KKR to acquire remaining stake in Global Atlantic for $2.7bn

BY Richard Summerfield

Private equity giant KKR & Co. has agreed to pay around $2.7bn to acquire the remaining 37 percent stake it does not own in insurance company Global Atlantic Financial Group.

The deal, which will see KKR’s ownership of the company increase to 100 percent, will be fully funded by its existing balance sheet, which had $23bn of cash and investments as of 30 September 2023. Upon closing, Global Atlantic will continue to be led by its management team and operate under the Global Atlantic brand.

KKR has served as Global Atlantic’s asset manager since 2021, offering access to its global investment and origination capabilities. According to the firm, Global Atlantic’s assets under management have grown significantly, up from $72bn in 2020 to $158bn today.

Under the terms of the deal, which is expected to close in the first quarter of 2024, KKR will pay Global Atlantic’s minority shareholders an amount in cash equal to Global Atlantic’s book value, with certain adjustments.

“The strategic partnership we envisioned three years ago has exceeded our expectations,” said Joe Bae and Scott Nuttall, co-chief executives of KKR. “It has been transformative for both businesses and a great cultural fit that has enabled us to contribute to Global Atlantic’s continued strong performance and success, while also being a key driver of growth for KKR. We expect the new ownership structure will foster even closer collaboration, allowing us to fully leverage our complementary strengths and grow faster together.”

“We are taking this step because we have demonstrated, over the last three years, that we are stronger together,” said Allan Levine, chief executive of Global Atlantic. “Being part of KKR has strengthened our position as a leading insurance company and enhanced our ability to deliver compelling solutions for our clients. Moving from a diverse group of shareholders to a single one with KKR clarifies our objectives and allows us to think – and invest – longer term.

“Although we hope to unlock further value by taking this step in our capital structure, neither our client-first approach nor our investment and risk management framework will change, and the day-to-day experience of our clients and colleagues will feel very much the same as it does today,” he added.

News: KKR to buy remaining stake in insurer Global Atlantic for $2.7 billion

Capital Power acquires US gas power plants in $1.1bn deal

BY Fraser Tennant

In a deal that positions it as one of the largest generators in North America, Canadian energy company Capital Power has acquired two US natural gas-fired generation facilities – based in California and Arizona – at a cost of $1.1bn.

Capital is aiming to increase its power generation through greenhouse gas emissions-free renewables as well as more stable, but polluting, energy sources such as natural gas.

The La Paloma natural gas-fired generation plant in Kern County, California has a capacity of 1062 MW, while the Harquahala natural gas-fired generation facility in Maricopa County, Arizona has a capacity of 1092 MW.

The acquisitions of the natural gas-fired power plants are estimated to bring an average annual adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of approximately $265m for the 2024-28 period.

“These plants are well positioned to bolster our current portfolio,” said Avik Dey, president and chief executive of Capital Power. “They align with our commitment to providing reliable, affordable power solutions that support a balanced approach to the energy transition through offering reliable generation while we grow our own renewables fleet.”

Following completion of the transaction, Capital will rise from ninth position to become the fifth largest non-regulated gas-powered generator in North America. The company plans to achieve net-zero emissions by 2045.

“We are pleased with how this strategic investment fully aligns with our financial objectives,” said Sandra Haskins, senior vice president finance and chief financial officer of Capital Power. “The acquisitions offer an attractive entry point in the Western Electricity Coordinating Council (WECC) market, are immediately accretive and maintains our investment grade credit ratings and balance sheet strength.”

The two acquisitions are each expected to close in the first quarter of 2024, subject to the receipt of regulatory approvals and the satisfaction of other customary closing conditions.

Mr Dey concluded: “This transaction underscores our dedication to delivering long-term value to our shareholders and advancing our position as a leader in the power generation sector.”

News: Capital Power acquires two natgas-fired power plants in U.S. for $1.1 bln

Novant and Tenet agree $2.4bn three hospital deal

BY Richard Summerfield

Novant Health has agreed to acquire three hospitals and affiliated operations from Tenet Healthcare Corporation in a deal worth around $2.4bn.

The deal, which is expected to close in early 2024, includes Hilton Head Hospital in Beaufort County, Coastal Carolina Hospital in Jasper County and East Cooper Medical Center in Charleston County, all of which are in South Carolina.

Under the terms of the deal, Tenet’s Conifer Health Solutions subsidiary will also provide expanded revenue cycle management services to the three hospitals following completion of the transaction.

At present, Novant operates 16 hospitals in North Carolina and South Carolina, along with 800 other healthcare locations. The nonprofit system boasts a workforce of 36,000 employees and has $7.6bn in annual revenue. Tenet Healthcare, a for-profit health system based in Dallas, Texas, owns 61 acute care and specialty hospitals and more than 480 ambulatory surgical centres and surgical hospitals.

“We’re excited about making this long-term investment for healthcare across our region,” said Carl S. Armato, president and chief executive of Novant Health. “As a health system rooted in the Carolinas, we are committed to expanding the communities we serve across our regional delivery network known for safe, quality, patient-centered care in South Carolina. Across the region – from Wilmington to Conway and Myrtle Beach, and now Charleston, Hilton Head, and Hardeeville – Novant Health is uniquely positioned to provide compassionate, expert, affordable, and personalized care that is easy to access and understand. This investment is the next phase of a long-term vision to improve the health and wellness of communities across South Carolina.”

“I am pleased to be in a partnership with Novant Health, whom we’ve admired for their innovative approach to patient-centric healthcare,” said Saum Sutaria, chairman and chief executive of Tenet Healthcare. “Our three hospitals on the coast of South Carolina will become part of their network of care, bringing benefits for generations to come. Working together, we’ll work to ensure seamless continuity of care for patients, improve revenue cycle services, and enhance access to surgical procedures in convenient and safe outpatient settings. We appreciate the vision of their leadership to create a foundation of collaboration that will utilize each parties’ skills for the betterment of the communities we serve.”

The healthcare sector has seen a number of notable deals this year. The first three quarters of 2023 saw 53 announced hospital mergers, according to data from Kaufman Hall, equalling the number of hospital mergers reported in all of 2022.

News: Tenet Healthcare to sell 3 South Carolina hospitals for about $2.4 bln

M&A activity dips but recovery optimistic, claims new report

BY Fraser Tennant

Following the recovery in the global M&A market in the second quarter of 2023, deal activity fell in the third quarter, according to a new PitchBook report published this week.

In its ‘Q3 2023 Global M&A Report’, PitchBook reveals that global M&A deal value nearly reached a 10-year low in Q3 2023, falling sequentially by 19.9 percent. The report also notes that deal value is down 22.5 percent year to date despite a negligible decline in deal count.

Moreover, sponsor share of M&A deal flow has contracted to 33.1 percent, 4.8 percentage points below its Q4 2021 peak, en route to a second year of decline after 10 consecutive years of expansion. In addition, dealmakers are biding their time with smaller deals until conditions improve for megadeals.

“Nearly two years after reaching its zenith in Q4 2021, the downturn in global M&A shows no signs of slowing and in fact accelerated in Q3 2023,” said Tim Clarke, lead analyst, private equity at PitchBook. “It was a quarter that began with a budding recovery in equity and debt underwriting and stabilisation following the bank mini-crisis. However, it ended with the threat of a US government shutdown and a less friendly interest rate outlook by central banks, which gave M&A dealmakers pause.”

However, several market conditions are pointing to a forthcoming recovery in the M&A market next year. Trillions of dollars in dry powder for private equity sponsors and cash piles kept on hand by corporations are positioned for new deals. In addition, lower private-market valuations may spur rich public strategic buyers to scoop up private targets.

“The preconditions for a rebound are there, starting with the global total of $1.4 trillion in unspent PE dry powder, just 9.7 percent shy of its all-time high,” continued Mr Clarke. “An even larger cash pile is on the books of corporations. In the US alone, cash holdings surpassed $4.1 trillion in Q2 2023, an all-time record, and the figure grows to $5.8 trillion when including reserves held overseas.

The report observes that while only a portion of this is earmarked for strategic investments and acquisitions, untapped borrowing capacity and stock value easily compensate for the rest.

For these reasons, we believe that the currently weak trend in M&A will give way to an eventual recovery,” concluded Mr Clarke. “Recent events have most likely pushed that recovery from Q4 2023 to Q1 2024, but somewhere around this two-year anniversary we expect the tide to turn.”

Report: Q3 2023 Global M&A Report

Chevron announces $53bn all-stock acquisition of Hess Corp

BY Richard Summerfield

Chevron Corp has announced that it will acquire its smaller rival Hess Corp in a $53bn all-stock deal which will boost the company’s presence in oil-rich Guyana.

Under the terms of the deal, Chevron will acquire the company for $171 a share, a premium of about 4.9 percent on the stock’s last closing price. John Hess, chief executive of Hess Corp, is expected to join Chevron’s board of directors once the deal is closed in the first half of 2024.

Guyana has become a major oil producer in recent years after huge discoveries by Exxon Mobil, its partner Hess and China’s CNOOC, which together produce 400,000 barrels per day (bpd) from two offshore vessels and have said they could develop up to 10 offshore projects. Chevron said that the acquisition of Hess will add a major oilfield in Guyana as well as shale properties in the Bakken Formation in North Dakota.

The Chevron-Hess merger comes at an interesting time for deals in the oil & gas space, just weeks after Exxon Mobil announced it would acquire Pioneer Natural Resources for around $60bn.

“This combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets,” said Mike Wirth, chairman and chief executive of Chevron. “Importantly, our two companies have similar values and cultures, with a focus on operating safely and with integrity, attracting and developing the best people, making positive contributions to our communities and delivering higher returns and lower carbon.”

“Building on our track record of successful transactions, the addition of Hess is expected to extend further Chevron’s free cash flow growth,” said Pierre Breber, chief financial officer of Chevron. “With greater confidence in projected long-term cash generation, Chevron intends to return more cash to shareholders with higher dividend per share growth and higher share repurchases.”

“This strategic combination brings together two strong companies to create a premier integrated energy company,” said Mr Hess. “I am proud of our people and what we have achieved as a company, which has one of the industry’s best growth portfolios including Guyana, the world’s largest oil discovery in the last 10 years, and the Bakken shale, where we are a leading oil and gas producer. Chevron has a world-class diversified portfolio of assets and one of the industry’s strongest balance sheets and cash return profiles. I believe our strategic combination creates a company that is stronger in every respect, with the leadership, asset portfolio and financial resources to lead us through the energy transition and deliver significant shareholder value for years to come.”

According to Chevron, the deal will help to increase the amount of cash given back to shareholders. The company anticipates that in January it will be able to recommend boosting its first-quarter dividend by 8 percent to $1.63. The company also expects to increase stock buybacks by $2.5bn to the top end of its guidance range of $20bn per year once the transaction closes.

News: Chevron to buy Hess Corp for $53 bln in all-stock deal