DealZone

M & A wrap: Citi scores big with EMI deals

The music industry may have a bit of life left in it after all. At least that’s the impression one is left with this week after Citigroup scored a better-than-expected $4.1 billion from two deals that mark the end of a months-long auction to sell off the parts of 114-year-old British music company EMI Group.

Vivendi’s Universal Music Group and Sony won the auction for EMI’s recorded music and music publishing operations, trumping bids by archrivals Warner Music Group and BMG Music Publishing at the 11th hour, reports Peter Lauria, editor-in-charge of Technology, Media and Telecommunications at Reuters. Universal plans to buy EMI’s recorded-music unit for $1.9 billion, according to a source involved in the process, snagging the rights to music by artists such as Coldplay, the Beatles and Katy Perry in the deal.  A consortia led by Sony is expected to buy EMI’s publishing operation for $2.2 billion.

MF Global’s liquidators are struggling to sell the Asian business as one concern because of problems unwinding trading positions, so they may now sell the various country units separately, report Reuters correspondents Rachel Armstrong and Bruce Hextall. The provisional liquidators for the business in Hong Kong said on Friday there had been a number of encouraging bids for the regional business as a whole but the exercise has proved increasingly complex and the focus is now on selling off the various Asian business units individually.

U.S. coal giant Peabody Energy extended its $5 billion bid for Australia’s Macarthur Coal by two weeks after failing to reach the 90 percent threshold for acceptances by its Friday deadline, reports Sydney-based correspondent Lincoln Feast. Peabody’s acquisition of Macarthur will give it control of the world’s top producer of pulverized coal, just at a time when demand for steel-making materials holds up in Australia’s key coal market, China.

Companies in Greater China are lining up to sell shares in initial public offerings in coming months, braving jittery markets with $11.2 billion in deals, reports Hong Kong-based Elzio Barreto. Issuers are betting the steep rebound in Hong Kong and Chinese markets in the past month might signal renewed appetite for offerings that would provide funding for expansion and takeovers.

Deals wrap: AT&T’s crystal ball

The at&t logo is seen at their store in Times Sqaure in New York April 21, 2010. REUTERS/Shannon StapletonAT&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.

Deals wrap: Just one word – plastics

A worker sorts plastic bottles at a recycling centre in Hefei, Anhui province November 10, 2010. REUTERS/StringerPlastics. They don’t glitter like gold does, but more top hedge fund managers are betting on the chemical commodities that go into making plastics and buying up shares in the companies that produce them.

The Smart Money 30, a group that includes some of the biggest stock-picking equity funds, also trimmed bets on tech giants Apple and Google while favoring General Motors and Citigroup, according to data compiled by Thomson Reuters.

What’s the easiest way to boost your company’s reputation? Buy up a top global brand. At least that’s the advice being given to top Chinese companies by the country’s commerce minister, who is urging the country’s firms to seek out new foreign acquisitions in an effort to secure more name recognition abroad.

from Breakingviews:

Vikram Pandit can’t rock’n'roll like Guy Hands

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Vikram Pandit has been banging his head for years over Citigroup's financial problems. But that doesn't qualify him as an expert on heavy metal. So expect the bank to quickly offload EMI, the Iron Maiden-to-Katy Perry music publishing and recording business it seized on Tuesday.

The takeover marks the finale of a four-year cycle of recrimination between the bank and private equity boss Guy Hands. Hands' London-based Terra Firma overpaid for the business in May 2007, larded on too much debt and then, partly because of cuts needed to meet interest payments, soured relations with EMI's primary asset -- its artists. But Hands also tripled the company's profit. Some financial wiggle room and a charm offensive might be all a refreshed EMI needs to thrive.

from Breakingviews:

Uncle Sam’s AIG exit likely to be drawn out

There's no quick way for the U.S. government to exit American International Group <AIG.N>. Converting $49 billion of preferred stock to common shares and selling them would, like the government's exit from Citigroup <C.N>, take a while. And that's assuming other share sales, needed for separate repayments relating to AIG, go smoothly.

As of June 30, AIG owed the government just over $100 billion -- though a further $4 billion has since been repaid. AIG has also made progress offloading assets. Big examples include the IPO of AIA, the Asian unit currently expected to debut on the Hong Kong market in the next month or so, and the $15.5 billion sale to MetLife <MET.N> of American Life Insurance, or Alico, which is winding its way towards closing. The New York Fed converted debt into preferred shares in these entities worth $16 billion and $9 billion, respectively, and the deals will help pay that off.

Back at AIG itself, there are around $49 billion of preferred shares owned by the Treasury. The Citi example shows how that block of prefs might be swapped into common equity and then sold, over time. In the Citi case, the government is turning a profit on its shares, potentially making the idea interesting for AIG as well.

Deals wrap: Selling the ex-bankrupts

A Chevrolet logo is seen on a car displayed on the exhibition stand of Chevrolet during the first media day of the 80th Geneva Car Show at the Palexpo in Geneva March 2, 2010.      REUTERS/Valentin Flauraud General Motors’ coming initial public offering may be a hard sell. After all, the automaker burnt investors with its Chapter 11 filing a little over a year ago. The IPO of GM and, in time, those of other cleaned up ex-bankrupts like Delphi and Chrysler, deserve cautious investor interest. *View article

Barnes & Noble shares soared 21 percent after the struggling bookseller said it was up for sale and could get a bid from its founder to go private. *View article *View NYT’s article on who may bid for the company

Citigroup is poised to put its British online bank Egg up for auction as part of a plan to dispose of billions of dollars in unwanted assets, the Financial Times says. *View article

Deals wrap: Hot prospects in VC

Workers walk outside the London Stock Exchange October 16, 2008. REUTERS/Andrew WinningVenture Capital Journal profiles 10 young venture capitalists who are poised to do great things. All of their “Hot Prospects” are under 36 years old and all have yet to make their mark in VC. The series runs all week.*View article *View profile of Chi-Hua Chien *View profile of Ann Miura-Ko

Asahi President Naoki Izumiya told Reuters he expects to have $9.2 billion on tap for acquisitions over the next five years as it looks for new growth drivers outside the shrinking domestic beer market. * View article

Is the SEC’s $75 million settlement with Citigroup a victory for Wall Street accountability or a punishment for taxpayers and Citi shareholders? *View NYT article

Citi’s risky businesses

Assume for a moment that Citi is successful in raising $3 billion for private equity and hedge funds, and assume for another moment that the U.S. government takes away these businesses away from Citi, as legislators are threatening. What happens next? Why is Citi building a business it may soon have to sell? And why would any investor give money to a hedge fund manager that may have to sell its business?

Investors will not likely care about whether the bank will sell its alternative asset management business. Customers care most about who is investing their money day to day, not which corporate logo is on the stationery. And if Citi has to sell the business, it will get a slightly higher price for a business that has an extra $3 billion under management.

Citi is still walking into a mine field by building a business that lawmakers are explicitly trying to keep banks out of. One thing for sure–if Citigroup is building alternative asset management businesses, nobody can accuse it of being under the thumb of the government, which still owns billions of the bank’s shares.

The afternoon deal: Citi spinoff rings up strong debut

CITIGROUP/Another day, another sign of renewal for initial public offerings. Primerica co-CEOs John Addison and Rick Williams capped the day off by ringing the closing bell after the Citigroup life insurance spinoff’s shares soared in their April Fool’s Day debut on the New York Stock Exchange.

Appetite for the company’s stock remained strong throughout the day, with shares jumping more than 30 percent above the initial offering price in afternoon trade as investors bet that the life insurer will reap rewards as the economy continues to mend.

Primerica priced at $15 a day earlier, above the $12 to $14 range that was expected. Citigroup sold 21.3 million shares in the offering and raised a total of $320 million in the deal. The bank will retain up to a 43 percent stake in the insurer, with plans to reduce it over time.

DealZone Daily

Friday’s highlights:

Citigroup Inc could pay commercial and investment banking bonuses for 2009 that are similar to 2008 levels, and may cap individual cash payouts at about $60,000, according to people that have been briefed on the plan.

CF Industries Holdings Inc (CF.N) withdraws its year-long hostile bid to buy rival fertilizer maker Terra Industries Inc (TRA.N) on Thursday, bringing a three-way battle for control of the North American fertilizer business closer to a conclusion.

Shiseido Co Ltd, Japan’s largest cosmetics company, agrees to buy U.S.-based Bare Escentuals Inc for $1.7 billion, as it looks to revamp its global brand and expand in North America.