M & A wrap: Carlyle steps up
Carlyle Group filed for a $100 million offering for its common units, making it the latest private equity group to list on public markets.
It’s been a rough summer for U.S. initial public offerings after the stock market nosedived, but tech issues could see strong demand after bankers and fund managers return from vacation in September, reports Clare Baldwin.
International Paper won its bid for rival packaging producer Temple Inland. The company raised its bid 5 percent to $32 per share, roughly $3.7 billion, to convince a skeptical Temple board.
“Another wave of Chinese acquisitions is expected soon as the Asian superpower seeks to diversify investments beyond the underperforming greenback, and as share price falls translate to cheaper purchases,” reports The Australian.
Moving on the T-Mobile debate:
Deutsche Telekom AG could miss out on a multi-billion dollar break fee if regulatory hurdles cause the failure of its $39 billion deal to sell T-Mobile USA to AT&T, a person familiar with the matter said.
“If there are conditions to be attached to the transaction, we will work on the matter together with AT&T,” Deutsche Telekom spokesman Philipp Kornstaedt told Bloomberg.
“The government’s antitrust lawsuit is bad news for AT&T, but it’s potentially disastrous for T-Mobile,” reports CNNMoney.
M & A wrap: How will AT&T respond?
AT&T is expected to soon present a proposed solution to antitrust regulators to salvage its planned $39 billion acquisition of smaller rival T-Mobile USA, according to people close to the matter. The company misread the Justice Department’s signals on the T-Mobile deal, reports Bloomberg.
AT&T is overlooking its best argument for the T-Mobile merger, reports Fortune.
August was a rotten month for stocks and it wasn’t much kinder to some of the world’s most successful hedge fund managers, early returns show.
AIG’s airplane leasing arm filed for an initial public offering, the last big asset sale by the bailed-out insurance giant to pay back the U.S. government.
“Groupon’s initial public offering is about to hit some very rough turbulence,” writes NYT’s Steven M. Davidoff.
M & A wrap: AT&T goes to court
The Justice Department made a bold move when it sued to block AT&T’s $39 billion acquisition of T-Mobile. Now comes the hard part, reports Carlyn Kolker and Diane Bartz.
“The lawsuit seeking to block AT&T Inc.’s takeover of T-Mobile USA Inc. shows a more aggressive antitrust stance by the U.S. Justice Department that limits prospects for other big telecommunications deals,” Bloomberg reports.
Consumers still lose if AT&T can’t by T-Mobile, writes Dan Frommer.
It’s a good day for the American consumer, not to mention a great day for Sprint and Verizon, writes columnist Felix Salmon.
The NYT flushes out the nuances of the antitrust battle ahead and how AT&T landed in this situation.
On the IPO front, Manchester United reported record full year profit and revenue, strengthening its hand ahead of a planned $1 billion flotation in Singapore later this year.
from Felix Salmon:
Justice makes the right decision on AT&T
The Justice Department's official complaint seeking to stop AT&T from taking over T-Mobile minces no words:
T-Mobile in particular - a company with a self-described "challenger brand," that historically has been a value provider, and that even within the past few months had been developing and deploying "disruptive pricing" plans - places important competitive pressure on its three larger rivals, particularly in terms of pricing, a critically important aspect of competition... unless this acquisition is enjoined, customers of mobile wireless telecommunications services likely will face higher prices, less product variety and innovation, and poorer quality services due to reduced incentives to invest than would exist absent the merger. Because AT&T's acquisition of T-Mobile likely would substantially lessen competition in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18, the Court should permanently enjoin this acquisition.
One thing which fascinates me is the way in which neither the complaint nor the press release makes any mention of the fact that the proposed deal would give the merged company substantially all of the market in GSM cellphones -- the only ones which work in most of the rest of the world. Americans who travel internationally pretty much have to get their cellphone service from one of these two providers -- and they're highly sensitive to exorbitant international roaming fees. Which would almost certainly go up in the event of this merger.
The noises coming from the FCC in the wake of this suit are supportive, with FCC chairman Julius Genachowski saying that he too has "serious concerns about the impact of the proposed transaction on competition." He adds for good measure that "vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile."
AT&T hasn't officially given up, but I can't see it winning this particular fight with the law. This, then, is a good day for the American consumer, not to mention a great day for Sprint and Verizon. AT&T and T-Mobile have both put enormous amounts of management time and shareholders' money into putting this merger together, all of which will now be for naught. Rather than fight the inevitable, they should go back to fighting each other where it matters: in the marketplace.
@Keng_CA says “All this talk about T-Mo doing horribly is not true – they just weren’t performing as well as DT likes.”
T-Mobile has not had an RoE above 7.1% in any year since 2006. For the last 12 months it has been 4.1%. For comparison, AT&T and Verizon (and indeed almost any healthy company) have RoE in the teens.
If you were a manager or shareholder of Deutsche Telekom, how would you justify investing the $3B settlement in a business that is returning 4-7% rather than distributing it to shareholders or finding a better use for the capital?
M & A wrap: Finding more perks to Google’s latest buy
Google’s blockbuster acquisition of Motorola Mobility will bring an unusual stable of tax and accounting benefits to the search-engine giant, already one of Corporate America’s most savvy users of such perks.
Japan’s Sony, Toshiba and Hitachi will merge their liquid-crystal display operations using $2.6 billion of government-backed funds to fend off growing competition from rivals in South Korea and Taiwan. Here’s the press release.
“Amid rocky markets this month, IPOs failed at a pace reminiscent of the tech-bubble hangover,” reports the WSJ.
“The Bank of America deal is actually a case study in why the rest of us can’t invest like Warren Buffett,” reports Slate.
For your morning distraction, Conrad Black tells Vanity Fair who he blames for his woes and what life was like in prison.
from Felix Salmon:
Will AOL go private?
Some companies are in growth businesses; the stock market, as a rule, tends to love them. Other companies are in an inexorable secular decline; they tend to get punished by equity investors. There's a good reason for that: stock-market investors are looking for stocks which go up over time, rather than stocks which are going to zero while paying out as much in dividends as they can along the way.
If you want an example of a business which is in a certain secular decline, it's hard to come up with a better one than AOL's hugely profitable dial-up business. And so it makes a lot of sense that, as Claire Atkinson reports today, AOL is looking at the idea of going private -- perhaps with a sale to KKR. This is not a particularly revolutionary idea: Jonathan Berr has pushed it, and Bloomberg called it AOL's "last, best hope". AOL is on the record as having hired the most high-powered M&A advisors in the world; they're no idiots, and only idiots wouldn't look at a buy-out option for a company trading at a significant discount to its book value.
If I were a potential private-equity buyer, though, I'd do a sum-of-the-parts analysis and rapidly come to the conclusion that Tim Armstrong's strategy is too much risk for too little potential reward. Take AOL, and sell off the non-core assets -- things like Moviefone, MapQuest, AIM, and Advertising.com. What's left? The AOL/HuffPo traffic-and-content monster, on the one hand, and the dial-up business, on the other. Armstrong's idea is that you use the cashflows from the latter to beef up the former, so that when the dial-up revenue eventually disappears, the dial-up caterpillar has transformed itself into a glorious web-publishing butterfly. (Sorry, MSN.)
The problem is that the transformation from caterpillar to butterfly is extremely inefficient -- there's a lot of work and energy involved, to achieve a result which can be fleeting and fragile.
Now private-equity shops are actually a good place to quietly work hard on putting exactly that kind of strategy into effect. Without being distracted by the need to produce strong quarterly results, executives can concentrate on building businesses which are going to be worth lots of money over the long term.
But there's no precedent for the idea that throwing hundreds of millions of dollars at a web content company will make it big and strong and self-sufficient. Expensive web content is expensive, especially when you're trying to build out a network of thousands of locally-staffed sites. Meanwhile, profitable websites tend to be run on the cheap -- including HuffPo, before it was bought by AOL. If I wanted to make a long-term for-profit investment in a website built on the genius of Jonah Peretti, I'd choose BuzzFeed over HuffPo any day.
So the ruthless logic of the market would seem to imply that the best thing to do with the dial-up business and the content business is to tear them apart. The dial-up business, on its own, is ripe for a managed decline, where you extract as much money as possible before it finally dies. Private equity companies do that kind of thing very well.
Hey they could make a ton of money off a reality show “Arianna and KKR” Imagine what it would be like to see those two try to work together.
M & A wrap: Lehman plan offers 20 cents on the dollar
Lehman Brothers Holdings Inc. will ask a bankruptcy judge to let creditors vote on its $65 billion payout plan, a key step toward ending the biggest bankruptcy in U.S. history.
Hong Kong-listed shares of China Construction Bank rose more than four percent after Bank of America said it will sell about half of its stake in the Chinese lender, providing relief to investors by removing uncertainty surrounding the stake.
Facing limited domestic growth options because of their inability to merge, Canadian banks are finding opportunity to build domestic market share in the troubles of capital-challenged European and U.S. banks.
Andrew Ross Sorkin looks into the mystery of Steve Jobs’s philanthropy.
M & A wrap: Backing away from CCB stake
Bank of America Corp is selling about half its stake of China Construction Bank to a group of investors for $8.3 billion in cash, the bank said.
Greece’s Alpha and EFG Eurobank sealed a mega merger, with the help of Qatar, that is expected to trigger more deals to shore up banks battered by a severe debt crisis and recession.
Zynga, the social games maker may delay its plans for an initial public offering until November because of poor market conditions, the New York Post newspaper reported late on Sunday.
“TMX Group, which has gained the most of any exchange involved in the industry’s biggest wave of acquisitions, is now in danger of being left without a buyer,” reports Bloomberg.
M&A wrap: Buffett trades off his reputation
Warren Buffett showed again that his name and money is enough to give a struggling company instant credibility in the market. But the legendary investor also demonstrated his canny command of that reputation means that deals such as the $5 billion investment in Bank of America can immediately generate profits.
Anglo-Irish bank has chosen preferred bidders for its $9.5 billion U.S. commercial real estate loan portfolio and aims to have completed that sale, the largest in the United States in recent years, before the end of the year.
Glencore, the world’s largest commodities trader, stood on the verge of its largest takeover bid since its May stock market listing, after South Africa’s Optimum Coal confirmed it had received approaches.
The New York Times’ Dealbook is reporting that Rio Tinto and the Mitsubishi Corporation have raised their offer for Coal & Allied to approximately $131 a share , valuing the company at about $11.6 billion.
The blogging service Tumblr is close to raising $75-$100 million in venture capital, implying a market value of $800 million, the Wall Street Journal reported, citing people familiar with the matter.
M & A wrap: A Buffett bailout for BofA
Warren Buffett’s Berkshire Hathaway will invest $5 billion in Bank of America, stepping in to shore up the company in the same way he helped prop up Goldman Sachs during the financial crisis.
Bank of America shares rose 20 percent in pre-market trading on the news. Shares for the largest U.S. bank by assets have lost roughly a third of their value in August, and half their value since the beginning of the year.
The news of Steve Jobs’s resignation had many of his peers weighing in on the Apple co-founder’s legacy. Former Google CEO Eric Schmidt said Jobs is the “most successful CEO in the U.S. of the last 25 years,” while former eBay CEO Meg Whitman said his contributions are “unparalleled in the business world.”
Samsung Electronics Co reiterated on Thursday it is not interested in buying Hewlett-Packard Co’s PC business, shooting down persistent market talk the South Korean firm may snap up the unit to become the world’s top PC maker.
The deadline for initial bids in the auction for Hulu was extended until the end of the week to allow interested parties more time to examine the online video site’s financial information, according to people familiar with the situation. Yahoo, Google Inc, DirecTV and Amazon.com were among the parties preparing to submit an offer for the U.S. online company, the people said.
Is there a future for Morgan Stanley and Goldman Sachs? That’s the question WSJ’s Dennis Berman tackles on Mean Street.
