BC Partners to acquire European cable and media operator from KKR

BY Fraser Tennant

In a deal which will boost its position as the communication and media leader in South Eastern Europe, United Group B.V. is to be acquired by private equity (PE) firm BC Partners from fellow investor KKR.

Following completion of the transaction, KKR, which manages multiple alternative asset classes, including PE, energy, infrastructure, real estate and credit, will maintain a substantial minority stake.

The financial terms of the transaction have not been disclosed.

“We are delighted to partner with United Group’s management team and KKR to support the company’s next phase of growth,” said Nikos Stathopoulos, a partner at BC Partners. “United Group is a high-quality asset, with defensive growth characteristics, leading infrastructure, differentiated content and loyal customers. Its attractive and integrated business model and regional leadership position it well for further organic and acquisitive growth.”

Since its inception, BC Partners’ PE team has completed 104 PE investments in companies with a total enterprise value of €129bn and is currently investing its tenth private equity fund.

Investing in United Group since 2014, KKR has helped the company to become the leading provider of communications and media services in South Eastern Europe. United Group’s fibre and cable networks have the largest presence in the region, covering 1.82 million homes which benefit from broadband speeds substantially higher than local peers and high quality local and international content.

Over the past 18 years, United Group has expanded its presence through both organic growth and acquisitions, now employing over 3400 staff. “We are proud of the way in which United Group has developed,” said Jean-Pierre Saad, managing director at KKR. “It is a great example of a truly convergent operator across communications and media with market leading product innovation and services.”

Acting as advisers to BC Partners are Morgan Stanley and LionTree, while Credit-Suisse is advising United Group. The transaction is subject to relevant regulatory approvals.

Mr Saad concluded: “We will remain closely committed to the further development of United Group and are looking forward to working with BC Partners and the management team to further strengthen the company’s growth.”

News: BC Partners snaps up majority ownership of cable firm United Group from KKR

Majority of US companies lack compliance automation strategies, claims new report

BY Fraser Tennant

Compliance leaders in the US are yet to fully automate their compliance activities in order to respond more efficiently to shifting regulatory expectations and a changing risk landscape, according to a new KPMG report.

The report, ‘Innovating compliance through automation’, found that only one in five chief information officers (CIOs) and chief compliance officers (CCOs) said they had a well-defined strategy to automate compliance in the next two years. However, 90 percent did say they had plans to increase funding for automation in the coming years.

Among the report’s key findings: (i) 36 percent of CIOs and CCOs said that attention from leadership and stakeholders is a top challenge they have encountered or expect to encounter in implementing compliance automation; (ii) when asked what is limiting their ability to automate compliance activities, 70 percent of CIOs and CCOs named data integrity and 67 percent pointed to data availability as leading factors; and (iii) 32 percent of CIOs and CCOs said the availability of resources to support automation is lacking.

Furthermore, CCOs and CIOs differ on their view of the subject matter knowledge their organisation requires to tackle compliance automation, with approximately 18 percent of CCOs stating knowledge was lacking while 40 percent of CIOs pinpointed this as the main automating compliance challenge.

"Companies are automating routine operational tasks to increase efficiencies and lower costs," said Amy Matsuo, a principal in KPMG’s risk consulting services and national leader of regulatory insights practice. "The next step is for organisations to pivot from using automation in operational processes to deploying it for compliance analytic and predictive purposes. To do so, they must first prioritise compliance activities that can be automated while setting expected returns on investment."

According to the report, compliance activity priorities are based on product safety (42 percent), industry specific regulations (41 percent), cyber security and information protection (36 percent), privacy (29 percent), fraud (27 percent) and consumer protection (22 percent) regulatory obligation categories.

Ms Matsuo concluded: "Organisations will need to identify personnel with the appropriate skills, knowledge and availability to undertake automation. This requires a unique skillset that blends an understanding of business operations, compliance issues and risk management with technological proficiency."

Report: Innovating compliance through automation

Barrick Gold and Randgold Resources agree $6.5bn deal

BY Richard Summerfield

Barrick Gold Corporation, the world’s largest gold mining company, has agreed to acquire Randgold Resources for $6.5bn in an all-share deal, securing the biggest deal in the gold mining space for over three years.

The two companies expect the deal to close by the first quarter of 2019, pending customary closing conditions and shareholder approval. Once completed, Barrick, which will be listed in both New York and Toronto, will own five of the world’s 10 lowest-cost gold mines. The majority of the company’s focus will be on Africa and the Americas.

Barrick’s shareholders will own about two-thirds of the new business and Randgold investors the rest. Under the terms of the deal, each Randgold shareholder will receive 6.1280 new Barrick shares for each share of the Randgold, the companies said.

In a statement announcing the deal, John L. Thornton, executive chairman of Barrick, said: “The combination of Barrick and Randgold will create a new champion for value creation in the gold mining industry, bringing together the world’s largest collection of Tier One Gold Assets, with a proven management team that has consistently delivered among the best shareholder returns in the gold sector over the past decade. Our overriding measure of success will be the returns we generate and not the number of ounces we produce, balancing boldness and prudence to deliver consistent and growing returns to our fellow owners, a truly simple but radical and achievable concept. There are no premiums in the merger because we strongly believe in the opportunity to add significant value for our shareholders from the disciplined management of our combined asset base and a focus on truly profitable growth.”

“Our industry has been criticised for its short-term focus, undisciplined growth and poor returns on invested capital,” said Mark Bristow, chief executive of Randgold. “The merged company will be very different. Its goal will be to deliver sector leading returns, and in order to achieve this, we will need to take a very critical view of our asset base and how we run our business, and be prepared to make tough decisions. By employing a strategy similar to the one that proved very successful at Randgold, but on a larger scale, the New Barrick Group will leverage some of the world’s best mines and talent to create real value for all stakeholders.”

2018 has been a challenging year for the industry. The price of gold has fallen more than 8 percent and the shares of both Barrick and Randgold have declined more than 30 percent. The companies hope that the merger will enable them to cut costs and drive profitability.

News: Canada's Barrick Gold to buy Randgold for $6.5 billion

Marsh & McLennan to buy JLT for $5.7bn

BY Richard Summerfield

Marsh & McLennan, one of the world’s largest insurance brokers, has agreed to acquire British rival Jardine Lloyd Thompson Group (JLT) for around $5.7bn. The deal, the latest in a series of mergers in the insurance sector, is expected to close in spring 2019, subject to customary antitrust and regulatory approvals, and the approval of JLT’s shareholders.

Under the terms of the deal, holders of JLT's common shares will receive a cash consideration of £19.15 for every JLT share held, a 38 percent premium on the average price of JLT’s shares over the past three months. The total cash consideration equates to $5.6bn in fully diluted equity value, or an estimated enterprise value of $6.4bn. The transaction will be funded by a combination of cash on hand and proceeds from debt financing.

"The acquisition of Jardine Lloyd Thompson creates a compelling value proposition for our clients, our colleagues and our shareholders,” said Dan Glaser, president and chief executive of Marsh & McLennan. “The complementary fit between our companies creates a platform to deliver exceptional service to clients and opportunities for our colleagues. On a personal level, I have come to know, and respect, Dominic Burke and his management team from my time both at MMC and as an underwriter. I am confident that with the addition of the talented colleagues of JLT, Marsh & McLennan will be an even stronger and more dynamic company,” he added.

The deal is expected to achieve annual cost synergies of around $250m within three years of completion, according to Marsh & McLennan, though the realisation of these cost synergies will likely result in one-time integration costs of approximately $375m. In total, Marsh & McLennan expects to cut 2 to 5 percent of the combined company’s jobs. Savings are also expected in real estate and IT operations. Annual revenue is expected to rise to $17bn after the deal closes.

The insurance space has seen a spate of consolidation deals announced this year as the industry grows accustomed to tougher regulations and more attractive prices. In March, AXA agreed to acquire XL Group for $15.3bn, around a month after American International Group said it would buy reinsurer Validus for around $5.6bn.

News: Marsh & McLennan to pay £4.3 billion for British insurance broker JLT

British Steel cuts 400 jobs in bid to secure “long-term future”

BY Fraser Tennant

In a streamlining process designed to ensure its long-term growth, British Steel is to cut 400 jobs at its sites in the UK, Ireland, France and the Netherlands – approximately 10 percent of its 5000-strong workforce.

The cuts will be made in managerial, professional and administrative roles, despite first quarter profits being a reported £21m.

The company has stated that the cuts are part of the company’s ongoing transformation – which has already seen it commit £170m toward improving its manufacturing operations during its first three years. British Steel was saved from collapse two years ago when investment firm Greybull bought the business for £1 from Tata Steel.

British Steel is also taking further steps to secure a sustainable future, including continuing to improve manufacturing performance and increasing turnover through strong sales.

“We have made a strong start to life as British Steel but our external environment is constantly changing,” said Gerald Reichmann, British Steel’s chief financial officer. “It is unfortunate we need to go through the proposed redundancy process but by focusing on profitable, niche products I am confident we will create a long-term future for our business and the communities in which we operate.”

British Steel has made it clear that no site closures are being considered as part of the streamlining process. The company has also said that it remains committed to making significant investments in its core products – rail, wire rod, construction and special profiles – along with its iron and steel-making operations.

“It is important our business continues to evolve,” said Roland Junck, British Steel’s executive chairman. “We have already committed £120m to capital expenditure projects and are pressing ahead with the £50m upgrade to our Scunthorpe Rod Mill. However, the pace of change we need in this challenging industry requires further and continued investment along with more agile and efficient operations. To help us achieve this, we have to make difficult decisions.”

Mr Reichmann concluded: “Strong market conditions support the approach we are taking – we have a robust order book and continue to secure significant contracts with customers, old and new, around the world.”

News: British Steel plans to shed 400 jobs 'a body blow' to workforce