You are here
Home > Region > China > Global M&A Roundup Nov 10, 2017 – Hengda Real Estate, Mattel, Ortho-Clinical Diagnostics

Global M&A Roundup Nov 10, 2017 – Hengda Real Estate, Mattel, Ortho-Clinical Diagnostics

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

Target: Hengda Real Estate Group

  • Industry: Real Estate
  • Acquirer: Multiple buyers
  • Target: Hengda Real Estate Group
  • Size: 9.1 billion
  • Consideration: Cash
  • Sell Side Advisors: Undisclosed
  • Buy Side Advisors: Gram Capital
  • Legal Advisors: Undisclosed

On November 6th, 2017 a consortium led by the Shandong Highway Group entered into an agreement to acquire a 14% additional ownership stake in Hengda Real Estate Group, a subsidiary of China Evergrande group, for $9.1 billion USD. This acquisition will increase the investor’s ownership stake in the Hengda Real Estate Group from 22% to 36.5%.

This is the third round of capital raising undertaken by the Hengda Real Estate Group and is a part of China Evergrande’s deleveraging campaign. Earlier this year, China Evergrande announced plans to shift away from its past high-debt, high-leverage, high-turnover, and low-cost model to a low-debt, low-leverage, low-cost and high-turnover model.

The terms of the agreement require that the net profit of the Hengda Real Estate Group after deducting non-recurring gains and losses be no less than $7.5 billion, $8.3 billion, and $9.1 billion USD for fiscal years 2018 through 2020. The investment into the Hengda Real Estate Group is a good sign of the investor’s confidence in the company, especially considering the terms of the deal. China Evergrande group is to reduce its leverage following the close of the deal.

Target: Ortho-Clinical Diagnostics Inc.

  • Industry: Healthcare
  • Acquirer: Potential Buyers
  • Target: Ortho-Clinical Diagnostics Inc.
  • Size: $7 billion
  • Consideration: Cash
  • Sell Side Advisors: Undisclosed
  • Buy Side Advisors: Undisclosed
  • Legal Advisors: Undisclosed

On November 10th, 2017 reports surfaced that the Carlyle Group, one of the world’s largest private equity firms with $180 billion assets under management, is looking to sell Ortho-Clinical Diagnostics for approximately $7 billion through either a merger agreement or initial public offering.

Ortho-clinical was purchased by the Carlyle Group from Johnson & Johnson in 2014 for $4.15 billion using ~$3.3 billion in debt and ~$850 million in cash. At the time of the purchase the Carlyle Group believed it could tap into rising demand for sophisticated medical diagnostics products and services. They announced a plan to accelerate investment in research and development and the expansion into emerging markets.

Ortho-Clinical produces and markets medical equipment and automation systems for screening, diagnosing, monitoring, and confirming diseases. It sells its products in over 125 countries and generates ~$1.7 billion in revenue annually.

The Carlyle group has invested heavily in health care companies in the past and is now looking to cash out on some of them. Earlier this year Carlyle agreed to sell of part of its 60% stake in Pharmaceutical Product Development LLC.

Target: Mattel Inc.

  • Industry: Consumer & Retail
  • Acquirer: Hasbro Inc.
  • Target: Mattel Inc.
  • Size: $5 billion
  • Consideration: Undisclosed
  • Sell Side Advisors: Undisclosed
  • Buy Side Advisors: Undisclosed
  • Legal Advisors: Undisclosed

On November 10th, 2017 it was reported that Hasbro Inc. is looking to Acquire Mattel Inc. which is currently valued at $5 billion USD. Mattel’s shares have surged as much as 24% to $18.10 per share in late trading since the report went public. The deal would merge the two largest toymakers in the United States. Speculation of a Mattel takeover started last month after an analyst suggested that the company would be better off as an acquisition target.

Mattel had been down 47% this year, has suspended its dividend, and escalated a cost-cutting push. The company incurred a sharp sales decline last quarter, down 22% in North America, which was primarily driven by the Toys R’ Us chapter 11 bankruptcy.  Hasbro is currently valued at more than $11 billion and is up 15% on the year.

Last year there were reports that Mattel and Hasbro held merger discussions and had been in on-and-off again talks about a deal at that time. Mattel is now in a worse situation making it a much cheaper target for Hasbro and a combination of the two companies is expected to generate significant scale and synergies.

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

Mergers & Acquisitions
Typical M&A Process Walkthrough
Types of M&A Auctions
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.

Leave a Reply