M&A wrap: T-Mobile “crying out” for Sprint tie-up?
Deutsche Telekom may be forced into a tie-up of its sub-scale U.S. wireless unit with Sprint Nextel after a $39 billion deal with AT&T collapsed. While Deutsche Telekom is now walking away with a $6 billion breakup package, its chief executive Rene Obermann has lost a lot of time and will now have to invest in the U.S. market or find a new way to exit the country, an option analysts regard as unlikely. T-Mobile USA “is just crying out for a merger with Sprint. That’s the only long-term solution for Deutsche Telekom,” Will Draper, head of telecoms research at Espirito Santo, said.
Goldman Sachs claimed the spot as the top U.S. M&A adviser in 2011 as rivals JP Morgan and Morgan Stanley fell in the standings due to the collapse of AT&T’s $39 billion deal to buy Deutsche Telekom’s T-Mobile USA unit. JP Morgan, which had previously been the top U.S. M&A adviser for the year, advised AT&T along with Greenhill and Evercore. Morgan Stanley, which had been No. 2 in U.S. M&A based on the dollar value of transactions on which it had advised, was working for Deutsche Telekom along with Citigroup, Credit Suisse and Deutsche Bank.
Olympus Corp is preparing to issue about $1.28 billion (100 billion yen) in new shares to bolster its depleted finances, with Japanese high-tech stalwarts Sony and Fujifilm seen as possible buyers, the Nikkei business daily reported. The report comes after a warning from one of the camera and endoscope maker’s leading shareholders that the scandal-tainted board may try to retain control by issuing new shares to dilute the power of existing shareholders.
The New York Times Co is nearing a sale of 16 regional newspapers spread across the U.S. Southeast and California to Halifax Media Holdings, it said on Monday. The possible sale, news of which comes just days after the Times Co announced the sudden retirement of its chief executive, is the latest in a series of steps the company has taken to cut costs and focus on its most important newspapers and their websites.
Qatar and Luxembourg are to buy bailed-out Dexia’s private banking arm for 730 million euros ($950 million), less than analysts had estimated, as the Franco-Belgian group is broken up.
Deals wrap: Who will Sprint call?
Bankers said Sprint had a handful of options after AT&T swooped in to buy T-Mobile USA for $39 billion, but none of them would give it the clout to compete in a market dominated by AT&T and Verizon Wireless, which would collectively hold an almost 80 percent market share. Verizon Wireless CEO Daniel Mead said he had no interest in buying Sprint.
Charles Schwab will buy online brokerage optionsXpress Holdings in a $1 billion deal that gives Schwab a stable of the most active retail traders, as options continue to boom.
Shutterfly said it agreed to buy privately held card design company Tiny Prints in a $333 million cash-and-stock deal, as the photo-sharing service tries to win back customers in a market increasingly dominated by social networking sites like Facebook.
Buyouts in Asia are chiefly dependent on bank loans but in a first-of-its-kind for the region, the debt portion of one deal last week was financed entirely through a bond issue, likely opening a new funding route for private equity firms, writes Stephen Aldred.
Secondary market trading has provided a valuation boost for many venture capitals’ assets, like Facebook and Twitter. Now, the expansion of startups’ market inclusion is set to generate greater short-term profit and higher expectations for investors, many of which have no affiliation to venture capital or to venture capital limited partnerships, writes peHUB’s Jonathan Marino.
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: Icahn turns inward
Seems billionaire investor Carl Icahn has had enough of managing money for outsiders. The 75-year-old stock picker dropped a bit of surprising news on Tuesday when he said he plans on returning all of his clients’ money, making him the latest in a string of investors to do so.
Barnes & Noble’s bid to reinvent itself as a formidable competitor in the burgeoning e-books sector is off to a solid start. Its Nook is the second best-selling e-reader on the market behind Amazon’s Kindle, and the book chain’s chief says it has 25 percent of the e-books market. So why can’t the bookseller find any buyers? Reuters correspondents Phil Wahba and Jessica Hall take a closer look in a new piece.
Jury selection in the trial against Galleon Group hedge fund founder Raj Rajaratnam kicks off the action today in a case at the heart of the biggest insider trading investigation in a generation.
NYT’s DealBook editor Andrew Ross Sorkin wonders why Rajat Gupta isn’t facing criminal charges if the insider trading accusations lodged against him last week are so serious? Felix Salmon responds with his take on the situation.
Renewed talk that Deutsche Telekom and Sprint Nextel are in discussions to combine their operations in the U.S. sent shares in both companies up on Tuesday.
Deals du Jour
Shares in Sprint Nextel have soared on talk that Deutsche Telekom may make an offer to buy the company. But the high cost of any deal, combined with the technological challenges, suggest the German company may be better off considering a joint venture rather than a bid, our commentary team say.
The high price of staying competitive in the U.S. market makes the decision on Sprint a tough call for Deutsche Telekom, analysts say.
And here’s a round-up of deal-related stories from Tuesday’s press:
* The U.S. government is talking to Citigroup Inc about how to sell the roughly one-third stake the government acquired as part of its bailout of the bank, Bloomberg said. Reuters story here.
* India’s largest power producer, state-run NTPC Ltd, is looking to spend up to $1 billion to acquire a South African coal mining firm, the Mint newspaper said. Reuters story here.
* Brazilian billionaire Andre Esteves plans an initial public offering for his BTG Pactual investment bank in 2010, Valor Economico newspaper said, without citing a source for the information.
* RSA, the UK general insurance group, is looking at large acquisitions potentially worth about 600 million pounds ($994 million), that might need to be supported with a rights issue, the Financial Times said.
Mobile merger report rings bells
Sprint Nextel‘s stock soared 11 percent before the market opened on a British newspaper report that T Mobile parent Deutsche Telekom had appointed Deutsche Bank to advise on a possible run at Sprint, valuing the U.S. cellular carrier at $11 billion.
Sprint certainly is a logical target for any company looking to boost its position in the very busy U.S. mobile market. It announced a large goodwill write-off in February 2008
And Deutsche Telekom is on the make. It signed a deal with France Telecom to combine the companies’ British mobile phone businesses — T-Mobile UK and Orange — last week.
A Sprint deal would make T-Mobile the top U.S. mobile company, but it would cost a bundle … and that’s just the up-front funding. Combining Sprint’s CDMA and T Mobile’s GSM technologies would take technological wizardry no less daunting than the magic the German carrier might have to employ in Washington to ensure a deal clears antitrust and other regulatory hurdles.
So while the hype could last through the day, any near-term excitement about a mega mobile merger could well be tempered by the time your next phone bill arrives.
Is 3 the magic number for Vodafone?
(By Sarah Young, Acquisitions Monthly)
The proposed £7bn merger of Orange and T-Mobile in the UK may be too much for Vodafone to bear, pushing it into a tie-up with Hutchison Whampoa’s mobile businesses 3, not just in the UK but also in Italy.
Indeed, earlier this year, Vodafone merged its operations with those of 3 in Australia.
If Orange and T-Mobile ink a deal by October, as they say they will, and the competition watchdogs approves it, 3 will find itself as the UK’s fourth largest mobile operator with just 8% of the market. Vodafone will be pushed back into third place – something one of the world’s largest mobile phone operators could find difficult to stomach in its home market.
Its third place position will make it hungrier for 3 than Telefonica’s O2, which currently holds the top mobile spot in the UK. Sources said that Vodafone was more committed than O2 to buying T-Mobile UK.
Hutchison is also considering a possible merger of its 3 Italia operation, but has ruled out a deal with Italian number three player Wind. Perhaps Vodafone, the number two player in Italy, could also look to do a deal with 3 in that country’s market.
Despite the fact that losses at its 3G mobile operations have narrowed, questions continue to be asked about Hutchison’s commitment to the mobile industry in the long term. The Hong Kong-based group will need to look carefully at its options but it’s clear that in the UK a successful Orange and T-Mobile merger will leave 3 looking more vulnerable than ever.
Deals du Jour
Deutsche Telekom and France Telecom have confirmed they are talking to combine their UK mobile operations in a JV. And Abu Dhabi’s ATIC has offered to buy Chartered Semiconductor — another sign that M&A is picking up after Kraft/Cadbury?
For all Reuters deals news, click here.
Just one story we picked up from other media today: Chinese machinery maker Tengzhong is still working to close a deal with General Motors Co to buy the U.S. automaker’s Hummer brand after a regulatory setback, Chinese media reported.
Handicapping prospects of a Sprint Nextel deal
Sprint Nextel Corp appears to be considering several deals, including a possible spinoff of its Nextel business, a WiMax joint venture with Clearwire Corp, or a takeover by Deutsche Telekom.
With the company scheduled to report earnings on May 12, investors hope something — anything — will happen to shake up the struggling wireless company. But analysts aren’t so sure that any of those transactions would create value for shareholders, especially considering the company’s less-than-stellar acquisition track record and its struggles with subscriber losses and network problems.
“While restructuring is a possibility we see significant hurdles to completing value added transactions,” said Morgan Stanley analyst Simon Flannery. “There are multiple impediments to value creating transactions including technological, regulatory, and financial barriers.”
Spinning off Nextel would unravel the $35 billion acquisition of that company in 2005. At the time of the merger, the combined company had a market capitalization of $70 billion, compared with just $23 billion in market cap today. CEO Dan Hesse said in April he was not actively looking for a buyer for the Nextel assets, but would evaluate any offers. But would it be feasible?
Goldman Sachs analysts had this to say in a research report:
A deeper dive highlights the complexity: (1) credit markets are effectively still closed, and uncertainty around cash flow projections at Nextel further limits funding capabilities; (2) Legal risks are extremely high – involving FCC challenges around the Nextel spectrum swap, as well as probably bondholder and shareholder litigation; (3) untangling the Sprint Nextel integration process would be a huge challenge, with Sprint executives recently highlighting the difficulty.”
Cowen & Co. analyst Tom Watts was more upbeat: “(T)he likelihood of a transaction is high. We expect at least one of Sprint’s three potential deals to be announced over the next few weeks, potentially as early as May 12.”
Sprint overcharged my small (US) company for over $50,000.00. We caught them doing it and now they refuse to refund the over-payments. You can read the full story at http://www.sprint-really-sucks.com
