Back in December of 2017, Kindred Healthcare announced that it would be bought out by Humana, TPG Capital, and Welsh, Carson, Anderson & Stowe after months of acquisition talks. Facing a huge debt load (949.61 D/E ratio), challenging industry conditions, and uncertainty regarding federal support for Medicare and Medicaid (big sources of revenue for Kindred Healthcare), the company at one point had courted half a dozen private equity firms before agreeing to a deal with the consortium.
CARLYLE AND GIC ACQUIRE SPECIALTY CHEMICALS BUSINESS
The Carlyle Group and Singapore’s Sovereign Wealth Fund GIC have announced their intention to acquire the specialty chemicals division of Dutch conglomerate, Akzo Nobel, for a price of €10.1 billion ($12.6 billion). This purchase price includes debt. The specialty chemicals business of Akzo Nobel manufactures a variety of chemicals used in many consumer products, including soap, food products, pharmaceuticals, and adhesives.
SALESFORCE ACQUIRES MULESOFT – THE TALE OF A UNICORN
On March 20th, 2018, Salesforce announced a deal to acquire MuleSoft (NYSE: MULE) for $6.5 billion. The deal represents a 36% premium over MuleSoft’s current share price. Salesforce’s shares were relatively flat during regular trading and dipped slightly (-2.3%) during after-hours trading, while MuleSoft’s shares jumped 27% in regular trading and an additional 4.6% in after-hours trading.
UPDATE: UNILEVER AND KKR
After an active process with several private equity funds involved, Unilever has decided to sell its margarine and spreads business (Becel, Flora, Country Crock, and Blue Band brands) to KKR for $8.04 billion. KKR is a global investment firm that manages multiple alternative asset classes. The firm has $153 billion in assets under management and has a long history in the consumer sector.
MANUFACTURING: CAN THE U.S. STAY RELEVANT?
There is a lot to be said about the U.S. economy today. Phrases such as “manufacturing is on the decline” and “worker productivity has been slowing down” are all too common now.
To address the former, the U.S. economy is often described as having three phases. A booming agricultural U.S. economy lasting through the 1800s was followed by a shift to an industrial and manufacturing economy. Recently, as of the late 1900s, the U.S. seems to have lost its edge in manufacturing and turned to services, an industry portrayed as intangible and possessing low barriers to entry.
However, the story is a bit more nuanced.
WYNDHAM SELLS ITS GROWING EUROPEAN RENTAL BUSINESS TO PLATINUM EQUITY
Wyndham Worldwide Corporation recently announced an agreement to sell its European vacation rental business to Platinum Equity, LLC for approximately $1.3 billion, or 9.2x EBITDA. Under the deal terms, Platinum Equity will acquire the target through its Platinum Equity Capital Partners IV, L.P. fund in the second quarter of 2018. The deal is subject to approval of the European Commission and includes a $55 million termination fee from Wyndham Worldwide.
BAIN CAPITAL & IHEART MEDIA: THE SLIPPERY SLOPE OF LBOS
An important player in the private equity market, Bain Capital, is increasingly under public scrutiny for its failed LBO deals. Since 2000, there have been 5 key LBO deals that generated poor returns for Bain Capital: Gymboree Corp, Toys ‘R’ Us, Guitar Center, TOMS Shoes, and iHeart Media. The fund nonetheless still has sound finances due to management fees and purchasing senior debt at significant discounts. Thus, close examination of these failed LBO deals, especially iHeart Media, will reveal whether Bain Capital is on the slippery slope of LBOs and the impact of this trend on the private equity industry.
THE IMPACT OF TAX REFORM ON THE PE INDUSTRY
On December 19th, a Republican-controlled Congress narrowly passed a tax reform bill. This bill represents the most significant tax overhaul since 1986 and has profound implications for the private equity industry. Although this administration is often chastised for being overly friendly to private equity barons, the reality of this bill is far more complicated.
ARES MANAGEMENT MAKES CORPORATE CONVERSION
res Management L.P., one of the largest global alternative asset managers with $106.4 billion in AUM, has decided to convert from its current structure as a limited partnership to a standard C corporation, as a result of the recent decrease in the US corporate tax rate. In doing so, Ares becomes the first publicly listed alternative asset manager in the US to take such a step, amidst growing speculation that some alternative asset managers would be making the conversion.
AN APOLLO BACKED-IPO: GOOD FOR ADT?
On the morning of January 18th 2018, it was made public that home-security company ADT Services would go public with an IPO of $14 per share. Because ADT is owned by private equity firm Apollo Global Management LLC, the implications of this initial public offering are more complex than may first seem.