Tag: M&A

WillScot Bolsters Modular Space Solutions With $3.8B McGrath Buyout

Posted on by slightbourne@noblecapitalmarkets.com

WillScot Mobile Mini Holdings Corp. announced Monday that it will acquire modular rental provider McGrath RentCorp in a $3.8 billion deal. The acquisition aims to solidify WillScot’s position as a leading provider of modular space and portable storage solutions across North America.

Under the terms of the agreement, McGrath shareholders will receive $123 per share, comprised of 60% cash and 40% WillScot stock. This reflects a 10.1% premium over McGrath’s share price as of January 26th. Once completed, McGrath shareholders will own approximately 12.6% of the combined company.

The deal comes as WillScot looks to expand its footprint and diversify its customer segments through McGrath’s complementary business. McGrath serves over 10,000 business customers with modular building leasing and sales solutions across the U.S.

According to WillScot CEO Brad Soultz, “The transaction will further accelerate our growth, with combined 2023 pro forma revenue of $3.2 billion and adjusted EBITDA of $1.4 billion, we will be on path to achieve a $700 million free cash flow run-rate twelve months after we close.”

WillScot expects to realize $50 million in run-rate cost synergies within two years following the close of the acquisition in Q2 2024. The company has a track record of successfully integrating past deals and meeting synergy targets.

The combined company will be able to cross-sell value-added products and services and roll out operations best practices across the broader customer base. It will also have increased scale and expanded infrastructure to accelerate organic growth strategies already in place.

Along with revenue and cost synergies, the deal provides WillScot with greater geographic diversification and depth in adjacent sectors like electronic test equipment rental through McGrath’s TRS-RenTelco business.

On the financial front, the combined company is projected to generate approximately $3.2 billion in revenue and $1.4 billion in adjusted EBITDA in 2023. It expects to produce around $700 million in free cash flow within twelve months after the merger is finalized.

To fund the cash component of the acquisition, WillScot has secured committed bridge financing of $1.75 billion, along with expanded capacity from its existing credit facilities. The company is committed to rapid deleveraging and plans to achieve a 3.0-3.5x net leverage ratio within a year post-close.

McGrath’s board has unanimously approved the transaction. With shareholder approval and regulator sign-off, the buyout is anticipated to close during Q2 2024. Until then, McGrath will operate as an independent, publicly traded company.

The acquisition is the latest in WillScot’s strategy to capitalize on demand growth for modular space and storage solutions. The company has acquired over 15 businesses since going public in 2017, including the transformative $1.2 billion merger with Mobile Mini in 2020.

For McGrath shareholders, the deal provides a significant premium and ongoing upside through ownership stake in WillScot. It also enables McGrath’s rental solutions to reach a wider audience through WillScot’s expansive branch network and customer base.

Inhibrx Sells Lead Asset INBRX-101 to Sanofi for Up to $2.2 Billion

Posted on by slightbourne@noblecapitalmarkets.com

Biotechnology company Inhibrx announced today that it has entered into a definitive agreement to sell its lead therapeutic candidate, INBRX-101, to French pharmaceutical giant Sanofi in a deal valued at up to $2.2 billion.

INBRX-101 is a recombinant alpha-1 antitrypsin (AAT) therapy being developed for the treatment of alpha-1 antitrypsin deficiency (AATD), a rare genetic disorder that can cause severe lung and liver disease. Under the terms of the agreement, Sanofi will acquire Inhibrx through a merger in which Inhibrx shareholders will receive $30 per share in cash, a contingent value right (CVR) worth up to $5 per share, and one share in a new publicly traded company called Inhibrx Biosciences for every four shares of Inhibrx held.

Inhibrx Biosciences will retain all of Inhibrx’s pipeline assets and infrastructure outside of INBRX-101. This includes several early-stage therapeutic candidates such as INBRX-105 for solid tumors, INBRX-106 for hematologic malignancies, and INBRX-109 for conventional chondrosarcoma. The new company will receive $200 million in cash funding from Sanofi and begin trading publicly after the completion of the merger.

The total potential value of the upfront cash payment, CVR, and Inhibrx’s debt assumption implies an aggregate transaction value of approximately $2.2 billion. Inhibrx shareholders will also own 92% of the equity in the newly formed Inhibrx Biosciences, which will provide opportunities for future value creation.

The acquisition provides Sanofi with full rights to develop and commercialize INBRX-101 globally. The drug candidate is currently in a registrational Phase 2/3 trial evaluating its safety and efficacy in patients with AATD. Inhibrx believes INBRX-101 has multi-billion dollar peak sales potential if approved, which likely drove Sanofi’s interest in the asset.

Inhibrx’s innovative AAT therapy utilizes the company’s novel therapeutic protein engineering capabilities. INBRX-101 is designed to maintain the stability and activity of AAT, potentially enabling less frequent dosing than current AAT therapies. This next-generation approach could position INBRX-101 as a best-in-class treatment option for AATD.

The proposed transaction has been unanimously approved by the boards of directors of both companies and is expected to close in Q2 2024, subject to Inhibrx shareholder approval, regulatory clearances, and other customary closing conditions. Until then, it will be business as usual for Inhibrx as it continues developing its pipeline assets.

For Sanofi, the acquisition expands its portfolio in rare diseases while strengthening its capabilities in protein sciences and engineering. Adding INBRX-101 provides Sanofi with a promising late-stage candidate that can leverage its expertise and infrastructure in pulmonary diseases. Sanofi has been active on the deals front lately, including a recent $3.2 billion deal for Amunix Pharmaceuticals, as it refreshes its pipeline.

Meanwhile, the new Inhibrx Biosciences will emerge as an up-and-coming biotech with strong financial backing, a seasoned management team, and innovative technology platforms. The company will continue operating under the Inhibrx name and leadership. This strategic deal allows Inhibrx to unlock significant value from its lead program while retaining its other assets and resources to drive future growth.

The transaction is a win for both parties, providing Sanofi with a potential blockbuster drug and Inhibrx shareholders with an attractive return and ongoing upside through Inhibrx Biosciences. It demonstrates the broader trend of big pharma leveraging M&A to access innovative therapies from smaller biotech players. As Inhibrx’s programs advance, it will be interesting to see if Inhibrx Biosciences attracts buyout interest down the road. But for now, the company seems well-positioned to create value by advancing its earlier-stage pipeline.

Take a look at more emerging growth biotech companies by taking a look at Noble Capital Markets’ Senior Research Analyst Robert LeBoyer’s coverage universe.

HPE’s Blockbuster $14B Acquisition of Juniper Networks Signals AI Networking Wars

Posted on by slightbourne@noblecapitalmarkets.com

Hewlett Packard Enterprise (HPE) sent shockwaves through the tech industry this week with the announcement of its planned $14 billion acquisition of Juniper Networks. The all-cash deal represents HPE’s largest ever acquisition and clearly signals its intent to aggressively compete with rival Cisco for network supremacy in the burgeoning artificial intelligence era.

The deal comes as AI continues to revolutionize networks and create new demands for automation, security, and performance. HPE aims to leverage Juniper’s networking portfolio to create AI-driven solutions for hybrid cloud, high performance computing, and advanced analytics. According to HPE CEO Antonio Neri, “This transaction will strengthen HPE’s position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation as we help bridge the AI-native and cloud-native worlds.”

With Juniper under its fold, HPE expects its networking segment revenue to jump from 18% to 31% of total revenue. More importantly, networking will now serve as the core foundation for HPE’s end-to-end hybrid cloud and AI offerings. The combined entity will have the scale, resources, and telemetry data to optimize networks and data centers with machine learning algorithms.

HPE’s rivals are surely taking notice. Cisco currently dominates enterprise networking and will face a revitalized challenger. Smaller players like Arista Networks and Extreme Networks will also confront stronger competition from HPE in key verticals. Cloud giants running massive data centers, including Amazon, Google and Microsoft, could benefit from an alternative vendor focused on AI-powered networking infrastructure.

The blockbuster deal also signals bullishness on further AI adoption. HPE is essentially doubling down on the sector just as AI workloads start permeating across industries. Other enterprise tech companies making big AI bets include IBM’s recent acquisitions and Dell’s integration of AI into its hardware. Startups developing AI chips and networking software are also likely to benefit from HPE’s increased focus.

For now, HPE stock has barely budged on news of the acquisition, while Juniper’s shares have jumped over 30%. HPE is betting it can accelerate growth and deliver value once integration is completed over the next two years. Analysts say HPE will need to maintain momentum across its expanded networking segment to truly threaten Cisco’s leadership. But one thing is clear: the AI networking wars have officially begun.

This massive consolidation also continues a trend of legacy enterprise tech giants acquiring newer cloud networking companies, including Cisco/Meraki, Broadcom/Symantec Enterprise, and Amazon/Eero. Customers can expect intensified R&D and new solutions that leverage AI, automation and cloud analytics. However, some worry it could lead to less choice and higher prices. Regulators are certain to scrutinize the competitive implications.

For now, HPE and Juniper partners see it as a positive development that gives them an end-to-end alternative to Cisco. Solution providers invested in networking-as-a-service stand to benefit from HPE’s focus on consumption-based, hybrid cloud delivery models. With Juniper’s technology integrated into HPE’s GreenLake platform, they can wrap more recurring services around a broader networking portfolio.

Both companies also promise a smooth transition for existing customers. HPE says combining the best of its Aruba networking with Juniper’s assets across the edge, WAN and data center will lead to better experiences and lower friction. Juniper CEO Rami Rahim also touts the deal as accelerating innovation in AI-driven networking.

Of course, the real heavy lifting starts after the acquisition closes, as integrating two complex networking organizations is no easy feat. HPE will aim to become a one-stop shop for customers seeking to modernize their networks and leverage AI, while avoiding the complexity of buying point products. With Cisco squarely in their crosshairs, the networking wars are set to reach a new level.

SoftBank Bounces Back: $7.6B T-Mobile Win Boosts Assets After String of Investment Flops

Posted on by slightbourne@noblecapitalmarkets.com

Japanese conglomerate SoftBank Group saw its shares soar 5% this week after announcing it will receive a windfall stake in T-Mobile US worth $7.59 billion. The deal highlights a reversal of fortunes for SoftBank and its founder Masayoshi Son, who has weathered missteps like the WeWork debacle but is now reaping rewards from past telecom investments.

The share acquisition comes through an agreement made during the merger of SoftBank’s US telecom unit Sprint and T-Mobile. With the merger complete and certain conditions met, SoftBank will receive 48.75 million T-Mobile shares, doubling its stake in the mobile carrier from 3.75% to 7.64%.

This is a big win for SoftBank as it substantially increases its portfolio of listed assets. SoftBank has worked to shift towards more conservative investments after facing heavy criticism for pouring money into overvalued late-stage startups like WeWork. The Japanese firm was forced to bail out WeWork after its failed IPO in 2019, leading to billions in losses.

However, the T-Mobile windfall, along with the recent blockbuster IPO of SoftBank-owned chip designer Arm, helps balance the books. It also bumps SoftBank’s internal rate of return on its original Sprint investment to 25.5%, a solid result.

SoftBank Trading at Steep Discount Despite Strong Assets

Even with missteps like WeWork, SoftBank still holds an impressive array of assets from its years of prolific venture investing. Yet the Japanese firm trades at a 45% discount to the value of its holdings, presenting an opportunity for investors.

The influx of liquid T-Mobile shares adds more tangible value compared to some of SoftBank’s private startup investments. Having more listed stocks helps improve SoftBank’s loan-to-value ratio, giving it more marginable equity relative to debt obligations.

This could help narrow the gap between SoftBank’s market capitalization and net asset value. The T-Mobile windfall and Arm IPO shore up SoftBank’s balance sheet with listed assets at a time when the gap between its market cap and value of holdings remains substantial.

Son’s Missteps Bring Scrutiny But Vision Still Intact

While the WeWork bet soured investor perception of SoftBank’s investment strategy, Son has shown he still has an eye for disruption. His early investments in Alibaba and Yahoo! set the stage for his later dominance in late-stage startup funding.

However, the WeWork debacle led Son to pledge increased financial discipline and a shift towards AI-focused companies. Recent wins like the Coupang IPO and rising value of holdings like DoorDash reassure investors that Son still knows how to pick winners early.

SoftBank also stands to benefit from Son’s long-term vision on the potential of AI, having acquired chipmakers like Arm to position itself as a leader in the so-called Information Revolution. As AI comes to dominate technology over the next decade, SoftBank’s early moves could pay off handsomely if Son’s predictions come true.

T-Mobile Deal Highlights Importance of Sprint Merger

While US regulators initially balked at the T-Mobile/Sprint merger over competition concerns, the deal is now paying off for SoftBank. The Japanese firm’s persistence in pursuing the merger exemplifies its long-term approach, as the benefits are now apparent.

The combined T-Mobile/Sprint is now a much stronger competitor versus Verizon and AT&T, going from the 4th largest US wireless carrier to 2nd largest. T-Mobile has aggressively expanded its 5G network and subscriber base since completion of the merger in 2020.

SoftBank also benefited by negotiating the share acquisition as part of the original merger agreement, allowing it to substantially increase its T-Mobile stake down the road at minimal additional cost.

Final Thoughts

The T-Mobile share acquisition highlights a reversal of fortunes for SoftBank after missteps like WeWork resulted in negative headlines and billions in losses. While the firm still trades at a discount to the value of its holdings, the T-Mobile windfall and Arm IPO help increase its listed assets versus debt.

Son’s long-term vision and willingness to make bold bets still drive SoftBank, even if investments like WeWork went sour. With the US telco mission accomplished by enabling the Sprint/T-Mobile merger, SoftBank now has both its legacy telecom investment and new T-Mobile shares paying off. Looking ahead, SoftBank is well-positioned in AI and next-gen chips to ride disruption waves far into the future if Son’s predictions on technology evolution prove prescient.

Aon Bets $13.4 Billion on Mid-Market Insurance Growth

Posted on by slightbourne@noblecapitalmarkets.com

Insurance brokerage and consulting powerhouse Aon (AON) unveiled a definitive agreement on December 20th to acquire middle-market peer NFP in an all-cash $13.4 billion deal. NFP focuses on property and casualty brokerage, benefits consulting, wealth management and retirement plan advisory specifically for mid-sized clients.

The landmark transaction allows Aon to aggressively expand into the lucrative mid-corporation segment amid an economic landscape stoking demand for recession-resistant insurance policies. With NFP expecting 2022 revenues nearing $2.2 billion and a roster of over 7,700 client organizations, the bolt-on acquisition provides Aon a launching pad towards deepening its presence among growth-oriented middle-market enterprises.

Tap Exploding Market for Mid-Sized Firms

Several tailwinds have powered extraordinary growth within insurance brokerages catering to mid-cap corporations. As middle-market companies strive for enhanced risk management oversight amid volatile conditions, they increasingly seek broker partners delivering customized guidance on property/casualty and employee benefits policies.

NFP’s singular mid-market focus perfectly aligns with this surging addressable market. The brokerage brings specialized consulting capabilities around financial, health, and retirement offerings that resonate powerfully among mid-sized organizations. After closing in mid-2024, NFP’s offerings significantly broaden and diversify Aon’s middle-market resources.

The opportunistic move also builds on Aon’s existing relationship with mid-market insurance access point Businessolver. By consolidating NSM Insurance and now NFP, Aon assembles an unrivaled mid-corporation product portfolio spanning risk management, human resources, payroll, and compliance functionality.

Betting on Consistent Insurance Demand

Aon’s bold acquisition reflects confidence that commercial insurance spending will continue rising despite recessionary warnings. Employer-sponsored health plans, property policies, casualty coverage, and other risk transfer solutions retain fundamental necessity for corporations of all sizes. With mid-sized companies facing substantial human capital and operational exposures, brokerages like NFP and Aon constitute trusted partners for navigating complex risk landscapes.

The sector’s recession resilience and anti-cyclical behaviors produce reliable revenues amid broader economic uncertainty. Aon has witnessed only one year of revenue declines over the past decade. The industry giant averaged yearly sales growth of 8.4% since 2013.

Strategic Growth Play

From a financial perspective, NFP dramatically strengthens Aon’s growth trajectory. Adding the brokerage’s high-single-digit annual revenue gains provides immediate scale. In an investor presentation, management projected total company sales expansion of 8% in 2024 and 14% in 2025 post-acquisition. Significant cross-selling opportunities and global expansion of NFP’s capabilities should spur ongoing upside.

Aon expects to realize $150 million in cost synergies by 2025. The combination presents chances to eliminate redundant corporate structures and leverage joint capabilities in technology, data analytics and digitization to drive efficiency gains. Ensuing margin expansion would magnify bottom-line profit growth produced by the increased revenues.

Although the transaction costs require $7 billion in new debt, NFP is projected to start contributing towards deleveraging by 2025. While 2024 margins may compress initially, management reinforced commitment towards long-term margin expansion. From 2013-2021, Aon’s margins grew from 16.4% to record 35.7% levels.

Risks and Costs

Despite projected profitability gains, Aon’s stock dropped nearly 8% on the announcement as shareholders weigh risks around significant integration costs and execution challenges. Management forecasts $400 million in one-time transaction and integration expenses associated with consolidating the sizable acquisitions.

There are additionally risks tied to client retention. As occurred with some Willis Towers Watson customers after Aon’s failed merger attempt in 2021, certain NFP accounts may reevaluate relationships depending on changes in account management or service model adjustments.

Overall, however, investor reception remains positive. The deal continues an active era defined by transformative combinations as large brokers fight for differentiation. Aon has now spent nearly $30 billion on M&A to distinguish its portfolio. Adding NFP crucially now arms the brokerage giant to increasingly capitalize on lucrative mid-market tailwinds in coming years.

Watch AON’s NobleCon19 presentation: Cybersecurity – Is Your C-Suite Ready for 2024?

Japanese Steel Giant Nippon to Acquire U.S. Steel in $14.9 Billion Mega-Deal

Posted on by slightbourne@noblecapitalmarkets.com

In a tectonic deal poised to reshape the global steel industry, Japan’s largest steel producer, Nippon Steel, has announced a definitive agreement to acquire iconic American steelmaker United States Steel Corp. in an all-cash transaction valued at approximately $14.9 billion.

The blockbuster acquisition represents a 142% premium over U.S. Steel’s share price since August 11th when the struggling American steel icon first announced a strategic review process to explore “all options” for the company. Nippon has already lined up the required financing to fund the transaction, which is predicted to face few antitrust or other regulatory hurdles.

Industry analysts see the merger as hugely beneficial for Nippon as it aggressively pushes towards its goal of 100 million metric tons in global crude steel capacity. Adding U.S. Steel’s substantial production footprint across the resurging American steel market and other regions drastically accelerates Nippon’s global growth trajectory.

The deal also provides Nippon strategic access to growing U.S. steel demand from automakers ramping up manufacturing after resolving recent strikes, as well as the booming renewable energy industry needing steel under incentives in the U.S. Inflation Reduction Act. With U.S. Steel struggling financially in recent quarters despite rosy market dynamics, it became an attractive takeover target this summer.

Nippon leadership emphasized the company’s decades of experience in the U.S. steel market through its existing Standard Steel business gives them confidence of seamlessly integrating American staff and existing unions. Nippon has committed to uphold all of U.S. Steel’s current obligations to employees, unions and collective bargaining agreements.

The brazen takeover reveals the rapid ongoing consolidation within steel markets across the world, as titans like Nippon and ArcelorMittal aggressively expand through mergers and acquisitions. For U.S. Steel, it represents the end of over a century operating as an independent industrial behemoth synonymous with American steel since its 1901 founding by magnates like J.P. Morgan and Andrew Carnegie.

While U.S. Steel searches for a new foreign owner, America’s two next largest steel producers by capacity—Nucor and Cleveland Cliffs—remain fiercely independent. Yet market watchers speculate they may also soon be targeted by hungry international steel conglomerates racing to build market share globally.

Ultimately, the Nippon deal provides a clear path forward for struggling U.S. Steel. But it also continues the trend of foreign takeovers changing the face of American steel with more production capacity and profits accruing abroad. The Biden administration must now scrutinize whether the deal sufficiently safeguards America’s economic and national security interests.

With Nippon expecting the acquisition to close sometime between Q2 and Q3 2024, it launches a new era for the changing U.S. steel industry now overshadowed by growing international forces. Only time will tell whether domestic steelmakers can thrive under new foreign management, or if America’s independent steel era has come to a close.

Biotech Dealmaking Heats Up as Private Capital Charges Back In

Posted on by slightbourne@noblecapitalmarkets.com

A wave of multibillion dollar buyouts has swept the beaten-down biotech sector in recent months, marking a potential turning point for an industry hammered throughout 2022 – 2023.

With valuations of public companies still depressed, flush private investors have stepped up acquisitions of promising drug developers to bolster pipelines for the long-term. And in a bullish sign for the strategic direction of the space, therapeutics targeting high unmet needs and novel modalities remain key areas of focus amid dealmaking.

As macro gloom recedes, the renewed embrace of biotech M&A highlights a pivot back toward the innovation-driven spending required to sustain growth post-pandemic.

BMS Kicks Off Buying Spree With $13.2B Turning Point Deal

Bristol Myers Squibb fired the starting gun on big-ticket biopharma deals in October, announcing a $5.8 billion purchase of Mirati Therapeutics (MRTX). The buyout delivered a 122% premium in order to land Mirati’s promising portfolio of precision cancer medicines.

Market observers viewed the unsolicited, $58 per share bid as a credible benchmark of intrinsic value vigilantly researched by a strategic acquirer. Immediately in the deal aftermath, similar development-stage oncology names rallied sharply as traders priced in new takeout probabilities.

In fact, suitors moved swiftly to capitalize on improved biotech sentiment, with Horizon Therapeutics agreeing to a $26.4 billion around the same time. The transaction marked 2023’s largest healthcare buyout, further reinforcing peak valuations remain attainable for commercial-stage rare disease names.

Scaling Up to Compete in Gene Therapy

Gene therapy remains one especially alluring area for dealmaking despite lofty price tags. These ultra-rare disease medicines come with cure potential that commands premium sales and reimbursement pricing power.

Recognizing the imperative to bulk up gene therapy capabilities, Pfizer ponied up $5.4 billion to reinforce its genetic medicines pipeline through the acquisition of French outfit Vivet Therapeutics. The move added Vivet’s promising gene therapy for Wilson disease, along with manufacturing strengths across multiple delivery mechanisms.

And gene editing pioneer Sangamo Therapeutics is selling off its cell therapy assets to Sanofi for $700 million as it refocuses efforts around in vivo gene insertion. The deal hands Sanofi disruptive cell therapy technology utilizing precisely engineered zinc fingers to correct disease-causing mutations.

Analysts say more buyouts centered on next-gen platforms are likely on the horizon as drug developers vie for leadership in areas forecast to reshape therapeutic spaces.

Take a look at more biotechnology companies by looking at Noble Capital Markets’ Senior Research Analyst Robert LeBoyer’s coverage universe.

Private Capital Eagerly Steps in to Back Innovation

Beyond M&A from strategic acquirers, private equity firms have swooped in to capitalize on depressed biotech valuations. The robust dry powder levels built up during the boom years leave private investors eager to allocate while achieving advantageous cost bases.

Among notable deals, Angel Pond Capital teamed up with life science investor OrbiMed to take gene therapy biotech Generate Biomedicines private for $478 million. The transaction represented a 130% premium to ensure locking up Generate’s base editing technologies believed to be capable of correcting over 75% of known point mutations.

In cybersecurity and enterprise software, sponsor-led take privates had utterly dominated deal flow in 2022. But order books are now once again filling up with biotech buyouts from special purpose acquisition vehicles, highlighting a normalization in deal dynamics after last year’s freeze-out from rate-sensitive private market valuations.

Market Recovery Taking Shape

The fresh upswing in biotech M&A follows a wave of dip buying from some the world’s largest asset managers in shares of industry leaders like Vertex Pharmaceuticals and Regeneron Pharmaceuticals. Warren Buffett’s Berkshire Hathaway has been particularly aggressive stepping in to purchase stakes in key biopharma bluechips.

Meanwhile, the fund-raising backdrop continues improving for earlier stage biotechs as well after deal activity all but shuttered for much of 2023. Multiple debt offerings and venture rounds have successfully priced in recent months, ensuring the all-important continuity of innovation cycling.

With fundamentals stabilizing and access to capital normalizing, the environment for biopharma dealmaking has markedly improved. Expect the momentum to carry through 2024 as drug developers position through M&A for the next, post-pandemic leg higher while private capital readily supports compelling technologies at discounted prices. The long-term health of the biotech ecosystem depends on transactions advancing today’s high-potential assets, and the industry appears to have emerged from its lull ready to strike the necessary deals.

Integra Bets on Ear, Nose, and Throat Growth With $280 Million Acclarent Purchase

Posted on by slightbourne@noblecapitalmarkets.com

Medical device maker Integra LifeSciences announced today it will purchase Acclarent, a leader in ear, nose and throat (ENT) technologies, from Johnson & Johnson’s Ethicon division for $275 million upfront plus future regulatory milestones. The deal values Acclarent at approximately 2.5 times sales, with the company generating $110 million in revenues during 2022.

For Integra, the acquisition provides an opportunity to significantly expand its footprint beyond neurosurgery and establish the company as a major player in the attractive ENT specialty devices segment. The global ENT market is projected to grow at a 5-6% clip annually, adding an estimated $1 billion in addressable market opportunity for Integra.

Acclarent brings to Integra pioneered balloon dilation platforms for treating chronic sinusitis as well as novel treatments for Eustachian tube dilations. Its flagship products are the only FDA-approved stents for maintaining sinus openings after surgery. Acclarent also provides image guidance systems to assist surgeons with minimally invasive procedures.

The company maintains strong brand awareness and deep clinical relationships after rebuilding its commercial presence following a period of declining sales between 2017-2020.

Integra management sees substantial room for additional share gains in ENT given Acclarent’s leadership in balloon dilation and the generally fragmented supplier landscape in ENT today. The global sinus dilation devices market alone is projected to reach $3.5 billion by 2030, providing a sizable growth pipeline for Acclarent’s portfolio.

Strategic and Financial Benefits

The acquisition furthers Integra’s strategy to complement its legacy strength in neurosurgery with scaled positions across faster-growth clinical applications adjacent to its core.

Integra aims to replicate its #1 share in dural repair for neuro procedures by becoming one of few dominant players in ENT. The company believes the combination of its commercial infrastructure and Acclarent’s innovative portfolio can support above-market growth for the foreseeable future.

Financially, Acclarent is being acquired at an attractive upfront valuation of 2.5 times sales. Integra management expects the deal will be immediately accretive to earnings per share after closing.

Acclarent generated gross margins in line with Integra’s overall company average in 2022, providing opportunities for further margin expansion from operating leverage as the business scales.

The transaction also comes at a time when medtech valuations have declined from their pandemic peaks, enabling Integra to obtain Acclarent at what it believes to be an opportunistic price.

Cultural and Portfolio Fit

Integra CEO Jan De Witte highlighted the cultural alignment between both organizations and focus on restoring patient lives as key rationales behind the deal.

De Witte said, “Acclarent’s culture of pioneering technologies aligns with Integra’s legacy of innovation to transform care and restore patients’ lives. We are looking forward to welcoming the Acclarent employees to the Integra team. Together, we can make a profound impact on the future of ENT and neurosurgery.”

Acclarent will operate as part of Integra’s $1.3 billion Codman Specialty Surgical division focused on neurosurgery. Integra sees substantial opportunities for its neurosurgery and ENT sales teams to collaborate on treating certain brain tumors by leveraging skull base surgical approaches.

Integra also gains access to a robust ENT product development pipeline, including next-generation surgical staplers, powered sinus surgery technologies, and potential new indications for Acclarent’s balloon dilation platforms.

Acclarent’s R&D and regulatory expertise will help accelerate Integra’s internal efforts to bring new generations of minimally invasive surgery products to market.

Smooth Post-Close Integration

Integra expects to retain Acclarent’s entire workforce as part of ensuring a smooth organizational transition after the deal closes. The company aims to operate Acclarent as an independent business unit during the near-term while integrating back-office functions.

Manufacturing operations will continue to be outsourced to third parties and Integra anticipates no supply chain disruptions to Acclarent’s product availability.

The transaction is projected to close by the second quarter of 2024, subject to customary antitrust and regulatory clearances globally. Transition services agreements will provide additional support for up to four years following deal closure.

By maintaining continuity of strategy, personnel and manufacturing, Integra hopes to achieve targeted revenue and cost synergies from the integration of Acclarent, while continuing its above-market growth trajectory in the ENT segment. The addition of Acclarent’s portfolio and innovative roadmap makes this transaction an important step forward in Integra’s strategy to complement leadership in neurosurgery with scaled positions in some of medtech’s most attractive and fastest-growing markets.

Eagle Bulk Shipping to Merge with Rival to Create Dry Bulk Behemoth

Posted on by slightbourne@noblecapitalmarkets.com

Dry bulk shipping company Eagle Bulk Shipping (EGLE) announced Sunday night that it has agreed to an all-stock merger with sector peer Star Bulk Carriers Corp. (SBLK). The deal will create one of the world’s premiere owners of dry bulk vessels with a combined fleet of 169 ships worth over $2 billion.

Under the terms of the agreement, Eagle shareholders will receive 2.6211 shares of Star Bulk for each Eagle share they currently hold. With Star Bulk shares closing at $19.95 on Monday, December 11, this values Eagle stock at $52.29 per share. Compared to Eagle’s actual close of $46.19 on Monday, this deal premium comes out to 13%.

Powerhouse in Making

The merger brings together two already sizable dry bulk fleets under one umbrella to better compete on costs and provide customers integrated solutions. For example, the combined entity can offer both Capesize vessels ideal for long haul bulk transport as well as Supramax ships designed for flexibility.

With over 150 million deadweight tonnage (DWT), the new entity will rank among the top five largest publicly-traded dry bulk owners globally. Management estimates at least $50 million per year in cost savings through operational synergies, consolidated corporate overhead, and improved purchasing leverage with suppliers.

And the company will maintain an industry-leading balance sheet with net debt of $1.4 billion equaling a reasonable 37% of its $2.1 billion capitalization. The merger therefore sets up the new Star Bulk as a dominant player in dry bulk shipping both in scale and efficiency. Noble Capital Markets Senior Research Analyst Michael Heim states in his latest research report that “the combined market capitalization of $2.1 billion and fleet of 159 ships makes it one of the largest in the world.”

Modern, Eco-Friendly Fleet

Critically, Star Bulk inherits an even more modern and environmentally-friendly fleet from Eagle. The average vessel age will drop to 11 years versus 14 years currently. Eagle’s ships were built at top-tier Asian shipyards known for quality and efficiency.

Just as important, Eagle has been an early and enthusiastic adopter of exhaust gas scrubbers which reduce harmful emissions. In fact, 97% of the combined fleet will now have these scrubbers installed well positioning the company for impending environmental regulations.

Maintaining a modern, eco-friendly fleet is increasingly important to winning business from customers like commodities giants Glencore and Trafigura who value corporate responsibility. So the transaction gives Star Bulk key competitive advantages on this front.

Market Perform on Limited Remaining Upside

With significant strategic rationale behind the merger, the analyst still downgraded Eagle stock to a Market Perform with limited additional upside. Specifically, they dropped their price target to $52 simply reflecting the implicit deal price.

So while the merger appears to make industrial sense and places fair long-term value on Eagle, investors shouldn’t expect much added price appreciation from current levels. Of course, there is a small chance the merger fails to close as anticipated allowing shares to diverge back downward.

But assuming smooth sailing through the expected close in 1H 2024, Eagle shareholders can take comfort in the 13% premium and exciting combined company outlook. This sets up Eagle owners to become owners in the industry’s next dry bulk titan.

Take a moment to take a look at more research on Eagle Bulk Shipping by Noble Capital Markets Analyst Michael Heim.

Endeavor Energy Partners Exploring Potential $30 Billion Sale

Posted on by slightbourne@noblecapitalmarkets.com

Endeavor Energy Partners, the top privately-held oil and gas producer in the prolific Permian Basin of west Texas and New Mexico, is considering a sale that could value the company at an astonishing $25-30 billion, according to a recent Reuters exclusive.

The news comes fresh off the heels of some absolutely massive M&A action among public oil independents, with the $60 billion tie-up between ExxonMobil and Pioneer Natural Resources followed by Chevron announcing the $50+ billion purchase of Hess Corp. Now the private players are looking to capitalize on the consolidation wave by monetizing their substantial acreage as well.

Driving the potential multi-billion dollar valuation is Endeavor’s premier 350,000 net acre position in the coveted Midland sub-basin, the sweet spot of the larger Permian. With oil prices still hovering near $80 per barrel despite recession fears, there remain plenty of companies willing to pay up for high-quality acreage that can drive efficient growth for years to come. And Endeavor’s assets definitely check those boxes.

The Visionary Behind Endeavor’s Rise

Endeavor traces its roots back 45 years when Texas oilman Autry Stephens founded the small independent. The 85-year old Stephens grew the company through shrewd acreage acquisitions and by managing costs tightly with vertically integrated services businesses.

Now with retirement on the horizon, Stephens has apparently decided that the time is right to capitalize on the current market enthusiasm and secure his life’s work’s future by selling Endeavor to one of the large public independents like an Exxon or Chevron. Certainly Stephens’ estate and early investors would realize a tremendous windfall from such a deal.

While Endeavor has reportedly considered offers before, this time the process seems to be progressing firmly with investment bankers at JP Morgan already preparing marketing materials for potential buyers. So while there’s no guarantee that Endeavor finds a buyer or completes a sale, things have moved beyond the tire-kicking stage.

Ripe for the Picking by “Big oil”

As mentioned previously, Endeavor’s footprint in the core of the Permian Basin makes the company a logical target for any number of deep-pocketed suitors from major integrateds to large E&Ps looking to expand their presence.

And most of the likeliest buyers like Exxon, Chevron, and ConocoPhillips have all recently pulled off huge, multi-billion dollar deals to consolidate acreage while still leaving their balance sheets relatively unscathed. Using their equity and maintaining strong investment grade credit ratings remains paramount for the majors.

For example, Chevron structured its takeover of Hess Corp such that the $50 billion price tag amounted to less than half of its current cash position. So the company would have no issues stepping up to buy another large, complementary Permian pure-play.

Of course Exxon is in the same boat having expertly engineered the Pioneer acquisition to be immediately accretive to earnings and cash flow. So whileAbsorbing all of Endeavor’s 350k acres might be a bridge too far for XOM, the supermajor could easily swallow a chunk of the company or join a consortium.

Not to be outdone, ConocoPhillips recently closed its buyout of existing partner Lime Rock’s 50% stake in the Canadian Surmont oil sands project proving its appetite for sizable deals remains healthy. CEO Ryan Lance has also been vocal about wanting to bulk up the company’s Permianpresence over the long term giving it both the strategic rationale and financial means to pursue Endeavor.

Each of these independent E&Ps seem well suited to provide a soft landing for founder Autry Stephens’ life work. Endeavor has quietly built up a world class asset base that now looks poised to fetch an exceptional valuation and secure a new, well-heeled owner. So investors will be following the sales process closely as a potential deal would recalibrate the consolidation environment. Of course, we will have to wait and see what 2024 ultimately has in store for one of the Permian’s great growth stories.

AbbVie’s $8.7 Billion Acquisition of Cerevel Therapeutics: A Game-Changer for Neuroscience Innovations

Posted on by slightbourne@noblecapitalmarkets.com

Pharmaceutical giant AbbVie made a huge splash in the neuroscience space this week with the announcement of its definitive agreement to acquire clinical-stage biotech Cerevel Therapeutics for $8.7 billion. This transforms AbbVie’s position in neuroscience and adds multiple late-stage assets to its pipeline that could drive significant growth over the next decade.

At $45 per share in cash, AbbVie is paying a hefty premium for Cerevel, reflecting its belief in the blockbuster potential of the company’s pipeline. Cerevel has built an impressive roster of new compounds for psychiatric and neurological conditions—areas where AbbVie already has an established presence with treatments for Parkinson’s disease and migraine but now gains even more scale.

The crown jewel of the deal is emraclidine, an investigational antipsychotic for schizophrenia and other psychiatric disorders that could set a new standard of care. Currently in late-stage development, emraclidine has shown early signs of superior efficacy and safety compared to existing schizophrenia meds. With schizophrenia impacting over 5 million people across developed markets, emraclidine represents a multibillion-dollar opportunity for AbbVie commercially.

Beyond emraclidine, Cerevel has a range of other clinical-stage neuro assets that strengthen and complement AbbVie’s pipeline. These include tavapadon for Parkinson’s, CVL-354 for depression, and darigabat for epilepsy—all of which have potential for best-in-class status in their respective categories.

Take a moment to take a look at Noble Capital Capital Market’s Senior Research Analyst Robert LeBoyer’s coverage universe.

According to AbbVie’s chairman and CEO Richard Gonzalez, “Our existing neuroscience portfolio and our combined pipeline with Cerevel represents a significant growth opportunity well into the next decade.” He notes AbbVie’s global commercial infrastructure can help accelerate these drugs to market globally.

Gonzalez has orchestrated a highly successful strategy for AbbVie centered around building global therapeutic franchises in immunology, oncology, and aesthetics. Adding neuroscience as a fourth core franchise has been an ambition for awhile. Between Humira facing biosimilar competition and the need to fuel AbbVie’s next chapter of growth, this acquisition is a strategic step to position neuroscience as a more prominent piece of the puzzle.

For Cerevel, the buyout represents a major win and validation of the platform they have built. As CEO Dr. Ron Renaud comments, “Cerevel has always been committed to transforming what is possible in neuroscience…with AbbVie’s long-standing expertise in developing and commercializing medicines on a global scale, Cerevel’s novel therapies will be well positioned to reach more people.”

Wall Street is reacting positively to the deal announcement, with shares of both companies rising 3-4% the day it was announced. Investors recognize the growth implications and are cheering AbbVie’s move to recharge its pipeline.

While the deal is expected to close in 2024 pending approvals, it marks the continuation of a surge in biotech M&A driven by the appetite of large pharmas to augment their portfolios externally. With over 200 neuroscience programs in mid- to late-stage industrywide across CNS disorders, neurological treatments are having a moment right now. For AbbVie, the Cerevel transaction cements its intent to be at the forefront in capturing this opportunity.

Medical Device Company Laborie Acquires Urotronic for Innovative Prostate Treatment Technology

Posted on by slightbourne@noblecapitalmarkets.com

Portsmouth, New Hampshire-based medical device manufacturer Laborie Medical Technologies announced it has acquired Minnesota company Urotronic in a deal worth up to $600 million. The acquisition provides Laborie entry into the interventional urology market and adds Urotronic’s novel Optilume drug-coated balloon technology to its product portfolio.

The definitive agreement was signed on September 6, 2023 with an upfront payment of $255 million in cash to close the deal. Up to $345 million more is payable based on certain commercial and reimbursement milestones being achieved.

Optilume is a minimally invasive surgical therapy (MIST) that combines mechanical dilation with delivery of the chemotherapy drug paclitaxel to treat urinary tract conditions like urethral strictures and benign prostatic hyperplasia (BPH), also known as enlarged prostate.

BPH affects over 40 million men in the United States alone and the global market for BPH treatment is valued at over $4 billion. Current surgical interventions for BPH like transurethral resection of the prostate (TURP) or laser procedures can have side effects and long recovery times.

Optilume has already gained FDA approval and CE Mark in Europe for treating BPH. This regulatory clearance, along with positive clinical data showing good safety and efficacy, were key factors in Laborie’s decision to acquire Urotronic.

The Optilume technology represents a paradigm shift in how urologists can treat patients suffering from BPH and urethral strictures. Rather than invasive surgery or permanent implants, the drug-coated balloon can be inserted cystoscopically and then inflated to dilate the urethra and deliver the paclitaxel to the tissue. The minimally invasive approach leads to fast patient recovery compared to other options.

Take a moment to take a look at Noble Capital Markets’ Medical Device Research Analyst Gregory Aurand’s coverage list.

According to Laborie Medical President and CEO Michael Frazzette, “There has never been a minimally invasive, combination drug-device therapy like Optilume before, leading to a highly disruptive, paradigm change for physicians treating urethral strictures and BPH.”

Urotronic CEO David Perry likewise noted that “Backed by positive clinical data, the Optilume BPH therapy is truly groundbreaking as the only MIST option that doesn’t require cutting, burning, steaming or a permanent implant.”

The Urotronic acquisition represents a strategic move for Laborie Medical Technologies to push further into the global urology market. Laborie is focused on high-growth segments including urology, gastroenterology, gynecology, and obstetrics.

According to Patricia Industries, which owns Laborie, the deal furthers Laborie’s long-term growth strategy by adding an innovative product with strong potential to its portfolio. Urotronic’s employees and assets will be fully integrated into Laborie Medical after the acquisition.

Laborie itself was acquired by Patricia Industries in 2017 for an estimated $2.4 billion and has gone through a period of rapid growth since then. The company manufactures a range of diagnostic equipment like urodynamic systems as well as therapy products such as electrodes for pelvic floor stimulation.

The global medical device market has seen a surge of M&A activity in recent years. Strategic mergers and acquisitions allow companies to expand their product lines, access new technology, enter new geographic markets, and consolidate to gain economies of scale.

Medtech titan Boston Scientific for example has made 10 acquisitions in the past 5 years totaling over $10 billion to become a leading player in less invasive device treatments. Teleflex likewise acquired Neotract and its novel UroLift system for treating BPH in a $1 billion purchase in 2017.

The closing of the Urotronic acquisition provides another growth milestone for Laborie Medical as it executes its strategy of providing innovative therapeutic solutions to physicians and hospitals involved in urological procedures. Adding Optilume’s promising technology gives it a differentiated offering in the nonsurgical treatment of enlarged prostate and strengthens Laborie’s portfolio for continued expansion in the urology device sector.

AMN Healthcare Expands Its Footprint with Acquisition of MSDR

Posted on by cpatches

AMN Healthcare (NYSE: AMN), a prominent player in total talent solutions for healthcare organizations across the United States, has announced its plans to acquire MSDR, marking a significant move in the healthcare staffing sector. The definitive agreement, with a purchase price of $300 million, encompasses two healthcare staffing companies, Medical Search International (MSI) and DRW Healthcare Staffing (DRW), both of which specialize in locum tenens and advanced practices.

Meet the Companies:

MSI, established in 2002, is renowned for its services in placing high-quality healthcare professionals specializing in psychiatry, anesthesia, radiology, and surgery, serving healthcare systems throughout the United States. DRW, founded in 2011, boasts expertise in psychiatry, anesthesia, and surgery placements, making it a valued leader in the locum tenens industry. Notably, Chris Wang, the Chief Executive Officer and Managing Partner of DRW, will continue to contribute as the President of MSDR.

Growth Prospects and Financials:

This strategic acquisition positions AMN Healthcare for substantial revenue growth within the locum tenens sector. In 2022, MSDR generated $104 million in revenue, and the annualized revenue for 2023 stands at approximately $155 million. AMN anticipates the deal to be modestly accretive to adjusted earnings per share (EPS) within the first 12 months of integration.

The acquisition is slated to close in the fourth quarter of 2023, contingent on regulatory approvals and closing conditions. It will be treated as an asset purchase, creating a step-up in the tax basis for the intangible assets acquired.

Expanding Solutions and Expertise:

With the integration of MSDR, AMN Healthcare’s extensive portfolio of solutions is set to expand significantly. Clients will gain access to a larger and more diverse candidate pool, including healthcare professionals specializing in some of the most sought-after and in-demand services.

Moreover, the acquisition brings the wealth of expertise and knowledge of the MSDR team in recruitment, placement, and operations, coupled with candidate matching technology tailored for locum tenens. This move underscores AMN Healthcare’s commitment to delivering high-quality, tailored workforce solutions.

Commentary from Leadership:

AMN Healthcare President and Chief Executive Officer Cary Grace expressed enthusiasm about the acquisition, stating, “We are very excited to welcome the MSDR team into the AMN Healthcare family and expand the workforce solutions available to our clients across the country.” The move signifies a strategic growth opportunity that positions AMN Healthcare as a stronger and more comprehensive player in the healthcare staffing industry, ultimately benefitting both healthcare organizations and the dedicated professionals they serve.

Explore more healthcare and biotechnology stocks covered by Noble Senior Analysts Gregory Aurand and Robert LeBoyer