Category: Mergers

EMC Expands the Cloud with Purchase of Virtustream

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Hopkinton-based data storage leader EMC Corp. has announced plans to acquire Virtustream, a privately held Maryland firm that specializes in migrating business software to the cloud.

In announcing the deal, EMC said Virtustream would form the basis of EMC’s new managed cloud services business. EMC has been shifting its strategy to increase its focus on helping customers move all their application to cloud-based IT environments.

EMC said the Virtustream deal, when finalized, would complete “the industry’s most comprehensive hybrid cloud portfolio to support all applications, all workloads and all cloud models.”

Virtustream’s chief executive officer Rodney Rogers will report to EMC Chairman Joe Tucci.

“Virtustream is an exceptional company and this is a critical and transformative acquisition for EMC in one of the industry’s fastest-growing and most important sectors,” Tucci said. “With Virtustream in place, EMC will be uniquely positioned as a single source for our customers’ entire hybrid cloud infrastructure and services needs.”

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Virtustream, a fast-growing company founded in 2009, works with large enterprises worldwide to migrate, run and manage mission-critical applications in the cloud, including SAP. Virtustream customers include marquis enterprises such as The Coca-Cola Co., Domino Sugar, Heinz, Hess Corporation, Kawasaki, Lexmark and Scotts Miracle-Gro.

As it stands, EMC offers customers its Federation Enterprise Hybrid Cloud Solution, an on-premise private cloud offering that provides access to public cloud services such as VMware vCloud Air. Virtustream will bring to the EMC portfolio a managed cloud software and services capability available on or off premises. EMC intends to incorporate the Virtustream offerings into the Federation Enterprise Hybrid Cloud Solution where they expect the combined capabilities, products and services will allow them to address the complete breadth of cloud computing needs.

Stop & Shop and Hannaford – The Makings of an Arranged Marriage

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The parent companies of regional grocery giants Stop & Shop and Hannaford have been looking into combining their operations under one umbrella for quite some time, but they may have a small roadblock in that plan – the Commonwealth of Massachusetts.

The shareholders of Royal Ahold and the Delhaize Group were quite enthusiastic about news of a possible merger, demonstrating their assent by way of a significant rise in both stock prices. However, some officials here in Massachusetts think antitrust issues may bring the entire affair to a screeching halt.

Hannaford has 25 stores in Massachusetts and another 131 fly the Stop & Shop banner. Like many brick-and-mortar competitors in other industries, they are often set up in close proximity to each other and officials fear this will lead to problems with fair competition following the proposed merger.

Both companies do more than 60% of their commerce in the US. While Ahold, parent company of Stop & Shop, has properties mostly clustered in the Northeast, Delhaize does most of its business in the U.S. as Food Lion, a Southeastern regional powerhouse. Analysts say that a merger would realize somewhere in the neighborhood of $670 million per year in reduced costs.

Massachusetts officials are far more concerned with the issues of competition. Economists who favor the position of the state are saying that the merger could go off without a hitch if some of the stores were sold. Everything is speculative at the moment, however, with both sides looking for a way to compromise.

It is unclear whether the merger of the two companies would result in a name change. Both brands are valued in the state, and part of the issue rests in trying to determine what will happen with the customer-facing side of the brand.

Keep your eyes on this space for updates.

Raytheon buys 80% of Websense for $1.9 billion

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In an effort to improve its cyber-protection technology, Waltham-based Raytheon has reached agreement with private-equity firm Vista Equity Partners LLC  to acquire an 80 percent share of Websense Inc. for $1.9 billion. Vista acquired Websense two years ago for about $990 million.

Raytheon plans to integrate Websense into its existing  Raytheon Cyber Products unit and operate the new division with Websense incumbent CEO John McCormack at the helm.

In addition to contributing the $400 million cyber products unit,  Raytheon will infuse $1.6 billion in cash, $600 million in the form of a loan. For its 20 percent stake, Vista will contribute $335 million to the venture.

Websense’s Triton platform, which allows companies to adapt and respond to future cyber attacks, is said to be what particularly appealed to Raytheon.

In November, Raytheon spent $420 million to bolster its intelligence business by acquiring surveillance and cybersecurity company Blackbird Technologies.

A Full and Exciting Year for Harvard Bioscience

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Harvard Bioscience of Holliston, a global developer, manufacturer and marketer of a range of life sciences equipment, has reported record quarterly revenues of $30.4 million for Q4-2014, an approximate 9.0 percent increase of $2.5 million in comparison to the $27.9 million earned in Q4-2013.

The company stated it was able to significantly improve its operating margins and other key metrics in the final quarter of 2014. “The fourth quarter wrapped up a very fulfilling and exciting year for our company,” President and CEO Jeffrey A. Duchemin said in a statement. According to Duchemin, acquisitions completed last October, combined with a new management philosophy, contributed to the strong finish. Acquisitions included Multi Channel Systems MCS GmbH and Triangle Biosystems Inc.

Combined with their procurement of HEKA Electronik of Germany in the first quarter of 2015, Duchemin expects the new additions to continue to “contribute toward our organic growth as our sales team offers a complete set of electrophysiology solutions to our customers.” He concluded, “In 2014, we put together the building blocks of a solid foundation that we believe will continue to deliver value for our shareholders. We look forward to another great year.”

Income from continuing operations, as measured under U.S. generally accepted accounting principles (GAAP), was a loss of $19,000, or $0.00 per diluted share, for the three months ended Dec. 31, 2014; compared with a loss of $255,000, or $0.01 per diluted share, for the same quarter in 2013. For the year 2014, revenues were $108.7 million, an increase of 3.3 percent, or $3.5 million, from 2013’s results.

Boston Scientific Purchases American Medical Systems Unit for 1.6 Billion

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Boston Scientific, a Marlborough-based life sciences company, announced on Monday that it has agreed to acquire the urology division of American Medical Systems for $1.6 billion. Boston Scientific expects to close the acquisition in the third quarter of 2015. This will be the company’s largest acquisition since it purchased Guidant Corp, a manufacturer of cardiovascular products, in 2006 for $27.2 billion.

American Medical Systems (AMS), a division of Endo International, published reports last week that Boston Scientific was to close a deal with Endo for an unspecified AMS unit. The urology unit of AMS, based in Minnetonka, Minnesota, employs roughly 800 workers worldwide. It covers the men’s health and prostate health divisions of AMS. The unit is being sold for $1.6 billion up front, plus a potential for another $50 million based on the unit’s sales in 2016. Acquisition of the urology branch encompasses AMS products that treat erectile dysfunction, male urinary incontinence, and benign prostatic hyperplasia.

Boston Scientific (BSX) states the company’s technologies complement their portfolio of products that treat other urological conditions, including kidney stones, pelvic organ prolapse, female incontinence and abnormal uterine bleeding. This follows their purchase of Bayer AG and IOGyn last year. IOGyn, based in California, received FDA approval for a system treating uterine fibroids and polyps. AMS products that treat urology related issues in women will not be included in the deal.

Over the course of the previous year, the AMS unit generated $400 million in sales and adjusted operating income of about $130 million, with net income of around $60 million according to BSX. President and CEO of Boston Scientific, Mike Mahoney, expects the acquisition will create a business with annual sales of nearly $1 billion and will enable “strong future growth prospects through portfolio innovation and international market expansion.” BSX anticipates more than $50 million in annual pre-tax cost savings by the end of 2018 with boosted profits starting as early as 2016.

The announcement comes less than a month after an out-of-court settlement with competitor Johnson & Johnson. BSX paid $600 million to their rivals after Johnson & Johnson disputed their purchase of Guidant. The settlement avoided a $7.2 billion lawsuit filed by the rival company that had agreed to purchase Guidant before BSX acquired it for $27.2 billion.

Study Foresees Continued Medical Technology Growth

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The medical technology industry is growing as an increasingly significant sector of the Massachusetts economy. According to predictions from Evaluate Ltd., a market research firm, it is expected to grow at a 5 percent annual rate for the next five years. The report, entitled “EvaluateMedTech World Preview 2014, Outlook to 2020” (free registration required for download) shows that medical technology sales are expected to reach $514 billion by the end of that period, with influential mergers and emerging players reconstructing the faces of industry leaders.

Westborough-based Coghlin Companies, Inc. recently announced that their subsidiary Cogmedix, a medical device manufacturer founded in 2008, had outgrown its space and was relocating to its new location in Worcester, more than doubling the size of its facility to keep up with growth and demand. The announcement of the merger involving Medtronic and Covidien, estimated at $42.9 billion, is  is anticipated to form the new market leader in an industry that will be worth over half a trillion dollars by 2020.

Research has also shown that spending on global research and development will reach $30.5 billion by that year, a growth of 4.2 percent. In the first half of 2014, $1.3 billion was raised in completed medical technology IPO offerings, a 44 percent increase from the same period in 2013. During the first half of this year, the value of mergers in the medical technology field rocketed up by 363 percent compared with the same period the year before, a huge indicator of what can be expected in the near future.

Staples Acquiring Office Depot for $6.3 Billion

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Options for stationery and computer accessories are set to change after Framingham-based Staples, Inc. officially merges with Office Depot next year. Staples is acquiring its major rival in a $6.3 billion deal that should be completed by the end of this year. CEO Ron Sargent aims to reinvent the brand and move into areas beyond office supplies.

Office Depot acquired Office Max in 2013. The combined annual profits of all three companies reaches nearly $40 billion and the merger is expected to save Staples at least $1 billion. The deal came about in an effort to address the issue of Staples’ declining stock as well as the company’s increased focus on online sales instead of retail space.

In January, activist investor Starboard Value, who has a financial stake in both Staples and Office Depot, urged Sargent to pursue a merger. The idea was unanimously approved by the boards of directors of both companies, though the deal is still subject to the approval of regulators and Office Depot shareholders.

Office Depot, based in Boca Raton, Florida, will give shareholders $7.25 in cash and 0.2188 of a share in Staples when the merger is complete. In a statement, Staples responded to Starboard Value’s letter by saying they were open to “constructive dialogue” with shareholders as the merger moves forward.

Based on results from the last trading day prior to media reports of a merger, the deal values Office Depot shares at $11. That result indicates a 44-percent premium over the day’s closing price and a 65-percent premium over the previous 90-day closing price average for Office Depot shares, indications that the merger could be lucrative business for all involved.

Study Foresees Continued Medical Technology Growth

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In recent years, the medical technology and medical device manufacturing industries have become an increasingly significant sector of the Massachusetts economy. According to predictions from Evaluate Ltd., a market research firm, it is expected to grow at a five percent annual rate for the next five years. The report, entitled “EvaluateMedTech World Preview 2014, Outlook to 2020,” shows that medical technology sales are expected to reach $514 billion by the end of that period, with influential mergers reconstructing the faces of industry leaders.

The announcement of the merger involving Medtronic and Covidien, estimated at $42.9 billion, is one such example. It is anticipated that together they could become the new market leader in an industry that will be worth over half a trillion dollars by 2020. Research has also shown that spending on global research and development will reach $30.5 billion by that year, a growth of 4.2 percent. In the first half of 2014, $1.3 billion was raised in completed medical technology IPO offerings, a 44 percent increase from the same period in 2013. During the first half of this year, the value of mergers in the medical technology field rocketed up by 363 percent compared with the same period the year before, a huge indicator of what can be expected at least in the near future.

The Evaluate Ltd. report predicted that activity among the major players in the sector will continue on a large scale. The Medtronic-Covidien union represents the biggest merger in the industry’s history and marks the beginning of a period of rapid change for the market. This, and other megamergers, will continue to dominate and reshape the various areas of the field in the immediate and possibly extended future.

EnerNOC to Spend $76 Million for World Energy Solutions

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Boston energy software company EnerNOC Inc. announced on Tuesday that they plan to lay out $76 million in cash for energy auction business World Energy Solutions, Inc.  This places a value of $5.50 for each share of World Energy stock, about 1/3 higher than Tuesday’s closing price of $4.15 per share (Nasdaq: XWES). EnerNOC will also be taking on World Energy’s debt, totaling approximately $10 million as of the end of June.

Directors at both Enernoc and World Energy already approved the deal, which is expected to close during Q1-2015.

EnerNOC Chairman and Chief Executive Timothy G. Healy said, “This acquisition advances our energy intelligence software business and will help us deliver more value to our enterprise customers who are looking to increase productivity and take control of their energy costs.”

The two companies have overlapping customer bases. Users of EnerNOC software include companies, utilities and various other entities buying and managing energy while World Energy runs online energy auctions.

EnerNOC revenues during 2013 totaled about $383 million with profits of $22 million, compared to World Energy’s revenues of $35 million with a net loss of $2 million. EnerNOC reported it expects the deal to boost its annual revenue by about $30 million.

World Energy is allowed to seek offers from other buyers for another 55 days, with EnerNOC having the right to match any offer.

What the deal means for employment is unclear. World Energy currently has more than 100 workers. EnerNOC said in an SEC filing that employment decisions will be made during planning to integrate the businesses.

Boston’s Sapient Corp to be Sold in $3.7B deal

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French advertising conglomerate Publicis Groupe has acquired independent Boston-based ad agency Sapient Corp. for $3.7 billion in a deal that was announced on Monday morning.

Sapient’s current co-chairman and CEO Alan Herrick will be CEO of the new Publicis.Sapient group, which will add Razorfish Global and Rosetta, two other subsidiaries of Publicis within the new company. The creation of that organization is expected to increase the total revenue that Publicis receives from digital and interactive services to 50 percent.

Most of the principals involved noted that Sapient’s production operations in India will help cut costs for the new firm, while also stating that the offices of certain unnamed subsidiaries will be consolidated.

Almost eight years ago, Publicis purchased another Boston digital-related company, Digitas, for $1.3 million, which fared better than Publicis’ last attempt at a merger, when a proposed deal with Omnicom collapsed. That subsidiary will now be known as DigitasLBi, and will join Sapient’s former subsidiaries: SapientNitro, Sapient Global Markets and Sapient Government Services in what Publicis is calling a new platform.

The acquisition is expected to be completed sometime early next year, with Publicis set to pay $25 in cash for each share of Sapient. Based on last Friday’s share price, that would give Sapient shareholders a 44 percent premium.

Sapient began as a consultant for IT firms in 1990, but derives the majority of its nearly $1.4 billion current revenue as a result of its evolution into a marketing and ad agency. The company has offices in 37 cities that has nearly 12,000 employees across the world, including 640 in Boston.

Since 2009, Sapient has acquired a number of firms, most notably New York-based Nitro, which was renamed the aforementioned SapientNitro following the merger of the two companies’ staffs. Other acquisitions included design studio Second Story, consumer research firm Iota, marketing analytics company (m)Phasize, and La Comunidad an ad agency geared toward Latino demographics.