General Growth battle intensifies
The battle for control of General Growth, owner of shopping centers across America, continues, as it weighs two rival offers.
General Growth, which is trying to exit bankruptcy, will consider at a board meeting Thursday whether to postpone a key court hearing set for Friday as it continues talks with suitors Simon Property and Brookfied Asset Management.
It has asked Simon to increase its $5.8 billion bid. General Growth may also come back with a new counter0ffer on antitrust issues that could arise from a merger of the two largest U.S. mall owners.
Despite being in bankruptcy since last April after grappling with falling rents and rising vacancies, bidders are keen to take control of the Chicago-based company, which owns a number of malls which generate high cash in posh destinations.
If shoppers, which fuel America’s economy, return to stores in force, it could turn into a good investment.
After listing, General Growth attracts more interest
Fairholme Capital Management and Pershing Square, two key investors in General Growth Properties, have offered to invest another $3.93 billion in the mall operator to help it emerge from bankruptcy. Shareholders, who only had access to the stock again on the NYSE as of last Friday, bid the stock more than 4 percent higher in early Tuesday trade.
While the new offer does not knock out the one from GGP rival Simon Property Group, it could get more support among unsecured creditors who would have had to settle for cash and stock under GGP’s original proposal.
The latest deal builds on one from Brookfield Asset Management but now allows General Growth to remain an independent company instead of selling itself to Simon, its largest competitor.
Simon’s bid is still out there, so while General Growth’s managers might get excited by attracting more interest, the race to win control of the country’s number two mall operator may still have more than a few twists and turns.
DealZone Daily
For the latest deals news from Reuters, click here. And here’s the top stories from the newspapers (some external links may require subscription):
John Tiner, former head of the Financial Services Authority, and now chief executive of Resolution – the investment vehicle established by Clive Cowdery — said his company is targeting pure asset management businesses in its quest to create an enlarged British life assurance and fund management group, the FT said.
LLoyds Banking Group is in talks with stockbroker Execution about creating a joint venture as it plans to build a sizeable presence in the UK equity broking market, the Times said.
In asset management, it’s shedding season
For asset managers, the shedding season seems to have no end in sight.
More asset management units of financial institutions are likely to find their way into the market in the months ahead, as they look to separate distribution from product creation, Jefferies & Co’s financial institution group predicts.
More than two-thirds of global asset management deal activity came from such divestitures in the third quarter, a record level in a three-month period, Jefferies said.
These included deals such as Bank of America’s agreement to sell the long-term asset management business of Columbia Management to Ameriprise, Bank of New York Mellon’s acquisition of Insight Investment from Lloyds, and the purchase by Sumitomo Trust & Banking of Citigroup’s 64 percent interest in Nikko Asset Management.
“As larger financial institutions refocus on strategic strengths, we expect they will continue to separate asset management distribution from manufacturing,” said Aaron Dorr, a managing director.
There were 38 deals in the third quarter, down from 66 in the same period last year, but disclosed deal value climbed to $4.5 billion from $4.2 billion and managed assets transacted rose to $749 billion from $728 billion, Jefferies said.
from Summit Notebook:
Tax evaders on the run
By Neil Chatterjee The U.S. has promised it will hunt down tax evaders. And it seems tax evaders are on the run. DBS bank, based in the growing offshore financial centre of Singapore, told Reuters it had been approached by U.S. citizens asking for its private banking services. But when told they would have to sign U.S. tax declaration forms, the potential clients disappeared. Swiss banks also approached DBS on the hope they could offload troublesome U.S. clients to a location that so far has not been reached by the strong arms of Washington or Brussels. DBS said no thanks. In fact many private banks and boutique advisors now seem to be avoiding U.S. clients. Will this spread to other nationalities, as governments invest in tax spies and tax havens invest in white paint? Is this the end of offshore private private banking?
KBW analysts see asset manager deals
Asset managers are in for some deal-making as the sector tries to deal with the chinks exposed by the financial crisis, KBW analysts predict.”Stressed capital markets have depressed profitability at most asset managers and brought to the fore many of the challenges that have been confronting the industry but were obscured by the bull market,” the analysts write in a report.Some of the deal activity has already been playing out as divestitures by financial services companies, with negotiations ongoing for such units as AIG’s business and Bank of America’s Columbia.KBW’s analysts predict most acquisitions are likely to be smaller transactions.Possible buyers? Invesco, BlackRock, Bank of New York Mellon, Franklin Resources, Legg Mason, Affiliated Managers Group, Federated Investors, Blackstone, Fortress, GLG Partners and others have expressed a continued interest in acquisitions, they said.Those hungry for larger deals could include Franklin and Bank of New York Mellon, the analysts said, adding that they see little likelihood of deals between publicly traded asset managers.
Deals du Jour
Citigroup plans to sell 20 businesses in consumer finance, many of them located in Europe, its chief executive Vikram Pandit said in an interview with Singapore’s Business Times.
He said the move was due to the shift in the consumer finance market where “there is less funding availability and they are probably less robust as businesses.”
Pandit also said that the group’s capital position following the completion of the exchange of preferred shares for common equity in July, reflected an “incredible financial strength.”
In other M&A related stories reported by Reuters and other media on Wednesday:
Austrian oil and gas group OMV is in talks to buy a $1.2 billion stake in Turkish fuel retailer Petrol Ofisi, OMV and Petrol’s majority owner Dogan Holding said. The move comes after OMV earlier this year sold its stake in Hungarian peer MOL after an ill-fated takeover attempt, raising money that analysts expected it to use to expand in other parts of the region. For the Reuters report click here.
India’s Bharti Airtel plans to bid for telecom operator Millicom’s Sri Lankan mobile network, the Economic Times said, citing two executives familiar with the developments.
Deals du Jour
Spain’s Banco Santander (SAN.MC) has appointed advisers to spin off its Brazilian business in a $3 billion initial public offering (IPO) to create one of Brazil’s biggest bank, the FT reports. But it’s not new — Reuters carried the story last week, which said Bank of America-Merrill Lynch, Credit Suisse and UBS would underwrite any deal. Click here for that story. More details could come from Santander today alongside its Q2 results.
In other M&A related stories reported by Reuters and other media on Wednesday:
Private equity firm Kohlberg Kravis Roberts & Co is in the advanced planning stage for an initial public offering of stock in Dollar General Corp, a discount retailer. Goldman Sachs, Citigroup and KKR are likely to underwrite the deal, the Wall Street Journal cited people familiar with the matter as saying.
Sumitomo Trust and Banking has agreed to buy Nikko Asset Management, Citigroup’s Japanese asset manager, for about 100 billion yen ($1.1 billion), the Nikkei newspaper reported.
National Australia Bank (NAB.AX) has agreed to buy 80.1 percent of Goldman Sachs JBWere’s private wealth management business in Australia and New Zealand. Click here for a Reuters story.
Reinsurer PartnerRe (PRE.N) has agreed to buy 19.5 percent additional Paris Re (PRI.PA) shares as part of its bid to buy the smaller rival in a $2 billion deal. Click here for a Reuters story.
Goldman’s Viniar: Why pay twice?
Turns out Goldman Sachs is a staunch advocate of going organic — when it comes to the money management business.
As Barclays auctioned off its Barclays Global Investors unit this year, Goldman was widely seen as a likely acquirer. That is until Blackrock In under Larry Fink emerged as the buyer with a $13.5 billion deal.
Lots of other money managers are expected to be sold, as the industry consolidates and cash-strapped banks look for valuables to pawn. But Viniar told analysts Goldman’s preference is to grow the business without deals, and appeared to question the very idea of money manager deals.
“If there were an acquisition that made sense financially for us to do, we would certainly consider it,” he said, something he says every three months to calm down excitable analysts. “When we look at the prices of most of the acquisitions, we think that they haven’t made sense in that you’ve had to assume really heroic growth rates that we don’t think are realistic.”
Jefferies Putnam Lovell recently said it counted 35 management deals in the second quarter, compared with 52 deals a year earlier. Besides the BGI takeover, Aquiline Capital Partners acquired Conning & Co, JPMorgan Chase bought the remainder of its Highbridge Capital Management hedge fund unit and Woori Finance purchased Credit Suisse’s 30 percent interest in a joint venture.
Yet Viniar notes money management firm deals are tricky, since buyers have to pay a premium for the company and then put up more money to retain star managers. And even as billions of profits come sloshing into Goldman’s coffers, Viniar apparently doesn’t like to part ways with the firm’s cash.
“It has taken a while, but we’ve grown (the asset management business) quite successfully, almost exclusively organically.” he said. “And the high likelihood is that is the way we are going to continue to grow it in the future.”
