Wilbur Ross looks at banks, calls commercial real estate a “time bomb”

Billionaire investor Wilbur Ross said on Thursday he would consider buying banks under a newly revised proposal on private equity investment in troubled banks, but the rules should be eased further.

U.S. banking regulators on Wednesday partially retreated from a much-criticized proposal to impose new rules on private equity investment in troubled banks, aiming to encourage responsible investment in distressed banks.

The regulators lowered capital requirements and dropped or modified measures that could have required investors to kick in more capital after their initial investment. The rules will be further reviewed in six months.

In an interview with Reuters Television, Ross said the capital requirements should be lowered even further.

Under the current proposal, Ross said he still would be “in the game” and look at banks that have good local deposits. He said many of his potential targets are in Sunbelt States such as Florida, Arizona, Texas and Nevada.

Warner Chilcott to buy P&G’s pharma biz

Warner Chilcott Plc agreed to buy the pharmaceutical business of Procter & Gamble Co for $3.1 billion, winning an auction that drew few bidders.

The unit had attracted interest from some private equity firms but very few pharmaceutical bidders, sources familiar with the auction said.  Many of the key products within P&G’s pharma unit, such as the overactive bladder drug Enablex, already face stiff competition from a wide range of rival drugs, while other products are close to their patent expiration. Other pharmaceutical companies are struggling enough with these problems without buying a business that echo these issues, the sources said.

As a result, Warner Chilcott was essentially in a bidding war alone. Under terms of the deal, Warner Chilcott will pay $3.1 billion in cash.  It will finance the deal, and restructure some of its existing debt, through $4 billion in funding it received from a syndicate of banks, sources said.

Private equity asks for a top-up

cashA number of private equity firms in Europe are going back to investors for more money to fix over-extended balance sheets and fund add-on acquisitions for companies in their portfolio.

Private equity’s world has turned upside down since the start of the credit crisis. All the stats show that deal flow has dropped off a cliff and those deals that have got done are smaller and the equity cheques larger. At the same time,  restructuring situations are mounting as firms face the uneviable choice of injecting more equity or face losing their investments to the banks.

The upshot is that buyout funds raised in rosier times are no longer suited to the current environment, if indeed they have any capital left at all.

Deals du Jour

The logo of an Opel car dealer is pictured in Himmelkorn, near Leipzig August 9, 2009. With Magna and GM finally agreeing terms on Opel, more deals are on the horizon.

Mergers and acquisition stories in the media on Friday include:

A Canadian bank has approached Allied Irish Banks and the Irish government with a proposal to buy a stake in Allied when it has been cleansed of its risky loans, the Irish Times reported on Friday

India’s federal government will offer its 49 percent stake in Bharat Aluminium Co (Balco) to Sterlite Industries (India) Ltd for about 20 billion rupees ($416 million), the Economic Times reported on Friday.

Barclays Capital has prepared a database of more than 100 private-equity owned companies ready to be listed in the next 12 to 18 months, the Wall Street Journal reported on Friday.

Nycomed crafts a buyout, 2009-style

Nycomed, the Swiss drug company, already has 4 billion euros or so of net debt and some pretty junky single-B credit ratings. But that’s not deterring the private-equity owned outfit from plotting a bid for the drugs business of Belgium’s Solvay, even in these leverage-phobic times. As I wrote earlier:

“Switzerland’s Nycomed plans to draw on buoyant junk bond markets and new cash from its private-equity owners to fund a buyout of Solvay’s drugs unit, people familiar with the matter said.

“Such a structure would allow Nycomed — which already has billions of euros of syndicated loans — to bypass the moribund leveraged loan market and would create a group with some 6 billion euros ($8.6 billion) in yearly sales.”

Deals du Jour

Australia and New Zealand Banking Group Ltd will likely clinch a deal this week to buy some Asian assets from British lender Royal Bank of Scotland Group for about $775 million, a source briefed on the situation told Reuters, marking it the Australian bank’s biggest overseas purchase.

In other M&A related stories reported by other media on Monday:

British-based, US-listed cable operator Virgin Media is considering a secondary listing of its shares in London to attract UK-based investors, according to a report in the Times newspaper. Virgin will make an announcement about its decision at its second-quarter results this month, the report said.

The biggest private equity groups are sitting on $400 billion of debt that needs to be repaid over the next five years, putting the future of some of the largest buyouts in doubt, the Financial Times said, citing data from S&P LCD.

Warburg’s 5.9 percent stake in Webster explained

A Warburg Pincus deal to invest $115 million in Webster Financial on Monday left at least some folks scratching their heads. 

The private equity firm agreed to start with an initial investment acquiring 5.9 percent of Webster’s common stock, to be raised to 15.2 percent after getting regulatory and other approvals. 

On the face of it, the 5.9 percent figure was unusual because the stake threshold for private investors in banks is 9.9 percent — beyond which they need to get the Fed to sign off on the deal.

Deals du Jour

Spain’s Banco Santander (SAN.MC) has appointed advisers to spin off its Brazilian business in a $3 billion initial public offering (IPO) to create one of Brazil’s biggest bank, the FT reports. But it’s not new — Reuters carried the story last week, which said Bank of America-Merrill Lynch, Credit Suisse and UBS would underwrite any deal. Click here for that story. More details could come from Santander today alongside its Q2 results.

In other M&A related stories reported by Reuters and other media on Wednesday:

Private equity firm Kohlberg Kravis Roberts & Co is in the advanced planning stage for an initial public offering of stock in Dollar General Corp, a discount retailer. Goldman Sachs, Citigroup and KKR are likely to underwrite the deal, the Wall Street Journal cited people familiar with the matter as saying.

Sumitomo Trust and Banking has agreed to buy Nikko Asset Management, Citigroup’s Japanese asset manager, for about 100 billion yen ($1.1 billion), the Nikkei newspaper reported.

KKR’s latest listing missive

nysePrivate equity giant KKR’s latest document on its lengthy route to becoming a publicly-traded company makes the intriguing suggestion that it could list on either the Nasdaq or the NYSE.  

The idea all along has been for KKR, after listing on Euronext through buying its Amsterdam-listed fund KPE, to potentially list on the NYSE, so switching to Nasdaq would be quite a suprise.

Press releases up to now have pinpointed the NYSE as KKR’s possible future home. However, today’s document is a filing to unitholders rather than a statement to the press, so it is more formal and looks at all possible eventualities (such as a long section on risk factors).

Leverage available for right assets

By Sarah Young, from Acquisitions Monthly

It’s widely acknowledged that the tables have turned on private equity and with debt scarce it is their bids for assets which are looking uncompetitive compared to offers from the strategic buyers they out-priced time and again in the days of readily-available leverage.

But there are exceptions to this new reality.

Insiders say that bank appetite to lend to private equity firms bidding for German credit card payments processor Easycash is such that the four or five buyout houses participating in the UBS-run auction are in with a reasonable chance of winning the asset.

Banks are willing to lend between 3x and 4x last year’s ebitda to fund the deal, meaning it could weigh in at around the €250 million plus mark.