Mergers & Acquisitions

A $4.3 bln oil deal parlays financial engineering

21 Feb 2013

Linn Energy’s purchase of Berry Petroleum is the first time an oil master limited partnership has swallowed a whole exploration company. The bold move leans on the tax advantages of such structures and raises the sector’s risk profile. Linn’s 8 pct yield is a necessary buffer.

U.S. debit-card deal recalls value of subprime

20 Feb 2013

Since the crisis, borrowers with middling to poor credit have been all but abandoned by mainstream lenders. Yet the $1.1 bln sale of prepaid card provider NetSpend, which caters to them, values the company at 17.5 times expected earnings. It’s a sweet spot that now eludes banks.

Office romance gives new meaning to reverse merger

20 Feb 2013

An announcement from Office Depot needed a big glop of white-out as it disclosed a $1.2 bln deal with OfficeMax before crossing all the t’s. Typically, failings in mergers show up later rather than earlier. In this case, with everything now official, the good news is yet to come.

Heinz deal shows value of ultra-long investing

19 Feb 2013

Berkshire Hathaway and 3G Capital are pouring on financial sauce unpalatable to others. Dividends and debt will eat up much of Heinz’s cash, meaning it could take a decade for the $28 bln deal to produce a decent return. It’s the kind of dish that’s definitely an acquired taste.

Offices Depot and Max lucky to have each other

19 Feb 2013

Uniting the U.S. purveyors of pens and paper clips is about as obvious as it gets in M&A. The potential $3 bln of synergies could be worth more than the market value of the two companies combined. As the Internet ravishes retail, at least this corner can cling to life by merger.

Mega-buyout in UK mobile risks skinny returns

18 Feb 2013

Debt is cheap and plentiful. Big M&A is stirring. And EE’s parents are keen to float Britain’s biggest mobile operator. No wonder buyout shops are circling, for what could be a $15 bln-plus deal. But even with high leverage, the returns wouldn’t be much to ring home about.

M&A advisers get a lot of Valentine’s Day love

14 Feb 2013

Cupid’s two big deals alone, Heinz and American Airlines, required the services of two dozen banks and law firms. Some $36 bln of corporate hugs on Thursday pushed the 2013 global deals tally 17 pct ahead of where it was a year ago. Hearts must be racing across Wall Street.

Heinz deal gives taste of new buyout secret sauce

14 Feb 2013

Private equity firm 3G is swallowing the ketchup maker for $28 bln with Warren Buffett’s help. In the past, such mega-buyouts required multiple LBO firms to work. With club deals all but dead, the Heinz takeover, like Dell’s, shows the new way forward.

U.S. airlines need to fly abroad for better returns

14 Feb 2013

The $11 bln union of US Airways and AMR should boost the industry’s profitability. But earnings won’t gain more altitude until America’s airlines team up with overseas rivals and boost margins by cutting cost. That requires Congress to lift curbs on foreign ownership.

AB InBev moves fast to keep Mexico prize

14 Feb 2013

The world’s top brewer has quickly rejigged the $20 bln takeover of Grupo Modelo. If U.S. regulators now approve, the deal still makes sense for AB InBev, both financially and strategically. It will get bigger in Mexico and can still try to make Corona beer a global smash.

Biotech deals show how to pluck without killing

13 Feb 2013

Pharma mergers are usually a recipe for destroyed value. Yet big drugs companies need the innovation more prevalent at biotech firms. Sanofi’s increased stake in the $16 bln Regeneron, avoiding full control, is a good way to collect feathers without swallowing the bird.

Vodafone cable mega-deal would be logical but pricey

13 Feb 2013

Telcos trade at a discount to cable, so Vodafone investors may balk. But the UK mobile group has reasons to eye Germany’s Kabel Deutschland. Households are ready to buy landlines, mobile, TV and Internet together. Vodafone could afford a 10 bln euro deal. And real savings exist.

Comcast ad-libs on winning NBC Universal script

13 Feb 2013

The U.S. cable operator engineered a multi-step deal with GE in 2009. Now, it smoothly has accelerated and tweaked the acquisition of the rest of NBC Universal for $16.7 bln. With the financial side sorted, Comcast CEO Brian Roberts must now prove he’s the right owner.

Law of haste makes waste should govern M&A suits

7 Feb 2013

Delaware judges often warn attorneys to do their homework before suing. Now one group of legal eagles is being grounded for doing just that. This undermines efforts to curb deal litigation. Courts are right to want to punish a rush to the courthouse. But they must be consistent.

Elan’s $3.25 bln deal reduces risk – and raises it

6 Feb 2013

The biotech is selling part of its 50 pct stake in its blockbuster drug, and main asset, Tysabri, to partner Biogen. That should maximize Elan’s profit: this reduces the incentive Biogen has to sell competing drugs. The danger is the cash burns a hole in the company’s pocket.

Corporate governance: EADS 1 – France 0

6 Feb 2013

The French government couldn’t appoint its preferred candidate, Anne Lauvergeon, to the Airbus maker’s top spot. Instead, former Thales CEO Denis Ranque will get the job. EADS reformed governance after its failed merger with BAE. The new system seems to be working.

Liberty pushes envelope for post-crisis M&A debt

6 Feb 2013

The U.S. media group is funding the cash element of its $23 bln Virgin offer by gearing up its target. Almost $8 bln of new debt will be issued with the deal. Overall leverage may still be below pre-crisis multiples. But it’s a big moment - and could beget more levered M&A.

Polyus sale could leave gold deal bulls hanging

6 Feb 2013

Russian billionaire Mikhail Prokhorov’s potential exit from Polyus, the Siberian gold miner, has revived talk of a tie-up with fellow Russian producer Polymetal. An enlarged national player might please the Kremlin, but the industrial logic of gold mergers is weak.

Murdoch and Malone make better allies than rivals

5 Feb 2013

The media moguls are squaring off again. John Malone’s Liberty Global wants to buy Britain’s Virgin Media - a rival to the Rupert Murdoch-backed BSkyB. But the two UK companies complement each other. Collaboration would work in their favour, leaving third player BT as the loser.

Dell’s $24 bln LBO involves a club of one

5 Feb 2013

And Silver Lake, the sole private equity firm included, isn’t even really the club. Michael Dell is contributing his 14 pct stake in the PC maker, cash and an investment from his MSD Capital. Time was mega-deals needed a team of buyers. For now, they remain more exclusive.