was carved-out of the Panasonic Corporation for $1.67bn in 2013.

Hiro Hirano, a member of KKR and CEO of KKR Japan, said: "Calsonic Kansei is a best-in-class auto-parts manufacturer that supplies high-quality products to the world's largest automotive brands. As a partner to Calsonic Kansei's management team, we aim to assist the company in achieving its growth ambitions and make available our international network and industry expertise to continue Calsonic Kansei's success globally."

News: KKR to buy Nissan-backed supplier Calsonic for up to $4.5 billion

Cyber safety: Symantec to acquire Lifelock for $2.3bn

BY Fraser Tennant

In a combination that will form the world’s largest digital safety platform for consumers and families, Symantec Corp. has announced that it is to acquire LifeLock, Inc. – a transaction with an enterprise value of $2.3bn.

The definitive agreement between cyber security company Symantec (the maker of Norton antivirus software) and LifeLock, a provider of proactive identity theft protection services, is expected to be financed by Symantec via cash on the balance sheet and $750m of new debt.

Once Symantec’s acquisition of LifeLock (for $24 per share) is complete, two business leaders, one in consumer security and the other in identity protection and remediation services, will have been brought together to create the world’s largest consumer security business with over $2.3bn in annual revenue (based on last fiscal year revenues for both companies).

Symantec’s board of directors has also confirmed that it has increased the company’s share repurchase authorisation from approximately $800m to $1.3bn, with up to $500m in repurchases targeted by the end of fiscal 2017.

“As we all know, consumer cyber crime has reached crisis levels,” said Greg Clark, CEO of Symantec. “LifeLock is a leading provider of identity and fraud protection services, with over 4.4 million highly-satisfied members and growing. This acquisition marks the transformation of the consumer security industry from malware protection to the broader category of digital safety for consumers.”

Illustrating the “crisis levels” referenced by Mr Clark is data showing that, in the last year, one third of American citizens and over 650 million people globally were the victims of cyber crime. As a consequence, more and more consumers are becoming concerned about digital safety.

“After a thorough review of a broad range of alternatives, our board of directors unanimously concluded that Symantec is the ideal strategic partner for LifeLock and offers our shareholders a significant premium for their investment, at closing,” said Hilary Schneider, CEO of LifeLock. “Together with Symantec we can deploy enhanced technology and analytics to provide our customers with unparalleled information and identity protection services. We are very pleased to have reached an outcome that serves the best interests of all LifeLock stakeholders.”

The Symantec/LifeLock transaction has been approved by the boards of directors of both companies and is expected to close in the first calendar quarter of 2017, subject to customary closing conditions (including LifeLock stockholder approval).

Mr Clark concluded: “With this combination we will be able to deliver comprehensive cyber defence for consumers.”

News: Symantec to acquire LifeLock for $2.3 billion

Advancing technology impacting CFO reporting - EY

BY Fraser Tennant

An increase in data caused by advancing technology is adversely impacting the ability of chief financial officers (CFOs) to deliver effective corporate reporting, according to an EY report published this week.

The report, ‘How can reporting catch up with an accelerating world?’, which is based on a survey of more than 1000 CFOs and heads of reporting of large organisations across 25 countries, reveals that 66 percent of respondents consider technological advances – such as cloud-based systems, data analytics, robotic process automation (RPA) and artificial intelligence (AI) – to be their number one external reporting challenge – up from 57 percent in 2015.

Additionally, almost one third (32 percent) of the CFOs surveyed ranked their current reporting operating model as “average”, with 56 percent stating that transforming their model – perhaps striking a balance between central control and devolved reporting attuned to local needs – is now a major focus.

“CFOs worldwide are struggling to make the most of the increased volume and speed of data available to them,” said Peter Wollmert, EY global and EMEIA Financial Accounting and Advisory Services (FAAS) leader. “Many are encumbered by legacy systems that do not allow reporting teams to extract forward-looking insight from large, fast-changing data sets. The result is an increasing expectation gap between what boards now look for from corporate reporting, and what CFOs can deliver. Until reporting catches up with technological advancements it will continue to be compromised.”

The report also advances some bold strategies to deal with the corporate reporting issue, including increasing the use of: (i) outsourcing; (ii) managed services; (ii) captive shared services centres – onshore or near-shore; (iv) captive shared services centres – offshore; and (v) centralised centres of excellence.

That said, the report does indicate a preference among CFOs for moving towards a model in which control resides with a head office but with significant responsibilities being assigned to local markets. Twenty-nine percent of survey respondents saw this as the future model, while only 24 percent currently operate a system such as this.

Whatever model is eventually established, CFOs hope that the new reporting arrangements will increase the accuracy and effectiveness of reporting, improve data analytics in reporting to drive forward-looking strategic insight, and provide a more flexible and agile reporting function.

Mr Wollmert concluded: “CFOs are mapping how they see the future of reporting. However, unless decisive action is taken quickly to define a bold strategy and vision for advancing the reporting process, they will continue to fall behind the pace of technology. For CFOs contemplating this journey, the mantras for their reporting function need to be responsive and streamlined.”

Report: How can reporting catch up with an accelerating world?

Samsung to acquire Harman International in $8bn deal

BY Richard Summerfield

Samsung Electronics announced on Monday that it had agreed to acquire Harman International Industries in a deal worth $8bn.

Under the terms of the deal, Samsung will pay around $112 per Harman share held. All together, the company will be paying a premium of 28 percent on Harman's closing price on Friday 11 November, the last day of trading before the deal was announced. The two companies expect the transaction to close in mid 2017, though the deal is still subject to regulatory approval.

For beleaguered Samsung, still reeling from the damage done to its mobile phone business following the withdrawal of the fire-prone Galaxy Note 7, the company’s commitment to the connected automotive sector may come as welcome relief. The automotive space is an increasingly popular investment destination for tech firms, and with industry giants Google and Apple both increasing their interest and presence in the industry in recent years, Samsung’s deal for Harman may prove a prudent investment.

Harman's products, which provide infotainment, telematics and connected safety and security services, are used in more than 30 million vehicles made by some of the world’s biggest car manufacturers, including BMW, Toyota and Volkswagen.

“Harman perfectly complements Samsung in terms of technologies, products and solutions, and joining forces is a natural extension of the automotive strategy we have been pursuing for some time,” said Oh-Hyun Kwon, vice chairman and chief executive of Samsung, in a statement. “As a Tier 1 automotive supplier with deep customer relationships, strong brands, leading technology and a recognized portfolio of best-in-class products, Harman immediately establishes a strong foundation for Samsung to grow our automotive platform.”

Samsung’s movement into the automotive space has developed over the last 12 months. Following the creation of the division in 2015, the company has invested $450m in Chinese car manufacturer and rechargeable batteries firm BYD Co Ltd. It has also held negotiations with Fiat Chrysler Automobiles over the potential sale or partnership of its Magneti Marelli manufacturing unit.

Harman will, according to Samsung, continue to operate as a standalone Samsung subsidiary, with its chief executive Dinesh Paliwal continuing to lead the division.

News: Samsung to buy car tech firm Harman for $8 billion, South Korea's biggest overseas deal

Trump wins election, markets fluctuate

BY Richard Summerfield

The political outsider, Republican Donald Trump, has claimed a historic and stunning victory in the US presidential election, bringing an end to eight years of Democratic rule. The result initially plunged the global markets into chaos and stunned Wall Street.

As Mr Trump’s supporters celebrated his victory, along with Republican successes in both the Senate and House of Representatives, the dollar and US stocks endured a mixed day, falling sharply before recovering somewhat throughout Wednesday’s trading.

European shares initially followed suit. Though many news agencies predicted losses of around 4 percent, the FTSE 100 fell around 1.4 percent initially before recovering throughout Wednesday. In the first hours of trading on Thursday morning, the FTSE continued its gains, climbing a further 1.06 percent, nearing the 7000 mark.

The Mexican peso, however, dropped 13 percent against the dollar at one point, marking the currencies biggest daily move in nearly 20 years. The peso did rebound 4 percent on Wednesday, though it was still down 8.5 percent.

Asian shares rallied in trading on Thursday with the Nikkei climbing 7 percent at one point, following of 5 percent drop in the previous day’s trading. Gains were also seen elsewhere as Australian stocks soared 3.3 percent in the largest daily gain since late 2011 . Shanghai rose 1.3 percent.

Wall Street, which had lent its considerable support to Ms Clinton during the bruising and historic election campaign, was initially left reeling by the result as investors fled some of their riskier assets. Yet US stocks actually closed up on Wednesday, with investors jumping headlong into sectors which could benefit from Mr Trump's election. Oil & gas producers, energy companies and construction firm sand pipeline operators were all seen as attractive investment destinations, given Mr Trump’s preference for oil & gas investment. The fact that the GOP has indicated that it would invest at least $500m in infrastructure development over the next five years can be seen as one of the driving forces behind these gains.

Mr Trump’s views on the Dodd-Frank reform act, implemented in the wake of the financial crisis, as well as other notable Democrat legislation including the Affordable Care Act, have also affected stocks; healthcare companies fell as the markets anticipated the end of Obamacare.

Oil markets, which have steadied in recent months following two years of uncertainty, fell temporarily below $45 a barrel on Wednesday morning, as the wider global commodities market reacted to the election result with some concern. The global benchmark, Brent Crude, fell to its lowest point since August, down 2.3 percent to $44.98. However, oil prices rebounded on Thursday; at the time of writing, Brent Crude futures were up 1.14 percent, or 53 cents, at $46.89 per barrel. Though the outlook for the commodities market still appears contentious, there is hope that a recovery in the oil & gas sector in 2017 may be relatively rapid.

News: US stocks, bond yields jump after Trump shock, Mexican peso falls