Global Investing Roundup

Iberia Takes Flight; Ralcorp Posts Up; Telmex Ready for Battle

• Spain's largest airline, Iberia Lineas Aeraes de Espa (IBRLF), has become the subject of a takeover offer from a group of investors for $4.4 billion (3.7 billion euros). The group is led by Gala Capital Partners Equity and includes Spanish millionaire Alicia Koplowitz. The private equity group also includes Iner-avante, Spanish-based lender Bilao Nizkaia Kuttxa and Juan Jose Hidalgo, a private investor. Earlier this year, a group led by British Airways PLC (BAIRY), along with U.S. private equity fund TPG Capital, also known as Texas Pacific Group, made an offer of $2.85 billion (3.4 billion euros). Following the initial bid, a group of Spanish shareholders were looking for a higher price for the airline. A third group has also expressed an interest in bidding for the airline. Currently, Iberia is the market leader in flights between Latin America and Europe. Pressured by low cost airlines Ryanair Holdings plc (RYAAY) and London-based easyJet PLC, Iberia has been reducing the number of short-haul flights to focus on longer, more-profitable. It has also been implementing measures to lower labor and operational costs. Earlier this week, Chairman Fernando Conte had said the measures were working and the company would be doubling ordinary dividends to shareholders this year.

• Kraft Foods Inc. (KFT) has agreed to sell its Post Cereal business line to Ralcorp Holdings Inc. (RAH), a leading maker of cereals and frozen foods. The deal will be valued at $2.6 billion, including $1.65 billion in stock and the assumption of $950 million in debt. The Post business had revenues of $1.1 billion in 2006. Brands included in the sale include Raisin Bran, Shredded Wheat, Honeycomb and Pebbles. Kraft has been under pressure from activist investors such as Nelson Peltz to divest its slower-growing businesses. The terms of the deal call for Post to be spun off to current Kraft and Ralcorp shareholders and then be combined with Ralcorp. Kraft will then operate as subsidiary of Ralcorp. Post will be run as a separate division than the private label cereals and will account for roughly 32% of total sales in the new company. The deal will boost revenue at Ralcorp to $3.3 billion, an increase of 50% from the current level of $2.2 billion.
• Telefonos de Mexico SA, better known as Telmex (TMX), the largest telephone company in Mexico, announced yesterday (Thursday) that it plans to spin off its international telecommunications and yellow pages divisions into a separate company. The move hopes to improve the competitive position of each of the companies. The new company, Telmex Internacional, will oversee the residential and commercial phone services offered in Brazil, Columbia, Peru, Chile and Argentina. The five operations generated $4.1 billion of earnings before interest, taxes, and depreciation (EBITDA) in the first nine months of the year. In Peru, Columbia and Brazil, where Telmex Internacional also owns cable networks, the company will be able to offer the so-called "triple-play service" - Internet, phone and cable TV - to customers. The company is expected to face competition in all of its market from other international telecom companies, including Spain's Telefonica (TEF) and Brazil's Tele Norte Leste Participacoes SA (TNE). The transaction is expected to be approved by shareholders and regulators in Mexico and several other countries. Telmex stock closed at $36.11 in New York, up $2.25 per share, or 6.65%, on the day.