February 2021 public M&A update: PE firms search for their perfect match

February 2021 public M&A update: PE firms search for their perfect match

Six of the eight (75%) public M&A deals (within Market Tracker’s scope) announced in February, featured a P2P element, which included both of the firm offers announced.

Among the firm offers announced in February is yet another offer for Signature Aviation. Existing competing bidders from US private equity firms Global infrastructure Partners, and Blackstone (in conjunction with Cascade), decided to combine their efforts and make a £3.46 bn proposal for the FTSE 250 company. This follows on from Global Infrastructure’s £3.4 bn solo recommended offer for Signature Aviation in January (for more on this see Global Infrastructure Partners take the lead on Signature Aviation bid). The joint offer may have been influenced by Cascade’s agreement with Blackstone, stating it would vote against any competing offer for Signature Aviation in respect of its 19% holding in the company. The prospect of a bidding war saw Signature Aviation’s shares jump over 60% since Blackstone and GIP first expressed an interest in December 2020.

The second firm offer comes from another US private equity group, Starwood Funds, who announced a £467.9 m recommended offer for RDI REIT plc. The announcement saw RDI close over 33% higher on 26 February, at 122 pence per share, bringing the investment trust back up to pre Covid-19 levels. As is the case for Cascade in the Signature Aviation offer, Starwood Funds already have a significant holding in RDI, with shares representing 29.59% of RDI’s existing share capital. Starwood Funds has notably maintained its ‘significant strategic shareholding’ in RDI since July 2020, at a time where the company was trading at a significant discount following the onslaught of the pandemic.

The increase in US investors is a continuing trend. See also: New year, New deals as 2021 sees a continued uptick in M&A activity and Foreign companies in UK shopping spree.

Of the recent announcements, private equity house TDR Capital LLP featured on two possible offers. The first is a joint possible offer with US private equity firm, Squared Capital, with a £2.25 bn offer for FTSE 250 energy equipment supplier, Aggreko plc. The FTSE 250 company supplies numerous events, including Glastonbury, and has a £225 m contract for the Tokyo Olympics and Paralympics. Aggreko, who had lost more than half its share price during the pandemic, before starting to make a slow recovery in November 2020, saw its share price close around 33% higher on the day of the announcement. The consortium will have until 5 March to confirm whether it will be making an offer for Aggreko.

TDR Capital also made a £504 m possible offer for financial services company, Arrow Global, which represents the fourth offer TDR has made for the company. The previous three proposals were rejected by the board of Aggreko, as the board felt the offers materially undervalued the company and its prospects.  However, the latest proposal has the support of Founder and Chief Investment Officer, Zachary Lewy, who provided a binding letter of support to TDR on 5 February in respect of his 2.1% holding in Arrow Global. TDR Capital has until 8 March to confirm whether it will be making a firm offer for Arrow Global.

Retailer, French Connection, has been the interest of numerous possible takeovers recently, with Spotlight Brands in conjunction with US private equity group Gordon Brothers International LLC (‘Spotlight’) and Go Global Retail in conjunction with HMJ International Services Ltd (‘Go Global’) announcing possible offers for the company on 5 February 2021. Since the announcement, Spotlight confirmed on 2 March 2021 that it will not be making an offer for French Connection, however discussions are still ongoing with Go Global. Alongside ongoing discussions with Go Global, French Connection announced on 2 March that it has been approached by a further three interested parties. Accordingly, the retailer has agreed with the Takeover Panel that any discussions will take place in the context of a Formal Sale Process (FSP). The commencement of the FSP means that Go Global will no longer be subject to the ‘Put up or Shut Up’ deadline of 5 March 2021.

P2P transactions accounted for 67% of all firm offers announced in 2020 and made up 58% of the total deal value. This was a notable increase from previous years, as reported in our 2020 Public M&A report. In line with our predictions, this trend looks set to continue with private equity firms and financial institutions featuring on 63% of firm offers and 70% of possible offers so far in 2021. The increase in P2P transactions has been attributed to a number of factors, including an excess of ‘dry powder’ (cash reserves), more favourable currency rates due to the fall in the sterling, and ‘good value’ deals resulting from a fall in share price due to the pandemic. 

For more on the trends and developments in the public M&A market in 2020, see our Market Tracker trend report: Trends in UK Public M&A 2020. Market Tracker will also follow up on these trends in its Q1 2021 update. 

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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.