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Home > Industry > Consumer & Retail > Global M&A Roundup Nov 3, 2017 – Qualcomm, Dynegy, Braskem, CalAtlantic Group, Dunkin’ Brands Group

Global M&A Roundup Nov 3, 2017 – Qualcomm, Dynegy, Braskem, CalAtlantic Group, Dunkin’ Brands Group

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

Target: Qualcomm Inc

  • Industry: Technology
  • Acquirer: Broadcom Ltd
  • Target: Qualcomm Inc
  • Size: $86.5 billion
  • Consideration: Cash & Stock
  • Sell Side Advisors: Not Disclosed
  • Buy Side Advisors: Bank of America Merrill Lynch, Citi, Deutsche Bank, JP Morgan, Moelis & Co, Morgan Stanley
  • Legal Advisor: Wachtell Lipton

Broadcom Ltd submitted a proposal to acquire Qualcomm Inc for $60.00 per share in cash and $10.00 per share in Broadcom shares at an implied equity value of $103 billion and implied enterprise value of $86 billion. This will be the largest technology deal in history and the combined ~$200 billion company will be a dominant force in the smartphone chip industry.

Broadcom designs, develops, and supplies semiconductors and integrated circuits and has a 30% exposure to the smartphone industry as a percentage of sales. An acquisition of Qualcomm, a digital wireless communications chip manufacturer, will increase that exposure to 60%. The acquisition is in line with Broadcom’s strategy of acquiring leading technology companies and looks attractive due to increased scale, drop in Qualcomm’s stock price earlier this year and Broadcom’s ability to improve Qualcomm’s operating margins.

Qualcomm is likely to advise shareholders to vote against the deal because it believes the valuation is low as a $70 per share offer is within its 52-week range. Qualcomm’s share price plunged earlier this year due to a lawsuit filed by Apple.

Target: Dynegy Inc

  • Industry: Power & Utilities
  • Acquirer: Vistra Energy Corp
  • Target: Dynegy Inc
  • Size: $10.5 billion
  • Consideration: All-Stock
  • Sell Side Advisors: Morgan Stanley, PJT Partners
  • Buy Side Advisors: Citi, Credit Suisse
  • Legal Advisors: Skadden, Shearman & Sterling, Sullivan & Cromwll, Simpson Thacher & Bartlett

Vistra Energy Corp entered into an agreement to acquire Dynegy Inc at an implied enterprise value of $10.5 billion on October 30th, 2017. Dynegy will receive .652 shares of Vista Energy for each share of Dynegy common representing a 30% premium over Dynegy’s closing share price on October 27th, 2017.

The deal positions Vistra Energy Corp — currently the largest retailer and generator of electricity in Texas — as a leading integrated power company with an industry leading cost structure and diversified portfolio. The deal is expected to generate $4 billion in equity value through expected EBITDA, Free Cash Flow, and tax synergies.

The deal will combine Dynegy’s high-quality infrastructure and power generation capabilities in the Northeast, Mid-Atlantic, Midwest, and Texas with Vistra’s strong retail and commercial operations. The combined company will serve approximately 240,000 commercial and industrial customers and 2.7 million residential customers in five top retail states.

Target: Braskem SA

  • Industry: Industrials
  • Acquirer: LyondellBasell
  • Target: Braskem SA
  • Size: $10 Billion
  • Consideration:  Not Disclosed
  • Sell Side Advisors:  Not Disclosed
  • Buy Side Advisors:  Not Disclosed
  • Legal Advisors:  Not Disclosed

On October 30th, 2017 reports surfaced that LyondellBasell Industries entered into discussions to acquire Braskem SA at an implied enterprise value of ~$10 billion USD. The combination would result in the world’s largest integrated petrochemicals and plastics producer and this deal would be the largest in Brazilian history.

LyondellBassell indicated earlier this year that is was looking to build on leading positions and technologies in core strengths through acquisitions of large-scale assets that complement core competencies, leverage their corporate structure while maintaining investment grade status, create synergies and strengthen growth and margin profile.

The acquisition is in line with LyondellBassell’s strategic plan as Braskem S.A. is South America’s largest petrochemical company with 29 plants in Brazil, five plants in the US, and 2 plants in Germany. The company increased its EBITDA margins in Brazil from 18% to 25% and some analysts estimate that this merger would result in $950 million of cost savings.

Braskem S.A. two largest shareholders own 97% of the company and a company spokesman released a statement saying that the deal is an issue for their shareholders.

Target: CalAtlantic Group Inc

  • Industry: Industrials  
  • Acquirer: Lennar Corp
  • Target: CalAtlantic Group
  • Size: $9.2 Billion
  • Consideration: All-Stock
  • Sell Side Advisor: JP Morgan
  • Buy Side Advisor: Citi
  • Legal Advisors: Gibson Dunn & Crutcher, Goodwin Procter LLP

On October 30th, 2017 Lennar Corporation announced a definitive merger agreement with CalAtlantic Group at an implied enterprise value of $9.2 billion. CalAtlantic will receive .885 shares of Lennar Class A common per share of CalAtlantic common stock, which represents a 27% premium over CalAtlantic’s closing share price on October 27th, 2017.

The combined enterprise will create the largest homebuilder in the United States with a strong balance sheet and significant free cash flow. The deal is projected to generate $250 million of annual cost savings and synergies through direct cost savings, reduced overhead costs, and elimination of duplicate public company expenses.

CalAtlantic Group is one of the largest homebuilders in the United States offering entry to luxury property in 43 metropolitan areas spanning 19 states. Lenmar Corporation builds housing property, provides mortgage financing, title insurance, and closing services, and operates a vertically integrated asset management platform focusing on commercial real estate. The deal increases the scale of Lennar’s operations and the combined company will control approximately 240,000 home sites and have 1,300 active communities in 49 markets across 21 states where approximately 50% of the United States population currently lives.

Target: Dunkin’ Brands Group Inc

  • Industry: Consumer & Retail
  • Acquirer: Jab Holdings
  • Target: Dunkin’ Brands Group Inc
  • Size: $5.45 billion
  • Consideration:  Not Disclosed
  • Sell Side Advisors:  Not Disclosed
  • Buy Side Advisors:  Not Disclosed
  • Legal Advisors: Not Disclosed

On October 30th, 2017 rumors started circulating that Jab Holdings was looking to acquire Dunkin’ Brands Group for an implied enterprise value of $5.45 billion. Jab Holdings Company is a private equity firm focused on companies with premium brands, attractive growth, and strong margin dynamics.

Dunkin’ Brands Group franchises Dunkin’ Donuts and Baskin-Robbins chains worldwide and has 18,000 franchise locations across 60 countries. Dunkin’ Brands has been focused on expanding its chains into growing international markets. Domestically, Dunkin Donuts has been looking to build its market share outside of its core northeastern market, while Baskin-Robbins is looking to do the same outside of its California market.

Jab Holdings has been on an acquisition spree over the last two years with acquisitions of Panera Bread, Krispy Kreme Doughnuts, and Keurig Green Mountain to name a few. The acquisition would be in line with Jab Holdings’ previous acquisitions and the Dunkin’ Brands Group’s industry leading beverage margins, premium brand, and solid 5 year EBITDA, free cash flow, and dividend growth are in line with Jab Holdings’ investment philosophy.

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

Bradley is an incoming 2018 summer analyst at Macquarie Capital in the metals & mining group in Toronto. He worked at Scotia Wealth Management for over a year in both full time internship and part-time positions. He will be graduating from UBC’s Sauder School of Business in 2019 with a major in finance and minor in statistics. Outside of academics he is studying for the CFA level 1 exam, an analyst for ACIIC—a student run investment organization—and a varsity baseball player.

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