Bad Finance: M&A synergies deserve large salt dose 24 Mar 2016 Energy Transfer Equity’s expected EBITDA boost from its deal to buy Williams Companies just went from $2 bln a year to under a tenth of that – even before closing. Many mergers fail to capture cost savings, and most fall short on revenue gains. Skeptical analysis is required.
Energy Transfer scorches its own Williams earth 24 Mar 2016 The buyer is slashing expected merger synergy benefits by 90 pct and warning of big reductions at its target’s Oklahoma operations. It may put pressure on Williams to return to the negotiating table. For now, ETE seems more hostile to the deal than its reluctant seller ever was.
Italian bank revolutions set unappetising template 24 Mar 2016 Banco Popolare and BPM have sealed the first merger in Italy’s mutual reform. Yet mooted cost savings don’t look generous enough to offset messy governance and tough capital needs. That’s not great news for others, particularly stragglers like Monte dei Paschi di Siena.
German M&A rules leave targets worse off 24 Mar 2016 An attractive tie-up of U.S. cash dispenser Diebold and German rival Wincor Nixdorf was left hanging in the balance because of safeguards meant to protect minorities. The deal stacks up strategically and financially. Rules and taxes that prevent sensible value creation don’t.
Yum’s China growth goals face market reality check 24 Mar 2016 The U.S. fast-food giant may sell up to 20 pct of its Chinese unit to private investors before spinning it off. On current trends the stake could fetch $2.4 bln, Breakingviews calculations suggest. To do better, Yum’s more ambitious targets will have to survive China’s slowdown.
U.S. gene tester puts China bids under microscope 23 Mar 2016 Affymetrix is in a bind. Rival Thermo Fisher made a solid $1.3 bln offer that’s now below the target’s share price. Former bosses swooped in with a higher non-binding bid backed by little-known Chinese funders. The board must choose – and fast. The question: Does it feel lucky?
When a 90 pct takeover premium isn’t enough 23 Mar 2016 That’s what Premier Foods, the UK owner of Mr Kipling cakes, has knocked back from $12 bln rival McCormick. It sounds crazy. Yet the suitor can clearly afford much more. Premier’s low valuation explains the gap. The board is doing shareholders’ work for them.
Bang & Olufsen buyout hinges on China bass boost 22 Mar 2016 The Danish electronics maker is in bid talks with Chinese luxury distributor Sparkle Roll. Both companies’ business models are under pressure. At B&O’s inflated $447 mln price it would be hard to make a deal stack up – unless sales can be massively increased in China.
Marriott’s Starwood deal suffers China syndrome 21 Mar 2016 To trump an interloping bid from Beijing’s Anbang, Marriott raised its offer for its hotelier rival to $13.6 bln. Even with more cost cuts, the math suggests significant value destruction. Anbang may have reasons to pay up, but Western buyers can’t be so careless of shareholders.
IHS-Markit $13 bln merger is long on hope 21 Mar 2016 A bigger, diverse data company could cross-sell to different clients, the theory goes. Markit’s shareholders could end up roughly 10 pct better off. But extra revenue of $100 mln looks aspirational. Big share buybacks and high debts could hobble investment in new products.
Sherwin-Williams deal tinted trustbuster yellow 20 Mar 2016 The U.S. paint maker is buying rival Valspar for $11.3 bln. A healthy premium exceeds the value of expected cost savings, raising doubts about the financial logic. And Sherwin’s avowed confidence of passing regulatory muster is colored by terms that may give shareholders pause.
It’s time for Marriott to check out of Starwood 18 Mar 2016 The U.S. hotelier has 10 days to sweeten its offer after China’s Anbang won over the Westin owner with a $13.2 bln cash deal. Marriott may struggle to top that without destroying value for its shareholders. Pocketing the break fee and moving on beats a bidding war.
Home Retail: A tale of when smaller is better 18 Mar 2016 Even a generous bid isn’t a happy ending for the UK retailer. Investors who bought in at the Argos owner’s market debut a decade ago are now a third worse off. Burberry and Experian, the consumer groups it spun out, have soared. Mergers fix some problems; demergers more so.
Li Ka-shing brings funding finesse to telco M&A 18 Mar 2016 The tycoon may sell 20 pct of his UK mobile unit to outsiders. That could raise 1 bln pounds to help buy Telefonica’s O2, on top of the 3.1 bln pounds sovereign funds are already chipping in. That would let Li complete the 9 bln pound deal with no fresh investment.
TransCanada’s pipeline deal suggests safe now sexy 18 Mar 2016 Buying Columbia for $13 bln bolsters the energy company’s business of transporting gas to the eastern U.S. The seller has ample cash and a backlog of low-risk projects to build infrastructure. That adds up to a prudent investment as markets sour on precarious boom-time assets.
Canon’s $6 bln Toshiba deal no picture of distress 18 Mar 2016 The Japanese group is buying its scandal-hit rival’s medical equipment unit, its second big purchase in just over a year. The multiple of 42 times 2015 earnings suggests Canon’s urge to diversify from cameras and printers was even greater than Toshiba’s desire for a quick sale.
U.S. trustbusters look blind to media disruption 17 Mar 2016 The Justice Department sued to stop a $56 mln merger of southern California’s largest newspapers, saying a monopoly would result. Yet regulators approved competitively riskier deals involving the likes of DirecTV. It’s as if they never heard of falling readership and ad sales.
CBS exit from radio in tune with the times 16 Mar 2016 The $24 bln broadcaster is mulling a sale of its 117 U.S. stations, just as internet service Pandora may be on the block. The moves could make sense, given stiff competition from the likes of Spotify, waning advertising and other industry disruption. The trick is to find buyers.
Market only half buys LSE merger thesis 16 Mar 2016 Investors have priced in the 450 mln euros in annual savings Deutsche Boerse and its rival exchange hope to create by merging – but no more. The two aim to create value from revenue synergies too. If they can’t convince the market, the tie-up looks vulnerable to an interloper.
Anbang’s U.S. hotel block bookings getting pricey 14 Mar 2016 The Chinese insurer is in a hurry, leading a $13 bln offer for Starwood on top of a $6.5 bln deal to buy Strategic Hotels from Blackstone and its $2 bln purchase of the Waldorf Astoria in 2014. It’s hard to see how they all meet Anbang Chairman Wu Xiaohui’s own financial targets.