TIME mergers

The World’s Biggest Generic Drug Maker Just Got Bigger

An employee works in the tablet production plant at Teva Pharmaceutical Industries Ltd.'s headquarters in Jerusalem on Sept. 19, 2011.
Adam Reynolds—Bloomberg via Getty Images An employee works in the tablet production plant at Teva Pharmaceutical Industries Ltd.'s headquarters in Jerusalem on Sept. 19, 2011.

Israeli drug firm Teva acquires $40 billion generic drug business

Israel’s Teva Pharmaceuticals Industries Ltd said Monday it’s dropping its hostile bid for Mylan Inc. and hooking up instead with Allergan Inc.

Tel Aviv-based Teva will buy Allergan’s generics business for $40.5 billion in cash and stock, in a deal that will catapult it into the world’s top 10 pharma companies.

The deal is the latest in a series of eye-popping mergers in the global pharma business, combining the world’s biggest and third-biggest makers of generic drugs. It is a response to increasing pressure from cash-strapped health systems around the world that are trying to keep costs under control. It’s also the biggest ever acquisition by an Israeli company.

It’s also another dramatic twist in the battle for control of Botox-maker Allergan, which agreed in March to be acquired by Actavis Inc. rather than fall into the hands of Canada’s Valeant Pharmaceuticals. Valeant’s bid had been backed by activist investor Bill Ackman. Actavis subsequently renamed itself Allergan.

Mylan had rejected Teva’s approach in April because it didn’t want to sell out for the “low-quality and high-risk currency” of Teva’s shares, especially in the light of the civil war in Teva’s boardroom last year that led to both the chairman and chief executive losing their jobs.

However, the market has increasingly appeared to accept chief executive Ered Vigodman’s assurances that such problems are now a thing of the past, taking the Israeli company’s stock to within touching distance of its all-time high in 2010. Allergan has agreed to take Teva shares worth $6.75 billion as part of the deal, giving its a stake in the Israeli company estimated at just under 10%.

Teva is paying the remaining $33.75 billion in cash, which will allow Allergan to strengthen its balance sheet after taking on $21 billion in debt to finance the Actavis/Allergan deal in March.

Teva said the deal had been approved by both boards and should close in the first quarter of next year.

This article originally appeared on Fortune.com

Read next: This New FDA-Approved Cholesterol Drug Is a Game Changer

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TIME mergers

U.S. Greenlights AT&T and DirecTV Merger

at&t direct tv
Tim Boyle—Bloomberg/Getty Images, Rebecca Sapp—Getty Images

With conditions about expanding broadband access and preserving competition

It’s official: AT&T can complete its purchase of satellite TV provider DirecTV now that the FCC has now approved the final conditions of the merger. The approval was not a surprise but many have been wondering what terms the agency would impose on a deal that will create the country’s biggest pay-TV provider, and has implications for internet policy.

On Friday, the FCC published a news release that set out the terms AT&T will have to follow. They are related to expanding broadband access and preserving competition, and can be summed up like this:

  • Expanding “Fiber to the Premises” to 12.5 million customers: under the deal, AT&T pledges to deploy high speed fiber internet offerings to millions. The FCC says this will help offset any reduced competition in the TV market.
  • Discount broadband for low-income consumers: AT&T will have to provide standalone broadband service (as opposed to a bundle of video and broadband) at a reasonable price to certain consumers.
  • Fiber to schools and libraries: AT&T’s fiber build out will have to reach schools and libraries, which are eligible for federally subsidized broadband rates.
  • Net neutrality for data caps: AT&T’s home internet service comes with data caps. To ensure comply with net neutrality rules, AT&T pledges it will treat all incoming video the same and not exclude DirecTV service from any such caps.
  • Report on interconnection deals: the FCC’s net neutrality rules only apply to consumers, and not at a deeper level of the internet where broadband providers connect to websites. To ensure AT&T doesn’t abuse its power at this deeper level (ie by throttling Netflix), it will have to disclose any “interconnection” agreements so the FCC can ensure they’re not unreasonable.

The terms will remain in place for four years after the merger closes.

The merger go-ahead and conditions were passed by Chairman Tom Wheeler and the agency’s two other Democratic Commissioners. One Republican Commissioner, Michael O’Reilly, concurred in part and the other, Ajit Pai, dissented in part.

The conditions set down on Friday are consistent with Wheeler’s larger priorities of expanding broadband, and making it affordable to all Americans. Earlier this month, the FCC and Google announced a program to bring free fiber access to a number of public housing projects.

This article originally appeared on Fortune.com

TIME mergers

Lockheed Martin Buying Helicopter Maker Sikorsky in $7.1B Deal

Defense Secretary Gates Travels To Afghanistan And Iraq
Justin Sullivan—Getty Images A Blackhawk helicopter (R) carrying U.S. Secretary of Defense Robert Gates arrives in the Green Zone December 10, 2009 in Baghdad, Iraq.

Lockheed Martin Corp., the world’s biggest defense contractor, is about to get even bigger after buying helicopter maker Sikorsky from United Technologies Corp. in a deal worth 7.1 billion after “taking into account tax benefits resulting from the transaction.”

It will be Lockheed’s biggest acquisition since 1995, when it merged with Martin Marietta in a deal valued at $10 billion.

For United Technologies, it’s the end of a 70-year relationship with the helicopter pioneer, maker of the iconic Black Hawk choppers used by the U.S. military (read more about the strategy of new CEO Greg Hayes here). It’s also a reaction to falling margins driven by cuts in the defense budget and, more seriously over the last year, a sharp drop in civil orders from the oil and gas industry. Oil companies have slashed investment spending in response to the 50% drop in oil prices since last summer.

Sikorsky had said in the spring that its first-quarter operating profit fell 11% on a 7% decline in sales. Operating margins fell to 3% last year from over 6% in 2013. The company has already announced plans to shrink the number of its facilities, cutting 1,400 jobs in the process.

The agencies reported that the deal isn’t likely to face too much pressure from antitrust authorities, as Lockheed doesn’t currently make helicopters itself, so the Department of Defense isn’t likely to suffer any reduction on competition for further contracts.

Reuters said that Textron Inc., the parent company of Bell Helicopter, had dropped out of the bidding for Sikorski due to price concerns. United had needed a high price because it faces a chunky tax bill, given that the value of Sikorsky has risen so much since United bought it.

Read next: This Is the Surprising Way the Iranian Military Responded to the Nuclear Deal

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TIME mergers

Charter Promises To Play by the Government’s Internet Rules

Charter Communications Buys Time Warner Cable In $79 Billion Deal
Yvonne Hemsey—Getty Images Charter Communications's office in Newtown, Connecticut is seen May 30, 2015.

If it's allowed to merge with Time Warner Cable

Charter is ready to go above and beyond the government’s requirements for maintaining a free and open Internet, as long as it gets to merge with Time Warner Cable. The cable and Internet giant submitted a statement to the Federal Communications Commission Thursday explaining why the proposed merger between the two companies, along with Bright House Networks, is in the public interest.

If the merger is approved, Charter said that it would not block or throttle certain types of Internet traffic or prioritize certain content in paid “fast lanes.” These are central tenets of net neutrality rules which the FCC recently reenacted, but Charter is agreeing to adhere to these standards even if the new regulations are later ruled illegal (it’s happened before).

Charter also said it would submit disputes over interconnection agreements to the FCC. Interconnection is how ISPs like Charter transfer traffic from content services such as Netflix into people’s homes. The agreements have come under increased public scrutiny over the last year due to drawn-out debates between Netflix and Internet companies like Comcast and Verizon.

Even with these promises, there’s no guarantee that the FCC will approve the merger, which would give Charter about 19 million broadband customers and 17 million TV customers. Comcast dropped a bid to acquire Time Warner Cable earlier this year after it became clear that the FCC was unlikely to approve the deal.

TIME mergers & acquisitions

Here’s Why Merger Approvals Are Getting So Slow

It's not just your imagination

As the number of mergers and acquisitions has rapidly increased in the past few years since the 2007-08 financial crisis, government watchdog agencies have been slower at approving them, The Wall Street Journal reports.

The Justice Department and the Federal Trade Commission are using more time to investigate mergers, the newspaper reported, citing data from antitrust lawyer Paul Denis of Dechert LLP. Denis’ data show recent merger reviews are taking 10 months on average versus seven months in previous years.

The Journal noted a few reasons why recent mergers have been held in regulatory limbo:

External factors explain the length of some antitrust probes. Telecom mergers, such as the Comcast and AT&T deals, require an added layer of FCC review. And deals with a strong international component can take longer as firms coordinate with antitrust agencies overseas.

Some atypically long processes could be affecting Denis’ data. Comcast waited 14 months to hear about its bid for Time Warner Cable before ultimately dropping the plan in the face of regulatory pressure. Meanwhile, a review of AT&T’s attempt to acquire DirecTV has been in the works for more than a year.

TIME mergers

Here’s One Big Reason T-Mobile Should Merge With Dish

Dish has been hoarding something very valuable

Satellite TV provider Dish Network is in talks to merge with wireless carrier T-Mobile, the Wall Street Journal reported late Wednesday evening, a move that would mark the latest in a series of successful and attempted deals consolidating the telecom industry.

T-Mobile—and its customers (and investors and lawyers)—has much to gain from combining with Dish. Despite years of edgy advertising and disruptive offerings flown under the marketing banner of “The Uncarrier,” T-Mobile remains stuck in fourth place behind its wireless rivals in terms of subscribers. T-Mobile’s outspoken CEO, John Legere, has long sought to make a big move to help his company compete with his industry’s twin titans, Verizon and AT&T, most recently by moving toward a merger with rival Sprint. That deal was ultimately called off under pressure from regulators.

What Dish offers T-Mobile is a finite resource valuable for big telecoms: Wireless spectrum, a government-regulated resource that carriers need to be able to offer service. Dish was markedly aggressive in snatching up such spectrum during recent government auctions, and now has about $60 billion worth of it. Until now, it hasn’t been clear what Dish was up to—it doesn’t run its own wireless network, so the spectrum was only beneficial to Dish as something valuable to hoard.

But if Dish and T-Mobile merge, T-Mobile would be able to tap into that spectrum, adding more and faster service across the country. That, combined with the continuation of its industry-unsettling “Uncarrer” strategy, could turn T-Mobile into a real threat for Verizon and AT&T for the first time. And because the deal wouldn’t reduce the number of major mobile carriers in the U.S., regulators are more likely to let this merger happen.

What’s in it for Dish? It would finally get to use that $60 billion in spectrum without the costly expensive of building its own wireless network — and start selling broadband data packages, too, moving into a lucrative new market.

TIME mergers

Everything You Need to Know About Merger Mastermind John Malone

The deal-maker had a hand in creating the cable industry itself, now he's at it again

Once known as the King of Cable, John Malone helped introduce pay-TV to the masses in the ’70s and ’80s. Now the media mogul, who serves as the chairman of the conglomerate Liberty Media, is helping orchestrate a merger between Time Warner Cable and Charter Communications. (Liberty Media owns the largest stake in Charter.) If approved by regulators, the combined cable and broadband giant would serve almost 24 million total customers, making it nearly as large as industry leader Comcast, which has 27 million subscribers. Here’s everything you need to know about Malone.

Claims to Fame: After an early stint as a researcher at Bell Labs, a 32-year-old Malone became the CEO of a struggling cable operator called Tele-Communications Inc, or TCI, in 1973. By the 1980s TCI was the largest pay-TV operator in the United States, wiring millions of Americans’ homes for cable for the first time. He sold the company to AT&T for $55 billion in 1999, then turned his attention to his role as chairman of Liberty Media, where his investments have ranged from Charter to Sirius XM to the Atlanta Braves.

Current Challenges: The cable industry Malone helped build is losing subscribers because of online competitors such as Netflix and Hulu, which let customers stream their favorite television shows whenever they want on any device. Costs are also on the rise as networks charge ever-increasing fees to carry their content—ESPN alone now charges cable companies more than $6 per subscriber.

Biggest Champion: Charter and Time Warner Cable CEOs Tom Rutledge and Rob Marcus. Rutledge, who has been a vocal proponent of consolidation as a way to protect the cable industry’s future, would remain the head of the newly expanded Charter. Marcus, who has been trying to sell Time Warner Cable since he took on the top role at the company last year, could receive more than $61 million in severance pay.

Biggest Obstacle: The Federal Communications Commission, which forced Comcast to scuttle its own plans for a merger with Time Warner Cable in April. Regulators worried that the expanded Comcast would have too much control of the broadband Internet market.

Can He Do It? Malone’s merger has a better shot than Comcast’s because a combined Charter and Time Warner Cable still wouldn’t control a majority of the broadband market. And Malone is as skilled in the dark art tax-saving acquisitions and spinoffs as they come—in addition to being anointed the king, some have called him the Darth Vader of cable.

Vital Stats

74: Malone’s Age

$55 Billion: Money in cash and stock Charter will pay to buy Time Warner Cable

$8.6 billion: Malone’s net worth, according to Forbes

2.2 million acres: Amount of land Malone owns, making him the largest landowner in the U.S. (For more on Malone’s holdings, check out this Fortune story.)

TIME mergers

Why the Latest Cable Merger Won’t Fail Like Comcast

The Charter deal would not be on the scale of the proposed Comcast-TWC merger

Is Charter Communications Inc bold or foolish? The cable company announced it will acquire rival Time Warner Cable Inc – even though Comcast’s attempt to pull off the same deal foundered just weeks ago on anticompetitive concerns.

Comcast, recall, struck out after spending 14 months and $336 million on legal and lobbying bills. The price of failure for Charter would be even steeper: It has agreed to pay Time Warner Cable a $2 billion break-up fee in the event the deal doesn’t go through. But, for now at least, merger fans have little to worry about.

Even though the deal, which also involves Charter swallowing another small operator called Bright House Networks, would create a broadband behemoth, it would not be on the scale of the proposed Comcast-TWC merger. (The latter deal would have given Comcast exclusive control of over half the high-speed broadband connections in the country; the figure in the Charter deal will be closer to one quarter).

That scale difference alone is likely to quell anticompetitive concerns. While FCC Chair Tom Wheeler is already making noise about the need for the deal to “benefit” consumers, this likely means the agency will try to extract a few promises from Charter rather than erecting full-blown roadblocks.

Also aiding Charter is that, unlike Comcast, it doesn’t own content verticals like NBC. In the view of regulators, this reduces the chances of major mischief in the form of the merged company favoring some type of broadband content over others.

One more good sign for Charter is that public interest groups, which promptly threw a fit after Comcast announced its merger plans in early 2014, are so far keeping their powder dry. The president of Public Knowledge, for instance, said that his group is still assessing the implications.

“No, we have to review all details,” said Gene Kimmelman in response to an email asking if his group plans to oppose the merger. “And it must be shown to benefit the public in the FCC review, which is certainly not clear at this point in time. We may oppose unless certain public interest protections are put in place.”

Finally, Charter’s chances are improved by the simple fact that it is not named Comcast. As Fortune editor Alan Murray recently explained, Comcast’s rotten customer service helped it achieve a singular infamy, even by the low standards of America’s little-loved cable companies. This ensured that consumers and regulators alike were determined to stop Comcast from growing bigger.

All this is why the Charter deal, while no slam-dunk, is likely to go through with relatively few hitches.

This article originally appeared on Fortune.com.

TIME mergers

Meet the Man Who Brought AOL Back From the Dead

AOL Inc. Chief Executive Officer Timothy Armstrong Interview
Bloomberg via Getty Images Timothy "Tim" Armstrong, chairman and chief executive officer of AOL Inc., listens to a question during a Bloomberg Television in New York, U.S., on Friday, June 27, 2014.

Tim Armstrong's work led to the $4.4 billion Verizon deal

When Tim Armstrong took over America Online in 2009, Wired wondered whether he had lost his mind. Armstrong was a top ad executive at Google, a still-ascendant Internet giant. America Online wasn’t even America Online anymore. It had been officially redubbed AOL in 2006, and was indeed a shrunken version of its former self. The once-hot consumer tech company was preparing to be spun off from parent company Time Warner in a rebuke of the mega-merger between the two firms in 2000.

(Time Warner merged with AOL in 2000. Time Warner spun off AOL in 2009. Time Warner spun off Time Inc. in 2014)

AOL’s ride has been bumpy since 2009, complete with constant acquisition rumors, public firings of executives and a perplexingly consistent dial-up Internet business. But by refocusing the company’s efforts on new opportunities such as programmatic ad buying and online video, Armstrong has helped the company escape the aged branding of its old free Internet CDs. There’s now a future in AOL–at least that’s the belief held by Verizon, which announced Tuesday that it will buy the company for $4.4 billion in cash, a 23% premium on the company’s share price over the last three months. Armstrong is likely to thank for that.

Armstrong, 44, began his career with stints at Disney and Snowball.com, a youth-focused Web portal that ascended during the dot-com bubble. He joined Google in 2000 to help the fledgling Internet company develop better relationships with advertisers. Armstrong opened Google’s New York “office” at a Starbucks in Manhattan’s Upper West side in 2000. He eventually became the president of Google’s Americas Operations, with one of his primary tasks being to lure lucrative brand advertisers from Madison Avenue onto Google’s myriad ad products. When Armstrong departed the search giant for AOL, former Google CEO Eric Schmidt called him “one of the most creative, fun and respected leaders in the ad industry.”

At AOL, Armstrong has worked to transform the company into an ad tech and media platform. AOL bought The Huffington Post for $315 million in 2011, and it has also snapped up smaller publishing outlets such as TechCrunch and Engadget. The company has been investing heavily in ad tech, with its AOL Platforms network helping publishers place ad units across the Web. Today, less than a quarter of AOL’s revenue comes from its Internet subscriptions, compared to more than 40% in 2010. In 2013, the company posted its first year-on-year revenue gain in eight years, and closed out 2014 with $126 million in profit, a 36% increase over the previous year.

But Armstrong has also been at the helm for some misfires. While still at Google, he co-founded Patch, a news website focused on hyperlocal reporting in communities around the United States. AOL bought Patch after Armstrong took over in 2009, but the site failed to live up to its lofty ambitions. Armstrong ended up publicly firing Patch’s creative director in a conference call with all Patch employees. He later apologized for his brash manner.

Verizon is less interested in Armstrong’s media forays than the ad tech platform he’s helped build out. AOL’s tech will likely be used to power a new mobile video streaming service that Verizon is planning to launch as soon as this summer. The wireless carrier also bought Intel’s failed streaming platform technology OnCue to help develop that service.

Armstrong, who will remain in charge of AOL as it becomes a Verizon subsidiary, sees big opportunities in the new partnership. He wants to kill the memory of those dialup disks once and for all, for instance. In a memo to employees announcing the merger, he boasted, “We are building toward becoming the largest media technology company in the world.”

TIME mergers

Here’s Why Verizon Really Wants AOL

A pedestrian walks past the Verizon Communications Inc. headquarters in New York City on July 26, 2005.
Bloomberg—Bloomberg via Getty Images A pedestrian walks past the Verizon Communications Inc. headquarters in New York City on July 26, 2005.

Verizon officially jumped into the world of ad business

In its acquisition announcement this morning, Verizon Wireless declared its $4.4 billion acquisition of AOL, the Internet stalwart, to be a driver of its “over the top,” or Internet-delivered, content strategy.

This will be positioned by many as a content play: Verizon owns the pipes, and AOL makes the stuff that travels through the pipes. (If that argument sounds familiar, take a walk down memory lane to AOL’s $164 billion merger with Time Warner in 2000. The only difference is, in that deal AOL was the content and Time Warner was the pipes.)

The content play makes sense, and it’s not even the first time Verizon has tried to get into the content business. Remember Sugar String, Verizon’s bizarre foray into tech news last year? The company shuttered it after a month following reports that writers were prohibited from covering politically charged topics such as net neutrality.

AOL has plenty of tech news, from Engadget and TechCrunch to the tech section of the Huffington Post. But the company has been positioning itself as much more than a content company for some time now. In January, when rumors of a Verizon-AOL tie-up first surfaced, analysts pointed to AOL’s foothold in advertising technology as the most attractive piece of the deal. CEO Tim Armstrong has been beating the technology drum, calling ad automation “the single largest trend” on the Web.

AOL’s revenue paints a clear picture of that trend. Last year, the company earned $995 million from display and search ads on the media properties it owns. It earned almost as much — $856 million — from selling ads for third party sites. That’s the advertising technology business, and it’s AOL’s fastest-growing segment. It grew 39% between 2013 and 2014. Contrast that with revenue from its in-house media operations during the same period, where display ads fell 3% and search ads grew just 4%.

Through acquisitions over the years, AOL has built up a advertising technology infrastructure that allows any content company to pay AOL to buy and sell ads on its behalf using algorithms. The rise of programmatic advertising has driven the already-low price of digital ads, such as banners and video pre-rolls, even lower because they eliminate the need for human interaction. Instead, inventory is bundled together, segmented by audience, and algorithms decide which ad will be served to which person through a split-second auction that happens each time a Web page loads.

This isn’t a business Wall Street likes or even understands. To an outside observer, the tech platforms are indistinguishable, indefensible, and in a “race to the bottom,” undercutting each other on prices. That’s why Wall Street has tanked the stocks of a number of publicly traded ad-tech companies. Rocket Fuel has watched its stock go from $56 a share when it went public in 2013 to under $9 per share. Tremor Video, which went public at $9 a share in 2013, now trades below $3. Millennial Media, which went public at $23 per share, now trades below $2.

Now Verizon owns a growing ad-tech company that happens to be in a not-exactly-growing content business. Perhaps the most astounding piece, though, is AOL’s third revenue segment, dial-up subscriptions. A legacy from its early days, AOL still makes a jaw-dropping $606.5 million from dial-up subscribers. Last year, that business shrunk just 7%.

This article originally appeared on Fortune.com.

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