Corporate Financier’s Notes by Aivars Jurcans
Done! And Done
StoneCo, a Brazilian credit card processor, has agreed to buy Linx, a software company, in a USD 1.12 billion stock and cash deal. Linx is said to have 70,000 retail clients who currently process payments with gross transaction value of USD 55.7 billion through other providers.
Intercontinental Exchange, the owner of New York Stock Exchange, has agreed to buy Ellie Mae, a technology platform for the mortgage finance industry, from Thoma Bravo, a private equity firm, in a deal valued at USD 11 billion, including debt. This transaction values Ellie Mae at 23x times 2020 adjusted ebitda. Thoma Bravo completed the take-private acquisition of Ellie Mae in 2019 for USD 3.7 billion.
Source: Reuters, FT
Deals On The Table
Goldman Sachs is said to be seeking to acquire the credit-card business of General Motors, which has about USD 3 billion in outstanding balances.
Prudential, a UK insurer, said it will split off its US business entirely and float Jackson, its US operation, in H1 2021 before selling its stake down to zero. If market conditions do not allow for an IPO it will demerge the business directly to shareholders.
American Express is said to be in “advanced talks” to buy Kabbage, a small business lender, in an all-cash deal paying USD 850 million (including retention payments). Kabbage was valued at more than USD 1 billion after Softbank ploughed USD 250 million into the company in 2017.
Leonardo Del Vecchio, Italian billionaire and founder of Luxottica, is said to be planning to raise his stake in Mediobanca, a financial group. to 13%-14% after he receives approval from the European Central Bank later this month.
Axa, a French insurer, is said to be considering a sale of its Singapore business “to raise funds divesting peripheral operations”. The unit, which offers life and property and casualty insurance, generated EUR 615 million of revenue in 2019.
Banco Bradesco, Brazil’s 2nd largest lender, is said to be considering a potential IPO of Elo Servicos, a card network in which it has a stake.
A New Deal
Equity Group Holdings, a Nairobi-based lender, will pay USD 95 million instead of USD 105 million for a 66.53% stake in Banque Commerciale Du Congo “because of the fallout of the coronavirus pandemic.
Metrics To Watch
FinecoBank, an Italian internet bank (established in 1999), reported a cost-to-income ratio of 32% in Q2 2020, well below the 75,8% at UBS, 62% at First Republic, 58.6% at UniCredit and 51% at JPMorganChase.
M&G, an asset manager, trades on a trailing price/book value of 1.5x times, according to S&P Global, a fraction of the rating commanded by Schroders and Jupiter.
Commerzbank’s, a German lender, shares trade at just 1/5 of their tangible book value.
Monzo, a UK challenger bank, at year-end had customer deposits of just under GBP 1.4 billion, while its loans and advances, net of provision, amounted to only GBP 124 million, or just over 7% of assets. The remaining deposits of GBP 1.37 billion were in cash and cash equivalents, most of which were held at central banks.
Companies and consumers have flooded US banks with more than USD 2.4 trillion in deposits since the start of the year, taking to total to a record USD 15.65 trillion in July 2020.
According to Refinitiv data, 8 M&A deals of more than USD 10 billion have been signed in the past 6 weeks.
A Thought Worth Noting
“July is going to be positive for industrial production [in Europe], even August will too. But after the summer, this is when the real work will start. Even leaving aside the risk of a second wave of infections, there won’t be the tailwinds of pent-up demand. But there will also be the headwinds of an uncertain global economic recovery and the strong euro hampering exports.”
Katharina Utermohl, economist, Allianz
To receive your personal weekly copy of Banking M&A Digest please subscribe at http://eepurl.com/gepqdP