Record year for UK’s cyber security sector

BY Richard Summerfield

2020 was a landmark year for cyber security investment in the UK, according to a new government report from the Department for Digital, Culture, Media and Sport (DCMS).

As the UK workforce became largely remote over the last year due to COVID-19, there were record levels of investment in the cyber security sector. The report notes that more than £800m was invested in the sector in 2020, while the number of active cyber security firms in the UK increased 21 percent with almost 50,000 people now employed in UK cyber security.

The report, which tracked the UK’s cyber security industry across a range of indicators between April 2019 and December 2020, also highlighted a nine percent rise in employment in the industry, with more than 3800 new full-time jobs created, bringing the total number of people working in the sector to 46,683.

“The need for cutting-edge cybersecurity has never been greater and this resilient sector is growing, diversifying and solidifying its status as a jewel in the UK’s tech crown,” said digital minister Matt Warman, speaking at the CyberASAP online event. “With more than 3,800 new jobs created, firms – large and small – are doing vital work keeping people and businesses secure online so we can build back safer from the pandemic. I am committed to supporting the industry to reach new heights, create more jobs and lead new innovations in this field.”

The report also found that the sector’s total annual revenue continued to rise, by 7 percent, reaching £8.9bn within the most recent financial year. The sector also contributed more than £4bn to the economy – up 6 percent in the last year, with mainly mature firms driving growth.

The 2020 edition of the report also suggested that more than half of firms (54 percent) are now based outside of London and the South East, with cyber security clusters prospering across the country in areas such as Scotland, Northern Ireland and North West England.

Given the gravity of the situation over the last 12 months, it is, perhaps, unsurprising that the cyber security sector has seen such considerable growth. Businesses have seen a marked expansion in the number and type of cyber threats they have had to confront. Ransomware attacks against UK organisations surged during 2020, for example, while phishing attacks also exploded in volume as hackers sought to take advantage of more employees working from home.

Report: Cyber Security Sectoral Analysis 2021

Nestlé to divest water unit for $4.3bn

BY Richard Summerfield

Nestlé S.A. has agreed to sell its Nestlé Waters North America (NWNA) unit to One Rock Capital Partners and Metropoulos & Co. in a deal worth $4.3bn.

In June 2020, Nestlé announced it was conducting a strategic review of the unit, as it planned to sharpen the focus of its global water portfolio. A potential sale to One Rock had been rumoured for a number of weeks.

The sale includes a number of brands in the US and Canada, as well as the US direct-to-consumer and office beverage delivery service ReadyRefresh. Headquartered in Stamford, Connecticut, NWNA has approximately 7000 employees in the US and more than 230 in Canada. The unit also has 27 production facilities across North America.

“We continue to transform our global waters business to best position it for long-term profitable growth,” said Mark Schneider, chief executive of Nestlé. “This sale enables us to create a more focused business around our international premium brands, local natural mineral waters and high-quality healthy hydration products. We will also boost our innovation and business development efforts to capture emerging consumer trends, such as functional water.”

“Nestlé Waters North America’s iconic brands have earned the trust and preference of consumers everywhere due to an uncompromising commitment to quality,” said Tony W. Lee, managing partner of One Rock. “We are excited to further this commitment and build upon the market leadership of the business alongside the Company’s talented management team.”

“One Rock brings to bear extensive corporate carve out and operational capabilities that we believe will be instrumental to NWNA’s ongoing success as a standalone company,” said R. Scott Spielvogel, managing partner of One Rock. “We look forward to working closely with our Operating Partners to accelerate the growth of NWNA’s extraordinary set of attractive brands, while continuing to create value in the communities in which the Company operates.”

“I am pleased to have the opportunity to lead NWNA as it enters the next phase of evolution,” said Dean Metropoulos, founder of Metropoulos & Co. “This is an important inflection point for the business as it transitions to an independent company, and I look forward to collaborating with One Rock and NWNA’s management team to deliver unparalleled value to our customers.”

News: Nestle to sell N.American water brands for $4.3 billion, focus on premium lines

Ideal fit: Lanxess acquires Emerald Kalama in $1.1bn deal

BY Fraser Tennant

In a move designed to boost its presence in North America, Germany-based specialty chemicals company Lanxess has accelerated its growth course to acquire Emerald Kalama Chemical for an enterprise value of $1.1bn.

Lanxess has stated that it will deploy existing liquidity to purchase Emerald, which is majority-owned by affiliates of US private equity firm American Securities LLC. Like its acquirer, Emerald is a specialty chemicals company whose products include food preservatives, household and cosmetic applications, flavours and fragrances, as well as plastics and adhesives for industry.

The Cologne-headquartered company was one of a number of potential suitors for US-based Emerald, which reportedly included private equity firms HIG Capital, Rhone Capital and TPG Capital.

“We are gaining further momentum on our growth course,” said Matthias Zachert, chairman of Lanxess. “The businesses of Emerald Kalama Chemical are an ideal fit for us. We will further strengthen our consumer protection segment and open up new application areas with strong margins, for example in the food industry and animal health sector. In addition, we will also enlarge our presence in our growth region of North America. All this will make us even more profitable and stable.”

Employing 500 people, Emerald runs three production sites in Kalama in the US state of Washington, Rotterdam in the Netherlands and Widnes in the UK. The company reported 2020 sales of approximately $425m, and approximately $90m in earnings before interest, taxes, depreciation and amortisation (EBTDA).

Around 45 percent of its turnover is generated in North America.

“The company has a very efficient setup, bundling all its production activities at only three sites,” added Mr Zachert. “That is why we expect to integrate the new business very quickly.”

With the acquisition of Emerald, Lanxess is pursuing a targeted expansion of its portfolio. The company has a strong position in the global business with antimicrobial active ingredients and preservatives, including for consumer protection products and animal hygiene, such as disinfectants effective against coronavirus (COVID-19).

The deal is expected to close in the second half of 2021 subject to approval by the relevant authorities.

News: Chemical firm Lanxess buys U.S.-based Emerald Kalama in $1.1 billion deal

Power provider Frontera to restructure under Chapter 11

BY Fraser Tennant 

In a move to reduce its approximated £800m debt, natural gas plant operator Frontera Holdings LLC has filed for Chapter 11 bankruptcy protection in order to implement a comprehensive restructuring support agreement (RSA).

Frontera joins an expanding list of operators, which includes California Resources and a pair of natural-gas-fired power plants owned by Talen Energy Corporation, seeking Chapter 11.

Under the terms of the RSA, most of the company's debt will be converted into equity and the current term loan and revolving credit facility lenders will become the new owners of Frontera.  

Throughout the restructuring process and beyond, Frontera expects that employees and vendors will continue to be paid and that the Frontera Generation Facility – the company’s 526MW, combined-cycle natural gas plant near Mission, Texas, which exports power to Mexico – will continue to generate electricity and serve its customers.

Frontera’s subsidiary entities in Mexico are not included in the Chapter 11 filing and also are continuing to operate in the ordinary course of business.

In bankruptcy court filings, Frontera attributed its Chapter 11 filing and RSA to the coronavirus (COVID-19) pandemic's massive disruption to demand for the debtors' energy production.

“These actions represent an important milestone to reducing debt and strengthening the company for the benefit of our stakeholders,” said Lee Davis, chief executive of Frontera. “Frontera intends to use the court-supervised process to create a sustainable capital structure and position the company to achieve long-term success.”

Currently, Frontera has $773m in debt under a secured term loan and revolving credit facility, as well as $171m in secured notes. Under this agreement, lenders agree to convert a substantial portion of the current term loan and revolving credit facility debt into equity. Once approved by the Bankruptcy Court, these lenders will become the company’s new owners.

Furthermore, Frontera has secured $70m in debtor-in-possession (DIP) financing to ensure liquidity throughout the Chapter 11 process. The company's liquidity position will allow the Frontera Generation Facility to operate the business in the ordinary course and fund Chapter 11 administrative costs.

The DIP financing is part of $145m in exit financing that will be provided by lenders upon Frontera’s emergence from the Chapter 11 process.

News: Frontera Holdings Files for Chapter 11 in Southern Texas Court

Renesas and Dialog agree $6bn deal

BY Richard Summerfield

Renesas Electronics Corp has agreed to buy Dialog Semiconductor in a deal worth $5.9bn. Dialog accepted the all-cash offer of around €67.50 per share, the companies said in a statement announcing the deal. The price represented a 20 percent premium to Dialog’s Friday close of €56.12.

“The transaction we announced today represents our next important step in catapulting Renesas’ growth plan to achieve substantial strategic and financial benefits, following our previous acquisitions,” said Hidetoshi Shibata, president and chief executive of Renesas. “Dialog has a strong culture of innovation along with excellent customer relationships and serves fast growing areas including IoT, industrial and automotive. By bringing Dialog’s talented team and expertise into Renesas, together, we will accelerate innovation for customers and create sustainable value for our shareholders.”

“For several years, we have successfully executed on a diversification strategy that positions Dialog for high-growth,” said Dr Jalal Bagherli, chief executive of Dialog. “We have built a strong foundation of high-performance analog and power efficient mixed-signal expertise, extended our product portfolio and applied our technologies into markets including 5G, wearables, automotive, smart home, connected medical and industrial IoT.”

He continued: “This compelling platform – combined with Renesas’ leading embedded compute, analog and power portfolio – creates even greater growth opportunities in today’s increasingly connected world. The Dialog team is excited to join forces with Renesas. The combined company will be in an even stronger position to provide innovative products for these markets, building on Renesas’ extensive sales, distribution and customer support capabilities.”

The deal is the last transaction in the increasingly active semiconductor industry. According to Bloomberg, the volume of deals involving semiconductor companies more than doubled in 2020 to $144bn. A marked shortage of available semiconductors has impacted the manufacturing of various consumer electrical goods, with Sony and Apple among those companies worst affected.

Renesas and Dialog both supply Apple. In Dialog’s case, Apple accounted for two-thirds of the company’s $1.4bn in total sales in 2019. Dialog’s other clients also include Samsung, Xiaomi and Panasonic. The company expects revenue generated from Apple to fall to about 25 percent by the end of 2023.

Dialog confirmed on Sunday that it had received an offer from Renesas after media reports of interest from the Japanese company and Franco-Italian chipmaker STMicroelectronics.

News: Renesas boosts power and connectivity prowess with $6 billion Dialog deal