LVMH goes shopping at Tiffany’s

BY Richard Summerfield

The world’s biggest luxury group LVMH has agreed to acquire US jeweller Tiffany & Co in a deal worth $16.2bn.

The deal will see Tiffany shareholders receive $135 per share held in cash, a premium of 7.5 percent over Tiffany’s closing share price on Friday, and more than 50 percent above where it stood before LVMH’s interest emerged. The acquisition of Tiffany will strengthen LVMH’s position in the jewellery space and further increase its presence in the US.

LVMH first approached Tiffany in late October with a $14.5bn bid which was rejected as too low. The higher offer has been approved by the boards of both companies but is still subject to the approval of Tiffany’s shareholders. The deal is expected to be completed by the middle of next year.

“We are delighted to have the opportunity to welcome Tiffany, a company with an unparalleled heritage and unique position in the global jewellery world, to the LVMH family,” said Bernard Arnault, chairman and chief executive of LVMH. “We have an immense respect and admiration for Tiffany and intend to develop this jewel with the same dedication and commitment that we have applied to each and every one of our Maisons. We will be proud to have Tiffany sit alongside our iconic brands and look forward to ensuring that Tiffany continues to thrive for centuries to come.”

“Following a strategic review that included a thoughtful internal process and expert external advice, the Board has concluded that this transaction with LVMH provides an exciting path forward with a group that appreciates and will invest in Tiffany's unique assets and strong human capital, while delivering a compelling price with value certainty to our shareholders,” said Roger N. Farah, chairman of the board of directors of Tiffany.

LVMH expects the deal, which will be financed by bond issues, will add around €500 to €600m to its operating profits in the first 12 month.

The deal for Tiffany is the latest in a succession of notable deals for LVMH, which has built up a large portfolio of luxury brands across different retail sectors, including Moët & Chandon, Dom Perignon, Givenchy and Louis Vuitton.

News: LVMH aims to restore Tiffany's sparkle with $16.2 billion takeover

Demand for M&A insurance grows

BY Richard Summerfield

There has been a notable increase in demand for M&A insurance, according to a new report from Aon.

The report, ‘Insurance for M&A: a coming of age and an exciting future ahead’, notes that following a decline in M&A activity after the 2008 financial crisis, the volume of deals reached pre-recession values in 2015 and has increased ever since. The recent economic environment has been favourable for M&A, as interest rates have remained low, company balance sheets are stronger, and deal activity has risen significantly among private equity firms.

According to the report, 3200 deals were transacted globally using warranty and indemnity (W&I) insurance in 2018. W&I insurance is the largest insurance product by premium volume, however buyers and sellers are also looking to tax insurance, litigation and contingency insurance, and bespoke products that include environmental or cyber policies. The market value for transactional liability solutions reached $2.3bn in 2018, a 35 percent increase from 2014.

“Buyers, sellers, and legal and professional service firms are fully aware of the value of insurance during the transaction process, and this has culminated with improved infrastructure within the insurance market,” said Alistair Lester, chief executive of Aon M&A and Transaction Solutions for EMEA. “Insureds now have access to more sophisticated products, a wider choice of providers, larger coverage limits, lower premiums, and services such as capital advisory and consultancy.”

“For an insurer or an MGA, working out how best to capture the opportunities begins with an understanding of the likely evolution of the marketplace. We have developed forecasts for the growth of the marketplace in Europe, including the products that will dominate, evolutions in coverage and how local markets will operate,” said Rohan Dixon, chief executive and president of Aon Inpoint. “This enables us to help insurers identify where the opportunities are, how to access them and how they can improve their capabilities and offerings to better serve buyers and sellers in the M&A environment.”

Report: Insurance for M&A: a coming of age and an exciting future ahead

Blackstone takes £3bn majority stake in MagicLab

BY Fraser Tennant

As part of its push to invest in companies with robust growth profiles, PE firm Blackstone is to acquire a majority stake in dating app startup MagicLab for $3bn.

Founded in 2006 by its chief executive Andrey Andreev, MagicLab’s suite of brands – which includes the dating and social networking apps Bumble and Badoo – has connected and transformed the lives of over 500 million people around the world across dating, social and business.

Constantly seeking new ways to drive long-term growth, Mr Andreev has been at the forefront of innovation in the dating industry and has continued to invest in finding the most talented entrepreneurs and tech visionaries to mentor.

“Blackstone presented MagicLab with a great opportunity to further develop the brands and platform, and I am confident Blackstone will take MagicLab to the next level in terms of growth and expansion,” said Mr Andreev. “I am incredibly proud of the company, and of how we have connected millions of people around the world.”

As part of the acquisition, Mr Andreev will be selling his stake and stepping down from the business. He will be replaced as chief executive by Whitney Wolfe Herd, founder and chief executive of Bumble, who, together with Blackstone, will work to accelerate the business’ growth even further.

“At MagicLab, I have had the pleasure of working with some of the best and most talented entrepreneurs,” continues Mr Andreev. “My aim now is to ensure a smooth and successful transition before I embark on a new business venture in search of innovative leaders with new and exciting ideas. I am grateful for all the support of my partners and employees over the years as we could not have gotten to this point without them. I wish MagicLab and Blackstone every success.”

Mr Wolfe Herd added: “This transaction is an incredibly important and exciting moment for Bumble and the MagicLab group of brands and team members. Blackstone is world-class at maximising the success of entrepreneur-led companies, which presents a tremendous opportunity.”

Martin Brand, a senior managing director at Blackstone, concluded: “We look forward to partnering with MagicLab to help fuel the company’s continued expansion in the years ahead.”

News: Blackstone acquires dating apps Bumble, Badoo

Stryking the Wright deal

BY Richard Summerfield

Medical device manufacturer Stryker Corp has announced that it will acquire smaller rival Wright Medical Group in a deal worth $5.4bn, including convertible notes.

Under the terms of the deal, Wright shareholders will receive $30.75 in cash per share, giving the deal an equity value of $4bn. The agreed price represents a premium of 39.7 percent to the company’s close price on Friday. The boards of both companies have approved the deal, which is expected to close in the second half of 2020, subject to customary closing conditions and pending regulatory approval.

“This acquisition enhances our global market position in trauma & extremities, providing significant opportunities to advance innovation, improve outcomes and reach more patients,” said Kevin Lobo, chairman and chief executive of Stryker. “Wright Medical has built a successful business, and we look forward to welcoming their team to Stryker.”

“We believe this transaction will provide truly unique opportunities and will create significant value for our shareholders, customers and employees,” said Robert Palmisano, executive director, chief executive and president of Wright Medical. “By merging our complementary strengths and collective resources, we will be able to advance our broad platform of extremities and biologics technologies with one of the world’s leading medical technology companies that shares our vision of delivering breakthrough and innovative solutions to improve patient outcomes.”

By acquiring Wright Medical, Stryker will expand its “trauma and extremities business” through Wright Medical's “highly complementary product portfolio and customer base”, the companies said in a statement. Stryker also believes the deal will strengthen its trauma and extremities business in “the fastest growing segments in orthopaedics”.

Founded in 1950, Wright Medical manufactures implants to treat injuries to parts of the body including the shoulders, elbows and ankles, and has recorded global sales approaching $1bn.

The deal is the latest in a series of mergers in the medical device industry. In recent years, 3M agreed to buy wound-care maker Acelity for $6.7bn including debt, and Boston Scientific acquired BTG for £3.3bn in cash. 

News: Stryker boosts bone implants with $4 billion Wright Medical buyout

China-driven M&A in North America plummets in 2019, reveals new report

BY Fraser Tennant

M&A activity in North America instigated by Chinese investors dropped sharply in 3Q 2019, according to a new report by Pitchbook.

In its ‘3Q 2019 North American M&A Report’, the financial information and technology provider reveals that a little over $20bn worth of North American M&A deals with Chinese acquirers have been consummated in 2019 through 3Q –  a massive downturn from the $298.5bn that was invested in 2016.

According to the report, the plummeting M&A activity by Chinese acquirers is due to the increasingly tense relationship between the US and China being played out in the trade war, with a seemingly unending series of tit-for-tat tariffs the order of the day in recent years.

“M&A has been one of the areas hit hardest by the trade war, with deal value for North American target companies with a Chinese acquirer on pace to fall by over 90 percent since peaking in 2016,” states the report. “The US/China trade war rages on and has led to a precipitous decline in cross-border activity, with far fewer Chinese companies willing or able to acquire US companies.”

Furthermore, not only have American and Chinese companies avoided doing deals together, but the US government has occasionally prevented deals, with the Committee on Foreign Investment in the US (CFIUS) blocking a number of major transactions, such as Singapore-based Broadcom’s $100bn-plus attempt to purchase Qualcomm, reportedly on national security grounds.

Beyond the waning M&A activity between the two economic powerhouses, the report notes that North American M&A activity continues apace, with 3Q 2019 seeing robust deal flow totalling over $600bn. Drilling down, eight deals above $10bn closed during the quarter, accounting for over one-third of total deal value.

“In 2019 to date, we have seen over 8000 deals close with an accumulative value of nearly $1.6 trillion, approximately on pace with the first three quarters of 2018,” adds the report. “Much of this quarter’s total value was attributed to just a few colossal deals, such as such as Bristol-Myers Squibb’s  $74bn acquisition of Celgene and BB&T’s $66bn acquisition of SunTrust Bank.”

The report concludes: “We expect M&A value to end the year on a high note, barring any broader economic slowdown.”

Report: 3Q 2019 North American M&A Report