Deals: Without Dubai, It’s Downright Dry

In our M&A Roundup for the week ended Aug. 26, the Middle-East nation's investment in MGM Mirage accounts for 60% of the activity.
Roy HarrisAugust 27, 2007

Dubai government investments totaling $5.86 billion in operations of MGM Mirage Inc. accounted for 60 percent of last week’s merger-and-acquisition volume, as North American deal activity continued the relatively languid pace of the past five weeks.

There were 36 transactions valued at a total of $9.68 billion, up from $8 billion the prior week and $6.49 billion the week before, according to data provided to CFO.com by mergermarket.

An examination of the top 10 North American deals showed that private-equity buyers were continuing the summer holiday from M&A occasioned by the sudden, severe crunch in the credit market, although they may well be busy searching for ways to negotiate lower prices
on the deals done during an overheated spring.

The year-to-date value of announced deals is $1.32 trillion, compared with the prior year’s $929.9 billion, although the number of deals this year stands at 2,998, compared with 3,203 over the same period of 2006.

Infinity World Development Corp. to buy CityCenter Holdings LLC from MGM Mirage for $2.7 billion

Infinity World, a Dubai-based holding company of Dubai World, a state-owned investment holding company, will acquire a 50-percent stake in MGM Mirage’s CityCenter Holdings LLC. CityCenter Holdings was established to own CityCenter, the mixed-use luxury residential, resort, and retail complex MGM Mirage is developing on the Las Vegas Strip, where MGM Mirage is headquartered. After closing, MGM Mirage will receive additional consideration of $100m, and the joint venture will obtain project-specific financing to fund remaining project costs. At the same time, Infinity World also agreed to purchase a 9.5 percent stake in MGM Mirage.
Seller financial advisor: UBS
Bidder financial advisor: Credit Suisse
Seller legal advisor: Christensen, Miller, Fink, Jacobs, Glaser, Weil and Shapiro
Bidder legal advisor: Paul Hastings Janofsky & Walker

Infinity World buy 9.5 percent of MGM Mirage for $2.39 billion

This purchase by the Dubai state-owned holding company is priced at $85 per share, a premium of 5 percent over the Aug. 22 closing price, and 14.4 percent above the Aug. 21 closing price. The acquisition aims to allow both companies to develop large-scale luxury properties and attract international clients, while benefiting from parent Dubai World’s real-estate experience. MGM Mirage believes the transaction will be accretive to long term earnings, and will profoundly impact its balance sheet.
Seller financial advisor: UBS
Bidder financial advisor: Credit Suisse
Seller legal advisor: Christensen, Miller, Fink, Jacobs, Glaser, Weil and Shapiro
Bidder legal advisor: Paul Hastings Janofsky & Walker

US Steel Corp. to buy Stelco Inc. for $1.54 billion

Hamilton, Ontario-based Stelco definitively agreed to be acquired by the Pittsburgh-based steelmaker, and both board approved the merger. The boards of directors of both companies have approved the merger. Stelco is one of Canada’s largest steel companies, while integrated producer U.S. Steel makes steel products in North America and central Europe. The acquisition especially will strengthen U.S. Steel’s position as a supplier of flat-rolled steel products to the North American market, and will generate annualized pre-tax synergies of more than $100 million by the end of 2008. It will also be accretive to earnings per share that year. The per-share price offered is a premium of 43 percent. Shareholders owning more than 76 percent of Stelco’s shares, including Tricap Management Ltd., Sunrise Partners LP, Appaloosa Management LP, and Stelco CEO Rodney Mott, agreed irrevocably to support the transaction. U.S Steel has $900 million in fully committed senior credit facilities underwritten by J. P. Morgan Securities Inc. and Scotia Capital. The transaction is expected to close before the end of the year. In June, Stelco said it was reviewing strategic alternatives in light of the continuing consolidation of the steel industry, and was working with CIBC World Markets and UBS it its review.
Seller financial advisor: CIBC World Markets; UBS
Bidder financial advisor: JPMorgan
Seller legal advisor: McCarthy Tetrault
Bidder legal advisor: Morgan Lewis & Bockius; Osler Hoskin & Harcourt

JSW Steel Ltd. to buy 90% of Jindal Enterprises LLC, Jindal United Steel Corp., and SAW Pipes USA from Jindal Saw Ltd. for $810 million

JSW Steel, of India, is an integrated stainless steel manufacturer. U.S.-based Jindal United Steel makes steel plates, while Jindal Saw Pipes USA makes large-diameter pipes and Jindal Enterprises provides coating and engraving service. Some existing Jindal Enterprises holders will continue to own the remaining 10 percent. Jindal Saw wholly owns Jindal Enterprises, which in turn owns 49 percent of JUSC, while a subsidiary of Jindal Saw has a 19.47 percent holding in SAW Pipes USA. JSW is also acquiring inventory worth $130 million in the acquisition. The acquisition will be funded through foreign currency debt of $300 million to be raised against the guarantee of JSW Steel and balance to be raised in the name of JUSC, Saw Pipes, and Jindal Enterprises. This acquisition is expected to be earnings-per-share accretive, and to yield a post-tax cash flow exceeding $200 million to Jindal Saw against a nominal initial equity investment. All targets will be merged into one entity, with JSW shipping slabs or billets from India and finishing them at the rolling mills. The three companies reported combined loss of $17 million in 2006. This acquisition will enable JSW to enter North America markets to meet demand for plate and pipe.
Seller financial advisor: Not Available
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

Abu Dhabi National Energy Co. to buy Pioneer Natural Resources Canada Inc. from Pioneer Natural Resources Co. for $540 million

The United Arab Emirates investment holding company, interested in the power sector, will buy Pioneer, a Canadian gas and oil exploration subsidiary, as part of its strategy of developing existing businesses. Following the completion of the acquisition, Pioneer Canada will provide 27 percent of the combined entity’s daily production. Pioneer Canada will also bring its exploration and production team with newly acquired expertise in coal bed methane exploration and production. The deal will be financed through borrowing of $9 billion through bonds. The company has $3.5 billion of bonds outstanding and has investment-grade ratings from both Moody’s Investors Service and Standard & Poor’s. The transaction is expected to close during the fourth quarter.
Seller financial advisor: TD Securities
Bidder financial advisor: Internal
Seller legal advisor: Osler Hoskin Harcourt
Bidder legal advisor: Latham & Watkins; Heenan Blaikie

Infineon Technologies AG to buy the mobility products business of LSI Corp.for $500 million

Germany’s Infineon Technologies, a mobile communication technology company, will pay up to $50 million of the $500-million cash price as a performance-based payment in the first quarter of 2009. LSI’s mobility products business had sales of $186m in the year’s first six months. The transaction includes 700 LSI employees who will join Infineon upon completion, but does not include the production facilities. Infineon is expecting a positive EBITA in 2008. Following the merger with Agere Systems on April 2, LSI is strategically reviewing its business portfolio and focusing on market opportunities in storage and networking. Through this transaction LSI seeks to transition to a global contract manufacturing model. Proceeds are expected to be used for a stock repurchase program of up to $500 million. Infineon aims to expand its business in the wireless market with the addition. The deal is expected to close in the fourth quarter.
Seller financial advisor: Goldman Sachs
Bidder financial advisor: Lazard
Seller legal advisor: Internal
Bidder legal advisor: Gibson Dunn & Crutcher

Emcor Group Inc. to buy Ohmstede Ltd. from First Reserve for $455 million

Emcor is a based mechanical and electrical construction services, energy infrastructure, and facilities services provider. Ohmstede Ltd. provides heat-exchanger services provider as a part of First Reserve, the oldest and largest private equity firm specializing in the energy industry. The price will be financed through a combination of cash and long-term debt. The acquisition advances Emcor’s growth strategy by adding Ohmstede’s profits and strong cash flow. Emcor estimates the transaction will contribute about $280 million to revenue, and be accretive to net income by more than 10 cents a share, with accelerated earnings per share contribution in 2009. Completion is expected in September or early October.
Seller financial advisor: Harris Williams & Co; Credit Suisse
Bidder financial advisor: UBS
Seller legal advisor: Simpson Thacher & Bartlet
Bidder legal advisor: Ropes & Gray

X-Rite Inc. to buy Pantone Inc. for $180 million

X-Rite is a provider of color measurement processes through hardware, software, and services for the verification and communication of color data. Pantone Inc. provides color management software, and produces a collection of retail products. X-Rite is expanding its range of products. Transaction will be financed by the borrowings from Merrill Lynch, Fifth Third Bank, National City Bank, LaSalle Bank, and GoldenTree Asset Management LP. Total debt up to $415 million will fund the transaction and refinance existing X-Rite debt. The transaction is expected to close by the end of the year.
Seller financial advisor: Goldman Sachs
Bidder financial advisor: Headwaters MB
Seller legal advisor: Skadden Arps Slate Meagher & Flom
Bidder legal advisor: McDermott Will & Emery

Tower Tech Holdings Inc. to buy Brad Foote Gear Works Inc. for $159 million

Tower Tech makes wind tower support structures for the wind turbine industry. Brad Foote Gear Works makes and repairs gear systems. The deal includes $137.6 million cash, and assumption of debt of about $21 million. Terms call for Foote shareholders to receive $64 million in cash, with Tower issuing 16 million shares, and also cash. Tower will finance the cash portion of the transaction with debt and equity financing. Tontine Capital Partners LP will purchase 12.5 million Tower shares at $4 per share in a private placement transaction, and will also provide $25 million of debt financing through senior subordinated convertible notes. After completion, Tower plans to raise $25 million of additional equity capital with a rights offering to its existing shareholders. Completion is expected by the fourth quarter.
Seller financial advisor: Not Available
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

Hormel Foods Corp. to buy Burke Corp. for $110 million

Hormel, the manufacturer of consumer branded meat and food products is acquiring Burke, a maker of fully cooked meat products. The transaction is in line with Hormel’s strategy, and will be accretive to earnings for its fiscal 2008. Hormel expects to increase in production and manufacturing capabilities, and to strengthen its position in the pizza-topping industry.
Seller financial advisor: Not Available
Bidder financial advisor: J.H. Chapman
Seller legal advisor: Nyemaster, Goode, West, Hansell & O’Brien
Bidder legal advisor: Internal

source: mergermarket