My, how you’ve grown.
What else to say about Orange County’s business landscape over the past year?
Everything from the size and volume of mergers and acquisitions to the possibilities of technology and the ambitions of a fairly young local homebuilder got much bigger in 2014.
Start with the biggest deal OC has ever seen: Irvine-based drugmaker Allergan Inc.’s $68 billion sale to Actavis PLC, which has been approved by both sides and is expected to be completed in coming months. It was also the biggest deal in the healthcare industry this year, a sector that had about $250 billion in M&A activity globally, and wasn’t far off from claiming the overall title, which appears poised to go to Comcast for its $70 billion buy of Time Warner Cable.
Call Allergan an outlier and you’ve still got an eye-popping deal on the local books for this year: Anaheim-based Questcor Pharmaceuticals Inc. sold to Mallinckrodt PLC, a drugmaker with a tax-friendly headquarters in Ireland and operations headquarters in St. Louis, for $5.8 billion in cash and stock.
The Questcor deal was completed in August, and the pursuit of Allergan had taken center stage for Big Pharma and Wall Street by then. The sale still ranks among the top deals in OC’s history—besides Allergan, it’s the highest price fetched by a local company since Beckman Coulter Inc. in Brea got $6.8 billion from Washington, D.C.-based conglomerate Danaher Corp. in 2011.
Another multibillion sale of a local drugmaker bookended Allergan’s megadeal when Aliso Viejo-based Avanir Pharmaceuticals Inc. went for $3.5 billion to Otsuka Pharmaceutical Co. in Japan this month. The deal came a few weeks after Actavis and Allergan struck an agreement.
Indeed, the sales of Allergan, Questcor and Avanir add up to about $77 billion, close to a third of the overall dollar volume of healthcare deals worldwide for the year.
TRI Pointe, Oculus
OC’s real estate and technology sectors added to the trend.
The first came when Irvine-based TRI Pointe Homes Inc. combined with Weyerhaeuser Co.’s homebuilding subsidiary, Weyerhaeuser Real Estate Company. The $2.8 billion deal vaulted TRI Pointe into a spot among the biggest publicly traded homebuilders in the U.S., with a market capitalization of about $2.3 billion and 31,000 parcels under its control. It added five homebuilder brands to TRI Pointe, a 5-year-old company that went public in 2013.
Facebook Inc. made a big splash in the technology sector when it bought Irvine-based virtual reality headset maker Oculus VR for $2 billion, a deal completed in July. Oculus now operates as a unit of Facebook, with its operating headquarters still in Irvine.
A couple of other companies took another tack, rolling up smaller deals on a regular basis to fuel rapid growth.
Santa Ana-based Universal Services of America and its Universal Protection Systems unit continued to be a busy buyer, with seven acquisitions across the U.S. over the course of the year. The company is now the 20th largest employer in OC, with 3,600 workers here.
Huntington Beach-based insurance broker Confie Seguros also covered the U.S. to shop for numerous buys of local brokerages and agencies that helped boost its revenue to about $350 million a year, giving it a place among OC’s largest private companies.
Orange County’s financial sector also stood out for another round of growth spurts by several banks. It was only three years ago that OC was home to just one bank with more than $1 billion in assets.
There are a handful of banks above the $1 billion mark now, and a couple of others close. Two of them—Banc of California and Opus Bank, both based in Irvine—are closing in on $5 billion in assets as they jockey for the top spot.
Irvine-based Pacific Premier Bank is closing in on the $2 billion mark for assets, while First Foundation Bank, also in Irvine, and Costa Mesa-based Pacific Mercantile Bank are each over $1 billion. California Republic Bank and Sunwest Bank, both in Irvine, were each getting close to the $1 billion mark by mid-year when the Business Journal published our annual list of local banks.
Other segments of the local economy moved up in different ways. A number of hotels—the Balboa Bay Resort, Island Hotel, Hotel Irvine, Westin South Coast Plaza, Hilton Anaheim among them—got started on or wrapped up significant renovations.
There were upgrades on food offerings made or put in motion throughout OC, too, with the Packing House in Anaheim opening during the summer and the 4th Street Market in Santa Ana expected to debut early next year. The scene at South Coast Collection in Costa Mesa continued to draw foodies, and other retail centers took steps to bolster their menus, with the highly anticipated Din Tai Fung at South Coast Plaza a high-end exemplar of the trend.
The local business community in September also got one of the biggest blasts of media coverage it’s ever seen, when Bill Gross, cofounder and chief investment officer of Newport Beach-based Pacific Investment Management Co., left the bond house for Janus Capital Group Inc. His new employer set him up in an office a few blocks from Pimco’s headquarters in Newport Center.
Gross’ move followed months of speculation and media scrutiny that was first sparked when Mohamed El-Erian left his post as Pimco’s chief executive officer and co-chief investment officer.
Coverage of Gross’ departure spanned the globe and brought an estimated $300 million of high-end media exposure to Janus, a relatively small financial brand prior to his arrival.
Gross has more recently gotten attention for increasing the assets of the Janus Global Constrained Bond Fund from $10 million to $1.2 billion. That’s still a slight fraction of the Total Return Fund he ran at Pimco, but Gross has earned some bragging rights on quality. His Janus fund posted slight gains in October and November while unconstrained bond mutual funds as a peer group posted losses.
Pimco’s Total Return Fund also bucked the trend with slight gains over the two months, although it’s likely Gross can claim a win there, since a fund of its size—about $160 billion, even after heavy outflows in recent months—likely still reflects the direction he provided until October.
More on that in 2015.