Mergers & Acquisitions
Activity is down, with the overall dollar volume kept high by one big deal.
The Teva-Ivax deal brought the 2005 value of Florida mergers and acquisitions to $21.3 billion as of late September, according to FactSet Mergerstat, a California research firm. Those figures don't include the $4.5-billion merger of two Florida companies expected to close in the fourth quarter: Jacksonville-based Fidelity National Financial's information services unit and credit card and check processor Certegy, based in St. Petersburg.
Without the Ivax deal, the total value of Florida mergers and acquisitions through the first three quarters drops to about $14.3 billion, $1.2 billion below the $15.5 billion for the 2004 period.
John H. Hill Jr.
James Cassel"Overall, it's a great market for sellers.""What we have is an active and deep middle market.""I'm not sure I'm optimistic going out of next year."
If the numbers worry Florida's M&A community, most don't sound concerned, pointing to the breadth of deals across a variety of industries, including business services, leisure and hospitality, manufacturing and distribution. "Banking and financial deals are up," adds Michael V. Mitrione, a partner with the Gunster Yoakley law firm in West Palm Beach.
Two types of buyers are active: Strategic buyers focused on industry consolidation, and financial buyers from private equity firms. Strong corporate earnings, low interest rates and a healthy stock market have given the strategic buyers plenty of cash that they can put to work. Private equity firms, meanwhile, are playing an increasingly important role, accounting for between 15% and 20% of acquisitions.
"Overall, it's a great market for sellers," says John H. Hill Jr., senior managing director at Hyde Park Capital Partners, a private investment bank in Tampa.
While the Ivax deal is a blockbuster, it's still an anomaly in Florida, where M&A activity tends to involve deals in the millions of dollars, not billions. "What we have is an active and deep middle market," says Daniel H. Aronson, a partner with the Greenberg Traurig law firm in Fort Lauderdale who specializes in mergers and acquisitions, venture capital and private securities offerings.
Indeed, according to figures from FactSet Mergerstat, since Jan. 1, 2002, 131 Florida companies have sold for more than $50 million. Only 13 of those companies sold for more than $500 million, however -- a pattern that seems to be holding in 2005. Of the 34 deals in the first three quarters of this year that exceeded $50 million, only four were for more than $500 million.
What's ahead for 2006? James Cassel, founder and president of Capitalink, a Coral Gables investment banking firm, is cautious: "I'm optimistic going into next year. I'm not sure I'm optimistic going out of next year."
Teva Pharmaceutical Industries
One of Florida's biggest deal makers, Phillip Frost, made headlines when he announced that he would sell Ivax, the generic drug powerhouse he founded in the late 1980s, for about $7 billion to Israel-based Teva Pharmaceutical Industries. The deal is expected to close by the end of this year or early 2006.
Frost, a dermatologist by training, launched Ivax in Miami within months of selling his first company, Key Pharmaceuticals, to Schering-Plough for $800 million in 1986. Over the past 18 years, he has built Ivax into a maker of more than 70 generic drugs and distributor of more than 160 additional generic and over-the-counter drugs. Ivax went through ups and downs in the late 1990s, but after a turnaround has continued to grow, posting sales of $1.8 billion in 2004.
When the cash and stock deal closes, Ivax will be a subsidiary of Teva. Frost, 68, will serve as vice chairman of Teva's board of directors.
Ashford Hospitality Trust
CNL Hotels & Resorts
Believing that the luxury and "upper upscale" market are where the money is now, Orlando-based CNL Hotels & Resorts, the nation's second-largest hotel real estate investment trust, or REIT, sold 30 hotels to Dallas-based Ashford Hospitality Trust for $465 million in cash. The deal included midrange Marriott brands such as Residence Inn, Courtyard and others in 16 states.
Earlier this year, CNL also sold two Holiday Inn Express properties for $8.3 million. Then shortly after the Ashford deal, CNL sold an additional five hotels for $109 million to Pyramid Hotel Opportunity Venture and one hotel, the Lake Lanier Islands Resort in Georgia, for $24.5 million.
As of early September, the Orlando REIT had sold 38 hotels for $607 million. The company will use the cash for debt reduction. CNL Hotels & Resorts has 94 hotels and resorts remaining in its portfolio and approximately $5.8 billion in assets.
Genesee & Wyoming
Rail Management Corp.
After 25 years of running Rail Management Corp., Panama City Beach business leader Earl Durden sold his rail operation to short-line and regional freight railroad company Genesee & Wyoming of Greenwich, Conn., in June. "I had reached the time of my life when I wanted to cut back some," says Durden. The deal, which totaled $243 million in cash and assumption of $1.7 million in debt, gives GWI 14 short-line railroads with operations in the South and Southeast U.S. as well as Wisconsin.
Durden says he had a number of potential suitors, both financial buyers such as private equity firms and strategic suitors like GWI that were already in the industry. Why go with a strategic buyer? "They were able to pay more money," says Durden matter of factly.
Rail Link, a Jacksonville subsidiary of GWI, will run the RMC operations, which employ about 300. Durden remains active in Florida's business community as a member of the Florida Council of 100, a member of the Florida Transportation Commission and a director on several corporate boards. He retains one railway holding in Arizona, the Copper Basin Railway.
Sweet Home Alabama
FFLC Bancorp-Union Bank of Florida
Montgomery, Ala.-based Colonial BancGroup's acquisition of two Florida financial institutions, Leesburg-based FFLC Bancorp and Sunrise-based Union Bank of Florida, pushed it to the No. 5 spot in the ranks of Florida commercial banks with approximately $7.4 billion in deposits. The deals, totaling $465.5 million, gave Colonial 33 additional offices in Lake, Sumter, Citrus, Marion, Miami-Dade, Broward and Palm Beach counties.
At the time of the deal, Union Bank had $1 billion in assets, $631 million in deposits and $643 million in loans. FFLC Bancorp and its subsidiary, First Federal Savings Bank of Lake County, had $1 billion in assets, $795 million in deposits and $884 million in loans.
Colonial paid $232 million for FFLC and $233.5 million for Union. Both deals gave the sellers a combination of cash and stock.
CarePlus Health Plans of Florida
When Congress passed the Medicare Prescription Drug Improvement and Modernization Act of 2003, it re-energized Medicare HMO plans at least in part because of increased reimbursements. A wave of M&A activity in the Medicare HMO arena nationwide began in 2004 and included big deals by PacifiCare Health Systems and Anthem Inc. In early 2005, Medicare HMO deal making reached Florida when Louisville, Ky.-based Humana purchased Coral Gables-based CarePlus Health Plans of Florida for $444.4 million. Humana's purchase gives the company 50,000 Medicare Advantage HMO members in Miami-Dade, Broward and Palm Beach counties. The deal also includes 10 CAC-Florida Medical Centers and PrescribIT Rx pharmacy company in Miami-Dade County. Nationally, the company provides HMO, PPO and fee-for-service products to about 475,000 Medicare-eligible people.
FLORIDA DEALS2004QuarterValue (billions)DealsPrice DisclosedPrice Not Disclosed1st$4.22234701642nd$2.56269901793rd$8.68272931794th$5.1119866132Total$20.5797331965420051st$3.32209681412nd$5.93224701543rd
(as of 9/19)$12.0419877121Total$21.29631215416Source: FactSet Mergerstat