As we had long forecast, the higher central banks raise interest rates, the lower the Merger and Acquisition trend… which hit record highs at the height of the COVID War in 2021 when interest rates sank and governments pumped in countless trillions to artificially prop up sinking economies. 

And as we have continued to detail, it is important to understand that M&A activity will continue to slow down as interest rates remain high. But as economic conditions worsen there will be more corporate defaults. This will bring revenues of struggling companies down, making it cheaper for the “Bigs” to buy out those in economic distress. This in turn will continue to shrink the competitive landscape in many business sectors. Here are some of the latest “Big” takeovers.

ENERGY CONGLOMERATE BUYS DOMINION’S GAS PIPELINES FOR $9.4 BILLION 

Enbridge Inc., a Canadian international energy company, is paying $9.4 billion in cash to buy three natural gas pipeline companies from Dominion Energy. Enbridge also will assume $4.6 billion in debt belonging to the pipeline operations.

The pipeline companies move gas in Ohio, North Carolina, and parts of the U.S. West.

The transaction seems to represent two alternative views of the U.S. energy future.

The sale is part of Dominion’s “top-to-bottom” review of its operations begun last year. The sale will help the company shed what it calls “non-core assets” so it can focus on its electric utility business.

Dominion is preparing for an “all-electric” future in which electric cars, data centers, and assorted smart technologies place greater demands on the electric grid and in which homes migrate away from gas as a heating and cooking fuel.

Dominion serves about 3.5 million electricity customers.

In 2022, Dominion sold its West Virginia gas distribution network to Hearthstone Utilities for $690 million.

Enbridge already operates the world’s largest fuel pipeline network and now becomes North America’s largest gas distributor. It moves about 50 percent of the oil and 30 percent of the natural gas on the continent.

Gas pipelines are “must-have infrastructure for providing safe, reliable, and affordable energy,” CEO Greg Ebel said in a statement announcing the purchase. “Adding natural gas utilities of this scale and quality, and at an attractive multiple, is a once-in-a-generation opportunity.”

On news of the deal, Enbridge’s stock price slipped 5.5 percent, while Dominion’s ticked down 0.6 percent.

Gas is having its moment in the energy transition as the global economy seeks cleaner alternatives to oil and coal.

In pursuing a sale of assets to Oneok Inc., an Oklahoma gas company, Magellan Midstream Partners has touted gas as “a more powerful growth engine.” TC Energy, another Canadian pipeline business, has said it will sell its oil pipelines so it can focus on gas.

SWEET! SMUCKERS BUYS HOSTESS BRANDS FOR $5.6 BILLION

J.M. Smucker, the 126-year-old company that makes the leading brand of jams and jellies in the U.S., is chowing down on the company that produces Twinkies and Ding Dongs.

Smucker will be the new owner of Hostess Brands, a prize for which the jelly king will pay about $34.25 a share.

Hostess shareholders will be paid $30 per share in cash and also receive 0.03002 shares of Smucker. 

Smucker also will take on Hostess’s debt.

The sale is expected to close in January.

As of the market’s close on 8 September, Hostess’s market capitalization was $3.73 billion, up 25 percent to date this year. The share price grabbed another 18 percent in premarket trading on 11 September as the sale became known.

The share price fared less well earlier this year when the company raised prices to offset higher commodity prices. Soon, demand for Hostess’s treats began to droop. The company expects to sell fewer gooey delights this year and has halted future price hikes indefinitely.

The recent weakness in sales sparked speculation that the company might be sold. Hostess has fielded offers from PepsiCo and Mondelez International, the home of Oreo cookies, CNBC reported.

Hostess filed for Chapter 11 bankruptcy and closed in 2012. A year later, private equity firms Apollo Global Management and Metropoulos & Co. partnered to buy select Hostess brands, including the iconic Twinkie.

The entire Hostess brand was resurrected in 2016 through a merger with a special-purpose acquisition company.