DealZone

Deals wrap: AIG’s $9 billion stock offer less than half of what was expected

American International Group and the Treasury will sell nearly $9 billion in stock as the bailed-out insurer begins its return to public control. This offering is less than half of what had been expected when Wall Street banks offered their services to manage the stock sale in January. The company was rescued in September 2008, receiving $182 billion in bailouts and managed to restructure while preserving two core businesses. At the time, few expected AIG would even exist today.

Professional networking service website LinkedIn is looking to go public, a move that could value the company at more than $3 billion. In this article, NYT’s Steven M. Davidoff explains why certain plans LinkedIn has for its IPO would “not only disenfranchise its future shareholders, but contains elements that have been heavily criticized by corporate governance advocates.”

The impact of AT&T’s proposed acquisition of T-Mobile on competition, pricing and consumer choice will be examined at a congressional hearing, where top executives are scheduled to appear to defend the deal. A successful merger would concentrate 80 percent of U.S. wireless contract customers in just two companies — AT&T/T-Mobile and Verizon Wireless.

Microsoft’s decision to acquire internet phone service Skype for a hefty $8.5 billion was immediately slammed by analysts, who questioned the logic of the deal and suggested the software giant paid too much. Reuters Breakingviews columnist Richard Beales thinks that, in theory, there are potential advantages to the deal but points out how Microsoft’s poor M&A track record and the high price means the transaction is unlikely to ever connect with investors.

Medco Health Solutions CEO David Snow says no biotech company is too big to be bought. He told the Reuters Health Summit he sees major drugmakers needing the growth potential of biotech more than ever.

from Breakingviews:

GM needs to double earnings to repay taxpayers

General Motors' much anticipated initial public offering filing finally landed on Wednesday. But investors shouldn't get too caught up in the hype. Sure, the automaker looks in pretty decent shape thanks to last year's bankruptcy clean-up, and car sales are motoring away from last year's lows. But to repay U.S. taxpayers in full, GM needs to at least double its earnings.

That's assuming the carmaker is valued at the same earnings multiple as Ford Motor. Granted, GM and its bankers could argue that it has advantages over its cross-town rival that may warrant a higher valuation. It has far less debt, for starters. And it has a stronger position in fast-growing China.

But operationally GM is still lagging: the pre-tax margin on its global autos business was 5.7 percent in the second quarter. After years of losses and in a fairly low-margin industry, that's worth shouting about. But it falls shy of Ford's 7.2 percent margin in the same period. There's an even bigger gap of more than three percentage points between the margins the two manufacturers make in the key North American market.

General Motors staff has IPO dreams

CHINA-AUTOS/Ever wonder how General Motors is holding onto its top talent? 

After a traumatic bankruptcy and series of federal bailouts, the company still owes billions of dollars to the U.S. and Canadian governments. It lost $1.2 billion in its latest quarter, and only sees a slight uptick in auto sales next year.    

The days of banner-year profits and bonuses must seem far off for GM’s executives and finance staff.  GM’s Chairman has already said pay caps imposed on companies by the U.S. government’s pay czar make it tough to hire executives.

While other job opportunities are obviously limited in Detroit, and they may have nowhere better to go in the industry,  the company’s plans for a 2010 IPO has emerged as a key staff retention tool, one of its top executives said on Tuesday.

That’s Mr. Geithner to you, Jamie…

USA/CEO-SURVEY“Dear Timmy, we are happy to be able to pay back the $25 billion you lent us. We hope you enjoyed the experience as much as we did.”

That’s JPMorgan ChUSA-CHINA/GEITHNERase CEO Jamie Dimon’s biting sense of humor on display yesterday as he read a  mock letter to U.S. Treasury Secretary Timothy Geithner before the Annual NYU International Hospitality Industry Investment Conference in New York. Dimon’s sarcastic tone shocked some participants and cheered others, according to sources who attended the meeting.

“I congratulate him not only for his candor but for his wit,” said Mark Grant, managing director of structured finance at Southwest Securities in Dallas. “The fact that Jamie Dimon had the self composure, the sense of humor and the fortitude to make such a statement in public not only made me smile but it reminded me of days seemingly long past when men stood up on their own two feet and played the Great Game with style.”

from Photographers' Blog:

Tim Geithner : What’s In Your Wallet?

What's in U.S. Treasury Secretary Timothy Geithner's wallet? Not much.

While testifying in front of a House Appropriations Subcommittee on Capitol Hill Thursday Geithner was shown a $50 Billion Zimbabwean bank note (rendered worthless by Zimbabwe's hyperinflation) by U.S. Representative John Culberson (R- TX) and asked if he had ever seen one himself. Geithner immediately pulled a piece of Zimbabwean currency out of his own pocket and showed it off to the committee. At the next break in the hearing I approached Geithner and asked how he happened to have a piece of foreign currency in his pocket. His response was "I often have some foreign currency in my wallet. Want to see?" He pulled a very thin and mostly empty wallet from his pocket.

Amongst many empty slots in the thin weathered leather wallet there could be seen three credit or debit cards with Visa and Mastercard logos (all inserted into the wallet upside down so that the card issuers could not be seen) and an old and yellowed looking identification card of indeterminate origin.

From inside the wallet Geithner extracted a small pile of receipts and paper including a New York City MTA farecard, pointing out that there were European Euros tucked amongst the paper.

Post Traumatic Stress Test Order

A week ago, when the Fed and Treasury mesmerized the financial world with the results of “stress tests” and capital-raising targets for banks, nobody spent much time asking “what if they can’t raise the money?” There was a sense that authorities had washed away enough uncertainty in the sector to satisfy investors. In short order, healthier institutions started raising capital. Those that didn’t need any stepped up efforts to rid themselves of onerous state support.

Bank of America shares are on a tear after the bank raised nearly $13.5 billion through a stock sale. Along with money it raised by selling part of its stake in China Construction Bank, this put Bank of America about half way to filling its stress-test gap.

But when Regions Financial, a large U.S. Southeast regional bank that was stress-tested, announced plans this morning to raise $1.25 billion through stock offerings — also about half of what federal regulators told it to raise — investors balked, sending its stock down more than 8 percent.

Stress Management

SPAIN/Perhaps the best that can be hoped for from the upcoming week of stress test anxiety is that once it is over, a modicum of uncertainty will be gone as well. Sometime today, we should know how heavy the yardstick used in the tests was. The banks either already know or will soon find out whether they passed, and on May 4, expect all kinds of whooping and hollering outside the Deans’ office when the results are officially posted. Of course, there is a pretty good chance that as the banks find out the test results, the news will find a way out, so May 4 may turn out to be somewhat anti-climactic.

What happens next is still a bit vague. There is much talk about officials force feeding more funds to stressed-out banks. And despite the bad press on shotgun marriages — what with NY AG Andrew Cuomo stomping his feet over alleged pressure applied to Ken Lewis for Bank of America to take over Merrill Lynch — financial matchmakers will certainly look at the failures as prime candidates for synergistic harmonization.

But for the optimist, the market truism that the end of uncertainty is always a good thing could come as a welcome spring break for the troubled financial sector.

from Funds Hub:

Blowin’ in the wind

rtr22twuThe timing of the Alternative Investment Management Association's hedge fund disclosure initiative indicates just how strong the winds of change are blowing in hedge fund land.

Coming just a day after ECB President Jean-Claude Trichet called the credit crisis "a loud and clear call" for extending hedge fund regulation, the move shows the hedge fund industry feels it must be more active in deciding the future shape of regulation.

The move, which will include regular -- probably quarterly -- disclosure of systemically significant holdings and risk exposure to national regulators, goes further than that suggested at last month's Treasury Select Committee by Marshall Wace chairman and Hedge Fund Standards Board trustee Paul Marshall, who had proposed aggregating data through prime brokers.

from Funds Hub:

Saving Hendry? Thanks but no thanks, says Hugh

rtr1z9ud1It was always unlikely that a letter of advice was going to change the mind of maverick hedge fund manager Hugh Hendry.

 

And in his latest letter to investors, Hendry has smartly rebuffed any attempt to 'save' him from his bond investments.

 

The letter in question -- Gregor.us's monthly note, entitled "Saving Hugh Hendry" -- praises the Eclectica co-founder and CIO as a "brilliant and colourful" hedge fund manager who saw the coming storm and took cover well in advance.

Taxpayer dollars losing appeal?

CashWhen the U.S. government started handing out taxpayer dollars to banks under TARP last fall, hundreds of banks lined up. To many, government money was cheaper than the terms they were getting in private and public markets.

“That really, in effect for several months, put a lot of our discussions with issuers really on hold,” said John Duffy, CEO of investment bank KBW, which specializes in the financial services sector.

Now, the pendulum may be swinging away from the government.

The Obama administration has made it clear that the recipients of more capital will have to live under dictates on what they can and cannot do with the money — dividend restrictions, executive compensation caps and such.