Deals wrap: What now for Berkshire?
Warren 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.
The return of blockbuster takeovers in the exchange industry has put the spotlight back on the London Metal Exchange, but its tightly held, member-run structure means it is likely to remain independent for now, writes Sue Thomas.
Deals wrap: AT&T’s crystal ball
AT&T’s surprise $39 billion deal to buy T-Mobile USA from Deutsche Telekom will create a new leader in the U.S. mobile sector and likely draw scrutiny. The regulatory challenge will be predicting what the dominant form of communication will be 3 to 5 years from now, analyst Evan Stewart said. The deal will take a year to close, in which time customers are expected to see improved network quality, according to AT&T.
Sprint Nextel risks being further eclipsed by Verizon and the new AT&T, which together would boast 230.3 million customers in the U.S., compared to Sprint’s less than 50 million, writes Michael J. de la Merced and Jenna Wortham of The New York Times.
Citigroup plans to slash the number of common shares outstanding and reintroduce a dividend after suspending payouts two years ago, taking another step in its long recovery from the brink of failure during the financial crisis.
Warren Buffett said he believes Japan’s devastating earthquake is the kind of extraordinary event that creates a buying opportunity for shares in Japanese companies and that his Berkshire Hathway is looking for more large-scale acquisitions anywhere in the world. “The United States is most likely where we will do something,” he added.
Facebook agreed to buy Snaptu, an application developer for mobile devices that are less sophisticated than smartphones, as the world’s largest Internet social network focuses on expanding its mobile services.
The Carlyle Group acquired a majority stake in movie special effects company Foundry from Advent Venture Partners and other stakeholders, in what Advent partner Mike Chalfen called a validation of the firm’s growth investment strategy, writes VentureBeat’s Ciara Byrne.
Deals wrap: Japan crisis may delay some IPOs
Extreme market volatility tends to make investors a jittery bunch. The deadly earthquakes and nuclear crisis in Japan will obviously have an immediate impact there, but the fallout from the catastrophe is expected to spread across the globe where it could delay or even cancel a slew of new share offerings and debt deals.
According to IFR, a Thomson Reuters publication, one major deal in the pipeline that’s at risk of cancellation is the planned $6-$8 billion London-Hong Kong IPO of Swiss commodity trading group, Glencore, a deal expected in May.
Institutional investors will be demanding a higher return on their investments, forcing stock and bond deals to expect lower valuations, or face being pulled all together. Glencore’s IPO may be the victim of bad timing.
Yesterday we told you about Nasdaq OMX Group’s desire to make a counterbid for NYSE Euronext. But there are significant hurdles that it must overcome if it wants to trump the $9 billion offer Deutsche Boerse made for the Big Board.
Nasdaq must find $5 billion in debt financing, account for a relatively steep $347.5 million termination fee on the NYSE-D.Boerse deal and team up with the IntercontinentalExchange, which would look to buy NYSE Euronext’s lucrative interest-rate futures business. All of this means, the deal is far from a certainty.
Finally, Peter Mycroft Psaras of Seeking Alpha takes an in-depth look at Warren Buffett’s purchase of Lubrizol. Psaras uses his own formula, which is based on Buffett’s Owner Earnings, to see if the Berkshire Hathaway CEO overpaid for the company.
Deals wrap: AOL looks to Huffington Post
AOL will buy The Huffington Post for $315 million, relying on the high-profile liberal pundit who co-founded the influential website to rescue it from the dustbin of Internet history. The Wall Street Journal looks at the good and the bad of the deal. Felix Salmon asks if AOL is really the right parent for the unique and very valuable Huffington Post Media Group.
Danaher agreed to buy medical diagnostics company Beckman Coulter for $5.8 billion cash, moving further into its growing medical technology business.
Blackstone Group has taken a majority stake in San Diego’s historic Hotel del Coronado. The private equity firm has been active in buying U.S. commercial real estate such as hotels, retail property and warehouse space from distressed owners and others who need cash.
Warren Buffett’s Berkshire Hathaway will buy the 19.9 percent it does not own of Wesco Financial, in a deal worth about $547.6 million, the companies said.
Deals wrap: Seeking greener pastures
The usual flurry of brokerage firm traders seeking to join hedge funds after the payout of annual bonuses could be more of a blizzard this year, with compensation shrinking on Wall Street and a regulatory crackdown in the offing.
A break-up sale could be looming for niche auto designer and producer Pininfarina SpA, creator of almost every Ferrari sportscar since the early 1950s.
Expect to see bolt-on acquisitions in construction services and materials firms across Europe as the industry heats up.
The New York Mets hopes to sell a 25 percent stake by June to raise cash for a potential Bernard Madoff-related settlement, The Wall Street Journal reports.
“Smith & Nephew Plc, which gained 16 percent on takeover speculation, is still worth almost 60 percent more, or $15.6 billion, in an acquisition,” reports Bloomberg.
“Buffett’s rich because he thinks about businesses as businesses — commitments backed by people he trusts and people who trust him — not as tradable shares that can be bought or sold with abandon,” reports MSN Money.
Deals wrap: Creeping takeovers
A string of stake buys and takeover bids has shown how merger rules in the euro zone’s two biggest economies can be used to gain control of a target quietly or on the cheap.
Goldman Sachs said it will limit its private placement of shares of social networking site Facebook to investors outside the United States, citing “intense media coverage.”
Federal regulators could approve Comcast Corp’s purchase of NBC Universal as early as Tuesday, a person familiar with the matter said.
Asian hedge funds are beginning to make a tactical sojourn to markets abroad, reversing a trend of global funds setting up shop in Asia.
“The cloud of uncertainty hovering over Spain’s economy doesn’t make an ideal backdrop for mergers and acquisitions. But that hasn’t stopped many of the country’s blue-chip companies from striking big, and in some cases bold, acquisitions abroad in recent months,” reports the WSJ.
MarketWatch makes some predictions for a post-Warren Buffett world.
Deals wrap: What’s next for Apple?
Shares of Sony rose nearly 3 percent at one point on Tuesday, but later retreated as analysts dismissed speculation that the electronics maker could be an acquisition target of Apple. *View article *View WSJ article looking at an Apple tie-up with Netflix
Warren Buffett’s Berkshire Hathaway said hedge fund manager Todd Combs would join the firm, potentially bringing the company a step closer to solving Buffett’s succession puzzle.*View article *View background article on Todd Combs
The NYT’s Andrew Ross Sorkin delves into SEC insider trading laws and how they apply to two rail yard employees facing charges. *View article
Malcolm Gladwell takes a look at Steven Rattner and the rescue of General Motors. *View The New Yorker article
Deals wrap: Competition for Potash?
China’s state-owned chemicals group Sinochem has approached Singapore state investor Temasek to join a consortium that may bid for Potash, sources said. It was unclear if this potential consortium will bid to buy a blocking stake or make a full counter offer. *View article
Air Products raised its bid for Airgas to $5.5 billion, the latest salvo in its hostile move on the rival company. *View article
The Justice department is looking into Google’s takeover of airline ticketing software firm ITA Software Inc, to determine whether the deal would exert too much influence on the online travel industry. *View WSJ article *View scores.org graphic on Google’s acquisitions
The WSJ takes a look at Berkshire Hathaway’s bid for Wesco Financial. “This begins as a Warren Buffett love story. The intriguing question is whether it ends that way,” reports the WSJ. *View WSJ article *View additional article on the deal
The afternoon deal: Hard rock, hard time
Hot news items today include the Teva deal, MGM Mirage’s move out of Atlantic City and a possible Siemens spin off. But the limelight shines elsewhere, on a hard rocking Buffet and inmate number No. 61727-054.
Warren Buffett Rocks Out (NYT) “The Oracle of Omaha made a guest appearance in a music video produced by employees of Geico, the insurer he owns through Berkshire Hathaway.”
Madoff Beaten in Prison (WSJ) “Mr. Madoff was treated for a broken nose, fractured ribs and cuts to his head and face, according to a felon currently at Butner serving time on drug charges who was familiar with his condition at the time.” The 20 Hot New York City Startups You Need To Watch (Business Insider)
from Funds Hub:
Trust the Cadbury trustee to get a deal
Warren Buffet may think Kraft isn't doing a good deal by taking over Cadbury. With Kraft shares falling, Cadbury's shareholders may not think the deal too sweet either and some disgruntled British consumers may be appalled that a much loved brand will be sold to a non-British group -- and one that sells chocolate symbolised by a lilac cow at that.
But one party is sure to get a good deal: the Cadbury pension fund trustees.
While Cadbury fans are digesting the takeover news, the trustees have lost no time in seeking a dialogue with Kraft to make sure they do get a good deal for the workers they represent. Call it fiduciary duty if you like but be sure pension trustees, used to a sponsor that "stood behind the pension fund for more than a hundred years", will give Kraft a hard and cold look to assess its credentials as a sponsor -- what the pension industry calls in vaguely biblical terms "the covenant".
In theory there is no need for a fight -- Kraft was swift to assure it would honour "the existing contractual employment rights, including pension rights". But did the multi-national really know what this pledge would cost, at least in pension terms?
Almost certainly no, because truth to tell the pension trustees themselves do not know. The fund is waiting for the results of its triennial valuation, which should give an accurate picture of the fund's financial shape. Independent consultant John Ralfe told me he thought trustees could present Kraft with a cash injection bill of £200 million or more.
Whether the assessment of an independent consultant not involved with the scheme in question proves right or not, it is fair to assume this kind of money would still be a small price to pay for the successful completion of a £11 billion deal.
If it turns out to be more, Kraft will still be careful not to antagonise the pension trustees because they may not be able to scupper a deal recommended by the board, but a prolonged struggle could attract the attention of The Pensions Regulator.
