BC Partners to acquire European cable and media operator from KKR

BY Fraser Tennant

In a deal which will boost its position as the communication and media leader in South Eastern Europe, United Group B.V. is to be acquired by private equity (PE) firm BC Partners from fellow investor KKR.

Following completion of the transaction, KKR, which manages multiple alternative asset classes, including PE, energy, infrastructure, real estate and credit, will maintain a substantial minority stake.

The financial terms of the transaction have not been disclosed.

“We are delighted to partner with United Group’s management team and KKR to support the company’s next phase of growth,” said Nikos Stathopoulos, a partner at BC Partners. “United Group is a high-quality asset, with defensive growth characteristics, leading infrastructure, differentiated content and loyal customers. Its attractive and integrated business model and regional leadership position it well for further organic and acquisitive growth.”

Since its inception, BC Partners’ PE team has completed 104 PE investments in companies with a total enterprise value of €129bn and is currently investing its tenth private equity fund.

Investing in United Group since 2014, KKR has helped the company to become the leading provider of communications and media services in South Eastern Europe. United Group’s fibre and cable networks have the largest presence in the region, covering 1.82 million homes which benefit from broadband speeds substantially higher than local peers and high quality local and international content.

Over the past 18 years, United Group has expanded its presence through both organic growth and acquisitions, now employing over 3400 staff. “We are proud of the way in which United Group has developed,” said Jean-Pierre Saad, managing director at KKR. “It is a great example of a truly convergent operator across communications and media with market leading product innovation and services.”

Acting as advisers to BC Partners are Morgan Stanley and LionTree, while Credit-Suisse is advising United Group. The transaction is subject to relevant regulatory approvals.

Mr Saad concluded: “We will remain closely committed to the further development of United Group and are looking forward to working with BC Partners and the management team to further strengthen the company’s growth.”

News: BC Partners snaps up majority ownership of cable firm United Group from KKR

Barrick Gold and Randgold Resources agree $6.5bn deal

BY Richard Summerfield

Barrick Gold Corporation, the world’s largest gold mining company, has agreed to acquire Randgold Resources for $6.5bn in an all-share deal, securing the biggest deal in the gold mining space for over three years.

The two companies expect the deal to close by the first quarter of 2019, pending customary closing conditions and shareholder approval. Once completed, Barrick, which will be listed in both New York and Toronto, will own five of the world’s 10 lowest-cost gold mines. The majority of the company’s focus will be on Africa and the Americas.

Barrick’s shareholders will own about two-thirds of the new business and Randgold investors the rest. Under the terms of the deal, each Randgold shareholder will receive 6.1280 new Barrick shares for each share of the Randgold, the companies said.

In a statement announcing the deal, John L. Thornton, executive chairman of Barrick, said: “The combination of Barrick and Randgold will create a new champion for value creation in the gold mining industry, bringing together the world’s largest collection of Tier One Gold Assets, with a proven management team that has consistently delivered among the best shareholder returns in the gold sector over the past decade. Our overriding measure of success will be the returns we generate and not the number of ounces we produce, balancing boldness and prudence to deliver consistent and growing returns to our fellow owners, a truly simple but radical and achievable concept. There are no premiums in the merger because we strongly believe in the opportunity to add significant value for our shareholders from the disciplined management of our combined asset base and a focus on truly profitable growth.”

“Our industry has been criticised for its short-term focus, undisciplined growth and poor returns on invested capital,” said Mark Bristow, chief executive of Randgold. “The merged company will be very different. Its goal will be to deliver sector leading returns, and in order to achieve this, we will need to take a very critical view of our asset base and how we run our business, and be prepared to make tough decisions. By employing a strategy similar to the one that proved very successful at Randgold, but on a larger scale, the New Barrick Group will leverage some of the world’s best mines and talent to create real value for all stakeholders.”

2018 has been a challenging year for the industry. The price of gold has fallen more than 8 percent and the shares of both Barrick and Randgold have declined more than 30 percent. The companies hope that the merger will enable them to cut costs and drive profitability.

News: Canada's Barrick Gold to buy Randgold for $6.5 billion

Marsh & McLennan to buy JLT for $5.7bn

BY Richard Summerfield

Marsh & McLennan, one of the world’s largest insurance brokers, has agreed to acquire British rival Jardine Lloyd Thompson Group (JLT) for around $5.7bn. The deal, the latest in a series of mergers in the insurance sector, is expected to close in spring 2019, subject to customary antitrust and regulatory approvals, and the approval of JLT’s shareholders.

Under the terms of the deal, holders of JLT's common shares will receive a cash consideration of £19.15 for every JLT share held, a 38 percent premium on the average price of JLT’s shares over the past three months. The total cash consideration equates to $5.6bn in fully diluted equity value, or an estimated enterprise value of $6.4bn. The transaction will be funded by a combination of cash on hand and proceeds from debt financing.

"The acquisition of Jardine Lloyd Thompson creates a compelling value proposition for our clients, our colleagues and our shareholders,” said Dan Glaser, president and chief executive of Marsh & McLennan. “The complementary fit between our companies creates a platform to deliver exceptional service to clients and opportunities for our colleagues. On a personal level, I have come to know, and respect, Dominic Burke and his management team from my time both at MMC and as an underwriter. I am confident that with the addition of the talented colleagues of JLT, Marsh & McLennan will be an even stronger and more dynamic company,” he added.

The deal is expected to achieve annual cost synergies of around $250m within three years of completion, according to Marsh & McLennan, though the realisation of these cost synergies will likely result in one-time integration costs of approximately $375m. In total, Marsh & McLennan expects to cut 2 to 5 percent of the combined company’s jobs. Savings are also expected in real estate and IT operations. Annual revenue is expected to rise to $17bn after the deal closes.

The insurance space has seen a spate of consolidation deals announced this year as the industry grows accustomed to tougher regulations and more attractive prices. In March, AXA agreed to acquire XL Group for $15.3bn, around a month after American International Group said it would buy reinsurer Validus for around $5.6bn.

News: Marsh & McLennan to pay £4.3 billion for British insurance broker JLT

Energy M&A dominates market – EY report

BY Richard Summerfield

Global M&A activity in the power and utilities sector reached a record high of $180bn in the first half of 2018, according to EY’s ‘Power transactions and trends Q2 2018’ report.

Renewables were responsible for nearly half of all deals announced in the second quarter, with 63 contracts totalling $12.9bn announced.

Despite the all-time high in M&A activity, there was a 14 percent decline, quarter-on-quarter, in deal value to $83bn, however.

Momentum also began to gather in the clear energy space .The European Union’s landmark agreement to achieve 32 percent renewable energy consumption by 2030 was particularly noteworthy. Equally, three other renewables deals in the US were announced, totalling $3.8bn.

Developing markets also emerged as an investment destination for traditional M&A. Thailand and India saw $5.3bn and $3.2bn worth of deals respectively. In Estonia,  deals by both domestic and foreign investors reached $600m.

European activity was strong, particularly in the second quarter, with $45.7bn worth of deals recorded, representing 55 percent of total power and utility global deal value. Asia-Pacific saw a 78 percent quarter-on-quarter increase in deal value to $10.3bn. Renewables were the driving force behind this increase, with 25 clean energy deals worth a total of $3.8bn announced during the period.

The majority of transactions in Q2 were in the US, which generated 75 percent of the total deal value for the quarter, of which $21.1bn or 78 percent were domestic deals. Consolidation was a major driving force. For example, Center Point Energy bid $8.1bn for Vectren and NextEra Energy's bid $5.8bn bid for Gulf Power.

“The first half of 2018 reflects a complex deal environment characterised by a changing generation mix and a growing appetite for renewables investment, which will continue to drive the deal agenda into the second half of the year,” said Miles Huq, EY global power & utilities transactions leader.

He added: “Around the world, we are also seeing utilities companies increasingly exploring new technologies, including battery storage, electric vehicle infrastructure and digital grid technologies. With sector convergence on the rise, we are also seeing more non-conventional competitors emerge as the power and utilities landscape continues to undergo transformation.”

Global outbound deal activity was led by China, which accounted for $31.2bn of cross-border energy deals, including the largest deal of the quarter: the $27.4bn takeover bid of Portugal's EDP by China Three Gorges.

Report: Power transactions and trends Q2 2018

TPG and Vodafone Australia combine in merger of equals

BY Fraser Tennant

In a combination that will establish a leading challenger full-service telecommunications provider in Australia, TPG Telecom Ltd and Vodafone Hutchison Australia (VHA) are to merge in a transaction with a pro forma enterprise value of approximately $15bn.  

The merger – a Scheme Implementation Deed (SID) – combines two highly complementary businesses to create a leading integrated, full-service telecommunications company, with a comprehensive portfolio of fixed and mobile products for consumers and enterprises.

It is also envisaged that the merger of TPG, which has Australia’s second largest fixed line residential subscriber base, and VHA, the country’s third largest mobile operator, will create a more effective challenger to Optus and Telstra – the two biggest mobile companies in Australia, with a combined market share of more than 80 percent.

Upon completion, TPG shareholders will own 49.9 percent of the merged group with VHA shareholders owning the remaining 51.1 percent. The merger of TPG and VHA has been unanimously recommended by the board of TPG.

“The merger with VHA represents an exciting step-change in TPG’s evolution, and will benefit both our shareholders and Australian consumers alike," said David Teoh, chairman and chief executive of TPG. “Together TPG and VHA will own the infrastructure required to deliver faster services and more competitive value propositions.” Mr Teoh will be chairman of the merged group while Iñaki Berroeta, currently chief executive of VHA, will be managing director.

“We are joining with TPG from a position of strength and momentum," said Mr Berroeta. “VHA has a track record of reliability, stability and a fantastic customer experience, which has seen the business prosper. Together, TPG and VHA will provide stronger competition in the market and greater choice for Australian consumers and enterprises across fixed broadband and mobile.”

Alongside the merger agreement, TPG and VHA have signed a separate joint venture (JV) agreement to acquire, hold and licence 3.6 GHz spectrum. The JV will not terminate if the merger fails to proceed.

Mr Berroeta concluded: “The combination of TPG and VHA will create an organisation with the necessary scale, breadth and financial strength for the future. The equal terms of the combination preserves the competitive strengths of the two businesses.”

News: Vodafone in $11bn Australian merger