M&A

Deals: The Chill Is Here

In our M&A Roundup for the week ended Jan. 27, the surprising recent strength in the North America market finally gives out.
Roy HarrisJanuary 28, 2008

If you’ve been preparing for the merger-and-acquisition bust to hit North America full-force, well, no need to wait any more.

After weeks of surprisingly active dealing in December and early January, corporate dealermakers held back in the week ended Sunday, initiating only 33 transactions worth a total of $3.4 billion, according to data provided to CFO.com by mergermarket. That was a shadow of the M&A level of the prior week, when $15.03 billion worth of deals were proposed — 62 of them in all — led by the $6.63-billion Oracle/BEA Systems combination.

In contrast, the largest transaction last week among the top 10 North American deals was the $852-million purchase of the Redbud power plant from Helson Holdings LLC by three Oklahoma power entities. Numbers 7 through 10 failed to top $200 million.

For the year to date, M&A volume edged up to $31.06 billion, less than half the $65.68 billion of the booming January 2007. This month’s 211 deals fell far short of the 369 in the year-earlier month.

Grand River Dam Authority, Oklahoma Gas and Electric Co., and Oklahoma Municipal Power Authority to buy Redbud power plant from Kelson Holdings LLC for $852 million

The Redbud power plant, in Luther, Okla., is being sold by Kelson Holdings LLC, the Massachusetts based energy generation company that is a subsidiary of South Birmingham, Ala.-based private equity firm Harbinger Capital Partners. Oklahoma G&E is an Oklahoma City-based transmitter of electricity, while Grand River Dam Authority, a state-owned hydroelectric facilities operator, is based in Vinita. The third buyer, Oklahoma Municipal, also based in the state’s capital, is a state governmental agency. When the deal is completed, Oklahoma G&E will own 51 percent. The acquisition will help Oklahoma G&E focus on efficiency and demand. The sale is in line with Kelson’s strategy of acquire assets at a discount and improving their financial and operating performance before selling them.
Seller financial advisor: Goldman Sachs; and Merrill Lynch
Bidder financial advisor: UBS
Seller legal advisor: Stroock & Stroock & Lavan
Bidder legal advisor: Jones Day

Iteration Energy Ltd. to buy Cyries Energy Inc. for $521 million

The amount offered by Calgary, Alberta-based oil and natural gas company Iteration for Cyries is $428.67 million excluding debt of Cyries, also of Calgary. ‘s debt. Terms call for Iteration to issue 1.475 shares for each share held by Cyries, an oil and gas exploration and production company. The offer price equates to $7.58 per share, representing a premium of 4.8 percent. The two companies plan to merge to form a new company, with Iteration holders owning 46 percent and Cyries holders the remaining 54 percent. The new board initially will have eight members, including six from the current Iteration and two from Cyries.
Seller financial advisor: FirstEnergy Capital
Bidder financial advisor: Not Disclosed
Seller legal advisor: Macleod Dixon
Bidder legal advisor: Bennett Jones

Elway Merger Sub Inc. to buy Bronco Drilling Co. for $496 million

Elway is investment holding company with interests in providers of drilling and oil field services, and is a wholly owned subsidiary of Houston-based Allis-Chalmers Energy Inc., the provider of drilling and oil field services. Edmond, Okla.-based Bronco provides land drilling services to oil and natural gas exploration and production companies. Non considering Bronco’s debt, the deal is for $437.8 million. Terms call for Allis-Chalmers to pay $280 million in cash and issue $157.8 million of its own equity, with the $16.33-a-share price representing a premium of 21.8 percent. After the combination, Bronco will operate as a wholly owned Allis-Chalmers subsidiary, with holders of Allis-Chalmers owning 72.1 percent and Bronco Drilling’s stockholders will owning 27.9 percent. The acquisition is expected to close in mid-year.
Seller financial advisor: Johnson Rice & Company
Bidder financial advisor: RBC Capital Markets
Seller legal advisor: Akin Gump Strauss Hauer & Feld
Bidder legal advisor: Andrews Kurth

Teva Pharmaceutical Industries Ltd. to buy CoGenesys Inc. from New Enterprise Associates, OrbiMed Advisors LLC, and Red Abbey Venture Partners LLC for $400 million

Petach Tikva, Israel-based pharmaceutical company Teva specializes in developing, producing, and marketing generic and proprietary branded pharmaceuticals and active pharmaceutical ingredients. It is buying Rockville, Md.-based biopharmaceutical company CoGenesys, which focuses on developing innovative long-acting medicines across broad therapeutic areas. CoGenesys was formed as a spin-off from Human Genome Sciences Inc. also of Rockville, in June 2006, after which it raised a round of financing from private equity firms including New Enterprise, OrbiMed, and Red Abbey. The transaction is expected to close in the first half.
Seller financial advisor: Credit Suisse
Bidder financial advisor: Lehman Brothers
Seller legal advisor: Cooley Godward Kronish
Bidder legal advisor: Willkie Farr & Gallagher

CIENA Corp. to buy World Wide Packets for $305 million

Linthicum, Md.-based CIENA, a provider of network products, agreed to pay $290.2 million for Spokane Valley, Wash.-based World Wide Packets, not counting debt of the supplier of products for enabling cost-effective delivery of ethernet-based services. Terms call for $200 million to be paid in cash and $90.17 million in CIENA shares priced at $26.52 each. World Wide Packets will merge with a wholly-owned subsidiary of CIENA and will continue to operate from Spokane Valley and San Jose. The transaction is expected to closed by the second quarter.
Seller financial advisor: Goldman Sachs
Bidder financial advisor: Morgan Stanley
Seller legal advisor: Wilson Sonsini Goodrich & Rosati
Bidder legal advisor: Hogan & Hartson

JJW Hotels & Resorts to buy Hotel le Meridien Dona Filipa, Hotel Le Meridien Penina, and San Lorenzo Golf Course from Starman Hotels for $268 million

London-based JJW Hotels is a subsidiary of MBI International, also of London, a conglomerate engaged in the food, construction, oil and gas, and hospitality sectors. It is buying three Portugal-based properties in San Lorenzo Golf, Hotel le Meridien Dona Filipa, and Hotel Le Meridien Penina. The seller, Starman Hotels, is a London-based joint venture operating in the hotel industry, with 32 hotels in its portfolio. It was founded by Starwood Capital Group and Lehman Brothers.
Seller financial advisor: Molinaro Koger
Bidder financial advisor: Internal
Seller legal advisor: Freshfields Bruckhaus Deringer
Bidder legal advisor: CMS

Cogdell Spencer Inc. to buy Marshall Erdman & Associates Inc. from Baird Capital Partners and Lubar & Co. for $247 million

Charlotte, N.C.-based real estate investment trust Cogdell Spencer is buying Madison, Wis.-based Marshall Erdman, which designs, engineers, and builds health care facilities. The sellers, Baird Capital Partners and Lubar, are Milwaukee-based private equity firms. KeyBank NA, debt provider to Cogdell Spencer, will provide term loan of $100 million. In 2004, Baird and Lubar acquired Marshall Erdman. This transaction is expected to close by end of February.
Seller financial advisor: Wachovia
Bidder financial advisor: KeyBanc Capital Markets
Seller legal advisor: Godfrey & Kahn
Bidder legal advisor: Clifford Chance

Multi Color Corp. to buy Collotype International Holdings Pty Ltd. for $175 million

Multi Color, a Sharonville, Ohio-based provider of packaging services and decorating products to consumer product and food and beverage companies, national retailers, and container manufacturers, agreed to acquire Collotype, an Australian label making company under terms that call for 70 percent cash and the rest in new shares. Multi Color also intends to pay $10 million additionally as earn-outs, based on the achievement of certain the performance targets by Collotype. The transaction is expected to be immediately accretive, and is expected to be closed by Jan. 31.
Seller financial advisor: Not Available
Bidder financial advisor: Deloitte
Seller legal advisor: Not Available
Bidder legal advisor: Jones Day

Finley Resources Inc. to buy Arkansas-Louisiana-Texas and Rockies oil and gas properties for $130 million

Fort Worth, Tex.-base Finley, an oil and gas producer, agreed to acquire oil and gas properties in the three-state area and the Rockies region in a deal expected to close by the end of Februrary. Finley has expanded its credit facility with Bank of Scotland to finance the acquisition..
Seller financial advisor: Not Available
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

Insight Enterprises Inc. to buy Calence LLC for $125 million

Tempe, Ariz.-based Insight, a provider of IT computing products, software, and services, agreed to pay cash for Tempe-based Calence, a technology service networking solutions, advanced communications, and managed services provider. The acquisition is expected to be accretive to earnings for Insight, and should close by the second quarter.
Seller financial advisor: Not Available
Bidder financial advisor: JPMorgan
Seller legal advisor: Not Available
Bidder legal advisor: Not Available