Real M&A’s 2015 Guide for Deal Watchers: Pfizer to MegaBrewTara Lachapelle and Brooke Sutherland
If 2014 was the year of the megadeal, 2015 may be the sequel.
Some of the world’s biggest corporations embarked on hefty acquisitions this year, from Comcast Corp.’s $68 billion deal for Time Warner Cable Inc. in February to last month, when Halliburton Co. and Actavis Plc announced a combined $100 billion in takeovers on the same day. Transactions that exceeded $10 billion in value accounted for almost a record proportion of the $2.9 trillion of merger agreements struck in 2014, according to data compiled by Bloomberg.
Companies put cash to work on acquisitions for a number of reasons -- dimming growth prospects, competitive pressures and more recently, turmoil in oil markets. Some sought partners without coming to terms on a deal. For the companies that missed out on the action, 2015 may be their year.
“People are very optimistic about M&A,” Phil Colaco, managing director at Deloitte Corporate Finance, said in a phone interview. “If the stock market performance is even moderate, I think you’ll see the average size of deals going up and see some of these bigger deals happen.”
Here are a few possibilities:
PFIZER’S NEXT MOVE -- Pfizer Inc. is the one to watch in the pharmaceutical industry after the $201 billion drugmaker was spurned by AstraZeneca Plc this year. As the company faces flat sales and limited upside to its stock price, a big acquisition could be the remedy, and it’s already shown a willingness to be bold. AbbVie Inc. stands out among the handful of logical candidates. Sales of AbbVie’s rheumatoid arthritis medicine Humira are projected to climb 20 percent by 2020 and it could bolster the established-products unit that New York-based Pfizer may eventually split off. AbbVie’s shares also trade at a cheaper valuation than most of the other companies that have been speculated targets for Pfizer.
“MEGABREW” -- That’s the nickname for the much-speculated merger of beer giants Anheuser-Busch InBev NV and SABMiller Plc. Some analysts have said it’s probably only a matter of time before Leuven, Belgium-based AB InBev, the $184 billion Budweiser brewer, makes a bid for its $85 billion rival so that it can tap into faster-growing regions such as Africa. It may come down to price. London-based SABMiller failed in September in trying to buy Heineken NV, a deal that would have helped shield itself from getting bought. While SABMiller’s valuation isn’t far from the more than eight-year high it reached in September, any pullback in the shares may create an opportunity for AB InBev to strike.
VODAFONE-LIBERTY -- Vodafone Group Plc is under pressure to come up with a countermove after BT Group Plc ratcheted up the competition for bundled mobile, wireline, TV and Internet services in Europe this year by going after wireless provider EE. John Malone’s Liberty Global Plc may be Newbury, England-based Vodafone’s best option for a transformational deal. While a transaction wouldn’t be without hurdles, the shift toward quad-play packages makes a combination with London-based Liberty a “must rather than an option,” according to Ottavio Adorisio of Societe Generale. Vodafone Chief Executive Officer Vittorio Colao is considering it, people familiar with the matter said this month.
DANONE-MEAD JOHNSON -- Speculation about this deal cooled when Danone said it planned to keep its medical-nutrition division, as proceeds from selling that unit could have helped fund a takeover of Mead Johnson Nutrition Co. The merger still makes sense, though. Buying Mead Johnson would give Danone a greater presence in baby food, a fast-growing industry in which Danone is a distant second place to Nestle SA. Shares of the Paris-based company are trailing the broader U.S. and European markets, while Glenview, Illinois-based Mead Johnson trades near a record. After a year in which shareholders often rewarded companies that made acquisitions, Danone could face pressure to finally pursue a deal.
Representatives for Pfizer, AB InBev, SABMiller, Vodafone, Liberty Global and Mead Johnson declined to comment. Representatives for North Chicago, Illinois-based AbbVie and Danone didn’t respond to phone calls or e-mails seeking comment.