Boeing terminates $4.2bn Embraer deal

BY Richard Summerfield

Boeing Co announced it has abandoned a deal to buy 80 percent of the commercial airline business of Embraer, saying the Brazilian company had failed to satisfy necessary conditions of the agreement.

On Saturday, Boeing terminated its Master Transaction Agreement (MTA) with Embraer. Under the terms of the agreement, Boeing had an option to terminate the agreement until 24 April, subject to extension by either party if certain conditions were met. Boeing did not disclose what the unmet conditions were and declined to comment on the specifics. The company will pay a termination fee of $75m to Embraer.

In response to the termination, Embraer said Boeing was making false claims to back out of the transaction due to its “own financial condition and 737 Max and other business and reputational problems”. Embraer also said that it would “pursue all remedies”.

“Boeing has worked diligently over more than two years to finalise its transaction with Embraer,” said Marc Allen, president of Embraer Partnership & Group Operations. “Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”

In 2018, Boeing and Embraer said they expected to close the deal by late 2019, pending regulatory approval. The deal faced an antitrust probe from the European Union. Boeing said that all regulatory authorities had approved the deal, except for the European Commission.

For Boeing, the deal a would have strengthened its position in the smaller jet market, adding the E-Jet-E2 to its portfolio.

Going forward, the two companies have confirmed that they will maintain their existing MTA, originally signed in 2012 and expanded in 2016, to jointly market and support the C-390 Millennium military aircraft.

News: Boeing Backs Out of $4.2 Billion Embraer Joint Venture Deal

Couche-Tard drops Caltex bid for now

BY Richard Summerfield

The proposed $5.6bn merger between Canadian convenience store Alimentation Couche-Tard and fuel retailer Caltex Australia has been shelved as the repercussions of the COVID-19 outbreak continue to be felt around the world.

In a statement, Couche-Tard confirmed that while it still believes that Caltex is a good fit for its expansion into Asia, and would be willing to re-engage once coronavirus-related uncertainty subsides, in the short-term it plans to prioritise safeguarding its own business.

“We remain convinced of the long-term financial and strategic merits of an acquisition of Caltex and all the benefits it would offer to the shareholders of both companies,” said Brian Hannasch, president and chief executive of Couche-Tard. “Despite the COVID-19 situation, we have worked to complete due diligence on schedule through a significant investment of time and money. Our current plan would be to reengage the process once there is sufficient clarity as to the global outlook, and the work done to date should mean that we will be able to quickly formalize our proposal at that time.”

He added: “Couche-Tard is focused on managing its own business through this period and prioritizing the health, safety and well-being of its employees, customers and the communities it serves.”

For Caltex, the collapse of the deal comes as oil prices go into freefall. US crude oil prices turned negative as drops in global fuel demand impacted storage capacity and sales. OPEC has agreed to cut production by an initial 9.7 billion barrels per day yet to flow on to the market. In response, Caltex has brought forward a planned maintenance shutdown of its Brisbane refinery in a bid to soften the economic hit.

Steven Gregg, chairman of Caltex, said in a separate statement: “We remain confident in the strength of Caltex as an independent business, and should we receive an approach in the future would be willing to consider it on its merits.”

News: Couche-Tard shelves $5.6 billion Caltex Australia buyout as deal becomes latest virus victim

Frontier Communications files for Chapter 11

BY Fraser Tennant

In an attempt to reduce its debt by more than $10bn, telecommunications company Frontier Communications, along with its direct and indirect subsidiaries, has filed for Chapter 11 bankruptcy to expedite the implementation of a restructuring plan.

In conjunction with a restructuring agreement (RSA), Frontier has received commitments for $460m in debtor-in-possession (DIP) financing. Following court approval, the company’s liquidity will total over $1.1bn, comprising the DIP financing and more than $700m cash on hand.

This liquidity, combined with cash flow generated by Frontier’s ongoing operations, is expected to be sufficient to meet the company’s operational and restructuring needs.

“We are undertaking a proactive and strategic process with the support of our bondholders to reduce our debt by over $10 bn on an expedited basis,” said Robert Schriesheim, chairman of the finance committee at Frontier. “We are pleased that constructive engagement with our bondholders over many months has resulted in a comprehensive recapitalisation and restructuring. We do not expect to experience any interruption in providing services to our customers. 

“With a recapitalised balance sheet, we will have the financial flexibility to reposition the company and accelerate its transformation by allocating capital resources and adding talent to enhance our service offerings to our customers while optimising value for our stakeholders,” he continued. “Under the RSA, our trade vendors will be paid for goods and services provided both before and after the filing date.”

Under the RSA, bondholders have, subject to certain terms and conditions, agreed to support implementation of a plan that is expected to reduce the company’s debt and provide significant financial flexibility to support continued investment in its long-term growth.

In addition, Frontier intends to proceed with the sale of its Washington, Oregon, Idaho and Montana operations and assets to Northwest Fiber for $1.352bn in cash, subject to certain closing adjustments, on or around 30 April 2020, and will seek court approval to complete the transaction on an expedited basis.

“With the agreement with our bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” added Bernie Han, president and chief executive of Frontier. “At the same time, the COVID-19 pandemic continues to impact the entire business community, and our team is focused on ensuring the health and safety of our employees and customers.”

News: Frontier Communications files for bankruptcy protection

Print priorities: LSC Communications files for Chapter 11

BY Fraser Tennant

In a move to strengthen its liquidity and improve its capital structure, multinational commercial printing company LSC Communications, along with most of its US subsidiaries, has voluntarily filed for Chapter 11 bankruptcy.

As part of the restructuring process, Chicago-based LSC has received commitments for $100m in debtor-in-possession (DIP) financing from certain of its revolving lenders, subject to the satisfaction of certain closing conditions, which will allow it to continue to operate and pay vendors in full.

LSC’s subsidiaries in Mexico and Canada are not included in the Chapter 11 proceedings and will continue to operate as normal.

“As one of the country’s largest and most experienced printers with the leading mailing distribution network, we have a strong foundation and world-class team that will continue to work closely with our clients and vendors to achieve our mutual success,” said Thomas J. Quinlan III, chairman, president and chief executive of LSC Communications. “At the same time, the situation related to COVID-19 continues to evolve and impact our people, our communities, our clients and our vendors.”

LSC’s decision to file for Chapter 11 follows a comprehensive evaluation of opportunities to reduce its debt and better position the company to compete and deliver exceptional products and services to its clients.

“Our leadership continues to take the necessary steps to fortify our operations and effectively execute our critical role during this time, while making sure the health and safety of our employees remains our top priority,” continued Mr Quinlan. “Notably, the support we are receiving from our lenders through this process will help us to manage through these unprecedented near-term challenges as well as position LSC for the future.”

Since terminating its merger with Quad Graphics in July 2019, LSC’s proactive and aggressive approach to improving its cost structure and streamlining its manufacturing platform has seen it close eight of its facilities, as well as winning a host of new contracts.

News: LSC Files Chapter 11

Alnylam secures $2bn Blackstone investment

BY Richard Summerfield

Private equity firm Blackstone Group Inc is to invest $2bn in Alnylam Pharmaceuticals through an equity-and-debt deal, the firms announced on Monday.

Under the terms of the deal, Blackstone will acquire $100m in Alnylam stock and pay $1bn for 50 percent of Alnylam’s royalties and commercial milestones for inclisiran. The drugmaker could pick up another $150m from Blackstone Life Sciences for its cardiometabolic programmes vutrisiran and ALN-AGT, as well as a loan worth up to $750m.

“Alnylam is focused on building a top-tier biopharmaceutical company, advancing RNAi therapeutics as a whole new class of medicines with transformative potential for patients around the world,” said John Maraganore, chief executive of Alnylam. “This exciting new relationship with Blackstone brings us much closer to that goal, securing our bridge towards a self-sustainable financial profile that we believe can now be achieved without any need for Alnylam to access the equity markets in the future.”

He continued: “A central component of this strategic relationship is a partial monetization of our royalty for inclisiran. If approved, we believe this therapy holds enormous promise as a potential game-changer in hypercholesterolemia management. We are pleased to retain half of the royalties we receive from Novartis, allowing Alnylam to benefit from inclisiran’s anticipated future success. We couldn’t be more pleased to enter into this highly innovative arrangement with Blackstone, which has shown a significant commitment to Alnylam’s future and alignment with our long-term vision.”

“Blackstone is uniquely positioned to provide customized, one-stop-shop financing solutions at scale while establishing development collaborations with the world’s leading biotech companies,” said Nicholas Galakatos, global head of Blackstone Life Sciences. “Alnylam’s RNAi technology represents one of the most promising and rapidly advancing frontiers in biology and drug development today, and aligns perfectly with our investment strategy.

“Our collaboration with Alnylam provides non-dilutive access to capital to advance important new medicines in development across several disease indications including heart disease, the leading cause of death in the U.S. and globally,” he added.

Alnylam had been in talks with several buyers to sell its royalty rights for its cholesterol therapy inclisiran months before the global COVID-19 outbreak.

News: Alnylam's gene-silencing efforts get $2 billion Blackstone backing