DealZone

Deals du Jour

Royal Bank of Scotland is talking to investors to gauge support for a “modest” equity placement of 3 to 4 billion pounds, a source tells us, as it tries to limit government control.  JPMorgan and Cazenove are thought to be close to agreeing a price for Cazenove’s share of their J.P. Morgan Cazenove joint venture before the end of the year, the Independent on Sunday newspaper says.

For these and other Reuters stories on deals, click here. And for Monday’s stories in other media (some of the links may require subscription):

German power giant E.ON is in advanced talks with potential partners to build new solar power plants in Andalusia, southern Spain, its chief executive tells Spanish daily Expansion.

Chinese industrial gas provider Yingde Gases Group aims to raise up to HK$3.58 billion ($462 million) in a Hong Kong initial public offering later this month, a Hong Kong newspaper reports.

Martindale, the UK’s leading maker of methadone, has attracted interest from a number of private equity groups, the Financial Times reports on Sunday.

Deals du Jour

A year on from the collapse of Lehman the newspapers are full of stories reflecting on the bank’s failure. A senior Bank of England official said he was “astounded” the U.S. government let the bank fall, but some might be more shocked by the rapid bounce-back of the stock markets, which is helping big M&A deals come down the pipeline.

For the latest Reuters deals news, click here.

And here’s a round-up of deal-related stories from Monday’s press:

* French Economy Minister Christine Lagarde plans to extend billions of euros of loan guarantees to France’s top banks for another year, and is calling on them to provide action plans on financing the economy, Les Echos reported.

* Tony O’Reilly is ready to give up his controlling stake in debt-laden Independent News & Media, following months of restructuring discussions. As part of a wider plan, bondholders will take cash and shares ahead of a rights issue, the Times of London reported.

from Alexander Smith:

Santander wins with Brazil float

    Buying ABN AMRO may have bankrupted Royal Bank of Scotland and Fortis, but it has proved another coup for Spain's Santander whose chairman Emilio Botin has shown his eye for a bargain.
    After flipping Italy's Banca Antonveneta for an impressive profit before the ink was even dry on the contract to take it over from ABN, Botin is now looking to float Banco Santander Brasil, including another former ABN asset, Banco Real, once part of the Dutch bank's Latin American empire.
    With Brazilian valuations riding high and the IPO market flourishing, Citigroup reckons BSB could be worth as much as $30 billion. If so, the partial sale would again demonstrate Botin's ability to spot a good deal.
    Brazil is far too important to Santander -- it accounted for 18 percent of the bank's first half profits of 4.5 billion euros -- for Botin to give up control. But a flotation of 15 percent of the Brazilian bank could raise $4.5 billion of scarce capital while giving Botin another currency for shopping in South America. lt is already Brazil's third-largest bank by assets.
    Santander has been able to keep buying through the financial crisis, becoming the biggest bank in the euro zone as a result. Botin has also picked up Sovereign Bancorp in the U.S. and Alliance & Leicester, along with the remains of failed former building society Bradford & Bingley, in Britain.
    Floating the Brazilian business would crystallise its value. It might also boost Santander's own share price, but risks investors taking the view that a global roll-out of the bank's name and brand means the parent is becoming a conglomerate rather than an integrated group.
    The possibility of attracting a conglomerate discount won't have escaped Botin, whose family still owns nearly 2.5 percent of the $115 billion bank.
    Unlike his colleagues in the banks which have failed, Botin has his family fortune tied up in the business he runs. This, surely, is a powerful reason why Santander has avoided plunging into areas where the risk was far greater than the executives knew or cared. The bank has the strength to take advantage of the fashion for things Brazilian, and he can reflect that the acquisition which sunk RBS has done him no harm at all.

Kroes keeps up pressure

Neelie Kroes’ campaign to ensure the European Commission’s rules over state aid are respected has remained in a high gear over the last few weeks. Three times the Competition Commissioner has spoken publicly about how restructuring plans for shaky banks bailed out last Autumn should be agreed with the governments of those countries.

This Tuesday she told the British Banker’s Association the truth. Royal Bank of Scotland made the largest ever corporate loss last year and yet was still saved by the government with a massive £20 billion plus rescue injection. One might ask how such an institution, so fundamentally important for the economy, could not be?

Kroes does not dispute that. What she does insist on is that such aid cannot be effectively propping up the bank indefinitely, allowing the balance sheet, and hence the bank’s business, to remain bigger than it should be, if it were not for that aid.

Another deal in healthcare: what’s the magic pill?

pillsAs dealmakers everywhere struggle to get deals done, the healthcare industry seals yet another one.

Express Scripts has agreed to buy health insurer WellPoint’s prescription business for $4.68 billion in a significant expansion for the U.S. pharmacy beenfit manager. The deal will be a concoction of cash and up to $1.4 billion in common stock, and will generate more than $1 billion of incremental EBITDA.

This comes on the heels of Pfizer’s $68 billion acquisition of Wyeth, Merck’s $41.1 billion takeover of Schering Plough and Roche Holding’s $46.8 billion buyout of Genentech. Granted, this isn’t a pharma deal, but it still falls under the umbrella of the healthcare sector.

from Funds Hub:

Returns and Reckonings

 

It may be the awakening we all experience in the spring, but this month two different class actions against previous financial giants were started by a bunch of pension schemes. In both cases a small group of such previously semi-obscure institutions have de facto come under the spot light for suing companies-- and their executives-- which they say have been less than straight about their financial shape and lost them millions.

 

rtxbi7hEarlier this week five schemes, including Europe's second largest one, clubbed to become lead plaintiff in a class action over about $274 million losses incurred since Bank of America took over Merrill Lynch.

 

Earlier this month two public pension schemes in the UK, Merseyside and North Yorkshire, started a class action against Royal Bank of Scotland and former chief executive Fred Goodwin. The legal firm working on the case, Coughlin Stoia Geller Rudman & Robbins, hired Cherie Blair. One of its lawyers even told Reuters: "Never underestimate Cherie Blair," leaving a faint promise for fire works.

West Coast Care

CVS CaremarkCVS Caremark Corp is bolstering its position on the West Coast with its acquisition of rival Longs Drugs Stores Corp. The deal, announced on Tuesday, is worth $2.54 billion and will allow CVS to expand in states like California and broaden the reach of its prescription services. The acquisition of Longs’ 521 stores will also give CVS a leading position in Hawaii, where it doesn’t operate. CVS will pay $71.50 per share for Longs, including its Rx America subsidiary, a prescription benefits management services company with over 8 million members. Longs shares closed at $54.04 before the news on Tuesday, but surged nearly 30 percent in extended trading on the deal. Shares in CVS fell nearly 7 percent on the news.
GM chief Rick Wagoner says there’s significant interest in the auto maker’s planned sale of up to $4 billion of assets as it battles record losses and falling sales, but no deals are expected soon. General Motors Corp is struggling against an accelerating downturn in its home market and high oil prices that have hammered sales of its trucks and SUVs, triggering a $15.5 billion quarterly loss, the third-largest in its 100-year history. Earlier this month, sources told Reuters GM was in talks with India’s Mahindra & Mahindara Ltd and automakers in Russia and China about selling its Hummer brand.

A consortium led by Goldman Sachs Group Inc has agreed to pay about $1.5 billion for a number of ABN AMRO’s private equity assets, the Wall Street Journal said Wednesday. On Monday, Belgian-Dutch financial services group Fortis said that together with Britain’s Royal Bank of Scotland Group and Spain’s Banco Santander, it had sold a number of ABN AMRO private equity assets to a Goldman Sachs-led consortium. The Journal said Goldman’s investment comprised 32 European companies as well as roughly $450 million in capital to be invested in future deals.
Other deals of the day:

* Australia’s CSL Ltd, the world’s top maker of blood plasma products, is buying smaller U.S. rival Talecris Biotherapeutics Holdings Corp for $3.1 billion, to boost its presence in the fast-growing biopharmaceutical industry.

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.

The Yahoo lament

yang.jpgMicrosoft‘s $47.5 billion bid may not have met Yahoo’s price target, but the deal sure had a lot of promise, Yahoo’s Chief Executive Jerry Yang lamented during an on-stage interview at the D: All Things Digital conference. Yang said the software giant appears no longer interested in a full merger. “We did not walk away from that proposal. Microsoft did,” Yang said. This might just be a brave face for Yang, who will need one to face a potentially hostile board filled with activist agitators hand picked by Carl Icahn. Then again, Yang may feel emboldened by reports that Icahn may not be able to muster the votes to change Yahoo’s position. News Corp Chairman Rupert Murdoch, also at the D, was quoted by Dow Jones as saying: “Icahn? That’s not serious. It’s just a lot of helpful noise.”

Royal Bank of Scotland extended yesterday’s deadline for the auction of its insurance arm, which includes its Direct Line and Churchill brands, the Daily Mail reports. First-round bids for Britain’s largest motor insurer are expected to come within days, the paper said. RBS declined to comment on the auction for RBS Insurance, expected to be valued around 7 billion pounds ($13.8 billion). Italian insurer Generali, which had been seen as a strong candidate, pulled out of the running because of the hefty price and RBS’s unwillingness to consider breaking off parts of the unit, sources close to the situation told Reuters.

A member of the founding family of Anheuser-Busch said any talks with Belgian brewer InBev should be based on shareholder value rather than the Busch family’s legacy, the Wall Street Journal reports. The comments signal a hardening of the split within the family, which could embolden InBev to make a bid for the St. Louis brewer, the newspaper said. InBev is weighing an offer that could top $45 billion, the Journal reported, citing people familiar with the matter. “A possible merger is not a family issue,” Adolphus Busch IV, an uncle of CEO August Busch, wrote in a release to the newspaper. It is not “a matter of family solidarity or legacy. It is strictly a matter of shareholder value.”

Wagging the dog

Follow Carl, from the Good Dog, Carl series of Classic Board Books published by Farrar, Straus & Giroux, 1989Yahoo has struck an advertising partnership deal with WPP Group that will let WPP units GroupM and 24/7 Real Media buy ads on Yahoo’s online ad exchange. Yahoo said the deal would first involve WPP units GroupM and 24/7 Real Media. It may be a stretch to expect this shake off the dogs of war unleashed by Carl Icahn, who is trying to unseat the Yahoo board for its failure to deal with a $47.5 billion unsolicited takeover bid from Microsoft. If the ad tie-up deal with Google that’s still in the trial phase hasn’t done so, why would a deal with WPP? But at the same time, Yahoo CEO Jerry Yang can hardly be seen to be sitting on his hands.

Warren Buffett’s Berkshire Hathaway has pulled out of the bidding in Royal Bank of Scotland‘s 7 billion pound ($13.62 billion) auction of its UK insurance business, according to the Financial Times. Berkshire told the FT it had looked at the business, which includes the insurers, Direct Line and Churchill, but had decided not to bid, without giving a reason.

Japan’s Bridgestone said it was forming a strategic alliance with rival Toyo Tire & Rubber aimed at coping with high materials prices and intensifying competition. The two companies plan to team up in developing advanced tire technology and procuring raw materials. They will also use each other’s production facilities and said they would take stakes in each other worth 8 billion yen ($76 million).