Philip Morris agrees $16bn Swedish Match takeover

BY Richard Summerfield

Philip Morris International has agreed to acquire Swedish Match AB, a maker of nicotine pouches, for $16bn.

The deal, which has been recommended by Swedish Match’s board of directors, is expected to close in Q4 2022, subject to acceptance by Swedish Match shareholders, regulatory approvals and other customary conditions.

Philip Morris has made a cash offer for the Stockholm-based group at 106 crowns per share, valuing it at 161.2 billion crowns - $16bn. However, according to hedge fund Bronte Capital, which owns about 1 percent of Swedish Match, the offer price is “unacceptable”. Bronte has reiterated its opposition to the takeover. Under Swedish law, 90 percent of shareholders need to agree to the deal for it to proceed.         

The deal, should it be completed, is a significant bet on cigarette alternatives, an area in which Philip Morris is already a major player. The company has been at the forefront of the tobacco industry’s push to diversify beyond cigarettes as regulations become ever more restrictive globally. The company developed the IQOS heated-tobacco system and last year agreed to take over Vectura Group Plc, a developer of asthma drugs. It also acquired Fertin Pharma, which produces a smoking-cessation aid.

Swedish Match’s products include Zyn nicotine pouches, which are tobacco-free and rapidly growing in popularity in both the US and Scandinavia. Swedish Match makes most of its profit from Swedish-style snuff called ‘snus’, which is banned in the European Union, outside of Sweden. In the US, the Food and Drug Administration (FDA) approved the marketing of snus as less harmful than cigarettes in 2019. In the US, Swedish Match is the market leader in the nicotine pouch and chewing tobacco markets, according to its website, and number three in moist snuff. In Scandinavia, it is market leader for snus products and number two for nicotine pouches.

“This is not a cost synergy case,” said Lars Dahlgren, chief executive of Swedish Match. “This is rather a textbook example of perfect industrial logic – two companies that share the same vision and that also are very complementary in their commercial setups.”

The deal for Swedish Match raises some questions regarding Philip Morris’s future relationship with former parent company Altria, which has a range of oral nicotine products. Philip Morris was split off from Altria in 2008 because of shareholder demands for better returns. The spinning off of Philip Morris saw the companies agree to a complex non-compete arrangement.

News: Philip Morris bets on cigarette alternatives with $16 bln Swedish Match bid

Switch Inc taken private in $8.38bn deal

BY Richard Summerfield

Data centre operator Switch Inc has agreed to be taken private by DigitalBridge Group in a deal worth $8.38bn.

Under the terms of the deal, DigitalBridge will acquire all outstanding common shares of Switch for $34.25 per share in an all-cash transaction valued at approximately $11bn, including the assumption of debt. The deal will be carried out by DigitalBridge Partners II, the value-added digital infrastructure equity strategy of the investment management platform of DigitalBridge, and an affiliate of global infrastructure investor IFM Investors.

The transaction, which was unanimously approved by a special committee of the Switch board of directors, is expected to close in the second half of 2022, subject to approval by Switch stockholders and the satisfaction of other customary closing conditions.

“Today’s announcement is an important step towards our long-term vision for the growth and evolution of our company,” said Rob Roy, founder and chief executive of Switch. “Through this partnership we will be ideally positioned to continue to meet strong customer demand for Switch's environmentally sustainable Tier 5 data center infrastructure. Following our expansion into a Fifth Prime campus last year, and with our plan to construct more than 11 million additional square feet of capacity through 2030, Switch's strategic position has never been stronger. The combination of our advanced data center infrastructure, significant expansion capacity in our land bank, and a new partnership with experienced digital infrastructure investors lays a strong foundation for Switch's continued industry leading growth.”

“At DigitalBridge, we are building the world's leading global digital infrastructure investment platform, and this transaction allows us to partner with one of the industry's fastest growing and highest quality data center portfolios,” said Marc Ganzi, chief executive of DigitalBridge. “Rob and his team share our vision for the future of communications infrastructure, making us the ideal partner to scale their business both domestically and internationally to meet the exponentially rising demand from large enterprise customers looking for mission critical digital infrastructure. We are also pleased to partner with IFM Investors, one of the world's leading institutional infrastructure investors, to execute this compelling transaction.”

 “IFM is excited to partner with DigitalBridge and Switch on this transaction,” said Kyle Mangini, global head of infrastructure at IFM. We consider Switch to be an excellent digital infrastructure business with strong potential. The company is a recognized industry leader with an impressive approach to ESG. Today's announcement reflects IFM’s strategy of investing in high quality infrastructure to protect and grow the long-term retirement savings of working people.”

 News: DigitalBridge to buy data center owner Switch for $8.38 billion

LTI and Mindtree’s $3.5bn merger creates Indian tech giant

BY Fraser Tennant

In a combination that creates an Indian tech giant, global multinational information technology services and consulting companies L&T Infotech (LTI) and Mindtree are to merge in a transaction valued at $3.5bn.

The two companies have decided that, in light of recent industry shifts, such as the prominence of large deals and the preference for end-to-end offerings, the time is appropriate to combine the strengths of both organisations to better serve customers.

Under the terms of the merger agreement, all shareholders of Mindtree will be issued shares of LTI at the ratio of 73 shares of LTI for every 100 shares of Mindtree. The new shares of LTI so issued will be traded on the National Stock Exchange of India and the Bombay Stock Exchange.

Significant scale benefits are anticipated through LTI and Mindtree’s complementary strengths, resulting in a stronger portfolio of offerings across verticals. Enhanced customer engagement and delivery model through industrialisation of delivery and streamlined value-enabling processes is expected to result in improvement in large deal capabilities.

These opportunities will create a more distinctive employee value proposition and stronger partnerships with ecosystem players.

The name of the combined entity will be ‘LTIMindtree’ and will leverage the advantages of both the brands and create value for stakeholders.

“This merger represents our continued commitment to grow the IT services business in line with our strategic vision,” said A. M. Naik, chair of Mindtree. “The highly complementary businesses of Mindtree and LTI will make this integration a ‘win-win’ proposition for our customers, investors, shareholders and employees.”

The transaction is subject to shareholder and regulatory approvals.

“We are confident that the proposed merger will help us build on the combined strengths of both these organisations to unlock synergies through scale, cross-vertical expertise and talent pool,” said S. N. Subrahmanyan, vice chair of LTI. “This will help us emerge as a partner of choice for large-scale tech transformations and create a distinctive employee value proposition.”

Until the merger process is complete, for the moment, both companies will continue to function independently while a steering committee oversees the transition.

News: India's L&T Infotech, Mindtree merge to create $18 billion tech company

China’s CH-AUTO goes public in $1.7bn SPAC deal

BY Fraser Tennant

In a move that takes the Chinese electric vehicle manufacturing and design service company public, CH-AUTO Technology Corporation Ltd is to merge with US special purpose acquisition company (SPAC) Mountain Crest Acquisition Corp. IV in a deal valued at $1.7bn, including debt.

Under the terms of the definitive agreement, CH-AUTO shareholders will be entitled to receive approximately 125 million shares valued at $10 per share, subject to closing adjustments.

The combined company plans to operate under the name CH Auto Inc and list on the Nasdaq stock exchange.

“The past two years have been quite challenging for us,” said Qun Lu, founder and chief executive of CH-AUTO. “We had to reduce our operations by slowing down the businesses of manufacturing of vehicles and automotive parts. By entering into this agreement with Mountain Crest, we expect to see a positive and rebounding impact on CH-AUTO’s finance capabilities, manufacturing and sales activities, and promotion of brand awareness.”

Mr Lu will continue to lead the holding company as its chief executive after closing of the transaction, which is expected in the fourth quarter of 2022.

“CH-AUTO is a unique and compelling investment opportunity, being one of the first electric vehicle automakers in China with proven technology breakthroughs as well as manufacturing innovations, along with its enormous future growth potential through its existing and pipeline vehicle models,” said Suying Liu, chairman, chief executive and chief financial officer of Mountain Crest. “I am thrilled to be partnering with Mr Lu and his exceptional team to bring their vision to fruition.”

While the transaction has been approved by the boards of directors of CH-AUTO and Mountain Crest, it will require the approval of stockholders and is subject to other customary closing conditions, including the receipt of certain regulatory approvals.

Mr Lu concluded: “Dr Liu and I are excited about the development prospect for the combined company, and we expect that CH-AUTO will rapidly transform into a leading next-generation automotive company that is built on years of design and manufacturing experience.”

News: Chinese EV company CH-AUTO to go public via $17-bln SPAC deal

Sembcorp agrees $6.29bn Keppel Corp deal

BY Richard Summerfield

Singaporean offshore engineering group Sembcorp Marine has agreed to a $6.29bn merger with Keppel Corp’s offshore and marine unit. 

Under the terms of the deal, Temasek, Sembcorp’s majority shareholder, will become the largest shareholder in the merged company, with a 33.5 percent stake. As part of the merger, Keppel and its shareholders will own 56 percent of the newly combined company, with Sembmarine’s shareholders owning the rest.

According to a joint statement announcing the deal, the combined entity’s market value was S$8.7bn on a proforma basis, but that this could change based on the entity’s share price when it lists.

The combined company will be wholly owned by a new holding entity, which will be listed on the Singapore stock exchange, the two companies said in the joint statement. A shareholder meeting is expected to be held in the fourth quarter to seek approval for the transaction, which is subject to various regulatory sign offs.

“The signing of a win-win agreement on the Proposed Combination of Keppel O&M and Sembcorp Marine marks a strategic milestone for the offshore & marine sector,” said Loh Chin Hua, chief executive of Keppel and chairman of Keppel O&M. “It brings together two leading O&M companies in Singapore to create a stronger player that can realise synergies and compete more effectively amidst the energy transition. Together with the resolution of Keppel O&M’s legacy rigs, this is a major step forward in Keppel’s Vision 2030 journey, as we simplify our business and sharpen our focus on providing solutions for sustainable urbanisation.”

“The Proposed Combination marks a major milestone in Sembcorp Marine’s strategic business transformation journey since 2015 to stay resilient amid dramatic changes in our industry,” said Tan Sri Mohd Hassan Marican, chairman of Sembcorp Marine. “Sembcorp Marine and Keppel O&M are Singapore’s homegrown marine icons. I am confident the Combined Entity, with its larger operational scale, broader geographical footprint and enhanced capabilities, will create a leading Singapore player to capitalise on the opportunities in the offshore and marine, as well as the renewable and clean energy sectors.”

“We are pleased that Keppel and Sembcorp Marine have come to an agreement on the terms of a combination that we think will be transformational for the companies,” said Nagi Hamiyeh, head of the portfolio development group at Temasek. “We believe the combined business will have the expertise and capacity to accelerate the pivot towards growing opportunities in the renewable and clean energy sectors, and pursue meaningful projects around the world that address the increasing need for greener and cleaner energy solutions. In doing so, it will be able to deliver long-term value creation for shareholders and other stakeholders. We look forward to the support of the shareholders of Keppel and Sembcorp Marine to make this possible.”     

News: Temasek-backed oil rig builders agree $6.3 bln merger amid sector downturn