Deals wrap: Glencore IPO draws key investors
Glencore kept a lid on its aspirations for a much-hyped market debut, targeting proceeds of $11 billion after securing record commitments from investors. The commodities trader set a price range of 480 to 580 pence per share for the London IPO, confirming an earlier Reuters report. That values it at $61 billion at the mid-point, in line with early forecasts. Glencore is planning a dual-listing in London and Hong Kong.
Chip equipment maker Applied Materials will buy Varian Semiconductor for $4.9 billion, as it looks to maintain its edge in new chipmaking technology to meet rising demands. Applied expects to fund the transaction with a combination of cash on hand and debt.
ConAgra Foods said it raised its offer for private-label food maker Ralcorp Holdings by 5 percent to about $4.9 billion in cash. The company, one of North America’s largest packaged food companies is looking to gain access to more U.S. store brands that have been attracting people looking to cut spending on food. ConAgra’s proposal comes after Ralcorp said late on Sunday that its board rejected an unsolicited offer it received from a third party in March.
German engineering conglomerate Siemens is looking for acquisitions of up to 3 billion euros ($4.5 billion) to boost core areas after raising its full-year outlook on strong demand from emerging markets. The company makes products ranging from lights bulbs to trains and power plants to name a few.
When Nasdaq and InterContinentalExchange first unveiled their spoiler takeover offer for NYSE Euronext, it was valued at $11.1 billion – or $1.78 billion more than the bid from rival Deutsche Boerse. Within a month, that gap has narrowed by 55 percent. In this Wall Street Journal piece, Shira Ovide explains what has happened in the past month to change the price-gap of the offers.
The afternoon deal: Hard rock, hard time
Hot news items today include the Teva deal, MGM Mirage’s move out of Atlantic City and a possible Siemens spin off. But the limelight shines elsewhere, on a hard rocking Buffet and inmate number No. 61727-054.
Warren Buffett Rocks Out (NYT) “The Oracle of Omaha made a guest appearance in a music video produced by employees of Geico, the insurer he owns through Berkshire Hathaway.”
Madoff Beaten in Prison (WSJ) “Mr. Madoff was treated for a broken nose, fractured ribs and cuts to his head and face, according to a felon currently at Butner serving time on drug charges who was familiar with his condition at the time.” The 20 Hot New York City Startups You Need To Watch (Business Insider)
DealZone Daily
Auto maker General Motors is grappling with the future of its European units Saab and Opel after one sale collapsed and the other was pulled, targeting the bulk of its 9,000 job cuts at Opel’s German factories.
Bookseller Borders UK called in the administrators yesterday, adding its name to a growing list of failed British high street retailers. Administrator MCR is hoping to sell the business, bought by Valco (the private equity arm of turnaround specialist Hilco) in July this year, as a going concern.
Lachlan Murdoch, son of News Corp chief executive Rupert Murdoch, sold some $27.6 million of his shares in his father’s company as he bought 50 percent of Daily Mail & General Trust’s radio operations in Australia.
For the latest deals news from Reuters, click here.
And here’s the top stories from elsewhere (some external links may require subscription):
Concerns over Dubai World’s debt dominated the news as stocks around the world tumbled and markets struggled to get to grips with the extent of the problem in the absence of solid information, says the Financial Times.
Siemens AG’s hearing aids business, valued at up to 3 billion euros, is drawing interest from private equity firms including KKR and BC Partners, Bloomberg writes.
from Commentaries:
Conti should turn tables on Schaeffler
Porsche isn’t the only family-controlled German company that has got itself into a complete pickle bidding for a far larger rival.
Indeed, if you want a test case of how ambition can land a company in serious financial difficulties, look no further than Schaeffler, a privately-owned ball bearings maker which has seriously overextended itself following a bid for listed car parts maker Continental last year.
Despite snapping up 90 percent of Conti’s stock, Schaeffler could easily lose control of its intended prey and may end up being swallowed by it. Following the bid battle, Schaeffler holds a 49.9 percent direct stake in Conti. A further 39.36 percent is held by Schaeffler's banks -- Sal Oppenheim and Metzler -- in a sort of warehousing deal to reflect the fact that Schaeffler does not actually have the money to buy the whole of Conti. Schaeffler has signed an agreement that it will not increase its stake above the current level prior to August 2012.
This leaves Schaeffler in an awkward spot. It cannot consolidate Conti and the two companies continue to be run as separate units in an uncomfortable stand-off. Conti is not paying a dividend, meaning that Schaeffler can only finance the stake out of its own earnings. Meanwhile, Conti’s share price has fallen sharply from the 75 euros Schaeffler paid a year ago to around 25 euros now.
Both companies are highly leveraged. Schaeffler has debts of about 11 billion following the Conti takeover, while Conti has net debts of a similar amount -- just over 11 billion -- mostly the result of its purchase of VDO from Siemens. Its debts are equivalent to 71 percent of its enterprise value.
It is Conti’s high debts which, paradoxically, may allow the target to turn on its pursuer. It must repay 3.5 billion euros ($5 billion) by the middle of next year and intends to raise equity to meet part of this liability. The only alternative would be to sell assets at low prices, which would hurt Schaeffler. There is talk of an equity issue to raise 1.5 billion euros.
Sorry, Jim. You are completely wrong. Schaeffler´s idea was to build up a strong new integrated company – it still makes sense. It was Conti who hasn´t done any homework namely CEO Neumann. This company is still unable to get their problems under control. Neumann is supported by the unions only – THAT explains the situation exactly! Or have you heard anything from the banks since yesterday evening…???
