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As forecast, the Merger and Acquisition trend which we have been long reporting would peak when the Federal Reserve would aggressively raise interest rates and cut off the cheap money supply.
Now, according to the Financial Times, U.S. M&A activity fell 43 percent in recent months. They also note that while autumn is the time for new stock sales and corporate mergers, with interest rates going up, they “slowed to a trickle.”
Here is the latest “trickle.”
JOHNSON & JOHNSON BUYS HEART DEVICE MAKER FOR $17 BILLION
Health products giant Johnson & Johnson will pay $380 a share to take over Abiomed, a Massachusetts company making Impella, a heart pump used to treat clogged arteries, heart attacks, and heart failure.
The pump is inserted into the heart through a catheter or by surgery to keep the organ functioning while other treatments or procedures are carried out.
Under the deal’s terms, J&J will pay an additional $35 a share if certain benchmarks are met over time.
The purchase is part of J&J’s new strategy that will spin off its consumer products division next year as a separate company. The division will continue to make and market Band-Aids, Listerine mouthwash, Aveeno skin lotion, Benadryl allergy capsules, and other over-the-counter remedies.
The remaining entity will focus on drugs and medical devices, such as Impella.
“This acquisition is consistent with expanding J&J med tech into high-growth markets while advancing the standard of care,” CEO Joaquin Doato said in a statement announcing the deal.
Abiomed’s sales grew 22 percent in its most recent fiscal year, reaching $1.03 billion. The company will bring $937 million in cash and liquid assets with it when it becomes part of J&J, The Wall Street Journal reported.
Abiomed is testing new uses for Impella that could add new revenue streams. However, tests are not yet completed or conclusive, leaving J&J to gamble on the outcomes.
Meanwhile, J&J will market Impella through its global sales network.
KKR PAYS RECORD PRICE FOR PHILADELPHIA APARTMENT CAMPUS
Private equity firm KKR has agreed to pay $357 million for Presidential City, an apartment complex of four 12-story buildings on the edge of Philadelphia, setting a record price about $100 million higher than ever paid for a housing complex in the city’s history.
The pricey sale contradicts apartment market trends, in which demand has peaked, rents are cooling, and vacancy rates are rising, as we reported in “High Rents Chill Apartment Demand” (1 Nov 2022).
In the third quarter, $74 billion worth of apartment properties sold in the U.S., down 17 percent from a year earlier.
However, KKR’s Presidential City tenants are primarily high-income professionals who pay a smaller share of their incomes on rent than their counterparts who live farther into the city, KKR said in a statement.
Rents for a one-bedroom flat in the firm’s new property start at $1,800, compared to as much as $3,000 for similar spots downtown.
Also, Philadelphia’s apartment stock has a higher proportion of older buildings that have lower values than newer towers in urban centers.
With rising interest rates and demand for apartments easing, investors are sifting the market for older properties with high occupancy rates among professionals and other high earners.
The deal worked because KKR was able to assume the seller’s existing mortgage, which was issued before interest rates jumped.
“Without that financing in place, this would not have been a possible transaction,” Billy Butcher, KKR’s chief operating officer, said in comments quoted by The Wall Street Journal.
The KKR fund that bought the complex has 19 percent of its holdings in residential real estate, including an apartment block in Jacksonville, Fla., and a 365-unit apartment building in Brooklyn, N.Y., for which it paid $190 million.