Space company Masten files for Chapter 11

BY Fraser Tennant

Signalling serious financial distress and putting at risk a NASA-funded mission to send one of its landers to the surface of the moon, pioneering NewSpace company Masten Space Systems has filed for Chapter 11 bankruptcy.

Masten is one of five companies that had won contracts from NASA to deliver payloads to the lunar surface. NASA issued an award originally valued at $75.9m to Masten in April 2020 to deliver a suite of experiments to the lunar surface using its XL-1 lander.

However, the NASA contract did not cover the entire cost of mission and Masten had difficulty raising additional funds by finding private payloads to fly to the lunar surface. Originally scheduled for 2022, the mission was pushed back to November 2023 because of what the company said in June 2021 were pandemic-related supply chain issues.

“NASA received notification its payloads slated for delivery aboard Masten Mission One may be impacted by Masten business operations,” said NASA in a statement. “The agency is working closely with the company to ensure that any potential changes comply with federal acquisition regulations. In the event Masten is unable to complete its task order, NASA will manifest its payloads on other flights.”

According to the Chapter 11 filing, Masten, based in Mojave, California, has estimated assets of between $10m and $50m, and estimated liabilities in the same range. Among the company’s creditors are SpaceX, Psionic LLC, Astrobotic Technology, NuSpace and Frontier Aerospace.

The filing follows months of losing key employees, including Sean Mahoney, chief executive, and Reuben Garcia, director of technical operations and manager of landing systems.

The company has also laid off 20 employees, including 15 engineers working on the XL-1 lander.

“Masten intends to use the Chapter 11 process to streamline its expenses, optimise its operations and conduct sale processes that maximise value for its unsecured creditors,” said Masten in a statement. “We expect the case to move quickly in order to minimise expenses.”

The company has also furloughed the remainder of its staff in the hope that they can be brought back if the company’s financial situation improves.

“We are hopeful that the Chapter 11 process will enable us to continue operations and deliver value for our customers and the space industry,” concluded Masten.

News: Space company Masten files for bankruptcy after struggle with NASA moon contract

Global dealmakers expect activity uptick in 2H22, reveals new survey

BY Fraser Tennant

Global M&A deal activity is expected to increase in the second half of 2022 despite challenging market conditions, according to a new Datasite survey.

In its ‘2H 2022 M&A Outlook’ survey, Datasite reveals that 68 percent of the more than 540 global dealmakers surveyed said they expect global deal volume to rise in the second half of 2022, with 41 percent expecting to see the biggest increase in transformational acquisitions or mergers, followed by debt financing at 37 percent and secondary buyouts at 34 percent.

Additionally, 78 percent of dealmakers are pricing at least a 5 to 7 percent increase in inflation, if not higher, into their financial valuation models for the rest of the year. When asked how inflation is expected to impact M&A deal flow, 46 percent of dealmakers said they expect a greater component of deals to be financed via equity, with an additional 34 percent predicting more straight cash deals.

Drilling down, the Datasite survey states that uncertain valuations, inflation and the Russia-Ukraine war are affecting other aspects of dealmaking, including deal size and the timing of completion. Dealmakers said the war, as well as inflation and the cost of capital, are factors likely to prevent a deal from closing before the end of 2022.

Qualitative feedback from dealmakers also points to uncertainty around valuations as another factor having a significant impact on M&A overall, including pausing larger acquisitions and merger processes, especially among corporate and private equity dealmakers.

“Despite geopolitical uncertainties and overall market volatility, global deal activity itself is still strong,” said Rusty Wiley, chief executive of Datasite. “However, when it comes to valuations, dealmakers will likely adjust multiples downward so the net result may be lower valuations overall in the second half of the year.”

And while valuations are lowering, deal times are lengthening. “The median length of time for a new deal, or asset sale or merger, has increased by 5 percent year-over-year so far this year, while deal preparation time is also rising, up 31 percent, for the same time frame,” added Mr Wiley. “This means many dealmakers are ‘ready to go’ but have not launched their projects just yet.”

Report: 2H 2022 M&A Outlook

Amazon’s healthcare push continues

BY Richard Summerfield

Amazon has agreed to acquire primary care organisation One Medical in a deal valued at around $3.9bn.

Under the terms of the deal, Amazon will acquire One Medical for $18 per share in an all-cash transaction valued at approximately $3.9bn, including One Medical’s net debt. Completion of the transaction is subject to customary closing conditions, including approval by One Medical’s shareholders and regulatory approval. Upon completion, Amir Dan Rubin will remain as chief executive of One Medical.

“We think health care is high on the list of experiences that need reinvention,” said Neil Lindsay, senior vice president of Amazon Health Services. “Booking an appointment, waiting weeks or even months to be seen, taking time off work, driving to a clinic, finding a parking spot, waiting in the waiting room then the exam room for what is too often a rushed few minutes with a doctor, then making another trip to a pharmacy – we see lots of opportunity to both improve the quality of the experience and give people back valuable time in their days. We love inventing to make what should be easy easier and we want to be one of the companies that helps dramatically improve the healthcare experience over the next several years.”

He added: “Together with One Medical’s human-centered and technology-powered approach to health care, we believe we can and will help more people get better care, when and how they need it. We look forward to delivering on that long-term mission.”

“The opportunity to transform health care and improve outcomes by combining One Medical’s human-centered and technology-powered model and exceptional team with Amazon’s customer obsession, history of invention, and willingness to invest in the long-term is so exciting,” said Mr Rubin. “There is an immense opportunity to make the health care experience more accessible, affordable, and even enjoyable for patients, providers, and payers. We look forward to innovating and expanding access to quality healthcare services, together.”

One Medical, whose parent company is San Francisco-based 1Life Healthcare, Inc, is a membership-based service that offers virtual care as well as in-person visits. It also works with more than 8000 companies to provide its health benefits to employees. One Medical has about 767,000 members and 188 medical offices in 25 markets, according to its first-quarter earnings report, which also showed the company had incurred a net loss of $90.9m after pulling in $254.1m in revenue.

Amazon’s interest in healthcare services has been growing for some time. In 2018, the company acquired online pharmacy PillPack for $750m before opening its own online drug store that allows customers to order medication or prescription refills and have them delivered to their front door in a couple of days. And last year, it began offering its Amazon Care telemedicine programme to employers across the US.

News: Amazon strikes $3.5 bln deal for One Medical in long march into U.S. healthcare

Suncorp sells banking arm for $3.3bn

BY Richard Summerfield

Australia and New Zealand Banking Group (ANZ) has announced a $3.3bn deal to acquire the banking arm of insurer Suncorp Group.

Under the terms of the deal, ANZ will continue operating the Suncorp Bank brand for five years as it takes on an additional $47bn in home loans and $45bn in deposits.

The acquisition is subject to approval from the Australian Competition and Consumer Commission and the federal treasurer, Jim Chalmers. The deal is also subject to a minimum completion period of 12 months and to certain other conditions.

“This proposal has been assessed through the lens of creating value for shareholders and, just as importantly, to ensure there is alignment of purpose and values and positive outcomes for our people and customers,” said Christine McLoughlin, chairman of Suncorp. “Suncorp Group, which is the proud home of several of Australia and New Zealand’s leading and most trusted insurance brands including AAMI, GIO, Shannons, Apia and Vero, and of course the Suncorp brand, will continue to offer the same great service to Queenslanders.

“Both businesses will benefit from a singular focus on their growth strategies and investment requirements,” she continued. “We believe the agreed price fairly values the Bank and reflects the hard work of our people and progress made on delivering our strategic objectives. Our purpose of building futures and protecting what matters – the focus of our company for over 100 years – will remain at our core and enable our people to deliver on our vision to create the leading Trans-Tasman insurance company.”

“The acquisition of Suncorp Bank will be a cornerstone investment for ANZ and a vote of confidence in the future of Queensland,” said Shayne Elliott, chief executive of ANZ. “With much of the work to simplify and strengthen the bank completed, and our digital transformation well-progressed, we are now in a position to invest in and reshape our Australian business. This will result in a stronger more balanced bank for customers and shareholders.

“ANZ has licenced the Suncorp Bank brand for five to seven years and we are committed to maintaining its current branch footprint in Queensland for at least three years post completion,” he added. “This is a growth strategy for ANZ and we will continue to invest in Suncorp Bank and in Queensland for the benefit of all stakeholders.”

Going forward, Suncorp will continue to be led by its current chief executive Clive van Horen, and according to Mr Elliott there will not be any job losses at the company for at least the next three years. The company’s insurance operations in Australia and New Zealand were not included in the deal.

News: Australia's ANZ to buy Suncorp banking arm for $3.3 billion, boost mortgage business

European PE dealmaking strong in H1 2022, reveals new report

BY Fraser Tennant

European private equity (PE) dealmaking was strong through the first half of 2022, with record dry powder and the rise of private credit funds keeping the deal environment moving, according to a Pitchbook report published this week.

In its ‘European PE Breakdown’, Pitchbook reveals that despite an unpredictable macroeconomic and policy environment, and continued downside volatility, PE dealmaking across Europe continued to be resilient in the first half of 2022.

The report also makes clear that deal size, not deal count, was behind the record deal value seen in the first half of the year. Transactions got larger, with the median deal size accelerating to €47.6m. Deals sized greater than €2.5bn hiked nearly three times in deal value compared to H1 2021.

“Sponsors’ record dry powder levels and the rise of private credit funds has kept the deals environment moving, as the syndicated loan and high yield debt markets come under stress,” said Dominick Mondesir, senior analyst of EMEA private capital at Pitchbook. “Sponsors doubled down on their investment sweet spots, as they were able to take advantage of softer multiples.”

Key takeaways from the report include: (i) deal value totalled €463.5bn through 30 June, a year-over-year (YOY) increase of nearly 35 percent, driven primarily by a spike in deal sizes; (ii) take-private activity also increased over H1 2021, and with take-privates offering one of the best risk-reward plays for PE firms, they are expected to remain a major theme in 2022; (iii) exit volume remained flat, but cumulative exit value fell by 25 percent YoY as valuations dropped; and (iv) fund count is pacing toward its lowest total ever, with just 40 vehicles closed in H1, as limited partners struggle to keep up with general partners’ demand for capital.

However, despite these strong H1 figures, Pitchbook forecasts that the second half of the year may be a different story, with slowing growth, rising interest rates and the possibility of a recession potentially leading to a more pressurised dealmaking environment.

Mr Mondesir concluded: “In the second half of the year, we expect the dealmaking environment to experience rapidly declining consumer and business confidence, rising high yield credit spreads, falling GDP, accelerating inflation, and the expectation of further interest rate increases, which is likely to cause a recession underpinned by stagflation.”

Report: European PE Breakdown