Sainsbury’s shops at ASDA

BY Richard Summerfield

The UK’s second biggest food retailer, J Sainsbury’s, has agreed to acquire Walmart subsidiary Asda in a deal valued at £7.3bn.

The deal, which came as a shock to many, will likely generate a number of competition concerns, since it would create a new grocery superpower accounting for nearly £1 in every £3 spent on groceries on the UK high street.

The deal for Asda, the number three ranked UK supermarket chain, will see Walmart get nearly £3bn in cash and 42 percent of the newly-combined business. Walmart paid £6.7bn for Asda in 1999.

“We believe that the combination of Sainsbury’s and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues,” said David Tyler, chairman of Sainsbury’s. “As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy. The proposal will bring together two of the most experienced and talented management teams in retail at a time when the industry is undergoing rapid change. We welcome Walmart as a significant shareholder and look forward to working closely with them.”

The companies have confirmed that both the Sainsbury’s and Asda brands will be maintained and there are no planned store closures or disposals as a result of the combination. However, given that the combined company would have a workforce of around 360,000, there are significant concerns about an emerging duopoly in the sector. The UK’s Competition and Markets Authority has stated that it is likely to review the combination, which could have consequences for the workforce.

Joe Clarke, the acting national officer of the Unite union, noted that the deal could have implications for thousands of jobs. “Staff are already facing uncertainty through restructuring and changes to contracts at [Sainsbury’s]. Sainsbury’s bosses need to give workers clarity over what the future could hold and assurances over jobs as matter of urgency,” he said.

Roger Burnley, chief executive of Asda, said: “The combination of Asda and Sainsbury’s into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice. Asda will continue to be Asda, but by coming together with Sainsbury’s, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive.”

News: Sainsbury's to top Britain's Tesco with £7.3 billion swoop on Walmart's Asda

T-Mobile and Sprint agree $26bn mega-merger

BY Fraser Tennant

In a combination set to create thousands of American jobs and boost US economic growth, mobile carrier rivals T-Mobile US and Sprint Corporation have agreed to merge in an all-stock transaction valued at $26bn. 

The deal, which follows months of negotiation between T-Mobile's parent, Deutsche Telekom, and Japan's SoftBank, parent of Sprint, is expected to create more competition and unmatched value for customers across the US, with existing T-Mobile and Sprint customers benefiting from increased speeds, coverage and performance.

The combined company will have a market value of $146bn and be named T-Mobile.

Moreover, the new company will have the network capacity to create a nationwide 5G network in the critical first years of the 5G innovation cycle – the years that will determine if US firms lead, as they did in 4G, or follow in the 5G digital economy.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation and a second-to-none network experience – and do it all so much faster than either company could on its own,” said John Legere, current president and chief executive of T-Mobile US. “As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.”

Mr Legere will serve as chief executive of the new entity while Marcelo Claure, the current chief executive of Sprint, will serve on the board.

“The combination of these two dynamic companies can only benefit the US consumer," said Mr Claure. “Both Sprint and T-Mobile have similar DNA, and we intend to build the world’s best 5G network that will make the US a hotbed for innovation and redefine the way consumers live and work.”

The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close no later than the first half of 2019.

Mr Claure concluded: “I am confident this combination will spur job creation and ensure opportunities as part of a larger, stronger combined organisation. As we do this, we will force our competitors to follow suit, as they always do, which will benefit the entire country.”

News: T-Mobile agrees $26bn mega-merger with Sprint

Takeda proposes to acquire Shire in $65bn deal

BY Fraser Tennant

In a deal that could spark a new wave of big pharma deals, Japan’s Takeda Pharmaceutical Company Limited has made a $65bn offer to acquire Jersey-based rare disease drugmaker Shire Plc.

The deal, if completed, would be the biggest acquisition of a drug company this year.

Earlier this week, the board of Shire confirmed that it would recommend the offer to its shareholders, subject to satisfactory resolution of the other terms of the possible offer, including completion of reciprocal due diligence by Shire on Takeda.

With the deal in a preliminary phase, and Takeda having the right to make a lower offer or walk away should Shire receive a higher rival bid, the Japanese company, under UK takeover rules, is required to make its intentions known by 8 May 2018.

Long seen as a likely target for a takeover, Shire was almost acquired by US drugmaker AbbVie Inc in 2014, until reforms to US tax rules scuppered the deal. In addition, Shire was the subject of an aborted acquisition attempt by Botox-maker Allergan Plc last week.

A firm offer by Takeda for Shire is subject to the following conditions: (i) satisfactory completion of a confirmatory due diligence review by Takeda; (ii) the unanimous and unconditional recommendation of the board of Shire; and (iii) final approval by the board of Takeda.

If the deal gets the go-ahead, it would be the largest overseas acquisition by a Japanese company and make Takeda one of the world’s leading drugmakers. The offer to acquire Shire is the fifth to have been made by Takeda in recent months. This proposal is worth 49.01 pounds per share, comprised of 27.26 pounds per share in new Takeda shares and 21.75 pounds per share in cash.

At completion, Shire shareholders would own approximately 50 percent of the enlarged Takeda and the new Takeda shares will be listed in Japan and in the US through an American Depositary Receipt (ADR) programme.

A global leader in serving patients with rare diseases, Shire develops best-in-class therapies across a core of rare disease areas, including hematology, immunology, genetic diseases, neuroscience and internal medicine, with growing therapeutic areas in ophthalmics and oncology. The firm reaches patients in more than 100 countries.

However, the firm has been struggling with debt and sold its oncology business to a French drugmaker for $2.4bn earlier this month.

News: Shire willing to back $64 billion Takeda bid, market signals doubts

Global M&A value hit record high in Q1 2018, reveals new report

BY Fraser Tennant

The dramatic surge in dealmaking activity at the tail end of 2017 has continued into 2018, with the value of global M&A reaching a record Q1 value, according to a new report by Mergermarket.

In its ‘Global & Regional M&A Report Q1 2018’, the M&A data and intelligence provider notes that: (i) global M&A reached record levels as corporates pursue innovation through M&A; (ii) private equity (PE) activity recorded its fourth consecutive $100bn figure quarter for buyouts; and (iii) Q1 2018 deal value is up 18 percent on Q1 2017’s value, recording $890.7bn (across 3774 deals).

In addition, while large tech companies have looked to diversify their offering through M&A, more traditional firms also had to react to newer, more innovative firms, with many looking towards defensive consolidation. Recent trade disputes between China and the US have served to boost these defensive strategies further.

Furthermore, global PE activity remained remarkably high, with many investors pursuing larger targets as the mid-market became saturated. In Q1 2018 there were 699 buyouts worth a total of $113.6bn, representing the strongest start to the year since 2007. Q1 2018 is also the fourth consecutive quarter in which buyout activity has reached the $100bn figure.

“The extraordinary surge in dealmaking seen at the end of 2017 has carried through into 2018,” said Jonathan Klonowski, EMEA research editor at Mergermarket. “Global M&A hit its highest Q1 value on record as pressure from investors and the search for innovation continues to push corporates towards M&A. PE activity also rebounded to pre-financial crash highs.”

In addition, the report reveals that 14 deals which breached the $10bn mark have been recorded so far this year, including the $67.9bn deal between Cigna and Express Scripts and the $46.6bn transaction which will see German utility Eon acquire Innogy, a subsidiary of German energy company RWE. 

Mr Klonowski added: “Following on from the trend seen in 2017, intra-European dealmaking has once again been active across the continent in the first quarter with the top three deals all being conducted between European companies.”

Report: Global & Regional M&A Report Q1 2018

Novartis agrees AveXis acquisition

BY Richard Summerfield               

Swiss drug manufacturer Novartis AG has agreed to acquire boutique gene-therapy company AveXis Inc for $8.7bn.

The deal will see Novartis pay $218 in cash for each AveXis share held, a 72 percent premium to AveXis’s 30-day volume-weighted average stock price. The deal is expected to close in mid-2018.

“The commitment, drive and expertise of the entire AveXis team has created significant stockholder value, and we are pleased that Novartis recognizes that value in the potential of AVXS-101, our first in class manufacturing capabilities and our gene therapy pipeline, all of which serve to transform the lives of people devastated by rare and life threatening neurological diseases such as SMA, Rett syndrome and genetic ALS,” said Sean Nolan, president and chief executive of AveXis. “With worldwide reach and extensive resources, Novartis should expedite our shared vision of bringing gene therapy to these patient communities across the globe as quickly and safely as possible.”

Since Mr Narasimhan became CEO of Novartis International, the company has refocused its efforts on expanding into new areas. Focused medicines and gene therapy have become key areas for the company. Earlier this year Novartis made a $170m deal with Spark for rights to use its blindness treatment, Luxturna, outside the US.

According to a statement announcing the deal, AveXis has several ongoing clinical studies for the treatment of SMA, an inherited neurodegenerative disease caused by a defect in a single gene.

“The proposed acquisition of AveXis offers an extraordinary opportunity to transform the care of SMA. We believe AVXS-101 could create a lifetime of possibilities for the children and families impacted by this devastating condition,” said Mr Narasimhan. “The acquisition would also accelerate our strategy to pursue high-efficacy, first-in-class therapies and broaden our leadership in neuroscience. We would gain with the team at AveXis another gene therapy platform, in addition to our CAR-T platform for cancer, to advance a growing pipeline of gene therapies across therapeutic areas. We look forward on the closing of the deal to a smooth transition for AveXis employees and welcoming them to Novartis.”

Paul Hudson, chief executive of Novartis Pharmaceuticals, said: “Bringing AveXis on board would support both our ambition to be a leader in neurodegenerative diseases and our Neuroscience franchise priorities to strengthen our position in devastating pediatric neurological diseases such as SMA. We relish the opportunity to leverage our expertise, our 70-plus year heritage in neuroscience and our global footprint to help AVXS-101 benefit high-need SMA patients around the world.”

Novartis will likely fund the deal through the $13bn it recouped for selling its stake in a consumer healthcare joint venture with its partner GlaxoSmithKline. The deal, which was announced in late March, saw GSK take control of a number of products, including Sensodyne toothpaste, Panadol headache tablets, muscle gel Voltaren and Nicotinell patches.

News: Novartis bets big on gene therapy with $8.7 billion AveXis deal