Another Wave of M&As

May 18th, 2016 by

mergers-acquisitionsWith few other options to do so, companies have continued to turn to mergers and acquisitions as a way of creating value. This is especially true of the biggest corporations that have the means to shell out billions on buying out their competitors. Thus, the effect of these M&As haven’t been felt evenly across the markets, creating an even more top-heavy corporate environment.

Recent Acquisitions

Although there has been uneven activity lately in M&As in general, several significant deals have been struck in the past two weeks.

Media

In a deal that would be worth roughly $864 million, Gannett (GCI) has raised its offer to buy Tribune Publishing Co. (TPUB) by 22%, from $12.25/share to now $15/share. Over the past three weeks since the previous public offer was rejected, the stock price for TPUB has doubled from $7/share to $14/share. This acquisition continues to be a hostile takeover, with several failed attempts at privately negotiating an offer that both sides can agree on.

Gannett owns USA Today and a portfolio of local news assets across the country. Tribune, meanwhile, owns about a dozen large newspapers that include the Los Angeles Times and the Chicago Tribune. An executive from Gannett, Chairman John Louis, indicated that he expected there to be great synergies between the two publishing companies.

Healthcare

In yet another healthcare merger, global bellwether Pfizer (PFE) bought biopharmaceutical company Anacor (ANAC) for $4.5 billion. Similarly, juggernaut Wal-Mart (WMT) agreed to expand its existing partnership with the drug distributor McKesson (MCK) to improve the efficiency of its pharmacy business.

Energy

oil-rigWhile consolidation spreads across the news media and pharmaceutical industries, the merger between Range Resources (RRC) and Memorial Resource Development (MRD) comes as more of a surprise. Energy firms have been deterred from such deals since oil and natural gas prices have tumbled. However, Memorial sports a light debt load, making the $3.3-billion acquisition more attractive. It is the most lucrative acquisition on record for Range Resources.

Telecom

The biggest of the M&A news comes from Charter Communications (CHTR), which has finalized its dual purchase of Time Warner Cable (TWC) and Bright House Networks for a total of $71 billion. The original Bright House acquisition added up to $10.4 billion while Charter paid more than $60 billion to purchase Time Warner. Both deals were first pursued last year.

Apple and China

apple-inc-508812_640Interestingly, Warren Buffett’s legendary holding company, Berkshire Hathaway (BRK) disclosed that it currently has a stake in Apple (AAPL) worth about $1 billion. Buffett is known to avoid technology companies, but this public disclosure follows a one-year period where shares of the company have fallen by about 30%, perhaps presenting a bargain opportunity.

Meanwhile, fellow billionaire investor Carl Icahn went the opposite direction, dumping Apple’s stock due to fears about the profitability of its expanding business in China. Apple has focused on not only growing its iPhone sales and manufacturing base in China but also becoming more involved in the country’s economy. In fact, the company has invested $1 billion in another unrelated Chinese company, a ride-hailing service that is expected to rival Uber.

One concern about business in China is the potential for $26 billion of buyout deals for Chinese companies listed on U.S. stock exchanges to be abandoned due to possible impending rule changes in the People’s Republic. The unraveling of these buyouts could prove damaging to the stock markets in general.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.