Roche secures Spark for $4.3bn

BY Richard Summerfield

Swiss healthcare company Roche has agreed to acquire US-based gene therapy specialist Spark Therapeutics for $4.3bn.

The deal will see Roche pay $114.50 per share in an all-cash transaction, a premium of approximately 122 percent to Spark Therapeutics’ closing price on 22 February 2019 and a premium of approximately 19 percent to the company’s 52 week high share price on 9 July 2018. The deal is expected to close in the second quarter of 2019.

“Spark Therapeutics’ proven expertise in the entire gene therapy value chain may offer important new opportunities for the treatment of serious diseases,” said Severin Schwan, chief executive of Roche. “In particular, Spark Therapeutics’ haemophilia A programme could become a new therapeutic option for people living with this disease. We are also excited to continue the investments in Spark Therapeutics’ broad product portfolio and commitment to Philadelphia as a center of excellence.”

“As the only biotechnology company that has successfully commercialised a gene therapy for a genetic disease in the US, we have built unmatched competencies in the discovery, development and delivery of genetic medicines. But the needs of patients and families living with genetic diseases are immediate and their needs vast,” said Jeffrey D. Marrazzo, chief executive of Spark Therapeutics. “With its worldwide reach and extensive resources, Roche will help us accelerate the development of more gene therapies for more patients for more diseases and further expedite our vision of a world where no life is limited by genetic disease.”

For Roche, the addition of Spark will be critical as it loses the patent of its $21bn a year trio of cancer medicines Rituxan, Herceptin and Avastin. Going forward, biosimilars of these treatments will provide stiff competition for the company in both Europe and North America. The deal is also part of Roche’s pivot away from cancer treatments, an area in which the company has been the world’s largest player.

Loss-making Spark, the only biotech that has successfully commercialised a gene therapy for a genetic disease in the US, had $51.6m in revenue in the first nine months of 2018 from Luxturna and also had income from a deal with Pfizer, which it is partnering with on another gene therapy for haemophilia B.

News: Roche 'steps up' for gene therapy with $4.3 billion Spark bet

US tech CFOs anxious over cyber security and economy, says new survey

BY Fraser Tennant

Cyber security and economic growth are the top concerns of US tech firms in 2019, according to a BDO survey published this week.

The  firm’s ‘2019 Technology Outlook Survey’, which features the views of 100 chief financial officers (CFOs), states that data privacy remains at the centre of the tech sector’s worries, with 87 percent of CFOs expressing a high or moderate concern about the issue. It also ranked third in the list of companies’ biggest business priorities for 2019, after scaling the business (37 percent) and product or service innovation (34 percent).

“Tech companies can expect to face many challenges in the year ahead,” says Aftab Jamil, assurance partner and global leader of BDO’s technology practice. “These include data breaches and cyber attacks, as well as continued regulatory uncertainty concerning trade and other policies.”

Additional findings from the BDO survey include the difficulties tech firms are having recruiting and retaining talent, adding new products or services, and pursuing mergers and acquisitions.

According to the CFOs surveyed, the implementation of the EU’s General Data Protection Regulation (GDPR) and the California Data Privacy Act in 2018 have further reinforced issues tech firms are facing.

“Regulatory bodies will continue to demand greater levels of accountability and transparency, and the race toward innovation will continue to speed up,” continues Mr Jamil. “As a result, tech companies will need to re-evaluate and fortify their operational and financial management in order to respond swiftly and nimbly.”

Despite these challenges, survey respondents expressed optimism about their business operations, with 84 percent expecting an increase in total revenue in 2019, at an average net change of 12.7 percent, and 62 percent anticipating an increase in their number of employees.

Respondents are also optimistic as to the impact of the new US tax reform law which is expected to have in impact this year. While 68 percent harbour high or moderate concerns about tax changes overall, 75 percent expect the reforms to be “favourable”, with 9 percent expecting them to be it to be “very favourable”.

“US tax reform will continue to have ripple effects on tech companies – and across all industries – for years to come,” said David Yasukochi, tax office managing partner and co-leader of BDO’s technology practice. “Tech companies will have to ensure constantly redefine their tax strategy to manage future risks and opportunities that come with the tech industry’s continued impressive growth.”

 Report: 2019 Technology Outlook Survey

Bankruptcy forces Payless ShoeSource to close its US doors

BY Fraser Tennant

As the latest retail chain to shut up shop in the US, shoe retailer Payless ShoeSource is to close its 2500 stores in the US after filing for Chapter 11 bankruptcy – for the second, and likely final, time.

The company first filed for Chapter 11 bankruptcy in April 2017, closing approximately 400 stores.

In addition to its Chapter 11 filing, Payless ShoeSource will also be seeking protection from creditors under the Companies' Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice.

Founded in 1956, Payless ShoeSource serves millions of customers through its extensive global network spanning 36 countries worldwide. The firm has 420 stores in Latin America, the US Virgin Islands, Guam and Saipan, as well as 370 international franchisee stores across the Middle East, India, Indonesia, Indochina, Philippines and Africa.

“The challenges facing retailers today are well documented and, unfortunately, we emerged from a prior reorganisation ill-equipped to survive in today’s retail environment,” said Stephen Marotta, chief restructuring officer at Payless ShoeSource. “The company has been left with too much remaining debt, too large a store footprint and a yet-to-be realised systems and corporate overhead structure consolidation. As a consequence, we must wind down our North American retail operations under Chapter 11 and the CCAA.”

The company has said that it expects store closings will begin at the end of March – with many stores remaining open until the end of May – as it conducts liquidation sales in the US and Canada. E-commerce operations have also been wound down. However, profitable stores throughout Latin America, which are not part of the Chapter 11 filing, and international franchisees’ stores will continue to operate as usual. “As we move through the process, we will work to minimise the impact on our employees, customers, vendors and other stakeholders,” added Mr Marotta.

Additionally, authorisation is being sought from the US Bankruptcy Court for customer gift cards and store credit to be honoured until 11 March 2019, and to allow returns and exchanges of applicable non-final sale purchases made prior to 17 February 2019, until 1 March 2019. A similar request will be made in the Canadian Court. However, rewards programmes and outstanding merchandise coupons in North America have been discontinued with immediate effect.

"I would like to express our deep appreciation for the hard work of our dedicated employees and their commitment to customers, who have shown us tremendous loyalty for more than 60 years,” concluded Mr Marotta.

News: Payless ShoeSource seeks bankruptcy protection again

Scout24 taken private in $6.4bn deal

BY Richard Summerfield

Private equity firms Hellman & Friedman and Blackstone have agreed to acquire German digital marketplace company Scout24 in deal worth $6.4bn, including debt.

The deal, which will be the largest ever PE buyout of a German company, is subject to a minimum acceptance threshold of 50 percent plus one share, as well as customary closing conditions and merger control review. The transaction is being made through holding company Pulver Bidco, jointly controlled by funds advised by Hellman & Friedman and affiliates of Blackstone, and is expected to close in late May.

Scout24 accepted a revised €46 a share offer from the two US private equity firms after rejecting a €43.50 per share offer in January. The offer represents a 27.4 percent premium to the unaffected share price of €36.1 on 13 December 2018 and a 24.4 percent premium to the unaffected three month volume weighted average share price of €37. The offer values Munich-based Scout24 at almost 18 times 2019 earnings before interest, taxes, depreciation and amortisation (EBITDA).

“We believe this is an attractive offer with a substantial premium, high transaction certainty and a strategic value-add for the company,” said Hans-Holger Albrecht, chairman of Scout24.

“Hellman & Friedman and Blackstone are known to Scout24 as trusted and long-term partners given their prior ownership and familiarity with the company,” said Tobias Hartmann, chief executive of Scout24. “The terms of the offer represent an attractive opportunity for a highly strategic partnership that recognises the quality of the Scout24 platform, its employees, customers and partners. I am delighted about our joint long-term vision and ambition to turn Scout24 into a leading European digital player.”

Scout24 was previously owned by Hellman & Friedman, which acquired a controlling stake from Deutsche Telekom in 2013 for €1.5bn before listing the business in 2015, valuing it at €3.2bn. KKR sold a 50 percent stake in the business to private insurance group Swiss Mobiliar in 2016.

Hellman & Friedman and Blackstone are believed to have defeated rival PE firms to secure Scout24, including EQT Partners, Silver Lake and KKR & Co.

News: Private equity firms win over Scout24 with improved $6.4 billion bid

UK FinTech investment reaches record levels

BY Richard Summerfield

2018 was a record year for the FinTech industry, according to Innovate Finance’s ‘2018 FinTech VC Investment Landscape’ report. Last year saw $36.6bn of venture capital (VC) invested in the sector across 2304 deals – a 148 percent increase from 2017 and a 329 percent increase over five years.  

VC and private equity (PE) investment in the UK’s FinTech sector reached record levels in 2018, up 18 percent year-on-year to $3.3bn. PE investment rose 57 percent to $1.6bn, while venture capital dipped to $1.7bn, ahead of its peers in Europe.

VC investment into FinTech in both China and the US overshadowed and outpaced all other global regions, however. Of the top 15 deals in 2018, over half occurred in the US and a third in China. Combined, China and the US accounted for 80 percent of the world’s 15 largest deals.

China led the way, with $18.9bn invested across 90 deals. The US was the most dynamic and mature market, with $10.6bn invested across 1042 deals, a 52 percent increase in capital invested year-on-year. The UK’s FinTech sector ranked third. Within Europe, the UK continued to dominate, though Germany in second place on the continent saw $716m invested across 48 deals, with third placed Switzerland attracting $328m invested across 40 deals.

“It is very encouraging to see that investment continues to grow in the UK FinTech sector, reaffirming its position as a leading global financial and technology centre,” said Charlotte Crosswell, chief executive of Innovate Finance. “The UK has a unique position across financial services, technological innovation, regulators and government which all play a crucial role in this impressive growth journey. However, we should not be complacent as new challenges lie ahead; we must focus on growing our talent and capital pipeline across the UK, to ensure sustainable and inclusive growth in the future.”

2018 was also a notable year for a number of challengers and banking platforms, including Revolut, Monzo and SolarisBank, among others, which raised record amounts of capital.

Report: 2018 FinTech VC Investment Landscape Report