M&A

Deals: Meltdown at Least Warms the Week’s M&A

In our M&A Roundup for the week ended Sept. 28, Berkshire Hathaway infusion into Goldman and the Chase purchase of WaMu assets give a boost to an o...
Roy HarrisSeptember 29, 2008

Fallout from Wall Street’s financial meltdown warmed up last week’s North American merger-and-acquisition activity, as Berkshire Hathaway’s infusion into Goldman Sachs and JP Morgan Chase’s purchase of Washington Mutual assets from the Federal Deposit Insurance Corp. added $7 billion to the dealmaking.

But three other deals of more than $1 billion also helped keep week-to-week activity from disappearing completely, compared to the $60.25 billion of deals the prior week, when Bank of America paid $44.35 billion to purchase Merrill Lynch & Co. The second-largest deal of last week was Bristol-Myers Squibb Co.’s $4.17-billion agreement to buy ImClone Systems Inc., according to data provided to CFO.com by mergermarket.

Dealmaking in North America totaled 47 transactions, worth $12.95 billion, bringing the year-to-date results to 2,876 deals with a value of $753.23 billion. For the same period last year, 3,836 transactions totaled $1.31 trillion.

A positive note for the state of M&A came from a report based on Thomson Reuters data that showed hostile takeovers more than doubling so far this year in the U.S. The report cited falling stock prices and weakened corporate defenses as the reason.

U.S. hostile deal activity reached a record high of $211 billion so far this year, the report said, up 140 percent from a year ago.

“Given the volatility in the equity markets and the number of companies trading at distressed levels, companies with strong balance sheets are trying to be opportunistic and go after targets that may be temporarily depressed,” according to Stefan Selig, Bank of America Corp.’s vice chairman of global investment banking and head of global mergers and acquisitions. Unfriendly deals, including unsolicited and hostile deals, have accounted for 22.1 percent of all U.S. mergers, compared with 12.1 percent for all of 2007, according to the company’s FactSet MergerMetrics branch.

Hostile deals crossed international boundaries, as foreign companies such as InBev NV made major moves. InBev, of course, paid $60.4 billion for Anheuser-Busch Cos Inc.

Berkshire Hathaway Inc. to buy an undisclosed interest in Goldman Sachs for $5.00 billion

Omaha-based holding company Berkshire Hathaway, controlled by billionaire investor Warren Buffett, agreed to acquire an the stake in New York City-based investment bank Goldman under terms giving Berkshire perpetual preferred shares paying an annual dividend of 10 percent. Goldman Sachs will have the right to buy back these shares any time at a premium of 10 percent. In addition to the preferred shares, Berkshire will receive warrants, exercisable over a five-year term at a strike price of $115 per share.
Seller financial advisor: Internal
Bidder financial advisor: Not Available
Seller legal advisor: Sullivan & Cromwell
Bidder legal advisor: Munger Tolles & Olsen

Bristol-Myers Squibb Co. to buy ImClone Systems Inc. for $4.17 billion

New York City-based global biopharmaceutical company ImClone received an unsolicited proposal from New York City-based global biopharmaceutical company Bristol-Myers Squibb, which currently has a 16.6 percent stake in ImClone. Terms call for a $62-a-share price offering a premium of 4.4 percent.
Seller financial advisor: JPMorgan; Lazard
Bidder financial advisor: Citigroup; Credit Suisse; Morgan Stanley
Seller legal advisor: Davis Polk & Wardwell (Advising JPMorgan)
Bidder legal advisor: Cravath Swaine & Moore

JPMorgan Chase & Co. to buy deposits, assets, and certain liabilities of Washington Mutual from the Federal Deposit Insurance Corp. for $1.90 billion

New York City-based financial services company JPMorgan Chase paid the FDIC for the deposits, assets, and liabilities of Seattle-based WaMu’s banking operations, including the Nevada and Utah based banking operations of Washington Mutual Bank. Senior unsecured debt, subordinated debt, and preferred stock of Washington Mutual Bank were excluded from the transaction. The buyer will not be acquiring any assets or liabilities of the banks’ parent holding company, Washington Mutual Inc., or the holding company’s non-bank subsidiaries.
Seller financial advisor: Internal
Bidder financial advisor: Internal
Seller legal advisor: Simpson Thacher & Bartlett
Bidder legal advisor: Sullivan & Cromwell

China Petroleum & Chemical Corp. to buy Tanganyika Oil Co. Ltd. for $1.8 billion

Tanganyika, a Vancouver, Canada-based petroleum company, definitively agreed to be acquired by China Petroleum & Chemical Corporation, the Beijing, China based integrated energy and chemical company. Both boards approved the merger at a price of $30.74 a share, offering a premium of 21.1 percent.
Seller financial advisor: Scotia Capital
Bidder financial advisor: Lehman Brothers
Seller legal advisor: Cassels Brock & Blackwell
Bidder legal advisor: Stikeman Elliott; Vinson & Elkins

Occidental Petroleum Corp. to buy the Permian and Piceance Basin from Plains Exploration & Production Co. for $1.25 billion

Occidental, the Los Angeles-based oil and gas exploration and production company, agreed to acquire the remaining 50 percent stake in the oil and gas properties in the two basins from Houston-based Plains Exploration, an oil and gas company. The transaction is expected to close in the fourth quarter.
Seller financial advisor: Barclays Bank; Banc of America Securities; JPMorgan
Bidder financial advisor: Not Available
Seller legal advisor: Bracewell & Giuliani
Bidder legal advisor: Not Available

Centre Partners Management LLC to buy Connors Bros. Income Fund for $620 million

Markham, Canada-based Connors — which indirectly owns, through its subsidiaries, a 100 percent interest in Clover Leaf Seafoods L.P. and Bumble Bee Foods LLC — definitively agreed to be acquired by New York City-based private equity firm Centre Partners for $8.21 a share, representing a premium of 38.4 percent. The transaction is expected to close in mid-November.
Seller financial advisor: Genuity Capital Markets
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

GHL Acquisition Corp. and Greenhill & Co. to buy Iridium Holdings LLC for $563 million

New York City-based blank check company GHL, along with New York City-based investment bank Greenhil, acquired Iridium, the privately held Bethesda, Md.-based provider of voice and data mobile satellite services. Terms call for $100 million in cash, out of which $23 million will be paid by Greenhill, with $332.28 million payable in equity, based on 36 million GHL shares. The acquisition is expected to close by first quarter of 2009.
Seller financial advisor: Evercore Partners; Fieldstone Private Capital Group
Bidder financial advisor: Duff & Phelps
Seller legal advisor: Simpson Thacher & Bartlett
Bidder legal advisor: Covington & Burling; Davis Polk & Wardwell; Dechert (Advising Duff & Phelps)

McAfee Inc. to buy Secure Computing Corp. for $412 million

Secure Computing, a San Jose-based provider of enterprise gateway security products, definitively agreed to be acquired by McAfee, the Santa Clara-based company involved with security technology. Both boards approved the merger, in which terms call for a $5.75-a-share price that offers a premium of 27.2 percent.
Seller financial advisor: Citigroup
Bidder financial advisor: JPMorgan
Seller legal advisor: Dorsey & Whitney; Simpson Thacher & Bartlett (Advising Citigroup)
Bidder legal advisor: Wilson Sonsini Goodrich & Rosati

Medtronic Inc. to buy CryoCath Technologies Inc. for $381 million

CryoCath, a Montreal-based medical technology company with a focus on cryotherapy products to treat cardiac arrhythmias, definitively agreed to be acquired by Minneapolis-based Medtronic, a medical technology company. Both boards approved the merger at a price of $8.45 per share, offering a premium of 97.1 percent. The transaction is expected to close in the 4th quarter of 2008.
Seller financial advisor: Asanté Partners
Bidder financial advisor: Not Available
Seller legal advisor: Davies Ward Phillips & Vineberg
Bidder legal advisor: Stikeman Elliott

Puget Sound Energy Inc. to buy Mint Farm Generation LLC from Wayzata Opportunities Fund LLC for $240 million

Privately held Bellevue, Wash.-based energy and gas utility company Puget Sound Energy, a subsidiary of Puget Energy Inc., agreed to acquire the 310-megawatt Longview, Wash.-based Mint Farm Power Plant from Wayzata, a fund of Wayzata Investment Partners, based in Wayzata, Minn. This transaction is expected to close by the end of the year.
Seller financial advisor: Internal
Bidder financial advisor: Internal
Seller legal advisor: Tonkon Torp
Bidder legal advisor: Dewey & LeBoeuf

source: mergermarket