Macy’s receives $5.8bn takeover bid

BY Richard Summerfield

US department store Macy’s has received a $5.8bn takeover bid from an investor group consisting of Arkhouse Management and Brigade Capital Management.

Arkhouse, a real-estate focused investing firm, and Brigade, a global asset manager, submitted a proposal to acquire the Macy’s stock they do not already own for $21 a share on 1 December, a premium of 20.76 percent premium from its closing at $17.39 on Friday 8 December. Both investors own a stake in Macy’s through Arkhouse-managed funds.

The 165-year-old Macy’s operates almost 500 stores across the US under its own brand as well as Bloomingdale’s (a more upscale chain with 30-plus locations) and beauty retailer Blue Mercury.

The potential deal, first reported by The Wall Street Journal, would see Arkhouse and Brigade take control of Macy’s in an increasingly troubled sector. The US department store space has struggled in recent years, with JCPenney, Neiman Marcus and Lord & Taylor all declaring bankruptcy in 2020. Department stores have been confronting a broader shift in consumer habits as shoppers gravitate toward specialty retailers and online shopping.

Macy’s reported $1.2bn in profit on $24.4bn in revenue in the last fiscal year, down from $1.4bn in earnings on $24.5bn in revenue in 2021. In 2020, Macy’s announced the closure of 125 stores in a bid to exit weaker shopping malls and focus on smaller-format stores in strip malls. The company also announced it was cutting 2000 jobs at its headquarters in Cincinnati and offices in San Francisco.

The company is also experiencing some upheaval in the boardroom, after it was announced that Jeff Gennette, the chief executive who has spearheaded the company’s turnaround efforts, will be succeeded by Tony Spring, who now runs Bloomingdale’s. Mr Gennette will be retiring in February.

At present, Macy’s has a market capitalisation of about $4.77bn and its shares are down nearly 15.79 percent this year.

Despite the uncertainty surrounding Macy’s, the company surpassed analysts’ estimates for quarterly profit on lower inventories and strong demand for beauty products in November, signalling that attempts to trim inventory from 2022 highs were finally working ahead of the crucial Christmas shopping season.

Arkhouse and Brigade may be motivated to take control of Macy’s in order to acquire the company’s valuable real estate portfolio. According to JP Morgan, Macy’s total real estate value is estimated to be around $8.5bn, or $31 per share, including the iconic Herald Square property worth around $3bn.

News: Macy’s offered $5.8bn buyout that could take it off stock market

Roche to acquire obesity drug developer Carmot

BY Richard Summerfield

In a deal that will significantly boost its anti-obesity pipeline, Swiss pharmaceutical giant Roche has agreed to acquire Carmot Therapeutics. Under the terms of the deal, Carmot’s equity holders will receive $2.7bn in cash, and a further $400m if certain milestones are met.

The transaction, which is expected to close in the first quarter of 2024, will provide Roche with access to Carmot’s current research and development portfolio, including all clinical and preclinical assets. Carmot’s most promising obesity drug candidate, a once-weekly injection called CT-388, belongs to a class known as dual GLP-1/GIP receptor agonists and mimics a hormone typically released into the body after eating. Following encouraging phase one trial results, the Carmot drug is ready to be tested on humans in the second of three trial stages, with a possible market launch in the 2030s.

“Obesity is a heterogeneous disease, which contributes to many other diseases that together comprise a significant health burden worldwide,” said Thomas Schinecker, chief executive of Roche Group. “By combining Carmot’s portfolio with programs in our Pharmaceuticals pipeline and our Diagnostics expertise and portfolio of products across cardiovascular and metabolic diseases, we are aiming to improve the standard of care and positively impact patients’ lives.”

“We are encouraged by the clinical data for the lead asset CT-388, which demonstrated substantial weight loss in Phase 1b,” said Levi Garraway, chief medical officer and head of global product development at Roche. “These data suggest the potential for a differentiated profile to treat obesity and its associated diseases. The broad Carmot portfolio offers different routes of administration and opportunities to develop combination therapies that treat obesity and potentially other indications.”

“We are proud of the pipeline that we have built in obesity and diabetes and the strong data we have generated to date,” said Heather Turner, chief executive of Carmot. “With distinct routes of administration and the potential for combinations, we feel Carmot’s pipeline has the potential to meet patients where they are in their metabolic journey and have a significant impact on patients’ lives. We are confident that Roche will enable robust development of our programs and help us achieve our goal of delivering life-changing therapeutics for people living with metabolic and potentially other diseases.”

The announcement comes just over a month after Roche agreed to acquire Telavant from Roivant Sciences and Pfizer for an initial $7.1bn, granting the company the rights to an experimental treatment for inflammatory bowel disease.

News: Roche joins race for obesity drugs with $2.7 billion Carmot deal

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