Arkansas' Biggest Deals of 2014 Soar While Value Slips


The mergers and acquisitions spigots were opened wide last year in Arkansas. The number of big deals — those valued at $9 million or more — soared 38 percent, increasing to 101 in 2014 compared with 73 in 2013.

The known value of those deals, however, fell 15 percent, totaling $18 billion last year compared with $21.2 billion in 2013.

The deals ranged across industries in Arkansas, from agribusiness (Tyson) to energy (Murphy Oil) to financial services (Bank of the Ozarks and Simmons First) to real estate, a lot of real estate.

That leap in the number of big deals reflected trends globally and in the United States. More than 40,400 M&As were announced worldwide last year, an increase of 6 percent. In the U.S., the number of deals rose 10 percent over the previous year to 15,734.

Worldwide, the value of mergers and acquisitions rose 47 percent, to $3.5 trillion, the best performance globally since 2007, before the financial crisis. In the United States, M&A value in 2014 hit $1.5 trillion, a 51.5 percent increase compared with 2013.

In terms of deal-making nationally, last year may have been the year the Great Recession ended.

Capital is abundant, interest rates are low, and people are looking for growth opportunities, said Marshall McKissack, managing director of mergers and acquisitions at Stephens Inc. of Little Rock. That combines to create a good environment for M&As. The U.S. economy continues to lead the world, generating “tremendous interest both domestically and from international buyers looking to the U.S. as a place to invest,” he said.

Can we finally say that the economic downturn, the nation’s longest since the Great Depression, is behind us?

“I think so,” McKissack said. “I think people are still dealing with some of the effects of it. But I think people’s desire [is] to see it behind them, and in looking for opportunities to invest, people become less cautious, more optimistic on what might be possible and make investments on the acquisition side.

“So I think it’s certainly in the rear view mirror.”

Tyson Pays $8.6B for Hillshire

In Arkansas, the biggest deal by far was the almost $8.6 billion purchase by Tyson Foods Inc. of Springdale of the Hillshire Brands Co. of Chicago.

For Tyson, the acquisition gave it an opportunity to own highly recognizable brand names like Ball Park hot dogs and Jimmy Dean sausage.

Tyson CFO Dennis Leatherby said the acquisition makes strategic sense for Tyson, which was seeking growth in its prepared foods division. Tyson’s prepared foods division is 86 percent private label, while Hillshire is 89 percent brand names.

“When you think about that, the power of combining those together is just phenomenal,” Leatherby said. “It’s really just a great combination.”

To help pay for the acquisition, Tyson sold its poultry operations in Mexico and Brazil to JBS SA, the parent company of Pilgrim’s Pride Corp. of Greeley, Colorado, deals that added to this year’s list.

The Mexican operations — three plants, seven distribution centers and 5,400 employees — gained Tyson $400 million. Those in Brazil — three plants and 5,000 employees — brought in $175 million. Tyson had outbid JBS in the contest to purchase Hillshire Brands.

Murphy Oil Corp. of El Dorado was behind the second-largest deal in 2014, selling 30 percent minority stakes in its Malaysian oil and gas assets to PT Pertamina Malaysia Eksplorasi Produksi, owned by the Indonesian government. Murphy received $2 billion in the sale.

Arkansas banking companies also were active last year. For example:

  • Bank of the Ozarks Inc. of Little Rock announced a $216 million deal for the $1.2 billion asset Summit Bancorp Inc. of Arkadelphia in January 2014 and later in the year a $228.5 million agreement to buy the $1.6 billion-asset Intervest Bancshares Corp. of New York.
  • In May, Simmons First National Corp. said it was buying the $1.9 billion-asset Community First Bancshares Inc. of Union City, Tennessee, for $243.4 million. Simmons also announced it was paying $209.1 million for the $1.1 billion-asset Liberty Bancshares Inc. of Springfield, Missouri.

Real Estate Draws Buyers

A number of shopping centers and big apartment buildings in Arkansas also traded hands last year. A few in the $40 million range:

  • A New York commercial real estate group paid $43.9 million for two shopping centers in Fayetteville in December.
  • Three affiliates of Maxus Realty Trust Inc. of North Kansas City, Missouri, bought the three phases of Foothills Apartments in North Little Rock in March, paying $42.6 million.
  • Inland Real Estate Income Trust Inc. of Oak Brook, Illinois, bought the Midtowne Shopping Center in Little Rock, paying $41.5 million to IMI MTLR LLC of Skokie, Illinois.

Activist Investors

Stephens advised on more than $20 billion in mergers and acquisitions, McKissack said. “It was a good year.”

“I would say we saw particular strength in our telecom and media group, financial services and, broadly defined, our industrial group,” he said.

One trend McKissack noticed last year was an increase in hostile shareholder activity. “That was certainly up in 2014,” he said.

“There’s been a tremendous amount of capital raised by hedge funds pursuing an activist strategy,” McKissack said. “That’s an opportunity to try to generate outsize returns.

By and large, those hedge funds or activist funds have been very successful in generating returns for their limited partners, and it’s continued to fuel interest in that strategy. It was big in ’14. I expect it to be an area of increasing activity in 2015.”

Asked whether he knew of any Arkansas-based companies that needed to be alert to the trend, he said, “Not that I want to talk about.”

Dillard’s Inc. of Little Rock has received some of that activist investor attention recently. Marcato Capital Management LP of San Francisco, owner of 4.9 percent of Dillard’s stock, said in November that Dillard’s should create a stand-alone real estate investment trust for its assets. Marcato thinks such a move would push the retailer’s stock even higher.

The 2015 Picture

McKissack is optimistic about the deal-making environment this year. “It’s a seller’s market,” he said. “Valuations remain high or have come back to pre-crisis levels.” And for companies that have shown sustained growth “that’s a highly sought after opportunity among both strategic buyers and financial buyers.”

In addition to low interest rates and cash-rich corporations seeking growth, McKissack said: “There’s just been more confidence for sure in the U.S. economy, and more confidence in the board room has translated into more transactions.”