Deals: Private Equity Takes a Breather

In our M&A Roundup for the week ending July 22, a relative lull results from the dearth of LBOs in the top 10.
Roy HarrisJuly 23, 2007

A slowdown in mergers and acquisitions last week resulted from what appeared to be something of a holiday for private equity practitioners.

Among the top 10 North American deals in the period ended July 22, the leader was a sale to a private buyer: Basell NV, which agreed to pay $20 billion for Houston-based Lyondell Chemical Co. Basell’s acquisition doubled the size of its unsuccessful attempt the prior week to buy another Texas outfit, Huntsman Chemical Co. Huntsman broke off its agreement with Basell after getting a higher offer from Apollo Management’s Hexion Specialty Chemicals Inc.

The week’s $43.66 billion of dealmaking was off from $70.45 billion in the prior seven days, but brought the year’s total to $1.21 trillion, according to data provided to CFO.com by mergermarket.

Citigroup advised four of last week’s top deals, the most of any investment bank. They included the Basell transaction, Houghton Mifflin Riverdeep Group’s $4-billion purchase of some Reed Elsevier plc Harcourt publishing operations, and IHOP Inc.’s $2.03-billion acquisition of Applebee’s International Inc.

Basell NV to buy Lyondell Chemical Co. for $20 billion

The definitive agreement, approved by both boards, calls for Houston-based Lyondell to be acquired for $48 a share, a premium of 19.6 percent. Lyondell is a global manufacturer of chemicals and plastics; a refiner of heavy, high-sulfur crude oil; and a significant producer of fuel products. Privately-owned Basell, headquartered in Hoofddorp, Netherlands, provides polypropylene and advanced polyolefins products. Its owner is Russian-born American Leonard Blavatnik’s Access Industries, which bought Basell from BASF AG and Royal Dutch Shell two years ago. Access is focused on natural resources and chemicals, telecommunications and media, and real estate. Basell was snubbed the prior week by Huntsman Chemical Co., which agreed to be acquired by private-equity company Apollo Management through its Hexion Specialty Chemicals Inc. unit for $10.16 billion, nearly $1.5 billion more than in the Basell-Huntsman deal that Huntsman broke off. The Lyondell-Basell transaction is expected to close in the fourth quarter.
Seller financial advisor: Deutsche Bank; Perella Weinberg Partners
Bidder financial advisor: Citigroup; Merrill Lynch
Seller legal advisor: Baker Botts
Bidder legal advisor: Skadden Arps Slate Meagher & Flom

Plains Exploration & Production Co. to buy Pogo Producing Co. for $5.79 billion

The definitive agreement to combine the Houston-based companies calls for $24.88 in cash and 0.68201-shares of Plains to be exchanged for each share of Pogo, which explores onshore and offshore for oil and gas. That represents a premium of 18.4 percent. Plains Exploration is an independent oil and gas company primarily engaged in the activities of acquiring, developing, exploiting, exploring, and producing U.S. oil and gas properties. Rationale & Synergies: Along with asset diversification and significant cost savings, the combined company will have a total estimated reserve potential of 1.4 billion barrels of oil equivalent. This transaction, combining reserves of 1.4 billion barrels of oil or equivalents, almost doubles Plains Exploration’s production. The transaction is expected to qualify as a tax-free reorganization, and will give Plains Exploration holders 66 percent of the combined company, with Pogo holders owning the remaining 34 percent. Close is expected in the fourth quarter.
Seller financial advisor: Goldman Sachs; TD Securities
Bidder financial advisor: Lehman Brothers
Seller legal advisor: Baker Botts
Bidder legal advisor: Andrews Kurth

Houghton Mifflin Riverdeep Group to buy Reed Elsevier plc’s Harcourt U.S. Schools Education division for $4 billion

Irish company Houghton Mifflin Riverdeep will get the Harcourt Education, Harcourt Trade Publishers, and Greenwood-Heinemann divisions of Reed Elsevier in the deal for Houghton Mifflin’s $3.7 billion in cash and $300 million in common. Credit Suisse, Lehman Brothers and Citigroup are providing debt financing, and J. & E. Davy will also provide $235 million in new equity financing for the transaction. Reed Elsevier had announced in February that it intended to sell the division to sharpen its strategic focus on the growing digital opportunities in its Scientific & Medical, Legal and Business divisions. Reed Elsevier will end up holding 11.8 percent of Houghton Mifflin Riverdeep when the transaction closes, expected late this year or early next.
Seller financial advisor: UBS
Bidder financial advisor: Citigroup; Credit Suisse; Lehman Brothers
Seller legal advisor: Freshfields Bruckhaus Deringer
Bidder legal advisor: Weil Gotshal & Manges

Yamana Gold Inc. to buy Meridian Gold Inc. for $3.03 billion

Yamana Gold’s unsolicited tender offer for Reno, Nev.-based Meridian is the same as the unsolicited proposal of June 27. Concurrent with the offer, Yamana entered into a business combination agreement to acquire Northern Orion Resources Inc. Meridian is a mid-tier gold producer, while gold producer Yamaha is based in Vancouver, B.C. Terms call for 2.235 Yamana shares and $3.02 per share to be paid for each Meridian share, for a total value of $31.73 a share, a premium of 4.8 percent. In late April, Yamana proposed a three-way combination to Northern Orion, which signed an agreement letter. According to Yamana, Meridian’s CEO agreed to execute a confidentiality agreement during the discussions in mid-June, although no discussions were scheduled. After the unsolicited June 27 offer, Meridian said it would not enter discussions with Yamana because the proposal does not reflect Meridian’s asset base.
Seller financial advisor: Goldman Sachs; BMO Capital Markets
Bidder financial advisor: Genuity Capital Markets; Wellington West Capital; Canaccord Adams
Seller legal advisor: Fraser Milner Casgrain; Skadden Arps Slate Meagher & Flom
Bidder legal advisor: Cassels Brock & Blackwell; Dorsey & Whitney

IHOP Corp. to buy Applebee’s International Inc. for $2.04 billion

The definitive agreement prices the deal for Overland Park, Kans.-based Applebee’s at $25.50 a share, a premium of 4.6 percent. Glendale, Calif.-based IHOP develops, franchises, and operates its family restaurant chain under the International House of Pancakes name, while Applebee’s develops, franchises,and operates restaurants in the bar-and-grill segment of the casual dining industry. IHOP will finance the transaction through a whole- business securitization backed by Applebee’s assets and other borrowings under its securitization structure. IHOP has obtained a bridge facility commitment to fund the transaction pending the completion of both securitizations. Closing is due in the fourth quarter, when it is expected that IHOP will issue new preferred stock via already committed private placements.
Seller financial advisor: Banc of America Securities; Citigroup
Bidder financial advisor: Greenhill & Co; Lehman Brothers
Seller legal advisor: Blackwell Sanders; Cravath Swaine & Moore; Simpson Thacher & Bartlett
Bidder legal advisor: Paul Weiss Rifkind Wharton & Garrison; Skadden Arps Slate Meagher & Flom; Wachtell Lipton Rosen & Katz

Ristretto to buy Williams Scotsman Inc. for $1.56 billion

The definitive agreement calls for Baltimore-based Willliams Scotsman, a provider of modular space, to be purchased by Ristretto, the parent company of Paris-based Algeco. The boards of directors of both companies have approved the merger. Algeco makes, sells, and rents mobile structures for industrial use. The price is $28.25 per share, a premium of 22.03 percent. The transaction is expected to close in the 4th quarter of 2007. Termination Date:
Seller financial advisor: Banc of America Securities; CIBC World Markets
Bidder financial advisor: Citigroup; Morgan Stanley
Seller legal advisor: Paul Weiss Rifkind Wharton & Garrison
Bidder legal advisor: Paul Hastings Janofsky & Walker

ReAble Therapeutics Inc. to buy DJO Inc. $1.50 billion

The definitive agreement calls for Vista, Calif.-based DJO, which has a system for treating musculoskeletal and vascular health conditions, to be acquired by ReAble for $50.25 a share, or a premium of 19.36 percent. ReAble, a portfolio company of Blackstone Group, is based in Austin, Tex., and makes traction systems, electrotherapy, and iontophoresis products, continuous passive motion devices, and other items used in orthopedic rehabilitation. Combining the companies with complementary products will offer a broad go-to-market approach through multiple sales channels. Blackstone has committed to provide equity financing to ReAble, with a close expected in the fourth quarter.
Seller financial advisor: Wachovia
Bidder financial advisor: Banc of America Securities; Credit Suisse
Seller legal advisor: Latham & Watkins
Bidder legal advisor: Simpson Thacher & Bartlett

Yamana Gold to buy Northern Orion Resources for $845 million

This second part of the three-way combination envisioned, including Yamaha’s tender offer for Meridian, calls for exchange of 0.5430-shares of Yamaha, worth $6.97, for each share of Toronto-based Northern Orion, a premium of 14.3 percent. The transaction is expected to close in the third quarter.
Seller financial advisor: Endeavour Financial International; GMP Securities
Bidder financial advisor: Canaccord Adams; Genuity Capital Markets; Wellington West Capital
Seller legal advisor: Blake Cassels & Graydon; DuMoulin Black
Bidder legal advisor: Cassels Brock & Blackwell

Meda AB to buy Medpointe Inc. from Cypress Group LLC, Ferrer Freeman & Co., Frazier Healthcare Ventures, and The Carlyle Group LLC for $793 million

Swedish pharmaceutical company Meda AB agreed to pay $520 million in cash, along with 17.5 million news shares valued at $273.3 million. Frazier Healthcare, Ferrer Freeman, and MedPointe’s management will become shareholders in Meda, with Carlyle and Cypress each acquiring 6 percent stakes in Meda. SEB Merchant Banking will provide bank loans to Meda to finance the transaction. Medpointe, with a staff of 710, had annual revenue of approximately $252 million. The transaction is in line with Meda’s marketing and product-pipeline views, will provide strong markets in the U.S. and Europe, and is expected to be earnings-per-share accretive in 2009. The close is subject to U.S. antitrust approvals.
Seller financial advisor: Not Available
Bidder financial advisor: Skandinaviska Enskilda Banken
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

LKQ Corporation Inc. to buy Keystone Automotive Industries Inc. for $773 million

Pomona, Calif.-based Keystone’s definitive agreement with Chicago-based LKQ calls for a price of $48 a share, a premium of 10 percent. Both boards have approved the merger. Keystone distributes aftermarket collision replacement parts produced by independent manufacturers for automobiles and light trucks. LKQ provides recycled light-vehicle original-equipment-manufacturer products and related services. The transaction is expected to close in the fourth quarter.
Seller financial advisor: JPMorgan
Bidder financial advisor: Robert W Baird & Co.
Seller legal advisor: Latham & Watkins
Bidder legal advisor: Bell Boyd & Lloyd

source: mergermarket

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