Endeavor Energy attracts takeover interest; Allete explores sale; Palliser targets Samsung; AbbVie places $9 bln bet on Cerevel; and much more
Happy Friday!?
Earlier on Friday, David French was first to report that Endeavor Energy Partners is exploring a sale that could value the largest privately-held oil and gas producer?in the Permian basin of the United States at between $25 billion and $30 billion.
The sale would come almost 45 years after Texas oilman Autry Stephens started the company that would become Endeavor. The 85-year-old wildcatter has decided to capitalize on a wave of mega deals sweeping the sector.
Stephens has asked JPMorgan Chase bankers to prepare to launch a sale process for Endeavor in the first quarter of 2024.?
Stephens has considered offers from suitors for Endeavor in the past, including in 2018, Reuters has reported. He now wants to settle the company's future rather than let his estate decide after his death who it should sell it to.?
Endeavor's operations span 350,000 net acres in the Midland portion of the Permian basin, the most lucrative oil and gas region in the United States.
The consolidation wave hitting the industry, as producers seek to boost scale and lock up the best acreage, shows there would be appetite among the few potential buyers for Endeavor.
In October, Exxon Mobil clinched a $60 billion deal to buy Pioneer Natural Resources and Chevron announced a $53 billion agreement to buy Hess.?
In these transactions, the acquirers are using their stock as currency, rather than tapping into their cash piles. This leaves them with sufficient financial firepower to bid for Endeavor, even as they try to complete and integrate these acquisitions. Exxon is familiar with Endeavor's operations because the two companies teamed up to drill on some of the latter's land until 2022.
ConocoPhillips completed in October a $2.7 billion deal to buy out a 50% stake in the Surmont oil sands project in Canada. It has also shown an interest in?CrownRock, which is majority-owned by private equity firm Lime Rock Partners and led by another Texas wildcatter, Timothy Dunn, Reuters has reported. The sale process for?CrownRock?is ongoing.
It is unclear whether Exxon, Chevron or Conoco will pursue a bid for Endeavor. There has been outreach from multiple interested parties in recent times, which helped influence the decision to explore a sale of Endeavor.?
David also scooped that?Allete, a U.S. power utility and renewable energy developer?that has a market value of about $5.2 billion, including debt, is exploring a sale of the company.
Allete?is working with JPMorgan Chase on a sale process that has attracted suitors that include infrastructure funds and buyout firms.?
Allete?shares jumped 9% after David’s scoop was published on Tuesday, giving the company a market capitalization of about $3.5 billion.?Allete?also had net debt of about $1.7 billion as of the end of September.?
Headquartered in Duluth, Minnesota,?Allete?has 150,000 electricity customers in northern Minnesota and 15,000 electricity customers, 13,000 natural gas customers and 10,000 water customers in northwestern Wisconsin. It also operates wind, solar, coal-fired, biomass and hydroelectric power generation assets across the Upper Midwest.
Prior to the news of the potential company sale,?Allete's?shares had lost 14% of their value this year, underperforming a 12% drop in the S&P Utilities index, as the company's pivot to renewable energy production weighed on its profitability.
The company plans to invest around $3.3 billion in clean energy initiatives and transmission projects by 2027, it said in an investor presentation last month.
Allete?reported operating income of $36 million in the third quarter of 2023, little changed from the $33.4 million it posted a year ago. Its operating expenses came in at $348.8 million, little changed from the $354.9 million it posted a year ago.
Elsewhere, Svea Herbst-Bayliss was first to report that activist investor Palliser Capital is urging Samsung C&T to spend its cash better,?improve governance and communications and simplify its corporate structure to boost its share price.
The London-based hedge fund has suggested SCT - the effective holding company of South Korea's largest business conglomerate Samsung Group that is controlled by its founding family - consider making a number of potential changes that could lift its share price by as much as 170%.
Possible changes could include speeding up plans to cancel its treasury shares, appointing more diverse board members who have expertise in capital allocation, naming one chief executive to oversee its four business units that now each have their own head, and reviewing whether some businesses could be sold or spun off and listed.
Any positive adjustments to capital allocation and governance could chip away at the so-called "Korea discount" where South Korean companies like SCT often have lower valuations than global peers due to factors such as low dividend payouts, the dominance of opaque conglomerates known as chaebols and geopolitical risks involving North Korea.
SCT sits at the top of Samsung Group that counts Samsung Electronics as its crown jewel. The founding family members, including the electronic giant's chairman Jay Y. Lee, are the biggest shareholders, collectively controlling more than 31% of SCT.
Palliser owns a 0.62% stake in SCT, which has a total market value of about $17 billion.
Palliser's chief investment officer, James Smith, proposed SCT, which has construction, trading and investment, fashion and resort businesses, buy back shares and consider transitioning to a holding company structure.
And finally, before AbbVie announced its nearly $9 billion deal to buy?Cerevel?Therapeutics,?David Carnevali scooped that the two parties were nearing a deal.
The deal for?Cerevel?marks the second large deal for AbbVie in the past week, coming days after it agreed to buy cancer drug developer?ImmunoGen?for $10.1 billion in cash, highlighting its appetite to place big bets on promising new medicines.
It is paying $45 per share in cash for?Cerevel, which is developing drugs for Alzheimer's, Parkinson's, psychosis, epilepsy, and panic disorder. Its experimental drug?emraclidine?is in?midstage?trials as a treatment for schizophrenia that will yield data the company hopes can be used to seek regulatory approval.
The deal represents a 73% premium to?Ceverel's?closing share price on Dec. 1, before rumors started circulating among traders about a potential sale of the company. The stock had risen 42% since Dec. 1, when Reuters reported on Wednesday afternoon that AbbVie was nearing a deal to buy the company for $45 per share.
Trading in options on?Cerevel?had experienced an unusual surge along with its stock price in the days before Wednesday's deal announcement, with upside call options drawing hefty interest.
Revenue from Humira, once the top-selling drug in the world, is expected to fall precipitously following market entry of over half a dozen biosimilar versions of the drugs this year in the U.S. It already faced competition in Europe.
Humira sales, which topped out above $21 billion in 2022, are expected to be below $9 billion next year.?
Meanwhile, sales of AbbVie's blockbuster leukemia drug Imbruvica dropped 20% in the third quarter due to competition from?BeiGene's?Brukinsa?and AstraZeneca's?Calquence.
Imbruvica is also one of the 10 drugs that will be subject to the first-ever price negotiations by U.S. Medicare health plans, with new prices expected to come into effect in 2026.
Greg Roumeliotis reported that Bain stands to make more than 10 times?the $250 million it invested in?Cerevel?Therapeutics following the sale to AbbVie.?
Boston-based Bain committed $350 million in 2018 to carve Cambridge, Massachusetts-based?Cerevel?out of Pfizer, but only $250 million of that was drawn. The deal with AbbVie now values Bain's 36.5% stake in?Cerevel?at about $2.7 billion.?
This more than tenfold return is significantly higher than the private equity industry's average return on invested capital in the healthcare sector of 2.9 times, according to investment advisor Cambridge Associates.?
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Bain's success reflects the high stakes of its bet on?Cerevel's?drug portfolio. It is developing medicines for Alzheimer's, Parkinson's, psychosis, epilepsy and panic disorder. Its experimental drug?emraclidine?is in mid-stage trials as a treatment for schizophrenia that will yield data the company hopes can be used to seek regulatory approval.
Bain and Pfizer, which retained a 15% stake in?Cerevel, took the company public in 2020 through the merger with a special purpose acquisition vehicle. It was one of the few such deals to have proved successful, as most companies that went public through that route in the past three years now trade at a fraction of their deal value.?
Bain, which has about $180 billion in assets under management, is one of the private equity industry's most prolific investors in the healthcare sector, completing more than 940 deals in the space since 1984.
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And here’s a recap of the?other highlights from the Reuters corporate finance file this week:?
Koh Gui Qing?reported that major life insurers are accessing cheap funding at record levels from a U.S. government-backed financing system, sapping billions of dollars meant to help increase affordable housing.?
Doyinsola?Oladipo?reported that the?New?Terminal One at New York's John F. Kennedy International Airport has issued $2 billion in bonds to begin refinancing $6.5 billion in bank loans raised last year during an extraordinary period of municipal bond market volatility.
Amy-Jo Crowley, Anousha Sakoui and Oliver Hirt?reported that Bain Capital is the last remaining bidder for software company?SoftwareOne?Holding after other interested parties, including private equity firm?Apax?Partners, dropped out.
David Carnevali?reported that?Blackstone is exploring the sale of Anthos Therapeutics, a developer of a new generation of blood thinners it launched four years ago with backing from Novartis.
Svea Herbst-Bayliss?reported that activist investment firm Jana Partners is urging Frontier Communications to begin a strategic review, including a possible sale of the telecommunications company, arguing that its shares will continue to lag unless corrective action is taken.
Zoom Video Communications was the bidder that was rebuffed by call center software firm Five9, according to a person familiar with the matter.
Marcelo Teixeira?reported that?Mercon?Coffee Group, one of the world's largest coffee traders, has?filled?for bankruptcy protection in the United States due to what it defined as "exceptionally challenging operating environment".?
Foo Yun Chee?reported that Danish food ingredients and enzymes makers Novozymes and Chr. Hansen are expected to secure EU antitrust approval for their all-share $22 billion tie-up based on remedies offered to address competition concerns
Chinese electric vehicle maker Nio plans to spin off its battery manufacturing unit, according to two people with knowledge of the matter, as part of the efforts by the company to turn profitable, reduce costs and improve efficiency.
Chen?Aizhu?and Trixie Yap?reported that Shell has shortlisted at least four companies including state-run China National Offshore Oil Corp (CNOOC) and top global energy trader Vitol as bidders for its Singapore refinery assets.?
Thank you for reading this week’s edition! Please do share the newsletter with anyone you think might be interested.
Have a wonderful weekend.?
Best,
Anirban?
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Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Reuters News
Thomson Reuters
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