M & A wrap: Glencore and Xstrata in mega merger talks
Xstrata and Glencore are in talks over an all-share merger that could create a combined group worth more than $80 billion, shaking up the industry with its biggest deal to date.
Glencore, the world’s largest diversified commodities trader, already owns 34 percent of mining group Xstrata and a tie-up between the two Swiss-based companies — in a deal which would trump Rio Tinto’s $38 billion acquisition of Alcan in 2007 — has long been expected, as Glencore aims to add more mines to its trading clout.
Now that Facebook has filed its hotly anticipated initial public offerings, analysts told Reuters correspondents Alexei Oreskovic and Alistair Barr that the social networking company’s honeymoon with investors may already be over.
Despite the massive IPO, CEO Mark Zuckerberg will exercise almost complete control over Facebook. Here is Zuckerberg’s letter to investors.
The graffiti artist who took Facebook stock instead of cash for painting the walls of the social network’s first headquarters made a smart bet, The New York Times says.
Venture capitalists are flocking to to China, leaving Europe behind, Deal Journal says.
Deals wrap: What drives insider trading culprits?
The U.S. government’s crackdown on insider trading continues. On Wednesday, two men were accused by federal prosecutors of carrying out a 17-year conspiracy to trade on corporate merger secrets stolen from three major U.S. law firms.
As this latest case makes clear, non-disclosure rules and clever systems of checks and balances are only so helpful in preventing insider trading.
“You can’t legislate human behavior. People will act as people will do,” David Lazarus, senior managing director, co-founder, EdgeRock Realty Advisors, said at the Reuters Global M&A Summit in New York, adding there’s always people whose greed will push them over the line.
Shares of Swiss commodities trader Glencore are set to start trading in London on May 24 and in Hong Kong on May 25, a Hong Kong newspaper reported.
Virgin Atlantic boss Sir Richard Branson told Bloomberg that he plans to remain a “major shareholder” in his airline even as his company seeks out a partner to compete with British Airways.
“Generally in their mid-20s or early 30s, today’s start-up founders are becoming more assertive in funding rounds, securing better terms and, in many cases, cashing out part of their investments well before an initial public offering,” writes Evelyn M. Rusli in NYT’s DealBook.
Is the venture fundraising industry becoming too exclusive for its own good? PeHub’s Connie Bessemer investigates.
Deals wrap: Who will Sprint call?
Bankers said Sprint had a handful of options after AT&T swooped in to buy T-Mobile USA for $39 billion, but none of them would give it the clout to compete in a market dominated by AT&T and Verizon Wireless, which would collectively hold an almost 80 percent market share. Verizon Wireless CEO Daniel Mead said he had no interest in buying Sprint.
Charles Schwab will buy online brokerage optionsXpress Holdings in a $1 billion deal that gives Schwab a stable of the most active retail traders, as options continue to boom.
Shutterfly said it agreed to buy privately held card design company Tiny Prints in a $333 million cash-and-stock deal, as the photo-sharing service tries to win back customers in a market increasingly dominated by social networking sites like Facebook.
Buyouts in Asia are chiefly dependent on bank loans but in a first-of-its-kind for the region, the debt portion of one deal last week was financed entirely through a bond issue, likely opening a new funding route for private equity firms, writes Stephen Aldred.
Secondary market trading has provided a valuation boost for many venture capitals’ assets, like Facebook and Twitter. Now, the expansion of startups’ market inclusion is set to generate greater short-term profit and higher expectations for investors, many of which have no affiliation to venture capital or to venture capital limited partnerships, writes peHUB’s Jonathan Marino.
Deals wrap: Activist investors team up
Activist investors are back and flexing their muscles again after fading into the background during the credit crisis, though they are now dependent on cutting deals with big institutions to get their way.
As technology giants and private equity firms look for potential acquisition targets, customer relationship company Convergys may spark renewed interest, several sources familiar with the situation said.
Putin and Medvedev, Gazprom and Rosneft: the key players in Russia tend to come in pairs. Now state banks Sberbank and VTB are set to strengthen their duopoly as Russia’s financial sector emerges from crisis.
Reuters columnist Felix Salmon discusses the relevancy of exchanges with Andrew Ross Sorkin.
“Top venture-capital firms including Accel Partners and Kleiner Perkins Caufield & Byers are riding the frenzy around companies like Facebook Inc. and Groupon Inc. to raise billions of dollars in new funds, even as the rest of the venture industry struggles to gather money,” reports the Wall Street Journal.
The volume of U.S. follow-on offerings totals $13.7 billion for year-to-date 2011, a 21% increase over last year.
from Breakingviews:
Skype IPO may add dose of healthy hype to Valley
Skype's initial public offering may add a dose of healthy hype to Silicon Valley. The Internet telephony group's $100 million float should be red hot. While there have been several tech offerings this year, investor reception has been uneven. A bit of justified excitement over Skype's growth and its backers' gains is just what the Valley's capitalists -- and entrepreneurs -- need.
With hot companies like Facebook and Zynga ruling out public floats in the near future, that leaves growth investors hungry for the next big ticket. Skype obliges. It has 560 million registered users and continues to grow. It added 86 million in the first six months of the year. Moreover, it is in the black. Skype has totted up $116 million of adjusted EBITDA since January, and this figure could grow rapidly if the company succeeds in cracking the lucrative enterprise market.
Moreover, Skype is big. Place estimated 2011 revenue of $1 billion on the same multiple as Google, and the company may be worth more than $5 billion. That would be a huge gain for the private equity backers at Silver Lake who led the firm's carve-out from eBay, clarified copyright issues with Skype's founders and tweaked its software. They valued the firm at $2.75 billion at purchase in 2009.
Valuing Skype in line with Google may sound optimistic. But there's the issue of scarcity -- the $100 million float is minuscule. This could set off a mad scramble for the few available shares, sending them rocketing.
The Valley needs a bit of this sort of ebullience. Venture capitalists are sitting on a huge backlog of companies that could go public -- which is one reason the average fund established since 1998 hasn't made any profits for investors. Sure, there have been 11 tech IPOs this year and more in the pipeline, such as Demand Media. But the average IPO is up less than 2.5 percent, according to Thomson Reuters data.
That's not much to write home about -- and certainly not a big draw for sellers or buyers. A successful Skype offer would be a different story. Investors would presumably clamor for more of the same, increasing valuations on tech firms that earn money on social applications. If there's enough appetite, it could even tempt companies like Facebook, Zynga and Yelp to consider selling shares to the public. Skype deserves some hype.
from Entrepreneurial:
Hot prospects: Top 10 VCs under 36
-- Lawrence Aragon is the Editor-in-Chief of Thomson Reuters publication the Venture Capital Journal and compiled this list with the help of his VCJ staff of editors and contributors. --
Let me introduce you to 10 young venture capitalists who are poised to do great things. All of our “Hot Prospects” are 35 years old or younger and all have yet to make their mark in VC.
While you may not be familiar with Chi-Hua Chien, 32, of Kleiner Perkins, Phin Barnes, 34, of First Round, Alex Kinnier, 33, of Khosla Ventures, Ken Howery, 34, of Founders Fund or Ann Miura-Ko, 33, of Floodgate, we’re sure you will be in the next several years.
Read the profiles by clicking on the pictures below.
In compiling our list of “Hot Prospects,” we didn’t have hard data to crunch. Our picks haven’t been in the business long enough to have had a major exit. So we looked at a variety of other factors that suggest future success, such as praise from experienced VCs, founding or helping to build a stellar company, successful angel investments, rapid promotion to partner, early investments in promising private companies, technical wizardry, and overcoming a major challenge.
Venture Capital is all about assessing early stage companies, and making a business decision. The ONLY people which have credibility are those who have ACTUAL hands-on experience at this stage in a broad range of industries. Earning an MBA studying theoretical business cases barely relates to the far most complex and fast moving REAL world. Don’t confuse a 30-34 year old’s “paper credentials” with expertise. Not one of them is experienced enough (at this stage) to be credible decision makers.
Deals wrap: Coke acting like a VC
The Coca-Cola Co – the world’s largest beverage producer – has been thinking and acting more like a venture capital firm over the last few years, as it attempts to find new ways to increase profits and stay ahead of the competition, according to a Reuters exclusive.
Coke’s Venturing and Emerging Brands unit, dubbed VEB, was founded in 2007 with the purpose of investing in independent brands, like Honest Tea and Zico coconut water. VEB president Deryck van Rensburg told Reuters the venture arm currently receives three to four unsolicited pitches per week from entrepreneurs. Van Rensburg added it was “not inconceivable” for it to work in other places, such as China, where there is “a huge entrepreneurial community.”
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Pharmaceutical company GlaxoSmithKline is also looking at smaller strategic acquisitions. Glaxo CEO Andrew Witty told French daily La Tribune: “We may do small targeted deals, but nothing big. We will not do a large transaction in pharma nor in generics.”
For a Big Pharma company like Glaxo small is a relative term, as it is reportedly kicking the tires on a potential acquisition of U.S. biotech firm Genzyme, along with rival Sanofi-Aventis. The rumored deal last week sent Genzyme’s market value soaring 15 percent to $16.7 billion.
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The trend of private equity firms buying up consumer-oriented food companies continued with the announcement that Lion Capital intends to purchase French frozen-food firm Picard Surgeles from rival BC Partners. According to Reuters, the deal would be France’s biggest leveraged buyout since the collapse of Lehman Brothers. The Reuters story also quoted “three people familiar with the matter” that Picard had a pre-deal value of about 1.5 billion euros ($1.9 billion).
GE: bringing small things to life
With talk about a multibillion-dollar deal to sell NBC Universal to Comcast burbling away, General Electric CEO Jeff Immelt popped the top on a $250 million venture fund designed to buy stakes in small healthcare technology companies.
“What we’re trying to do is embrace the venture community, try and do a series of early-stage and later-stage type investments,” Immelt said in an interview. “We don’t do everything inside our four walls.”
Competing venture capitalists might consider Immelt’s embrace more of a bear hug. GE is taking a similar approach to the energy industry. It has a stake in A123 Systems, the battery maker that was one of the best-received initial public offerings of the year. Scott Malone, our reporter who interviewed Immelt, notes that taking stakes in smaller companies rather than buying them outright gives GE more flexibility. It gains exposure to a wider array of technologies, any one of which could take off.
“GE is in the midst of a $6 billion drive to revamp its healthcare arm, called ‘Healthymagination,’ that includes rolling out products intended to help hospitals and other health providers cut costs and making investments to encourage the adoption of electronic medical records,” Malone reports.
Might be just cosmetic, but a new name would be a good place to start.
Take the word “healthy…” then add “imagination…” and
human health professionals get Healthymagination, a GE Healthcare initiative that Jeffrey Robert Immelt believes
in the power of bringing good things to life, as in life sciences.
Of course, GE knows how free and clear a woman’s breast is. However, GE’s vintage television ad, “A mammogram. Don”t put it off,” reveals how free and clear GE Healthcare’s MRI scanning products help women have a better life while combatting breast cancer at the same time.
Watch this classic mommogram-theme TV advertisement posted at the following address:
http://www.youtube.com/community
Can this hybrid jump-start the IPO market?
One of the biggest criticisms made of the IPO process is that investment banks turn around and flip hot new stocks for a big, quick profit, crowding out institutional investors with a longer attention span, and showing with no regard for a company’s long term prospects.
But Menlo, California-based InsideVenture, which is backed by major venture capital firms such as Venrock and Frazier Ventures, major institutional investors such as T Rowe Price, and even the New York Stock Exchange, thinks its new Hybrid Private-Public Offering (HPPOs) method of launching IPOs, introduced this week, is a way around that problem and a way to spur a recovery in the IPO market.
Here’s how an HPPO would work: small and mid-cap companies would still have to file standard IPO registrations with the U.S. Securities and Exchange Commission. But the company would then work with InsideVenture to allocate about half the shares to its existing shareholders and any of the 225 long-term fundamental investors that are InsideVenture members. Once it had lined up a roster made up of enough long term investors, the company would launch its IPO.
InsideVenture CEO Mona DeFrawi told Reuters in November that the disappearance of boutique investment banks after the dot com bust earlier this decade left the major investment banks focused mostly on larger-cap companies, leaving an opening for her firm’s services.
In March, InsideVenture introduced 50 private healthcare and tech companies to its member institutional investors at a conference, but a spokesman for InsideVenture said no companies have yet filed to do an HPPO-type IPO.
Still, with an IPO market that so far in 2009 has only seen seven deals, by mature companies at that, anything is worth a try.
(PHOTO: Reuters/Chip East, New York Stock Exchange, March 2009)
Customer to Venture Capitalists: Please, go out of business
Even in the depths of a recession, venture capitalists are relentlessly upbeat, but one of their big customers poured cold water on that Thursday, asking some members gathered in Boston for the annual meeting of the National Venture Capital Association to go out of business.
“I hope some of you go out of business. I hope that does happen,” Rebecca Connolly, a partner in Fairview Capital, said on a panel. Her West Hartford, Connecticut, firm has about $3 billion under management, 70 percent of it in venture capital funds and the rest with private equity. Fairview, a fund of funds, manages money for pension funds and endowments
Connolly said that until 2000, venture capital provided good returns but since the dotcom bubble burst in 2001 returns have been very disappointing, hardly justifying the investment. Venture capitalists are supposed to find small companies with big potential and help them grow into big companies, like Microsoft, Starbucks or Intel.
“Let’s just flush everything out and get back to less competition, less money,” Connolly said, adding a caveat: “Just not my funds.”
The venture capitalists meeting here have been pondering what to do to start making more money again. They discussed ways to get initial public stock offerings going again, which are a good source of high returns.
When venture capital firms disappear they don’t die with a bang, or even a whimper. Instead, they just fade away, as partners are unable to raise new rounds of funding for investment. One senior official of the NVCA, asked about Connolly’s comments and whether lots of funds were starting to disappear, had a succinct answer: “I don’t want to talk about it.”
Photo: Fairview Capital
Hey Boomja, might I recommend “revenues” as a way to fund future investments. A revolutionary concept, I know, but one that works.
