M&A

DealWatch

Sprint and Nextel; Symantec and Veritas; Oracle and PeopleSoft; Mylan Laboratories and King Pharmaceuticals; Permira, Apollo, and Toys R Us; Honeyw...
Craig SchneiderDecember 15, 2004

• Sprint Corp. is reportedly near a deal to acquire Nextel Communications, known for its walkie-talkie service, for more than $34 billion. The companies plan to announce the merger on Wednesday, according to The New York Times. The newspaper also cited unnamed executive sources who cautioned that the deal could fall apart if a planned spin-off of Sprint’s fixed-line business is not deemed tax-free for shareholders by the Internal Revenue Service.

If the deal goes through, 74 percent of the mobile-telephony market would be controlled by three carriers, according to the Times. By subscribers, a Sprint-Nextel merger would be third-largest after Cingular, which recently acquired AT&T Wireless, and Verizon Wireless. Speculation that Verizon Wireless and Vodafone might attempt to acquire Sprint itself have been repeatedly rejected by both companies.

• Symantec Corp. is reportedly close to a deal to buy Veritas Software Corp. for more than $13 billion. The acquisition could come as early as this week, according to The New York Times, but citing unnamed executives, the paper also warned that talks could collapse. Symantec makes the Norton line of computer security and maintenance software; Veritas makes data backup and storage programs. The exact terms of the deal could not be determined, reported the Times, and neither company returned phone calls seeking comment.

• PeopleSoft Inc. has agreed to be acquired by Oracle Corp. for $26.50 a share in cash, or around $10.3 billion, after rebuffing several offers and being taken to court for instituting a controversial takeover defense. The price tag is nearly 66 percent higher than Oracle’s initial $16 per share bid in June 2003 and 75 percent higher than PeopleSoft’s market value before Oracle formally launched its takeover battle, according to reports. The deal is expected to close by early January. The companies also agreed to end all pending litigation brought by Oracle over PeopleSoft’s poison pill.

Oracle chief executive Larry Ellison added in a statement that Oracle intends to “immediately extend and improve support for existing JD Edwards and PeopleSoft customers worldwide,” addressing long-held fears that those products would not be supported by Oracle after a takeover.

• The $4 billion bid of Mylan Laboratories Inc. for King Pharmaceuticals Inc. was thrown into question when the target announced that it will restate earnings for 2002, 2003, and the first six months of 2004 to recognize expenses related to product returns. The merger agreement reportedly stipulates that Mylan can back out of the deal if King restates its earnings.

Billionaire investor Carl Icahn, who offered to buy Mylan for $5.4 million last month to stop the deal, has filed a federal lawsuit against the company and asset manager Richard C. Perry, accusing Perry of a vote-buying scheme intended to help Mylan acquire the company over Icahn’s opposition, reported the Associated Press. According to a November filing with the Securities and Exchange Commission, cited by the wire service, Perry Corp. owns 26.6 million shares of Mylan — about 335,000 more than Icahn — as well as 7 million shares of King. In a statement, Milan Puskar, chairman and founder of Mylan, called the lawsuit “another feeble attempt by Icahn to intimidate Mylan and its shareholders.”

• European buyout firm Permira has joined forces with U.S. rival Apollo to bid for the global operations of Toys R Us for an estimated $3.5 billion, according to The Financial Times. The team faces competition from Kohlberg Kravis Roberts, Cerberus, and Bain Capital, as well as U.S. property groups looking to engineer a “Kmart-style restructuring” by breaking up the toymaker’s extensive property portfolio, according to the report. New bids are due after the crucial Christmas trading period.

One person close to the situation told the FT that “the U.S. side is a bit of a basket case. We were interested in the European operations but they were not willing to sell that bit off by itself.” Earlier this year, Permira teamed up with Apollo and two other buyout groups to buy Bermuda-based satellite operator Intelsat for $5 billion, the paper noted.

• Honeywell International Inc. agreed to acquire Novar Plc. for $2.4 billion, including $580 million in Novar debt, in a deal that will add product offerings to its security, fire, and building-controls products business. Honeywell expects to fund the acquisition with existing cash resources and credit facilities.

Novar’s core divisions include Indalex Aluminum Solutions and Security Printing Services, but Honeywell has stated that it intends to hold only Novar’s Intelligent Building Systems unit. Chief executive officer David Cote acknowledged in a Financial Times article that it might have been “cleaner” for Honeywell to buy the one unit alone but added that the company hopes to raise $1 billion to $1.5 billion by selling the two other divisions.

• Humana Inc. announced that it would acquire CarePlus Health Plans of Florida, as well as the company’s ten CAC-Florida Medical Centers and a pharmacy management company, for about $408 million. The purchase is expected to close within 90 days, according to a Humana statement. Approximately 75 percent of the transaction will be financed by line-of-credit borrowings; the balance will be funded with cash on hand.