First Republic heads towards receivership; Corvex builds stake in Algonquin; Millennium Trust explores sale; and much more
Happy Friday!
Earlier today, Greg Roumeliotis was first to report that the U.S. Federal Deposit Insurance Corporation (FDIC) is preparing to place First Republic Bank under receivership imminently. The report sent shares of the lender down nearly 50% in extended trading.
The U.S. banking regulator decided the troubled regional lender's position has deteriorated and there is no more time to pursue a rescue through the private sector, the source told Reuters, requesting anonymity because the matter is confidential.
If the San Francisco-based lender falls into receivership, it would be the third U.S. bank to collapse since March. First Republic said earlier this week its deposits had slumped by more than $100 billion in the first quarter.
The FDIC, the Treasury Department and the Federal Reserve were among the government bodies that orchestrated meetings with financial companies about a lifeline for the bank, Reuters reported earlier on Friday.
News of the imminent move to put First Republic in receivership comes the same day the Federal Reserve and FDIC detailed their supervisory lapses before deposit runs caused the collapse of Silicon Valley Bank and Signature Bank in March.
The Fed's assessment of its inadequacies in identifying problems and pushing for fixes at Santa Clara, California-based SVB came with promises for tougher supervision and stricter rules for banks.
Large banks had orchestrated an earlier lifeline for First Republic, placing $30 billion in combined deposits from U.S. banking heavyweights, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.
But First Republic struggled to find support from larger banks or private equity firms on its proposed move to create a so called "bad bank" or sell assets such as securities and mortgage book.
BREAKINGVIEWS had this take on the failure of First Republic – “When Silicon Valley Bank and Signature Bank failed in March, U.S. authorities bailed out their depositors regardless of size. The response signaled that when a mid-sized U.S. lender collapses, doing anything less might spark a systemic crisis. The slower destruction at First Republic Bank could provide an opportunity to reverse the regrettable precedent.”
Elsewhere, Svea Herbst Bayliss and David French scooped that Corvex Management has built a stake in Algonquin Power & Utilities, joining other activist investment firms pushing for changes at the Canadian power company.
Corvex, which is led by hedge fund veteran Keith Meister, met with Algonquin's management last week for the first time, sources told Reuters, describing the meeting as friendly in nature.
The size of Corvex's stake in Algonquin, which has a market capitalization of around C$7.8 billion ($5.75 billion), and its plans moving forward could not be learned.
Algonquin owns and operates regulated utilities, as well as power generating and water assets, across Canada and the United States, with its regulated business serving more than 1 million customers, according to its website.
The company is grappling with a $7.5 billion debt burden following a series of acquisitions in recent years.
In January, as part of a plan to bolster its financial strength, Algonquin said it would seek to raise $1 billion from selling assets, and would slash its dividend payment to shareholders by 40%.
And finally, David French and I were first to report that the private equity owners of Millennium Trust Company are exploring options for the U.S. retirement account custodian, including a sale that could value it at as much as $8 billion, including debt.
The sale effort comes as Millennium Trust's business is buoyed by higher interest rates adopted by the U.S. Federal Reserve to fight inflation.
Credit ratings agency S&P Global Inc said last month the higher rates boost the revenue Millennium Trust receives from interest on the cash deposit balances of customers.
Millennium Trust, which is owned by buyout firms Abry Partners and Parthenon Capital Partners, is working with financial advisors JPMorgan Chase and Raymond James Financial on the sale process.
Potential buyers could include private equity firms and financial services companies which operate custodian and asset management businesses.
Millennium Trust will also entertain the sale of a minority stake to a private equity firm, should an outright sale not be feasible.
And here’s a quick recap of the other highlights of the Reuters corporate finance file this week:
Sheikh Jassim Bin Hamad Al Thani, the son of Qatar’s former prime minister, submitted his final bid for the entirety of Manchester United just before Friday's deadline, a person familiar with the matter told Reuters.
Glencore boss Gary Nagle has a narrow opening. Teck Resources, the Canadian coal and copper miner he wants to buy for some $23 billion, this week abandoned its complicated proposal to split the company after it lacked enough shareholder support. The development gives the Swiss suitor scope to pounce before its target tees up a revised breakup plan. A surgical strike would be the best approach.
Reaching for Plan C is rarely a good sign. Canadian miner Teck Resources tore up Plan A, which was a scheduled shareholder vote on splitting the company. It withdrew the plan at the eleventh hour because it lacked support, in part because it was too fiddly, with cash flow from its coal unit helping its metals business excavate copper for a while. Boss Jonathan Price and controlling shareholder Norman Keevil also are rejecting Plan B, an even more intricate, all-share $24 billion takeover bid from Glencore. If Teck doesn’t come up with a persuasive third option, and soon, it is likely to face increased pressure to sell.
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Training software company iLearningEngines Inc agreed to go public through a merger with blank check company Arrowroot Acquisition in a deal that values the combined company at $1.4 billion, it said.
Knowing when to sell out is a common dilemma among family-owned companies. For 106-year-old German heat pump maker Viessmann it looks like an odd move, given its technology is in demand and at the forefront of the energy transition race. Yet a 12 billion euro sale of its core business to $35 billion American fridge-to-air-conditioning group Carrier Global looks like a necessary step to stay ahead. It’s also a lesson for German and EU politicians.
Drugmakers including Merck, AstraZeneca and AbbVie said they are open to acquisitions and reported a ramp up in research and development spending as the industry's larger players look for new sources of future revenue.
Cellnex's decision to pick former Telecom Italia CEO Marco Patuano as its new boss increases the odds of seeing the 27 billion euro mobile phone tower operator returning to the M&A negotiating table – as a seller. The appointment ends months of boardroom infighting that culminated with the departure of former Chairman Bertrand Kan on April 4. Patuano has the backing of activist fund TCI and Italy's Benetton family, Cellnex's largest investors with an overall 17.6% stake, and they want a radical shakeup to cut debt and revamp the company's battered stock. A modest 0.8% share price rise on Friday signals investors may agree.
Trillium Capital LLC chief executive Scott Murray told Reuters that his $4 billion bid for Getty Images Holdings was genuine and that he made the offer public after the multimedia agency has ignored the activist investor for weeks.
Shareholder advisory firm Institutional Shareholder Services Inc (ISS) urged investors in TravelCenters of America to vote for the company’s planned $1.3 billion sale to BP, saying it "presents higher certainty of completion."
Deutsche Boerse is making a bold data pivot. Chief Executive Theodor Weimer is buying Danish fund software firm SimCorp for 3.9 billion euros in cash. The German exchange operator is hoping a shift into the faster-growing data business will mean a richer valuation. It’s a logical, albeit costly, gamble.
Britain is sending a clear message to big U.S. technology groups: build it, don’t buy it. The country’s competition watchdog on Wednesday inflicted a possibly fatal blow to Microsoft’s $69 billion takeover of “Call of Duty” owner Activision Blizzard over concerns that the merger would harm competition in the fast-growing cloud-gaming market. The level for Big Tech to get mega-acquisitions through antitrust regulators has gone from hard to extreme.
Thank you for reading this week’s edition! Please do share the newsletter with anyone you think might be interested – feedback will be most welcome.
Have a great weekend!
Best,
Anirban?
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Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Thomson Reuters
Twitter: @asenjourno