Breakingviews

Valentino makes Permira look not shabby nor chic

By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It had all the hallmarks of a boom-time finance disaster. Permira’s leveraged 5.4 billion euro acquisition of a controlling stake in Hugo Boss through Valentino Fashion Group was one of the biggest deals of 2007, the year that the sub-prime crisis kicked off in earnest and Terra Firma bought EMI Group. Five years on, the UK buyout firm is selling Valentino to the Qatar royal family for a punchy price. That leaves Permira’s fashion binge looking respectable, if not glamorous.

Comcast deal extends content’s precarious reign

By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Content’s reign in TV Land is secure for now but maybe not for long. As media moguls gather for their annual Sun Valley confab, U.S. cable operator Comcast struck a deal to sell its minority stake in A&E Television Networks to its partners for $3 billion. That implies a healthy valuation of over $19 billion, all the more impressive given the fight elsewhere that represents the industry’s future.

Intel deal closes circuit to faster chips, growth

By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.Intel has found a way to close the circuit on faster growth. Next-generation chips are cheaper, quicker and require less electricity. But toolmakers haven’t spent the sums necessary to make the switch. Intel’s $4.1 billion investment in ASML should remove such bottlenecks.

The clever deal has multiple components. First, Intel will give the Dutch company $1 billion over five years for research and development into the production of 450-millimeter wafers and extreme ultra-violet lithography. These should cut costs and make chips more powerful. Intel also will buy a 15 percent stake in ASML in two increments, for a total of $3.1 billion.

Supreme Court gives shot in arm to Obamacare M&A

By Robert Cyran

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Expanding health coverage to more than 30 million Americans remains politically contentious. But the Supreme Court’s decision not to overturn the law means that it’s here to stay. The increased number of covered patients is a lucrative opportunity for insurers that helps justify juicy merger premiums. That’s the logic behind WellPoint’s pricey $4.5 billion bet on Amerigroup. More deals are likely.

Duke CEO sucker punch a value lesson for investors

By Christopher Swann

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Leadership is supposed to have its privileges. So naming the chief executive was a prize electric firm Progress Energy demanded when selling itself to larger rival Duke Energy. In return they accepted a tiny premium. That Progress’ man Bill Johnson lasted only hours in his job is a reminder to investors never to sacrifice value for the prestige of getting the top job.

Bristol-Myers and Astra make fat bet on obesity

By Robert Cyran

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Bristol-Myers Squibb and AstraZeneca have made a fat bet on obesity. The U.S. and UK drug giants are teaming up in the $7 billion purchase of Amylin Pharmaceuticals. Seven times estimated sales is a hefty price to pay for a biotech whose main drugs face stiff potential competition. But Amylin’s focus on diabetes, a sadly expanding market across the globe, makes this a healthier financial endeavor.

Glenstrata wobble another blow for M&A bankers

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The collapse of Glencore-Xstrata would be a $130 million blow to mergers and acquisitions bankers. Nine banks would lose most of that fee pool, and league-table standing too, if investor pressure nixes the $26 billion Xstrata buyout. Even in a merger boom, that would hurt. But it’s particularly painful in a thin year for deal-making.

Quest board cleverly squeezes more out of MBO

By Robert Cyran

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Quest Software’s directors have come up with a canny plan to squeeze more money out of a buyout offer backed by Chief Executive Vincent Smith. They were put on the defensive in March when Smith, who owns a third of the enterprise software company, teamed up with private equity shop Insight Venture Partners for a lowball bid. But independent board members managed to level the playing field by offering Dell an option to acquire a 19.9 percent stake in the firm if Smith didn’t support its superior bid. That bagged shareholders a 12 percent bump in the purchase price.

KKR gets rich prescription for top-of-market LBO

By Robert Cyran and Quentin Webb
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

KKR has found the right formula to exit Alliance Boots, its top-of-the-market drugstore deal. Walgreen’s two-stage acquisition of its European rival should more than double the investment KKR and its partners made at the peak of the leveraged buyout frenzy. What the U.S. drug chain’s investors will get for their money – as much as $16.2 billion – is harder to fathom.

The first stage sees Walgreen pay about $6.7 billion in cash and stock for 45 percent of Boots. The firm’s ownership is currently split fairly equally between KKR funds, Boots Executive Chairman Stefano Pessina and outside investors. Pessina, who will become a Walgreen director, takes proportionately more stock than the financial investors.

Xstrata shareholders should say no

By Chris Hughes

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Xstrata shareholders should vote down the $45 million three-year retention package awarded to Chief Executive Mick Davis to seal the miner’s tie-up with commodity trader Glencore. Sure, the merger would collapse, but that’s a price worth paying.