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Weekly M&A Digest - September 22, 2017

John Shipman, Senior Financial Writer | September 22, 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.

Another Aerospace Deal as Northrup Grumman Buys Orbital ATK

Predictions that United Technologies’ buyout of Rockwell Collins could spark more deal-making appear to be on the money, as Northrup Grumman agreed to buy Orbital ATK for $7.8 billion in cash. Orbital makes rocket motors for missile systems.

Northrup is competing with Boeing to develop a next-generation intercontinental ballistic missile program. So far, no one is waving any major red flags over antitrust concerns, though Defense News notes that similar to concerns Boeing raised over the Rockwell acquisition by United Technologies, rival defense contractors may make some noise over this deal. Orbital is working on the ICBM propulsion systems for both Northrup and Boeing. Following the Northrup-Orbital announcement, a Boeing executive told CNBC the company is also looking “at other ways to increase our top line” through M&A. 

Merrill Weekly Digest 9-22-2017

Toshiba Decides on Bain-Led Group for Memory Chip Sale

Toshiba’s board decided to go with a Bain Capital-led offer to buy its memory chip business for about $18 billion. Reports last week said the parties had signed a non-binding deal agreement, and Apple and Dell will reportedly provide some financial support. The Bain group beat out offers from rival consortiums led by Western Digital and Foxconn.

The Wall Street Journal points out that the transaction still faces some tests, including antitrust review by regulators worldwide, and objections from Western Digital, a Toshiba chip business partner who says it has the right to veto any sale.

ThyssenKrupp, Tata Steel to Combine European Steel Businesses

Germany’s ThyssenKrupp and Tata Steel of India signed a tentative agreement to merge their European steel businesses. Bloomberg said the two have been in talks for more than a year as steelmakers face overcapacity issues and look for ways to cut costs.

The venture will be owned equally and still requires an OK from the EU. The companies indicated the potential loss of as many as 4,000 jobs as they combine operations, Bloomberg reported. Steel prices have been under pressure amid a glut driven by cheaper exports from China. The ThyssenKrupp-Tata combination would create the second-largest producer in Europe, behind ArcelorMittal.  

Sprint, T-Mobile Merger Speculation Rekindles

Sprint and T-Mobile are reportedly in talks to merge in a stock-for-stock deal. “Both companies and their parents, Deutsche Telekom and Softbank, have been in frequent conversations” about a deal, CNBC said, “in which T-Mobile parent Deutsche Telekom would emerge as the majority owner.”

Forgive investors if they take a we’ll-believe-it-when-we-see-it view on a transaction, as this would be the latest in a series of merger talks the two carriers have had over the years. “In fact, it’s been going on for so long that something of a cycle has begun to develop, where news breaks that talks are happening, the hype dies down, and then everyone forgets about it just in time for new reports of merger talks to steal headlines again,” BGR writes.

Huntsman-Clariant Deal Faces Stiff Activist Opposition

A deal to combine Huntsman and Switzerland’s Clariant into a $15 billion trans-Atlantic chemical company is facing a formidable hurdle after two Clariant investors opposed to the deal boosted their combined stake to 15.1 percent.

A vehicle called White Tale Holdings -- created by Keith Meister, head of investment fund Corvex, and another fund called 40 North – sent a letter to Clariant’s board stating they "remain convinced, and increasingly so, that the proposed merger is detrimental to Clariant shareholders.” The Wall Street Journal notes the deal has to pass a shareholder vote, and Clariant needs two-thirds of votes cast to back the transaction. “If turnout is around the historic Swiss average of 60%, the activists need only 20% of all investors on their side, including themselves,” WSJ said.  

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