Smurfit Kappa to acquire rival WestRock

BY Richard Summerfield

In a deal that will create the world’s biggest paper and packaging company, Smurfit Kappa has agreed to acquire its rival WestRock for $11bn.

The newly combined company will be known as Smurfit WestRock and will be run through a holding company incorporated and domiciled in Ireland. Subject to the satisfaction of closing conditions, the transaction is expected to complete in the second quarter of 2024.

Under the terms of the deal, WestRock shareholders will receive one Smurfit WestRock share and $5 cash, equivalent to $43.51 per share, while Smurfit Kappa shareholders will receive one new share. Existing Smurfit Kappa shareholders are expected to own approximately 50.4 percent of Smurfit WestRock and WestRock stockholders the remaining 49.6 percent.

According to a statement announcing the deal, the combined company will opt for a New York primary listing as around 65 percent of its revenues are set to be in the US and Latin America, and because “multiples and the pool of capital over there is bigger for companies like ours”.

The companies had a combined revenue of roughly $34bn in the year to July, which would make Smurfit WestRock the largest listed global packaging firm by that metric. At present, Smurfit, which operates in 22 European countries and 13 in South, Central and North America, is Europe’s largest paper and packaging producer. WestRock is the second-largest packaging company in the US.

“This incredibly exciting coming together of our two great companies is a defining moment within the global packaging industry,” said Tony Smurfit, chief executive of Smurfit Kappa. “Smurfit WestRock will be the ‘Go-To’ packaging partner of choice for customers, employees and shareholders. We will have the leading assets, a unique global footprint in both paper and corrugated, a superb consumer and specialty packaging business, significant synergies, and enhanced scale to deliver value in the short, medium and long term.”

“We look forward to working with Smurfit Kappa to build a leading global platform that harnesses the strength of WestRock’s consumer portfolio, presents a truly comprehensive offering of packaging solutions for customers and delivers meaningful value to our shareholders today and into the future,” said David Sewell, chief executive of WestRock. “Smurfit Kappa shares our deep commitment to innovation across the packaging lifecycle, and we are confident that Smurfit WestRock will continue to lead the industry forward.”

News: Smurfit Kappa strikes $11 bln WestRock deal to create packaging leader

Asbury acquires Koons in $1.2bn deal

BY Fraser Tennant

In what is the largest auto retail acquisition since 2021, US auto dealer Asbury Automotive Group, Inc. is to acquire privately-owned dealership group Jim Koons Automotive Companies for approximately $1.2bn.

Asbury plans to fund the purchase price with existing liquidity, credit facility and cash on hand. The deal is subject to customary closing conditions and expected to close in the fourth quarter of 2023 or early in the first quarter of 2024.

“This acquisition is transformative for our company, enabling Asbury to further expand into one of the country’s top economies in one of its fastest growing regions, with some of the US’ best performing dealerships,” said David Hult, president and chief executive of Asbury. “Koons has an impressive history of achievement in sales and revenue, and is legendary for its emphasis on people and for giving back.”

Founded in 1973, Koons is one of the US’ largest private auto dealership groups and the number one automotive retailer in the Washington-Baltimore region for over 25 years. In 2022, the group retailed more than 61,000 units (26,000 new and 35,000 used) and had over $3bn in revenue. It employs more than 2500 people in 20 locations throughout the Washington DC, Baltimore and Philadelphia region.

“At Koons, it has always been all about people, and we deeply appreciate Asbury’s commitment to continuing this tradition,” said Jim Koons, chairman of Jim Koons Automotive Companies. “Our work with David Hult, and the Asbury team, gives us confidence that not only are our customers in excellent hands, but so are our employees, with opportunities for future growth being a part of Asbury.”

The sale of Koons is one of the most sizeable in auto retail history, including 20 dealerships, 29 franchises and six collision centres. Asbury currently operates 138 dealerships, representing 31 domestic and foreign brands, as well as 32 collision repair centres.

“We are proud to continue what Jim Koons and his exceptional management team expanded upon: an unwavering dedication to excellence in automotive retailing,” concluded Mr Hult. “We expect the Koons dealerships’ profitability to be generally in line with the profitability of Asbury’s dealerships.”

News: Auto dealer Asbury to expand Mid-Atlantic presence with $1.2 billion Jim Koons buy

Enbridge acquires Dominion trio in $14bn deal

BY Fraser Tennant

In a deal that will create the largest natural gas utility franchise in North America, Canadian pipeline operator Enbridge Inc. is to acquire three utilities from American power and energy company Dominion Energy, Inc. for $14bn.

Th three utilities are: (i) The East Ohio Gas Company, also known as Dominion East Ohio, which serves more than 1.2 million customers across more than 400 communities and 27 counties in Ohio; (ii) Questar Gas, which serves about 1.2 million customers across Utah; and (iii) the Public Service Company of North Carolina, also known as PSNC Energy, which serves more than 600,000 customers across 28 counties in North Carolina.

The deals for the three will consist of $9.4bn in cash and $4.6bn of assumed debt.

With the addition of these gas utility operations, Enbridge now has a significant presence in the US utility sector. Upon closing, Enbridge’s gas utility business will be the largest by volume in North America.

The acquisition of each gas utility is expected to close in 2024.

“Adding natural gas utilities of this scale and quality, at a historically attractive multiple, is a once-in-a-generation opportunity,” said Greg Ebel, president and chief executive of Enbridge. “The transaction also reinforces our position as the first-choice energy delivery company in North America.

“The assets we are acquiring have long, useful lives – and natural gas utilities are ‘must-have’ infrastructure for providing safe, reliable and affordable energy,” he continued. “The entire Enbridge team is looking forward to serving our customers with dedication, and to providing them with safe, reliable and affordable energy service for years to come.”

Enbridge’s primary gas utility, Enbridge Gas Inc., has a storied 175-year history, and serves about 75 percent of residents in the Canadian province of Ontario. Enbridge Gas and its affiliate, Gazifère, presently provide safe, reliable service through 3.9 million residential, commercial, institutional and industrial meter connections in Ontario and Quebec.

Mr Ebel concluded: “These gas utilities have each committed to achieving net-zero greenhouse gas emissions by 2050, and are expected to play a critical role in enabling a sustainable energy transition.”

News: Enbridge bets big on US gas with $14 billion bid for Dominion utilities

FTC approves Amgen/Horizon deal

BY Richard Summerfield

The Federal Trade Commission (FTC) has approved Amgen’s $27.8bn takeover of Horizon Therapeutics, ending months of speculation and uncertainty over the viability of the proposed deal.

In May, the FTC filed a lawsuit to block the deal over concerns that Amgen would leverage its drugs to secure favourable insurance coverage terms for Horizon’s thyroid eye disease treatment Tepezza and gout drug Krystexxa. Tepezza received nearly $2bn in sales in 2022, while Krystexxa brought in $716m.

Under the terms of the deal, Amgen agreed to pay a premium of approximately 47.9 percent on the closing share price of $78.76 per Horizon share on 29 November 2022. The deal had originally been expected to close in the first half of 2023, prior to the FTC’s antitrust lawsuit.

However, a deal has now been reached which will allow the acquisition, Amgen’s largest ever, to close early in the fourth quarter of this year. Last week, the FTC temporarily suspended its suit against Amgen, which allowed it to consider whether to settle the case.

Under the terms of the agreement struck between the FTC and Amgen, there will be restrictions imposed on Amgen to address key concerns the FTC raised in its suit. Specifically, Amgen is prohibited from ‘bundling’ Tepezza and Krystexxa. Amgen will also have to get approval from the FTC to acquire any products that treat the same diseases as Tepezza and Krystexxa do. Amgen is required to seek those signoffs from the agency through 2032. All other requirements will be effective for 15 years after the agreement is finalised, including a requirement that Amgen submit annual compliance reports to the FTC and states. A monitor will be appointed to oversee Amgen’s compliance, and the monitor’s reports will likewise be submitted to the FTC and to the states.

Federal lawsuits to block the merger by six states - California, Illinois, Minnesota, New York, Washington and Wisconsin - have also been dismissed as part of the settlement.

“Consolidation in the pharmaceutical industry has given companies the power and incentive to engage in exclusionary rebating practices, which can lead to sky-rocketing prices on essential medications,” said Henry Liu, director of the FTC’s Bureau of Competition. “Today’s proposed resolution sends a clear signal that the FTC and its state partners will scrutinize pharmaceutical mergers that enable such practices, and defend patients and competition in this vital marketplace.”

Amgen first moved to buy Horizon in December 2022 to gain access to the company’s rare disease assets, beating other potential suitors, including Sanofi and Johnson & Johnson. But the buyout was quick to attract regulatory and political scrutiny for its potential antitrust issues. Senators including Elizabeth Warren were particularly critical of the deal and its potential impact on drug prices.

In a press release issued on Friday, Amgen said it “has consistently stated to the FTC, the courts and the public that it has no reason, ability or intention to bundle” Horizon’s drugs with any of its own medicines. This “narrow assurance, formalized in the consent order with the FTC, will have no impact on Amgen’s business”, the company added.

News: FTC approves Amgen/Horizon deal

Asterion acquires Steag in €2.6bn deal

BY Fraser Tennant

In a race which saw it outbid Czech billionaire Daniel Kretinsky, Spanish investment management firm Asterion Industrial Partners is to acquire German energy utility Steag in a transaction that values the business at €2.6bn.

Mr Kretinsky, who built his wealth in the energy industry, has recently embarked on an acquisition spree in Europe, attempting to buy Steag through his energy holding company EPH.

As well as developing Steag into a sustainable energy utility, the acquisition represents further growth of Asterion’s European energy presence into Germany beyond its existing footprint in Spain, France, Italy and the UK.

“Our firm is fully committed to the energy and heat transition,” said Jesús Olmos, chief executive of Asterion. “Steag is very well positioned to be a very relevant player in Germany and Europe in this process toward cleaner, more competitive and reliable energies such as solar and wind power, while offering an interesting energy mix that is also supported by coal and gas to guarantee the viability of this transition.”

For more than 85 years, Steag has stood for efficient and safe power generation both nationally and internationally, operating six coal power plants in western Germany. “It also has a team of experienced management and skilled employees with technical expertise in wind, solar, and district heating,” added Mr Olmos. “Its energy sites have excellent infrastructure and are optimally connected to the German energy grid.”

The transaction is expected to be completed by the close of 2023, subject to customary conditions and regulatory approvals.

“The sale decision is groundbreaking for the future of the group and its two divisions,” said Andreas Reichel, labour director and chairman of the management board of Steag. “After all, this decision provides greater economic room for manoeuvre for upcoming investments in the future and also helps to secure existing jobs in the long term. The best possible solution has thus been found for all parties involved, including our employees.”

Mr Olmos concluded: “With the experience of Asterion’s team in managing companies in green transformation, we are excited to work together to deliver on Steag’s decarbonisation plans and create new, green jobs.”

News: Spain's Asterion buys German utility Steag for $2.8 billion