Global M&A activity to resurge in 2023, claims new report

BY Fraser Tennant

A stronger period for private equity (PE) and M&A deal activity is on the horizon following months of macroeconomic turmoil, according to a new report by BMS.

In its ‘Private Equity, M&A and Tax 2023’ report, which provides a comprehensive analysis of trends in the European, North American and Asian M&A markets, BMS suggests that while deal volumes have fallen compared to the high levels achieved in 2021 and early 2022, activity will bounce back toward the latter half of 2023,  

This optimism comes despite an M&A landscape impacted by various macro developments, including the coronavirus (COVID-19) pandemic, war in Ukraine, concerns around recession, higher interest rates to curb inflation and risks associated with the recent banking crisis.

“2023 has gotten off to a subdued start compared the deal activity levels seen over the past two years,” said Tan Pawar, head of private equity and M&A at BMS. “However, momentum is growing, and we have not seen a decrease in enquiries from companies eager to obtain M&A insurance.”

Among a number of key findings, the BMS report found that: (i) a growing appetite remains in the M&A insurance market, with a 40 percent growth in insurance products purchased over the past 24 months; (ii) there has been an uptick in claims from policies underwritten during the pre-2022 M&A boom, resulting in reinsurers looking to manage risk to a much greater degree; (iii) although European M&A activity tailed off in the latter half of 2022, the tax insurance market saw a record number of enquiries; and (iv) the secondaries market remained active in 2022, with total transaction volume exceeding $100bn for the second year running.

The report also suggests that against the backdrop of an increasingly challenging macroeconomic environment and a  potential global recession in 2023, distressed sales could increase.  

Mr Pawar concluded: “With market conditions expected to stabilise, we should see a resurgence in deal activity by the end of the second quarter and into the second half of 2023.”

Report: Private Equity, M&A and Tax 2023

Enel sells Peruvian assets to CSGI in $2.9bn deal

BY Fraser Tennant

In a deal valued at $2.9bn, Italian multinational manufacturer and distributor of electricity and gas Enel Group is to sell its equity stakes in two Peruvian assets to power grid company China Southern Power Grid International (CSGI).

Under the terms of the agreement, CSGI will acquire Enel Perú’s equity stakes in Enel Distribución Perú S.A.A. (equal to around 83.15 percent of the share capital) and Enel X Perú S.A.C. (equal to 100 percent of the share capital).

The overall transaction is expected to generate a reduction of Enel Group’s consolidated net debt of approximately €3.1bn in 2023 and a positive impact for 2023 on reported group net income amounting to approximately €500m.

The transaction is in line with the group’s current strategic plan, which envisages the completion of group repositioning on six core countries, namely Italy, Spain, the US, Brazil, Chile and Colombia, in order to enhance value creation.

“With this transaction, we are able to maximise the value of the investments carried out so far in grid digitalisation and advanced energy services in Peru,” said Francesco Starace, group chief executive and general manager of Enel Group. “It is thanks to the expertise and dedication of colleagues that we leave buyers with an excellent set of assets, which will continue to drive the sustainable development of the country through automated digital networks and innovative energy solutions.”

The closing of the sale is subject to certain conditions precedent customary for these kinds of transactions, including clearance from the competent antitrust authority in Peru and approvals of competent Chinese authorities for outbound direct investments (ODI).

A leading energy player in Peru since 2007, the Enel Group operates in power distribution and supply with around 1.5 million end users in northern Lima. The group in Peru also operates in the generation business, with more than 2GW of installed capacity, nearly half of which from renewables, in the distributed generation and energy efficiency segments and in the e-mobility segment.

Mr Starace concluded: “We continue to implement the asset disposal plan announced to the markets during the presentation of Enel’s strategic plan last November and aimed at finalising the Group’s streamlining process that has always been a cornerstone of our strategy.”

News: Enel agrees to sell two Peruvian assets to China's CSGI for $2.9 bln

Cineworld files bankruptcy exit plan

BY Richard Summerfield

Cineworld, the London-listed cinema chain, which filed for bankruptcy protection in the US in autumn 2022, has filed a reorganisation plan with a Texas bankruptcy court which will effectively wipe out its existing shareholdings.

The filing with the US Bankruptcy Court for the Southern District of Texas, Houston Division formalises a deal that was first outlined on 3 April, which intends to cut the company’s debt by about $4.53bn and raise $2.26bn in funds to emerge from bankruptcy. The plan does not provide for any recovery for its existing shareholders, the group said.

Cineworld is “seeking to confirm the plan on an expeditious timeline” and reiterated its expectation that it can emerge from the Chapter 11 bankruptcy strictures “during the first half of 2023”. The plan is subject to court approval and Cineworld acknowledges that court approval depends on certain creditor approvals.

“This agreement with our lenders represents a ‘vote-of-confidence’ in our business and significantly advances Cineworld towards achieving its long-term strategy in a changing entertainment environment,” said Mooky Greidinger, chief executive of Cineworld. “With a growing slate of blockbusters and audiences returning to cinemas in increasing numbers, Cineworld is poised to continue offering moviegoers the most immersive cinema experiences and maintain its position as the ‘Best Place to Watch a Movie’.”

In a filing, Cineworld said that its proposal to the court is supported by lenders holding and controlling approximately 83 percent of the group’s term loans due 2025 and 2026 and revolving credit facility due 2023, and approximately 69 percent of the debtors’ outstanding indebtedness under the debtor-in-possession financing facility previously agreed with the court.

Cineworld last week dropped plans to sell its businesses in the US, the UK and Ireland after failing to attract a suitable buyer. The company is seeking to continue to operate its global business and cinemas as usual without interruption. However, the company will “continue to consider the proposals that were received in respect of its ‘rest of the world’ business”.

Cineworld, the second largest cinema operator in the world, also operates the Regal, Cinema City, Picturehouse and Planet cinema brands.

News: Cineworld Expects Exit From Chapter 11 in Next Three Months, Files Formal Reorganization Plan

Virgin Orbit comes back down to earth

BY Richard Summerfield

Virgin Orbit Holdings, Inc. and its US subsidiaries, has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court in the District of Delaware. The company, which is 75 percent owned by Virgin Group, has filed for bankruptcy in order to seek a sale of its assets.

Virgin Investments, one of Virgin Orbit’s sister companies, will inject $31.6m into the satellite launcher to help it stay afloat while the business searches for a new owner. Virgin Orbit said it planned to pay its suppliers and vendors “to the fullest extent possible” and was committed to working with customers to try to find a buyer “able to continue to fulfil their needs”.

“The team at Virgin Orbit has developed and brought into operation a new and innovative method of launching satellites into orbit, introducing new technology and managing great challenges and great risks along the way as we proved the system and performed several successful space flights – including successfully launching 33 satellites into their precise orbit,” said Dan Hart, chief executive of Virgin Orbit. “While we have taken great efforts to address our financial position and secure additional financing, we ultimately must do what is best for the business. We believe that the cutting-edge launch technology that this team has created will have wide appeal to buyers as we continue in the process to sell the Company. At this stage, we believe that the Chapter 11 process represents the best path forward to identify and finalize an efficient and value-maximizing sale.

“I’m incredibly grateful and proud of every one of our teammates, both for the pioneering spirit of innovation they’ve embodied and for their patience and professionalism as we’ve managed through this difficult time,” he continued. “Today my thoughts and concerns are with the many talented teammates and friends now finding their way forward who have been committed to the mission and promise of all that Virgin Orbit represents. I am confident of what we have built and hopeful to achieve a transaction that positions our Company and our technology for future opportunities and missions.”

In late March, the company announced it was laying off 85 percent of its 750 staff and ceasing operations for the foreseeable future as it was unable to raise sufficient out-of-court capital to continue operating its business. The company aborted the UK’s first satellite launch from Cornwall in January, blaming an “anomaly”.

News: Virgin Orbit: Richard Branson's rocket firm files for bankruptcy

Sartorius acquires Polyplus in €2.4bn deal

BY Fraser Tennant

In a deal designed to strengthen its activities supplying cell and gene therapy companies, life science group Sartorius is to acquire French drugmaker Polyplus from private investors for approximately €2.4bn.

To finance the acquisition, Sartorius will receive a bridge loan facility from JP Morgan for a transitional period. Sartorius intends to refinance this loan with long-term financing instruments which might also include an equity component.

Founded in 2001 and based in Strasbourg, France, Polyplus has locations in France, Belgium, the US and China. The company has been expanding its focus beyond transfection reagents through acquisitions in adjacent technologies like plasmid design, and protein and plasmid manufacturing, broadening its upstream portfolio for gene therapies as well as gene-modified cell therapies.

“The innovative solutions of Polyplus are highly complementary to our portfolio, in particular to our offering of cell culture media and critical components for the development and manufacture of advanced therapies,” said René Fáber, member of the executive board and head of the bioprocess solutions division at Sartorius. “There are also strong synergies with our portfolio of downstream solutions for the manufacture of gene therapeutics.”

The combination of Sartorius’ and Polyplus’ portfolios creates a unique ability to optimise the total process workflow to deliver unparalleled value for cell and gene therapy customers, in an effort to make these critical therapies more affordable.

“This acquisition is a major milestone in the history of Polyplus, and a recognition of its innovative upstream market leadership position and our highly talented Polyplus teams around the world,” said Mario Philips, chief executive of Polyplus. “We would be excited to join forces with a world class bioprocess market leader as Sartorius.”

The transaction – which is expected to close during the third quarter of 2023 – is subject to customary conditions, including completion of the information and consultation of the works’ council and approval by regulatory authorities.

Mr Faber concluded: “As a leading supplier of critical components to produce cell and gene therapies, Sartorius and Polyplus together will be excellently positioned to play a significant role in the dynamic field of cell and gene therapy.”

News: Sartorius to buy Polyplus for 2.4 bln euros