Manhattan-New York

In Case You Missed It: News Round-up

Martin Mitchel of CTGContributed by Martin Mitchell of the Corporate Training Group

In case you were too busy to have kept up with all the news, contributor Martin Mitchell has gathered some important market events from last week to help you start this week well informed: 

Mergers and Acquisitions

  • Data Domain, a data de-duplication company already under offer from NetApp for $1.5bn stock and cash, received a competing all cash $1.8bn offer from EMC, the world’s largest maker of storage systems and software.
  • London-listed insurer Amlin is buying the corporate insurance business of Fortis for €350m. It is being purchased from the Dutch government after it took over the Dutch assets of Fortis last October. Fortis Corporate Insurance focuses on marine, property and liability business in The Netherlands and Belgium.
  • The planned injection of $19.5bn by Chinalco into Rio Tinto was finally abandoned. The deal had been much criticised by Rio Tinto’s Australian shareholders because the Chinese were to own assets near Australian defence interests, and by the UK shareholders because they wanted to share in what they saw as very favourable terms. Instead, Rio is going to raise money via a $15.2bn rights issue, led by Credit Suisse and JPMorgan Chase, and by allowing rival BHP Billiton to enter into a joint venture on some iron ore mines in Australia for $5.8bn. Chinalco will enjoy the $195m break fee.    

Financial Institutions

  • An interview with Kenichi Watanabe, Nomura’s chief executive revealed that more than half of the 1600 investment bank staff in Japan are looking to move to Lehman-style contracts that will reduce their basic pay and make them easier to sack, in return for potentially higher performance-related bonuses. 
  • One of Barclays’ largest Middle Eastern shareholders disposed of its stake. International Petroleum Investment Corporation, an investment vehicle of the Abu Dhabi royal family, invested £3.5bn in Barclays around seven months ago when Barclays was keen to avoid the need for any UK government investment. The investor was described as a valuable ‘strategic and commercial’ relationship by Barclays at the time. The sale of the stake realised a substantial profit for the investors, estimated at £1.46bn. Credit Suisse handled the placing with 220 institutional investors, earning around £80m in fees.  
  • A less favourable outcome was reportedly achieved by the Singapore’s state investment company Temasek, which sold its near 2 per cent stake in Barclays at the beginning of the year realising a loss estimated at £500m.
  • Again, in contrast to the profits reaped by Abu Dhabi’s IPIC in selling its Barclays stake, hedge fund Paulson & Co closed its short position on the UK bank at a loss of $165m.
  • Barclays also announced plans to close its final salary pension scheme to existing members. The scheme had been closed to new members in 1997. Chief executive John Varley said the scheme had become ‘untenable’ after its £200m surplus had ballooned into a £2.2bn deficit in the space of a year.
  • The sale of Barclays’ asset management operation, Barclays Global Investors (BGI) to Blackrock is nearing completion, although there is still some haggling around the price. Blackrock appear to have offered in excess of $10bn, whilst Barclays are looking for $12bn. If the sale goes ahead, Barclays President Bob Diamond is likely to take a seat on the board at Blackrock.  Barclays has until June 18th to seek counter-bids after agreeing to sell iShares (part of BGI) to CVC Capital Partners for $4.2bn.
  • Lloyds Banking Group received a demand from its biggest union that it must keep its final salary pension scheme open. Lloyds also faced much criticism at its AGM – particularly questioning the extent to which it undertook due diligence before buying HBOS.
  • JPMorgan Chase and American Express plan to raise money in the public markets by selling common stock. JPMorgan is hoping to raise $5bn and Amex is hoping to raise $500m. The sales are to help fund the repayment of US government Tarp funds, and will meet one of the Federal Reserve’s preconditions for doing so. The Federal Reserve requires recipients to demonstrate that they have access to public equity markets. JPMorgan is looking to repay the $25bn it received from the Tarp. Amex is looking to repay $3.4bn.
  • Spain’s largest bank, Santander is seeking permission from the Spanish market regulator to issue up to €2.5bn of preference shares. The issue will strengthen its capital ratios and liquidity.
  • Spain’s second largest bank, BBVA made a novel offer to its staff – don’t come in to work for up to the next five years and get one-third of your salary plus a guaranteed job when you return. 
  • One of the two private equity firms still holding shares in UK retailer Debenhams sold most of its stake. CVC Capital Partners used Debenhams’ £323m placing and open offer to sell most of its stake. Of the three private equity firms involved in the original backing of Debenhams in 2006 (CVC, Merrill Lynch Private Equity and TPG), only TPG retains a substantial stake.

Credit

  • General Motors (GM), the US carmaker that is under Chapter 11 bankruptcy protection, has asked for the US courts to approve a restructuring plan. Under the plan, the ‘new’ GM will emerge under the ownership of the US and Canadian governments, a United Auto Workers union healthcare fund and unsecured bondholders. Figures for March 31 showed that global assets totalled $82.3bn and liabilities totalled $172.8bn. The US and Canadian governments are to provide $33bn to finance operations whilst the company is under Chapter 11 protection. The US government had already advanced loans of $19.4bn before the bankruptcy filing. The new entity is expected to be a private company.
  • This follows the New York bankruptcy judge’s approval of smaller carmaker Chrysler’s sale of most of its assets to Fiat, the US and Canadian governments and the United Auto Workers union. Most of Chrysler’s secured creditors have accepted 29c per dollar and the deal would see Fiat initially holding a 20% stake, that could rise above 50% as Chrysler repays government loans. Fiat will provide technology for a new line-up of smaller cars as well as use of its international dealer network.
  • Samsonite, the iconic maker of suitcases has agreed a debt for equity swap. The private equity owned entity had about $800m of debt after being taken over by CVC Capital Partners in a $1.7bn deal in July 2007. The deal involves CVC injecting a further $175m to retain a controlling 60% stake with the major lender the Royal Bank of Scotland (RBS) taking a minority stake. The debt will be reduced to about $240m under the deal.
  • Private equity house Candover desperately needs to raise capital and cut costs before a key test of its debt covenants on June 30th. Candover has £198m of private placement notes that mature in 2014 but require the ratio of net debt to the value of Candover’s investment portfolio to remain lower than 40%. In December it was just over 30%, since when most investment values have fallen. The portfolio includes the likes of UK betting and bingo operator Gala Coral, Swedish bed maker Hilding Anders and UK secure mail services provider DX Group.
  • Rabobank became the first European bank to issue subordinated bank debt this year with a $1.5bn issue. The perpetual tier one securities will pay an 11% coupon.
  • UK life assurance and pensions outfit Pearl Group has finalised a deal that will cut its £3bn debt. The deal will see 17 banks take a £400m writedown but gain a £75m convertible bond and secure a new investment of £500m from Liberty Acquisition Holdings.
  • BBB-rated aerospace and defence company BAE Systems raised $1.5bn in bonds. The issue refinanced debt due to be repaid in 2010 and 2011 and was split into two tranches of $500m and $1bn.
  • The UK’s Debt Management Office saw its most successful ultra-long dated gilts issue when it received bids for twice the £2bn of 40-year bonds on offer. The success was an indication of the change in sentiment since its last 40-year auction failed on March 25th. The bonds are yielding around 4.65%, which is very favourable compared to two-year yields of only 1.15%.

Note : The details contained in this article have been drawn from a daily review of the Financial Times

/by