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Weekly M&A Digest - September 1, 2017

John Shipman, Senior Financial Writer | September 01, 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.

Gilead to Buy Kite Pharma for Nearly $12 Billion

Gilead Sciences agreed to pay $11.9 billion for Kite Pharma, as the company known for its drugs that treat HIV and hepatitis C moves to expand its reach into cell-therapy cancer treatments.

It’s a bold grab for stronger growth, with a potentially big payoff similar to the boost Gilead received after it bought Pharmasset for $11 billion in 2011. That deal yielded the drugs Sovaldi and Harvoni, used to treat hepatitis C, which have reaped billions in sales. Kite Pharma’s promising cancer immunotherapies use a patient’s own genetically-modified immune cells to attack the disease. It’s a one-time treatment, but the complexity of its manufacture and delivery means the cost can run up to $500,000, according to a Reuters report.    

United Technologies Near Deal to Acquire Rockwell Collins for $20 Billion

Reports said United Technologies is close to cinching a deal to purchase Rockwell Collins for more than $20 billion, nearly a month after first word of deal talks. If completed, it could be the largest aerospace deal ever, the Wall Street Journal reported.

UTX CEO Greg Hayes said during a late-July second-quarter earnings call that the company “will be opportunistic for the right deal,” while noting “we continue to have a placeholder at $1 billion to $2 billion for M&A this year.” A merger with Rockwell Collins “could set off a wave of similar acquisitions as other companies might seek to round out their own businesses by purchasing some of Rockwell’s competitors,” Defense News wrote, citing analysts.

New Uber CEO Talks IPO

Newly named Uber Technologies CEO Dara Khosrowshahi sketched out an aim to take the ride-hailing company public in 18 to 36 months during comments to employees this week.

Khosrowshahi’s aspiration now initiates a period of anticipation for investors eager to own a piece of the fast-growing, high-profile company, as well as for those with capital already in who are keen to have some sense of when they’ll have a chance to exit. The CEO sets an ambitious target, but needs to first steady the Uber ship -- which has been beset by controversy over its culture and legal dust-ups -- in order to convince the broader investing audience the company is ready for the scrutiny that comes with public ownership stage.

Scrutiny on Linde/Praxair Pact Continues 

Industrial gas purveyors Linde and Praxair said they were responding to a second request for information from the US Federal Trade Commission, seen as standard procedure regarding their $74 billion merger. The transaction was announced late last year, and the companies expect to close in the second half of 2018.

The Deal noted the companies indicated in their merger agreement an expectation that they will be required to make divestitures to soothe antitrust concerns. “A provision in their merger contract limits the amount of spinoffs they must submit to if ordered by enforcers to assets that individually or in the aggregate generated 2016 annual revenue in excess of €3.7 billion ($4.43 billion) or Ebitda in excess of €1.1 billion ($1.32 billion),” the publication said. The companies -- with Linde based in Germany and Praxair in the US -- said their pact is being reviewed by authorities in about 24 jurisdictions, The Deal said.

Update: United Technologies confirmed on Sept. 4 an agreement to purchase Rockwell Collins for $23 billion in a deal considered one of the largest in aerospace history. The companies expect to close the transaction by the third quarter of 2018, subject to shareholder and regulatory approval. Reports say analysts do not anticipate resistance from regulators as the companies supply different parts for aircraft manufacturing. Bloomberg notes the pace of consolidation among suppliers has picked up as parts makers grapple with manufacturers’ push “to reduce costs and boost production rates to support faster output of narrow-body jetliners such as Airbus’s A320 and Boeing’s 737.”

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