MOU signed in ThyssenKrupp/Tata Steel merger

The first step has been taken towards merging Tata Steel and Thyssenkrupp, in a move which would create Europe’s second-largest steel group, according to BBC News.

The two companies have been discussing a merger since 2016, when Indian-owned Tata changed plans to sell off its UK sites. A Memorandum of Understanding has been signed which proposes a joint venture on equal terms.

The merger would result in annual savings of up to ?€600m (£533m) and the loss of around 4,000 jobs, with an equal split between administration and production shared across both companies.

Following the merger, the new entity would be headquartered in the Netherlands and would ship around 21 million tonnes of flat steel products each year, second only to ArcelorMittal. The joint venture’s annual turnover would be around ?€15bn with a workforce of 48,000 across 34 locations.

Tata Steel chairman Natarajan Chandrasekaran said: “The strategic logic of the proposed joint venture in Europe is based on very strong fundamentals and I am confident that Thyssenkrupp Tata Steel will have a great future.”

Following the announcement shares in Tata Steel rose 1% while Thyssenkrupp jumped 5%.

 

Poundland gets green light to acquire 99p Stores

British variety store chain Poundland has received formal clearance from the UK’s Competition and Markets Authority (CMA) to acquire rival chain 99p Stores.

Confirming its provisional findings, published in August, the CMS announced on Friday that it has concluded the merger may not be expected to result in a substantial lessening of competition. Consequently, the merger will not result in customers facing a reduction in choice, value or quality of service.

Poundland Group plc (Poundland) and 99p Stores Limited (99p Stores) offer general merchandise such as groceries, stationery, homeware, gardening and seasonal merchandise. In comparison to other retailers, the companies sell most of their products at a single price point.

The CMA found that the companies are each other’s closest competitors, along with rival chain Poundworld. But following completion of the merger, Poundland and 99p Stores will continue to face competition from other value retailers such as B&M, Home Bargains, Wilko and Bargain Buys, as well as supermarket chains like Tesco and Asda. CMA’s inquiry group’s assessment found that Poundland would not have an incentive to reduce the quality of its offering, either at the local or at the national level.

Poundland stated that it welcomes this decision and will now move to complete the acquisition of 99p Stores by the end of September, adding that it will provide further information on its plans for 99p Stores in conjunction with the publication of its interim results on 19 November 2015.

Chief executive of Poundland, Jim McCarthy, said:

“We welcome the CMA’s decision to clear the merger. We believe that the acquisition of 99p Stores will be great for both customers and for shareholders and we will now move to completion by the end of the month.”

The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries, as well as  enforcing competition and  certain aspects of consumer law. Panel members at the CMA are from a various backgrounds, such as economics, law, accountancy and business. Membership of an inquiry group usually reflects a mix of expertise and experience, including industry experience. 

Betfair and Paddy Power plan to merge

UK betting and gaming company Betfair and Irish bookmaker Paddy Power have announced plans for possible a GBP5bn merger deal that would create one of the world’s largest gambling firms.

It was reported on Wednesday that although the final details of the deal are still to be decided, the companies expect Paddy Power to own 52% of the combined business, while Betfair will own the remaining 48%. It is also anticipated that the combined business would have annual revenues of around GBP1.1bn.

Paddy Power was founded in 1988 with the merger of three Irish bookmakers. It has 350 betting shops and is the third-largest online bookmaker, while Betfair’s betting exchange operates online only. Betfair was founded in 2000 by Edward Wray and Andrew Black who reportedly hold  significant shareholding of GBP279m and GBP84m respectively.

According to industry data, the new group would be the UK online market leader with a 16% share, which would mean the group would be better placed to compete in new and existing markets. At current market prices the combined group would be worth GBP5.8bn

Following a merger between the two companies, Betfair’s CEO Breon Corcoran would become chief executive of the combined group, while Paddy Power’s chief executive Andy McCue, would become chief operating officer. Paddy Power’s chairman, Gary McGann, is expected to chair the board of the new company.

Corcoran was cited as saying: “We fundamentally believe this industry is all about scale. By putting together two distinct but phenomenally strong brands, we’ll have a market leading position in the UK, Ireland, Australia and in the United States.”

Paddy Power’s chief financial officer, Cormac McCarthy, stated that the combination was “just a possibility” right now.
“We think this is a very attractive opportunity, the scale and capability is unsurpassed and would leave us in a much better place to compete in our current markets, where competition is intense,” he added.

Financial results were also released by both companies on Wednesday, which revealed that Betfair’s first-quarter revenues increased 15%, while Paddy Power’s operating profit grew 33% to GBP58m, for the first six months of the year, according to the Guardian newspaper. In addition it reported that shares in the companies went higher in early trading following the merger announcement, with Betfair shares up 18% Paddy Power shares up 14%.

IBM acquires US-based cloud computing infrastructure group SoftLayer

US information technology major International Business Machines Corp (NYSE:IBM), or IBM, said it had inked a final accord to acquire domestic cloud computing infrastructure provider SoftLayer Technologies Inc for an undisclosed sum.

The deal, which hinges on the receipt of the requisite regulatory approvals, is seen to be finalised in the third quarter of this year.

Upon closing, SoftLayer will merge with IBM SmartCloud into a global platform as part of a new cloud services division at the buyer, bringing a complementary suite of services to the existing portfolio, IBM said.

The acquisition of SoftLayer, which caters to some 21,000 clients through 13 data centres located in the US, Asia and Europe, is seen to cement IBM’s presence in cloud computing, the company noted. The target is seen to speed up IBM’s ability to integrate public and private clouds for its clients, the buyer added.

Flybe’s expansion plans negatively impacted by EC’s expected decision to block Ryanair-Aer Lingus deal

UK regional airline company Flybe Group Plc (LON:FLYB) said it is disappointed by the news that the European Commission (EC) will most certainly block Irish low-cost carrier Ryanair Holdings Plc’s (LON:RYA) planned buyout of Aer Lingus Group Plc (LON:AERL).

EC’s expected decision would not only prevent Ryanair from securing the 70% it does not already own in its smaller rival, but also hinder Flybe’s deal to acquire 43 Aer Lingus UK and European routes plus some aircraft for EUR1m (USD1.3m).

This latest agreement is part of Ryanair’s “unprecedented” remedies package in connection with the Aer Lingus bid. The company had also agreed to sell all of its and Aer Lingus’ London-Gatwick operations to International Airlines Group (LON:IAG).

Yesterday, Ryanair announced it was notified by the EC of its intention to ban the buyout despite the offered concessions. The company also noted it would appeal any prohibition decision to the European Courts. In its own statement, Flybe said it would wait to see the outcome of that process.

Ryanair is offering a price of EUR1.30 (USD1.75) per share to buy the remaining shares in Aer Lingus, thus valuing the company at EUR694m.

Virgin agrees $23bn merger with US-based Liberty Global

US cable TV operator Liberty Global Inc (NASDAQ:LBTYA) has agreed to take over UK broadband andcommunication group Virgin Media Inc (NASDAQ:VMED, LON:VMED) in a cash-and-stock deal worth some USD23.3bn (EUR17.1bn), in a move that would create the world’s leader in broadband communications, the pair said.

Under the terms of the deal, Virgin Media’s shareholders stand to receive USD17.50 cash, 0.2582 Liberty Global series A shares and 0.1928 Liberty Global series C shares for each of their Virgin Media unit. The transaction reflects a value of USD47.87 per share for Virgin Media, based on the buyer’s closing on 4 February.

The combined business will have 25m customers and cover 47m homes in 14 countries, the companies said. The merged entity will concentrate on the strongest and most strategic markets in Europe.

The two companies, with complementary strengths in product portfolio and expertise across digital TV, broadband and telephony services, digital TV, expect the increased scale to generate significant synergies. Liberty Global said the acquisition, in line with its value creation strategy, will add to its free cash flow.

The buyer will issue some 86m own class A shares and 65m class C shares as part of the price, which gives Virgin Media an equity value of USD16bn. The cash component will amount to USD5.9bn and will be covered with debt and available liquidity, Liberty said. The share exchange will see Virgin Media’s shareholders controlling some 36% of Liberty’s pro forma shares outstanding and around 26% of its votes. Following the merger, Liberty Global will redomicile from Delaware to the UK and be listed on the Nasdaq, with plans to also seek a European listing.

Subject to shareholders approval, the transaction is expected to wrap up in the second quarter of 2013.

LionTree Advisors, Credit Suisse Group AG (NYSE:CS), Shearman & Sterling LLP and Ropes & Gray acted as advisors to Liberty Global. Virgin Media used the advisory services of Goldman Sachs & Co, JPMorgan Chase & Co (NYSE:JPM) Fried Frank Harris, Shriver & Jacobson LLP and Milbank, Tweed, Hadley & McCloy LLP.

Steel giant ArcelorMittal favourite to acquire ThyssenKrupps Alabama plant

Luxembourg-based steel and mining group ArcelorMittal (AMS:MT) is one of the two top bidders for German steelmaker ThyssenKrupp AG’s (ETR:TKA) steel business in the Americas, offering USD1.5bn (EUR1.1bn) for the company’s Alabama plant, according to a report by the Wall Street Journal.

Companhia Siderurgica Nacional (NYSE:SID), or CSN, is the other leading competitor with an offer of USD3.8bn for the Alabama plant and a stake in ThyssenKrupp’s mill in Brazil, but sources cited by the paper said CSN has less balance sheet flexibility and lacks supply of high-quality slabs and that limits the chances of its bid.

ThyssenKrupp expects binding offers by mid-February, with a decision regarding a buyer to be made this fiscal year to end September 2013. The Americas operations were offered for sale in 2012, with their parent targeting a price equal to their book value of USD8.86bn, it has said.

ArcelorMittal confirmed last week it had made an offer for the Alabama plant, which its CFO Aditya Mittal described as a world-class quality asset, the Wall Street Journal said. The Luxembourg steel group also said last week it had raised USD4bn from issuing stock and bonds.

This plant has some 1,500 employees, while the one in Brazil employs 3,500.

The German group announced last year plans to sell these operations or seeking partnerships with the view of putting an end to losses at the mills and focusing on its business in Europe.
It had also received offers from other suitors, but these are not seen as strong rivals to ArcelorMittal and CSN due to their weaker financial position, the Wall Street Journal said.

Swatch acquires acquires Canadian watchmaker Harry Winston

Swiss watches and jewellery maker The Swatch Group Ltd has inked an agreement to acquire the luxury brand diamond jewellery and timepiece division of Canada’s Harry Winston Diamond Corp (TSE:HW), the parties said on Monday.

The price tag of the takeover is USD750m (EUR560.4m), plus the assumption of up to USD250m of pro-forma net debt. Swatch will acquire US-based HW Holdings Inc and its unit Harry Winston Inc, as well as the production company in Geneva, Switzerland. It will add the business’ 535-strong global workforce.

The deal, which has yet to obtain the requisite regulatory approvals, does not include the mining business of Harry Winston Diamond Corp, which in connection with the transaction, has agreed to be renamed Dominion Diamond Corp.

The target is viewed as complementary to Swatch’s prestige segment, the buyer’s chariwoman Nayla Hayek noted.

The move represents a sound return on the original investment in the Harry Winston brand, the vendor’s CEO Robert Gannicott said.

Rothschild served as advisor to Harry Winston Diamond Corp on the deal.

US fashion group Gap to acquire Intermix for $130m

US fashion company The Gap Inc (NYSE:GPS) has agreed to acquire women’s fashion boutique Intermix Inc for USD130m (EUR98.8m), the Wall Street Journal (WSJ) reported.

The deal represents Gap’s first acquisition since 2008 when it bought women’s active apparel retailer Athleta Inc for USD150m.

The target operates 30 stores in the US and Canada and Gap plans to double them and expand the chain overseas, Art Peck, president in charge of new brands at Gap, told the WSJ.

Intermix’s private-equity owner, Goode Partners LLC, and Gap started takeover discussions in late October 2012 and completed them at the end of last year, Intermix founder and CEO Khajak Keledjian said. Goode Partners owned a 40% stake in the retailer, which generates annual sales of some USD130, according to a knowledgeable source.

As part of the deal, Keledjian will remain at the company as chief creative officer.

Mexican Coca Cola bottler Femsa acquires Coca Cola bottling unit in Philippines for $689m

Coca-Cola Femsa SAB de CV (MXK:KOFL), the bottler of Coca Cola in Mexico, said on Friday it would pay USD688.5m (EUR525.3m) in cash to buy 51% in The Coca-Cola Company’s (NYSE:KO) bottling unit in the Philippines.

The deal, which allows Coca-Cola Femsa to expand beyond Latin America, gives the buyer the option to purchase the remaining 49% in Coca-Cola Bottlers Philippines Inc (CCBPI) at any time within the next six years.

Coca-Cola Femsa will increase its exposure to fast-growing emerging economies with this acquisition, expecting profitable growth and long-term returns in these economies, it said.

The transaction, reflecting an enterprise value of USD1.35bn for CCBPI, is seen to wrap up in early 2013.

CCBPI runs 23 production plants, serving nearly 800,000 customers and is expected to sell some 530m unit cases of beverages in 2012.

The buyer’s advisors include Allen & Company LLC, Rothschild, Cleary, Gottlieb, Steen & Hamilton LLP and SyCip Salazar Hernandez & Gatmaitan.