STB approves $31bn railways acquisition

BY Fraser Tennant

Giving the green light to the first major railroad merger in 20 years, the US Surface Transportation Board (STB) has approved the $31bn merger of Canadian Pacific (CP) and Kansas City Southern (KCS).

The STB’s decision is effective as of 14 April 2023, at or after which point the two railways combine to create the new CPKC – the first single-line railway connecting the US, Mexico and Canada.

Among the core conclusions reached by the STB regarding the public and pro-competitive benefits of the CP-KCS combination are that the combination should ultimately enhance safety and benefit the environment.

The regulator also stated that the transaction will make possible improved single-line service for many shippers and will result in merger synergies that are likely to allow CPKC to be a vigorous competitor to other Class I carriers by providing improved service at lower cost.

“The STB’s decision clearly recognises the many benefits of this historic combination,” said Keith Creel, president and chief executive of CP. “As the regulator found, it will stimulate new competition, create jobs, lead to new investment in our rail network and drive economic growth.

“These benefits are unparalleled for our employees, rail customers, communities and the North American economy at a time when the supply chains of these three great nations have never needed it more,” he continued. “A combined CPKC will connect North America through a unique rail network able to enhance competition, provide improved reliable rail service, take trucks off public roads and improve rail safety by expanding CP’s industry-leading safety practices.”

Headquartered in Calgary, Canada, CPKC will operate approximately 20,000 miles of rail, employing close to 20,000 people. Once combined, full integration of CP and KCS is expected to happen over the next three years, unlocking the benefits of the combination.

“This important milestone is the catalyst for realising the benefits of a North American railroad for all of our stakeholders,” said Patrick J. Ottensmeyer, president and chief executive of KCS. “The KCS board of directors and management team are very proud of the many contributions and achievements of the people who have made KCS what it is today.”

Mr Ottensmeyer concluded: “We are excited for the boundless possibilities as we move forward into the next chapter as CPKC.”

News: US regulator approves Canadian Pacific purchase of Kansas City Southern

Pfizer agrees $43bn Seagen acquisition

BY Richard Summerfield

In a transaction that will boost its cancer treatments portfolio, Pfizer Inc has agreed to acquire biotech firm Seagen Inc in a $43bn deal.

Under the terms of the deal, Pfizer will pay $229 in cash per share to buy Seagen, funding the transaction through $31bn of new long-term debt, as well as short-term financing and cash. The company is paying a premium of about 35 percent to Seagen’s closing price on Friday, the last day of trading before the deal was announced. The deal is expected to complete in late 2023 or early 2024.

The move for Seagen comes as Pfizer looks to refill its drugs pipeline and pivot away from its coronavirus (COVID-19) products, which have experienced a sharp fall in sales of late. Pfizer already has 24 approved cancer medicines, and 33 programmes in clinical development, and the acquisition of Seagen will see it add an additional four approved cancer therapies which had combined sales of nearly $2bn in 2022.

“Pfizer is deploying its financial resources to advance the battle against cancer, a leading cause of death worldwide with a significant impact on public health,” said Albert Bourla, chairman and chief executive of Pfizer. “Together, Pfizer and Seagen seek to accelerate the next generation of cancer breakthroughs and bring new solutions to patients by combining the power of Seagen’s antibody-drug conjugate (ADC) technology with the scale and strength of Pfizer’s capabilities and expertise. Oncology continues to be the largest growth driver in global medicine, and this acquisition will enhance Pfizer’s position in this important space and contribute meaningfully to the achievement of Pfizer’s near- and long-term financial goals.”

“Pfizer shares our steadfast commitment to patients, and this combination is a testament to the passion, dedication and talent of the Seagen team to achieve our mission to discover, develop, and commercialize transformative cancer medicines that make a meaningful difference in people’s lives,” said David Epstein, chief executive of Seagen. “The proposed combination with Pfizer is the right next step for Seagen to further its strategy, and this compelling transaction will deliver significant and immediate value to our stockholders and provide new opportunities for our colleagues as part of a larger science-driven, patient-centric, global company.”

Many of the world’s largest pharmaceutical companies, including Pfizer, are sitting on significant cash piles and need to invigorate their pipelines of medicines, as key drugs go off patent before the end of the decade. Pfizer has been under pressure to do a big deal, after the company forecast that revenues would slump by a third to between $67bn to $71bn in 2023 owing to steep falls in sales of COVID-19 vaccines and treatments. In 2023, Seagen expects revenue of about $2.2bn, a 12 percent rise year on year. Pfizer believes that in 2030 Seagen could contribute more than $10bn in risk-adjusted revenues.

News: Pfizer signs $43 bln Seagen deal in cancer drug push

Failed battery firm gets a Recharge

BY Richard Summerfield

Recharge Industries, an Australian portfolio company of privately owned US firm Scale Facilitation, has been successful in its bid for ownership of Britishvolt, the battery manufacturer which collapsed into administration in January.

Under plans presented by Recharge Industries, the Britishvolt project will make the UK’s first gigafactory a reality, creating a strategic economic and security asset which will play a critical role in the UK’s industrial and net-zero strategies. The newly acquired Britishvolt will provide thousands of green, skilled and local jobs that will drive local and national benefits, according to a statement announcing the deal.

“We are thrilled to have been successful in our bid for ownership of Britishvolt; our plans are the right ones for the local community and the UK economy,” said David A. Collard, founder and chief executive of Scale Facilitation. “Our proposal combined our financial, commercial, technology and manufacturing capabilities, with a highly credible plan to put boots and equipment on the ground quickly. Our technology – including an exclusive license for the intellectual property and battery technology – has been developed and validated over the last decade through C4V in the US and will be the backbone of both gigafactories in Geelong and Cambois. Backed by our global supply chain, strategic delivery partners and a number of significant customer agreements in place, we’re confident of making the Cambois Gigafactory a success and growing it into an advanced green energy project.”

The original Britishvolt was intended to create a home-grown EV battery industry that can support domestic car production, but the company collapsed in January after failing to raise enough funding for the factory in northern England. The company was a much-heralded part of the UK government’s ‘levelling up’ agenda, however Britishvolt had only raised around £200m by summer 2022 and had pushed back its production timeline. The government had offered £100m to the former Britishvolt owners if they hit certain construction milestones, but they were not met.

The company was planning to build its 30GWh factory in phases to take advantage of rising EV demand ahead of the UK’s 2030 ban of new petrol and diesel cars. The plant, located near Blyth in Northumberland, was expected to employ about 3000 people when operating at full capacity.

Going forward, the new owners will keep the Britishvolt brand name but will focus on batteries for energy storage and hope to have those products available by the end of 2025. Recharge also plans to build a battery factory in Geelong, a former car manufacturing hub in Australia, free from Chinese and Russian materials.

News: Australia's Recharge Industries buys failed battery firm Britishvolt

BP acquires TravelCenters of America in $1.3bn deal

BY Fraser Tennant

As part of its aim to significantly grow investment throughout this decade, petroleum company BP is to acquire the publicly traded full-service travel centre network TravelCenters of America Inc. in a transaction valued at $1.3bn.

Under the terms of the merger agreement, BP will acquire all of the outstanding shares of TravelCenters common stock for $86 per share in cash. The sale price represents an 84 percent premium to the average trading price of the 30 days ended 15 February 2023 of $46.68.

The acquisition of TravelCenters complements BP’s existing convenience and mobility business and will help expand its offers, including electric vehicle charging, biofuels, renewable natural gas (RNG) and hydrogen.

A condition of the sale is the approval by shareholders who own a majority of TravelCenters’ outstanding shares: Service Properties Trust, which owns 7.8 percent and The RMR Group, which owns 4.1 percent. Both have agreed to vote their shares in favour of the sale.

At the closing of the transaction, which has been unanimously approved its board of directors, TravelCenters will terminate its management agreement with RMR pursuant to the terms of the agreement and pay a termination fee to RMR that is currently estimated to be approximately $44m.

“The announcement that BP is acquiring TA is a result of the successful implementation of our turnaround and strategic plans,” said Jonathan M. Pertchik, chief executive of TA. “We have improved our core travel centre business, expanded our network, launched our specialised business unit eTA to prepare for the future of alternative fuels and improved our operating and financial results, none of which we could have accomplished without the hard work and dedication of our employees at every level.”

Founded in 1972 and headquartered in Westlake, Ohio, TravelCenters’ over 18,000 team members serve guests in 281 locations in 44 states, principally under the TA, Petro Stopping Centers and TA Express brands. TravelCenters’ offerings include diesel and gasoline fuel, truck maintenance and repair, full-service and quick-service restaurants, travel stores, car and truck parking and other services.

Subject to shareholder and regulatory approval, the transacting parties are targeting closing the acquisition by mid-2023.

News: BP to buy TravelCenters for $1.3 bln in U.S. fuel retail drive

CVS strikes $9.5bn Oak Street Health deal

BY Richard Summerfield

CVS Health Corp has agreed to acquire Oak Street Health Inc in an all-cash transaction valued at $9.5bn. The deal will allow CVS to offer routine health screenings and diagnosis to older adults.

The deal will see CVS acquire all the outstanding shares of Oak Street at $39 per share, representing an enterprise value of approximately $10.6bn. The agreed price represents a nearly 16 percent premium to Oak Street Health’s closing price last Tuesday. The parties anticipate that the deal will close in 2023.

CVS Health expects to fund the transaction through available resources and existing financing capacity. The transaction has been approved by the board of directors at each of the respective companies and is subject to approval by a majority of Oak Street Health’s stockholders, regulatory approval and satisfaction of other customary closing conditions. Private equity funds affiliated with Newlight Partners LP and General Atlantic LLC and certain members of the Oak Street Health board of directors, which collectively own approximately 45 percent of the common stock of Oak Street Health, have agreed to vote the shares they own in favour of the transaction, subject to customary exceptions.

“Combining Oak Street Health’s platform with CVS Health’s unmatched reach will create the premier value-based primary care solution,” said Karen S. Lynch, health president and chief executive of CVS. “Enhancing our value-based offerings is core to our strategy as we continue to redefine how people access and experience care that is more affordable, convenient and connected.”

“This agreement with CVS Health will accelerate our ability to deliver on our mission and continue improving health outcomes, lowering medical costs, and providing a better patient experience while offering significant value to our shareholders,” said Mike Pykosz, chief executive of Oak Street Health. “Together with CVS Health, we will have access to greater resources and capabilities to expand the reach of our platform, provide more opportunities for our teammates and, most importantly, make a meaningful difference in the lives of the patients we serve.”

“Oak Street Health is a premier value-based primary care platform,” said Shawn M. Guertin, chief financial officer of CVS Health. “We believe that in partnership with CVS Health, Oak Street Health can accelerate its growth and provide an attractive return to our shareholders over time. The pending acquisitions of Oak Street Health and Signify Health will also meaningfully advance our goal of adding 200 basis points of long-term adjusted operating income growth, a key commitment we made to shareholders at our December 2021 Investor Day.”

The deal, CVS’ third largest in the last decade, echoes moves by rivals Walgreens Boots Alliance, Cigna and tech giant Amazon, all of which expanded their healthcare offerings, especially primary and urgent care delivery, during the coronavirus (COVID-19) pandemic. Oak Street Health has approximately 600 primary care providers and 169 medical centres across 21 states in the US.

News: CVS digs into primary care with $9.5 bln Oak Street Health deal