Unstructured Finance

The Great American IPO?

GMWe (the taxpayers)  paid some of the $50 billion to bail General Motors out of its bankruptcy misery last year.  Now, the former American industrial icon is going to launch one of the biggest U.S. IPOs  of the decade.

According to estimates by Independent International Investment Research, GM’s initial offering would raise $12 billion, higher than any U.S. IPO this year and exceeding all over the last ten years, except for Visa’s offering in 2008 and AT&T Wireless in 2000.

The Wall Street Journal said this morning that GM is close to picking JPMorgan and Morgan Stanley as lead underwriters for the IPO. The U.S. Treasury, which owns  a 61-percent stake in GM, said on Thursday that the timing would be decided by GM, based on market conditions.

Creating an appetite for a company that lost more than $80 billion in four years and has more than $14 billion debt, is not going to be an easy sell.  Still,  with GM swinging back to profitability and auto sales showing a rebound,  the former backbone of industrial America coud just be the next Great American IPO.

Battered car-makers rounding blind corner

AUTOSHOW/(Update: This piece was written, as several commenters have pointed out, before GM clinched a sale of Saab to Spyker on January 26.)

By Quentin Carruthers

(Acquisitions Monthly) Automakers face a demand slump in Europe and the longer-term challenge of addressing climate change. Both pressures are expected to lead to further restructuring, consolidation and M&A activity.

The North American International Auto Show, held each January in Detroit, Michigan, is just coming to an end. Detroit is the hometown of America’s “Big Three” automobile makers – Ford, General Motors, and Chrysler – and the show constitutes one of the most important events in the industry’s calendar.

DealZone Daily

Hershey is still working on a bid for Cadbury that would top Kraft’s 10.5 billion pound bid for the British confectioner. As the clock ticks down for rivals to enter the fray, Hershey — the one remaining party to declare its hand — has still not decided if it will table a formal offer, but has authorized the drawing up of a bid. At the same, Kraft has stepped up the charm offensive with Chief Executive Irene Rosenfeld visiting Cadbury shareholders in London. She has found some doors shut, however, indicating that investors find the bid too low.

First round bids for debt-ridden film studio MGM are due on Friday, with 12 companies having expressed an interest in the business, including rivals Time Warner and Lions Gate Entertainment, as well as Liberty Media, News Corp and private equity firms. Non-binding bids for the studio, controlled by a consortium of private equity and media firms, are expected to come in at $1.5 billion to $2 billion, way below $3.7 billion it owes its lenders.

Telecoms billionaire Carlos Slim has launched a $21 billion bid to unite Telmex and Telmex Internacional with Latin America’s top mobile phone provider America Movil. Slim, who controls all three companies, wants to create a leading fixed-line, mobile and internet services company to stave off competition from rivals.

DealZone Daily

The pursuit of Cadbury is rapidly becoming a one horse race after Italy’s Ferrero ruled itself out of the fight and cut off talks with potential bid partner Hershey, leaving only the U.S. chocolate maker to declare its hand in the battle for the British confectioner. Cadbury, meanwhile, yesterday put the finishing touches to its defence against U.S. food giant Kraft’s 10.5 billion pound hostile bid by promising an improved performance and a raised dividend.

Luxembourg-based investment firm Genii Capital intends to improve its bid for Swedish carmaker Saab in order to catch the eye of seller General Motors. Bids from Genii, which is working with Formula One supremo Bernie Ecclestone, and Dutch carmaker Spyker have failed to prevent GM from appointing advisers to oversee the wind-up of the business.

India telecoms group Bharti Airtel has created a new unit to pursue emerging markets acquisitions after failing to reach a deal with South Africa’s MTN last year.

DealZone Daily

Cadbury posts its final defence against Kraft’s hostile takeover, but a muted share price reaction shows it is not changing market views about the deal much.  Ferrero, the Italian chocolate maker, is “very close” to taking a decision on whether to launch a counterbid together with U.S. group Hershey, a source close to the operation tells Reuters. Italy’s Il Messagero reported earlier Ferrero was securing a $4.5 billion syndicated loan.

General Motors repeats it is closing down Saab, because it has not yet received a credible bid. Dutch group Spyker meanwhile, says it remains hopeful that a deal can be reached.

And in other media:

Ford remains open to talks with potential bidders for its Volvo cars unit, despite a commercial agreement on a sale with China’s Zhejiang Geely, Sweden’s Dagens Industri says.

Auto Show-Yes Virginia, there is a Volt-based Cadillac

(This is the first in a series of blogs that will come from Detroit this week during the North American International Auto Show and related events).

converj1Not only is the Volt on the way, but now GM is planning to build a fancy version of the electric car.

GM will build a Cadillac version of the highly anticipated battery-powered Chevy Volt sometime in 2013 or later, Vice Chairman Bob Lutz said at the Detroit auto show. The rechargeable or plug-in Converj (pictured at last year’s show) will be aimed at consumers “who don’t mind paying a large price for a luxury vehicle” compared with the Volt’s expected price around $40,000.

On Wind Down Avenue, Saab Sees More Signs of Interest

Good thing for Saab that shutting down a car business is a lengthy process. There are orders to fill, inventories to clear and various other contracts to conclude. Bidders for Saab know this, so even as the deadlines come and go,  signs of life for a deal are going to have plenty of room to grow.

So now, even as General Motors starts turning off the lights, new bidders are emerging. Formula One motor racing boss Bernie Ecclestone (pictured left) has, according to the BBC, joined forces with Luxembourg-based private investment company Genii Capital to pitch a rival proposal, and of course Dutch luxury carmaker Spyker has come through with an improved bid for the struggling maker of the 9-3 and 9-5 sedans, as promised.

Swedish media reports on Friday named Jan Nygren, formerly a  Saab aerospace executive and senior defence ministry official, as the head of a group of Swedish investors submitting a last-minute bid for the ailing carmaker. Nygren confirmed the group’s interest but declined to give details.

GMAC plays its too-big-to-fail card… again

The Treasury, as major shareholder of such credit boom casualties as Citigroup and General Motors, showed with its $3.8 billion infusion into GMAC that it can still be counted on to safeguard the financial system from systemic collapse. The auto-loan company, which had dutifully spread its wings into mortgages in the housing boom, wound up becoming a bank to qualify for TARP bailout funds a year ago – the day after Christmas 2008, to be precise. How could Treasury say no?

Now taxpayers are plonking another $3.8 billion into GMAC to help cover mortgage losses. That gives us another majority shareholding in a company that could not have survived to pay its bills, workers and its executives without aid. No, it’s not much in terms of the government’s balance sheet. But it should rankle in Congress when lawmakers come back from holiday.

Not far behind the brouhaha over universal health care lays the still smoldering debate over “too big to fail”. Is it naïve to note that the timing of GMAC’s new lifeline came when legislators were safely tucked away at home? Arguing that AIG was too big to fail, with its myriad confusing and distracting derivative contracts, and that GM was too big to fail, with its strategic position just behind the aorta of the American manufacturing heartland, or even that Citigroup, with its corner office (sans fireplace) in the U.S. superbanking community can somehow be extended to GMAC might seem farfetched to fiscal hawks.

Saab rolls into 2010

Saab workers are probably reminding themselves it is always darkest just before the dawn, which takes a lot longer to arrive in the Scandinavian winter than anywhere else. With the lights set to start going out at Saab plants, word surfaced that parent General Motors’ Dec. 31 deadline for bids was being extended into early January.

GM had given itself to the end of this month to consider bids for loss-making Saab while continuing a process to wind down the company, which has drawn interest from Dutch luxury carmaker Spyker and others. Spyker Cars Chief Executive Victor Muller said in a text message GM had extended the deadline for a final offer from Spyker Cars until Jan. 7, and added he believed there are multiple bidders for Saab.

As we’ve noted previously in DealZone, having emerged from bankruptcy means GM doesn’t have to manage deadlines for asset sales with creditors breathing down its neck. Sure, they have to keep an eye on Congress, which holds a majority stake of the company. But with healthcare, the financial overhaul and terrorism to worry about, GM could well keep extending the deadline for a few months. Plus, its worth keeping in mind what kind of exposure GM is running here, and what a week or two really means for GM to keep the lights on at Saab.

Saab story ends

It’s official. General Motors will wind down operations at its loss-making Swedish unit Saab after an attempt to sell it to small Dutch luxury carmaker Spyker Cars failed. Things were already looking dire for a deal weeks ago. GM said early in the month it would consider offers for Saab until the end of the month and move to close the Swedish unit then if it appeared that it couldn’t be sold. Given it couldn’t save Saturn or Pontiac, Saab’s prospects for a GM-engineered solution had been slim at best.

GM said the move was not a bankruptcy or forced liquidation process. Saab will satisfy debts, it said, including supplier payments, and Saab operations will be wound down in an orderly fashion.

Niche luxury carmaker Koenigsegg was another last-ditch possibility that fell through for the Swedish automaker, which did manage to sell some assets to China’s BAIC. Saab has around 3,000 staff, and about the same number in other businesses are going to find the Scandinavian winter particularly cold this year.

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