DealZone

Spark needed

Could the sale of Britain’s biggest electricity distribution network help re-energise infrastructure dealmaking?

The supposedly steady business of buying and running roads, ports, and power grids has had a torrid time. The credit crunch has undermined some big infrastructure players, made it tricky to finance deals, and revealed that demand for some services — like toll roads and airports — is flakier than expected. Asset sales have run aground, instead of commanding the big premiums they would have fetched in the frantic debt-fuelled auctions of yore.

Nonetheless, optimists say the world’s long-term infrastructure needs are enormous. They are also cheered by the record $100 billion or so of funds that Preqin says are currently being raised (albeit slowly). And there may be some chinks of light on the M&A front. As Greg Roumeliotis and I wrote earlier:

“EDF’s possible sale of British or French power networks worth billions of euros suggests infrastructure dealmaking is set to recover after a dismal year for the once-hot asset class.

“The French utility owns Britain’s biggest electricity distribution network and France’s power grid RTE. It has not begun any formal sales process for either, but bankers and investors say advisers are working toward possible sales.

“Tourists” arrive in private equity

Opportunistic buyers, lovingly dubbed “tourists” by those in the industry, have moved into the secondary private equity market. They’re looThe cruise ship from Mediterranean Shipping Company Musica dwarfs Via Garibald as it arrives in Veniceking for┬ápositions in brand-name private equity funds at knock-down prices. As I wrote in a DealTalk today:”Pension funds and wealthy middle-east sovereign wealth funds are buying up investments in private equity funds, pushing up prices and sidelining secondary firms that specialise in acquiring the assets.”The market for second-hand private equity assets — where private equity investors offload assets to specialist buyers — has mushroomed as the credit crisis has intensified. And increasing numbers of cash-strapped investors are concerned about meeting their future commitments to buyout funds.”New investors have been attracted to deals by steep discounts to net asset value, forcing up prices for specialist buyers, such as Goldman Sachs (GS.N) and HarbourVest Partners (HVPE.AS) that last month closed secondary funds after reaching their $5.5 billion and $2.9 billion targets respectively.”Read the full piece here.

Disk trouble

Sandisk flash memory cardsAnother day, another round of hand-wringing: Do I, or don’t I? That seems to be the mantra of top executives mulling buys in what continues to be a rocky market while those on the receiving end are left wondering will he, or won’t he?

So far, it ain’t looking good — for the sellers, or the buyers.

Late last night, Samsung Electronics Co Ltd, the world’s top memory chip maker, decided to dump its pursuit of flash memory card maker SanDisk Corp. That unsolicited deal would have been worth $6 billion, but Samsung apparently got cold feet after seeing SanDisk’s wider-than-expected quarterly loss.

“Your surprise announcements of a quarter billion dollar operating loss, a hurried renegotiation of your relationship with Toshiba and major job losses across your organization all point to a considerable increase in your risk profile and a material deterioration in value, both on a stand-alone basis as well as to Samsung,” Samsung CEO Lee Yoon-woo wrote to SanDisk management in a letter disclosed by Samsung on Wednesday.

Turning the page on Borders

Barnes & NobleBarnes & Noble Inc reportedly has read the market and decided to turn the page on an acquisition of rival Borders Group Inc. The largest U.S. specialty bookseller, which had been looking into a bid for Borders, is likely to take a pass because of tight lending markets that would make it difficult to arrange bank financing, the Wall Street Journal said, citing people familiar with the situation. Borders, which put itself up for sale in March, has struggled with liquidity issues and has been closing underperforming stores and taking other steps to turn around its business.

Reuters’ DealTalk columnists report that overseas metal and mining companies may have U.S. coal assets in their sights. Indian and Russian firms in particular are looking to snap up assets in order to gain a foothold in the U.S. metallurgical coal market, DealTalk says. Metallurgical coal, also called met or coking coal, is used to make coke, the material used to fuel blast furnaces at steel mills. Two assets that could be on the market are privately owned U.S. coal producers United Coal and Bluestone, one source familiar with the matter said.

Shares in Impala Platinum (Implats), the world’s No. 2 producer of the precious metal, raced 9 percent higher on Thursday partly boosted by market talk that BHP Billiton could make a $26 billion bid for the South African company. South African website www.Miningmx.com said BHP may soon have no choice but to make an offer of at least 200 billion rand ($25.65 billion) for Implats. The article said BHP, the world’s largest producer of metals and minerals, had the world’s best and most diversified portfolio of assets in the resources sector — with the exception of platinum, to which it has no exposure. “At the moment it is pure speculation, but yes, for sure the speculation is affecting the (share) price,” Roy Lamb, a trader at Investec Securities in Johannesburg said. BHP declined to comment.