Deals wrap: AT&T’s crystal ball
AT&T’s surprise $39 billion deal to buy T-Mobile USA from Deutsche Telekom will create a new leader in the U.S. mobile sector and likely draw scrutiny. The regulatory challenge will be predicting what the dominant form of communication will be 3 to 5 years from now, analyst Evan Stewart said. The deal will take a year to close, in which time customers are expected to see improved network quality, according to AT&T.
Sprint Nextel risks being further eclipsed by Verizon and the new AT&T, which together would boast 230.3 million customers in the U.S., compared to Sprint’s less than 50 million, writes Michael J. de la Merced and Jenna Wortham of The New York Times.
Citigroup plans to slash the number of common shares outstanding and reintroduce a dividend after suspending payouts two years ago, taking another step in its long recovery from the brink of failure during the financial crisis.
Warren Buffett said he believes Japan’s devastating earthquake is the kind of extraordinary event that creates a buying opportunity for shares in Japanese companies and that his Berkshire Hathway is looking for more large-scale acquisitions anywhere in the world. “The United States is most likely where we will do something,” he added.
Facebook agreed to buy Snaptu, an application developer for mobile devices that are less sophisticated than smartphones, as the world’s largest Internet social network focuses on expanding its mobile services.
The Carlyle Group acquired a majority stake in movie special effects company Foundry from Advent Venture Partners and other stakeholders, in what Advent partner Mike Chalfen called a validation of the firm’s growth investment strategy, writes VentureBeat’s Ciara Byrne.
Deals wrap: HCP’s $6.1 billion acquisition
HCP said it would buy most of the real estate assets of privately held nursing and assisted living firm HCR ManorCare from Carlyle Group in a $6.1 billion sale and leaseback deal. The deal follows a spate of acquisitions in the seniors’ housing and assisted living space.
Japan’s Otsuka Holdings could rise about 5 percent on its market debut on Wednesday after pricing its $2.4 billion IPO conservatively to reflect investor worries about its heavy reliance on profits from one drug.
In Hong Kong, the weak state of the IPO market is seen in Huaneng Renewables’ scrapped IPO plans and Datang’s low-priced IPO, the WSJ reports.
Deals wrap: Exchange consolidation
Singapore Exchange has agreed to an $8.3 billion deal for Australia’s ASX. The first major consolidation of Asia-Pacific exchanges faces regulatory hurdles, including getting Australia’s parliament to lift a 15 percent ownership cap on the ASX. *View article *View article on SGX’s CEO *View graphic on world’s top 10 exchanges *View WSJ article
Communications cable maker CommScope said it is in talks with private equity firm The Carlyle Group to sell itself. It is the latest sign of resurgent acquisitions for private equity firms, which are under pressure to invest billions of dollars of capital raised in the past few years. *View article
Wind farm owner and operator First Wind Holdings, which is planning a $300 million IPO this week, may be a risky bet in the current energy climate, write Clare Baldwin and Scott Malone. *View article *View IPOfinancial.com article
Tech behemoths rushing to fill holes in their portfolios may buy up most of the remaining public security software companies over the next 12 to 24 months, according to tech investment bankers and analysts, writes Nadia Damouni. *View article
Noted: Goldman sees more utilities M&A
Goldman Sachs analysts say M&A among Europe’s utilities is likely to pick up this year, and name Britain’s Shanks, Drax, International Power, the country’s water companies (Severn Trent, Northumbrian Water, Pennon and United Utilities), and Edison of Italy as the most likely targets. (Shanks, of course, is already in the Carlyle Group’s crosshairs.)
The Goldman team looked at company ownership; the political and regulatory backdrop; and the firms’ sizes and relative valuations to come up with its top picks.
From the note, dated Jan 7:
“We believe M&A activity will pick up over the course of 2010 as current market valuations provide a once-in-a-cycle opportunity for potential acquirers, current economic weakness is likely to accelerate sector consolidation and private equity firms are likely to deploy capital as credit markets open up …
“However, we expect the bulk of M&A activity to continue to come through disposals, as companies seek to strengthen their balance sheets, mainly to avoid credit rating downgrades as a result of their high gearing levels.”
World’s financial center is moving, Carlyle co-founder says
The financial crisis has made the world less focused on the U.S., which will have to face up to the fact that it is not as significant as before, Carlyle Group co-founder David Rubenstein told a large audience at the World Business Forum in New York:
“After World War II we were 48 percent of the world’s GDP; now we are about 20 percent of the world’s GDP… We have to get used to the fact that the dollar is relatively cheap and … that the dollar is probably not going to be the reserve currency that it’s been for so many years.”
Rubenstein said the center of the financial world won’t just be New York, but spread between here, London, Shanghai, Dubai, Sao Paulo and a few other cities.
Rubenstein concentrated particularly on the U.S. economy’s problems, listing issues such as the deficit, inflation, taxes and employment. He said that the U.S. is about two years into the recession and probably has a “month or two to go.”
He listed the areas he thinks are attractive investment opportunities: distressed investing, companies getting support from the U.S. government, energy (both carbon and alternative), healthcare and emerging markets such as China, India and Brazil.
Among the final tidbits of advice that the private equity chief shot at the audience was to avoid excessive leverage:
“What we learned out of this most recent recession is if you borrow a lot of money it comes home to roost, so I’d avoid leverage–even normal leverage can be very dangerous at times when the economy goes down.”
Carlyle Group calls 2008 a “humbling experience”
Private equity firm The Carlyle Group gave a blunt assessment of 2008, when a financial crisis pulled three of its portfolio companies — German auto parts maker Edscha, energy company SemGroup and Hawaiian Telcom — into bankruptcy protection or administration. In its annual report, Carlyle told investors “the year 2008 was a humbling experience for us and most of the financial services industry. After several years of unprecedented growth, product innovation, geographic expansion, capital deployment and investment gains, our world changed dramatically.” Going forward, Carlyle takes a cautious view. “In 2008, the financial landscape change — and it will remain changed for the foreseeable future. Operating conditions for our portfolio companies will remain challenging. Transactions will be fewer and smaller. More equity will be required and debt terms will be less favorable. And hold periods will increase while returns will decrease.”
Click here to see the full Carlyle Group annual report.
Neuberger action moves to court
The sale of the Neuberger asset management arm of Lehman might have been agreed back in September, but it’s not quite a done deal.
The whole process has been rather messy — Lehman put a majority percentage of the prized asset management arm up for sale in August, prior to filing for bankruptcy.
The unit, one of Lehman’s best performing assets, drew interest from a number of private equity bidders such as Kohlberg Kravis Roberts, Hellman & Friedman, Blackstone, Bain Capital and Clayton Dubilier & Rice, sources previously said.
Some estimates valued the unit between $8 billion and $10 billion.
After its September bankruptcy filing, the whole of the asset was marketed. Bidders were whittled down to the winning team of Bain Capital LLC and Hellman & Friedman LLC who clinched the deal for $2.15 billion.
Typically, that would have been the end of it — but because the sale was being done after Lehman filed for bankruptcy, an auction is to take place and could draw counter bids. The 45-day clock for the auction started ticking in October and stops at noon on Monday.
The most likely potential bid could come from Carlyle Group, which together with former Neuberger Berman Chief Executive Jeffrey Lane, in October filed an objection to the sale of Neuberger and said in court it would itself be interested bidding, but believed that Bain and H&F had an unfair advantage.
