April 08, 2024 | Materials | Europe | Active
DS Smith / Mondi : Deal Insight
On 26-Mar-24, International Paper (IP US) proposed to acquire its British rival, DS Smith, with the aim of competing with an earlier proposal from Mondi. IP has proposed exchanging 0.1285 of its shares for each DS Smith share, initially resulting in an offer value of 415p per share, implying a 47.7% premium to DS Smith’s closing price on 7-Feb-24, which was the target’s last undisturbed date. Under the proposed terms, DS Smith shareholders would own 33.8% of the combined group, with IP shareholders holding the remaining 66.2%. IP, headquartered in Tennessee, indicated that discussions with DS Smith are ongoing, but emphasised the standard caveat that “there can be no certainty that any offer will ultimately be made.” Under UK takeover law, a put-up-or-shut-up (“PUSU”) date has been established for 23-Apr-24, by which IP must either submit a formal offer or declare its intention not to do so. DS Smith’s board has confirmed that it “acknowledges the strategic merits and potential for value creation through a combination with International Paper”, while also noting that discussions with Mondi are continuing. DS Smith had confirmed media speculation regarding discussions with Mondi on 8-Feb-24, after which UK-based Mondi stated that “it is in the early stages of considering a possible all-share combination.” With Mondi facing a PUSU deadline of 7-Mar-24 (subsequently extended twice, to 4-Apr-24, and now, to 23-Apr-24), Mondi and DS Smith jointly disclosed that they had reached an “agreement in principle” on the key financial terms of a potential all-share offer. Under this agreement, Mondi shareholders would hold 54% of the combined entity, while DS Smith shareholders would retain the remaining 46%. Although the DS Smith / Mondi merger ...
March 22, 2024 | Energy | Europe | Active
Encavis / KKR-led Consortium : Deal Insight
Power and energy producer Encavis has agreed to be acquired by US private equity firm KKR in a €2.8bn voluntary public takeover under German law. Viessmann (private), a German, family-owned heating and refrigeration manufacturing company, will join KKR as a “significant minority” co-investor. KKR is offering €17.50 per share, representing a 54.2% takeover premium to Encavis’s undisturbed price on 5-Mar-24, before the company announced it was in discussions with KKR. Encavis’ management and supervisory boards have approved the transaction and intend to recommend shareholders to accept the offer, pending their review of the offer document. Their support will be conveyed through a joint reasoned statement, expected to be published after the offer document is dispatched. There is a 54.285% minimum acceptance condition, a threshold established to ensure that at least 50% is secured after factoring in potential conversions by convertible bondholders. Encavis anticipates that only a few convertible holders will exercise their conversion rights since the adjusted conversion price is worth over €18.00, surpassing the €17.50 offer consideration. KKR has separately secured binding agreements from multiple Encavis shareholders who collectively hold nearly 31% of Encavis. These have been named as Abacon Capital and several unidentified existing shareholders, and they have expressly offered to support the offer and are expected to remain as “indirect long-term investors” in Encavis. According to the M&A release, of the 31% of support, approximately 13% will be rolled over, while the remaining 18% will be sold to KKR. Otherwise, completion is subject to foreign investment clearances and antitrust approvals. The announcement did not ...
March 15, 2024 | Industrials | Asia | Active
Alumina / Alcoa : Deal Insight
Following the announcement on 26-Feb-24 that disclosed the initiation of a transaction process and an exclusivity deed, US aluminium manufacturer Alcoa agreed to acquire its Australian joint venture partner, Alumina, in an all-stock scheme of arrangement on 12-Mar-24. Pursuant to a scheme implementation deed (SID), the agreed 0.02854 merger ratio equates to AUD 1.15 per share, a 13.1% takeover premium to Alumina’s undisturbed share price. The SID permits Alcoa to declare ordinary dividends of up to $0.10 per share per quarter (note that Alumina is not permitted to pay a dividend, and has not paid one since 2022). Alumina’s board recommends that its shareholders vote in favour of the deal in the absence of any superior proposal, and also subject to a fairness opinion from an independent expert. The exchange ratio will result in Alumina shareholders owning 31.6% of the combined company, while Alcoa shareholders will own the remaining 68.4%. Additionally, two new mutually agreed-upon Australian directors from the Alumina board will join Alcoa’s board upon scheme effectiveness. Regulatory conditions to closing include those from Australia’s Federal Investment Review Board (FIRB), the Australian Competition and Consumer Commission (ACCC), and the Brazilian Administrative Council for Economic Defence (CADE). Additionally, the deal is subject to confirmation of an Australian Tax Office (ATO) class ruling for scrip-for-scrip rollover relief. Approval from both sets of shareholders is also required – 50% of shareholders and 75% of votes at Alumina, and 50% majority at Alcoa; Allan Gray, which holds 19.9% of Alumina, has agreed to conditionally sell its stake to Alcoa to support the scheme. The SID encompasses customary deal protections, including no-shop, no-talk, and no-due diligence provisions, along with a matching right for Alcoa if a competing proposal emerges. The termination fee is set at $22m, with an RTF of $50m. Alcoa shares offered to Alumina holders will be issued in the form of CHESS depository interests (CDIs), representing a unit of beneficial ownership in Alcoa shares. This structure enables Alumina shareholders to trade Alcoa shares via CDIs on the Australian Stock Exchange (ASX). Therefore, to facilitate this, Alcoa will ...
March 08, 2024 | Industrials | Asia | Active
CSR / Compagnie de Saint Gobain : Deal Insight
French construction materials company Saint-Gobain announced on 26-Feb-24 that it has entered into a scheme implementation deed (SID) to acquire Australian rival, CSR, in a deal valued at AUD 4.5bn. Saint-Gobain will pay AUD 9.00 per share, representing a 32.9% takeover premium over CSR’s undisturbed price on 20-Feb-24, the day before Bloomberg reported on initial takeover talks. The companies subsequently confirmed on 22-Feb-24 that an indicative proposal was tabled. If the scheme is delayed beyond 26-Jun-24, an AUD 0.02 per month ticking fee will take effect. CSR is permitted to pay a fully-franked dividend of up to AUD 0.25, but this will be deducted from the offer consideration. Saint-Gobain’s board unanimously approves the scheme and CSR’s board has unanimously recommended that its shareholders vote in favour of the transaction, subject to a fairness opinion. Each CSR director intends to vote in favour of the deal. The SID imposes customary exclusivity obligations on CSR, including no-shop, no-talk, and no-due diligence provisions, but with customary fiduciary exceptions, notification requirements, and a matching right. The deal is subject to CSR shareholder approval (75%) and approval from Australia’s Foreign Investment Review Board (FIRB). Regulatory notifications were anticipated to be made by 6-Mar-24. Clauses on reasonable best efforts require Saint-Gobain to agree to any conditions imposed by a government agency as long as such conditions do not have a material impact on the expected value “to be obtained by Saint-Gobain from the transaction as a whole or conduct or on the operation of the CSR Group’s business after implementation of the scheme.” A MAC is defined to encompass a reduction of CSR’s consolidated net assets by more than AUD 180m and a recurring EBITDA decline by more than AUD 65m, with both metrics measured against “what it would reasonably have been expected to have been.” CSR generated AUD 414.6m in EBITDA for its fiscal year ending 31-Mar-23, and consensus is for the company to report its 2024 fiscal year EBITDA, ending 31-Mar-24, at AUD 402.9m, per Bloomberg. The indicative timeline estimates that the scheme booklet will be submitted to the Australian Securities and Investment Commission (ASIC) in ...
March 05, 2024 | Financials | North America | Active
Discover Financial Services / Capital One Financial : Deal Insight
On 19-Feb-24, Capital One Financial, the US consumer bank backed by Warren Buffett’s Berkshire Hathaway, confirmed a definitive merger agreement to acquire Discover Financial Services, a smaller rival and credit card issuer. The acquisition aims to create a global payments giant. Terms of the agreement call for Capital One to offer 1.0192 of its shares for each Discover share, valuing Discover at $35.3bn, and the all-share consideration represents a 26.6% takeover premium. Upon closing, Discover shareholders will hold 40% of the combined entity, with Capital One shareholders owning the 60% majority. The merger agreement allows Discover to pay regular quarterly dividends up to $0.70 per share, while Capital One is entitled to pay up to $0.60 per share. Completion is contingent on approvals from both sets of shareholders, as well as regulatory approvals from the Federal Reserve, the Office of the Comptroller of the Currency (OCC), Financial Industry Regulatory Authority (FINRA) and state banking authorities. The merger agreement contains customary clauses including reasonable best efforts that requires both companies to “defend and appeal any action or proceeding by a governmental entity (other than a bank regulatory agency)”. In our view, this is a potential risk since if Fed or OCC rejects the merger, the companies would not be obligated to appeal. The “requisite regulatory approvals” definition covers “all regulatory authorisations, consents, orders and approvals (i) from the Federal Reserve Board and the OCC.” A burdensome condition restricts the companies from offering any remedy “that would reasonably be expected to have a material adverse effect on the surviving entity and its subsidiaries, taken as a whole, after giving effect to the mergers.” The termination fee and RTF are set at $1.4bn each. On timing, Capital One’s CEO, Richard Fairbank, said on the M&A call that regulatory filings are expected ...
February 28, 2024 | Technology | Asia | Active
Altium / Renesas : Deal Insight
On 15-Feb-24, Japanese chipmaker Renesas Electronics (“Renesas”) announced a firm agreement to acquire Australian electronic design automation (EDA) company Altium for AUD 9.1bn, or AUD 68.50 cash per share. The offer consideration represents a 33.6% one-day takeover premium, and the boards of both companies unanimously approved the deal. Through effectiveness, Altium is permitted to pay an interim dividend for its half-year ending 31-Dec-23. The dividend amount remains at the discretion of the board, but it is capped “up to an amount agreed” between the merger parties; on 26-Feb-24, Altium confirmed that it raised and will pay an AUD 0.30 dividend for its fiscal 1H’24, and this will trade ex- on 4-Mar-24, with a record date of 5-Mar-24. The M&A announcement confirms that Altium’s interim dividend “will not be deducted from the scheme consideration” but that any additional distributions beyond this will be subject to a corresponding deduction. Structured as an Australian scheme of arrangement, the deal is subject to competition clearances from the US, Germany, and Turkey, as well as clearances from the Australian Foreign Investment Review Board (FIRB), CFIUS, and the German Ministry for FDI. Furthermore, approval from Altium shareholders is needed: 50% of shareholders present and voting (headcount test) and 75% of votes cast. Most notably, neither SAMR antitrust nor Renesas shareholder approval are required. Altium’s board unanimously recommends its shareholders approve the scheme, contingent upon an independent expert concluding that the deal is in the best interest of the shareholders. All directors of Altium, holding 10.4%, intend to vote in favour of the deal. Following the acquisition, Altium will continue to be led by its current CEO, Aram Mirkazemi, and will operate as a wholly-owned subsidiary of Renesas. The scheme implementation agreement includes customary provisions such as “no shop,” “no talk,” and “no due diligence” clauses, alongside customary fiduciary-out exceptions, as well as matching rights to Renesas. This is interesting, particularly since Autodesk (ADSK US) proposed to acquire the company in 2021. The MAC is defined to encompass any event that is “reasonably likely” to result in Altium’s underlying EBITDA declining by at least 25% compared to what it reported for FY’23 (Reported EBITDA for 2023 was $96.0m, hence $72.0m). According to the SIA, Renesas is solely responsible for securing FIRB approval and must ...
February 22, 2024 | Real Estate | Europe | Active
Redrow / Barratt Developments : Deal Insigth
Barratt Developments, the UK’s largest homebuilder, has entered into a definitive agreement to acquire its smaller rival, Redrow, in a £2.5bn all-share deal, aiming to bolster its position and capitalise on the anticipated long-term recovery in the UK housing market. Per the companies’ Rule 2.7 announcement made on 7-Feb-24, Redrow shareholders will receive 1.44 new Barratt shares for each Redrow share, and based on the previous day’s closing prices, this implies a value of 763p per Redrow share and a 27.2% one-day takeover premium. Both merger parties’ boards unanimously intend to recommend the deal to their respective shareholders, and upon closing, Barratt shareholders will own 67.2% of the combined company, with Redrow shareholders owning the remaining 32.8%. The merger is structured as a UK scheme of arrangement, whereby at least 75% in value of Redrow shares must approve the scheme at the court meeting, and 75% of those in attendance must approve at an EGM. As well, the relative sizes of the companies makes this a Class 1 transaction, meaning that 50% of Barratt shareholders need to vote at a separate EGM. Regulatory conditions include approval from the UK CMA, where Barratt has committed under the Cooperation Agreement to exert all reasonable efforts to secure approval from the antitrust regulator. The scheme document will be released “in due course,” with the companies noting that the Takeover Panel has granted an extension of the deadline for its posting. The document will be published concurrently with a Barratt shareholder circular and prospectus, both of which require approval from the FCA. The companies anticipate that the three will be published by mid-April 2024, with shareholder meetings scheduled for ...
February 19, 2024 | Consumer Discretionary | Asia | Ended
On 6-Feb-24, Japan’s second-largest mobile carrier, KDDI, entered into a partnership agreement with Mitsubishi (8058 JP) to jointly control Lawson, Japan’s third-largest convenience store chain. Mitsubishi, which currently owns 50.06% of Lawson, will maintain its shareholding, while KDDI seeks to offer minority shareholders JPY 10,360 cash per share. Lawson’s board has revised the dividend forecast for its fiscal year and has decided to not distribute further dividends. The takeover offer will ultimately lead to 50% pro forma stakes for each of KDDI and Mitsubishi. KDDI’s current ownership of Lawson stands at only 2.1%, and through the public tender offer’s 20.0% one-day takeover premium, it hopes to achieve a 14.43% minimum acceptance condition, a number that would enable KDDI and Mitsubishi to jointly hold at least two-thirds of Lawson (given the 50.06% at Mitsubishi plus 2.11% at KDDI). If two-thirds is achieved, the offerors will then pursue a two-step consolidation to ultimately buy out minorities. In addition to the minimum acceptance condition, antitrust clearances are needed from regulators in Japan, China, South Korea, and the EU. The parties indicated that they have begun advance preparations and will consult with relevant authorities from the date of announcement. As is customary with Japanese tender offers, the acceptance period will only be launched after the companies secure all regulatory approvals and fulfil other customary conditions. Lawson’s board is obliged to provide a unanimous opinion in favour of the offer, with the consent of all disinterested directors, and this opinion must remain consistent. Accordingly, on 6-Feb-24, Lawson’s board expressed its support for the offer and indicated its intention to recommend that shareholders tender their shares. The board will reaffirm its opinion when the acceptance period commences. According to the preliminary timeline, the companies anticipate launching the tender offer “in or around” April 2024, with a subsequent squeeze-out expected to be completed by ...
February 13, 2024 | Health Care | North America | Active
Catalent / Novo Holdings : Deal Insight
On 5-Feb-24, Catalent, a manufacturing subcontractor for Novo Nordisk’s (NOVOB DC) popular obesity drug Wegovy, has agreed to be acquired by Novo Holdings, the parent company of Novo Nordisk, for $63.50 per share. The offer represents a 16.5% one-day premium and a 39.1% premium over Catalent’s closing price on 28-Aug-23, the day before the target’s board initiated a strategic review of its business. Shortly after the acquisition completes, Novo Holdings intends to sell three of Catalent’s more than 50 fill-finish sites, located in Anagni, Italy, Bloomington, Indiana, and Brussels, Belgium, to Novo Nordisk, for $11bn. Novo Holdings controls Novo Nordisk through voting and share capital stakes of 77.7% in and 28.1%, respectively. The transaction has been unanimously approved and recommended by Catalent’s board and has garnered support from Elliott Management, a key Catalent investor (2.2%), which has entered into an agreement to support and to vote in favour of the deal. The merger agreement includes a no-shop clause along with customary fiduciary-out provisions. Additionally, it contains standard clauses covering representations, warranties and covenants, as well as a MAC with specific carve outs for war and pandemics. Conditions include Catalent shareholder approval (50%) and regulatory clearances. Notification under HSR and the initiation of the regulatory processes, including to the CMA, will be made within 20 business days (by 6-Mar-24). Critically, HSR clearance is also needed for Catalent’s sale of three fill-finish sites to Novo Nordisk. The companies plan to submit a briefing paper to the UK CMA, and if requested, they will submit a draft merger notice to the regulator within 30 business days of a request. A burdensome clause imposes restrictions on the companies, prohibiting them from taking any ...
February 09, 2024 | Consumer Discretionary | Asia | Ended
Vinda / APRIL Group : Deal Insight
On 14-Dec-23, Vinda International (“Vinda”), a diaper maker listed on the Hong Kong stock exchange and incorporated in the Cayman Islands, received a HKD 26.1bn pre-conditional offer from Indonesian billionaire Sukanto Tanoto. The offer was made through Tanoto’s privately-held entity, Asia Pacific Resources International Limited (APRIL) Group, at HKD 23.50 cash per Vinda share, reflecting a 13.5% premium over the previous day’s closing price. Vinda stated it does not intend to declare any dividends prior to the offer completing. However, in the event of such a distribution, the consideration will be adjusted downward, accordingly. The offer is conditional on four pre-conditions that need to be fulfilled prior to a 15-Sep-24 long-stop date: (i) approvals from relevant antitrust regulators, including China’s SAMR and the Taiwan Fair Trade Commission (Taiwan FTC); (ii) clearances under applicable laws of the People’s Republic of China (PRC); (iii) no other legal impediments during the fulfilment of pre-conditions (i) and (ii); and (iv) the receipt of option letter from Essity, a Swedish tissue maker (ESSITYB SS) and one of Vinda’s major shareholders. Concerning the latter condition, on 18-Dec-23, the companies confirmed that Essity issued the option letter to Vinda on 15-Dec-23, thereby satisfying condition (iv). Separately, APRIL is not aware if there are any consents or approvals needed for pre-condition (ii), which refers to the clearance under laws of PRC. Pre-conditions (i) on antitrust and (iii) on no legal impediments are not waivable. On 5-Feb-24, the companies announced that SAMR was notified under a simplified procedure on 19-Jan-24. Further, they communicated that, according to their legal adviser, a pre-condition previously anticipated from the Japan Fair Trade Commission is not required, but they will need clearance from the Taiwan FTC, however. Accordingly, a requisite notification with the Taiwan FTC was made on ...