Deals wrap: Treasury sells stake of AIG
The Treasury made a small profit when it sold a portion of its shares in AIG, but it was unclear how its investment in the beleaguered insurer will ultimately fare.
Tuesday’s $8.7 billion stock offering, (being dubbed by some as AIG’s re-IPO) which included 200 million shares sold by the Treasury and 100 million sold by AIG itself, is far smaller than the $10 billion to $20 billion deal some banking sources had suggested earlier this year, hinting at a potential lack of investor interest.
With the sale, the Treasury has raised $5.8 billion of the $47.5 billion it needs to break even and now has another 1.5 billion shares to sell.
The government can claim a small victory with this sale, but the Deal Journal says the biggest beneficiary of the decision are the banks underwriting the sale.
A day after Yandex surged in its debut coupled with LinkedIn’s record IPO last week, comes the news that the maker behind a series of popular games on Facebook, Zynga, may file for a multibillion-dollar IPO as early as this week.
Can Zynga be blamed for attempting to cash in on the latest Internet IPO craze? Hardly not, but each new booming success leads to more caution of another dreaded tech bubble waiting to burst.
Finally, Fiat exercised an option to acquire a further 16 percent of Chrysler bringing its stake to 46 percent following the Detroit-based carmaker repayment of $7.6 billion in U.S. and Canadian government loans from its 2009 bailout.
Deals wrap: Fiat speeds toward control of Chrysler
Fiat will pump another $1.3 billion into Chrysler this quarter as it moves closer to its target of owning a controlling stake in the U.S. automaker. The deal will take Fiat’s holding in the company to 46 percent, just 5 percent shy of the 51 percent it needs to assume full control.
Read the politically charged, behind-the-scenes story of how the Singapore Exchange failed in its bid for a full takeover of Australian stock exchange operator ASX.
The prosecution amped up the tone of its attacks on Raj Rajaratnam in closing arguments at the insider trading trial of the hedge fund manager on Wednesday, saying the Galleon Group founder wanted to “conquer the stock market at the expense of the law.” The jury is expected to begin deliberations once the defense wraps up its closing arguments either Thursday or next Monday.
In an interview with CNBC, NYSE Euronext chief Duncan Niederauer explains why a merger with Deutsche Boerse would better suit his company’s expansion strategy than one with competing bidders Nasdaq OMX and IntercontinentalExchange.
Deals wrap: Galleon trial to be a “battle royal”
The insider trading case against Galleon Group hedge fund founder Raj Rajaratnam finally goes to trial next week. Rajaratnam faces up to 25 years in prison if convicted of conspiracy and securities fraud but plans to fight the charges and clear his name in court.
“All signs are pointing to a battle royal,” one securities attorney said of the upcoming trial in an interview with Reuters correspondent Grant McCool. According to a Wall Street Journal report, Goldman Sachs CEO Lloyd Blankfein has agreed to testify for the U.S. government at the trial. Here’s a rundown of some of the other main players involved in the case.
Should Americans be alarmed that Germany’s Deutsche Boerse is taking over Big Board parent NYSE Euronext? Not really seems to be the consensus with lawmakers and regulators who took part in the Reuters Future Face of Finance Summit this week.
Fresh signs that Chrysler is getting closer to going public again. The automaker is in advanced talks with banks on financial details that will help clear the way for the initial public offering later this year, several people with knowledge of the discussions told Reuters.
“Two months into the year, M&A is off to its best start since Lehman failed and the flow of deals slowed to a trickle,” writes WSJ’s Stephen Grocer.
Deals wrap: Consolidation wave to grow for exchanges
“The mergers of exchanges have only just begun as growing competition and even new regulation drive them closer together, irrespective of national borders,” write correspondents Luke Jeffs and Rachelle Younglai from the Reuters Future Face of Finance Summit.
As talk of future exchange deals swells, the CEO of the Singapore Exchange said he’s not planning any more concessions to Australian officials to win approval for his exchange’s $7.7 billion bid late last year for that country’s bourse operator ASX.
J. Crew will once again be a private company after shareholders approved a $2.86 billion deal for the retailer to be acquired by TPG Capital and Leonard Green & Partners.
Chrysler has taken the first step to re-enter the U.S. capital markets through filings with the Securities and Exchange Commission, the automaker’s boss, Sergio Marchionne, told Reuters Insider TV on the sidelines of the Geneva Motor Show on Tuesday.
Who will succeed Warren Buffett at the helm of Berkshire Hathaway? That’s still anybody’s guess, but according to Dealbook the company’s board has identified four managers it says could fill his shoes as CEO when the investment titan, now 80, retires.
France’s Carrefour, the world’s second-largest retailer, plans to spin-off its discount unit and a portion of its property business in a bid to revive its share price after a recent spate of profit warnings from the company.
Deals wrap: Valuing Facebook
Facebook has raised $500 million from Goldman Sachs and Russian Internet investment group Digital Sky Technologies in a deal valuing the social networking site at $50 billion, the New York Times reported, citing people involved in the transaction.
“Facebook doesn’t need to stay worth $50 billion forever — Goldman just needs to engineer an IPO valuation somewhere north of that, then exit quietly in the public markets,” writes Felix Salmon about the deal.
Italy’s Fiat set its sights on a majority stake in Chrysler after completing a long-planned demerger of its car-making activities from its truck and tractor business. Click here for a factbox on the demerger.
Expect M&A to drive biotech stocks in 2011, according to Money Morning.
Battered car-makers rounding blind corner
(Update: This piece was written, as several commenters have pointed out, before GM clinched a sale of Saab to Spyker on January 26.)
By Quentin Carruthers
(Acquisitions Monthly) Automakers face a demand slump in Europe and the longer-term challenge of addressing climate change. Both pressures are expected to lead to further restructuring, consolidation and M&A activity.
The North American International Auto Show, held each January in Detroit, Michigan, is just coming to an end. Detroit is the hometown of America’s “Big Three” automobile makers – Ford, General Motors, and Chrysler – and the show constitutes one of the most important events in the industry’s calendar.
Touring the floor with a group of her fellow Congressmen was Nancy Pelosi, Speaker of the House of Representatives, who told reporters: “We came to listen, to learn, to observe, to measure, to judge what has happened to the investment that we made.”
US state investment includes US$60bn of government loans to support automotive assemblers, in return for control of GM and a minority stake in Chrysler, both of which came out of Chapter 11 bankruptcy proceedings in mid-2009. A further US$3.5bn has been used to support parts suppliers, and US$3bn to support car retailers.
Total state support equates to a loan of more than US$50,000 for each job in the manufacturing side of the industry, as calculated by Philip Wylie, director and automotives leader at restructuring adviser Houlihan Lokey.
Saab WILL survive. Spyker purchased Saab from GM last month…. come on guys GET WITH IT!!! Embarrassing.
The afternoon deal: Tiny Spyker wins a car
It’s been an auto-fueled day with investors on tenterhooks awaiting the now announced $400 million Spyker/Saab deal. Although Saab kept the spotlight, there is news from Chrysler, Opel, Porsche, Mitsubishi, Peugeot and Geely’s Volvo.
From Reuters, get the Saab deal wrap up here, along with a Saab factbox, timeline and profile of Spyker’s CEO Victor Muller. Find some additional facts about Spyker from The Swedish Wire here.
The Guardian has a great story on the mystique around the car brand called, “How did it all go wrong for Saab?”, and in a warning before the deal was announced, Fiat and Chrysler Chief Executive Sergio Marchionne said: “Marginal players will continue to be marginalized.”
Other auto news:
from Environment Forum:
GM, Chrysler cleared executive decks in 2009
When 2009 began, both General Motors and Chrysler were sliding toward bankruptcy. As the year ends, both companies have survived to fight another day.
The same can't be said for their senior executives.
Of the top 10 executives at GM's glass-towered Detroit headquarters in January, only one -- Bob Lutz -- remains. At Chrysler, only two of the 10 highest-ranking executives are still in Auburn Hills.
At GM, the churn took a dramatic toll at the vice president level. Of the 55 top executives, including vice presidents and divisional leaders, who were at GM at the start of the year, 26 have left the automaker. Of the remainder, few remain in the same positions they held, according to a Reuters tally.
The sweep was made near complete on Dec. 1 when the board at General Motors Co parted company with former chief executive Fritz Henderson after he had the post for only eight months.
Only at Ford did any of the former Big Three -- now called the Detroit Three -- automakers kept the slate of top executives pretty much intact. Only two of Ford's top 10 executives have left; both retired.
Of course, Ford did not declare bankruptcy to save itself as GM and Chrysler did this year with funding from the Obama administration.
The View From The Dealer Floor
Major automakers don’t sell cars to American consumers; they sell to dealers. And the biggest U.S. dealership chain by a wide margin is Fort Lauderdale, Florida-based AutoNation, which sold over 440,000 new and used vehicles last year.
So when AutoNation CEO Mike Jackson talks, auto executives listen — or so you would think.
In an interview with Reuters, Jackson said Detroit automakers had largely ignored his warnings over the past decade that the U.S. industry was headed for a crisis.
“I think I was usually able to reach an intellectual agreement on where the industry was headed. Where we disagreed was how much time we had to get there. On that, even I was wrong. Time was up,” Jackson said. Jackson thinks GM and Chrysler can be fixed. But he also thinks Washington should let either or both fail if their current turnaround effort backed by $60 billion in taxpayer funds falters. Here are excerpts from the interview and Jackson’s view of where GM, Chrysler, Ford and their rivals stand now in the marketplace:
Q: Are GM and Chrysler capable of change?
A:I think they had a near-death experience. When you really get down to the point where we either get this done or we won’t exist anymore, then it happens. …My sense is that absolutely Sergio (Marchionne) is providing leadership at Chrysler and (Fritz) Henderson at GM. It’s under way, and it’s going to happen. Q: You’re looking to buy Ford and GM dealerships. Why is that?
A: We always bet on the biggest, broadest brands. Now we’ll take a look if the pricing and the opportunities are right. We love Chevy and we love Ford. Those are the brands that will succeed in the future. Those are the brands that are going to get the majority of the product and marketing dollars from those companies. They’re also the broadest brands. You can sell everything from Chevy from a Corvette to an Aveo. It’s unbelievable how well accepted and how approachable those brands are for the American consumer.
Come on.
Gone are the days of planned obsolescence where you traded out before the cost of maintenance hit you. Not that long ago warranties for 3y/30k miles were replaced with 10/100. The paint doesn’t even chip anymore.
The secondary warranty market just exacerbates the ever increasing spread between when an auto is replaced for new.
People got used to 2 year leases but the days of $79 a month (1997) are over. Not that long ago a BWM was $400 a month, now it’s a Corolla and a 48 month lease -not that you can get approved for credit on either.
Face it, the market has changed and it’s due to more than a economic downturn.
from Commentaries:
Should Volkswagen demand a Magna Carta?
Magna International seems to be taking seriously threats from Volkswagen to pull its business following the Canadian car parts maker's Opel victory.
Magna's co-CEO Donald Walker is saying that after talking to them, most of his other customers are happy that the car parts group -- which along with Russian backer Sberbank is buying a 55 percent shareholding in GM's Opel -- is able to protect their technologies.
Apparently VW is still unconvinced, so Magna will "finalising the internal procedures" and will have more talks with the German carmaker.
Walker is also stressing that Magna is not looking to compete with its clients but is simply aiming to get a good return on its investment in Opel, reiterating that Magna will remain a parts company.
There seems little doubt that Magna can manage potential conflicts, after all it already builds cars for BMW, Chrysler and Mercedes as well as making parts for Toyota, Ford and VW.
But to say Magna won't be competing with other carmakers once it starts building Opel cars is stretching the point. Why else would you buy Opel if it wasn't to take market share from VW and others?
“The government can claim a small victory with this sale”
Uh, no. The sale reveals that there was little real demand for AIG shares. There were more flippers than genuine buyers. That will be remembered on future sales, and buyers will require a greater discount to the current market price to get them to part with money for shares of AIG.