DealZone

from India Insight:

Dark horse Tech Mahindra wins race to acquire Satyam

Tech Mahindra, part of Indian business group Mahindra & Mahindra, won the race to acquire Satyam Computer Services on Monday, in a deal that'll help the mid-sized outsourcer gain in size and also lift clarity on Satyam's fate.

In a race that saw only a handful of bidders, Tech Mahindra beat rivals such as engineering conglomerate Larsen & Toubro and U.S.-listed Cognizant Technologies. Tech Mahindra agreed to buy a 31 percent stake in Satyam at 58 rupees, a 23 percent premium to Satyam’s last closing price.

(Click here to watch a Reuters Insight video)

Tech Mahindra, established more than 20 years ago as a joint venture between Mahindra & Mahindra and British Telecom, faces the daunting task of reshaping Satyam, a company at the heart of India's biggest corporate scandal.

Ever since Satyam's founder Ramalinga Raju shocked markets by disclosing the $1 billion-plus fraud, there have been numerous reports of Satyam's employees jumping ship and some clients cutting back on orders to Satyam.  The company's accounts are also still being restated and its U.S. liabilities are unclear.

Will the government continue to keep a close eye on Satyam? What's going to be the fate of Satyam's employees and clients? Will the Tech Mahindra-Satyam combination be able to grab market share from leaders Tata Consultancy, Infosys Technologies and Wipro? These are issues for which Tech Mahindra will need some answers pretty soon.

from India Insight:

Fraud-hit Satyam pins hopes on shaky white knights

Three months after its founder Ramalinga Raju shocked markets by disclosing India’s biggest corporate scandal, Satyam Computer Services is desperately pinning its survival hopes on its auction set for April 13.

But only a handful of bidders are in the race due to lack of clarity over Satyam’s accounts and potential legal liabilities from U.S. lawsuits. Even if the company manages to find a buyer for a 51 percent stake, it’ll take a long time to instill confidence among employees already jumping shipand nervous clients.

What about the role of the government, whose appointed-board is due to choose the buyer the same week the country heads for national elections? Will the government remove its handpicked board or continue to keep a watchful eye on any new strategy chalked out by the new buyer?

Missing Lady Luck

CityCenterThere was a time not so long ago when “smart” investors and analysts believed that casinos were a sure bet, that gambling was recession proof, and that it was a vice people could not shake off even if money got tight. And so casino giant after casino giant started on mega projects that set to outdo each other and make glitzy Las Vegas, well, glitzier. 

This recession is changing several of those plans. And despite the retirees putting their life savings into slot machines for fun in Atlantic City, casinos are taking a hit. 

MGM Mirage, one of the biggest of them all, is trying to come up with funds amid a sharp downturn. The company, which is controlled by billionaire Kirk Kerkorian, is hoping to raise money to meet debt payments and also to fund CityCenter, a troubled project it jointly owns with Dubai World, in Las Vegas.

from Left field:

Cubs bidder admits he is (horrors!) a White Sox fan

wrigley1John Canning Jr, who came up short last year in his bid for the storied Chicago Cubs baseball team, made a shocking admission on Tuesday.

The chairman of Chicago private equity firm Madison Dearborn Partners, speaking about his industry at a breakfast meeting, said he roots for the cross-town rival White Sox.

"The only thing that I was able to come out of the closet on was I'm actually a White Sox fan. God, what a relief not to buy the Cubs," he said as the audience of several hundred local executives laughed.

Distressed investors say TGIF

Roman Catholics have fish Fridays. Boxing fans have Friday Night Fights. For distressed investors, like Jon Winick, president of Clark Street Capital, there’s Friday night Failure. 
 
“You can count on Friday failures for the next six to twelve months,” Winick said at a distressed investing conference in New York this week. He forecasts bank failures to rise to 200 through next year.
 
There have been 14 bank failures so far this year, according to the Federal Deposit Insurance Corp, with filings every Friday since Jan. 16 after the year end and New Year’s Day holidays.
    
The FDIC seized 25 banks last year. In just the first seven weeks of 2009, the 14 bank failures mean the FDIC is on pace to close more than 100 banks in 2009.
     
Distressed investors say they are expecting a record wave of bankruptcies this year, marking unprecedented opportunity for investors and a feeding frenzy on Fridays. The filings on Fridays are procedural, as the FDIC posts the failures at the end of the week. That allows the declaring bank to give regulators the weekend to sort things out, and it prevents a big run on the bank because branches are closed.
 
Brad Hunter, national director of consulting at Metrostudy, a housing industry research firm, thinks things are just getting started. He said bank takeovers ultimately could exceed 1,000. 
 
“Option ARM loans are coming due, and that will trigger another wave of foreclosure,” he said.

Yahoo’s deal with Google: Band-Aid

So Yahoo and Google scaled back the terms of their search advertising deal in what looks like a last-ditch, attempt — at least for Yahoo — to get it past U.S. regulators.

Some analysts called it the Band-Aid deal, while others said it smacks of desperation.

Frost & Sullivan’s digital media global director Mukul Krishna said the revised terms were “more of a Band-Aid than the extensive surgery” Yahoo needs.

Oiling the Barclays machine

BarclaysWhen you need some fast cash, you can always count on oil money. Qatar’s sovereign wealth fund is reportedly considering backing a share issue by Barclays. You’ll recall that earlier this week Britain’s No. 3 bank said it would sell billions of pounds worth of shares to bolster its stretched balance sheet. The Financial Times quotes a person close to the Qatar Investment Authority as saying “We’re looking at it.” The QIA manages about $60 billion in assets and earlier this year bought under 2 percent of Credit Suisse. Qatar, which is the richest Arab country on a per capita basis thanks partly to high oil prices, is looking to spend between $10 billion and $15 billion over the next two years on bank stakes, Prime Minister Sheikh Hamad bin Jassim al-Thani told Reuters in February.

Of course, it’s not just the oil-rich out there poking around those struggling banks. Activist shareholder Olivant said on Wednesday it had raised its stake in Swiss bank UBS, which has been hit by massive losses on risky investments, to 2.5 percent. Olivant, headed by former UBS Chief Executive Luqman Arnold, said by taking a stake worth about $1.8 billion it was “demonstrating its belief in the potential restoration of shareholder value achievable through decisive action on the part of the UBS board”. Interpretation: We want change. How about splitting up the bank?

If banks aren’t your thing, there’s always Hollywood. Movie studio DreamWorks SKG is close to a deal with India’s Reliance ADA Group to form a new movie venture, the Wall Street Journal reported on Tuesday, citing people familiar with the talks. The Journal said a deal with Reliance would give movie director Steven Spielberg the cash to finance his DreamWorks team’s departure from Viacom Inc’s Paramount Pictures later this year.

Signs of sovereign life

ubs.jpgSovereign wealth funds were thought to be nearly extinct sources of capital for the crumbling western banks. But life finds a way. The Government of Singapore Investment Corp, one of the world’s biggest sovereign wealth funds, said it would subscribe to UBS‘s rights issue. A GIC spokeswoman declined to provide the value for the transaction but said it currently owns 0.4 percent in UBS common stock. It controls 9.54 percent of the voting rights in UBS. The fund invested 11 billion Swiss francs ($11 billion) in mandatory convertible notes in UBS last December, after the bank’s U.S. housing crisis losses. In January, GIC invested $6.88 billion in Citigroup. Its sister fund Temasek Holdings pumped $5 billion into Merrill Lynch. GIC says on its website that it manages well above $100 billion but some analysts estimate the figure is closer to $300 billion.

The U.S. Federal Reserve Board approved Bank of America Corp‘s acquisition of Countrywide Financial Corp, the nation’s largest mortgage lender. Bank of America agreed in January to pay $4 billion for Countrywide, a California-based firm that helped fuel a multi-year housing boom that went bust when risky loans to shaky borrowers began to fail. In a statement, the federal regulator said it considered many comments for and against the bank buyout and “has considered carefully the financial factors of the proposal.” The Fed also said that it vetted about 770 individual comments on the proposed takeover and the views of many other stakeholders.

Applied Materials has approached beleaguered Dutch semiconductor equipment maker ASM International to buy a significant part of its business for $400 million to $500 million. Shares in ASMI jumped as much as 23 percent to an eight-month high after the company said its U.S. rival had expressed interest in two of its businesses that make machines to deposit thin films of materials on silicon wafers. ASMI, which is locked in a dispute with activist investors who are trying to sack its chief executive, said a divestment would have major implications for its strategy.

The long wait for Icahn’s blog is nearly over

icahn.jpgEvery day we hit the refresh button, full of hope that billionaire investor Carl Icahn’s blog will finally arrive despite long odds and uncooperative lawyers. Looks like we’re almost there.

Icahn told Reuters on Wednesday that The Icahn Report is finally going live — “in a week or two” — with its founder’s famously strong opinions about corporate governance and the individual companies that fail to live up to his standards.

“I think the time has finally come when people are starting to focus on the many abuses in a number of companies in corporate America and the damage they do,” the 71-year-old financier and hedge fund operator said.

Just enough for the Citi

citigroup.jpgCitigroup‘s $3 billion $4.5 billion stock offering didn’t exactly dazzle one of its most well-known critics, as Oppenheimer analyst Meredith Whitney said the company will need to raise an additional $10 billion to $15 billion or sell assets worth billions to truly shore up its capital position. “The fact that Citi raised capital at this time did not come as a surprise to us, but the fact that the company raised such a small amount of capital at this time confounds us,” said Whitney, who correctly predicted last year that the company would have to cut its dividend.

Time Warner is kissing its majority-owned cable division goodbye, part of CEO Jeffrey Bewkes’s attempt to revamp the company and lift its sluggish stock price. Details on how the transaction will be structured were scarce, but analysts have speculated that the separately listed unit could be spun off to shareholders.

UK gas producer BG Group has made a $12 billion bid approach to Origin Energy, seeking to bolster its position in the fast-growing Asia-Pacific gas market by securing the Australian utility’s gas reserves. The companies said BG, valued at around $85 billion, had approached Origin with a proposal of A$14.70 per share in cash — a 40 percent premium to Origin’s close of A$10.47 on Tuesday.