Even though shareholder activism is on the rise and hostile deals are expected to grow, global poison pills that are in force have steadily declined over the past six months, according to Thomson Reuters Strategic Research.

The report says there were 1,320 pills in force as of March 31, down nearly 12 percent from September. Companies are letting their plans expire at a faster pace than those who are adopting and renewing plans.

“This could be in response to an unfavorable deal-making environment sparked by the credit crunch and companies may not be concerned that they are a target at the present,” the report said.

The United States, however, has been seeing increased shareholder activism. The data reflects that trend: Nearly 87% of the pills currently in-force are U.S. based companies.

The report also said there have been no pill adoptions this quarter from the 2007 Fortune 500 roster.

No first-time pills have been adopted. No pills have been renewed. Eight pills quietly expired during the first quarter of 2008.

“Larger U.S. corporations continue to steer clear of the poison pill as a means to protect the company from unwelcome shareholders and are willing to take the risk that an unwelcome bidder could take a meaningful position. This year there has been no pill activity in Fortune 500 names except allowing the expiration of existing plans. Pressure from shareholders, concerns of corporate governance image, and a subdued M&A market likely played a role in company’s decision to abstain from renewal and adoption.

Companies considering the adoption, renewal, or expiration of poison pills should consider these steps:

• How your shareholder base will react if a change to a poison pill policy is made.
• Find out the voting guidelines used by investment advisors regarding poison pills.
• Carefully weigh the pros and cons of poison pill adoptions.”

Nearly 51% of the existing poison pills in-force worldwide are up for expiration over the next three years. There was a wave of new plans that flooded the market in the late 1990s and most plans have an expiration of ten years from the time of adoption. Over one third of the outstanding pills in-force are up for expiration for the remainder of 2008 and all of 2009.

Earlier this year, data from research firm FactSet SharkWatch indicated that some industries are affected more than others when it comes to shareholder activism.

That data - which measured the percentage breakdown of the 501 campaigns in 2007 by sector - revealed why it may be better to be a non-energy minerals company than a bank if you want to steer clear of trouble.

Shareholder activist and “Queen of the Corporate Jungle” Evelyn Davis is not happy about Ford Motor’s planned sale of British brands Jaguar and Land Rover to Indian automaker Tata Motors. And when Evelyn Davis is not happy about something, she makes sure people know it.

At the annual Ford shareholders meeting on Thursday, Davis, who grills CEOs at hundreds of annual shareholder meetings, called the sale “outrageous” and urged shareholders to vote against the entire board except Executive Chairman Bill Ford Jr.

 ”Tata sells cars that are $2,500 to the lowest of the low outcasts of India,” Davis said, adding that Jaguar represented elegance and exclusivity. “How could the board sell us out to an outfit like that who sell to people like that.”

Ford has agreed to sell Jaguar and Land Rover to Tata in $2.3 billion deal that gives Tata a line-up ranging from the world’s cheapest car to some of its more expensive.

Davis also urged Ford to dump Chief Executive Alan Mulally, hired from Boeing in 2006, because he was “not a car guy.” She urged Bill Ford Jr, who had stepped down from that position to hire Mulally, to retake the CEO position.    

“I think you should go back to Boeing,” she told Mulally.

Bill Ford defended Mulally’s record as CEO, saying that his management has moved the turnaround quicker “than anyone thought he could.”         

After a repeated exchange with Bill Ford Jr., and requests for details on the company’s hedging practices for currency rates and commodity costs, and questions on the amount of legal fees it has to pay each year, Davis said: “Remember one more thing, a prime minister only serves at the pleasure of the king, and I want the king back,” she said.      

“If you are referring to me, thank you, but …,” Ford said. (The rest of his response was drowned out by Davis)     

“I want to dump all of the directors except you because you are my king, and you delivered me my Jaguar personally.”

“I paid a regular price by the way, for those who didn’t know that.”

Well, who knew Prime Minister Davis owned a Jaguar? Stay tuned for another set of interesting Davis comments — sure to come at GM’s annual meeting scheduled for June.

While the skyrocketing cost of fuel is forcing U.S. airlines to consider cost-cutting measures — chief among them is consolidation — Continental Airlines has used the rising price of oil as one of the reasons to back out of advanced merger talks with United Airlines.

Continental Airlines on Sunday called off talks with United Airlines, citing the other carrier’s weak financial condition and the increasing cost of jet fuel prices, which have more than doubled since the start of last year.

That reason has left many sractching their heads — how does the rising cost of oil hinder the benefits of a merger? I suppose one could argue that United, with its extensive international network, could siphon too much money as fuel costs continue to rise — probably offsetting any cost benefits a merger could accomplish.

That brings us to another question: how do airlines strike a balance between selling the deal to investors (saying they would cut costs by reducing capacity, shedding hubs etc.) and selling the deal to Washington (saying they would protect jobs, not shed hubs etc.)

Delta Air Lines, which has agreed to merge with Northwest, has obviously gone with the latter approach. In hopes of getting the deal approved by the DOJ, the carriers promised to not let the merger get in the way of job security.

Naturally, Wall Street reacted unfavorably, causing shares of both the airlines to slide in response to the news.

Now United, which has been having a parallel set of merger talks with US Airways and could announce a deal in early May, will have to decide who they want to sell the deal to.

Actually, it’s not about who you sell the deal to. It’s about who you sell it to first. 

Surely Delta’s plans to not cut capacity or shed hubs or lose jobs will look a bit different after antitrust approval, if that does come through. Because, really, what good is going through the huge headache of merging with another carrier if you aren’t going to cut costs?

Meanwhile, Continental is in advanced talks with British Airways and American Airlines about a potential alliance, with plans to seek antitrust immunity.

In sum, despite all the different routes airlines are taking, one thing is certain: skyrocketing fuel prices are prompting some major decisions in the U.S. airline industry. To merge or not to merge is the question.  

With Chrysler announcing a deal last week that would allow the struggling U.S. automaker and its Japanese counterpart Nissan to make cars for each other, industry experts are wondering if a bigger alliance isn’t far off.

Chrysler, which was spun off by former German parent Daimler AG in 2007 to private equity firm Cerberus Capital Management (Daimler still owns a rougly 20 percent stake) , is not in the best position to grow globally without a partner. And overseas, of course, is where the growth is.

U.S. auto sales, hurt by higher gasoline prices, a weak housing market and a subprime mortgage crisis, are expected to dip to their lowest level in a decade (and could hit their lowest point in 15 years) in 2008.

So U.S. automakers are looking offshore to increase sales. General Motors, which saw more than 50 percent of its sales come from overseas last year, has said it expects that growth to continue, with overseas sales far surpassing domestic numbers.

Chrysler needs to become a global player if it wants to compete with GM, Ford, Toyota, or really, any other major automaker.

And for that, Chrysler — which sells barely any cars overseas – needs a foreign partner. The beginnings of that are visible in the deal with Nissan.

Under the new alliance, Nissan will build a small car for Chrysler. And Chrysler will build a full-sized pickup truck for Nissan.

That takes care of the lack of a small car in Chrysler’s protfolio. But Chrysler could also face a cash problem. The automaker needs cash to work on new technology and increase fuel efficiency to meet future standards. (Congress passed a new energy law in December 2007 that requires automakers to increase fuel economy across the industry to 35 miles per gallon by 2020 — up 40 percent from current levels. GM has said that would add, on average, $6,000 to the price of vehicles sold in the United States).

Already, Chrysler relies on Daimler for clean diesel engines and on General Motors for hybrid technology. After the purchase, Cerberus did set aside a block of money for Chrysler but that money is not going to last forever, especially when the company’s operations are burning cash. (When reporting annual results, Daimler said Chrysler sustained a net loss of about $2.9 billion between the close of its spinoff on August 4 and the end of the third quarter in 2007. Chrysler disputes those figures but is not willing to provide its own.)

A more permanent alliance with Renault-Nissan could go a long way toward helping Chrysler compete in today’s market. Chrysler could also use Renault-Nissan to get lower prices on parts and raw materials.

And Renault-Nissan CEO Carlos Ghosn is not averse to partnering with U.S. automakers.  In 2006, encouraged by billionaire investor Kirk Kerkorian, Ghosn engaged in talks with GM’s CEO Rick Wagoner for a possible alliance that could include Renault-Nissan taking up to a 20-percent stake in GM. The talks fell through after GM decided the terms were not satisfactory.

With Renault-Nissan and Chrysler, the question is: can it work? Nissan is already part of a previous merger with French automaker Renault. CEO Carlos Ghosn is credited with making Renault-Nissan work in ways experts had never imagined.

But getting a French company to work with a Japanese company is complex enough. Add to that an American company and things could get really complicated.

That said, in the long run it may be Chrysler’s best option. Former Chrysler President Thomas Stallkamp has said that Chrysler was not capable of standing alone in 1998 when the deal with Daimler was done.

Things are different today. Competition is stiffer, the market is more saturated and the demand for technology is greater. If Chrysler could not stand alone then, it’s anyone’s guess how it can stand alone now.

Every large U.S. airline is reportedly in talks with another carrier for a possible merger. What the final route map will look like remains pretty unclear.

Ever since Delta Air Lines and Northwest Airlines began merger talks in January (the two announced a deal on Monday), the industry has been abuzz with who’s-talking-to-whom. Continental and United have laid major groundwork for a merger and could move ahead “pretty quickly” with a deal, sources have told Reuters.

A merger between United and Continental, the second and fourth-largest U.S. airlines respectively, would surpass a Delta-Northwest combination as the world’s largest carrier.

Some reports say that United Airlines has also been in talks with US Airways about a potential merger. And it’s not just media reports: executives are also publicly dropping hints of the need to merge.

In a message to US Airways employees today, CEO Doug Parker reiterated his long-held opinion that the industry is too fragmented and that mergers would produce a “much healthier industry” that would benefit employees and passengers.

Continental CEO Larry Kellner, who has always said the airline would like to remain independent unless the competitive landscape changes, on Tuesday said the Delta-Northwest merger “will change the competitive landscape for Continental and the entire airline industry” and added that Continental will review strategic alternatives to ensure it remains a strong long-term competitor.

After racking up $35 billion in losses and finally emerging from a five-year slump in 2006, U.S. airlines are hoping that mergers could lead to higher fares as combined carriers reduce flights and use their increased market power to raise prices.

The airlines also face a renewed sense of urgency to consolidate and cut costs amid skyrocketing fuel prices, a weak economy and a growing competitive threat from European carriers as trade barriers fall on trans-Atlantic travel.

And even though Delta and Northwest have agreed to a deal, they aren’t being spared the buzz. There is now talk of American Airlines, currently the largest carrier, possibly making a counter bid for Northwest. Calyon Securities analyst Ray Neidl said in a research note: “They’d [American] be a good fit for either Delta or Northwest, and I don’t entirely rule out them coming in as a spoiler. I’m not predicting it, but it’s a possibility.”

United and US Airways tried to merger in 2001, but the deal was blocked by the U.S. Department of Justice. Then, in 2005, America West acquired US Airways.

That was not the end of it: US Airways also proposed a merger with Delta Air Lines in 2006, but was fended off by creditors and the pilots’ union.

Confused? Join the club. There are definitely more mergers to come in this industry. And they will likely come in quick succession as airlines rush to get these deals approved under the Bush administration, considered to be more merger-friendly.

For the final route maps, just belt up and sit tight. Shouldn’t be too long a ride.

Sure, global deal volume is down. But acquisitions by companies in emerging markets of targets in developed countries are climbing quick and fast. Dealogic says such deals rose a whopping 91 percent to $51.5 billion just in the first quarter.

China was the top emerging market nation to invest in developed nations, boosted by the $14.3 billion acquisition of a stake in U.K.-based mining giant Rio Tinto by Aluminum Corp of China earlier this year.

This huge increase comes amid a global dowturn in M&A actitivity. Total deal volume was down 22 percent from a year earlier, at $861.2 billion, according to the same data.

U.S. targeted M&A totaled $318 billion, down 28 percent. More than one-third of that volume was driven by the Altria Group spin-off of Philip Morris International ($111.3 billion), according to Dealogic.

Interesting to note here is that the U.S. targeted deal count was actually up 16 percent — which means people did more deals for less. The average deal size dropped 37 percent to $385 million. No big surprise here: Interest from private equity companies had pushed takeover prices sky-high, but the credit squeeze that began last year has made it harder for those companies to borrow, forcing asset prices down.

And finally, how much advisory revenue do you think was generated from global M&A in the first quarter? Just $4.3 billion. Of that, U.S. companies generated only $1.6 billion.

As analysts have said, expect the trend to continue: smaller deals, cheaper assets. And Lakshmi Mittal, known for being the head of the world’s largest steel group and growing his company primarily through  takeovers, has said: “At the end of the day you have to keep emotions away.”

Ford Motor Co on Wednesday publicly announced the long-awaited sale of its European luxury brands – Jaguar and Land Rover — to Indian automaker Tata Motors Ltd in a $2.3 billion deal that several analysts have applauded and some have questioned.

While the jury is still out on whether this was a good decision for Tata, it begs the question for Ford: Why is Ford selling non-U.S. brands at a time when its rivals are focusing on overseas growth?

Sure, Ford has lost more than $15 billion in the past two years, and it needs cash. But after selling its famed Aston Martin brand last year and now shedding these two British nameplates, Ford is left with just one non-U.S. brand — the Swedish unit Volvo. No certainty on how long Volvo will be a part of the Ford family but it’s staying put for now.

General Motors Corp, which saw 59 percent of its global sales occur outside the United States in 2007, has said it expects overseas sales to surpass domestic sales continually for the next few years.

Chrysler, which was split off from German automaker Daimler in 2007, is also eyeing international growth as it takes several steps to increase its presence overseas. 

While U.S. auto sales fell to their lowest level in a decade last year and are expected to fall further this year, countries like India, China, Russia and parts of Europe and South America are proving to be markets of rapid growth with a healthy appetite for foreign brands.

Perhaps Ford’s sale at a time like this underscores the gravity of its situation in North America. The automaker has said it needs to focus on restructuring its U.S. operations and bringing them back to profitability. The company’s North American unit alone lost $6 billion in 2006 and $3.5 billion in 2007.

If U.S. auto sales slip below 15 million units this year, as the most pessimistic forecasters suggest is possible in a recession, pressure on Ford and its U.S. rivals to cut costs and protect cash will only grow.
 
That will put the spotlight back on Ford Chief Executive Alan Mulally who will have to show that the company’s focus on turning around its largest market really was “a better idea.” (The three words that made Ford’s ad slogan famous in the 1960s and 70s — when the U.S. market was flourishing and Ford did, indeed, have several better ideas.)

Sovereign wealth funds — the increasingly powerful investment arms of governments around the world — are growing at a rapid pace, according to the Preqin Sovereign Wealth Funds Review.    

There are currently 46 active sovereign wealth funds worldwide, with aggregate assets at $3.05 trillion, the study says, adding that assets have risen 51 percent from the end of 2006.    

The Middle East is the biggest region for SWFs in terms of value, with 41 percent of all capital centered there. Asia has 31 percent of the capital, with Europe laying claim to 19 percent, according to the study.

Boosted by ballooning trade surpluses, these countries have been investing overseas, leading some to fear their strategic intentions. But several fund executives have recently said these funds present little threat to the fund management industry, but rather offer opportunities for asset growth.

Sovereign funds such as Temasek and the Government of Singapore Investment Corp have made high-profile investments in U.S. financial institutions such as Citigroup and Merrill Lynch, who sought billions of dollars after suffering huge subprime-related losses.

About 60 percent of the funds are investing in private equity, the study said.

“Sovereign wealth funds have long-term investment horizons, relatively few restrictions on investment, and are seeing their total assets being driven even-higher by record oil prices,” Tim Friedman, the editor of the study, says.

Morgan Stanley economist Stephen Jen earlier this week said the funds could reach $12 trillion in total assets by 2015, soon surpassing total official foreign reserves held by central banks, and becoming the main vehicle for capital investment.

The sovereign funds have been focusing on recapitalizing the sectors, like banking, where cash is needed to rebuild their balance sheets after the subprime meltdown resulted in massive losses. U.S. and European banks have been actively seeking cash from sovereign wealth funds.  

While some fear these funds are investing for political gain, many say there is only evidence of financial incentives for these investments.  U.S. lawmakers two weeks ago unveiled a task force to examine funds owned by foreign governments.

While the jury is out on SWF’s motivation, no one disagrees that times are tough, and the cash comes in handy.  But as Ralph Waldo Emerson once said: “Money often costs too much.”