Centennial and Colgate Energy to combine in $7bn deal

BY Fraser Tennant

In a major merger of equals transaction, US oil and gas company Centennial Resource Development, Inc. and oil exploration and production company Colgate Energy Partners III, LLC are to combine in a deal valued at $7bn.

The merger values Colgate at approximately $3.9bn and is comprised of 269.3 million shares of Centennial stock, $525m of cash and the assumption of approximately $1.4bn of Colgate’s outstanding net debt.

The cash consideration and the repayment of Colgate’s outstanding credit facility borrowings at closing are expected to be funded with cash on hand and borrowings under an upsized revolving credit facility.

“This transformative combination significantly increases scale and drives accretion across all our key financial and operating metrics,” said Sean Smith, chief executive of Centennial. “Importantly, the combined company is expected to provide shareholders with an accelerated capital return programme through a fixed dividend coupled with a share repurchase plan.”

Moreover, the combined company will be the largest pure-play exploration and production (E&P) company in the Delaware Basin with approximately 180,000 net leasehold acres, 40,000 net royalty acres and total current production of approximately 135,000 barrels of oil per day.

“The merger of Colgate and Centennial is compelling from a financial, operational and strategic standpoint, establishing a leading Permian Basin independent,” said James Walter, co-chief executive of Colgate. “We believe the pro forma company is positioned to maximise returns for our new investor base, with our combined management team bringing a track record of operational excellence and strategic value creation.”

The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the second half of 2022.

Upon closing, Sean Smith will serve as executive chair of the board of directors of the newly combined business, and James Walter and Will Hickey, co-chief executives of Colgate, will lead the company as co-chief executives and serve on the board of directors.

The combined company will operate under a new name which is expected to be announced prior to closing.

Mr Hickey concluded: “We expect the combined company will be a top-tier, low-cost operator that is able to deliver better margins and shareholder returns.”

News: Centennial, Colgate Energy combine to create $7-bln Permian basin producer

Philip Morris agrees $16bn Swedish Match takeover

BY Richard Summerfield

Philip Morris International has agreed to acquire Swedish Match AB, a maker of nicotine pouches, for $16bn.

The deal, which has been recommended by Swedish Match’s board of directors, is expected to close in Q4 2022, subject to acceptance by Swedish Match shareholders, regulatory approvals and other customary conditions.

Philip Morris has made a cash offer for the Stockholm-based group at 106 crowns per share, valuing it at 161.2 billion crowns - $16bn. However, according to hedge fund Bronte Capital, which owns about 1 percent of Swedish Match, the offer price is “unacceptable”. Bronte has reiterated its opposition to the takeover. Under Swedish law, 90 percent of shareholders need to agree to the deal for it to proceed.         

The deal, should it be completed, is a significant bet on cigarette alternatives, an area in which Philip Morris is already a major player. The company has been at the forefront of the tobacco industry’s push to diversify beyond cigarettes as regulations become ever more restrictive globally. The company developed the IQOS heated-tobacco system and last year agreed to take over Vectura Group Plc, a developer of asthma drugs. It also acquired Fertin Pharma, which produces a smoking-cessation aid.

Swedish Match’s products include Zyn nicotine pouches, which are tobacco-free and rapidly growing in popularity in both the US and Scandinavia. Swedish Match makes most of its profit from Swedish-style snuff called ‘snus’, which is banned in the European Union, outside of Sweden. In the US, the Food and Drug Administration (FDA) approved the marketing of snus as less harmful than cigarettes in 2019. In the US, Swedish Match is the market leader in the nicotine pouch and chewing tobacco markets, according to its website, and number three in moist snuff. In Scandinavia, it is market leader for snus products and number two for nicotine pouches.

“This is not a cost synergy case,” said Lars Dahlgren, chief executive of Swedish Match. “This is rather a textbook example of perfect industrial logic – two companies that share the same vision and that also are very complementary in their commercial setups.”

The deal for Swedish Match raises some questions regarding Philip Morris’s future relationship with former parent company Altria, which has a range of oral nicotine products. Philip Morris was split off from Altria in 2008 because of shareholder demands for better returns. The spinning off of Philip Morris saw the companies agree to a complex non-compete arrangement.

News: Philip Morris bets on cigarette alternatives with $16 bln Swedish Match bid

Switch Inc taken private in $8.38bn deal

BY Richard Summerfield

Data centre operator Switch Inc has agreed to be taken private by DigitalBridge Group in a deal worth $8.38bn.

Under the terms of the deal, DigitalBridge will acquire all outstanding common shares of Switch for $34.25 per share in an all-cash transaction valued at approximately $11bn, including the assumption of debt. The deal will be carried out by DigitalBridge Partners II, the value-added digital infrastructure equity strategy of the investment management platform of DigitalBridge, and an affiliate of global infrastructure investor IFM Investors.

The transaction, which was unanimously approved by a special committee of the Switch board of directors, is expected to close in the second half of 2022, subject to approval by Switch stockholders and the satisfaction of other customary closing conditions.

“Today’s announcement is an important step towards our long-term vision for the growth and evolution of our company,” said Rob Roy, founder and chief executive of Switch. “Through this partnership we will be ideally positioned to continue to meet strong customer demand for Switch's environmentally sustainable Tier 5 data center infrastructure. Following our expansion into a Fifth Prime campus last year, and with our plan to construct more than 11 million additional square feet of capacity through 2030, Switch's strategic position has never been stronger. The combination of our advanced data center infrastructure, significant expansion capacity in our land bank, and a new partnership with experienced digital infrastructure investors lays a strong foundation for Switch's continued industry leading growth.”

“At DigitalBridge, we are building the world's leading global digital infrastructure investment platform, and this transaction allows us to partner with one of the industry's fastest growing and highest quality data center portfolios,” said Marc Ganzi, chief executive of DigitalBridge. “Rob and his team share our vision for the future of communications infrastructure, making us the ideal partner to scale their business both domestically and internationally to meet the exponentially rising demand from large enterprise customers looking for mission critical digital infrastructure. We are also pleased to partner with IFM Investors, one of the world's leading institutional infrastructure investors, to execute this compelling transaction.”

 “IFM is excited to partner with DigitalBridge and Switch on this transaction,” said Kyle Mangini, global head of infrastructure at IFM. We consider Switch to be an excellent digital infrastructure business with strong potential. The company is a recognized industry leader with an impressive approach to ESG. Today's announcement reflects IFM’s strategy of investing in high quality infrastructure to protect and grow the long-term retirement savings of working people.”

 News: DigitalBridge to buy data center owner Switch for $8.38 billion

LTI and Mindtree’s $3.5bn merger creates Indian tech giant

BY Fraser Tennant

In a combination that creates an Indian tech giant, global multinational information technology services and consulting companies L&T Infotech (LTI) and Mindtree are to merge in a transaction valued at $3.5bn.

The two companies have decided that, in light of recent industry shifts, such as the prominence of large deals and the preference for end-to-end offerings, the time is appropriate to combine the strengths of both organisations to better serve customers.

Under the terms of the merger agreement, all shareholders of Mindtree will be issued shares of LTI at the ratio of 73 shares of LTI for every 100 shares of Mindtree. The new shares of LTI so issued will be traded on the National Stock Exchange of India and the Bombay Stock Exchange.

Significant scale benefits are anticipated through LTI and Mindtree’s complementary strengths, resulting in a stronger portfolio of offerings across verticals. Enhanced customer engagement and delivery model through industrialisation of delivery and streamlined value-enabling processes is expected to result in improvement in large deal capabilities.

These opportunities will create a more distinctive employee value proposition and stronger partnerships with ecosystem players.

The name of the combined entity will be ‘LTIMindtree’ and will leverage the advantages of both the brands and create value for stakeholders.

“This merger represents our continued commitment to grow the IT services business in line with our strategic vision,” said A. M. Naik, chair of Mindtree. “The highly complementary businesses of Mindtree and LTI will make this integration a ‘win-win’ proposition for our customers, investors, shareholders and employees.”

The transaction is subject to shareholder and regulatory approvals.

“We are confident that the proposed merger will help us build on the combined strengths of both these organisations to unlock synergies through scale, cross-vertical expertise and talent pool,” said S. N. Subrahmanyan, vice chair of LTI. “This will help us emerge as a partner of choice for large-scale tech transformations and create a distinctive employee value proposition.”

Until the merger process is complete, for the moment, both companies will continue to function independently while a steering committee oversees the transition.

News: India's L&T Infotech, Mindtree merge to create $18 billion tech company

China’s CH-AUTO goes public in $1.7bn SPAC deal

BY Fraser Tennant

In a move that takes the Chinese electric vehicle manufacturing and design service company public, CH-AUTO Technology Corporation Ltd is to merge with US special purpose acquisition company (SPAC) Mountain Crest Acquisition Corp. IV in a deal valued at $1.7bn, including debt.

Under the terms of the definitive agreement, CH-AUTO shareholders will be entitled to receive approximately 125 million shares valued at $10 per share, subject to closing adjustments.

The combined company plans to operate under the name CH Auto Inc and list on the Nasdaq stock exchange.

“The past two years have been quite challenging for us,” said Qun Lu, founder and chief executive of CH-AUTO. “We had to reduce our operations by slowing down the businesses of manufacturing of vehicles and automotive parts. By entering into this agreement with Mountain Crest, we expect to see a positive and rebounding impact on CH-AUTO’s finance capabilities, manufacturing and sales activities, and promotion of brand awareness.”

Mr Lu will continue to lead the holding company as its chief executive after closing of the transaction, which is expected in the fourth quarter of 2022.

“CH-AUTO is a unique and compelling investment opportunity, being one of the first electric vehicle automakers in China with proven technology breakthroughs as well as manufacturing innovations, along with its enormous future growth potential through its existing and pipeline vehicle models,” said Suying Liu, chairman, chief executive and chief financial officer of Mountain Crest. “I am thrilled to be partnering with Mr Lu and his exceptional team to bring their vision to fruition.”

While the transaction has been approved by the boards of directors of CH-AUTO and Mountain Crest, it will require the approval of stockholders and is subject to other customary closing conditions, including the receipt of certain regulatory approvals.

Mr Lu concluded: “Dr Liu and I are excited about the development prospect for the combined company, and we expect that CH-AUTO will rapidly transform into a leading next-generation automotive company that is built on years of design and manufacturing experience.”

News: Chinese EV company CH-AUTO to go public via $17-bln SPAC deal