Mergers & Acquisitions Roundup

In recent months on this blog I have updated and followed up on a variety of mergers and acquisitions in a variety of different industries. The past week has seen some movement on some of those proposed mergers or attempted hostile bids or whatever the case may be; the best way to update them is to provide a summary of each situation.

The M&A market is expected to gain traction in the coming months after a slower than normal start to the year, especially in certain industry types.

CVS – Aetna
This proposed mega-deal made the news on Wednesday because the $40 billion debt deal that CVS is undertaking as part of the nearly $70 billion dollar merger is going to lower their credit rating.

It is no secret that certain lending institutions would consider CVS a credit risk with taking on such a significant amount of debt at one time. It was a component of the deal that nobody discussed when it was initially announced.

Then, on top of that debt load issue, are the rather legitimate conflict of interest and consumer protections aspects of this deal which are still being reviewed. The general consensus is that a foundational problem with this merger is the combination of a major health insurer with a major retail pharmacy chain which has a parent company involved in healthcare services.

It will be interesting to watch this merger, if approved, it could be a situation where CVS Caremark wins the battle but loses the war.
Broadcom vs. Qualcomm
This attempted hostile takeover by Broadcom of their U.S. based competitor, Qualcomm has been a very strange scenario from the beginning.

The whole backstory is very complicated, and some great reporters and financial news services have provided insightful reporting on this convoluted mess. Broadcom is a tech company based in Singapore and they have attempted to buy Qualcomm multiple times at different valuations.

The problem for Qualcomm is that they do not have another willing investor or potential suitor that they could join forces with in a more amicable way to stave off Broadcom.

Then, to top it all off, the U.S. government got involved in the past week to temporarily halt the potential merger over concerns that a foreign held company was acquiring a U.S. based company with certain proprietary technologies in telecommunications. They have certain regulatory concerns over the deal.

Broadcom has now pledged to the U.S. government on Wednesday that they will invest in the training of American engineers and others in the workforce to keep high-paying, “good” jobs in the United States.

The whole situation is a disaster and it has been from the beginning. I am not sure if the federal government is going to sign off on this proposal. That creates uncertainty for the future of Qualcomm as well.

Smuckers & ConAgra

What struck me about this proposed deal (which is now dead) is that in my time in the food industry ConAgra was always usually in the role of the buyer. In this case, they were looking to sell their Wesson brand cooking oil business to JM Smucker Company.

The federal government shutdown the deal over anti-trust concerns citing that Smucker would then control about 70% of the entire cooking oil market. The government felt that this would be unfair to the consumers and could create price hikes that would limit consumer choice.

The Smucker side of the story is, in short, that the government used inflated numbers and did not take into account the impact of private label brands and smaller regional brands in the cooking oil market. I must add in the defense of the government, that not too many smaller brand labels of cooking oil jump to my mind.

I could understand the rationale behind Smucker (who generally make smart decisions in M&A activity) would want the Wesson brand. I can only predict that ConAgra wanted to sell the brand because they are moving away from holdings in that segment of the industry and they would have used the cash from the deal to invest into more core strategic areas of new business development.

Comcast versus Disney/FOX Over Sky TV

The latest bidding war is just heating up between Comcast and Disney/FOX over the rights to SKY. A major investment bank downgraded Comcast stock after they put that offer on the table for SKY.

I understand Comcast trying to bolster their core business in this play for SKY, but it does make you wonder if the deal is done whether or not they will have overextended.

Bayer & Monsanto
A major mega-merger which I have covered since it was announced. The European Union issued a statement saying they will have a vote on the proposal soon after multiple postponements in recent months.

This merger proposal will have an impact on the farmers, the consumers, and the price of food supplies. The introduction of more potential GMO containing seeds is another concerning aspect of this deal that merits the attention of the public.

Rite Aid and Albertson’s

The debacle that was the failed attempt of Walgreens and Rite Aid to merge, left Rite Aid in a precarious situation when stacked against larger competitors.

The list of suitors for Rite Aid within the retail pharmacy landscape was slim to none, so they went outside the box a bit and found a partner in Albertson’s to bail them out.

Albertson’s is a large retail grocery chain for those who do not know, and they used to own pharmacies that were operated within their grocery stores primarily. So they understand the aspects of the retail business and some of the dynamics of the retail pharmacy channel.

This merger actually makes some sense and will allow Rite Aid to stay alive in an increasingly competitive market.

That is the roundup on mergers for now. I am sure that one or all of these proposals will have some developments as we move forward in the coming weeks. Stay tuned.

The Battle Over Sky News: Front Lines In The Media Battle Between Comcast and Disney

The financial news had some buzz around the potential for a bidding war between Disney/FOX and Comcast for Sky News/Networks on Tuesday. This activity signals what could be the opening salvo in a protracted battle between the major players in the television/visual media to play out across the next several months.

In this case, the asset is Sky News/Networks which has a viewership reach in Europe that is valuable for media companies seeking to expand their capacity and content distribution. In the current situation, FOX owns part of Sky and presented a bid recently to purchase the remaining stake it did not own.

Comcast jumped into the mix on Tuesday with an offer to purchase a controlling interest in Sky which represents a 16% higher valuation than the offer made by FOX. This situation is further complicated by the pending merger of Disney and FOX which essentially puts Disney into the driver’s seat on this deal because Disney would ultimately own Sky upon completion of the merger.

This means that Disney would have to evaluate the offer made by Comcast and decide whether they will propose a counter proposal for Sky. Many financial and merger experts with knowledge of the situation believe that a counter offer will take place and that Sky Networks will end up selling at a premium after a bidding war between Disney and Comcast.

Furthermore, the sentiment in the industry on Tuesday was that Disney might, in essence, lose the battle for Sky Networks, but “win the war” by securing some type of legal assurances from Comcast regarding the bidding for other FOX assets. Disney wants to avoid having bidding wars with Comcast over several different pieces of the now almost former 21st Century Fox properties.

It remains to be seen whether Disney can wrangle that type of agreement out of Comcast which would be unusual but not unprecedented. The general sentiment about the future of Sky is that they would be best suited with Comcast because it meshes better with their core business.

Many consumers visualize Sky as a news company, especially in America where we may have the channel as part of a cable or satellite TV package. The parent company, Sky PLC, which is what is at stake here in this potential bidding war between Comcast and Disney/FOX is much larger than just a news service.

Sky has a satellite television service, broadband service, on-demand internet streaming services, and telecommunications service offerings in the United Kingdom, Ireland, Austria, Germany, and Italy. This asset would increase the service offering capabilities for Disney with their new streaming application or for Comcast who is in the business of optimizing home entertainment, broadband, and telecommunications services.

Moreover, the much larger battle will revolve around the future of Hulu. The Hulu streaming service is owned partially by ABC/Disney, FOX, and Comcast (NBC). The proposed merger of the Disney and FOX assets would include their respective stakes in Hulu.

In fact, the potential to control streaming content through Hulu was one of the significant factors in the Disney bid for FOX according to a report from CNBC and Comcast could create some trouble in giving up their piece in Hulu in the future.

The total sum of this consolidation activity, amid the backdrop of Disney preparing for launch of their own streaming application service, will affect the consumer. The rights to content and the distribution of content will be the main driver in the way the consumer accesses all types of media. The control of that content into the hands of the few, is going to set the table for conditions where pricing can become prohibitive.

Disney, should the pending merger meet approval, would retain their 30% share in Hulu plus gain the 30% share held by FOX and would be the majority stakeholder in the streaming service which reaches over 30 million subscribers and has revenues from ad sales and subscription fees. It is also a significant asset that Comcast has invested money into as well and they may not be willing to just part ways with their stake. They could put Disney “over the barrel” for that last big piece of the Hulu business unit.

The overall health of Sky as a provider is solid, it is my understanding that the business growth in Italy was stagnant for a long period of time but that it has since rebounded. It remains to be seen if the change in ownership causes any noticeable alterations to the way that the customers in Europe will be serviced. Most merger and acquisition type of scenarios feature the potential suitors touting the benefits they would bring to the table.

This case is no different with Comcast essentially stating that they would improve the services offered currently by Sky and use their technology and service delivery expertise to help provide a better customer experience.

Disney has also made similar overtures in their bid stating how desirable Sky would be for them to reach European audiences in a new way, and that they would fully complete the consolidation of an asset that was held in part by FOX for a long period of time. They would look to build upon that tradition and reputation that FOX has built into the programming and content there, but the management of the other portions of that business are outside the scope of the core business for Disney.

The proposals for Sky News and the parent company, Sky PLC, are almost certainly going to create a bidding war between two media heavyweights: Disney and Comcast. This bid could very well represent the opening round of a war between the two entities for other assets contained both within the FOX/21st Century Fox business and outside of those businesses.

The stakes for the consumer are high because the control of content and distribution will both be up for grabs, and the costs for access to that content will have a definitive impact on the consumer in the future. It remains to be seen which side will ultimately emerge, but what is clear is that either Disney or Comcast will be growing even larger and more influential than they are today.

(Background information courtesy of Fortune,, CNBC, Recode)