M&A

Deals: Vanishing Act

In our M&A Roundup for the week ended Sept. 2, a mere $5.52b of transactions are proposed. The 2 private equity deals among them aren't valued.
Roy HarrisSeptember 4, 2007

With the air now officially out of the 2007 merger-and-acquisition balloon, North American dealmaking continued to languish in the week ended Sept. 2, with 39 proposed transactions valued at a total of $5.52 billion. For the second straight week, none of the reported value came from leveraged buyouts.

The number of deals actually rose from 36 in the prior week, when the proposed transactions were worth $9.68 billion. But relative to the routine $50-billion-plus weeks of the first half, such variations were little to shout about. Indeed, in that prior week the total value of deals reflected $5.86 billion in deals the Dubai government did with MGM Mirage Inc.

Last week, there was no such multi-billion-dollar M&A among the top 10 transactions on the continent, according to data provided to CFO.com by mergermarket. The largest proposed deal was Medco Health Solutions Inc.’s $1.26-billion agreement with PolyMedica Corp., a provider of diabetes testing supplies. The only other $1-billion proposal: a $1.12-billion offer from UK-based Central African Mining & Exploration Co. for Toronto-based Katanga Mining.

As has been the case in recent weeks — it’s been a month now since dealmaking approached $25 billion over a seven-day period — the year-to-date value of proposed transactions hardly budged. The 3,076 deals this year now total $1.32 trillion, compared with 3,315 deals valued at $974.48 billion in the prior year.

As for private equity, which played a starring role in 2007’s first-half performance, last week there were only two deals, for which the value wasn’t reported. In the prior week, three deals with undisclosed values were included in the listings. For the year-to-date, when private equity was king, however, 540 such transactions accounted for a reported $496.15 billion of dealmaking.

Medco Health Solutions to buy PolyMedica for $1.26 billion

Under the definitive agreement Medco is offering $53 a share, a premium of 17 percent for the Wakefield, Mass.-based diabetes testing supply and products concern. It operates through two segments: diabetes and pharmacy. Medco, based in Franklin Lakes, N.J., provides pharmacy benefit management services in the U.S. and Puerto Rico. Medco currently manages more than $6.5 billion in drug spending for 2.8 million patients under treatment for diabetes, while PolyMedica has one million members under care in its focus on diabetes-related pharmacy care. The transaction is expected to close late this year.
Seller financial advisor: Deutsche Bank
Bidder financial advisor: Lazard
Seller legal advisor: Weil Gotshal & Manges
Bidder legal advisor: Sullivan & Cromwell

Central African Mining & Exploration Co. to buy Katanga Mining for $1.19 billion

Katanga, based in Toronto, is a copper producer. Central African Mining, based in London, is an integrated exploration, mining, trading, and investment company that already owns 22 percent of Katanga’s outstanding stock. Central African’s offer is to exchange 17 of its shares for each remaining Katanga common share, representing about $17.83 per share, a discount of nearly 18 percent for Katanga. The maximum number of shares to be issued is approximately 343.6 million. Holdings & After completion, Central African will maintain its current listing on AIM and apply also for a listing on a Canadian Stock Exchange.
Seller financial advisor: CIBC World Markets; GMP Securities
Bidder financial advisor: Seymour Pierce Group
Seller legal advisor: Cassels Brock & Blackwell
Bidder legal advisor: SALANS

Chicago Bridge & Iron NV to buy ABB Lummus Global from ABB Ltd. for $950 million

Chicago Bridge, an engineering company based in Hoofddorp, the Netherlands, has an agreement Zurich-based ABB covering Lummus, a Bloomfield, N.J.-based construction management and engineering services provider. Lummus Global employs about 2,400 people and holds 70 proprietary technologies and more than 1,000 patents. Chicago Bridge estimates that Lummus will have revenues of about $1 billion in 2007, and says that the combined entity will be able to provide clients with a full range of hydrocarbon-related services, from proprietary technology to engineering. The acquisition, representing ABB’s strategy of focusing on its core business in power and automation technology, is expected to close in the fourth quarter.
Seller financial advisor: Not Available
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Skadden Arps Slate Meagher & Flom

Acer Inc. to buy Gateway Inc. for $755 million

Taiwan-based Acer’s definitive agreement with Irvine, Calif.-based Gateway Inc. calls for a price of $1.90 per share, a 57-percent premium. Gateway sells personal computers, servers, and related products, while Acer specializes in making and selling a range of information technology products, and provides software and maintenance services. The combination will make Acer the third-largest PC company in the world and will strengthen its U.S. presence. Gateway intends to exercise its right of first refusal to acquire all of the shares of PB Holding Co., parent company of Packard Bell BV, from Lap Shun (John) Hui. Packard Bell is a French PC vendor. In addition, Gateway is in discussions with a third party to sell Gateway’s U.S.-based professional business. The transaction is expected to close by December.
Seller financial advisor: Goldman Sachs
Bidder financial advisor: Citigroup
Seller legal advisor: O’Melveny & Myers (Advising Goldman Sachs); Skadden Arps Slate Meagher & Flom
Bidder legal advisor: Orrick Herrington & Sutcliffe

NBC Universal Inc. to buy Sparrowhawk Media Ltd. from 3i Group plc and Providence Equity Partners Inc. for $353 million

General Electric Co.’s NBC Universal media and entertainment subsidiary, based in New York, has an agreement to acquire London-based Sparrowhawk, an operator of cable television channels. The sellers are two private equity companies, 3i based in London and Providence Equity based in Providence, R.I., along with David Elstein, a former television-station executive. Sparrowhawk owns a group of about 30 pay-television channels, including 18 versions of the Hallmark channel outside the U.S. The acquisition also includes Sparrowhawk’s broadcast facility based in Denver and international distribution rights to over 580 titles. Buying Sparrowhawk will enable NBC Universal to gain exposure in Asia and Central and Eastern Europe, and will move the portfolio toward higher growth areas. Sparrowhawk has estimated annual revenues of more than $200 million. 3i Group, Providence Equity Partners, and David Elstein acquired Sparrowhawk Media from Crown Media Holdings Inc. for about $242 million in February 2005.
Seller financial advisor: Not Available
Bidder financial advisor: Internal
Seller legal advisor: Ashurst
Bidder legal advisor: Weil Gotshal & Manges

Firstsource Solutions to buy MedAssist Holdings Inc. from RoundTable Healthcare Partners LP for $330 million

Firstsource, which provides business outsourcing services provider, is a subsidiary of Mumbai-based ICICI Bank Ltd. The price in its agreement to buy Louisville, Ky.-based MedAssist represents a multiple of 3.3 times the $99 million of MedAssist revenues for 2006. MedAssist provides revenue management services to healthcare providers. RoundTable, ased in Lake Forest, Ill., is a private equity firm that acquired its majority interest in MedAssist in May 2003. Firstsource’s U.S. subsidiary will raise $275 million in debt for the transaction and will fund the balance through internal accruals. The deal would give Firstsource access to more than 1,000 U.S hospitals and physician offices. It is in line with Firstsource’s strategy of strengthening its position in the U.S. healthcare, enhancing the product portfolio, and cross-selling products to MedAssist’s customers.
Seller financial advisor: Robert W. Baird & Co.
Bidder financial advisor: Agile Equity
Seller legal advisor: Kirkland & Ellis
Bidder legal advisor: Linklaters

Kuwait Foreign Petroleum Exploration Co. to buy ConocoPhillips (Pangkah) Ltd. from ConocoPhillips Co. for $330 million

The state-owned oil and gas exploration company of Kuwait , based in Safat, is acquiring the Indonesian-based unit of Houston-based ConocoPhillips, with its 25-percent interest in the Pangkah block oil and gas field. The acquisition is consistent with the Kuwait’s strategy of expand in Southeast Asia, especially Indonesia. The acquisition also would help ConocoPhillips focus on other areas of Indonesia other than northeast Java. The Pangkah block currently produces 60 million standard cubic feet per day of gas and is expected to rise to 100 million standard cubic feet daily. It also expects to start oil production in 2009.
Seller financial advisor: Harrison Lovegrove & Co.
Bidder financial advisor: Rothschild
Seller legal advisor: Internal
Bidder legal advisor: Not Available

Apollo Health Street Pvt Ltd. to buy Zavata Inc. for $170 million

Apollo Health, a health services provider based in Jubilee Hills, Hyderabad, is a subsidiary of Apollo Hospitals Enterprise Ltd., which is also involved in hospitals. It would acquire Atlanta-based service provider Zavata in a deal to be funded with $120 million of debt from Barclays plc and Bank of India. Of the remaining amount, $25 million will come from Apollo Hospitals Enterprise and $25 million from One Equity Partners LLC, a U.S.-based private equity firm and Temasek Holdings, a Singapore based private equity group. Zavata employs more than 450 people in India and more than 500 people in the U.S. The price is 10 times Zavata’s EBITDA for 2006.
Seller financial advisor: Not Available
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

MIPS Technologies Inc. to buy Chipidea Microelectronics SA for $152 million

Mountain View, Calif.-based MIPS, a provider of processor architectures, has agreed to acquire, the Porto Salvo, Portugal-based supplier of analog and mixed signal intellectual property, for $147 million in cash and the rest in performance based payment of 610,687 shares of MIPS in 2009. MIPS will make an initial payment of $120 million from cash reserves, with the balance payable from escrow within two years, subject to an indemnification holdback and deferred payments.
Seller financial advisor: A BILLION AMRO
Bidder financial advisor: Jefferies & Company
Seller legal advisor: Not Available
Bidder legal advisor: Cooley Godward Kronish; Jones Day (Advising Jefferies & Company)

American Dental Partners Inc. to buy Metro Dentalcare from Sentinel Capital Partners for $95 million

Under its agreement, Wakefield, Mass.based American Dental, a provider of business services to dental groups, would acquire the Apple Valley, Minn.-based dental health service provider from New York-based private equity company Sentinel for a price that includes earnouts. Terms call for $10 million in earnouts possible, based on Metro’s EBITDA for 2007, to be paid in 2008. Metro reported 2006 revenue of $70 million. American Dental plans to fund the acquisition through revolving and interim credit facilities, and expects to complete the transaction in the fourth quarter.
Seller financial advisor: Not Available
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

source: mergermarket