(Corrects to show total has not risen to more than Citigroup’s total fund raising. Most of the funds had already been accounted as shown in the factbox that is linked below)

Swiss bank UBS launched a deeply discounted rights issue worth 16 billion Swiss francs ($15.55 billion) at a third below its latest market price in a bid to lure investors to repair its battered balance sheet. This takes their total capital raising to $29.22 billion (not $44.22) still below Citigroup’s $42.15 billion, which is by far the biggest sum total so far in the credit crisis. The emergency offering, at 21 francs per share, is 73 percent below UBS’s peak price less than one year ago and far below what some analysts had expected in recent weeks, when speculation had centered around 24-25 francs per share.

Power company NRG Energy has made an unsolicited bid to buy competitor Calpine for about $11 billion in stock. Calpine, which emerged from bankruptcy earlier this year, said it was reviewing the bid to determine if it was in the best interests of its shareholders. The proposal implies a premium of about 6.7 percent based on the shares’ Wednesday closing prices. NRG Chief Executive David Crane said in an interview that Calpine’s chairman, William Patterson, called on Friday to say they were giving the offer serious consideration, but gave no details on timing or how the board was leaning. He said he had not heard from the Calpine board since.

The $34.8 billion buyout of BCE hit a wall when a Quebec court backed debtholders who complained the plan led by Ontario Teachers’ Pension Plan and U.S. private equity partners is unfair. The Quebec Court of Appeal said that BCE, Canada’s largest telecommunications group, failed to prove that a buyout could have been structured to provide a satisfactory price for the company’s shares while avoiding an adverse effect on the debenture holders. The appeal court sent the case back to the lower court in which the bondholders’ complaint was first rejected in March, but BCE said that it and the purchasing group would seek to appeal the decision to the Supreme Court of Canada as quickly as possible. Bondholders had complained that the Ontario Teachers’ offer made June 30, 2007 is a reorganization of BCE rather than simply a buyout, and that while the big telecom’s shareholders were offered a premium, the value of BCE bonds had dropped.

Shares in Cadbury rose more than 3 percent on renewed market speculation of a takeover bid for the British confectioner. Cadbury had no immediate comment. Traders said U.S. investor Warren Buffett, Hershey and Kraft Foods Inc were being mentioned as potential suitors.

Deals of the day:

* Sinosteel, China’s largest ferrous metals trader, does not rule out taking a stake in Australian iron ore miner Fortescue Metals Group, Sinosteel President Huang Tianwen said.

* China Construction Bank has agreed to acquire Hefei Xingtai Trust for 3.4 billion yuan ($486 million), the trust firm said on its website, as China’s second-biggest bank by assets diversifies into other financial businesses.

* Dutch Philips Electronics NV is selling its stake in struggling medical transcription provider MedQuist to CBay Systems Holdings for about $285 million.

* Shareholders in Dyno Nobel Ltd, the world’s No. 2 explosives maker, approved a A$2.6 billion ($2.5 billion) takeover by fertilizer group Incitec Pivot.

* Argentina’s Grupo Petersen, which recently bought a 14.9 percent stake in Repsol’s Argentine affiliate, YPF, launched an offer to buy all of YPF’s floating shares.

UBS said it made a huge loan to Blackrock so that the U.S. asset manager could buy $15 billion of distressed assets from the Swiss bank, easing the strain on UBS’s balance sheet, but not freeing it from the risk. This must have been a tough one for UBS’s credit department to swallow. Citigroup took a similar tack to offload subprime assets. UBS said it had provided 75 percent of the funding used by Blackrock to buy the portfolio. Blackrock raised $3.75 billion in equity from investors to pay for the rest of the package, UBS said. UBS’s stock was down about 4 percent, but traders said that was because of concerns the bank may have to increase the size of its rights issue.

Time Warner and Time Warner Cable said their boards agreed to split the companies, giving Time Warner $9.25 billion from a special dividend that it will use towards paying down debt. As part of the deal, Time Warner’s stake in the cable operator rises to 85.2 percent from 84 percent. The Wall Street Journal says Time Warner will slash its $34.6 billion debt load, by two-thirds. Time Warner Cable now has a more hefty debt load, borrowing to pay the dividend.

Dutch office supplier Corporate Express is said to be bolstering its defenses against a hostile Staples bid with a deal to buy French rival Lyreco for 1.4 billion euros ($2.2 billion) that the companies say would make it the biggest office supplier in Europe, but is spooking investors. Corporate Express shares fell almost 9 percent. Lyreco says the combined company would better weather weaker economic conditions and demand. “Volume and size helps in this business,” he told reporters. Staples formally launched its 1.5 billion euro unsolicited bid for Corporate Express on Monday, which the company rejected as too low.

Third Point, a $5.7 billion hedge fund headed by activist Dan Loeb, has recently accumulated a stake of over 5 million shares in Yahoo and is supporting investor Carl Icahn’s proxy battle, a source familiar with the matter said. Meanwhile, Microsoft’s CEO Steve Ballmer, arguably the best source on Microsoft’s intentions, said in Israel, the software giant is not looking to bid to buy all of Yahoo but is in talks about other types of deals with the U.S. No. 2 search engine. “We are not bidding to buy Yahoo,” Ballmer said. “Yet, we are trying to have discussions about deals with Yahoo that might create value, but not a whole acquisition of the company.” A person familiar with the discussions told Reuters earlier this week that Microsoft has made an alternative offer, proposing to buy Yahoo’s search business and take a minority stake in the Web firm.

Insurer Allianz is in talks about the future of its Dresdner Bank unit and sees a real chance for banking consolidation in Germany, its chief executive said in remarks that boosted German bank shares. “Discussions are currently taking place, although these have not yet reached the stage where I should like to report on them today,” Michael Diekmann said in the text of a speech prepared for the group’s annual shareholder meeting. Allianz is splitting Dresdner Bank into two legally separate business segments, one for private and corporate clients and one for its Dresdner Kleinwort investment banking activities, which it aims to complete by the end of the year at the latest. The move, announced earlier this year to prepare Dresdner to play a role in German banking consolidation, has spurred speculation about possible tie-ups among the country’s commercial banks, long hampered by tiny market shares at home that have undermined their ability to compete abroad.

Other deals of the day:

* ArcelorMittal, the world’s top steel maker, is in talks with Australia’s Macarthur Coal after buying a 15 percent stake in the company, setting up a possible bidding war for the A$4.4 billion group and pushing its shares up 14 percent.

* QBE Insurance dropped its A$8.7 billion ($8.4 billion) bid proposal for rival Insurance Australia Group after IAG rejected it as too low, triggering an 8 percent slide in IAG’s shares.

* Funtastic, an Australian toy and homewares distributor, said it had received a bid proposal from a consortium led by private equity group Archer Capital, valuing the group at about A$132.4 million ($127.3 million).

* Venezuela’s leftist government has entered Bolivia’s financial market through the acquisition of micro-lender Prodem, a top official at Prodem said.

* Bank of Nova Scotia said it was expanding its business in Peru by buying all of Grupo Altas Cumbres‘ Peruvian operation, Banco del Trabajo, for an undisclosed sum.

* A group led by U.S. investment firm Aetos Capital is struggling to get funding to buy Japanese property developer Daito Trust Construction, financial sources told Reuters.

Even though global M&A activity has slowed considerably this year, Citigroup believes “we are not at the start of a precipitous downturn in M&A.”

In a research report, the investment bank says there is still an appetite for acquisitions and there is still hope for bankers as cheaper valuations provide an opportune time to buy.

Some of the biggest pending deals include Mars’ $23 billion acquisition of
Wrigley for cash, Westpac’s $17 billion acquisition of St George for equity, BG
Group’s $15 billion acquisition of Origin Energy for cash, and Hewlett-Packard’s
$13 billion acquisition of Electronic Data Systems for cash.

The report said: “We believe activity will continue to recover as we progress through the more mature phase of the bull market. Mature bull markets are consistent with rising M&A as corporate confidence stays high and equity financing becomes the
preferred option.

The report does say, however, that as M&A recovers it will not be in the same form as it was in 2006 or 2007, reflecting the changing availability of financing. Investors should
expect less debt and more equity financed deals. Large companies with strong
balance sheets will be the main driver of activity, not private equity.

Last year, about $4.5 trillion of M&A activity was announced. As of the end of April,
there have been $983 billion of deals announced this year. At the current run rate, M&A
activity in 2008 should be weaker than in both 2006 and 2007, the report says.

M&A binges are often fueled by certain asset classes providing excessively easy financing at the time — those are asset classes investors should be most wary of, the report says, as they usually reflect excessive valuations.

In 2000, 60 percent of all deals involved equity financing But in the 2007 M&A boom, just 21 percent of deals involved equity financing.

So despite a retreat in private equity and a tightening of the credit market, the M&A space will continue to be active, albeit not as much as in the recent past. And companies in emerging markets will continue to be well-bid.

“Given relatively cheap valuations, it still makes sense for many companies to buy rather than build,” the report said.

As the global credit crunch threatens to tip some U.S. banks over the edge, potential acquirers are looking into how regulators have dealt with any bank failures in the past, according to a recent memo from the law firm of Wachtell, Lipton, Rosen & Katz.

“There appears to be a widespread perception of meaningful risk of an acceleration in financial institution failures,” the firm’s lawyers wrote in a memo. “At the moment, it is difficult to predict the extent to which we will see bank failures in the near-term.”

Still, any failures could present buying opportunities after the regulators have moved in and sorted through the mess.

The Federal Deposit Insurance Corp, which insures deposits at more than 8,000 U.S. banks and thrifts and oversees the soundness of the institutions, has in the past held auctions of failed institutions, the lawyers said.

Sometimes to encourage buyers, the agency has also entered into loss-sharing agreements, where the FDIC “agrees to bear much of the further credit loss associated with the failed bank’s assets.”

However, the law firm said the crisis this time around is somewhat different from those in the past. Private equity, hedge funds and sovereign wealth funds have stepped up with cash for financial institutions looking to raise money. Recent examples: private equity firms were part of capital raises by Washington Mutual and National City.

And regulators are taking notice.

“This can be expected to translate into a more receptive regulatory climate for private investments into banks and thrifts,” the lawyers wrote.

Microsoft’s latest step toward Yahoo is less of a takeover but may provoke no less rejection. Anupreeta Das reports that the software giant is looking at taking Yahoo’s search business and a minority stake in the Web pioneer, but would stop short of a full-out merger, which may well also meet rejection from Yahoo. Yahoo would put its Asian assets, including significant minority stakes in Yahoo Japan and China’s Alibaba, up for sale, while Microsoft would buy a chunk of what remains of the company, a source tells her. Asset sales aside, billionaire investor Carl Icahn may well aim to hold out for a whole deal, particularly if he gets control of the board. At least the proposal from Microsoft would complicate discussions between Yahoo and Google. The two companies are still talking about a possible search advertising partnership. A person familiar with Icahn’s thinking said on Sunday that an alternative deal for Yahoo, rather than a full acquisition, would prompt him to push Yahoo to do a deal with Google.

U.S. diversified manufacturer Manitowoc has raised its bid for British kitchen equipment maker Enodis to 1.08 billion pounds ($2.1 billion) to trump a rival offer. Manitowoc, which makes cranes and restaurant equipment, said it was offering 294 pence a share for Enodis, topping an agreed 282p bid from U.S. rival Illinois Tool Works Inc. The offer from ITW beat an earlier bid of 260 pence a share from Manitowoc. The two U.S.-based companies bid more than twice what Enodis was worth before the war started.

Barclays is considering making a daring takeover bid for a rival as part of a move to raise capital from shareholders, so reports the UK’s Daily Telegraph. “There has been intense speculation about whether Barclays will follow Royal Bank of Scotland, HBOS and Bradford & Bingley to raise capital to bolster its balance sheet but the bank itself has remained enigmatic,” it reports, adding that Chris Lucas, Barclays’ finance director, recently told analysts that “all options are open”. It says Barclays’ top team “feels it has earned kudos with the City by walking away from last year’s battle for ABN Amro, which was bought by a consortium led by RBS for £47bn.”

Other deals of the day:

* Top Nordic IT-services firm TietoEnator, subject of a roughly $1.1 billion euro bid from a unit of private equity firm Nordic Capital, said it is talking to other parties than Nordic Capital about the future of the company.

* Web conglomerate IAC/InterActiveCorp plans to announce it is buying StarNet Interactive, parent company of GirlSense.com, a website that lets teenagers design and market virtual fashions.

* Educomp Solutions said it had acquired a 51 percent stake in U.S.-based Learning.com with a $24.5 million investment, which included an infusion of new capital.

* Norwegian media group Schibsted will buy 35 percent of Metro Sweden for 350 million Swedish crowns ($58 million) and the firms are to form a joint venture in advertising, Schibsted said.

With all the interest in Yahoo Inc these days, we took the opportunity to ask Nokia CFO Rick Simonson at the Reuters Global Technology, Media and Telecoms Summit if the world's largest mobile phone maker would be interested in buying Yahoo. He laughed and joked that of all the questions we could have asked him, this was one he didn't see coming. Then he goes on to say:

We've not been involved obviously in Yahoo. We're focused on closing the acquisition with Navteq ...

We're not out in the desert trying to invent a search algorithm that's better than Google or Yahoo's for instance. They've got some scale there we don't have.

As it is, Nokia doesn't see returns from its investment in Internet services until about 2010. But at least it's only earmarking hundreds of millions of euros a year on the project -- far short of the last price tag of $47.5 billion that Microsoft last offered for all of Yahoo.

(Photo: Reuters)

U.S. investors are flooding into India’s entertainment industry even as Indian moguls send money over to Hollywood.
 
While the credit crunch has stalled private investment in Hollywood films, U.S. financial firms are looking to tap into the 17 percent annual growth enjoyed by the Indian media industry.
 
India’s Economic Times reported investors including Blackstone, Goldman Sachs and Lehman Brothers have flocked to the Indian industry, while media titans like Viacom, Disney and BBC have partnered up with entertainment companies in a trend that’s expected to continue.
 
Smaller investors are getting into the game too. Already 34 mutual funds have been set up to take advantage of India’s growing entertainment industry. Two Indian investment funds, Pyramid Saimira and Vistaar Entertainment Ventures, are each launching a fund that invests solely in India’s film industry, also called Bollywood, the Economic Times reported.
 
Bollywood is the world’s largest film industry by volume. More than 1,000 movies are released every year and about 3.7 billion tickets are sold — more than twice as many as the next largest market, the United States, according to a recent report by Ernst & Young. 
 
But the money is flowing both ways, with Indian moguls sending money over to Hollywood as well. Billionaire industrialist Anil Ambani just announced that he will invest $1 billion in deals with the production companies of George Clooney, Nicholas Cage, Tom Hanks and Brad Pitt, according to UK’s Times Online.
 
The cash is greatly appreciated. The subprime crisis has caused a drought in U.S. movie investment. As the credit crunch continues to blow up hedge funds, survivors are circling the wagons and putting money into more conservative bets — and the film industry is feeling left out.
 
And while the big Hollywood names can pull in some international funding, lesser known filmmakers are caught in limbo as investors walk away, according to an  article in the New York Times.
 
The New York Times piece profiles Sanjay Sanghoee, a New York investment banker and novelist, scrambling to raise money for his film “Merger,” which he based on his novel by the same name.
 
“Merger” had received hedge fund interest last October before the credit markets got real ugly. Sanghoee even doubled his budget to $15 million from $7 million. And who wouldn’t want to invest in a plot that has it all: spy satellites, CIA conspiracies, blackmail, sexual deviance, hostile takeovers — just a normal Tuesday for your average I-banker.

But as investors reduce their funding or drop out completely, Sanghoee is searching for capital. And now the Indian born I-banker might be wise to turn to Mumbai to find funding for his Hollywood film.

“O, be some other name! That which we call a rose by any other name would smell as sweet.” –Romeo and Juliet

Debt analysts told an audience at New York University last week that the maligned securities known as collateralized debt obligations can still help diversify investment portfolios and disperse risk when used correctly. But first the markets will have to come to terms with the negative aura surrounding CDOs, which have been blamed for their role in the housing and credit crisis.

“CDOs will be back at some point. They might have a different name…,” Stanford University professor Darrell Duffie said, trailing off to a roomful of laughter at a credit conference sponsored by Moody’s and NYU.

Duffie, president-elect of the American Finance Association, has a suggestion: “CRTs,” or Credit Risk Transfer products. That’s how he referred to CDOs and other securitized products throughout his keynote presentation, “Credit Risk Transfer: Implications for Financial Efficiency and Stability.”

A name is no small thing — just ask author and fund manager Antoine van Agtmael. In 1981, he pioneered investing in what was then known as the “Third World.” But as that didn’t sound very appealing, he created a new term. Ever heard of a little something called “emerging markets?”

Banks financing the $34.8 billion private equity buyout of BCE have been hammering away all weekend to win higher interest rates, tighter loan restrictions and stronger protections that far exceed the original terms, according to the New York Times. Citing people on both sides of the transaction, the paper said talks began to fray late on Friday but lasted all weekend. “It’s patently obvious that the banks have no intention of closing the deal,” said one executive who read the revised terms. Investors have long worried that the massive private equity buyout might be repriced, delayed or abandoned altogether. Looming over the discussions is the spectre of the Clear Channel deal, in which some of the very same lenders also tried to back out, producing an ugly tangle of court cases that was only resolved last week.

Microsoft said it proposed an alternative deal to Yahoo rather than a full acquisition, but a person who knows the mind of Carl Icahn, the man driving trying to unseat Yahoo’s board, said the move was likely to prompt the billionaire investor to nudge Yahoo back toward Google. This source isn’t just familiar with the matter, but has a taste for rustic allusions: “Microsoft is trying to get the milk without buying the cow, and if you look at Icahn’s history, he has never been used that way.” Microsoft did not clarify what that alternative deal might be.

Facebook founder and CEO Mark Zuckerberg stressed his company’s independent spirit, after a report said the social networking site might be sold to software giant Microsoft, which is hunting for ways to beef up its Internet business. “You can tell, from our history and what we’ve done, that we really wanted to keep the company independent, by focusing on building and focusing on the long-term,” Zuckerberg told Reuters while in Japan to launch a Japanese language version of Facebook. Microsoft already has a small stake and the Wall Street Journal said this month the software giant, with the Yahoo deal in limbo, had approached Facebook to gauge its interest in a full takeover.

U.S. diversified manufacturer Manitowoc has increased its bid for British kitchen equipment maker Enodis to $2.1 billion to trump a rival offer. Manitowoc, which makes cranes and restaurant equipment, said it was offering 294 pence a share for Enodis, topping an agreed bid of 282 pence a share from U.S. rival Illinois Tool Works. The offer from ITW beat an earlier bid of 260 pence a share from Manitowoc. Enodis, which makes fryers for fast food groups such as McDonald’s and Burger King, will also pay an interim dividend of 2 pence a share.

Other deals of the day:

* The direct banking arm of Dutch financial services group ING Group is offering 416 million euros ($644 million) in cash for Germany’s Interhyp to expand its global business.

* France’s PSA Peugeot Citroen said it would invest between 300 million euros and 350 million euros ($467.9-545.9 million) in a Russian joint venture with Japan’s Mitsubishi Motors Corp.

* The Czech government will demand at least 100 billion crowns ($6.2 billion) from the winning bidder for Prague Airport, Finance Minister Miroslav Kalousek said in a newspaper interview.

* Cyprus Trading Corp agreed to buy up to 50 percent of local mobile telephone operator Areeba Ltd from South Africa’s MTN, CTC said.

If you are a bank, gobbling up other banks can do wonders to your stock – once an industrywide crisis recedes.

Sandler O’Neill analysts say in a research note they looked at bank stocks from the time of the last major recession and how shares did after touching bottom in roughly October 1990.

Contrary to conventional wisdom that takeovers often end up dragging on valuations, acquisitive banks’  median stock price rose by 214 percent three years later and as much as 290 percent five years later, “far outdistancing the performance of the broader bank group,” writes Mark Fitzgibbon, Sandler O’Neill’s director of research.

Among the reasons why the buyers did well: they were generally companies that had excess capital and less severe credit issues, had bold executives and were proactive. “They were able to buy good franchises cheap and fix them up,” according to the note.

The banks in the list included Union Planters Corp, which did 20 deals and saw its stock price rise 283 percent over the three year period. Bank One Corp, which also did 20 deals, saw its stock soar 161 percent over the same period, according to the note.  FleetBoston Financial Corp, which did one deal in that period, saw its stock price rise 239 percent, the note said.

Sandler O’Neill, a boutique investment bank that focuses on financials, goes a step further with a list of the “new breed of regional consolidators” that could be active acquirers, and if history is any any indication, do well when the current credit crisis is over. Among the banks that feature in that 21-name list are Wells Fargo, US Bancorp, BB&T Corp, SunTrust Banks and Regions Financial Corp.

Of course eating doesn’t mean you won’t be eaten at some point. Neither Union Planters (now part of Regions Financial), Bank One (taken over by JPMorgan Chase), or FleetBoston (Bank of America), has survived as an independent entity.

Photo Credit: Reuters