Cognizant makes $1.3bn Belcan acquisition

BY Richard Summerfield

In a move that will expand its presence in the aerospace, defence, space and automotive sectors, Cognizant Technologies has agreed to acquire digital engineering firm Belcan for nearly $1.3bn in cash and stock.

The transaction is expected to close in Q3 2024, subject to the receipt of required regulatory approvals and other closing conditions. The total purchase price of approximately $1.29bn comprises $1.19bn in cash consideration and a fixed 1.47 million Cognizant shares, with a current value of $97m based on Cognizant’s closing share price on Friday 7 June 2024. The cash consideration is expected to be funded through a mix of cash on hand and debt.

Cognizant said it intends to increase its share repurchase plan to maintain current share count guidance of 497 million for the full year 2024.

“We believe that acquiring Belcan will strengthen Cognizant’s position in the sizable and fast-growing ER&D services market,” said Ravi Kumar, chief executive of Cognizant. “Belcan’s deep engineering capabilities and domain expertise across the aerospace & defense market will be complemented by Cognizant’s scale and own multi-decade digital engineering expertise, providing Belcan’s blue-chip client roster access to our advanced AI, Cloud and Data technologies. We see the opportunity to immediately accelerate revenue growth and create compelling shareholder value through our combined engineering capabilities. Belcan’s clients would gain access to Cognizant’s full suite of technology services, while Cognizant’s clients across the manufacturing, automotive, energy, and high-tech sectors we believe will benefit from Belcan’s engineering skills.”

Lance Kwasniewski, the current chief executive of Belcan, is expected to continue to lead the company, which will operate under the Belcan name as an operating unit of Cognizant.

“We are excited about this unique combination and the value creation it will bring to our customers, along with the opportunities it will provide for our employees” said Mr Kwasniewski. “Cognizant will better position our team to capitalize on compelling tailwinds, including increasing outsourced ER&D spend, the transformative impact of digital engineering adoption rates, robust commercial aerospace demand, and favorable long-term defense and space spending. Belcan’s experienced team has built a growth-oriented business delivering highly complex, mission-critical, scalable services to our long-standing customer base. I look forward to continuing to lead our team as we unite and leverage Belcan’s and Cognizant’s comprehensive services and cross-industry clientele to execute on our collective strategy, ultimately earning the role of our clients’ most trusted partner in intelligent engineering.”

Belcan has been owned by private equity firm AE Industrial Partners since 2015.

Cognizant expects the Belcan deal to deliver over $100m in annual revenue synergies within three years, with additional cost synergies expected over time.

News: Cognizant to acquire Belcan for $1.3 billion

Bain Capital acquires PowerSchool in $5.6bn deal

BY Fraser Tennant

In a deal that takes the K-12 education software and cloud-based solutions provider private, PowerSchool Holdings is to be acquired by US private investment firm Bain Capital in a transaction valued at $5.6bn.

Under the terms of the definitive agreement, PowerSchool stockholders will receive $22.80 per share in cash upon completion of the proposed transaction, which represents a premium of 37 percent over PowerSchool’s unaffected share price of $16.64 as of 7 May 2024.

Upon completion of the transaction, PowerSchool’s common stock will no longer be publicly listed on the New York Stock Exchange, and PowerSchool will become a privately held company.

A global education technology company supporting over 55 million students and over 17,000 customers in more than 90 countries, PowerSchool brings together the best of K-12 educational and operational technology to support every step of the learning journey.

“PowerSchool is uniquely positioned to provide differentiated, mission-critical solutions that drive better education outcomes, empower educators and help district operations run more efficiently,” said Hardeep Gulati, chief executive of PowerSchool. “With Bain Capital’s support, PowerSchool will have access to additional resources and the flexibility to deliver even more growth and innovation.”

“PowerSchool’s innovative software solutions in and out of the classroom provide a strong foundation for K-12 academic success. said David Humphrey, a partner at Bain Capital. “Their products are highly respected by administrators, educators, students and parents because they foster active collaboration and offer actionable insights needed to support positive learning outcomes.”

The transaction – which has been approved by the PowerSchool board of directors – is expected to close in the second half of 2024, subject to customary closing conditions, including receipt of regulatory approvals.

“As demand for K-12 educational technology grows, we believe there are significant opportunities to expand access to PowerSchool’s best-in-class product suite around the world,” concluded Max de Groen, a partner at Bain Capital. “We look forward to working with PowerSchool to accelerate the company’s growth while strengthening its commitment to help educators and students realise their full potential.”

News: Bain Capital to take PowerSchool private in $5.6 bln deal

WM to acquire Stericycle in $7.2bn medical waste deal

BY Fraser Tennant

In a transaction that expands its environmental solutions in a growing healthcare market, WM is to acquire fellow medical waste management company Stericycle for approximately $7.2bn.

Under the terms of the definitive agreement, WM will acquire all outstanding shares of Stericycle for $62 per share in cash, representing a premium of 24 percent to Stericycle’s 60-day volume weighted average price as of 23 May 2024.

The acquisition advances WM’s growth strategy, underscores the importance of executing its sustainability initiatives and aligns with its financial goals, including growth in operating earnings before interest, taxes, depreciation and amortisation and cash flow.

Previously known as Waste Management and based in Houston, Texas, WM is driven by commitments to put people first and achieve success with integrity. Through its subsidiaries, WM provides collection, recycling and disposal services to millions of residential, commercial, industrial and municipal customers throughout the US and Canada.

“We have a proven track record of integrating and optimising acquired businesses that benefit our customers and employees and deliver a strong return on investment for our shareholders,” said Jim Fish, president and chief executive of WM. “We look forward to working with the Stericycle team to capture the strategic, customer service, environmental and financial benefits of this acquisition.”

A US-based business to business services company and a leading provider of compliance-based solutions that protect people and brands, promote health and wellbeing and safeguard the environment, Stericycle provides customers in North America and Europe with solutions for regulated waste and compliance services and secure information destruction.

“Our sustained focus and commitment to transforming our business over the past five years has uniquely positioned Stericycle for this transaction,” said Cindy J. Miller, president and chief executive of Stericycle. “This deal creates significant value for shareholders, unlocks new opportunities to deliver diversified services to customers, and supports investment in the growth and development of our team members.”

The transaction has been unanimously approved by the boards of directors of both companies.

Expected to close as early as the fourth quarter of 2024, the transaction is subject to the satisfaction of customary closing conditions, including regulatory approvals and approval by a majority of the holders of Stericycle’s outstanding common shares.

Mr Fish concluded: “The acquisition of Stericycle broadens the scope of our service offerings and brings together the leader in solid waste and a premier company in regulated medical waste services.”

News: Waste Management adds medical-waste portfolio with $7.2 bln Stericycle deal

WeWork wins bankruptcy plan approval

BY Richard Summerfield

Shared office provider WeWork has won the approval of a US bankruptcy judge for its Chapter 11 bankruptcy plan, enabling the company to eliminate $4bn of debt and handing control over to a group of lenders and real estate tech firm Yardi Systems.

The company, which was founded in 2010 and was once trumpeted as the future of the office, amassed considerable losses during a period of aggressive global expansion prior to the COVID-19 pandemic. However, as demand for office space fell dramatically during the pandemic and in the immediate aftermath, the company was forced to file for bankruptcy protection in November 2023.

The plan, which was approved in a New Jersey bankruptcy court last week, will eliminate $4bn of the firm’s debt and reduce future rent obligations by $12bn, according to the company. WeWork expects to complete the restructuring by mid-June, noting that it was now positioned for “sustainable, profitable growth”, raising the prospect of it breaking even after years of steep losses.

Going forward, WeWork plans to operate 337 shared office spaces globally, around half the number of sites it had around a year ago. The US and Canada will remain its biggest market, with more than 170 locations. Yardi Systems is taking a majority stake in exchange for providing $450m in financing along with other investors. Japan’s SoftBank Group also remains a backer.

“Due to the tireless efforts of our team, and the unwavering loyalty of so many of our members, we have completed our Chapter 11 proceedings with success well beyond our initial expectations,” said David Tolley, chief executive of WeWork. “In one of the largest and most complex restructurings, we have achieved extraordinary outcomes. Over the last year, we have also seen strong demand across the WeWork system and increased our member net promoter scores. Each of these achievements represents an exceptional testament to our people, our brand and our industry-leading service offerings.”

Prior to the plan’s approval, Adam Neumann, co-founder and former-chief executive of WeWork, confirmed he was no longer attempting to acquire the business. Mr Neumann stepped down from WeWork in 2019 after its initial failure to go public, and following criticism of the firm’s internal culture. He had reportedly offered $500m for the company but declined to move forward with his bid, noting that he did not think WeWork’s plan was viable in the long term.

News: US court approves WeWork bankruptcy exit

ConocoPhillips strikes $22.5bn Marathon deal

BY Richard Summerfield

ConocoPhillips has agreed to acquire Marathon Oil in an all-stock transaction with an enterprise value of $22.5bn, including $5.4bn of net debt.

Under the terms of the deal, Marathon shareholders will receive 0.2550 shares of Conoco common stock for each share of Marathon common stock held, representing a 14.7 percent premium to Marathon’s closing share price on 28 May 2024, and a 16 percent premium to the prior 10-day volume-weighted average price.

The deal, which is expected to close in the fourth quarter of 2024, subject to the approval of Marathon’s stockholders, regulatory clearance and other customary closing conditions, is the latest in a spate of recent consolidation deals in the oil & gas industry. 2023 saw transactions worth a total of $250bn struck by companies in the space, and significant dealmaking has continued throughout the first half of 2024.

“This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading US unconventional position,” said Ryan Lance, chairman and chief executive of ConocoPhillips. “Importantly, we share similar values and cultures with a focus on operating safely and responsibly to create long-term value for our shareholders. The transaction is immediately accretive to earnings, cash flows and distributions per share, and we see significant synergy potential.”

“Powered by our dedicated employees and contractors, we built a top performing portfolio with a multi-year track record of peer-leading operational execution, strong financial results and compelling return of capital to our shareholders - all while holding true to our core values of safety and environmental excellence,” said Lee Tillman, chairman, president and chief executive of Marathon Oil. “ConocoPhillips is the right home to build on that legacy, offering a truly unique combination of added scale, resilience and long-term durability.”

According to a statement announcing the deal, Conoco expects to achieve at least $500m of run rate cost and capital savings within the first full year following the closing of the transaction. Furthermore, independent of the transaction, Conoco expects to increase its ordinary base dividend by 34 percent to 78 cents per share starting in the fourth quarter of 2024.

Upon closing of the transaction, Conoco expects share buybacks to be over $20bn in the first three years, with over $7bn in the first full year, at recent commodity prices.

News: ConocoPhillips to buy Marathon Oil for $22.5 billion in latest energy merger