American International Group CEO Robert Benmosche asked the insurer’s board for time to explore options besides a public offering for its Asian life unit after a $35.5 billion deal to sell it to Prudential fell apart, a source familiar with the matter tells Paritosh Bansal.
Benmosche wanted to explore other options for American International Assurance, including selling parts of the business, after the directors on Monday voted down a sale to Prudential on revised terms, the source said. The British insurer had asked AIG to cut the price to $30.4 billion.
With an outstanding IOU to Uncle Sam of more than $50 billion, AIG hardly seems to be in a position to turn up its nose at a lower bid for AIA from Britain’s Prudential. The message was pretty clear to Pru’s CEO Tidjane Thiam that his shareholders were in little mood to approve a $21 billion rights issue to fund a $35 billion purchase of AIG’s Asian assets. So he came back with a $30 billion offer. No surprises there. He’d be mad not to haggle, particularly given it looks like Pru is the only buyer out there.
Suggestions that AIG would opt for an IPO of the Asian business shouldn’t have been much of a threat to Pru’s bid. Expectations were that AIG would get around half what Pru was offering – after haggling – if it went to market, and that assumed a market with a whole lot more appetite for new issues than the one AIG is now looking at.
While Royal Dutch Shell could well have been working on its $4.7 billion cash deal to buy privately held East Resources before the BP blowout on April 20, the deal could become a beacon for others looking trying to figure out how to expand away from sucking crude through deepwater rigs and towards natural gas and solid land.
The deal raise Shell’s daily gas production in North America by about 7.5 percent and give it access to a swathe of the Marcellus Shale (pictured left), the northeastern U.S. rock formation that is a crucial source of future U.S. gas production.
RiskMetrics has weighed in against Pru buying AIG’s AIA Asian assets, saying $35.5 billion is too much. The risk advisory firm joins a chorus of analysts chirping away from Singapore to London about problems with a deal that would pay off a huge chunk of AIG’s debt to Uncle Sam while transforming Pru into an Asian powerhouse.
Prudential holds a shareholders vote on June 7 to clear a $21 billion rights offer to fund the acquisition. One big issue is the price tag, which has drawn scrutiny given the fact that AIG has limited leverage to demand a big premium since it is selling the assets under duress. Pru’s ability to hit its projected revenue “synergies” from the deal are a big concern too.
MF Global’s new CEO would have had a far harder time slashing costs this way at his last job. As Governor of New Jersey, Jon Corzine faced huge budget deficits, an unwieldy management structure and stagnant income – arguably far worse conditions than exist at the futures and options trading brokerage he is running now.
While it might be nasty, if not cynical, to suggest he was happy about putting up to 15 percent of his workforce out on the street, he would have certainly enjoyed an immediately satisfying impact. “We are weeding out low-performing businesses,” he said on a conference call with investors, enjoying the power of voters being shareholders rather than employees. MF is also freezing new hiring, reducing compensation, and eliminating or postponing initiatives that are not central to the company’s direction.
Hedge fund firm Man Group apparently pricey deal to buy GLG Partners gives Man – the world’s biggest listed hedge fund — better access to the large and lucrative U.S. market. It also counts as a small win for the human race in its apocryphal war for investors’ funds with cheaper, faster and — many would argue — far more dangerous algorithmic trading machines known as black boxes.
The $1.6 billion cash-and-shares deal represents a heady 55 percent premium to GLG’s closing price on Friday. Clearly some investors are worried it’s a little too rich. It has so far driven the shares of Man – which had already lost about a fifth of their value since mid-April — down by a little more than 8 percent.
Having spent more than $42 billion to buy about 60 companies, Larry Ellison’s Oracle has set something of a daunting standard for merger activity in the business software industry. So while SAP’s plan to buy smaller business software maker Sybase for $5.8 billion may not roil markets, it could certainly shake up things in an already busy infotech sector.
With Sybase, SAP gets a boost in mobile technology, but will also end up with a big database business that provides steady revenues but little else on which SAP can grow its business.
Having taken a nibble at the Chinese insurance market in December, helping number three life insurer China Pacific Insurance list a $3.1 billion IPO in Hong Kong in December, Goldman Sachs is taking a bigger bite at that most promising and enticing of global investments, China’s financial products industry.
Sources tell us that an investing arm of Goldman is in the final stages of an agreement to buy AXA’s $1.05 billion stake in Taikang Life, China’s No.4 life insurer. The deal would allow France’s AXA to shed a non-core asset, while granting Goldman a piece of China’s growing insurance industry, report George Chen and Michael Flaherty.
As long expected, UAL is buying Continental Airlines for about $3.17 billion in stock, forming the world’s largest carrier and further shrinking the U.S. airline industry. It’s the biggest deal in the market since Delta’s 2008 purchase of Northwest, and retires another storied brand from the days when air travel was as much about glamor as it was about getting somewhere. The combined company will have 10 hubs, with Houston as its largest, and a workforce of nearly 90,000.
Continental Chief Executive Jeff Smisek will run the Chicago-based combined airline, but the brand will be UAL. The deal is expected to produce $1 billion to $1.2 billion in annual revenue and cost benefits for the combined company by 2013. One-time costs of about $1.2 billion are expected over a three-year period.
There is a sound logic to mergers in the market for fixed-line telephones. Mobile connectivity is increasingly marginalizing the business and clouding its prospects. A bunch of small, regional fixed-line operators, this logic goes, will have a much harder time squeezing profit out of the business than a few larger players.
But are things really so bleak for CenturyTel, which said on Thursday it would buy Qwest Communications in a $10.6-billion stock deal? The cost-cutting near-merger-of-equals comes with what might look like a skimpy 15 percent premium to Qwest’s market price, and investors are hardly cheering the news by bidding up stocks. But if growth forecasts for landlines are low, then a the premium probably should be as well.