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Weekly M&A Digest - October 20, 2017

John Shipman, Senior Financial Writer | October 20, 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.

Germany’s Hochtief Bids for Abertis, Topping Atlantia Offer

Hochtief, a German heavy construction company controlled by Spain’s Actividades de Construccion y Servicos, offered to buy Spanish toll-road operator Abertis for €18.6 billion ($21.9 billion). The bid exceeds one made by Italy’s Atlantia valued at €17 billion in May.

The rival offer sets up a potential duel for Abertis with an outcome that may be influenced by national interests. Reuters reported that the bid was launched through Hochtief to protect ACS's credit rating, and a source close to ACS said its offer has the backing of the Spanish government, “which may be reluctant to see Abertis’s politically sensitive motorways concessions in Spain fall into foreign hands.” Atlantia had attempted to buy Abertis in 2006, but the deal crumbled under opposition from the Italian government. 

Merrill Weekly Digest

Airbus-Bombardier Pact Rankles Boeing

Airbus said it’s teaming up with Bombardier by taking a majority stake in the Canadian company’s CSeries aircraft program. US trade officials recently hit Bombardier with a 300 percent tariff on the CSeries planes after Boeing complained Bombardier was selling them at prices below what they cost to build. Airbus has proposed assembling the aircraft in the US to avoid the tariff.  

The smaller, narrow-bodied CSeries jets could be a competitive threat to Boeing’s 737, potentially pushing it into the costly development of a replacement sooner than it has planned, analysts suggested. A Boeing spokesman said the Airbus-Bombardier partnership “looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government.”

Impax Laboratories, Amneal Pharma Deal Creates Generics Standout

Impax Laboratories and Amneal Pharmaceuticals are combining in an all-stock deal that is expected to create the 5th largest US generic drug maker by sales. Impax shareholders will get 25 percent of the new entity, while privately-held Amneal will own 75 percent. Impax has a market cap of about $1.6 billion. 

The merger comes at a time when generic drug companies are slugging it out amid intense price competition, with drug prices sliding as wholesalers pressure manufacturers as they vie for pharmacy contracts. Novartis said this week it will shutter a generic-drug manufacturing facility in Colorado, eliminating 450 jobs. The company told the Denver Post the move was due to “double-digit price erosion caused by customer consolidation” within the US market.

Nordstrom Pauses on Go-Private Plan

Department store chain Nordstrom said a group of family members is suspending “for the balance of the year” its exploration into taking the company private, but they will revisit the effort after the holiday season. 

Reports earlier this month indicated the pursuit of a go-private transaction had run into some hurdles amid disagreements on financing terms. The New York Post reported that a recent bankruptcy at Toys ‘R’ Us highlighted the ongoing travails in the retail sector and fueled anxiety among both lenders and the Nordstroms. The company announced in June that members of the family had formed a group to explore going private.

Aramark Bulks Up With Purchases of Avendra, AmeriPride

Food-services provider Aramark is bolting on two companies to bolster its procurement, facilities and uniform businesses. It is buying Avendra, for $1.35 billion to enhance its purchasing capabilities, the company said, while AmeriPride, with a $1 billion price tag, boosts Aramark’s position in uniforms and linen rental and supply.

Avendra is majority owned by Marriott, while other stakeholders include Hyatt Hotels and InterContinental Hotels. AmeriPride is family owned and dates back to 1889. In an interview with the Wall Street Journal, Aramark CEO Eric Foss noted the company is now in a better position to do deals after paying down debt and improving profitability. “Our ability to grow through M&A has arrived,” Foss said.

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