Deals wrap: Merger Monday
Duke Energy agreed to buy Progress Energy for $13.7 billion in stock, creating the largest U.S. power company in terms of market value and generating capacity.
DuPont said on Sunday it will buy Danish food ingredients and enzymes firm Danisco for $5.8 billion to boost its position in the fast-growing food sector.
Genzyme shares rose more than 3 percent after Sanofi-Aventis confirmed the companies were in direct talks about a takeover deal.
Playboy founder Hugh Hefner is taking the company private.
Big banks missed by a decade their golden opportunity for a foothold in China, reports the WSJ. Reuters columnist Wei Gu puts Morgan Stanley and JPMorgan’s China joint ventures in perspective.
When shopping for a deal, stick to countries with good governance, according to this paper.
Deals wrap: Who’s tuning into RadioShack?
Blackstone Group and TPG Capital are unlikely to continue to pursue a possible bid for RadioShack, two sources familiar with the situation said. The electronics company had a handful of private equity firms circling but interest appears to be waning. * View article
Private equity firms have incentives both to buy and sell right now. Pressure is on to invest billions of dollars raised in 2006-2008 as the end of those funds’ investment periods approach, while funds are also keen to sell or take public existing investments to reward under-pressure investors. * View article
Hedge funds have cut back their bets over a volatile summer for financial markets, worried that big swings in investor sentiment are playing havoc with their carefully-researched trades. * View article
Andrew Ross Sorkin takes a closer look at Playboy and asks, Why should Hefner have all the fun? * View NYT article
In giving its Asia chief executive the chop, AIG may have unlocked two deals. First, the flotation of its AIA division in Hong Kong, which should now go ahead after a false start. Second, an eventual merger between AIA and the Asian portion of its big rival — and recent failed suitor — the UK’s Prudential. * View article
Penthouse aka FriendFinder finally files for IPO
After adopting the more innocuous name of a company it acquired last year, “FriendFinder Networks,” Penthouse Media Group filed for a $460 million IPO on Tuesday.
Penthouse bought FriendFinder– which runs sites that help subscribers find friends of all sorts, from FrenchFriendFinder.com for those interested in working on their French, to hook-up sites AdultFriendFinder and BigChurch.com, a site for single Christians –for $500 million a year ago.
The idea was to tap into the online adult market and become less of a publishing company than an internet company. The purchase also included popular video chat site cams.com, an adult site which helps new friends connect visually.
In March, Penthouse had said it planned to raise $250 million in an IPO in the second quarter. But as the IPO market floundered in the second half of 2008, those plans got scuttled.
FriendFinder joins a pipeline of IPOs facing a harsh climate. But this IPO in particular faces two major challenges, despite the old adage that sex sells: the proceeds will be used largely to pay off debt, something investors generally resist, and arch-rival Playboy has seen its shares wilt in 2008, falling 78 percent. What’s more FriendFinder Networks’ profits fell more than 20 percent between 2006 and 2007.
Still, social networking sites remain popular- in its SEC filing, FriendFinder claims to have 270 million members, who presumably need companionship, even in a recession.
In effect, when an IPO such as the one being proposed, is completed, the stock purchasers of the entity have offered ice thin liquidity and reduced debt load, which is the basis of the current economic freeze the world is experiencing, in exchange for a piece of paper that encourages future actions similar to those management actions of the past.
Change management is the relevant subject. Changing actions will allow our economic engine to reset itself away from excess spending, debt, and an out of control “greed” mindset which drove leverage which is now driving unemployment.
IPO issues that are equity based supporting a great and well managed business model are good for all. Those issues that supply bail out for previous mistakes and bad management decisions tend to only be good for those that benefited from the past leverage mistakes.
The investment bankers of the world can be a needed brake, if you would, when debt offerings come to light that only support a greed mentality.
Gene Sartin
President & CEO
The Transition Companies
http://www.transitioncompanies.com
gsartin@transitioncompanies.com
