BloombergBrief_MA_Newsletter_201459.pdf

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1/13

Tuesday

Sept. 2, 2014

www.bloombergbriefs.com

QUOTE OF THE WEEK

"Gail, there are a lot of peoplewho want to throw ice on top ofhim. I thought that you shouldhave the honor because you

deserve it more than anybody." Jefferies CEO Rich Handler addressing

Carl Icahn's wife in a YouTube video challenging

her husband to take the Ice Bucket Challenge

WEEK IN NUMBERS

3.4x: Increase in 'sBurger King

enterprise value since its 2010 buyout by

(page 3)3G Capital

22: Number of deals worth more than

$5 billion announced since the beginningof July (page 5)

IN THIS ISSUE

INSIGHT. Big tech's biggest deals; Bill

chalks up his secondAckman Tim

deal. Pages 2-4.Hortons

M&A TRENDS.Big deals continued

during the summer slowdown. Page 5.

BUYERS & SELLERS. Samsonite and

's M&A plans. Page 9.Agfa-Gevaert

ACTIVIST SITUATIONS.Page 10.

Q&A.The switch to smart credit and debit

cards will spawn mergers, say John

and atGuzzo Peter Ognibene Berkery

. Page 12.Noyes

told me before theBill Ackman

tournament that he was as good as any

pro playing in the tournament, and he

won his flight, said ,Michael Milken

recounting the activist investor's

self-appraisal before a charity tennis

match Aug. 23 where amateurs were

paired with pros.

EDITOR'S CORNER

Twitch Deal, Alibaba IPO Point the Way to More M&ABY JOHN E. MORRIS, BLOOMBERG BRIEF EDITOR

Burger King Worldwide Inc.'s $12.1 billion deal Aug. 26 to

buy Canadian cafe chain offers a bit ofTim Hortons Inc.

everything for deal observers. It combines iconic brands, Bill

Ackman is involved and it's structured as a tax inversion, adding

tax and political dimensions (see pages 3-4).

Still, that may be a one-off transaction. The more telling

announcement was 's $970 million deal theAmazon.com Inc.day before for online gaming company Twitch Interactive Inc.

More telling because it reflects the convergence of Amazon and

the other behemoths of the tech and online worlds: ,Apple Inc.

, andGoogle Inc. Facebook Inc. Alibaba Group Holdings Ltd.

What were once an online book seller, a computer maker, a search engine, a social

media site and an e-commerce venue are now competing with each other on multiple

fronts in devices, supplying content, for a share of users' online time and for

advertising dollars. Google lost out to Amazon once not even considered a rival in

the wooing of Twitch and its backers.

To avoid being outflanked, all five are snapping up products, technology and user

bases. So far this year they have announced a combined 45 acquisitions worth nearly

$30 billion (see page 2). While Facebook's $18 billion deal for messaging service

swelled the total, even without that transaction these companies wouldWhatsApp Inc.

still be on pace for nearly $18 billion of deals in the full year, according to data compiledby Bloomberg. (Google was also interested in WhatsApp.)

If Facebook is any guide, more deals will follow. Since its 2012 IPO, Facebook has

bought 25 companies. With Alibaba poised to go public in the U.S., the wrestling match

for assets will only grow more intense. Alibaba has done eight deals since the beginning

of last year. Soon it will have U.S.-registered stock to spend and its shareholder Yahoo!

will top up its war chest selling shares in the IPO.Inc.

So grab a seat. The fun has just begun.

Converging Businesses Have Bred Competition for Assets

or use by [email protected] only. Redistribution only allowed with firm license. Call +12126179030 o.
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2/13

Sept. 2, 2014 Bloomberg Brief Mergers 2

INSIGHT: TECH M&A COMPILED BY JOHN E. MORRIS, BLOOMBERG BRIEF EDITOR

Big Tech's Buying SpreesFour U.S. technology companies are increasingly competing with one another for customers and for target companies (see page 1).

Below are the top deals by each tech major, based on data compiled by Bloomberg.

Amazon

ANNOUNCED TARGET VALUE ($M)

8/25/14 Twitch Interactive 970

7/22/09 Zappos.com 817

3/19/12 Kiva Systems 775

11/8/10 Quidsi 545

4/26/99 Alexa Internet 250

1/31/08 Audible 216

8/4/98 Junglee 187

4/26/99 Exchange.com 162

10/7/10 BuyVIP.com 134

8/19/04 Joyo Amazon Co Ltd 75

Source: Bloomberg MA

The online retailer and content provider has made relatively few

acquisitions in recent years after a spurt during the dot-com years.

Google


8/15/11 Motorola Mobility 9,813

4/13/07 DoubleClick 3,240

1/13/14 Nest Labs 3,200

10/9/06 YouTube 1,302

6/11/13 Waze 969

11/9/09 AdMob 750

7/9/07 Postini 625

6/21/14 Dropcam 555

6/10/14 Skybox Imaging 500

6/13/11 Admeld 400


Google bought Motorola Mobility for its intellectual property and soon

sold its phone-making unit. Nest Labs promises to add technology to

extend the reach of the Internet to other devices and equipment, while

Waze enhanced Google's mapping service.

Facebook


2/19/14 WhatsApp 18,025

3/25/14 Oculus VR 1,993

4/9/12 Instagram 1,000

4/23/12 Patent porfolio 550

4/25/13 Parse 85

3/21/11 Snaptu Ltd 70

1/13/14 Branch Media 15

7/19/07 Parakey not disclosed

8/10/09 FriendFeed not disclosed

2/22/10 Octazen not disclosed

Source: Bloomberg MAWhatsApp's messaging service brought a large new base of users to

the social network company.

Apple


6/30/11 Nortel's patent portfolio 4,500

5/28/14 Beats Electronics, Beats Music 3,000

12/20/96 Next Computer 400

1/10/12 Anobit Technologies 390

7/27/12 AuthenTec 337

7/14/11 C3 Technologies 155

9/2/97 Power Computing 100

3/14/01 PowerSchool 62

2/24/12 Chomp 50

10/31/13 Cue/USA 40

Source: Bloomberg MAApple has been sparing with its purchases. The Beats deal this year

added both sound equipment and a music delivery technology.



3/13


INSIGHT: REPEATED DEALS BY JOHN E. MORRIS, BLOOMBERG BRIEF EDITOR

Burger King, Tim Hortons: How Repeated Deals Created ValueNo one can say that Bill Ackman

doesn't like Tim Hortons Inc.

In July 2005, the activist publicly

pressured its then-parent, Wendy's

, to spin off theInternational Inc.

Canadian coffee chain, arguing that its

cashflow and growth would make it a hot

stock as a standalone business.Less than three weeks later, Wendy's

said it would do just that and its shares

rose 14 percent. With a 9.3 percent stake,

Pershing Square Capital Management

was in the money. (To be fair,LP

Wendy's management had considered a

spinoff the year before.)Fast forward to June 2012, when

Pershing Square acquired a 29 percent

stake in Wendy's bigger rival Burger

, which privateKing Worldwide Inc.

equity firm had taken3G Capital Inc.

private in 2010. Burger King relisted its

shares in the process. Ackman did well

again as Burger King's enterprise value

rose 61 percent since the relisting, in a

span when the S&P 500 was up 48

percent.

Ackman still held 10.9 percent last week

when the "Home of the Whopper"

announced its $12.1 billioncash-and-stock merger with Tim Hortons.

Ackman therefore is once again backing

a play based on Tim Hortons's growth.Burger King has been a gift to bankers

and private equity firms. The chain was

languishing as a subsidiary of Diageo

in 2002 when ,Plc TPG Capital Bain

andCapital Partners LLC Goldman

agreed to take itSachs Capital Partners

off the drinks company's hands for $1.5

billion. Four years later, after the buyout

firms turned the business around, they

refloated it at an enterprise value of $2.9

billion. While its EV barely budged as a

public company, 3G took it private again

in 2010 at a premium, paying $3.9 billion.The Burger King and Tim Hortons

stories may seem like so much financial

maneuvering. The numbers paint a

different picture.

Burger King's EV doubled in four years

under TPG, Bain and Goldman, according

to data compiled by Bloomberg.

Its EV nearly tripled in two years under

3G, as net income, Ebitda and margins

rose even even as revenue fell with the

sale of restaurants to franchisees.

Since Diageo sold Burger King 12 years

ago, the chain's EV has increased almostninefold, Bloomberg data show.

Wendy's and Tim Hortons have thrived,

as well. Wendy's EV has nearly tripled

since the spinoff, rising 194 percent. TimHortons rose 56 percent from its

separation to the eve of the Burger King

offer and was up 93 percent by the end of

last week, with the deal premium factored

in. Both companies beat the S&P 500 in

that span, which was up 53 percent

between the spinoff and last week.

Comparing the gains in EV to the S&P

actually understates the achievement

because the stocks in the index benefit

from any leverage on the companies; the

share value should increase faster thanthe EV if there is debt.

The final validation of the dealmaking

came after the announcement: Not only

did Tim Hortons's stock shoot up 31.5

percent from its Aug. 21 close, before the

first reports of a deal, but Burger Kingwas up 19.5 percent at week's end.

The moral of the story may be that

financial engineering isn't always a bad

thing.

Burger King, Tim Hortons, Wendy's Have Each Gained in Value Through Multiple Deals



4/13


INSIGHT: TAX INVERSIONS

Investors Liked the Rationale for a Fast-Food Merger

Burger King Joins Long List of Inversions

Eleven U.S. companies have announced deals or made takeover offers

this year that would move their headquarters abroad for tax purposes

a record number of the so-called tax inversions. Burger King's

merger with Canada's Tim Hortons would be the latest.

Merger Was Greeted Warmly on Both Sides

Acquirers increasingly are seeing their shares rise when they

announce deals. Burger King's stock was up more than most more

than 25 percent at one point after news reports of a deal first surfaced.

The merger will reduce Burger King's tax bill and Burger King says it

can help Tim Hortons expand outside the U.S. and Canada.

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5/13


WEEK IN REVIEW: M&A TRENDS COMPILED BY JOHN E. MORRIS

Momentum Has Been Sustained Despite a Summer Lull

While global M&A activity in the week ended Aug. 29 was slow

at $51.7 billion, it remained above the weekly average for the

previous six years. This year remains on pace to see full-year

totals at their highest levels since 2007.

Six deals worth more than $1 billion were announced last week

and there were four over $7 billion, including competing bids forBrazil's . Global Village'sGlobal Village Telecom Holding SA

parent said last week it is in negotiations withVivendi SA

to finalize a deal.Telefonica SA

Private equity firms played key roles last week, led by 3G

, which owns 70 percent of Capital Burger King Worldwide Inc.

the buyer in the week's largest deal. In addition, Oak Hill Capital

bought in a secondaryPartners LP Berlin Packaging LLCbuyout from for $1.4 billion and investedInvestcorp KKR & Co.

$400 million for an 18 percent stake in China's largest chicken

breeder Fujian Sunner Development Co. Ltd.

Six of the nine weeks since the beginning of July have seen

deal volumes below the year-to-date average. Still, the deal

activity levels over the summer were higher than in the first

quarter of 2014. Moreover, there was a steady stream of large

deals:

77 deals worth $1 billion or more have been announced since

July 1.

22 deals over $5 billion have been announced in that span.

The biggest deals over the summer were AbbVie Inc.'s $54.7

billion offer for Shire Plc, Kinder Morgan Inc.'s $48.9 billion

agreement to buy its affiliate Kinder Morgan Energy PartnersLPand Lorillard Inc.'s 26.7 billion agreement to buy Reynolds

American Inc.

North American targets continue to dominate by deal value, asthey have all year.

The bids for Global Village Telecom swelled the total for Latin

America. Six of the top 20 targets last week were in China.

Pace of Dealmaking

Week by Week Activity

Regional Breakdown



6/13


Largest Deals Announced or Amended Aug. 23 - Aug. 29

ANNOUNCED TARGET INDUSTRY COUNTRY ACQUIRERVALUE

($M)

8/26 Tim Hortons Inc Retail CA Burger King Worldwide Inc 12,112

8/28* Global Village Telecom Holding SA Telecommunications BR Telefonica Brasil SA 9,960

8/28 Global Village Telecom Holding SA Telecommunications BR Telecom Italia SpA 9,244

8/24 InterMune Inc Biotechnology US Roche Holding AG 7,664

8/28 China Huarong Asset Management Co Diversified Finan Serv CNCITIC Group Corp, Khazanah Nasional Bhd, Goldman Sachs Group,China International Capital Corp, Warburg Pincus et al

2,361

8/25 Berlin Packaging LLC Packaging&Containers US Oak Hill Capital Partners LP 1,430

8/25 Twitch Interactive Inc Software US Amazon.com Inc 970

8/27 Eagle Ottawa LLC Auto Parts&Equipment US Lear Corp 850

8/28 Techlaw Solutions Inc Commercial Services US Ubic Inc 800

8/26 CIAC Potassium Salt Development Co Chemicals CN Dongling Grain & Oil Co Ltd 617

8/27 Jialin Pharmaceutical Co Ltd Pharmaceuticals CN Luye Pharma Group Ltd 600

8/25Dongyang Kingrain Film TV Culture CoLtd et al

Media CN Zhejiang WHWH Industry Co Ltd 541

8/25 809 megawatt power plant Utilities US Calpine Corp 530

8/26 Origo Exploration AS Oil&Gas NOTemasek Holdings Pte Ltd, Riverstone Energy Ltd, Barclays NaturalResource Investments

525

8/26 Fujian Sunner Development Co (18%) Food CN KKR & Co LP 400

8/25 Weidenhammer Packungen GmbH Packaging&Containers DE Sonoco Products Co 377

8/26Wearnes Automotive Pte Ltd, AssociatedMotor Industries Pvt Ltd

Retail SG StarChase Motorsports Singapore Pte Ltd 364

8/28China Coal Technology EngineeringGroup Chongqing et al Resources CN Tian Di Science & Technology Co Ltd 337

8/26 Imtech ICT division IT Services NL Vinci SA 336

8/25 Oil and gas assets, Texas Oil&Gas US Unnamed Buyer 326


Pending and completed M&A and investment transactions announced or amended in the past week. Real estate assets are excluded. *Amended offer

WEEK IN REVIEW: TOP DEALS

Bloomberg Brief: MergersTed Merz

Bloomberg Brief

Executive Editor

[email protected]

+1-212-617-2309

Jennifer Rossa

Bloomberg Brief

Managing Editor

[email protected]

+1-212-617-8074

Jeffrey McCracken

Bloomberg News

Managing Editor

[email protected]

+1-212-617-8517

John E. Morris

Mergers Editor

[email protected]

+1-212-617-0628

Leslie Hemenetz

Contributing Data Editor

[email protected]

+1-212-617-5513

Salih Yilmaz


[email protected]

+44-20-3525-4256

Eshani Gupte


[email protected]

+1-212-617-5969

Nick Ferris

Newsletter Business Manager

[email protected]

+1-212-617-6975

Adrienne Bills

Advertising

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Lori Husted

Reprints & Permissions

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2014 Bloomberg LP. All rights reserved.



7/13


REAL M&A

It May Be Time for ConAgra to Unwind Ralcorp Deal That Created a Hybrid BusinessBY TARA LACHAPELLE

The best way for ConAgra Foods Inc.

to commemorate the two-year

anniversary of buying Ralcorp Holdings

may be to undo the deal.Inc.

Since ConAgra completed the $6.7

billion acquisition, it's the only

food-products maker in the Standard &Poor's 500 Index that's handed losses to

shareholders. Chief Executive Officer

last month announcedGary Rodkin

plans to step down as he struggles to

prove the purchase he oversaw was

worth the money.

It's time for ConAgra's board to evaluateoptions, including breaking up the $14

billion company and selling the pieces,

according to Rhino Trading Partners LLC.

While Rodkin said in November 2012 thatadding Ralcorp's faster-growing

private-label business would be a "great

fit" for the maker of Chef Boyardee, Slim

Jim and Healthy Choice foods, the unit

has since dragged down profit and

contributed to a $681 million writedown.

"When you make a very large bet and

it's not working out and your CEO leaves,

this is exactly the kind of situation where

you'd want to be evaluating strategicalternatives," Timothy Chen, a New

York-based analyst at Rhino Trading, said

in a phone interview. "We're two years

post-merger and people expect results. If

the results aren't there, investors are

going to expect the board to take action."

Teresa Paulsen, a spokeswoman for

Omaha, Nebraska-based ConAgra, said

in an e-mail last week that the company is

"confident of and committed to our

strategy that includes differentiatedpositioning and strong balance among our

consumer foods, commercial foods andprivate brand businesses. We are making

good progress and we are confident of

our ability to meet this year's financial

commitments."

Before the Ralcorp acquisition,

ConAgra was focused on branded

packaged foods such as Hunt's ketchup,

Swiss Miss cocoa and OrvilleRedenbacher's popcorn. Most are

second- and third-tier brands, according

to Ken Shea, a food and beverage

analyst for Bloomberg Intelligence.

Buying Ralcorp made ConAgra more of

a hybrid company by substantially

increasing its revenue from private-label

foods, which are sold under supermarket

names. Most food companies sell either

branded products or private-label items.From the deal's closing in January 2013

through last week, ConAgra shares

slipped 0.3 percent, while every other

food-products company in the S&P 500

advanced at least 10 percent, according

to data compiled by Bloomberg. ConAgra

was valued last week at about 14 times

this year's estimated profit, a 30 percent

discount to the median for similar-sized

North American food makers.

For the fiscal year ended in May, thecompany booked a $681 million non-cash

charge, most of which related to theprivate-label business.

"ConAgra is burdened with a

challenging portfolio, and the situation is

getting worse," Alexia Howard and other

analysts from Sanford C. Bernstein & Co.

wrote in a July note. "It remains to be

seen whether the company can

successfully manage both private-labeland branded products under the same

roof."

"They're really in limbo right now,'' Jack

Russo, an analyst at St. Louis-based

Edward Jones & Co., said in a phone

interview. A breakup or sale may be

unlikely right now because ConAgra

probably prefers to give the next CEO a

chance to lay out a strategy, Russo said.

It would also be difficult to find a buyerthat wants the whole company given that

it operates two different businesses, he

said.

Selling itself in pieces is an option,

Chen of Rhino Trading said. It may make

sense for , a $3.5TreeHouse Foods Inc.

billion private-label foodmaker, to

combine with that piece of ConAgra, he

said.

Ron Bottrell, a spokesman for Oak

Brook, Illinois-based TreeHouse, said thecompany doesn't comment on deal

speculation.The dilemma in divesting Ralcorp now

is that ConAgra may get less than it paid

for the business, Russo of Edward Jones

said.

Still, the CEO departure and Ralcorp

disappointments have opened the door

for some sort of deal or even activist

investors' initiatives, according to Chen."The board certainly needs to evaluate

all options,'' Chen said. "If they don't, it's

not going to be very long until their

shareholders ask them to if they

haven't already."

Merger Gave Revenue a Lift, Then Net Income Fell



8/13


http://brief.tkr.me/blinkBMMIhttp://brief.tkr.me/blinkBMMIhttp://brief.tkr.me/blinkSPORTS


9/13


BUYERS AND SELLERS WHAT COMPANIES ARE SAYING ABOUT ACQUISITIONS AND DIVESTITURES

Samsonite Buying Spree May Continue; Agfa-Gevaert Rethinks External GrowthCOMPILED BY JOHN E. MORRIS

Samsonite International SA

The Mansfield,

Massachusetts-based

luggage manufacturer

and distributor is

eyeing acquisitions

with a more "retail

feel," Chief Financial

Officer Kyle Francis

said on anGendreau

Aug. 27 earnings call.This year, Samsonite

has acquired several companies and brands,

including French luggage brand Lipault, mobile

phone case maker Speck and backpack brand

Gregory Mountain Products. Comments on this

page have been edited and condensed.

Erwan Rambourg, analyst at HSBC: I

understand that you are still open to

looking at opportunities. Given

everything you have to do with the

recently acquired brands, do you still

have that appetite for the short-term oris this more of a long-term statement?

As far as acquisitions go,Gendreau:

we're still looking, and our pipeline is just

as full as what it was six months ago and

we are evaluating. There are some

things we're looking at that have a bit

more of a retail feel to them, so we'relooking across markets like Latin America

and Europe. So I would say we're still

active, but as we've always said: it's hard

to judge when you'll actually get these

things done. I'll tell you nothing is closing

tomorrow, but there are plenty of thingswe're looking at.

The IT systems manufacturer is again considering

external growth, , PresidentChristian Reinaudoand Chief Executive Officer, said on an Aug. 27

earnings call.

Guy Sips, KBC Securities analyst: As

you're looking at external growth, are

you looking more in the health-care

division or more in the graphics

division?

Almost four years ago, theReinaudo:

logic of my appointment as CEO and the

capital increase at basically the same

time was to try to find growth through

external growth of the company. And thelogic is back now, because we have the

debt level that we believe is at the right

level. We have completely eliminated at

least on the short- to medium-term the

risk of silver going to fantastic levels. So

Agfa-Gevaert NV

it's time to rethink external growth.

And the logic, which was prevailing fouryears ago, is still the same. It has to be

either to complement or increase our

market positions in the markets where we

are strong to make sure that we can

harvest and better amortize the cost of

R&D in these markets. This is true formarkets that are somewhat specific as

opposed to global. And number two, it is

targeting the few technology holes that

we may have. So where is it? It could be

either in the consolidation of our

traditional markets. It could be in IT,

health care in general terms, and it couldbe in inkjet. So that's the three domains;

nothing has changed. But what is also

true is that, considering the multiples of

this company in terms of valuation, weare not going to make crazy acquisitions

at multiples that we can never recover.

So it makes the equation a bit more

complicated.

By the way, on the debt in the quarter,

we have done two things in terms of

refinancing the company. One, we have

reissued bonds, which are now at

maturity 2019, therefore, pushing a bit

more than 40 million from 2015 to 2019.And we have secured a loan. So we have

room to maneuver and I believe we can

use it intelligently in a few acquisitions,

which are going to help the top line

evolution.

Source: Samsonite



10/13


ACTIVIST SITUATIONS

Significant Actions at Companies Targeted by Activist Investors

Source: Bloomberg News



11/13


DEAL ROSTER COMPILED BY JOHN E. MORRIS AND MATTHEW MONKS

JPMorgan, Lazard, Kirkland Tapped Again for Latest Burger King DealBurger King Worldwide Inc. agreed

Aug. 26 to acquire forTim Hortons Inc.

about $12.1 billion in a deal that creates

the third-largest fast-food company and

moves its headquarters to Canada.

Burger King has lined up $12.5 billion in

financing to fund the cash portion of the

deal, including $9.5 billion from a debtpackage led by JPMorgan Chase &

Co.and Wells Fargo & Co. Warren

's hasBuffett Berkshire Hathaway Inc.

committed $3 billion of preferred equity

financing, according to the statement.

Berkshire will earn 9 percent annual

interest on its investment.

Private equity firm 3G Capital Inc.

owns 70 percent of Burger King. Three ofits advisers on the Tim Hortons

transaction JPMorgan, andLazard

advised 3G when itKirkland & Ellis

purchased Burger King in 2010.

Kirkland & Ellis was also counsel to the

chain on its merger in 2012 with an entity

controlled 'sBill Ackman Pershing

, whichSquare Capital Management LP

resulted in Burger King's shares beingrelisted.

TARGET:Tim Hortons Inc.

INVESTMENT BANKS

RBC Capital Markets

Peter Buzzi

Ben Mandell

LAW FIRMS

H.B. Clay Horner

Adam Emmerich

Jodi Schwartz

Michael Segal

Eric Rosof

Nelson Fitts

Gordon Moodie

Citi

Osler Hoskin & Harcourt LLP

Wachtell Lipton Rosen & Katz

BUYER:Burger King Worldwide Inc.

INVESTMENT BANKS

Ben Bernstein

Alex HeckerTim George

LAW FIRMS

Stephen FraidinDean Shulman

Joshua Korff

David Feirstein

William Sorabella

Jay Ptashek

Michael Kim

Michael Carew

Jeffrey Samuels (tax)Alyssa Wolpin (tax)

Robert Killip (tax)

JPMorgan

Lazard

Wells Fargo & Co.

Kirkland & Ellis

Davies Ward Phillips & Vineberg LLP

Paul Weiss Rifkind Wharton & Garrison



12/13


Q&A

Switch to Smart-Chip Credit Cards Will Spawn Mergers, Say Berkery Noyes Bankers

U.S. banks and other

credit and debit card

issuers are preparing

to switch to cards with

security chips in the

wake of hacking

incidents that have

resulted in millions of

stolen card numbers.

The transition to the

improved technology,

long used elsewhere

in the world, will likely

prompt mergers

among companies tied

to cards, according to

andJohn Guzzo

,Peter Ognibene

managing directors at

the investment bank

. TheBerkery Noyes

change will require

new point-of-sale

hardware and processing software to handle more

data. By making it harder to conduct fraud in

person, the switch may generate more electronic

fraud so-called "card not presented"transactions that will drive demand for

improved security, they told Bloomberg Brief's

John E. Morris.

Q: Who will be under pressure

because of the changes?

Guzzo: Hardware manufacturers will

need to reconfigure to produce new

technology. That's upstream; that's where

it starts. Also, there's fraud prevention

vendors that will benefit as they innovate

and discover other ways to authenticate

users.Ognibene: Now your identity is protectedby signatures and PINs and behavioral

patterns. Going forward this will beprotected by additional algorithms

including bio-metric technology.

Q: Who will benefit?

Payment processors that canGuzzo:

handle the different technologies will

benefit if they can handle the transition

from cards that require signatures to

cards with chips. Also, companies withanti-fraud tools to the extent there are

algorithms to authenticate the individual.

Companies already in theOgnibene:

card-not-present area see a lot of

potential since they are already very

skilled at analyzing vast quantities of

data.

Q: How is this all likely to play out in

terms of M&A?

Successful innovators willGuzzo:

become acquisition targets.And the multiples will beOgnibene:

huge. Acquirers who purchase

cutting-edge technology with have good

sustainable advantages.

Q: Will payment processors need tomake acquisitions? If so, what will

they likely be looking for?

Guzzo: They will be looking for proven

fraud-prevention technology vendors.

Q: Are big merchants likely to make

acquisitions in this area? Or will they

exert their influence through product

purchases?

Big payment technology vendorsGuzzo:

will make acquisitions.

Q: We hear a lot about mobile

payments. How will that affect theconsolidation?

Any device provider that can linkGuzzo:

technology with mobile devices will reallycome out ahead.

Providers in the mobile spaceOgnibene:

are ahead of the curve when dealing with

device authentication measures.

Q: What companies will be looking toacquire mobile purchasing

technology? Consumer products

makers? Payment processors? Card

issuers?

Likely all of the above asGuzzo:

companies look to broaden their offerings

Q: Will there be advantages to scale

during the transition?

I think it will be more theOgnibene:

technology, or the technology that can

adapt. When you think about it, the

current paradigm has been in place for a

long time. This is disruptive.

Q: How important is venture capital

and private equity investment in the

field?

There's a ton of private equityOgnibene:

in the space. Between the move toward

mobile devices, the move tocard-not-presented technology, the new

banking regulations, and just the sheer

scale of credit card processing, it creates

a huge amount of interest from venturecapital and private equity.

Guzzo: Once you've got the algorithms

right, you're looking at the ability to sell

the same dataset multiple times. When

you've verified the identity of the

consumer, you can sell that to the

processor, then the bank. There are lots

of places where that data can be

intercepted and therefore need

verification.

John Guzzo

Peter Ognibene



13/13


TARGET ACQUIRER

DEAL

SIZE

(M)

EXPECTED

COMPLETION

DATE

OFFER

PER

SHARE

TARGET

PRICE

PAYMENT

TYPESPREAD

PROJECTED

ANNUALIZED

RETURN

1W %

CHANGE IN

SPREAD

MAJOR

MOVEMENT?

Allergan Inc Valeant 54,214 12/31/14 169.24 163.68 C&S 3.40% 10.01% 1.11%

American Realty CapitalHealthcare Trust Inc

Ventas Inc 2,305 12/31/14 11.22 10.97 C/S 2.28% 6.62% -0.45%

Bally Technologies IncScientificGames

5,053 06/30/15 83.30 79.29 Cash 5.06% 6.05% -1.98%

Bell Aliant Inc BCE Inc 3,949 09/19/14 31.14 30.80 C/S 1.10% 19.16% -0.06%

Cleco CorpVariouspossiblebidders

5,062 - 62.00 56.42 Cash 9.89% - -1.98%

Covidien PLC Medtronic Inc 46,236 - 96.23 86.83 C&S 10.83% - 1.97%

DIRECTV AT&T Inc 66,044 05/31/15 95.00 86.45 C&S 9.89% 13.13% -1.28%

El Paso Pipeline Partners

LP

Kinder

Morgan Inc

10,276 12/31/14 42.70 41.56 C&S 2.74% 8.07% -0.19%

Family Dollar StoresDollar

General9,550 - 78.50 79.83 Cash -1.67% - -0.20%

Family Dollar Stores Dollar Tree 9,093 06/30/15 74.50 79.83 C&S -6.68% -7.99% -0.20%

InterMune IncRoche

Holding7,664 12/31/14 74.00 73.45 Cash 0.75% 2.20% -

International GameTechnology

GTECH SpA 6,285 06/30/15 18.02 16.86 C&S 6.88% 8.23% -0.59%

International RectifierCorp

InfineonTechnologies

2,345 06/30/15 40.00 39.40 Cash 1.52% 1.84% -0.76%

Kinder Morgan EnergyPartners LP

KinderMorgan Inc

48,882 12/31/14 99.06 96.38 C&S 2.78% 8.20% -0.33%

Kinder MorganManagement LLC KinderMorgan Inc 10,681 12/31/14 100.04 97.72 Stk 2.37% 6.99% -0.17%

Kodiak Oil & Gas CorpWhiting

Petroleum6,038 12/31/14 16.40 16.27 Stk 0.80% 2.37% 0.12%

LIN Media LLCMedia

General2,450 03/31/15 24.32 23.32 C/S 4.29% 7.33% -3.64%

Lorillard IncReynolds

American Inc26,697 06/30/15 67.51 59.70 C&S 13.08% 15.65% 1.55%

MICROS Systems Inc Oracle Corp 4,614 09/02/14 68.00 67.97 Cash 0.04% 4.03% -0.21%

Pepco Holdings Inc Exelon Corp 12,136 09/30/15 27.25 27.56 Cash -1.12% -1.03% -0.65%

Protective Life CorpDai-ichi Life

Ins5,531 - 70.00 69.40 Cash 0.86% - -0.23%

QR Energy LP BreitBurnEnergy Ptnrs 2,378 06/30/15 22.55 21.63 Stk 4.25% 5.09% -0.46%

Riverbed TechnologyElliott

Associates3,133 - 21.00 18.84 Cash 11.46% - -0.79%

Rockwood Holdings Inc Albemarle 6,005 03/31/15 81.19 80.98 C&S 0.26% 0.44% -0.84%

Safeway Inc Albertsons 9,129 12/31/14 40.00 34.78 Cash 15.01% 44.18% -0.66%

Tim Hortons Inc Burger King 13,264 - 93.45 87.40 C&S 6.92% - -

Time Warner Cable IncComcast

Corp68,405 12/31/14 157.32 147.93 Stk 6.35% 18.68% 0.05%

Trulia Inc Zillow Inc 2,287 12/31/15 63.70 61.63 Stk 3.36% 2.50% -1.64%

tw telecom inc Level 3 7,172 12/31/14 41.47 41.04 C&S 1.05% 3.10% -0.19%

URS Corp AECOM 5,795 10/31/14 60.77 60.58 C&S 0.31% 1.86% -0.10%

DEAL ARBITRAGE


BloombergBrief_MA_Newsletter_201459.pdf

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