DealZone

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.

Noted: Europe SA on the takeover trail?

A poll from UBS and the Boston Consulting Group finds a “surprisingly healthy” one in five European companies is likely to make a significant (EUR 500 mln+ in sales) acquisition in 2010. Some of the other key findings:

“Corporates are seeking growth: Strategic and growth-related considerations such as expansion of product offering, access to new geographies and access to new customers and distribution channels were the three most cited drivers of M&A activity, from a choice of 12 drivers.

“Lack of attractive targets and company valuations are main M&A barriers: Lack of attractive targets (cited by 40% of respondents) and, reflecting the speed and extent of stock markets’ recovery, high valuations (cited by 39% of
respondents) were the most commonly cited barriers to M&A.

Dealzone Daily

Ferrero — the maker of Nutella — might be considering an offer for an alliance with Cadbury, Il Sole 24 Ore says, saving the British group from Kraft’s clutches. Cadbury shares aren’t moving much, which says something about how the market sees the story. Elsewhere, Austria’s Erste Bank closed its rights issue late on Monday, with demand less than stellar.

The Lehman estate files its long-expected lawsuit against Barclays Capital, according to court documents. And with UBS’s investor day and the Euro Finance Week conference in Frankfurt on elsewhere, all eyes are on Europe’s banks again.

For all other Reuters stories about deals, click here.

UBS and the UK banks shake-up

Some cheering news on an otherwise tough day for UBS - the Swiss bank has bagged key roles for both Lloyds and RBS, as the two British banks agree to a massive shake-up that involves taking 31 billion pounds more of government money. As Victoria Howley and Daisy Ku wrote earlier:

“UBS AG (UBSN.VX) has taken key roles on two landmark deals to shore up British banks — landing the Swiss bank a welcome boost in fees and prestige on the same day it shocked the market with worse-than-expected results.

“UBS is working alongside Bank of America Merrill Lynch (BAC.N) to raise 13.5 billion pounds ($22 billion) for Lloyds Banking Group Plc (LLOY.L) in the world’s largest rights issue.

Road to UBS recovery wobbly

UBS American HQA bitter U.S. tax row has hit UBS harder than many investors thought and the Swiss wealth management giant is still losing more rich client money than what it manages to attract, its disappointing third-quarter results showed.

UBS shares tanked and the data suggest turnaround maestro Oswald Gruebel may have to work a bit harder to bring home the profit that will convince the super rich to stick around.

“Reputation is a fragile dimension, painstaking to build but easily broken. It will take a more than persuasive convincing for wealthy clients to fully perceive the firm as a safe haven again, even though there are positive shoots of normality returning,” said Cubillas Ding, senior analyst at international financial research and consulting firm Celent.

Noted: UBS sees 15% M&A rebound next year

Like SocGen before them, UBS strategists are looking forward to a pickup in M&A next year. ubs-ma-as-percentage-of-global-market-cap

From a note published on Monday:

“We expect 2009 to mark the trough in global M&A transactions and for activity to pick up in 2010 and beyond. For FY2010, globally we expect M&A activity in the region of $2.5-2.7trl, an increase of 15% on current annualised run rate for 2009 and close to levels last seen in mid 2004-05. The biggest driver of an increase in activity is likely to be the increase in risk appetite in equity markets and in the boardroom, a return to earnings growth and profitability by World Inc and a backlog of pending asset disposals.”

“Credit conditions are also supportive and we expect private equity and bank lending to pick up at some point next year.”

Keeping score: UK M&A, Asian tech and US debt

Here are the highlights from this week’s Thomson Reuters investment banking scorecard:

Cadbury deal lifts UK M&A to $168.8 billion

The $19.3 billion offer by Kraft Foods for UK confectioner Cadbury lifted UK target M&A to $168.8 billion for the year-to-date period, an increase of 19% over last year. The transaction could rank as the second largest non-government acquisition in the UK this year after Xstrata’s $42.5 billion bid for Anglo American in June.

UBS, which advised on both the Cadbury and Anglo deals as well as the UK government investments in Lloyds Banking Group and RBS, leads the year-to-date UK target league table with $124.6 billion from 21 announced deals.

Switzerland’s pound of UBS cheese

When Switzerland sold its stake in the country’s largest bank at the top end of its price range, it made a hefty profit on compensation for interest lost from shedding the mandatory convertible notes it held in the bank early. It’s not as if it didn’t deserve a big payoff, having gone to the mat with the mighty U.S. government to defend UBS over allegations that it aided and abetted wealthy American tax dodgers.

Our source says the Swiss sold 332 million shares at 16.50 Swiss francs each, at the top end of a 16 to 16.50 francs price range, with books being three to five times oversubscribed. That gives government 5.5 billion Swiss francs ($5.1 billion), plus 1.8 billion francs in compensation, making a profit on the 6 billion francs it shelled out in its rescue attempt last October.

Has the U.S. regulatory offensive poked so many holes in the Swiss banking system as to rob it of its best asset? While UBS is starting to pay its dues, it could be taking on fresh liability by complying with the order to hand over the names of thousands of UBS’s rich American clients to Washington. This could result in fresh provisions for big legal bills, as outed clients sue UBS for breaking that same Swiss banking secrecy law that had been so important to the wealth management bank for so long.

Deals du Jour

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Details emerge of the Swiss government’s disposal of 9 percent stake in UBS. Traders snapped up the 332 million shares at the top end of the expected price range in a heavily oversubscribed sale, a source told us. 

Talks over a complicated merger between telecommunications firms MTN and Bharti Airtel are extended for a second time until the end of September. As uncertainty over a successful completion drags on one shareholder we talked to said the extension showed that the deal may be too complex.

For the latest Reuters stories on M&A and investment banking, click here.

For a round-up of other stories featured in the media today take a look at our market chatter.

UBS’ Tax Break

UBS shares are on the rise after news of a deal in principle to end U.S. government tax litigation against the Swiss wealth management giant. This probably involves the bank handing over the names of 5,000 U.S. clients holding secret Swiss accounts, or 10 percent of the names Washington was after. The best news for investors right now is there is no fine involved.

Hardly the end of uncertainty the market would normally crave. While the deal will not formally violate Swiss bank secrecy rules, it’s hardly going to end pressure on Switzerland and UBS — and the entire offshore financial world — to stop shielding the wealthy from paying their dues.

For now, the ebbing threat of a fine, removing the risk of more capital-raising by UBS, is being welcomed. Now, all the bank needs is a business model built on better citizenship. Perhaps they can manage something dramatic before they report quarterly results tomorrow. UBS is expected to post a second-quarter net loss of 1.1 billion Swiss francs ($1 billion). It lost billions of business from wealthy clients after it handed over about 250 names in February to settle a separate U.S. criminal probe.