DealZone

M & A wrap: Lifting the Vale

Brazil’s Vale said on Wednesday it has created a new logistics company for cargo transport, but it denied media reports it is planning to sell stock in the unit in a spin-off. Logistics services generated $1.5 billion in revenue in 2010, an increase of 33 percent from the year before.

Cerberus Capital Management LP’s deal to buy 64 hotels from bankrupt Innkeepers USA Trust could still go forward, but at a lower price, two sources familiar with the situation told Reuters.

NYT’s DealBook contributor Steven M. Davidoff writes that Capital One’s proposed $9.2 billion acquisition of ING Direct requires clearance from the Federal Reserve, as it poses a potential systemic risk. “Whether or not the Fed approves the Capital One/ING Direct transaction, it is time for the Fed to run public hearings on what exactly Dodd-Frank means for our banks and what we as a country want from them,” writes Davidoff.

Why IPO when the markets stink? Venture capitalist Jeff Richards’s answer: “You go public in a choppy market because your business has strong fundamentals that investors will buy into regardless, you raise important growth capital, and begin establishing a track record as a public company.”

If private equity firms drafted their NFL dream team, who would make the roster? Fortune.com’s Dan Primack goes deep.

Post Traumatic Stress Test Order

A week ago, when the Fed and Treasury mesmerized the financial world with the results of “stress tests” and capital-raising targets for banks, nobody spent much time asking “what if they can’t raise the money?” There was a sense that authorities had washed away enough uncertainty in the sector to satisfy investors. In short order, healthier institutions started raising capital. Those that didn’t need any stepped up efforts to rid themselves of onerous state support.

Bank of America shares are on a tear after the bank raised nearly $13.5 billion through a stock sale. Along with money it raised by selling part of its stake in China Construction Bank, this put Bank of America about half way to filling its stress-test gap.

But when Regions Financial, a large U.S. Southeast regional bank that was stress-tested, announced plans this morning to raise $1.25 billion through stock offerings — also about half of what federal regulators told it to raise — investors balked, sending its stock down more than 8 percent.

Stress Management

SPAIN/Perhaps the best that can be hoped for from the upcoming week of stress test anxiety is that once it is over, a modicum of uncertainty will be gone as well. Sometime today, we should know how heavy the yardstick used in the tests was. The banks either already know or will soon find out whether they passed, and on May 4, expect all kinds of whooping and hollering outside the Deans’ office when the results are officially posted. Of course, there is a pretty good chance that as the banks find out the test results, the news will find a way out, so May 4 may turn out to be somewhat anti-climactic.

What happens next is still a bit vague. There is much talk about officials force feeding more funds to stressed-out banks. And despite the bad press on shotgun marriages — what with NY AG Andrew Cuomo stomping his feet over alleged pressure applied to Ken Lewis for Bank of America to take over Merrill Lynch — financial matchmakers will certainly look at the failures as prime candidates for synergistic harmonization.

But for the optimist, the market truism that the end of uncertainty is always a good thing could come as a welcome spring break for the troubled financial sector.

UBS dodges bigger bullet in tax pact

SWITZERLANDEmbattled Swiss bank UBS struck a deferred prosecution agreement with the U.S. Justice Department that will cost them $780 million. It could have been worse.

Though paying a hefty fine, the Swiss bank is paying ZERO punitive fines, despite conceding that they helped U.S. residents – estimated to number 250 — avoid paying income taxes over an eight year period.

The agreement announced on Wednesday specifies that UBS will give up $380 million of profit from eight years of cross-border business — of which $200 million will be paid to the U.S. Securities and Exchange Commission and $180 million to the Department of Justice — and $400 million for back taxes, tax penalties and restitution for unpaid taxes and interest .

Who’s your boss, Mr. Liddy … and for how long?

Edward Liddy was appointed chief executive of insurer American International Group Inc within hours of a Sept. 16 government rescue, averting the 89-year-old insurer’s collapse.

On Monday, fifty-five days after stepping into the corner office, Liddy unveiled the company’s biggest-ever loss. Concurrently, the U.S. government restructured most elements of  its initial AIG bailout in favor of a new better-for-AIG scheme, overshadowing the bad quarterly news.

Under the revised plan, AIG gets easier repayment terms and, most importantly, the U.S. Treasury will sink $50 billion  into a fund that will buy and hold mortgage derivatives, including those underlying AIG credit default swaps — a thorny area that has led to massive losses for the insurer.

AIG says to report ‘earnings’. Really???

American International Group, the once giant insurer which has become best known as a sinkhole for government money, says it will report third-quarter results on Nov. 10.

Most notable was how AIG described what almost certainly was one of the ugliest reporting periods in financial history: “AIG’s earnings release and financial supplement will be available in the investor information section” of its website.

Earnings? According to the Merriam-Webster dictionary the use of the word “earnings” means money was earned during the quarter, or that the company will report there was money left in the coffer after pay outs. That is unlikely, at least based on analysts’ expectations.

Obamanomics and the Federal Reserve

Barack Obama economic adviser Laura Tyson said at the Democratic National Convention on Monday that U.S. financial regulation needs modernizing, but hedged on how big a role to give the Federal Reserve.

Tyson, former chair of the Council of Economic Advisers in the Clinton administration, said she believes the Fed failed to crack down on subprime mortgage lending in recent years.

“What we have learned from the past two years … is that the old form of regulation is broken,” Tyson said.

Bad News Bear

People enter the Bear Stearns building after JPMorgan Chase & Co said yesterday it was buying Bear Stearns for $2 a share, in New YorkThe aftershocks of Bear Stearns’ collapse are front and center. China’s CITIC Securities is moving on, formally calling off its $1 billion strategic tie-up; JPMorgan is moving in, ditching plans for a new office building now that it owns the $1.5 billion Bear Stearns HQ.

The Federal Reserve — hours away from the most aggressive rate cut in years — is arranging shotgun weddings for failing financial institutions, but policy makers might be running out of eligible suitors. “There may be some potential buyers left, but the list is looking pretty thin,” said Adam Compton, co-head of global financial stock research at RCM Global Investors.

Across the Atlantic, the European Commission said that while it was not asking for job cuts at stricken British mortgage lender Northern Rock, the bank would have to slim down to be a viable business in the future without state support. UK newspapers reported that one-third of staff could be axed.