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The government is readying a post-Brexit vote housing package that will provide billions of pounds to residential developers in an attempt to abate the housing crisis and stimulate the flagging economy.

HOMENEWS

Government prepares multi-billion pound housing stimulus

22 August 2016 | By Samuel Horti

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The government is readying a post-Brexit vote housing package that will provide billions of pounds to residential developers in an attempt to abate the housing crisis and stimulate the flagging economy.

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It is understood that the new multi-billion pound fund, administered through the Homes and Communities Agency (HCA), will back developers from all parts of the industry, including the private rented sector (PRS).

Small and medium-sized enterprises (SMEs) will be in pole position to receive the money, which will be made available in the form of loans, as will developers using modular construction to build out schemes.

A source familiar with the plans said the all-encompassing fund would also support the assembly of complex sites around the country, and would be used to give financial guarantees to developers worried about the risks of delivering big schemes.

The final details of the fund – which the source said would comprise new money – are currently being thrashed out at the top level of government and are likely to be announced in the Autumn Statement.

Government to take on more risk than ever before

It will mark a shift in attitude from the government to development: it is now willing to take on more financial risk than it has ever done in the past to tackle the ever-deepening housing crisis.

Housebuilders are known to be stepping away from land acquisitions in the wake of the Brexit vote and hesitating on fresh projects – bringing the need for alternatives into sharper focus – and well-placed sources acknowledge that the government understands the need to diversify supply.

Off-site construction has moved to the top of the government’s agenda since the Brexit vote alongside PRS, as ministers seek ways to address the ever-widening gap between housing supply and demand.

Property Week revealed last week that ministers were gearing up to use modular construction to tackle the housing crisis.

Gapping up
In reaction to strong earnings/guidance: AVH +3.3%

M&A news:

Other news:

Analyst comments:

Gapping down
In reaction to disappointing earnings/guidance: DRD -15.8%

M&A news: PFE -0.5% (Medivation confirms deal to be acquired by Pfizer for $81.50/share in cash, or ~$14 bln)

Select metals/mining stocks trading lower:

Select oil/gas related names showing early weakness:

Other news:

Analyst comments:

Sanofi said to weigh alternative deals to Medivation; eyes BioMarin pharmaceutical - sources - part 2

Hacks at the FT last night landed a rather good scoop about Pfizer winning the long running Medivation auction with a $14 billion takeover bid. Here is the link:

The story has not yet been confirmed but it's written pretty hard and been followed by other "newspapers of record", so I would be surprised if it wasn't announced later today.

The key question now is: what will Sanofi do next?

The French drugs giant aggresively pursued Medivation since the beginning the year but, in case you don't recall, a couple of months ago I wrote that the French pharmaceutical group was also looking at BioMarin Pharmaceutical as a back up target should it lose out in the auction. Here is the link:

Teleperformance (Paris:RCF), the worldwide leader in outsourced omnichannel customer experience management, today announced that it has entered into a definitive merger agreement to acquire LanguageLine Solutions LLC from ABRY Partners and minority equity owners.

LanguageLine Solutions is the US market leader in over-the-phone and video interpretation solutions to a wide range of organizations in the healthcare, insurance, financial services, communications and government sectors. Founded in 1982 and headquartered in Monterey, California, LanguageLine Solutions had revenue of USD 388m and adjusted EBITDA of USD 147m in 2015.

Daniel Julien, Executive Chairman of Teleperformance, and Paulo César Vasques, Teleperformance Chief Executive Officer, commented: “LanguageLine Solutions delivers mission critical services to a large array of clients in verticals that we already service in customer service and technical support. It is a superb organization that supports 25,000 clients across the US, Canada and the UK in more than 240 languages with a sophisticated growing network of approximately 8,000 interpreters. This acquisition will reinforce and boost Teleperformance’s global leadership as a provider of high end value-added services, and will positively impact Teleperformance’s profitability profile. We intend, together with LanguageLine Solutions’ seasoned leadership team, to gradually expand these lines of service across Teleperformance’s geographic footprint.”

“When completed, the deal will create immediate value for Teleperformance shareholders as it is expected to be accretive to earnings per share by around 10% on a pro forma basis for 2016”, they added.

Peggy Koenig, Managing Partner and Co-CEO at ABRY Partners, said: “LanguageLine has been a long-held and important investment for ABRY. Management has grown revenue, diversified the product lines and increased profitability meaningfully over the course of our investment, and we are thrilled that the Company has found a perfect home within Teleperformance. We wish the management team and Teleperformance continued success going forward.”

“I would like to heartily thank ABRY Partners for having been such great shareholders, supporting LanguageLine’s mission of enabling communications in order to empower relationships as well as our aggressive growth strategy. We know that Teleperformance, with its global culture and footprint, is the perfect partner to help us write a great new chapter in the history of the language access solutions industry. The LanguageLine leadership team is excited to join the Teleperformance group in order to expand the reach of our business and to help us to continue to provide total and complete client satisfaction”, added Scott W. Klein, LanguageLine Solutions Chief Executive Officer.

The consideration for the transaction will be USD 1.522bn at closing. The acquisition will be fully financed through a debt financing provided by Crédit Agricole, HSBC and Société Générale. Paul Hastings LLP and Linklaters LLP acted as legal advisors to Teleperformance in conjunction respectively with the acquisition and the financing.

Credit Suisse and Morgan Stanley acted as financial advisors to LanguageLine Solutions on the transaction and Kirkland & Ellis LLP acted as legal advisor.

The transaction is expected to close before year end, subject to receipt of certain regulatory approvals and other customary closing conditions.

Two FTSE 250 groups that make specialty chemicals used in products ranging from latex gloves to anti-ageing creams are on the lookout for acquisitions, at a time when megamergers are gripping the upper end of the industry.

The chief executives of Croda and Synthomer told the FT they were in the market for bolt-on deals as well as bigger transactions that could transform their respective companies.

Their acquisitive appetites chime with the large-scale consolidation that looks set to sweep the broader sector, most notably the proposed $130bn combination of Dow and DuPont of the US.

In contrast to such giants of chemical manufacturing, UK-listed groups are smaller and tend to focus on niche substances that typically sell in low volumes but at high prices.

Callum MacLean, chief executive of Synthomer, which makes synthetic rubber used in medical gloves and has a market value of £1.3bn, said he wanted to double the size of the group “within two to three years”.

“First and foremost we want to invest in our existing business and get organic growth and R&D to move forward,” he said. “However we are quite ambitious to grow by M&A as well.”

He added: “We are looking at adjacent opportunities where they are still specialty chemicals . . . [For larger deals] the spectrum of what we are looking at is up to a maximum of €1bn or sterling.”

Synthomer also produces formulations that go into coatings, carpet backings, paper and plastics. It reported a one-third rise in pre-tax profit to £72.5m in 2015, even as revenue fell 9.7 per cent to £894m because of currency movements and lower raw material prices.

In March, it announced the $226m (£157m) acquisition of an adhesives and coatings business from US-based Hexion.

That was the first deal since Mr MacLean’s arrival in 2015 from Ineos, the petrochemicals group that grew rapidly over the past two decades by acquiring commodity chemical businesses from large international players such as BP, ICI and BASF.

The chief executive of Croda, meanwhile, said the company was concentrating on bolt-on deals providing access to new niches or established areas with fast-growing technologies.

Steve Foots said the £4.5bn-valued company also had four “bigger, transformational” targets on its wishlist and would be prepared to look at transactions above £1bn — though he added a note of caution. “They’re one-in-a-decade, one-in-a-generation events so we’re patient . . . 90 per cent of M&A in our industry, we’d argue, is capital destructive, so you have to be very careful with choosing the right businesses to acquire.”

Founded in Yorkshire in 1925, Croda’s products include active ingredients for anti-ageing creams and additives for fungicides, with customers including L’Oréal, Estée Lauder and Procter & Gamble. Last year it booked record sales and pre-tax profit of £1.1bn and £252m, respectively.

Croda paid €155m (£109m) in December for Incotec, a Dutch company that enhances the performance of seeds — an area it has identified as key for its crop care business. However, some analysts have questioned the ability of both companies to find larger deals, given their positions as specialist suppliers to niche segments.

Since the devaluation of sterling following Britain’s June 23 vote to leave the EU, Croda has also been among a number of UK-listed companies viewed by analysts as potential takeover targets for overseas buyers seeking bargains.

But Mr Foots said: “We are passionate about our independence. We’re a company that is always looking to expand.”