DealZone

Calm waters run deep

Jerry YangYahoo’s Gerry Yang may have thought that giving Carl Icahn a board seat would calm the roiling waters that threatened to pull the chief executive under. But a recount of the vote for its board revealed a strong protest vote against five of nine directors, including Yang. The Internet company said revised vote tallies showed 33.7 percent of votes withheld for Yang, the company’s co-founder. That’s more than twice the opposition to his reappointment to the board as in the disputed first count. Yang has been under pressure for months over failed attempts by Microsoft Corp to buy Yahoo and over questions about his leadership. Analysts were split over whether the recount, while potentially emboldening for critics, was a symbolic embarrassment to the leadership or a new threat to its power. Ahead of the Aug. 1 meeting, Yahoo settled a proxy fight with Icahn, giving the billionaire investor and two members of his proposed slate seats on an expanded board of 11 members instead of the previous nine.

Austrian oil and gas group OMV has called off its unsolicited $23 billion bid offer for Hungarian rival MOL, saying European Union restrictions were too tough to make the deal worthwhile. The move ends an acrimonious year-long standoff between the companies that had begun to irritate some investors and weighed on OMV’s share price. The stock rose nearly 8 percent to a three-week high of 45.60 euros on relief a deal was off. “It was a bad strategic move to make an offer, so this should just narrow the situation,” said Erste Bank analyst Jakub Zidon.

And here’s one from the unwanted advances department: Acquisitive miner XstrataLonmin, unveiled a $10 billion takeover bid for the world’s third-biggest platinum producer, to diversify its business from industrial metals such as copper. South Africa-focused Lonmin swiftly rejected the bid as its shares soared 51 percent to a high of 35 pounds on Wednesday, slightly over Xstrata’s planned offer of 33 pounds a share. Lonmin – and this perhaps is no big surprise — rejected the bid as undervaluing the firm.

Other deals of the day:

* Hunting is to sell its Canadian-based oil and gas division Gibson Energy to private equity firms Riverstone Holdings and Carlyle Group for C$1,270 million ($1.22 billion).

* China’s Tongling Nonferrous Metals said it planned to buy a 51 percent stake in a copper smelter based in Inner Mongolia for 450 million yuan ($65.7 million).

Bill Gates the activist?

gates1.jpgTech titan Bill Gates appears to be making the transition from head of the biggest software company in the world to a man comfortable taking out the trash. His investment company, BGI, which owns 2.3 percent of Waste Management, is telling the company its unsolicited $6.2 billion bid for Republic Services is ill-advised and that it should walk away. While his investment vehicles have stakes in dozens of companies, they have kept low profiles over the years and Gates has not traditionally been known as an activist investor. But BGI didn’t mince words in its letter to Waste Management’s CEO and board, disclosed on Thursday. “We can only assume your ill-timed and poorly conceived pursuit of Republic is designed to disrupt what you perceive as a competitive threat to your position in the market,” wrote BGI. “An acquisition of Republic will most certainly burden the company with excessive debt, distract your management, result in significant regulatory burdens, and thereby reduce shareholder value,” it said.

Yahoo‘s annual investor meeting today will be a magnet for discontent over the company’s failure to reach a merger deal with Microsoft and complaints about the company’s past performance. But any real action to reshape Yahoo’s course is likely to take place only after the meeting, once activist investor Carl Icahn and two outside nominees join an expanded 11-member board as part of a deal with the company to avoid a proxy battle. Far from a showdown over control of Yahoo, the annual meeting has the makings of a noisy media circus where the issue of whether Yahoo should remain independent or not competes with older protests over executive pay and human rights policies. For while the exercise of shareholder democracy will allow investors small and large to vent over what might have been, the outraged speeches are likely to have only symbolic effects since Icahn withdrew his overt challenge to Yahoo’s board. “I am sure that Yahoo management will take a verbal beating,” Jim Friedland, an analyst Cowen & Co, said. “I just don’t think that the annual meeting is where the debate over Yahoo strategy is going to take place.” In a blog post on Thursday, Icahn downplayed the importance of the event, saying he plans to skip the meeting himself.

Spanish solar power company Fotowatio said that General Electric‘s Energy Financial Services unit had bought 32 percent of the company for 150 million euros ($233.5 million). Grupo Corporativo Landon — a holding company for the Gallardo family, which owns Barcelona-based pharmaceutical group Almirall — also bought a 17.5 percent stake for 75 million euros, the company added in a statement. Fotowatio said that together with its new partners, it had earmarked 2.5 billion euros to invest by 2012 in photovoltaic and thermosolar plants in Spain, Italy, the United States, and other countries. Currently, the company has four installations, with a total installed capacity of 60 megawatts, which it plans to expand to 800 MW by 2012. Photovoltaic (PV) power has boomed in recent years in Spain due to generous government subsidies, but these will be slashed next year.

A-courtin’ we will go

Wedding ornamentLike a bad soap opera, the Internet storyline is getting more and more convoluted. The tale so far: Microsoft Corp, spurned by Yahoo Inc, is courting Time Warner Inc to allow a union with Internet division AOL. But Yahoo, which turned its back on Microsoft’s $47.5 billion bid, also wants AOL’s hand. These talks have taken on a new urgency ahead of Yahoo’s Aug. 1 shareholders meeting, a source familiar with discussions told Reuters on Tuesday. How either marriage will work is not immediately clear, but any combination will likely redraw the landscape for advertising on the Internet. So why is AOL so attractive? Both Yahoo and Microsoft view it as beneficial to leverage their positions in the Internet marketplace, where search giant Google Inc dominates. Stay tuned.

But good soaps are not only made in America. It seems the Germans are good at them, too. Tires-to-brakes maker Continental rejected Schaeffler Group’s surprise 11.2 billion euro ($17.8 billion) bid, saying only the family owned firm stood to gain from the offer which was too low. Late on Tuesday, the ball-bearing maker announced the terms of its proposed takeover after winning control of more than a third of Continental’s shares through a web of options organized for it discretely by banks. Schaeffler’s bearings are found in London’s landmark Ferris wheel, the London Eye and it also makes high-precision bearing supports for the U.S. space shuttle and the European launch vehicle Ariane, not that that has any bearing on a deal.

Some suitors, however, do get lucky. Mining company Cleveland-Cliffs Inc said on Wednesday it would acquire Alpha Natural Resources Inc for about $10 billion in cash and stock to expand its coal assets. Stockholders of Alpha, an Appalachian coal producer, will receive 0.95 of a Cleveland-Cliffs common share and $22.23 in cash for each of their common shares when the union is completed. Based on closing stock prices on Tuesday, the deal values Alpha at $128.12 per share, a premium of 35 percent, the companies said in a statement. The combined company will be renamed Cliffs Natural Resources and will include nine iron ore facilities and more than 60 coal mines located across North America, South America and Australia.

More Microhooey?

People walk past Yahoo! offices in Santa MonicaThe Wall Street Journal leads with a piece saying Microsoft is preparing a new bid for Yahoo‘s search business that could bring on board media giants Time Warner and News Corp and effectively lead to Yahoo’s breakup. The talks are preliminary and unlikely to result in a deal with Yahoo, the paper said, and although it all seems whimsical, Yahoo shares jumped more than 6 percent in early trade. Yahoo rejected a $47.5 billion takeover offer by Microsoft, and earlier this week questioned whether the software maker was ever serious about a full-scale merger. Carl Icahn, who is running a slate of directors to replace Yahoo’s board and has called for the removal of Chief Executive Jerry Yang, has met with Microsoft, which is encouraging him to press his proxy contest as a way to keep pressure on Yahoo to enter into a deal that would lift its share price, the paper said, citing people familiar with the matter.

British events organizer and publisher Informa said it was considering a 2.15 billion pound ($4.3 billion) bid approach from a consortium of private equity firms, sending its shares 10 percent higher. Informa said in a statement that Providence Equity, The Carlyle Group and Hellman & Friedman had made a bid proposal of 506 pence a share on June 26. “Discussions continue to be at an early stage and there can be no certainty that an offer will be made,” it said. When news emerged last month that the equity firms were working on a bid for the media company, the shares showed only modest gains as analysts questioned whether a deal would succeed in the current tight credit markets.

The markets took down another deal yesterday. Blaming grim market conditions Blockbuster abandoned its $1.3 billion offer to buy electronics retailer Circuit City. Shares of the video rental chain jumped more than 7 percent in extended trade after the news while Circuit City’s shares fell 1.6 percent, after declining nearly 12 percent at Tuesday’s close — hitting their lowest point in two decades. Speculation that a potential deal with Blockbuster would not happen gained ground after Circuit City posted a wider quarterly loss and cut its dividend in June.

Nokia’s Symbianic relationship

nokia.jpgFresh from having Yahoo slip through its fingers, Microsoft‘s plan to leapfrog into Consumerville takes another hit with news that Nokia is paying 264 million euros ($410 million) to buy out other shareholders of Symbian, the dominant player in smartphone software. Nokia says it will dissolve royalty payments for the platform, making it more attractive when compared to Google‘s rival free platform, Android. Symbian’s operating systemis already used in two-thirds of smartphones; Nokia makes 40 percent of all phones sold globally. “This puts a lot of pressure on Microsoft right at a time when they are trying to really push into the consumer space,” said Gartner analyst Carolina Milanesi. “For operators this offers a good alternative to Android.”

British gas producer BG Group launched a hostile $13.1 billion bid for Australia’s Origin Energy, as it seeks to boost its position in Asia-Pacific’s fast-growing gas market. BG is taking its A$13.8 billion all-cash bid, valuing Origin at A$15.50 a share, direct to shareholders after Origin’s board rejected it last month. Origin claimed then that its coal seam gas reserves alone were worth over $15 billion. Shares in Origin, which have surged over 85 percent this year, rose 6.2 percent to a record A$16.48 before closing up 5.8 percent at A$16.42, indicating investors expect an even higher offer. If successful, the deal would be the second-largest foreign takeover of an Australian company after Cemex, North America’s largest cement producer, bought Rinker Group last year for $14.2 billion.

Russian oil major Lukoil bought a 49 percent stake in Italian refiner ERG SpA‘s Mediterranean plant for 1.35 billion euros ($2.1 billion), in a sign of the growing energy ties between Russia and Italy. Lukoil and ERG, Italy’s second-biggest refiner by market share, agreed a joint venture valued at 2.75 billion euros to control ERG’s Isab di Priolo refinery on Sicily. ERG will have 51 percent of the new company.

All aboard the Orient Express

barclays1.jpgJapan’s Sumitomo Mitsui Financial Group may invest about $926 million in British bank Barclays, people familiar with the matter told Reuters, the latest in a string of subprime-hit Western lenders increasingly turning to Asia for funding. Japan’s third-largest bank is also considering a business alliance in Asia with Barclays, which is expected to raise about $8 billion from sovereign wealth funds and other investors and then offer shareholders the right to buy on the same terms. If Sumitomo Mitsui opts to invest it would give the Japanese bank a stake of just over 2 percent. Up to five outside investors are also expected to participate, and backers may include existing Singapore-based sovereign wealth fund Temasek and China Development Bank, plus the Qatar Investment Authority.

Steve Ballmer insisted Microsoft will not seek to make a spate of other Internet acquisitions (Facebook, we’re looking at you) in the wake of its failed bid for Yahoo, according to the Financial Times. “People don’t understand what they’re talking about,” Ballmer said. “At the end of the day, this is about the ad platform. This is not about just any one of the applications.” Meanwhile, over at Yahoo, a spate of executives are reported running for the hills, just as the company is trying to justify its decision to go it alone and to repel Carl Icahn’s proxy fight. Among the departed: Flickr co-creator Stuart Butterfield, whose bizarrely hilarious resignation letter could best be summed up as: “There Will Be Tin.”

The fate of the world’s largest leveraged buyout hangs in the balance ahead of Friday afternoon’s decision by the Supreme Court of Canada on whether BCE treated its bondholders unfairly in agreeing to a $34.8 billion ($34.5 billion) takeover. Ontario Teachers’ Pension Plan, with U.S.-based private equity firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity, are offering C$42.75 a share to take BCE, parent of Bell Canada, private.

Chicken-and-egg time at Yahoo

chick.JPGA story in The Wall Street Journal about Yahoo’s “reorganization” plans even as executives are leaving had us wondering which came first, the reorganization or the departures. The cynical might envision two scenarios:

Scenario 1: Yahoo begins hemorrhaging executives the week after it chooses Google over Microsoft. Investors, already mad at CEO Jerry Yang and the board for not cutting a deal with Microsoft, are likely to see the loss of top talent as a fallout. So Yahoo decides to do some damage control by “reorganizing” its various products, such as mail and messaging, into something more centralized, and indicate that as the reason for some six departures this week.

Scenario 2: After failing to strike a deal with Microsoft, and with investors less than thrilled at the Google partnership, Yahoo needs to do something to show the world it’s worth more than $47.5 billion. It dips into a fast-depleting bag of tricks and pulls out, wait, a “reorganization” plan we’ve sort of heard before. Executives shake their heads, worry that may not save the company and that they’re better off as venture capitalists (or maybe they’re considering job offers at Microsoft), and begin deserting.

Getting Sirius

howard.jpgOprah, meet Howard. Reports in the Washington Post and The Wall Street Journal say the head of the FCC will support the merger of XM, home to Ms. Winfrey, and Sirius,  where Mr. Stern holds court, removing the last regulatory hurdle to the long-awaited merger of the country’s only two satellite radio operators. Aides to the FCC chief said he decided to give his support after the companies agreed last week to concessions intended to prevent the new company from raising prices or stifling competition among radio makers, the Post reported.  As of last week there was still some static coming from members of Congress, but with the FCC backing the deal it’s unclear how they will make themselves heard.

In his first public comment on the end of the Yahoo/Microsoft merger talks, billionare financier Carl Icahn, said on Sunday the subsequent deal Yahoo forged with Google “might have some merit.” He had previously said a Google deal should be considered a secondary alternative to the Microsoft offer. “While the Google deal is not the same as an offer of $34.375 per share for Yahoo, I am continuing to study it,” Icahn told Reuters. Icahn declined to comment on whether he would continue to press his proxy battle to replace the board of Yahoo.

Belgian brewer InBev warned U.S. rival Anheuser-Busch that it should fully explore its $46 billion takeover offer before doing a deal with Mexico’s Modelo. In a letter that appeared to be aimed at Anheuser-Busch shareholders, InBev suggested that doing a deal with Modelo could impact the value of its $65-a-share takeover offer. Inbev’s Chief Executive Carlos Brito wrote to Anheuser-Busch’s CEO August Busch IV that he was committed to a “friendly combination,” and “we would expect that prior to proceeding with any alternative transaction, especially if your shareholders will not be given the opportunity to vote on it, you would first fully explore our offer and the potential adverse consequences any such transaction could have on the ability of your shareholders to receive our premium offer.”

Game, Google

google.jpgWith Google looking like the big winner after doing an ad search deal with Yahoo, pretty much everyone else involved is looking like a loser. Microsoft will have to take its mammoth war chest and try to find another way to make a meaningful stab at the coveted online ad space — or concede the market altogether. Though Yahoo is waving enhanced revenue and cash flow figures around, the deal is seen as better for Google, which is the undisputed heavyweight champion in ad search and just gets a juicy space to show how mighty it is. “Google has made an enormous gain strategically. This move might well have shut Microsoft out of the online space altogether,” said Sanford Bernstein analyst Jeffrey Lindsay. Speculation is rising that the Yahoo/Google deal could provoke antitrust scrutiny, and Carl Icahn still has his troops massing to oust Jerry Yang and the Yahoo board. But if he had any clout to force Yahoo into a deal with Microsoft, it wasn’t on show yesterday. Did he lose cred, or does he plan to keep fighting? He may say soon, but probably not on his blog.

With signs that its wealthy clientele are growing nervous, UBS has wrapped up a 16 billion franc ($15.4 billion) rights issue. Flows into its wealth management business slowed to a trickle in the first three months of the year, and this is the Swiss bank’s second effort to resuscitate finances ravaged by the global markets crisis. Dieter Ewald, a fund manager at UBS shareholder Frankfurt Trust, said such concerns had prompted him recently to pare back his investment in the Swiss bank. “UBS is handicapped,” he said. “We are worried that wealth management will be hit. We want to see that the new management can bring it back on track, and then we would invest more again.”

Pfizer may bid for Ranbaxy Laboratories, countering a $4.6 billion offer by Japan’s Daiichi Sankyo for the Indian generic drug maker, the Business Standard newspaper said. Ranbaxy’s shares jumped nearly 5 percent on the report while Daiichi Sankyo’s shares dropped 2 percent. Daiichi Sankyo and Ranbaxy are seeking to become a pharmaceuticals powerhouse that sells both branded drugs and generics. The newspaper added Pfizer had held talks with the Ranbaxy founders for a possible acquisition a year earlier.

Wrigley Field deal hits the wall

tribune.jpg A plan to sell the Wrigley Field, home of the Chicago Cubs, has failed to make progress after an Illinois state group said it could not agree to terms set by Tribune Co, the field’s owner. The proposed deal hinged on a plan to sell fans “equity seat rights” which they could then split or trade.

The Chicago Tribune had slightly different take on the story, saying “the state’s efforts to purchase Wrigley Field slammed into an ivy-covered wall Monday when owner Tribune Co. rejected a no-tax proposal.” Regardless of who rejected whom — perhaps the Curse of the Billy Goat is to blame? — it looks like the deal isn’t happening, which could be good news for Internet billionaire Mark Cuban, who has said he wants to buy the Cubs together with Wrigley Field.

A Yahoo employee severance plan meant to protect workers after a merger or change of control should be scrapped, according to a new shareholder lawsuit against the Internet company and its directors, The New York Times reported on Tuesday.The plaintiffs, two Detroit pension funds, and billionaire investor Carl Icahn, who is waging a battle for control of the Yahoo board, have criticized the severance plan as costly and said it was an obstacle to any merger. The lawsuit claims Yahoo could be faced with up to $2.4 billion in potential severance payouts under the plan — which was put in place as the prospect of a Microsoft acquisition was looming, but would also be triggered if Icahn were to take control of the company.