Air Methods emerges from bankruptcy protection

BY Richard Summerfield

Private equity-owned medical helicopter company Air Methods has successfully emerged from Chapter 11 bankruptcy protection with significantly reduced debt and increased liquidity.

The company, headquartered in Englewood, Colorado, was acquired by private equity firm American Securities in 2017. It filed for bankruptcy in late October 2023 with around $2.24bn in debt. Air Methods’ creditors were demanding around $1.3bn in payments, of which the company could only cover around 15 percent.

“Today marks an important inflection point for Air Methods in our transformation journey as we enter our next stage focused on investing in the business and executing on our growth initiatives for the benefit of our healthcare partners, communities, customers, and patients,” said JaeLynn Williams, chief executive of Air Methods. “With a stronger balance sheet and additional financial resources, we remain focused on serving our contractual partners, opening new greenfield bases, optimizing our field operations, expanding our frontline team, and going in-network with commercial insurers. We are well-positioned for long-term success and excited about the opportunities ahead.”

As part of the restructuring process, ownership of the business transitioned to the company’s lenders and noteholders upon emergence, as contemplated by the pre-packaged plan of reorganisation. Some of the new owners are investing approximately $185m of new capital. Air Methods will continue to provide services through its fleet of 365 medical helicopters and fixed-wing aircraft, operating from 275 bases and serving 47 states across the US.

The company aimed to complete its debt restructuring by the end of 2023, according to its court filings, and announced the successful completion its financial restructuring on 28 December. The restructuring saw the company cut around $1.7bn of its debt. In its filing, the company said its business had suffered due to high operating costs, rising interest rates and the enforcement of the US No Surprises Act, which banned surprise bills for out-of-network medical care and made it more difficult for the company to collect payment for services rendered.

Founded in 1980 to provide air transport for patients and urgent supplies, Air Methods’ troubles began after it was taken private by American Securities. Its finances were first sapped by having to increase salaries to attract and keep skilled employees.

News: Air Methods exits bankruptcy with $1.7 billion less debt

Nippon Steel Corporation acquires US Steel in $14.1bn deal

BY Fraser Tennant

In a deal that creates the world’s second-biggest steel producer, Japan’s largest steelmaker Nippon Steel Corporation (NSC) is to acquire United States Steel Corporation for approximately $14.1bn.

Under the terms of the definitive agreement, NSC will acquire US Steel for $55 per share in an all-cash transaction representing 40 percent premium, providing certain and immediate value to US Steel shareholders.

The transaction will further diversify NSC’s global footprint by significantly expanding its current production in the US, adding to its primary geographies of Japan, Association of Southeast Asian Nations (ASEAN) and India.

As a result of the acquisition, it is expected that NSC’s total annual crude steel capacity will reach 86 million tonnes – accelerating progress toward its strategic goal of 100 million tonnes of global crude steel capacity annually.

“This transaction brings together two companies with world-leading technologies and manufacturing capabilities,” said Eiji Hashimoto, president of NSC. “It also demonstrates our mission to serve customers worldwide, as well as our commitment to building a more environmentally friendly society through the decarbonisation of steel.”

The transaction has been unanimously approved by the board of directors of both NSC and US Steel.

“NSC has a proven track record of acquiring, operating and investing in steel mill facilities globally,” said David B. Burritt, president and chief executive of US Steel. “The transaction also benefits the US – ensuring a competitive, domestic steel industry, while strengthening our presence globally.”

The transaction is expected to close in the second or third quarter of 2024, subject to approval by US Steel’s shareholders, receipt of customary regulatory approvals and other customary closing conditions.

Mr Hashimoto concluded: “NSC has long admired US Steel with deep respect for its advanced technologies, rich history and talented workforce and we believe we can jointly take on the challenge of raising our aspirations to even greater heights.”

News: Japan's Nippon Steel to acquire U.S. Steel for $14.9 billion

Steady start for M&A in Q1 2024, forecasts new report

BY Fraser Tennant

Global M&A in Q1 2024 will see an uptick in activity with acquisitions in the technology, media and telecommunications (TMT), consumer, healthcare and energy sectors set to rise, according to a new report by Datasite.

In the ‘Datasite Forecaster Special Report: The Year of the Buy-Side’, the virtual data room provider suggests that while tighter financing costs, a volatile market and the long-term impact of the coronavirus (COVID-19) pandemic have curbed M&A deal activity in 2023, there will be opportunities in 2024.

According to the report: (i) buyers are taking advantage of softening market conditions and lowered seller expectations to pursue one-on-one acquisitions with vigour; (ii) with sell-side M&A finally cooling in the real estate and industrials industries, acquirers are scouring the landscape for pickups; and (iii) more advisers are being hired for one-on-one acquisitions as buyers decide to take no chances during this rare window of opportunity.

“Fewer sell-side auction processes in top industries this year have opened the door to more one on one deals,” said Merlin Piscitelli, chief revenue officer for Europe, Middle East and Africa (EMEA) at Datasite. “Buyers are taking full advantage, scouring the real estate, industrials, TMT, and consumer industries for pickups.

“The exception to this is energy & power, which is seeing a resurgence on both sides of the M&A equation,” he continued. “Meanwhile, life science and healthcare M&A continues to slowly recover from its COVID-19 induced feeding frenzy.”

The report also suggests that artificial intelligence (AI)-powered technologies will continue to impact not only the kinds of deals being done but also how deals are managed.

“From its ability to streamline several aspects of dealmaking, including powering data analysis and automating repetitive tasks, the momentum behind AI is set to grow,” added Mr Piscitelli. “In fact, in a recent Datasite survey, 42 percent of global dealmakers said productivity was the biggest benefit of using generative AI in their business and most expect that AI will help speed up deals by 50 percent.”

Another sign, according to Datasite, of a steady start to M&A activity in Q1 2024 is the willingness of acquirers to bring in financial advisers – buy-side deals being one-on-one acquisitions in which advisers have traditionally played a smaller role.

Mr Piscitelli concluded: “For years, strategic buyers have struggled to acquire in a market rife with private equity competition and inflated valuations. Without knowing how long their window of opportunity will last, buyers are leaving nothing on the table.”

Report: Datasite Forecaster Special Report: The Year of the Buy-Side

Macy’s receives $5.8bn takeover bid

BY Richard Summerfield

US department store Macy’s has received a $5.8bn takeover bid from an investor group consisting of Arkhouse Management and Brigade Capital Management.

Arkhouse, a real-estate focused investing firm, and Brigade, a global asset manager, submitted a proposal to acquire the Macy’s stock they do not already own for $21 a share on 1 December, a premium of 20.76 percent premium from its closing at $17.39 on Friday 8 December. Both investors own a stake in Macy’s through Arkhouse-managed funds.

The 165-year-old Macy’s operates almost 500 stores across the US under its own brand as well as Bloomingdale’s (a more upscale chain with 30-plus locations) and beauty retailer Blue Mercury.

The potential deal, first reported by The Wall Street Journal, would see Arkhouse and Brigade take control of Macy’s in an increasingly troubled sector. The US department store space has struggled in recent years, with JCPenney, Neiman Marcus and Lord & Taylor all declaring bankruptcy in 2020. Department stores have been confronting a broader shift in consumer habits as shoppers gravitate toward specialty retailers and online shopping.

Macy’s reported $1.2bn in profit on $24.4bn in revenue in the last fiscal year, down from $1.4bn in earnings on $24.5bn in revenue in 2021. In 2020, Macy’s announced the closure of 125 stores in a bid to exit weaker shopping malls and focus on smaller-format stores in strip malls. The company also announced it was cutting 2000 jobs at its headquarters in Cincinnati and offices in San Francisco.

The company is also experiencing some upheaval in the boardroom, after it was announced that Jeff Gennette, the chief executive who has spearheaded the company’s turnaround efforts, will be succeeded by Tony Spring, who now runs Bloomingdale’s. Mr Gennette will be retiring in February.

At present, Macy’s has a market capitalisation of about $4.77bn and its shares are down nearly 15.79 percent this year.

Despite the uncertainty surrounding Macy’s, the company surpassed analysts’ estimates for quarterly profit on lower inventories and strong demand for beauty products in November, signalling that attempts to trim inventory from 2022 highs were finally working ahead of the crucial Christmas shopping season.

Arkhouse and Brigade may be motivated to take control of Macy’s in order to acquire the company’s valuable real estate portfolio. According to JP Morgan, Macy’s total real estate value is estimated to be around $8.5bn, or $31 per share, including the iconic Herald Square property worth around $3bn.

News: Macy’s offered $5.8bn buyout that could take it off stock market

PE and VC-backed firms see rapid European growth, reveals new report

BY Fraser Tennant

European private equity (PE)- and venture capital (VC)-backed companies are growing rapidly and significantly outperforming privately owned firms, according to a new report by Gain.pro.

In its 2023 ‘Finding Growth in Europe: A Private Equity Perspective’, it is revealed that over the past decade, PE- and VC-backed companies achieved growth rates of 10 to 12 percent – double that of privately owned companies at 5 percent.

Among the key takeaways from the report, PE- and VC-backed companies are more active in buy-and-build than their privately-owned counterparts. An active buy-and-build strategy is applied by 28 percent of PE- and VC-backed companies, meaning they acquire at least one company per year. This compares to only 12 percent for privately owned companies.

In terms of organic growth rates, the report notes that the technology, media and telecommunications (TMT) sector is performing best, showing an average organic growth rate of 8 to 10 percent. TMT is followed by the financial services and science & health sectors. The report also showcases that there are plenty of growth opportunities in the lower-growth industrials, materials & energy and consumer sectors.

“With high-interest rates here to stay, growth is only going to get tougher,” said Sid Jain, head of insights at Gain.pro. “But what we see in the data is that PE-held businesses continue to demonstrate resilience. It is clear that even in today’s lacklustre macro-environment, investors can expect significant opportunities within the European PE landscape.”

According to the report, European investors need to be more vigilant to find growth opportunities, seeking out multiple arbitrage opportunities that do not rely on overall market multiples, but more on buy-and-build and operational improvements.

Mr Jain concluded: “The next decade will be challenging for PE investors, but those who work hard and use smart data-driven sourcing strategies will be well-positioned to succeed.”

Report: Finding Growth in Europe: A Private Equity Perspective: 2023 Edition