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Global M&A Roundup Oct 20, 2017 – The Warranty Group, Abertis Infraestructuras

Our previous Canadian Mergers & Acquisitions roundups can be found here. Our previous global M&A roundups can be found here.

Target: The Warranty Group, Inc.

  • Industry: Financial Institutions
  • Acquirer: Assurant, Inc. (NYSE:AIZ)
  • Target: The Warranty Group, Inc.
  • Size: $2.5 billion
  • Consideration: 81% Equity, 19% Cash
  • Source of Funds: Common Stock, Debt
  • Sell Side Advisors: UBS
  • Buy Side Advisor: Morgan Stanley
  • Legal Advisors: Willkie Farr & Gallagher LLP, Skadden, Arps, Slate, Meagher & Flom LLP
  • Expected Close: H1 2018

Assurant entered into a definitive agreement to acquire a 77% stake in The Warranty Group (TWG) for $2.5 billion on October 17, 2017.

$372 million of the cash portion of the consideration will be paid to TPG Capital and $591 million will go towards repaying some of TWG’s existing debt. The deal will also offer 16 million Assurant shares as part of the consideration.

Assurant will fund a portion of the deal through a $1 billion bridge facility and $350 million unsecured term loan facility.

The combined company will change its name to Assurant Ltd and will continue to trade publically under the AIZ ticker symbol.

The deal will expand Assurant’s lifestyle offerings, specifically in the Protected Automobiles, Extended Service Contracts, and Financial Service Contracts segments. The deal will also provide Assurant with access to new markets in Asia, providing accelerated growth opportunities that align with the company’s strategic roadmap.

The deal is expected to generate $60 million of pre-tax operating synergies by the end of 2019, with additional cross-selling opportunities. Assurant hopes to produce more diverse and predictable earnings, and leverage their global footprint to accelerate mobile growth.

Target: Abertis Infraestructuras, S.A. (BME:ABE)

  • Industry: Infrastructure
  • Acquirer: Hochtief Aktiengesellschaft (DB:HOT)
  • Target: Abertis Infraestructuras, S.A. (BME:ABE)
  • Size: €37.9 billion
  • Consideration: 51% Equity, 49% Cash
  • Source of Funds: Common Stock, Debt
  • Sell Side Advisors: Not Disclosed
  • Buy Side Advisors: Not Disclosed
  • Legal Advisors: Not Disclosed
  • Expected Close: Not Disclosed

On October 18, 2017, Hochtief proposed an offer to acquire Abertis Infraestructuras for an implied Enterprise Value of €37.9 billion. The offer consists of a €18.8 billion consideration to shareholders, €16.8 billion in net assumed debt and €2.3 billion in minority interest.

The deal will pay a consideration of €18.76 per Abertis share or 0.1281 Hochtief shares per Abertis share. The equity portion is subject to a minimum take-up of 193 million Abertis shares.

The offer values Abertis at an implied EV/EBITDA of 11.0x and an implied PE multiple of 18.5x. The deal will be financed through in-kind issuance of new shares and debt financing backed by a consortium of international banks led by JP Morgan.

The deal would combine two highly complementary infrastructure leaders with a focus on Public-Private Partnership (PPP) projects in high-growth developed markets, including the US, Canada, and Australia. The combined company will access the entire infrastructure lifecycle by leveraging Hochtief’s expertise in tendering, development and construction and Abertis’s experience in operations and maintenance.

Hochtief will move towards a 90% dividend payout ratio as the company unlocks significant growth-driven synergies.  The combined company expects €4-6 billion (NPV) in Greenfield project developments, €1 billion (NPV) in O&M concessions and €1 billion (NPV) in cost synergies.

Hochtief’s offer has sparked a bidding war with Atlantia. Back in May, Atlantia offered to acquire Abertis for an implied Enterprise Value of €30 billion in hopes of forming the world’s biggest toll road company.

To better understand our M&A write-ups, please refer to the following:

Mergers & Acquisitions
Cash or Stock Consideration for M&A
Accretion/Dilution Part I: EPS, Earnings Yield & All-Stock Transactions

Accretion/Dilution Part II: Math and Breakeven Premiums

Accretion/Dilution Part III: Using Debt for Acquisitions
Accretion/Dilution Part IV: Synergies & Sources of Funds

Sara Troka is a first year HBA student at Ivey Business School. Sara will be joining a bank in NYC next summer. She was involved in the York Finance Club as VP Marketing and the York University Student Investment Fund as a Junior Analyst. Outside of finance, Sara enjoys photography and fashion. She is an avid traveler who enjoys exploring historic cities and beaches across Europe.

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