Merger mania hits with $96 billion of deals in 24 hours

Companies kicked off the week by announcing more than US$70 billion (S$95.5 billion) of deals, led by Charles Schwab's US$26 billion buyout of discount brokerage TD Ameritrade Holding. PHOTO: AFP

TOKYO (BLOOMBERG) - A buyout frenzy is gripping boardrooms from Tokyo to Paris to San Francisco, adding fuel to a record-breaking rally in global stocks.

Companies kicked off the week by announcing more than US$70 billion (S$95.5 billion) of deals, led by Charles Schwab's US$26 billion buyout of discount brokerage TD Ameritrade Holding. Multibillion-dollar transactions involving luxury goods giant LVMH, Swiss drugmaker Novartis and Japanese conglomerate Mitsubishi Corp added to the buoyant mood, sending the MSCI World Index to an all-time high.

While the deals have no single theme - ranging from industry consolidation to diversifying revenue away from flagging home markets - one common thread is acquirers availing themselves of cheaper financing as central banks shift towards stimulus mode. Receding fears of a global recession and tentative signs of progress in US-China trade talks may be giving executives confidence to pull the trigger.

"The recent M&A explosion reflects an undeniable economic optimism," said Brock Silvers, managing director at Adamas Asset Management in Hong Kong. "The US enjoys both low inflation and unemployment, while the Fed looks dovish, and trade talks are rumored to be nearing an initial success. Investment capital is plentiful and cheap."

The S&P 500 Index, Dow Jones Industrial Average and Nasdaq Composite Index all closed at records on Monday, while the Stoxx Europe 600 hit a level unseen since May 2015. Japan's Topix Index touched its highest point of 2019 during Tuesday trading, helped in part by a surge of as much as 17 per cent in Hitachi Chemical after larger rival Showa Denko K K said it was eyeing a stake.

Given the low cost of financing, it's surprising there hasn't been even more deals, said Rhett Kessler, senior fund manager at Sydney-based Pengana Capital Group, which oversees about A$3 billion (S$2.78 billion). The Federal Reserve and European Central Bank have both restarted expansions in their balance sheets, and borrowing costs ranging from bond yields to prime and swap rates are down this year.

Monday saw at least 10 deal announcements worth US$1 billion or more, according to data compiled by Bloomberg. The following is a description of some of the latest plans:

Industry Consolidation

Charles Schwab, the San Francisco-based brokerage, announced it would acquire TD Ameritrade, amid a collapse in investing costs as providers embrace zero fees.

Canada's Kirkland Lake Gold announced a C$4.9 billion (S$5 billion) all-share agreement to buy Detour Gold Corp.

EBay Inc is selling its ticket marketplace StubHub to European rival Viagogo for US$4.05 billion in cash.

Branching Out

LVMH, the luxury giant that already sells everything from Louis Vuitton bags to Dom Perignon champagne, is adding the 182-year-old US jeweller Tiffany & Co, known for its robin's egg blue boxes.

Novartis agreed to buy Medicines Co and its promising heart drug for US$9.7 billion, the latest move in the Swiss drugmaker's push to amass novel treatments for complex conditions.

Canadian convenience-store giant Alimentation Couche-Tard offered A$8.6 billion (S$7.96 billion) for fuel retailer Caltex Australia, sweetening its bid for about 2,000 sites as it seeks to broaden a global expansion.

Japan goes Abroad

Asahi Kasei is buying Veloxis Pharmaceuticals for US$1.3 billion, the latest of a series of deals by Japanese drugmakers.

Mitsubishi Corp and Chubu Electric Power are expected to buy Eneco of the Netherlands after being selected as the preferred bidders. The deal may help Japan shift towards renewables.

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