|To: richardred who wrote (2938)||10/19/2011 11:09:08 AM|
|From: Glenn Petersen|
|The market likes the news. I have a couple of friends who work for Abbott on the sales side. Both feel that the company has been well managed. |
As Economy Goes, So Go Takeovers, Even as Bargains Abound
By STEVEN M. DAVIDOFF
New York Times
October 18, 2011, 7:28 pm
The merger market is like a pack of lemmings. If the economy is good , the takeover market will follow, but when times are bad, the market stalls.
For the moment, there are still mega-deals, like Kinder Morgan’s $21.1 billion acquisition of the El Paso Corporation, and takeover activity is up. The volume of global mergers and acquisitions was up 22 percent, to $2.748 trillion, for the last 12 months ending in August from the period a year ago, according to Thomson Reuters. The increase in deal volume was driven in part by a threefold increase in hostile offers and strong company balance sheets.
Yet many major economies in the world are growing sluggishly, if at all. The negative economic outlook is likely to counteract some otherwise strong drivers for deal-making.
The International Monetary Fund estimates growth for advanced economies at just 1.6 percent this year and only 1.9 percent in 2012, compared with a historical average of about 3 percent. In the United States, unemployment remains stubbornly high, and 2011 G.D.P. growth was recently estimated by a National Association for Business Economics poll of economists to be about 1.57 percent.
The European sovereign debt crisis has worsened the economic growth problem. And the uncertainty over how far the crisis will spread in Europe is bound to drive down takeover volume.
Then there is the stock market. In a presentation last week at the Penn State M&A Institute, Jane Wheeler, a senior managing director at Evercore Partners, noted that since 1985, takeover volume had grown in only two years when the Standard & Poor’s 500-stock index had declined.
So we have the lemmings problem again. Takeover volume follows the stock market, and the market is down. Its recovery is fragile given the negative trends.
Also weighing on the merger market are signs that the Obama administration is stepping up antitrust enforcement. Last year, the federal government made a second request for information, an indication of an in-depth investigation of a transaction, in 4.1 percent of deals, compared with 2.5 percent in the last year of the Bush administration, according to a joint report submitted to Congress by the Federal Trade Commission and Department of Justice.
Mergers are also being challenged more often, and antitrust enforcement appears to be becoming even more aggressive in recent months. Although Continental and United Airlines cleared antitrust review by the Obama administration in August 2010, the federal government is suing to stop AT&T’s acquisition of T-Mobile USA after effectively blocking Nasdaq’s bid to acquire NYSE Euronext and Avis’s effort to acquire Dollar Thrifty.
All this spells a decline in takeover volume. Deal makers do not want to take undue risks, and fear of uncertainty and a downturn is real even beyond the heightened regulatory scrutiny.
Yet there remain some forces that should be putting wind in deal makers’ sails.
The takeover market’s pattern of following equity prices is counterintuitive. When stocks are down, valuations are low and takeovers should make the most sense from a value perspective. Right now, price-earnings multiples are about 15 times earnings, compared, according to Standard & Poor’s, with a historical average approaching 20 times earnings. One would think companies would be rushing to scoop up low-priced assets.
This is particularly true since credit is easy, at least for some. The high-yield market is choppy at best, but good companies can borrow at incredibly low rates for long periods. The Norfolk Southern Corporation, for example, priced a $400 million 100-year bond with a yield of 6 percent.
Even beyond credit there is cash, and companies have plenty of it. Standard & Poor’s estimates that American companies have more than $2 trillion of cash on their balance sheets. Although much of it is held abroad as companies wait for the federal government to lower the dividend tax on the repatriation of cash, certainly hundreds of millions of dollars can be spent domestically.
Private equity firms are also sitting on big cash hoards. Globally, private equity still has almost $1 trillion in dry powder, according to a study by Bain. Leveraged buyouts currently average a mix of about 40 percent equity and 60 percent debt. Private equity therefore has enough firepower for more than $2 trillion in buyouts.
So where are they? The industry remains notably hesitant to make deals. Only 6.5 percent of global M.& A. transactions through the first nine months of 2011 were private equity acquisitions, according to Dealogic.
While it is hard to know what in particular is holding private equity back, they too are most likely following the economic cycle, afraid to invest in a volatile, potentially down market.
Must-do deals will still happen, like the El Paso acquisition, which Kinder Morgan’s chairman and chief executive, Richard D. Kinder, called a “once-in-a-lifetime transaction.”
Yet the overall trend is that of M.&A. rushing toward a cliff. Companies that might have pulled the trigger on an acquisition will instead spend their cash on dividends and stock buybacks.
Sure, some brave companies will take a plunge and try to acquire at a lower value. And the slowdown in initial public offerings may also spur takeover activity.
These are likely to be small blips. For the next few months, investment bankers are going to have a hard year as they try to point to the positive factors in the market to sell deals. But they are going to be running against those lemmings.
Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions.
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|To: richardred who wrote (2747)||10/20/2011 1:24:42 PM|
|Plans unveiled for Taylor Devices|
I see the paper at work sometimes.
IMO TAYD will benefit now as their is some lead time from orders from the destruction in Japan.
President Douglas Taylor said the company’s current location on Tonawanda Island, where it has been since 1960, is too small.
Besides the purchase and renovation of the buildings, the $2.7 million project involves the use of lots on the site for parking. The main entrance will be on Oliver Street, Taylor said.
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|To: richardred who wrote (2500)||10/24/2011 10:13:45 AM|
|Oracle To Buy RightNow For $43/Shr Or $1.5 Billion |
Here they go again.
Oracle is jumping back into the M&A business, this morning announcing a deal to acquire cloud-based customer service software provider RightNow Technologies for $43 a share, or about $1.5 billion net of cash and debt.
The company said the the deal has been approved by the RightNow board, and should close by late 2011 or early 2012, subject to holder approval and certain regulatory approvals.
“Oracle is moving aggressively to offer customers a full range of cloud solutions including sales force automation, human resources, talent management, social networking, databases and Java as part of the Oracle Public Cloud,” Oracle VP Thomas Kurian said in a statement. “RightNow’s leading customer service cloud is a very important addition to Oracle’s Public Cloud.”
RNOW this morning is up $6.90, or 19.2$, to $42.86.
ORCL is down 14 cents, or 0.4%, to $31.98.
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|From: richardred||10/24/2011 10:26:52 AM|
Insurer Cigna to buy HealthSpring for $3.8BInsurer Cigna to buy HealthSpring for $3.8 billion to boost Medicare Advantage business
On Monday October 24, 2011, 9:14 am
BLOOMFIELD, Conn. (AP) -- Managed-care company Cigna Corp. said Monday it buy fellow health insurer HealthSpring Inc. in a $3.8 billion deal that would boost Cigna's Medicare Advantage business.
The Bloomfield, Conn., company will pay $55 per share in cash for HealthSpring, which is based in Nashville, Tenn. That represents a 37 percent premium over the stock's Friday closing price of $40.16.
HealthSpring shares soared 33 percent, or $13.34, to $53.50 in premarket trading, while Cigna stock was up more than 3 percent, or $1.55, to $46.25.
Cigna said the boards of directors for both companies have approved the deal, and it is expected to close in the first half of 2012.
Medicare Advantage plans are privately run versions of the government's Medicare program. They are subsidized by the government and offer basic Medicare coverage topped with extras or premiums lower than standard Medicare rates.
HealthSpring has about 340,000 Medicare Advantage customers in 11 states, including Florida, New Jersey, Pennsylvania and Texas. It also has a Medicare prescription drug business with more than 800,000 customers.
Cigna said it has a commitment from Morgan Stanley for bridge financing, and that plus available liquidity will fund the acquisitions.
Cigna is the fourth-largest commercial health insurer based on enrollment, trailing WellPoint Inc., UnitedHealth Group Inc. and Aetna Inc. It operates health care, group disability and life segments in the U.S. The insurer also has a growing international segment that sells individual insurance in several countries and operates an expatriate business that covers people living outside their home countries.
Big insurers like Cigna have reported strong results in recent quarters. Analysts have speculated that companies would look to make acquisitions with the cash they were piling up.
Cigna said Monday it will move up its third-quarter earnings report to Friday from Nov. 3.
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|To: Glenn Petersen who wrote (2761)||10/25/2011 1:00:13 AM|
|Jim Beam Inviting Biggest Liquor Takeover Since 2005: Real M&ABy Devin Banerjee and Duane D. Stanford - Oct 24, 2011 4:37 PM ET Mon Oct 24 20:37:57 GMT 2011 |
Jim Beam Inviting $11B Liquor Takeover
With bourbon sales outpacing vodka in the U.S. as drinking at home increases, Beam’s command of a third of the domestic market with Jim Beam and Maker’s Mark may lure Pernod, Europe’s second-biggest distiller, or Diageo, the world’s largest spirits company.
With bourbon sales outpacing vodka in the U.S. as drinking at home increases, Beam’s command of a third of the domestic market with Jim Beam and Maker’s Mark may lure Pernod, Europe’s second-biggest distiller, or Diageo, the world’s largest spirits company. Photographer: Tim Boyle/Bloomberg
Jim Beam Inviting Biggest Liquor Takeover Since 2005
John Sommers II/Bloomberg
Sales of the Jim Beam brand rose almost 8 percent in the 52 weeks ended Sept. 4, compared with a 4 percent increase for the category, according to SymphonyIRI Group, a Chicago-based market researcher.
Sales of the Jim Beam brand rose almost 8 percent in the 52 weeks ended Sept. 4, compared with a 4 percent increase for the category, according to SymphonyIRI Group, a Chicago-based market researcher. Photographer: John Sommers II/Bloomberg
Jim Beam bourbon and Skinnygirl cocktails may be enough to persuade Pernod-Ricard SA (RI) and Diageo Plc (DGE) to attempt the biggest spirits acquisition in six years.
Beam Inc., the liquor company formed in the breakup of Fortune Brands Inc. this year, would be worth about $59 a share in a takeover, said Goldman Sachs Group Inc. That would value the Deerfield, Illinois-based owner of Courvoisier cognac and Cruzan rum at $10.8 billion including net debt, making it the largest deal in the liquor industry since 2005, according to data compiled by Bloomberg.
With bourbon sales outpacing vodka in the U.S. as drinking at home increases, Beam’s command of a third of the domestic market with Jim Beam and Maker’s Mark may lure Pernod, Europe’s second-biggest distiller, or Diageo, the world’s largest spirits company, said Davenport & Co. and Goldman Sachs. While Pernod’s $14.2 billion in debt and Diageo’s distribution of tequila and cognac brands may be hurdles to a takeover, according to GFI Group Inc., Beam is an appealing entry into the bourbon market because it isn’t family controlled like Jack Daniel’s owner Brown-Forman Corp. (BF/A), said Liberum Capital Ltd.
“Beam’s bourbon play is attractive for the potential buyers,” Alfredo Scialabba, a special situations analyst at GFI Group in New York, said in a telephone interview. “They have a very strong position in the U.S., which is the most profitable market, so it would be a very nice addition to one of the other global players.”
Stephanie Schroeder, a spokeswoman for Paris-based Pernod, declined to comment on whether the company is interested in acquiring Beam.
Alcohol, Golf Balls “We will continue to look at opportunities for acquisitions where we see a chance to strengthen our company,” said Stephen Doherty, a spokesman for London-based Diageo. “Targets we pursue will be those which make strong strategic sense for our business and where the valuation is sensible.”
Beam’s shares rose as much as 1.9 percent before ending today’s trading in New York up 0.5 percent at $49.41.
Fortune Brands, an assemblage of alcohol, home and golf products, announced in December that it would split in three to focus on liquor after its largest investor, William Ackman, sought to dismantle the company to boost shareholder value. The Titleist golf unit was sold this year, and Beam and Fortune Brands Home & Security Inc. began trading independently after the Oct. 4 separation.
‘Prosperous Future’ “The new Beam is off to a great start, and we’re primed to accelerate profitable long-term growth,” said Clarkson Hine, a spokesman for Beam. “With the powerful combination of our brands, strategy, innovation engine and financial flexibility, we see a bright and prosperous future as a leading player in the dynamic spirits industry.”
He said there are many rumors in the industry that never come true and declined to comment on whether Diageo or Pernod have approached Beam.
Beam generates more than 30 percent of its sales from bourbon, primarily Jim Beam and Maker’s Mark, Judy Hong, a New York-based analyst at Goldman Sachs, wrote in an Oct. 4 report. Beam’s bourbon brands account for about a third of the total volume of bourbon sold in the U.S., Hong estimated. Bourbon is a type of whiskey that can only be produced in the U.S., must be aged in new, charred white oak barrels and made of a grain mix of at least 51 percent corn.
‘Great Business’ Earlier this year, the company bought Skinnygirl cocktails, created by Bethenny Frankel of reality TV show “The Real Housewives of New York City.” The brand caters to women with 100 calories per serving.
“We think it’s a great business and it’s a great collection,” Ackman said of Beam in a phone interview last week. “We love the business.” He declined to comment on the potential for a sale. Ackman’s Pershing Square Capital Management LP was the company’s largest investor with 13.5 percent of the shares as of Aug. 9 before the split, data compiled by Bloomberg show.
Jim Beam is the third-largest whiskey brand in the U.S. behind Brown-Forman’s Jack Daniel’s and Diageo’s Crown Royal. Sales of the Jim Beam brand rose almost 8 percent in the 52 weeks ended Sept. 4, compared with a 4 percent increase for the category, according to SymphonyIRI Group, a Chicago-based market researcher. Crown Royal grew 5 percent while Jack Daniel’s declined slightly in the same period.
Bourbon, Vodka “It’s a very valuable bourbon franchise, in particular, and a global bourbon platform,” Ann Gurkin, a Richmond, Virginia-based analyst at Davenport, said in a phone interview. “There is big potential for growth.”
Sales of bourbon have outpaced vodka in the U.S. this year, according to Nielsen Holdings NV, a New York-based research company. Growth is being driven, in part, by new flavored bourbon drinks, such as the black cherry-flavored Jim Beam Red Stag that was introduced in 2009.
While alcohol consumption has declined at restaurants and bars, drinking at home has risen steadily in the U.S. after the longest recession since the Great Depression ended in June 2009. The Real Personal Consumption Expenditures of Alcoholic Beverages for Off Premises Index has gained 13 percent since then and reached a record in August, the last month for which figures were available, according to data compiled by Bloomberg.
Jack Daniel’s Beam is also an attractive acquisition target because it’s one of the only spirits companies not controlled by a family, Pablo Zuanic, a New York-based analyst at Liberum Capital, said in a phone interview. Jack Daniel’s Tennessee Whiskey and Early Times 354 Kentucky Bourbon Whiskey are made by family-owned Brown-Forman.
“There’s not a lot of hurdles if an acquirer wants to pursue an acquisition at Beam,” Goldman Sachs’ Hong said in a phone interview. “There’s a scarcity of assets out there. A lot of the multinational companies like Diageo or Pernod really don’t have a major presence in the global bourbon category.”
Beam is worth about $59 a share in a takeover by valuing the company’s equity and debt at about 14.3 times estimated earnings before interest, taxes, depreciation and amortization of $757 million in the next 12 months, according to Hong. That multiple is based on past deals in the spirits industry, said Hong, who estimates there’s a 30 percent to 50 percent chance of Beam being acquired.
Allied Domecq At $10.8 billion including net debt, a takeover of Beam would be the biggest deal in the spirits industry since Pernod agreed to buy Allied Domecq Plc in 2005 for 9.32 billion pounds ($17.8 billion), data compiled by Bloomberg show.
Since it was separated earlier this month, Beam had already gained 17 percent to $49.17 as of last week, giving it a market value of about $7.6 billion. That means a takeover at $59 a share would only represent a 20 percent premium.
Applying the average premium of 31 percent in spirits takeovers greater than $1 billion, Beam would be worth about $64.41 a share, or $9.95 billion plus about $1.7 billion in net debt, data compiled by Bloomberg show.
“There’s a lot of excitement and speculation around this stock,” said GFI Group’s Scialabba. “But, of course, it’s expensive right now.”
Beam may instead be a buyer. Chief Executive Officer Matt Shattock said last month the standalone liquor company is prepared to make large acquisitions if the right opportunity arises. He declined to identify potential targets.
‘Won’t Feel Constrained’ “We won’t feel constrained in terms of the scale,” Shattock said in a Sept. 14 phone interview. “We have a strong and very flexible capital structure and that gives us the opportunity to contemplate various types of transactions.”
Still, Pernod, which makes Chivas Regal whiskey and Absolut vodka, may be interested in acquiring Beam, according to Goldman Sachs’s Hong and Davenport’s Gurkin. Beam would give the distiller, which currently has no U.S. bourbon brand, a 31 percent share of the American bourbon market and carry Pernod into the Canadian market, according to Liberum Capital’s Zuanic.
“If Pernod were to buy Beam, in the U.S. it would be almost as big as Diageo,” Zuanic said. “It’s more strategic to Pernod.”
Pernod is seeking to cut its borrowings to about four times adjusted Ebitda by June 2012, from 4.4 times as of June 30. Pernod, which was boosted to investment grade by Moody’s Investors Service last month, was able to raise $1.5 billion from its biggest dollar bond sale last week with the lowest coupon it’s ever paid for 10-year debt. The distiller had total debt of almost 9.8 billion euros ($14.2 billion) as of June 30, data compiled by Bloomberg show.
‘Many Toys’ There will be no “transformational acquisitions from our side in this and the next fiscal year,” Pernod CEO Pierre Pringuet said last week in a phone interview.
“You can be like a child looking at the shop windows, saying ‘there are many toys I’d like to buy,’” Pringuet said. “But we have one focus today, to continue to deleverage the group.”
Diageo “continues to be the frontrunner in terms of chatter about a Beam takeout,” Vivien Azer, an analyst at Citigroup Inc. in New York, said in a phone interview. Diageo, which is facing slower sales growth in Europe and the U.S., may want to buy Beam to gain share in the American bourbon market. Acquiring Beam would boost Diageo’s share of the U.S. bourbon market to 44 percent from 13 percent, according to Liberum Capital’s Zuanic.
‘Defensive Move’ “It’s strategic for Diageo because it would put them in a very, very strong position in the U.S.,” Zuanic said. “It would also be a defensive move, to some extent, against Pernod.”
The seller of Johnnie Walker Scotch whisky, Smirnoff vodka and Guinness beer could also expand Beam’s bourbon sales in Europe and Asia, where Brown-Forman has done relatively well selling its Jack Daniel’s Tennessee whiskey, Zuanic said.
Diageo would need to resolve conflicting distribution agreements, including with LVMH Moet Hennessy Louis Vuitton SA (MC), said GFI Group’s Scialabba. Diageo already has distribution deals with Jose Cuervo tequila and LVMH’s alcohol division for Hennessy cognac. Beam makes Courvoisier cognac and Sauza tequila.
United Spirits Ltd. (UNSP) of Bangalore, India, has said it’s interested in buying Beam’s Teacher’s Scotch whisky, the best- selling Scotch whisky in India, the Wall Street Journal reported Sept. 29, citing comments by United Spirits Managing Director Ashok Capoor. Capoor told the Journal that the companies hadn’t approached each other. The company didn’t respond to an e-mail sent to its media relations department requesting comment.
“The spirits market itself is relatively fragmented, so the consolidation is a trend that we think will continue,” said Goldman Sachs’ Hong. “Beam, with their Jim Beam brand, has the strategic appeal of being one of the few global bourbon brands.”
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