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.

“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.

“Self-imposed financing constraints: Corporates plan to rely on internal financing for deals. 42% of respondents plan to use existing cash reserves or cash flow whilst 23% would use existing debt facilities. Beyond this there is a clear
preference for equity financing (14%) over new bank loans (5%) or traded debt issues (4%). This suggests an upper limit to deal sizes over the next year – consistent with the early stages of other M&A waves.

“Not many mega deals yet: Only 20% of respondents expect a transformational deal in their sector vs. 43% in last year’s survey. This is consistent with (1) a preference for internal funding of deals, (2) product markets not having undergone
the seismic change that many expected a year ago, (3) still relatively moderate risk appetite of senior executives and (4) perceived higher valuations …

“Corporate restructuring outlook: Restructuring expectations are high; 66% of respondents expect more deal-based restructuring in their industry over the next 12 months. “Forced” divestitures and voluntary sales of underperforming
businesses are expected to feature heavily (29% of respondents each).

“Shareholder activism: A significant majority (75%) of respondents expect more pressure from investors, banks and other creditors to conduct more deal-based restructuring in their sectors.

“Return of Private Equity: Higher financial investor involvement is expected, although more as sellers (cited by 54% of respondents) than as buyers (36% of respondents).”

In a linked note, UBS’s “special situations” team also names its top picks for European M&A: Aegis, Basilea, C&C, Croda, Kloeckner, Meggitt, Peugeot, Sonaecom, and Temenos.

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 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.

“It is also working with Morgan Stanley (MS.N) to advise Royal Bank of Scotland Plc (RBS.L) on its participation in the UK government’s Asset Protection Scheme (APS). [ID:nL3540088]

“UBS’s advisory team is led by Alex Wilmot-Sitwell, co-chief executive of the investment bank, and Chris Fox, a managing director in the bank’s London financial institutions group.

“Lloyds is paying 500 million pounds in fees and expenses, of which 190 million pounds ($309 million) will go to the six banks underwriting the rights issue — UBS and Merrill alongside Citi (C.N), Goldman Sachs (GS.N), HSBC (HSBA.L) and JPMorgan Cazenove (JPM.N).

“As joint sponsors and global co-ordinators, UBS and Merrill are likely to earn more than the other four, implying payouts of more than 32 million pounds each.”

For the full story, click here.

For more on UBS honcho Wilmot-Sitwell, see this profile in the Times of London from April, with nuggets such as the fact his father is credited with inventing the “dawn raid”.

Elsewhere, Legal Week magazine has the skinny on the “Magic Circle” law firms working for RBS, Lloyds and the Treasury.

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.

Will the arrival of Merrill Lynch veteran Robert McCann, hired to restore trust in UBS’ battered American wealth franchise, improve things?

Photo credit: The U.S. flag flies outside the U.S. headquarters of Swiss bank UBS in New York August 4, 2009.  REUTERS/Brendan McDermid (UNITED STATES BUSINESS)

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.”

“We do think investors can take advantage of the growing interest in M&A as the likelihood of deals gets priced into stocks. The average take-out premium historically has been 30-40%, much of which is earned around the announcement of a deal. Merger arbitrage post bid announcement has earned a levered IRR around of 9% this year.”

“Despite a 27% decline in global M&A activity in 2009, deal volumes in Asia remained strong. At the current run rate, 2009 activity in the region will be up on 2008, taking APAC’s share of global M&A to 25%, from 6% in 1995. A meaningful pick-up in global activity in 2010 will require a rebound from trough deal volumes this year in the Americas and Europe.”

“M&A activity could be especially prevalent in the Financials and Healthcare sector due to the shock of increased regulation affecting their industry dynamics. The Healthcare sector, along with Technology is one of the best placed sectors from a balance sheet point of view too, generating high free cash flow and with limited debt on the balance sheet (or net cash in the case of Tech). Asset disposals at the Industrials and Materials sectors could be a theme if excess capacity pressures intensify.”

Despite a dismal couple of years for M&A, the strategists also say there has been a longer-term shift to a higher “natural rate” of mergers than in previous eras (see graph), as dealmaking benefits from globalisation, deregulation, privatisation and the development of financing markets.

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.

Biggest week for U.S. corporate debt since May

Bolstered by multi-billion dollar deals in the financial and insurance sectors, the market for U.S. corporate investment grade debt saw its biggest week for news issues since May. Hong Kong’s Hutchison Whampoa topped the list of global debt offerings this week, raising $3 billion in the U.S. markets, while insurers Prudential Financial and Met Life each raised over $1 billion.

JP Morgan holds first place with 13% of the market, while Bank of America has 12.8% of investment grade underwriting in the U.S.

Asia Pacific tech M&A hits $15.2 billion

This week’s $3.1 billion acquisition of Singapore-based Chartered Semiconductor Manufacturing by state-owned Advanced Technology Investment Co, a UAE sovereign wealth fund, brings year-to-date Asia Pacific technology volume to $15.2 billion, a 33% increase over last year at this time.  Deals in the both the materials and consumer staples sectors are up over 60% in the region this year.

Overall, worldwide sovereign wealth fund acquisition activity totals $25 billion so far this year, a 32% decline over 2008.

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.

The U.S. is gunning for other banks too, and European governments have been vocal about clamping down on tax-havens, so how UBS handles the fallout could set precedents across the off-shore wealth-management industry.

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.

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.