Unstructured Finance

Lead Paint and Seat Belts

VOLVO-SAFETY/For the past decade, Volvo has focused on making safe sexy. Sleek designs and souped-up engines have chipped away at the image of the Volvo as a boxy, baby seat-friendly tank, but it still retains more cachet as a cradlemobile than just about any other car. That could all change with new ownership. 
 
An unnamed source at China’s Changan Automobile tells the National Business Daily that Ford is trying to sell the high-end Swedish car brand to Changan. The report didn’t provide much more detail. 
 
For Ford, such a move is hardly reckless. Though they are in better shape debt-wise than GM and Chrysler, Ford has been looking to unload pricey brands for some time and will need cash to see them through what is expected to be a protracted economic downturn.
 
Chinese automakers may not be in much better shape, though, as the auto market slows globally. While it’s not hard to see why a safety-conscious brand might command a premium in China, a country much maligned for exporting unsafe products, Volvo is hardly alone in the For-Sale spotlight in what is still the world’s fastest growing major economy. 
 
GM may be more desperate to sell its Saab brand – another Swedish safety scion – than Ford is to dump Volvo. Industry sources say U.S. auto companies have approached a number of Chinese companies about possible asset sales but found little interest. The Chinese automaker Chery secured a $1.45 billion loan this week and said it would use the funds to improve its product quality rather than to buy U.S. auto assets.  
  
Deals of the day 
 
* Prudential Financial, Manulife Financial and three other firms are expected to place competing bids for two Japanese life insurers put up for sale by American International Group, according to people familiar with the matter.
 
* India’s Oil & Natural Gas Corp will go ahead with its $2.6 billion takeover of Imperial Energy after a British regulator denied its request for an extension, the Economic Times reported, citing an unidentified person involved in the deal. 
 
* Vodafone said it would make a public offer for navigational and locating services firm Wayfinder Systems, valuing the Swedish company at 239 million Swedish crowns ($30 million). 
 
* UK life insurer Friends Provident will pay 170 million ringgit ($46.8 million) for a 30 percent stake in Malaysia’s AmLife Insurance Bhd as it gears up its presence in Asia.
 
* Australian zinc miner Perilya voiced confidence that its deal to sell a controlling stake to Chinese smelter Shenzhen Zhongjin Lingnan Nonfemet would win foreign-investment approval. The Chinese company will become a majority shareholder in Perilya following a share placement, Perilya said in a statement. 
 
* Oz Minerals, the world’s second-largest zinc miner that is scrambling to refinance its debt, has attracted the interest of several Chinese metals companies, according to three sources with direct knowledge of the matter. 
 
* Land of Leather Holdings said it had terminated talks with potential bidders. 
 
 * Shares in Norwegian information technology group EDB Business Partner rose as much as 11 percent after business daily Finansavisen said Telenor is in talks to sell its 51 percent stake. 
 
* United Business Media, a British publishing and exhibitions group whose PRNewswire distributes corporate press releases, said it acquired Sanguine Microelectronics for an initial $8 million to expand its presence in China.  

(Photo: Reuters/Bob Strong)

With a pit crew like this…

As GM’s resident guru, Bob Lutz, was telling CNBC he was guardedly optimistic that a short-term loan will be made available to the auto industry, the global picture clouded considerably. The chief of Italian carmaker Fiat told a magazine the company was too small to survive alone, Sweden was reported mulling a rescue package for Volvo and Saab, and Toyota, the world’s biggest car maker, was said to be eyeing spending cuts of up to 40 percent.
 
Fiat’s chief, Sergio Marchionne, went a little further, prognosticating that Chrysler will disappear and that only six big players will be left around the world when the dust settles. 
 
White House and congressional negotiators are working on an emergency rescue for the struggling industry, but passage of even a slimmed-down lifeline is far from certain. Sen. Richard Shelby, the top Republican on the Senate Banking Committee, has threatened a filibuster to block any bailout, according to Politico.com. The Senate is due back in session today.
 
Shelby, an Alabama Republican who has spoken out against the proposed “bridge loan” emergency package, indicated he was ready for battle. “This is a bridge loan to nowhere,” said Shelby, appearing on “Fox News Sunday” with Sen. Carl Levin of Michigan, a Democrat. Senate Banking Committee Chairman Christopher Dodd, who is leading efforts to craft bailout legislation, told CBS that GM Chairman Rick Wagoner should resign. Levin, whose state is home to the major automakers, said he was confident there would be a deal but was less certain a filibuster could be avoided.
 
Deals of the day:
* San Miguel will buy a majority stake in Petron from the Ashmore Group for about 32.8 billion pesos ($675 million) after the British investment company completes a deal with the Philippine government, San Miguel’s president said.
* U.S. energy producer Arch Coal expects production in 2009 to be flat or slightly lower while overall output for the U.S. coal industry will slow, and also sees plenty of opportunity for acquisitions amid the economic downturn.
* Hedge Fund firm Centaurus is likely to sell its minority stake in French IT services group Atos Origin, but not in the immediate future, sources close to the matter said.
* Belgian-Dutch financial services group Fortis has upped the selling price of its Belgian insurance unit, which French peer BNP Paribas agreed to buy, a Dutch newspaper said. * One potential investor has already cast its eye over Latvian bank Parex, which the state has had to rescue, an official at the country’s bank supervisory body was quoted on as saying.
* Investment group Evolve Capital said it had offered 10.7625 pence a share to buy niche investment bank Blue Oar in a deal that would value the company at 17.9 million pounds ($26.3 million).
* British mid-sized broking firms Ambrian Capital and Panmure Gordon & Co said they have held talks regarding a possible merger between the companies.
* Qantas Airways warned investors its proposed $5.6 billion merger with British Airways faced major obstacles over the terms of the deal and stressed there was a reasonable chance talks would fail.
* French healthcare diagnostics group BioMerieux said it had acquired privately held PML Microbiologicals, a U.S-based provider of culture media and microbiological products.
* Peabody Energy, the most valuable U.S. coal miner, said it is eyeing potential investments in the western regions of China, the country that is expected to drive much of the global growth in demand for coal.
* Swiss drugmaker Roche Holding is still committed to its $43.7 billion bid to buy out U.S. biotech group Genentech, its chief executive was quoted as saying in an interview. * Santos, Australia’s third-largest oil and gas firm, was considering potential initiatives but talk of a possible bid from China National Petroleum Corp (CNPC) was pure speculation, the company said.

(Photo: Reuters/Joachim Hermann)

A checkered flag of surrender

After day one of round two of the $34 billion automaker race to viability, a merger between GM and Chrysler is back on the table, along with just about everything else. Lawmakers are looking for that magic headline that will make the bailout make sense to taxpayers. Senate Banking Committee Chairman Sen. Chris Dodd noted that nothing focuses attention on solutions like impending death.

So far, prospects of an auto czar doling out big chunks of money or a federally mandated merger haven’t convinced the Treasury to use its mighty TARP chest to fund salvage efforts for the auto industry. The Fed could make a loan to automakers in some circumstances. It is expected to send a letter to Dodd today explaining how it must obtain sufficient collateral under law to make any emergency loans, a source familiar with the letter told Reuters.

Motor Trend’s blog argues that a shot-gun wedding would just allow GM to replenish a brand line-up that it has just shrunk to make itself more nimble. In his testimony, GM CEO Rick Wagoner noted that earlier merger talks with Chrysler failed because GM did not have the money.

What Estee Lauder can (af)Ford

It was clearly a joke, but the bleak state of the auto industry was sadly evident when this happened at  Estee Lauder Cos Inc.’s annual stockholders’ meeting on Friday.

Leonard Lauder, the company’s chairman, and founder Estee Lauder’s son, was first up at the meeting held at the St. Regis hotel in New York City.

As he ran through the list of attendees, Lauder introduced “a board member of the Ford Motor Co,” who “said Estee Lauder should buy Ford.”

See your $25 bln, raise you $50 bln

Detroit’s Big Three were on Capitol Hill yesterday looking for a bigger bailout. They knew the results numbers coming out this morning would be grim and would offer little cheer for the future. The $700 billion in financial industry aid that motored through Congress last month must have flashed a big green light for the auto industry.

Originally, $25 billion in loan guarantees were offered to help U.S. cars get greener. But the car companies say the restrictions on how they can use that money make it less than helpful. In fact, GM and Chrysler might not even pass a financial viability test attached to the funds: If strictly enforced, the test could keep them from getting money at all.
 
Enter $50 billion more now being sought by the Big Three. Half of this amount is meant to pay for healthcare and other benefits for retired autoworkers. The other half would help to ensure solvency — perhaps making GM and Chrysler healthy enough to qualify for the initial aid.
 
To put the total proposed package in perspective, it amounts to a rebate of roughly $5,500 on every car, minivan, SUV and crossover that will be sold in the United States this year.

Deals of the day:

* Panasonic said it would acquire smaller rival Sanyo, creating Japan’s top electronics maker and foreshadowing further consolidation in an industry hit by slowing consumer demand.

Car and Driver

Panasonic‘s designs on rival Sanyo could produce an $8.7 billion deal, and analysts in Japan seem to think creating a solar power and hybrid car-battery powerhouse is a good fit for a green future. Panasonic runs a car battery venture with Toyota, while Sanyo offers nickel-metal hydride batteries to Ford and Honda and develops lithium-ion batteries for cars with Volkswagen.
 
Unfortunately, the auto industry is a bit strapped right now. Both presidential candidates have vowed to make high-efficiency cars a big priority, so PanaSanyo must be thinking beyond automakers’ empty pockets. But so far, Detroit has had little luck impressing lawmakers with the need for taxpayer funding for the future of their industry, and one can only think that shipping dollars to Japan to buy batteries would be even less appealing in a recession.
 
Shares of Panasonic rose 6.8 percent on Tuesday, while Sanyo rose 34.5 percent to its daily limit, helping the Nikkei average to a rise of 6.3 percent. Panasonic says nothing has been decided on a Sanyo purchase, but the Nikkei business daily reported a deal could be announced by Friday.
 
If PanaSanyo wants to double-down its bet on the car market, it might also consider picking up XM Sirius – if nothing else, they can probably get it for a song.

Deals of the day:

* Want Want China, one of China’s biggest snack makers, said its chairman, Tsai Eng-meng, and family members had reached an agreement to buy Taiwan’s media firm China Times Group for an undisclosed sum.

* Tycoon Richard Li and China Netcom, the two largest shareholders of PCCW, have reached an agreement to buy out other shareholders of the city’s dominant fixed-line provider for up to $2.5 billion and take the company private, a newspaper reported.

20 percent = zero

At the end of December 2007, Daimler’s 20-percent stake in Chrysler was valued at about $1.18 billion.

At the end of June, Daimler valued that investment at about $219.6 million.

Today, Daimler said the book value of that 20-percent stake is zero.

That’s right, zero.

To put that zero in perspective:

A year ago, after Daimler sold 80 percent of Chrysler to U.S. private equity firm Cerberus Capital Management, the German automaker listed the value of its minority interest at $1.8 billion.

Ten years ago, Daimler paid $36 billion for all of Chrysler.

For Daimler to disclose that the book value of its stake has come to nothing, and to do it at a time when it is in talks to sell that stake to Cerberus, is bad news for Chrysler.

West Coast Care

CVS CaremarkCVS Caremark Corp is bolstering its position on the West Coast with its acquisition of rival Longs Drugs Stores Corp. The deal, announced on Tuesday, is worth $2.54 billion and will allow CVS to expand in states like California and broaden the reach of its prescription services. The acquisition of Longs’ 521 stores will also give CVS a leading position in Hawaii, where it doesn’t operate. CVS will pay $71.50 per share for Longs, including its Rx America subsidiary, a prescription benefits management services company with over 8 million members. Longs shares closed at $54.04 before the news on Tuesday, but surged nearly 30 percent in extended trading on the deal. Shares in CVS fell nearly 7 percent on the news.
GM chief Rick Wagoner says there’s significant interest in the auto maker’s planned sale of up to $4 billion of assets as it battles record losses and falling sales, but no deals are expected soon. General Motors Corp is struggling against an accelerating downturn in its home market and high oil prices that have hammered sales of its trucks and SUVs, triggering a $15.5 billion quarterly loss, the third-largest in its 100-year history. Earlier this month, sources told Reuters GM was in talks with India’s Mahindra & Mahindara Ltd and automakers in Russia and China about selling its Hummer brand.

A consortium led by Goldman Sachs Group Inc has agreed to pay about $1.5 billion for a number of ABN AMRO’s private equity assets, the Wall Street Journal said Wednesday. On Monday, Belgian-Dutch financial services group Fortis said that together with Britain’s Royal Bank of Scotland Group and Spain’s Banco Santander, it had sold a number of ABN AMRO private equity assets to a Goldman Sachs-led consortium. The Journal said Goldman’s investment comprised 32 European companies as well as roughly $450 million in capital to be invested in future deals.
Other deals of the day:

* Australia’s CSL Ltd, the world’s top maker of blood plasma products, is buying smaller U.S. rival Talecris Biotherapeutics Holdings Corp for $3.1 billion, to boost its presence in the fast-growing biopharmaceutical industry.

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