M&A

Deals: A Resurgent Week

In our M&A Roundup for the week ended Sept. 23, transaction values nearly tripled, thanks to four billion-dollar-plus acquisitions.
Roy HarrisSeptember 24, 2007

Dealmaking experienced a bit of a surge last week, nearly tripling in value to $12.69 billion from the prior seven days on the strength of four acquisitions of more than $1 billion. Last week, only one deal topped a billion.

As was the case the prior week, 36 transactions were reported for the week ended Sept. 23, according to data provided to CFO.com by mergermarket. But the top 10 North American deals last week were led by a $2.53-billion agreement by Newpage Holding Corp. to purchase the Finnish paper-products company Stora Enso Oyj’s North American business, and Deutsche Telekom AG’s $2.39-billion deal to buy Suncom Wireless Holdings Inc.

There were four private equity deals in the week, valued at a total of $3.37 billion — equal to the prior week’s entire transaction volume. The latest deals were led by the purchase, by the Abu Dhabi government-controlled Mubadala Development Co., of 7.5 percent of the Carlyle Group for $1.35 billion.

Year-to-date, overall dealmaking rose to $1.35 trillion, based on 3,357 deals. Through Sept. 23, 2006, 3,599 deals worth a total of $1.05 trillion had been announced.

Newpage Holding Corp. to buy the North American paper business of Stora Enso Oyj for $2.52 billion

Dayton, Ohio-based paper-products maker Newpage agreed to pay $1.5 billion in cash, $200 million in notes, and $370 million of shares to pay for Stora Enso Oyj’s paper products business. Based in Helskink, it makes coated paper and packaging products. The shares being paid represent a 19.9 percent stake in Newpage. In the deal, Newpage will assume liabilities worth $450m of the acquired business. The operations being purchased include eight paper mills in the U.S. and one in Canada. Stora Enso will retain the Corenso North American operations and an associated company, Thiele Kaolin Co. Newpage is expecting cost savings of $265 million. The transaction is expected to close in first quarter 2008.
Seller financial advisor: UBS; Poyry Capital
Bidder financial advisor: Goldman Sachs
Seller legal advisor: Cleary Gottlieb Steen & Hamilton
Bidder legal advisor: Schulte Roth & Zabel

Deutsche Telekom AG to buy Suncom Wireless Holdings Inc. for $2.39 billion

A definitive agreement was signed for SunCom Wireless to be acquired by Bonn-based Deutsche Telekom’s T-Mobile USA Inc. unit. After completing an exchange of territories with Cingular Wireless and AT&T Wireless Services in 2005, SunCom is licensed to provide digital wireless communications services covering 14.8 million people in the southeastern U.S. 4.1 million in Puerto Rico and the U.S. Virgin Islands. The deal is for $27 a share, a premium of 22.7 percent. Certain investment funds affiliated with Highland Capital Management L.P. and Pardus Capital Management, who together own more than 50 percent of SunCom issued shares, have committed to vote in favor of the transaction. The acquisition will build T-Mobile’s network in North Carolina, South Carolina, Tennessee and Georgia, along with Puerto Rico and the Virgin Islands. The transaction is expected to close in the first half of 2008.
Seller financial advisor: Goldman Sachs
Bidder financial advisor: Deutsche Bank
Seller legal advisor: Hogan & Hartson; Wachtell Lipton Rosen & Katz
Bidder legal advisor: Cleary Gottlieb Steen & Hamilton

ITT Corp. to buy EDO Corp. for $1.5 billion

New York-based EDO, designs and manufactures a range of products for defense, intelligence, and commercial markets, and provides related engineering and professional services, signed a definitive agreement to be acquired by ITT Corp., of White Plains, N.Y. The boards of directors of both companies have recommended the merger at $56 a share, a premium of 8.72 percent. The deal is expected to close in early 2008.
Seller financial advisor: Citigroup
Bidder financial advisor: Lazard; UBS
Seller legal advisor: Debevoise & Plimpton; Dewey Ballantine (Advising Citigroup)
Bidder legal advisor: Simpson Thacher & Bartlett

Mubadala Development Co. PJSC to buy a 7.50-percent stake in Carlyle Group LLC for $1.35 billion

Mubadala is a wholly owned investment company. Under the definitive agreement, Mubadala will not give Washington, D.C.-based Carlyle any voting rights in Mubadala, but instead will receive a value-related protective measure against a share-price decline after the public listing. The deal represents a 10 percent discount to $20 billion, the firm valuation that the both companies agreed upon. Mubadala has also committed an additional $500 million to a buyout fund managed by Carlyle. The deal is expected to close in October.
Seller financial advisor: Citigroup
Bidder financial advisor: Goldman Sachs
Seller legal advisor: Simpson Thacher & Bartlett
Bidder legal advisor: Not Available

Standard Chartered plc to buy American Express Bank Ltd. from American Express Co. for $860 million

London-based Standard, a banking group, agreed to acquire the New York-based internation bank unit of Amex. For all of 2006, American Express Bank had earnings of $31 million and managed assets of $22.5 billion. Terms call for Standard Chartered and Amex to enter into a put and call option under which Amex may sell, and Standard Chartered may buy, American Express International Deposit Co. 18 months after the acquisition of American Express Bank at the net asset value of the bank at the time of exercise of the option. The acquisition was funded from internal cash resources and Standard Chartered’s ongoing debt funding program. The sale is in line with Amex’s strategy of focusing on its payments businesses, and is not expected to have any impact on its earnings during the current year. It is expected to close in next year’s first quarter.
Seller financial advisor: Lehman Brothers; Lazard
Bidder financial advisor: Goldman Sachs
Seller legal advisor: Skadden Arps Slate Meagher & Flom
Bidder legal advisor: Slaughter and May; Sullivan & Cromwell

Apax Partners to buy Qualitest Pharmaceuticals Inc. and Vintage Pharmaceutical Inc. for $850 million

London-based private equity firm Apax agreed to buy the two companies from founder William S. Propst in a transaction financed via acquisition financing provided by RBC Capital Markets as lead arranger and bookrunner with General Electric Capital Corp. committing a lead order as first lien co-arranger and syndication agent.
Seller financial advisor: Bear, Stearns & Co
Bidder financial advisor: Internal
Seller legal advisor: Seyfarth Shaw
Bidder legal advisor: Kirkland & Ellis

Targa Resources Partners LP to buy the San Angelo and Louisiana operating units of Targa Resources Inc. for $705 million

Targa Resources Partners, a Houston-based natural gas company, expects to fund the transaction through a mix of debt and equity of 50 percent each. It has secured a revolving credit facility of $250 million. Targa Resources is a portfolio company of Warburg Pincus LLC, the U.S. based private equity firm. Targa Resources is a general partner of Targa Resources Partners and owns 38.6 percent stake of it. Completion is expected in the fourth quarter.
Seller financial advisor: Internal
Bidder financial advisor: Tudor, Pickering & Co
Seller legal advisor: Internal
Bidder legal advisor: Richards Layton & Finger

Paetec Holding Corp. to buy McLeodUSA Inc. for $557 million

The PS Acquisition Corp. subsidiary of communications provider Paetec Holding Corp., of Fairport, N.Y., agreed to acquire Cedar Rapids, Iowa-based McLeodUSA, a provider of integrated communications services, for a price that includes net debt of $65 million. Under the terms of agreement, all outstanding McLeodUSA shareholders will receive 1.30 shares of Paetec common for every McLeodUSA share, resulting in Paetec issuing 40 million shares. Through this acquisition, Paetec will provide fiber optic network in 18 states. At closing, expected in next year’s first quarter, McLeodUSA will be able to repay outstanding senior secured notes worth $104 million.
Seller financial advisor: Deutsche Bank; Jefferies & Company
Bidder financial advisor: Merrill Lynch
Seller legal advisor: Latham & Watkins (Advising Deutsche Bank); Ropes & Gray
Bidder legal advisor: Hogan & Hartson; Willkie Farr & Gallagher (Advising Merrill Lynch)

GB Gas Holdings Ltd. to buy Newfield UK Holdings from Newfield Exploration Co. for $486 million

GB Gas Holdings Limited, a Berkshire, U.K.-based holding company with interests in gas exploration and a subsidiary of Centrica plc, agreed to acquire the U.K. gas exploration business of Houston-based Newfield for a price that includes an 80-percent interest in the Seven Seas gas development, an 85 percent interest in the Grove Gas Field, which started production in April 2007; and an interest in about 200,000 net acres of land located in the Southern Gas Basin. The remaining interest of Seven Seas and Grove Field will be retained by Sojitz Corp., a Japanese conglomerate. The acquisition is in line with Centrica’s strategy of increasing gas reserves. It is expected to close in the fourth quarter.
Seller financial advisor: Jefferies & Company
Bidder financial advisor: Internal
Seller legal advisor: LeBoeuf, Lamb, Greene & MacRae
Bidder legal advisor: Allen & Overy

Statkraft Norfund Power Invest A/S to buy Empresa de Electricidad de los Andes S.A. (Electroandes) from PSEG Global Inc. for $390 million

Statkraft, a Norwegian investment company based in Oslo, agreed to acquire Electroandes, a Lima, Peru-based electricity generation company. Seller PSEG is the Newark, N.J.-based company engaged in electric generation and related distribution facilities. The price includes assumed debt of $106 million. Statkraft is equally owned by Norfund, the Norwegian private equity firm, and Statkraft SF, the Oslo-based electric power generation company. PSEG Global is a subsidiary of Public Service Enterprise Group Inc. Electroandes owns and operates four hydro-generation plants with total capacity of 180 megawatts, and 437 miles of electric transmission lines. The transaction is expected to close in October.
Seller financial advisor: JPMorgan
Bidder financial advisor: Not Available
Seller legal advisor: Shearman & Sterling
Bidder legal advisor: Not Available

source: mergermarket