Noted: Will European insurers hit M&A trail?

Analysts at UBS are predicting the European insurance industry could be at the start of a new wave of mergers and acquisitions (M&A) as companies look to counter falling demand for insurance by taking over rivals to boost top-line growth and extract cost synergies.  Bank rescues have created a number of potential targets as well.

The team, led by Marc Thiele, says:

“We believe European large-cap insurers will look for M&A in Eastern Europe and Asia…In our opinion, this would be more attractive than acquiring cash-generative businesses in mature countries; while this tends to offer greater cost-savings potential, it also offers less premium growth.

“On top of the normal M&A considerations, there are a number of additional game-changing transactions possible following the decisions involving ING and RBS to exit the insurance business in agreement with the European Commission.

DealZone Daily

British bid target Cadbury will paint a glowing picture of its prospects this week as it makes an  impassioned plea for independence and endeavours to fend off Kraft’s advances.  Meanwhile, Italian chocolate-makerFerrero is still undecided on whether or not to bid for the embattled confectioner but has lined up a $4.5 billion loan from Mediobanca, The Times writes, citing Italian news reports over the weekend.

In another multi-billion M&A process, Dutch brewer Heineken will pay $5.4 billion in shares to acquire the beer business of Mexico’s FEMSA.

For other deals news from Reuters, click here.

And in other media:

Richard Branson has approached US buyout giant Blackstone about backing a bid for Northern Rock’s “good bank” being spun out of the state-owned lender, according to the Daily Telegraph.

Noted: Goldman sees more utilities M&A

Goldman Sachs analysts say M&A among Europe’s utilities is likely to pick up this year, and name Britain’s Shanks, Drax, International Power, the country’s water companies (Severn Trent, Northumbrian Water, Pennon and United Utilities), and Edison of Italy as the most likely targets. (Shanks, of course, is already in the Carlyle Group’s crosshairs.)

The Goldman team looked at company ownership; the political and regulatory backdrop; and the firms’ sizes and relative valuations to come up with its top picks.

From the note, dated Jan 7:

“We believe M&A activity will pick up over the course of 2010 as current market valuations provide a once-in-a-cycle opportunity for potential acquirers, current economic weakness is likely to accelerate sector consolidation and private equity firms are likely to deploy capital as credit markets open up …

Noted: Financial M&A drivers for 2010

Across the different bits of financial services – such as fund management, broker-dealers, insurance, and trading systems – mergers and acquisitions fell sharply in 2009. But Freeman & Co outlines 10 drivers that should make this a busier year for dealmaking:

“1. Banks and insurance companies continue to assess whether their asset management units
are core to their business, especially those that have stand alone brands or are in non-core

2. Large transformational asset management deals will diminish, but deals in the $3-30 billion
AUM range will increase from current lows

DealZone Daily

Wednesday’s highlights:

Ford Motor Co (F.N) and China’s Geely are set to report progress as soon as Wednesday in talks to sell Ford’s Volvo unit to the Chinese automaker, two people with direct knowledge of the matter say.

Spyker Cars presses ahead with efforts to cut a deal for Saab with General Motors, with talk of possible backing from a Dutch billionaire fanning the Swedish carmaker’s faint hopes of an eleventh-hour reprieve.

Chinese Internet firms are eyeing more spin-off offerings after raising nearly $1.5 billion this year as they bank on strong foreign interest in high growth China plays.

DealZone Daily

Tuesday’s highlights:

The proposed merger of two live music powerhouses, Live Nation Inc and Ticketmaster Inc , is given a huge boost as a British regulatory body drops its objections and approves the deal.

Sweden says a last-ditch bid by Spyker Cars for Saab offers a thread of hope the iconic brand would survive, as talks between the Dutch luxury carmaker and General Motors trigger an extended deadline.

Dubai World disappoints creditors by making little progress on securing standstill on $22 billion of debt, as a key creditor meeting proves a tame affair with less than half the expected attendees showing up.

Noted: Europe SA on the takeover trail?

A poll from UBS and the Boston Consulting Group finds a “surprisingly healthy” one in five European companies is likely to make a significant (EUR 500 mln+ in sales) acquisition in 2010. Some of the other key findings:

“Corporates are seeking growth: Strategic and growth-related considerations such as expansion of product offering, access to new geographies and access to new customers and distribution channels were the three most cited drivers of M&A activity, from a choice of 12 drivers.

“Lack of attractive targets and company valuations are main M&A barriers: Lack of attractive targets (cited by 40% of respondents) and, reflecting the speed and extent of stock markets’ recovery, high valuations (cited by 39% of
respondents) were the most commonly cited barriers to M&A.

Keeping score: Exxon-XTO data points

From the Thomson Reuters data team:

    Exxon Mobil’s $40.7 billion acquisition of XTO Energy ranks as the sixth biggest announced worldwide M&A transaction this year and the fourth biggest US target transaction. The deal ranks as the eighth biggest Energy & Power M&A transaction in history and marks the biggest US transaction since Chevron’s $43.3 billion acquisition of Texaco in October 2000.  The $85.1 billion combination of Exxon and Mobil in December 1998 ranks as the biggest Energy & Power deal on record. Worldwide, energy & power M&A totals $330.9 billion for year-to-date 2009, an 18.1% decrease from last year at this time.  Worldwide M&A in the oil & gas sector totals $203.7 billion, a 17.2% increase over last year at this time. In the US, energy & power M&A accounts for 12.2% of overall activity, a 7.5 decline from last year.  Oil & gas M&A activity in the US totals $74.9 billion, a 35.6% increase over 2008. With the announcement, JP Morgan (advisor to Exxon Mobil), moves from fourth place to third place for worldwide merger advisors, with $467.5 billion in announced deals from 299 deals. Barclays and Jefferies (advisors to XTO Energy) rank 10th and 21st, respectively. In the US, JP Morgan remains in third place with $269.5 billion.  Barclays moves to sixth place from seventh and Jefferies moves from 23rd place to 13th.

Keeping score: autos M&A, U.S. property, Spanish loans

Highlights from this week’s Thomson Reuters Investment Banking scorecard:

Powered by Germany’s Volkswagen AG, the volume of minority stake purchases in automotive manufacturers totals $11.2 billion for year-to-date 2009, the biggest year on record.
In this week’s biggest deal, Volkswagen secured a 19.9% stake in Japanese automobile maker, Suzuki Motor Corp, valued at $2.5 billion.  Volkswagen’s 49.9% stake in German rival, Porsche was valued at $5.8 billion and completed on December 7th.  Year-to-date, worldwide M&A activity in the industrials sector totals $244.3 billion, a 9% increase over last year at this time.

Simon Property Group’s $2.3 billion acquisition of Baltimore-based Prime Outlets Acquisition Co LLC, an owner and operator of shopping centers, ranks as the biggest US-based real estate transaction since Boston Properties Inc acquired New York’s General Motors Building and other properties from Macklowe Properties for $3.9 billion in May 2008.
US real estate mergers and acquisitions, which account for just 2% of overall US M&A, total $12.5 billion for year-to-date 2009, a 60% decline from 2008.

Spain’s Urbaser SA, a waste management company, closed a $1.1 billion term loan from a syndicate of banks this week, brining the volume of syndicated lending in Spain to $66.2 billion, more than double last year’s total.
Borrowers in the energy & power and industrials sectors comprise 83% of overall syndicated loans in Spain this year, with multi-billion dollar borrowings from utilities such as Gas Natural ($29 billion) and Iberdrola SA ($6.8 billion) and infrastructure concern Grupo Ferrovial SA ($4.6 billion).