Asia’s sovereign wealth funds may be loaded, but they don’t need long memories to recall the big losses they’ve suffered on seemingly sure-thing investments in Wall Street’s troubled banks. So with reports that Lehman Brothers came up empty in efforts to win funds from top Chinese brokerage CITIC Securities and state-owned Korea Development Bank, it’s anybody’s guess where it will come up with the cash it needs to deal with an expected $4 billion in writedowns before announcing results in September.  

The path most traveled heads further east, to Singapore and the gulf, where investors could be equally, if not more gun-shy given the news flow. A ray of hope could shine from Singapore though. State investment firm Temasek said it was prepared to plunk more money into Western banks. An Singapore sling couldn’t come at a better time. This morning, Citi’s Prashant Bhatia became the latest big bank analyst to warn on Lehman and fellow investment banks Goldman and Morgan Stanley, lowering third quarter estimates for all three, and The Wall Street Journal says the Fed had called Credit Suisse last month to see if it had pulled a credit line from Lehman, acting to prevent a repeat of the cascading speculation that helped sink Bear Stearns.

U.S. private equity investor Lone Star is buying the rump of lender IKB, Germany’s most prominent casualty of the subprime crisis. The sale by state bank KfW closes an embarrassing and costly chapter for Europe’s biggest economy. IKB nearly collapsed a year ago under the weight of $24 billion in investments linked to risky U.S. home loans, making it Europe’s first major victim of the global financial crisis. The government brokered the first of three rescues to avert what the country’s banking watchdog warned could trigger Germany’s biggest financial crisis since the 1930s depression. But as the cost of the rescues spiraled towards 10 billion euros ($14.8 billion), Berlin started looking for a buyer.

In a Wagnerian triumph echoing through Europe’s car factories, ball-bearing maker Schaeffler has won the battle for control of tires-to-brakes firm Continental. Continental Chief Executive Manfred Wennemer, who had slammed Schaeffler as “egotistical, autocratic and irresponsible” after it covertly gathered 36 percent of Continental’s stock, will go by the end of the month, leaving the way clear for the creation of the world’s third-biggest car-industry supplier, with sales of $50 billion. The agreement allows Schaeffler’s stake to creep up to just under 50 percent. But with effectively 36 percent already, the Bavarian group owned by glamorous billionaire Maria-Elisabeth Schaeffler and her son already has control.

Mizuho Financial Group, Japan’s second-largest bank by assets, said it would invest $120 million in U.S. merger advisory firm Evercore Partners, marking the latest push by a Japanese financial company into the world’s largest economy. Mizuho and Evercore, a boutique company that advises on larger mergers and acquisitions, also agreed to work together on M&A deals between Japan and North America, the Japanese bank said in a statement. Though on a smaller scale than Mitsubishi UFJ Financial Group’s $3.5 billion deal for UnionBanCal Corp last week, which was seen as providing the Japanese lender with a U.S. base for its M&A dreams, and Tokio Marine’s $4.7 billion bid for Philadelphia Consolidated last month, it’s clear the Japanese are serious about overseas expansion, which is aimed at offsetting slackening growth in the domestic market. Acquisitions by Japanese companies abroad totalled $24 billion in the first half of this year, according to Thomson Reuters data, nearly matching the total for all of 2007.

Deals of the day:

* Investment firm Bay Harbour Management snapped up U.S. apparel chain Steve & Barry’s for $168 million at an auction, the retailer said.

* Polish restaurant operator AmRest has offered 20.2 million zlotys ($9 million) for 11.2 percent of smaller rival Sfinks to boost its stake to 25.5 percent, the company said in a statement.

* Mold Tek Technologies said it has signed a preliminary agreement with the promoters of a U.S.-based firm and its associate firm in India to acquire 100 percent stakes in both of them.

* Japanese communications satellite firm and pay TV broadcaster Sky Perfect JSAT said it would set up a joint venture with U.S. firm Stratos focusing on mobile satellite services.

In the end, he wasn’t in some sub-Saharan refuge, an Asian island paradise or a secluded European spa … fugitive former hedge fund manager Samuel Israel III (pictured right) was holed up in a mobile home (pictured below). Israel handed himself over to authorities in Massachusetts to start his 20-year prison sentence after having faked his suicide to avoid doing time. Israel, who co-founded Connecticut hedge fund Bayou Group, in 2005 pleaded guilty to a scheme to fabricate returns and cheat investors out of $450 million. He was sentenced in April. Police said his mother convinced him to turn himself over to police. If he was hoping for another shot at fleedom, he can forget about it. “There is not the slightest possibility that I or any other judge would release you at this point,” Judge Michael Ponsor told Israel before turning him over to U.S. Marshals.

Landmark Communications could announce the sale of the Weather Channel to a group made up of NBC Universal, Blackstone and Bain Capital in the next day or two, sources briefed on the matter said. The final price on the cable network, which produces national, regional and local weather-related programs, is expected to be between $3 billion and $3.5 billion, and likely at the higher end of that range, the sources said. The parties have been negotiating directly with Landmark since Time Warner withdrew its bid two weeks ago. There is always a small chance things could fall apart or slow down at the last minute, but absent any such unforeseen problems, the deal should be announced in the next couple days, one of the people said.

BHP Billiton said U.S. antitrust authorities have cleared its unsolicited $170 billion bid for rival miner Rio Tinto. The company’s announcement said the clearance satisfied part of U.S. antitrust law requirements. U.S. law gives antitrust authorities the right to re-open their investigation if new information comes to light before the transaction closes, experts say. However in reality, the United States has now given full clearance to the deal, not that U.S. opposition is a major issue for the mega merger. Problems are more likely to be raised in Asia and Europe.

British market research company Taylor Nelson Sofres rejected an improved approach worth 1.08 billion pounds ($2.14 billion) from WPP, saying it still preferred its merger with German peer GfK. WPP’s latest proposal substantially undervalued the company, said TNS, which had previously opened its books to WPP after rejecting previous approaches. TNS is the world’s third-biggest market research company, with clients such as Procter & Gamble and Unilever, while GfK is the world’s fifth-biggest and counts Panasonic and Henkel among its customers. A completed tie-up would step up pressure on market leader AC Nielsen in an industry which has become increasingly important as companies hunt for more information on their clients and services. Analysts have said from the start that WPP, which would merge TNS with its Kantar business, could disrupt the TNS-GfK deal, bidding up the price.

Storied New York public relations advisor Kekst & Co sold out to French advertising and communications company Publicis Groupe SA for an undisclosed sum. Kekst, known for advising on high profile financial takeovers, was founded in 1970 by its current chief executive, Gershon Kekst, 73, and employs about 70 people. The company, based on Madison Avenue, New York, has advised on more mergers and acquisitions than any other public relations agency over the last two decades, according to data from Corporate Control Alert. One industry insider who asked not to be identified, but is not involved with the deal, speculated that the transaction could be worth around $150 million. The figure assumes estimated profits of $20 million and an estimated deal multiple of 6 or 7 times, plus a premium, that person said.

Other deals of the day:

* U.S. private equity house Lone Star could offer shares in Korea Exchange Bank in a block sale if the pending $6.3 billion deal to sell control of KEB to HSBC falters, KEB chief executive said.

* Australian bank Macquarie has applied to Chinese regulators to buy a nearly 20 percent stake in a trust company, in order to expand its corporate banking and wealth management services in China, sources with direct knowledge of the deal said.

* Huawei Technologies, China’s largest mobile phone equipment maker, has narrowed the field of bidders for a stake in its mobile devices unit — reported to be worth more than $2 billion — to five private equity companies, sources said.

* Telecommunications firm Pacnet said it had signed a joint venture with China-based firm Zhong Ren Telecom, to offer Internet protocol services to Chinese companies and expand its presence in the country.

* International Business Machines said it has bought privately held software maker Platform Solutions Inc and the two companies have dropped their legal complaints against each other.

* Northstar Neuroscience said it received an unsolicited offer from Tang Capital Partners to buy the company for $2.25 per share.

* Hedge fund SAC Capital reported that it had cut its stake in Take-Two Interactive Software to 4.4 percent from 5.3 percent.