China-driven M&A in North America plummets in 2019, reveals new report

BY Fraser Tennant

M&A activity in North America instigated by Chinese investors dropped sharply in 3Q 2019, according to a new report by Pitchbook.

In its ‘3Q 2019 North American M&A Report’, the financial information and technology provider reveals that a little over $20bn worth of North American M&A deals with Chinese acquirers have been consummated in 2019 through 3Q –  a massive downturn from the $298.5bn that was invested in 2016.

According to the report, the plummeting M&A activity by Chinese acquirers is due to the increasingly tense relationship between the US and China being played out in the trade war, with a seemingly unending series of tit-for-tat tariffs the order of the day in recent years.

“M&A has been one of the areas hit hardest by the trade war, with deal value for North American target companies with a Chinese acquirer on pace to fall by over 90 percent since peaking in 2016,” states the report. “The US/China trade war rages on and has led to a precipitous decline in cross-border activity, with far fewer Chinese companies willing or able to acquire US companies.”

Furthermore, not only have American and Chinese companies avoided doing deals together, but the US government has occasionally prevented deals, with the Committee on Foreign Investment in the US (CFIUS) blocking a number of major transactions, such as Singapore-based Broadcom’s $100bn-plus attempt to purchase Qualcomm, reportedly on national security grounds.

Beyond the waning M&A activity between the two economic powerhouses, the report notes that North American M&A activity continues apace, with 3Q 2019 seeing robust deal flow totalling over $600bn. Drilling down, eight deals above $10bn closed during the quarter, accounting for over one-third of total deal value.

“In 2019 to date, we have seen over 8000 deals close with an accumulative value of nearly $1.6 trillion, approximately on pace with the first three quarters of 2018,” adds the report. “Much of this quarter’s total value was attributed to just a few colossal deals, such as such as Bristol-Myers Squibb’s  $74bn acquisition of Celgene and BB&T’s $66bn acquisition of SunTrust Bank.”

The report concludes: “We expect M&A value to end the year on a high note, barring any broader economic slowdown.”

Report: 3Q 2019 North American M&A Report

Murray Energy to implement RSA via Chapter 11

BY Fraser Tennant

With coal continuing to lose market share to natural gas and renewable fuels, US private coal miner Murray Energy has entered into a restructuring support agreement (RSA) with an ad hoc lender group in order to restructure more than $2.7bn of debt.

To implement the RSA, Murray Energy, including certain of its subsidiaries, has filed for Chapter 11 bankruptcy protection. The company intends to finance its operations throughout Chapter 11 with cash on hand and access to a $350m new money debtor-in-possession (DIP) financing facility, subject to bankruptcy court approval.

Lenders party to the RSA have committed to provide the full amount of the DIP facility. The proceeds will be used to refinance borrowings under Murray Energy’s existing credit facility and to support ordinary course operations, as well as payments to employees and suppliers throughout the restructuring process.

Furthermore, under the RSA, the ad hoc lender group has agreed to form a new entity – Murray NewCo – to serve as a ‘stalking horse bidder’ to acquire substantially all of Murray Energy’s assets by credit bidding its debt under a Chapter 11 plan, subject to an overbid process. The RSA contemplates that substantially all of Murray Energy’s prepetition funded debt will be eliminated.

The RSA further states that Mr Robert E. Murray will be named chairman of the board of Murray NewCo, as well as president and chief executive. Murray Energy founder Robert Murray, having stepped down as chief executive, will remain the company’s chairman.

“We appreciate the support of our lenders for this process, many of whom have been invested with the company for a long time,” said Mr Moore. “I am confident the DIP facility provides the company with adequate liquidity to get payments to our valued trade partners and continue operating in the normal course of business without any anticipated impact to production levels.”

Murray Energy was the fourth-largest coal producer in the US in 2018, with 46.4 million short tons of output.

Mr Moore concluded: “Although a bankruptcy filing is not an easy decision, it became necessary to access liquidity and best position Murray Energy and its affiliates for the future of our employees and customers and our long-term success.”

News: Murray Energy files for bankruptcy as U.S. coal decline continues

Prologis takes Liberty

BY Richard Summerfield

Prologis Inc has agreed to acquire its rival, industrial real-estate firm Liberty Property Trust, in an all stock deal valued at around $12.6bn, including the assumption of debt.

Under the terms of the deal, Liberty shareholders would receive 0.675 times a Prologis share for each unit they hold, about $61 a share. The deal is expected to close in the first quarter of 2020.

The deal is expected to generate immediate savings of around $120m from administrative costs, operating leverage, lower interest expense and lease adjustments, the companies said in a statement. The acquisition will also bolster Prologis’ presence in a number of target markets, such as Lehigh Valley, Chicago, Houston, Central PA, New Jersey and Southern California.

In order to complete the deal, Prologis has announced that it plans to dispose of approximately $3.5bn of assets on a pro rata share basis. This includes $2.8bn of non-strategic logistics properties and $700m of office properties.

“Liberty and Prologis represent two of the finest teams of real estate professionals and two of the finest portfolios of industrial real estate ever assembled,” said Bill Hankowsky, chairman and chief executive of Liberty. "The joining of these two platforms at this moment, when industrial logistics has become so pivotal to the new economy, will further the industry’s ability to support the nation’s supply chain and enhance value creation for our combined shareholders. It is a testament to Liberty’s outstanding teams of professionals, both present and past.”

“Liberty’s high-quality logistics real estate will strengthen our portfolio as well as our customer roster,” said Eugene F. Reilly, chief investment officer at Prologis. “We are also excited about the caliber of talent at Liberty and expect a number of their employees to join us to help manage the portfolio and execute on capital deployment.”

“Liberty’s logistics assets are highly complementary to our US portfolio and this acquisition increases our holdings and growth potential in several key markets,” said Hamid R. Moghadam, chairman and chief executive at Prologis. “The strategic fit between the portfolios allows us to capture immediate cost and long-term revenue synergies.”

The companies have also identified future synergies with the potential to generate approximately $60m in annual savings, including $10m from revenue synergies and $50m from incremental development value creation.

News: Prologis to buy warehouse rival Liberty in $12.6 billion deal

Cision taken private in $2.74bn deal

BY Richard Summerfield

An affiliate of private equity firm Platinum Equity is to acquire public relations and software company Cision Ltd in a deal worth $2.74bn.

Under the terms of the deal, which has been unanimously approved by Cision’s board members, Platinum Equity will acquire all outstanding shares of Cision for $10 per share in cash, representing a 34 percent premium over Cision’s stock over a 60-day period ending on 21 October, the day before the deal was announced.

The deal, which is expected to close in Q1 2020, will see Cision become a wholly owned entity of the Platinum Equity affiliate. There had been rumours that Cision had been in negotiations with potential new private equity owners since around March.

“This transaction will provide shareholders with immediate and substantial cash value, while also providing us with a partner that shares in our commitment to customers and employees and can add strategic and operational value,” said Kevin Akeroyd, chief executive at Cision. “Based on our extensive engagement with Platinum over the past several months, we are confident that Platinum's support will enable Cision to execute on its strategy and next phase of growth.”

“Cision has a long history of leadership providing software and services to public relations and marketing communications professionals and has developed a growing portfolio of earned media management offerings for the world's leading brands,” said Jacob Kotzubei, a partner at Platinum Equity. “Platinum looks forward to nurturing Cision's core business, supporting and anticipating the diverse needs of the company's customers, and driving new opportunities for innovation. As a private company, Cision will be able to make strategic investments for sustainable and profitable growth, while remaining agile and focused on operational excellence. We are excited to partner with Cision's management team as it embarks on this new chapter.”

According to a statement announcing the deal, Cision may solicit alternative acquisition proposals from third parties during a ‘go-shop’ period from the date of the agreement until 12 November 2019.

News: PR Newswire owner Cision to be taken private for $2.74 billion

Automotive supplier DURA moves forward with financing

BY Fraser Tennant

To facilitate an infusion of new capital and to pursue an expedited going-concern sale process, global automotive supplier DURA Automotive Systems is undergoing a restructuring process in order to fuel its future growth.

To implement the restructuring, DURA and its domestic subsidiaries have filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code. DURA’s non-US subsidiaries are not part of the Chapter 11 filing.

Furthermore, DURA has obtained a commitment from Lynn Tilton, DURA’s chief executive and majority owner, for a $77m debtor-in-possession (DIP) financing facility, including $50m of new money, the proceeds of which will be used to fund DURA’s ongoing business operations, including capital expenditures for future platforms.

This facility will allow DURA to continue business as usual while pursuing a court-supervised, going-concern sale, commonly referred to as a ‘363 sale’. The contemplated sale is expected to have no effect on DURA’s customers, suppliers or employees.

“Ongoing constituent disputes have made it impossible for DURA to access ordinary course, yet essential financing,” said Ms Tilton. “The actions announced today will allow the company to move forward and access the necessary capital that will fuel its growth. I look forward to working closely with DURA’s leadership and its talented and dedicated work force throughout this process as we continue the transformation of this great company.”

Founded in 1914, DURA is a  leading global automotive supplier specialising in the design, engineering and manufacturing of innovative solutions that drive the evolution of mobility. Employing more than 9400 people in 14 countries, DURA invests in technological advancement, including vehicle lightweighting, design aesthetics, amalgamated mechatronics and advanced safety & advanced mobility and markets compete systems and modules to leading automakers in the Americas, Asia and Europe.

“The financing Ms Tilton has agreed to supply will provide DURA with much-needed capital to fund growth programmes that we have recently been awarded,” said Kevin Grady, executive vice president and chief financial officer (CFO) at DURA. “These important actions will allow us to continue our operations as normal. Most critically, this expedited sales process will not result in any supply disruptions or trade impairments.”

DURA expects this expedited sales process, including the closing on the 363 sale, to be completed within approximately 120 days.

News: Dura Automotive files for Chapter 11 bankruptcy