Jessica Hall

There's a big war brewing over single-serve coffee brand Diedrich Coffee Inc.   

Green Mountain Coffee Roasters Inc on Tuesday raised its bid for Diedrich to $265 million, or $32 a share in cash, to challenge a sweetened offer from Peet's Coffee & Tea Inc on Monday. Peet's cash-and-stock offer is valued at $30.41 per share.
    
Diedrich, which makes and sells K-Cup refills for Green Mountain Coffee's single-cup Keurig brewer system, said its board is "continuing to analyze the two offers" to determine whether Green Mountain's offer "continues to be a superior proposal."
    
Peet's, of course, said it thinks its cash-and-stock proposal is superior "given the greater certainty of an faster closing and the potential upside for Diedrich's shareholders through the Peet's stock component." It has until Friday to make a revised offer.
 
Meanwhile, Green Mountain said its all-cash offer is better than Peet's because Peet's proposal is subject to market fluctuations in its stock price. 

Earlier this month, Peet's had agreed to buy Diedrich for $26 per share, in a bid to cash in on Diedrich's status as a licensee of Green Mountain's fast-growing single-cup coffee brewing systems. Green Mountain emerged as an interloper with a competing offer.

"Peet's does have a sense of urgency to enter the fast-growing single cup market, and Diedrich probably is its only reasonable opportunity," Anton Brenner of Roth Capital Partners said.

After a cool few months, the phones are heating up again for restructuring advisors. 

Michael Kramer, head of restructuring at Perella Weinberg Partners, told the Reuters Restructuring Summit that the calls he gets from possible clients aren't quite as panicked as early this year. 

"I think the new inquiries are picking up today -- not nearly the way they were at the beginning of the year, and the emotion behind the inquiry is a little bit different.

"At the beginning of the year, it was desperation. We are in real trouble. We have to do this. How are we going to deal with this? We are going to have problems next week. We are running out of capital." 

"Today it's much more, 'We think we're going to have a problem in the future and how do we deal with that?'" 

Some distressed companies looking for buyers may want to take solace in the fact that it looks to Kramer like there might be some interested buyers out there now.

He says they've been calling to, saying "We're fine, we're healthy, but we want to take advantage of the overall situation."

(Reporting by Caroline Humer)

This year's annual August doldrums was one for the record books.

U.S. M&A for the month totalled $13 billion, its lowest since February 1994, while global M&A stood at $72 billion, the lowest since February 2003, according to data from Thomson Reuters.

The largest U.S. deal was Warner Chilcott's $3.1 billion purchase of Procter & Gamble's prescription drug business.

Year-to-date, however, European M&A has suffered even more, with total deal value halving to $378.4 billion. U.S. mergers, at $441.5 billion, have fallen 40 percent from a year ago. Fees for completed in August sank to $694 million, the lowest since records started in 1998, according to Thomson Reuters.

Global financial sponsor deals reached $2.4 billion, the lowest level of activity in 8 years. Privaty equity and other financial sponsor activity accounted for only 3.2 percent of total M&A activity in August. So far this year, global buyouts totaled $32.1 billion, down 80 percent from a year ago, the data showed.

Billionaire investor Wilbur Ross said on Thursday he would consider buying banks under a newly revised proposal on private equity investment in troubled banks, but the rules should be eased further.

U.S. banking regulators on Wednesday partially retreated from a much-criticized proposal to impose new rules on private equity investment in troubled banks, aiming to encourage responsible investment in distressed banks.

The regulators lowered capital requirements and dropped or modified measures that could have required investors to kick in more capital after their initial investment. The rules will be further reviewed in six months.

In an interview with Reuters Television, Ross said the capital requirements should be lowered even further.

Under the current proposal, Ross said he still would be "in the game" and look at banks that have good local deposits. He said many of his potential targets are in Sunbelt States such as Florida, Arizona, Texas and Nevada.

Ross said the private equity industry has about $450 billion of unused capital and roughly $100 billion of that could be used to invest in banks.

Separately, Ross called the commercial real estate market the next "time bomb" that the market under-appreciates. Ross said he would be an investor in distressed commercial properties.

- Photo credit: Reuters/Rebecca Cook

Warner Chilcott Plc agreed to buy the pharmaceutical business of Procter & Gamble Co for $3.1 billion, winning an auction that drew few bidders.

The unit had attracted interest from some private equity firms but very few pharmaceutical bidders, sources familiar with the auction said.  Many of the key products within P&G's pharma unit, such as the overactive bladder drug Enablex, already face stiff competition from a wide range of rival drugs, while other products are close to their patent expiration. Other pharmaceutical companies are struggling enough with these problems without buying a business that echo these issues, the sources said.

As a result, Warner Chilcott was essentially in a bidding war alone. Under terms of the deal, Warner Chilcott will pay $3.1 billion in cash.  It will finance the deal, and restructure some of its existing debt, through $4 billion in funding it received from a syndicate of banks, sources said.

Still, Warner Chilcott said the deal will immediately boost earnings and will bring "compelling" financial dynamics, including future generation of substantial cash flow. From P&G's perspective, the deal will allow it to focus more clearly on its consumer health care products and give it added flexibility for potential stock buybacks.

PepsiCo Inc's offers to buy its two bottling affiliates has dragged on and on and could be a distraction for the companies as they begin planning for 2010.
    
Bill Pecoriello, CEO of ConsumerEdge Research, said he believes PepsiCo would only be willing to raise its offer 10 percent and that would be insufficient to entice Pepsi Bottling Group to the negotiating table.
    
Pecoriello said the soda saga has dragged on longer than he expected and there's no catalyst in sight to trigger talks. 
    
"The biggest worry is that it becomes a distraction. You get to the point when you have to start planning for 2010 and everyone is in limbo," Pecoriello said.
    
PepsiCo's strategy could be to let time pass and hope PepsiBottling's shares drift lower -- making the $29.50 per share offer look more enticing. Still, PepsiCo has room to raise its offer and it would be attractive for the soda giant even if it paid in the upper $30-per-share range, Pecoriello said. PepsiCo could afford to pay in the high $20-per-share range for PepsiAmericas.
    
If PepsiCo walked away from the deal, it would have to invest $400 million to improve the performance of its North American beverage business, he said. Rival Coca-Cola is gaining momentum and could pressure PepsiCo.
    
PepsiCo has said its offers were "full and fair."

The bankers on Merck's pending $41 billion merger with Schering-Plough will get a nice pay day -- one for the record books, in fact.

An amended proxy filing shows that the investment banks on the deal will receive more than $100 million in total advisory fees.

Goldman Sachs is set to receive $33.33 million, while Morgan Stanley will get $20 million for advising Schering-Plough, according to the filing with the U.S. Securities and Exchange Commission.

J.P. Morgan Chase is in line for a fee of $45 million for advising Merck, the filing said.

A portion of these fees are only payable upon completion of the transaction, so the deal must complete for the banks to receive the total payout.

The total target side advisory fees of $53.33 million are the 7th largest total target side disclosed advisory fee on any transaction involving a full acquisition of a U.S. public target since 2003, according to FactSet MergerMetrics.

Meanwhile, on the acquirer's side, the $45 million advisory fee is the 4th largest total acquirer side disclosed advisory fee on any transaction involving a full acquisition of a US public target since 2003, FactSet MergerMetrics said.

"The individual advisory fees themselves are not exceptional, but the $100.33 mil payable by both the target and acquirer in the deal is the third largest total disclosed fee we have identified behind the $122 mil payable on the BellSouth / AT&T deal and the $118 Phelps Dodge / Freeport-McMoRan deals," FactSet MergerMetrics said.

Of course, fees are not disclosed on all deals so it's hard to get a full picture. But no matter how you look at it, $100 million is a nice chunk of change.

Nina Kampler said yes to a pair of sneakers, but no to a new prom dress.

Kampler, executive vice president of strategic retail and corporate solutions at Hilco, said she has cut back on some spending during the recession, but hasn't skimped on items that her four children really need or experiences that educate or enrich their lives.

While the other members of her family nixed the annual Spring vacation to a resort, they will be taking a trip to Africa this summer. "One is an educational and growing experience, the other is sitting in the sun. It's very different," Kampler said during the Reuters Global Retail Summit in New York.

When asked about ways she or her family have changed their spending habits during the recession, Kampler said she has bought less clothing and did not buy an extra car for her kids who were coming home from college.

Although they may be able to afford the extra car, Kampler said she felt it was important to teach her kids to understand they can't buy everything they want all the time.  Plus, they needed to learn to communicate with each other and coordinate who shares the existing cars. 

Areas where she hasn't cut back?

"Absolutely no cutbacks on food or entertaining in my house, absolutely no cutbacks on the education and enrichment of my children.  No cutbacks on books and music, I feel these things nourish the soul," Kampler said.

While she would buy a new pair of sneakers if a child needed them, she drew the line on a new prom dress for her daughter who already had a dress hanging in her closet.

"The generation that has been overspending for the past decade has the opportunity to get their kids on the right path," Kampler said.  "I'm more reflective, focusing on the lessons I want the next generation to learn."

As far as other life lessons, Kampler joked that she would never marry someone who bought an engagement ring online.  "People do that?" she asked, incredulous.

(Reuters photo)

It doesn't just feel slow, it is slow.

The global M&A volume stands at $751.6 billion so far this year, marking the slowest start to a year since 2003, when volume was $502.9 billion, according to data from Thomson Reuters.

Year-to-date volume has fallen 40 percent from the same period last year. That decline decline represents the worst drop in activity for the year-to-date period since 2001 when volume slipped 52 percent from 2000, Thomson Reuters said.

Europe has been hardest hit, with volume down 48 percent from last year. Asia, including Japan, has slipped 46 percent -- marking a record for that region, Thomson Reuters said.

The U.S. has benefitted from some mega-deals at the start of the year (Remember those? Wyeth and Pfizer, Schering-Plough and Merck? Ah, the good days), so year-to-date volume is down only 33 percent.

Looking at cold, hard cash, global M&A fees for transactions completed this year stands at $6.7 billion, a 58 percent decline from a year-ago.

Ouch.

Is it a green shoot or just a less-brown twig? That's the question posed by the Blackstone Group's Chief Operating Office Tony James at the Keefe, Bruyette & Woods Diversified Financial Services Conference.
    
"These supposedly green shoots the government wants us to believe in -- we see them as slowing rates of decline, not signs of growth," James said.
 
Blackstone views the current economic crisis as worse than a typical recession, but not as severe as the Great Depression. The firm expects a faster rebound than seen after the Great Depression, but it will be more like "grudging regrowth" than a vibrant resurgence, James said.
    
Overall, James said the private equity firm was excited by investment opportunities but the firm would proceed with caution.

(Photo, of James at 2006 Reuters Summit, by Keith Bedford)