DealZone

DealZone Daily

U.S. drugstore operator Walgreen is to buy rival Duane Reed for $618 million from private equity firm Oak Hill Capital Partners, giving the company the market lead in New York. The acquisition brings the company 257 new stores in the city and has prompted analysts to think that struggling chain Rite Aid might make an attractive target for Walgreen rival CVS Caremark as it looks to catch up.

Britain’s Babcock International has increased a proposed offer to buy defence firm VT Group to as much as 1.29 billion pounds, but its advances have again been rejected.

For more Reuters deals stories, click here.

In other media:

Beijing’s sovereign wealth fund, China Investment Corp, is investing $1.5 billion with three private equity secondary specialists – firms that buy positions in buyout funds from other investors – the FT reported. CIC will put $500 million with each of Lexington Partners, Goldman Sachs and Pantheon Ventures in special accounts that will be kept separate from the firms’ main funds.

 Leading shareholders in Telecom Italia are discussing among themselves the possibility of merging with Telefonica of Spain, the FT writes. The discussions are said to be informal and preliminary but involve Telecom Italia’s three biggest Italian shareholders – Mediobanca, Intesa Sanpaolo and Generali.

Sovereign Funds sextuple down

They may be placing smaller bets, but sovereign wealth funds were back with a vengeance in the third quarter.

Global corporate mergers and acquisitions activity involving sovereign wealth funds jumped sixfold to nearly $22 billion in the quarter, with 37 deals completed. Global announced M&A volumes involving state investment vehicles stood at $21.8 billion, up from $3.6 billion in the second quarter, according to our data.

The number of deals more than doubled from 17 in the April-June period. Only two weeks into the fourth quarter, there were five pending or completed deals with a combined value of $164.7 million. At the height of the boom in the first quarter of 2006, sovereign wealth funds sealed 35 deals worth $45.7 billion.

from Breakingviews:

Norway SWF wages lone governance crusade

Norway's $420 billion oil fund is rattling the cage of some of the foreign companies in which it has invested. As a shareholder it deserves praise for putting its head above the parapet. But as a sovereign wealth fund it is treading a fine line.

Norges Bank Investment Management (NBIM) has been stung into action by a combination of domestic political pressure to account for its investments and heavy losses on some parts of its extensive external investment portfolio.

NBIM has publicly chastised Volkswagen for its plans to take over Porsche assets as part of a cosy merger between the two German carmakers. A detailed letter to VW Chairman Ferdinand Piech, published in full on its website, doesn't mince words.