Deals wrap: BHP Billiton’s CEO confronts shareholders
BHP Billiton’s boss is likely to face calls next week for a massive share buyback when he faces shareholders in Australia after his third straight failure to pull off a major acquisition.
Investment bankers are pitching to advise Symantec on strategic options as some shareholders push to break up the company, but the software maker has not made a decision to hire bankers and remains on track with its own strategy, sources said.
General Motors is in the final stage of talks to sell equity to Chinese partner SAIC as part of its landmark initial public offering, two people familiar with the matter said.
Sanofi-Aventis’ $18.5 billion pursuit of Genzyme may be a foregone conclusion for many healthcare industry executives and bankers, but few rivals likely will copy the hostile bid. Read more industry news at the Reuters Health Summit runs which runs from November 8-11.
Private equity firms are using dividend recaps as protection against deals going bad, just stop dressing them up as something they are not, writes Dan Primack for Fortune.com.
Deals wrap: Potash Corp repercussions
Australia’s farm sector would have too much of an advantage if BHP Billiton was allowed to buy Potash Corp, argued Canada’s farm minister. While Canada’s decision to block the deal stunned many, most Potash Corp investors seem unperturbed, eying its long-term growth prospects.
Alastair Sharp looks at what Ottawa’s market-rattling decision could mean for Canadian tech giant Research In Motion.
The terms of GM’s upcoming share sale show that, once public, the stock will have to as much as double before its biggest shareholder, the U.S. government, gets close to breaking even, writes columnist Antony Currie.
BHP weill not let any competitors use there rail line to ship Iron Ore in Australia even though they are more than happy to pay and we are supposed to just hand them the keys to what will ammount to a Potash Cartel! I think not!!! If BHP really wants to be in the Potash business, there are lots of green field sites that they can invest in.
from Breakingviews:
Canada may have shot itself in the foot on Potash
Canada may have just shot itself in the foot. The Ottawa government said BHP's $39 billion takeover bid for Potash Corp provided no net benefit to the nation. There's some basis for this in the specific instance. But what the decision fails to reflect is the long-term damage such a politicized rejection does to Canada's ability to attract capital.
While BHP still has 30 days to plead its case, the decision by the conservative government of Stephen Harper will be regarded as a major victory in Saskatchewan. The provincial government opposed the takeover of Potash, an asset that it used to own. It clearly marshaled some persuasive arguments for its resistance, though Minister of Industry Tony Clement said he was prohibited from sharing them.
However, the province had earlier estimated the takeover could reduce tax revenue by C$3 billion over a decade. Two-thirds of the hit would arise if BHP used tax credits from developing its own potash assets to shelter its target's income. The rest would be the result of piling acquisition debt onto its target.
BHP had said it was willing to ensure there was no tax impact. Of course, many companies that have made promises under the Investment Canada Act's requirement that takeovers create a benefit for the nation have failed to live up to their pledges.
But that highlights a flaw in the law's enforcement which can and perhaps ought to be fixed regardless of the merits of BHP's case. It, however, should not be the basis for rejecting a deal that created no obvious threat to competition or consumers.
After all, the longer-term ramifications of protecting Potash may hurt Canada, particularly if investors now view Canada's natural resources as takeover-proof. That would raise financing costs, reduce Toronto's rising might as a financial center for the global mining and metals sector and, ultimately, reduce Canadian wealth. It's hard to see how an outcome like that would be of any net benefit to the country.
from Breakingviews:
Blocking BHP’s Potash bid could damage Canada
Blocking BHP's move on Potash Corp could be damaging for Canada. The government will decide by Wednesday whether to allow the $39 billion deal to proceed. A BHP takeover might squeeze the tax the fertilizer giant pays its home province. But those costs are outweighed by the discount that the country's companies would suffer if Canada was deemed to have turned protectionist.
Under the Investment Canada Act's broad remit, foreign investments must be a net benefit to the country. The government must weigh factors like the impact on jobs, competition, productivity, the ongoing participation of Canadians in the business, and the country's ability to compete in world markets.
In BHP's case, there is no impact on competition. While the Anglo-Australian miner plans to run the business differently if it takes control, its proposals are not that radical. Even if Potash Corp remained independent, a different management team could follow a similar path to BHP.
The bid does throw up some genuine concerns about the impact on Saskatchewan, where Potash Corp is based. The province estimates the takeover could reduce tax revenues by C$3 billion over a decade. Two-thirds of the hit would arise if BHP used tax credits from developing its own potash assets to shelter Potash Corp's income. The rest would be the result of piling acquisition debt onto its target. BHP is willing to ensure there is no tax impact, though foreign acquirers in Canada have a poor track record of keeping their promises.
However, blocking the deal would have broader repercussions. The danger is that investors would view Canada's mining sector as takeover proof, which would hit share prices and increase financing costs. It could also make Canada less attractive for other miners. Last year, mining companies raised $22 billion of equity capital in Toronto for projects in Canada and abroad—34 percent of mining equity capital raised worldwide. If the government was vague about the reasons for its decision, other Canadian companies might also be viewed as enjoying protection from a change of ownership.
If the Canadian government wants to capture a greater share of its natural resources it can do so through the tax system. But if it wants to maintain its image as an open market, Canada cannot afford to stand in the way of BHP's bid.
…and $3 Billion is not chump change to a province of only 1 million people.
Deals wrap: Cutting the deal in half
Wal-Mart may scale back its bid for Massmart and take a 50 percent stake, rather than a full buyout, Massmart said in a statement. Wal-Mart has been under increasing fire from shareholders to revive its ailing U.S. stores, and some analysts have said it should concentrate on fixing its business at home before spending big on expansion. *View article
Private equity firm Blackstone Group reported a rise in quarterly earnings and said the value of its investment funds grew. *View article
With the U.S. car industry in a slow, fragile recovery from a punishing downturn, auto parts makers are reluctant to pull the trigger on deals, delaying a long-predicted wave of consolidation in the sector, write Soyoung Kim and Deepa Seetharaman. *View article
BHP Billiton dismissed a newspaper report that Canada’s federal government was leaning toward blocking its $39 billion hostile takeover bid for Potash Corp *View article *View quarterly results from Potash
Italian utility Enel has dropped the minimum price for the initial public offering of its renewable energy unit to attract enough investors to Europe’s biggest listing in three years, financial sources said. *View article
Deals wrap: On the road to a GM IPO
GM is on track for a mid-November IPO, sources told Reuters. China’s top automaker SAIC has not ruled out taking a stake in the company. *View article *View SAIC article *View WSJ blog which extracts some nuggets from GM’s SEC filing
China’s Sinochem will no longer launch a counterbid for Potash, sources said. “It’s finished,” Reuters was told. *View article
“BAE Systems could be poised for a major buying spree in the U.S. defense sector as Europe’s top defense contractor chases new growth in the face of looming spending cuts,” writes Soyoung Kim and Andrea Shalal-Esa. *View article
Yahoo is sounding out how serious the interest is in the company following news of potential suitors, according to the WSJ. *View article *View Yahoo analysis
Deals wrap: Pfizer mixing medicines
Pfizer has agreed to buy King Pharmaceuticals for $3.6 billion. *View article *View WSJ blog on who’s benefiting from the deal *View Forbes blog on why the deal seems bad for Genzyme
L’Oreal may be bidding for Avon, the Daily Mail reported. Avon shares jumped 6 percent on the news. *View article
The Australia dollar’s surge to 28-year highs could cause a headache for Foster’s wine business bidders. *View article
Google is investing in a proposed underwater electric cable to join future offshore wind projects to the East Coast power grid. It’s an investment in “a superhighway for clean energy,” according to Google. *View article
A consortium of Chinese companies may make a rival bid for Potash. Andrew Ross Sorkin reports the politically charged subtext is: “Do we really want the Chinese to control the company that has the largest capacity to produce fertilizer?” *View article
Deals wrap: Oil sensitivities
CNOOC agreed to pay $1.1 billion for a stake in a U.S. shale oil and gas field, testing the U.S. political climate with a deal for assets once deemed off limits to the Chinese due to protectionist sentiment. *View article *View factbox on China M&A activity
Rival bids for Potash look unwieldy, analysts say, which leaves Potash alone to defend itself from BHP’s $39 billion offer. *View article *View timeline
The private equity industry is bouncing back and has a strong presence in UK mergers and acquisitions, according to the FT. *View article
The New Yorker looks at the evolution of the video business, what went wrong with Blockbuster and what’s in store for Netflix. *View article
Deals wrap: Viewing Potash through the media
Reuters blogger Felix Salmon looks at how the media covered a report of the effects of a takeover of Potash Corp. Felix finds the coverage often differed from the actual report. *View blog *View Reuters article
“The biggest merger in Australian business history is dead. The board of Rio Tinto is preparing to abandon a $120 billion iron ore deal with the rival mining giant BHP Billiton in the Pilbara,” reports The Sydney Morning Herald *View article
Doing the math on the AIG bailout and repayment isn’t all that hard, reports Andrew Ross Sorkin from the NYT. *View article
Dollar Thrifty shareholders rejected Hertz’s takeover bid last week. Avis continues to be interested in Dollar Thrifty. The NYT takes a look at where the three companies can go from here. *View article
Deals wrap: Avis ups the ante in bidding war
Car rental company Avis has agreed to pay a $20-million break-up fee in its offer for Dollar Thrifty if rival Hertz walks away from its own takeover bid. Dollar Thrifty shareholders were due to vote on the Hertz offer on Thursday in Chicago, but announced they have delayed that vote, citing additional voting activity. *View article*
Hertz and Avis have been going back-and-forth in their bid to wrest control of Dollar Thrifty since Hertz initially announced its takeover bid last April. Hertz and Dollar Thrifty agreed to a sweetened deal earlier this month, currently worth about $50.95 a share or roughly $1.5 billion. The Wall Street Journal said the Avis deal isn’t likely to help Dollar Thrifty shareholders that much, as Avis’s additional $20 million break-up fee was just “45 percent of the $44.6 million break-up fee that would be due to Hertz immediately upon signing an Avis deal.” *View WSJ blog*
China’s Sinochem is working feverishly to put together a rival bid for Potash Corp to counter BHP Billiton’s $39-billion hostile takeover offer, sources told Reuters. Although BHP’s bid deadline isn’t until November 18, “sources close to the firm” told Reuters a decision could come soon. *View article*
Is there trouble looming for the hedge fund industry? Wall Street hedge fund firm D. E. Shaw this week laid off around 150 staff, roughly 10 percent of its 1,500-person workforce, according to Reuters Breakingviews columnist Rob Cox. Cox points out the layoffs are unlikely to be an isolated event as assets under management at hedge funds are down 29 percent since 2007. *View blog*
