DealZone

BHP Billiton’s $39 billion battle to take control of Potash is expected to drag on into next year after it failed to win immediate backing from Canadian authorities.

“To some extent the longer it drags on, it might be better for BHP because it reduces the tension, although if someone else comes in like the Chinese it is another game,” said Peter Chilton, an analyst at Constellation Capital Management. *View article *View article on the possibility of a counter bid

“In the fast-paced world of Silicon Valley innovation, Google’s chief dealmaker David Lawee puts many a youthful engineer to shame,” writes Alexei Oreskovic. *View article

MUFG, Japan’s biggest bank by assets, is looking to buy a 15 to 20 percent stake in a bank in South Korea, Australia or Indonesia to tap the region’s growing economy, a senior executive said. MUFG and its domestic rivals have been stepping up their overseas expansion in the face of weak growth prospects at home, writes Jean Yoon and Taiga Uranaka. *View article

Bloomberg reports “as much as 20 percent of hedge funds globally may be liquidated by the first quarter because smaller managers are starved for fees and new capital, according to Bank of America Corp.’s Merrill Lynch & Co. unit.” *View Bloomberg article

Burger King,which has underperformed rivals and has forecast weak demand, is considering a sale, a source familiar with the situation said. One potentially interested party is 3i Group, a source told Reuters.  *View article

August’s unseasonable burst of dealmaking — the busiest in over a decade — could herald a wider rebound in M&A for the remainder of the year as low interest rates, record cash piles and low stock-market values encourage chief executives to strike deals. *View article *View Seeking Alpha article on how the deals boom means trouble ahead

Regulators did not grant Lehman Brothers the same assistance as its competitors and thereby aggravated the global crisis, former Lehman Chief Executive Dick Fuld will tell a “too big to fail” commission. *View article *Full coverage

Stanley Druckenmiller's departure may reveal something important about hedge funds. The famed investor plans to close down his 30-year-old, $12 billion firm, Duquesne Capital Management. On one level, it's just a very rich guy wanting to play more golf. But on another, it suggests bigger fund firms may struggle to live up to past glories.

The onetime George Soros colleague clearly doesn't need the money. Forbes pegged Druckenmiller's wealth at $2.8 billion earlier this year. But he hasn't wanted for years, and he's only 57. The desire to keep winning has kept other billionaires involved in the investing business far longer. His old boss Soros, for instance, just turned 80. Warren Buffett is only a couple of weeks off that landmark and Carl Icahn is well into his 70s.

Early retirement can have its appeal. There's nothing wrong with recognizing the toll that managing other people's money can take. And investors with considerably smaller fortunes have been lured by the golf links. Druckenmiller, a seven handicap, cited both factors in his decision, according to an interview with Bloomberg. The billionaire also has serious philanthropic interests.

American International Group reports better-than-expected quarterly results and says it has started talks on disentangling itself from the U.S. government. The insurer is nearly 80 percent-owned by the government. *View article

Hedge fund investors scarred by global credit crisis losses are setting their expectations lower and beginning to content themselves with smaller gains they would have balked at two years ago.  *View article

“Being an entrepreneur is like eating glass and staring into the abyss of death,” Elon Musk tells TechCrunch. *View article

Assume for a moment that Citi is successful in raising $3 billion for private equity and hedge funds, and assume for another moment that the U.S. government takes away these businesses away from Citi, as legislators are threatening. What happens next? Why is Citi building a business it may soon have to sell? And why would any investor give money to a hedge fund manager that may have to sell its business?

Investors will not likely care about whether the bank will sell its alternative asset management business. Customers care most about who is investing their money day to day, not which corporate logo is on the stationery. And if Citi has to sell the business, it will get a slightly higher price for a business that has an extra $3 billion under management.

Citi is still walking into a mine field by building a business that lawmakers are explicitly trying to keep banks out of. One thing for sure–if Citigroup is building alternative asset management businesses, nobody can accuse it of being under the thumb of the government, which still owns billions of the bank’s shares.

As an investment strategy, making private equity and hedge fund managers rich is a probable loser. As a tax policy, it is a guaranteed one.

The U.S. House of Representatives passed a bill last week that would raise the taxes that private equity and other investment managers pay on "carried interest," their share of the takings when a holding such as a startup or turnaround is sold at a profit.

Carried interest is currently taxed at the lower capital gains rate, meaning that many private equity barons can pay less in tax than the people who clean their swimming pools or mind their children. This is patently unjust. Carried interest is compensation for labor, earned income in other words, rather than gains on capital that might be lost.

Sovereign wealth funds are finding new territories to play in, pension woes are creating deal-making opportunities and investors suddenly find themselves wielding new-found power.  Those are some of the themes spotlighted on the last day of the Reuters Private Equity and Hedge Funds Summit.

Here is a selection of the best from the summit:

Hedgies, private equity dance to investors’ tune
Buyout exec Moulton says pension woes drive deals
Search for growth seen driving mergers
SWFs muscling in on funds business

From around the Web:

True Love: Who Wants to Buy JDate? (WSJ)
“Spark says it is reviewing the proposal. In the end it will depend on whether it takes its own advice and gives up the single life.” – WSJ

Pfizer will present a nearly $4 billion offer for Germany’s Ratiopharm this week, sources tell Reuters, launching a possible bidding war with Teva Pharmaceutical and Actavis. A decision is unlikely before the end of the month.

Hedge fund Elliot Associates offers to buy Novell Inc — the world’s No. 2 maker of Linux — sending its shares up 28 percent. Speculation is that other bidders could come in and drive the price up further.

Britain’s Prudential seems to have stopped its decline after it announced a $35.5 billion takeover of AIA — the Asian life insurance business of AIG. The stock dropped a fifth since the Pru announced its offer, but it’s now bounced a percent or so.

At the Private Equity and Hedge Funds Summit, Primus co-CEO Robert Morse tells Reuters the opportunities in real estate in the U.S. are extraordinary. The $1.2 billion financial investment firm is now setting its sights on property owned by distressed sellers in the United States.

Here is a selection of the best stories from today’s summit:
BC Partners boss sees mini-bubble brewing
CQS raises $750 million for convertibles
BC Partners to court sovereign fund investors
Toscafund says UK stocks’ low value “absurd”

From the Web:

Buffett Casts a Wary Eye on Bankers (NYT)
“”Don’t ask the barber whether you need a haircut.” That little nugget was buried in Warren E. Buffett’s annual letter to Berkshire Hathaway shareholders published over the weekend.” – NYT

This Year’s Huge (So Far) M&A Deals And The Lawyers Masterminding Them (Business Insider)
A slide show of the big deals and the lawyers behind them.

Follow the shifting money patterns into Asia and the secondary market at the Reuters Private Equity and Hedge Funds Summit. Later this week look for exclusive interviews from top management at Blackstone, 3i and THL.

Private Equity and Hedge Funds Summit:
-Asia set to grab a 5th of hedge fund flows
-PE secondary deals seen picking up
-Hedge funds, private equity face profit squeeze

Deals from the Web:

‘Golden Era’ May Elude Private-Equity Investors as Prices Rise (Bloomberg)
“Private-equity firms tell investors that the years following recessions offer the best opportunity to make money. This time may be different.” – Bloomberg