Global M&A activity forecast to grow in H1 2019, says new report

BY Fraser Tennant

The number of global M&A deals is forecast to increase by 2 percent year-over-year (YOY) during the first six months of 2019, according to a new report by Intralinks.

In its ‘2019 Deal Flow Predictor’, Intralinks highlights an uptick in M&A activity in North America (NA), Asia-Pacific (APAC) and in Europe, with the  strongest growth in deal announcements expected to come from the real estate, energy & power and materials sectors.

Among the report’s key findings for H1 2019:  (i) in NA, the number of M&A deals is forecast to increase by around 5 percent; (ii) in APAC, the number of deals is expected to increase by around 4 percent; and (iii) among the five largest European economies, France, Italy, Germany and the UK are expected to show higher levels of M&A announcements, with Spain expected to be flat.

Conversely, M&A activity in Europe, the Middle East & Africa (EMEA) and Latin America (LATAM) is expected to fall by 1 percent and 6 percent in H1 2019, respectively. 

However, despite indications that the M&A market will push higher in the short term, Intralinks suggests that the pace of the current M&A up-cycle, which began in 2014, may have peaked and that dealmakers face considerable headwinds in 2019.

These headwinds  include a slowing global economy, partly driven by the trade war between the US and China, rising interest rates, depressed global equity markets, increasing nationalism and protectionism against cross-border M&A, and the uncertainty and potential damage to European economic growth caused by the political chaos of the current Brexit process.

In terms of Brexit, the Intralinks report examines whether the UK’s departure from the EU is an opportunity or a threat, while noting that UK has been one of the best-performing M&A markets in Europe in recent years  –  the number of announced deals for UK targets in Q4 2018 having been 41 percent higher than in Q2 2016.

“Of course, this does not necessarily predict what will happen once the UK actually leaves the EU, but it is nevertheless an interesting and counterintuitive example of how investors may be assessing the UK’s prospects as being brighter than they currently appear in a post-Brexit world,” said Philip Whitchelo, vice president, global market & customer engagement at Intralinks. “If the UK government makes good on its promises to continue to make the UK an attractive destination for investment, perhaps by lowering taxes and streamlining regulation, then Europe’s largest M&A market may continue to thrive.”

Report: Deal Flow Predictor 2019

Entegris and Versum agree merger of equals

BY Richard Summerfield

Chemicals manufacturer Entegris Inc has announced that it is to acquire rival Versum Materials Inc in a $4bn all-stock merger, creating a $9bn company which specialises in advanced materials, specialty gases and microcontamination control.

The deal is expected to close in the second half of 2019, subject to the satisfaction of customary closing conditions, including receipt of US and international regulatory approvals, and stockholder approval at each company.

Under the terms of the agreement, Versum Materials shareholders will get 1.120 shares of Entegris for each share held. Entegris stockholders will own 52.5 percent of the combined company, while Versum Materials stockholders will own 47.5 percent.

The companies expect the merger to generate around $75m in annual cost savings within 12 months of closing.

“We are excited to combine with Versum Materials to create a premier specialty materials company for the semiconductor and other high-tech industries,” said Bertrand Loy, president and chief executive of Entegris. “The combined company will be ideally positioned to more effectively help our customers achieve higher yields and new levels of performance and reliability, and together, we will be well positioned to take advantage of long-term secular semiconductor growth, and to tackle new industry process challenges. I have great respect for the Versum Materials team and look forward to joining forces as we embark on this next chapter and create new value for our stockholders, employees and customers.”

“We could not ask for a better partner in Entegris,” said Guillermo Novo, president and chief executive of Versum Material. “This merger will create greater benefits and growth opportunities than either company could have achieved on its own. It dramatically accelerates our goal of portfolio diversification – creating an end-to-end materials solutions provider across the entire semiconductor manufacturing process. With enhanced global scale and world class technical expertise, we’ll be poised to drive further innovation and support investments across our technology, infrastructure, and additional capabilities – enabling us both to better serve our customers and provide expanded opportunities for our employees.”

News: Chemicals maker Entegris to buy Versum in $4 billion microchip bet

Emerging Europe sees deal values soar

BY Richard Summerfield

2018 was another banner year for dealmaking in emerging Europe, according to CMS’ Emerging Europe M&A report.

Last year, deal value in the region grew 12.5 percent reaching a total of €80.5bn. It was the second highest level in the past five years, thanks to a number of mega deals, including Vodafone’s €6.07bn purchase of Liberty Global’s CEE operations.

Deal volume, however, remained flat: 0.9 percent own on 2017 with 2093 transactions. The region has demonstrated remarkable stability in recent years, despite the ongoing uncertainty permeating the global economy and ongoing political instability in key markets, such as Poland, which was the second-most active country in the region, attracting 323 deals in 2018.

Russia, which is included in the report, was the most targeted with 605 deals. Poland’s real estate and construction sectors were the most targeted, accounting for nearly a quarter of all deals in the country. Poland also saw seven of the 20 biggest property deals in the region, including the acquisition of the Wars Sawa Junior shopping centre, bought by Atrium European Real Estate of Austria for €301.5m.

Romania also saw a 73 percent jump in deal value last year due to a notable increase in telecoms sector activity. Deal volume fell, however.

Across the region, real estate was the most active sector, with 432 deals recorded, up 10.8 percent on 2017. Telecoms and IT recorded the highest total deal value, at €18.18bn. The UK was the top foreign investor in emerging Europe, by value, investing €9.77bn. The US was the top foreign investor by volume, with 89 deals.

 “M&A activity has been surprisingly buoyant,” said Helen Rodwell, a partner at CMS. “Markets have reached a size and level of sophistication that makes them more aligned to western European expectations and standards and that is reflected in interest from international investors including private equity funds and corporates.”

“There is a lot of potential for growth and development in the Balkans which is why it is attracting interest from international investors.” said Radivoje Petrikić, a partner at CMS. “The challenge for them is the availability of the right targets.”

Whether the current levels of activity can be maintained in 2019 remains to be seen, particularly in light of current economic uncertainty. Regardless, 2018 was an impressive year for the region.

Report: Emerging Europe M&A Report 2018/19

Bristol-Myers and Celgene agree record deal

BY Richard Summerfield

Bristol-Myer Squibb is to acquire Celgene Corp for $74bn in a cash and stock deal which combines two of the biggest pharmaceutical companies in the world.

The deal will see Celgene shareholders receive one Bristol-Myers Squibb share and $50 in cash for each share held, or $102.43 per share, a premium of 53.7 percent to Celgene’s closing price on the day before the deal was announced. The boards of directors of both companies have approved the deal, which is expected to close in the third quarter of 2019.

“Together with Celgene, we are creating an innovative biopharma leader, with leading franchises and a deep and broad pipeline that will drive sustainable growth and deliver new options for patients across a range of serious diseases,” said Giovanni Caforio, chairman and chief executive of Bristol-Myers Squibb. “As a combined entity, we will enhance our leadership positions across our portfolio, including in cancer and immunology and inflammation. We will also benefit from an expanded early- and late-stage pipeline that includes six expected near-term product launches. Our new company will continue the strong patient focus that is core to both companies’ missions, creating a shared organisation with a goal of discovering, developing and delivering innovative medicines for patients with serious diseases. We are confident we will drive value for shareholders and create opportunities for employees.”

“For more than 30 years, Celgene’s commitment to leading innovation has allowed us to deliver life-changing treatments to patients in areas of high unmet need,” said Mark J. Alles, chairman and chief executive of Celgene. “Combining with Bristol-Myers Squibb, we are delivering immediate and substantial value to Celgene shareholders and providing them meaningful participation in the long-term growth opportunities created by the combined company. Our employees should be incredibly proud of what we have accomplished together and excited for the opportunities ahead of us as we join with Bristol-Myers Squibb, where we can further advance our mission for patients. We look forward to working with the Bristol-Myers Squibb team as we bring our two companies together.”

The Celgene/Bristol-Meyer deal is the second notable merger to be announced in the pharmaceutical sector recently, following news of the $8bn merger between Eli Lilly & Co and Loxo Oncology announced on Monday.

News: Bristol-Myers to buy Celgene for $74 billion in largest biopharma deal

Vinci gets Gatwick

BY Richard Summerfield

Vinci Airports has agreed to acquire a majority stake in Gatwick Airport Limited, the UK’s second-busiest airport, for $3.7bn.

By acquiring a 50.01 percent stake in Gatwick, Vinci now operates 46 airports across 12 countries. Gatwick will be the largest airport in the French company’s portfolio, having handled nearly 46 million passengers in 2018, up from 32 million at the time of its previous sale a decade ago. The airport expects passenger numbers to grow to 60 million in the coming years.

The remaining 49.99 percent share in the company will be held by private equity firm Global Infrastructure Partners (GIP). The deal is expected to complete in the first half of 2019.

“Creating synergies and sharing best practices being at the core of our values, the whole Vinci Airports network will benefit from Gatwick Airport’s world-class management and operational excellence, which has allowed it to deliver strong and steady growth in a very constrained environment,” said Nicolas Notebaert, president of Vinci Airports, in a statement. “As Gatwick’s new industrial partner, Vinci Airports will support and encourage growth of traffic, operational efficiency and leverage its international expertise in the development of commercial activities to further improve passenger satisfaction and experience.”

Adebayo Ogunlesi, GIP chairman and managing partner, said: “We welcome Vinci Airports, one of the world’s most respected airport operators, as a partner in Gatwick airport. We look forward to building on the Gatwick success story together.”

“This partnership is focused on continuing the transformation at the airport over the last decade,” said Michael McGhee, a partner at GIP. “We are pleased Vinci Airports shares our vision of Gatwick’s future. We expect the transaction to be completed by the middle of next year, with the senior leadership team remaining in place. Their focus, along with everyone at Gatwick, obviously remains on doing their very best for customers over the busy holiday period after the challenges of recent days.”

Announcement of the deal was delayed by the chaos caused by three days of drone sightings at Gatwick in the run-up to Christmas. The drone sightings closed the airport’s runway, disrupting flights for 140,000 passengers. In response to the disruption, Gatwick has invested £5m in anti-drone technology.

News: France's Vinci in $3.7 billion swoop on UK's Gatwick airport