2019's Biggest Mergers and Acquisitions (So Far)
Mergers and acquisitions are one of the ways for a company to grow and expand its business. M&As enable companies to extend their global footprint, diversify across geographies, gain access to better technological know-how and other resources, benefit from consolidating strategic imperatives, add complementary product lines, expertise and even turn rivalries into partnerships. The medium of mergers and acquisitions is often termed as that of "inorganic growth."
However, M&As don't always guarantee success. While many deals have been hugely successful, some have failed miserably. According to a BCG report, the past ten years have been relatively good times for dealmakers. The analysis shows that “from 2009 through 2018, about half of all public-to-public M&A deals created value in terms of announcement returns and longer-term performance.”
Just like the success of deals, a positive investor reaction isn’t a norm, and, in many cases, news of acquisition sends stock prices plummeting.
Here are some of the biggest mergers and acquisitions announced in 2019 (so far)
Merger of equals: United Technologies and Raytheon
In June 2019, United Technologies Corporation (UTX) and Raytheon Company (RTN) entered into an agreement where the two companies would combine in an all-stock merger of equals. Raytheon is a leading defense company while United Technologies is an established name in the aerospace domain. The merger of Raytheon and United Technologies will offer a complementary portfolio of platform-agnostic aerospace and defense technologies. The combined entity, which will be named Raytheon Technologies Corporation, will be listed under the symbol “RTX” and will have pro forma 2019 sales of approximately $74 billion.
“With a strong balance sheet and robust cash generation, Raytheon Technologies will enjoy enhanced resources and financial flexibility to support significant R&D and capital investment through business cycles.” Raytheon and United Technologies have a combined market value of nearly $182 billion (as of this date).
Bristol Myers Squibb’s bid to acquire rival Celgene
The year 2019 began with a definitive merger agreement between Bristol-Myers Squibb (BMY) and Celgene (CELG) under which Bristol-Myers Squibb will acquire Celgene in a $74 billion deal. The acquisition is based on compelling strategic and financial benefits.
“Together with Celgene, we are creating an innovative biopharma leader, with leading franchises and a deep and broad pipeline that will drive sustainable growth and deliver new options for patients across a range of serious diseases,” said Giovanni Caforio, M.D., Chairman and Chief Executive Officer of Bristol-Myers Squibb. The company expects more than $45 billion free cash flow generation in the first three years post-closing and approximately $2.5 billion run-rate cost synergies by 2022. With its robust financial strength and flexibility, the company is fully capable to “realize the full potential of the enhanced late- and early-stage pipeline.”
The transaction is expected to close by end of 2019 or beginning of 2020, subject to conditions and regulatory approvals.
Saudi Aramco’s majority stake acquisition of SABIC
In March this year, Saudi Aramco signed off a share purchase agreement to acquire a 70% majority stake in Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund of Saudi Arabia, in a private transaction for $69 billion. At the time of the deal, Saudi Aramco and SABIC had petrochemicals production capacity of 17 and 62 million tons per annum, respectively. The stake will align the strengths and interests of two major global companies to enhance competitiveness and address the fast-growing petrochemicals market. The acquisition is in sync with Saudi Aramco’s long-term strategy to “drive growth through an enhanced line with Downstream portfolio by increasing global participated refining capacity from 4.9 million to 8-10 million barrels per day by 2030.”
AbbVie’s bid for Allergan
In June 2019, AbbVie Inc. (ABBV) entered into a definitive transaction agreement to acquire Allergan (AGN) in a $63 billion deal. The new entity, with approximately 83% AbbVie shareholders and 17% Allergen shareholders, will have an annual combined revenue of approximately $48 billion, robust cash flows, presence in 175 countries and cutting-edge R&D pipeline. The deal is expected to provide annual pre-tax synergies and other cost reductions of at least $2 billion in year three as a result of optimizing the research portfolio, eliminating overlapping R&D, driving efficiencies in selling, general and administrative expense, and eliminating redundancies in manufacturing and supply chain, among other things. The deal is expected to close by early 2020, subject to approvals.
Occidental Petroleum Corporation’s outbidding of Chevron for Anadarko
In May this year, Occidental Petroleum Corporation (OXY) outbid Chevron to acquire Anadarko Petroleum Corporation (APC) in a transaction valued at $57 billion, including the assumption of Anadarko’s debt making it one of the biggest deals in the oil segment in recent times. Backing by Berkshire Hathaway helped Occidental, which is much smaller than Chevron, close the deal. In August, Occidental completed the $55 billion deal with a more than 99% of the shares voting in favor of the deal. Chevron had earlier entered into an agreement to acquire Anadarko for $33 billion. However, after Occidental’s offer to Anadarko, Chevron did not counter-bid.
Some of other notable deals in 2019 have been that of Newmont Mining Corporation (NEM) and Goldcorp, Fidelity National Information Services's (FIS) takeover of Worldpay and Fiserv's (FISV) acquisition of First Data, Danaher’s (DHR) buy of biopharma business of General Electric Life Sciences, acquisition of Tableau by Salesforce (CRM), and merger of BB&T (BBT) and SunTrust (STI). And as of today (November 1), Alphabet (GOOG,GOOGL) announced it will buy Fitbit (FIT) for $2.1 billion.
The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. Details based on press releases by companies and company websites. The list has been carefully prepared, and any exclusions from the list are unintentional.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.