This year has seen activist shareholders — keen to maximise returns from their investments — push to unravel US mergers that created unwieldy conglomerates. Now, bankers predict their tactics will spur similar activity across Europe.
European companies announced just 32 spinoffs this year, compared with a record 100 in the US, where such plans by Hewlett-Packard and Ebay were greeted with rising share prices. There may be more opportunity for these moves on the European continent, said Severin Brizay, head of mergers and acquisitions in Europe, Middle East and Africa at UBS Group.
“Companies are looking to become more nimble and focused, and there are still more conglomerates in Europe than the US,” he said. “The trend has been largely US-dominated, particularly in tech, and will continue to expand in Europe.”
Key to this is the expectation that activist campaigns will rise in Europe, spurring boards to act — sometimes pre-emptively. The best year for initial public offerings since 2007 and an abundance of cash-rich buyers, including buyout funds looking for targets, could also incentivise conglomerates to give up on business units that no longer meet expectations.
Companies that may explore spinoffs include ThyssenKrupp, which could separate or sell its European steel unit, and Rio Tinto Group, which could offload its Alcan aluminium business, according to analysts.
This month Unilever said it would split its US and European spreads operations into a standalone unit. The unit is valued by analysts at between €6bn and €10bn.
Germany’s Bayer announced plans in September to list its plastics unit in 2015, a move that analysts say could yield proceeds of €10bn, providing funds for acquisitions in healthcare.
Reckitt Benckiser Group said in July it will spin off its pharmaceutical unit through a sale or UK IPO, while EON, Germany’s largest utility, plans to separate its fossil-fuel power plants.
It’s a strong start to a pipeline that already has some bankers labelling the trend “Spinmania”.
If 2015 does turn out to be the year of the European spinoff, the effect may fuel M&A markets beyond the next 12 months. Again the US serves as a precedent, after Pfizer spun off its animal-health business Zoetis through an IPO in 2013.
Activist Bill Ackman’s hedge fund Pershing Square Capital Management, a unit of which sold shares in a Dutch IPO in October, said on November 12 it acquired shares in the company and planned to press for a rise in shareholder returns, increasing pressure on Zoetis for a sale or restructuring.