September mergers: $60 billion of deals in just a few days

Jeff
Chiu/Getty Images

• September has seen a flurry of activity in mergers and
  acquisitions with four major deals announced over the past
  week.
• Comcast
  won a bidding war for Sky,
  miner
  Randgold Resources was bought by Barrick
  Gold,
  Michael Kors picked up Versace, and Pandora
  was purchased by Sirius
  XM.
• The combined deals are worth more than $60
  billion.
• “September can always be a big month for
  deals,” Ben Kelly, a merger arbitrage analyst at Louis
  Capital, told Business Insider on Tuesday.

The final two weeks of September have seen a flurry of activity
in the dealmaking space, with four major deals — and rumors of a
fifth — announced in just a handful of days.

Over the weekend, the bidding war for Sky finally reached its
conclusion when US broadcasting giant Comcast outbid Fox for the
British company in a deal that values it at more than $40
billion.

A rare sealed auction, in which both Comcast and Fox were
required to bid for Sky’s assets without knowing what the other
had bid,
saw Comcast outbid Fox by more than $2 per share,
offering £17.28 ($22.71) per share to Fox’s £15.67
($20.60).

Sky’s board immediately recommended Comcast’s offer to its
shareholders, and the biggest takeover in European media history
was complete.

“This acquisition will allow us to quickly, efficiently and
meaningfully increase our customer base and expand
internationally,” Comcast CEO Brian Roberts said after the
deal was confirmed.

The Sky-Comcast deal has been swiftly followed by three
major, albeit smaller, deals. First up, Sirius XM — the New
York-based digital media company focused on satellite radio — had
a
$3.5 billion bid for music-streaming service Pandora accepted
on Monday.

Even bigger than Sirius XM and Pandora’s tie-up was news that
UK-listed
Randgold Resources is to be bought by Barrick Gold, creating
an $18 billion gold-mining giant, the biggest in the world,
producing in excess of 200 tonnes of gold a year.

“Our industry has been criticised for its short-term focus,
undisciplined growth and poor returns on invested capital,” Mark
Bristow, Chief Executive of Randgold said in a statement. “The
merged company will be very different,” 

He added: “Its goal will be to deliver sector leading returns,
and in order to achieve this, we will need to take a very
critical view of our asset base and how we run our business, and
be prepared to make tough decisions.”

The final deal of the week’s mergers and acquisitions bonanza saw

Michael Kors announce Tuesday that it has agreed to buy the
Italian fashion house Versace in a deal with an
enterprise value of $2.1 billion. 

“We are excited to have Versace as part of our family of
luxury brands, and we are committed to investing in its
growth,” 
Michael
Kors
 Chairman and CEO 
John
Idol said in a press
release.
 

Leaving aside the completed deals, there are also
reports that ride-sharing giant Uber is ready to bid for the
London-based food-delivery platform Deliveroo. Deliveroo was
valued at around $2 billion last year, and according to
Bloomberg, would not be interested in selling for any price
that’s not “considerably higher” than its current valuation. A
deal between the two companies is likely a long way off, but that
it is even being discussed and reported is significant.

Why the sudden flurry of deals?

There are numerous reasons for the recent M&A boom,
which also saw
Coca-Cola buy Costa Coffee in late August. First up, big
mergers tend to come towards the end of economic cycles. It’s not
entirely clear whether or not we’re approaching the end of a
cycle, or if the current economic and stock market boom will
continue, but companies clearly think economic conditions are
right for deals.

September, the final month of the third quarter, also tends
to provide a solid time of year to go for a big deal.

“September can always be a big month for deals as projects that
were put on hold, or were having finishing touches put on them
over the Summer break get the sign-off from key decision makers
coming back from their holidays,” Ben Kelly, a merger arbitrage
analyst at Louis Capital told Business Insider on Tuesday.

“Now we have Brexit approaching an end-game and acquirers are
happy to take advantage of weak GBP to pick up assets,” Kelly
added with regards to deals for Sky and Randgold. Those deals saw
non-UK firms buy British companies, using the weakness of the
pound against the dollar to secure relatively less expensive
buys.