Hope yet for a Lehman Seoul mate

August 22, 2008

Lehman BrothersJust yesterday, the sound of doors closing could almost be heard echoing across the pacific as Lehman Brothers reportedly hit the Asian wealth circuit looking for help filling its expected $4 billion in third-quarter writedowns. Now state-run Korea Development Bank says it might be interested in buying the bank, lighting an 8 percent fire cracker under Lehman’s stock in premarket trade. “We are studying a number of options and are open to all possibilities, which could include (buying) Lehman,” a KDB spokesman said. KDB said it was open to mergers or acquisitions of both domestic and foreign companies to beef up its weak areas as the government was aiming to privatize it by 2012. Previous reports said KDB and CITIC Securities, China’s biggest brokerage, balked at the high price Lehman was asking.

Since its long-standing dispute with CME Group‘s Chicago Board of Trade over trading rights is just about settled, the Chicago Board Options Exchange may soon become a takeover target. While the CBOE is expected to pursue an initial public offering, with a filing possible as soon as next month, many exchange industry experts see that as only an interim step. It will be like sticking a “for sale” sign up, they argue. Despite being the top U.S. equities options market, with a stranglehold on index options, the CBOE may have to consider a bigger partner. It is one of the few remaining stand-alone exchanges, which leaves it vulnerable to a squeezing of its margins by growing competition, particularly exchanges that can offer investors stocks and options under the same roof.

Mining giant BHP Billiton‘s $128 billion bid for rival Rio Tinto could raise competition issues in iron ore. With mines across Australia’s ore-rich Pilbara region, Rio Tinto and BHP are the world’s second- and third-largest iron ore producers, respectively, behind Brazil’s Vale, and analysts reckon a combined group would control about 35 percent of the world’s seaborne traded iron ore. In a nine-page “statement of issues” ahead of its Oct.1 ruling, the Australian Competition and Consumer Commission (ACCC), which can order companies to sell assets if it thinks they have too big a hold in one sector, highlighted the likely impact of a deal on the iron ore trade and, in particular, on Australian steelmakers, but saw no major competition issues in copper, gold, uranium, bauxite or alumina. “I don’t think that’s a surprise to the two companies, particularly BHP … that iron ore would be the one area the regulators would be looking at very closely,” said Ken West, a partner at Perennial Growth Management. “But the Pilbara is the one they don’t want to be tampered with. If the regulators don’t show flexibility, then the Pilbara could become a deal breaker,” West said.

Other deals of the day

* Aon Corp, the world’s largest insurance broker, has made a recommended cash offer for Benfield valuing the UK-listed broker at 844 million pounds ($1.6 billion).

* New Zealand jeweller Michael Hill International said it had agreed to acquire 17 stores from the chapter 11 bankruptcy of Whitehall Jewelers Holdings Inc. The company said it would pay $5 million for the stores in Illinois and Missouri, its first foray into the U.S. market.

* Providence Equity Partners and MBK Partners are among the private equity firms on the shortlist for a 45 percent stake in the new telecom unit of Hong Kong’s PCCW, in a deal that could fetch more than $2.5 billion.

* Mining giant BHP Billiton‘s $128 billion bid for rival Rio Tinto could raise competition issues in iron ore, Australia’s antitrust regulator said.

* Vitec Group said it will buy California-based LED lighting business Litepanels for up to $64.5 million to expand its Broadcast Systems division.

* British alternative software vendor Formjet said it has decided not to go ahead with a planned 1.2 million pound acquisition of a specialist distribution company.

* Sale of Russia-focused Imperial Energy is likely to be announced next week, an Indian government source said, confirming that Oil and Natural Gas Corp is in the race to buy the firm.

* South Korea’s POSCO, the world’s No.4 steelmaker, may buy iron ore, steel mill and shipyard assets in Ukraine, as it looks to reassure investors who have questioned its potential acquisition of Daewoo Shipbuilding.

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