Mallinckrodt files for Chapter 11 bankruptcy protection

BY Richard Summerfield

Specialist pharmaceutical company Mallinckrodt plc, including several of its subsidiaries, has filed for voluntary prepackaged Chapter 11 proceedings in the US Bankruptcy Court for the District of Delaware.

The filing, Mallinckrodt’s second bankruptcy proceeding in three years, will see the company cut $1bn from what it owes to victims of the US opioid crisis. The company’s restructuring plan will hand ownership to its lenders in exchange for a $1.9bn reduction in debt and would wipe out existing equity shares.

The company originally filed for Chapter 11 in 2020 to address its high debt load, litigation over its marketing of highly addictive generic opioids and disputes over its drug pricing. Its original restructuring plan saw the company, which denied any wrongdoing, agree to pay $1.7bn to settle around 3000 lawsuits alleging it used deceptive marketing tactics to boost opioid sales.

However, declining sales for its key branded drugs, including its most valuable drug, Acthar Gel, left Mallinckrodt unable to manage scheduled payments. In June, the company missed a $200m payment, a move which began negotiations around a second bankruptcy filing. To date, Mallinckrodt has only made one payment of $450m under the original agreement.

The company expects to exit its latest bankruptcy in the fourth quarter of 2023 with the support of its key stakeholders. If the court approves the restructuring, Mallinckrodt will have more than $450m in available liquidity, including $250m in new credit and its existing cash.

The plan, if it wins approval, will cancel the majority of the $1.25bn that Mallinckrodt still owes under the original settlement agreement, in exchange for a final payment of $250m.

“We are moving forward with the anticipated next steps for our financial restructuring plan and appreciate the significant support of our key stakeholders to reach this milestone,” said Siggi Olafsson, president and chief executive of Mallinckrodt. “Implementing this agreement will meaningfully enhance Mallinckrodt’s financial foundation and better position the business for the future. We expect to complete this process on an expedited basis and emerge as a stronger organization that will continue to help improve outcomes for patients with severe and critical conditions.

“I would like to thank the Mallinckrodt team for their resilience and dedication to our company’s mission. We also thank our customers, vendors, suppliers and other partners for their ongoing support as we work together to meet our patients’ needs. As we move forward, we are continuing to deliver the important therapies that patients depend on us to provide,” he added.

News: Mallinckrodt Goes Bankrupt Amid Debt-Cut Plan, Opioid Deal

Asterion acquires Steag in €2.6bn deal

BY Fraser Tennant

In a race which saw it outbid Czech billionaire Daniel Kretinsky, Spanish investment management firm Asterion Industrial Partners is to acquire German energy utility Steag in a transaction that values the business at €2.6bn.

Mr Kretinsky, who built his wealth in the energy industry, has recently embarked on an acquisition spree in Europe, attempting to buy Steag through his energy holding company EPH.

As well as developing Steag into a sustainable energy utility, the acquisition represents further growth of Asterion’s European energy presence into Germany beyond its existing footprint in Spain, France, Italy and the UK.

“Our firm is fully committed to the energy and heat transition,” said Jesús Olmos, chief executive of Asterion. “Steag is very well positioned to be a very relevant player in Germany and Europe in this process toward cleaner, more competitive and reliable energies such as solar and wind power, while offering an interesting energy mix that is also supported by coal and gas to guarantee the viability of this transition.”

For more than 85 years, Steag has stood for efficient and safe power generation both nationally and internationally, operating six coal power plants in western Germany. “It also has a team of experienced management and skilled employees with technical expertise in wind, solar, and district heating,” added Mr Olmos. “Its energy sites have excellent infrastructure and are optimally connected to the German energy grid.”

The transaction is expected to be completed by the close of 2023, subject to customary conditions and regulatory approvals.

“The sale decision is groundbreaking for the future of the group and its two divisions,” said Andreas Reichel, labour director and chairman of the management board of Steag. “After all, this decision provides greater economic room for manoeuvre for upcoming investments in the future and also helps to secure existing jobs in the long term. The best possible solution has thus been found for all parties involved, including our employees.”

Mr Olmos concluded: “With the experience of Asterion’s team in managing companies in green transformation, we are excited to work together to deliver on Steag’s decarbonisation plans and create new, green jobs.”

News: Spain's Asterion buys German utility Steag for $2.8 billion

PE landscape resilient and adaptable in H1 2023, reveals CVCA

BY Fraser Tennant

The Canadian private equity (PE) landscape continues to navigate market dynamics with resilience and adaptability, according to a new report by the Canadian Venture Capital and Private Equity Association (CVCA).

In its ‘H1 2023 Canadian Private Equity Market Overview’, the CVCA reveals that C$1.6bn was raised across 161 deals in Q2 – a 4 percent increase in deal volume compared to Q1 2023.

Moreover, despite a 19 percent decline in disbursed capital, the PE industry has maintained a strategic focus on smaller investments and sectors aligned with sustainable growth. The average deal size declined by 22 percent to C$10m, reflecting the industry’s preference for smaller investments.

“The Canadian PE sector’s approach to investment and focus on sustainable growth strategies reflect a resilient response to market dynamics,” said Kim Furlong, chief executive of the CVCA. ​“Investors have shown cautious optimism, remaining committed to the mid-market and choosing sectors with longer-term potential, such as information and communications technology (ICT) and cleantech.”

Sector-wise, ICT claimed the top spot with C$936m invested across 64 deals, contributing to 26 percent of total investment value. The cleantech sector continues to shine, surpassing previous years’ performance with C$885m invested across 16 deals, underscoring the growing focus on climate issues and solutions.

As far as buyout and add-on investment activity is concerned, the industry experienced a decline, with C$435m raised from 47 deals in Q2, reflecting a 50 percent reduction in deal value. However, despite the challenges posed by rising interest rates, investors remain committed to smaller deals that align with their strategies.

In terms of the exit landscape, there were 46 exits totalling C$139m in H1 2023. M&A transactions accounted for 80 percent of exits, while exits via a secondary buyout represented the remaining 20 percent.

“Canada’s PE landscape remains strong in the mid-market,” concludes Ms Furlong. “Opportunities to assist on succession planning and the growth of small and medium sized companies continue to dominate.”

Report: H1 2023 Canadian Private Equity Market Overview

Earthstone Energy sold for $4.5bn

BY Richard Summerfield

In an all-stock transaction valued at around $4.5bn, including debt, Permian Resources has agreed to acquire Earthstone Energy.

The deal consists of 1.446 shares of Permian Resources common stock for each share of Earthstone common stock, giving it a per share value of $18.64 and a premium of 14.8 percent based on Earthstone’s close on Friday, the last day of trading before the deal was announced.

The deal has been unanimously approved by the boards of directors of both Permian Resources and Earthstone and is expected to close by the end of 2023, subject to customary closing conditions, regulatory approvals and shareholder approvals.

Once the transaction is complete, Permian Resources’ board of directors will be expanded to consist of 11 directors, including the addition of two representatives from Earthstone. Permian Resources’ executive management team will lead the combined company with the headquarters remaining in Midland, Texas. Permian Resources shareholders will own approximately 73 percent of the combined company and existing Earthstone shareholders will own approximately 27 percent.

“We believe the acquisition of Earthstone represents a compelling value proposition for our shareholders and strengthens our position as a premier Delaware Basin independent E&P,” said Will Hickey, co-chief executive of Permian Resources. “Earthstone’s Northern Delaware position brings high-quality acreage with core inventory that immediately competes for capital within our portfolio. Additionally, we have identified numerous ways to leverage our deep Delaware Basin experience and incremental scale to improve upon these assets across the board, including approximately $175 million of annual synergies. Permian Resources has a proven integration track record, and we believe the successful execution of these cost savings will create incremental value for both Permian Resources and Earthstone stakeholders.”

“We are very pleased to announce this transaction with Permian Resources and believe the combination of the two companies’ top-tier assets and history of success will create an even stronger large-cap E&P company which is uniquely positioned to drive profitable growth and development in the world-class Permian Basin,” said Robert Anderson, president and chief executive of Earthstone. “We believe this all-stock transaction provides Earthstone’s shareholders with excellent value for their investment now and in the future. In less than three years, we have grown Earthstone from a small-cap E&P company producing approximately 15,000 Boe per day to one with a production base of over 130,000 Boe per day, delivering significant value enhancement for shareholders along the way. Our success directly reflects our outstanding employees’ dedication, hard work and perseverance. I personally thank each and every one of our employees. I could not be prouder of the Earthstone team and the company we have built together.”

“As significant owners of the business, our primary goal is to drive value for our investors, and the Earthstone transaction is another example of value creation for shareholders,” said James Walter, co-chief executive of Permian Resources. “We expect the transaction to be accretive across all key financial metrics before synergies and significantly accretive including synergies, both over the short and long-term. After evaluating over $20 billion of potential transactions during the past twelve months, we firmly believe the acquisition of Earthstone represented the best transaction for Permian Resources. It checks all the boxes, enhancing shareholder value while improving upon an already best-in-class company.”

Looking forward, Permian has identified $30m of annual general and administrative savings. The combined company is also expected to benefit from a lower overall cost of capital, leading to potential financial synergies of $30m annually.

News: Permian Resources to buy Earthstone Energy in $4.5 bln deal

Intel and Tower terminate $5.4bn deal

BY Richard Summerfield

Intel Corporation and Tower Semiconductor have announced the mutual termination of the previously announced $5.4bn deal which would have seen Intel acquire Tower. The termination is due to the companies’ inability to obtain the regulatory approvals required under the terms of the deal.

As per the terms of the previously agreed deal, Intel will now be required to pay a termination fee of $353m to Tower.

Intel announced its intentions to buy Tower – a contract chipmaker that manufactures semiconductors for other companies – in February 2022 for $5.4bn. However, the company was unable to secure approval for the deal from the Chinese antitrust authorities before the deadline passed. The deadline for the deal was midnight California time on 15 August.

“Tower was very excited to join Intel to enable Pat Gelsinger’s vision for Intel’s foundry business,” said Russell Ellwanger, chief executive of Tower. “We appreciate the efforts by all parties. During the past 18 months, we’ve made significant technological, operational, and business advancements. We are well positioned to continue to drive our strategic priorities and short-, mid- and long-term tactics with a continued focus on top and bottom-line growth.”

“Our foundry efforts are critical to unlocking the full potential of IDM 2.0, and we continue to drive forward on all facets of our strategy,” said Pat Gelsinger, chief executive of Intel. “We are executing well on our roadmap to regain transistor performance and power performance leadership by 2025, building momentum with customers and the broader ecosystem and investing to deliver the geographically diverse and resilient manufacturing footprint the world needs. Our respect for Tower has only grown through this process, and we will continue to look for opportunities to work together in the future.”

“Since its launch in 2021, Intel Foundry Services has gained traction with customers and partners, and we have made significant advancements toward our goal of becoming the second-largest global external foundry by the end of the decade,” said Stuart Pann, senior vice president and general manager of Intel Foundry Services. “We are building a differentiated customer value proposition as the world’s first open system foundry, with the technology portfolio and manufacturing expertise that includes packaging, chiplet standards and software, going beyond traditional wafer manufacturing.”​

Intel’s acquisition of Tower was a move designed to bolster its own contract chip-making business with enhanced manufacturing capacity and intellectual property, while also giving it a wider global reach. And while there was a possibility that the deal could have been completed without Chinese approval, since China represents a major part of Intel’s business and strategy, regulatory approval in China was deemed essential. The deal was approved by antitrust bodies in the US and Europe, however it ran into significant delays and obstacles in China, which is indicative of the challenges faced by US companies with ties to China in the current geopolitical climate. It is becoming increasingly difficult for companies to conduct business amid tensions between the two countries.

News: Intel scraps $5.4 bln Tower deal after China review delay