M & A wrap: Can Facebook live up to the hype?
As Facebook is expected to submit paperwork to regulators for its initial public offering, Reuters Social Media Editor, Anthony De Rosa, uncovers three problems standing in the way of Facebook’s future growth.
Which exchange will Facebook choose to “friend”? Bloomberg reports NYSE and Nasdaq are competing now for what may be the biggest ever by a technology company.
European Union regulators have blocked the merger of exchange operators Deutsche Boerse and NYSE Euronext to avoid giving them a stranglehold on the European futures market. “The merger between Deutsche Boerse and NYSE Euronext would have led to a near-monopoly in European financial derivatives worldwide,” EU Competition Commissioner Joaquin Almunia said in a statement.
The failure of the NYSE Euronext/Deutsche Borse tie-up is a stark reminder to dealmakers that the fate of their work often rests in government hands, Deal Journal writes.
from Breakingviews:
Forget the IPO, Facebook could reverse into Yahoo
By Rob Cox The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Now that Yahoo has fired its chief executive, anything could happen to the rudderless Internet hodgepodge. Private equity firms, one of Yahoo's founders and even AOL are said to be mulling bids. But consider a more radical option: a takeover by the rival most responsible for Yahoo's fall from grace -- Facebook.
It's of course easy to marshal arguments why Facebook's creator, Mark Zuckerberg, should avoid staining his company Yahoo purple. The social network is already growing rapidly. Revenue doubled in the first half to $1.6 billion with profit of nearly half a billion.
Moreover, Facebook is a private company without the $20 billion or so of cash needed to buy Yahoo. Since Facebook is just starting to profitably harvest its audience of 750 million users, the firm should stick to its knitting, or so the argument goes.
But Facebook has the ingredients to make Yahoo succeed, starting with a clear mission. Yahoo has struggled to articulate a vision beyond being the first page people see when they open a browser. Beyond that, nothing binds Yahoo's pieces -- news, photo albums, stock quotes, email, job listings and entertainment -- together. They look like orphaned applications for a social network.
What unifies Yahoo's bits and bobs is a relatively robust display advertising platform. In an overall crummy second quarter, display revenue increased 5 percent to $467 million. Facebook is still building out its capacity to sell such ads. A combination would make a compelling pitch to advertisers.
In search, both have a common nemesis in Google. They also have a shared partner in Microsoft, which owns a piece of Facebook and whose Bing search engine collaborates with Yahoo.
from Breakingviews:
Upstart M&A boutiques earn place at fee table
By Jeffrey Goldfarb The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Upstart M&A boutiques are eating from Wall Street's table. Two newish shops -- Blair Effron's Centerview and Frank Quattrone's Qatalyst -- helped Motorola Mobility strike a deal to sell itself to Google for $12.5 billion earlier this week. Along with two other firms opened over the last five years by Ken Moelis and Joseph Perella, this quartet is gnawing at the fee pool of big investment banks.
It wasn't always clear there would be enough work to go around. In the aftermath of the crisis, flocks of bankers either went solo or joined veterans like Bob Greenhill and Roger Altman, who had done so years before. Effron, Perella and Moelis -- who started their boutiques in 2006 and 2007 -- had a head start on the 2008 crunch, enabling them to woo disenfranchised colleagues with the promise of independence and equity stakes. Meanwhile, Quattrone's return to the industry in 2008 neatly coincided with resurgent demand for his Silicon Valley M&A expertise.
Global merger activity plunged from over $4 trillion in 2007 to about $2 trillion two years later. But the four relative newcomers are claiming their share. According to Thomson Reuters data, which double-counts deals involving more than one firm, they have advised on nearly $900 billion-worth of transactions since 2006. That's about 5 percent of the worldwide volume over that span. Based on estimates by Freeman & Co using publicly disclosed figures, Centerview, Perella Weinberg, Moelis & Co and Qatalyst have pocketed a combined $1.3 billion of merger-related fees over five years.
The likes of Lazard, Evercore and Greenhill have picked up market share, too. It couldn't be happening at a worse time for Wall Street's giants, either. Their trading and lending arms are struggling, so even a modest loss of business on the advisory side stings.
But specialized M&A firms weren't besieged during the crisis in the way mortgage bond trading behemoths were. Corporate boards are also sensitive to conflicts of interest when hiring advisers. And it helps the independent players that acquirers like Google are sitting on hoards of cash that lessen the appeal of the lending and capital-raising promised by bigger banks. With those factors in place, Effron, Quattrone, Moelis and Perella shouldn't have much trouble keeping their firms nourished.
Deals wrap: Cooling off on IPOs
Samsonite, the world’s biggest luggage maker, dropped 7.7 percent in its Hong Kong trading debut on Thursday, underscoring tepid investor appetite for initial public offerings as global markets struggle.
Pipeline operator Energy Transfer will buy smaller rival Southern Union for about $4.11 billion to bolster its natural gas gathering and transportation capacity amid burgeoning production from U.S. shale fields.
Alibaba Group said it has reorganized Taobao, China’s largest e-commerce website, into three separate companies, squashing any chance of a Taobao public offering.
Investors learned a hard lesson on Wednesday about red-hot Internet companies: they can go cold very quickly. The Lonely Value Investor writes about loving Pandora’s product, but hating the stock.
DealZone Daily
Cerberus Capital Management said it would buy defense contractor DynCorp International for about $1 billion in cash in one of the biggest leveraged buyouts of a publicly traded US company since the global financial crisis. Read the Reuters story here.
A subsidiary of China’s Sinopec Group agreed to pay $4.65 billion for ConocoPhillips’s stake in a Canadian oil sands project, marking the country’s second largest investment in North America. Read the Reuters story here.
And in stories reported by other media on Tuesday:
Buyout lender Intermediate Capital Group has raised 843 million euros for a new fund that will invest in debt-burdened private equity deals, the FT said. The fund will buy debt at a discount and provide fresh capital for European companies worth as much as 500 million euros.
DealZone Daily
Britain’s ruling Labour government would seek to extend its powers to scrutinise foreign takeovers of UK companies if it wins an election on May 6, a party source told Reuters on Sunday. The source played down a BBC report that the plan would amount to a “Cadbury’s Law”, to protect UK companies against hostile takeovers .
Shares in Macarthur Coal leapt 10 percent as investors bet a global bidding war for the Australian miner could escalate, amid talk that Xstrata may enter the fray. A bid would pit Xstrata against Peabody Energy of the US and and local miner New Hope Corp.
And in news from other media over the weekend and on Monday:
National Australia Bank is working on plans for a 2 billion pounds flotation of its UK operations, according to the Sunday Times. The plan would be put into action if NAB fails to acquire 318 branches being sold by Royal Bank of Scotland.
DealZone Daily
Monday’s top stories:
* Zhejiang Geely Holding Group, China’s largest private-run car maker, agrees to buy Ford Motor’s Volvo car unit for $1.8 billion, the country’s biggest overseas auto purchase. (See how the two carmakers stack up here, and read a profile of Geely founder Li Shufu here.)
* Sinopec , Asia’s top oil refiner, will buy a stake in upstream assets in Angola for $2.46 billion and said it wanted more such deals.
For more on these and the rest of the latest deal-related news from Reuters, click here.
And elsewhere on the web (some external links may require subscriptions):
* Billionaire financier George Soros and philanthropist George Kaiser are in the race to buy close to 4 percent in the Bombay Stock Exchange (BSE), the Business Standard newspaper reports.
* Australia’s sovereign wealth fund, the Future Fund, is considering buying Macquarie Group’s (MQG.AX) 23.2 percent stake in airports fund MAP Group (MAP.AX), the Age says.
DealZone Daily
The Dubai government unveiled plans to recapitalise its indebted Dubai World flagship and repay Nakheel bonds in full, injecting what it said was $9.5 billion in new funding, but without new aid from Abu Dhabi. Read the Reuters story here.
Bharti Airtel looked set to wrap up its $9 billion deal to buy most of Kuwaiti telecom group Zain’s African assets, giving India’s top mobile operator a foothold in the frontier market after two failed attempts to buy South Africa’s MTN. Read the Reuters story here.
For more on these and the rest of the latest deal-related news from Reuters, click here.
In M&A and corporate finance news reported by other media on Wednesday:
German carmaker Daimler AG and France’s Renault are close to deciding on a wide-ranging strategic partnership that would include a swap of small equity stakes, the Financial Times said, citing unnamed sources close to the situation.
DealZone Daily
Arrow Energy says discussions with Royal Dutch Shell and PetroChina over their $3 billion joint takeover offer for the Australian group are continuing. That is despite a story in the Australian Financial Review that says Arrow is set to reject the bid as too low. Read the Reuters story here.
Also in energy, China National Offshore Oil Corp (CNOOC) is planning a joint venture with Argentina’s Bridas Energy Holdings. It will pay $3.1 billion to take a 50-percent stake in subsidiary Bridas Corporation. Incidentally, Bridas owns 40 percent in Pan American Energy — which is 60-percent owned by oil major BP.
For these and all other stories, click here.
And elsewhere in media:
The Japanese government is considering spinning off Nippon Telegraph and Telephone Corp’s fibre-optic businesses into a separate company, the Yomiuri newspaper reported.
Phillips-Van Heusen is close to a deal to buy U.S. fashion brand Tommy Hilfiger Corp for about 2.2 billion euros ($3 billion), The New York Times reported, citing people briefed on the matter.
Keeping Score: South Korean IPOs and MetLife record
An overview of the week in M&A, capital markets and syndicated loans — with league tables, up-to-date industry and country trends, as well as top transactions for the past week — from the Deals Intelligence team at Thomson Reuters:
South Korean Offering is Third Largest IPO of the Year
The recently announced $1.6 billion IPO from Korea Life Insurance Co is the largest South Korean IPO of the year and the largest offering from a South Korean company since January 2006. The listing is also the third largest global IPO in 2010. Year-to-date, IPOs in South Korea total nearly $1.9 billion from 13 issues, up nearly seven times from the same time last year. This IPO bolsters South Korea’s ranking in the global IPO market, accounting for 8% of total proceeds this year.
MetLife Announces Largest Acquisition on Record
US-based MetLife Inc’s $15.5 billion announced acquisition of American Life Insurance Co Inc from AIG is the company’s largest acquisition on record. So far this year, insurance M&A activity in the United States totals $18.7 billion, just over 11% of total United States M&A. Overall, M&A transactions in the United States are up 12% from the same time last year and deals in the global insurance industry are up over six times compared to 2009.
Securitizations Boost Global Debt Markets
With year-to-date securitized issuance up nearly three-fold so far in 2010, mortgage and asset-backed securities account for 12.1% of overall activity this year, compared to 2.6% for year-to-date 2009. Overall activity in the global debt markets is down 15% from the same time last year. With a nearly $1.1 billion mortgage-backed offering from UK-based Fosse Master Issuer Plc, securitized issuance is up over 500% in Europe from the same period last year.
