M & A wrap: Plan B for ING
Dutch financial services group ING Group has scrapped plans for a separate trade sale of its Belgian insurance business, worth 500 to 750 million euros, a person familiar with the deal said on Wednesday.
Sears “has been a mismanaged asset,” Gregory Melich, an analyst at International Strategy & Investment, said in a Bloomberg Television interview yesterday. “A lot of traditional department stores have reinvigorated themselves through merchandising, through changing their locations; you think of Macy’s. You haven’t seen that from Sears.” Yesterday the largest U.S. department store chain reported that it would close as many as 120 locations after same-store sales fell 5.2 percent in the eight weeks ended Dec. 25.
Whirlpool investors–already burned by a sagging stock in 2011–aren’t spending time trying to figure out what the impact of Sears’ planned store closings will be. They’re just bailing out, reports the Wall Street Journal. As Whirlpool has seen weak demand of its own this year, investors are seemingly done for now in waiting for turnaround signs. Shares are off 7 percent today to $47.57, pushing Whirlpool’s stock price down more than 46 percent for 2011.
Deutsche Boerse and NYSE Euronext have extended the deadline for completion of their planned merger to March 31 next year as they seek to convince European regulators to back the $9 billion deal.
Deal Book asks, how do you go from being one of the country’s most-renowned and respected business leaders to landing on the list of the Worst C.E.O.’s of 2011? Sydney Finkelstein, professor of strategy and leadership at the Tuck School of Business at Dartmouth College and author of “Why Smart Executives Fail” presents his list of the worst C.E.O.’s of 2011.
from Breakingviews:
Wal-Mart sounds pricy vuvuzela on African growth
Wal-Mart <WMT.N> has finally sounded the vuvuzela on African expansion. After months of speculation about how it would try to capitalize on the continent's growth, the U.S. retailer is offering $4.2 billion to acquire South Africa's Massmart Holdings <MSMJ.J>. The price could grate on shareholders' ears. But the deal gives Wal-Mart a local vehicle -- and local knowledge -- to help it gain access to a market with a profile that should suit it well.
If the deal is accepted by Massmart, Wal-Mart will be paying close to 13 times the Johannesburg-based retailer's EBITDA. For a company that trades at closer to 7 times, that's a big premium, albeit a drop in the bucket against Wal-Mart's nearly $200 billion market capitalization.
But Wal-Mart will get a foothold in what should be a bright spot in the world's growth map. South Africa, where Massmart operates 232 stores from Limpopo in the northeast to the Western Cape, is one of the CIVETS economies (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) widely hailed as the next sizable emerging markets.
The International Monetary Fund estimates sub-Saharan output will grow nearly 6 percent per annum from 2011. Capitalizing on this would be a stretch for Wal-Mart from its Bentonville, Arkansas headquarters. Sure, the retailer has become a smart international operator and broadly understands poorer shoppers, something Africa has in unfortunate abundance. But Wal-Mart would lack local knowledge in a new market.
Piggybacking on Massmart's business makes African expansion a much less risky proposition for the U.S. giant. From its home market where it operates a variety of retail formats, the South African group has been rolling out its Game mass-discount stores in Botswana, Ghana, Malawi, Mozambique, Namibia, Zambia and elsewhere.
Moreover, buying Massmart should boost margins in Wal-Mart's international business, which accounts for around a quarter of its revenue. While Wal-Mart International's operating margins were around 3.8 percent in the first half of this year, Massmart's stood at closer to 5 percent. Apply Wal-Mart's massive purchasing power, and profitability could increase further.
This entry ticket to a CIVETS lair doesn't come cheap. But with growth elusive at home, it should be a price Wal-Mart shareholders are happy to pay.
DealZone Daily
British insurer Prudential is to list in Hong Kong on May 11 and announced a secondary listing in Singapore to fund its $35.5 billion takeover of rival AIA, AIG’s Asian life insurance business. Prudential said it would publish prospectuses for each of the listings on May 5.
U.S. air carriers United Airlines and Continental are considering a nil premium all stock merger to create the world’s largest airline valued at about $6.6 billion. US Airways earlier dropped out of merger discussions with United. Many believed United had only entered talks with US Airways to draw out Continental, arguably a better match for it.
CenturyTel is to buy Qwest Communications in another stock deal, valuing the combination of the U.S.’s third and fourth largest landline telephone companies at $10.6 billion. The deal is designed to let the new business, CenturyLink, cut costs and compete more effectively, as consumers increasingly unplug their phone lines and go mobile.
For other Reuters deals news, click here.
In other media:
American clothing group North Face has take a 5 percent stake in Blacks Leisure, a move that could prevent Mike Ashley’s Sports Direct mounting another bid for the outdoor clothing retailer, the Telegraph reports.
Private equity firm Bridgepoint is in exclusive talks to buy arts and crafts retailer Hobbycraft for more than 100 million pounds the FT reports, seeing off interest from rivals Blackstone and Exponent and car parts and cycle retailer Halfords.
DealZone Daily
The world’s largest credit and debit card processor Visa is to pay some $2 billion for CyberSource, a company that helps retailers take online payments, including from mobile phones. Analysts estimate Visa already has 45 percent of the online market and the deal will only serve to boost the company’s position further.
The U.S.’s largest mall owner Simon Property Group has sent a revised recapitalization plan to rival General Growth Properties, which would see new investors, including Oak Hill Advisers, RREEF, ING Clarion Real Estate Securities and Taconic Capital, inject a further $1.1 billion into the business. Simon has already offered to invest $2.5 billion for about a quarter of its rival, while Paulson & Co — the U.S. hedge fund that bet against Goldman Sachs Abacus mortgage product — injecting a further $1 billion.
Film moguls Bob and Harvey Weinstein and backer Ron Burkle could reach a deal for Walt Disney’s Miramax Films within days, despite a rift between the Weinsteins and one of their minority shareholders Mark Cuban.
For more Reuters deals news, click here.
In other media on Thursday:
Private equity firm Advent International is frontrunner to buy sofa chain DFS. Despite claims from the company’s founder Lord Kirkham that he is already “loaded”, the 500 million pound auction of the business has continued, the FT reported.
The FT also wrote that online grocery retailer Ocado is poised to appoint JPMorgan Cazenove, UBS and Goldman Sachs to advise on a possible 1 billion pound summer flotation.
DealZone Daily
British Airways (BAY.L) and Spanish carrier Iberia (IBLA.MC) sign their merger agreement, sealing a long-awaited deal to create the world’s third largest airline by revenue. The deal creates a group with a combined market value of around $8 billion. Read the Reuters story here.
India’s Essar plans a $2.5 billion listing in the United Kingdom. The energy company expects to be included in the FTSE and has hired JPMorgan and Deutsche Bank to help it sell its shares.
UAL Corp’s United Airlines is in merger talks with US Airways in a deal that could create the second-largest carrier in the United States, two sources tell Reuters. Read the story here.
For all Reuters news on deals, click here. Elsewhere in media:
Greeting cards retailer Card Factory is on the verge of a 350 million pounds sale to private equity firm Charterhouse Capital Partners, UK newspaper the Times reports.
Hospital chain HCA Inc is preparing an initial public offering that may raise $3 billion, and plans to interview banks to underwrite the sale in the coming weeks, according to Bloomberg.
DealZone Daily
Royal Dutch Shell and PetroChina have secured Arrow Energy’s coal-seam gas assets for $3.1 bln after sweetening their offers for the business. The fresh bid was pitched at a 35 percent premium to Arrow’s share price before the first offer was announced, highlighting burgeoning interest in the coal-seam gas industry.
The former chief exexcutive of AIG is to sell most of his stock in the U.S. insurance giant to a unit of Swiss banks UBS. The deal for the 10 million shares, at about a 20 percent discount to Friday’s closing price, will earn Maurice “Hank” Greenberg $278.2 m.
Private equity firms are interested in acquiring and merging two German department store chains. U.S. firms are interested in acquiring Metro’s Kaufhof and Arcandor’s Karstadt chains, people familiar with the matter said.
For more deals news from Reuters, click here.
And in other media:
Richard Branson’s Virgin Money has lined up financing from Abu Dhabi Sovereign Wealth Funds and buyout house Blackstone needed to buy 320 bank branches from Royal Bank of Scotland, the Daily Express reports. Other suitors for the estate include Spain’s Santander and National Australia Bank.
Dealzone Daily
Bookseller Borders UK has stopped taking online orders and is on the brink of falling into administration if a buyer for the business is not found, the FT reports.
For the latest deals news from Reuters, click here.
And here’s the top stories from the newspapers (some external links may require subscription):
Private equity firm Endless and convenience store chain Costcutter have ruled themselves out of the race to acquire chunks of the Threshers off-licence empire, owned by First Quench Retailing, the Independent says, leaving rival retailers Bargain Booze, EFB Retail and Rhythm & Booze still in the chase.
DealZone Daily
British publisher Informa is in talks to buy its German rival Springer Science and Business Media from private equity firms Candover and Cinven, the FT says.
Informa initiated talks with Springer three weeks ago and is considering an all cash bid, according to its story, but private equity firms including Apax and EQT are still looking at the business.
For the latest deals news from Reuters, click here.
And here are the top stories from the newspapers (some external links may require subscription):
French fashion group PPR is planning to sell its retail businesses, including books and music chain FNAC and discount furniture business Conforama, as soon as it can, chief executive Francois-Henri Pinault told the WSJ.
Insurance broker Marsh & McLennan is closing in on a deal for HSBC Insurance Brokers, the UK’s ninth largest broker, valued at 150 to 200 million pounds, the Daily Telegraph says.
Noted: Should Tesco stop & shop for Ahold?
Could buying the undervalued Dutch retailer Ahold, which operates U.S. brands including Stop & Shop, make sense for Tesco?
ING analysts Peter Brockwell and John David Roeg think there is a “compelling strategic logic” for a deal.
The pair say buying Ahold’s established U.S. business would be a way of quickly turning round Tesco’s fledgling, and loss-making, business Fresh & Easy, with Tesco funding a deal with cash, shares and disposals.
A tie-up with Ahold would also make sense for domestic rival Delhaize, although given that Ahold is twice its size, any transaction would have to be a stock-based merger, they add. Most other potential predators lack the necessary financing, a strategic rationale to do a deal, or synergies, the ING team reckons.
From the note:
“Ahold’s substantial undervaluation could trigger a takeover.
“We see three possible scenarios: (1) nothing happens, the undervaluation persists; (2) management tries to reduce the gap through more ambitious growth targets/capital restructuring; or (3) predators could eye Ahold’s quality assets.
Deals du Jour
Belgium’s Solvay is selling its drugs unit to U.S. partner Abbott Laboratories for 4.5 billion euros ($6.6 billion) in cash and reinvest in chemicals and plastics. Sources familiar with the deal have earlier told Reuters Abbott had agreed to buy the unit to bloster its flagging prescription drug business.
Australia’s biggest department store chain Myer plans to raise up to $2 billion in a share offering that will test investor appetite for retail stocks.
In M&A news reported by Reuters and elsewhere on Monday:
* A Saudi prince is set to spend up to 350 million pounds ($558 million) to buy a 50 percent stake in English soccer club Liverpool, al-Riyadh newspaper quoted him as saying on Sunday.
* Kraft Foods Inc (KFT.N) is poised to launch a hostile bid for Cadbury (CBRY.L) valuing the British confectionery business at around 11 billion pounds ($17.6 billion), a report in The Observer newspaper says.
* Italian cable maker Prysmian (PRY.MI) has 1 billion euros ($1.5 billion) in liquidity to fund growth and is eying acquisitions in high-growth areas such as Russia, the company’s chief executive told Sunday’s Il Sole 24 Ore.
* Russia’s Rusal, the world’s top aluminium producer controlled by Russian businessman Oleg Deripaska, is ready to file a prospectus for a Hong Kong listing, which will value the firm at $30 billion, the Sunday Times said.
