Deals: An M&A Grab Bag

In our M&A Roundup for the week ended Nov. 4, transactions rise for a third week with some curious consumer-products buys. But patterns are hard to...
Roy HarrisNovember 5, 2007

Acquisition activity continued stronger for the third straight week, with recent deals encompassing a hodge-podge of cross-border transactions, private equity purchases, and two notable cases of consumer-products giants bringing closely-held enterprises into the public fold.

Tobacco, food, and brewery company Altria Group Inc. agreed to add cigar and tobacco-products maker John Middleton Inc. from Bradford Holdings Inc. for $2.9 billion. Meanwhile, Clorox Co. announced plans to pay $925 million for Burt’s Bees Inc., which is owned by AEA Investors LLC. The two deals gave a consumer flavor to our roundup of the top ten North American deals last week, according to data provided to CFO.com by mergermarket.

In all, 51 transactions were proposed, worth a total of $16.58 billion. The total — up from 36 deals worth $11.28 billion in the prior seven days — brought total year-to-date dealmaking to $1.42 trillion, compared with $1.19 trillion through Nov. 4, 2006. Last year M&A activity included 4,144 deals as of Nov. 4, compared to 3,904 deals this year.

Penn West Energy Trust to buy Canetic Resources Trust for $5.63 billion

Calgary-based Canetic definitively agreed for fellow Canadian trust Penn West to acquire it for about $16.68 a share, or a premium of 7.4 percent. Both boards have approved the merger. The target is an oil and gas royalty trust, and the combined trust would be the largest conventional oil and gas trust in North America. When completed, it would give Penn West holders about 67-percent control, with Canetic holders owning the remaining third. The transaction is expected to close in mid-January.
Seller financial advisor: TD Securities
Bidder financial advisor: Scotia Capital; CIBC World Markets; RBC Capital Markets; and BMO Capital Markets
Seller legal advisor: Blake, Cassels & Graydon
Bidder legal advisor: Burnet Duckworth & Palmer

Altria to buy John Middleton from Bradford Holdings Inc. for $2.9 billion

The New York-based tobacco, food, and brewery company agreed to acquire Middleton, of King of Prussia, Pa., from Bradford, a holding company based in Wilmington, Del. After deducting about $700 million in tax benefits from the transaction, the net cost of the acquisition is $2.2 billion, which Altria will finance with its existing cash resources. After the acquisition, Middleton’s revenues are projected to increase to $360 million for 2007, with operating income of $182 million. The acquisition is in line with Altria’s long-term growth plans in the U.S. and with its business plan of diversifying itself in the tobacco industry. Middleton president Orrin Ridington Jr. will continue to lead the company’s operations, and current CEO Clinton Price Sr. will retire as previously planned. Completion is expected by the end of this year.
Seller financial advisor: Sandler O’Neill & Partners
Bidder financial advisor: Centerview Partners
Seller legal advisor: Cozen & O’Connor
Bidder legal advisor: Wachtell Lipton Rosen & Katz; Sutherland Asbill & Brennan; and Hunton & Williams

Mapfre SA to buy The Commerce Group Inc. for $2.32 billion

Webster, Mass.-based Commerce Group definitively agreed to be acquired by Majadahonda, Spain-based insurance, financial, and real estate concern Mapfre. Commerce is engaged in writing personal automobile insurance. The $36.70-a-share cash price is a premium of 14.6 percent, and Mapfre will finance the purchase by raising equity capital of $718 million, through the issuance of bonds up to $1.148 billion, and with internal resources.
Seller financial advisor: Bear, Stearns & Co
Bidder financial advisor: Citigroup
Seller legal advisor: Nutter, McClennen & Fish
Bidder legal advisor: Clifford Chance

Clorox to buy Burt’s Bees from AEA Investors for $925 million

Oakland, Calif.-based Clorox will add Burt’s Bees all-natural skincare products including lip balms, soaps, and shampoos. The target is based in Morrisville, N.C., and private-equity parent AEA Investors is in New York. Under the terms of the agreement, Clorox will pay an additional $25 million towards the anticipated tax benefits. It is funding the transaction through a combination of cash and short-term borrowings. Burt’s Bees estimates that revenues will be $170 million this year. The transaction is in line with Clorox’s strategy of growing in and beyond its core consumer-product activities, and is part of a plan to expand its natural products. Completion is expected by the end of the year.
Seller financial advisor: Goldman Sachs
Bidder financial advisor: Lehman Brothers
Seller legal advisor: Fried Frank Harris Shriver & Jacobson
Bidder legal advisor: Morrison & Foerster

Ashmore Energy International Ltd. to buy 50 percent of Chilquinta Energia S.A. and 37.9 percent of Luz del Sur S.A.A. from PSEG Global Inc. for $885 million

Houston-based investment company Ashmore, with interests in the energy sector, agreed to buy the stakes in Chilquinta, of Valparaiso, Chile, and Luz del Sur, of Lima, Peru, from Newark, N.J.-based PSEG. Exclusive of debt, the price was $685 million. The acquired interests generated EBITDA of about $90 million for the year ended June 30, 2007. The transaction is expected to result in dilution of PSEG’s future EPS up to 10 cents annually. The acquisition helps Ashmore enter the Chilean market and represents a further commitment of capital to the Peruvian market. The transaction is expected to close by the end of 2007.
Seller financial advisor: Citigroup
Bidder financial advisor: JPMorgan; and Credit Suisse
Seller legal advisor: Cravath Swaine & Moore
Bidder legal advisor: King & Spalding

Alinda Infrastructure Fund to buy South Staffordshire Water Plc from Arcapita Bank B.S.C. for $825 million

The Alinda fund, managed by New York-based private equity firm Alinda Capital Partners LLC, acquired Walsall, UK-based South Staffordshire Water, a utility, from Arcapita, a Manama, Bahrain-based provider of financial services and a venture capital group. Arcapita Bank had acquired South Staffordshire in 2004.
Seller financial advisor: Dresdner Kleinwort
Bidder financial advisor: RBC Capital Markets
Seller legal advisor: Linklaters
Bidder legal advisor: Ashurst

Vallourec Group SA to buy the Atlas Bradford Premium Threading & Services, TCA, and Tube-Alloy units from Grant Prideco Inc. for $800 million

Boulogn, France-based steel tubes manufacturer Vallourec agreed to acquire, debt-free, the properties from Houston-based Grant Prideco, which makes and supplies oilfield drill pipe and other drill stem products. Atlas Bradford supplies connection technology, while TCA is engaged in the heat treatment operations, and Tube-Alloy is engaged in production and repair of down-hole tubular accessories for the oil & gas industry. The three businesses have reported a combined revenue of $229 million and EBITDA of $74 million for the year ended Sept. 30, 2007. The transaction is expected to close in the latter part of 2007 or early 2008.
Seller financial advisor: Credit Suisse
Bidder financial advisor: CALYON; Rothschild; and SG
Seller legal advisor: Fulbright and Jaworski; and Howrey
Bidder legal advisor: Akin Gump Strauss Hauer & Feld

Barrick Gold Corp. to buy Arizona Star Resource Corp. for $791 million

Toronto-based Arizona Star definitively agreed to be acquired by Barrick, also of Toronto, with both boards approving the merger. The price was $18.83 a share, a premium of 22.4 percent. Arizona Star owns a 51-percent interest in the Cerro Casale gold-copper deposit. Barrick engages in the acquisition, exploration, and development of gold properties. The transaction is expected to close in the fourth quarter.
Seller financial advisor: Citigroup
Bidder financial advisor: Not Available
Seller legal advisor: Dorsey & Whitney; and Fraser Milner Casgrain
Bidder legal advisor: Davies Ward Phillips & Vineberg

United HealthCare Services Inc. to buy Avidyn Health LLP, Fiserv Health Plan Administrators Inc., Fiserv Health Plan Management, Innoviant, and Innoviant Pharmacy Inc. from Fiserv Inc. for $775 million

United HealthCare, a provider of health insurance related services and a division of Birmingham, Ala.-based UnitedHealth Group Inc. agreed to acquire these health businesses of Brookfield, Wisc.-based Fiserv, which provides information management systems and services to the financial industry. Fiserv will retain its CareGain technology business and the recently acquired WorkingRx, the workers’ compensation services business.. Fiserv will receive approximately $475 million of net transaction proceeds. It would experience a 1 to 2 percent reduction in EPS for 2008. The transaction is expected to close by the end of 2007 or in the first quarter of 2008.
Seller financial advisor: Credit Suisse
Bidder financial advisor: Not Disclosed
Seller legal advisor: Not Available
Bidder legal advisor: Not Disclosed

Greenstreet Equity Partners LP to buy TECO Transport Corp. from TECO Energy Inc for $405 million

An investment group led by Miami-based private equity company Greenstreet agreed to pay cash to acquire Metairie, La.-based TECO Transport, a water transportation company, from Tampa-based TECO Energy Inc., an energy-related holding company. Net proceeds from the transaction, including such transaction-related costs as state and federal taxes, are expected to be approximately $370 million to $380 million, and TECO Energy will use them to strengthen its balance sheet. The transaction is expected to close by year-end.
Seller financial advisor: Morgan Stanley
Bidder financial advisor: AMA Capital Partners
Seller legal advisor: Skadden Arps Slate Meagher & Flom
Bidder legal advisor: Willkie Farr & Gallagher

source: mergermarket