M&A is hot!

Recent mergers, takeovers and takeover bids have spun the world of M&A. First, we have the NN Group who took over Delta Lloyd for 2.5 billion euros. Although in October an initial bid by NN Group was declined. Second, there was the attempt by Kraft Heinz to takeover Unilever. Kraft Heinz offered 50 dollar per share, a markup of 18% of the share value on that day, totaling a 134 billon dollar bid. This bid would have been the largest takeover in Dutch history, currently belonging to the sale of ABN AMRO for 72 billion. Next and most recently, General Motors Co. and PSA Group inked the deal on their takeover of General Motors’ subsidiary Opel/Vauxhall. With Opel/Vauxhall’s additional 17.7 billion euros, the PSA Group including car manufacturers Peugeot and Citroën, will because of this takeover be the number 2 manufacturer of Europe. The last couple of months have been a busy time for the M&A world. Here we talk about the reasons behind the takeovers and the most recent developments.

NN Group, owner of Nationale Nederlanden, signed the deal on end of December, however they still do not have an approval of the European Committee. With a total value of 2.5 billion this merger is the larger Dutch merger in the insurance sector. The merger is expected to be completed on the end of second quarter. Delta Lloyd stated that great benefits would results from the merger, due to for instance insurance diversification and tax benefits. The total expected benefits are estimated between 150 and 200 million euros. Once the merger is complete Delta Lloyd CEO Hans van der Noordaa will resign, stating his function was activities were not relevant anymore. Both operations of Delta Lloyd and Nationale Nederlanden will be led by NN CEO Lard Friese.

Although the takeover bid by Kraft Heinz was not accepted and has been withdrawn, the consequences of this action are still taking place. Sustainability growth has been a key focus of Unilever in what they call its Sustainable Living Plan introduced in 2010. This is where Kraft Heinz saw a window of opportunities, as the takeover would allow Kraft Heinz to decrease the spending on sustainability and increase profit margins. Next to this, Unilever is a relatively low levered firm making it an easy target for takeovers. Being too levered however can be dangerous as well, since banks are then incentivized to take on a firm’s assets, besides the debt, and own the whole firm. Here you see how important the amount of leverage can be for a firm. The consequences of the merger are still pending as Unilever is pressured by shareholders since they hold the decision vote. Rumors go Unilever is planning to let go butter brands Flora and Stork to increase shareholder return.

The PSA group, Peugeot, DS and Citroen's parent company, agreed to pay respectively 1.3 and 0.9 billion dollars for Opel and Vauxhall. With a market capacity of 13% this makes the PSA group the second largest auto manufacturer followed by the Volkswagen Group. Opel has been making losses since the year 2000 totaling to an amount of 15 billion in total over the years. PSA also suffered from bad times and nearly went bankrupt three years ago. The French carmaker was bailed out by the government and Chinese investors. Since the deal has only been official since March 6 not much has been announced concerning the future plan for both firms. Currently there is still much uncertainty for the employees and customers of Opel.