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jeudi 5 novembre 2009
Telefonica ups bid for Brazil GVT; Vivendi silent
Wed Nov 4, 2009 11:56am EST
By Guillermo Parra-Bernal
SAO PAULO (Reuters) - Spanish telecommunications company Telefonica (TEF.MC: Quote, Profile, Research, Stock Buzz) raised its offer for Brazilian rival GVT (GVTT3.SA: Quote, Profile, Research, Stock Buzz) on Wednesday by 5.2 percent, seeking to trump a potential counteroffer by French media group Vivendi (VIV.PA: Quote, Profile, Research, Stock Buzz) and seal a deal by the end of the month.
Management at Telefonica's Telesp (TLPP4.SA: Quote, Profile, Research,Stock Buzz) unit raised the offer in order to "ensure the success of its bid and to reinforce its intention" to buy GVT, according to a regulatory filing. Under the new terms, the bid was upped to 50.50 reais a share, valuing the deal at $3.9 billion, from 48 reais a share, or $3.7 billion, previously.
The move sent GVT shares as much as 1.4 percent higher to 51.70 reais -- above the improved Telefonica offer. They later backtracked slightly and were trading 1.2 percent ahead at 51.60 reais.
The decision to raise the bid was based on GVT's "encouraging" third-quarter results, the filing said. GVT, which is based in the southern Brazilian city of Curitiba, reported net income of 57.2 million reais ($33 million) for the quarter, compared with a loss of 14.8 million reais a year earlier.
Faced with eroding margins and saddled with fines for poor service in Sao Paulo state, Telefonica needs GVT to revive bottom-line growth. The decision to boost the offer highlights the company's willingness to grab GVT and trump any additional offer by Vivendi or any other suitor, analysts said.
"Telefonica is sending a message to any bidder, that much more money will be needed to trump them," said Valder Nogueira, a telecommunications and technology analyst with Itau Securities in Sao Paulo.
Telefonica closed 0.06 percent higher in Madrid at 18.82 euros. Telesp was up 0.3 percent at 43.26 reais in afternoon trading in Sao Paulo.
Vivendi surged 2.2 percent to 18.99 euros.
BREAK-UP FEES?
On Tuesday, GVT shareholders unanimously agreed to remove a poison pill clause that was an obstacle to a merger by making takeover bids too costly. The waiver of the defense clause was set as a precondition by Telefonica and Vivendi to proceed with any takeover attempt.
Paris-based Vivendi, whose $3 billion friendly approach hasn't been formalized yet by the board, declined to comment.
Vivendi is still monitoring the GVT situation despite an apparent set-back to its bid, a source close to the matter told Reuters on Wednesday.
"We do not expect Vivendi to come back with a new offer, even if the possibility is not totally excluded," said Arnaud-Cyprien Nana Mvogo at French brokerage Aurel BGC.
It is still unclear how GVT's controlling shareholders, the Swarth Group and Global Village Telecom, will treat an agreement they signed with Vivendi on September 9 to sell Vivendi at least 20 percent of the outstanding shares.
"Is there any break-up fee, is there anything that could shed some light on their accord? We don't know," said Nogueira, the analyst in Sao Paulo.
At the time, Vivendi said it would seek to obtain control of at least 51 percent of GVT shares.
Most analysts doubt that Vivendi will seek to trump Telefonica's offer.
"Telefonica's improved offer is also good news for Vivendi because it will allow the French conglomerate not to pursue the deal and to eventually request break-up fees," Aurel's Nana Mvogo said.
To muscle out Telefonica, Vivendi would have to offer a minimum 53.02 reais a share. But the French giant has a long-standing policy of only buying assets that won't risk its investment-grade debt ratings and its policy of paying high dividends.
Telefonica has said it expects regulatory approval from the Brazilian telecommunications industry watchdog Anatel before an offer, initially set for November 19.
International Financing Review, a Thomson Reuters publication, reported on Wednesday that Telefonica's chief executive in Brazil, Antonio Carlos Valente, is urging Brazilian President Luiz Inacio Lula da Silva to lean on state-controlled bank Banco do Brasil to arrange financing for the GVT acquisition.
IFR said the financing package could reach 6 billion reais, without specifying how it obtained the information.
JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz) and Banco Santander (SAN.MC: Quote, Profile, Research, Stock Buzz) are advising Telefonica. BNP Paribas is Vivendi's bank, while GVT hired Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) and Goldman Sachs Group (GS.N: Quote, Profile, Research, Stock Buzz) as advisers.
($1=1.728 reais)
(Additional reporting by Dominique Vidalon in Paris and Robert Hetz in Madrid; Editing by Dave Zimmerman)
Hyatt Hotels IPO price at $25 per share
Wed Nov 4, 2009 7:46pm EST
NEW YORK (Reuters) - Hyatt Hotels priced its initial public offering of 38 million shares at $25 per share on Wednesday, within its expected range.
Hyatt shares will start trading on Thursday under the ticker "H" (H.N: Quote,Profile, Research, Stock Buzz) on the New York Stock Exchange.
Chicago-based Hyatt had said it would sell its shares for between $23 and $26 each. The proceeds of the $950 million IPO would go to the Pritzker family, which controls the company.
If the IPO's underwriters, led by Goldman Sachs (GS.N: Quote, Profile,Research, Stock Buzz), along with Deutsche Bank Securities (DBKGn.DE:Quote, Profile, Research, Stock Buzz) and J.P. Morgan Securities (JPM.N:Quote, Profile, Research, Stock Buzz), choose to exercise an option to buy another 5.7 million shares, those proceeds will go to Hyatt.
Hyatt's revenue for the first half of 2009 declined 18.5 percent from a year earlier, reflecting sluggish demand for hotels, especially from the corporate sector.
Two of Hyatt's rivals -- Marriott International (MAR.N: Quote, Profile,Research, Stock Buzz) and Starwood Hotels & Resorts (HOT.N: Quote,Profile, Research, Stock Buzz) -- have forecast declines in revenue per available room of as much as 5 percent in 2010, suggesting that the U.S. hotel industry will not quickly rebound from the current recession.
(Reporting by Deepa Seetharaman; Editing by Steve Orlofsky)
Asian IPO fatigue hits India, elsewhere
Thu Nov 5, 2009 6:09am EST
By Narayanan Somasundaram and Prashant Mehra
HONG KONG/MUMBAI (Reuters) - An ache has hit the belly of investors who feasted on initial public offerings in Asia, in a sign the primary equity window that saw a big revival two quarters ago is beginning to quickly shut.
The indigestion is becoming a familiar trend across India, China and Australia, making a case for firms forming a long IPO pipeline to trim their high price expectations.
More than 30 companies plan to list in either the Hong Kong and Indian markets over the next few months.
The Hong Kong list includes big names such as Rusal, Las Vegas Sands (LVS.N: Quote, Profile, Research, Stock Buzz) and China Minsheng Banking Corp (600016.SS: Quote, Profile, Research, Stock Buzz), and a clutch of property firms. Reliance Infratel, a unit of Reliance Communications (RLCM.BO: Quote, Profile, Research, Stock Buzz), and Vedanta's (VED.L:Quote, Profile, Research, Stock Buzz) Sterlite Energy are among big Indian offers planned.
"The pricing has been pretty aggressive. Hopefully this market volatility will prevent some of them from launching their IPOs now," said Ho Yin Pong, a Hong Kong-based portfolio manager at RCM Asia Pacific.
He feels he can pick up the same stocks, especially the Indian ones, cheaper in the secondary market.
Last week, Deutsche Bank pulled out all stops to cover a $100 million IPO of Indian cable television firm Den Networks, which managed to scramble through in the final hours with huge support from India's state run life insurance giant.
"That was a real close one. DB (Deutsche Bank) did rally us to bail out the issue," an official at Life Insurance Corp of India, which put in bids for nearly a quarter of Den Networks, said on the condition of anonymity.
"The pricing was a tad stiff, but we did spot the long-term opportunity."
Deutsche Bank was the primary arranger for the share offering, which closed on the day another Indian firm Indiabulls Power (INDP.BO: Quote, Profile,Research, Stock Buzz) had a disastrous listing.
A Deutsche Bank spokesman declined to comment on the deal.
Spokespeople from LIC, which plans to pump in 500 billion rupees ($10.6 billion) into Indian equity this year, could not be reached for comment.
Investor appetite began waning after a rash of offerings in the Chinese property sector and Indian power sector had tepid openings.
Australia has also seen a cooling in demand for new offerings, with shares of department store chain, Myer Holdings (MYR.AX: Quote, Profile, Research,Stock Buzz), falling 9 percent in their debut earlier this month. Its price to earnings ratio was a tad below a main competitor.
Asian property listing are seen particularly vulnerable to the softening sentiment, with at least 16 Indian developers and a bunch of Chinese real estate firms eyeing listings.
"Even if one or two of these fail, it will be disastrous for the industry, because the confidence that is gaining now, will be hit," said Pranay Vakil, India head for global property services firm Knight Frank,
Glorious Property (0845.HK: Quote, Profile, Research, Stock Buzz) fell 23 percent on its Hong Kong debut this month, Shenzhen-based Excellence Real Estate Group Ltd last week shelved plans for an up to $1 billion Hong Kong IPO month, blaming market conditions.
That should give caution to companies waiting in the wings to cash in on the equity rally this year, which has boosted the MSCI Asia Pacific ex Japan stocks index .MSCIAPJ nearly 60 percent so far this year despite the recent correction.
But falling markets and continuing uncertainty about the health of the economy are spooking investor sentiment. Asian markets have fallen 7 percent from their 2009 peak last month.
"The opportunity is shrinking, fading fast. Too many at the same time," said a banker who has helped arrange about $5 billion in new share sales so far this year for his Indian clients.
"The answer to sustain the momentum is attractive pricing but I would lose my job if I insist that." The banker, who is not authorized to speak to media, did not want to be named.
(Additional reporting by Parvathy Ullatil in Hong Kong; Editing by Michael Flaherty and Lincoln Feast)
SocGen misses profit forecast as bid talk returns
Wed Nov 4, 2009 12:40pm EST
By Sudip Kar-Gupta and Julien Ponthus
PARIS (Reuters) - Societe Generale's (SOGN.PA: Quote, Profile, Research,Stock Buzz) lower-than-expected third quarter profit has highlighted the French bank's weakness compared to many of its rivals and its position as a possible bid target if there is a sector shake-up.
Like peers Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) and Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz), SocGen's investment banking results powered the profit line although debt provisions rose to cover an expected further rise in bad loans in 2010.
Net profit rose to 426 million euros ($623 million) euros from 183 million a year earlier, mainly due to the fact that SocGen's investment banking arm swung to a profit from a year-earlier loss.
However, the bank missed the average estimate of 481 million euros in a Reuters poll of 10 analysts as group revenues were weaker-than-expected and provisions were higher. The banking group's revenues took a hit at its international arm, affected by the Russian economic slowdown and its investment management arm, due to outflows.
France's second-biggest and the euro zone's No.6 bank by market value has been steadily recovering since a 4.9 billion euro trading loss in January 2008, which it blamed on unauthorized deals carried out by Jerome Kerviel, a former junior trader at the bank.
However, SocGen remains the subject of persistent bid speculation in France. Last week, Credit Agricole (CAGR.PA: Quote, Profile, Research,Stock Buzz) -- the country's biggest bank by branches -- denied a report in Le Monde that it was considering a merger with SocGen and insurer Groupama.
La Tribune newspaper said on Wednesday that BNP Paribas (BNPP.PA:Quote, Profile, Research, Stock Buzz) was looking at SocGen.
BNP Paribas, France's biggest bank by market capitalization, denied the Tribune article. BNP reiterated that its immediate focus was on integrating its recent buy of Fortis assets.
"This rumor is unfounded from A to Z!," a BNP spokesman said in an emailed statement to Reuters.
SHARES RECOVER
Nevertheless, the Tribune article helped push up SocGen's shares, which were also boosted by the company's solid performance at its French retail banking division.
"Even though BNP has denied it, it would be a good opportunity for them," said Agilis Gestion fund manager Arnaud Scarpaci. Agilis Gestion owns some SocGen shares.
SocGen shares, which fell 4 percent on Tuesday, were up 4.6 percent at 45.65 euros in early morning trade. At that price, SocGen has a market capitalization of around 34 billion euros.
BNP Paribas shares were up 2.3 percent at 52.06 euros, giving BNP a market capitalization of around 62 billion euros.
SocGen's results kicked off the third-quarter earnings season for French banks, with BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) also expected to post higher earnings on Thursday.
Though many of the world's top banks have posted higher profits over the last month, doubts remain over provisions in the sector and the aftermath of the financial crisis.
On Wednesday, Bank of Ireland (BKIR.I: Quote, Profile, Research, Stock Buzz) posted an underlying first-half loss and said it might have to seek further state aid, while earlier this week UBS (UBSN.VX: Quote, Profile,Research, Stock Buzz) reported a loss and the UK injected more taxpayer money into Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) and Lloyds (LLOY.L: Quote, Profile, Research, Stock Buzz).
"We are still weighing up the effects of the crisis. We are simply in a period of stabilization in economic activity," SocGen Chief Executive Frederic Oudea told BFM radio.
SocGen shares have risen around 34 percent so far this year, less than a 48 percent gain in the DJ Stoxx European banking index .
($1=.6835 Euro)
(Editing by Will Waterman, Simon Jessop and Karen Foster)
Bain in exclusive talks for Citi's Bellsystem: sources
Wed Nov 4, 2009 4:24am EST
TOKYO (Reuters) - Bain Capital has won exclusive rights to negotiate with Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) to buy its Japanese telemarketer in a deal that could be worth more than $1 billion, three people with knowledge of the transaction said.
It would be the largest private equity deal in Japan involving a foreign buyout firm since March 2008.
Bain Capital will retain the right until Friday of this week, the people said, asking not to be identified because the bidding process is not public.
Permira PERM.UL and a team of CVC Capital and Blackstone (BX.N: Quote,Profile, Research, Stock Buzz) also made offers in the final round of bidding for Bellsystem24, which closed on Friday last week, the people said.
Bain Capital last year outbid Japanese private equity firm Advantage Partners for D&M Holdings, the maker of Denon audio equipment. Bain Capital opened an office in Japan in 2006.
The sale of Bellsystem24 initially drew strong interest from a number of private equity firms including Kohlberg Kravis Roberts & Co KKR.UL, which teamed up with Itochu Corp (8001.T: Quote, Profile, Research, Stock Buzz) before dropping out of the bidding.
Bellsystem24 operates call centers and competes against Moshi Moshi Hotline Inc (4708.T: Quote, Profile, Research, Stock Buzz) and Transcosmos Inc (9715.T: Quote, Profile, Research, Stock Buzz) in Japan.
Citigroup put Bellsystem24 up for sale as part of its global efforts to raise cash and bolster its capital. The U.S. bank has also sold its retail broker Nikko Cordial Securities and asset management company Nikko Asset Management.
(Reporting by Wakako Sato and Junko Fujita in Tokyo, Megan Davies in New York and Michael Flaherty in Hong Kong; Editing by Joseph Radford)
Goldman to sell stake in landmark China buyout deal
Wed Nov 4, 2009 5:08am EST
By George Chen and Michael Flaherty
HONG KONG (Reuters) - Goldman Sachs (GS.N: Quote, Profile, Research,Stock Buzz) has agreed to sell half of its holding in Shineway Group, China's top meat processor, to a Chinese fund for about $150 million, earning roughly five times its investment from the landmark 2006 deal, sources with direct knowledge of the matter said on Wednesday.
The acquisition attracted wide public interest in 2006, in part because it involved foreign investors taking a stake in a national brand and industry leader. It was also among the first leveraged buyouts in China by a group of foreign investors, which included Singapore's state investor Temasek Holdings TEM.UL.
Sources said the Asia Special Situation Group (ASSG) of Goldman Sachs signed a deal last week to sell part of its stake in Shineway to CDH Investments, an influential Chinese private equity fund and already a major shareholder of the meat processor. Shineway, well known in China for its sausage products, has a listed arm, Henan Shuanghui Investment & Development Co Ltd 000895.SZ.
ASSG was one of Goldman's best and fastest profit streams in the region, but its prominence within Goldman has faded since the financial crisis. Several ASSG star bankers, including its co-head Zhang Yi, have left the firm.
"ASSG is now under pressure to improve its performance. After all, it is not a long-term investor for such deals like Shineway either," said one source.
"But CDH has long-term commitment to Shineway given its strong Chinese background and good relations with the government," he added.
CDH Investments, established in 2002, is a spin-off from China International Capital Corp, the investment banking joint venture one-third owned by Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz).
Shineway, Goldman Sachs and CDH declined to comment. The sources declined to be identified because the sale process is private and confidential.
THREE YEARS; FIVE TIMES
Goldman's sale of the stake will bring its holding in the parent to roughly 5 percent down from around 10 percent, according to the sources.
Including leverage used for the transaction, Goldman will earn around five times its investment through the sale of its Shineway stake, one source said.
After the deal, CDH would become No.2 shareholder of Shineway, in which the management of Shineway would remain its control, said the sources.
Temasek and New Horizon, a U.S. dollar private equity fund run by Wen Yunsong, the son of Chinese Premier Wen Jiabao, would also remain as key shareholders, the sources added.
In late 2006, a consortium-led by Goldman's ASSG and CDH bought control of Shineway Group for $256 million, beating rival bidders including CCMP Capital Asia at that time.
Financial details were not fully disclosed at the time but the sources said Goldman paid about $75 million for a stake in Shineway.
The deal, which sparked debate from Chinese media and scholars on whether the national industry leader was sold too cheaply to foreign investors, won Beijing's approval at the end of 2006. Buyout deals remain very rare in the Communist nation.
($1=6.827 Yuan)
(Editing by Lincoln Feast)
Magna, labor at GM's Opel agree cost cuts
Tue Nov 3, 2009 8:54am EST
FRANKFURT (Reuters) - Opel's labor force has agreed to contribute 265 million euros ($390 million) in annual savings if General Motors finally sells a majority stake in its European arm to a group led by Canada's Magna.
"The cuts are painful for us all, but we are prepared to assume responsibility," Opel labor leader Klaus Franz said in a statement on Tuesday announcing the accord with Magna after weeks of talks with workers across Europe.
The agreement on behalf of 50,000 Opel staff -- around a fifth of whom are supposed to lose their jobs under the new owners -- moves the sale of Opel a step forward, but GM's board of directors still has to give the final green light this week.
Under pressure to shrink back to profit now that the U.S. carmaker has emerged from bankruptcy, GM's board has already agreed once to sell a 55 percent stake in loss-making Opel to Magna and its Russian partner Sberbank.
But EU competition authorities have asked GM to confirm it would make the same decision knowing that 4.5 billion euros in state aid promised by Germany would go to any buyer of Opel, not just Magna, Berlin's favored bidder.
GM Chief Executive Frederick "Fritz" Henderson has expressed confidence that a sale will go ahead soon, but the new board that oversees GM since its emergence from bankruptcy in July has refused to act as a rubber stamp for management desires.
A source told Reuters last month that there was still a possibility that GM's board could opt out of a sale of Opel in favor of keeping the European carmaker.
PUSH INTO RUSSIA
Magna's deal with labor calls for avoiding plant closures or forced layoffs at Opel, which was ringfenced and propped up with German aid to keep it out of GM's dip into bankruptcy.
Opel workers are set to get 10 percent of the company in return for cost concessions, while GM would hold 35 percent.
Closing the Opel transaction awaits crucial details on financing, including nailing down details of aid sought from states with Opel plants such as Britain, Spain and Belgium.
The European Commission is keeping a close eye on the deal to ensure state aid is not misused for political purposes.
Magna's group has vowed to inject 500 million euros into Opel and use it for an aggressive push into the Russian market.
Sealing the deal would be a coup for Magna founder and Chairman Frank Stronach, who left his native Austria at age 21 as an impoverished toolmaker but went on to build one of the world's biggest car parts group.
It would also mark a milestone in the dismantling of GM, the 101-year-old U.S. company that was unseated last year as the world's largest automaker by Toyota Motor Corp.
Opel, founded in 1863 and which GM bought in 1929, is the backbone of General Motors' European business.
Opel and British sister brand Vauxhall saw sales in Europe fall 11.4 percent in the first three quarters of 2009 to around 828,000 units, reducing its market share to 7.6 percent from 8.0 percent a year earlier. At that rate its 2009 sales could reach around 1.1 million units.
Opel's big products are the Astra compact and Corsa small car, both of which sold over 400,000 units in 2008.
GM relaunched out of bankruptcy with $50 billion in funding from the U.S. government, which now owns about 60 percent of carmaker.
($1=.6835 Euro)
(Reporting by Michael Shields; editing by David Cowell)
Kraft quarterly results could make a case to Cadbury
Tue Nov 3, 2009 7:39am EST
By Brad Dorfman
CHICAGO (Reuters) - Kraft Foods Inc (KFT.N: Quote, Profile, Research,Stock Buzz) will need to show progress in cutting costs and improving organic revenue when it reports earnings on Tuesday, in a bid to convince Cadbury (CBRY.L: Quote, Profile, Research, Stock Buzz) shareholders it is a viable deal partner.
Lower commodity prices and cost controls helped other consumer-staples companies beat analyst estimates in recent weeks, including Kellogg Co (K.N: Quote, Profile, Research, Stock Buzz), Clorox Co (CLX.N: Quote,Profile, Research, Stock Buzz) and General Mills Inc (GIS.N: Quote, Profile,Research, Stock Buzz). They also came in slightly ahead of muted revenue expectations.
If that trend holds for Kraft -- which is due to present a formal takeover bid for UK confectioner Cadbury by November 9 -- it could boost the company's shares and make for a more compelling offer.
"The trend has been for food companies across the board to beat the number," Edward Jones analyst Matt Arnold said. "I haven't seen many companies in consumers staples post a miss lately."
Kraft is likely to stick by its initial cash and stock proposal to Cadbury shareholders that was disclosed on September 7, sources familiar with the situation told Reuters.
That deal was valued at 745 pence a share, or 10.2 billion British pounds ($16.7 billion), at the time. The proposed bid was worth 733.4 pence, or 10.06 billion pounds ($16.5 billion) Monday afternoon based on the decline in Kraft shares.
The world's No. 2 foodmaker is scheduled to post third-quarter earnings after the New York Stock Exchange closes at 4 p.m. EST.
LETTING THE NUMBERS DO THE TALKING
Kraft Chief Executive Officer Irene Rosenfeld is not expected to take questions about the Cadbury bid when she talks to analysts about earnings on Tuesday, a spokesman said.
But the results will help set the stage for Kraft's bid.
The maker of Velveeta cheese and Oreo cookies is expected to post earnings of 48 cents a share in the quarter, according to Thomson Reuters I/B/E/S, up from 44 cents a year earlier, with lower commodity costs and its own cost-cutting measures helping boost profits.
But revenue is expected to fall to $10.32 billion from $10.46 billion, hurt by divestitures and strength in the dollar compared with a year earlier.
Cadbury chairman Roger Carr dubbed Kraft a "low growth conglomerate" in his letter to Rosenfeld rejecting the initial offer and analysts say Kraft will need to show sustainable growth prospects to overcome that perception.
In the past three quarters, Kraft has actually disappointed analysts in terms of revenue, with sales coming in 2 percent, 3 percent and 4.6 percent below expectations, according to Thomson Reuters I/B/E/S.
Earnings per share have been better, with the company reporting earnings of 4.4 percent more than analysts expected in the second quarter and 13.3 percent more than expectations in the first quarter.
Kraft's earnings' report comes almost two weeks after Cadbury reported a 7 percent rise in underlying sales for the third quarter, beating even the most bullish forecasts.
(Reporting by Brad Dorfman; editing by Carol Bishopric)
Stanley Works sees deal adding to earnings by 2nd year
Tue Nov 3, 2009 2:07pm EST
By Bhaswati Mukhopadhyay
BANGALORE (Reuters) - Tool maker Stanley Works (SWK.N: Quote,Profile, Research, Stock Buzz), which is buying rival Black & Decker Corp (BDK.N: Quote, Profile, Research, Stock Buzz) for $3.46 billion in stock, said the combined company is expected to earn about $5 per share in the third year after the close of the deal.
The transaction, which combines a top hand tool maker and a power tool maker, will really start to add to earnings from the second year.
In 2008, Stanley Works earned $3.41 a share, excluding items. Black & Decker earned $5.47 a share, before items, in the year.
The deal is expected to be closed in the first half of 2010. The combined company, which will be called Stanley Black & Decker, sees $600 million in charges in the first year.
The companies said the driving motivation of the deal is the $350 million in annualized cost savings as well as the improved finances of the more diversified company.
Black & Decker has almost reached the limit in terms of how much it can reduce costs, analyst David MacGregor of Longbow Research said.
With the outlook for power tools remaining rather dismal, Black & Decker realizes that the only way it could sustain value for shareholders is to combine with somebody else, he said.
Black & Decker Chief Executive Nolan Archibald said, "we will have global low-cost sourcing and manufacturing platforms, and a broader geographic sales footprint with additional opportunities in high-growth emerging markets."
The increased resources from cost synergies will be used to invest in security solutions, engineered fasteners and other high-growth platforms, Archibald said on a conference call.
In North America, Europe and Asia, there are significant organizational overlaps, Stanley Works CEO John Lundgren said. These overlaps, Lundgren said, will allow for consolidation and integration of back office functions.
These integrations will lead to about $135 million of synergies. Another $95 million of cost synergies will come from elimination of corporate overheads, Stanley Works said.
"We expect to continue to invest about two-thirds of our excess free cash flow in acquisitions and growth," Stanley Works CFO James Loree said on the call.
Stanley Works -- whose brands include the Stanley line, Bostitch, Proto and Mac Tools -- supplies tools, hardware and security systems.
Analyst Sam Darkatsh of Raymond James said while the deal does implicitly add to security sales, it increases exposure to construction and consumer-related end markets as well as to mass retail.
There will also be revenue synergies, Stanley Works CEO said, adding that they will be looking at cross-selling opportunities of products of both companies in existing mature markets.
"We are targeting a strong investment rate credit rating, no less than BBB+ and perhaps as high as single A over time," Stanley Works CFO Loree said.
Analyst Michael Lasser of Barclays Capital said in a note that the transaction raises the obvious question of how it will affect the home improvement retail industry.
"While the combination could put some pressure on the gross margins of the retailers over the long term, we think the near-term impact on Home Depot (HD.N: Quote, Profile, Research, Stock Buzz) and Lowe's Cos Inc (LOW.N:Quote, Profile, Research, Stock Buzz) will likely be muted given the size and market positions of these companies."
Shares of Black & Decker, whose brands include DeWalt, Kwikset and Price Pfister, were up 24 percent at $58.47 in afternoon trade on the New York Stock Exchange. They earlier touched a year-high of $60.02.
Stanley Works shares rose 5 percent to $47.26.
(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Gopakumar Warrier, Ratul Ray Chaudhuri)
Lloyds, RBS agree to massive shake-up
Tue Nov 3, 2009 8:09am EST
By Clara Ferreira-Marques and Steve Slater
LONDON (Reuters) - Britain's two largest retail lenders are to get another 31 billion pounds from the government and have agreed to sell hundreds of branches and key businesses to appease EU competition concerns over state aid.
The deal announced on Tuesday paves the way for Britain to begin reducing its holdings in Royal Bank of Scotland and Lloyds Banking Group, a potentially critical source of funds as the country struggles with a ballooning budget deficit.
RBS and Lloyds ended months of uncertainty, with Lloyds announcing that it would drop out of a government insurance scheme for bad debts by raising 13.5 billion pounds ($22.08 billion) in the world's largest ever rights issue, as part of a 21 billion-pound capital raising plan.
The move leaves RBS, 70 percent state-owned, as the only bank joining the government's Asset Protection Scheme but under more flexible terms than expected earlier this year, which RBS said will allow it to leave the scheme within four years.
Both banks, however, also agreed to disposals to meet EU state aid rules, with RBS particularly hit, selling chunks of its retail bank under the revived brand Williams & Glyn, its RBS Insurance arm and shrinking its investment bank.
"We do feel bruised by what we've had to go through," RBS's chief executive Stephen Hester said on a conference call.
"Our job (of turning around RBS) has been made more difficult by some of the aspects of the EU settlement, but nevertheless we believe it is a doable job," he added.
Shares in RBS were down 4.8 percent at 1100 GMT at 36.8p, well below the average price of 50.5p paid by the government for its stake in the bank. Lloyds, whose takeover of beleaguered rival HBOS was backed by the state, was up 1.3 percent at 86.2p, also below the government's entry price of 122.6p.
"The news is potentially good for both UK consumers and rival banking groups, although more debatable for both Lloyds and RBS shareholders," Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers.
mercredi 16 septembre 2009
London's big guns line up for Cadbury defense
LONDON (Reuters) - Three of London's top rainmakers are set to square up against a superstar of the 1980s merger era if the looming takeover battle between Kraft (KFT.N) and Cadbury (CBRY.L) ignites.
North America's largest food group has yet to make a formal offer for the British confectioner, but both sides have engaged big name bankers in case battle ensues.
The stakes are high, with Cadbury's bankers set to share a fee pot of up to $49 million and Kraft's advisers looking at up to $42 million, according to estimates from Thomson Reuters and U.S. consulting firm Freeman & Co.
In Kraft's corner is Bruce Wasserstein, the Wall Street veteran who achieved fame as an adviser to buy-out house KKR on its titanic acquisition of RJR Nabisco in 1989, recorded for posterity in the book Barbarians at the Gate.
Wasserstein -- chairman and chief executive of investment bank Lazard (LAZ.N) -- is flanked by senior bankers James Agnew and David James from corporate brokers Deutsche Bank (DBKGn.DE) and Citigroup (C.N).
Cadbury is backed by the trio that ran last year's demerger of its U.S. soft drinks business Dr Pepper Snapple -- Goldman Sachs' (GS.N) Karen Cook, Simon Robey of Morgan Stanley (MS.N) and Nick Reid of UBS (UBSN.VX).
City "superwoman" Cook combines her role as a partner at the bank with raising six children and a non-executive directorship at UK supermarket group Tesco (TSCO.L).
She has worked on four deals in the last three-and-a-half years with Roger Carr, chairman of both Cadbury and Britain's largest gas retailer, Centrica (CNA.L).
LONG-STANDING TEAM
Robey, Morgan Stanley's co-chair of global M&A, has worked on a string of high-profile deals for the bank, including the defense work that helped UK-listed miner Rio Tinto (RIO.L) see off a $66 billion hostile bid from rival BHP Billiton (BLT.L).
Reid is working with his co-head of UK investment banking Tim Waddell and senior M&A banker James Robertson.
"This team has been advising Cadbury for over two years. They are used to working together in adverse conditions," said a consumer banker who knows them.
"They all have big reputations in London," he added.
Reid and Cook go back further than that, having worked together at Schroders, the UK investment bank that was acquired by Citigroup in 2000, and Goldman Sachs. Reid joined UBS from Goldman in September 2006.
The tactics Cadbury's bankers have used for other clients offer a glimmer into how an engagement with Kraft might unfold.
They helped salvage Cadbury's exit from the drinks business with last year's demerger of Dr Pepper Snapple when private equity firms could no longer afford to buy the assets.
Cadbury's shares rose sharply after the disposal, the final reversal of the buying binge that had seen the company bulk up to become a global beverages player at the expense of its focus on confectionery.
Cook and Reid have also shown they can extract a good price from buyers. Cook was one of the advisers that helped Cadbury sell its European soft drinks business in February 2006 to Blackstone (BX.N) and Lion Capital for $1.85 billion.
That was a fairly good price considering trade buyers were wary after the French government blocked Coca-Cola's (KO.N) acquisition of the business on anti-trust grounds in 1999.
Reid and the UBS contingent also helped underperforming UK brewer Scottish & Newcastle extract two raised offers out of Carlsberg (CARLb.CO) and Heineken (HEIN.AS) before it agreed to sell itself for 7.8 billion pounds in January 2008.
Robey was Rio Tinto's lead adviser in the determined defense against BHP Billiton (BHP.AX). He worked with Rio this year on the canceled $19.2 billion investment from Chinalco.
That was a hard sell to UK shareholders, but a vital lifeline at the height of the credit crisis for a company saddled with $38 billion in debt.
When markets improved, Rio dumped Chinalco in June, opting instead for a $21-billion rights issue and iron ore joint venture with BHP.
Analysts said the final outcome was better for Rio's credit quality than the Chinalco deal, and praised the level of cost savings and synergies that would be achieved.
(Editing by Sitaraman Shankar)
© Thomson Reuters 2009 All rights reserved
Taiwan Mobile to pay Carlyle $1 billion in swap deal
By Faith Hung and Michael Flaherty
TAIPEI/HONG KONG (Reuters) - Carlyle Group and Taiwan Mobile struck a $1 billion deal on Wednesday, with Carlyle taking a big chunk of the telecommunications group in a sign the private equity firm has faith in the island's economy.
The deal creates Taiwan's largest pay TV operator and marks the second major acquisition in Taiwan's telecoms sector in the last five months after China Mobile agreed to buy 12 percent of Taiwan's Far EasTone (4904.TW) for $529 million in April.
Though Taiwan's economy is still recovering, investors are betting that improved relations with China will open up business prospects and profits.
Carlyle will exchange its stake in Taiwan cable company Kbro for a 15.5 percent stake in Taiwan Mobile (3045.TW), while Taiwan Mobile will pay T$32.8 billion ($1 billion) via a share swap and cash. It will also assume T$24 billion of debt.
"This is not an exit for us," Carlyle Managing Director Gregory Zeluck told a news conference. "We continue to be confident in the Taiwan market, and hope to help Taiwan Mobile become a bigger player in the industry."
The share swap values Carlyle's Taiwan Mobile stake at NT$55 per share, representing about a 5 percent premium to Wednesday's closing price of the Taiwan telecom operator.
JPMorgan is the adviser to Carlyle on the deal.
BIGGEST CABLE OPERATOR
The transaction will create the largest pay TV operator in Taiwan, with a 32 percent market share of 1.6 million subscribers, Taiwan Mobile said at the news conference.
"The deal would allow Taiwan Mobile to post a major threat to Chunghwa Telecom (2412.TW) in the ADSL Internet business," said Chang Chi-sheng, a fund manager at Uni-President Asset Management.
The deal will make Carlyle the second-largest shareholder of Taiwan Mobile after the Tsai family.
The Tsai family also controls Fubon Financial (2881.TW), which has become the parent of Taiwan's No. 2 life insurer following its $600 million acquisition of ING's (ING.AS) domestic insurance operation.
The enterprise value of Kbro -- market value and debt -- is $1.8 billion, according to sources close to the deal who were not authorized to speak publicly about the deal.
Taiwan Mobile aims to close the deal some time late this year, pending regulatory approval, President Harvey Chang said.
Shares of Taiwan Mobile ended up 1.16 percent at T$52.50, roughly in line with the broader market's 1.28 percent rise.
($1=T$32.55)
(Additional reporting by George Chen in Hong Kong; Editing by Anshuman Daga and Jacqueline Wong)
© Thomson Reuters 2009 All rights reserved
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