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Weekly M&A Digest - November 3, 2017

John Shipman | November 03, 2017

A compendium of highlights and observations from the week’s notable M&A news, compiled by Merrill Corporation which facilitates the sharing and disclosure of financial information in transactions such as these.

Broadcom weighs giant bid for Qualcomm

Broadcom Ltd. is weighing an offer in excess of $100 billion for Qualcomm, Bloomberg reported, citing anonymous sources. The news outlet said Broadcom was considering paying $70 a share for Qualcomm in a cash-and-stock transaction that would be the largest ever for a chipmaker. 

Avago Technologies acquired Broadcom Corp. last year, paying $37 billion, and kept the Broadcom name. Broadcom is also now in the process of acquiring Brocade Communications Systems for $5.9 billion. Bloomberg points out that Qualcomm has been caught up in a legal battle with Apple over licensing fees, which is “costing revenue and jeopardizing the business model that for years made Qualcomm one of the most successful chipmakers in the world.”

Antitrust regulators still mulling AT&T-Time Warner merger

Reports during the summer suggested the $85 billion AT&T-Time Warner merger was hitting regulatory snags, and it appears some issues are still playing out. The Wall Street Journal reported that the US Justice Department’s antitrust division “is preparing for litigation in case it decides to sue to block the deal,” citing people familiar with the matter.

Discussions over potential settlement terms continue between the companies and regulators, WSJ said, with the outcome unclear. The deal isn’t necessarily in trouble, the paper points out, but it does indicate more scrutiny than anticipated. Unfulfilled expectations has been a theme in 2017, a year that brimmed early with hope that the new administration would usher in a lighter regulatory touch, potentially fostering a pickup in M&A. As the year end approaches, the anticipated pickup in deal making remains elusive.

Merrill M&A Weekly Digest Nov 3 2017

Builder Lennar acquires CalAtlantic for $5.7 billion   

Homebuilder Lennar clinched an all-stock deal valued at $5.7 billion, excluding debt, to acquire CalAtlantic Group, a combination the companies say creates the largest US builder by revenue. They expect to eliminate $250 million in overlapping costs, with 30 percent of the targeted savings aimed for fiscal 2018.

This is a continuation of consolidation among homebuilders that survived last decade’s housing crash, and who are now seeking to build on a rebound by boosting their scale and whittling down costs. CalAtlantic is the result of a 2015 merger of Ryland Homes and Standard Pacific. Recent data showed September US sales of new single-family homes rose to their highest level in almost 10 years. A separate survey indicated confidence among homebuilders reached a six-month high in October. 

Akzo Nobel in merger talks with Axalta Coating

Paint makers Akzo Nobel and Axalta Coating Systems confirmed they are in merger talks, which follows Akzo’s snub of a potential $29 billion offer from PPG Industries during the summer. Akzo’s stance angered some large shareholders and the Dutch company’s chairman will step down in April.

Bloomberg said Akzo’s talks with Axalta were a move “to create a deterrent” should PPG decide to make another takeover attempt as early as December. The thinking is that combining with Axalta would make Akzo too big for PPG to swallow.

Rockwell Automation Rejects Emerson Electric Bid

Rockwell Automation said it has rebuffed two takeover offers from Emerson Electric since August, with the most recent coming on Oct. 10 and worth about $28 billion. The company said the board deemed that the offers were not in Rockwell’s or its shareholders’ best interests.

CNBC’s David Faber, citing sources close to Rockwell, said the company’s rejection involved “a number of concerns including what they say is Emerson’s inability to successfully integrate previous acquisitions.” Emerson said in a statement that there are no current discussions, and it “remains a disciplined aquirer.”

Novartis buying Advanced Accelerator Applications in cancer treatment push

Novartis is buying Advanced Accelerator Applications in $3.9 billion transaction that boosts the Swiss drug company’s stable of cancer treatments. Novartis will pay cash for the French maker of therapies known as radio-pharmaceuticals.

AAA’s treatment, Lutathera, is able to more directly target tumor cells in pancreatic cancer, and “was shown to significantly increase the chances of survival in patients with neuroendocrine tumors that couldn’t be removed surgically,” compared with standard hormone therapy, the Wall Street Journal reported. The paper noted the AAA deal comes at a time when Novartis’s blockbuster blood cancer drug Gleevec is facing generic competition.

Union of for-profit colleges as Strayer, Capella combine

Strayer Education and Capella Education agreed to merge in an all-stock deal that values the combined entity at about $2 billion, with Strayer shareholders owning 52 percent of the company. The two will continue to operate as independent institutions, but will consolidate back-office operations as they target $50 million in cost savings. Hailed as a merger of equals, Strayer will be the remaining entity and will be renamed Strategic Education Inc.   

The combination comes after a period of turbulence among for-profit colleges, spurred by regulatory scrutiny centered around aggressive marketing practices and complaints of saddling students with large debt burdens. Strayer and Capella remained above the fray amid an industry shakeout that included ITT Tech and Corinthian Colleges shutting down following federal government sanctions.

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