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Deal Disruption Spreads With Rout Curbing Mega-IPOs, Lending

Deal Disruption Spreads With Rout Crimping Mega-IPOs, Lending

(Bloomberg) -- The market rout’s effect on dealmaking is widening, as Russian tycoon Mikhail Fridman considers postponing the biggest European initial public offering this year and major private equity and real estate transactions are hit.

Wintershall Dea, Fridman’s oil and gas venture with BASF, is considering delaying its proposed listing, people familiar with the matter said. It had been planning an IPO in the second half of the year that would value the company at $20 billion or more.

  • Wintershall’s listing would have ranked as the largest in the European energy sector in at least a decade
  • Independent explorer Neptune Energy, which has discussed selling shares as early as this year, is also reevaluating the timeline for its listing, the people said. That could delay an exit for its backers, which include private equity firms Carlyle and CVC as well as China’s sovereign wealth fund
  • More than $3 billion of European IPOs have already been scrapped over the past year. Pulled equity offerings have been outnumbering new deals coming to the market, and investor pitches by videoconference have replaced in-person meetings
Deal Disruption Spreads With Rout Curbing Mega-IPOs, Lending

Lenders are getting more wary of extending credit after market volatility surged. Bank of America backed out of financing the biggest take-private of a U.K. company this year, Clayton Dubilier & Rice’s 400 million-pound ($525 million) buyout of public relations firm Huntsworth, Bloomberg News reported Tuesday.

  • BofA pulled out in the final days leading up to last week’s deal announcement, according to people with knowledge of the matter
  • Royal Bank of Canada, which advised CD&R on the deal alongside BofA, jumped in and provided loans to fund the transaction
  • Wall Street firms often win deal mandates by offering to provide loans for a deal, making it relatively unusual for them to advise on a transaction without committing funds from their balance sheet
  • Talks with Chinese banks to refinance one of the world’s longest suspension bridges, which crosses Istanbul’s Bosporus strait, are also being delayed following travel restrictions between China and Turkey, people with knowledge of the matter said

Commercial property deals are getting pushed back as the coronavirus spreads. AEW, a real estate investment manager backed by Natixis, is postponing the launch of a 900 million-euro ($1 billion) European real estate sale, according to people with knowledge of the matter.

  • The office properties are located in countries including France, Germany, the Netherlands and Spain, which have all seen the number of coronavirus cases rise
  • Real estate investors are struggling to gauge the impact of the contagion, as commercial property values typically take months to adjust to market conditions
  • While the steady income provided by long leases can be an attractive safe haven in periods of turmoil, rents could be driven down if the outbreak triggers a global recession
Deal Disruption Spreads With Rout Curbing Mega-IPOs, Lending

Negotiations on one of the world’s biggest M&A deals of 2020 fell apart last week. The Japanese owner of 7-Eleven scrapped plans to acquire Marathon Petroleum’s Speedway gas stations for $22 billion, according to people familiar with the matter.

  • Seven & i Holdings decided not to proceed due to concerns over valuations, with the coronavirus outbreak one of the factors that impacted talks, one person said
  • The deal would have been a record purchase for Seven & i, a retail giant with 69,000 stores worldwide, including 7-Eleven outlets and Ito-Yokado supermarkets in Japan
Deal Disruption Spreads With Rout Curbing Mega-IPOs, Lending

Companies are considering renegotiating previously announced mergers and acquisitions after the outbreak of the coronavirus, according to law firm Hogan Lovells.

  • Some are seeking to change the terms of pending transactions, while others are postponing deals, Hogan Lovells said in a report Tuesday
  • Deal flows will likely slow due to financing difficulties and the impact of travel on negotiations, according to a separate report from law firm White & Case
  • Some buyers may also hold off on acquisitions hoping that they will be able to snap up those assets at a lower price in the future, White & Case said
Read more:
Private Equity Firms With Energy Holdings Hit in Downdraft
Jet-Setting Bankers Grounded With Virus Fears Hobbling M&A
IPO Pitches Now Come via Video as Meetings Dwindle: ECM Watch
Private Equity at Crossroads as Rout Offers Deals, Curbs Lending
ANALYSIS: Morgan Stanley, E*Trade Merger Excludes Coronavirus

To contact Bloomberg News staff for this story: Dinesh Nair in London at dnair5@bloomberg.net;Myriam Balezou in London at mbalezou@bloomberg.net;David Hellier in London at dhellier@bloomberg.net;Jack Sidders in London at jsidders@bloomberg.net;Swetha Gopinath in London at sgopinath12@bloomberg.net;Ercan Ersoy in Istanbul at eersoy@bloomberg.net;Asli Kandemir in Istanbul at akandemir@bloomberg.net;Takako Taniguchi in Tokyo at ttaniguchi4@bloomberg.net;Manuel Baigorri in Hong Kong at mbaigorri@bloomberg.net;Lisa Du in Tokyo at ldu31@bloomberg.net

To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, Michael Hytha

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