DealZone

Deals wrap: What now for Berkshire?

David Sokol, Chairman, MidAmerican Energy Holdings, and Chairman, President, and CEO of NetJets, speaks during the Fortune Brainstorm Green conference in Dana Point, California April 13, 2010. Reuters/Mario AnzuoniWarren Buffett’s reputation as someone who prides himself on his transparency and handpicks managers who can run businesses in a similar manner, took a blow when David Sokol, widely seen as Buffet’s successor at Berkshire Hathaway, resigned after buying shares in chemical company Lubrizol Corp before pushing Buffett to acquire it. Sokol said he did nothing wrong. Analysts said any impact on Berkshire Hathway will be short-term but acknowledged that Buffet’s brand was damaged.

Other Berkshire execs seen as possible successors to Buffett include Ajit Jain, Berkshire Hathaway Reinsurance Group chief, repeatedly praised by Buffett for his running of the insurance business;  Gregory Abel, MidAmerican Energy Holdings CEO, who Buffet called a “terrific manager” and part of a “dream team” at the Berkshire-owned utility; and Matthew Rose, Burlington Northern CEO, who joined Berkshire after selling the No. 2 U.S. railroad company to Buffett last year for $26.4 billion.

Warren Buffett’s hunt for a large acquisition could lead to targets like Eaton, Illinois Tool Works or Cliffs Natural Resources, all of which seem to fit his recent preference for growth in industries outside of his core insurance unit, writes Michael Erman and Ben Berkowitz.

Vodafone will buy out Indian partner Essar in a $5 billion deal that ratchets up its exposure to a mobile market that has proved challenging despite its rapid growth.

The NY Mets are seeking $200 million for a minority portion of the team — a badly needed cash infusion that the team’s owners would pour directly into the club’s operations and use to pay off some of their debt, writes the New York Times.

Is 3 the magic number for Vodafone?

(By Sarah Young, Acquisitions Monthly)

The proposed £7bn merger of Orange and T-Mobile in the UK may be too much for Vodafone to bear, pushing it into a tie-up with Hutchison Whampoa’s mobile businesses 3, not just in the UK but also in Italy.

Indeed, earlier this year, Vodafone merged its operations with those of 3 in Australia.

If Orange and T-Mobile ink a deal by October, as they say they will, and the competition watchdogs approves it, 3 will find itself as the UK’s fourth largest mobile operator with just 8% of the market. Vodafone will be pushed back into third place – something one of the world’s largest mobile phone operators could find difficult to stomach in its home market.

Deals du Jour

TMT is heating up. Vodafone, the British mobile phone operator, is pondering a bid for T-Mobile UK, while Microsoft has hired Morgan Stanley to sell its digital agency Razorfish. Both stories are in the Financial Times. Private equity group Candover says it has ended talks with potential acquirers, confident it can meet debt covenants. For all Reuters Deals news, click here.

And here’s what other media are writing today.

* Anglo American (AAL.L) is building its defences against a 41 billion pound ($67.74 billion) merger approach from Xstrata (XTA.L) by plotting talks about a major Chinese investment, the Sunday Telegraph reported.

* Switzerland’s UBS (UBSN.VX) is to pay 3 to 5 billion Swiss francs ($2.77-$4.62 billion) in the next two weeks to settle a U.S. tax probe into the bank, Swiss newspaper Sonntag reported on Sunday.

It’s all a bit Zainy

The rumours just won’t go away.

Rumour number one: the Kuwaiti-backed Zain telecommunications group has effectively put its African operations up for sale with a reported price tag of US$12 billion.

Rumour number two: Zain is in talks with France’s Vivendi about doing a deal.

Zain has even posted on its website some of those news reports stating that its African business is under the hammer, effectively advertising a sale.

“I think we will know [about it] very quickly,” one source close to the parties said.

Huntsman buyout hits the rocks

rocks.jpgPrivate equity buyouts of Clear Channel and BCE have already gone to court due to tightening credit markets, and now it looks like Apollo Management’s $6.5 billion buyout of U.S. chemical company Huntsman Corp may be next. Apollo’s Hexion Speciality Chemicals filed a lawsuit against Huntsman on Wednesday that would seek to limit its liability if the deal falls apart, saying financing for the buyout– one of the last still to close from the private equity boom of 2007 — was in jeopardy because of Huntsman’s weakened financial position. Huntsman called the move “a blatant attempt to deprive our shareholders,” and a countersuit seems to be all but inevitable.

Spanish retail bank Santander is looking at taking over insurer Allianz’s loss-making Dresdner Bank, according to sources familiar with the matter. Commerzbank, Germany’s second-biggest bank, is already in advanced talks about a deal with Dresdner. But foreign banks like Santander are keen not to miss a rare chance to get a foothold in Europe’s biggest economy, whose banking market is largely closed to outsiders because of the dominance of not-for-profit community savings banks.The Dresdner sale is only part of the merger mania in Germany’s banking sector: Top retail bank Deutsche Postbank is also up for sale and Citigroup is selling its retail business here.

Vodafone has dropped out of the auction for Tiscali, according to the the Financial Times, driving the Italian broadband company’s shares down more than 9 percent. Vodafone had been seen as the most likely buyer for Tiscali as it could acquire both the Italian and British divisions to combine them with existing assets. BSkyB and Carphone Warehouse, Italy’s Wind and Swisscom are still in the frame, and the FT said that Vodafone could even re-enter the process if an agreement with the remaining bidders could not be reached. At a time of tight credit markets, slowing consumer spending and flagging broadband growth, it seems that bidders can afford to play hardball.

Busy signals

vodafone1.jpgYou can’t tell the telecom mergers without a scorecard: France Telecom proposed a $41 billion bid for TeliaSonera to create the world’s third-largest broadband operator and fourth-biggest mobile company, but the Nordic company rejected the offer. Britain’s Vodafone said its U.S.-based Verizon Wireless venture with Verizon is in advanced talks to buy U.S. rural mobile service provider Alltel, potentially making it the top U.S. wireless carrier ahead of AT&T. Deutsche Telekom clinched a deal last month with the Greek government that gives it a 25 percent stake in operator OTE, and India’s Reliance Communications and South Africa’s MTN are also close to a tie-up. What is the deal? “In the current context of consolidation, it appears unavoidable to have critical mass,” said France Telecom Chief Executive Didier Lombard.

Verizon’s move in particular was a surprise as it came only seven months after Alltel was loaded up with debt in a private-equity takeover by TPG Capital and Goldman Sachs’ GS Capital Partners. The deal would value Alltel at eight times its earnings before interest, tax, depreciation and amortization, compared with its November sale to private equity firms for about nine times EBITDA, the source said. While TPG and Goldman don’t appear to have made much money, it doesn’t seem they’ve lost much either. It’s hard to imagine they planned to flip it after 6 months, but perhaps for private equity these days, getting out free is good enough.

BHP Billiton, the world’s top miner, said it sees no need to sell assets to win regulatory approval for its $170 billion proposed takeover of rival Rio Tinto, but did not rule out that it might have to. Chief Executive Marius Kloppers also said his company had not held talks with any Chinese entity about buying a stake in BHP. If it had, he added, it would have had to disclose the discussions to the market. BHP will send its takeover offer to Rio shareholders only after it has been cleared by anti-trust regulators in Europe, Australia, the United States, Canada and South Africa, expected later this year. It filed its application to the European Commission, which it considers one of the three key regulators on the bid, on May 30. The EC will say by July 4 whether it will approve the deal, open an in-depth investigation, or permit a short extension.

Back to the well?

lehman.jpgLehman Brothers stock took an early hit on a report in the Wall Street Journal that it may raise up to $4 billion in fresh capital. It’s not clear who might want to buy into the storied brokerage, particularly given the number of top banking heads that have recently rolled down Wall Street. Lehman may issue common stock, diluting current shareholdings, and will probably reveal its capital plans when it reports quarterly results the week of June 16, the report said. Two months ago, the bank sold $4 billion of preferred shares, and in early May, it sold $2 billion of 30-year bonds.

Staples raised its bid for Dutch office supply distributor Corporate Express by about 14 percent to 9.15 euros a share, or $2.65 billion, but in order to secure the deal Corporate Express would have to nix its plan to buy French peer Lyreco. Staples says it has the backing of about 23.3 percent of Corporate Express shareholders. The initial bid was met with a cool response. This time, Corporate Express is blushing a bit more warmly, saying it will carefully review the new offer and make a further announcement in due course. “The 9.15 euros is somewhat higher than we expected. We believe this offer is attractive,” said Rabo Securities analyst Philip Scholte.

China Merchants Bank has agreed to buy control of Wing Lung Bank for $4.66 billion in a deal that will provide China’s sixth-largest lender with greater access to the Hong Kong market. After initially dropping out of the auction, China Merchants Bank returned late in the process to beat front runners Australia and New Zealand Banking Corp and Industrial Bank of China, the world’s largest bank by market value. China Merchants said late on Monday it would pay HK$156.50 a share for a 53 percent stake in Wing Lung, confirming what people with direct knowledge of the matter told Reuters on Friday.