Would-Be Dealmakers Warn of M&A, IPO Delays Due to Shutdown

(Bloomberg) -- Dealmakers are starting to feel pain from the partial U.S. government shutdown.

With multiple regulatory agencies -- including the Securities and Exchange Commission -- down to a skeleton staff, companies are telling investors that their pending takeovers and stock sales could be delayed.

A prolonged shutdown could muddle Eli Lilly & Co.’s plan to unload its stake in Elanco Animal Health Inc., the unit it spun off last year, Lilly Chief Executive Officer Dave Ricks said in an interview Tuesday.

“We have said this year we are going to take the second step and sell the 81 percent that we currently hold,” Ricks said. “We need the SEC to open to do that. That’s a problem.”

The impasse in Washington could be dire for initial public offerings this quarter, according to another industry expert.

“People typically go out in early January with IPOs because if you price after Feb. 14, you need your audit for 2018,” said David Goldschmidt, global head of capital markets at Skadden Arps Slate Meagher & Flom LLP. “The window to price by Feb. 14 is closing and if people aren’t able to do their deals by then there’s a chance we could lose a good part of the first quarter for IPOs.”

Other deals that might be affected by the shutdown that began Dec. 22 include:

• Eclipse Resources Corp. and Blue Ridge Mountain Resources Inc. extended the termination date of their roughly $900 million merger “to provide the parties additional flexibility in light of the shutdown of portions of the U.S. federal government,” according to a regulatory filing Tuesday.
• The Committee on Foreign Investment in the U.S., or CFIUS, -- the agency that vets acquisitions for national securities risks -- told at least two sets of would-be merger partners on Dec. 22 that it had suspended all deadlines for declarations and transactions under review, according to regulatory filings. That could slow down acquisitions that Americas Silver Corp. and InfraREIT Inc. have pending, the companies said last week. Initial CFIUS reviews are 45 days, under normal circumstances.
• Ready Capital Corp. told investors that the “ongoing federal government shutdown” could force it to change the timing of a special meeting scheduled for Feb. 28 to vote on a stock issuance tied to its takeover of Owens Realty Mortgage Inc., according to a filing last week.

Even if the Trump administration reaches a deal with Congress to end the shutdown soon, pending IPOs face continuing delays. That could include highly anticipated listings by Lyft Inc., which announced in December that it had filed confidentially for an IPO, and Uber Technologies Inc., which also filed confidentially last month according to a person familiar with the matter.

“Another couple weeks and you’ll have serious IPO delays,” said Carter Mack, the president and co-founder of JMP Group LLC. “Even if the shutdown ends and the SEC gets back to work, there’s going to be a backlog of deals filed in the interim that haven’t been assigned to examiners.”

Companies had been waiting to see whether 2019 would start with a market rebound, Mack said.

“Normally you’d see companies taking advantage now, but they’re not,” he said.

--With assistance from Ed Ludlow.

To contact the reporters on this story: Matthew Monks in New York at mmonks1@bloomberg.net;Taylor Riggs in New York at triggs2@bloomberg.net;Nabila Ahmed in New York at nahmed54@bloomberg.net;Drew Singer in New York at dsinger28@bloomberg.net

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Michael Hytha

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