In the red corner - retail investors keen to “Save Dragon Oil”. Armed with a website and a 3,000-page printout detailing of the Turkmenistan-focused oil explorer’s investors…

“We have re-run the numbers on an all scrip BHP Billiton takeover of Rio Tinto at a 30% premium (2.3 BHP shares for each RIO share). We see such a deal as materially EPS dilutive (by 12% even after year 3) and would significantly decrease BHP’s return on equity (from 25% to 12%).

“We do not see BHP making another takeover offer for RIO because: (i) The iron ore JV should capture many of the synergy benefits expected from the possible merger. (ii) If the iron ore JV fails on account of not passing regulatory hurdles similarly then we do not see a takeover receiving regulatory passage. (iii) We do not foresee shareholder support for the deal (and any such deal would use BHP script) with the potential EPS dilution and ROE erosion significant. (iv) Non-availability of sufficient credit facilities.

“We see a reinstatement of the buyback as a more preferable option for BHP shareholders than another tilt at RIO. A buyback of US$18bn in FY11 would be 7% EPS accretive and return gearing to a more normal level of 25% (BHP is debt free by end FY11 on our current forecasts).”

BayernLB, which like many other German landesbanken appears to have never met a toxic asset it didn’t like, had just paid 1.65 billion euros for a 50 percent stake in Hypo. Around half of that went into Haider’s government’s coffers.

True to his pork-barrel politics, Haider used the funds to, among other things, subsidise Carinthian teenagers’ driving licence fees, scrap kindergarten fees, and pay out cash to Carinthian families to “offset inflation” in 2008, conveniently timed shortly before an election.

This worked to cement Haider’s image as the generous leader looking after the man on the street. But since his death in a car crash last year, it shows that the basis of this policy was not sustainable. Hypo is now in urgent need of another year-end emergency capital injection of more than 1 billion euros, after it went cap in hand to the Austrian government and BayernLB for 1.6 billion euros last year already.

Hypo’s breakneck expansion in the former Yugoslavia is the main reason for its continued losses this year. Haider and his confidante, ex-CEO Wolfgang Kulterer, started and presided over this expansion, which let Hypo’s balance sheet balloon to more than four times what it was in 2002. (This is the same Kulterer who pleaded guilty last year of false accounting during his time as Hypo CEO.)

But Haider’s heirs in Carinthia, which still owns 12 percent of the bank, refuse to tap into the proceeds from the Hypo sale to help BayernLB prop up the bank’s balance sheet. They call for the Austrian federal government to step in.

“You can’t portray Hypo as the bad guy and pretend all other banks losing money in eastern Europe were just ‘unlucky,’” said Gerhard Doerfler, Haider’s successor as governor of Carinthia. “Hypo must not be treated worse just because it’s not based in Vienna.” (The big Austrian players in eastern Europe will all remain profitable this year and either won’t come for a second helping from the government’s banking package or didn’t tap it in the first place.)

Austria’s finance ministry is so far holding its course and says recapitalising the bank is first and foremost an issue for the owners. They, including Carinthia, will meet on Dec. 10. Financial watchdog FMA has told the bank they need to approve a capital injection then or face sanctions. Carinthians will know then how much more wealth the government will be able to spread.

QATAR PRICES BIGGEST MIDDLE EASTERN BOND ON RECORD
This week’s $7 billion offering from the State of Qatar marked the largest bond offering from a Middle Eastern issuer on record and the second multibillion dollar offering from Qatar this year.  For year-to-date 2009, debt capital markets activity from Middle Eastern issuers totals $38.6 billion, a 120% increase over last year at this time.
The offering, which was led by Barclays, Credit Suisse, Goldman Sachs, JP Morgan and Qatar National Bank, bested the previous Middle Eastern record, a $3.2 billion offering from UAE-based real estate developer, Nakheel Co PJSC.

TECH DEALS DOMINATE RECORD TAIWAN M&A ACTIVITY
Taiwan’s Innolux Display Corp agreed to merge with Chi Mei Optoelectronics Corp, a manufacturer of LCD TV panels in a merger valued at $13.1 billion, including debt.  The deal ranks as the largest merger in Taiwan’s history.
M&A activity in Taiwan totals $26.1 billion for year-to-date 2009, nearly five times last year’s total and the largest annual period for M&A activity in Taiwan on record.  High technology mergers account for just over 60% of activity in Taiwan this year, while financials account for $6.1 billion or 23%.

UNITYMEDIA IN BIGGEST BUYOUT EXIT THIS YEAR
Germany’s Unitymedia GmBH, a provider of cable television and internet services was acquired by Englewood, Colorado-based Liberty Global Inc in a deal valued at $5.2 billion.  A portfolio company of BC Partners and Apollo Management LP, the sale marks the biggest M&A exit for a buyout consortium this year.
Worldwide M&A activity for buyout-backed companies totals $75.0 billion for year-to-date 2009, a 58% decrease from last year at this time when activity totaled $177.5 billion.

Italian chocolate maker Ferrero could be interested in Cadbury’s gum and candy division, a unit worth about 5 billion euros ($7.4 billion), in a possible joint takeover bid, business daily Il Sole 24 Ore said on Friday.

TPG, Blackstone, Warburg Pincus, BC Partners and Advent are among the first-round bidders for discount retailer Matalan, which is being auctioned with an estimated price tag of about 1.5 billion pounds, the FT said.

Some of Goldman Sachs Group’s largest shareholders have asked the company to cut the size of its bonus pool and pass along more of its profits to investors, the Wall Street Journal said.

Yinka Adegoke and Sinead Carew report the appointment of PepsiCo veteran Michael White (pictured below), who has no experience in pay TV, as DirecTV CEO is being read as a sign the company’s parent, Liberty Media, just wants a baby-sitter until its sells the operation in the next couple of years.

Telecom leaders Verizon and AT&T approached Liberty earlier this year, they report. Both have cross-marketing deals with DirecTV and would leapfrog the rest of the market with the addition of DirecTV’s subscriber base. But fears of insurmountable regulatory resistance put those talks on ice.

Liberty Media shareholders are set to vote this morning on a plan to split DirecTV from Liberty Entertainment — a move that Wall Street believes could pave the way for a telephone company to put in a bid for DirecTV, leading to a similar bid for smaller rival Dish Network.

If Comcast gets its content pipeline connected to NBC Universal, the pressure on the telcos to boost subscribers could get them to test the regulatory waters again.

Finally, Blackstone Group’s Pinnacle Brands Corp is likely to buy U.S. frozen vegetable company Birds Eye Foods for more than $1.3 billion, according to the Wall Street Journal.

For the latest deals news from Reuters, click here.

Throughout 2009, United Technologies Corp Chief Executive Louis Chenevert’s mantra was that the diversified U.S. manufacturer was a “willing buyer” with a $2 billion takeover budget and that all it needed was to find a “willing seller.”

Its deal last week to buy General Electric Co’s security business for $1.82 billion answered the question of what the world’s largest maker of elevators and air conditioners was going to do with its M&A budget.

But one question was left unanswered — what of Textron Inc’s Bell helicopter unit? An executive at United Tech’s Sikorsky arm in March said that a merger with Bell was an “interesting hypothesis.”

Textron never commented on the idea.

Shareholders may have gotten their answer to that question on Wednesday.

“There aren’t many helicopter manufacturers out there and the ones that are out there aren’t selling,” Greg Hayes, United Tech’s chief financial officer, told investors, when asked about where the Hartford, Connecticut-based company would be focusing its M&A energy.

Once United Tech closes its takeover of GE’s security arm — which will be its biggest deal since 2005, when it bought Kidde — the company is probably “pretty much done” making big buys in that sector.

It remains interested, however, in smaller, so-called “bolt-on” deals in security, as well as control makers in the heating, ventilation and air conditioning area.

The security deal represented something of an M&A rapprochement between the two Connecticut industrial titans — it was the first major sale of a unit from one to the other since GE tried to box out United Tech in a bid for Honeywell International Inc, which was ultimately quashed by regulators.

But United Tech doesn’t expect a flurry of other unit sales to follow — a merger of GE’s jet engine business and United Tech’s Pratt & Whitney unit, for example, is not in the cards.

“I don’t think GE’s going to sell their business to us, not that I could afford it, probably,” Hayes said.

The chance of a joint Ferrero-Hershey bid may be slim. Questions about funding commitments and investment restrictions set on Hershey by its charitable trust ownership structure make any deal involving the maker of chocolate kisses a tough sell.

And market sources say that if they were successful, a Ferrero-Hershey tie-up would likely lead to a breakup of Cadbury along geographic lines.

Thain, speaking at the Reuters Global Finance Summit in New York, said a deal to sell a partial stake in Merrill Lynch to Goldman Sachs would have been better for him, but the sale of the entire Wall Street firm to Bank of America was the best outcome for shareholders.

Over a fateful weekend in September 2008, as Lehman hurtled toward bankruptcy, AIG floundered and the financial system looked into the abyss, Merrill held discussions with Bank of America, Goldman Sachs and Morgan Stanley for various transactions, Thain said.

Initial discussions with Bank of America involved either the sale of the entire company or a 9.9 percent stake and a multibillion credit line, the former Merrill CEO said.

With Goldman, discussions only involved the stake sale and the credit line. Discussions with Morgan Stanley about a strategic transaction were brief, he said.

"When Bank of America offered $29 a share on Sunday afternoon, it was clear to me that was the best thing for our shareholders," Thain said. 

Thain was fired by Bank of America soon after the deal closed, and is now considering a career in private equity and other jobs. 

"The risk to the shareholders, the risk to the company that a 9.9 percent stake and a multibillion dollar credit facility might not be enough was much too high," Thain said. "Now, for me personally, it might have been better. But my job was to protect the shareholders."