DealZone

BlackRock reported a big jump in fourth-quarter profit and revenue, topping analysts’ estimates. With markets on an upswing, the $3.6 trillion behemoth created when Chief Executive Laurence Fink bought Barclays’s investment unit for $15 billion just over a year ago finally appears to be paying off for investors.

Cross border deals are providing an opportunity for boutique investment banks to shine, reports NYT.

“An unusual burst of trading ahead of a $3.5 billion takeover for cardboard box maker Smurfit-Stone Container Corp left some analysts remarking on the timing,” reports WSJ.

Private equity firms need show a profit to past investors to lure in new investors but expectations are muted for the expected flood of IPOs, reports WSJ.

Also in the news:
Texas Instruments’ margins disappoint, envisions spending hike
Tellabs sales disappoint and shares tumble
EMC beats Street, shares fall on VMware margins
Kimberly-Clark restructures pulp, tissue business

U.S. drugstore operator Walgreen is to buy rival Duane Reed for $618 million from private equity firm Oak Hill Capital Partners, giving the company the market lead in New York. The acquisition brings the company 257 new stores in the city and has prompted analysts to think that struggling chain Rite Aid might make an attractive target for Walgreen rival CVS Caremark as it looks to catch up.

Britain’s Babcock International has increased a proposed offer to buy defence firm VT Group to as much as 1.29 billion pounds, but its advances have again been rejected.

For more Reuters deals stories, click here.

In other media:

Beijing’s sovereign wealth fund, China Investment Corp, is investing $1.5 billion with three private equity secondary specialists – firms that buy positions in buyout funds from other investors – the FT reported. CIC will put $500 million with each of Lexington Partners, Goldman Sachs and Pantheon Ventures in special accounts that will be kept separate from the firms’ main funds.

BM&FBovespa, the world’s third-largest exchange operator by market value, aims to raise its stake in CME Group to 5 percent, making it among the top three shareholders in the fast-moving market maker. Given Brazil’s huge presence in global commodities markets, it’s not hard to see why the country’s main exchange would want to increase its exposure to the top U.S. commodities trading entity. BM&FBovespa said it will invest $175 million over 10 years in a new trading platform with CME. But shares in CME, the world’s largest exchange operator by market cap, fell in early trading, although they later recovered to rise moderately. Hardly the reaction one would expect on news that a hungry, strategic buyer is more than doubling its stake.

It is possible regulatory concerns weighed on the stock. Cross border mergers that include potential technology transfer are natural fodder for antitrust boffins. But Bovespa is likely in for the long haul, as it has more to gain from taking a position in CME than the other biggest shareholders, Blackrock and Fidelity.

As far as the timing goes, CME which already has a 5 percent stake in BM&FBovespa, said only a couple days ago it would buy the bulk of Dow Indexes, showing it is not afraid of moving on big-name deals. The stock is nearly 20 percent down from a year high hit in early January, possibly underscoring the case for Bovespa to move at bargain prices.

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.

Barclays will look a whole lot healthier after securing $13.5 billion from BlackRock for its crown-jewellish BGI asset-management arm. This is the same Barclays that turned down aid from the British government and bought defunct Lehman Brothers’ U.S. investment banking business in September, giving it that heroic posture of a down-but-not-out, maybe somewhat punch-drunk prize fighter — Britain’s own Rocky Balboa. Now, as far as Chief Executive John Varley is concerned, BGI-less Barclays is one of the best-capitalized banks in the world.

Investors are cheering Barclays on. Its share price has soared more than fivefold in the last three months, after crashing to a 24-year low on fears that it might need taxpayer funds.

The deal makes BlackRock the world’s biggest asset manager. Though the wealthy of the world are hurting in the recession along with the paycheck-to-paycheck crowd, it’s hard to see Barclays staying in the back seat of the lucrative asset-management market for long. Under the cash-and-shares deal, Barclays takes a 19.9 percent stake and two seats on the board of the enlarged group, to be called BlackRock Global Investors (giving the new firm the added bonus of not having to change BGI’s stationery).

Barclays‘ seemingly never-ending effort to get top dollar for its Barclays Global Investors unit appears to be enticing some Middle East money behind the current best bid from U.S. fund manager BlackRock, which is believed to be in the neighborhood of $12 billion.

Barclays said it had received proposals for BGI and iShares from a number of parties, including BlackRock, and was continuing talks. BlackRock confirmed the talks, but both sides said issues remained that could derail a deal. San Francisco-based BGI is the world’s biggest fund manager, with $1.5 trillion in assets under management and would more than double the size of BlackRock.

With Bank of New York Mellon also in the hunt, sources say Barclays may keep a hand in the game after a sale, possibly taking a stake of up to 20 percent in the enlarged asset manager. Media reports say BlackRock may get funding from Middle East investors, possibly including some Barclays shareholders. The Qatar Investment Authority and Adia, the government investment arm of Abu Dhabi, are in talks alongside Kuwait’s KIO to inject $3 billion into BlackRock for a 12 percent stake, the UK’s Sunday Telegraph newspaper said.

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”.

UBS said it made a huge loan to Blackrock so that the U.S. asset manager could buy $15 billion of distressed assets from the Swiss bank, easing the strain on UBS’s balance sheet, but not freeing it from the risk. This must have been a tough one for UBS’s credit department to swallow. Citigroup took a similar tack to offload subprime assets. UBS said it had provided 75 percent of the funding used by Blackrock to buy the portfolio. Blackrock raised $3.75 billion in equity from investors to pay for the rest of the package, UBS said. UBS’s stock was down about 4 percent, but traders said that was because of concerns the bank may have to increase the size of its rights issue.

Time Warner and Time Warner Cable said their boards agreed to split the companies, giving Time Warner $9.25 billion from a special dividend that it will use towards paying down debt. As part of the deal, Time Warner’s stake in the cable operator rises to 85.2 percent from 84 percent. The Wall Street Journal says Time Warner will slash its $34.6 billion debt load, by two-thirds. Time Warner Cable now has a more hefty debt load, borrowing to pay the dividend.

Dutch office supplier Corporate Express is said to be bolstering its defenses against a hostile Staples bid with a deal to buy French rival Lyreco for 1.4 billion euros ($2.2 billion) that the companies say would make it the biggest office supplier in Europe, but is spooking investors. Corporate Express shares fell almost 9 percent. Lyreco says the combined company would better weather weaker economic conditions and demand. “Volume and size helps in this business,” he told reporters. Staples formally launched its 1.5 billion euro unsolicited bid for Corporate Express on Monday, which the company rejected as too low.