Apollo agrees $2.6bn Aspen deal

BY Richard Summerfield

Investment funds associated with Apollo Global Management have agreed to acquire Aspen Insurance Holdings Ltd in an all-cash transaction valued at $2.6bn.

The deal, which has been approved by Aspen’s board of directors, will see the Apollo Funds acquire all of the outstanding shares of Aspen for $42.75 per share in cash. The transaction is expected to close in the first half of 2019, subject to the approval of regulators and Aspen’s shareholders, as well as the satisfaction of other closing conditions. The funds are paying around a 7 percent premium to Aspen’s closing share price on the day before the deal was announced.

“We are tremendously excited for the Apollo Funds to acquire Aspen,” said Alex Humphreys, a partner at Apollo. “We believe that Aspen benefits from strong underwriting talent, specialized expertise and longstanding client relationships which makes them well positioned in the market. We look forward to working with Aspen to build on the existing high quality specialty insurance and reinsurance business and we aim to leverage Apollo’s resources and deep expertise in financial services to support the company as it embarks on its next chapter.”

“We are delighted to have reached this agreement with the Apollo Funds,” said Glyn Jones, chairman of Aspen’s board of directors. “This transaction, which is the outcome of a thorough strategic review by Aspen’s board of directors, provides shareholders with immediate value and will allow Aspen to work with an investor that has substantial expertise and a successful track record in the (re)insurance industry.”

“This transaction is a testament to the strength of Aspen’s franchise, the quality of our business and the talent and expertise of our people,” said Chris O’Kane, Aspen’s chief executive. “Under the ownership of the Apollo Funds, Aspen will have additional scale and access to Apollo’s investment and strategic guidance, which will help us to accelerate our strategy and take Aspen to the next level. We are excited about the future as we embark on a new chapter in our history with a partner that understands our strengths, culture and customer-centric philosophy.”

Aspen has been up for sale for some time and Apollo has long been touted as a potential acquirer for the company. Aspen reported a loss of about $15m in the second quarter of 2018, continuing its run of poor financial returns. The company has suffered losses in three out of the last four quarters, having been adversely affected by hurricanes, wildfires and earthquakes.

News: Apollo Agrees to Acquire Aspen Insurance for $2.6 Billion

Santos to acquire Quadrant for $2.15bn

BY Richard Summerfield

Santos Ltd, Australia’s second largest independent oil & gas producer, is to acquire privately held Quadrant Energy for at least $2.15bn.

The deal will provide Santos with a strong boost to its domestic natural gas offering as it will gain access to Quadrant’s 80 percent stake in the Dorado oil field, which Quadrant’s partner Carnarvon Petroleum recently called a “truly incredible” oil discovery. The field has been found to have around 171 million barrels of oil, making it one of the biggest discoveries in the region for around 30 years as well as one of the largest oil resources ever found on the North West Shelf.

Under the terms of the deal, Santos has agreed a $2.15bn base price for Quadrant; however, the company has agreed to pay $50m for certified resources of 100 million barrels for the Dorado field, and then $2 a barrel extra for reserves of between 100 million and 125 million barrels, and $2.50 a barrel for reserves above 125 million.

“This acquisition delivers increased ownership and operatorship of a high-quality portfolio of low cost, long-life conventional Western Australian natural gas assets which are well known to Santos, and importantly significantly strengthens Santos’ offshore operating capability,” said Kevin Gallagher, managing director of Santos. “It is materially value-accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier.”

“We have delivered operational excellence, outstanding results in our exploration program and successfully integrated an entire new business model throughout the company,” said Brett Darley, chief executive of Quadrant. “All of this has been achieved with a strong focus on the environment, and the commitment to the health and safety of our people.

“On behalf of Quadrant Energy I would like to say how pleased I am to be part of this agreement with Santos and our business and people are well placed for this exciting new chapter as part of a national and international oil and gas producer.”

The deal for Quadrant, which is 36 percent owned by Brookfield Asset Management Inc and 22 percent by Macquarie Group Ltd, will be funded via existing cash resources and new debt facilities.

According to a statement from Santos, the two companies’ assets overlap in Western Australia, providing synergies estimated at $30m to $50m a year.

News: Australia's Santos expands with $2.15 billion Quadrant buy after spurning takeover

New report highlights lack of gender diversity in ASX 201-500 companies

BY Fraser Tennant

Women account for only 15.8 percent of board roles in ASX 201-500 companies, according to a new report – the first of its kind examining the state of gender diversity within small-cap companies – by the Australian Institute of Company Directors (AICD) and Heidrick & Struggles.

The ‘Beyond 200: A Study of Gender Diversity in ASX 201-500 companies’ report also reveals that there are signs that boards of newer companies and those chaired by individuals who also chair larger listed boards are leading the way towards greater gender diversity.

The report’s key findings include: (i) female representation on boards greatly declines beyond the ASX 200, falling from 27.9 percent across the ASX 200 to 15.8 percent across ASX 201-500 companies; (ii) newer companies are more likely to have greater gender diversity, with women accounting for 25.3 percent of directorships for companies listed in the last five years; and (iii) female representation rises to 22.9 percent on ASX 201-500 boards chaired by an ASX200 chair.

“This report indicates that there are larger obstacles to achieving greater gender diversity among companies outside the ASX200, given small board sizes and greater presence of founders and investors,” said Elizabeth Proust, chairman of the AICD. “However, it also shows chairs of larger companies are exerting their influence and newer companies have heard the message about the importance of diversity.”

In 2015, the AICD set a target for all boards to achieve gender diversity based on a strong body of evidence showing that diverse boards lead to better outcomes for shareholders and stakeholders alike. Further research showed that 30 percent is where ‘critical mass’ is reached in a group setting and the full benefits of diversity are realised.

The report also states that while the AICD has been tracking progress towards the 30 percent gender diversity target as far as ASX 200 boards are concerned for several years, it felt it was now time to “shine the spotlight” on small-cap companies.

Ms Proust concluded: “Greater gender diversity on boards of all sizes is fundamental to the future of good governance in this country. Continued advocacy, engagement and education is needed to see all boards reap the benefits of diversity.”

Report: Beyond 200: A Study of Gender Diversity in ASX 201-500 companies

Data scientists top UK CEO recruitment wishlist, claims new survey

BY Fraser Tennant

Illustrating their increasing role in supporting future business growth, data scientists have been named the most important workforce capability by UK chief executives, according to a new survey by KPMG.

In its ‘Growing pains: 2018 Global CEO Outlook’ report, KPMG states that more than two thirds of survey respondents (69 percent) named the data scientist role as important in supporting future growth plans, followed by emerging markets experts (57 percent) and emerging technology specialists (55 percent ), such as artificial intelligence professionals.

The KPMG analysis also suggests that firms should focus on the impact of technological disruption as well as considering business opportunities beyond domestic markets.

“UK CEOs are encouragingly bullish on their resourcing requirements and evidently more so than their counterparts elsewhere in the world,” said Mark Williamson, partner and head of the people consulting practice at KPMG in the UK. “This sends a powerful message to the world that UK business leaders can see past market uncertainty and are focused on future-proofing their operations.”

In order to respond to technological disruption, the report also notes that UK businesses need to treat technology disruption as part of an integral part of business strategy, and respond by looking at ways in which their workforce can change its size, shape and composition to meet the strategic demands of the next decade.

“Fundamentally, the nature of digital disruption is potentially transformative if approached with the right mindset,” continued Mr Williamson. “Technology disruption is becoming such an integral part of business strategy that we expect business leaders to increasingly establish their own training programmes and invest in external support.”

The KPMG report showcases the views of 150 UK leaders and a further 1150 chief executives across the globe.

Mr Williamson concluded: “UK business leaders are embracing digital disruption and are confident in the potential for automation to create jobs in the near future. The rise of the data scientist is clear evidence of this sentiment and shift in priorities within UK boardrooms.”

Report: ‘Growing pains: 2018 Global CEO Outlook’

M&A market booms

BY Richard Summerfield

The global M&A market is booming with average deal sizes climbing in the first half of the year, according to Pitchbook’s ‘2Q 2018 Global M&A Report’.

“The M&A market is inexorably linked with business sentiment, corporate fundamentals and macroeconomic forces,” said Wylie Fernyhough, an analyst at PitchBook. “With all these indicators continuing to trend positively, the global M&A boom shows no signs of stopping and the announced deals should ensure M&A activity continues to flourish throughout the rest of the year.”

In Q2, across the US and Europe there were 4735 completed deals totalling $987.8bn in value, a decline of 2 percent and an increase of 24 percent respectively, over the first quarter of 2018. Q1 saw 4823 deals worth $799.7bn. The mega-merger market remained strong in H1, with 31 deals recorded worth in excess of $5bn. Vodafone's $21.8bn purchase of UPC Czech was one of five deals above $10bn which closed in Q2 and which caused a rise in average deal value.

In total, across Europe, there were 3424 transactions completed totalling $569.7bn, compared to 5336 deals valued at $797.8bn achieved in the same period last year. Despite this decline, European M&A has not yet suffered the prophesised negative effects of Brexit.

Thirteen mega-deals were closed in 2018, five of which were in the UK, including announced deals such as Takeda’s bid for Shire worth $62bn and the ongoing $34bn tug of war between Fox and Comcast for Sky. North America saw 5213 deals completed, worth $1 trillion.

The financial services sector saw deal value fall in H1 2018, however, as fewer large deals closed. The sector saw 790 completed transactions with a total value of $161.5bn, down from 960 deals with a value of $227.6bn in the first half of 2017. Regardless of the slow start to 2018, the sector did see two notable deals in Q2, including the $3bn acquisition of Pure Industrial by Blackstone and Ivanhoé Cambridge.

One of the key deal drivers going forward may be the ongoing shift in global interest rates. In North America rates have risen, whereas in the eurozone rate rises may still be a year away. As a result, many companies may be pushing through acquisitions in the short term in order to secure more attractive financing before rates rises potentially derail transactions, making them financially unattractive.

Report: 2Q 2018 Global M&A Report