The Biggest Deals of 2016


By Dennis Boone



Biggest-Deals-2016

“If you’re going to be thinking, you may as well think big.”— Donald Trump

Fitting, perhaps, that we cite the nation’s designated deal-maker-in-chief—who closed on the biggest deal of his own career last Nov. 8—as we survey the top-dollar transactions around  the regional business scene in Kansas City for 2016. The occasional billion-dollar deal throughout the year was interspersed with plenty of nine-figure transactions, reshaping the local economy in ways both impactful and subtle. Leading the way:

Great-Plains-EnergyGreat Plains Energy

The biggest deal of the year, hands down, came in May, when Great Plains Energy announced a $12.2 billion deal to acquire its neighbor to the west, Topeka-based Westar Energy, the major utility serving central and eastern Kansas. Now the question becomes: Does it remain a done deal?

When he announced the acquisition, Great Plains’ chairman and CEO Terry Bassham said “the combination of our two companies is the best fit for meeting our region’s energy needs” for a combined 1 illion customers in Kansas and Missouri. 

Regulators in each state, however, took a less optimistic view of the union, particularly on the Kansas side. The Missouri Public Service Commission, after initial mild skepticism, signed off on the deal with a few modifications to protect customers in the state from bearing the costs of any under-performance by the Kansas operations. The Kansas Corporation Commission, however, expressed serious reservations about what it saw as lack of detailed evidence to support the claims that the merger would lower electricity costs, and suggested that Great Plains was overpaying Westar’s market value by $2.3 billion. In December, the KCC’s staff said it couldn’t recommend approval of the acquisition as currently structured. 

That didn’t kill the deal, but it will make navigation to completion a bit more challenging for Great Plains Energy. Its spokesman, Chuck Caisley, insisted that “there’s not a better deal out there,” to satisfy Westar’s interest in an acquisition. “This preserves local control. This generates savings,” he said—and if the deal ultimately is not approved, Westar would eventually be sold in any case. Just not to Great Plains.

Bats Global Markets

We’re a proud lot in Kansas City, but it’s a sense of understated pride; chest-thumping is kept to a minimum—especially when we’re clearly superior to major population centers with respect to things that really matter in life: housing prices, for example. Barbecue. Or more recently, pro baseball and football.  Perhaps that reluctance to boast about the good things going for us is why we take things a bit personally when we see some of the local glitter flittering away, and losing a national company headquarters falls into that category. For a decade, we cheered as a tech-savvy underdog, Bats Global Markets, roared from startup in 2005 to billion-dollar revenues in just a few years, and then to status as the world’s second-largest equities trading platform, surpassing the venerated NASDAQ as the trading marketplace for shares of innovative companies.

But, like all good things, this one came to a next chapter, if not an end, when officials announced in September that Bats would be subsumed into the Chicago Board Options Exchange, a deal valued at $3.2 billion. While Bats’ executives insisted that the Kansas City-based human capital behind its rise to prominence would remain on board and continue to drive innovation for the new parent, and that it would retain a presence here, the region loses that headquarters claim to financial-services prominence.The sale came just months after Bats executed its initial public offering of stock, a deal that produced seven- and eight-figure payouts for some of the directors and senior managers who built the company. 

AMC-EntertainmentAMC Entertainment

This one falls into the subtle-change category. You might not feel it when the previews start or when the credits roll, but when you check out a new blockbuster film at an AMC Entertainment theater in 2017, your eyeballs will be feted by the world’s largest entertainment company, in terms of screens operated. Two deals totaling more than $1 billion each  during 2016 gave the Leawood-based company that distinction. The first came in November, when AMC formalized its $1.2 billion acquisition of Odeon & UCI Cinemas, a British giant that added 2,243 European screens to AMC’s global count and made it the world’s biggest screen operator.
The domestic title was formalized in December, when regulators signed off on the $1.1 billion acquisition of Georgia-based Carmike Cinemas, which added 2,917 screens to AMC’s domestic count of 5,295, That made it the nation’s biggest operator, with more than 8,200 screens. Both deals were further proof that we do, indeed, live in a global economy: AMC itself is now owned by Dalian Wanda Group, the Chinese entertainment conglomerate that bought the company in 2012.

EPIQ-SystemsEPIQ Systems

In a bit of a parallel to the Bats’ story, the region also lost its claim last year to being the home of another innovative public company that leveraged technology to play on a global stage. This time, it involved EPIQ Systems, which only a year earlier had made its 13th (and, as it turned out, final) appearance on Ingram’s Corporate Report 100 list of the fastest-growing companies based in the Kansas City region. And by the end of 2015, it had cracked the $500 million revenue mark for the first time. That kind of size and consistent growth will eventually attract attention of deep pockets and acquisitive eyeballs, and in July, Atlanta-based OMERS Private Equity announced that it would spend roughly $1 billion to buy EPIQ. From its origins in Kansas City, Kan., EPIQ had grown into a global provider of integrated technology and services for the legal profession. 

Highwoods-PropertiesHighwoods Properties

It’s the crown jewel of retail and nightlife in Kansas City, so it was quite natural for parochially inclined eyebrows to arch a bit in late 2015, when Highwoods Properties announced that it would put the Country Club Plaza up for sale.
Those 14 square blocks and 1.4 million square feet of retail and dining space hold a special place in the hearts of Kansas Citians, not just for their shopping and entertainment allure, but in large part for the fond childhood memories of pushing away from the Thanksgiving table to go see the Christmas lights come on and celebrate this region’s official start of the holiday season. Highwoods itself had been on the receiving end of similar skepticism in 1998, when it bought the Plaza from the original hometown, developer, J.C. Nichols, for $560 million. As 2016 dawned, Highwoods announced that a new entity called Country Club KC Partners would snap up that real estate for $660 million, easily the biggest regional real-estate transaction of 2016 (but in retail realty terms, what must have been a disappointing return, 17 years after the initial investment). The new ownership group is made up of two large companies with histories in retail-center management and investment—Macerich, a REIT based in Santa Monica, Calif., and Taubman Centers of Bloomfield Hills., Mich.

DST-SystemsDST Systems

The biggest nine-figure deal you might have overlooked in 2016 involved a sale by DST Systems, both a major employer and a civic anchor in Downtown Kansas City. DST provides business data services for corporate clients working in the asset management, brokerage, retirement and healthcare sectors, but the company determined that it its long-term interests required divesting its customer communications unit for an impressive $410 million. This sale was no small consideration: The communications operation accounted for 40 percent of DST’s 2015 revenue—a hefty $1.1 billion. But Steve Hooley, DST’s chief executive officer, said the company’s strategic focus was being sharpened on the healthcare and financial services sectors. The communications unit, and its primary functions in print and mail activities involving customer and investor communications, was seen as part of a business model challenged with long-term secular decline. The buyer? New York-based Broadridge Financial Solutions. 

WireCo-WorldGroupWireCo WorldGroup 

As oil prices started to ebb from their midsummer highs of $115 a barrel in 2014, the aftershocks began to ripple around the world. First up were the companies that deal in transporting and processing petroleum products. Then came the cutbacks in the oil patch, as the domestic rig count fell from 1,931 in September 2014 to just over 500 by the same month in 2016. All along the way, suppliers were feeling the pinch, too, and one of them had long called the Kansas City region home. WireCo World Group, which manufactures wire rope and other products for industrial clients around the globe, ran in to a major cash crunch in 2015. This, after years of growth that put it among the region’s fastest-growing companies as recently as 2011. But by mid-2016, it was clear that a recapitalization was needed. That came in the form of a $260 million infusion, which bought controlling interest for Canadian-based Onex. With that deal, the region loses claim to being the headaquarters home of WireCo, which ranked No. 31 among the region’s 100 largest private companies in 2016.

BankofKansasCityBank of Kansas City

By the time Bank of Kansas City, a subsidiary of Oklahoma-based BOK Financial, closed on its $102 million acquisition of Missouri Bank & Trust Co. in November, the Kansas City region was well-prepared for the news: after all, the deal had been announced the previous December, not long before year-end. Based on FDIC figures as of last June, the union created a new No. 10 on the region’s list of largest banks, ranked by deposits, and an entity on the threshold of $1 billion in deposits. That’s an impressive breakthrough for the parent company out of Tulsa, which entered the regional market in 2006 and almost immediately had to fight the headwinds of the harshest economic downturn in half a century, and a financial-services climate that has reduced the nation’s count of commercial banks from more than 7,000 at the onset of the 2008 financial crisis to roughly 5,100 by year-end.

EyeVerifyEyeVerify

Civic boosters want to redefine Kansas City as the City of Entrepreneurs, pointing to a proud history that stretches back a century and enfolds names like Hallmark, H&R Block, Cerner and Bats Global Markets. They all made it to the billion-dollar revenue club, and business executives frequently ask: Who’s next? That pursuit has yielded a tech sector that has grown sufficiently fast and wide to earn this region the moniker Silicon Prairie, but it may be a while before we witness the next company to join the 10-figure revenue club. Still, tech is affording us a new perspective that says maybe, just maybe, we can start to see that future from here. The biggest example of that in 2016 was the sale of EyeVerify to Alibaba, perhaps the world’s largest on-line commerce company. Founded in 2012 by local entrepreneur Toby Rush, EyeVerify was based on an innovative approach to digital security, potentially steering us from the 20th-century construct of passwords, and toward a new generation of biometric security, relying on eye scans that can be captured by a smartphone. Upon news of the sale, the company cautioned that you can’t believe everything you read—and what was being routinely printed suggested a $100 million sale price. If so, that would easily make it the region’s biggest tech-related transaction of 2016—and fodder for hopes of much more tech innovation to come here.

The Biggest Deals: Other Notable Deals

Of course, there were a lot more headline-inducing transactions around the region, but without disclosure of the costs, it’s harder to tell which are not just financially bigger, but potentially more significant for the Kansas City business scene. Among them:

  • In November, Summit Custom Homes announced that its operating assets were being acquired by Clayton Homes, a subsidiary of Warren Buffet’s Berkshire Hathaway. Summit had steadily climbed the list of area home builders to become the region’s largest, and at an impressive pace: Last year, it ranked No. 36 on the list of the area’s fastest-growing companies, with $86.4 million in 2015 revenues—a monster surge from 2012, its first year on the list, with $23.8 million. 
  • In July, Schick Solutions announced that a French company, Breteche Industrie Group, would buy the Kansas City operations for an undisclosed sum. The company will remain in Kansas City operating under that name as a division of Breteche. Founded in 1956, Schick is a leading manufacturer of handling systems for industrial and food-production uses.
  • After years of strong revenue increases, staffing solutions provider Nextaff roared to the top of Ingram’s Corporate Report 100 list of the region’s fastest-growing companies in 2012. Plenty of incentive for Kentucky-based Malone Workforce Solutions to go shopping in the Kansas City area and do that deal in July.
  • One of the most jaw-dropping entrepreneurial success stories in the past two decades involved Silpada, a company launched by two housewives who took $50 from their grocery budgets to start a jewelry shopping club. In 2010, they sold it to Avon for $650 million, and just two years later, bought it back for $85 million. Then, to the surprise of many, Silpada announced last spring it would close its doors; Berkshire Hathaway’s Richline Group agreed in October to acquire Silpada’s assets.
  • The world’s largest light jet dealer, jetAvia, swooped into the region in May from its base in Austin, Texas, to acquire Kansas Aircraft Corp., extending the buyer’s product range into piston and turboprop models. KAC was founded in 1990 by Michele Stauffer, who sold it to aviation executives Tim and Dianne White in 2013.
  • In July, Kansas City law firm Husch Blackwell extended its national reach by completing a merger with Milwaukee-based Whyte Hirschboeck Dudek, a deal announced in the spring. The new, bigger Husch Blackwell now has an attorney count of more than 700, with 19 offices around the nation and annual revenues 
    of roughly $346 million.

 

 

Biggest Deals: Real Estate

In addition to the sale of the Country Club Plaza, there was plenty of action on the real-estate front in 2016. Among the biggest deals of the year in construction and development:

  • This one will top the real-estate projects list for a decade, and with good reason: It will take nearly that long for Cerner Corp. to build out its Innovation Campus in south Kansas City, where 16,000 are expected to be working by 2025. The $4.6 billion project is the largest development deal in Missouri’s history.
  • The long-running saga in the redevelopment of the former Brookridge Country Club site took another step toward fruition in November, as the Overland Park City Council set up a framework to advance the $1.8 billion mixed-use project.
  • The first commercial activity launched in 2016 at BluHawk, a sprawling 300-acre project in southern Johnson County with a hefty price tag of $1 billion. In addition to various residential options, it will offer office, retail, hotels and a satellite of the Hutchinson-based Kansas Cosmosphere space museum.
  • Not far to the south of Cerner’s emerging campus, in Grandview, the $400 million Gateway Village project is moving dirt. Billed as the world’s largest artificial-turf complex, it will have up to 15 lighted soccer fields, a fieldhouse of between 86,000 and 150,000 square feet, 400,000 square feet of retail and office space, as many as 400 apartments and 80 smaller multifamily units, several dozen homes and a group of small hotels with as many as 500 rooms, combined.
  • Amazon.com added even more BTUs to a red-hot industrial market with news during the year that it would lease 822,000 square feet for a fulfillment center at Logistics Park Kansas City in southwest Johnson County, then followed up in the summer by announcing plans for an 856,000-square-foot facility in Wyandotte County. That will bring the on-line retailer’s Kansas City regional footprint to 4.2 million square feet, with more than 6,000 employees.
  • Developer John Bondon secured the blessing of the Lee’s Summit City Council in October for the Village at View High, a $225 million mixed-use development near Third Street and View High Drive, an area filling up fast in the former stretch that separated the city from Kansas City. It will include 250,000 square feet of retail and 100,000 square feet of office space, plus more than 300 apartments.
  • In Downtown Kansas City, a pair of nine-figure projects continue to push the multifamily development in the commercial business district. The biggest entails Commerce Tower, a remake of the former office building into 300 residential units, with a $140 million price tag. After meeting its rental projections with OneLight, the Cordish Company is moving ahead with the $105 million TwoLight, a  project that will add 296 more luxury units Downtown.
  • One of the biggest undeveloped tracts in Johnson County will be home to a $210 million development by Oddo Development Co. Sonoma Plaza, near Lenexa City Center, will entail 675 luxury apartments and a senior living facility, plus retail offerings and office space covering 125,000 square feet.
  • Garmin Industries is getting in on the action with a $200 million expansion of its Olathe headquarters, including a 720,000-square-foot manufacturing and distribution center slated to be operating by 2020. That will clear the way for up to 2,600 more employees, nearly doubling the existing staff of 2,800.
  • And the American Royal is saddling up for a relocation to Wyandotte County, where it will make its new home in a $160 million complex on nearly 275 acres adjacent to the Kansas Speedway grounds.