Luxottica and Essilor agree $49bn merger

BY Richard Summerfield

Following years of speculation, eyewear brands Luxottica and Essilor have announced that they are to merge in an all stock deal worth $49bn, a move which will create a global superpower in the industry.

The new company is expected to have more than 140,000 employees and sales in more than 150 countries, once the deal has been completed. The companies expect the transaction to close in the second half of 2017, subject to regulatory and shareholder approval.

Under the terms of the merger, the newly combined giant will be known as EssilorLuxottica and will be led by Leonardo Del Vecchio, executive chairman of Luxottica Group.

Luxottica, which owns the Oakley and Ray-Ban brands, currently has a 14 percent market share of the eyewear industry, while Essilor has 13 percent. Around half of the combined company’s revenue is expected to be generated in the US. Europe will account for roughly 22 percent, Africa, Asia and the Middle East for around 18 percent.

In a statement announcing the deal, Hubert Sagnières, chairman and chief executive of Essilor, stated: “Our project has one simple motivation: to better respond to the needs of an immense global population in vision correction and vision protection by bringing together two great companies, one dedicated to lenses and the other to frames. With extraordinary success, Luxottica has built prestigious brands, backed by an industry state-of-the-art supply chain and distribution network. Essilor brings 168 years of innovation and industrial excellence in the design, manufacturing and distribution of ophthalmic and sun lenses. By joining forces today, these two international players can now accelerate their global expansion to the benefit of customers, employees and shareholders as well as the industry as a whole."

Mr Del Vecchio said: “With this agreement my dream to create a major global player in the eyewear industry, fully integrated and excellent in all its parts, comes finally true. It was some time now that we knew that this was the right solution but only today are there the right conditions to make it possible. The marriage between two key companies in their sectors will bring great benefits to the market, for employees and mainly for all our consumers. Finally, after 50 years, two products which are naturally complementary, namely frames and lenses, will be designed, manufactured and distributed under the same roof."

News: Luxottica and Essilor in 46 billion euro merger to create eyewear giant

Deals belie uncertainty

BY Richard Summerfield

2016 was a challenging but rewarding year for global M&A, according to a new report from Mergermarket.

Thanks in part to seismic shifts in global politics – namely the victory for populism in both the US and the UK – a decline in dealmaking volume may have been anticipated last year, and yet 2016 saw a remarkable amount of activity.

“Despite a series of political shockwaves during 2016 including the UK’s Brexit and Donald Trump’s surprise victory, global M&A fared well," said Mergermarket’s EMEA research editor, Katharine Dennys. “Global M&A managed to reach its third highest deal value since 2007. 2017 remains uncertain especially with the president-elect pledging to clamp down on high profile acquisitions such as the AT&T/Time Warner deal that was announced in October.”

The US was the most attractive investment destination, in terms of both deal value and volume last year, with 4951 deals announced in the jurisdiction worth $1.5 trillion, the second highest annual value recorded in the US since Mergermarket began keeping records in 2001. This continued activity came despite deal value dropping 22.9 percent compared to 2015. Indeed, 2016 saw 347 fewer deals announced. In total, 47.5 percent of global deal activity was targeted at the US.

Another notable trend through 2016 was the emergence of China as an oversea acquirer. Chinese companies announced 258 outbound deals last year worth $185.3bn, up markedly from $49.1bn in 2015.

European M&A saw a dip in activity, however, down 10.3 percent. Yet, despite this, inbound M&A into Europe reached an all-time high, with 1280 deals worth $410.7bn announced in 2016, up 35.6 percent compared to 2015.

Looking ahead, 2017 will likely continue to be an unstable year geopolitically. The issue of Brexit negotiations will continue to loom over Europe. Elections in France and Germany too will likely have an impact on European focused activity. The nascent Trump administration will no doubt have a significant impact on global dealmaking.

Elsewhere, the Chinese overseas deal rush may come to an abrupt end this year following the announcement that the Chinese government will scrutinise overseas transactions worth more than $2bn in an effort to reduce capital outflows that are a drain on foreign exchange reserves.

Report: Global and regional M&A: Q1-Q4 2016

$3.3bn deal sees Gartner and CEB join forces to create leading research and advisery company

BY Fraser Tennant

In a deal that creates the world’s leading global research and advisory company, Gartner, Inc. has announced its intention to acquire CEB Inc. in a transaction with a total enterprise value of $3.3bn.

The definitive agreement between Gartner, the world's leading information technology research and advisory company, and CEB, the industry leader in providing best practice and talent management insights , will see Gartner acquire all of the outstanding shares of CEB in a cash and stock transaction valued at approximately $2.6bn, which includes Gartner’s assumption of approximately $700m in CEB net debt.

Furthermore, under the terms of the agreement, CEB shareholders will receive $54.00 in cash and 0.2284 shares of Gartner common stock for each share of CEB common stock they own, implying 70 percent cash and 30 percent stock consideration for the offer.

“We are excited about joining forces with CEB, a world-class company we have long admired”, said Gene Hall, chief executive of Gartner. “Our highly complementary business models will create the leading global research and advisory company for all major functions in the enterprise. We look forward to working with CEB’s highly talented teams to leverage our global reach and apply Gartner’s proven operational and sales execution capabilities at scale to accelerate growth across CEB’s businesses.”

The deal will also see Gartner’s existing syndicated research and advisory services being introduced to CEB’s clients in a broad range of functional areas that extend well beyond Gartner’s existing IT, marketing and supply chain roles. In addition, CEB’s best practice and talent management insights will be introduced to Gartner clients worldwide. 

“We have long admired Gartner for its impact on clients and track record of growth,” said Tom Monahan, chairman and chief executive  of CEB. “We’re pleased to reach this agreement, which offers compelling benefits to CEB shareholders, clients and employees. CEB shareholders will receive substantial and immediate value for their investment while benefiting from the upside and strong growth prospects of the combined company.”

The transaction has been unanimously approved by the boards of both companies and is expected to close in the first half of 2017.

Mr Monahan concluded: “The combined company will have unmatched insight into technology, talent and the other drivers of corporate performance, and we look forward to working with the Gartner team to accelerate our growth and scale our impact on members and clients.”

News: IT Research Firm Gartner Is Buying CEB for $2.6 Billion

Global M&A activity down 18 percent in 2016 says new review

BY Fraser Tennant

The volume of global mergers & acquisitions (M&A) activity in 2016 fell 18 percent from the record high seen in 2015, according to a review published this week by Dealogic.

Moreover, the fall – from $4.66 trillion in 2015 to $3.84 trillion in 2016 – followed three consecutive year-on-year increases. And while volume fell 18 percent, M&A revenue was down by only 2 percent.

Among the key M&A trends and developments highlighted by Dealogic are: (i) cross-border M&A activity being down 3 percent globally year-on-year; (ii) China outbound volume hitting a record high of $225.4bn; (iii) US inbound M&A also hit a record high, with a total of $486.3bn; (iv) 4Q global M&A hitting the $1 trillion mark in the first week of December, the biggest quarter since 4Q 2015 and only the tenth time that quarterly volume has surpassed the trillion mark.

Looking to M&A volume in Europe, targeted M&A of $903.1bn was down 13 percent from the $1.03 trillion announced in 2015 – the lowest total since 2013 ($760.3bn). Among the notable deals in the region was the $47bn pending bid by Qualcomm for NXP Semiconductors (announced in October 2016), the biggest US acquisition of a European company on record.

Towards the end of the year (October 2016) there was a late surge in big deals, with five transactions announced worth $20bn or more. Topping the list was AT&T’s $107.9bn bid for Time Warner (announced on 22 October), the seventh largest M&A transaction on record and the biggest deal announced in 2016. In second place was Bayer’s $66.3bn acquisition of Monsanto. Overall, October 2016 saw a record monthly high of $600.8bn.  

Like 2015, technology was once again the top sector (for only the second time on record) with a total of $612.9bn in 2016, short of the record high of $691.4bn the previous year. And for the first time since 2012, healthcare M&A activity fell outside the top three, ranking fourth for global M&A volume, with $320.9bn.

Goldman Sachs led the global M&A volume ranking with $970.4bn, followed by Morgan Stanley and JPMorgan with $866.0bn and $823bn respectively. Goldman Sachs also topped the global M&A revenue ranking with a 10.1 percent wallet share.

Finally, in terms of withdrawn transactions, M&A volume of $837.3bn in 2016 was the highest since 2008 ($948.5bn), with the years seeing two of the top five $100bn-plus withdrawn deals on record. These were Pfizer’s $160bn bid for Allergan (withdrawn in April 2016) and Honeywell International’s $102.8bn bid for United Technologies (withdrawn in March 2016).

Report: Dealogic – Global M&A Review: Full Year 2016

Chinese dealmaking to defy regulatory scrutiny

BY Richard Summerfield

The Chinese economy has been in a state of flux in recent years. With the national economy being retooled and Chinese firms looking overseas for merger and acquisition opportunities, one could be forgiven for thinking that dealmaking activity within the country would be waning.

However, a new report from A.M. Best,'Chinese Mergers & Acquisitions Activity Continues Amid Evolving Regulatory and Policy Environment', suggests that activity in the country will continue, despite a number of challenges. Though activity may slow in the coming year due to an uncertain economic outlook and evolving government policies in China and overseas markets, dealmaking will continue regardless.

“The number of both outbound and domestic deals is expected to continue to grow, although depreciation pressure on the yuan and eroding foreign currency reserves may cause some downside impact on outbound deals,” notes the report.

Dealmaking in overseas real estate has proved particularly attractive to Chinese acquirers in recent years. While private enterprises have been active in jurisdictions including the US, Europe and South Korea, state owned enterprises have also begun to pursue overseas deals.

With  more Chinese firms pursuing overseas opportunities, regulatory challenges will need to be overcome, particularly for those active in the US. Accordingly, the report warns Chinese acquirers to be mindful of complying with extensive regulations. It highlights Anbang’s withdrawal of its application for approval for its Fidelity & Guaranty Life deal as a key example of the increased regulatory scrutiny facing Chinese firms. In 2016, Anbang’s deal for Fidelity collapsed after New York regulators required additional information on the deal’s funding and shareholder structure.

The report also highlights Anbang’s aborted $14bn bid for Starwood Hotels & Resort Worldwide Inc., as well as Fosun’s unsuccessful purchase agreement for Israeli insurer Phoenix Holdings Ltd as examples of outbound Chinese deals which collapsed under regulatory scrutiny.

Though 2017 will likely see Chinese firms encounter more regulatory difficulty, dealmaking is set to continue. That said, depreciation pressure on the yuan and the eroding of foreign currency reserves may have an impact on outbound deals.

Report: Chinese Mergers & Acquisitions Activity Continues Amid Evolving Regulatory and Policy Environment