DealZone

Deals wrap: Standard Chartered’s call for cash

A woman walks down the stairs of the Standard Chartered headquarters in Hong Kong October 13, 2010.    REUTERS/Bobby Yip  Standard Chartered launched a $5.3 billion rights issue to bolster its finances in response to Basel regulations and to take advantage of growth opportunities. The cash is not however a war chest for acquisitions, Chief Executive Peter Sands said. *View article *View analysis on the stringent new rules for banks *View article on other banks following Standard Chartered’s lead

China has the world’s largest IPO market this year and next year could be even busier if the government allows foreign companies to sell shares on its stock markets, an executive at Credit Suisse said. *View article

Matt Rosoff at Business Insider predicts a deal is still coming from Microsoft and Adobe. *View article

from Breakingviews:

China IPO frenzy returns — but not in China

China is no longer blindly in love with new stocks, as seen in this week's flop of Ningbo Port. But other markets have caught the fever. Four Chinese companies rose on average around 50 percent on their debut in New York and Hong Kong in the past week. Cash-rich global investors are hungry for China's high rates of growth. A flood of new supply may test their appetite.

The excitement over the latest crop of overseas-listed China stocks is reminiscent of recent years' booms on the Shanghai and Shenzhen markets. Children's clothing maker Boshiwa <1698.HK>, and restaurant chain Country Style Cooking , rose by 41 percent and 47 percent respectively on their debuts. On domestic markets, the story is very different. China's third-largest port operator fell 4 percent on September 28, its first day of trading.

Global investors are chasing Asian growth. Asian equity funds, excluding Japan, had their best week of inflows in more than 15 months for the week ended September 22, according to fund tracker EPFR Global. Consumer-focused stocks, like Boshiwa, are particularly hot, as Chinese politicians air their promises to rebalance the export-led economy toward consumption.

from Breakingviews:

Uncle Sam’s AIG exit likely to be drawn out

There's no quick way for the U.S. government to exit American International Group <AIG.N>. Converting $49 billion of preferred stock to common shares and selling them would, like the government's exit from Citigroup <C.N>, take a while. And that's assuming other share sales, needed for separate repayments relating to AIG, go smoothly.

As of June 30, AIG owed the government just over $100 billion -- though a further $4 billion has since been repaid. AIG has also made progress offloading assets. Big examples include the IPO of AIA, the Asian unit currently expected to debut on the Hong Kong market in the next month or so, and the $15.5 billion sale to MetLife <MET.N> of American Life Insurance, or Alico, which is winding its way towards closing. The New York Fed converted debt into preferred shares in these entities worth $16 billion and $9 billion, respectively, and the deals will help pay that off.

Back at AIG itself, there are around $49 billion of preferred shares owned by the Treasury. The Citi example shows how that block of prefs might be swapped into common equity and then sold, over time. In the Citi case, the government is turning a profit on its shares, potentially making the idea interesting for AIG as well.

Deals wrap: Reaching for the wine

Red wine made by Fosters is displayed on the shelf of a liquor store in Melbourne September 8, 2010. REUTERS/Mick Tsikas Foster’s beer business has been getting all the limelight recently but the company has now rejected a private equity offer worth up to $2.5 billion for its wine business. The news raised speculation that suitors for the combined group, which has a market value of about $11 billion, might now step forward. *View article *View article on Foster’s CEO

BA-Iberia has earmarked Asia as a key region for expansion once their own merger solidifies, though restrictions on foreign investment could narrow their range of acquisition targets.*View article

The defense world is bracing for a whirlwind of dealmaking as tighter budgets and new security threats prompt the Pentagon’s large contractors to move resources to cybersecurity and unmanned defense. *View article *View graphic *View full coverage of the Reuters Aerospace and Defense Summit

Deals wrap: Is 3PAR a good deal?

File photo of a man inspecting a diamond at the Israel Diamond Exchange in Ramat Gan near Tel Aviv December 15, 2009. REUTERS/Gil Cohen Magen Dell is expected to soon give up its pursuit of 3PAR, either ceding to HP’s last offer of $30 per share or giving up at a few dollars higher, according to a Reuters survey of eight technology investors and analysts. * View article *Columnist Robert Cyran asks: Is 3PAR an overpriced bauble for HP?  * An MSN article makes the case that both Dell and HP are certifiable.

AIG faces the prospect of looking for another buyer for its Taiwan unit after regulators threw out its proposed $2.2 billion sale of Nan Shan Life to China Strategic.  There have been suspicions in Taiwan about the connections of China Strategic with political foe China, and concern it did not have the experience to run an insurance business.  * View article

Some high-profile IPO’s are under water and this is not sitting well. “Investors are sick to the back teeth of being treated like idiots,” Dan Nickols, at Old Mutual Asset Managers, tells the Financial Times. *View FT article

from Breakingviews:

GM needs to double earnings to repay taxpayers

General Motors' much anticipated initial public offering filing finally landed on Wednesday. But investors shouldn't get too caught up in the hype. Sure, the automaker looks in pretty decent shape thanks to last year's bankruptcy clean-up, and car sales are motoring away from last year's lows. But to repay U.S. taxpayers in full, GM needs to at least double its earnings.

That's assuming the carmaker is valued at the same earnings multiple as Ford Motor. Granted, GM and its bankers could argue that it has advantages over its cross-town rival that may warrant a higher valuation. It has far less debt, for starters. And it has a stronger position in fast-growing China.

But operationally GM is still lagging: the pre-tax margin on its global autos business was 5.7 percent in the second quarter. After years of losses and in a fairly low-margin industry, that's worth shouting about. But it falls shy of Ford's 7.2 percent margin in the same period. There's an even bigger gap of more than three percentage points between the margins the two manufacturers make in the key North American market.

Deals wrap: ICBC’s offer

A company logo of the Industrial and Commercial Bank of China (ICBC) is seen outside one of its branches in Beijing June 18, 2010.   REUTERS/Bobby Yip  Industrial and Commercial Bank of China Ltd, the world’s most valuable bank, says it will pay shareholders of its Hong Kong arm a 27 percent premium to take it private, as part of an effort to expand its presence there. *View article

GM is ratcheting up the PR in advance of an IPO, and the NYT takes a look at the mechanics of the promotion. *View NYT article

Who owns the “Sky” in “Skype”? *View paidContent article

peHUB is live-blogging KKR Earnings Call. *View peHUB article

from Breakingviews:

Skype IPO may add dose of healthy hype to Valley

Skype's initial public offering may add a dose of healthy hype to Silicon Valley. The Internet telephony group's $100 million float should be red hot. While there have been several tech offerings this year, investor reception has been uneven. A bit of justified excitement over Skype's growth and its backers' gains is just what the Valley's capitalists -- and entrepreneurs -- need.

With hot companies like Facebook and Zynga ruling out public floats in the near future, that leaves growth investors hungry for the next big ticket. Skype obliges. It has 560 million registered users and continues to grow. It added 86 million in the first six months of the year. Moreover, it is in the black. Skype has totted up $116 million of adjusted EBITDA since January, and this figure could grow rapidly if the company succeeds in cracking the lucrative enterprise market.

Moreover, Skype is big. Place estimated 2011 revenue of $1 billion on the same multiple as Google, and the company may be worth more than $5 billion. That would be a huge gain for the private equity backers at Silver Lake who led the firm's carve-out from eBay, clarified copyright issues with Skype's founders and tweaked its software. They valued the firm at $2.75 billion at purchase in 2009.

from Breakingviews:

As ex-bankrupt, GM deserves cautious IPO interest

General Motors' coming initial public offering may be a hard sell. After all, the automaker burnt investors with its Chapter 11 filing a little over a year ago. But companies that emerge from bankruptcy can significantly outperform the stock market. On the other hand, a third of them go bust again. The IPO of GM and, in time, those of other cleaned up ex-bankrupts like Delphi and Chrysler, deserve cautious investor interest.

Shares of formerly-bankrupt companies tend to do well if markets are anywhere from plodding to bullish. A portfolio of such stocks including Federated Stores (which later became Macy's) in the early 1990s, and another after the dot.com bust in the early 2000s, would have sharply outperformed stock indices. The early 1990s batch returned about 28 percent more over 200 days than stocks of similar pubic firms, according to a study by New York University professor Edward Altman.

There are several possible explanations. Analysts caught out by companies going bust may be overly cautious about their prospects when they return to the public eye. Executives may also be tempted to lowball expectations. After all, they get to take credit -- and some of the profit -- for beating targets.

Deals wrap: A successor for Buffett?

A fairly unheralded 44-year-old Chinese-American hedge fund manager, with a strong background as a human rights activist, has become a leading candidate to replace Warren Buffett, should he retire as founder and CEO of the $100-billion Berkshire Hathaway fund, according to the Wall Street Journal.

Li Lu, who was a student leader during the 1989 Tiananmen Square protests in Beijing, is the first person to be identified to potentially replace the soon to be 80-year-old Buffett, in what the WSJ story said is “among the most high-profile succession stories in modern corporate history.”

Buffett told the WSJ his retirement plans are not imminent and his job would likely be split after he leaves the company into separate CEO and investing functions. The WSJ story revealed David Sokol, the current chairman of Berkshire unit MidAmerican Energy Holdings, is considered the top contender for Buffett’s CEO role, while Li would potentially serve as one of Berkshire’s top fund managers.