Most reporters covering the M&A space are all too familiar with the Sunday night dealwatch. Many big takeovers are traditionally announced on Sunday night so they can be splashed all over the front page of Monday papers  that are otherwise devoid of major news.

Now, meet the Friday afternoon death watch, which is threatening to ruin the weekends for many U.S. banking executives, their customers, regulators and some reporters.

Banking regulators typically swoop down and take over troubled banks on Fridays, and with the U.S. economy slowing, executives at many more banks may have to make changes to their weekend plans.

Although it is not a policy, the Federal Deposit Insurance Corp prefers to take over institutions on a Friday as it gives regulators the time to do the transition before reopening branches the following Monday.

“It gives you the weekend to put new people in place,” says John Douglas, a former FDIC general counsel who is now a partner at the law firm Paul Hastings.

“In an emergency situation they would do it earlier,” Douglas says. “But typically it is a Friday.”

It is a strong preference. Five banks have failed this year, and all of them have been taken out on Fridays.

It might just be a coincidence, but Friday evenings are also typically the time that both companies and politicians typically announce bad news — as it is the day that many newspapers tend to have earlier deadlines and as fewer people tend to read them on a Saturday. 

The latest bank failure — and one of the largest of them all – was just last Friday. Regulators swooped in to seize mortgage lender IndyMac Bancorp after a bank run in which panicked customers withdrew more than $1.3 billion of deposits in 11 business days. By Monday, regulators had reopened the bank’s doors and will run the bank while they look for a buyer.

Analysts decline to speculate about which banks might fail, but several smaller lenders and even larger ones appear to have elevated levels of troubled loans relative to their sizes.

Earlier this month, RBC Capital Markets analyst Gerard Cassidy estimated that more than 300 banks could fail in the next three years, up from his February estimate of no more than 150.

For at least a year or two, TGIF may not be the refrain at many banks.

(Photo credit: Reuters)

In what looks like the perfect prescription for growth, Teva Pharmaceutical is buying rival generic drugmaker Barr Pharmaceuticals Inc. The over $7 billion deal, plus about $1.5 billion in debt, is aimed at expanding Teva’s leadership in the U.S. market and fortifying its presence in Europe. Israel-based Teva, the world’s largest generic drug company, plans to buy New Jersey-based Barr for $66.50 per share in cash and stock. The price represents a 42 percent premium to Barr’s closing price on Wednesday, the companies said. Teva told analysts in February it was seeking to extend its U.S. market share to 30 percent of generic prescriptions by 2012, up from about 20 percent. Barr is about the fifth-largest generic company by U.S. prescriptions.

Freddie Mac may have its own prescription for keeping itself alive. The mortgage giant is considering raising capital by selling as much as $10 billion in new shares to investors, The Wall Street Journal reported, citing people familiar with the matter. The report comes after the U.S. Treasury and Federal Reserve announced a plan on Sunday to shore up the balance sheets and borrowing capabilities of Freddie Mac and sister company Fannie Mae. Such a share sale, which has not yet been determined, could forestall a full government rescue, the WSJ said. The main buyers for any new-stock issues are likely to be existing shareholders worldwide, the paper said, citing one person involved in the discussion.

And what better way to the end the week than with the latest installment of the classic soap opera, As My Yahoo Turns. In the latest episode, a person with knowledge of the plans says Yahoo is unlikely to get into a bidding war over AOL with Microsoft Corp because if Microsoft gets in the way, Yahoo could instead renew talks over News Corp’s Web properties. Yahoo, seeking to shape an independent growth strategy after rebuffing Microsoft’s bid to take it over, has kept in contact with News Corp, the source said, but discussions with Time Warner Inc about AOL appeared further along. Did you get all that? News Corp chief Rupert Murdoch said just last week that a deal between his company, which owns the popular MySpace online social network, and Yahoo was “very unlikely.” But that was last week. Once again, stay tuned …

More deals of the day:

** Zentiva advised its shareholders to reject a $2.1 billion takeover offer by France’s Sanofi-Aventis, as investors awaited a higher one in the bidding war with a Czech financial fund.

** The private equity arm of AMP Ltd has received several offers for Jeminex Group, a company in its portfolio with an enterprise value of up to A$400 million ($388 million), two sources familiar with the matter told Reuters.

** Rambler Media, the British-registered owner of Russia’s Rambler Internet portal, said it has agreed to sell the Begun advertising agency to Google Inc for $140 million.

** Spanish construction firm ACS has agreed to sell its 45.3 percent stake in energy utility Union Fenosa to France’s EDF and a deal may be announced on Friday, Spain’s ABC newspaper reported.

A throng of union leaders, New York City council members, and service workers descended on Kohlberg Kravis Roberts’ New York headquarters on Thursday,  to pressure Henry Kravis, one of the buyout giant’s founders, to pay more taxes.

The crowd of more than 150, some brandishing placards with slogans such as “No tax breaks for Buyout CEOs” and “Take back the economy”, was made of workers demanding an end to tax provisions that protesters say help private equity bosses pay lower tax rates than a janitor or security guard.

Andrew McDonald, a spokesman for the Service Employee International Union said the activists singled out KKR, rather than other private equity firms because it is the second biggest employer in the U.S. The union says the number of employees in KKR’s portfolio companies is 800,000.

Mike Fishman, President of SEIU’s Local 32BJ, said the tax dollars KKR doesn’t pay “deprives working people of social services.” 

KKR owns businesses including mattress maker Sealy, software firm Sunguard and retailer Toys R Us. 

In a statement, KKR said, “We disagree with the SEIU’s distortion of the facts and their street theater approach.  We work hard to build better companies that benefit multiple stakeholders - including the millions of pension beneficiaries who receive good returns on our investments.”

“We’re calling for a code of conduct for treating workers more fairly,” said McDonald. “We have an economy that’s not working for working people.”

Several New York City political figures were present, including Manhattan Borough President Scott Stringer and City Council members Eric Gioia and John Liu. Liu says that closing the New York City tax loophole in question, the Unincorporated Business Tax, would generate $100 million for New York City.

The union has plans to expand its advocacy. “Today it starts with taxes, but it will extend to a whole set of other issues,” MacDonald said.

The one potential benefit to the M&A slowdown? Helping the environment…a little.

It might be a stretch, but finding even the tiniest bright spot to the weak M&A environment may help soothe the pain felt as global dealmaking dropped 30 percent in the first half of the year.

With M&A volume down, and banks tightening the rein on expenses, most of the focus has been the havoc wreaked on banks’ bottom lines and the potential impact on year-end bonuses.

One study, however, found that the M&A slowdown is actually good for the environment.

How so? A study commissioned by Merrill DataSite, which provides password-protected websites that can store documents used for due diligence, said M&A advisers jetting around Europe to work on cross-border deals emitted 98,000 tons of carbon dioxide over the past year. (How does one measure that?)

The study also says the bankers used more than 112 million pages of A4 paper (There must have been a pretty scientific way of measuring that, too). An average cross-border deal apparently involves five international flights per individual and 20,000 pages of paper. Who knew?
 
And why did Merrill DataSite commision such a study? Well, the company says it is enjoying a booming business as companies seek to cut costs. 

So, the study concludes, as bankers travel less now, less carbon-dioxide gets emitted and less paper gets used. Bankers may not be happy, but Mother Nature is.

Banks battered by the credit crisis may look cheap, but so far neighbors have mostly resisted the temptation to gobble up neighbors, thanks in no small part to an accounting peculiarity that threatens to turn a target’s balance sheet into a ticking time bomb set to explode on purchase.

Under U.S. accounting rules, if a company acquires another, it must record the value of the target’s assets and liabilities at their market value at the time of purchase. For banks acquiring banks now, that is a problem. The purchase could end up cutting into the acquirer’s capital.

But Jamie Dimon is not going to let one thorny accounting issue hold him back.

The JPMorgan chief, fresh from digesting Bear Stearns, said at a conference call after announcing higher-than-expected quarterly profits that he expects the current crisis to lead to more mergers in the banking sector over time.

And although purchase accounting makes doing a deal difficult, he seems poised to do one when he sees one.

“I think the mark-to-market accounting makes it harder for a bank to buy a bank because you have to basically write the loans to a market value,” Dimon said. “But it does not make it impossible. Certainly not for us.”

His finance chief, Mike Cavanagh, echoed the sentiment.

“We wouldn’t do a deal or not do a deal based on pure accounting…we would do or not do a deal based on how much value we thought it adds to shareholders,” Cavanagh said. “Just makes it harder, that’s all.”

(Photo credit: Reuters)

Shares of Barr Pharmaceuticals Inc surged more than 22 percent on Thursday on media reports that long-rumored talks with Teva Pharmaceutical Industries might finally lead to a deal.

TheMarker and Globes financial newspapers reported that Israel-based Teva, the world’s biggest maker of generic drugs, was in talks to buy New Jersey-based Barr, marking further consolidation in the generic drugs industry. A deal could be in the range of $7 billion to $7.5 billion, the media reports said. The companies declined to comment.

The deal would boost Teva’s market share in the United States, where it wants to expand its presence, and give it a formidable franchise in oral contraceptives.

Goldman Sachs analysts questioned the timing and need for Teva to make such a move:
“Our initial reaction from a Teva perspective (assuming credence behind the report) would be surprise on both timing and target. At the risk of getting ahead of ourselves given the lack of any corporate commentary, a combination here would bring attractive product and geography additions to Teva but it doesn’t initially strike us as a need to own asset…a deal here would also add significantly to Teva’s US exposure (albeit without meaningful product overlap) where we see slowing growth in the next 3-5 years relative to international markets.”

Still, Teva has the ability to easily finance a deal, Bank of America Securities analysts said. The company has a net debt of about $1.7 billion, but is expected to generate $2 billion in free cash flow in 2008, analysts said. With financing tough to come by for most mergers lately, Teva actually appears to be well-positioned if it moved ahead with a deal.

Plus, Teva could get Barr for a decent price. Before news of a possible deal triggered a jump in Barr’s stock price, the company had been trading at 14-times 2009 earnings forecasts, which was below their historical range, Bank of America said. Over the past 10 years, Barr’s price-to-earnings multiple has averaged 17-times, analysts said.

Shares of Barr hit a midday high of $58.33 and traded at $57.40, up 22 percent in afternoon trading on the New York Stock Exchange. Teva shed 2.1 percent on Nasdaq.

With speculation for a deal already raising Barr’s stock price, the question remains what type of premium could be paid for a deal that runs the risk of some antitrust scrutiny, competitive pricing pressure in the generic drug market, and exposure to the weak U.S. market?

(PHOTO: Barr Pharmaceuticals Inc website)

It looks like Merrill Lynch has made up its mind regarding its house-cleaning priorities. The investment bank is expected to announce on Thursday that it will sell its 20 percent stake in Bloomberg LP back to the news and financial data company for about $4.5 billion, a source familiar with the matter said. No one on either side is talking, but selling the Bloomberg stake could help Merrill Chief Executive John Thain raise capital to make up for write-downs related in part to subprime mortgages. It is not immediately clear what role, if any, New York Mayor and Bloomberg founder Michael Bloomberg (pictured), who still owns about 70 percent of the company, has played in the Merrill transaction. Merrill also owns a substantial stake in money manager BlackRock Inc, but BlackRock, the largest publicly traded asset management company in the United States, said on Thursday that Merrill had decided against selling the stake. Merrill reports earnings later in the day.

Shares in Teva Pharmaceutical Industries fell nearly 1 percent on Thursday after reports it was in talks to buy rival Barr Phamaceuticals for up to $7.5 billion. TheMarker and Globes financial newspapers reported online overnight that Israel-based Teva, the world’s biggest maker of generic drugs, was in talks to buy New Jersey-based Barr in what would be a further consolidation of the generic drugs industry. TheMarker put the price tag at $7.5 billion, citing capital market sources. That would make it Teva’s biggest acquisition, surpassing the $7.4 billion purchase of Ivax two years ago. Globes cited a price of $7 billion to $7.5 billion. Barr has a market value of $5.1 billion.

And it’s starting to get ugly in Europe. Continental Chief Executive Manfred Wennemer withdrew from the public eye on Thursday to plot his defense against an unwanted $18 billion bid from family-owned Schaeffler Group. If Schaeffler succeeds in buying the group, which is three times its size, it would be the first time a German family business has taken over a company listed on the country’s blue-chip DAX index. But Schaeffler’s advances have stirred resentment at Continental’s headquarters in Hanover, sparking a war of words between both sides. On Wednesday, Continental’s Wennemer hit back at the offer, saying it was too low and warning that the predator could ultimately dismantle Continental. Schaeffler, owned by German billionaire Maria-Elisabeth Schaeffler, countered it had no such plans, labeling Wennemer’s tone “incomprehensible”.

More deals of the day:

** UK-based buyout firm Doughty Hanson said it agreed to buy a majority stake in TMF, a management and accounting outsourcing services business, for 750 million euros ($1.2 billion).

** Indonesia’s PT Bumi Resources has acquired a majority stake in Australian-listed Herald Resources Ltd after Herald’s board recommended Bumi’s improved A$563 million ($547 million) bid.

** Swiss insurer Zurich Financial Services said it would buy two Brazilian companies, paying up to $241 million and adding to a string of recent smaller acquisitions. Zurich said it would buy 87.35 percent of Companhia de Seguros Minas Brasil and 100 percent of Minas Brasil Seguradora Vida e Previdencia from Banco Mercantil do Brasil.

** Bank Hapoalim, one of Israel’s largest banks, said it had agreed to acquire 78 percent of Russian mid-sized SDM Bank for $111 million.

** Australian mining contractor Ausdrill Ltd has agreed to buy Taylor Wimpey Plc’s mining division in Ghana for $20 million, expanding its business in Africa, coveted by its suitor Macmahon Holdings Ltd.

** Daiichi Sankyo and Ranbaxy Laboratories said the Japanese drugmaker’s deal to take over the Indian firm was “binding and final”, but the statement failed to halt Ranbaxy shares slide.

** Chinese state-owned trading firm Sinosteel has lifted its stake in Australian iron ore explorer Midwest Corp to 54 percent, with its takeover offer due to close.

** Hudson’s Bay Co, the Canadian retailer whose name is synonymous with the country’s frontier past, was bought by the U.S.-based private equity fund that owns the Lord & Taylor department store chain, one of the oldest names in American retailing.

** Bilfinger Berger, Germany’s second largest builder, has bought U.S. industrial services specialist Tepsco from private investor Churchill Equity, it said.

Grey Wolf is licking its wounds after shareholders of the U.S. oil driller rejected the company’s proposed buyout of oil services firm Basic Energy Services on Tuesday. 

Grey Wolf’s shareholders were likely banking on a takeover offer from Canada’s Precision Drilling Trust, which had previously bid $10-a-share for the company and said that the offer would be back on the table if Grey Wolf broke off its deal for Basic. 

Another deal in the U.S. energy services sector could also be in peril, said Raymond James analyst Marshall Adkins, and this one doesn’t even have a competing bid to shake up shareholders.

“It wouldn’t be entirely surprising to see a similar result in the upcoming Allis-Chalmers/Bronco Drilling vote,” Adkins said in a research note on Wednesday. 

Oilfield service company Allis-Chalmers Energy is trying to buy Bronco Drilling in a stock and cash deal currently valued at about $450 million.

Adkins said that, given a recent pullback in Allis-Chalmers shares, the current offer represents a roughly 16 percent discount to its peer group’s price-to-earnings and enterprise value-to-EBITDA multiples.

“As a result, shareholders could reject Allis-Chalmers’ second offer for Bronco,” Adkins said. “Stay tuned for next month’s shareholder vote!”

Bronco shareholders vote on the offer on August 14.

(Reporting by Michael Erman)

Sprint Nextel Corp seems to have a tough time no matter what it tries to do.

Shares of Sprint and South Korea’s SK Telecom Co fell on news the telecommunications companies were in talks for a technology collaboration after previous efforts at a deal had collapsed.

Shares of Sprint lost almost 4 percent in afternoon trading on Wednesday, while SK Telecom closed down 2.7 percent.

Sprint and SK Telecom are discussing a possible pact for technology, but are not in talks for a merger, sources familiar with the matter had told Reuters. The talks may lead to the companies working together to create data applications for cell phones, one source had said. Sprint and SK Telecom declined to comment.

Some media reports said that SK Telecom is considering a minority investment in Sprint even though the No. 3 U.S. mobile telephone services company in November had rejected a $5 billion investment by SK Telecom and a group of private equity firm.

“We note that the previous funding offer was made when Sprint stock was at (about) $15 — 70 percent above current levels,” Goldman Sachs analysts said in research report. Sprint currently trades at about $8.70.

Analysts dismissed speculation that SK Telecom could buy Sprint, which has been struggling to stem the loss of subscribers and integrating its 2005 acquisition of Nextel. Sprint has a $26 billion market capitalization, compared with SK Telecom’s market cap of about $15 billion.

“The size of a potential outright acquisition of Sprint would be problematic given SK Telecom’s smaller size,” Goldman Sachs said. “This deal would require a sizeable cash component, an unlikely scenario in current capital market conditions.”

“SK Telecom’s interest in Sprint’s assets could be lessened given that Sprint agreed to cede partial control of its WiMax spectrum through a contribution into a Clearwire JV,” Goldman Sachs said.

Both SK Telecom and Sprint run wireless networks based on the same CDMA technology, which is widely used in the United States. They have also been looking at the emerging WiMAX technology for next-generation high-speed wireless data.

“What SK brings to the table: SK Telecom’s original proposal highlighted the following merits: (1) economies of scale on handsets/equipment, (2) experience in marketing and driving uptake of mobile data, and (3) technical/strategic expertise on both LTE and WiMax,” Goldman Sachs said.

Still, analysts said SK Telecom has had poor results from its overseas investments so far, especially in the United States. Last month, SK Telecom agreed to sell its money-losing U.S. mobile unit, Helio, for $39 million in stock to Virgin Mobile USA and to invest $25 million in Virgin Mobile. Both Helio and Virgin rent space on Sprint’s network.

A deal involving all three — Sprint, SK, and Virgin Mobile USA — could make more sense, said Lee Shi-hoon, an analyst at Hyundai Securities.

General Motors Corp, which has lost $51 billion in the last three years (yes, that’s right, $51 billion) and is trying to cut costs and restructure yet again, said yesterday it will try to sell up to $4 billion in assets.

That’s a lot of $$ to raise from asset sales. In fact, it’s almost as much as the automaker’s market cap of about $5.6 billion.

So what can it sell? We know it is already reviewing its Hummer brand — and a sale is likely. But with skyrocketing gas prices and a huge slump in demand in the U.S., Hummer, with its 9-14 miles per gallon, will probably not even net GM $1 billion.

What else could it sell? A sale of Onstar, its vehicle communications system, is possible. A sale of its remaining 49-percent stake in its finance arm, GMAC, is also possible. But what is most likely is that GM — often criticized for having too many brands — will try to offload more brands.

Next likely to come under scrutiny (even though GM has said no other brands are for sale) are Saturn — a fading-but-recently-revived brand made more attractive with an independent dealer network — and Saab —  a Swedish “near-luxury” brand which has the disadvantage of being “neither here nor there,” as some investment bankers have said. (It doesn’t have the premium luxury positioning but lacks the scale of a mass-market brand).

But here’s the real conundrum: Potential buyers for the brands would have to be from overseas — a foreign automaker who wants to gain a presence in the U.S. auto market. As U.S. vehicle sales fall to their lowest levels in 15 years and U.S. automakers are cutting production to align with ever-falling demand, it wouldn’t make much sense to help more automakers come into the market and expand their presence here.

That would only end up putting more pressure on profit margins for everyone. It would force the Big Three to cut production further. It would create more competition and more capacity amid slipping demand. It would give a new competitor a space, a dealer network and a platform to grow in a market that is already hurting the Big Three U.S. automakers so much that analysts are wondering if a bankruptcy is on the horizon.

So it doesn’t really make sense. Besides, with GM having said it needs to raise capital by selling assets, potential buyers are likely to lowball offers. But then again, GM needs the cash. Sure, it has $24 billion in cash on hand, but the automaker is burning through a few billion every quarter.

Desperate times call for desperate measures.