Deals wrap: Treasury sells stake of AIG
The Treasury made a small profit when it sold a portion of its shares in AIG, but it was unclear how its investment in the beleaguered insurer will ultimately fare.
Tuesday’s $8.7 billion stock offering, (being dubbed by some as AIG’s re-IPO) which included 200 million shares sold by the Treasury and 100 million sold by AIG itself, is far smaller than the $10 billion to $20 billion deal some banking sources had suggested earlier this year, hinting at a potential lack of investor interest.
With the sale, the Treasury has raised $5.8 billion of the $47.5 billion it needs to break even and now has another 1.5 billion shares to sell.
The government can claim a small victory with this sale, but the Deal Journal says the biggest beneficiary of the decision are the banks underwriting the sale.
A day after Yandex surged in its debut coupled with LinkedIn’s record IPO last week, comes the news that the maker behind a series of popular games on Facebook, Zynga, may file for a multibillion-dollar IPO as early as this week.
Can Zynga be blamed for attempting to cash in on the latest Internet IPO craze? Hardly not, but each new booming success leads to more caution of another dreaded tech bubble waiting to burst.
Finally, Fiat exercised an option to acquire a further 16 percent of Chrysler bringing its stake to 46 percent following the Detroit-based carmaker repayment of $7.6 billion in U.S. and Canadian government loans from its 2009 bailout.
Deals wrap: Fiat speeds toward control of Chrysler
Fiat will pump another $1.3 billion into Chrysler this quarter as it moves closer to its target of owning a controlling stake in the U.S. automaker. The deal will take Fiat’s holding in the company to 46 percent, just 5 percent shy of the 51 percent it needs to assume full control.
Read the politically charged, behind-the-scenes story of how the Singapore Exchange failed in its bid for a full takeover of Australian stock exchange operator ASX.
The prosecution amped up the tone of its attacks on Raj Rajaratnam in closing arguments at the insider trading trial of the hedge fund manager on Wednesday, saying the Galleon Group founder wanted to “conquer the stock market at the expense of the law.” The jury is expected to begin deliberations once the defense wraps up its closing arguments either Thursday or next Monday.
In an interview with CNBC, NYSE Euronext chief Duncan Niederauer explains why a merger with Deutsche Boerse would better suit his company’s expansion strategy than one with competing bidders Nasdaq OMX and IntercontinentalExchange.
Deals wrap: Valuing Facebook
Facebook has raised $500 million from Goldman Sachs and Russian Internet investment group Digital Sky Technologies in a deal valuing the social networking site at $50 billion, the New York Times reported, citing people involved in the transaction.
“Facebook doesn’t need to stay worth $50 billion forever — Goldman just needs to engineer an IPO valuation somewhere north of that, then exit quietly in the public markets,” writes Felix Salmon about the deal.
Italy’s Fiat set its sights on a majority stake in Chrysler after completing a long-planned demerger of its car-making activities from its truck and tractor business. Click here for a factbox on the demerger.
Expect M&A to drive biotech stocks in 2011, according to Money Morning.
Battered car-makers rounding blind corner
(Update: This piece was written, as several commenters have pointed out, before GM clinched a sale of Saab to Spyker on January 26.)
By Quentin Carruthers
(Acquisitions Monthly) Automakers face a demand slump in Europe and the longer-term challenge of addressing climate change. Both pressures are expected to lead to further restructuring, consolidation and M&A activity.
The North American International Auto Show, held each January in Detroit, Michigan, is just coming to an end. Detroit is the hometown of America’s “Big Three” automobile makers – Ford, General Motors, and Chrysler – and the show constitutes one of the most important events in the industry’s calendar.
Touring the floor with a group of her fellow Congressmen was Nancy Pelosi, Speaker of the House of Representatives, who told reporters: “We came to listen, to learn, to observe, to measure, to judge what has happened to the investment that we made.”
US state investment includes US$60bn of government loans to support automotive assemblers, in return for control of GM and a minority stake in Chrysler, both of which came out of Chapter 11 bankruptcy proceedings in mid-2009. A further US$3.5bn has been used to support parts suppliers, and US$3bn to support car retailers.
Total state support equates to a loan of more than US$50,000 for each job in the manufacturing side of the industry, as calculated by Philip Wylie, director and automotives leader at restructuring adviser Houlihan Lokey.
Saab WILL survive. Spyker purchased Saab from GM last month…. come on guys GET WITH IT!!! Embarrassing.
Faster than a speeding bankruptcy
After enjoying a bit of confusion from savior Fiat about the imperative of a June 15 deadline, and a quick, 24-hour trip to the Supreme Court, Chrysler creditors now know in no uncertain terms just how much political will there is behind getting the automaker’s government-orchestrated deal done.
The top U.S. court can certainly be counted on to ponderously deliberate matters of vital importance to the nation. But when the consequences of delay are dire (thousands of auto workers’ jobs, a U.S. presidency, etc.), a decision to not make a decision can come with lightning speed.
In a brief two-page order, the justices said opponents of the Fiat-Chrysler deal had not met the burden of showing the Supreme Court needed to intervene. The court’s action was not a decision on the merits of the challenge, they said. The Chrysler dispute marked the first time the Supreme Court had been confronted by legal issues involving the federal government’s power to deal with the economic crisis.
More importantly, it showed that the mechanics working on the reconstruction of the auto industry may have one less headache to worry about as they hammer out problems at General Motors, which is using a similar quick-sale strategy in its bankruptcy in New York.
The whole bailout is so stupid on so many levels. Paying workers not to work, paying workers to quit, giving Chrysler to a company along with billions of dollars. This FAKE bankruptcy is a fraud by our US Treasury, among others. Anyhow, get ready to print some more money.
Live blog of the Chrysler bankruptcy hearing
Reuters will be sending live updates from the Chrysler bankruptcy hearing, on the automaker’s plan to reject 789 dealership franchises, expected soon after 0830 ET. Read the updates below or follow us on Twitter.
Now if we can cancel contracts with UAW, we can get somewhere. Otherwise a fake bankruptcy. Also, I would like to declare BK and get rid off all my debts and keep my money. Where do I go?
(((((((((()))))))))
Fake bankruptcies, fake car companies, fake banks, all make me ill. REAL bankruptcies start soon, minus 100′s billions of taxpayers money.—STUPID STUPID STUPID
No deal on Opel as GM needs more cash – again
What’s surprising: Talks for General Motors Corp’s Opel failed to yield a deal.
What’s not-so-surprising: GM needs cash. Again.
Talks that ran all through Wednesday night to sell Opel to one of four final bidders narrowed the race to two but failed in sealing a deal. German ministers, emerging in the early hours of Thursday morning after more than 12 hours of talks, blamed GM and the U.S. Treasury for the failure.
Why? Because GM, the ministers say, shocked participants by announcing it needed 300 million euros ($415 million) more in short-term cash from the German government to keep Opel operating.
Italian automaker Fiat and Canadian auto parts supplier Magna remain in the race to buy Opel. Belgian private equity firm RHJ International is out. China’s Beijing Automotive Industry Corp was not present at the meeting but the option for it to return with a more detailed offer remained open.
Meanwhile, GM, which has lost $82 billion in the past four years and has received $19.4 billion in government funding since the beginning of this year. It has also said it would likely need $7.6 billion from the U.S. Treasury after June 1. Buy GM cars or not, they sure are getting your money.
Fiat and Magna are probably waiting for GM to go bankrupt in order to get a better deal afterwards. What really amazes me is how Fiat can afford to buy GM Europe, there is no cash and they have plenty of problems themselves. To me it looks more like the blind leading the lame, how can this ever become a viable cooperation.
Chrysler lawyer’s e-mails show doubts on speed of deal
Opponents seeking to slow down Chrysler’s blitz through bankruptcy court received unexpected support for their argument on Wednesday: Chrysler’s lead attorneys. An email that turned up during discovery showed that Jones Day attorneys tried to discourage the U.S. government from setting a June 15 deadline for completing a sale of most of the automaker’s assets to a group led by Fiat. A lawyer for a group of Indiana pension funds, which oppose the sale, read the email in court which showed Jones Day attorneys said the tight schedule would undermine the credibility of their case, called the time frame a mistake and said it would “stuff the judge” by forcing such a rapid hearing schedule. “The debtor lost that one,” said the Indiana fund’s attorney, Glenn Kurtz of White and Case, referring to Jones Day recommendation regarding the deadline. Judge Arthur Gonzalez overruled Jones Day attorneys who objected to entering the email, which the U.S. Treasury released during discovery, because it was not meant to be public and tapped into Chrysler’s legal strategy.
-By Tom Hals and Emily Chasan
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Chrysler, an American Bankruptcy
Chrysler’s private equity owners Cerberus, or at least their lawyers, will arrive at bankruptcy court in Manhattan later this morning. Yesterday, President Obama assured hand-wringing industrialists that the process would be quick and efficient and that Chrysler would emerge a leaner, meaner machine.
To some degree, one can look at the U.S. airline industry in the same light. But that industry, while “saved” through bankruptcy numerous times, is today a shadow of its former self, and remains haunted every so often by the threat of a return to that business mortuary for rebirth.
But a lot has changed since the crisis mad bankruptcy court so busy. The key for the new age of court-run restructuring is to sell major assets before going to court — effectively leaving creditors to haggle over the dregs. Some disgruntled creditors contend that the quick bankruptcy promised by Obama is being engineered in such a way because the sales would never make it past a judge.
In the first major bankruptcy for the auto industry since the crisis began, Obama criticized a handful of “speculators” for greedily holding out for more taxpayer money. He praised union workers for making concessions and financial institutions, led by JPMorgan, for agreeing to take losses up front. He even praised the car company’s management.
But if you look closely, you may start to sympathize with anyone who bought a bond and is being told to settle for less to serve the common good. And to have the management of the company and its bankers praised for effectively engineering a lot of this mess might well make your eyes cross in disbelief.
Deals of the Day:
* Sumitomo Mitsui Financial Group, Japan’s third-largest bank, will buy Citigroup’s Japanese brokerage and key investment banking units in a $5.9 billion deal that will create a banking powerhouse.
I will never purchase a FIAT or Chrysler product and will try to talk anyone I know into not buying those products ever again. I can’t believe they think canceling franchise agreements with dealers who have had their product lines in family owned businesses for generations is going to save them. Again, small business owners must pick up the slack for Washington’s mess. Much less the thousands of employees who will lose their jobs not because their dealership laid them off, but because Fiat thinks Chrysler will be more profitable by having less dealerships. Most people who were going to buy a Dodge truck or Jeep will just switch to Ford because the dealership is close to their homes or offices. What a waste. Bankruptcy court, you got to love it. Donald Trump does.
Chrysler bankruptcy looms despite deal
Chrysler’s biggest lenders and the U.S. government reached a breakthrough framework deal to cut the automaker’s debt by $6.9 billion, but officials say bankruptcy is still a strong possibility with the Obama administration’s Thursday deadline for a comprehensive rescue plan just hours away.
Fiat Chief Executive Sergio Marchionne was quoted by the president of the Canadian Auto Workers union as saying Chrysler would likely enter Chapter 11 bankruptcy for a period of time. But Michigan Senator Carl Levin said, “If they do go into bankruptcy, it would really be in and out.” A source with senior-level knowledge of the restructuring told us that a surgical bankruptcy could be a way, for instance, to address “recalcitrant” lenders.
With Germany’s Daimler AG dumping its 19.9 percent stake in Chrysler and Italy’s Fiat poised to “eventually” own more than a third of the company, European know-how and innovation have never been more important for the U.S. auto industry.
Deals of the Day:
* British education and training company BPP Holdings said it had received a preliminary approach from Apollo Global at 620 pence per share in cash. The approach was at a 70 percent premium to BPP’s closing price on Tuesday valued BPP at 303.5 million pounds ($447 million).
* Australian iron ore miner Fortescue Metals has completed approvals for its equity tie-up with China’s Hunan Valin Iron and Steel Group, the company said.
* Russia’s Aeroflot may agree to buy 49 percent of troubled German airline Blue Wings, Russian Transport Minister Igor Levitin, who is also Aeroflot’s chairman, told Reuters.
Maybe Fiat is just waiting for Chrysler to go bankrupt, a bankrupt Chrysler can put Fiat in a better negotiating position and Fiat may end up with a better deal.
“The government can claim a small victory with this sale”
Uh, no. The sale reveals that there was little real demand for AIG shares. There were more flippers than genuine buyers. That will be remembered on future sales, and buyers will require a greater discount to the current market price to get them to part with money for shares of AIG.