Dutch bancassurer ING says it will split itself in two as part of a restructuring deal with the European Commission, transforming itself over the next four years into a smaller Europe-focused bank.

It is also launching a 7.5 billion euro rights issue to pay back 50 percent of its aid from the Dutch state early.

Also in the Netherlands, brewer Heineken has held discussions to buy the brewing operations of Mexican conglomerate Femsa, the Financial Times reports.

In other M&A news:

UK budget retailer Matalan has had offers from private equity firms that could value it at around 1.5 billion pounds, according to several reports.

Indian state-run telecoms firm Bharat Sanchar Nigam (BSNL) regards a $13.7 billion price for a 46 percent stake in Kuwait’s Zain Telecom is expensive, the Business Standard reported, citing the firm’s chairman. For the Reuters story click here.

Lloyds Banking Group’s private equity unit LDC is in talks to acquire legal outsourcing company CPA Global for 400 million pounds ($666 million), the Financial Times reports.

Insurance companies are the focus of many deals pages on Thursday, with Prudential eyeing a listing in Asia, AXA moving to sell a stake in China’s Taikang and Aviva detailing its restructuring now the Delta Lloyd IPO is moving.

Other deal news today includes:

* South Korea’s Korea National Oil Corp (KNOC) has agreed to buy Canada’s Harvest Energy Trust for C$1.8 billion, the Canadian company said.

* Brazilian telecoms company GVT hired the local investment banking units of Credit Suisse and Goldman Sachs to help it respond to takeover attempts by two global rivals.

* Zambia has eight suitors remaining in the hunt to buy Zamtel, Zambia’s fixed-line telephone operator, a source told Reuters.

With just over two months to the end of the year, there is a sense that time is running out for getting deals done in 2009. Many of the long-running deal sagas are coming to a close, or are getting done. Overnight, news emerged that BAA has finally agreed a 1.5 billion pound sale of British airport Gatwick.

Other deal news in the papers on Wednesday include:

* U.S. Bancorp is eyeing FBOP Corp, an owner of eight banks that may be put up for sale by the Federal Deposit Insurance Corp (FDIC), the Wall Street Journal reported on Tuesday, citing people familiar with the situation.

* National Express’s largest shareholder, Spain’s Jorge Cosmen, supports a merger proposal by British bus and rail operator Stagecoach, the Financial Times reported.

For months, as he endured hearings on Capitol Hill and fought off a series of lawsuits, Bank of America CEO Ken Lewis trudged through a post-apocalyptic financial landscape against a steady drumbeat of questions about his future. The deal he had called “the strategic opportunity of a lifetime” — his purchase/salvage of Merrill Lynch — had swung from an act of patriotism, keeping the American way of banking from utter ruin, to a scandal over Merrill losses and bonuses.

Perhaps he should have seen the writing on the walls of the vacant houses financed by Countrywide, the mortgage lender Lewis purchased/salvaged just six months before the Merrill deal. The two transactions may have been strategic gems, but they were laced with political poison as the economy floundered toward its dramatic deleveraging and taxpayers pumped $20 billion into Bank of America to fund the Merrill deal.

“It was only a matter of time,” Campbell Harvey, a professor at Duke University’s business school, told Jon Stempel. “There is too much collateral damage.” As Stempel reports, Lewis spent north of $130 billion on acquisitions, including FleetBoston Financial Corp, the credit card issuer MBNA Corp, LaSalle Bank Corp, Countrywide, Charles Schwab Corp’s U.S. Trust private banking unit, and Merrill. In buying Merrill, he added a giant investment bank to what was already the largest U.S. retail bank, credit card issuer and mortgage provider. (Wells Fargo & Co has since become No. 1 in mortgages.)

Lewis plans to be gone by the end of the year and leaves no immediate successor, so Bank of America has only a few months to figure out who to anoint. Though his demise is a cautionary tale, odds are good that the bank’s worst days are behind it. An incoming chief can blame Lewis for any ill-conceived agreements surrounding Merrill. More importantly, with economic recovery apparently at hand, Lewis’ deals of a lifetime have a better chance than ever of paying off.

More big consumer brands are being dealt across the Atlantic. With Kraft’s bid for Cadbury churning, consumer goods giant Unilever plans to pay 1.275 billion euros ($1.87 billion) for a chunk of Sara Lee’s personal care brands, helping the cake maker sheds non-core businesses to focus on food. Sara Lee shareholders are sweet on the deal – bidding the stock up more than 9 percent in early trade. In a space reserved for winners and losers, this deal looks like it has natural benefits for both parties.

The asset sale is quite a bit less rich than the chocolate deal, which is for the whole of Cadbury rather than just its brands, the soap business brings with it a fresh scent of a recovery in deals activity. It is the first major acquisition for the Anglo-Dutch company’s new Chief Executive Paul Polman, and Sara Lee’s CEO Brenda Barnes is still only half-way through her business-shedding exercise.

Credit Suisse analyst Charlie Mills said the price Unilever is paying of 10 times core operating profit, or EBITDA, is not huge by industry standards, reflecting the fairly disparate collection of assets. Brylcream hair gel is part of the mix.

“We’re not convinced that this is the greatest collection of assets but another acquisition shows Unilever still moving from the back foot (cost cutting and disposals) to the front foot (volume growth and acquisitions),” he said. It may also be worth remembering that the deal speaks to Unilever’s business. It is built on brands, whereas Sara Lee is a brand unto itself.

So far as markets are concerned, Sara Lee is the winner here. Having been able to find a buyer for a huge chunk of assets it had on the block, it is now going to be able to buy back more stock and preserve its 11-cent quarterly dividend.

ING sells its 51 percent stake in a wealth management joint venture to partner Australia and New Zealand Banking Group for $1.6 billion as the Dutch group slims down through asset sales.

ING is offloading assets to raise 6-8 billion euros, and is also selling its Asian and Swiss private banking assets. HSBC is the front-runner to buy the Asian private bank assets, sources tell Reuters.

In other M&A news:

Britain’s biggest pubs group, Punch Taverns, puts more than 300 of its worst performing pubs up for sale as it strives to cut its debt pile.

French state-controlled power group EDF could raise its stake in waste, water and transport firm Veolia to 13-14 percent as Veolia’s boss is set to go to EDF, French daily Les Echos said.

For deals reported by other media click here.

Canadian media firm CanWest Global Communications Corp will sell down its 50.1 percent stake in Australia’s Ten Network, worth about A$714 million ($620 million), in a move that could put Ten into play.

In other M&A news reported by Reuters and other media on Thursday:

* Chilean forestry group CMPC said it is in talks to buy a unit of Brazilian giant Aracruz for $1.4 billion, which would give it access to the world’s cheapest pulp producing market.

* Chinese solar wafer manufacturer ReneSola said it will buy Dynamic Green Energy Ltd for about $88.5 million, mostly in stock, expanding the arts company into the market for solar panels.

* U.S. pharmaceuticals company Abbott Laboratories has made an offer to buy the drug unit of Belgian conglomerate Solvay SA, competing with Swiss drugmaker Nycomed, the Wall Street Journal says, citing people familiar with the matter.

* Toyota will sell its brokerage unit to Tokai Tokyo Financial as part of efforts to consolidate resources into automobile operations, the Nikkei business daily reports.

POSCO and South Korea’s chemicals-to-brokerage group Hanwha are studying a potential bid for Daewoo International, sources close to the companies tell Reuters. Daewoo International’s market value is around $3 billion.

Meanwhile, five British companies unleash a wave of cashcalls to raise over 1.6 billion pounds, rushing to strengthen balance sheets during a “window of opportunity” as investors show a strong appetite to support fundraisings.

In M&A news reported by Reuters and elsewhere on Wednesday:

U.S. oil and gas exploration and production firm SandRidge Energy strikes a deal to buy bankrupt rival, Crusader Energy Group, for $230 million, in a cash and stock deal that would give it additional acreage in the Anadarko and Permian basins.

British mobile phone operator Vodafone is buying another 6 percent stake in its Indian mobile joint venture from two of its associates for $180 million, adding to its 52 percent ownership, the Economic Times reports.

Taiwan’s Far Eastone wants to buy private equity firm MBK’s stake in China Network Systems, a Taiwan cable TV operator, The Commercial Times says. Click here for Reuters story.

China’s Geely Automobile, whose parent has been linked with both Volvo and Opel, said it would raise $334 million by issuing convertible bonds and warrants to an affiliate of Goldman Sachs.

Genetic-testing specialist Qiagen is buying British peer DxS Ltd to expand its cancer diagnostics business and will raise its capital to fund the deal and possibly further takeovers.

There are signs of life returning to M&A in the potash sector -- with market speculation that Potash Corp of Saskatchewan may bid for Germany's K+S.

Canada's Potash Corp -- the world's largest producer of the key ingredient in synthetic crop fertiliser -- said last month that North American potash inventories had fallen in July, an indication that sales of potash had begun to move again after a seizing up of the market.

Some analysts reckon that the market is now reaching a bottom and that there will be a sharp rebound in 2010 as farmers start buying again.

K+S Chief Executive Norbert Steiner told Reuters in an interview on Tuesday that the world's fourth-largest potash supplier saw an end to a decline in prices in Europe, but that demand remains depressed.

And K+S is not in the strongest position right now. The company is looking at a capital increase as one of a clutch of measures to bolster its balance sheet following its acquisition of Morton Salt from Dow Chemical.

With K+S trading at just over 35 euros/share compared with a price of nearly 84 euros/share a year ago, it is probably time for Potash Corp to at least take a look.

There is also renewed speculation that Potash Corp itself could be taken over by a mining company.

Bond sales are at a record, equity markets are at year-highs, private equity firms are sitting on huge cash piles -- Blackstone alone has $29 billion -- and banks are lending to each other again.

The ingredients should all be there for a resurgence of cash-driven mergers and acquisitions. But instead, the market is in hibernation.

So far the value of all M&A deals completed this year totals $990 billion. You have to go back to 2003 -- when the total for the year was $1.23 trillion -- to find a figure this low, according to Thomson Reuters data.

Of this, some $364 billion -- just 37 percent -- were cash deals, marking a dramatic shift in the mix of recent years when cash has dominated.

The main spanner in the works is the still dire state of banks' balance sheets and the crippled syndicated loan market. This has kept a tight lid on cash bids of any size, with the mega merger or takeover a distant memory.

Most banks are doing all they can to shrink their balance sheets, guard against problem exposures and to lend to their best clients. As a result, global syndicated loan volumes hit their lowest monthly volume since 1993 in July.

True, corporate bond issuance is booming and companies are raising equity, but this is not going to be enough to fill the void. And even if companies are confident of being able to fund their purchases with bonds, they first need to find a bank to give them a bridge loan.

The absence of debt finance has all but killed off fully-funded hostile cash bids. One consequence has been a shift to the type of bear hug Xstrata is attempting on Anglo American, where a attempts to win shareholder support for a deal before launching an offer.

Meanwhile, other companies are assembling warchests to give them the opportunity to move quickly when they spot a bargain. German chip-maker Infineon, for instance, recently raised equity to repay borrowings and prepare a stash of dry powder for acquisitions.

Another approach is to raise equity by partially listing subsidiaries. Spanish bank Santander is seeking to float part of its Brazilian unit and British insurer Aviva is doing the same with its Dutch operation, Delta Lloyd. Not only does this raise some fresh capital to bolster the parent's position, but gives the unit concerned an acquisition currency without drawing on its cash-strapped parent.

An alternative is to buddy up with a cash-rich financial investor. Germany's Bertelsmann, for example, teamed up with KKR to form a music rights management company designed to prey on distressed competitors.

One area where buyers don't always have to put up that much cash for control is in distressed companies. In some cases, banks are willing to hand over the keys so long as the acquirer is willing to inject some more cash into the company to put in on a stable footing. One example is the acquisition of Pearl by special purpose acquisition company Liberty International, where Liberty put in fresh cash, and the banks wrote down some of their debt.

Vulture investing isn't going to spur much of a recovery in overall volumes, however. That's probably a good thing. A great deal of the hyperactive M&A of recent years was wasteful and left businesses saddled with too much debt. Moreover, many businesses are more concerned about bolstering their balance sheets and steering a steady course through the recession rather than empire-building.

There remains another problem with distressed M&A: the relative shortage of targets. Banks have been reluctant to get too tough with troubled borrowers for fear of realising further losses -- so rather than foreclose they have often been prepared to amend debt terms and relax covenants. This has allowed many to ride out the storm so far. And for less distressed sellers, market volatility has made it harder to agree on value.

Like the banks, CEOs are being equally cautious about what they do with their cash. Those who have survived the financial crisis aren't about to be caught napping a second time. They may be tempted into share offers to grab assets they think worth acquiring if they see greater market and economic stability returning, but most will be keeping their cheque books deep in their inside pockets for now.

-- By Neil Unmack and Alexander Smith