Macy’s receives $5.8bn takeover bid

BY Richard Summerfield

US department store Macy’s has received a $5.8bn takeover bid from an investor group consisting of Arkhouse Management and Brigade Capital Management.

Arkhouse, a real-estate focused investing firm, and Brigade, a global asset manager, submitted a proposal to acquire the Macy’s stock they do not already own for $21 a share on 1 December, a premium of 20.76 percent premium from its closing at $17.39 on Friday 8 December. Both investors own a stake in Macy’s through Arkhouse-managed funds.

The 165-year-old Macy’s operates almost 500 stores across the US under its own brand as well as Bloomingdale’s (a more upscale chain with 30-plus locations) and beauty retailer Blue Mercury.

The potential deal, first reported by The Wall Street Journal, would see Arkhouse and Brigade take control of Macy’s in an increasingly troubled sector. The US department store space has struggled in recent years, with JCPenney, Neiman Marcus and Lord & Taylor all declaring bankruptcy in 2020. Department stores have been confronting a broader shift in consumer habits as shoppers gravitate toward specialty retailers and online shopping.

Macy’s reported $1.2bn in profit on $24.4bn in revenue in the last fiscal year, down from $1.4bn in earnings on $24.5bn in revenue in 2021. In 2020, Macy’s announced the closure of 125 stores in a bid to exit weaker shopping malls and focus on smaller-format stores in strip malls. The company also announced it was cutting 2000 jobs at its headquarters in Cincinnati and offices in San Francisco.

The company is also experiencing some upheaval in the boardroom, after it was announced that Jeff Gennette, the chief executive who has spearheaded the company’s turnaround efforts, will be succeeded by Tony Spring, who now runs Bloomingdale’s. Mr Gennette will be retiring in February.

At present, Macy’s has a market capitalisation of about $4.77bn and its shares are down nearly 15.79 percent this year.

Despite the uncertainty surrounding Macy’s, the company surpassed analysts’ estimates for quarterly profit on lower inventories and strong demand for beauty products in November, signalling that attempts to trim inventory from 2022 highs were finally working ahead of the crucial Christmas shopping season.

Arkhouse and Brigade may be motivated to take control of Macy’s in order to acquire the company’s valuable real estate portfolio. According to JP Morgan, Macy’s total real estate value is estimated to be around $8.5bn, or $31 per share, including the iconic Herald Square property worth around $3bn.

News: Macy’s offered $5.8bn buyout that could take it off stock market

PE and VC-backed firms see rapid European growth, reveals new report

BY Fraser Tennant

European private equity (PE)- and venture capital (VC)-backed companies are growing rapidly and significantly outperforming privately owned firms, according to a new report by Gain.pro.

In its 2023 ‘Finding Growth in Europe: A Private Equity Perspective’, it is revealed that over the past decade, PE- and VC-backed companies achieved growth rates of 10 to 12 percent – double that of privately owned companies at 5 percent.

Among the key takeaways from the report, PE- and VC-backed companies are more active in buy-and-build than their privately-owned counterparts. An active buy-and-build strategy is applied by 28 percent of PE- and VC-backed companies, meaning they acquire at least one company per year. This compares to only 12 percent for privately owned companies.

In terms of organic growth rates, the report notes that the technology, media and telecommunications (TMT) sector is performing best, showing an average organic growth rate of 8 to 10 percent. TMT is followed by the financial services and science & health sectors. The report also showcases that there are plenty of growth opportunities in the lower-growth industrials, materials & energy and consumer sectors.

“With high-interest rates here to stay, growth is only going to get tougher,” said Sid Jain, head of insights at Gain.pro. “But what we see in the data is that PE-held businesses continue to demonstrate resilience. It is clear that even in today’s lacklustre macro-environment, investors can expect significant opportunities within the European PE landscape.”

According to the report, European investors need to be more vigilant to find growth opportunities, seeking out multiple arbitrage opportunities that do not rely on overall market multiples, but more on buy-and-build and operational improvements.

Mr Jain concluded: “The next decade will be challenging for PE investors, but those who work hard and use smart data-driven sourcing strategies will be well-positioned to succeed.”

Report: Finding Growth in Europe: A Private Equity Perspective: 2023 Edition

Western Global Airlines exits Chapter 11

BY Fraser Tennant   

Having struggled under a heavy debt load and weak market conditions, US cargo airline Western Global Airlines has exited the Chapter 11 bankruptcy process following the completion of a comprehensive financial restructuring plan.

Under the plan, the carrier has reduced its debt by more than $460m and infused significant new capital into the company, while preserving its workforce and long-term relationships with customers and suppliers.

The company, which operates chartered cargo jets for the US military and other customers, filed for Chapter 11 in August 2023, stating that it would restructure with the help of $77m in financing from creditors.

Over the course of 100 days, the company restructured its debt through an in-court process while continuing to operate without disruption. The restructuring included a cash award retention programme for nearly its entire workforce that drew upon $77.5m of debtor in possession (DIP) financing provided by its owners, Jim and Sunny Neff.

The owners also funded equity and exit financing, and waived nearly $100m of secured and unsecured prepetition debt held by them in order to provide recovery to all creditors.

"My top priority has always been to preserve the long-term viability of our company and protect our people,” said Jim Neff, founder and chief executive of Western Global Airlines. “I am pleased our restructuring process has achieved that. It continues to be a privilege to lead our team, especially as Western Global Airlines has emerged stronger and ready to thrive again as it has historically done.”

Headquartered in Estero, Florida, in only 10 years Western Global Airlines has become a leading, global logistics powerhouse, safely and reliably flying to over 400 airports in 135 countries on six continents on behalf of its diverse, blue chip client base in the logistics industry.

“As always, I am immensely grateful to our employees, customers and partners for their enduring support as we navigated the Chapter 11 process,” concluded Mr Neff. “I look forward to sharing the company's successes with our loyal employees and to continue to serve as a critical partner for our customers.”

News: US's Western Global Airlines exits Chapter 11

Roche to acquire obesity drug developer Carmot

BY Richard Summerfield

In a deal that will significantly boost its anti-obesity pipeline, Swiss pharmaceutical giant Roche has agreed to acquire Carmot Therapeutics. Under the terms of the deal, Carmot’s equity holders will receive $2.7bn in cash, and a further $400m if certain milestones are met.

The transaction, which is expected to close in the first quarter of 2024, will provide Roche with access to Carmot’s current research and development portfolio, including all clinical and preclinical assets. Carmot’s most promising obesity drug candidate, a once-weekly injection called CT-388, belongs to a class known as dual GLP-1/GIP receptor agonists and mimics a hormone typically released into the body after eating. Following encouraging phase one trial results, the Carmot drug is ready to be tested on humans in the second of three trial stages, with a possible market launch in the 2030s.

“Obesity is a heterogeneous disease, which contributes to many other diseases that together comprise a significant health burden worldwide,” said Thomas Schinecker, chief executive of Roche Group. “By combining Carmot’s portfolio with programs in our Pharmaceuticals pipeline and our Diagnostics expertise and portfolio of products across cardiovascular and metabolic diseases, we are aiming to improve the standard of care and positively impact patients’ lives.”

“We are encouraged by the clinical data for the lead asset CT-388, which demonstrated substantial weight loss in Phase 1b,” said Levi Garraway, chief medical officer and head of global product development at Roche. “These data suggest the potential for a differentiated profile to treat obesity and its associated diseases. The broad Carmot portfolio offers different routes of administration and opportunities to develop combination therapies that treat obesity and potentially other indications.”

“We are proud of the pipeline that we have built in obesity and diabetes and the strong data we have generated to date,” said Heather Turner, chief executive of Carmot. “With distinct routes of administration and the potential for combinations, we feel Carmot’s pipeline has the potential to meet patients where they are in their metabolic journey and have a significant impact on patients’ lives. We are confident that Roche will enable robust development of our programs and help us achieve our goal of delivering life-changing therapeutics for people living with metabolic and potentially other diseases.”

The announcement comes just over a month after Roche agreed to acquire Telavant from Roivant Sciences and Pfizer for an initial $7.1bn, granting the company the rights to an experimental treatment for inflammatory bowel disease.

News: Roche joins race for obesity drugs with $2.7 billion Carmot deal

KKR to acquire remaining stake in Global Atlantic for $2.7bn

BY Richard Summerfield

Private equity giant KKR & Co. has agreed to pay around $2.7bn to acquire the remaining 37 percent stake it does not own in insurance company Global Atlantic Financial Group.

The deal, which will see KKR’s ownership of the company increase to 100 percent, will be fully funded by its existing balance sheet, which had $23bn of cash and investments as of 30 September 2023. Upon closing, Global Atlantic will continue to be led by its management team and operate under the Global Atlantic brand.

KKR has served as Global Atlantic’s asset manager since 2021, offering access to its global investment and origination capabilities. According to the firm, Global Atlantic’s assets under management have grown significantly, up from $72bn in 2020 to $158bn today.

Under the terms of the deal, which is expected to close in the first quarter of 2024, KKR will pay Global Atlantic’s minority shareholders an amount in cash equal to Global Atlantic’s book value, with certain adjustments.

“The strategic partnership we envisioned three years ago has exceeded our expectations,” said Joe Bae and Scott Nuttall, co-chief executives of KKR. “It has been transformative for both businesses and a great cultural fit that has enabled us to contribute to Global Atlantic’s continued strong performance and success, while also being a key driver of growth for KKR. We expect the new ownership structure will foster even closer collaboration, allowing us to fully leverage our complementary strengths and grow faster together.”

“We are taking this step because we have demonstrated, over the last three years, that we are stronger together,” said Allan Levine, chief executive of Global Atlantic. “Being part of KKR has strengthened our position as a leading insurance company and enhanced our ability to deliver compelling solutions for our clients. Moving from a diverse group of shareholders to a single one with KKR clarifies our objectives and allows us to think – and invest – longer term.

“Although we hope to unlock further value by taking this step in our capital structure, neither our client-first approach nor our investment and risk management framework will change, and the day-to-day experience of our clients and colleagues will feel very much the same as it does today,” he added.

News: KKR to buy remaining stake in insurer Global Atlantic for $2.7 billion