M&A uptick expected – survey
A survey of top dealmakers found that merger activity will increase during the balance of 2010, a sharp contrast in sentiment from last year.
A survey conducted by Brunswick Group LLC found that 78 percent of respondents expect M&A activity will continue to rise, while 22 percent said it would stay at the same pace seen in the first quarter.
Mergers and acquisitions topped more than $520 billion in the first quarter, up 19 percent from the first quarter of 2009, according to Thomson Reuters. Emerging markets and energy-focused takeovers made up a growing slice of the activity in the first quarter. Still, merger volume dropped 16 percent from the fourth quarter of 2009.
No advisors predicted a drop in deal activity for the remainder of 2010, according to the Brunswick survey. That’s in contrast to the 69 percent of respondents last year who said it would would take up to five years to return to the level of M&A activity seen in 2007.
The third annual survey polled 48 market participants in the M&A community, including bankers, lawyers and other advisors. Results were released on the eve of the 22nd Annual Tulane University Law School Corporate Law Institute, a top M&A conference.
Rising boardroom and CEO confidence in deal market conditions was the most significant factor driving the renewed activity, above the greater availability of credit and the low interest rate environment or an improving equity market and buoyant stock prices.
Among the top sectors seen as ripe for consolidation in 2010 are healthcare, energy, financial services, and technology and telecommunications, according to the survey.
DealZone Daily
British Airways (BAY.L) and Spanish carrier Iberia (IBLA.MC) sign their merger agreement, sealing a long-awaited deal to create the world’s third largest airline by revenue. The deal creates a group with a combined market value of around $8 billion. Read the Reuters story here.
India’s Essar plans a $2.5 billion listing in the United Kingdom. The energy company expects to be included in the FTSE and has hired JPMorgan and Deutsche Bank to help it sell its shares.
UAL Corp’s United Airlines is in merger talks with US Airways in a deal that could create the second-largest carrier in the United States, two sources tell Reuters. Read the story here.
For all Reuters news on deals, click here. Elsewhere in media:
Greeting cards retailer Card Factory is on the verge of a 350 million pounds sale to private equity firm Charterhouse Capital Partners, UK newspaper the Times reports.
Hospital chain HCA Inc is preparing an initial public offering that may raise $3 billion, and plans to interview banks to underwrite the sale in the coming weeks, according to Bloomberg.
Is Dell overpaying for Perot?
With something like $10 billion in cash, Dell wouldn’t seem to be stretching itself to buy Perot Systems. But the $3.9 billion it is offering represents a 67 percent premium, so Dell shareholders should probably ask themselves whether Perot’s business is worth so much.
Perot is a business service company with a big component dedicated to health information. It was founded in 1988 by Ross Perot — the same Ross Perot who ran for U.S. president as an independent in 1992 and 1996.
Dell’s cash pile is burning a hole in its pocket. It has said it wants to step up acquisitions, and services businesses are a logical target area, with higher margins and steadier revenue than the business of building and selling computers that made Michael Dell (pictured in shades above) the tech mogul he is today.
But why does Perot command such a hefty premium? “We think this acquisition is expensive,” and even pricier than Hewlett-Packard’s purchase of EDS last year, said analyst Shannon Cross of Cross Research. She says the cost-saving benefits are few. Even Dell says cross-selling benefits won’t materialize until 2012.
“Dell investors should be outraged at paying such a large sum for such a small, vertical operation,” said Douglas A. McIntyre of Wall St 24/7.
Wow. That is a game changer of sorts….
After HP/Compaq/DE lining up service and hardware…. took Dell long enough to decide to go this route….
To bad they missed coming up with a competitive mp3 player/phone with a developer network… but hey competing the old fashion way on service and support has gotta work… doesn’t it?
Is Genentech taking over Roche?
Roche’s megabucks Genentech buy is looking more like a reverse takeover — in some ways, at least.
The Swiss drugmaker splashed out $47 billion to buy out its biotech partner to secure access to Genentech’s impressive new drugs. But Roche’s U.S. operations are to operate under the Genentech name and research, development and commercial operations are all being based at the U.S. group’s South San Francisco headquarters.
Now Roche doesn’t even consider itself Big Pharma. It says it will leave the industry group Pharmaceuticals Research and Manufacturers of America (PhRMA) but will retain Genentech’s membership of the Biotechnology Industry Organization (BIO).
“As part of the world’s largest biotechnology company, Genentech and Roche believe that BIO’s purpose is closely aligned with the direction of the new company and, therefore, can represent the company’s interests in Washington, among policymakers, legislators and the general public,” Roche said in a statement.
PHOTO CREDIT: People are reflected in a window (R) as they walk past the headquarters of Swiss pharmaceutical company Roche in Basel February 4, 2009. REUTERS/Christian Hartmann
Please tell me what happened to my DNA stock? It just disappeared out of my portfolio. How much was I paid per share and where did the money go? Janice NIchols
Another deal in healthcare: what’s the magic pill?
As dealmakers everywhere struggle to get deals done, the healthcare industry seals yet another one.
Express Scripts has agreed to buy health insurer WellPoint’s prescription business for $4.68 billion in a significant expansion for the U.S. pharmacy beenfit manager. The deal will be a concoction of cash and up to $1.4 billion in common stock, and will generate more than $1 billion of incremental EBITDA.
This comes on the heels of Pfizer’s $68 billion acquisition of Wyeth, Merck’s $41.1 billion takeover of Schering Plough and Roche Holding’s $46.8 billion buyout of Genentech. Granted, this isn’t a pharma deal, but it still falls under the umbrella of the healthcare sector.
And in a market where deals aren’t getting done — mainly due to tight credit conditions and partly due to value gaps between buyers and sellers (due to the huge declines in stocks late last year) — you’ve gotta ask: what’s the magic pill?
Deals of the day:
* Indian mid-sized IT outsourcer Tech Mahindra won a bidding auction for a majority stake in fraud-hit Satyam Computer Services Ltd, edging out Larsen & Toubro, seen by some analysts as the favourite bidder. * India’s Larsen & Toubro, which has built up a 12 percent stake in Satyam Computer Services, plans to hold on to the stake, its chief financial officer said on television channel NDTV Profit. * Pakistan’s Habib Bank Ltd. (HBL) and MCB Bank are interested in buying the operations of Royal Bank of Scotland (RBS) in the South Asian nation, the two banks said in separate statements on Monday. * A bid by Japan’s Mitsubishi Rayon Co for unlisted British chemicals maker Lucite International has hit a hurdle in China where regulators have delayed the acquisition, two sources briefed on the matter said.
* Orascom Telecom said on Monday it was proposing to extend the deadline to April 15 for implementing a court order for the Egyptian firm to sell its shares in mobile firm Mobinil to France Telecom.
Pushing Drugs
The drums of consolidation in Big Pharma were beating loudly after Pfizer bid for Wyeth in January. And as Merck and Schering-Plough were already teamed up on key drugs, the deal they announced this morning was hardly a shock. Though analysts said the pact has lots of logic to sell it — the companies are practically neighbors in New Jersey — the market is playing defense, so any excitement about Monday merger mania was quickly quashed as the economic Thorazine kicked in.
Long the preferred defensive play in a downturn, Big Pharma has been suffering along with the rest of the market as investors unwind the bull-market era and dump stocks for treasuries in the face of the biggest surge of new government debt issuance in living memory. Plus, consider that just last week the Obama administration was marshaling the president’s executive might to make good on a campaign pledge to tackle soaring health-care costs. Considering the environment, the strength of logic might not be enough to cast the Merck/Schering-Plough deal as anything other than a defensive necessity.
Shareholders are acting defensively as well. Merck shares were retreating in premarket trade, indicating a lack of confidence that the synergies of the merger will overcome what ails Wall Street. Deals of the Day:
* Iceland’s financial watchdog said it had taken over investment bank Straumur Burdaras <STRB.IC>, the last major Icelandic bank left standing after the country’s financial collapse in October.
* Four global spirits makers, including Diageo, have shown interest in acquiring stake in India’s United Spirits, the world’s third-largest spirits maker, the Times of India said on Monday, quoting agencies.
* Swiss logistics group Kuehne & Nagel has agreed to buy J. Martens Holding AS, a Norwegian service provider to the oil and gas industry, it said.
* India’s Satyam Computer Services said it was commencing a competitive bidding process to select an investor to acquire 51 percent stake in the fraud-tainted outsourcer.
Roche basks in Genentech defence
It wasn’t quite the market response Genentech CEO Arthur Levinson was looking for.
Levinson and his team worked hard to make the bull case for the biotech group by providing long-term forecasts to prove it is worth far more than Roche is willing to pay. Yet Genentech shares still ended down 4.6 percent, or nearly $4, in line with a grim market on March 2.
Roche investors, by contrast, were in distinctly chipper mood on March 3, marking up the Swiss group’s stock by more than 5 percent.
Why the skewed response? JP Morgan analysts put it down to the fact that positive news for Genentech is also good for Roche (after all, it already owns 56 percent of the U.S. business) and such news could actually have a bigger impact on the Swiss group because it trades on a much lower multiple.
“Most factors cited by Genentech to highlight the value of the business represent an even greater upside to Roche shareholders, as that upside could be leveraged outside the U.S. and should boost what is currently a much lower Roche valuation,” the brokerage’s analysts adds.
