Fidelity to pay $35bn for Worldpay

BY Richard Summerfield

US FinTech Fidelity National Information Services Inc (FIS) has agreed to acquire payment processor Worldpay for about $35bn.

The deal will see Worldpay shareholders receive 0.9287 FIS shares and $11.00 in cash for each share of Worldpay held - a premium of about 14 percent based on the last day of trading before the deal was announced. Upon closing of the transaction, FIS shareholders will own approximately 53 percent and Worldpay shareholders will own approximately 47 percent of the combined company.

The deal values Worldpay at around $43bn, inclusive of debt. FIS and Worldpay combined will have annual revenues of about $12bn and adjusted core earnings of around $5bn.

The merger is the biggest deal announced in the electronic payments industry to date. It comes as more consumers utilise digital payments, rather than cash. Worldpay, the companies noted in a press release, processes over 40 billion transactions annually, supporting more than 300 payment types across more than 120 currencies.

“Scale matters in our rapidly changing industry,” stated Gary Norcross, chairman, president and chief executive of FIS. “Upon closing later this year, our two powerhouse organisations will combine forces to offer a customer-driven combination of scale, global presence and the industry’s broadest range of global financial solutions. As a combined organization, we will bring the most modern solutions targeted at the highest growth markets. The long-term value we will create for clients and for shareholders will set the bar in our industry and will create a range of new career opportunities for our employees. I have never been more excited about the future of FIS.”

“At Worldpay, our focus has always been on delivering more value to our clients and partners and making decisions that achieve our growth and performance objectives. Combining with FIS helps us accelerate the achievement of that, now benefitting from new scale and capabilities that will truly differentiate the company globally,” said Charles Drucker, executive chairman and chief executive of Worldpay. “We are proud to become part of one of the financial services industry’s most respected and consistently performing companies, and I am excited about the new opportunities this brings both for the business and our colleagues worldwide.”

The deal is expected to generate an organic revenue growth outlook of 6 to 9 percent through 2021, and $700m of total core earnings savings over the next three years. Furthermore, the companies expect to generate $500m of revenue savings and aim to deliver nearly $4.5bn of free cash flow in three years.

News: U.S. firm FIS buys Worldpay for $35 billion in payments deal bonanza

FireEye report – Aggressive new attackers emerge

BY Richard Summerfield

The cyber security industry evolved significantly in 2018, with aggressive new attackers emerging, according to the FireEye Mandiant ‘M-Trends 2019 Report’.

Encouragingly, however, organisations are getting better at responding to breaches quickly. Over the past eight years, dwell times have decreased significantly – from a median dwell time of 416 days in 2011 to 78 days in 2018.

Thirty-one percent of the breaches investigated by Mandiant last year had dwell times of 30 days or less, up from 28 percent of compromises in 2017. Twelve percent had dwell times greater than 700 days, down from 21 percent in 2017.

The report suggests that the increase in compromises detected in less than 30 days is due to greater use of ransomware and cryptominers over the last 12 months, which are detected faster. FireEye also believes that companies are improving their data visibility through better tooling, which allows for faster response times. In the Americas, the median dwell time fell from 75.5 days in 2017 to 71 days in 2018.

Nation states continue to pose an increasingly dangerous and evolving threat. The report identifies North Korea, Russia, China and Iran, among others, as the most threatening actors which are continually enhancing their capabilities and changing their targets in alignment with their political and economic agendas. The report suggests that significant investments have provided these actors with more sophisticated tactics, tools, and procedures, with some becoming more aggressive, and others better at hiding and staying persistent for longer periods of time.

There are a number of important steps companies must take if they are to resist attacks which are coming in increasingly diverse forms. Attackers are targeting data in the cloud, including cloud providers, telecoms and other service providers; they are re-targeting past victim organisations and are even launching phishing attacks during mergers & acquisitions (M&A) activity.

“By regularly reviewing and updating their incident Response Plans and associated use cases and playbooks, organisations can mitigate the risk of destruction of important evidence, failure to identify major breaches, and extending the duration of breaches,” notes the report. “Organisations should incorporate important concepts such as evidence preservation during remediation activities, context of alerts instead of simple volume metrics, and eradication timing into these documents. This will empower front line analysts to effectively escalate relevant information to decision makers and avoid costly mistakes.”

Report: M-Trends 2019

Fading denim brand Diesel USA files for Chapter 11

BY Fraser Tennant

Blaming falling sales, a fumbled turnaround, expensive leases and inflexible landlords, denim and accessory brand Diesel USA has moved to protect itself from creditors and filed a voluntary petition for relief under Chapter 11 bankruptcy.

Hit hard by the ongoing downturn in the retail sector, the New York-based arm of Italian retail clothing company Diesel S.p.A. has seen annual sales plummet 53 percent, to $104m. In addition, cyber attacks and theft have proved costly to the retailer.

The Chapter 11 petition estimates up to $100m in assets and as much as $50m in debt. Diesel’s parent company the OTB Group is not part of the Chapter 11 filing.

Diesel’s bankruptcy comes at a time when several retailers, such as shoe store Payless, Victoria’s Secret and Gap, have reduced their footprints and closed stores following bankruptcy. However, unlike these retailers, Diesel intends to breathe new life into its US brand.

“The filing is a critical step in enabling Diesel USA to address certain long-term liabilities for a healthier and stronger business in the country, building a dynamic brand presence in line with the evolving US retail environment,” said Diesel in a statement. “This procedure opens the way to a redefinition of the brand’s geographic footprint in the US.”

This redefinition of the brand will include some important milestones for Diesel USA in 2019, including refitting and reviewing most of its retail store network and making sure its retail footprint meets the needs of both existing and new consumers.

Diesel is also looking to strengthen its e-commerce presence and has pledged to redouble its commitment to innovation via a series of key wholesale partnerships designed to give resonance to the retailer’s collections and special products, with tailored buying and distribution activities planned for each.

A premium denim and accessory brand which dominated pop culture in the 1990s and early 2000s, Diesel USA currently has 380 employees and 28 retail stores in the US, as well as relationships with department stores and specialty retailers.

The Diesel statement concluded: “We remain fully committed to the US market, a unique and fundamental window to an important player globally.”

News: Jeans maker Diesel USA files for bankruptcy

Iconic UK sports car manufacturer acquired by European investment firm

BY Fraser Tennant

One of the most iconic names in the automotive world, Morgan Motor Company has been acquired by Italian investment firm Investindustrial – which has taken a majority stake in the 110-year old British sports car manufacturer.

The financial terms of the transaction have not been disclosed. However, the investment is being executed without financial debt and Morgan will have a positive net cash position upon closing of the transaction.

Founded in 1909, Morgan hand-builds premium sports cars with a classic design in its historic factory in Malvern, UK, which is visited by more than 30,000 people each year. With revenues of £33.8m and a net profit of £3.2m in 2018, the company sells around 700 cars per year. It is also one of the last remaining British-owned carmakers.

“The past two years have been the most successful in our company’s history,” said Dominic Riley, chairman of Morgan. “However, to really fulfil our full potential and secure our long-term future, both the family and management team felt it was essential to bring in a strategic partner – a partner that shares our vision and has the expertise, financial resources and track record of success in the automotive world, to make it happen. That partner is Investindustrial.”

Following completion of the acquisition, the Morgan family will continue to act as stewards for the brand and retain a minority shareholding. And, for the first time in its history, the management team and all employees will have a share of the business.

“Morgan’s handmade British sports cars are true icons of the industry,” said Andrea C. Bonomi, Investindustrial’s chairman of the industrial advisory board. “We have followed the company and seen its progress for some time and see significant potential for Morgan to develop internationally while retaining its hand-built heritage. We share with the Morgan family the belief that British engineering and brands are unique and have an important place in the world.”

The transaction is expected to be completed in April 2019.

Steve Morris, chief executive of Morgan, concluded: “The future is bright for Morgan. We are coming off the back of two record years and now have the best possible owner and partner to take the business to the next level and develop Morgan’s global potential.”

News: Morgan family sells control to venture capitalist group

Chemicals dealmaking to remain robust despite headwinds

M&A activity in the global chemicals industry is expected to decline slightly in 2019 in the face of ongoing uncertainty, according to Deloitte’s 2019 Global Chemical Industry Mergers and Acquisitions Outlook.

The report suggests that rising interest rates, trade tensions and slowing economic growth will impact M&A activity in the sector, though the market will remain robust.

Global M&A volume in the chemicals space reached 600 deals in 2018, a decline of 5 percent compared to 2017, but total M&A value was still higher than in each of the years from 2010 to 2013. The value of M&A in the global chemicals industry rebounded to $72.4bn in 2018, up from $46.4bn in 2017.

The first quarter of 2018 was slow, although deal volume increased in each successive quarter in 2018, and deal values were also strong, with billion dollar-deals increasing in both quantity and value throughout the year.

Deloitte expects 2019 to be a challenging year, with growth in industrial production down and protectionism on the rise in many developed economies. However, the emergence of digitalisation is expected to transform the global chemicals industry and create additional M&A activity in the future.

“In 2019, we expect a modest decline in chemical industry M&A activity, but as demonstrated in the past, activity should still be strong despite global uncertainty,” says Dan Schweller, Deloitte Global M&A leader for the chemicals and specialty materials sector. “Underlying conditions for a strong M&A market remain intact – ample cash on-hand for buyers, availability of relatively cheap credit, and the desire to increase ROI for investors.

“Protectionism and trade concerns are weighing heavily on companies and global regulators continue to heavily scrutinize deals,” he continued. “As a result, we may see hesitancy towards cross-border M&A deals. However, the equity market declined in the fourth quarter, which may make high deal valuations – a limiting factor for M&A in 2018 – more palatable to investors moving forward.”

Report: 2019 Global chemical industry mergers and acquisitions outlook