M&A Roundup

General Motors and Cerberus; Alcatel and Lucent; Thales and Alcatel; Boston Scientific and Guidant; NTL and Virgin Mobile; National Bank of Greece ...
Helen ShawApril 6, 2006

In the first quarter of 2006, mergers and acquisitions in the United States totaled $310.7 billion, a 5 percent increase compared with the first quarter of 2005 but an 8 percent decline from the previous quarter, according to Dealogic. The telecom sector experienced the highest volume, $92.1 billion, mostly due to the $83.3 billion AT&T merger with BellSouth. The finance sector, with $29 billion, and retail, with $26 billion, were also active.

Global mergers and acquisitions totaled $930.9 billion, the most active period since the first quarter of 2000 and the third-highest quarterly total ever. The first-quarter total represents a 38 percent increase compared with the first quarter of 2005 and an 8 percent increase from the previous quarter. The most active sectors were telecommunications ($166 billion), utility and energy ($146 billion), and finance ($99 billion).

Some notable deals from the past week:

•General Motors agreed to sell a 51 percent interest in its only profitable division, finance arm General Motors Acceptance Corp., to an investor group led by private equity firm Cerberus Capital Management. The troubled automaker will receive $7.4 billion from the investor group and a $2.7 billion cash distribution from GMAC upon the deal’s expected close in the fourth quarter. In addition, the automaker will retain some GMAC assets with an estimated value of $4 billion that will monetize over three years.

•Paris-based telecommunications company Alcatel agreed to purchase Lucent for $13.4 billion in stock. Alcatel would own 60 percent of the combined company, which would be headquartered in France and traded on Euronext Paris and as American Depositary Receipts on the New York Stock Exchange. The deal is subject to regulatory approval.

• Separately, Europe’s largest military electronics maker, Thales, agreed to buy Alcatel’s satellite activities in exchange for cash and shares totaling $2.05 billion. Alcatel’s stake in Thales will increase from 9.5 percent to 21.6 percent.

• Boston Scientific received antitrust clearance from the staff of the Federal Trade Commission for its $27 billion acquisition of Guidant; details of the company’s agreement with the FTC staff were not disclosed. The deal still awaits approval by FTC commissioners and European regulators.

• U.K. cable company NTL agreed to acquire Virgin Mobile, which had declined an NTL offer late last year, for $1.67 billion. The deal will create a communications company with television, broadband, fixed-line, and mobile phone services. The agreement also includes a 30-year exclusive license for NTL to use the Virgin brand.

• National Bank of Greece will acquire a 46 percent stake in Turkey’s Finansbank for $2.8 billion, the largest overseas investment by a Greek company. The offer values Finansbank at $6 billion, an 11 percent premium over its current market value of $5.4 billion. The Greek bank plans to increase its stake to at least 50.01 percent later this year.

• In separate transactions, International Paper sold a total of 5.1 million acres of forests for $6.1 billion, a record sale for U.S. forest land, to groups led by Resource Management Service and TimberStar. As part of the deals, buyers agreed to supply wood to International Paper’s mills for periods ranging from 10 to 20 years.

• PMC-Sierra, a producer of networking chips, agreed to buy Passave, a privately held maker of chips for fiber-optic networks, for $300 million in stock. The deal is expected to close in April.