Kroger agrees $25bn Albertsons acquisition

BY Richard Summerfield

US grocery firm The Kroger Co. has agreed to acquire Albertsons Companies, Inc. in a deal worth $25bn. The acquisition will create a grocery giant in the US.

Under the terms of the deal, Kroger will pay $34.10 for each Albertsons share, representing a premium of about 33 percent to the stock’s closing price last Wednesday, a day before media reports emerged of a deal between the two.

Kroger and Alberstons, already the number one and two standalone grocers in the US, will combine to create a firm with nearly 5000 stores across the country. The scale of the deal is likely to attract antitrust scrutiny, however, as federal regulators and critics express concern at the creation of a new supermarket mega power at a time of soaring food costs.

To tackle these concerns, the companies have already announced plans to divest some stores and Albertsons is prepared to spin off a standalone unit to its shareholders immediately before the deal’s close, which is expected in early 2024. The new public company is estimated to comprise of 375 stores.

Kroger said it expects to reinvest about half a billion dollars of cost savings from deal synergies to reduce prices for customers. An incremental $1.3bn will also be invested into Albertsons. Kroger will have to pay Albertsons $600m if the deal is terminated.

“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” said Rodney McMullen, chairman and chief executive of Kroger. “Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors.”

He continued: “As a combined entity, we will be better positioned to advance Kroger’s successful go-to-market strategy by providing an incredible seamless shopping experience, expanding Our Brands portfolio, and delivering personalized value and savings. We’ll also be able to further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network and grow our alternative profit businesses. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders.”

“We have been on a transformational journey to evolve Albertsons Cos. into a modern and efficient omnichannel food and drug retailer focused on building deep and lasting relationships with our customers and communities,” said Vivek Sankaran, chief executive of Albertsons. “I am proud of what our 290,000 associates have accomplished, delivering top-tier performance while furthering our purpose to bring people together around the joys of food and to inspire well-being. Today’s announcement is a testament to their success.”

Kroger is the largest supermarket operator in the US, with 420,000 employees and more than 2700 stores, including Ralphs, Harris Teeter, Fred Meyer, and King Soopers. Albertsons is the country’s second-largest supermarket company, with 290,000 employees and almost 2300 stores, including Safeway and Vons.

News: U.S. grocer Kroger carts away Albertsons for $25 billion but faces antitrust test

Vital Pharmaceuticals files for Chapter 11 protection

BY Richard Summerfield

Vital Pharmaceuticals (VPX) – the manufacturer behind the Bang Energy drinks brand – has filed for Chapter 11 bankruptcy protection in the Southern District of Florida, a move it claimed would allow it to reorganise and regain market share from domestic rivals.

VPX’s restructuring efforts are being supported by $100m of additional financing from the company’s syndicate lenders to help ensure operations continue uninterrupted during the restructuring process.

“We are excited about our future, and particularly the new distribution system that we have spent the better part of this year assembling,” said Jack Owoc, chief executive and founder of VPX. “Utilizing our new state-of-the-art decentralized direct store distribution (DSD) will allow Bang Energy to get back to our pre-Pepsi meteoric annual success of several hundred percent year over year growth.

“The primary objective of our new DSD network is to regain the massive market share we earned prior to Pepsi and continue to achieve double digit growth and progress vigorously beyond 20% market share in energy drinks,” he continued. “Bang Energy’s new DSD network will launch nationwide and be closer to 100% as it officially completes its exit from the Pepsi relationship this month. This will be a comprehensive transition with no impact to product availability.”

VPX has endured a difficult period of late. Recently, the company lost a lawsuit against Monster Beverage Corp. In September, the company was ordered to pay Monster nearly $293m for interfering with its rival’s dealings with retailers and falsely advertising the mental and physical benefits of Bang drinks. The filing brings Monster’s lawsuit against VPX to an immediate halt.

The brand was previously distributed by the carbonated soft drinks (CSD) giant PepsiCo, until a disagreement between the two companies ended with Mr Owoc claiming PepsiCo “engaged in a premeditated plan to destroy Bang from day one”. PepsiCo has since bought into another energy drinks company, Celsius Holdings.

Immediately prior to VPX switching to Pepsi in early 2020, Bang’s share of the energy drink market was roughly 9.7 percent. Under Pepsi’s distribution, roughly 3.4 percent of that market share was lost. At $200m per share point, that equates to $680 million in today’s energy drink market, according to a VPX statement. Bang Energy’s newly orchestrated and soon-to-launch direct DSD network currently covers nearly 95 percent of the US market.

In August, speculation was rife that another CSD company – Keurig Dr Pepper (KDP) – was in talks to buy the VPX, with a deal worth $2-3bn being suggested in the press. Mr Owoc later confirmed no deal was in the pipeline, adding he “would never sell Bang Energy” for that amount.

News: VPX Seeks Chapter 11 Protection as It Transitions to World Class Distribution Network

EIG buys Tokyo Gas’ Australian LNG portfolio for $2.15bn

BY Fraser Tennant

Marking the launch of a strategy to build a diversified, global integrated liquified natural gas (LNG) company, MidOcean Energy, a unit of private equity firm EIG, is to buy four Australian LNG projects from Tokyo Gas Co., Ltd in a transaction valued at $2.15bn.

The acquisition will see EIG acquire Tokyo Gas’ interests in Gorgon LNG, Ichthys LNG, Pluto LNG and Queensland Curtis LNG – integrated projects that span Australia’s western and eastern seaboard and are major suppliers of LNG to Asia.

The Tokyo Gas portfolio is expected to generate approximately 1 million tonnes per annum of LNG net to MidOcean, production that is underpinned by long-life reserves and a globally competitive cost structure.

The transaction is also in line with the Tokyo Gas Group’s Management Vision, ‘Compass 2030’, where Tokyo Gas continues to demonstrate leadership in the transition to net-zero CO2 emissions.

“Since 2003, our company has participated in five Australian LNG projects and expanded its business holdings in upstream LNG interests,” said Tokyo Gas in a statement. “Four of those projects, excluding the Darwin LNG project, will be transferred to MidOcean. “Under the Compass Action plan, our company will review its asset portfolio in order to allocate resources to growth areas.”

Tokyo Gas, Japan's biggest city gas supplier, did not disclose the terms of the transaction.

“The launch of MidOcean reflects our deep belief in LNG as a critical enabler of the energy transition and the growing importance of LNG as a geopolitically strategic energy resource,” said Blair Thomas, chairman and chief executive of EIG. “We believe this transaction provides MidOcean with a foundational portfolio of cost-advantaged integrated LNG assets in a low-risk jurisdiction, ideally positioned to supply key customers in Japan, Asia and across the globe for decades to come.”

During its 40-year history, EIG has committed over $41.5bn to the energy sector through over 387 projects or companies in 38 countries on six continents. EIG’s clients include many of the leading pension plans, insurance companies, endowments, foundations and sovereign wealth funds in the US, Asia and Europe.

The transaction is expected to close in the first half of 2023, subject to customary closing conditions, including Australian regulatory approvals.

De la Rey Venter, chief executive of MidOcean, concluded: “We see a number of opportunities to further expand MidOcean’s position in supplying LNG markets around the world and look forward to working with our new partners and customers.”

News: EIG unit to buy Tokyo Gas's stakes in Australian LNG projects for $2.15 billion

L3Harris acquires Viasat in $2bn deal

BY Fraser Tennant

In a deal it hopes will help it to compete with larger Pentagon suppliers, defence contractor L3Harris Technologies is to acquire satellite operator Viasat, Inc.’s tactical radio business – Tactical Data Links (TDL) – for approximately $1.96bn.

Under the terms of the definitive agreement, the cash acquisition will be funded with debt financing and includes a net present value of approximately $350m in tax benefits.

Also known as Link 16, Viasat’s TDL network is integrated on military aircraft, ground vehicles, surface vessels and operating bases, enabling warfighters across multiple domains to securely share voice and data communications. The TDL product line is comprised of 450 employees and generates approximately $400m in annual sales.

L3Harris will acquire the TDL product line from Viasat’s government systems segment, consisting of Link 16 Multifunctional Information Distribution System (MIDS) platforms and associated terminals, which are installed in more than 20,000 US and allied platforms across the globe.

“This acquisition is part of our strategic effort to ensure operators have access to the most advanced, multi-function joint all-domain command and control (JADC2) solutions available,” said Christopher E. Kubasik, chief executive and chair of L3Harris. “Viasat’s TDL product line naturally aligns with our proven communication capabilities, and we are excited to partner with our customers and coalition allies as we modernise the Link 16 enterprise.”

The acquisition of Viasat’s TDL product line, which includes its Link 16 space assets, allows L3Harris to expand resilient communication and networking capabilities to a larger user base, achieving broader end-to-end, sensor-to-shooter connectivity – from operators to platforms or weapons data links and beyond – across multiple domains.

“Viasat’s TDL team has made outstanding contributions to US and allied national security, as well as our company’s growth, through sustained innovation and impressive execution over several decades,” added Mark Dankberg, chair and chief executive of Viasat.

The transaction is expected to close in the first half of 2023, subject to required regulatory approvals and clearances and other customary closing conditions.

An agile global aerospace and defense technology innovator, delivering end-to-end solutions that meet customers’ mission-critical needs. L3Harris provides advanced defence and commercial technologies across space, air, land, sea and cyber domains. The company has more than $17bn in annual revenue and 47,000 employees, with customers in more than 100 countries.

Mr Dankberg concluded: “Viasat’s increasing focus on space networks, integrating TDL with L3Harris and its portfolio of C2 assets and resources, offers new forms of growth opportunities and our long-time strategic partnership on TDL products provides a solid foundation.”

News: Defense contractor L3Harris to buy Viasat's unit for nearly $2 bln

ECP agrees $1.41bn Biffa deal

BY Richard Summerfield

Private equity firm Energy Capital Partners (ECP) has agreed to acquire British waste management company Biffa Plc in a deal worth $1.41bn.

Under the terms of the deal, Biffa shareholders will receive 410p per share from ECP-controlled Bears Bidco. Including dividend payments, the offer is 28 percent higher than the FTSE 250 group’s closing price of 325p a share on the day before the June bid was announced, and values Biffa’s equity at about £1.3bn. In June, Biffa’s board said it was “minded to recommend” that shareholders accept the initial 445p offer, however the final deal is worth 7.9 percent less per share than the original offer.

“It is the Biffa Board’s view that this offer represents a compelling opportunity, particularly in a weakening economic environment, for shareholders to realise, in cash and with certainty, the potential for future value creation,” said Ken Lever, chair of Biffa. However, he conceded that the offer was “lower than the proposal previously announced”.

Mr Lever added: “Since IPO in October 2016, the successful pursuit of our growth strategy has seen Biffa expand its leadership position in its I&C collections business and oversee a significant investment programme across UK green economy infrastructure, strengthening its capabilities as one of the leading sustainable waste managers in the UK. ECP is an experienced investor in environmental infrastructure and sustainability assets and offers a supportive environment to accelerate the Group’s further development and growth as a leading enabler of the circular economy.”

“ECP is excited to begin this long-term partnership with Biffa and its extremely talented employees and leadership,” said Andrew Gilbert, partner of ECP. “We intend for Biffa to remain focused on providing the high level of service to which its customers have become accustomed and look forward to supporting Biffa’s strategic initiatives, development, growth and industry leadership.”

ECP is a frequent investor in energy transition, electrification and decarbonisation infrastructure assets that are focussed on sustainability. Founded in 2005, ECP is a global investment firm with more than $26bn in capital commitments from more than 600 limited partners and a portfolio of more than 20 operating equity portfolio companies.

Biffa is one of the UK leaders in sustainable waste management with a significant investment programme across UK green economy infrastructure. The company has a history of private ownership. Biffa was acquired by Severn Trent in 1991 and floated in 2006. Two years later, the company was taken private again by a group of PE investors, before rejoining the London stock market in 2016.

News: UK waste firm Biffa agrees to Energy Capital Partners' $1.41 billion buyout deal