Weekly Banking Insight: Deals re-igniting activity in gaming, packaging and finance sectors

Greetings and welcome back to this weekly global investment banking update where we talk about the top transactions, themes, and narratives in the investment banking world.

This week saw an increase in strategic M&A primarily for cost-cutting, improving efficiency, or grabbing higher market share.

Carlyle is selling UK gaming business Jagex to CVC for £910m

Private equity firm Carlyle has planned to sell UK-based video games maker Jagex to CVC Capital Partners for an estimated £910m. Haveli Investments, led by Brian Sheth, collaborated with CVC in the deal. RuneScape, the flagship multiplayer game of Jagex, boasts 2.4m active subscribers and 1m free-to-play users. The transaction highlights the growing interest in the gaming sector. Post-acquisition, CVC aims to enhance RuneScape and invest in future games. The deal follows a trend of M&As in the industry, with Saudi Arabia and Microsoft making significant moves. The acquisition is pending regulatory approval. Morgan Stanley and Goldman Sachs advised on the deal.

Barclays to acquire banking business of Tesco for £600m

Barclays to acquire a majority stake in Tesco’s banking business for £600m, absorbing credit cards and unsecured personal loans totaling £8.3bn. The agreement includes a 10-year distribution deal to sell financial products under the Tesco brand. Tesco will retain insurance, ATMs, travel money, and gift card operations. About 2,800 staff will transition to Barclays. The move aligns with Tesco’s and Sainsbury’s recent exits from banking services, emphasizing the challenges faced by retailers in financial ventures. The transaction is expected to be finalized in H2 2024, pending regulatory approval. Barclays aims to strengthen its UK consumer business through diversification.

Mondi in talks to acquire rival DS Smith in all share deal

London-listed paper and packaging giant Mondi is in early-stage talks to acquire UK rival DS Smith in an all-share deal, potentially forming a £10bn industry leader. Shares in DS Smith surged 10%, reaching 310.2p, while Mondi’s shares slipped 3% to £13.40. The move follows a trend of consolidation in the packaging sector, exemplified by the $20bn merger between Smurfit Kappa and WestRock. The potential deal raises antitrust and funding questions, with DS Smith having a stronger Western European presence compared to Mondi’s focus on Eastern Europe.

Barratt to acquire its rival Redrow for £2.5bn set to become UK’s largest housebuilder

Barratt has solidified its position as the UK’s largest housebuilder with a £2.5bn all-share deal to acquire rival Redrow. This significant merger, recommended by both boards, aims to generate substantial cost savings amid a property market downturn. Barratt’s CEO, David Thomas, highlighted the move’s strategic benefits, creating a broader range of house types and price points. Redrow shareholders will receive 1.44 new Barratt shares for each Redrow share. The combined group, named Barratt Redrow, expects annual cost savings of £90m and aims to build approximately 22,000 homes annually. The deal awaits approval from shareholders and regulatory clearance.

Amundi expands its private markets capabilities with €350m acquisition of Alpha Associates

Amundi, Europe’s largest asset manager, is set to acquire Zurich-based private markets specialist Alpha Associates for up to €350m. The deal enhances Amundi’s multi-manager segment in its €75bn private markets business, bringing assets in this area to €20bn. This move aligns with Amundi’s strategy to expand in private assets, diversifying its reach across Switzerland, Germany, and Austria. The acquisition follows a trend among mainstream investment groups targeting alternative sectors for growth. The deal, including an upfront payment of €160m and an additional €190m based on revenue milestones, is expected to propel Amundi towards its 2025 target of €90bn in overall private assets.

Other key highlights:

1. The UK’s House of Commons business committee recommends strengthening national security rules for screening foreign investments in British companies, citing concerns about threats from China and Russia as well as safeguarding media freedoms, stating that the National Security and Investment Act introduced in 2021 is not keeping pace with evolving economic security threats.
2. UniCredit’s strong financial performance, doubling its shares since last year under CEO Andrea Orcel, has prompted discussions about potential acquisitions, including Banco BPM, Monte dei Paschi, and even a bold move with Commerzbank; however, the challenge lies in tightly-clustered valuations across European banks, making deals speculative until clearer valuation gaps emerge.
3. British American Tobacco (BAT) is working on divesting part of its nearly 30% stake in India’s ITC, valued at around £15bn, to enhance balance sheet flexibility and potentially resume share buybacks; BAT’s CEO Tadeu Marroco stated the move offers an opportunity to release and reallocate capital, leading to a more than 7% rise in BAT shares.
4. Australia’s Woodside and Santos have discontinued talks on a $52bn merger, ending months-long negotiations; Woodside shares rose 1%, while Santos’ fell 6%.
5. Former WeWork CEO Adam Neumann is attempting to buy the company out of bankruptcy, claiming Wall Street backing with Third Point hedge fund, though Third Point states it has held only preliminary talks and hasn’t committed to any transaction; Neumann aims to win over WeWork’s senior creditors as the company faces financial challenges in the bankruptcy process.
6. Japan’s second-largest mobile carrier, KDDI, has launched a $3.3bn tender offer for joint control of the Lawson convenience store chain, anticipating demographic shifts with an aging population and labor shortages driving fundamental changes in shopping behavior; KDDI aims to enhance Lawson’s digital capabilities and transform its stores into hubs for services catering to a less mobile elderly population.
7. US accounting firm Baker Tilly is set to be acquired by investment groups Hellman & Friedman and Valeas in the sector’s largest private equity deal to date, giving Baker Tilly US an enterprise value exceeding $2bn and enabling the firm to pursue an extremely aggressive acquisition strategy, challenging mid-tier accounting giants outside the Big Four.
8. Danish drugmaker Novo Nordisk is set to acquire 3 manufacturing sites for $11bn in a move to expand production of its weight loss drugs, Ozempic and Wegovy, which have fueled the company’s valuation beyond $500bn, following record sales in 2023; the deal is part of a three-way transaction, including the purchase of US drug manufacturer Catalent by Novo Holdings for $16.5bn.
9. Russian tech company Yandex, often compared to “Russia’s Google,” is set to sell its Russian operations in a $5.2bn cash-and-shares deal to a consortium of Russian investors, aiming to secure its future amid disruptions caused by the war in Ukraine; the sale involves spinning off some of its main international projects, following 18 months of negotiations with the Kremlin.
10. Barclays is reportedly set to withhold bonuses for dozens of investment bankers amid a slowdown in dealmaking, considering cuts for a larger group of low performers and shrinking the firmwide bonus pool; this move follows the bank’s struggle with higher-than-usual attrition and executive efforts to recover from last year’s departures, with potential negative implications on staff retention as capital markets are anticipated to rebound.

Parting thoughts

The month of February is starting to shape the trend for this year. The focus seems to have shifted to acquire high quality assets and cost-cutting which may sound tough now but better for long-term growth.

Stay tuned for the summary next week to stay upbeat in this fast-paced sector!

Sources: Bloomberg, Financial Times, Desktop Research

Disclaimer: This weekly global investment banking update provides insights into recent transactions and market trends for informational purposes only. It does not constitute financial advice, and readers are encouraged to verify information independently before making investment decisions. The content reflects the views of the respective sources mentioned, and while efforts are made to ensure accuracy, completeness, and reliability, we do not guarantee it. Investing involves risks, and past performance is not indicative of future results. The mention of specific companies or transactions does not imply endorsement. Stay informed about regulatory changes and market conditions, and consider seeking advice from qualified financial professionals for personalized guidance.