Thu, Jan 10, 2019 - Page 10 News List

Dealmakers warn of merger, IPO delays in the US


Dealmakers are starting to feel pain from the partial US government shutdown.

With multiple regulatory agencies — including the US Securities and Exchange Commission (SEC) — down to a skeleton staff, companies are telling investors that their pending takeovers and stock sales could be delayed.

A prolonged shutdown could muddle Eli Lilly & Co’s plan to unload its stake in Elanco Animal Health Inc, the unit it spun off last year, Eli Lilly chief executive officer Dave Ricks said in an interview on Tuesday.

“We have said this year we are going to take the second step and sell the 81 percent that we currently hold,” Ricks said. “We need the SEC to open to do that. That’s a problem.”

The impasse in Washington could be dire for initial public offerings (IPOs) this quarter, another industry expert said.

“People typically go out in early January with IPOs, because if you price after Feb. 14, you need your audit for 2018,” Skadden Arps Slate Meagher & Flom LLP global head of capital markets David Goldschmidt said.

“The window to price by Feb. 14 is closing and if people aren’t able to do their deals by then, there’s a chance we could lose a good part of the first quarter for IPOs,” he said.

Other deals that might be affected by the shutdown that began on Dec. 22 include Eclipse Resources Corp and Blue Ridge Mountain Resources Inc, which extended the termination date of their about US$900 million merger “to provide the parties additional flexibility in light of the shutdown of portions of the US federal government,” a regulatory filing said on Tuesday.

The Committee on Foreign Investment in the US (CFIUS) — the agency that vets acquisitions for national security risks — on Dec. 22 told at least two sets of would-be merger partners that it had suspended all deadlines for declarations and transactions under review, regulatory filings showed.

That could slow down acquisitions that Americas Silver Corp and InfraREIT Inc have pending, the companies said last week.

Initial CFIUS reviews are 45 days, under normal circumstances.

Ready Capital Corp told investors that the “ongoing federal government shutdown” could force it to change the timing of a special meeting scheduled for Feb. 28 to vote on a stock issuance tied to its takeover of Owens Realty Mortgage Inc, a filing last week said.

Even if the administration of US President Donald Trump reaches a deal with the US Congress to end the shutdown soon, pending IPOs face continuing delays.

That could include highly anticipated listings by Lyft Inc, which last month announced that it had filed confidentially for an IPO, and Uber Technologies Inc, which last month also filed confidentially, a person familiar with the matter said.

“Another couple weeks and you’ll have serious IPO delays,” JMP Group LLC president and cofounder Carter Mack said. “Even if the shutdown ends and the SEC gets back to work, there’s going to be a backlog of deals filed in the interim that haven’t been assigned to examiners.”

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