Strategic Asset Monitor in the S&P500

Summary of Yum! Brands' Recent Transactions and Their Impacts

On January 8, 2025, Yum! Brands, Inc. announced two significant developments:

1. Termination of Franchise Agreements in Turkey:

   • Yum! Brands terminated its franchise agreements with IS Gida A.S., the operator of 283 KFC and 254 Pizza Hut restaurants in Turkey, due to failure to meet Yum!'s standards. This will result in the temporary closure of these restaurants.
   • The Turkey operations had been underperforming, with sales significantly below the global average for both brands. Consequently, the loss of royalties from these closures is expected to have no material impact on Yum!'s core operating profit in 2025 and beyond. " "

2. Re-acquisition of Master Franchise Rights in Germany:

   • Yum! Brands re-acquired the master franchise rights for KFC and Pizza Hut in Germany from IS Holding in December 2024. This transaction is unrelated to the Turkey termination and has no operational impact on the German market. "

Financial Implications:

• Yum! Brands anticipates a pre-tax special charge of approximately $60 million in Q4 2024. This includes transaction costs for the German acquisition and termination-related costs for the Turkey business. "
• The Turkey closures will result in a one-time reduction in Yum!'s reported unit counts at the end of Q1 2025. However, Yum! remains confident in its global unit growth trajectory, with no expected impact on other markets. "

Operational Outlook:

• While the Turkey closures represent a temporary setback, Yum! Brands' global operations and growth strategy remain unaffected. The company continues to focus on maintaining high operational standards and expanding its footprint in other markets. "

ONEOK Completes Sale of Interstate Natural Gas Pipelines

ONEOK, Inc. has successfully closed the sale of its three wholly owned interstate natural gas pipeline systems to DT Midstream, Inc. The transaction, effective as of December 31, 2024, was completed for a total cash consideration of $1.2 billion, subject to customary adjustments. The pipelines involved in this sale are the Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission. " " "

Impact on Financials and Operations

This strategic move is part of ONEOK's efforts to optimize its asset portfolio and align with its capital allocation priorities. The proceeds from this sale are expected to enhance ONEOK's financial flexibility, aiding in the achievement of its leverage target of 3.5 times by 2026. This transaction is anticipated to support ONEOK's operational and financial strategies, potentially leading to improved financial health and operational efficiency. "

Operational Transition

DT Midstream, as the new owner, shares a commitment to safety and reliability, which is expected to benefit all stakeholders. Employees transitioning to DT Midstream will play a crucial role in establishing the company's new Tulsa office and ensuring the continued success of these essential natural gas systems. "

Cencora Completes Acquisition of Retina Consultants of America

On January 2, 2025, Cencora, Inc. completed its acquisition of Retina Consultants of America (RCA), a leading management services organization of retina specialists. Cencora acquired approximately 85% interest in RCA, with certain RCA physicians and management retaining a minority equity interest. The acquisition involved a cash outlay of $4.4 billion, subject to customary post-closing adjustments. This strategic move is expected to enhance Cencora's leadership in specialty services, expand its management services organization solutions, and provide differentiated value to stakeholders, including physicians and patients.

Financial Impact: Following the acquisition, Cencora has updated its fiscal year 2025 financial guidance, raising the adjusted diluted earnings per share (EPS) range to $15.15 to $15.45, up from the previous range of $14.80 to $15.10. This reflects the expected contribution from the RCA acquisition and continued momentum in the U.S. Healthcare Solutions segment. " "

Novo Holdings Completes Acquisition of Catalent

On December 18, 2024, Novo Holdings A/S completed the acquisition of Catalent, Inc., a leading global contract development and manufacturing organization (CDMO) in the pharmaceutical and biotech industry. The transaction was an all-cash deal valued at approximately $16.5 billion. As a result of the acquisition, Catalent's common stock has ceased trading and will be delisted from the New York Stock Exchange " " .

Transaction Details

• Merger Structure: Catalent became a wholly owned subsidiary of Creek Parent, Inc., a subsidiary of Novo Holdings. The merger involved Creek Merger Sub, Inc. merging with and into Catalent, with Catalent surviving the merger " .
• Merger Consideration: Shareholders of Catalent received $63.50 per share in cash, representing a 47.5% premium over the 60-day volume-weighted average price as of February 2, 2024 " .
• Asset Disposition: Shortly after the merger, Novo Nordisk A/S will acquire Catalent's three fill-finish sites located in Anagni, Italy; Bloomington, Indiana, USA; and Brussels, Belgium, along with related assets from Novo Holdings " " .

Potential Effects on Financials and Operations

• Financial Impact: The acquisition is expected to strengthen Catalent's position as a global service provider under private ownership, potentially enhancing its financial stability and operational capabilities with the backing of Novo Holdings " .
• Operational Changes: The acquisition may lead to strategic realignments and investments in Catalent's operations, leveraging Novo Holdings' resources to drive growth and innovation in product development and supply solutions for the pharmaceutical and biotech sectors " .

Leadership and Future Outlook

Alessandro Maselli will continue as President and CEO of Catalent, emphasizing the company's commitment to delivering exceptional outcomes for its customers and stakeholders. Novo Holdings aims to support Catalent in building on its momentum and positioning the company for future growth " .

This acquisition marks a significant milestone for Catalent, aligning with Novo Holdings' mission to invest in life sciences for the benefit of people and the planet " .

ONEOK's Asset Sale to DT Midstream

ONEOK, Inc. has entered into a definitive agreement to sell its three wholly owned interstate natural gas pipeline systems to DT Midstream, Inc. for a total cash consideration of $1.2 billion. The transaction, announced on November 19, 2024, is expected to close in the fourth quarter of 2024, pending regulatory approvals and customary closing conditions " " .

Details of the Transaction

• Assets Involved: The sale includes the Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission systems.
• Financials: The purchase price represents 10.8 times the previous 12 months EBITDA as of June 30, 2024 " .
• Strategic Rationale: This move is part of ONEOK's strategy to optimize its asset portfolio and enhance its capital allocation priorities. The transaction is expected to improve ONEOK's financial flexibility and support its deleveraging efforts towards a target of 3.5 times by 2026 " .

Potential Effects on Financials and Operations

• Financial Flexibility: The proceeds from the sale are anticipated to enhance ONEOK's financial flexibility, aiding in its deleveraging strategy " .
• Operational Impact: The transaction aligns with ONEOK's focus on its integrated operating footprint, and DT Midstream is considered an ideal owner for these assets due to its similar culture of safety and reliability " .

This strategic disposition underscores ONEOK's commitment to maintaining its position as a leading diversified energy infrastructure company " .

ConocoPhillips Completes Acquisition of Marathon Oil Corporation

On November 22, 2024, ConocoPhillips successfully completed its acquisition of Marathon Oil Corporation. This strategic move was executed through a merger, where Puma Merger Sub Corp., a wholly owned subsidiary of ConocoPhillips, merged with Marathon Oil, with Marathon Oil continuing as the surviving entity. The merger agreement, initially announced on May 28, 2024, stipulated that each share of Marathon Oil's common stock would be converted into 0.255 shares of ConocoPhillips' common stock, along with cash for any fractional shares " " .

Financial and Operational Impact

The acquisition is expected to significantly enhance ConocoPhillips' portfolio by adding high-quality, low-cost supply inventory, particularly in the U.S. unconventional sector. The company anticipates achieving over $1 billion in synergies on a run-rate basis within the next 12 months, primarily through the elimination of duplicate costs and integration efficiencies " .

The pro forma financial statements prepared for this transaction reflect the application of the acquisition method of accounting, with ConocoPhillips as the accounting acquirer. The assets and liabilities of Marathon Oil have been recorded at their estimated fair values as of the closing date. The preliminary merger consideration was approximately $16.558 billion, which includes the fair value of ConocoPhillips common stock issued and other cash considerations " " .

Potential Effects on Financials

The merger is expected to result in significant cost savings and operational efficiencies. However, the pro forma financial statements do not include potential cost savings from operating efficiencies or synergies, which are expected to be realized post-merger. These synergies are anticipated to result from the integration of personnel and the reduction of overlapping costs " .

Overall, this acquisition positions ConocoPhillips to strengthen its market position and enhance its operational capabilities, aligning with its strategic goals of expanding its asset base and optimizing its cost structure " .

Marathon Oil Corporation Acquisition by ConocoPhillips

On November 22, 2024, ConocoPhillips completed its acquisition of Marathon Oil Corporation through a merger. This transaction involved the conversion of Marathon's common stock into ConocoPhillips stock at an exchange ratio of 0.2550 shares of ConocoPhillips for each share of Marathon, along with cash for fractional shares " " .

Transaction Details

• Equity Awards: Marathon's equity awards were converted into ConocoPhillips' awards based on the merger agreement terms. Restricted stock units and stock options were adjusted according to the exchange ratio " .
• Commercial Paper Program: Marathon terminated its commercial paper program and settled all outstanding obligations " .
• Municipal Bonds: ConocoPhillips guaranteed $1 billion of Marathon's municipal bonds, with plans to assume all obligations by July 2026 " .

Potential Effects on Financials and Operations

• Financial Impact: The merger is expected to streamline operations and potentially enhance financial performance through synergies between the two companies.
• Operational Changes: Marathon's directors and officers were replaced by those from ConocoPhillips' merger subsidiary, indicating a shift in management and operational strategies " .

This acquisition marks a significant consolidation in the energy sector, potentially affecting market dynamics and competitive positioning for both companies.

Note: This summary is based on the latest available information as of November 22, 2024.

WM Completes Acquisition of Stericycle

On November 4, 2024, WM announced the completion of its acquisition of Stericycle, Inc. for a total enterprise value of approximately $7.2 billion. This acquisition is a strategic move to expand WM's environmental solutions into the healthcare market, enhancing its sustainability commitments and growth strategy. The transaction was funded through a combination of borrowings and cash on hand " " " .

Transaction Details

• Purchase Price: $62.00 per share in cash.
• Total Enterprise Value: Approximately $7.2 billion.
• Funding: Borrowings under WM's credit agreement and commercial paper program, and cash on hand " " .

Potential Effects on Financials and Operations

• Growth Strategy: The acquisition aligns with WM's long-term financial goals and sustainability initiatives, providing a platform in the medical waste sector with attractive growth dynamics.
• Financial Outlook: The acquisition is expected to enhance WM's operating EBITDA and cash flows, with projected cost synergies exceeding $125 million.
• Operational Synergies: The integration will leverage WM's logistics expertise, technology-enabled cost optimization, and waste disposal network " .

Strategic Importance

• Market Expansion: This acquisition positions WM to capitalize on the growing medical waste industry and secure information destruction services, furthering its leadership in comprehensive waste and environmental solutions.
• Leadership and Integration: Rafa Carrasco will lead the new WM Healthcare Solutions division, focusing on regulated medical waste and secure information destruction businesses " .

This acquisition marks a significant step for WM in expanding its service offerings and enhancing its market position in the healthcare sector, while also supporting its sustainability and financial objectives " .

Jacobs Solutions Inc. Completes Major Asset Disposition

On September 27, 2024, Jacobs Solutions Inc. successfully completed a significant transaction involving the disposition of its Critical Mission Solutions (CMS) and portions of the Divergent Solutions (DVS) business, collectively known as the SpinCo Business. This was achieved through a Reverse Morris Trust transaction, which included a series of strategic agreements and mergers " .

Transaction Details

• Separation and Distribution: Jacobs transferred its CMS and C&I businesses to a newly formed entity, SpinCo. Subsequently, Jacobs distributed 124,084,108 shares of SpinCo common stock to its shareholders on a pro rata basis " .
• Merger: SpinCo merged with Amentum, with SpinCo surviving as an independent public company listed on the New York Stock Exchange under the symbol "AMTM" " .
• Ownership Structure: Post-transaction, Jacobs' shareholders own approximately 51% of SpinCo, Jacobs retains about 7.5%, and Amentum Equityholder holds around 37%. An additional 4.5% of SpinCo stock is held in escrow as contingent consideration, dependent on SpinCo's fiscal year 2024 performance " .

Financial Implications

• Cash Payment: Jacobs received approximately $0.9 billion from SpinCo, which is subject to adjustments based on SpinCo's cash, debt, and working capital levels " .
• Debt Reduction: The cash received was used to fully redeem $575 million of the 2020 Term Loan Facility and partially redeem $333 million of revolving credit facility debt, resulting in a net zero impact on cash balances " .
• Pro Forma Financials: The transaction is expected to impact Jacobs' financial statements, with the CMS and C&I businesses being reflected as discontinued operations in future reports " .

Operational Impact

• Strategic Focus: This transaction allows Jacobs to streamline its operations and focus on its core business areas, potentially enhancing operational efficiency and financial performance.
• Future Plans: Jacobs intends to dispose of its remaining equity stake in SpinCo within 12 months, further simplifying its business structure " .

This strategic move is anticipated to provide Jacobs with greater financial flexibility and a more focused operational approach, aligning with its long-term business objectives " .

Summary of Diamondback Energy's Acquisition of Endeavor Energy Resources

On September 10, 2024, Diamondback Energy, Inc. (NASDAQ: FANG) announced the completion of its merger with Endeavor Energy Resources, L.P. This significant transaction involved Diamondback acquiring 100% of the Endeavor Interests from the Endeavor Stockholders. The acquisition was executed for a total consideration of approximately $7.1 billion in cash and 117.3 million shares of Diamondback's common stock " " .

Transaction Details

• Cash Consideration: Approximately $7.1 billion, subject to customary post-closing adjustments.
• Stock Consideration: 117.3 million shares of Diamondback's common stock were issued to Endeavor Stockholders, who now hold about 39.7% of the outstanding shares of Diamondback " " .

Strategic Impact

Travis Stice, Chairman and CEO of Diamondback, described the merger as transformative, positioning Diamondback as a leading independent oil company in North America. The acquisition enhances Diamondback's inventory in the Permian Basin, which is expected to drive future cash flow and operational efficiency " .

Financial and Operational Effects

• Increased Scale: The merger significantly increases Diamondback's scale and operational footprint in the Permian Basin, a key area for oil and gas production.
• Synergies and Cost Efficiency: The integration of Endeavor's assets is anticipated to yield operational synergies and cost efficiencies, bolstering Diamondback's low-cost operational model.
• Long-term Growth: The acquisition is expected to support Diamondback's long-term growth strategy by expanding its high-quality asset base and enhancing its ability to generate cash flow " .

Governance Changes

As part of the merger agreement, three former Endeavor executives, Lance Robertson, Charles Meloy, and Robert K. Reeves, have been appointed to Diamondback's board of directors, expanding the board to twelve members. These appointments are expected to bring valuable industry experience and insights to Diamondback's leadership team " .

Conclusion

The merger with Endeavor Energy Resources marks a pivotal step for Diamondback Energy, enhancing its position in the oil and gas sector and providing a robust platform for future growth and value creation for shareholders " .

Arch Capital Group Ltd. Completes Acquisition of Allianz's U.S. MidCorp and Entertainment Insurance Businesses

On August 1, 2024, Arch Capital Group Ltd. (ACGL) successfully completed the acquisition of Allianz's U.S. Middle Market Property & Casualty Insurance and U.S. Entertainment Property and Casualty Insurance Business. This transaction, initially announced on April 5, 2024, was executed under the Master Transaction Agreement. The acquisition includes policies with accident years from 2016 onwards and certain related assets " .

Transaction Details:

• Purchase Price: ACGL paid a base purchase price of $450 million and assumed certain liabilities " .
• Reinsurance Agreements: Affiliates of ACGL entered into reinsurance agreements and other service agreements to manage the acquired business " .
• Employee Transition: Nearly 500 former Allianz employees have joined Arch, ensuring continuity for clients and brokers " .

Operational Impact:

• Leadership: The new Arch MidCorp and Entertainment businesses will be led by Mark Lange, the newly appointed Chief Middle Market Executive " .
• Strategic Growth: This acquisition is expected to enhance Arch Insurance's middle market offerings and drive growth under the leadership of Matt Shulman, CEO of Arch Insurance North America " .

Financial and Strategic Implications:

• Financial Advisors: Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC acted as financial advisors, while Willkie Farr & Gallagher LLP served as legal advisors for the transaction " .
• Market Position: This acquisition strengthens Arch's position in the U.S. middle market insurance sector, potentially leading to increased market share and revenue growth " .

Overall, this strategic acquisition is poised to bolster Arch Capital Group Ltd.'s market presence and operational capabilities in the U.S. insurance market, aligning with their growth objectives and enhancing value for their clients and stakeholders.

Occidental Petroleum Corporation Completes Acquisition of CrownRock

On August 1, 2024, Occidental Petroleum Corporation (NYSE: OXY) announced the completion of its acquisition of CrownRock, L.P. The transaction was valued at approximately $12.4 billion, which included $9.4 billion in cash, 29,560,619 shares of Occidental's common stock, and the assumption of $1.2 billion of CrownRock's existing debt " " .

Details of the Transaction

• Cash Consideration: Approximately $9.4 billion, inclusive of working capital and other customary purchase price adjustments.
• Stock Consideration: 29,560,619 shares of Occidental's common stock were issued to the sellers.
• Debt Assumption: Occidental assumed $1.2 billion of existing debt from CrownRock and its subsidiaries " .

Potential Effects on Occidental's Financials and Operations

• Strengthened Portfolio: The acquisition is expected to enhance Occidental's asset portfolio, making it more robust and differentiated, according to Vicki Hollub, President and CEO of Occidental " .
• Operational Synergies: The integration of CrownRock's assets and team members is anticipated to create a high-performing employee base focused on developing low-emission, low-cost energy " .
• Financial Impact: The transaction involves a significant cash outlay and stock issuance, which may affect Occidental's cash reserves and shareholder equity. The assumption of debt could also impact the company's leverage ratios " .

This acquisition aligns with Occidental's strategy to expand its presence in the energy sector, particularly in the U.S., and to advance its low-carbon initiatives " .