Coterra Energy announces $3.5bn asset acquisitions

BY Richard Summerfield

Coterra Energy has announced it is to acquire certain assets in the Permian Basin worth $3.95bn from privately held Avant Natural Resources and Franklin Mountain Energy.

The deals will see Coterra acquire approximately 49,000 net highly contiguous acres in Lea County, New Mexico, creating a new 83,000-net-acre focus area. The cash portion of the deals is expected to be funded through a combination of cash on hand and borrowings. The company will issue approximately 40.9 million shares of Coterra common stock to certain sellers, valued at approximately $1bn.

The transactions are each subject to satisfaction of customary terms and conditions and expected to close during the first quarter of 2025 with an effective date of 1 October 2024. Neither deal is conditioned on the closing of the other transaction.

“We are thrilled to announce the pending acquisition of two high-quality Permian Basin asset packages,” said Tom Jorden, chairman, chief executive and president of Coterra. “These highly accretive acquisitions create an expanded core area in New Mexico that plays to Coterra’s organizational strengths. In addition to adding significant oil volumes in 2025, the acquired assets provide inventory upside to established and emerging oil-weighted formations.

“We have been drilling horizontal wells in Lea County, New Mexico since 2010 and are extremely excited with the recent results and future opportunity across the area. The newly scaled platform provides a long runway for capital efficient development and substantial free cash flow generation. Importantly, we are maintaining an industry-leading balance sheet,” he added.

The assets to be acquired include 400-550 net Permian locations, which will increase Coterra's New Mexico net locations by around 75 percent and Permian net locations by around 25 percent. Coterra said the acquisitions will create an additional oil-weighted focus area in New Mexico, with acreage adjacent to its existing footprint. The company estimates the acquired assets will add oil production of 40,000-50,000 barrels per day (bbl/day) and total production of 60,000-70,000 barrels of oil equivalent per day (boe/day) in 2025, with capital expenditures of $400m-$500m.

For 2025, Coterra has forecast pro forma oil production of 150,000-170,000 bbl/day, up 49 percent compared to the estimated 2024 midpoint of oil guidance, and total production of 720,000-760,000 boe/day, up 11 percent compared to the estimated 2024 midpoint of total production guidance of 55-60 percent oil. The company also forecast $2.1bn-$2.4bn of total capital spending in 2025, around 75 percent weighted to the Permian Basin.

News: Coterra Energy to shell out $3.95 bln to boost Permian Basin presence

Cencora acquires RCA in $4.6bn transaction

BY Fraser Tennant

In a deal that expands its speciality services, drug distributor Cencora is to acquire Retina Consultants of America (RCA) from private equity firm Webster Equity Partners for $4.6bn.

The acquisition of RCA – a management services organisation (MSO) that operates a network of retina specialists – will add to Cencora’s specialty capabilities and expand its business, broadening physician and manufacturer relationships as well as Cencora’s value proposition to all its stakeholders.

Cencora plans to fund the transaction through a combination of existing cash on hand and new debt financing. RCA’s affiliated practices, physicians and management will retain a minority interest in RCA, with Cencora holding approximately 85 percent ownership in RCA upon closing.

“The acquisition of RCA will allow Cencora to broaden our relationships with community providers in a high growth segment and build on our leadership in specialty,” said Bob Mauch, president and chief executive of Cencora. “With a compelling value proposition for physicians, an impressive leadership team and strong clinical research capabilities, RCA is well-positioned at the forefront of retinal care.

The leading MSO in the retina space and a trusted healthcare provider, RCA’s nearly 300 retina specialists across 23 states provide high-quality care to patients with physicians conducting over 2 million visits annually.

Cencora expects to use its suite of manufacturer services to enhance RCA’s research programme and outcomes, maintaining its position as a partner of choice to pharmaceutical innovators in the retina space.

“We are pleased to enter our next phase of growth with the support of a leading global pharmaceutical solutions organisation,” said Robby Grabow, chief executive of RCA. “With additional resources to support the continued execution of our growth strategy, we will be better positioned to continue expanding our physician network and enhancing the quality of care we provide.”

The transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals.

Mr Mauch concluded: “The addition of RCA will allow us to expand our MSO solutions and drive differentiated value across the healthcare system for manufacturers, providers and patients.”

News: Cencora bolsters specialty business with $4.6 bln deal for Retina Consultants of America

Stonepeak takes ATSG private in $3.1bn deal

BY Fraser Tennant

In a deal that takes the aviation holding company private, Air Transport Services Group (ATSG) is to be acquired by US investment firm Stonepeak in an all-cash transaction valued at approximately $3.1bn.

Under the terms of the definitive agreement, which has been unanimously approved by ATSG’s board of directors, holders of ATSG’s common shares will receive $22.50 per share in cash.  

The agreement includes a go-shop period whereby ATSG may solicit proposals from third parties for a period of 35 days continuing through 8 December 2024, and in certain cases for a period of 50 days continuing through 23 December 2024.

The transaction has fully committed equity financing from funds affiliated with Stonepeak and fully committed debt financing. The transaction is not subject to a financing condition. Upon completion, ATSG’s shares will no longer trade on NASDAQ, and ATSG will become a private company.

“This transaction reflects the tremendous value of our fleet of in-demand midsize freighter and passenger aircraft, and the strength of our talented teams across ATSG’s businesses,” said Mike Berger, chief executive of ATSG. “With Stonepeak’s investment and extensive expertise in transportation and logistics and asset leasing, ATSG will be well positioned to further expand its global presence in the air cargo leasing market and enhance its service offerings to customers.”

A premier provider of aircraft leasing and cargo and passenger air transportation solutions for both domestic and international air carriers, as well as companies seeking outsourced airlift services, ATSG is the global leader in freighter aircraft leasing with a fleet that includes Boeing 767, Airbus A321 and Airbus A330 converted freighters.

“ATSG plays a fundamental role in enabling the growth of e-commerce globally in a world that continues to shift away from brick-and-mortar shopping,” said James Wyper, senior managing director and head of transportation & logistics at Stonepeak. “ATSG’s deep relationships with some of the world’s largest e-commerce companies and integrators gives us confidence in the company’s trajectory as a sector leader.”

The transaction is expected to close in the first half of 2025, subject to customary closing conditions, including approval of ATSG’s shareholders and receipt of regulatory approvals.

Mr Berger concluded: “We would like to thank our employees for helping us achieve this significant milestone and for their continued dedication as we prepare to enter this new chapter as a private company.”

News: Stonepeak nears $3.1 billion deal for aircraft lessor ATSG

TGI Fridays files for bankruptcy protection

BY Richard Summerfield

Citing financial challenges resulting from the coronavirus (COVID-19) pandemic and problems with the company’s wider capital structure, restaurant chain TGI Fridays Inc filed for Chapter 11 bankruptcy protection on Saturday in the Northern District of Texas.

In a filing with the court, the company listed both assets and liabilities in the range of $100m to $500m. TGI Fridays, which is privately owned by TriArtisan Capital Advisors, will use the Chapter 11 process to “explore strategic alternatives in order to ensure the long-term viability of the brand”.

Founded in 1965 as a bar in New York, TGI Fridays rapidly expanded over the decades, peaking in 2008 with 601 restaurants in the US and a $2bn business. Today, the company counts 163 restaurants in the US, down from 269 last year. It closed 36 in January and dozens more in the week prior to the filing. The company’s sales in the US were $728m in 2023, down 15 percent from the prior year, according to Technomic.

However, thanks to the company’s franchise model, TGI Fridays said it only owns and operates 39 restaurants in the US, which is just a fraction of the 461 TGI Fridays-branded restaurants around the world. A separate entity, TGI Fridays Franchisor, owns the company’s intellectual property and has franchised the brand to 56 independent owners in 41 countries. Those other locations remain open.

“The next steps announced today are difficult but necessary actions to protect the best interests of our stakeholders, including our domestic and international franchisees and our valued team members around the world,” said Rohit Manocha, executive chairman of TGI Fridays. “The primary driver of our financial challenges resulted from COVID-19 and our capital structure. This restructuring will allow our go-forward restaurants to proceed with an optimized corporate infrastructure that enables them to reach their full potential.”

In September, British restaurant operator Hostmore abandoned plans to buy TGI Fridays after it was removed as the manager of TGIF Funding, which owns the right to collect royalties from the restaurant chain franchise. Hostmore's shares plummeted 90 percent, eventually leading it to announce plans to enter administration due to overwhelming debt.

The US casual dining industry has endured a turbulent few months. In September, a US bankruptcy judge approved a reorganisation plan for seafood chain Red Lobster after years of mounting losses. Italian American food chain Buca di Beppo filed for bankruptcy protection in August.

News: TGI Fridays operator files for bankruptcy amid financial woes

Global deal volume and values on the rise – report

BY Richard Summerfield

Despite several significant headwinds, global M&A deal volume and value continued to rise in Q3 2024, according to S&P Global’s ‘Q3 2024 M&A Equity Offerings Market Report’.

According to the report, stock market volatility led to a fall of nearly 33 percent in the total value of equity issuance, to $65.63bn from second quarter levels and nearly 21 percent from the same period in 2023. But the number of global M&A announcements increased quarter over quarter for the second straight period (though the increase was slight, rising just 0.36 percent) - the first time this has happened since the third and fourth quarters of 2020. Furthermore, the total value of global M&A deals increased 29.1 percent year over year to $708.74bn in the third quarter.

On a year-over-year basis, global M&A announcements increased 7.3 percent, ending a period of 10-straight quarters of declining global announcements. Deal announcement in the Asia-Pacific region were one of the key drivers of Q3 improvements. Across Asia Pacific, the number of transactions increased to 2742, up 16.1 percent from the previous quarter and 17.3 percent from the same period in 2023. Likewise, the total value of the deals announced increased to $165.81bn, almost doubling the previous quarter’s total and a 37.7 percent increase year over year.

Europe produced some year-over-year growth with M&A announcements increasing 7.0 percent to 2846 and the total value increasing 8.8 percent to $130.89bn. But M&A activity in the region fell quarter over quarter, with the number of transactions dropping 6.1 percent and aggregate value 25.8 percent.

Globally, initial public offerings (IPOs) struggled across the first three quarters of the year, driven by economic volatility and the surfeit of elections across Europe. Global IPO activity picked up from the lows in the first half of 2024, but the pace slowed compared to previous years. The value of offerings rose to $23.32bn in the third quarter, an increase of nearly 22 percent from the second quarter of 2024, but was down 32 percent from the third quarter of 2023.

The number of IPO transactions increased worldwide to 326, up from 322 in the second quarter, but down from 387 in the third quarter of 2023. There were 946 transactions across the first three quarters of 2024, down from 1061 in the first nine months of 2023. The Asia-Pacific region did buck this trend to an extent, and India in particular was a relative hotbed of IPO activity, with the number of deals across the country up 32.3 percent year over year to 262 for the first nine months of 2024. Over the same period, the growth in total value has been smaller, however, up 12.7 percent year over year to $7.65bn.

Report: Q3 2024 M&A Equity Offerings Market Report