** In another sign dealmakers are getting anxious about completing deals, leading bidders in the world’s biggest bank deal said they could drop the minimum acceptance level to 50 percent from 80 percent. The consortium of banks, led by Royal Bank of Scotland, is set to win the long-running takeover battle for ABN AMRO with their offer of about 70 billion euros ($99 billion). But still, it’s reserving the right to lower the minimum acceptance threshold for its offer to a majority of the issued shares. The consortium’s offer is currently worth about 37.85 euros per ABN share, 20 percent higher than the value of a rival offer from Britain’s Barclays.  

** Telecommunications equipment company 3Com plans to announce it is being acquired by Bain Capital and Huawei Technologies for more than $2 billion, according to The Wall Street Journal. The deal values 3Com at more than $5 per share, the Journal said. Huawei is China’s largest communications equipment maker. 3Com agreed last year to buy Huawei Technologies’ 49 percent stake in H3C, a joint venture between the companies, for $882 million. That deal gave 3Com full ownership of H3C. 
   
** Citigroup and Merrill Lynch have bought 5 percent stakes in India’s top commodities exchange, the Multi Commodity Exchange, valuing it at up to $1.1 billion. That’s more than the Bombay Stock Exchange, which sold stakes earlier this year. Total proceeds from the deals would be $150 million to $165 million. A spokesman for the exchange  said Indian authorities had approved the stake sale, which is a big first, as foreigners were previously not allowed to hold stakes in commodity exchanges.
 
** Also in India, top U.S. phone company AT&T is eyeing a wireless acquisition, the Wall Street Journal reported. The report, citing people familiar with the situation, said AT&T was also looking to significantly expand its Internet and phone services to businesses in India. AT&T Chief Executive Randall Stephenson was quoted as saying he saw the country as a “multibillion-dollar revenue opportunity.” Stephenson also said he is seeking partnerships in Dubai and plans to bid on wireless spectrum in an upcoming auction in Qatar.
    
** Anglo-Swedish drug company AstraZeneca has appointed a deal-making outsider as its chief financial officer. Simon Lowth, a former finance chief at Scottish Power and executive at McKinsey & Co, replaces Jon Symonds, who quit this summer to join investment bank Goldman Sachs. “The CEO (David Brennan) is a pharma man, so I don’t think it is necessary for the finance director to be one,” Paul Diggle of Nomura Code Securities commented.
    
** Mark Mobius, the executive chairman of Templeton Asset Management Ltd, is backing a takeover bid by Austrian oil and gas group OMV for Hungarian peer MOL, the Wall Street Journal reported on its Web site. The emerging-market guru said OMV’s informal $20 billion bid “makes a lot of sense”. Mobius declined to disclose the size of his stakes in the companies, but his support could encourage other investment funds to follow his lead, the report said. OMV told MOL shareholders on Tuesday it would offer $20 billion if MOL’s board agreed to negotiate. Templeton spokespeople could not immediately be reached for comment.
    
** As U.S. leveraged buyouts and multibillion dollar mergers fell off in the third quarter amid a major credit crunch, mid-market deals of up to $1 billion held up remarkably well.  Data provider Dealogic said mid-market U.S. deals valued at between $100 million and $1 billion totaled almost $82 billion in the third quarter, down only slightly from $83 billion for the same period in 2006. 
        
** Shares in British reinsurance broker Benfield jumped 10 percent after a newspaper report it received a 700 million pound ($1.42 billion) approach from Goldman Sachs. The Daily Telegraph reported Benfield directors and the private equity arm of Goldman Sachs were in talks for weeks but talks broke down at the start of last week. A Benfield spokesman said the group did not comment on market rumor and speculation but pointed out it had been buying back shares on the market at 269.7 pence — below the level of the reported Goldman approach. 
 

It seems Nasdaq is still pursuing the London Stock Exchange, which twice thwarted its takeover attempts. But now that the New York exchange operator has a Middle East sugar daddy, might the LSE’s bachelorette days be numbered?

According to The Observer, Nasdaq’s three-way deal with Borse Dubai, in which the two groups swap stakes in each other and buy Nordic markets operator OMX, may be its latest effort to get its hands on the LSE — especially since the buyer of most of Nasdaq’s LSE stake is none other than Dubai.

The paper said Nasdaq and Dubai are hatching a plan to launch a hostile takeover bid for LSE in February when Nasdaq is allowed to bid for a third time under U.K. rules. This would entice LSE into a pan-continental alliance with the goal of taking on transatlantic exchanges behemoth NYSE Euronext. London would have a dominant position in the new company, according to the plan.

Now, the LSE — which has its own predatory ambitions — has rejected several suitors in the past three years on the grounds that it was worth more than what the buyers were offering.

Will the lure of more money (courtesy of Dubai) throw LSE into Nasdaq’s waiting arms? Or will Dubai’s rival Qatar, which also bought an LSE stake, sabotage the plot?

Watch this space for more on the story of unrequited M&A love.

Photo: Nasdaq CEO Bob Greifeld (Reuters File)

Bear Stearns Chairman Jimmy Cayne isn’t the only Wall Street honcho who plays a lot of golf while his company endures hard times.

Let us tee up Mr. Stanley O’Neal, chairman and chief executive of Merrill Lynch & Co. Inc.

While the value of Merrill Lynch’s leveraged loans and mortgage investments are expected to fall like a birdie putt, O’Neal has found his stroke in recent months playing just as much, or more, golf than Cayne. (A Goldman Sachs analyst predicts Merrill will report some $4 billion in write downs when the brokerage and investment bank reports third quarter results next month.)

And Cayne caught all kinds of flack for golfing and playing cards while two lousy hedge funds tanked in July. A world-class bridge player, Cayne is a middlin’ golfer with a handicap of about 14.
   
But never mind that. O’Neal golfed like a champ this past summer. O’Neal’s golf handicap is an 8, but in early August he shot two rounds in the mid-70s.
   
O’Neal is a serious golfer.  He played 13 rounds of golf in August, according to Ghin.com, a Web site that tracks scores entered by golfers.
   
This month, O’Neal has not throttled back his golfing regimen as investors brace for bad news. Through Sept. 22, he had logged 7 rounds of golf, according to Ghin.com. On Saturday, Sept. 22, he played three rounds of golf in New York: Purchase Country Club in Westchester County, Waccabuc Country Club and Shinnecock Hills Golf Club in Southampton.
   
He shot an 80, an 89 and a 90 during that golf spree, according to Ghin.com scores. 
   
But the boss is not Merrill’s most active golfer among senior management. That title would go to Robert McCann, Merrill’s global private client chief who oversees about 15,000 to 16,000 brokers and some $1.6 trillion in assets.
   
This month, McCann played 11 rounds of golf through Sept. 23, according to Ghin.com. 
   
Should all this golfing by Merrill bigshots make investors nervous? Does keeping your eye on the ball mean you’re not keeping your eye on the ball?
   
One (golfing) school of thought: Investors should embrace the old work-life balance thing. You gotta think executives will burn out if they just work, work, work. Besides, isn’t the golf course where executives cinch deals, forge customer relationships and build camaraderie. And it sure beats the ropes course or an eight-hour Six Sigma seminar.
   
Another view would be that golf and the exclusive country clubs where executives play are exclusionary in nature. And some might argue that a non-golfer might not have as much chance for advancement as a golfer.
    
There’s probably some truth in both points of view. 
   
But not to worry about Merrill.
   
The company’s co-Presidents, Greg Fleming and Ahmass Fakahany, are not known as golf enthusiasts. Both men, and even McCann, are seen as possible successors to O’Neal. 
   
Some Merrill insiders give a slight edge to Fleming. He is known to send wee hours e-mail messages to his team, and he takes notice of what time in the wee hours individuals respond.  

(Photo. Top, Reuters file. Bottom, Merrill Lynch)     
    

Sometimes you’d rather not have your cake and eat it to. 
    
Archstone-Smith looked like a win-win for Lehman Brothers: the bank, with developer Tishman Speyer, stood to own the luxury apartment REIT as well as handle financing for the $22 billion buyout — while investing just $250 million of its own cash in the deal.  
    
Now it’s looking more like it could be a lose-lose. With potential investors underwhelmed by the deal’s aggressive terms, it’s possible that billions of debt related to the buyout won’t get sold as planned. That means either the sponsors will have to adjust terms, as Apax did in its Thomson Learning acquisition, or that the banks will be stuck with it — either leaving it on their books or selling at a discount.     
    
Either way Lehman takes a hit: as a principal, renegotiating on any terms could hurt potential profits. But by also banking the deal, Lehman otherwise risks having the debt clog its balance sheet or sold at a loss.  
    
The phenomenon of banks acting as principals in deals they also underwrote is not new — Goldman, for example, is part of the group buying TXU in addition to arranging financing. If things get dicey, at least the principals won’t have to go far to negotiate with their bankers — they may be on line with them at the cafeteria.

(Photo. Reuters file)

** You can’t be a global player without having heard that the Chinese expression for crisis consists of two characters, one meaning danger and the other opportunity. Might a couple of top Chinese banks smell a bit of both in Bear Stearns? A report that investors — including investment guru/granddaddy Warren Buffett – could buy a stake in Bear Stearns sent the troubled investment bank’s stock rocketing 7 percent. Bank of America and Wachovia are also mentioned as possible buyers, but most interesting could be possible bids from China CITIC Bank and China Construction Bank. Chinese banks are flush with dollars thanks to the booming U.S. trade deficit and years of record-setting foreign direct investment. If nothing else, they have plenty of experience with sub-prime loans. 
    
The New York Times report, citing unnamed people briefed on the discussions, said Bear could sell up to 20 percent of itself. “When you have a sophisticated investor and the second wealthiest person in the universe interested in Bear Stearns, then this may be signaling that the company may be about to turn the corner,” said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey, referring to Buffett. 
       
** Hitachi is considering selling a stake in its hard disk drive arm to a strategic investor to help it turn the loss-making business around, according to sources close to the matter. The news sent shares of Hitachi, Japan’s biggest electronics conglomerate, up 7 percent to a one-month high in its biggest one-day percentage gain in four years. Hitachi has not posted a profit in its hard disk drive business since buying it from IBM for $2 billion in 2002 due to crumbling prices of disk drives. The Carlyle Group, Kohlberg Kravis Roberts, Bain Capital, and Silver Lake are among funds cited as possible investors, the sources said.
    
** Investors looking at a $25 billion takeover of Sallie Mae are threatening to walk away from the deal, blaming legislation that cut subsidies to student lenders and rocky conditions in the credit market. But consortium leader J.C. Flowers has suggested the buyer group could renegotiate at a lower price, so Sallie Mae may just be headed for another round of negotiations rather than have the deal relegated to the LBO slag heap. The WSJ’s Deal Journal says the Sallie Mae fight could be the “the granddaddy of them all” in terms of battles between troubled companies and their LBO-backed buyers.
    
** Speaking of LBO financing woes, skeptical eyes are being cast at the $22 billion deal for landlord Archstone-Smith Trust. The buyers are now arranging financing and some investors say they are pricing the deal as if the last six months never happened. Number-four U.S. brokerage Lehman Brothers Holdings and property developer Tishman Speyer are trying to entice investors to buy $3.15 billion of loans linked to the buyout. And don’t forget First Data. Banks financing KKR’s acquisition of First Data plan to sell two more pieces of its $13 billion term loan, after small demand for an initial $5 billion portion.
        
** UK-based Insurer Pearl could make a long-anticipated cash offer for Resolution early next month, according to a source close to the matter who said the offer is unlikely to be above a regulatory minimum of 4.5 billion pounds. Resolution announced plans to merge with Friends Provident in July, but Pearl threatened to muscle in on the tie-up, announcing it had built a key stake in Resolution and opposed the deal. If it were to make a bid, Pearl would have to offer at least 660 pence — the highest it paid for Resolution shares, valuing the group at 4.5 billion pounds ($9.06 billion) — but below the current share price.
 
** Top Nordic bank Nordea’s shares shot higher after a newspaper report said rival SEB was poised to buy a 19.9 percent government-held stake in it. Swedish daily Dagens Industri cited two unnamed sources in the report. Sweden’s center-right government said it had no comment on the report, calling it speculation. It does plan to sell some 150 billion crowns ($22.97 billion) in state assets, including its large stake in Nordea, but has yet to announce when or how the sale would be conducted. 
     

The banks trying to sell down the First Data leveraged buyout debt appear to have caught a break with HSBC deciding to hold on for the ride. Sources tell Reuters Loan Pricing Corp. that HSBC will not sell its underwriting exposure on the deal, which is around 20 percent of the overall loan.

That lessens the amount of bank debt they now have to distribute to loan investors.

That’s just one piece of good news for the closely-watched deal.

The other is that strong demand has led First Data to more than double its current term loan sale to $13 billion from $5 billion, sources tell Reuters LPC.

The remaining underwriters are Credit Suisse, Citigroup, Lehman Brothers, Goldman Sachs, Deutsche Bank and Merrill Lynch.

The move by HSBC highlights the tug of war going on right now between the banks and debt investors. If the banks think they can get around 95 cents to 96 cents on the dollar, then they’ll sell down to investors and take a minor hit. But banks aren’t willing (not yet at least) to sell the debt in the low 90s. (”We don’t need to sell this at fire sale prices yet,” says one banker).

Does HSBC think the demand is low enough to where the market won’t scoop this up in the mid-90s? Maybe. It’s a complicated deal. But certainly the picture has brightened for the First Data loan sale, a bellwether of the $350 billion debt pig trying to squeeze through the proverbial python.

Not only did the Xinhua Finance deal add a spark to the moribund private equity scene, it rekindled the old “did somebody know about this deal ahead of time?” issue.

Last Wednesday, shares were trading around $5.25 (that’s down from the $13 IPO in March, by the way). The next day shares jumped to more than $6. The only announcement that week was a press release on Sept. 17 saying “Xinhua Finance Deems S&P Downgrade Unmerited.”

Yesterday, the stock closed at $7.88 and by the time the sun was up and shining this morning, alas, Xinhua Financial said Yucaipa was buying up a chunk of the company (shares are up 14 percent to $9 today). Barron’s blog pointed out the strange surge in shares earlier today.

At first blush, you’ve got to think somebody knew something. Such activity was fairly common when the buyout scene was hot.

Xinhua Finance, run by American businesswoman Fredy Bush, has taken heat from a shareholder over whether its IPO prospectus properly disclosed certain business relationships.

The Xinhua-Yucaipa story is interesting for several reasons, not the least of which is the suspicion of some sort of insider knowledge. Any deal involving Ron Burkle, founder of Yucaipa, is worthy of note. He’s a billionaire, an LA hot shot, and the son of a grocery executive who worked the check-out line in his younger days. Burkle has made a lot of headlines in the last year, including an effort to buy Tribune and a New York Post extortion case.

A front page article in the Wall Street Journal today gets to the bottom of a sour deal between Yucaipa and an Italian businessman, a deal that Bill Clinton’s main handler helped to broker.

(Photo. Forbes)

Long the main deal-rumor hothouse, the U.S. options market had a very quiet summer. Now deal chatter is back. Mostly, it’s about public companies eyeing each other in strategic deals, rather than LBO-financed private equity players. On Tuesday, call option volume in YRC Worldwide, J.B. Hunt Transport Services, Goodrich and Boyd Gaming turned active on takeover speculation. That followed big days on Monday for medical testing company Quest Diagnostics and online marketing company ValueClick, also seen by options players as acquisition targets. The talk has prompted a barrage of ”no comments” from the companies in question, and a flat-out denial from Deutsche Post, which was seen as a bidder for YRC.

** Nasdaq and Borse Dubai have raised their bid for OMX by 15 percent to $4.9 billion, up from the original $4 billion, and say they are close to owning a majority stake. Borse Dubai is offering 265 Swedish crowns ($40.57) per share, up from a previous offer of 230 crowns, and has secured 47.6 percent of OMX in stock or options for shares. Nasdaq and Borse Dubai also changed the minimum acceptance level to above 50 percent from 90 percent. The preemptive strike comes after a Qatar group started buying OMX shares at 260 crowns last week. 
 
** Royal Bank of Scotland and its partners have doubled their interest in target ABN AMRO to 8 percent, cutting the cost of  the bid by around 1 percent and taking advantage of market turmoil to boost its position at a discount to its own offer.
RBS, which looks set to win the battle for ABN when offers close next week, and partners Santander and Fortis added an interest over another 76.4 million shares. The interest is held via equity swaps and options which do not give them additional votes or investment rights. The deal could help trim the cost of the RBS-led 71 billion euro ($99.95 billion) offer by around 600 million to 700 million euros.
    
** The New York Times’ DealBook cites a BusinessWeek article suggesting Swiss Pharmaceutical giant Roche Holdings might raise its $3 billion hostile bid for Ventana Medical Systems, which has been busy building research alliances, boosting its stock price. 
    
** Highland Capital Management says it is urging PDL BioPharma to sell itself, and force the chairman and chief executive officer to quit. Highland Capital said it and its affiliates hold about 4.7 percent of PDL’s shares outstanding. Third Point, another investor, recently started pushing the company to put itself up for sale. Last month, PDL said it would sell off all of its marketed medicines, including Cardene, for short-term treatment of acute high blood pressure, and Retavase, a treatment for patients following heart attack. The company also withdrew its 2007 financial forecast.
 
** Shares in beleaguered U.K. bank Northern Rock jumped almost 14 percent after it said it had received approaches including a possible offer for the company. Northern Rock said it was in preliminary talks with unnamed “selected parties” but said the issue of price had not been discussed.
    
** Australian thermal coal producer New Hope has offered A$591 million ($518 million) for rival Resource Pacific Holdings. Soaring coal prices have fired up interest in coal producers. Resource Pacific shares rocketed as much as 57 cents, or 29 percent, to A$2.51 on the news, though the company advised its shareholders to take no action for now.
 
** A $1.4 billion private equity buyout of Singapore-based computer chip testing company United Test & Assembly Center is likely to win shareholder approval on Oct. 5, to the potential dismay of the deal’s bankers who are trying to cobble together enough investors to finance the deal. In an Asian version of the KKR-First Data drama, terms for UTAC were agreed before credit crisis, and the banks he underwriters are trying to convince the private equity funds — TPG and Affinity Equity Partners — to cut them some slack, according to people familiar with the situation. 

Photo Credit: Reuters

The First Data debt sale is apparently going better than some expected.

In the grand scheme of things, however, First Data is just one of many leveraged buyouts whose debt is looking for a home outside of the investment banks. As one investment banker put it, “$5 billion down, $345 billion to go.”

So while the issue has come up before, the question persists: with hedge funds still wary, who will step in and take some of this LBO debt off the bank’s balance sheets? Carlyle Group’s David Rubenstein suggested last week that pension funds could swoop in. Speaking at the Dow Jones Private Equity Analyst conference in New York, Rubenstein introduced what appears to be a novel theory pertaining to those who manage the retirements of state workers across the U.S. 

Under such a scenario, a pension fund like the enormous California Public Employees Retirement System (Calpers) would offer to buy buyout debt off a major bank like Citigroup at a discount, hoping to earn a decent return over the long haul.  The beauty of the arrangement would be in helping the banks avoid the awkward situation of selling the debt to opportunistic private equity funds–the very funds responsible for the debt in the first place. Indeed, buyout funds are raising money to invest in the LBO loans banks are hung up with.

No pension fund to date has disclosed plans to take on any of this debt. And it may never happen. But with roughly $350 billion of remaining LBO debt out there, the banks can only hope that some pension managers join the debt party soon.

** It’ll be spring time in New York by the time private equity bankers and investors start seeing their market thaw, according to survey by law firm Norton Rose. Even when it does recover — May 2008 is when the bulk of the predictions are expecting — bankers will see loan structures becoming more conservative, debt levels falling and covenants a-plenty. Sixty-eight percent of the 105 banks, private equity firms, corporates and hedge funds surveyed by Norton Rose say it will take more than nine months to return to the activity levels of July 2007, while 45 percent said 12 months was more likely. 
 
** Austrian oil and gas group OMV is taking its bid for Hungary’s MOL to shareholders, offering them $20 billion if they overrule board opposition. OMV holds 20 percent of MOL. It launched its bid in June to create central Europe’s biggest energy group, meeting fierce resistance from management. MOL’s board says the offer undervalues its business significantly and has refused to hold talks with its Austrian rival. MOL has launched an aggressive share buyback program to fend off the bid. It and friendly institutions now control 40 percent of MOL’s stock. It also lobbied Hungary’s government to draft a law to restrict foreign ownership in strategic companies.
    
** Britain has appointed Goldman Sachs to advise it on Northern Rock, according to a source close to the U.K. Treasury. Goldman will advise on issues relating to a guarantee safeguarding existing deposits at Northern Rock, the source said. The government guaranteed Northern Rock’s deposits last week, leaving it with a key role in trying to find a suitor.
    
** Lenovo Group, the world’s No.3 maker of personal computers, says it still hopes to acquire Packard Bell, after rival Gateway announced plans to buy the firm last month. Lenovo is integrating the ailing European operations it inherited from IBM in 2005. It said last month it was in exclusive talks to take over Packard Bell to spearhead a consumer expansion.  Gateway, itself the target of a $710 million takeover by Taiwan’s Acer, later said it would exercise a right of first refusal to buy Packard Bell. Lenovo says it is not currently in talks with Packard Bell, but could move on an opportunity if the Gateway deal falls through.
    
** Satellite television operator EchoStar Communications is considering a spinoff of its technology and infrastructure assets into a publicly traded company separate from its consumer pay-TV business. The company said yesterday it would buy Sling Media. Under the proposed plan, the spinoff assets would include its set-top box design and manufacturing business, its international operations, and assets used to provide fixed satellite services to third parties.

** Microsoft is in talks to buy up to 5 percent of Facebook in a deal that could value the fast-growing online social network company at $10 billion or more, the Wall Street Journal is reporting.  The WSJ’s Deal Journal talks with Bo Peabody, founder of Tripod, one of the original social networks, about prospects for Facebook.  
    
** The M&A Law Prof Blog takes a look at Accredited Home Lenders’ 16th amendment to its recommendation statement filing. “The document is a must read for all M&A lawyers as it details the history of the behind the scenes negotiations MAC settlement between Accredited Home Lenders and Lone Star.”
  
** Avaya Inc shares briefly fell more than 10 percent on Monday on concerns its private equity buyout may suffer the same fate as Harman International’s deal. Harman’s buyers, KKR and Goldman Sachs, walked away from the agreement on Friday, sending the company’s stock down more than 25 percent.

Reuters file photograph