DealZone
Behind the deals and deal-makers
Deals wrap: Nasdaq triumphant?
Nasdaq OMX and IntercontinentalExchange unveiled a rival bid to buy NYSE Euronext for about $11.3 billion in cash and stock, a 19 percent premium to the offer made by German competitor Deutsche Boerse. The move could raise new antitrust questions as it would combine the two largest U.S. stock exchanges. The new offer is valued at $42.50 per share, Nasdaq and IntercontinentalExchange said. The offer represents a 19 percent premium to NYSE’s closing price on Thursday and is 27 percent above the company’s valuation before Deutsche Boerse’s $10.2 billion bid in February. Analysts were skeptical about whether Deutsche Boerse would launch a counterbid.
Citigroup might be uncomfortable sitting on information needed to determine whether the onetime successor to Berkshire Hathaway Chairman Warren Buffett violated securities laws when he personally traded in shares of Lubrizol, which Berkshire acquired for $9 billion, but it doesn’t have to be damaging territory for Citi, writes Rob Cox.
No.1 concert promoter and ticketing company Live Nation Entertainment is in the running to buy the recorded music assets of Warner Music Group, the world’s third largest music company, according to a person familiar with the talks. Bids have come in valuing Warner Music Group at around $3 billion on an enterprise value basis, which includes both debt and equity.
Canadian satellite company Telesat Holdings is weighing takeover offers from EchoStar and Carlyle Group, and may decide on a possible sale in the coming days, according to Bloomberg. EchoStar agreed to buy Hughes Communications for $2 billion including debt in February.
Deals wrap: What now for Berkshire?
Warren Buffett’s reputation as someone who prides himself on his transparency and handpicks managers who can run businesses in a similar manner, took a blow when David Sokol, widely seen as Buffet’s successor at Berkshire Hathaway, resigned after buying shares in chemical company Lubrizol Corp before pushing Buffett to acquire it. Sokol said he did nothing wrong. Analysts said any impact on Berkshire Hathway will be short-term but acknowledged that Buffet’s brand was damaged.
Other Berkshire execs seen as possible successors to Buffett include Ajit Jain, Berkshire Hathaway Reinsurance Group chief, repeatedly praised by Buffett for his running of the insurance business; Gregory Abel, MidAmerican Energy Holdings CEO, who Buffet called a “terrific manager” and part of a “dream team” at the Berkshire-owned utility; and Matthew Rose, Burlington Northern CEO, who joined Berkshire after selling the No. 2 U.S. railroad company to Buffett last year for $26.4 billion.
Warren Buffett’s hunt for a large acquisition could lead to targets like Eaton, Illinois Tool Works or Cliffs Natural Resources, all of which seem to fit his recent preference for growth in industries outside of his core insurance unit, writes Michael Erman and Ben Berkowitz.
Vodafone will buy out Indian partner Essar in a $5 billion deal that ratchets up its exposure to a mobile market that has proved challenging despite its rapid growth.
Deals wrap: Swiss wealth managers targeted
The latest clampdown by German and U.S. authorities on tax-evading clients at banks such as Credit Suisse could make Swiss wealth management firms alluring takeover targets, bankers say. Swiss private banks have been intensifying their cleanup of untaxed assets in an effort to limit the attention of foreign authorities, reducing risk for potential acquirer, writes Martin de Sa’Pinto and Edward Taylor. Union Bancaire Privee, EFG and Julius Baer are seen as targets.
Valeant Pharmaceuticals said it was not interested in a bidding war for drugmaker Cephalon and was willing to walk away. But Chief Executive Michael Pearson also said Valeant may consider raising its offer if Cephalon opens up its books and the deal looks right. Shares of Cephalon surged more than 29 percent on Wednesday, above the $5.7 billion unsolicited offer from Valeant, in a sign investors are expecting a higher bid.
Conditions are better for a wave of U.S. bank mergers, with large deals that carry a price tag of $5 billion or more possible by the end of the year, a UBS AG investment banker said on Tuesday.
BATS Global Markets plans to list U.S. public stocks by year-end, opening the door for companies to float shares somewhere other than the Big Board or Nasdaq for the first time in years.
Deals wrap: GE to slow M&A warpath
General Electric continued on its M&A warpath with a $3.2 billion agreement to acquire France’s Coverteam, a maker of automation systems used in the oil and gas sector, marking the latest in a series of deals in the energy industry. But, after some $11 billion in acquisitions in the energy sector over the past six months, GE plans to slow its pace of dealmaking, a top executive said.
Rio Tinto said it would go ahead with its A$3.9 billion ($4 billion) takeover offer for Riversdale Mining even if it ended up with a minority stake in the Mozambique-focused coal miner.
Canada’s federal election could add a fresh element of uncertainty to the London Stock Exchange’s proposed C$3 billion ($3.1 billion) takeover of TMX Group, a deal which was already seen as far from a sure thing, writes Cameron French.
As lenders tighten mortgage standards and consumers stay on the sidelines amid a five-year slide in home prices, all-cash purchases are surging, writes Bloomerg’s John Gittelsohn. The deals are done mostly by investors who can get properties for less than buyers needing loans, fix them up and resell or rent them.
Deals wrap: eBay’s $2.4 billion GSI buy
EBay said it plans to buy e-commerce company GSI Commerce, which owns Web businesses such as the flash site Rue La La and ShopRunner, for $2.4 billion. Ebay said it will offer shareholders of GSI $29.25 per share, a 51 percent premium over its closing price on Friday.
Tabula announced $108 million in funding, one of the largest venture rounds in a decade for a chip company, writes VentureBeat’s Matt Marshall. The company says it can create programmable logic devices for $200, compared to a cost of more than $1,000 offered by competitors.
Despite soaring valuations of tech companies and warnings that the bust a decade ago may be repeated, there are notable differences between the dot-com boom and now, write Evelyn M. Rusli and Verne G. Kopytoff of the New York Times. Today, the stock market is not glutted with offerings and attractive tech start-ups like Groupon have real businesses — not just “eyeballs and clicks”. But, as cash continues to pile up, the fear is that all the money cannot be put to work responsibly, they add.
Well-known Canadian clothiers Le Chateau, Jacob and Reitmans could become takeover targets as a wave of U.S. retailers follows Target’s lead and seeks opportunities north of the border.
Deals wrap: Blockbuster year for M&A?
Despite upheaval in the Middle East and Japan, worldwide M&A have risen 58 percent to $717 billion so far this year, according to preliminary data from Thomson Reuters, marking the best start to a year since 2007 and building on last year’s tentative recovery. Analysts expect to see continued strong activity in mining and energy, but some warned it’s still too early to see the full implications of the recent crises.
Deal-making in Asia got off to a strong start in 2011, with cashed-up companies tapping investment opportunities in sectors from energy to industrials, and bankers say the transaction pipeline for the rest of the year looks healthy.
Executives at boutique investment banks see an increasing number of clients wanting their advice after a Delaware ruling last month accused large investment bank Barclays Capital of conflicts of interest.
Wall Street’s most powerful bank, Goldman Sachs Group, is making its worst showing in U.S. deal advisory rankings in more than two decades, sliding to 10th place in the first quarter of this year. The drop is mainly because the firm did not advise on two mega deals: AT&T’s $39 billion deal for T-Mobile USA and the $59 billion restructuring of insurer American International Group.
Deals wrap: Walgreen prescribes drugstore.com buy
Walgreen plans to buy drugstore.com for $429 million, expanding the online presence of the world’s largest drugstore chain. Drugstore.com shareholders will receive $3.80 a share, which is more than double the company’s closing stock price on Wednesday.
A sale of the British government’s $107 billion stake in Lloyds Banking Group and RBS may start next year, Bloomberg said, citing four people familiar with the matter.
Geothermal energy is likely to attract interest as investors rethink the outlook for nuclear power following the crisis in Japan, writes Leonora Walet and Tessa Dunlop. Japan sits on enough untapped geothermal power to replace all of its planned nuclear stations over the next decade, but the quake-prone country’s only plan to harness that energy’s potential is to develop hot springs.
Cheap valuations along with their respectable free cash flow and extensive real estate assets have made discount and dollar stores attractive targets for companies and private equity firms, and it looks like Wall Street can wring a few billion dollars more out of them, writes NR Sethuraman.
Deals wrap: Conoco may double assets sale
ConocoPhillips, the third-largest U.S. oil company, said it might double its planned sale of less-desirable assets to $20 billion, with proceeds going to buy back stock.
Conoco is executing a plan, first announced in late 2009, to increase shareholder value through debt reduction, stock buybacks and increased dividends. Conoco did not immediately specify what might be sold, but did say those assets targeted would be mature, high-cost projects.
Consumer goods group Colgate-Palmolive has agreed to pay around $940 million for Sanex, a shower gel and deodorant brand which owner Unilever had been ordered to sell. The sale comes just a week after Unilever announced it was stepping up new product launches to drive growth.
Corporate predators could find the beleaguered reinsurance sector offers attractive opportunities, provided they have the nerve to look beyond a round of bumper claims triggered by the Japanese earthquake. “The market was turning anyway, and the earthquake will shift it, which will obviously be a good entry point for private equity and for M&A activity on a wider basis,” said Barrie Cornes, insurance analyst at Panmure Gordon.
Deals wrap: Who will Sprint call?
Bankers said Sprint had a handful of options after AT&T swooped in to buy T-Mobile USA for $39 billion, but none of them would give it the clout to compete in a market dominated by AT&T and Verizon Wireless, which would collectively hold an almost 80 percent market share. Verizon Wireless CEO Daniel Mead said he had no interest in buying Sprint.
Charles Schwab will buy online brokerage optionsXpress Holdings in a $1 billion deal that gives Schwab a stable of the most active retail traders, as options continue to boom.
Shutterfly said it agreed to buy privately held card design company Tiny Prints in a $333 million cash-and-stock deal, as the photo-sharing service tries to win back customers in a market increasingly dominated by social networking sites like Facebook.
Buyouts in Asia are chiefly dependent on bank loans but in a first-of-its-kind for the region, the debt portion of one deal last week was financed entirely through a bond issue, likely opening a new funding route for private equity firms, writes Stephen Aldred.
Deals wrap: AT&T’s crystal ball
AT&T’s surprise $39 billion deal to buy T-Mobile USA from Deutsche Telekom will create a new leader in the U.S. mobile sector and likely draw scrutiny. The regulatory challenge will be predicting what the dominant form of communication will be 3 to 5 years from now, analyst Evan Stewart said. The deal will take a year to close, in which time customers are expected to see improved network quality, according to AT&T.
Sprint Nextel risks being further eclipsed by Verizon and the new AT&T, which together would boast 230.3 million customers in the U.S., compared to Sprint’s less than 50 million, writes Michael J. de la Merced and Jenna Wortham of The New York Times.
Citigroup plans to slash the number of common shares outstanding and reintroduce a dividend after suspending payouts two years ago, taking another step in its long recovery from the brink of failure during the financial crisis.
Warren Buffett said he believes Japan’s devastating earthquake is the kind of extraordinary event that creates a buying opportunity for shares in Japanese companies and that his Berkshire Hathway is looking for more large-scale acquisitions anywhere in the world. “The United States is most likely where we will do something,” he added.
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