Dead, Delayed, Renegotiated: Deals and Fights Over Them Pile Up

One megadeal can’t make up for all the others that have fallen by the wayside during the Covid-19 crisis.

While executives at Telefonica SA and Liberty Global Plc were hashing out the final details of their $39 billion deal to merge O2 with Virgin Media over the past week, at least 17 other transactions were falling apart, according to data compiled by Bloomberg. In total, more than $10 billion of mergers, acquisitions and investments have been terminated in the past seven days, the data show, with many more under threat as acquirers try to back out of agreements or renegotiate terms.

Crumbles

Real estate deals have been particularly hard hit, with deals falling apart across the residential and sectors as millions of Americans face unemployment and tourists stay home.

  • South Korea’s Mirae Asset Global Investments Co. on Sunday terminated its $5.8 billion purchase of 15 luxury hotels from an affiliate of Anbang Insurance Group Co. The portfolio included the JW Marriott Essex House, overlooking Central Park in New York City, and the Four Seasons in Jackson Hole, Wyoming. The Anbang unit is suing Mirae to try to force the deal through, joining more than half a dozen virus-related deal challenges that are before Delaware judges.
  • A lawsuit was also filed this week over SoftBank Group Corp.’s withdrawal of a $3 billion investment in WeWork. Co-founder Adam Neumann is suing the Japanese conglomerate over the deal, which was part of a rescue package after the workplace provider’s initial public offering was called off last year.
  • Amherst Holdings on Monday called off its $2.3 billion deal to buy Front Yard Residential, less than three months after the real estate investment trusts inked a deal. Executives said that the global health crisis would make integrating the businesses, which include a portfolio of more than 15,000 homes, too complex.
  • Just two months after announcing the sale of seven U.S. Kimpton hotels for $483 million, Xenia Hotels & Resorts Inc. said the transaction had been canceled. When the deal was announced, corporate travel restrictions were already in place in the U.S. and some hotel companies had pulled earnings forecasts.

Retail Rampage

Retail transactions are also getting scuttled as international lockdowns keep customers inside and threaten brick-and-mortar retailers.

  • The owner of lingerie chain Victoria’s Secret on Monday agreed to end a deal to sell the beleaguered business to private equity firm Sycamore Partners. Instead, L Brands split Victoria’s Secret from its Bath & Body Works stores and attempt to turn around the brand as a separate entity. Sycamore had sued to get out of the $525 million deal, claiming the pandemic was not an excuse for the company failing to pay rent and furloughing thousands of workers.
  • Activist investor Dan Loeb wants to back out of a $2.5 billion deal for Global Blue SA, which processes tax refunds for international luxury shoppers. Loeb’s Far Point Acquisition Corp. wants its shareholders to vote against the transaction, setting itself up for a fight with Global Blue’s owner, private equity firm Silver Lake.
  • An IPO of clothing brand Madewell looks unlikely after parent company J. Crew Group Inc. filed for bankruptcy — the first major retailer to go bankrupt during the shutdown. J. Crew was relying on the IPO to raise capital and ease its heavy debt load.

Renegotiated Deals

  • Auto-parts makers BorgWarner Inc. and Delphi Technologies Inc. managed to salvage their January tie-up, which had been under threat after BorgWarner said Delphi had used up a credit line without permission. Investors cheered as the companies said they’d agreed to new terms, which reduced the share ratio that was initially proposed by 5%.
  • Devon Energy Corp. and a unit of Banpu Pcl agreed to amend the terms of a deal struck in December for Devon’s Barnett Shale assets. Instead of $770 million upfront, Banpu will pay $570 million in cash plus an extra $260 million in contingent payments based on future commodity prices. The price of West Texas Intermediate crude has fallen more than 60% since the deal was signed.

Megadeals Fall Down

  • Two of the biggest U.S. deals to fall apart hit a wall in late March and early April, just a couple of weeks after the first states went into lockdown.
  • Rivals Woodward Inc. and Hexcel Corp. on April 6 called off a $6.4 billion merger agreement that would have created one of the world’s biggest aerospace and defense suppliers. The companies noted the pandemic’s effect on the aviation industry, which has so far been promised more than $85 billion in government funds after the crisis wiped out travel demand.
  • Xerox Holdings Corp. decided to back off of its $35 billion hostile bid for HP Inc., saying the Covid-19 pandemic made the macroeconomic and market outlook too uncertain.
  • Also, Carlyle Group Inc. and Singapore sovereign-wealth fund GIC Pte. Ltd. are backing out of a deal to buy a stake in American Express Global Business Travel. The deal, announced at the end of 2019, valued the American Express Co. unit at $5 billion, including debt. Carlyle and GIC agreed to purchase a 20% stake and American Express retained 50% ownership.

Slow IPOs

  • Software maker Procore Technologies Inc., Warner Music Group Corp. and retailer Cole Haan all pushed back plans for IPOs as the pandemic hit, Bloomberg News has reported.
  • At least three companies that got as far as picking dates for their share sales have delayed their listings, according to data compiled by Bloomberg. The largest of those would have been an offering of as much as $253 million by SHE Beverage Co., with smaller offerings by Avadim Health Inc. and 5 Finishes Inc.
  • Fifteen companies filed to withdraw their IPOs this year, the data show. That includes industrial software maker Vontier Corp. said in April that was pulling its listing “due to recent market and economic disruptions caused by the Covid-19 pandemic.”
  • Some companies are still managing to get deals done. Special purpose acquisition companies have raised $6.5 billion this year through IPOs in the U.S., and Kingsoft Cloud Holdings Ltd. raised $510 million Thursday in the first major U.S. listing of a Chinese company this year.

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