Deals wrap: Sexy but risky IPO

Formula One team Williams is on the final straight toward its market debut next week, the first of its kind to float, and while its novelty will attract some, others are unconvinced by the investment case.

Western investment banks are keen to underwrite more IPOs on China’s Shenzhen exchange this year as a surging economy turns the once insignificant market into a fundraising hotbed.

Italian fashion house Prada is quickly moving toward a Hong Kong listing thanks to a more favorable regulatory environment in Asia, Chief Executive Patrizio Bertelli told an Italian newspaper.

“Instead of achieving its goal, a defensive deal too often simply exposes the fault lines of a company and its management. The implosion at Dynegy is a good example, and we are about to see if something similar occurs with Zoran’s announced acquisition by CSR of Britain,” reports the New York Times.

J. Crew took on critics who say the retailer’s proposed $3 billion sale shortchanges shareholders and was reached after a flawed auction process,” reports the Wall Street Journal.

from Felix Salmon:

HuffPo’s future

The $315 million that AOL is paying for the Huffington Post is roughly 3X the valuation seen at its last capital raise two years ago, is 10X its 2010 revenues and is roughly 5X estimated forward 2011 revenues. Those are all big numbers, but not insanely so, for what is clearly a big strategic move on the part of AOL. After all, AOL has a market cap of $2.3 billion: right now it still dwarfs HuffPo. That might not be true in a few years' time, if HuffPo continues growing at its current rate and AOL continues to lose subscribers and revenues.

My feeling, then, is that this deal is a good one for both sides. AOL gets something it desperately needs: a voice and a clear editorial vision. It's smart, and bold, to put Arianna in charge of all AOL's editorial content, since she is one of the precious few people who has managed to create a mass-market general-interest online publication which isn't bland and which has an instantly identifiable personality. That's a rare skill and one which AOL desperately needs to apply to its broad yet inchoate suite of websites.

As for HuffPo, it gets lots of money, great tech content from Engadget and TechCrunch, hugely valuable video-production abilities, a local infrastructure in Patch, lots of money, a public stock-market listing with which to make fill-in acquisitions and incentivize employees with options, a massive leg up in terms of reaching the older and more conservative Web 1.0 audience and did I mention the lots of money? Last year at SXSW I was talking about how ambitious New York entrepreneurs in the dot-com space have often done very well for themselves in the tech space, but have signally failed to engineer massive exits in the content space. With this sale, Jonah Peretti changes all that; his minority stake in HuffPo is probably worth more than the amount of money Jason Calacanis got when he sold Weblogs Inc to AOL.

Deals wrap: JPMorgan surprises

A sign is seen outside the JPMorgan office in Los Angeles, California, October 12, 2010. REUTERS/Lucy NicholsonJPMorgan reports higher-than-expected quarterly earnings, helped by narrowing losses on bad loans that allowed it to release $2 billion in reserves.

JPMorgan CEO Jamie Dimon reckons the bank will generate up to $50 billion in excess capital over the next three years. The veteran dealmaker should resist the temptation to go on a spending spree, writes Breakingviews columnist Antony Currie.

Sanofi-Aventis hopes to reach a takeover deal that would value Genzyme at around $76 per share, or some $20 billion, the French newspaper Le Figaro said.

Deals wrap: LinkedIn’s IPO plans

The Wall Street sign is seen outside the New York Stock Exchange, March 26, 2009.   REUTERS/Chip EastLinkedIn plans to go public in 2011 and has selected its financial underwriters, three sources familiar with the process told Reuters.

Interest in Facebook shares is so strong that Goldman Sachs plans to stop soliciting interest from potential investors on Thursday, the Wall Street Journal reported, citing people familiar with the situation.

Felix Salmon lists reasons why Facebook won’t go public.

TechCrunch rebuts some recent themes surrounding Facebook in the blogosphere.

from Breakingviews:

Wal-Mart sounds pricy vuvuzela on African growth

Wal-Mart <WMT.N> has finally sounded the vuvuzela on African expansion. After months of speculation about how it would try to capitalize on the continent's growth, the U.S. retailer is offering $4.2 billion to acquire South Africa's Massmart Holdings <MSMJ.J>. The price could grate on shareholders' ears. But the deal gives Wal-Mart a local vehicle -- and local knowledge -- to help it gain access to a market with a profile that should suit it well.

If the deal is accepted by Massmart, Wal-Mart will be paying close to 13 times the Johannesburg-based retailer's EBITDA. For a company that trades at closer to 7 times, that's a big premium, albeit a drop in the bucket against Wal-Mart's nearly $200 billion market capitalization.

But Wal-Mart will get a foothold in what should be a bright spot in the world's growth map. South Africa, where Massmart operates 232 stores from Limpopo in the northeast to the Western Cape, is one of the CIVETS economies (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) widely hailed as the next sizable emerging markets.

from Breakingviews:

Mining deals show M&A funding market is open again

By Nicholas Paisner and Neil Unmack

The credit markets are slowly getting back to full health. The latest sign of vigour is a flurry of acquisition financing in the mining sector. On Monday, a consortium of banks lent Vedanta Resources $6.5 billion to help fund its purchase of a majority stake in Cairn India. Two days later, six large banks put up $45 billion to finance BHP Billiton's hostile bid for Canada's Potash Corp, according to Reuters.

The recent deals follow a good summer for large companies in the bond market. Earlier in August, blue chips IBM and Johnson & Johnson sold bonds at record low yields. July was the busiest-ever month for debt issues by emerging market governments and companies.

This buoyancy has allowed companies to refinance bank borrowings in the capital markets, freeing up lenders' balance sheets. The result has been a sharp drop in the cost of corporate loans. The average spread over Libor for an "A" rated borrower has halved from 145 basis points in the second quarter of 2009 to around 70 basis points today, according to Thomson Reuters LPC.

Tulane M&A Conference: Live coverage

Get live coverage from the M&A and corporate law conference by reporter Jessica Hall.

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.

DealZone Daily

Sri Lanka has approached Emirates airline about buying the Dubai-based carrier’s stake in state-controlled SriLankan Airlines, Emirates’ president says.

Emirates said in 2008 it was looking to sell all or part of its 43 percent stake in SriLankan Airlines, a holding which had previously been valued at about $150 million.

In M&A and corporate finance news reported by other media on Wednesday:

The pending $15 billion sale of a unit of American International Group to MetLife may be pushed back by a tax dispute that may require a ruling from the Internal Revenue Service, the Wall Street Journal reports.