Doors closing: Barneys New York files for Chapter 11

BY Fraser Tennant

In a move which threatens its almost 100-year history, US luxury department store operator Barneys New York filed for reorganisation under Chapter 11 of the US Bankruptcy Code.

As a part of the Chapter 11 process, Barneys New York will close its physical store locations in Chicago, Las Vegas and Seattle, in addition to five smaller concept stores and seven warehouse locations.

Alongside the bankruptcy process, the company has secured $75m in new capital which, combined with operating cash flow, will help it to meet its go-forward financial commitments, as well as facilitate a going concern sale process.

Well known for its high-end designer collection, Barneys New York has struggled in recent years with high rents and changing consumer tastes.

"For more than 90 years, Barneys New York has been an iconic luxury specialty retailer, renowned for its edit, strong point of view, creativity and representation of the world's best designers and brands," said Daniella Vitale, chief executive of Barneys New York. “Like many in our industry, Barneys New York's financial position has been dramatically impacted by the challenging retail environment and rent structures that are excessively high relative to market demand.”

“In response to these obstacles, the Barneys New York board and management team have taken decisive action by entering into a court-supervised process, which will provide the company the necessary tools to conduct a sale process, review our current leases and optimise our operations,” she continued. “While doing that we are receiving new capital to help support the business.”

Despite the store closures, Barneys New York will continue to serve customers in five flagship locations. In addition, Barneys.com and BarneysWarehouse.com will continue serving customers without disruption.

Serving as Barneys New York’s legal adviser is Kirkland & Ellis LLP. Houlihan Lokey is financial adviser, while M-III Partners, L.P. is restructuring adviser.

Ms Vitale concluded: "I would like to express my deep appreciation and profound gratitude for the continued support of our employees, vendor community and customers – truly the lifeblood of Barneys New York. We are unwavering in our commitment to executing our forward thinking vision on what retail should look like today."

News: New York retail icon Barneys files for bankruptcy

Cloud container vulnerabilities increase – report

BY Richard Summerfield

Adoption of cloud technology has increased considerably in recent years, however vulnerabilities in cloud containers have also increased, according to a new report from Skybox Security.

Skybox’s ‘2019 Vulnerability and Threat Trends Report: Mid-Year Update’ notes that vulnerabilities in cloud containers have increased by 46 percent compared to the same period in 2018, and by 240 percent compared to 2017,. However, less than 1 percent of newly published vulnerabilities were exploited in the wild, with 9 percent having any functioning exploit developed at all.

Over the last two years, the total number of new vulnerabilities has outpaced any other previous year. However, the number of vulnerability reports in the first half of 2019 declined by 13 percent compared to the same period last year. Still, the current figures are historically high, and it seems annual totals of around 15,000 new common vulnerabilities and exposures (CVEs) will be the new norm.

“More than 7000 new vulnerabilities were discovered in the first half of 2019 — that’s still significantly more than figures we’d see for an entire year pre-2017. So, organisations are likely still going to be drowning in the vulnerability flood for some time,” said Ron Davidson, chief technology officer and vice president of research and development at Skybox. “Roughly a tenth of these have an exploit available and just one percent are exploited in the wild. That’s why it’s so critical to weave in threat intelligence into prioritization methods, and of course consider which vulnerable assets are exposed and unprotected by security controls.”

To better protect themselves against attack, the report suggests that companies “assess occurrences against the latest threat intelligence, as well as the relationship of vulnerable assets to the security controls that could protect them. This way, action will be focused on the small subset of vulnerabilities posing a critical risk to your business.”

Organisations should ensure that they have reliable coverage to assess and prioritise vulnerabilities in public and private clouds and operational technology systems to truly understand the risks they face.

The report also noted that cryptocurrency ransomware, botnets, and backdoors appear to have substituted cryptocurrency mining malware as a tool of choice for cyber criminals. The use of these methods increased by 10 percent, 8 percent and 18 percent respectively.

Report: 2019 Vulnerability and Threat Trends Report: Mid-Year Update

EssilorLuxottica’s GrandVision

BY Richard Summerfield

Franco-Italian eyewear manufacturer and retailer EssilorLuxottica is to acquire Dutch rival GrandVision in a deal worth $8bn.

EssilorLuxottica will pay at least €28 a share for investment firm HAL Optical Investments’ roughly 77 percent stake in Grandvision. Following completion of the deal, EssilorLuxottica will be obliged to make an offer for the rest of GrandVision’s shares.

However, the transaction is expected to attract considerable regulatory scrutiny, particularly in light of the lengthy review that European antitrust authorities undertook when approving the $53bn merger between Essilor and Luxottica in 2017. Furthermore, EssilorLuxottica has already been criticised for its alleged prohibitive prices and bullying tactics. The addition of GrandVision to the company’s portfolio of brands may be unacceptable to regulators.

If approved, the deal will see EssilorLuxottica acquire 7200 new stores globally, over 37,000 employees and €3.7bn in annual revenue.

“This acquisition is another step towards our ambition to eradicate poor vision in the world before 2050,” said Hubert Sagnières, executive vice chairman of EssilorLuxottica. “Following the combination with Luxottica, it‘s a milestone in our vision of reshaping the optical industry with the aim to provide all consumers of the world a better optical experience with higher quality eyewear. We look forward to welcoming the 37,000 employees of GrandVision to the growing EssilorLuxottica family. Together, we will have an even stronger voice to champion better vision everywhere in the world.”

 “The future integration of GrandVision with EssilorLuxottica brings new opportunities to GrandVision’s business, its well-established retail banners, stores, employees and all our stakeholders,” said Stephan Borchert, chief executive of GrandVision. “Furthermore, it will create a truly global eyecare and eyewear company that is ideally positioned to capture changing consumer needs and behaviors, and provide its customers with a high quality optical omni-channel customer experience. This transaction is expected to provide value to GrandVision’s shareholders, while allowing for the acceleration of GrandVision’s growth strategy through the expansion of our store network and online platforms. EssilorLuxottica’s interest in joining forces with GrandVision is a clear recognition of GrandVision’s successful strategy, our state-of-the-art retail platform and our people. We look forward to joining forces with EssilorLuxottica in what will be an exciting new chapter ahead.”

At the time of announcing the deal for GrandVisison, EssilorLuxottica also reported revenues of €8.78bn during the first half of the year, up 7.3 percent.

News: EssilorLuxottica sets sights on retail dominance with $8 billion GrandVision deal

M&A deal value in MENA spikes in H1 2019, says new report

BY Fraser Tennant

Deal value in the Middle East and North Africa (MENA) region increased by 220.8 percent to $115.5bn in H1 2019 – up from $36bn in H1 2018 – according to a new EY report.

In its ‘H1 MENA M&A’ report, EY reveals that, while deal value increased significantly. deal volume witnessed a decrease of 10.7 percent, with 216 announced deals in H1 2019, down from 242 deals recorded in H1 2018.

Among the key deals in H1 2019 was Uber’s acquisition of Careem Networks for $3.1bn, the largest technology sector transaction to date in the Middle East, as home-grown technology start-ups find themselves being pursued by global players. The largest deal during H1 2019 was Saudi Aramco’s acquisition of a 70 percent stake in SABIC worth $69.1bn from PIF.

“MENA corporates are finding innovative ways to raise capital and have stepped up the frequency of their portfolio reviews,” said Matthew Benson, MENA transaction advisory services leader at EY. “Companies are reviewing their portfolios every quarter or more frequently – more often than global executives. With more frequent portfolio reviews, several non-core businesses are set aside for divestment thereby fuelling deal activity.”

In terms of domestic M&A activity, deal value in H1 2019 was driven by mega deals, with 111 deals amounting to $79.3bn, compared with 96 deals amounting to $5.5bn in H1 2018. In comparison, MENA witnessed 65 outbound M&A deals worth $21bn, compared with 77 deals worth $18.2bn in H1 2018.

As far as inbound investment is concerned, H1 2019 witnessed a fall in M&A deal volume in the MENA region, with 40 deals amounting to $15.1bn, compared with 69 deals valued at $12.3bn in H1 2018. The United Arab Emirates (UAE) was ranked the highest in terms of inbound M&A investment in the region, with 20 deals amounting to $14.4bn.

The EY report also reveals that the oil & gas sector was the top target sector for inbound activity, accounting for $10.8bn. Furthermore, four out of the six inbound deals in the sector were in the UAE, including three mega deals.

“Large sums of inbound M&A reinforce the MENA investment thesis,” said Anil Menon, MENA M&A and equity capital markets leader at EY. “We continue to believe that these are good times for strategic acquisitions in MENA.”

Report: EY H1 MENA M&A

Bain buys 60 percent stake in Kantar

BY Richard Summerfield

Bain Capital is to acquire a 60 percent stake in data analytics firm Kantar from debt-laden British multinational advertising and public relations company WPP.

The deal values Kantar at about $4bn. The sale will give WPP agencies, including Ogilvy and Wunderman Thompson, an infusion of funds to reduce their debt and rebuild. WPP said it will use about 60 percent of the proceeds of the sale to cut its net debt to the low end of a targeted range of 1.5-1.75 times core earnings for 2020. The rest of the money will be returned to shareholders. The deal is expected to close in early 2020, subjected to approval from WPP shareholder and regulatory approval.

Private equity giant Bain was engaged in an auction for Kantar and is believed to have overcome Apollo Global Management, Platinum Equity and Vista Equity Partners in the final round of bidding.

“Kantar is a great business and we look forward to working with Bain Capital to unlock its full potential,” said Mark Read, chief executive of WPP. “As a strategic partner and shareholder in Kantar, WPP will continue to benefit from its future growth while our clients continue to benefit from its services and capabilities. I would like to thank Eric Salama, his team and everyone at Kantar for their tremendous contribution to WPP – a contribution that will continue as we develop the business together. This transaction creates value for WPP shareholders and further simplifies our company. With a much stronger balance sheet and a return of approximately 8 percent of our current market value to shareholders planned, we are making good progress with our transformation.”

“Kantar is a market leader in many areas and we are excited to be partnering with its management team and WPP to build on this remarkable platform for growth,” said Luca Bassi, a managing director at Bain Capital Private Equity. “We see many opportunities for expansion and will invest in technology to expand the company’s capabilities and reinforce its global leading position.”

“Our new ownership structure presents a great opportunity for Kantar, our employees and our clients,” said Eric Salama, chief executive of Kantar. “In Bain Capital we have a partner who shares our ambition, brings relevant expertise and – with WPP – can help us accelerate our growth and impact for clients. We are focused on delivering ‘human understanding at scale and speed’ and the ‘best of Kantar’ more consistently. We will do so by investing more in talent and by becoming a more technology-driven solutions provider.”

News: Bain Buys Huge Stake in Market Research Business for $4 Billion