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.