Last night, the Philadelphia Stock Exchange’s board members met for one final, extravagant time before the exchange, the nation’s oldest, gets absorbed by Nasdaq-OMX sometime in June. Philadelphia’s financial elite was gathered at City Tavern, a restaurant in old Philadelphia near the spot where the exchange first met, and staffed by waiters in period dress. There was a harp player and a carvery to entertain and feed le tout financial Philadelphia, and a few members of the media, including Reuters.

Though the deal means the Philadelphia exchange will now be taking orders from a New York-based exchange, there was much revelry and merriment. PHLX, now the third largest equities options market in the United States, after the Chicago Board of Options Exchange and the International Securities Exchange, was once moribund. But under chairman Sandy Frucher’s tenure, the exchange staged a turnaroud and was able to fetch the much celebration-worthy price of $650 million from Nasdaq last year, more than ten times what Nasdaq paid for the Boston Stock Exchange, once larger than Philadelphia’s, last fall. Even the mayor of Philadelphia, Michael Nutter, who in 1983 was an intern at the PHLX, turned out to pay homage to Frucher and the PHLX leadership, putting on a game face, even if it meant Philadelphia was losing another of its institutions. He tried to put a positive spin on the turn of events, saying he would welcome Nasdaq-Philadelphia, as if it were a merger of two equals, even though Nasdaq has been mum on any renaming or rebranding plans.

When asked what he would do to make Philadelphia a more prominent financial center, he simply said the city has approached venture capital firms in New Jersey to consider opening satellite offices for their Pennsylvania commuters. And then he again called the new exchange “Nasdaq-Philadelphia”.

“That’s what I’ll call it,” he said.

M&A may be in a slump but there’s one area where more dealmakers are wanted: infrastructure.

“One thing we need in this market is more dealmakers - motivated dealmakers,” John Schmidt, partner at law firm Mayer Brown, told Reuters. “Investment bankers, when they go out motivated by the desire to do a deal, talk and educate people and say here’s what you can get. More people doing that can have an impact.”

Schmidt, who focuses on transport infrastructure, said the infrastructure sector is ripe for more private equity involvement, despite investments typically reaping lower returns (11-12 percent) than the 20 plus percent that buyout firms target.

Infrastructure has recently taken off as an investment in the US, taking its lead from decades of privatizations overseas. One recent asset on the block, the Pennsylvania Turnpike, drew a $12.8 billion bid from a consortium led by Spanish infrastructure firm Albertis. In the past few months, billions of dollars have been raised - with more coming - to invest in the sector.

Schmidt estimates that the value of toll roads, bridges and airports that could be privatized in the U.S. could add up to half a trillion dollars — about the same amount that has been, or is being raised. Whether or not that amount of deals happens is another issue, but private equity involvement is only going to boost it.

“I think private equity will be increasing players (in the sector),” Schmidt said. “They have the skills, the motivation. I think they bring a lot to the table. It is not just the intellectual, but the temperamental skill. They’re used to doing big deals and working on them for a long time - they bring a dealmaking intensity that can help the market. I think they’ll be major players.”

Merger talks between United Airlines and US Airways have slowed and a deal is not expected in time for review by the merger-friendly Bush administration. Sources said the talks have not ended, but that United, which is owned by UAL Corp, is continuing its alliance talks with Continental Airlines. No comment from United and US Airways. In a report on its web site, the New York Times cited people with knowledge of the discussions, saying the talks might be revived at some point but that in recent days there had been little to no contact between the companies. Continental, which called off merger talks with United in late April, is also in advanced alliance talks with American Airlines AMR Corp and British Airways, sources have previously told Reuters.

Yesterday, LG Electronics said it was “closely watching” the GE appliance business sale and had no plans to meet with visiting GE CEO Jeffrey Immelt. Now Immelt, globetrotting around Asia, says it is eyeing up LG as a potential buyer. Just in case LG really just wants to watch, Immelt also named China’s Haier, Mexico’s Controladora Mabe and Turkey’s Arcelik as contenders, as well as Sweden’s Electrolux. “It will be very intriguing to see what happens,” said Immelt. “It will fill lots of newspaper articles … for the next 6-9 months.” Analysts may be closely watching LG’s publicly tepid interest, but are not expecting it to bid. “I doubt LG Elec would be interested in pursuing this deal, since there’s little the company can gain. There’s a lot of overlap between the businesses with little premium potential for LG,” said Steve Lee, an analyst at Goodmorning Shinhan Securities. James Kim, a Lehman Brothers analyst, said LG did not have enough cash to fund a purchase and would not stand to benefit from GE’s brand equity.

Italy’s Generali dropped out of the running for Royal Bank of Scotland’s insurance arm, hours ahead of a first bid deadline, prompting speculation that interest in the asset is fading. RBS, Britain’s second-largest bank, had been expected to get interest from at least seven bidders, with Zurich Financial Services seen as the front-runner for the asset, valued at about 7 billion pounds ($13.8 billion). Rival Generali, with its hefty acquisition treasure chest, was also seen as a strong candidate. A Generali spokeswoman, however, said it had withdrawn. Generali gave no reason for its decision to pull out, but sources blamed high price expectations and RBS’s unwillingness to consider breaking off even some of the parts that make up the unit, Britain’s largest motor insurer.

Other deals of the day:

* Polish clothing retailer Vistula & Wolczanka has succeeded with its hostile bid to buy 66 percent of jeweller W.Kruk for nearly $140 million.

* French aerospace supplier Zodiac said it had agreed to buy cabin equipment manufacturer Driessen Aerospace. Zodiac did not give the value of the deal.

* Australian power producer and retailer Origin Energy is set to announce a decision within days on UK gas producer BG Group’s $12 billion takeover bid, with media reporting BG has improved its offer.

* Chinese metals trader Sinosteel said it will not increase its sweetened offer for Australian iron ore prospector Midwest beyond A$6.38 a share.

* South Korea’s largest refiner SK Energy confirmed it had agreed to buy a 35 percent stake in a joint venture with Sinopec Corp to build a petrochemical complex in central China.

* Investment company GPG said it expected to reach its target of a 35 percent stake in Tower, New Zealand’s No. 2 health insurer, based on advice received from shareholders for its partial offer.

Check out InBev looking at a nice, cold Bud.

Belgian business newspaper De Tijd reported on Tuesday that InBev's board of directors was about to decide whether to allow its advisers to start negotiating with Anheuser-Busch, the maker of Budweiser and other beers.

The Financial Times reported Friday that InBev was considering a $65-a-share bid for BUD and a source close to the situation confirmed for Reuters on Friday that a bid was being prepared.

In an industry already going through several hook-ups -- Molson Coors and SABMiller combining U.S. operations, Carlsberg and Heineken taking apart Scottish & Newcastle -- Anheuser-Busch could be an attractive option for InBev as last call approaches.

The company dominates the U.S. market, after all, nevermind the fact that demand for domestic beer has been sluggish.

That flaw may not repel other suitors, either. The FT's Alphaville blog suggests that Diageo and Heineken could both come after Anheuser-Busch.

Meanwhile, an InBev takeover of Anheuser-Busch would also roil the Mexican beer market, as Reuters' Chris Aspin explains.  

Also in the basket:
 
Target launches Sami Hayek for Target line
 
Potential buyers lining up to bid on Blass (WWD, subscription required)

(Photo: Anheuser-Busch)

GE CEO Jeffrey Immelt is in South Korea, where he may or may not be hawking the industrial conglomerate’s century-old appliances division. LG Electronics CEO Nam Yong said his company was “closely watching” developments surrounding the unit’s potential sale. General Electric said earlier this month it may sell or spin off the division, estimated to be worth up to $8 billion. LG, the world’s top maker of household air conditioners, has been talked about as a potential suitor, along with China’s Haier Group. Nam added he had no plans to meet with Immelt. This watching thing appears to be deeply ingrained in LG’s lexicon — the company is also “carefully watching” Nokia amid talk the top-ranked mobile phone maker may cut its prices and reenter the South Korean market.

Shares in Belgian brewer InBev, the world’s second-biggest by volume, lost over three percent after a newspaper reported it could soon start takeover talks with rival Anheuser Busch. Belgian business daily De Tijd reported that InBev’s board was about to decide whether to allow its advisers to start negotiating with Bud. This follows the FT’s report on Friday that InBev was considering a $65-a-share bid and had put together $50 billion in financing. A Busch family member, Adolphus Busch IV, told the Wall Street Journal on Tuesday some family members were open to holding talks with InBev but others wanted to keep the status-quo.Germany’s embattled Hypo Real Estate has given its backing to an offer from private equity investor JC Flowers and others to buy almost one quarter of its shares, also declining to give an earnings forecast for 2008. Hypo’s stock price had been under pressure since it surprised investors with subprime-linked writedowns in January. This prompted the investment bank and property lender to look for a committed long-term shareholder to secure its future.

Blackstone Group and Apollo Management are in talks to buy chemicals company Chemtura, the Wall Street Journal reports. The negotiations could fall apart since the parties are still arranging financing and discussing the price tag on the deal, it said. Chemtura, which has a market capitalization of about $1.9 billion, said in December it was pursuing strategic alternatives. Apollo, Blackstone and Chemtura could not be immediately reached for comment.

Shares of British classified advertising directory firm Yell Group rose as much as 5.4 percent on market talk of bid interest from Microsoft. Yell declined to comment. “There is a rumour out there that Microsoft is looking at Yell. The price out there is 220 (pence per share),” a London-based trader said.

Other deals of the day:

* Baugur Group has now concluded that it is not in the best interests of stakeholders to proceed with its offer for Moss Bros and has informed the board of Moss Bros of this decision.

* British military consumables maker Chemring Group said it would buy Scot Inc for $40 million from SMS Industries to boost its presence in the U.S. pyrotechnic market.

* Bemax Resources, an Australian mineral sands producer, said it had recommended a A$301 million ($289 million) takeover offer from Saudi Arabia’s National Titanium Dioxide Company, known as Cristal.

When David Einhorn speaks, people listen. Sometimes even before he speaks, as in the case of Lehman Brothers this week.

The boy-wunderkind founder of Greenlight Capital, whose harsh opinions of Allied Capital and other short investments have thrust him into a small pantheon of hedge fund traders whose utterances move stocks, spoke Wednesday afternoon to a well-heeled crowd of 1,000 or so investors.

But even before he spoke, Lehman stock sunk 5 percent on rumors that he would eviscerate the bank.

Now, Einhorn had previously disclosed that he was short Lehman, so it was plausible that he would discuss it that day, which he did. And Lehman’s alleged issues aren’t exactly news. Furthermore, there were several pessimistic analyst reports out that day.

But Einhorn’s speech raises the question of whether a new trade has emerged on Wall Street called “Beat the Short.”

In this case the game was complicated by a embargo on release of information from Einhorn’s speech for almost a day. The embargo, introduced by the conference organizers, meant that those attending the event got the benefit of Einhorn’s wisdom well before Reuters and other news organizations could report it to the wider market.

We’ll see what happens before uber-shortseller Jim Chanos speaks at the Securities Industry and Financial Markets Association meeting on June 16 in New York. His recent targets have included some cable companies, student lenders and infrastructure companies.

JP Morgan and Santander may be backing a $46 billion bid by Belgian brewer InBev NV for U.S. beer icon Anheuser-Busch Cos Inc, marking another jumbo funding pool at a time when the credit markets seem closed to most.

The involvement by JP Morgan, which is backing the $23 bilion helped fund the takeover of Wrigley Jr Co by Mars Inc and billionaire Warren Buffett, would demonstrate what more bullish merger and acquisition bankers have been saying in recent weeks: that lenders with enough balance sheet capacity will still lend to trusted clients for strategic transactions in certain sectors.

JP Morgan has weathered the damage caused by the U.S. subprime crisis better than many of its rivals. It is absorbing rival Bear Stearns (and in April reportedly made a bid for Wamu) and has providing funding for key deals such as Wrigley. 

Santander’s possible role illustrates another trend noted by bankers - the capacity of banks in emerging markets and continental Europe to stump up thanks to lower exposure to financial turmoil in the U.S.

Private equity firms Carlyle [CYC.UL] and BC Partners have both made acquistions in recent months with debt provided by local banks, one in Greece, the other in Turkey.

However, financing might still be hard in some instances as conditions remain tough in the syndicated loan market, said one banker, who was not involved in the InBev deal and declined to be named.

The loan for Pernod’s

Before the fate of the BCE Inc deal was thrown into question by a court ruling this week, the lenders on that $35 billion buyout had tried to renegotiate the terms of the funding pact, a source familiar with the situation previously told Reuters. The buyout of radio station operator Clear Channel Communications also was renegotiated in a legal settlement between its buyers and several bank lenders.

Banks financing the $6.1 billion LBO of casino and racetrack operator Penn National are also getting restless, the New York Times reported this week. 

(Reporting by Eleanor Wason in London)

As the long-rumored deal between Belgian brewer InBev NV and Anheuser-Busch inched closer to reality, options traders celebrated. Some even hoped for a drawn-out battle.

Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut noted that Friday’s surge in Anheuser Busch’s share price indicated a willingness by option investors to brace for a hostile battle if friendly negotiations falter.

“It’s becoming increasingly apparent that this would not be a straight forward collaboration between the two. It could be friendly, but there are big cultural divides between the two companies that would need to be addressed,” Wilkinson said. “The notable call activity in BUD perhaps goes straight to the heart to the matter and addressses the purported $65 price tag that is being floated in the media today.”

Investors often turn to calls, which give the right to buy the company’s shares at a given price and time, hoping to profit from share price appreciation. Late on Friday, roughly 255,000 calls compared to 40,000 puts changed hands in Anheuser Busch, nine times the normal volume, according to option analytics firm Trade Alert.

“So now option investors are snapping up June, July and September $60 calls, allowing them to buy BUD shares at a fixed cost of $60 piece, in the hopes that this may turn hostile, he said.

Wilkinson said these calls would be profitable if either of two things happen. One, investors jump on the bandwagon looking for takeover gains in Anheuser Busch shares. Secondly, a battle for control of Anheuser Busch between the existing management and InBev could easily increased the perceived volatililty of the share price.

Even if the share price stands still, a rise in its options implied volatility, a measure of uncertainty, could boost the price of the call option, Wilkinson said.

“So any continued rise in Anheuser Busch shares, particularly coupled with a rise in its projected volatility, would be a double whammy for option traders.”

(Reporting by Doris Frankel in Chicago)

British oil field services firm Expro International, which agreed to a private-equity takeover by Candover and Goldman Sachs in April, said it had received an expected, higher approach worth 1.7 billion pounds ($3.4 billion) from U.S. rival Halliburton. Expro said the proposal from Halliburton, the world’s second-biggest oil services company behind Schlumberger, was pitched at 1,525 pence per share and subject to conditions. Expro shares, up sixfold over the past four years, have been flat near current levels since that offer, and didn’t rise much today, implying that the market had a good idea of what it would get and doesn’t expect much in the way of a higher offer from the private equity side. The stock rose 0.3 percent to 1,545 pence early on Friday. Following news of the Halliburton offer a spokeswoman for Candover said: “Obviously we are looking at the situation.” 
 
Yahoo nominated nine of its 10 existing directors for reelection to the company’s board, setting the stage for a showdown with dissident investors at its annual shareholder meeting. In a regulatory filing, the embattled Internet media company postponed its annual meeting from July 3 until later the same month. It also disclosed two independent investor proposals challenging its executive pay and human rights record. The company said several shareholders other than billionaire investor Carl Icahn plan to nominate candidates to its board. Yahoo did not identify these new faces and whether they represent a serious alternative slate.
 
Shares in miners BHP Billiton and Rio Tinto dropped after a newspaper said Rio’s proposed acquisition by BHP was facing tougher than expected scrutiny from European regulators. The Wall Street Journal, citing people close to the matter, said European regulators were worried that the all-share offer, currently worth about $184 billion, could boost steel prices and slow economic development across the world. Rio has rejected BHP’s offer. The Journal said BHP Chief Executive Marius Kloppers was confident regulators would not block the deal and he could complete it by the fourth quarter of this year. But those close to BHP acknowledge that they are facing more questions from regulators than they expected, the newspaper said.
 
More deals of the day:
* A group led by private equity investor JC Flowers launched an offer of about 1.1 billion euros ($1.73 billion) for up to 24.9 percent of Germany’s subprime-hit Hypo Real Estate.
* French utility Suez SA has ended talks over a possible offer for British Energy Group, dealing a blow to the UK government’s hopes of ensuring competition in building new nuclear power plants. 
* IEF Capital said it dropped its proposed bid for Dutch property group VastNed Retail, worth some 1.15 billion euros ($1.8 billion), blaming weak financial markets and pushing VastNed shares to a six month low. 
* Polish clothing retailer Vistula & Wolczanka raised its bid for shares of jeweller W.Kruk to 24.50 zlotys from 23.70, the company said in a statement. 
* Compressor and machinery maker Atlas Copco said it had acquired two U.S. distributors of its products for an undisclosed sum. 
* Russian steel maker Severstal said it had reached a deal with Liberia’s Mano River Resources to buy 61.5 percent of an iron ore deposit in the West African country.
* China Mobile, the world’s biggest wireless carrier, will take over Railcom and take in a clutch of executives from smaller rivals as hopes grow that Beijing has embarked on a long-awaited overhaul of the industry. 
* China Merchants Bank has emerged as the “preferred” bidder for a controlling stake in Hong Kong lender Wing Lung, according to media reports. 
* GD Power Development Co, a major electricity and heat supplier, said it plans to pay 105 million yuan ($15 million) for a stake in a new life insurer to expand into the financial sector. 

Democratic presidential contender Barack Obama continues to be a fundraising juggernaut, having raised nearly $31 million in April alone. But it’s safe to say none of that campaign money came from billionaire financier Carl Icahn.

“I personally think he’d be a terrible president,” groused the 72-year-old corporate agitator to a well-heeled crowd of hedge fund managers and investors in New York yesterday.

Not known for restraint in expressing his opinions, Icahn warned listeners that a Democratic-controlled Congress and White House could wreak havoc in the economy, with “instant inflation, higher taxes and much higher interest rates.”

“I think what would be devastating is that you get a Democrat as president coupled with over 60 senators that are Democratic,” said Icahn, who has previously thrown his support behind Republican John McCain, who is 71. “They will legislate a huge spending spree.”

A huge spending spree? Budget deficits? Didn’t the U.S. have a budget surplus at the end of the the tax-and-spend Democratic Clinton years? And now we have record deficits after seven years of a Republican Bush presidency? And everyone is worried about inflation.

Of course, that’s all academic. The view from some on Wall Street: Republicans are fiscal conservatives and Democrats are tax-and-spenders.