M & A wrap: A Buffett bailout for BofA

Warren Buffett’s Berkshire Hathaway will invest $5 billion in Bank of America, stepping in to shore up the company in the same way he helped prop up Goldman Sachs during the financial crisis.

Bank of America shares rose 20 percent in pre-market trading on the news. Shares for the largest U.S. bank by assets have lost roughly a third of their value in August, and half their value since the beginning of the year.

The news of Steve Jobs’s resignation had many of his peers weighing in on the Apple co-founder’s legacy. Former Google CEO Eric Schmidt said Jobs is the “most successful CEO in the U.S. of the last 25 years,” while former eBay CEO Meg Whitman said his contributions are “unparalleled in the business world.”

Samsung Electronics Co reiterated on Thursday it is not interested in buying Hewlett-Packard Co’s PC business, shooting down persistent market talk the South Korean firm may snap up the unit to become the world’s top PC maker.

The deadline for initial bids in the auction for Hulu was extended until the end of the week to allow interested parties more time to examine the online video site’s financial information, according to people familiar with the situation. Yahoo, Google Inc, DirecTV and were among the parties preparing to submit an offer for the U.S. online company, the people said.

from Breakingviews:

HP tries big buyback to quell investor discontent

Sometimes an ounce of prevention is worth a pound of cure. Case in point: Hewlett-Packard. Like many tech concerns, it is sitting on a large cash pile. But the company's bidding war with Dell for control of 3PAR raises fears it may squander its $15 billion hoard on overpriced baubles. Promising to repurchase $10 billion of stock soothes investors. Refraining from such battles would be more effective.

HP's investors were already shaken by the surprise booting of chief executive Mark Hurd from the company. Making three bids in one week for 3PAR made them feel queasier. The stock lost another 5 percent of its value last week, bringing its total losses since the start of the year to about 25 percent. HP may fear the strategic implications of a Dell victory, but agreeing to pay $2 billion net of cash -- or more than three times the undisturbed price -- for 3PAR appears undisciplined.
Promising investors to return some of their cash is a sensible move. It reminds them that HP has a good record in rewarding despite a steady history of acquisitions. Since the existing buyback program is running low, it was natural to replenish the fund -- especially if the company feels its stock is priced at bargain levels.

Investors should be comforted by the fact the buyback lessens the chances that cash burns a hole in HP's pocket. The authorization is about equal to a year's worth of free cash flow. Of course, a better way to lessen investors' fear of HP squandering their money would be to avoid irrational acquisitions, like the bid for 3PAR, altogether.

from Breakingviews:

3PAR battle is case of undisciplined cash vs. cash

Consumers may still be deleveraging, but at big corporations it's liquidity galore. How else to explain the curious case of the bidding war over 3PAR, a data storage company coveted by Dell and Hewlett-Packard? There's no sound mathematical rationale for the 3PAR frenzy, which has now reached $2 billion with HP's third counter-offer to Dell.

Only a highly creative financier with a spreadsheet and a bong could justify the valuation on HP's latest bid -- the sixth for the company in three weeks. HP is offering $30 a share -- more than three times 3PAR's $9.65 undisturbed price as of Aug. 13. Plus, HP will pay a $72 million termination fee if it clinches the deal.

Let's put that into Excel and smoke it. Assume HP -- or Dell for that matter -- really can pump up the sales volume of 3PAR by stuffing it through its distribution pipeline. Consensus estimates compiled by Thomson Reuters show the company is already expected to improve sales from $195 million last year to $460 million by 2014.

Deals wrap: Lowering expectations

Marius Kloppers, BHP Billiton Chief Executive, poses for photographs in central London August 25, 2010. REUTERS/Toby Melville BHP Billiton tried to dampen expectations it would substantially raise its hostile $39 billion bid for Potash Corp as bumper results showed it has plenty of firepower. *View article *View reaction from analysts and investors *View Potash Corp deal scenarios

Dubai World believes it can raise as much as $19.4 billion from selling key assets over eight years, if creditors back its restructuring, a document obtained by Reuters showed. *View article *View reaction from analysts and investors

Dell and Hewlett-Packard are expected to raise their bids for 3PAR, but technology investors and analysts warn of valuations taking a back seat to egos. *View article

from Breakingviews:

HP’s deal mojo unrestrained by l’affaire Hurd

Mark Hurd, the Hewlett-Packard chief executive, turned out to be a man of hearty appetites -- including for deals. Before leaving HP earlier this month under a cloud, Hurd spearheaded an M&A tear that included the purchases of 3Com, Palm, and EDS. But any bankers worried that the tech group's appetite for deals might wane after Hurd's departure can breathe easier.

HP's unsolicited bid for 3PAR, unveiled on Monday, could even be taken as a sign the company's takeover libido has been given a boost. If that were to prove sustainably the case, though, shareholders might find it troubling.

A single $1.6 billion offer by a company with a $90 billion market value is, literally, no big deal. And HP says 3PAR's data storage technology fits perfectly into its product portfolio in the arena of cloud computing. Moreover, the tech giant can point to early successes from its 3Com purchase.

Tech looks for security blanket

As tech spending stages a comeback, watch for industry giants like Hewlett-Packard and IBM to start scouring the security software market for acquisitions that will boost their share of corporate IT budgets, Anupreeta Das reports. Security software is a critical component of the “stack” of applications used by companies to store and manage networks and data, making software makers from McAfee to upstart Sourcefire attractive targets.

“There is a clear trend toward convergence of technologies in the data center, and security is front and center,” said Daniel Ives, an analyst at FBR Capital Markets. He and other analysts said security spending by companies held up well during the recession even as overall IT budgets shrank — a mark of resilience that only adds to the lure of security companies. “Security really has the attention of CIOs (chief information officers),” Ives said in an interview. Read more, click here.

SEC to be busy with 3Com fishiness

Hewlett-Packard’s move into the network equipment market with a $3.1 billion deal for 3Com could be marred by allegations of insider trading. At first glance, the hallmarks of suspicious trading are there, according to option traders said. 3Com shares jumped 5.18 percent to $5.69 during the day — before the deal was announced — rising from the opening bell and closing a penny off the session high.

After the bell, when the deal was disclosed, 3Com shares shot up 35 percent to $7.65. Option market sources told our reporter Doris Frankel it wasn’t just the stock behaving oddly ahead of the late-afternoon news. Volume in 3Com call options — which convey the right to buy the company’s shares at a fixed price within a specified time period — soared.

A total of 8,085 calls traded, against only six puts. That amounted to 17 times the recent average daily call volume, according to option analytics firm Trade Alert.

Brocade: Deal or no Deal?

rtri2ikIn an October 11 research note titled “Castles in the Air, Downgrading to Perform,” Oppenheimer & Co analyst Ittai Kidron throws cold water on expectations that Brocade will be bought anytime soon.

The speculation began last week, after The Wall Street Journal reported that Brocade was “quietly” shopping itself, and that Oracle and Hewlett-Packard could be potential buyers.

Later, Reuters reported more details: Brocade had in fact been trying to sell itself for several weeks, and HP had kicked the tires — going as far as to begin due diligence — but stopped short of making an offer for the company because they were only interested in certain assets. Then, Oracle CEO Larry Ellison publicly said his company wasn’t about to buy Brocade. Apart from HP and Brocade, analysts have speculated that IBM and Juniper Networks could also be interested.

Will Brocade find a buyer now?

One theory is doing the rounds about why the Brocade-shopping-itself story found its way into the press when it did. People familiar with the matter have told Reuters that Brocade has been up for sale for weeks; one person said Brocade began sending out feelers to potential acquirers nearly two months ago.

Hewlett-Packard is said to have looked at Brocade, as did Oracle. One source said on Monday that HP went as far as to begin due diligence. But from what I hear, no one has found Brocade compelling enough to shell out a few billion dollars on the spot. If anything, HP could be interested in some of the assets of Brocade rather than the whole company, which could be why it stopped short of making an offer.

Other potential acquirers include IBM and Juniper, which is the No. 2 network equipment maker after Cisco, but bankers and analysts think neither company is likely to step in. From what I understand, IBM has not looked at Brocade, although that could change any minute.

Brocade on the block?

The Wall Street Journal reports that the data storage equipment maker wants to sell itself. While Oracle and Hewlett-Packard are potential bidders, a deal is not imminent and Brocade might not even go ahead with a sale, according to the report.

Just a couple weeks ago, Brocade said it expected to turn the corner in 2010, with revenue exceeding Wall Street expectations. Better late than never. It reported a loss for the third quarter and a decline in revenue from the second quarter, and saw its stock punished by traders who had been expecting a turnaround sooner.

Brocade also said in September that its integration of Foundry Networks, acquired last year, was going as planned, and its sales partnership with IBM was beginning to yield more benefit. Just the kind of thing you’d want to hear if you were a Brocade shareholder contemplating a sale. Tech services mergers have been very hot of late, and the potential buyers — particularly Oracle — are not exactly poor or deal-wary.