Carlyle Group Leads $7B Medtronic Deal, Bain & Cinven to Exit Pharma Giant, Sycamore Acquires Retailer Chico's

Insights

Chart of the Week: Blackstone's portfolio operations team accounts for 40% of Managing Directors in its private equity group. In a new research note, we take an inside look at the background, skills, and experience of Blackstone's operating partners. (Read More)

Recent Reports

• Western Europe Private Equity Report: Q2 2023
• North America Private Equity Report: Q2 2023
• Private Equity Exits Report: Q2 2023
• Private Equity Buyouts Report: Q2 2023

Deal News

Carlyle Group is negotiating to acquire a majority stake in two of Medtronic Plc's medical device businesses, which will collectively value the combined entity at over $7 billion. Medtronic was previously rumored to be spinning off the business units into a separate public entity to concentrate on higher-growth segments like heart and diabetes devices. If a deal materializes, the businesses will transition into a new company, majority-controlled by Carlyle, while Medtronic retains a 35% stake. (Source)

Bain Capital and Cinven are preparing to exit German pharmaceutical-maker Stada Arzneimittel AG, at an expected valuation of €10 billion ($10.5 billion). The private equity firms selected Jefferies Financial Group Inc., JPMorgan Chase & Co., Morgan Stanley, and Rothschild & Co. to broker the exit. Bain and Cinven’s acquired the Stada for €5.3 billion in 2017, helping to grow EBITDA 17% last year to €875 million. (Source)

GTCR and Apax Partners are exploring exit options for insurance firm AssuredPartners, with a possible valuation up to $16 billion. The company, projected to hit approximately $850 million in annual EBITDA, functions in an industry benefiting from inflation-influenced rises in asset values and subsequent broker fees. (Source)

Blackstone will facilitate the merger of PE-backed healthcare companies HealthComp Holding Company LLC and Virgin Pulse. The merged entity, valued at approximately $3 billion, will offer health-plan design and management, preventative care, and digital therapeutics to over 20 million members and 1,000+ self-insured employers. New Mountain Capital, the owner of HealthComp Holding Company LLC, will become the majority owner post-merger. (Source)

Canadian private equity firm Persistence Capital Partners has agreed to acquire the remaining shares of Neighbourly Pharmacy. The proposed buyout, priced at CAD 20.50 per share, reflects a 69% premium over Monday’s closing and a 47% premium to the 20-day volume-weighted average price of CAD 13.96, albeit below the 52-week high of CAD 25.50. Persistence Capital, already holding approximately 50.2% of Neighbourly's common shares, aims to acquire the remaining stakes through a newly formed entity, following a year where Neighbourly’s stock declined by about 48%. (Source)

Sycamore Partners has agreed to acquire apparel retailer Chico’s in a $938 million all-cash deal, securing shares at a 65% premium. Sycamore has presented several offers to acquire the retailer since 2015. More recently, activist investor Barington Capital Group has put pressure on Chico’s board to sell the company amid slowing sales and operational challenges. Chico’s, in addition to its namesake retail stores, also owns women’s apparel retailer White House Black Market. The deal is expected to close in Q1 2024. (Source)

Vista Equity Partners will acquire a majority stake in enterprise software-maker TRG Screen for $250 million in growth capital alongside an unnamed co-investor. Pamlico Capital will exit its TRG position, which it initially backed in 2018. Steve Matthews, CEO for the past nine years, becomes executive chairman, while Leigh Walters ascends to the CEO position. (Source)

Industry News

Carlyle Group Inc. is recalibrating its private equity business in the U.S., steering away from investments in U.S. consumer brands and restructuring its focus towards core sectors including technology and financial services. The U.S. consumer, media, and retail investing team is being disbanded, and four dealmakers, including partner David Basto, have been asked to depart. The pivot reflects a response to “increasingly challenging investment trends” in the U.S. consumer sector, with future U.S. strategies honing in on healthcare, government services, industrials, technology, and financial services. Almost a dozen staff will experience job changes or eliminations due to the withdrawal from U.S. consumer bets, although some will transfer to other teams. The firm will persist in consumer investments in Europe and Asia. CEO Harvey Schwartz is implementing stricter cost discipline, aiming to enhance stock price and is scrutinizing all business lines, while seeking to assure investors of the presence of key dealmakers to manage their investments. (Bloomberg)

Brookfield Asset Management Ltd. has garnered $12 billion for BCP VI, its largest private equity fund to date, with a self-commitment of $3.5 billion and the balance sourced from varied investors like pension plans and family offices. Even amidst a global lull in mergers and acquisitions, Brookfield has aggressively pursued multibillion-dollar deals, including purchases of American Equity Investment Life Holding Co. and Network International Holdings Plc. Though about $4 billion has already been utilized, Brookfield sees additional opportunities in sectors like technology and health care, especially given current more reasonable valuations, according to Cyrus Madon, CEO of Brookfield's private equity group. (MarketWatch)

Wells Fargo has sold approximately $2 billion of its private equity investments, specifically in funds managed by Norwest Equity Partners and Norwest Mezzanine Partners, as part of an initiative to concentrate on its core businesses amidst economic uncertainty (Reuters)

The decline in private-equity deal-making activity and the increase in interest rates are prompting private-equity investors to recalibrate their expectations, as expressed by executives at a recent industry conference. Kipp deVeer of Ares Management highlighted that fund assets will likely continue to sell for less due to higher interest rates, which have escalated debt costs and subsequently reduced return expectations and asset purchase prices for firms. The first half of the current year witnessed a 30% decrease in private-equity transactions, totaling around $418.32 billion, compared to the same period in 2022. The consequential slowdown in investment exits impedes the cash return flow to fund investors, limiting their capital for new fund commitments. Despite these challenges, higher rates have unveiled new opportunities in debt investing, presenting potentially higher returns and additional safeguards against insolvency for investors in floating-rate loans issued by private-debt funds. (Wall Street Journal)

Questions? Email us at news@valueaddpe.com