Asda to acquire EG Group

BY Richard Summerfield

British supermarket chain Asda has agreed to acquire the UK operations of petrol station giant EG Group, which is also owned by the Issa brothers and TDR Capital, in a £2.27bn deal.

Under the terms of the deal, Asda will acquire 350 petrol stations and more than 1000 food-to-go sites. The company plans to roll out the Asda Express convenience format across the EG UK and Ireland estate.

Asda intends to invest more than £150m within the next three years to “fully integrate the combined business” with shareholders, providing £45m of additional equity to fund the transaction. Upon completion, the merged business will have almost £30bn sales with EG UK and Ireland contributing £195m earnings before interest, taxes, depreciation and amortisation (EBITDA) to the group after rents. Going forward, Asda expects to realise synergies of £100m over the next three years. The company also expects to find more than £100m of working capital benefits due to its larger scale.

“Asda’s acquisition of EG UK and Ireland will create a consumer champion like the UK has never seen,” said Stuart Rose, chair of Asda. “Throughout my career in retail – one thing has always been true, that meeting the evolving needs of customers is the route to growth. This transaction is all about driving growth by bringing Asda’s heritage in value to even more communities and accelerating the growth of its convenience retail business.”

“This transaction with Asda represents an important strategic step for EG Group,” said Zuber Issa co-founder and co-chief executive of EG Group. “Following this sale, EG Group will benefit from a significantly strengthened balance sheet, supporting the continued roll out of its successful convenience retail, fuel and foodservice strategy and drive innovation to transform the consumer experience. This includes the ongoing investment and expansion of our EV charging business, evpoint, as well as hydrogen and other sustainable fuel retail infrastructure, which we continue to see as a significant future opportunity.”

“The sale of the EG UK&I business to Asda makes strategic sense for both parties and will enable EG Group to accelerate its growth in key markets including Europe, the US and Australia,” said Gary Lindsay, managing partner at TDR Capital. “The Group has developed a successful blueprint in the UK for developing one-stop shop sites which combine convenience retail, fuel and foodservice and there are significant value creation opportunities from rolling out this model, across the global estate. The Group remains at the leading edge of developing the forecourts of the future, and its ongoing development of alternative fuels and EV charging infrastructure.”

The deal, which is expected to close in Q4 2023, will be funded by £450m of equity from Asda’s shareholders, including its former owner, US retail giant Walmart, £770m of term loan debt and around £1.1bn from property-related transactions, including the sale and leaseback of some of its stores.

News: UK's Asda to buy EG petrol stations unit in $2.9-bln deal

ConocoPhillips buys remaining Surmont stake for $4bn

BY Fraser Tennant

Exercising its first right of refusal, Alaska's largest crude oil producer ConocoPhillips is to acquire TotalEnergies SE’s 50 percent stake in the Surmont oilsands field in Alberta for $4bn.

Currently holding a 50 percent interest as operator of Surmont, ConocoPhillips will own 100 percent upon closing. The acquisition thwarts efforts by Suncor Energy Inc. to buy into the Alberta site.

The transaction will be funded from either cash, short- and medium-term financing or a combination of both. The deal is also subject to contingent payments for a five-year term of up to approximately $325m representing $2m for every dollar that Western Canada Select pricing exceeds $52 per barrel during the month, subject to certain production targets being achieved.

Additionally, the transaction is structured as an asset purchase and the tax pools will be commensurate with the purchase price of the asset, including associated contingent payments.

“The acquisition reflects our ongoing commitment to enhance our returns-focused value proposition, improving our return on capital employed, lowering our free cash flow breakeven and further supporting our $11bn planned return of capital in 2023,” said Ryan Lance, chairman and chief executive officer of ConocoPhillips. “Long-life, low sustaining capital assets like Surmont play an important role in our deep, durable and diverse low cost of supply portfolio.

“Upon close, we look forward to leveraging our position as 100 percent owner and operator of Surmont to further optimise the asset while progressing toward our overall interim and long-term emissions intensity objectives,” he continued. “We will remain on track to achieve our previously announced accelerated greenhouse gas (GHG) intensity reduction target of 50 to 60 percent by 2030, using a 2016 baseline.”

Headquartered in Houston, Texas, ConocoPhillips is one of the world’s leading exploration and production companies based on both production and reserves, with a globally diversified asset portfolio. The company has operations and activities in 13 countries and approximately 9600 employees.

Expected to close in the second half of 2023, the transaction is subject to regulatory approvals and other customary closing conditions.

News: ConocoPhillips to buy rest of Canada's Surmont oil site, bumping Suncor

Chevron to acquire PDC Energy for $7.6bn

BY Richard Summerfield

Chevron Corp has agreed to acquire oil & gas producer PDC Energy in a deal worth $7.6bn.

Under the terms of the deal, Chevron will acquire all of the outstanding shares of PDC in an all-stock transaction valued at $6.3bn, or $72 per share. Based on Chevron’s closing price on 19 May 2023, PDC shareholders will receive 0.4638 shares of Chevron for each PDC share. The total enterprise value of the transaction is $7.6bn.

The deal has been unanimously approved by the boards of directors of both companies and is expected to close by year-end 2023. The acquisition is subject to PDC shareholder approval, as well as regulatory approvals and other customary closing conditions.

“PDC’s attractive and complementary assets strengthen Chevron’s position in key U.S. production basins,” said Mike Wirth, chairman and chief executive of Chevron. “This transaction is accretive to all important financial measures and enhances Chevron’s objective to safely deliver higher returns and lower carbon. We look forward to welcoming PDC’s team and shareholders to Chevron and continuing both companies’ focus on safe and reliable operations.”

“The combination with Chevron is a great opportunity for PDC to maximize value for our shareholders. It provides a global portfolio of best-in-class assets,” said Bart Brookman, president and chief executive of PDC. “I look forward to blending our highly complementary organizations, and I’m excited that PDC’s assets will help propel Chevron toward our shared goal for a lower carbon energy future.”

The deal for PDC will increase Chevron’s oil & gas footprint in the US, adding around 10 percent to the company’s reserves, giving it future production in the US, as well as adding about $1bn to both its capital expenditures and free cash flow as soon as 2024, or within a year of the deal closing. According to Mr Wirth, the acquisition will add 260,000 barrels of oil and gas production per day to Chevron’s output in 2024. The deal will also increase Chevron’s capital spending by about $1bn per year, raising its range to $14bn to $16bn through 2027.

Chevron has been increasingly active in recent years, completing deals to grow its operations in Colorado and Wyoming. The company, the second largest US oil producer, is one of the top producers in the Denver-Julesburg Basin after its $13bn acquisition of Noble Energy in 2020.

News: Chevron to boost US presence with $7.6 bln PDC Energy buy

Baxter divests biopharma business to PE group for $4.25bn

BY Fraser Tennant

In a deal designed to accelerate its clinical development pipeline and drive product innovation, global medical technology company Baxter International Inc. is to divest its biopharma solutions (BPS) unit to a private equity consortium comprising Warburg Pincus and Advent International.

Under the terms of the definitive agreement, Baxter will receive $4.25bn in cash, subject to certain closing adjustments, with net after-tax proceeds currently estimated to be approximately $3.4bn.

As a standalone company and in partnership with Advent and Warburg Pincus, BPS – a provider of sterile contract manufacturing solutions, parenteral delivery systems and customised support services to the pharma and biotech industries for decades – will operate as a premier, independent end-to-end contract development manufacturing organisation providing a range of services for clients, from clinical research to commercial deployment.

The transaction includes BPS manufacturing facilities and approximately 1700 employees in Bloomington, Indiana and Halle, Germany. The deal is also expected to generate revenues of approximately $600m for 2023.

“This transaction represents an important step in Baxter’s ongoing transformation journey as we continue to execute against our strategic priorities, enhance our focus and create additional value for all our stakeholders,” said José E. Almeida, chairman, president and chief executive of Baxter. “BPS has long been recognised worldwide as a trusted and preferred partner of contract manufacturing services for the pharmaceutical and biotech industries.”

Following completion of the transaction, Baxter expects BPS to be well-positioned to accelerate its go-to-market strategy and clinical development pipeline, execute on throughput expansion and drive further product innovation.

“BPS is a premier asset at the forefront of the biopharma industry, and one we have been closely following for a number of years,” said John Maldonado, a managing partner at Advent. “Leveraging our deep sector expertise and significant strategic resources, we believe this partnership can unlock multiple opportunities for growth and help the business realise its full potential.”

TJ Carella, managing director and head of healthcare at Warburg Pincus, added: “We are excited to partner with Advent and the impressive team at BPS who have developed differentiated technical capabilities and established an industry-leading reputation for quality and reliability in the supply chain for parenteral drugs.”

The transaction is expected to close in the second half of 2023, subject to receipt of customary regulatory approvals and satisfaction of other customary closing conditions.

Mr Almeida concluded: “I am confident that under the stewardship of Advent and Warburg Pincus, BPS will continue to build on its leadership position, foster world-class talent, invest in new capabilities and capacity, and provide leading-edge, high-quality solutions for its clients.”

News: Baxter to divest biopharma business for $4.25 billion

Eli Lilly to divest diabetes drug to Amphastar in $1bn deal

BY Fraser Tennant

In an effort to continue expanding the availability of diabetes drug Baqsimi to patients, US pharmaceutical company Eli Lilly and Company is to divest the drug to Amphastar Pharmaceuticals, Inc. in a transaction worth up to $1.08bn.

Under the terms of the definitive agreement, Amphastar will pay Lilly $500m in cash at closing and an additional $125m in cash upon the one-year anniversary of closing. Eli Lilly is also eligible to receive sales-based milestone payments of up to $450m in aggregate.

Launched by Eli Lilly in 2019 as an option to quickly render aid in rescue situations for people with diabetes who take insulin, Baqsimi is currently available in 27 international markets, with worldwide sales totalling $139.3m in 2022. It is the first and only nasally administered glucagon for the treatment of severe hypoglycaemia in people with diabetes.

“Our portfolio of therapies continues to make life better for people with diabetes, and we will continue this important mission while also increasing our focus on advancing our pipeline of potential breakthrough treatments,” said Mike Mason, executive vice president of Eli Lilly & Company. “Baqsimi’s positive impact has been felt by people with diabetes around the globe and we are working closely with Amphastar to facilitate a successful transition and consistent patient experience.”

The transaction has been approved by the boards of directors of both companies.

“The acquisition of Baqsimi will integrate our core strategic vision of strengthening our proprietary products profile in addition to enhancing our diabetes portfolio offering,” said Jack Zhang, president and chief executive of Amphastar. “We are optimistic about Baqsimi’s growth potential as it is the first and only commercial intra-nasal glucagon demonstrated to treat low blood sugar emergencies.”

A global pharmaceutical company focused on developing, manufacturing and marketing injectable, intranasal and inhalation products, including experience with a glucagon product, Amphastar expects to provide dedicated commercial investment for Baqsimi with the goal of enabling more people on insulin to be prepared with a glucagon rescue treatment for severe hypoglycaemia.

The transaction is not subject to any financing conditions and is expected to close in the second or third quarter of 2023, subject to the satisfaction of customary closing conditions.

News: Eli Lilly to sell low blood sugar drug to Amphastar for around $1 billion