Kroger carts away Albertsons; Murdoch attempts Fox-News Corp reunion; Musk investigation continues; and much more
Happy Friday!
Never a dull moment on the deals beat! Even as we were processing the latest shenanigans on the Musk-Twitter situation, a mega grocery merger landed out of the blue. Earlier today, Kroger snapped up Albertsons Cos in a $25 billion deal, creating a U.S. grocery behemoth to better compete with leader Walmart on prices while bracing for potential antitrust roadblocks.
The mega merger between the No. 1 and 2 standalone grocers in the United States will bring under one roof nearly 5,000 stores that include banners such as Albertsons' Safeway and Kroger-owned Ralphs and Fred Meyer.
The U.S. Federal Trade Commission (FTC) could, however, challenge the deal between the two major grocers as antitrust scrutiny intensifies under the Biden administration and decades-high inflation squeezes households, according to three antitrust experts.
With a customer base of 85 million households and 66 distribution centers, Kroger and Albertsons would together have an edge over negotiations on product prices with suppliers, including consumer goods companies, at a time when prices of groceries and essentials are soaring in the country.
Kroger said it expects to reinvest about half a billion dollars of cost savings from deal synergies to reduce prices for customers. An incremental $1.3 billion will also be invested into Albertsons.
Market leader Walmart has been doubling down on its own grocery business and has traditionally used its scale to demand the lowest possible prices from food and beverage suppliers, leaving rivals at a disadvantage in price negotiations.
Goldman Sachs and Credit Suisse were the financial advisors to Albertsons, while Citigroup and Wells Fargo advised Kroger. Citi and Wells also jointly arranged $17.4 billion of debt financing to support the deal.
Kroger will have to pay Albertsons $600 million if the deal is terminated.
Elsewhere, my colleagues Pamela Barbaglia and Andres Gonzalez scooped that Vodafone is speeding up talks with a handful of financial investors to sell a slice of its wireless towers unit as it hopes to agree a deal by Nov. 15 to coincide with its half-year earnings, two sources close to the matter told Reuters.
The British telecoms group is evaluating proposals to either halve its nearly 82% holding in Frankfurt-listed Vantage Towers or just sell 25% of it in a bid to free up cash and respond to activist pressure to shake up the company and improve profitability, the sources said, speaking on condition of anonymity.
Shares in Vantage Towers - which has a market value of 13 billion euros ($12.7 billion) - have dropped 18.3% since the start of the year. That makes it an attractive proposition for bidders - including a consortium of investment firms KKR and Global Infrastructure Partners (GIP) - to invest in a recession-proof business at a discount, the sources said.
A spokesperson for Vodafone said the company had previously expressed its "preference to move to co-control and deconsolidate Vantage", adding in doing so Vodafone would be "pragmatic and value oriented", pursuing whatever solution was in the best interest of its shareholders.
Meanwhile, Elon Musk’s Twitter-related troubles are not showing signs of waning – in May, federal regulators started investigating Musk’s late disclosure of his stake in Twitter. Earlier this week, Twitter revealed the investigation in a filing.
While the filing said he was under investigations, it did not say what the exact focus of the probes was and which federal authorities are conducting them.
Twitter, which sued Musk in July to force him to close the deal, said attorneys for the Tesla CEO had claimed "investigative privilege" when refusing to hand over documents it had sought.
In late September, Musk's attorneys had provided a "privilege log" identifying documents to be withheld, Twitter said. The log referenced drafts of a May 13 email to the U.S. Securities and Exchange Commission (SEC) and a slide presentation to the Federal Trade Commission (FTC).
And finally, Rupert Murdoch started a process that could reunite his media empire, News Corp and Fox Corp disclosed, saying they would consider combining at his behest, nearly a decade after the companies split.
Both have formed special committees to review proposals of a potential combination, they said.
If a deal goes through, the combination will allow Murdoch greater control over his media assets and help the companies trim costs. Media companies are fighting decades-low growth in advertising sales and for users' attention against deep-pocketed social media and content websites.
After years of expansion globally, Murdoch split his empire in 2013, placing the print business in newly created public entity News Corp and the TV and entertainment under 21st Century Fox.
The thinking at the time was that this would generate more value for shareholders, according to one person familiar with the decision-making. That vision was realized as Fox sold the bulk of its film and television assets to Walt Disney for $71 billion in 2019.
The media landscape has changed radically in the years since Murdoch separated his media holdings, with technology companies such as Apple and Amazon.com playing a significant role in distribution and bidding for sports rights.
It make sense, in this context, to reunite Fox and News Corp to create a company with complementary assets and greater scale, the person familiar with the proposal said. The combined companies would have around $24 billion in revenue.
And here’s a quick recap of the other highlights of the Reuters corporate finance file this week:
Elon Musk's banks, faced with huge losses on their commitment to finance the $44 billion buyout of Twitter, may not be able to back out of the deal easily but they might have a way to minimize the hit they take.
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Private equity fund Carlyle Group is preparing to launch the sale of its Gabon-focused oil and gas producer Assala Energy, hoping to raise over $1 billion amid high global energy prices, industry sources said.
Activist investor group Macellum Advisors is once again pushing for board seats at the struggling department store chain Kohl's Corp and the ouster of its chairman, according to a letter from the hedge fund to the shareholders.
KnowBe4 agreed to be taken private in a sweetened $4.6 billion deal with Vista Equity Partners, the latest cybersecurity firm to be snapped up by private equity in this year's market downturn.
ForgeRock agreed to a take-private deal with buyout firm Thoma Bravo that values the company at about $2.3 billion, just over a year after the digital identity management company went public.
Private jet service Flexjet agreed to merge with Todd Boehly's blank-check firm Horizon Acquisition Corp. II, in a deal that will value the combined company at $3.1 billion, including debt.
Assa Abloy AB said it was working to sell its Emtek and smart residential business in the United States to resolve U.S. antitrust issues that are holding up a planned acquisition.
French food company Danone will shed control of its dairy food business in Russia in a deal that could lead to a write-off of up to 1 billion euros ($978 million), it said.
Retail sector holding company CSC Generation Inc offered to pay $191 million for Bassett Furniture but the home furnishings retailer rejected the bid, which represented a 27% premium, as being too cheap.
Indian car rental platform Zoomcar Inc said it would go public in the United States through a blank-check merger valuing the combined company at $456 million including debt, as it seeks to expand into new markets.
Blank-check firm CONX Corp, backed by Dish Network Chairman Charles Ergen, said it has begun preliminary discussions to acquire Dish's retail wireless unit, Boost Mobile.
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 terrific weekend!
Warm regards,
Anirban?
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Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Thomson Reuters
Twitter: @asenjourno