Kroger agrees $25bn Albertsons acquisition

BY Richard Summerfield

US grocery firm The Kroger Co. has agreed to acquire Albertsons Companies, Inc. in a deal worth $25bn. The acquisition will create a grocery giant in the US.

Under the terms of the deal, Kroger will pay $34.10 for each Albertsons share, representing a premium of about 33 percent to the stock’s closing price last Wednesday, a day before media reports emerged of a deal between the two.

Kroger and Alberstons, already the number one and two standalone grocers in the US, will combine to create a firm with nearly 5000 stores across the country. The scale of the deal is likely to attract antitrust scrutiny, however, as federal regulators and critics express concern at the creation of a new supermarket mega power at a time of soaring food costs.

To tackle these concerns, the companies have already announced plans to divest some stores and Albertsons is prepared to spin off a standalone unit to its shareholders immediately before the deal’s close, which is expected in early 2024. The new public company is estimated to comprise of 375 stores.

Kroger said it expects to reinvest about half a billion dollars of cost savings from deal synergies to reduce prices for customers. An incremental $1.3bn will also be invested into Albertsons. Kroger will have to pay Albertsons $600m if the deal is terminated.

“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” said Rodney McMullen, chairman and chief executive of Kroger. “Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors.”

He continued: “As a combined entity, we will be better positioned to advance Kroger’s successful go-to-market strategy by providing an incredible seamless shopping experience, expanding Our Brands portfolio, and delivering personalized value and savings. We’ll also be able to further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network and grow our alternative profit businesses. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders.”

“We have been on a transformational journey to evolve Albertsons Cos. into a modern and efficient omnichannel food and drug retailer focused on building deep and lasting relationships with our customers and communities,” said Vivek Sankaran, chief executive of Albertsons. “I am proud of what our 290,000 associates have accomplished, delivering top-tier performance while furthering our purpose to bring people together around the joys of food and to inspire well-being. Today’s announcement is a testament to their success.”

Kroger is the largest supermarket operator in the US, with 420,000 employees and more than 2700 stores, including Ralphs, Harris Teeter, Fred Meyer, and King Soopers. Albertsons is the country’s second-largest supermarket company, with 290,000 employees and almost 2300 stores, including Safeway and Vons.

News: U.S. grocer Kroger carts away Albertsons for $25 billion but faces antitrust test

L3Harris acquires Viasat in $2bn deal

BY Fraser Tennant

In a deal it hopes will help it to compete with larger Pentagon suppliers, defence contractor L3Harris Technologies is to acquire satellite operator Viasat, Inc.’s tactical radio business – Tactical Data Links (TDL) – for approximately $1.96bn.

Under the terms of the definitive agreement, the cash acquisition will be funded with debt financing and includes a net present value of approximately $350m in tax benefits.

Also known as Link 16, Viasat’s TDL network is integrated on military aircraft, ground vehicles, surface vessels and operating bases, enabling warfighters across multiple domains to securely share voice and data communications. The TDL product line is comprised of 450 employees and generates approximately $400m in annual sales.

L3Harris will acquire the TDL product line from Viasat’s government systems segment, consisting of Link 16 Multifunctional Information Distribution System (MIDS) platforms and associated terminals, which are installed in more than 20,000 US and allied platforms across the globe.

“This acquisition is part of our strategic effort to ensure operators have access to the most advanced, multi-function joint all-domain command and control (JADC2) solutions available,” said Christopher E. Kubasik, chief executive and chair of L3Harris. “Viasat’s TDL product line naturally aligns with our proven communication capabilities, and we are excited to partner with our customers and coalition allies as we modernise the Link 16 enterprise.”

The acquisition of Viasat’s TDL product line, which includes its Link 16 space assets, allows L3Harris to expand resilient communication and networking capabilities to a larger user base, achieving broader end-to-end, sensor-to-shooter connectivity – from operators to platforms or weapons data links and beyond – across multiple domains.

“Viasat’s TDL team has made outstanding contributions to US and allied national security, as well as our company’s growth, through sustained innovation and impressive execution over several decades,” added Mark Dankberg, chair and chief executive of Viasat.

The transaction is expected to close in the first half of 2023, subject to required regulatory approvals and clearances and other customary closing conditions.

An agile global aerospace and defense technology innovator, delivering end-to-end solutions that meet customers’ mission-critical needs. L3Harris provides advanced defence and commercial technologies across space, air, land, sea and cyber domains. The company has more than $17bn in annual revenue and 47,000 employees, with customers in more than 100 countries.

Mr Dankberg concluded: “Viasat’s increasing focus on space networks, integrating TDL with L3Harris and its portfolio of C2 assets and resources, offers new forms of growth opportunities and our long-time strategic partnership on TDL products provides a solid foundation.”

News: Defense contractor L3Harris to buy Viasat's unit for nearly $2 bln

WBA agrees $1.37bn Shields deal

BY Richard Summerfield

Walgreens Boots Alliance (WBA) has agreed to acquire the remaining stake that it does not already own in Shields Health Solutions for $1.37bn. According to a statement announcing the deal, the transaction is expected to close by the end of the 2022.

Going forward, Shields will continue to operate as a distinct business and brand within Walgreens. The company delivered pro forma sales growth of 57 percent for the first nine months of fiscal 2022, driven by key contract wins, further expansion of existing partnerships and strong executional focus. Walgreens expects Shields to play a central role in Walgreens’ ongoing success as the company continues to align capabilities across primary care, specialty pharmacy care, post-acute care and home care.

“Our full acquisition of Shields will complete another major milestone as part of our consumer-centric healthcare strategy to drive sustainable long-term growth, and we are very pleased with our partnership and integration with Shields,” said Roz Brewer, chief executive of WBA. “We can now make further progress on our strategy through Shields’ integrated model, increasing our value to health systems, expanding access to payor partners and supporting improved outcomes and lower costs.”

Following completion of the deal, John Lucey, co-founder and current president of Shields, will lead the organisation as chief executive. Current Shields chief executive Lee Cooper will take on a new executive role within WBA.

“This transaction validates our tremendous impact to health systems and specialty patients, as well as the consistent growth and innovation the Shields team has achieved over the last decade,” said Mr Cooper. “As an important business within Walgreens, and under John Lucey’s leadership, Shields will be well-positioned to continue to scale its unique integrated care model for the benefit of all stakeholders.”

WBA started building a minority investment in privately held Shields in 2019, and that stake reached about 70 percent last year. Shields works with nearly 80 health systems that represent about 1000 hospitals nationwide. WBA has been seeking to shift its focus beyond drugstores, and last year it raised its stake in primary care provider VillageMD to 63 percent. WBA has around 13,000 locations worldwide, and has begun to move into areas such as care delivery and moving to free its instore pharmacists to work more on answering patient questions and helping to manage their health.

News: Walgreens to buy remaining stake in Shields Health for $1.37 billion

Collaborative future: Adobe acquires Figma in $20bn deal

BY Fraser Tennant

In a combination that will usher in a new era of collaborative creativity, multinational computer software company Adobe is to buy software design start-up Figma in a transaction valued at $20bn.

Under the terms of the definitive merger agreement, Adobe’s acquisition of Figma will be comprised of approximately half cash and half stock, subject to customary adjustments. The cash consideration is expected to be financed through cash on hand and, if necessary, a term loan.

Drawing on Adobe’s and Figma’s expansive product portfolio, the combined company will have a rare opportunity to power the future of work by bringing together capabilities for brainstorming, sharing, creativity and collaboration and delivering these innovations to hundreds of millions of customers.

“Adobe’s greatness has been rooted in our ability to create new categories and deliver cutting-edge technologies through organic innovation and inorganic acquisitions,” said Shantanu Narayen, chairman and chief executive of Adobe. “The combination of Adobe and Figma is transformational and will accelerate our vision for collaborative creativity.”

Once combined, it is expected that Adobe and Figma will reimagine the future of creativity and productivity, accelerate creativity on the web, advance product design and inspire global communities of creators, designers and developers. The combined company will have a massive, fast-growing market opportunity and capabilities to drive significant value for customers, shareholders and the industry.

"With Adobe's amazing innovation and expertise, especially in 3D, video, vector, imaging and fonts, we can further reimagine end-to-end product design in the browser, while building new tools and spaces to empower customers to design products faster and more easily,” added Dylan Field, co-founder and chief executive of Figma.

The transaction is expected to close in 2023, subject to the receipt of required regulatory clearances and approvals and the satisfaction of other closing conditions, including the approval of Figma’s stockholders.

Following closing, Mr Field will continue to lead the Figma team, reporting to David Wadhwani, president of digital media business at Adobe. For the moment, each company will continue to operate independently.

“Figma has built a phenomenal product design platform on the web,” concluded Mr Wadhwani. “We look forward to partnering with their incredible team and vibrant community to accelerate our joint mission to reimagine the future of creativity and productivity.”

News: Adobe to buy Figma in $20 billion bid on future of work that spooks investors

EQT agrees $5.2bn THQ takeover

BY Richard Summerfield

EQT Corp, the largest natural gas producer in the US, has announced that it has agreed to acquire Quantum Energy and Tug Hill Operating-backed THQ Appalachia I LLC and associated pipeline infrastructure in a deal worth $5.2bn.

Under the terms of the deal, EQT will acquire Tug Hill’s XcL Midstream, a pipeline firm that moves gas in Appalachia to market. EQT will pay $2.6bn in cash and about $2.6bn in stock to THQ Appalachia, which has net production of around 760 million cubic feet per day. According to a statement announcing the deal, EQT believes the acquisition of the THQ assets will add an estimated 800 million cubic feet per day of gas equivalent production.

The transaction is expected to close in the fourth quarter of 2022, with an effective date of 1 July 2022. Subject to the transaction close and EQT’s board approval process, Wil VanLoh, founder and chief executive of Quantum Energy Partners, will join EQT’s board of directors.

“The acquisition of Tug Hill and XcL Midstream checks all the boxes of our guiding principles around M&A, including accretion on free cash flow per share, NAV per share, lowering our cost structure and reducing business risk, while maintaining an investment grade balance sheet,” said Toby Z. Rice, president and chief executive of EQT. “The valuation metrics are compelling and accretion from the deal should lower our NYMEX free cash flow breakeven price by approximately $0.15 per MMBtu, which gives us greater free cash flow durability through the cycle.

“As a result of even more confidence in the sustainability of our business, we are enhancing our shareholder returns framework by doubling our share repurchase authorization to $2.0 billion and increasing our year-end 2023 debt reduction goal from $2.5 billion to $4.0 billion,” he added.

“We are extremely pleased to have entered into this transaction and, in doing so, look forward to becoming a core shareholder in EQT and working closely with the EQT management team and board to enhance the long-term value of the company,” said Mr VanLoh. “We believe the company is in a uniquely strong position as the largest producer of natural gas in the country, with a differentiated track record of operational excellence, a deep core inventory base and a peer-leading commitment to ESG. The Tug Hill and XcL Midstream assets are complementary to EQT’s existing footprint, and we believe the company is now positioned to create even more value for its shareholders through this highly strategic combination.”

THQ Appalachia is an exploration and production company operating in West Virginia. Private equity firm Quantum Energy invested in Tug Hill in 2014 and also has an equity commitment in THQ Appalachia, which is operated by Tug Hill.

News: Gas producer EQT to buy peer THQ Appalachia for $5.2 bln