Corporate Financier’s Notes
by Aivars Jurcans
Done! And Done
Intuit, a book-keeping software company (the maker of TurboTax and QuickBooks), has agreed to buy Credit Karma, a personal-finance portal offering free access to customer credit scores and borrowing history, for USD 7.1 billion in cash and stock. Credit Karma was valued at about USD 4 billion in a private share sale 2 years ago. The latest transaction values Credit Karma at about 7x times its trailing revenues.
Source: WSJ, FT
Natixis, a French lender, has agreed to sell most of its remaining stake in Coface, a credit insurer, to Arch Capital Group, a US specialty and mortgage insurer, in a EUR 480 million deal. Arch Capital will acquire 29.5% of Coface, while Natixis will keep the remaining 12.2% stake.
Charles Schwab has agreed to acquire Wasmer, Schroeder & Co, a Naples, Florida-based fixed income management firm with USD 10.5 billion in assets under management. Terms of the all-cash deal were not disclosed.
Eliott Management, an activist hedge fund, has revealed a 3% stake in NN Group, a Dutch insurer with a market capitalisation of EUR 13 billion. It was spun out of ING Bank after the financial crisis.
Morgan Stanley has agreed to acquire ETrade, an online trading platform, in an all-stock deal for USD 13 billion. ETrade manages USD 360 billion for more than 5.2 million clients, while Morgan Stanley controls USD 2.7 trillion of assets for 3 million clients. If ETrade decides to walk away from the deal, Morgan Stanley is to receive a USD 375 million breakup fee.
Source: FT, Reuters
Fidelity International, an investment manager, has acquired a USD 14.2 million stake in BC Technology Group, the operator of OSL (Asia’s digital-asset platform for professional investors).
Deals On The Table
Indonesian government is said to be looking to merge Bank Rakyat Indonesia, the country’s largest lender by assets, with Pegadaian, a pawnshop chain, and Permodalan Nasional Madani, a financing firm focusing on micro-businesses. The government owns a 57.3% stake in BRI.
Fullerton Financial Holdings, a subsidiary of Singapore’s Temasek Hodlings, is said to be working on a partial divestment of Fullerton India Credit, an Indian shadow bank with nearly 650 branches and a net worth of USD 612 million. Established in 2007, Fullerton India provides financing from personal loans to lending backed by property and vehicles.
First Abu Dhabi Bank is said to decide on the acquisition of Bank Audi’s, a Lebanese lender, Egyptian business in Q2 2020. Bank Audi Egypt had 50 branches and total assets of USD 4.4 billion of assets in September 2019.
Thomas H. Lee Partners, a private equity firm, is said to be exploring ways to make a partial or full divestment of its majority stake in HighTower Advisors, a registered investment adviser in the US. The deal could possibly value the entire company at more than USD 2 billion, including debt.
The UK-based Hinduja Group and Cerberus Capital, a private equity firm, are said to be considering joining forces to bid for a stake in Yes Bank, an Indian lender. Non-binding expressions of interest have already been received from JC Flowers, Tilden Park Capital Management, Oak Hill Advisors and Silver Point Capital.
Unipol, an Italian financial group, is said to buy a number of bankassurance JVs for around EUR 300 million as part of Intesa Sanpaolo bid of UBI Banca.
Thanks, But No Deal
A group of UBI Banca shareholders controlling 18% of share capital have dismissed the Intesa Sanpaolo’s takeover offer (EUR 4.9 billion) as “unacceptable”.
Metrics To Watch
Metro Bank, a UK lender, will target a return on tangible equity of above 8.5% by 2024.
Swiss Re corporate solutions business’s combined ratio – a measure of claims and costs as a proportion of premium income – came in at an “unacceptable” level of 127%. The company expects this to improve to 105% in 2020.
UBS, a Swiss bank, price to tangible book ratio increased from 0.75x in 2011 to 1.4x times by 2018; it has generated a shareholder return of more than 51% over the same period, well ahead of MSCI European Banks index. Its overall cost-to-income ratio is 79%, while it is said to be even higher at the investment bank.
Follow The Money
JPMorgan, Goldman Sachs and Jane Street Capital joined in a new funding round for MEMX, a challenger marketplace to New York Stock Exchange, Nasdaq and CBOE Global Markets. The size of investment and other details were not disclosed.
Revolut, a UK neobank (with a banking license issued in Lithuania in 2018), has raised USD 500 million in its latest funding round. Revolut was valued at USD 5.5 billion, 3x times the valuation at its previous funding round in 2018.
Mastercard’s shares have returned more than 1,600% since 2010. Its market worth, at USD 308 billion, exceeds Citigroup. Goldman Sachs and Morgan Stanley combined.
Since 2010, multiple expansion has been the main driver of private equity buyout deal returns in the US and Western Europe, accounting for about 50% of value increase.
Nearly 1/2 of the 2019 investment banking advisory fee pool of USD 15.6 billion came from sub-USD 1 billion transactions, according to Refinitiv data.
Europe’s central banks – the European Central Bank and national central banks of the eurozone nation states – employ 48,509 people, compared with 21,181 employees at the US Federal Reserve and 4,502 at the Bank of England.
According to UBS, a Swiss bank, starting in the 1980s, technology has created 89 US-based billionaires by the end of 2018, including 19 in that year alone.
The world’s 12 largest investment banks posted combined revenues of USD 147.5 billion across their trading and investment banking businesses in 2019, down 4% year-on-year to the lowest level since 2008.
Thoughts Worth Noting
“The yield curve is what is causing the sell-off in banks stocks. Investors do not like to own banks late in the [economic] cycle and with the low and flat-to-inverted yield curve – that is not a good environment for net interest income.”
Brian Klock, bank analyst, KBW
“The [asset management] industry is going through dramatic changes right now. Winners and losers are being created today like never before. The strong are getting stronger and the big are getting bigger.”
Marty Flanagan, CEO, Invesco
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Aivars Jurcans has more than 20 years of corporate finance and investment banking experience. His services are currently available through MURINUS ADVISERS.
Photo by Joe Taylor on Unsplash