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Merger Monday: Marriott, Prologis, Marathon, J Sainsbury Plc. and United Therapeutics on a buying spree

Last updated: 11:26 30 Apr 2018 EDT, First published: 10:30 30 Apr 2018 EDT

A giant red fish gobbling ships made with dollar bills
Markets were up on M&A activity with sellers SteadyMed, ILG, Andeavor and DCT Industrial Trust shares popping

A slew of companies with deep pockets on both sides of the Atlantic went on a buying spree on Merger Monday giving investors reasons to cheer the spring in M&A activity.

Supermarket shares were among movers on Monday after J Sainsbury plc. (LON:SBRY) agreed to merge with Walmart Inc’s (NYSE:WMT) U.K. business, ASDA Group Ltd, creating a supermarket colossus with estimated combined revenue of around US$70.15bn.

Read: Sainsbury-Asda: Five reasons why this £14bn mega-merger was inevitable

In return, Walmart will receive US$4.1bn in cash and a 42% stake in the combined business, the companies said in a statement on Monday.

CNBC reported on Monday that Walmart could use the cash from the sale to fuel its expansion in other international markets. Walmart is close to putting a $US12bn ring on India’s Flipkart which goes toe-to-toe with Amazon in India's booming e-commerce market.

Walmart shares were up 1.48% to US$88.58. 

Consolidation in the timeshare business

Meanwhile, Marriott Vacations Worldwide Corp. (NYSE: VAC) announced it's buying rival timeshare business ILG Inc. (NASDAQ:ILG) in a cash-and-stock deal valued at about US$4.7bn.

ILG Inc. shares popped 6% to US$34.60 on the news, while Marriott plunged 5.6% to US$127.00.

ILG has more than 250,000 owners in its Vistana Signature Experiences and Hyatt Vacation Ownership portfolios. The combined company will include approximately 650,000 owners and seven upscale and luxury brands.

Prologis Inc. (NYSE:PLD), a logistics company, will acquire smaller U.S. rival DCT Industrial Trust Inc. (NYSE:DCT), in an US$8.4bn all-stock transaction, the two companies said on Sunday.

Seller DCT popped 11.8% to US$65.69, while shares of buyer Prologis fell 2.24% to US$65.

M&A heats up oil industry

The biggest M&A news came from the oil industry with Marathon Petroleum Corp. (NYSE:MPC) buying rival oil refiner Andeavor (NYSE:ANDV) for US$23.3bn in a deal that would create the largest independent fuel maker in the United States.    

Oil refiner Andeavor was up nearly 16% to $US142, while Marathon slid 3.86% to US$78.29.

In a note seen by Bloomberg, Tudor Pickering Holt & Co. analyst Matthew Blair, called Andeavor a “big winner” in a deal that is “extremely positive.” As for Marathon, “big synergies will be key,” Blair wrote, adding that regulatory problems should be minimal, “given the disparate geographical markets of each company.” 

Confidence returns to deal-making

The pharma sector also saw M&A activity with SteadyMed Ltd. (NASDAQ:STDY) surging on a buyout by Maryland-based United Therapeutics Corp. (NASDAQ:UTHR).

In a deal valued at US$216mln, United Therapeutics will also make milestone payments related to SteadyMed’s drug Trevyent.

Read: SteadyMed surges in pre-market on buyout by United Therapeutics

The specialty pharmaceutical company’s shares soared 78% to US$4.72 in morning trade while United Technologies was nominally down.

World stocks are set to notch up a positive month for the first time since January, helped by the headline-grabbing M&A deals.

“Large M&A news shows that confidence is there for making big deals. And while I would suggest not all of the recent deals are positive, the ASDA-Sainsbury’s one looks particularly good and the stock price reactions seems to bear that out,” Michael Hewson, chief market analyst at CMC Markets, told Reuters.

 

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