Weekly Banking Insight: Holcim’s Split, Haleon’s ChapStick Deal, and more

Welcome back to this weekly insight article! This week we are definitely witnessing some strong moves in M&A but also looking at stricter competition authority in the UK. Let’s dive deeper into what’s unfolded in the past week in investment banking.

Holcim parting ways from its North American business arm

Swiss cement company Holcim is about to separate its North American business. The North American arm, a key contributor to Holcim’s sales, may be listed in the US. Holcim, formed in a 2015 merger, is valued at around $43.1bn. In 2023, its North American segment was expected to contribute $12bn, comprising 40% of the group’s total sales. The company, active in deals since its merger, recently sold its Indian businesses and acquired Firestone Building Products. The move aligns with the trend of European companies seeking US listings for higher valuations.

Haleon’s ChapStick sold to Yellow Wood Partners for $430m

Haleon is selling ChapStick to Yellow Wood Partners for $430m, aiming to simplify its portfolio and reduce debt. The London-listed company, spun off from GSK in 2022, seeks agility through streamlining and prior brand sales. CEO Brian McNamara emphasized ChapStick’s non-core status. The deal may pave the way for buybacks, easing leverage concerns. Haleon plans £300m in cost savings over three years, with £150m restructuring costs. Yellow Wood gains a passive stake in Suave Brands, part of its Unilever acquisition. This marks Yellow Wood’s fifth consumer goods sector carve-out in four years.

Crédit Agricole invests in Worldline

Crédit Agricole has acquired a 7% stake in payment group Worldline, forming a strategic partnership for a joint venture in merchant payments in France. Building on their April agreement, the collaboration aims to create a major player in French payment services for merchants. Worldline, facing a turbulent year with a 60% market value drop, will combine technological capabilities with Crédit Agricole’s distribution networks. While analysts believe it won’t materially change Worldline’s current challenges, the deal positions Crédit Agricole as a top three shareholder, signaling support for Worldline’s European payment market ambitions.

Française des Jeux (FDJ) acquired Kindred for €2.6bn

French lottery operator Française des Jeux (FDJ) has acquired Stockholm-listed gambling group Kindred for €2.6bn, forming one of Europe’s largest betting companies. Kindred’s board unanimously recommended FDJ’s all-cash offer, valuing shares at SKr130 ($12.47) each. The deal enhances FDJ’s position in French online betting, where it holds a lottery services monopoly, and provides an avenue for international expansion. Post-acquisition, 20% of FDJ’s revenue will come from international markets. Kindred, one of Europe’s top-five betting operators, aims for EBITDA over £250m in 2024. The acquisition follows Kindred’s sales process initiated in April amid activist investor pressure.

Vistra Energy’s complexities with its $476m TRA buyout

Vistra Energy purchased 76% of its Tax Receivable Agreement (TRA) for $476m, using SEC-registered preferred stock. The TRA, stemming from Vistra’s Chapter 11 restructuring, represents future tax savings. The $650m gross present value aligns with the latest balance sheet. Vistra secured amendments, resembling exit consents, limiting TRA holders’ information access and altering terms. This move sparked speculation about a potential capital structure cleanup preceding a leveraged buyout. Vistra may buy the remaining TRA units, rewarding initial participants if subsequent buyouts yield higher prices per unit within six months.

Other key highlights during the week:

1. UK’s competition authority CMA to investigate Vodafone-Three UK’s merger, that is poised to make the merged company UK’s largest mobile operator, over concerns regarding national security risk raised because of UAE’s stake in Vodafone as well as harming competition after merger
2. Blackstone is anticipating M&A deal flow to rise since it has indicated plans to step up dealmaking activity before market rebounds and prices rise again
3. UK scrutinising Abu-Dhabi backed RedBird IMI for taking over Telegraph Media Group for £600m over concerns regarding the proposed corporate structure
4. Zelis exploring an IPO of $15bn+ giving an exit to Bain Capital and Parthenon Capital
5. Succession and team moves at JPMorgan and LVMH are ones to watch
6. JetBlue-Spirit Airlines deal may be terminated
7. Buyout financing seems to be moving away from traditional debt to the likes of mezzanine debt and NAV financing

Parting thoughts

The above activity clearly indicates that dealmaking is certainly a priority for businesses the year. Bankers and business owners are finding ways to deal with high interest rates. Having said that, the optimism is relying on interest rates stabilising and eventually falling by end of this year or early next year. Also it seems IPOs are gaining momentum especially in the US and seems UK is quite concerned of Middle East’s investments in the county. It was a busy week for investment banking and hope it remains busy throughout the year.

Hope this is helpful and stay tuned for more such weekly updates!

Sources: Financial Times, Bloomberg and Desktop Research

Disclaimer: This article provides educational content on fixed income trading, aiming to simplify complex concepts for novice readers. It does not constitute financial advice, and readers should conduct their research or consult financial professionals before making investment decisions. Market conditions can change, impacting the performance of strategies discussed. The recent developments section is based on publicly available information and may not capture all market nuances.