Commentaries
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The guessing game ahead of Dell-Perot deal
In retrospect, it’s easy to say we could have guessed it:
Why didn’t some investors put 2+2 together and figure out that Perot Systems might be a target for Dell — before that is, Dell announced its $3.9 billion cash deal to buy Perot.
Looking back at Perot’s share performance, the stock has been building up momentum since July, despite warning of weak earnings in its August 4 quarterly report. The stock, which traded under $15 throughout the first half of the year, had built to $18 by last week. Perhaps this was early optimism about 2010 prospects. But the other explanation is some timely speculation that Perot was a logical target for fellow Texan company Dell.
Dell had made little secret of its plans to acquire computer services and software companies for months. Executives had dribbled out hints about what kind of targets it was after in the weeks and months leading up to the September 21 news.
Belatedly, it’s interesting to go back and read the dialogue at the Citigroup conference presentation on September 9th between Dell computer services chief Steve Schuckenbrock and a Citi analyst. It reads like the parlor game “20 Questions.” The following is an unedited transcript from ThomsonReuters SteetEvents:
Green shoots or just talk in fertiliser M&A
There are signs of life returning to M&A in the potash sector — with market speculation that Potash Corp of Saskatchewan may bid for Germany’s K+S.
Canada’s Potash Corp — the world’s largest producer of the key ingredient in synthetic crop fertiliser — said last month that North American potash inventories had fallen in July, an indication that sales of potash had begun to move again after a seizing up of the market.
Cash M&A still lifeless
Bond sales are at a record, equity markets are at year-highs, private equity firms are sitting on huge cash piles — Blackstone alone has $29 billion — and banks are lending to each other again.
The ingredients should all be there for a resurgence of cash-driven mergers and acquisitions. But instead, the market is in hibernation.
Morgan Stanley keeps Goldman from top M&A slot
Despite top billing for M&A involving European companies as well as Asia-Pacific and Japanese corporates, Goldman is not top of the league tables for global M&AÂ for the year to date.
Instead it is long-time rival Morgan Stanley leading the pack, capitalising on a sizeable advantage in deals involving U.S. companies. Goldman is in second place in the worldwide ranking and JP Morgan third.
Friends will find Pac-Man out of fashion
The 1980s revival continues. Music fans have been flocking to see the Human League and Spandau Ballet on their reunion tours. Now M&A aficionados can savour their own mini revival. Yes, it’s the return of the Pac-Man bid.
Two mid-sized British insurers, Friends Provident and Resolution have revived this gambit, named after a mind-bogglingly dull computer game where the objective is to eat your pursuers rather than be eaten yourself. In M&A, this involves the target of a bid approach (in this case, Friends) turning on the bidder and launching an offer itself.
In the case of Resolution there was a certain logic in so doing. Resolution is effectively a cash shell company, which has opaque governance. Its nil premium share for share approach offered little to Friends other than the chance to hand over 10 percent of the combined company’s profits to Resolution’s management. The proposed nil premium counterbid made little sense (other than to eliminate the 10 percent profit share). But it did at least tease out a slightly more generous bid proposal from Resolution.
Pac-Man defences are rare in M&A — and for good reason. They’re wholly unconvincing. If you get a bid for your company, and think that the combination has merit, squabbling over who bids for whom seems to miss the point. At worst it smacks of management self interest.
This is not the only reason there have been very few Pac-Man defences. The bigger problem is that they are uniformly unsuccessful. The target never actually gets to gobble up the predator. It is 10 years since Elf Aquitaine’s desperate attempt to see off an ultimately successful bid by fellow French oil major Total. The same year, British regional brewer Marston’s also used the defence against a bid from Wolverhampton and Dudley Breweries. It too failed.
That doesn’t stop it from rearing its ugly head from time to time. Pac-Man defences were raised as a possibility for Rio Tinto to turn the tables on BHP Billiton and more recently as a means for Anglo American to round on Xstrata. But generally that’s all it is: talk.
The Resolution-Friends situation is an unusual one. Resolution is a cash company that is desperate to do a deal, while Friends rejected a 150 pence per share bid from J.C. Flowers last year. There are particular reasons they have ended up in a sort of death embrace. So while the Spandaus may be back in favour, the Pac-Man bid is likely to remain consigned to the archive.
Bankruptcy-related M&A at 5-year high – more to come?
This week’s Thomson Reuters Investment Banking Scorecard shows bankruptcy-related M&A at a five year high.
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There were five bankruptcy-related M&A deals announced during the week, including the acquisition of venture-backed public company Nanogen by French investment holding company Financiere Elitech for $25.7 million.Â
from Alexander Smith:
Is Jefferies right to be bullish on M&A in AM?
A bull(ish) note from growing investment banking group Jefferies Putnam Lovell predicting "a steady flow of M&A activity in the global asset management industry" for the second half of 2009.
Jefferies is basing its view on the following factors:
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divestitures by larger financial groups shoring up their capital baseÂ
pure-play asset managers looking to bulk up
private equity firms drawn not least by lower capital requirements
And the firm is putting its money where its mouth is. It has recently been hiring scores of senior bankers from rival firms as it seeks to build itself a major presence.
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The Wall
