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Weekly M&A Digest - September 29, 2017

John Shipman, Senior Financial Writer | September 29, 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.

GE Selling Industrial Solutions Business for $2.6 Billion

General Electric is unloading its unit that makes circuit breakers and other power supply components, selling it to Switzerland’s ABB for $2.6 billion. ABB is seeking a bigger North American foothold for its electrical equipment operations, while GE is moving forward with its plans to focus on more profitable businesses.

GE has a plan to cut $2 billion in costs by the end of 2018, and after taking over in August, new CEO John Flannery isn't wasting any time in the effort to realign the conglomerate by selling off non-core assets. The company also confirmed plans to sell its fleet of corporate jets. Nelson Peltz’s Trian Fund Management -- a self-described "highly engaged shareowner" -- holds a roughly $2 billion stake in the company and has been pushing for moves to boost profits.

Merrill Corp Weekly Digest September 29, 2017

Denmark’s Nets in $5.3 Billion Buyout by PE

A group of investors led by US private equity firm Hellman & Friedman agreed to buy Danish payments processor Nets A/S for $5.3 billion. The deal continues a trend of consolidation in the payments industry, which has seen a handful of transactions in recent months. Among those, Blackstone and CVC Capital Partners paid $3.9 billion for the UK’s Paysafe Group in early August, and Vantiv agreed to buy Worldpay in July for $10 billion.

“The flurry of activity comes as competitors are looking to acquire assets to build scale, strip out costs and capitalize on a shift away from cash and checks towards digital payments,” the Financial Times wrote. The paper noted that the deal is the largest European leveraged buyout in almost five years.

Siemens, Alstom Merging Rail Businesses

Germany’s Siemens agreed to combine its rail business with train maker Alstom of France in what’s billed as a merger of equals to better compete with competition from China.

Siemens will have majority control with a stake slightly above 50 percent, though Alstom CEO Henri Poupart-Lafarge will run the combined entity, and its headquarters will remain in France. Alstom builds France’s high-speed TGV trains, and there is sensitivity to a loss of control to its new German partner. The two companies have seen increased competition from China’s state-backed CRRC Corp. Ltd, and the combination has drawn comparisons to European aviation consortium Airbus.

Reports said Siemens had held talks for a similar tie-up with Canada’s Bombardier. Bloomberg said France remained open to also adding Bombardier to the to Siemens-Alstom deal, though Alstom’s Poupart-Lafarge played down the possibility. “We are celebrating the wedding, and you are talking about the babies,” he quipped to reporters.

Parker Hannifin Closed Deal Challenged by Justice Department

The US Justice Department filed a civil antitrust suit against Parker-Hannifin, seven months after the company closed a $4.3 billion deal to buy Clarcor, and almost 10 months after the deal was first announced. The government contends the transaction “substantially lessened competition” for aviation fuel filters, and it seeks to have Parker-Hannifin divest one of its aviation fuel filtration businesses.

Clarcor was Parker-Hannifin’s largest acquisition ever, and CEO Thomas Williams told the Wall Street Journal when the deal was announced that he didn’t expect any divestitures would be necessary to comply with antitrust regulations. WSJ notes the DoJ action comes as recent deal activity in the aerospace arena has heated up, with United Technologies’ $23 billion buyout of Rockwell Collins, and Northrup Grumman’s $7.8 billion bid for Orbital ATK potentially drawing deeper scrutiny from regulators.

Canadian Retailers Metro, Jean Coutu in Talks

Grocer Metro is in talks to buy drugstore chain Jean Coutu for about C$4.5 billion ($3.6 billion) amid continued consolidation in the retail space spurred by intense competition from Amazon. The companies confirmed that they are in “exclusive discussions regarding a combination agreement,” with Metro seeking to acquire Jean Coutu for C$24.50 a share in a cash and stock deal.

Drugstores have been under pressure partly due to “efforts by provinces, led most recently by Quebec, to find savings from new generic drug regulations,” the Globe and Mail said. The paper noted grocers “have also felt the heat” of Amazon’s acquisition of Whole Foods, and “the possible reverberations in the industry as more supermarkets race to expand their e-commerce.” 

 

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