*DJ Glencore in Advanced Talks to Sell as Much as 40% of Agriculture Unit to CPPIB, Valuing Unit at About $6B, Could be Announced as Soon as This Week - Sources
MergerMarket
* SAGE stake sale likel to join Apache
* North Sea E&P asset sales to be backended
* European and African retail assets likely sale options
Royal Dutch Shell’s [LON:RDSA/B] upstream Gabon assets and SAGE pipeline stake sale may be among the prime picks for the company’s USD 30bn divestment program, two sources briefed on the situation said.
The company is currently reviewing which assets it plans to market to reach this target, a Shell spokesperson said.
Shell is having conversations with different advisors regarding potential divestments, the first source familiar said. At this point, the company is not marketing any assets and is expected to have a final list of assets to be divested in next few months, the first source briefed and a source familiar cautioned.
The company has hired Lazard to advise on the divestiture programme following its USD 50bn acquisition of BG Group, which closed earlier this year, the Shell spokesperson confirmed. Morgan Stanley and Bank of America have also been appointed to conduct the sale of unspecified assets, though the spokesperson said Shell expects several banks to bid for mandates in its asset sale programme.
Shell is likely to sell less than USD 10bn this year, with a divestment focus on the downstream segment and in local gas markets etc., Shell CEO Ben van Beurden said in the company’s 4Q15 earnings webcast
Last month, Mergermarket’s sister publication InfraNews reported that the Texas-based Apache (NYSE:APA) is exploring a sale of its 30% stake in the Scottish Area Gas Evacuation system (SAGE) pipeline and terminal. Apache is the operator of SAGE. SAGE Terminal and Main Pipe ownership is split between Apache, Shell (19.7%), Marathon Oil [NYSE:MRO](20%), TAQA Bratani (22.85%), Centrica [LON:CNA] (4%) and JX Nippon (3.15%), according to Apache reports.
The SAGE system comprises the 323 kilometre, 30-inch nominal bore SAGE Pipeline and the SAGE Gas Processing Terminal, which is located 65 kilometres north of Aberdeen at St. Fergus.
The stake sale by Apache is likely to see other partners in the project, including Shell, explore a sale of their stake, the sources briefed and a third source briefed said. It does not make sense for Apache to sell on its own, the first source briefed said. An incoming party would want enough interest in the asset to assert control and realise upside, he added.
It is an integrated system and for a deal to happen the separate asset needs to be put into a corporate structure and ring fenced from the upstream assets, the second source briefed said.
SAGE is owned by a mix of oil and gas companies but there are also various third party contracts such as with tariff and capacity agreements, which makes a separation complicated, this source added.
Another likely divestiture target are Shell’s upstream Gabon assets, the first and second sources briefed said. The company has privately suggested it could be a sale option and it would garner attractive buy side interest, the second source claimed.
Shell Gabon operates the Rabi, Gamba, Totou Toucan and Koula oil fields, which produced 12m barrels in 2015.
BG Group’s offtake agreements in neighbouring Equatorial Guinea could also be sold alongside Shell Gabon, the third source briefed said. In Equatorial Guinea, BG Gas Marketing has in place a long-term agreement with Equatorial Guinea LNG Holdings Limited (EGLNG) to purchase liquefied natural gas (LNG).
Equatorial Guinea provided 20.2% of BG Group’s LNG source in 2015. BG recorded a total EBITDA in the LNG sales and marketing division of USD 1.46bn.
While the composition of Shell’s exact divestitures remain an open question, the company is unlikely to sell major upstream assets in the near term, but would backend these processes till there is an oil price recovery, the same source said.
Elsewhere in Europe the company may look to divest a small number of refineries, the second source briefed said. Shell owns or has interest in refineries across Germany, Denmark and the Netherlands, including the Shell Pernis Refinery in Rotterdam, the largest European refinery with a 404,000 barrels per day capacity.
Some downstream assets may also come up for sale in South Africa, the first and second sources briefed said. The company is unlikely to market its upstream assets in the country, the second source added. It has been putting a lot of time and money into developing the assets and it would be illogical to sell, he said.
Any sale would be unlikely to take place at the same time as the ongoing divestment of Chevron South Africa, the first source briefed said. The process for Chevron South Africa, which consists of downstream refining, retail and logistics assets, is due to kick off next month and expected to be valued at around USD 700m, this news service previously reported.
Much of the former BG’s portfolio was assessed for sale during the acquisition period, the third source briefed said. However, there are a few smaller units that could still be put up for sale such as its Egyptian, Tunisian and its Trinidadian assets.
Shell is committed to maintaining its dividend and will ramp up divestments that have averaged USD 7.5bn in the past four years to reach its target, the third source said.
The UK energy company is reported to be reviewing the sale of its North Sea E&P assets and could see the likes of private equity-backed Neptune Oil & Gas as a buyer, according to previous press reports.
However, it will very difficult to sell its North Sea assets, the second source briefed said, as these are large physical assets for which would require a large price tag for which there is little demand at present. Shell may contemplate the sale of small infrastructure type assets such as its floating production, storage, and offloading vessels and pipeline interests, he added
MergerMarket
* Shareholders broadly supportive of management
* Industry comparables suggest valuation above 80p/share
Premier Foods [LON:PFD] has a strong rationale to push for a higher offer from McCormick & Company [NYSE:MKC], but should get a deal done, two minority shareholders told this news service.
McCormick has a 65p/share all-cash possible offer on the table, and negotiations are underway this week between the two parties, a Premier spokesperson confirmed.
McCormick first approached Premier at 52p/share on 12 February, and returned at 60p/share on 14 March, but Premier refused to entertain these initial approaches, as reported.
Even the 65p/share offer currently under discussion does not really capture Premier’s upside, one shareholder said. The company has a solid underlying business, and a capital raise and new management have improved its prospects since 2013, he said. Having now posted two consecutive quarters of growth, management’s labours are beginning to pay off, he added.
With Premier’s troubled history, shareholders should want to engage with McCormick, said an independent sector advisor. However, given its improved sales outlook, it makes sense for the board to negotiate for more than the proposed 65p/share offer, he said.
Premier posted GBP 144m EBITDA in the year ending 21 April 2015, and GBP 150m is a reasonable near-term expectation, said the shareholder. The standard EV/EBITDA ratio in the consumer food space is about 13x, he said. Discounting Premier’s ratio to account for some weaknesses, such as the fact that its turnaround has not yet been properly realised, he allowed for an 11x multiple.
An 11x multiple would imply a GBP 1.76bn EV, from which the shareholder subtracted GBP 1.01bn to account for corporate debt and pension shortfalls; this, he said, leaves GBP 708m in equity value and suggests a fair price of 86p/share.
A reasonable multiple for Premier would be around 10x-12x, said a second shareholder, who added he would be happy with an all-cash offer from McCormick above 70p/share, and would hope for 80p/share. The proposed Premier/McCormick joint operation presents good synergies, so he would not turn down a cash-and-shares mix, but he would prefer all cash, he said.
Supporting the shareholders’ valuations, the average European consumer food merger in the last five years was completed at an average EV/EBITDA multiple of 12.1x, according to Dealreporter analytics.
On the other hand, the average share price premium of these deals was 43.96%, the analytics show, while a 65p/share offer for Premier would represent a 106.35% premium over the company’s undisturbed share price.
If McCormick were to walk away, the first shareholder said he would not press for a shareholder meeting. However, the second shareholder said he expects the board to get a deal done with McCormick, and would reserve judgment on management’s performance until after he sees what kind of offer Premier ultimately accepts or rejects.
A spokesperson for McCormick declined to comment.
Tax inversions: what the new rules mean
On Monday, the US Treasury said it was taking additional steps to “rein in inversions” — transactions in which multinationals change their tax residence by acquiring a foreign company to cut their tax bills. It is aiming to tackle “serial inverters” — foreign companies that have rapidly acquired multiple US companies.
It will reinforce efforts to curb inversions that drastically restricted the potential tax benefits in cases where the foreign acquirer was significantly smaller than the US business. In future, when calculating the size of the foreign acquirer, any assets acquired from a US company within three years before the signing date of the latest acquisition will have to be ignored.
It also set out to reduce the tax advantages of inversions by curbing “earnings stripping” — the use of intercompany loans to reduce US tax bills. This move is likely to have far-reaching implications for other multinationals and private equity-backed companies as well.
Why is the Treasury taking action?
The Treasury says that inversions are draining billions of dollars from the US tax system and President Obama has long wanted to stop inversions. A statement from the White House on Monday said that when multinationals exploit tax loopholes “it erodes the American tax base, undercuts businesses that play by the rules and ultimately leaves the middle class and small businesses to pay the tab”.
What does it mean for the Pfizer-Allergan deal?
Pfizer’s $160bn takeover of Allergan, the Dublin-based drugmaker, was due to be finalised in the second half of this year. But Allergan’s share price fell more than 22 per cent in after-market trading on Monday, reflecting market fears that the anti-inversion moves would scupper the deal.
The Pfizer-Allergan merger is structured so that Pfizer shareholders would hold about 56 per cent of the new combined company, below the critical 60 per cent threshold that would have restricted benefits of the inversion under the old rules. But this is possible only because Allergan had been enlarged by a string of serial inversions. In 2013 Ireland-based Warner Chilcott bought US-based Actavis, then in 2015, Actavis bought US-based Allergan.
Analysts think the tax benefits of Pfizer’s takeover are likely be reduced once these deals are taken into account, following the Treasury’s latest actions. Pfizer and Allergan said in a joint statement on Monday they were reviewing the Treasury’s actions and would not speculate on any potential impact.
Does this mean inversions are over?
It’s very unlikely to stop inversions altogether. Companies can still benefit from moving their tax base out of the US. Only the US taxes foreign profits when they are repatriated and — together with the high US corporate tax rate — this creates a big incentive to relocate. But the latest move by the Treasury is its most assertive effort yet to reduce inversions. It is likely to restrict the number of potential acquirers for big US multinationals, which could have a big impact on the total value of inversion deals.
What is the income stripping provision and how broadly could it apply?
The proposal is aimed at reducing the tax benefits from inversions, although its impact will also be felt by other companies that use the tactic to reduce their US tax bills. The new rules will permit intercompany debt to be recharacterised as equity as part of an audit in certain circumstances. Tax experts said the impact of this would be far-reaching. It would affect private equity- backed companies and US multinationals as well as foreign-parented multinationals
Is further action likely?
The US Treasury is continuing to look at ways to curb inversions. But it notes that only Congress can stop inversions outright, which is why Mr Obama has proposed to fully close the loophole that allows for corporate inversions in each of his last three Budgets. Republicans such as Orrin Hatch, Senate finance committee chairman, accused the Treasury of “issuing unilateral band aids that only attempt to alleviate the symptoms.” He called for reform of “our outdated tax code that burdens our job creators with the highest corporate tax rate in the developed world”.
RTRS - WHITE HOUSE SAYS OBAMA TO ISSUE STATEMENT ON TAX INVERSIONS AT 12;15 PM ET AT WHITE HOUSE
DJ New Inversion Rules May Trouble Fertilizer Tie-Up -- Market Talk
10:44 ET - The latest Treasury curbs on inversions look troublesome for fertilizer heavyweight CF's proposed merger with Netherlands-based chemical firm OCI (OCI.AE), says Citi. It notes while CF hasn't "explicitly" outlined drivers of its anticipated $500M in deal synergies, the company did say last month it expects the combined company's tax rate to drop to 20-23% from CF's current level of about 35%. Citi adds Treasury's new rules on "income stripping"--shifting profits to low-tax countries--looked particularly concerning for the deal. CF eases 0.7% amid the broader market's pullback while OCI drops 3.8% in Amsterdam.
RTRS - U.S. HOUSE TRANSPORTATION PANEL CHAIRMAN SHUSTER SAYS PROPOSED CANADIAN PACIFIC RAILWAY MERGER WITH NORFOLK SOUTHERN NOT "IN THE BEST INTERESTS" OF U.S. FREIGHT TRANSPORT SYSTEM
Royal sur Fessenheim: "Mon idée, c'est de faire venir une usine Tesla"
Que deviendra le site de la centrale nucléaire de Fessenheim après sa fermeture? La ministre de l’Environnement et de l’Energie a livré ce mardi une suggestion: "Le principal problème, c'est la mutation du site (…) il faut donner un espoir au territoire. Mon idée, (c'est) de faire venir une usine Tesla", a déclaré Ségolène Royal lors d’une conférence de presse.
Elon Musk, le patron de l’entreprise de voitures électriques Tesla recherche en effet un site où implanter sa marque en Europe. Il hésite entre la France et l’Allemagne, selon Ségolène Royal. Aussi, la ministre a-t-elle tôt fait d’aller le courtiser.
"Qui ne risque rien n'a rien!"
Elle a expliqué ce mardi lui avoir déjà fait part de sa proposition. "Je lui ai dit: j'ai un endroit pour vous, Fessenheim", a-t-elle raconté, précisant qu'elle rencontrerait "dans dix jours" les dirigeants de l'entreprise américaine. "Il n'a pas dit non", a souligné la ministre, ajoutant: "Qui ne risque rien n'a rien!"
Ségolène Royal s’enthousiasme déjà de cette éventualité. "Ça serait formidable, parce qu'on annoncerait la fermeture de Fessenheim" et "il y a autre chose qui se construit, on tourne une page et puis on regarde le futur", a-t-elle dit, soulignant qu'"en plus, les voitures électriques, c'est l'industrie du futur". La ministre avait déjà évoqué début mars l'idée d'une usine de voitures électriques à Fessenheim, sans pour autant citer Tesla.