Fresh capital from wealth fund Temasek Holdings may do plenty to clean up Merrill Lynch’s balance sheet, and has the potential to boost the Singapore wealth fund’s stake in the struggling investment behemoth to 15 percent. That could be an uncomfortable level for U.S. politicians, and breaches a previously informal agreement to refrain from owning more than 10 percent of Merrill, according to a source familiar with the fund. A Temasek spokeswoman said on Tuesday that a portion of the deal is subject to regulatory approval. Citigroup is the other big U.S. bank to have gone to foreign wealth funds for big buckets of bail-out funding. If it ends up having to take more CDO-related write-downs to match the new bargain basement price one assumes Temasek is paying for its new stock of Merrill shares (they aren’t saying what the price might be) this whole thing could turn very political just as the race for the White House enters the final stretch.

British Airways says it is in talks with Spanish carrier Iberia about a potential all-share merger, sending shares in the UK airline up nearly 9 percent. Britain’s flagship carrier said in a statement the discussions had the support of both companies, although it expected it would take several months before terms could be agreed. BA’s chief executive, Willie Walsh, said the move made sense in current market conditions. BA owns 13.15 percent of the Spanish carrier, while Iberia has taken a 2.99 percent direct stake in BA, on top of exposure to a further 6.99 percent through contracts for differences linked to the BA share price. BA said both parties were confident of securing regulatory approval, adding that the European Union had already allowed the duo to cooperate widely.

Other deals of the day:

* Japanese TV and media group Tokyo Broadcasting System said it would spend $195 million to buy a majority stake in retailer StylingLife Holdings from Citigroup’s merchant banking unit in Japan.

* Central European Media Enterprises has bought an 80 percent stake in two Bulgarian television stations for $172 million, expanding its reach in eastern Europe, the company said.

* Kumho Tires is seeking investors to take over a $109 million stake in itself that U.S.-based Cooper Tire & Rubber plans to sell, an official at the South Korean company said.

* Autoliv, the world’s biggest maker of air bags and seat belts, said it had agreed to buy the automotive radar sensors business of Tyco Electronics for $42 million.

* IT and engineering services firm Rolta India said it acquired Chicago-based WhittmanHart Consulting, a division of WhittmanHart Inc.

Federal regulators have cleared the last remaining hurdle for Sirius Satellite Radio's proposed acquisition of XM Satellite Radio Holdings, a deal that will combine rivals in the nascent U.S. pay-radio market.

The U.S. Federal Communications Commission reached an agreement to conditionally approve the deal on Thursday, four months after the Department of Justice gave its blessing, and 18 months after XM and Sirius agreed to combine. Experts say that new services from a combined company could come in a few months, but suggest their holiday subscription growth may be hurt by the delayed deal closing.

Here are are some important dates in the history of the satellite radio industry.

* 1994 - CD Radio goes public at about $3.15.

* Oct. 1999 - XM goes public at $12 a share.

* Nov. 1999 - CD Radio changes its name to Sirius Satellite.

* Nov. 2001 - XM starts national radio service, after launching its first two satellites -- "Rock" and "Roll" -- earlier in the year.

* 2002 - Sirius launches national satellite radio service.

* Oct 2003 - XM reaches 1 million subscribers.

* Dec 2003 - Sirius signs 7-year, $220 million pact with the National Football League.

* Oct 2004 - Shock Jocks Opie and Anthony begin broadcasting on XM, on a premium channel.

* Oct 2004 - XM signs 11-year, $650 million pact with Major League Baseball; deal starts with the 2005 season.

* Oct 2004 - XM unveils Delphi MyFi, its first portable radio receiver.

* Dec 2004 - Sirius reached 1 million subscribers

* Oct 2004 - Sirius signs shock jock Howard Stern to 5-year, $500 million deal.

* April 2005 - XM raises subscription price to $12.95 a month from $9.99, matching Sirius.

*Sept 2005 - XM surpasses 5 million subscribers.

* Feb 2006 - XM signs 3-year, $55 million deal with Oprah Winfrey.

* Sept 2006 - Sirius tops 5 million subscribers.

* Jan 2006 - Sirius starts broadcasts of Howard Stern.

* Feb 2007 - Sirius and XM propose merger; Deal requires approval of their respective shareholders, the U.S. Federal Communications Commission and the U.S. Justice Department. Sirius CEO Mel Karmazin to be CEO of new company, XM Chairman Gary Parson to become Chairman.

* July 2007 - CEO Hugh Panero says he is stepping down in August; COO Nate Davis to become Interim CEO.

* Nov 2007 - XM and Sirius shareholders approve the deal.

* Mar 2008 - The Justice Department approves the deal.

* June 16, 2008 - FCC Chairman Kevin Martin announced his recommendation to approve the merger with conditions.

* June 30, 2008 - Sirius ends the second quarter with 8.9 million subscribers, up 25 percent from a year earlier. XM had 9.65 million subscribers at the end of June, up 17 percent from a year earlier.

* July 25, 2008 - FCC Commissioners approve the deal with conditions, clearing the way for a deal that will leave just one U.S. satellite radio service. Analysts expect the deal to close within days or weeks of the regulatory approval.

(Sources: XM, Sirius, Hoover's, Reuters)

(Top picture: A Russian Proton with a satellite for Sirius Satellite Radio is lifted into place at its launching pad at the Baikonur Cosmodrome, Kazakhstan, on September 1, 2000, while (L to R) Bob Prevaux, Program Director for Space Systems Loral talks with Rob Briskman, Executive Vice President for Sirius Satellite Radio and Ted Sitek, Mission Manager for International Launch Services. (Reuters/Karl Ronstrom))

Kohlberg Kravis Roberts’s plan to IPO is nothing new - the company filed its paperwork to do so a year ago. So why should the storied firm of private equity titan Henry Kravis (pictured) choose now to tap this battered market? Problems at its Amsterdam-listed fund are also hardly new. Shares of the fund, set to be exchanged for new NYSE-listed KKR shares as part of the offering, jumped 27 percent during morning trade. They had fallen about 30 percent since the beginning of May, and had lost more than half their value since late February last year as the credit crisis bit. It’s hard to see the deal framed as a statement of confidence that IPO investors are going to step up to the bar, given all the grim news swirling capital markets. What else might be prompting this move? Carlyle Capital Corp, an affiliate of U.S.-based buyout firm Carlyle Group and mainly invested in mortgage-backed assets, went bankrupt in March and liquidated its assets as it could not meet margin calls from its lenders. KPE said in March it had no exposure to residential real estate loans, but its net asset value dropped 3.4 percent in the second quarter amid investment losses and foreign currency transactions after a 5.4 percent drop in net assets from operations in the first quarter.

Consumer goods giant Unilever agreed to sell its North American laundry business to private equity firm Vestar Capital Partners for about $1.45 billion to complete the bulk of its sell-off program. The business makes Snuggle, Wisk and Surf products and had been looking to sell it for almost a year in its struggle to compete as a distant No. 2 behind archrival Procter and Gamble. Vestar intends to fold the business into its Huish Detergents operations and re-name it Sun Products Corp.

Other deals of the day:

* Britain’s BAE Systems said it had made a recommended offer for Detica Group, a provider of IT services to the national security sector, at 440 pence a share, valuing the business at about 538 million pounds ($1.07 billion) including assumed debt.

* French electrical engineering group Schneider Electric has agreed to buy Canada’s Xantrex for 415 million Canadian dollars ($409.3 million) to boost its renewable energy equipment operations.

* U.S. computer services and software group International Business Machines has agreed to buy French software maker Ilog for 215 million euros ($340 million), the companies said.

* Greek buyout firm Marfin Investment Group bought a 50 percent stake in Croatian tourism group Sunce Koncen as part of its expansion plans, MIG said in a statement.

* China’s Sichuan New Hope Agribusiness said it has acquired a dairy producer in Inner Mongolia in a deal that a Chinese newspaper said was worth 100 million yuan ($14.7 million).

* LUKOIL, Russia’s second-largest oil producer, has acquired 100 percent of Turkish firm Akpet, which accounts for about 5 percent of Turkey’s oil retail market, the company said.

It wasn’t a good week for the already tattered legacy of Eliot Spitzer, and no, we’re not talking about the tabloid headlines about the latest exploits of his sometime paramour Ashley Dupre.

For one thing, the lawsuit against former American International Group CEO Maurice “Hank” Greenberg, one of Spitzer’s highest profile prosecutions as New York Attorney general, looks a little closer to ending with a whimper. The Wall Street Journal reported that Greenberg was in talks with Andrew Cuomo, Spitzer’s replacement, though it wasn’t clear how advanced they were or whether they would lead to a resolution of the case.

For another, Spitzer’s regulatory legacy is under fire from two different financial sectors he successfully tangled with in his AG days.

Insurance brokerages, which gave up billions of dollars in commissions they used to take from insurers in return for steering business their way as a result of one key Spitzer reform, are crying foul. The ban on so-called contingent commissions was never applied universally and should either be imposed uniformly or lifted, according to leading players like Marsh & McLennan, Aon and Willis Group.

Turning to another industry where Spitzer’s political downfall was met with quiet rejoicing, Wall Street is increasingly questioning the sweeping reforms to sell-side research that investment banks were forced to accept to settle another Spitzer suit.  At least that’s what former E.F. Hutton president George Ball, who is now president of mid-market bank Sanders Morris Harris, did in an interview with Reuters.

“What happened five years ago was a little like a couple rushing to get married in Las Vegas,” Ball said in an interview. “If you do something in haste, after awhile you can see where some parts are unnecessary or just unwise.”

To be sure, Spitzer wasn’t alone in advocating those reforms, aimed at isolating analysts from pressure from the investment banking side of their firms. They were also endorsed by the SEC. 

But Ball is part of a rising chorus on Wall Street arguing that the reforms, which they say have fueled an erosion in research coverage, went too far.  Frank Quattrone, the star investment banker who fended off obstruction of justice charges for four year, told a Stanford University audience that the Spitzer reforms were making it tougher than necessary for start-ups to go public.

Is there a flavor of opportunism to all this? Maybe, but the grumblings from Wall Street added insult to injury for Spitzer after a state ethics panel filed charges against three of his former aides over accusations they leaked to newspapers information about arch-nemesis Joe Bruno’s travel on state aircraft.

Not to mention those photos of Dupre, who the New York Post helpfully identifed as Eliot’s “gal” heading to meet a new “pal” in a Manhattan hotel.

(Photo by Reuters)

Morgan Stanley’s money managers, entrusted with navigating the world’s financial markets with all kinds of sophisticated strategies, evidently have a little problem with long division.

On Thursday the big Wall Street bank announced that its investment management division snapped up a bigger stake in Brookfield Infrastructure Partners (BIP) than intended. Nearly twice as much.

Morgan received shares of BIP during the January spin-off by Toronto-based Brookfield Asset Management and then bought additional shares in the market. 

Yet what in March was reported to be a 12.6 percent stake in the infrastructure firm was, in reality, a 23.3 percent stake, according to a press release Thursday. That pushes it over the 20 percent threshold for regulatory disclosure requirements. Morgan Stanley blamed the mistake on bad data.

“The foregoing calculation was based on third party market data sources, which stated the issuer had approximately 39.2 million units outstanding,” Morgan said in the statement. Only recently, the firm said, did it learn BIP only had just 23.3 million units.

As a result, Morgan said it will now sell some of its 5.2 million BIP units to get below 20 percent. Using rough numbers, Reuters estimates Morgan needs to sell 530,000 units.  BIP units fell 2 percent on early NYSE trading.

Next time, maybe the firm will look at Brookfield’s financial reports. Or pick up the phone. Morgan Stanley declined to comment beyond its statement.

(Reuters photo)

The first lawsuits are flying but Roche's experienced dealmakers are unlikely to put more cash on the table just yet.

While it seems clear $89 a share won't do it -- the market has already pushed Genentech stock to $95 and some analysts are talking well over $100 -- the Basel-based drugs giant can afford to bide its time. With 56 percent of the biotech company already in his pocket, Chairman Franz Humer is ready to play a long game.

Genentech, which says Roche's bid for the remaining 44 percent is "unsolicited and unexpected", has formed a special committee of its three independent directors to assess the proposal. They will be engaging outside advisors, suggesting a lengthy process ahead. 

At the end of the day, most analysts believe a deal looks inevitable and Roche will end up sweetening its current $43.7 billion offer.

 The question is, by how much?

GM has had a rough few weeks, with its share price racing down hill and increasingly frequent questions about solvency. So we note with interest the second sign in two days that the auto giant is looking to pump up its position in higher growth markets abroad. Russian car maker GAZ said today it plans to create a $1 billion joint venture with GM. The director of GAZ’s light vehicles unit, Leonid Dolgov, said the venture will produce around 300,000 cars per year, allowing the partners to compete with French rival Renault in Russia, Europe’s largest car market. Yesterday, a source told us Chinese pickup truck maker Hebei Zhongxing Automobile was in talks with GM and major Chinese automaker FAW Group to explore opportunities for cooperation, including possible equity ties. The source gave no specifics about Zhongxing’s discussions with GM, which runs two ventures with China’s top automaker, SAIC Motor, making cars and minivans. These are hardly high-gear moves, but could amount to welcome pay-offs if things in the U.S. continue to stall.

U.S. investment bank JP Morgan has held talks with potential partners about forming a consortium to break up British mortgage lender HBOS, The Daily Telegraph newspaper reported. National Australia Bank, named by the Telegraph as a potentially interested party, played down the report, while a UK industry source said HBOS had not received an approach. “We’re not sure this is a clever time to make acquisitions,” NAB Chief Executive John Stewart told reporters on Friday, shortly after NAB announced a further A$830 million ($798 million) in losses from its exposure to U.S. mortgages. Without naming a source, the Telegraph said JP Morgan had also approached private equity firms and may talk to Spain’s Banco Santander about a deal that would resemble the break up of ABN AMRO by a group of three banks last year.

The chief of U.S. hedge fund Harbinger Capital Partners, the largest shareholder of Cleveland-Cliffs, has begun pushing the iron ore pellet maker to put itself up for sale, The Wall Street Journal said. Phil Falcone, who wants Cleveland-Cliffs to take advantage of the steel boom, reckons the company could fetch as much as $130 a share, or about $14 billion, the paper said, citing a person close to Harbinger. The move comes a week after Cleveland-Cliffs said it agreed to acquire coal miner Alpha Natural Resources for about $8.3 billion to expand its coal assets and capitalize on the boom in the global steel industry. In a regulatory filing made after the deal announcement, Harbinger Capital, which owns about 18.36 percent of Cleveland-Cliffs common stock, expressed concerns about whether the Alpha deal was in the best interests of shareholders.

Other deals of the day:

* Korea Development Bank, Hana Bank and Kookmin Bank are providing a $400 million bridging loan for LS Cable Ltd’s acquisition of Nasdaq-listed wire and cable maker Superior Essex, banking sources said.

* Daimler, the world’s biggest maker of commercial vehicles, plans to spend billions of dollars to take a stake in Russian truckmaker Kamaz, a source familiar with the situation told Reuters.

* Nuclear operator British Energy has agreed to be taken over by French utility Electricite de France for around 775 pence per share, a source briefed on the matter said.

* Chinese state-owned commodities trading house Sinosteel has extended its offer for shares in Australian iron ore prospector Midwest Corp by a month to Aug. 25, it said in a regulatory filing.

* U.S. hedge fund Harbinger plans to bid for British satellite communication firm Inmarsat, pending regulatory approval, and combine the group with its SkyTerra business.

* French retailer Casino said it had raised its stake in Brazil’s CBD to 35.3 percent from 32.9 percent after it acquired 5.6 million voting shares at 22.9 Brazilian real ($14.52) per share.

* French IT consulting group Capgemini said it had agreed to buy Dutch IT services group Getronics PinkRoccade’s (GPR) Business Application Services BV (BAS) unit in the Netherlands.

We knew the IPO market was bad for venture capital-backed startups, but it seems the M&A market isn’t getting any easier for them either. At least that’s what Paul Deninger, an investment banker at Jefferies & Co, said at a technology summit at Stanford University.

“The M&A market is going to get tougher,” Deninger warned. “We’ve got to repopulate the buyer base. You can count on one hand the buyers.” He named the usual suspects – IBM, Cisco, Microsoft, Hewlett-Packard – and other big companies that have tons of cash and are always on the lookout for a good buy. But after all, there are only so many startups these tech giants are interested in or have the ability to buy. “That can’t last forever.”

What’s worse, the competition among those trying to sell companies is only going to get tougher, Deninger said. That’s because venture capitalists are increasingly investing in companies that will be “good M&A opportunities, rather than pursuing big ideas that could become standalone IPO companies,” paving the way for an eventual glut of M&A candidates. That’s not surprising given the current market environment, where not a single venture-backed company went public in the second quarter.

But some of the other speakers at the summit had encouraging words for entrepreneurs who may be fretting that they won’t be able to sell or go public, especially if they have a well-developed line of products or services.

“Are you a feature, a product or a company?,” Lise Buyer,  a principal at Class V Group, which advises companies exploring the IPO option, asked startups to ask themselves. “If you’re a feature or a product, maybe you could go public at another time, but not now,” she said. “But if you’re a company, hang in there.”

Morgan Stanley banker Drew Guevara, meanwhile, had some advice for startups on how to play the M&A game. The trick, he said, was to make a potential acquirer feel like it wants you, rather than tacking on a “for sale” sign. “Have somebody say they want you.” After all, “you can’t do a hostile sell-side,” said Guevara, whose firm is involved in two hostile takeover deals this year — Microsoft’s failed takeover offer for Yahoo and Electronic Arts’ ongoing hostile bid for smaller rival Take-Two.

Photo: Summit at Stanford website

Déjà Vu for Clear Channel shareholders.  Ten months ago, they gathered in San Antonio to approve a $39.20 a share deal. Today, they’re back voting on a shaved price of $36 a share. The deal has seen enough drama over the past couple of years to rival an HBO series, with upset shareholders, wrangling between bankers and buyers and a showdown in court.  

The deal faces the same tough hurdle as the first time round. Under Texas law it needs two thirds support to win — and “no” votes count as against the deal. Clear Channel Chief Executive Mark Mays told Reuters in May that he didn’t have concerns about the vote because the deal had support from major shareholders such as Highfields, which agreed to keep up to $400 million equity in the company.

“Considering our stock was at $29 two days ago, it’s a fair deal from all aspects,” Mays said at the time.  The deal was also backstopped by funds being put into escrow until it closes, giving it a higher level of certainty that this time, it’ll close.  

Even after today, it isn’t exactly a green light all the way – the debt supporting the $17.9 billion deal has to be sold out and that’s no small feat in a clogged up credit market.

That’s leaving aside the bigger issue which is the future of a leveraged-up radio company in an economic downturn.

General Electric has bulked up on its health binge, moving to buy medical device maker Vital Signs for $860 million. Vital Signs shareholders are to get $74.50 per share in cash, a 28.4 percent premium to Wednesday’s closing price, and above the shares’ 52-week high of $61.20, reached on May 9. GE said the deal, which it expects to close in the fourth quarter, values Vital Signs at $860 million, net of cash and investments. It said that shareholders with a 37 percent stake in Vital Signs have agreed to vote in favor of the deal.

Chinese pickup truck maker Hebei Zhongxing Automobile Co is in talks with General Motors and major Chinese automaker FAW Group to explore opportunities for cooperation, including possible equity ties, a source close to the situation said. “Consolidation is inevitable in the Chinese auto market, which now has more than 100 players, and a company of Zhongxing’s size makes a good takeover target or joint venture partner,” the source told Reuters. “Zhongxing is holding talks with several potential partners including FAW and GM to seek cooperative opportunities, including possible equity ties, but nothing has been decided at the moment,” a source said.

Tribune has narrowed the potential list of bidders for the storied Chicago Cubs baseball team to 3-5 groups bidding $1 billion or more, according to sources briefed on the matter. Of the 10 groups approved to bid for the Cubs by Major League Baseball, only those that bid $1 billion or more for the team, its home ballpark Wrigley Field and a stake in a regional sports TV network advanced to the next round, said two sources, who asked not to be identified because the process is ongoing. While Tribune and baseball officials declined to comment, three sources said Internet billionaire Mark Cuban, owner of the National Basketball Association Dallas Mavericks; and a publicly held group led by New York City taxi tycoon Andrew Murstein were among those advancing. Others advancing included Tom Ricketts, chief executive of Incapital LLC, a Chicago securities and investment banking firm, and son of the founder of TD Ameritrade; and a group headed by Michael Tokarz, chairman of MVC Capital, one of the sources said. The Tokarz group includes Fred Malek, who previously bid on the baseball team in Washington.

Other deals of the day:

* The head of state-run Korea Development Bank said it would resume the delayed sale of Daewoo Shipbuilding in August, possibly wrapping up the $4 billion deal by end-2008.

* South Korea’s Hana Financial Group, the country’s No.4 banking group, said its banking unit would invest 329.6 billion won ($327 million) to take a 19.7 percent stake in the Bank of Jilin in China.

* Malaysia’s Maybank is set to buy another 5 percent of Pakistan’s MCB Bank as early as next month, in a deal estimated at $218 million, sources familiar with the matter said on Thursday.

* Intel Capital, the venture capital arm of top chipmaker Intel Corp, said it would pump $17 million into three Indian companies, comprising two Internet portals and one advertising firm.

* Mapletree Investments, a property firm owned by Singapore state investor Temasek, said it will support a rights issue by Mapletree Logistics Trust by buying units not taken up by other investors.