MBIA Gets Cash Infusion From Warburg Pincus; Reckitt Benckiser Inhales Adams Respiratory; China Automotive to Rev Up U.S. Sales; Lafarge Cements Future with Orsacom Acquisition
- Leading bond insurance company MBIA Inc. (MBI) announced yesterday (Monday) that it would receive a cash infusion from a leading private equity firm, the Associated Press reported. Warburg Pincus LLC will invest as much as $1 billion into the beleaguered insurance company to help provide capital and offset future deterioration in the credit markets. Initially, Warburg will buy $500 million of stock and will be the backstop on a rights offering of an additional $500 million. MBIA believes that it will have to establish a loss reserve of between $500 million and $800 million as a result of declines in mortgage-backed securities. In addition to the stock-and-rights purchase, Warburg Pincus will receive two series of warrants to purchase additional shares of MBIA. The first series allows it to purchase an additional 8.7 million shares at $40, while the second, or “B” series, permits the purchase of 7.4 million shares at $40, once certain conditions and approvals are met. Senior management at MBIA also intends to invest an additional $2 million in its own shares simultaneously with the Warburg investment. Investors sent MBIA shares up $3.95 each, or 13.17%, to close at $33.95.
- Adams Respiratory Therapeutics, Inc. (ARXT) is being purchased by Reckitt Benckiser Group PLC (RBGPF), a U.K.-based manufacturer of such household products as Lysol, Woolite, and Airwick. The boards of both companies have approved the transaction. Now it will be submitted for regulatory and shareholder approval. At $60 a share, Reckitt will pay a 37% premium for Adams shares. Total value of the Adams deal will be $2.3 billion. Adams is a leading producer of expectorants in the United States. The company’s product line includes Mucinex, Strepsil throat lozenges, Nurofen painkillers, and cough suppressant Delsym. For the fiscal year ended in June, the company had sales of $332 million. Reckitt Chief Executive Officer Bart Becht estimates Adams can double that by 2011.
- One of the leading suppliers of automotive parts in China, China Automotive Systems, Inc. (CAAS), will be distributing power-steering products in the United States along with U.S.-based supplier R&B. The two companies have had engineers working together on the design and development of a product line for vehicles in the United States since May of 2006. China Automotive has been a major supplier in China for many years, but this will be the company’s first foray into the U.S. marketplace. Chief Executive Officer Qizhou We said that “this is an important step for China Automotive Systems. We are confident that our products quality, reliability and favorable cost advantages will continue to attract more customers in North America.”
- Paris-based Lafarge SA (OTC: LFRGY) is buying Egypt’s Orascom Construction Industries SAE (ORSZF) for $12.9 billion AFP reported. Many analysts see this as yet another attempt by world’s largest cement company to grow its operations in the Middle East. The Gulf region in particular has experienced a tremendous growth spurt, driven by rising oil prices and economic expansion. By the time the deal is completed in early 2008, more than half of Lafarge’s total revenue will be coming from business in emerging markets. Lafarge said that 65% of the company’s earnings would come from emerging markets by 2010, up from only 45% today. The acquisition is being financed by $8.8 billion in debt and an offering of 22.5 million new shares at $183.82 per share, which will be purchased by Nassaf Sawaris, Orascom’s majority shareholder. That will give Sawaris an 11.4% stake in Lafarge upon completion of the sale. According to Orascom officials, approximately $11 billion of the sale’s proceeds will be returned to shareholders. After the deal was announced, Moody’s Investor Service (MCO) reiterated its Baa2 ratings on Lafarge debt, but changed its outlook to “negative,” saying the deal would initially weaken the company’s capital structure. However, Moody’s added that with Lafarge’s expected growth and performance improvement from the deal, the company should be able to reduce debt to the level required to maintain the rating.