The Biggest Deals of 2012: Mergers, Acquisitions in Arkansas Make for a Busy Year

(A correction has been made to this article. See end of story for details.)

Deal-making activity in Arkansas picked up in 2012 over 2011 levels, with the number of mergers and acquisitions believed to be valued at $9 million or more rising to 81 last year compared with 70 the year before.

Arkansas Business does its best to determine the value of mergers and acquisitions, but private sellers and buyers can and often do keep the details to themselves. We fail to determine the value of a large number of them in any given year (41, for example, of the 81 deals on this week’s list).

(To view the list of Biggest Deals as a PDF, click here, or buy a spreadsheet version here.)

(The PDF list of the Biggest ADFA Bond Deals can be found here, and is also available as a spreadsheet.)

Worldwide, the value of mergers and acquisitions last year totaled $2.6 trillion, according to financial data firm Thomson Reuters. That was a 2 percent increase over 2011.

Spinoffs and divestitures accounted for 47 percent of the global total ($1.2 trillion), Thomson Reuters said, the highest annual share since records began in 1980.

The value of announced M&A globally soared 53 percent in the fourth quarter of last year compared with the previous quarter of 2012. And that bulge in activity was especially true in the United States, according to Marshall McKissack, the managing director who leads the M&A practice at Stephens Inc. in Little Rock.

“With the pending fiscal cliff issues and the potential expiration of the Bush tax cuts for capital gains, there was really a flurry of activity across the U.S. for owners and shareholders to get transactions done by the Dec. 31 deadline,” McKissack said last week. “And we were no different. It was a busy month for us and a big fourth quarter.”

Nationally, $850 billion worth of deals were completed in 2012, according to McKissack, compared with $800 billion the year before. But the total number of transactions was down slightly, indicating a larger median-sized deal.

Emerging markets accounted for 28 percent of worldwide deal-making last year, a rise of 9 percent compared with 2011. And the energy and power sector saw the most activity, followed by the financial and real estate sectors, Thomson Reuters said.

The tax implications for closing a deal after Dec. 31 drove buyers and sellers to get deals done on a deadline, McKissack said, but politics hasn’t caused a fundamental change in the reasons for buying and selling businesses.

“Buyers want to own businesses and sellers want to sell them,” he said. Timing “is a factor, but it may not be the only factor in getting it done. ... We weren’t advising people to buy just because of the potential that taxes would increase, and did.”

Instead, slower organic growth in the economy encourages companies to look for acquisitions in order to speed up growth. And “outliers,” companies whose growth has outstripped general growth in GDP or in their particular industries, make for very attractive acquisition targets, McKissack said.

“A tremendous amount of equity capital out there combined with a still favorable leverage environment … continues to bode well,” he said.

In Arkansas last year, the sale to Walgreen Co. of Stephen LaFrance Sr.’s drugstore chain for $438 million likely got the most local press on the M&A front, primarily because both Walgreen and Stephen L. LaFrance Holdings’ storefronts — USA Drug, Super D Drug and Med-X — are so visible.

In addition, the sale deprived the state of one of its largest private companies. LaFrance had revenue of $825 million in 2011, Walgreen said at the time the acquisition was announced.

Another high-profile deal is the plan, mentioned in January and announced in October, by Murphy Oil Corp. to spin off its subsidiary, Murphy Oil USA Inc., comprising its retail gasoline kiosks, seven product distribution terminals and two ethanol production facilities in North Dakota and Texas.

The formal announcement came after a New York hedge fund, Third Point LLC, told the energy company that it had a “significant stake” in Murphy Oil, had sought approval to increase its position and urged the company to spin off its highly profitable retail arm.

Murphy Oil took the advice, and the new company will be independent and separately traded, similar to its 1996 spinoff of Deltic Timber Corp.

Murphy’s board also authorized a special dividend of $2.50 per share for a total dividend of about $500 million and a share buyback program of up to $1 billion of the company’s shares of common stock.

The spinoff is scheduled to be complete this year, Murphy officials say.

And, in fact, Third Point filings with the Securities & Exchange Commission indicate it accumulated a significant stake in Murphy Oil last year — at least $260.5 million in shares bought between July 1 and Sept. 30, 2012.

Other deal-making of note involving Arkansas enterprises came in the health care sector, with five significant transactions each totaling an estimated $9 million or more. Those ranged from the $113 million purchase by Tennessee company Acadia Healthcare of Amicare Behavioral Centers of Fayetteville to the cancellation by the University of Arkansas for Medical Sciences of its lease agreement with Central Arkansas Radiation Therapy Institute.

Banking also saw a number of conventional transactions as Arkansas-headquartered enterprises bet on growth. Among these were:

• Bank of the Ozarks' $27.3 million purchase of Genala Banc Inc. in Geneva, Ala.;

• Chambers Bancshares' estimated $21.5 million acquisition of Peterson Holding Co. of Decatur, which included unprofitable Decatur State Bank and a profitable thrift in Grove, Okla.; and

• Arvest's purchase — estimated at $16.3 million — of Union Bank in Kansas City, Mo., and 29 Bank of America branches in Arkansas, Oklahoma, Kansas and Missouri. The price tag on the Bank of America branches has not been disclosed.

Acquisitions of failing banks with assistance of the Federal Deposit Insurance Corp. are not included in the list of the biggest deals, but three of those went down in 2012. Simmons First National Bank of Pine Bluff acquired Truman Bank of St. Louis in September and Excel Bank of Sedalia, Mo., in October. In November, Centennial Bank of Conway acquired Heritage Bank of Florida, based in the northern Tampa suburb of Lutz.

Gwen Moritz contributed to this report.

(Correction, Jan. 21, 2013: The Dec. 31 purchase of Westquip Inc. of Oklahoma City by Hugg & Hall Equipment Co. of Little Rock, a deal valued at $12.1 million, was omitted from the list of the biggest deals of 2012. It has been added to the list and the story has been edited to reflect the additional deal.)