12.10.10 BRIEF Mergers Friday
Emerging Markets Buyers to Drive 2011 M&A M&A Announcements Target Acquirer Total Name Name Value By Brett Foley ($M) Asian companies seeking Survey Expectations for 2011 M&A EnBW Energie Republic of Germany 12,947 to expand internationally may EnBW Energie (EDF) Republic of Germany 6,250 Nicor Inc AGL Resources 3,138 propel modest gains in merg- ASIA 17% 57% 9% 7% Banco BTG Multiple acquirers 1,800 ers and acquisitions next year, Trade House Kopeyka X5 Retail Group 1,650 extending the recovery that 2% Conforama SA Steinhoff Int'l 1,596 began in 2010, a Bloomberg EUR 16% 58% 8% 1% Attfund Retail Hyprop Investments 1,303 survey showed. 2% Aster Sp Zoo Liberty Global 793 There will be at least a small US 17% 53% 8% 1% Ceske Radiokomunikace Macquarie Group 763 increase in mergers and ac- Two Power Plants Xcel Energy Inc 739 quisitions in 2011 after a 12 0% 20% 40% 60% 80% 100% Total SA Assets Arkema 736 percent gain to $1.96 trillion Large Increase Small Increase No Change Hochtief AG Qatar Investment Auth 531 so far this year, according Small Decrease Large Decrease
to the Global M&A Outlook, Source: Bloomberg 2011 M&A Survey which queried 1,030 invest- ment bankers, research ana- Recent Completed Deals lysts, traders, portfolio managers and sales- showed. Deals involving China have jumped total date target acquirer value people. Fifty-eight percent said the most in 2010, with Zhejiang Geely Holding active buyers would be based in Asia Pacific Group Co.'s agreeing to buy Ford Motor Dec 6 Mirant Corp GenOn Energy 2,112 or Central Asia, followed by North America, Co.’s Volvo Cars unit for $1.6 billion in August. Dec 6 Sara Lee Assets Unilever NV 1,871 the report found. Bright Food Group Co., Shanghai’s biggest Dec 6 Banco BTG Multiple 1,800 Asia and North America will have the most food and dairy company, is in talks to acquire Dec 6 McKechnie TransDigm 1,270 attractive targets for acquisitions next year, vitamin retailer GNC Holdings Inc., people Dec 6 Snyder's Lance Inc 827 followed by Western Europe, the survey with knowledge of the matter said this week.
continued on next page Weekly Data Comparisons Deal Type Summary Total 52-day Avg. Year To Date Deal Type Summary Deal Count Volume ($) Percent Number of Announced Deals 511 464 22,628 Company Takeover 223 30.64B 57 Volume ($) 53.8 billion 40.6 billion 1.98 trillion Cross Border 200 23.9B 44 Avg Disclosed Deal Size ($M) 176.5 163 164.5 Additional Stake Purchase 53 14.52B 27 Average Premium 13% 23% 22% Minority purchase 63 11.17B 21 Asset sale 135 9.94B 19 Deal Multiples Private Equity 29 3.26B 6 Number Private Placement 20 1.17B 2.2 Measurement Min-Max Median of Deals Majority purchase 45 854.12M 1.6 Free Cashflow 17 4.78 - 454.55x 25.6x Venture Capital 4 58.21M 0.11 Net Income 26 0.16 - 330.41x 18.44x Government Privatization 3 56.87M 0.11 Income B/F XO 24 0.13 - 227.16x 16.7x Joint Venture 25 38.57M 0.07 EBIT 23 1.72 - 151.09x 12.03x Management Buyout 4 15.07M 0.03 Cashflow from Ops. 24 0.98 - 307.36x 11.54x Net Income + Deprec 27 0.12 - 330.41x 8.86x Top Regions EBITDA 20 1.02 - 27.50x 8.56x target region Deal Count Volume ($) Percent Book Value 41 0.01 - 34.34x 2.01x Europe 104 28.83B 20 Stockholder Eqty 41 0.01 - 34.34x 1.95x North America 161 12.10B 32 Enterprise Value 37 0.00 - 37.34x 1.16x Asia Pacific 211 6.75B 41 Market Cap 39 0.01 - 41.35x 1.03x Latin America & Caribbean 16 4.73B 3 Total Assets 46 0.00 - 17.41x 1.03x Middle East & Africa 15 2.47B 3 Revenue 40 0.02 - 6.48x 1x Global 511 53.8B 100 12.10.10 mergers | Bloomberg Brief 2
Asia M&A... continued from page 1
because companies year, the data show. About 70 percent of Most Signi cant Obstacles to are “highly liquid,” debt survey respondents expect an increase Dealmaking in 2011 is becoming cheaper in M&A volume next year, compared and asset prices are with 90 percent who anticipated a rise Slow Economic Growth at historically attractive this year. levels, he said. Forty-four percent of those surveyed Market Volatility Domestic competi- said equity will be the major source of tion is also expected to capital for deal financing next year, fol- Government Regulation be a catalyst for global lowed by cash and debt. In last year’s Unrealistic Valuations M&A next year, and survey, debt issuance was expected to market volatility will be be the main source of M&A financing. Target Finances the biggest obstacle, Cross-border deals dominated with the survey showed. more than 8,100 transactions worth 0% 10% 20% 30% 40% Deals involving Asia $945 billion announced in the first 11 Source: Bloomberg Pacific companies months of 2010, a 41 percent increase have jumped 25 per- from the same period last year, the data cent this year through show. About 75 percent of the survey Primary Drivers of M&A in 2011 November, surpass- respondents favor such deals over do- Shareholder Demand ing Europe and mak- mestic M&A. 10% Financing ing them the second- Financial services was the most active 16% most active after North sector during the first 11 months, with
Domestic America, data com- $329 billion of transactions announced, Market Competition piled by Bloomberg followed by energy with $300 billion, the Stability 17% 11% show. There were data show. Energy may be the most ac- more than 8,700 deals tive sector in 2011 as the industry con- worth about $594 bil- solidates, the survey showed. lion in Asia through Deals in Brazil in the first 11 months hit Target Foreign Nov. 30, up from $429 a 10-year high with more than $130 bil- Valuations Players billion in the first 11 lion of transactions, the data show. 23% 23% months of 2009. The Source: Bloomberg Americas accounted for $1.1 trillion of trans- “You’ll see the developing world actions in the period, up 12 percent invest in the developed world,” said from $979 billion last year, according Bloomberg Brief Mergers Stephen Bird, Citigroup Inc.’s co- to Bloomberg data. Bloomberg LP chief executive officer for Asia Pacific. Global M&A volume rose 12 per- 731 Lexington Avenue, New York, NY 10022 M&A in the region is set to increase cent in the first 11 months of the 212-318-2000 Newsletter Ted Merz Executive Editor [email protected] 212-617-2309 Bloomberg News Katherine Snyder Managing Editor [email protected] Russian M&A Jumps to Three-Year High 212-617-5212 Mergers Editor Rob Williams by jason corcoran and denis maternovsky [email protected] Russian mergers and acquisitions and bonds fell. Rates on three- to 212-617-8844 hit a three-year high this quarter as five-year ruble loans have dropped Contributing companies took advantage of a drop to between 8 to 12 percent from 13 Data Editors Carol Chuang [email protected] in dollar borrowing costs. to 15 percent a year ago for Russian 212-617-3642 Deals involving Russian companies companies, said Andrey Goltsblat, reached $33.8 billion since Sept. 30, managing partner at his own Moscow Pratik M. Patel [email protected] the most since the last three months law firm, which focuses on M&A. 212-617-8705 of 2007 and three times the level in “Attractive rates are a key factor Reporter Alex Sherman the same period last year, according in the M&A pickup,” Goltsblat said. [email protected] to data compiled by Bloomberg. The “The cost of funding is dramatically 212-617-8278 figure compares with $37.7 billion for cheaper than 12 months ago.” China and $8.2 billion for Brazil, the Moscow-based X5 is borrowing the To subscribe via the Bloomberg professional data show. equivalent of $1 billion in five-year terminal type BRIEF
The Wire bloomberg news
■■Airgas Inc., fending off a hos- ■■Steinhoff International Hold- chines Corp., have already acquired tile $5.9 billion takeover bid by Air ings Ltd. entered into exclusive talks or built such assets. Compellent may Products & Chemicals Inc., should to buy PPR SA’s Conforama chain be able to negotiate a higher price, hold an auction process to get the for 1.2 billion euros ($1.59 billion) in he said. highest price, shareholder Pentwater cash. The total price would be more Capital Management LP said. “The than 1.5 billion euros, including the ■■Johnson Controls Inc. is look- board should run an expedited auc- working capital balance to be taken ing to buy more companies that tion process in an effort to sell Airgas on by the buyer, PPR Chief Financial specialize in components used in to the highest bidder on or before Officer Jean-Francois Palus said premium-seat making, said Detlef January 14, 2011,” Pentwater said today. Excluding debt, the transaction Juerss, head of development for in a letter to Airgas. Air Products on would value Conforama at about 6.1 the seat business. The company is Dec. 9 raised its bid to a “final” offer times 2009 earnings before interest, interested in manufacturers of seat of $70 a share, less than the $78 taxes, depreciation and amortiza- motors and specialty mechanics. price that Airgas directors said their tion, Bloomberg calculations show. The company last week agreed to company is worth. Airgas advised There have been 692 acquisitions buy C Rob Hammerstein Group, investors to take no action until the announced in the retail industry in which makes seat parts for Mer- company has reviewed the revised the past 12 months, according to cedes’ top-end S-class model. bid. Delaware Superior Court Judge Bloomberg data. Other acquisitions this year include William B. Chandler III has yet to Michel Thierry SA and Benoac rule on Air Products’ challenge to ■■Dell Inc. is in exclusive talks to Fertigteile GmbH. Airgas’s poison pill defense. Chandler buy Compellent Technologies Inc. asked Air Products in a Dec. 2 letter for about $876 million, a discount ■■Cove Energy Plc may sell its to indicate by Dec. 10 whether he to the data-storage maker’s current natural-gas assets in Mozambique should use the $65.50 bid or more in market value. Dell would acquire all before plans are put in place to ruling on the poison pill. of the outstanding common stock export liquefied natural gas to Asia. of Compellent for $27.50 apiece in With Anadarko Petroleum Corp., ■■China Petrochemical Corp. cash. The stock had almost doubled Mitsui & Co., Videocon Industries agreed to buy Occidental Petroleum in the past two months before today Ltd. and Bharat Petroleum Corp., Corp.’s Argentine oil and gas unit for on speculation it will get bought. Cove has made three “major” discov- $2.45 billion. The purchase marks There probably won’t be another eries off the coast of Mozambique. the Beijing-based company’s first bidder for Compellent, said Abhey The partners are now examining investment in Argentina’s oil and gas Lamba, an analyst at ISI Group, plans to produce liquefied natural gas industry, the Chinese refiner known since most of Dell’s rivals, such as as they step up exploration. “We have as Sinopec Group said. The deal is EMC Corp., Hewlett-Packard Co. a strategy to look to monetize before subject to government approvals. and International Business Ma- we go into full development, but we
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Snapshot
An increase in gold prices this year has Gold Mining Takeovers versus Gold Spot Price $1,600 16 coincided with a surge in gold-mining company takeovers. Gold spot prices $1,400 14 Volume have increased 25% from last year, while Volume ($ billions) $1,200 Gold Spot 12 takeovers in the gold mining industry $1,000 10 have increased by 154% year over year. $800 8 Two of the five largest acquisitions in the
$600 6 industry were in 2010, including New- crest Mining’s $8.9 billion cash and $400 4 stock deal for Lihir Gold in October and Gold Spot Price (per (per ounce) Price Spot Gold $200 2 Kinross Gold’s $6.7 billion all-stock $0 0 bid for Red Back Mining in September. 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Source: Bloomberg — Pratik M. Patel, Data Analyst 12.10.10 mergers | Bloomberg Brief 4
The wire continued from page 3
don’t want to miss too much of the upside,” Cove’s Chief Executive Of- On the Move Carlyle Seeks IPO Amid ficer John Craven said. Fundraising Drought ■■Peter Orszag, former White In 2008 and 2009, Carlyle House Budget Director, was hired Group cut workers, liquidated a as vice chairman of the investment- Private Equity hedge fund, was forced to close a banking division of Citigroup Inc. publicly traded debt fund, and saw ■■Carlyle Group, the world’s Orszag, who left President Barack four of the companies it owned file second-largest private-equity firm, Obama’s cabinet in July, will report to for bankruptcy. agreed to buy a 55 percent stake John Havens, chief executive officer “I predicted the party would end in Claren Road Asset Manage- of the firm’s institutional client group. badly, but it was even uglier than I ment, a $4.5 billion long-short hedge thought,” says William Conway, a fund focused on liquid credit assets. ■■ , the former U.S. Carlos Gutierrez co-founder of the firm. Citigroup Inc., which invested in secretary of commerce, was hired by Carlyle has returned to doing Claren Road in 2006, and Goldman as vice chairman of Citigroup Inc. deals, hiring bankers for new Sachs Group Inc.’s Petershill Fund, its institutional clients group. He pre- ventures and debating whether to which bought a minority stake in viously worked as chairman of Global dust off plans to sell shares to the 2008, will sell their holdings. Claren Political Strategies in Washington. public. Conway says he decided Road founders Brian Riano, John at the start of the year to ramp Eckerson, Sean Fahey and Albert ■■ was named chief Tom Naratil up buyouts after a two-year lull, Marino will continue to manage the financial officer of , replac- UBS AG according Bloomberg Business- day-to-day operations and make all ing John Cryan, who is leaving the week’s Dec. 6 issue. investment decisions. bank. Naratil was CFO and chief risk The firm has participated in 33 officer of UBS’s wealth-management deals this year totaling $16 billion. ■■WL Ross & Co. Chief Executive Americas unit. Cryan previously It beat out Blackstone and TPG OfficerWilbur Ross said his inves- was co-head of financial institutions Capital to buy NBTY for $3.8 bil- tor group remains in the bidding for investment banking at UBS. lion in July. In October, Carlyle Ireland’s EBS Building Society agreed to buy CommScope, even as it’s in talks with the govern- ■■ is joining Alexander Jung Bar- a manufacturer of fiber-optic ment about new capital targets for as vice chairman of clays Capital networks, for $3.9 billion. Carlyle the country’s fifth-largest lender. investment banking for Germany returned $5.7 billion to clients The Irish Central Bank said Nov. 28 and Austria, effective Jan. 1. He said through the third quarter,compared that the country’s banks will have the bank plans to hire more M&A with $2.4 billion in all of 2009. to increase their capital levels and bankers. Jung most recently worked The firm has contemplated a that Dublin-based EBS must raise for the Walther Rathenau Institute, a public offering since at least June an additional 438 million euros foundation for international politics, 2007, when Blackstone began ($577 million) to reach a core Tier and previously was the head of UBS trading on the New York Stock 1 capital ratio, a key measure of AG in Germany and held positions Exchange. It tabled the plans soon financial strength, of 13.5 percent. at Credit Suisse First Boston and after, when debt markets froze. This means the lender will have to Rothschild. Carlyle instead sold a 7.5 percent raise a total of 963 million euros by stake to an arm of the Abu Dhabi the end of December. The capital is ■■ was hired as head Rajesh Alva government for $1.35 billion in in addition to 350 million euros the of health-care Credit Suisse AG's September 2007. government injected into EBS this mergers and acquisitions business. The renewed interest in an IPO year, giving it control of the lender. He previously worked at Lazard Ltd., comes as wealthy individuals and which he left in May after 15 years institutions that traditionally backed ■■Drummond Co. is considering with the firm. private equity are increasingly selling a minority stake in its Colom- reluctant to commit fresh capital. bian coal mining operations as an ■■ joined Natalie McFarland Latham Carlyle says it has raised $3.7 bil- alternative to selling the whole unit new Houston office & Watkins LLP's lion in 2010. That’s up from $1 bil- to a mining company. Closely held as counsel. McFarland, previously lion last year but nowhere near the Drummond has held preliminary counsel at Vinson & Elkins LLP, will $20 billion it raised in 2008. talks with private-equity firmsFirst focus on financial transactions and “There will be significant advan- Reserve Corp. and Riverstone commercial lending in the energy tages to having a lot more capital,” Holdings LLC about a stake sale, sector. Latham's Houston office, says Conway. “Investors are reduc- while it continues to weigh a deal which is less than a year old, now ing commitments to funds and for the entire Colombian business, has more than 30 lawyers in Hous- making economic terms much less Bloomberg News reported. The ton, including former Baker Botts LLP attractive.” Colombian unit may be worth more and Akin Gump Strauss Hauer & than $6 billion. Feld LLP lawyers. — by Cristina Alesci 12.10.10 mergers | Bloomberg Brief 5
TOP DEAL ADVISERS BY INDUSTRY
Basic Materials Communications Banco Santander Goldman Sachs & Co Morgan Stanley BofA Merrill Lynch Morgan Stanley Credit Suisse Bank of America Merrill Lynch JP Morgan Barclays Capital BMO Capital Markets Citi Blackstone Group JP Morgan UBS CIBC Deutsche Bank AG BMO Capital Markets Lazard LLC Lazard LLC Credit Suisse Barclays Capital BNB Paribas Deutsche Bank AG Bank of America Merrill Lynch Banco Santander SA Citi Rothschild 0 20 40 60 80 100 Credit Suisse 0 5 10 15 20 25 30 $ billions $ billions Deutsche Bank Evercore Partners Consumer - Cyclical Goldman Sachs Consumer - Non-Cyclical Morgan Stanley Goldman Sachs & Co HSBC Bank Goldman Sachs & Co Credit Suisse Deutsche Bank AG Morgan Stanley JP Morgan Lazard LLC JP Morgan JP Morgan Jeffries Group Citi UBS Lazard LLC Lazard Bank of America Merrill Lynch Bank of America Merrill Lynch Credit Suisse Morgan Stanley Barclays Capital Citi Deutsche Bank AG Nomura Holdings Barclays Capital Evercore Partners Inc Qatalyst Group 0 5 10 15 20 25 30 35 0 25 50 75 100 125 $ billions Rothschild $ billions Societe Generale Energy Financial UBS Barclays Capital Deutsche Bank AG Rothschild Morgan Stanley Industry classification based Goldman Sachs & Co UBS on BICS (Bloomberg Indus- JP Morgan Credit Suisse try Classification Standard). Morgan Stanley Bank of America Merrill Lynch Internet sector was moved Citi Goldman Sachs & Co Credit Suisse from Communications to JP Morgan Deutsche Bank AG Barclays Capital Technology. REITs and Real Bank of America Merrill Lynch Nomura Holdings Inc Estate were moved from UBS Citi Financial and considered 0 10 20 30 40 50 60 70 80 90 separately. 0 10 20 30 40 50 60 $ billions $ billions
Real Estate Industrial
UBS JP Morgan Bank of America Merrill Lynch UBS JP Morgan Deutsche Bank AG Goldman Sachs & Co Goldman Sachs & Co Credit Suisse Citi Lazard LLC Morgan Stanley Morgan Stanley Credit Suisse Barclays Capital Lazard LLC Citi Bank of America Merrill Lynch Jefferies Group Inc Rothschild
0 2 4 6 8 10 12 0 10 20 30 40 $ billions $ billions
Technology & Internet Utilities
Morgan Stanley Morgan Stanley Goldman Sachs & Co Goldman Sachs & Co JP Morgan BNP Paribas Group Deutsche Bank AG Nomura Holdings Inc Barclays Capital JP Morgan Bank of America Merrill Lynch Blackstone Group Credit Suisse Rothschild UBS Barclays Capital Qatalyst Group HSBC Bank PLC Lazard LLC Societe Generale
0 5 10 15 20 25 30 0 10 20 30 40 50 60 70 $ billions $ billions 12.10.10 mergers | Bloomberg Brief 6
Deal Sheet
Target EnBW Energie Baden-Wuerttemberg SA Target Trade House Kopeyka OJSC Acquirer Federal Republic of Germany (State of Acquirer X5 Retail Group NV Baden-Württemberg) Total Value 51.5 billion rubles ($1.65 billion) including net Seller EDF SA debt Stake 45.01 percent Target Net Debt 336.4 million rubles
Total Value 4.7 bilion euros ($6.24 bilion) Multiples Multiples EBIT 21.01x (17.95x industry median) EBIT 4.61x (15.23x industry median) Revenue 0.95x (0.68x industry median) Revenue 0.62x (2.08x industry median) Cash Flow from Operations 18.57x (24.85x industry median) Cash Flow from Operations 3.56x (12.71x industry median) Net Income 31.99x (23.68x industry median) Net Income 8.03x (26.08x industry median) Analysis Analysis »Potentially the second-largest acquisition in the retail-hyper- » »The fifth-largest deal in the electric-integrated industry announced markets industry in the past 12 months. The largest deal was » in the past 12 months. The largest pending deal in this industry is Wal-Mart de Mexico SAB's acquisition of Walmart Centroamerica the International Power PLC takeover of GDF Suez Energy Inter- for $1.69 billion in December 2009. national for equivalent of $25.8 billion announced in August. »Average disclosed deal size this year is $417 million. » »This is the second largest M&A deal announced by Germany in »The second largest deal within the sector in five years. » » the last five years.T he largest deal was the purchase of an ad- »Largest takeover made by X5 Retail Group NV. Second-largest » ditional stake (89.05%) of Hypo Real Estate Holding AG in 2009 was purchase of Perekriostok ZAO in 2006 for $1.55 billion. for $7.5 billion. »With this deal, X5 Retail Group boosts presence in supermarkets » and other grocery stores segment.
Source: Bloomberg
Brief Mergers Newsletters
oB ml gber BRIEF brief BRIEF Structured o s d n u F e g d e H most read on u flt o w s 1. Basel means N es ot 2. eu raises Growth 01 . 01 . 90 3. u.S. y s c i m o n o c E T h e h e d g e fu n d in d u s tr y p o s te d a n o ur tfl ow bloomberg NEWS vol of $2.9 billion, or 0.2% of eits a c htotal assets, this Higher Capital ratios U 4. China’s Demand may W 0 9 . 1 0 . 1 0 mes Ju ly, t h e m o s ts in c e Ja nu a r y, a c c o r d in g t o e s ields may Fall to eisenhower & COMMENTAR h 5. Consumer Demise in U.s. strUctUred notes volUmes* t im a t e s by r e s e a r c h fi r m Tr i m t a b s. gi h e s t Forecast Friday n July's number follows an outflow of $2.7 bi 6. Boehner Supports Sold Last Week omura Paves l io n in Ju n e. T h e in d u s t r y h a s d r o p p e d 4 p e r l 7. China’s Car Y M e r g e r s By Deir cent since April 2010, according to Trimtabs, e v eS ln i c eJ a n u a ry Quarter-to-Date Dre Fretz way to $546.8 million Nomura Holdings, Inc. enter U. w h ic h a tr ibu te d th e d e c lin e m o s tly to n e g a 8. Swaps Show Subbarao eaken Case for y Second Quarter t ive r e t u r n s i n M ay a n d Ju n e. F low s h ave n ow u.S. exaggerated BankShares Gain on Basel Capital f u n d s in t h e B a r c lay H e d g e d a t a b a s e. 9. nflation Outlook may Pr Low $9.56 billion to begin competing in the U.S. retail s. retail 0 1 . 7 0 . 9 0 Sales Signal middle-Class ‘Sound’ Dem t BRIEF First Quarter is signaling plans been negative five of the last eight months for structured notes. market - C o m m o d ity tra d in g a d v is o rs fa re d b e te r, a t 10. ruble Bond Debut $11.61 billion (see chart, this page), the worst eight-month t ra c t in g $ 3 . 8 b ilo n in Ju ly. I t wa s t h e t we lf t h Year-to-Date uan first wor $10.65 billion the tokyo-based firm filed a market 2010 U. s s tr e tc h s in c e th e S e p te m b e r2 0 0 8 to A p r il month of inflows in the past 14 months, a sign . retail note iss l- data reports ax Cuts global interest-linked notes volUmes** with the Securities and 2 0 0 9 p e r io d . o fd e m a n d eve n a s r e tu rn s p o s te d by rates Peak $29.1 billion Morgan Stanley Uers - Brad sion on Sept. 8 that woul prospectus amoUnt C TA s a re d ow n 1 p e rc e n ts o fa r th is ye a r. D Sold Last Week exchange Commis- Bank of America ompt SNB to raise s y Da registered structured notes this Hedge$7,077,620,725 Fund Flows, 2009-2010 in to Cut y and ies in killman B - Tr im ta b s s a id th a th e d g e fu n d s a p p e a rt o S ook: 0 1 . 3 1 . 9 0 Quarter-to-Date d allow it to issue iD ■ Barclays h ave m is s e d o u t o n m a r ke t g a in s in t h e S & P e ■ m Monday $2.14 billion are currently no Japanese firms among $6,501,693,542 performance t ield ■ arch 2009. ■WHAT TO WATC Second Quarter year. 5 0 0 In d ex d u r in g Ju ly b e c a u s e o fc o n s e rva a personCOMPANIES: famil Basel $14.22 billion 16 banks that have issued SeC-re there Goldman Sachs - the Wire with stiffer capital First Quarter $4,641,729,777 t ive p o s it io n s. T h e S & P 5 0 0 s u r g e d 6 . 9 p e r $1.56 billion, toppin c notes this year. ables predicted (see ommittee gav M&A Announcements $22.26 billion the JPMorgan $2,581,388,000 cent during the month, while hedge funds regulatory/Compliance explore options for i Obama delivers r Year-to-Date the decision reflects the growin gistered lower yields $31.01 billion Deutsche Bank g a in e d o n ly 1 .9 3 p e r c e n t. t h e ■ iar with the matterHewlett-Packard says H: deal premiums Hit Highest Since 1st qtr 2009 in the market, where a total $2,321,516,843 Market Calls ■ECONOMY: Bank shares gaine A survey by Trimtabs shows hedge fund $67.49 billion Citigroup ■ requirements,e firms as more much as total SeC-registered structured notes hg interest $1,313,947,865 13F Forensics ■MARKETS: g stor y on page 6) of $31 billion of tur ing growth. a at a rate not seen sold so far in 2010. (See table at r HSBC 2 ts platfor mvis' solutions latest bid. emarks r By Carol Chuang, data analyst target acquirer value $1,272,661,070 over the hedge Peru’s sol Treasur y budg ules;HP Deal Nomura spokesman Peter ave been - 3 may buy ArcSight Name Name ($m) RBC o on the economy at 2 p $1,123,344,632 - economic-even ctober 1997. c . d after the price of acquisitions york declined to comment. ight). 4 The costhina's of insurin yuan rose to Her tz . eight years to compl truell in New Credit Suisse $1,122,978,150 ■■ climbed to a two-ye BAE Systems hire Bond investors time a than some an the registration is the first step in off i TRADING: raises offer fo since Enterprise GP Enterprise Products 21,029.7 m a n a g e r s Global Hedge Fund Returns 5 nc., the tradin et statement, after the UBS 9/13 business. is rising. ing notes under a medium- $1,074,326,181 r e m a ibn e a r nated 45 emplo Cocoa fell f sold this week 9/13 6 for $1.5 billi ed began buying Premiums Trend Upward gram which may include fixed-rate n SEK i s h o n e q u i 2:00 t Associated Materials Hellman & Friedman 1,300.0 er- $1,073,904,928 9/13 ts calendar he latest fallout f term notes pro ties. That may 5:00 EC Bimonthly meeting BIS g platfor m used by inst a record after gover nm r .m. re betting on the average premium ■■Ekspor tfinans ASA floating-rate notes or stru Eksportfinans - 9/13 7 for a fifth day toar high. g bank bonds 2 p.m., s Wells FargoDollar andThrif alysts y - $903,568,500 5:00 Thailand Board of Investments Meeting reflect the yees this week beca on as soon as today, Avoca Resources Anatolia Minerals Develop 876.7 three-month month notes that pa linked to the performance otes, - 9/13 35.00% sold $22.3 million of ctured notes Wells Fargo deteriorat 5:15 EU General Affairs Ministers Meet Big Picture Malaysia’s ringgit rose a t tors if the commodities, foreign exchange r $793,395,379 9/13 ug., estimate -$95 b reasur global acquirers pay over ing economic 8:45 European Commission Forecasts rom a ty Automotive Standard & Poor’s 500 Index y inves an index or basket of such of asse securities, RBS 9/13 against defau Arizant Inc 3M Co 810.0 declines, according to a Sept. 9 S - $122,991,000 landscape and TBA EU’s Barroso, Ukraine’s President t a one-year low. - BMO - 9/13 richet slowdown in eq JPMorgan the trading price for public 30.00% the notes will pay investors five time cific offering would require additioates, or Trimtabs expects August$114,857,000 to be a quiet month the reluctance TBA Mauritius Core Inflation Rates itutions to buy and s ent data showed faste source: Bloomber as there are historically very few redemptions 9/13 e formation to be filed. ts. A spe of hedge funds TBA Botswana Energy Conference European Centr use of a slowdown i Munters AB Alfa Laval AB 796.7 decline in the index. C filing. Jean-Claude Trichet i v a D to - d u e t o s e ag s o n a lity, it s a id in t h e r e p o rt . $59,350,000 to take on risk 11:00 Co-Generation World Africa 2010 isOut of lt plunged to a five-we illion. loss directly proportional to s any Nomura is ranked 27th among ba nal in need to be capabl D to companies has reached 25.00% investors will take a - TOPtop currency CURRENC U.S. Fed to Purchase Notes/Bonds G. Blanchflower, to the strongest level Tres Palacios Inergy LP 735.0 index between the issue date and matu issue structured notes in " R e d e m p ti o n s s h o u ld r e s u m e in S e p te m having only alertness and swift action. uity trading: any gain in the $585 millionber; inhistorically europe oneso farof the worst months for r e c e n tl y r e c ov more: flexibi 26.99 percent in the third the notes were placed by kets, according to Bloomberg. nks that hedge fund flows," the report said. For the touch:His ell large blocks r manufac european mar- in the U.S., Nomura has un e r e d m a ny o f a al Bank n business. 20.00% Zymogenetics Inc Bristol-Myers Squibb 725.2 Co. for a 0.5 percent fee. r ity. underwrote at least seven issues to year, flows toward hedge funds stand at $1 t h e lo s s e s t h a t t Jacksont Merrill Lynch & agency deals totaling $427.5 mill this year. - Y PERFORMERS r ichet made clea e of three says things: policy makhum l CUS the bank billion, following redemptions of $172 billion in occurred in performers presumably the ma lity. iquidnet ek low. quarter, the highest since iP 282649177 derwritten 11 Bloom - cording2 0 0 to9 a n dBloomberg $ 1 5 0 b ilo n in 2 0 0 8 . data. wieldy 22-member of shares, elimi since Gladstone LNG Total SA 599.0 taling The funds with more than $5 billion2 0in 0 8 . assets h Presidenti 15.00% return to the dangers ole, nflation Orge B h ■■ are not" Weregistered b e lieve it is s a fe t o a s s uwith m e t h is “ lo sthe t” SeC . ion, ac have recorded net inflows of $7.7 billionThe industrythis he's missing one er oldings 31.56 percent in the first Bank of America Corp. $ 3 2 0 b ilo n w iln o tc o m e b a ck to th e in d u s these deals - facing. w G - year, while funds with less than $200continues million to S r how out of touchyoming, he last mont columnist Overland Pass Williams Partners 424.0 million of ten-year, fixed-to-floating U. try any time soon," the report said. Trimtabs' by Strategy Snap on ers issued $20.2 s. n h ave s e e n n e t lo s s e s o f $ 1 8 .3 b ilo n , e q u iva s h ow s ig n s o f Mortgage-backed arbitrage ility, maintaining a fo rate notes, according to a Sept. ote findings are based on a survey of 954 hedge aug. 27, at a symposium ojor ity of the - quarter of 2009. 10.00% volume l e n t t o 1 5 . 7 p e r c e n t o f a s s e t s. c o n s o l i d a t i o n . Convertible arbitrage side the impor tanc Ecuador Bottling Embotelladoras Arca 375.0 filing. By Deir grows 10 Percent in that Governing Counci the securities will pay an initial Dre Fretz Asset-backed arbitrage t t isPure Fiction fixed interest rate of 6 percent per 3 SyeareC Banks have sold $4.98 billAND r ichet emphasized t e time whenhese a global policies re are Many of the big deals this zeke Capital structure arbitrage urope's economyec i 5.00% a 10 percent increase from July, and U A F x a Shot and h, seems to h cus on pr ice stabilit Beginning in the third year the notes wi ion of str uctured notes to individual invest ugust Distressed B's un filings with the Secur itie S p o t l ig h t f central bankers t e of heavy budget quarter carried high premi- pay a floating rate of three-month, U.S. Fixed income arbitrage Greekhe gover central nors of the . Liam Dalton, Ceo and founder of Axiom 1.14 l are - dollar Libor plus 1.75 percent, subject to Sales may total more than $47 billion for t the largest monthly volume so far this - All funds with the speech. ave lost the plot. out of place and 0.00% ll s and 1.05 he need for ing 2008 volumes when banks is exchange Commission that were co ors in the U.S. in August, Capital Manage- - Global Macro s thing in it addressed cover y is fading. ums. Goldcorp Inc.'s $3.1 a cap of 7.25 percent. inter 0.98 y, along tured Multi-strategy those of the banks can't have bee 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 Most Read M&A Stories quarterly beginning in December, 20 retailProducts.com. he year should the current pace con year, according to ment 0.77 KeeNe’ cuts. est will be paid sued a record $38 billion of the not mpiled by Bloomberg. Merger arbitrage ing deflation - billion cash bid for Andean Merrill & Lynch Co. Morgan Stanley led U.S. issuers, s 0.45 Market-neutral even after imp it remains unclear ir ish, out of Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 for a 0.7 percent fee. 15-year callable step-up notes, t 0.10 C i t distributed the notes10. tinue, exceed Equity statistical arbitrage r ish, who are al s r ichet Bank of Amer ica was the sec elling $1.8 billion of notes in August, i es, according to Str uc -0.23 O and a r ising cost of bo their problems, esppanish and Resources Ltd. had a iD BBG0014 - e g a P k c a B CTA/managed futures xQP Sachs followed with $600 million. he largest S -0.44 r Trump Spurned in NYC Islamic Center Bid t5 - Long/Short equities S osing auster ity measu n happy ond-largest issuer,e sellingC-registered $1.07 bil deal in 2010 to date. -0.83 Ner Mohamed El-Erian 55.5 percent premium and ■■Bank of America Corp. the jump in total note sales was dr iven b ncluding $1 billion of Fixed income arbitrage ready exper ienc how any t -1.34 economic uncerta hese notes made up 56 perc Short-biased equity ecially issued $21.3 t lion in notes. Goldman -2.01 - Intel Corp. agreed to pay Vodafone Sells Stake in China Mobile his is an increase from an ave y an increase in new notes linked to int a full break down of notes by a ent of the total dollar volume of sales in the -2.39 rrowing, -3.45 - rage of 21 percent dur ing the first six mo of Pimco on res a premium of 52.32 percent for its $6.59 billion acquisition of McAfee Inc. -4.09 t sset class, see char t on page 6. erest rates. inty and risk avers he Flowers, Others Weigh More Irish Buys month of August. -4.19 one reason for the higher premiums is there has been an increase in hostile and unsolic- nths of the year. For -5.24
ited deals. there were 14 such deals this quarter, almost triple the amount in the same quarter Bank of America To Hire Nomura's Mee e g a P k c a B ion. last year. hostile deals paid premiums of 38 percent on average this quarter; friendly deals paid NAB's A$13.3 Billion Axa Bid is Blocked 27.99 percent. there was also a $27 billion increase in basic material deals versus the prior quarter. the Potash CEO Says BHP Likely Not Only Bid average premium on basic material deals is 23 percent. It is 11.45 percent for industrial take- Enterprise to Buy Enterprise GP for $8 Bln overs. the proportion of all-cash deals is also rising. sixty-eight percent of deals have all-cash pay- ments, a 7 percent increase from the prior quarter. over the last five years, the average pre- mium for all-cash transactions has been 24 percent compared with 18 percent for stock deals. Recent Completed Deals
total Deal By Deal date target acquirer value Sep 8 Healthcare Bus Abbott 3,720 Sep 9 Inspectorate Bureau Veritas 668 gold mining m&a reaches 10-year High Sep 7 Bioniche Pharma Mylan Inc 550 For a risk-free trial visit By PratIk M. Patel, data analyst Sep 8 Aabar Invest Abu Dhabi Invest 526 gold mining company takeovers have Enterprise Products Partners' $21 billion Sep 9 Overland Pass Williams Partners 424 reached their highest annual volumes in 10 all-stock offer for Enterprise GP Holdings years. there have been $37.6 billion worth of was the largest. so far this year there have www.bloomberg.com/brief/mergers transactions so far this year, with the average been 35 takeovers in the pipeline industry for premium on the deals reaching 39.96%. a total volume of $40.78 billion. Anticipated Approvals andean resources received a $3.2 billion approval offer from goldcorp and six more deals worth SpotligHt date target acquirer type almost $1 billion were announced. Sep 14 Allegheny FirstEnergy Acq, Targ there were 297 transactions worth $34.35 Goldcorp Inc. and Eldorado Gold Corp Sep 15 Red Back Mining Kinross Gold Acq www.bloomberg.com/brief/structurednotes billion announced this week, a 33.4 percent executives discuss Sep 17 Continental UAL Corp Acq, Targ decrease in deal count and a 4.8 percent de- their $3.2 billion B a c k P a g e Sep 16 Dollar Thrifty Hertz Global Targ crease in dollar volume over the prior week. merger. Sep 15 Boots & Coots Halliburton Targ www.bloomberg.com/brief/hedgefunds www.bloomberg.com/brief/economics
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commentary by Alec Y. Chang, Ian G. John and Steven C. Sunshine Shift in FTC Antitrust Enforcement May Quicken Merger Closings
Merging companies may be able to a consent agreement. nine months. eliminate the delay in finding buyers for This approach, as outlined in the Prior to the completion of the di- assets the government requires them FTC’s 2003 Policy Statement on Ne- vestitures, UHS must hold the di- to sell, if the Federal Trade Commis- gotiating Merger Remedies, requires vestiture assets separate and apart sion maintains its current trend in ap- the acquiring firm to execute a divesti- from its remaining operations. If proving transactions. ture agreement and all ancillary agree- UHS fails to complete the divesti- The agency on Nov. 15 announced ments with a divestiture buyer before tures within the specified periods, a proposed consent agreement to ad- the parties formally present that buyer the FTC may appoint a trustee to di- dress its allegations that Universal to the FTC for approval. vest the assets, a common provision Health Services Inc.'s $3.1 billion The FTC staff then reviews the quali- in divestiture orders. acquisition of Psychiatric Solutions fications of the upfront buyer and the Inc. would reduce competition for divestiture agreement. After they're acute inpatient psychiatric services in satisfied with the agreement and any Upfront Buyer Not Required three regions. requested changes, they submit the Since August, the UHS consent The FTC says its proposal will pre- identity of the buyer and agreement agreement is one of four proposed serve competition by requiring the along with the consent agreement and consents the FTC has accepted with- decision and order to the agency's out upfront buyers. Others include con- commissioners, who must vote wheth- sent agreements signed in connection er to approve the package. with: Simon Property Group Inc.’s Generally, the FTC requests parties proposed acquisition of Prime Out- to delay the closing of their transaction lets Acquisition Co., Air Products until it grants approval. Upfront buyer & Chemicals Inc.’s proposed acquisi- The FTC historically has divestitures typically must be complet- tion of Airgas Inc. and Tops Markets required‘‘ ed within a short period -- 10 days is LLC’s acquisition of Penn Traffic Co. common -- after the merging parties In contrast, the FTC accepted only
merging parties close their transaction. three consent agreements without up- The FTC posits that the upfront front buyers in all of 2009 and a total of
to identify buyers of as- buyer requirement minimizes the risk three in 2008 and 2007 combined. that a remedy will fail to preserve com- This trend doesn't mean that the sets to be divested‘‘ be- petition in cases where the agency is FTC has abandoned its upfront buy- fore accepting a consent concerned about the adequacy of the er policy. The agency’s descriptions divestiture package, the lack of accept- of some of the above-referenced agreement. able buyers or the deterioration of the divestitures indicate that the usual assets pending divestiture. concerns animating the upfront buy- As emphasized in the 2003 Policy er policy were absent. Statement, an upfront buyer is likely For example, the FTC explained to be required when the “parties seek that the UHS divestitures involved to divest a package of assets com- stand-alone businesses, while the prising less than an autonomous, on- companies to sell psychiatric facilities agency noted that a number of quali- going business." in those markets to a buyer approved fied buyers had expressed interest in by the agency. The FTC increasingly has been will- the assets that Air Products would be Notably, the proposal doesn't desig- ing to accept consent agreements with- required to divest. nate a preapproved buyer, continuing out upfront buyers. In this alternative Of course, some merging parties may a trend in FTC merger enforcement in scenario, the acquiring firm commits the past few months that suggests a to sell a package of assets to an un- prefer the certainty associated with up- departure from the agency’s traditional identified buyer that is approved within front buyers. Others may now have an preference for upfront buyers. a defined period after the transaction opportunity to avoid the delays asso- This apparent shift may allow merg- is completed or the decision and order ciated with that process, particularly if ing parties to close their transactions becomes final. the assets they are willing to divest are more quickly. Unlike the Department For example, the UHS decision easily segregated and saleable. of Justice’s Antitrust Division, the and order requires certain assets to FTC historically has required merg- be sold within six months after the Alec Y. Chang, Ian G. John and Steven C. ing parties to identify buyers of as- decision and order becomes final, Sunshine are partners of sets to be divested before accepting while others must be divested within Skadden, Arps, Slate, Meagher & Flom LLP. 12.10.10 mergers | Bloomberg Brief 8
Deal Roster
Don Kendall made a name for himself by mediately agreed to fly to Russia when she company has a multiple of 19.8 times trailing giving Soviet leader Nikita Khrushchev his called him on Nov. 28 to come to the meet- 12-month earnings before interest, taxes, de- first taste of Pepsi. The 89-year-old former ing. preciation and amortization, according to data PepsiCo Inc. chief executive officer can also Hernán Cristerna, co-head of European compiled by Bloomberg. The median multiple take some credit for the company’s latest M&A for JPMorgan Chase, led the bank's for similar deals since 2001 is 9.66 times move in Russia -- the takeover of Wimm-Bill- team in advising Wimm-Bill-Dann, along with Ebitda. Based on projected 2010 Ebitda, the Dann Dairy & Juice Co. Kendall joined cur- Jeffrey Costello, the firm's chief executive multiple is 16.4 times, according to PepsiCo, rent CEO Indra Nooyi in Russia last week to officer of Russia. which in 2008 bought a majority stake in OAO help secure Prime Minister Vladimir Putin’s Including assumed debt, PepsiCo's $3.8 Lebedyansky, the country’s biggest juice blessing for the deal. Nooyi said Kendall im- billion purchase of a majority stake in the maker. — By Jeffrey McCracken and Duane D. Stanford
Target: Wimm-Bill-Dann Dairy Buyer: PepsiCo Inc. & Juice Co. Investment banks Centerview Partners LLC Investment bank JPMorgan Chase & Co. Morgan Stanley Hernán Cristerna
Cristerna advised Jeffrey Costello Law firms Davis Polk & Wardwell LP SSL International Yan Tavrovsky on its $3.8 billion George “Gar” Bason Jr. Alejandro Vicente acquisition by Reckitt Peter R. Douglas Benckiser in July Nikolai Tchernov Bason, global head of Davis Polk's M&A prac- John Banes George Foussianes tice, was also lead law- Erika Diane White
yer for PepsiCo in the Ashleigh S. Kyle Law firm Latham & Watkins LLP $7.8 billion purchases of Pepsi Bottling Group Avishai Shachar (tax) Christopher Allen and PepsiAmericas Craig A. Phillips (tax) Allen is represent- Mikhail Vardanian Michael N. Sohn (antitrust) ing Mobile Telesys- Yulia Dementieva tems on its takeover Ronan P. Harty (antitrust) Igor Gavrikov of Comstar United Edmond T. FitzGerald (benefits) TeleSystems Alexander Cohen Adel Aslani-Far Linklaters CIS
Sohn served as gen- eral counsel of the FTC, where he approved PepsiCo’s acquisition of Quaker Oats. 12.10.10 mergers | Bloomberg Brief 9
DEAL COMMENTARY By Ray Murphy J. Crew’s Go-Shop Provision is Longer Than Average
J. Crew Group Inc. this week filed its tion fee provisions in the JCG agree- lower fee is generally 50 to 70 per- preliminary proxy statement outlining ment to other similar private-equity cent of the default break-up fee. The its decision to sell itself for $43.50 per transactions of the recent past. exact amount of the fee discount for share in cash to private-equity firms With the renaissance of private eq- deals originating out of the go-shop TPG Capital and Leonard Green & uity deals in the past year, go-shop process varies significantly from deal Partners L.P. provisions have become increasingly to deal. Generally, these termination J. Crew shareholders will be weigh- common among the deals covered by provisions require only that the supe- ing the attractiveness of the purchase ArbJournal. The customary go-shop rior proposal be received during the price along with other strategic con- period has been approximately 30 go-shop period for the lower fee to siderations as they decide whether to to 45 days. Once the go-shop period be payable. In a few deals, the provi- support the deal. A shareholder vote expires, the target company isn’t per- sions require that the merger agree- on the transaction will likely be held in mitted to solicit additional offers. The ment actually be terminated within February 2011. A majority shareholder target company’s board is still able the go-shop period for the fee to be vote is required to approve the merger. to field and respond to unsolicited payable, such as the merger agree- Because the buyers are private-equity inquiries and acquisition proposals ment between Diedrich Coffee Inc. players (one of whom, TPG, previ- from potential acquirers; the board and Peet’s Coffee & Tea Inc. ously held an 88% stake in J. Crew), typically may change its recommen- The length of customary go-shop the transaction is expected to pass dation of the merger agreement until periods has become more predict- through required regulatory reviews the shareholders have voted on the able. In most of the deals that Arb- with little difficulty. merger agreement with the acquirer. Journal has covered in the past year, There is also no financing condition The board’s ability to change its rec- go-shop periods are about 40 calen- in the definitive merger agreement. ommendation in response to a supe- dar days. Outliers include the Info- Therefore, merger arbitrageurs view rior proposal received after the initial group IUSA acquisition by CCMP (21 the opportunity as a low-risk proposi- merger agreement is referred to as a days) and the JCG deal (53 days). tion in those key regulatory and financ- “fiduciary out.” ArbJournal has reviewed 18 merger ing areas. Go-shop provisions are designed to transactions from the past year with Once the preliminary proxy was filed, inoculate a target company’s board go-shop provisions to develop some the focus of the situation quickly shift- against claims by disgruntled share- perspective on ultimate outcomes, ed from the future prospects of deal holders, particularly activist funds looking specifically at how frequently completion to what transpired. A great and other interested acquirers, that such deals generate higher offers or, deal of attention has been paid to the the board has not fulfilled its -fidu alternatively, fail altogether. In four of role that Millard Drexler, J. Crew’s chief ciary duty to obtain the highest price the 18 deals, the shareholders of the executive officer, played in fielding that is reasonably available. Go-shop target ended up or will likely end up the initial indications of interest in the provisions are far more common in with more consideration than was due company. Drexler has also been criti- private equity deals than in strategic under the original merger agreement. cized for the timeliness with which he transactions. In three of those four deals, another informed the JCG Board of develop- According to Factset Mergermet- acquirer displaced the original suitor ments in the bidding process. rics, go-shop provisions were in- (i.e., Diedrich, CKE Restaurants Inc. cluded in about 50 percent of private and Dynamex Inc. In the fourth deal, Go-Shop Agreement equity deals announced so far this the original acquirer itself increased A central feature of the merger year with a transaction value greater the consideration in the face of op- agreement and the J. Crew board’s than $100 million and in only about 3 position to the original price from argument to shareholders that it has percent of strategic deals. shareholders (Entrust). Two of the 18 maximized the company’s buyout Lower Break-Up Fees deals fell apart and were terminated: prospects is the “go-shop” feature. Recently, there has been increas- Dynegy Inc. and Cedar Fair LP. Go-shop provisions allow the target ing dynamism in go-shops and re- Overall, JCG shareholders can take company in a deal to solicit other of- lated DMA provisions. A few years some comfort from the number of fers during a specified period after the ago, if either party terminated the go-shop precedents that resulted in agreement has been executed. For J. merger agreement because the tar- higher prices. J. Crew this week trad- Crew, that period is 45 days from the get received a superior proposal, ed above the $43.50-a-share DMA date of the agreement. The period will the target owed the acquirer the full price (and has done so consistently expire on January 15, allowing any break-up fee. since the deal announcement). interested parties an opportunity to This year, the majority of deals with inspect J. Crew’s holiday sales perfor- go-shops have included a reduced Ray Murphy is the owner and editor of mance before the deadline. break-up termination fee payable if ArbJournal, an online research service for As part of research coverage of the the merger agreement is terminated merger arbitrage and event-driven invest- transaction, we’ve undertaken a com- as a result of a superior proposal re- ment funds. Reach him at raymurphy@ parison of the go-shop and termina- ceived during the go-shop period. The arbjournal.com. 12.10.10 mergers | Bloomberg Brief 10
Stephen Fraidin, partner at Kirkland & Ellis LLP, talks to Bloomberg Law’s Lee Pacchia about merger activity through 2011 and 3G Capital Inc.’s acquisition of Burger King Q&A Holdings Inc. Q: We have an uptick in the num- tal, which completed an attractive shareholders, because they get ber of deals in 2010. Is this trend deal, and for Burger King, because their money sooner, and that’s going to continue? the shareholders got a heck of a a good thing, and they also like A: I think that there are really three good price for the company. There the fact that the conditions expire kinds of M&A activity that are worth tends to be an over emphasis on sooner, so that deals with the thinking about. The first type is by tactics and strategy. Really the key uncertainty. From the standpoint of strategic buyers. I think there is here is that this was a terrific busi- the buyer it is a good thing because going to be a fair amount of that ness deal from both parties stand- you get control of the company a lot because a lot of that activity was point. The structure that we used faster. So that’s a positive. stopped during the downturn. A lot was both a tender offer and a was Q: Despite the economy, insolven- of companies have a lot of cash on a simultaneous traditional one-step cy issues, there is willingness to hand and are looking at ways to merger. That hadn’t been done be- pursue mergers and acquisitions. expand through acquisitions. The fore, but I think that frankly, the logic What do you make of this? second type of transaction is either is kind of self evident. The structure private equity deals or highly lever- has been copied since then. I think A: The most interesting analysis aged transactions. Those deals de- it is going to be the template that about this issue that I have heard pend on borrowing money, typically people will follow, until someone came from a leading economist. comes up with a better idea. from banks and junk bond sources. He said there really are two A number of those deals is going to economies in this country. The Q: Tender offers were used quite a economy of big corporations and increase, but it won’t reach the kind bit several years ago and then fell the wealthy, that is going strong. of level of heyday of the leveraged out of favor. Are we going to see Then there is the economy of the buyout boom. Then the third type of more of them? unemployed. That is a problem- transactions is hedge fund activism, atic economy. The good economy, where hedge funds start proxy con- A: We are going to see more tender the corporate America economy, tests and try to influence companies. offers. Tender offers in strategic companies that have a lot of cash, Those are going to continue, but transactions have been used for a they can do deals and they will do I don’t think it is going to continue long time and will continue. Tender offers in leveraged deals fell out of deals. Unemployment is a separate at the rate that it was, because a but troubling problem. lot of hedge funds were hurt by the favor for a while in part due to some strange judicial decisions that the downturn in the economy, and a lot Q: Both those economies intersect- were liquidated. SEC has wisely cleared up. Secondly in leveraged deals it is really hard to ed in an interesting way in Canada use a tender offer, unless you can be with the Potash deal. Are we going Q: The catalysts are in place to to see more protectionism? keep deals coming into 2011? sure that when you close the tender offer you acquire 100 percent of the A: Protectionism is sometimes a A: I think the catalysts are in place company. Lenders don’t like to lend factor. Chinese companies face to keep strategic acquisitions go- money unless they have full access some protectionism in this country, ing strong, leveraged activity going to the cash flow of an acquired com- and I happen to be a free market OK. I think hedge fund activism pany. In the last several years people guy, and think that’s a mistake. is going to continue, but not as have developed the use of top-up I think when foreign companies strong as before. options or shares, that permit a buyer come in to buy American compa- to acquire enough shares in addition nies it is good for shareholders— Q: Could you tell us about a great to the majority they acquire through they often overpay. coup. In the Burger King deal you the tender offer to close the deal the were representing 3G Capital in same day they close the tender offer, Q: The macro view — the people its acquisition of the company, and the lenders like those deals and you talk to everyday — are they can you tell us a little bit about like to lend into them. looking up or down? the structure? A: I have never seen such incon- A: In the first place that was a coup A tender offer is a better approach sistent views in my career in the for the buyer K&E’s client, 3G Capi- from the standpoint of the target M&A environment.
News, Data, Commentary. Bloomberg Briefs. www.bloomberg.com/brief 12.10.10 mergers | Bloomberg Brief 11
Deal Arbitrage Spreads for select M&A deals withwiht U.S.-listed targets
Deal Size Announced Expected Offer Per Announced LAST Target Current Last Spread Target Acquirer ($M) Date Completion Date Share Premium in % Price Premium % Spread Move AIRGAS INC AIR PRODS & CHEM 7,496.88 02/05/10 01/14/11 70 48.32 61.84 13.2 8.16 6.37 LTX-CREDENCE COR VERIGY LTD 320.21 11/18/10 06/30/11 12.85 39.23 7.09 81.3 5.76 5.41 TALECRIS BIOTHER GRIFOLS SA 3,901.90 06/07/10 12/31/10 27.77 53.94 22.24 24.88 5.53 0.15 BUCYRUS INTERNAT CATERPILLAR INC 8,608.90 11/15/10 06/30/11 92 31.29 89.2 3.14 2.8 -0.16 EXCO RESOURCES I PRIVATE INVESTOR 5,183.24 11/01/10 20.5 37.71 18.69 9.68 1.81 -0.15 NICOR INC AGL RESOURCES 3,138.10 12/07/10 06/30/11 51.17 17.61 49.75 2.86 1.42 - PENN VIRGINIA GP PENN VIRGINIA RE 1,525.05 09/21/10 27.76 11.73 26.7 3.98 1.06 -0.08 MCAFEE INC INTEL CORP 6,593.67 08/19/10 48 52.32 46.97 2.19 1.03 -0.08 ALLEGHENY ENERGY FIRSTENERGY CORP 9,216.11 02/11/10 04/30/11 23.75 36.15 23.09 2.84 0.66 0.15 LADISH CO INC ALLEGHENY TECH 801.67 11/17/10 48.37 49.75 47.73 1.33 0.64 -0.04 HYPERCOM CORP VERIFONE SYSTEMS 444.4 09/29/10 06/30/11 9.35 70.37 8.79 6.42 0.56 0.03 NEWALLIANCE BANC FIRST NIAGARA FI 1,522.73 08/19/10 06/30/11 14.52 23.83 14.18 2.43 0.34 -0.03 AIRTRAN HOLDINGS SOUTHWEST AIR 1,014.63 09/27/10 06/30/11 7.75 67.51 7.44 4.17 0.31 0.02 ALBERTO-CULVER UNILEVER NV 3,701.34 09/27/10 37.5 20.63 37.25 0.67 0.25 0.09 MEDIACOM COMM MANAGEMENT GROUP 3,623.59 06/01/10 06/30/11 8.75 54.88 8.5 2.94 0.25 -0.02 T-3 ENERGY SERVI ROBBINS & MYERS 407.07 10/06/10 38.64 23.17 38.39 0.65 0.25 0.13 COMMSCOPE INC Private 3,787.80 10/25/10 03/31/11 31.5 37.66 31.27 0.74 0.23 0.55 CPI INTERNATIONA Private 517.57 11/26/10 19.5 35.87 19.3 1.04 0.2 -0.01 DEL MONTE FOODS Multiple 5,098.61 11/25/10 03/31/11 19 25.68 18.81 1.01 0.19 -0.04 SYNIVERSE HOLDIN Private 2,561.15 10/28/10 03/31/11 31 34.06 30.83 0.55 0.17 -0.1
League Tables
Global Financial Advisers Global Legal Advisers
2010 Year-to-Date 2010 Year-to-Date
MKT VOLUME DEAL MKT VOLUME DEAL Financial FIRM rank SHARE USD (Mln) COUNT legal FIRM rank SHARE USD (Mln) COUNT Morgan Stanley 1 22.29 438,424 290 Skadden Arps Slate Meagher & Flom 1 11.80 232,155 191 Goldman Sachs & Co 2 19.01 374,053 270 Sullivan & Cromwell 2 9.98 196,333 138 JP Morgan 3 17.72 348,551 241 Freshfields Bruckhaus Deringer 3 8.92 175,479 231 Credit Suisse 4 16.30 320,605 186 Simpson Thacher & Bartlett 4 8.80 173,196 141 Barclays Capital 5 14.08 276,924 140 Latham & Watkins LLP 5 8.05 158,411 210 Deutsche Bank AG 6 13.18 259,357 191 Cleary Gottlieb Steen & Hamilton 6 7.61 149,730 95 UBS 7 12.12 238,400 186 Wachtell Lipton Rosen & Katz 7 6.73 132,446 50 Bank of America Merrill Lynch 8 11.50 226,229 201 Dewey & LeBoeuf LLP 8 6.39 125,612 92 Citi 9 11.10 218,427 155 Linklaters LLP 9 6.13 120,545 145 Lazard LLC 10 9.18 180,573 154 Shearman & Sterling LLP 10 5.57 109,615 120 Rothschild 11 8.41 165,472 180 Allen & Overy LLP 11 5.56 109,282 155 BNP Paribas Group 12 5.73 112,671 80 Davis Polk & Wardwell 12 5.35 105,325 86 Nomura Holdings Inc 13 5.03 98,911 157 Stikeman Elliott 13 5.07 99,723 100 HSBC Bank PLC 14 4.33 85,083 59 Clifford Chance LLP 14 4.53 89,073 100 Societe Generale 15 3.59 70,647 25 Weil Gotshal & Manges LLP 15 4.08 80,194 111 Evercore Partners Inc 16 3.32 65,350 33 Gibson Dunn & Crutcher 16 3.85 75,727 101 Perella Weinberg Partners 17 3.26 64,076 20 Blake Cassels & Graydon LLP 17 3.71 72,969 106 RBC Capital Markets 18 3.06 60,196 124 Vinson & Elkins LLP 18 3.49 68,601 61 Blackstone Group 19 2.98 58,591 27 Cravath Swaine & Moore 19 3.36 66,053 53 Banco Santander SA 20 2.60 51,057 36 Mallesons Stephen Jaques 20 3.07 60,315 62 Source: Bloomberg As of: 12/09/2010 Source: Bloomberg As of: 12/09/2010 Excludes terminated deals. Excludes terminated deals. 12.10.10 mergers | Bloomberg Brief 12
To submit an event email [email protected] Calendars
Anticipated Approvals Calls and Meetings daTe TArget Acquirer Deal Type daTe Time Company Event description Value 12/13 Alberto Culver Co Unilever NV 3699 Target shareholders 12/13 9am Good Times Restau- Extraordi- Failed to meet NASDAQ continued rants Inc. nary Share- listing requirements on Dec. 9. 12/14 American Commer- Platinum Equity LLC 776 Target shareholders holders cial Lines Inc. Meeting 12/16 Monroe Bancorp Old National Bancorp 82 Target shareholders 12/13 2:30pm Tesoro Corp Analyst/ Subject of renewed takeover chat- 12/16 Internet Brands Inc. Hellman & Friedman 537 Target shareholders Investor ter per Theflyonthewall.com. LLC Meeting 12/17 American Oil & Hess Corp 367 Target shareholders Gas Inc 12/14 8:30am BMC Software Inc Investor Acquired cloud database company 12/20 NewAlliance Banc- First Niagara 1523 Target and acquirer Day GridApp Systems for undisclosed shares Inc National shareholders terms per Dec. 3 announcement. 12/20 Trafford Centre Capital Shopping 2584 Acquirer shareholders Group Centres 12/14 11am Broadcom Corp Analyst Day Acquired privately-held Beceem 12/21 Art Technology Oracle Corp 844 Target shareholders Communications Inc. for $316 mil- Group Inc. lion per Dec. 1 announcement. 12/22 Sumitomo Trust & Chuo Mitsui Trust 9200 Target and acquirer Banking Co. Ltd Holdings shareholders 12/14 1pm Lions Gate Entertain- Annual Hostile bid from Carl Icahn. 12/23 Cellu Tissue Holdings Clearwater Paper 492 Target shareholders ment General Inc. Corp Meeting 12/29 Atlas Energy Inc. Chevron Corp 4916 HSR
Conferences
daTe event featuring location contact / registration Dec. 10 Latin Lawyer M&A Conference "Bringing together the best legal minds from international and Sao Paulo latinlawyer.com/events/ local private practice, the banking and finance community, ma the in-house world, and regulatory bodies." Dec. 10 ACG New York LBO Sponsors Roundtable Luncheon Harvard Club of New acg.org/nyc York Dec. 13, Bloomberg's 1st Annual Healthcare Conference Two panel discussions focusing on trends in biotech, spe- Bloomberg Headquar- Sachin Roopani, 212- 12:30pm cialty pharma. ters, New York 617-5964, sroopani@ bloomberg.net Dec. 13 M&A Connects International Summit Explosive growth in BRIC countries. New York maadvisor.com/events Dec. 13-15 M&A Valuation for CFOs "find out from a panel of CFOs and seasoned deal-makers Metropolitan Hotel, Danielle Delannoy, what is making the M&A market tick" Toronto danielle_delannoy@ federatedpress.com, 1-800-363-0722 ext. 221 Dec. 17 ACG New York Private Equity Update Tappan Hill Mansion, acg.org/nyc or call 914- Tarrytown, N.Y. 631-3030 Jan. 6 ACG New York LBO Sponsors Roundtable Luncheon Harvard Club of New acg.org/nyc York Jan. 11-13 AM&AA Winter Conference "Back in the Game - The New Winning Strategies." Hilton New Orleans amaaonline.com Riverside Jan. 20, ACG New York Annual Winterbash Midtown Executive acg.org/nyc 6pm Club, New York Jan. 25 Liability Driven Investment Europe 2011 Feb. 2-4 Private Equity World Australia Keynotes include John Brakey, KKR Australia. Park Hyatt Melbourne terrapin.com