Deals wrap: Goldman buys a Chinese life insurance policy
Goldman Sachs is betting big on the word’s largest insurance market with its purchase of a 12 percent stake in China’s Taikang Life Insurance Co Ltd. Goldman’s deal could pave the way for Taikang’s planned initial public offering next year. Credit Suisse estimates China’s life insurance market –which generated $124 billion premium income in 2009 — will grow more than 20 percent per annum for the next decade.
BP’s proposed $16 billion share swap with Rosneft received a stay of execution when an arbitration panel gave it time to try to extend its April 14 deadline for the deal. The co-owners of BP’s Russian venture TNK-BP are trying to block the deal with Rosneft arguing that it violates TNK-BP’s shareholder agreement. By not killing the deal outright, the panel has given BP time to either persuade TNK-BP to drop its case or cut them in on the deal.
U.S. securities regulators may ease constraints on share issues by private companies, making it easier for start-ups like Facebook, Twitter and Zynga to raise money, the Wall Street Journal reported.
The Wall Street Journal’s Mike Spector provides an inside look at the intense bidding that took place for the Blockbuster chain on Wednesday night. A person who was at the auction says it “was at times like a ‘cage match’.”
Deals wrap: What’s next for Apple?
Shares of Sony rose nearly 3 percent at one point on Tuesday, but later retreated as analysts dismissed speculation that the electronics maker could be an acquisition target of Apple. *View article *View WSJ article looking at an Apple tie-up with Netflix
Warren Buffett’s Berkshire Hathaway said hedge fund manager Todd Combs would join the firm, potentially bringing the company a step closer to solving Buffett’s succession puzzle.*View article *View background article on Todd Combs
The NYT’s Andrew Ross Sorkin delves into SEC insider trading laws and how they apply to two rail yard employees facing charges. *View article
Malcolm Gladwell takes a look at Steven Rattner and the rescue of General Motors. *View The New Yorker article
Deals wrap: Hot prospects in VC
Venture Capital Journal profiles 10 young venture capitalists who are poised to do great things. All of their “Hot Prospects” are under 36 years old and all have yet to make their mark in VC. The series runs all week.*View article *View profile of Chi-Hua Chien *View profile of Ann Miura-Ko
Asahi President Naoki Izumiya told Reuters he expects to have $9.2 billion on tap for acquisitions over the next five years as it looks for new growth drivers outside the shrinking domestic beer market. * View article
Is the SEC’s $75 million settlement with Citigroup a victory for Wall Street accountability or a punishment for taxpayers and Citi shareholders? *View NYT article
The afternoon deal: Being Goldman
Getting raked over the coals for allegedly shady trading practices does nothing for the public’s trust in a company. But if the bottom line is affected, then it gets real serious.
Goldman’s top brass, along with other executives, are scurrying around the globe to meet with jittery corporate clients. They are holding phone calls with anxious customers and taking hedge fund trading partners out to sushi lunches, all in a bid to prevent business from going to one of its competitors.
For our special report on the impact on Goldman, and the companies response to the SEC’s civil fraud charges, click here. Find a graphic of Goldman’s share price and significant events here, or a look at Goldman’s shrinking U.S. IPO proceeds here.
from Financial Regulatory Forum:
Financial regulation scorecard
A House-Senate conference committee must find a middle ground between financial regulation bills passed by the two chambers. The committee's final report could differ from earlier versions.
Once approved by both chambers, the compromise legislation will go to President Barack Obama to sign it into law. That could happen by July 4, analysts say.
Here's a look at the status of major points in the House and Senate financial regulation bills.
The afternoon deal: Regulation overdrive
A joint Senate-House of Representatives conference committee convened at 2:15 p.m. EDT to begin merging competing bills from each chamber into what will be the biggest overhaul of the financial rules since the 1930s. Columnist John Kemp explains the simple conference process and the not so simple reality of merging the House of Representatives and Senate versions of the financial reform bill. The “base text” for the regulatory bill is here.
Not to be overshadowed by the financial regulation bill, the Commodity Futures Trading Commission said it plans to boost scrutiny of high-frequency trading, which now accounts for as much as half of all U.S. futures volume, and was fingered for its role in the May 6 stock market “flash crash.” Get the details of the co-location proposal here.
The SEC approved new so-called circuit breakers. The rules will require the exchanges to pause trading in certain stocks across U.S. equities markets if the price moves 10 percent or more in a five-minute period.
Also on the regulatory front is news of the SEC hunting for fresh dirt on Goldman Sachs, hoping to bolster their lawsuit against the bank and perhaps force it to settle on terms more to the regulators’ liking. Read the FT article here.
Following is a collection of regulatory factboxes:
DealZone Daily
Rather predictably, the probe into Goldman Sachs overshadowed the group’s first quarter results on Monday. Somewhat less predictably, Goldman’s rivals have been using the furore to elbow in front of the leading Wall Street bank. As an example, rival investment bankers have been lobbying authorities in China to drop Goldman as an underwriter for the more than $20 billion IPO of state-owned Agricultural Bank of China.
Australia and New Zealand Banking Group (ANZ) is preparing to bid for Lone Star’s $4bln controlling stake in Korea Exchange Bank, the nation’s sixth largest lender. The news of the arrival of unexpected contender for the U.S. private equity firm’s stake helped send shares in the bank 3 percent higher.
For more Reuters’ deals news, click here.
In other media:
Google is in talks to buy travel software manufacturer ITA Software Inc, Bloomberg reported. A deal could value ITA, whose programs are used by Orbitz Worldwide and Microsoft, as about $1 billion.
Goldman doesn’t need to be guilty, just smelly
If Goldman’s business starts suffering from the stain of the SEC’s lawsuit after a stellar quarter of earnings, the investment bank’s role in the rehabilitation of the financial sector could look more like a quadruple bypass at the heart of the matter.
Goldman’s stunningly hot earnings are nothing new. The company routinely throttles forecasts. So it almost didn’t matter how much money they earned. Think about that for a second. The nation’s most celebrated money maker getting no love from investors for making more money than it was expecting. What else is it supposed to do? Or, more importantly, are investors finally beginning to begrudge Goldman Sachs its success? If clients start to become fearful about doing business with the bank because of the lawsuit, its earnings-generating power will take a hit.
In fact, the smell test in this case could ultimately prove to be more important than the legal one. If the perception of unethical behavior at Goldman helps the Obama administration pass more stringent financial reform, then the SEC’s action will have been a bigger boon than any fine or penalty the bank might be made to pay down the long legal road ahead.
That may turn out to be of bigger value to a reformist government than a Goldman guilty plea. And if it turns out Goldman is not guilty, then the SEC will take it on the chin again, and the market is almost as familiar with that result as it is with another blowout quarter from Goldman Sachs.
I see a risk to GS business coming from the growing political appetite in the US for more disclosure, control over financial derivatives, appetite for bigger penalties in cases of volations of existing securities laws or regulations. That’s my current impression.
Achilles
DealZone Daily
Australia’s competition watchdog blocked National Australia Bank’s $13 billion agreed deal for wealth manager Axa Asia Pacific Holdings, opening the door for rival bidder AMP to make a comeback. Australia’s competition regulator defied expectations it would give conditional approval for a deal, instead issuing a flat rejection on the grounds a tie-up would hurt competition for retail investors.
British train and bus operator Arriva said it is in advanced talks with Deutsche Bahn about the German state rail company’s 775 pence a share bid, valuing the company at 2.7 billion euros including debt.
European consumer goods group Unilever will kick off the sale of its frozen food arm Findus next week, expecting to draw bids from private equity groups including Permira, Lion Capital and BC Partners.
For other deals news, click here.
More M&A and corporate finance news from other media:
U.S. government controlled insurer AIG is considering pursuing Goldman Sachs over losses incurred on $6bln on mortgage-backed securities. The move follows the SEC’s decision to file civil fraud charges against Goldman and could spark actions from other investors who have lost money, the FT writes.
Guy Hands’s Terra Firma may ask investors for 360 million pounds – three times the amount previously suggested — to see troubled music group EMI through its debt obligations until 2015, Bloomberg reports.
Goldman’s road to Wellsness
Most free marketers are happy to overlook a certain amount of outsmartiness from investment banks. After all, these are the rocket scientists who made mountains of cash by piling multiple levels of risk on dodgy investments and calling them hedges. Sure, such alchemy blew up in many a face, but the logic behind the free market does have a role to play here. Shorting synthetic CDOs would have ultimately helped force the market to recognize how much hot air was behind the subprime-fueled boom. But by not disclosing a mechanism built to fail — the Abacus CDO in question — Goldman Sachs may have taken too deep a bite out of the hand that feeds it.
When companies are being investigated by the SEC, they get a Wells Notice. They usually tell the markets when they get one. It’s a disclosure thing — you need to be upfront with the market about information that could be material to your results. There is no crime in not telling markets that you’ve received a Wells Notice, so long as the information is not material. But Goldman’s share price is tumbling, and even if it wins its battle with the SEC, Goldman could face angry shareholder charges for not revealing much sooner that it faced potential civil liability.
In those corners of the markets so consumed with conspiracy theory, it’s hard not to notice how close the timing of the charges comes to the debate on Capitol Hill about financial regulatory reform. On CNBC this morning, Democratic Senator Barney Frank dissed the idea of a conspiracy, as he would have been expected to do, but he admitted that the timing of the Goldman explosion helps Democrats’ chances of getting legislation through Congress.
It may have been misguided for Goldman to sit on its Wells Notice because it was expecting to settle with the government in such a way that would be immaterial to its financial performance. But it would have been delusional to think the issue would not become a defining one with Washington frothing over financial reform.
