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A mergermarket report on global M&A activity. Monthly M&A Insider

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Monthly M&A Insider A mergermarket report on global M&A activity DECEMBER 2 CONTENTS Introduction 3 North American M&A 4 Russian banking sector: Sources sceptical about consolidation prospectives 6 Tele2
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Monthly M&A Insider A mergermarket report on global M&A activity DECEMBER 2 CONTENTS Introduction 3 North American M&A 4 Russian banking sector: Sources sceptical about consolidation prospectives 6 Tele2 continues march Eastwards despite recent interstellar setback 8 North America 1 Latin America 24 Asia-Pacific 37 China 48 Japan 63 Australia 75 Europe 89 UK 11 Germany 114 France 127 Italy 139 Benelux 151 Iberia 166 Nordic 178 CEE and CIS 191 mergermarket Monthly M&A Insider Russia 2 Middle east & north africa 216 Part of The Mergermarket Group 8 Strand London, WC2R RL United Kingdom t: +44 () f: +44 () Broadway #4 New York, NY 13 USA t: f: Suite 21 Grand Millennium Plaza 181 Queen s Road, Central Hong Kong t: f: Introduction 3 Abu Dhabi s Christmas present to Dubai World Encouragingly, there was a rise in deal valuations in November compared to the preceding month in the UK, with the combined of all M&A transactions for the fourth quarter already up to 22.6bn, compared to a combined for all M&A in the UK of 1.8bn the quarter before. Similarly in North America, is signalling a slight turnaround in deal valuations, with the last quarter s total already exceeding aggregated investments by $5bn. This has primarily been driven by a raft of mega-deals of late, such as the recent announcement that ExxonMobil Corporation will acquire XTO Energy Inc for US$4.4bn. And although both regions will continue to face difficulties in 21, it is Dubai which is stealing the headlines this month. Three weeks of market turmoil followed after Dubai froze payments on $26bn in debt held by state-owned conglomerate Dubai World. This panic has been eased considerably by oil rich Abu Dhabi s sovereign wealth fund, who agreed to inject $1bn to aid it s more ostentatious neighbour which slid close to default following issues stemming from property developer Nakheel, which is owned by Dubai World. However, the debate rages on as to the damage done to Dubai s reputation, while the remaining $22bn in debts still remains outstanding. mergermarket are pleased to offer you the December edition of Monthly M&A Insider, a publication which provides you with features by mergermarket journalists, deals of the month, potential activity and deal drivers. We hope you continue to find it useful. By Anna Henderson, Remark Head of Research Elias Latsis Editor Anna Henderson For advertising opportunities contact: Erik Wickman Tel: North America Aksana Fitzpatrick Latin America Jennifer Ruiz Asia-Pacific Debbie Jung, Vinay Shahani Greater China Maggie Cheung, Crystal Chan Japan Shunsuke Okano, Anita Wong Australia Cicilie Lofsgard Europe Felix Barwinek UK Lars Lundqvist Germany Sola Akinola; Felix Barwinek France Damien Julliard Italy Zaynab Dost Benelux Kathleen Van Aerden Iberia Samuel Tedjasukmana Nordic Debora Mehler CEE/CIS Petra Witowski Russia Irina Arefyeva MENA Marie-Laure Keyrouz Introduction / North American M&A A review of the year s leading sectors: In the first half of 2, three sectors topped the charts in terms of aggregate M&A deal : Healthcare and Life Sciences, with 118 deals worth US$165bn;, with 172 deals worth US$68.5bn; and Energy, with 1 deals worth US$52.3bn. The second half of the year is coming to a close with significantly lower deal s in these sectors, with the exception of Energy, which received a major boost in mid-december thanks to ExxonMobil Corporation s US$4.4bn acquisition of XTO Energy Inc. Healthcare and Life Sciences deal in H2 has fallen roughly 83% to US$27.6bn, while deal has dropped by about 73% to US$18.5bn. But H1 figures in both of these sectors were grossly inflated: the Merck-Schering Plough, Pfizer-Wyeth and Roche-Genentech mergers together amount to an astounding US$151.5bn, while high-profile bank bailouts, including the Treasury s US$25bn investment into Citigroup, made up the bulk of deal in this period. Thus, H2 s significantly lower deal is not necessarily surprising, and it should not overshadow the fact that deal in all three of these sectors has been on the rise in the past six months. Indeed, the leading sectors in the first half of the year have remained at the forefront in terms of overall M&A thanks to industry-specific drivers that are set to keep M&A activity strong throughout 21. Healthcare and Life Sciences keeps up to speed In the Healthcare and Life Sciences industry, competition in distinct subsectors has been the driving force behind most mergers, which have increased in from 118 deals in H1 to 126 deals in H2 so far. Looming patent expirations in the pharmaceutical space have caused many companies to bulk up their offerings, while the push for updated, digitized information management systems has driven consolidation among the IT service providers to the healthcare industry. On top of this, North America s aging population is expected to place enormous demand on medical device and drug companies, making these businesses prime targets in recent months. These drivers are alive and well in recent activity. Tech-savvy, IT-focused companies have produced some major buyouts in recent weeks, attracting particular interest from financial buyers. Last month saw the US$5.1bn acquisition of US-based IMS Health, an information solutions company servicing healthcare providers, by the Canada Pension Plan Investment Board and US-based private equity firm TPG Capital, followed by Francisco Partners US$117m acquisition of QuadraMed Corporation, a US-based healthcare IT provider that develops software and services for hospitals throughout the US, announced in early December. December has also brought a wave of strategic mergers, most of which fall in the mid-market range, to the biotech and pharmaceutical industries. Cubist Pharmaceuticals, for example, recently announced its acquisition of Calixa Therapeutics, a US$93m deal that allows Cubist to obtain certain drug development rights owned by Calixa, a US-based drug developer focused on antibiotics. US-based Celgene Corporation also announced a strategic acquisition earlier in the month with its US$64m purchase of Gloucester Pharmaceuticals Inc. Medical device companies are consolidating at a fast pace as well. US-based Stryker Corporation illustrates this quite clearly, announcing two acquisitions this December. First, Stryker announced its US$525m acquisition of Ascent Healthcare Solutions Inc., which it bought from purchased from RoundTable Partners, and later in the month announced its plans to acquire orthopedics-focused Ostimed Corporation for US$67m. sector: smaller players keep deal high As is the case in the Healthcare and Life Sciences industry, a string of unusually large transactions in the first half of the year make the recent decline in M&A seem inevitable. But also like the Healthcare and Life Sciences space, this decrease in is coupled with an increase in deal driven by a very specific set of drivers, including distress in the US banking industry and heightened competition in the asset management space. Companies in the mid-market range can be credited with boosting deal over the past several months, which has increased by about 12% from 172 deals in H1 to 193 deals in H2. While the first half of the year was characterized by deals involving the industry s giants, M&A in the second half of the year is dominated by the smaller firms, starting with the US$29m acquisition of Anchor BanCorp Wisconsin by Badger Anchor Holdings and UMB Bank s acquisition of American National Bank s corporate trust division. Introduction / North American M&A The deals that followed shortly behind reveal the lingering impact of the financial crisis, with regional banks replacing global banks as the most common troubled targets. For example, Greater Atlantic Bank, which has assets of about US$23m, was acquired by Sonabank this month after going into receivership in October. Benchmark Bank, with assets of about US$179m, also went into receivership before being acquired by MB Bank NA this month. In a similar vein, the State Bank and Trust Co. acquired two banks in receivership under the FDIC: Buckhead Community Bank in the South, after it was shut down by the Georgia Department of Banking and Finance, and then First Security National Bank. Not all M&A in the sector shows signs of distress, however. The asset management industry is seeing healthier strategic M&A activity following US-based asset manager BlackRock s US$13.6bn acquisition of Barclays Global Investors (BGI) earlier in the year. The BlackRock-BGI merger created the world s largest asset manager and ramped up the competition for its peers, which may explain why smaller firms are beefing up their product offerings with add-on acquisitions. This month, for example, US-based asset manager Affiliated Managers Group Inc. (AMG) acquired Highbury for US$114m, in a deal that allows AMG to gain control of institutional investment manager Aston Asset Management, Highbury s sole subsidiary. Another example is the merger of TWC Group and Metropolitain West Asset Management, announced earlier this month. In acquiring Metropolitan West, TCW Group, the US-based asset management subsidiary of Societe Generale de France, immediately enhanced its fixed income product offering and gained access to the target s US$3bn in assets under management. Large-cap deal flow in the Energy sector Last but not least, the Energy sector is seeing a promising level of M&A activity in both and terms in the second half of 2. The industry has witnessed a remarkable 39% increase in deal and a 56% increase in from H1 to H2 so far, from 1 worth US$52.3bn to 145 worth US$81.6bn. The most significant transaction in this space is now ExxonMobil Corporation s US$4.3bn purchase of XTO Energy Inc., both US companies. The deal, which propelled Energy above all other sectors in terms of aggregate M&A deal, is driven primarily by ExxonMobil s desire to establish itself in the natural gas space, where it had previously lagged behind its competitors. The enormous price tag attached to ExxonMobil s purchase of XTO Energy has naturally placed this particular acquisition in the spotlight, but it is worth noting that this is in fact just one of several significant, albeit smaller, recent mergers in the industry. Last month, US-based Denbury Resources announced its US$4bn acquisition of Encore Acquisition Company, a USbased oil and natural gas company. Months earlier in August, Baker Hughes announced its US$5.5bn acquisition of BJ Company. Growth and geographical expansion are the common denominators in most of the industry s recent transactions. This has been particularly important to Asian buyers, who have been key players in the M&A landscape during the second half of 2. In November, China Investment Corporation (CIC) announced its plans to acquire a 15% stake in AES Corporation, the US-based power company. The previous August, another Chinese bidder, PetroChina Company Limited, agreed to acquire a 6% stake in Mackay River and Dover oil sands projects from Athabasca Oil Sands Corp (AOSC), a Canadian company. The flurry of large-cap Energy transactions involving Asian bidders, especially Chinese bidders, is likely to continue as these buyers look to establish themselves on North American soil. Outlook for 21 The sectors responsible for the landmark transactions of 2 are likely to remain in the headlines, with or without mega-deals. Indeed, Healthcare and Life Sciences and each contain a potent mixture of deal drivers that have set M&A in motion over the past six months and will continue to do so in the months ahead. Likewise, in the Energy sector, companies across the globe have illustrated their appetite for acquisitions, especially foreign buyers who have turned North America into an Energy M&A hotspot. The unique conditions in each of these industries have kept M&A going in a particularly difficult climate for closing deals, giving us plenty to look forward to as we move into the new year By Elizabeth Castro, Remark Introduction / Russian banking sector: Sources sceptical about consolidation prospectives Russian banking sector sources and analysts have become largely sceptical about prospects for banking market consolidation in the near future. Banks to concentrate on cleaning books from bad assets instead of M&A Talking on the sidelines of the Adam Smith Russian Banking Forum in London, one sector source said that mid-sized banks, which are being viewed as potentially the main drivers for market consolidation, do have appetites for M&A, but do not dare to go ahead. Facing the need to deal with growing amounts of bad loans, everyone is concentrating on making order in his own garden, the first source said. Another senior Russian banker said that bad loans are a major problem for Russian banks, therefore many of them must first clean their books to be acquired. A third source from a bank that recently performed asset consolidation said that despite Russian banks having the appetite for M&A now, most of them lack liquidity for acquisitions. Therefore, mergers through shares swaps are the most likely way of consolidation in the foreseeable future. This is going to create additional problems with regard to evaluation of the bank s and make negotiations very difficult. From about 1, banks, approximately 1 are potentially interesting as acquisition targets, the third source said. Estimates of problem loans to total loans in the banking system differ from 9% to 25%, according to several sources. There has been a deterioration in asset quality in 1H, however, the trend has slowed in 2H, with some data even turning positive, a sector analyst said. Uncertainty as to future development of the economy hinders M&A Banks are largely puzzled as to the future of the economy, several banking sources said. It is difficult to assess the current state of the economy because the evaluation of the situation by the Central Bank, the Government and other sources differs too much, the first source said. The second source agreed that the current situation is vulnerable and that valuations of the banks will be a problem. Bankers are trying to invest money in unclear targets outside Russia and it is unknown what the outcome of these investments would be, the second source added. Still, the analyst said that economic recovery is under way. The ruble exchange rate is stable and there is a consensus view that the banking system is close to the peak of nonperforming loans accumulation and the asset quality situation is manageable, the analyst said. There is a big uncertainty as to short-term prospectives, but in three to four years time, there is potential to resume a GDP growth of 5% to 6%, Francis Malige, Head of M&A at the Global Retail Banking Division of BNP Paribas Group, said, speaking at the conference. Banks are looking to raise capital for growth, while investors are also more willing to believe the positives, the analyst concluded. A market source estimated additional capitalization needs of the Russian banking system at over RUB 1trn (USD 34bn). The source added that the government s support, in the form of subordinated loans, is largely targeted to the statecontrolled VTB. As previously reported, there is a consensus that VTB and Sberbank are unlikely to consolidate banks in Russia. Foreign players looking at Russian market According to a Western European financial industry adviser, the Russian banking market remains attractive to western players. The financial services market in Russia is largely underserved, while some credit niches have high profit margins. Most foreign banks are under pressure, due to the financial crisis and do not have the appetite to seize opportunities, the source said. Still, a few of them that have withstood the crisis well are actively looking to enter Russia either now, or in the foreseeable future, the source said. On the other hands, there will be foreign banks selling their Russian subsidiaries, the source said. For instance, KBC is seeking buyers for its Russian subsidiary Absolut Bank. There will be other cases like this, the source added. Introduction / Russian banking sector: Sources sceptical about consolidation prospectives Russia s banking system has an immense growth potential and is therefore likely to remain a priority to investors, Malige said. Russian banks have again got access to international finance after the crisis, but investors are more selective now. Global investor confidence is likely to change towards emerging economies, including Russia, because their real GDP growth will be much higher than in mature economies, Malige added. Large international banks will want to invest in Russia, he said. The government s role in stimulating consolidation twofold The financial sector analyst said that the Russian Central Bank and government do not seem to be actively pushing consolidation. Consolidation of the banking sector would be good for the industry and has been mentioned among the government s priorities, however, there are still obstacles to active M&A. An increase of the minimum capital requirement for banks is an insufficient measure for stimulating consolidation, the analyst said. A source at a bank actively involved in M&A added that there has already been significant progress in improving the procedures for M&A of banks in the last times. As a result, the time needed for a merger of two banks has gone down to three to four months, the banker said. By Alexander Cajcyc in London Introduction / Tele2 continues march Eastwards despite recent interstellar setback Tele2, the Swedish integrated telecommunications firm, announced in December that it is to acquire a 51% stake in Mobile Telecom-Service LLP (trading as NEO Kazakhstan), the Kazakh mobile phone network operator, from JSC Kazakhtelecom, the listed Kazakhstan based telecommunications company, for a cash consideration of approximately 52.6m (SEK55m). The agreement, once approved by regulatory authorities, will see Tele2 inject approximately 34.4m (SEK36m) into the business. This capital will be predominantly used to upgrade its urban network capacity, where most of the ries 12m population is centred, and to relaunch the service. NEO Kazakhstan is the smallest of the three mobile network operators in the ry with just 5% market share and approximately 38, customers. The market leaders, TeliaSonera s K-Cell and Vimpelcom s Beeline, each have around a 45% share of the market. Tele2 hope to leverage the experience gained from the successful roll-out of their Russian services, which by 21 will provide coverage in 37 regions in the ry, to hit the ground running. The stated intention for the new Kazakh division is to grow its market share to 2% within four years of the company s relaunch as a price leader and for EBITDA to break even in two to three years. These optimistic targets are based on the Kazakh market s already considerable mobile penetration (estimated at 9%); its poor fixed-line network; good churn rate (35% per annum); and the ry s encouraging economic growth prospects, which forecasts GDP growth expanding at an average of 4.5% per annum over the next 1 years. As part of the deal, Tele2 have the option to buy the remaining 49% of the firm from Asianet Holdings B.V., the Netherlandsbased private investment group holding the remaining share capital in NEO Kazakhstan. Speaking about the deal, Harri Koponen, the President and CEO of Tele2 said, The acquisition of a mobile operation in Kazakhstan goes hand in hand with our ambition to carefully look for complementary assets in, or close to, our mobile footprint. Given the proximity of the Kazakhstan asset to other Tele2 operations, this acquisition should provide the potential of synergies deriving from the replication of our successful operational model. Tele2 was founded in 1993 and currently has 26m customers across 1 ries providing mobile services, fixed broadband and telephony, data network services, cable TV and con
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