DealZone

from Felix Salmon:

Will AOL go private?

Some companies are in growth businesses; the stock market, as a rule, tends to love them. Other companies are in an inexorable secular decline; they tend to get punished by equity investors. There's a good reason for that: stock-market investors are looking for stocks which go up over time, rather than stocks which are going to zero while paying out as much in dividends as they can along the way.

If you want an example of a business which is in a certain secular decline, it's hard to come up with a better one than AOL's hugely profitable dial-up business. And so it makes a lot of sense that, as Claire Atkinson reports today, AOL is looking at the idea of going private -- perhaps with a sale to KKR. This is not a particularly revolutionary idea: Jonathan Berr has pushed it, and Bloomberg called it AOL's "last, best hope". AOL is on the record as having hired the most high-powered M&A advisors in the world; they're no idiots, and only idiots wouldn't look at a buy-out option for a company trading at a significant discount to its book value.

If I were a potential private-equity buyer, though, I'd do a sum-of-the-parts analysis and rapidly come to the conclusion that Tim Armstrong's strategy is too much risk for too little potential reward. Take AOL, and sell off the non-core assets -- things like Moviefone, MapQuest, AIM, and Advertising.com. What's left? The AOL/HuffPo traffic-and-content monster, on the one hand, and the dial-up business, on the other. Armstrong's idea is that you use the cashflows from the latter to beef up the former, so that when the dial-up revenue eventually disappears, the dial-up caterpillar has transformed itself into a glorious web-publishing butterfly. (Sorry, MSN.)

The problem is that the transformation from caterpillar to butterfly is extremely inefficient -- there's a lot of work and energy involved, to achieve a result which can be fleeting and fragile.

Now private-equity shops are actually a good place to quietly work hard on putting exactly that kind of strategy into effect. Without being distracted by the need to produce strong quarterly results, executives can concentrate on building businesses which are going to be worth lots of money over the long term.

from Global Investing:

Do southern Europeans know something?

Slightly strange data from Deutsche Börse. Its latest survey of what top European executives have been doing shows increasing signs of optimism.  That is, management board and supervisory board members and their families have been buying shares in their own companies.

All well and good. But the strangeness kicks in when it becomes apparent that a lot of this buying has been done by the top people in the south.  Of 10 companies listed for the largest insider buying, seven were from southern Europe. Of the top sells,  seven were from more northern climes.

Deutsche Börse notes this -- "After Spain posted high purchase volumes last month (January), Italy has now awakened from hibernation" -- but gives no particular guidance.

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.

Stocks climb, bonds fall on Obama victory

Global stocks rose on Tuesday night as Barack Obama‘s history-making victory became apparent.

“People are hoping that we are seeing a path here to a resolution of one key uncertainty on the investment scene; who will be the leader of the free world,” said David Dietze, chief investment strategist at Point View Financial Services, Summit, New Jersey.

U.S. Treasury prices fell as the safe haven bid waned with global stocks rising. The 2-year note’s price traded down 3/32 for a yield of 1.44 percent.