Issue 31

Nokia, T-Mobile US agree $3.5 billion deal, world's first big 5G award

The network equipment business, which is led by three big players - China’s Huawei HWT.UL, Nokia and Sweden’s Ericsson (ERICb.ST) - has struggled with flagging growth since the current generation of 4G mobile equipment peaked in 2015.

Nokia will supply T-Mobile with its AirScale radio access platform along with cloud-connected hardware, software and acceleration services, they said in a statement.

Terms of the deal call for Nokia to supply a range of 5G hardware, software and services that will allow T-Mobile to capitalize on licensed airwave to deliver, broad coverage on 600 megahertz spectrum and ultra high-speed capacity on 28 gigahertz airwaves in densely trafficked urban areas, the companies said.

But cash-strapped telecom operators around the world have been gun-shy over committing to commercial upgrades of existing networks, with many seeing 5G technology simply as a way to deliver incremental capacity increases instead of new features.

5G networks promise to deliver faster speeds for mobile phone users and make networks more responsive and reliable for the eventual development of new industrial automation, medical monitoring, driverless car and other business uses.

The T-Mobile award is critical to Finland’s Nokia, whose results have been battered by years of slowing demand for existing 4G networks and mounting investor doubts over whether 5G contracts can begin to boost profitability later this year.

No.3 U.S. mobile carrier T-Mobile - which in April agreed to a merger with Sprint (S.N) to create a more formidable rival to U.S. telecom giants Verizon (VZ.N) and AT&T (T.N) - said the multiyear supply deal with Nokia will deliver the first nationwide 5G services.

T-Mobile US (TMUS.O) named Nokia (NOKIA.HE) to supply it with $3.5 billion in next-generation 5G network gear, the firms said on Monday, marking the world’s largest 5G deal so far and concrete evidence of a new wireless upgrade cycle taking root.

  From - Reuters

Starbucks and China's Alibaba to partner on delivery: media reports

Starbucks Corp and e-commerce company Alibaba Group Holding Ltd are set to join forces on coffee delivery, according to media reports, as the coffee retailer seeks to rebound from a sales slump in the once-booming China market.

The move follows a hint earlier this month by former Starbucks Executive Chairman Howard Schultz, who suggested that a tie-up with Alibaba’s billionaire founder Jack Ma could be on the horizon.

A formal announcement of the deal will be made later this week, the Wall Street Journal reported on Monday. Starbucks declined to comment. Starbucks quarterly sales in China declined 2 percent in the period ended July 1, a steep departure from the 7 percent growth in the same period a year earlier.

The Seattle-based cafe chain blamed a crackdown on unapproved third-party delivery services for much of the slowdown, as well as cannibalization of its own stores with the retailer’s rapid expansion in the Chinese market.

Increased competition from fast-growing rivals like China’s Luckin, which has already opened more than 660 outlets in 13 Chinese cities since officially launching in January, has also pressured Starbucks’ 3,400-store operation.

In its third quarter earnings call, Starbucks admitted to an “underperformance” in China, and said it was making progress on plans for delivery there, starting this fall in Beijing and Shanghai.

Wall Street is hoping a partnership with Alibaba’s food delivery arm,, will help fuel Starbucks growth plans in the country. Starbucks aims to almost double its number of stores in China by 2022.

“An imminent announcement of a delivery solution is an important first step, as is a roll out of mobile ordering,” which is not yet in China, Sharon Zackfia, an analyst for William Blair, wrote in a research note.

“While the margin implications of third-party delivery are unclear, no margin is worse than that of a lost sale,” Zackfia said.

Starbucks shares were down 29 cents, or 0.5 percent, at $51.86 in afternoon trading. They are down nearly 10 percent since the beginning of the year.

From – Reuters

Carlyle closes new mega-fund on $18.5B

The Carlyle Group has gathered $18.5 billion in commitments for its seventh flagship private equity vehicle, concluding an extended fundraising process and topping a $15 billion target. It's the largest buyout fund raised in the US this year by a huge margin, surpassing a $7 billion effort from American Securities that closed in February. 

Carlyle, though, is of course no stranger to enormous pools of cash. Last month, the firm closed its new Asia fund on $6.55 billion, its largest ever in the region. And Carlyle's previous flagship fund, its sixth, reached $13 billion in commitments in 2013, making Carlyle one of 11 firms in the US to raise at least $10 billion for a buyout fund since the start of 2009. 

While massive PE funds have proven rare in the US so far this year, they haven't fallen out of style for Carlyle's primary rivals, including publicly traded peers Apollo Global Management, Blackstone and KKR. Apollo and KKR raised $24.7 billion and $13.9 billion, respectively, for new funds last year, and reports emerged earlier this month that Blackstone has its eyes on $20 billion for a new flagship effort.

Combined, that could be more than $75 billion in new funds raised within the span of two years for four of the private equity industry's most famous firms. 

All those mega-funds are coming at a time when the wider private equity is pulling back from raising new capital after a lengthy boom time. While US firms collected some $243 billion for new funds in 2017, per PitchBook data, that figure was reduced to just $69 billion during 1H—which means that Carlyle's new $18.5 billion effort is equivalent to more than a quarter of all funds raised by PE in the US during the first six months of 2018.

Carlyle plans to use the new fund to make both majority and minority investments in a range of sectors, including aerospace, retail, healthcare, transportation and tech. The firm announced commitments to the vehicle from more than 320 investors spread across more than 50 countries.   

From – PitchBook

CVC Capital Partners joins Asia fundraising frenzy, inks $2.6B exit

CVC Capital Partners has set a $4 billion target for its latest Asia fund, according to the Financial Times, joining a host of private equity investors raising huge pools of cash in the region. And the firm will be restocking its coffers in a different way, too: In a separate move, CVC has agreed to sell French chipmaker Linxens to Chinese state-owned Tsinghua Unigroup for €2.2 billion (about $2.6 billion), per Reuters, the latest big-money exit for the European buyout giant.

Several of CVC's rivals have also been raising funds in Asia like never before. Last month, The Carlyle Group closed its latest effort in the region on $6.55 billion, its largest Asia fund ever. A week before that, Blackstone wrapped up a $2.3 billion Asia vehicle, and KKR closed a $9.3 billion Asian Fund III last year. Bain Capital is also believed to be gathering commitments for a multibillion-dollar pool to invest in the region, and Hong Kong-based Affinity Equity Partners raised a $6 billion fund earlier this year.

CVC's new Asia fund will be the firm's fifth, following a €2.55 billion predecessor from 2014. Just last June, meanwhile, the firm raised €16 billion for its seventh flagship buyout fund, the largest European vehicle of the decade, per the PitchBook Platform.

It's back in Europe—France, to be precise—where CVC's latest major sale is taking place. That's the home base of Linxens, a maker of microconnectors, antennas, inlays and other chip components for clients in the security and identity industries. CVC has backed the company since 2015, when it acquired Linxens in an SBO from Astorg for a reported €1.5 billion.

The firm lined up an even larger sale earlier this year in the UK. In April, CVC signed a deal to sell its stake in Sky Betting & Gaming to The Stars Group, another gambling business, for $4.7 billion. Like with Linxens, CVC had acquired its initial stake in Sky Bet in 2015. Another major CVC exit may be looming in Malaysia, where the firm's QSR Brands is believed to be mulling an IPO that could raise more than $500 million.

Huge funds, huge exits—what about huge new investments? CVC has been making those, too. Late last month, the firm agreed to take control of Recordati, an Italian pharmaceutical company that had been family owned for more than 90 years, in a deal that valued the business at nearly €5.9 billion. That was Europe's largest pharmaceutical move by a private equity firm in at least 10 years, per PitchBook data.

From – PitchBook

Chinese chipmaker Tsinghua Unigroup to buy France's Linxens for $2.6 billion: sources

China’s top state chip manufacturer Tsinghua Unigroup Ltd has signed a deal to acquire French smart chip components maker Linxens for about 2.2 billion euros ($2.6 billion), five people with direct knowledge of the matter said.

The deal, which the sources said was signed over a month ago but has not yet been announced publicly, will be a key test of European regulators’ stance on Chinese investment in the region that has been on the rise amid the country’s worsening trade relations with the United States.

Tsinghua’s acquisition of Linxens from private-equity group CVC is still pending regulatory clearance, three of the sources told Reuters, adding regulators in France, Germany and the company’s union need to approve the deal.

The authorities are not expected to object, the sources said on condition of anonymity as the information is confidential.
Tsinghua and Linxens did not respond to requests for comment.
According to three sources, Tsinghua has already locked in a deal with four banks for a 1.5 billion euro ($1.75 billion) bridge loan to fund the transaction. Credit Suisse, a main lender in the loan, also advised the seller, the people said. Credit Suisse declined to comment.

Before the Linxens deal, Tsinghua Unigroup accumulated a stake in Germany’s Dialog Semiconductor Plc, buying into share price weakness as the Anglo-German chipmaker faced uncertainty over its business relationship with Apple, its largest customer, towards the end of last year.

The stake, held via two wholly owned subsidiaries, reached 9 percent in December, according to company filings, making the Chinese investor the single largest shareholder in Dialog. Tsinghua did not respond to requests for comment at the time.

Failure to get local regulatory approval has previously scuttled Tsinghua’s offshore investment plans, such as share purchases totaling $2.6 billion from three Taiwanese chip makers - Powertech Technology Inc, ChipMOS Technologies Inc and Siliconware Precision Industries Co - that fell through in 2016 and 2017.

That followed a 2015 debacle when an informal $23 billion approach for U.S. giant Micron Technology Inc was rejected by the Idaho-based chipmaker amid national security concerns - a rationale that has increasingly been used to block Chinese deals in sensitive U.S. industries.

So far this year, China has spent $45.5 billion on European assets, more than double year-ago levels, while its investments in the United States has dropped 75 percent to $1.9 billion, according to Thomson Reuters data.

Linxens, headquartered close to Paris, has 535 million euros in annual sales and employs 3,500 staff at nine production sites globally. It also has offices in China, Singapore and Thailand.
Linxens, which does not have a U.S. presence according to its website, makes connectors crucial for communication between smart cards and electronic readers.

It also makes antennas and inlays for applications such as contactless payment, transport and access.

From – Reuters
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