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Weekly M&A Digest - October 6, 2017

John Shipman, Senior Financial Writer | October 06, 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.

Office Depot ‘Pivoting’ With CompuCom Purchase

Office Depot inked a deal to purchase IT services company CompuCom Systems for $1 billion from Thomas H. Lee Partners. At the deal’s completion, THL is expected to own a roughly 8 percent stake in Office Depot. With this transaction, the retailer said it is “pivoting” from a traditional retailer to “a broader business services and technology products platform.”   

It’s an increasingly familiar strategic move that’s now pervasive across all industries, as companies grapple with rapid technological change and out-dated business models. It’s also worth noting that private equity exits such as this have been trending lower since 2015, while the percentage of PE-sponsored middle-market companies acquired more than five years ago has escalated, according to a PitchBook report this summer. THL bought CompuCom in April 2013 from Court Square Capital Partners for $1.1 billion in equity and debt, The Deal reported.

Wal-Mart Snags Logistics Tech Startup to Duel With Amazon

Wal-Mart purchased so-called "last-mile" delivery startup Parcel to augment the armory in its pitched battle against Parcel, based in Brooklyn, specializes in scheduled and same-day deliveries and is expected to support Wal-Mart’s efforts in its and businesses in New York City.

The price was undisclosed, though Wal-Mart said it was smaller than previous acquisitions made this year. Beyond that, the transaction exemplifies the drumbeat of resources being marshaled to keep pace with Amazon. MergerMarket highlighted in an August report a flurry of deals in the logistics technology arena as other retailers try to keep up with Amazon’s “logistical prowess.” Wal-Mart’s Parcel deal echoes a similar move by Target this summer, which bought startup Grand Junction to bolster its same-day delivery services.

Merrill Weekly Digest October 6 2017

Nordstrom Go-Private Deal Said to Be Straining

The family-led buyout of retailer Nordstrom has hit rough waters, the New York Post reported, amid struggles to agree on the financing. The retail sector’s troubles have been well-documented, with consumers’ growing preference for online shopping taking a persistent toll on in-store traffic. Citing "insiders," The Post said the recent bankruptcy filing by Toys ‘R’ Us “added to the anxiety among lenders and the Nordstroms alike.”

The Nordstrom family turned down the commitments from the biggest lenders after deeming the interest rates and terms too onerous, the publication said. The company announced in June that members of the family had formed a group to explore the possibility of a transaction to take the company private.

Berkshire Buys Stake in Pilot Flying J

Warren Buffett’s Berkshire Hathaway purchased an almost 40 percent stake in privately-held Pilot Travel Centers, another family-owned enterprise, which operates 750 Pilot and Flying J truck stops. The deal price wasn’t disclosed, though Bloomberg’s Billionaires Index values the business at $9.1 billion. Berkshire plans to increase its stake to 80 percent in 2023.

The acquisition adds to Buffett’s penchant for transportation investments, the Wall Street Journal pointed out. Berkshire also owns BNSF Railway, an auto dealership group and NetJets, a private-jet company. “There will be more goods moving to more people as the years go by in the United States – that I would bet a lot of money on,” Buffett told WSJ.

Ash Grove Cement Draws Rival Buyout Offer

A bid by Ireland’s CRH to buy US cement maker Ash Grove Cement has drawn some competition. Reuters reported that Summit Materials, another US company created by former CRH executives, has made a rival bid after CRH said last month it would acquire Ash Grove for $3.5 billion.

Ash Grove confirmed it received an offer “from a third party” at an indicated enterprise value of $3.7 billion to $3.8 billion, and it’s engaging with the party on the proposal. For its part, CRH said it “notes the announcement made by Ash Grove,” and in particular that the period for obtaining Ash Grove shareholder approval for the Irish building material company’s offer has been extended. The Deal pointed out that CRH earned roughly half of its profits from the U.S. last year, “and looks to be making a move to take advantage of President Donald Trump’s proposed boost to infrastructure spending.”

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