DealZone

Bank of America’s Merrill Lynch is in talks with several firms including Blackstone and Apollo Investment Management to sell management rights of its $2.65 billion Asian Real Estate Opportunity Fund, a source tells Reuters. A deal would be valued at a few hundred million dollars, the source said.

Meanwhile, China’s sovereign wealth fund has acquired 1.1 percent of British drinks firm Diageo drinks group, the Financial Times reports. China Investment Corp’s stake is worth 221 million pounds.

In other media reports on Tuesday:

The chief executive of German automotive supplier Continental is planning to propose a 1 billion euro ($1.4 billion) capital increase, the FT says.

Wynn Resorts will likely join Las Vegas Sands by listing its Macau gaming business on the Hong Kong bourse, raising up to $2 billion, sources tell Reuters.

Investment dealer Citadel Securities is to take a majority stake in electronic trading platform Equiduct, the Financial Times reports.

The so-called “mid-market”, of mergers and acquisitions (M&A) valued at less than $500 million, is showing tentative signs of life.

On an initial reading, first-half deal data from Thomson Reuters suggests a market still struggling, with deals down 45.7 percent from a year earlier in dollar terms, to $213.3 billion. But on closer inspection, the second quarter reveals itself to have been busier than the first, and in fact home to a stronger rebound than the overall M&A market.

Granted, second-quarter M&A plunged 43 percent in dollar terms and 12 percent by number of deals, compared to the same period a year earlier. But compared to the first quarter, the number of deals actually rose 4 percent, while the dollar value of deals struck bounced 20 percent. (In the wider M&A market, the number of deals rose quarter-on-quarter by a similar amount, but dollar values fell 2 percent.)

Energy M&A has heated up over the past few weeks, with two large deals possibly on the horizon: the sale of Repsol’s Argentine unit YPF as well as Kosmos Energy’s stake in the Jubilee oil field in Ghana.

If thise deals would happen, it would follow Suncor Energy’s $20 billion takeover of rival Petro Canada, announced earlier this year.

So is M&A in the oil sector heating up? Maybe, but insiders warn that the fluctuations in oil and gas prices could slow the flow of deals.

Putting together new companies out of parts of old is a challenging task for dealmakers, particularly when the businesses concerned employ large numbers of workers.

The future shape of Germany’s auto industry remains uncertain, following the slow-mo breakdown of General Motors (GM.N) and the collapse of Porsche’s (PSHG_p.DE) bid to take over Volkswagen (VOWG.DE). Over the weekend the list of bidders for Porsche’s stake in Volkswagen grew, while a German newspaper on Monday reported the country’s economy minister saying the outcome of the bidding war for Opel was still up in air. For all the latest deals news from Reuters, click here.

Elsewhere, newspapers name a pair of European companies looking to offload businesses to support their financial position.

Final, first-half M&A data from Thomson Reuters, released earlier on Thursday, filled out the picture painted by preliminary data last week — deal-making has shrunk dramatically, even as investment bankers find solace in a record flurry of bonds and rights issues.

One interesting wrinkle, compared to the earlier numbers, is the inclusion of Xstrata’s unwanted approach for rival miner Anglo American, valued by the number-crunchers at $42.5 billion. That helped propel Goldman Sachs to the global top spot for M&A advice, and boosted several other banks engaged on the deal.

Some other nuggets:

* Compared to the first half of 2008, announced M&A is down 40.2% to $941 billion, the slowest H1 since 2004.

Hostile deals – and there are a few going on – have one unintended consequence: too many press releases.

Every side feels compelled to correct a rival’s spin as things heat up, which means almost every press statement has an equal and opposite reaction.

In Bermuda, a three-way battle between IPC, Validus and Max Capital flooded the wires for weeks with innumerable press releases, as each side tried to make a case for why their deal was better. (Shareholders voted down an IPC-Max deal, but the fight is not over yet.)

The auto industry shake up looks set to accelerate.

Germany’s Volkswagen is exploring a deal to cooperate with Japan’s Suzuki Motor to boost its presence in ultra-small cars, a source tells Reuters. The news sent Suzuki sahres racing to a 10-month high.

Cooperation with Suzuki, which dominates Japan’s 660cc minivehicle market along with Toyota’s Daihatsu, could yield a new model for VV below its upcoming “New Small Family” range of small cars, the source said.

Deal news reported by other media on Friday included:

Four savings banks in Spain’s Catalonia region are in advanced talks to create what would be the country’s eighth-largest savings bank, La Vanguardia newspaper reported. Unlisted savings banks Sabadell, Terrassa and Manlleu are discussing a merger which Caixa Manresa could also join, it said. For the Reuters strory click here.

Faced with big debts and falling revenues, companies across the world are hiring experts and pondering options.

One option is to swap old bonds for new, exchanging looming maturities for redemptions a few years off. Another is to buy back debts trading at discounted prices.

UK broadcaster ITV (ITV.L) is the latest company to swap its bonds, one of the most successful of a string of exchanges Reuters predicted back in April.

Japanese banks Aozora and Shinsei, both loss-making lenders backed by U.S. investors, are in talks to merge to create Japan’s sixth-largest bank.

A deal would give Aozora access to Shinsei’s retail deposits to ease its funding needs and could provide Shinsei with a much-needed boost to capital.

It could also signal that banks around the world will seek deals as they emerge from the financial crisis.

Trading giant Glencore is the front-runner to buy a 51 percent stake in Chemoil Energy from the family of the founder Robert Chandran, sources told Reuters. The stake in the marine fuel supplier could be worth about $240 million.

Other deals reported by Reuters and other media on Wednesday include:

CITIC 1616 Holdings is seeking to buy international direct dialing and mobile value-added service assets in the Asia Pacific region by the end of 2009, a senior executive told Reuters.

European Union antitrust regulators approved German utility RWE’s 8.2 billion euro ($11.4 billion) takeover of Dutch peer Essent on the condition that it sell Essent’s controlling stake in a German unit.