Mirae Asset pulls plug on $5.8bn US hotels deal

BY Fraser Tennant

Citing a breach of contract obligations, global investments company Mirae Asset has pulled out of a $5.8bn deal to acquire 15 US-located luxury hotels from Chinese insurer AnBang Insurance Group.

The South Korea-based Mirae said that Anbang – one of the largest insurance groups in China with a global network of over 30 million customers – had failed to remedy breaches of certain obligations regarding the acquisition, resulting in the termination of the transaction. AnBang bought the hotels for $6.5bn in March 2016 from US private equity firm Blackstone.

In September 2019, a consortium led by Mirae agreed to buy the hotels in New York, San Francisco, Los Angeles and other locations, from Anbang, which had been selling some of its overseas assets. The Chinese government took control of the insurer in 2018 after it took on too much debt. Chinese authorities also sentenced AnBang chairman Wu Xiaohui to 18 years in prison for fraud.

The transaction, in which Mirae placed a 10 percent deposit, had originally been scheduled to close on 17 April 2020.

“Among other things, AnBang had failed to timely disclose and discharge various material encumbrances and liabilities impairing the hotels and failed to continue the operation of the hotels in accordance with contractual requirements,” explained Mirae in a statement. “Mirae Asset will protect its rights vigorously in accordance with the terms of the agreement.”

For its part, AnBang has filed litigation against Mirae and affiliated entities in the US, claiming that Mirae’s decision to terminate the transaction is itself a violation of the deal and that AnBang did not breach any contractual obligations, a claim the asset manager denies. In its lawsuit filing, AnBang stated that it “seeks an order forcing defendants to specifically perform their obligations under a sale and purchase agreement and certain equity commitment letters”.

The collapse of the Mirae/AnBang deal is the latest M&A transaction to be impacted by the coronavirus (COVID-19) pandemic. The travel and tourism industries have been hit particularly hard, with hotels in affected regions seeing sharp declines in bookings.

News: Mirae Asset scraps $5.8 billion deal to buy U.S. hotels from China's Anbang

Boeing terminates $4.2bn Embraer deal

BY Richard Summerfield

Boeing Co announced it has abandoned a deal to buy 80 percent of the commercial airline business of Embraer, saying the Brazilian company had failed to satisfy necessary conditions of the agreement.

On Saturday, Boeing terminated its Master Transaction Agreement (MTA) with Embraer. Under the terms of the agreement, Boeing had an option to terminate the agreement until 24 April, subject to extension by either party if certain conditions were met. Boeing did not disclose what the unmet conditions were and declined to comment on the specifics. The company will pay a termination fee of $75m to Embraer.

In response to the termination, Embraer said Boeing was making false claims to back out of the transaction due to its “own financial condition and 737 Max and other business and reputational problems”. Embraer also said that it would “pursue all remedies”.

“Boeing has worked diligently over more than two years to finalise its transaction with Embraer,” said Marc Allen, president of Embraer Partnership & Group Operations. “Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”

In 2018, Boeing and Embraer said they expected to close the deal by late 2019, pending regulatory approval. The deal faced an antitrust probe from the European Union. Boeing said that all regulatory authorities had approved the deal, except for the European Commission.

For Boeing, the deal a would have strengthened its position in the smaller jet market, adding the E-Jet-E2 to its portfolio.

Going forward, the two companies have confirmed that they will maintain their existing MTA, originally signed in 2012 and expanded in 2016, to jointly market and support the C-390 Millennium military aircraft.

News: Boeing Backs Out of $4.2 Billion Embraer Joint Venture Deal

Couche-Tard drops Caltex bid for now

BY Richard Summerfield

The proposed $5.6bn merger between Canadian convenience store Alimentation Couche-Tard and fuel retailer Caltex Australia has been shelved as the repercussions of the COVID-19 outbreak continue to be felt around the world.

In a statement, Couche-Tard confirmed that while it still believes that Caltex is a good fit for its expansion into Asia, and would be willing to re-engage once coronavirus-related uncertainty subsides, in the short-term it plans to prioritise safeguarding its own business.

“We remain convinced of the long-term financial and strategic merits of an acquisition of Caltex and all the benefits it would offer to the shareholders of both companies,” said Brian Hannasch, president and chief executive of Couche-Tard. “Despite the COVID-19 situation, we have worked to complete due diligence on schedule through a significant investment of time and money. Our current plan would be to reengage the process once there is sufficient clarity as to the global outlook, and the work done to date should mean that we will be able to quickly formalize our proposal at that time.”

He added: “Couche-Tard is focused on managing its own business through this period and prioritizing the health, safety and well-being of its employees, customers and the communities it serves.”

For Caltex, the collapse of the deal comes as oil prices go into freefall. US crude oil prices turned negative as drops in global fuel demand impacted storage capacity and sales. OPEC has agreed to cut production by an initial 9.7 billion barrels per day yet to flow on to the market. In response, Caltex has brought forward a planned maintenance shutdown of its Brisbane refinery in a bid to soften the economic hit.

Steven Gregg, chairman of Caltex, said in a separate statement: “We remain confident in the strength of Caltex as an independent business, and should we receive an approach in the future would be willing to consider it on its merits.”

News: Couche-Tard shelves $5.6 billion Caltex Australia buyout as deal becomes latest virus victim

SoFi to acquire Galileo for $1.2bn

BY Richard Summerfield

Despite the scarcity of deals given the COVID-19 outbreak, some M&A activity is still occurring. On Tuesday, non-profit online student lender Social Finance Inc (SoFi) announced it had agreed to acquire payments and banking technology provider Galileo Financial Technologies for $1.2bn in cash and stock, subject to regulatory approval.

The deal will see Salt Lake City-based Galileo continue to operate as an independent subsidiary of SoFi Inc, with current chief executive, Clay Wilkes, remaining in charge of the company.

“SoFi has established itself as a leader in the fintech sector, providing our more than one million members a full array of financial products to help them get their money right,” said Anthony Noto, chief executive of SoFi. “The response by our members to our innovation across borrowing, saving, spending, and investing has motivated us to think bigger, bolder and more expansively given the insatiable consumer appetite for financial services innovation.

He added: “Together with Galileo, we will partner to build on our companies’ strengths to drive even greater financial technology innovation, making those products and services available to both current and future partners. While we march forward on our mission to help people achieve financial independence through our own direct efforts, with Galileo, we can enable a broader ecosystem of companies to join us in helping the world achieve financial independence.”

“SoFi has built a very strong diversified financial services company focusing on a full suite of financial services,” said Mr Wilkes. “These are products that many of our leading fintech clients are asking for. Distributing products through our enterprise class API is the vision behind this combination. I think it’s very powerful.

He continued: “We’re excited to work with SoFi to build on the services that have made Galileo the leading supplier of infrastructure services to leading financial, technology, and fintech companies. With the help of SoFi, we intend to continue to grow with and support all of our existing clients and the product roadmaps that they have defined.”

News: SoFi To Acquire Galileo Financial Technologies

Costco acquires Innovel from Transformco for $1bn

BY Fraser Tennant

In a $1bn deal which significantly bolsters its distribution, logistics and delivery capabilities, US multinational Costco has acquired third-party delivery and logistics provider Innovel Solutions from  integrated retailer Transform Holdco (TFCO) LLC, the operator of Sears and Kmart stores.

Under the terms of the acquisition agreement, Costco will provide TFCO warehousing, delivery and installation services to Sears and Kmart members on a long-term commercial arrangement. Costco will also retain over 1500 Innovel employees on a go-forward basis.

A provider of warehousing, transportation, installation and home delivery services to retail, manufacturing and commercial clients, Innovel’s network covers nearly 90 percent of the US and Puerto Rico. The company also regularly ranks in the top quartile of customer satisfaction scores. Costco has been a customer of Innovel since 2015.

As part of its acquisition of Innovel, Costco will enter into a long-term commercial agreement in which it will leverage TFCO’s Service Live platform to source technicians for complex installations across the country.

“We have had a great relationship with Innovel and share a philosophy of taking care of our members,” said Craig Jelinek, chief executive of Costco. “We believe the acquisition will allow us to grow our e-commerce sales of big and bulky items at a faster rate.”

Costco’s acquisition of Innovel comes as other large retailers, such as Walmart, Amazon, Target, The Kroger Cos., Albertsons Cos., Ahold Delhaize USA and Dollar General, boost their distribution, logistics and delivery capabilities to meet demand for fast-growing product categories and adapt to an emerging omnichannel business model. These efforts include the construction of new distribution centres, automated facilities to fulfill online orders and dedicated space in stores for e-commerce orders.

For TFCO, Costco’s acquisition of Innovel allows it to focus on its core assets and capabilities to deliver service excellence for its members and customers. TFCO believes this programme will give it the best chance to grow value and to maintain a meaningful retail presence in the US to support the expansion of its core businesses.

News: Costco buys logistics firm Innovel for $1 billion