M&A

Deals: Coming to America

In our M&A Roundup for the week ended Oct. 7, cross-border purchases and heightened activity help boost total transaction values to $20.67 billion.
Roy HarrisOctober 9, 2007

It was yet another vigorous week for North American deals, led by U.S. companies signing agreements to sell to a Canadian and a Finnish firm. Overall, the number of transactions climbed 50 percent and the volume swelled by 57 percent.

The biggest acquisition agreements were TD Bank Financial Group’s $8.17-billion purchase of Commerce Bancorp and Nokia Corp.’s $7.33-billion acquisition of NAVTEQ Corp., suggesting that the cheaper dollar may have been a factor. The two cross-border investments in American companies, however, were followed by the proposed $4.64-billion purchase of a 32 percent of Japan’s Nikko Cordial Corp. by a U.S. giant, Citicorp.

In all, there were 61 transactions valued at $20.67 billion in the week ended Sunday, according to data provided to CFO.com by mergermarket.

The dealmaking included five private-equity buyouts valued at a total of $692 million. Overall, though, it was the most M&A business since this year’s superheated first half gave way to the crisp chill of relatively low deal levels in July. That was, of course, when buyers saw favorable credit terms deteriorate from effects of the sub-prime mortgage scandal. The unsually busy October week brought the total worth of year-to-date transactions to just under $1.40 trillion, compared with $1.09 trillion for the period ended Oct. 7, 2006.

TD Bank Financial to buy Commerce Bancorp for $8.17 billion

Cherry Hill, N.J.-based Commerce, which has nearly 460 outlets, definitively agreed to be acquired by the Toronto-based financial services giant for $10.50 cash and 0.4142 shares of TD per Commerce share, a total of $42.37 that represents a 6.6-percent premium. The resulting company will be the first bank with critical mass in both the Canadian and U.S. markets when the deal is completed, perhaps next March or April..
Seller financial advisor: Goldman Sachs
Bidder financial advisor: JPMorgan; Keefe Bruyette & Woods; TD Securities
Seller legal advisor: Sullivan & Cromwell
Bidder legal advisor: Simpson Thacher & Bartlett

Nokia Corp. to buy NAVTEQ for $7.33 billion

Chicago-based NAVTEQ, a provider of digital mapping information for automobiles, mobile navigation devices, and Internet mapping applications, definitely agreed to the deal with Nokia, which is offering $78 a share, for a 0.04-percent premium. Espoo, Finland-based Nokia makes mobile devices and provides equipment, solutions, and services for network operators, service providers, and companies. If a superior offer emerges, NAVTEQ would be required to give Nokia at least three business days to adjustment the offer before NAVTEQ’s board can vote to change its recommendation. NAVTEQ’s current map data business would continue to be operationally independent, while still part of the Nokia Group organization. Closing is expected in the first quarter.
Seller financial advisor: Merrill Lynch
Bidder financial advisor: Citigroup
Seller legal advisor: Holland & Knight; Sidley Austin (Advising Merrill Lynch); Winston & Strawn
Bidder legal advisor: Shearman & Sterling

Citigroup to buy a 32-percent Nikko Cordial stake for $4.63 billion

New York-based Citigroup’s “triangular merger transaction” to purchase the remaining stake that it doesn’t already own in Tokyo-based Nikko Cordia is worth $14.73 per Nikko Cordia share, a premium of 16.3 percent. Nikko Cordial, a Japanese-listed securities firm, would be delisted from the Tokyo Stock Exchange, Osaka Stock Exchange, and Nagoya Stock Exchange after the deal. The exchange provides for a collar mechanism so that if the average price of a Citigroup share is above $58, 0.254 pf a Citigroup share will be exchanged, while if the price is below $37, the exchange would be for 0.398 of a Citigroup share. Assuming minimum acceptance of 22 percent, Citigroup will issue $2.9 billion in Citigroup shares to finance the acquisition, representing 66.3 million new shares issued, with about 1.21 percent dilution. On Aug. 31, Nikko Cordial received a share exchange proposal from Citigroup to make Nikko Cordial a wholly owned subsidiary of Citigroup Japan Holdings, via share-for-share exchange. On Sept. 5 Nikko Cordial established a special committee to examine the details and structures of proposal and the implied protection to minority shareholders, and on Oct. 2 both entities agreed. Citigroup will list on the Tokyo exchange before the effective date of the merger, and if it is not listed by the effective date, Nikko Cordial will provide assistance to shareholders in selling Citigroup shares. The merger aims to create Japan’s number one comprehensive financial services group.
Seller financial advisor: GCA Co
Bidder financial advisor: Citigroup
Seller legal advisor: Davis Polk & Wardwell
Bidder legal advisor: Paul Weiss Rifkind Wharton & Garrison; and Nishimura & Partners

E.ON AG to buy North American wind farms from Airtricity for $1.4 billion

Duesseldorf, Germany-based E.ON AG, a power and gas company, agreed to acquire the wind farms based in Chicago from Airtricity, a Dublin, Ireland-based renewable energy company. The price includes net debt and shareholders loans of $553 million. The deal increases E.ON’s worldwide installed wind power capacity from around 640 megawatts to 850 megawatt. Airtricity is a subsidiary of National Toll Roads Plc, Ireland’s listed developer and operator of newable energy. Airtricity intends to use proceeds from the sale to develop its European business. This transaction is in line with E.ON’s expansion strategy to explore the North American market, letting it diversify its regional and technological wind power portfolio. The transaction is expected to close by the end of the fourth quarter of 2007.
Seller financial advisor: Credit Suisse
Bidder financial advisor: Not Available
Seller legal advisor: Skadden Arps Slate Meagher & Flom
Bidder legal advisor: Not Available

Steel Dynamics Inc. to buy OmniSource Corp. for $1.1 billion

Fort Wayne, Ind.-based Steel Dynamics, a maker of carbon steel products, has agreed to acquire Fort Wayne-based OmniSource, a scrap processor for cash and stock. The transaction wold give OmniSource holders will receive $425 million and 9.7 million Steel Dynamics shares. The buyer will also assume liabilities, including net debt, of $210 million. OmniSource president and CEO will become an executive vice president of Steel Dynamics and a board member. When the deal is completed, expected to be in Novermber, OmniSource will operate as a wholly owned subsidiary and will continue to concentrate on ferrous and nonferrous scrap processing, brokerage, and industrial scrap management for customers. The acquisition is in line with Steel Dynamics’ strategy of expanding into the steel scrap and recycled metals sector, and will generate synergies of about $15 million a year.
Seller financial advisor: Internal
Bidder financial advisor: Morgan Stanley
Seller legal advisor: Eastman & Smith
Bidder legal advisor: Haller & Colvin; McDermott Will & Emery

McKesson Corp. to buy Oncology Therapeutics Network from One Equity Partners LLC for $575 million

San Francisco-based healthcare services and information technology company McKesson agreed to acquire the provider of comprehensive products, services, and technology to oncology practices from Chicago-based One Equity Partners for a price that includes assumption of debt. One Equity acquired Oncology Therapeutics in December 2004. After the acquisition, McKesson will combine Oncology’s operations with McKesson Specialty, part of its distributions segment. The acquisition is expected to be marginally dilutive to McKesson’s earnings in 2008 and 2009, but will become accretive in 2010. The transaction is expected to close in the third quarter.
Seller financial advisor: Deutsche Bank; JPMorgan
Bidder financial advisor: Citigroup
Seller legal advisor: Morgan Lewis & Bockius
Bidder legal advisor: Latham & Watkins

Arcapita Inc. to buy a majority stake in Varel International from KRG Capital Partners LLC for $369 million

Atlanta-based Arcapita agreed to acquire the stake in Carrollton, Texas-based Varel, a manufacturer of drill bits for energy and mining industries, from Denver-based KRG in part to help Varel to expand operations in Middle East, where Arcapita has local knowledge and contacts. In June 2006, KRG acquired Varel from its management, and in November 2006 American Capital Strategies Ltd. made a $50-million investment in Varel. The transaction is expected to close in the fourth quarter.
Seller financial advisor: Lehman Brothers
Bidder financial advisor: Not Available
Seller legal advisor: Hogan & Hartson
Bidder legal advisor: King & Spalding

PerkinElmer Inc. to buy ViaCell Inc. for $260 million

Waltham, Mass.-based PerkinElmer is involved in life and analytical sciences, optoelectronics, and fluid sciences businesses. Cambridge, Mass.-based ViaCell is a clinical-stage biotechnology company with a cellular medicine pipeline that focuses in the areas of cancer, neurological diseases, diabetes, and muscular dystrophy. The deal is for $300 million, less ViaCell’s cash position. PerkinElmer offered $7.25 a share, a premium of about 53.6 percent. The acquisition will let PerkinElmer expand its genetic screening business, while ViaCell will benefit from PerkinElmer’s global reach and resources. PerkinElmer will also expand its offering in neonatal and prenatal markets, since ViaCell offers preservation of umbilical cord blood. The deal will have a slight dilutive affect in fourth-quarter EPS, but will be accretive to 2009 EPS.
Seller financial advisor: UBS
Bidder financial advisor: Merrill Lynch
Seller legal advisor: Ropes & Gray
Bidder legal advisor: WilmerHale (Wilmer Cutler Pickering Hale and Dorr)

Citizen Holdings Co. to buy Bulova Corp. from Loews Corp. for $248 million

Tokyo-based watch manufacturer Citizen will buy Woodside, N.Y.-based Bulova from New York-based diversified company Loews, in line with Citizen’s plans to increase profit by expanding its business in the international market, especially the US. The transaction is expected to close by Jan. 10.
Seller financial advisor: Not Available
Bidder financial advisor: Not Available
Seller legal advisor: Hughes Hubbard & Reed
Bidder legal advisor: Not Available

Veronis Suhler Stevenson to buy MG LLC, trading as Tranzact, from Halyard Capital Fund LP for $185 million

Fort Lee, N.J.-based managers of Tranzact, a provider of technology-driven marketing approaches agreed to acquire the company in a management buy out, backed by New York-based private equity firm Veronis Suhler Stevenson. Seller Halyard Capital is also a New York private equity firm. The acquisition will be financed by committed senior debt from BMO Capital Markets Corp, the Canadian debt provider; Bank of Ireland Group plc; and financial services provider CIT Group Inc. The sale of Tranzact will generate a multiple of 12 times on Halyard’s original investment and a rate of return of more than 85 percent. The transaction, scheduled to close later this month, will provide Tranzact will resources for both organic growth and acquisitions.
Seller financial advisor: BMO Capital Markets
Bidder financial advisor: Not Available
Seller legal advisor: Paul Weiss Rifkind Wharton & Garrison
Bidder legal advisor: Not Available

source: mergermarket

Understanding Which ERP Modules Your Business Needs – And When