The Dow Jones Industrial Average jumped Friday after new home sales in the United States surged to a three-and-a-half-year high. The S&P 500 closed above 1,900 for the first time ever.
- M&A Deals Alive and Well – and Dishing Out Huge Profits
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- M&A Frenzy Stays Hot With Pfizer's $3.6 Billion Deal for King Pharmaceuticals
- International M&A Boom Fueled by Global Currency War
- China Steps Up Effort to Derail BHP Bid for Potash
- Is BP Dealing Away Its Future?
- Let's Make a Deal: How the Mergers-and-Acquisitions Boom Will Hurt the U.S. Economy
- HP, Dell Land In Pricey Bidding War as Tech Sector M&A Heats Up
- Investors' Hopes Riding on Surge in M&A Activity
- BHP Billiton's Bid for Potash Could Spark Surge of M&A Activity in Agribusiness Sector
- Money Morning Midyear Forecast: Three Reasons Technology Companies Will Continue to Coast through 2010
- The Airline Industry: How to Make Good Money From a Bad Business
- Delay in Prudential's Deal for AIG's Insurance Unit Threatens U.S. Debt Repayment
- SandRidge Energy Buys Oil Developer to Reduce Its Reliance on Suffering Natural Gas
- Three Ways to Profit From an Insurance-Sector Rebound
- Shareholder Concerns Snag Prudential's $35.5 Billion Deal For AIG's Asian Unit
Deal making is back on Wall Street - in a big way.
Mergers had been nearly non-existent for nearly six years in the wake of the financial crisis as global economic uncertainty, heightened scrutiny of corporate boards, high unemployment and the housing market bust had put a damper on M&A deals.
But 2013 has begun with a flurry of deal making, with $160 billion worth of merger activity thus far, the most at this point in the year since 2005, according to Dealogic.
And the stellar start to the markets this year - the S&P gained 6.6% in January and the Dow is quickly approaching its all-time high - suggests deal making will heat up in the months ahead.
The latest M&A deals come at a time of historically low financing costs, renewed corporate confidence, and companies flush with stockpiles of cash. In this climate, companies are seeking growth through deals and see them as a way to expand while appeasing anxious shareholders.
"The dam is burst. The forces were too powerful to hold back forever," James B. Lee,
vice chairman of JPMorgan Chase & Co. (NYSE: JPM), told The Wall Street Journal.
In just the last week, nearly $25 billion in M&A deals were announced. BP PLC's (NYSE ADR: BP) sale of its majority stake in Pan American Energy, which went for $7.1 billion, was at the top of the list. With that sale, BP will have secured about $21 billion of the $30 billion it hoped to raise from asset sales to help cover damages from its oil spill disaster.
Pfizer, the world's largest drugmaker, is paying $14.25 per share for King. That's a premium of 40% to the stock's Monday closing price of $10.15. As part of the deal, Pfizer will receive such products as Avinza and EpiPen, a pre-filled injection designed to quickly treat serious allergic reactions.
King also gives Pfizer access to the Flector pain patch and morphine pill Embeda. Pfizer has been looking to expand its pain products beyond the arthritis treatment Celebrex and nerve pain remedy Lyrica. King had $1.78 billion in revenue last year and is focused on making pain medications that patients can't abuse.
Pfizer needs new products to help offset revenue losses expected next year when generic copies of its top-selling drug, the Lipitor cholesterol pill, enter the market. Lipitor sales topped $11.4 billion last year.
A binge of mergers and acquisitions (M&A) is being fueled by the global currency war, which has increased the value of emerging market currencies.
The value of worldwide M&A totaled $1.75 trillion during the first nine months of 2010, a 21% increase from comparable 2009 levels and the strongest nine month period for M&A since 2008, according to Thomson Reuters.
But mergers and acquisitions involving companies located in the emerging markets skyrocketed by 62.9% during the same period over 2009, totaling $480.7 billion. During the first three quarters of 2010, emerging markets accounted for 27.4% of worldwide M&A volume compared to 21% during the comparable period in 2009.
And companies are showing more willingness to venture across borders to find the resources they're after.
M&A activity in deals across international borders has surged during the first nine months of 2010, totaling $723 billion accounting for 41.2% of overall M&A volume, compared to 26.1% last year at this time.
Fearing that it could have a negative impact on Chinese imports, the state-run Sinochem Group has hired Deutsche Bank AG (NYSE: DB) and Citigroup Inc. (NYSE: C) to help disrupt BHP's bid for the fertilizer company, people familiar the matter told the FT. A Chinese bank, thought to be Industrial and Commercial Bank of China, was also part of the team.
Citigroup, which acts as joint corporate broker to BHP along with Bank of America Corp.'s (NYSE: BAC) Merrill Lynch unit, has asked to be relieved of its role in BHP's bid in order to advise Sinochem on a potential counter-bid.
But here's the reality: Money problems - not the relief wells - could prove to be the undoing of BP PLC (NYSE ADR: BP). And that means the company's fate is most closely tied to its ongoing efforts to raise money by selling key assets from around the world.
BP is looking to divest $30 billion in assets during the next 18 months.Selling its assets is one way for the company to raise the money needed to cover its expected liabilities. But here's the problem: Those sales are moving right into the teeth of a new round of mergers-and-acquisitions (M&A) deals that were already taking place in the oil-and-gas sector, due to rising volatility there and the inability of some to withstand the uncertainty.
As a result of all this wheeling and dealing, the big will get bigger - and BP will get smaller. Indeed, the BP that emerges from the mess that it created should be smaller, leaner and smarter. But will that be good enough?
With the moribund growth prospects of the U.S. economy, there would seem to be no great urgency for companies to go on an M&A spree, yet the total value of announced buyout deals for August alone has topped $175 billion.
Cynics are reaching only one conclusion: With interest rates so low and corporations so cash-rich, it seems that company management teams would rather do anything with that cash than to give it back to shareholders via stock buybacks or boosted dividends.
And those deals signal additional trouble ahead for the U.S. economy.
In a Securities and Exchange Commission (SEC) filing late Tuesday, 3Par wrote that HP's $1.6 billion offer was "reasonably likely" to win support from its board. HP announced the $24 per share bid Monday, topping Dell's Aug. 16 offer of $1.15 billion, or $18 a share, by 33%.
The steep price increase comes at a time when tech companies are vying to acquire businesses that broaden their product offerings, and tech powerhouses are quickly snatching up quality companies.
Global takeovers announced so far this year have totaled $1.29 trillion, up 23% from the same time last year, according to Bloomberg News.
Last week a flurry of bleak economic news headlined by larger than expected unemployment claims spurred a 280-point drop in the Dow Jones Industrial Average.
But, investors took some solace from a flurry of M&A activity and an initial public offering (IPO) from General Motors Co., because acquisitions are seen as a sign companies are confident the economy will grow and business will improve.
Canada-based Potash, the world's largest producer of potash, yesterday (Tuesday) rejected an unsolicited takeover bid from the Australia mining giant, calling the offer "grossly inadequate."
The fertilizer company also quickly adopted a so-called poison-pill defense to fend off would-be suitors, though it said it would be open to a transaction if the price were right.
"We're going to have much stronger results in the second half [of 2010] than anyone's expecting," Mark Stahlman, a partner at research firm TMT Strategies, told CNBC.
Business was booming back in 2007, but technology companies froze when businesses and consumers were engulfed by the financial crisis. Global tech spending dropped 4.2% in 2009, but is already bouncing back in 2010.
The delay, or any disruption to the proposed takeover deal, could mean a major setback for AIG's efforts to raise funds to pay back its debts to the U.S. government.
Prudential had planned to issue a prospectus with details of the offering yesterday (Wednesday), including how many new shares will be issued and at what price to shareholders. But the British government's Financial Services Authority (FSA) put the deal on hold with a last minute request for further unspecified information.
SandRidge will pay $2.50 in cash and 4.78 SandRidge shares for each Arena share - a 17% premium to Arena's $34.26 Thursday closing price. The combined company will be valued at around $6.2 billion.
This purchase makes SandRidge one of the largest producers of conventional oil and gas in West Texas. It's the second acquisition for the company since November, when it paid $800 million for Forest Oil Corp. (NYSE: FST) properties.