Summit Notebook
Exclusive outtakes from industry leaders
China resource deals still hot
Investment bankers have been saying that there are only two things you need to know when it comes to Asia M&As — China and resources.
Is this still the case after Rio Tinto walked away from Chinalco’s $19 billion proposal earlier this year?
A noticeable rise has been seen over the last 12 to 18 months in China-related mergers and acquisitions, particularly Chinese firms moving on overseas targets, Philip Partnow, a senior banker with UBS Securities, said at the Reuters China Investment Summit.
“My personal view is it’s a very interesting and exciting area,” said Partnow, deputy head of UBS’s investment banking department in China. “There’s a lot of activity.”
But areas outside of resources were not as clear.
“It was rather unexpected to see a company that isn’t really involved in automobile manufacture going out to acquire a business like Hummer,” Partnow said, referring to little-known Chinese heavy machinery maker Tengzhong, and its surprising bid for General Motors’ Hummer brand.
Compared to automobiles, the resources sector is relatively straightforward, said the banker.
Japan eyes UK takeover rules
Japan’s takeover rules are destined to be shaken up — but probably not for some time.
The government wants to adopt Britain’s takeover rules rather than base policy on the U.S. model.
Hiroaki Niihara, director of the corporate system division at the Ministry of Economy, Trade & Industry, told the Reuters Japan Investment Summit that current rules make it too easy to defend against approaches and are bad news for minority shareholders.
A “poison pill” takeover defence by Bull-Dog Sauce Co in 2007 showed up shortcomings, he said.
But change will take time. METI has been in talks with Britain’s Takeover Panel, the body that oversees Britain’s takeover policies, whose members are market practioners.
The Panel recently delivered 10 boxes of documents detailing how its oversight works to versight to METI, and getting to grips with the system is just the start of the process of change.
How to gum up an exchange merger: salt water
It’s a puzzle M&A bankers and corporate executives have been trying to solve for years: how far from your home market can an acquisition take place and ultimately stumble over cultural differences? It’s a question that looms large as quintessentially Italian automaker Fiat prepares to swallow up Chrysler – inventor of the K-car and the minivan – and which reportedly haunts St Louis-based employees of Anheuser Busch in the aftermath of their company’s takeover by the penny pinching Belgians and Brazilians at InBev.
Gary Katz, CEO of Deutsche Boerse unit International Securities Exchange, insisted during his appearance at the Reuters Exchanges and Trading Summit that all has been sweetness and light since the Germans assumed control of the upstart American options exchange and that there has been “nearly zero turnover” since the takeover.
But Thomas Kloet, Chief Executive of Canadian exchange powerhouse TMX, was one of several executives at the summit who insisted that cross border mergers can often be a recipe for disaster and that the ideal mergers are “domestic roll-ups” like CME Group’s takeover of Nymex and the Chicago Board of Trade or indeed TSX Group’s takeover of the Montreal Exchange, which created TMX.
Implicitly criticizing some of the first-ever cross border deals in the sector like NYSE’s merger with Euronext, Kloet said: “there are significant regulatory differences that make cross border mergers pretty difficult to do, especially when they start passing over salt water, so to speak.”
Listen to the attached recording to hear the former ABN AMRO senior managing director’s ruminations on exchange M&A in full.
AUDIO – Deal making is back! (Um, maybe…)
There might not be the enthusiasm of a couple of years ago, but some deals in the defense sector might actually get done, according to Thomas Captain, head of Deloitte‘s aerospace and defense group.
Speaking at the annual Reuters Aerospace and Defense Summit in Washington, Captain said there were three possibbilities for deals that he sees in the near future.
While there seems to be little room (and even less money) for a huge, groundbreaking deal, Captain said there will be some opportunities for things to buy.
Captain gave a number of scenarios, including that European companies might want to make niche buys of U.S.-based shops and also, that despite currency concerns, U.S. companies still see some room to expand outside their borders.
Why? Many countries won’t do business with companies that don’t have a presence within their borders, so a company may want to make itself part of one thing, gaining it the flexibility to bid on another bit of possibly more lucrative business.
Aero and Defense is the final Reuters summit of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.
AUDIO – Finding value in tough times
Executives at this year’s Reuters Aerospace and Defense Summit almost uniformely said that finding critical, and rather immediate, value in mergers and acquisitions was especially important now in a climate of less money available for financing.
But opportunities do exist and can be found after careful hunting, said Alex Dorrian (heard first in this clip), CEO of Thales UK and executive vice president of International Operations for Thales Group worldwide, and Allan Cameron, chairman and CEO of Thales North America.
On defense, Cameron said he expected that spending in the United States going forward would “flatten, at best”.
Cameron and Dorrian led off the second day of the summit, held again in Reuters Washington, D.C. offices.
The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.
Silicon Valley execs self-absorbed (and thats not all bad)
With the white noise of MicroHoo ringing in everyone ears, we asked Adobe Systems CEO Shantanu Narayen why he thinks “royal weddings” — idylic mergers between multi-billion dollar companies — in Silicon Valley are few and far between.
You know, because, giant Deathstars are better for everybody, right?
The answer: Even though some merger adviser is probably ringing to talk about “strategic alternatives” (we suppose), Silicon Valley entrepreneur-types are, like, you know, obsessed with minding their own beeswax.
I think the Valley is all about innovation and about charting your own course. And companies seeing opportunities for themselves. I’m focused on how do I continue to drive great new products and deliver value to my shareholders.
I think the zen or the DNA of people there is all about growth and all about driving new innovation.
He was speaking in New York at the Reuters Global Technology, Media and Telecom Summit, where he spoke of his own company’s appetite for mergers.
(Photo: Reuters)
Grand Theft Audio 4 seen as “work of art”, EA says
The spectacular debut this month of Take Two’s blockbuster video game Grand Theft Auto was no better than expected, EA’s head of international publishing, Gerhard Florin, told the Reuters Technology, Media and Telecoms summit in Paris.
EA on Monday extended its public offer for Take Two by a month after failing to win more shareholder support for its $2 billion hostile bid but did not up the price. Florin said he was surprised there had not been a more negative approach to the violent game, which instead was hailed as a work of art, even in Germany, which tends to shun violent video games.
