| From: Glenn Petersen | 8/6/2014 12:25:03 PM | | | | | | As Big Merger Deals Boom, So Do Big Failures
By WILLIAM ALDEN
DealBook
New York Times
August 6, 2014 12:03 pm
Deal making has boomed this year. So has deal breaking.
The two merger attempts that fell apart on Tuesday — Rupert Murdoch’s bid for Time Warner and Sprint’s pursuit of T-Mobile US — are just the latest examples of mergers that weren’t.
So far this year, $428.2 billion of deals have been withdrawn, according to Thomson Reuters data. That is the highest level for this period since 2007, when $566.8 billion of deals were withdrawn. And it far surpasses the level of withdrawn deals for all of 2013, which was $278.5 billion.
The data counts unsolicited offers as deals. In fact, unsolicited or hostile bids accounted for 73 percent of the stymied activity so far this year. The deal values as calculated by Thomson Reuters include net debt.
Biggest Withdrawn Deals
VALUE,IN BILLIONS - TARGET - BUYER - WITHDRAWN
Three of the major bids that haven’t gone through were unsolicited, including the $94.3 billion offer for Time Warner that 21st Century Fox withdrew on Tuesday. Another was Pfizer’s $122.3 billion bid for the British drug maker AstraZeneca, which Pfizer abandoned after it was rejected.
The third was Charter Communications’ $62.6 billion pursuit of Time Warner Cable. That bid was foiled when when Comcast struck a deal to acquire Time Warner Cable for a higher amount. (As it withdrew its bid, Charter did a series of deals to pick up subscribers that Comcast was divesting.)
Another obstacle has been regulators. In abandoning the effort to merge with T-Mobile US, Sprint and its corporate parent concluded that antitrust regulators would not look kindly on a major tie-up in the telecommunications industry, which is dominated by a few large players.
So far this year, $2.5 trillion of deals have been announced, according to Thomson Reuters. But 15 percent of those efforts were later withdrawn.
“This has clearly been the year of the big deal,” said Richard M. Jeanneret, the vice chairman of transaction advisory services for Ernst & Young in the Americas. “I think it’s natural to assume that bigger deals are harder to get done, for a variety of different reasons, from financing to shareholder approval to regulatory support. It’s possible that you could see more deals, if they’re sizable, get more scrutiny.”
But Mr. Jeanneret said he was still optimistic about the deal market, arguing that confidence was running high and deal makers were anxious to act on long-delayed plans.
“Any time you’ve got momentum — and I think the momentum in this market is born out of confidence — I think you’re going to see bigger deals get done,” he said. “Others will try. You’ll see more things attempted.”
dealbook.nytimes.com |
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| From: richardred | 8/6/2014 1:36:52 PM | | | | | | OT- While cleaning the basement today. I found my first page interview for Individual Investors, for the magazine interview. I was in the running for the magazine shoot, but didn't make the final cut. The II site was owned by Juno Steinberg. The son of renowned investor Saul Steinberg, and husband of Maria Bartiromo. As I recall,It was near end of the dot com bubble the sight ended, and the magazine was sold to Kiplingers. It was upon it's demise. I decided to accept an SI invitation. This after reading and conferring with Jack Hartman on his impressive Quarter to Quarter Aggressive Growth Stocks board.
P.S. I wish I'd had hung on to that Perrigo stock. <G> Boy how the time does fly. I'm a lot older and grayer now, but the investing passion is still there. We did horse races back at II. Similar to what Elroy and Taro are doing to day at Picks of the Qtr. IMO contests keep you on your toes.
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| To: richardred who wrote (3729) | 8/7/2014 3:25:19 PM | | From: Glenn Petersen | | | | So, rather than structure the corporate tax code to provide companies with an incentive not to redomesticate overseas, we have decided to hit them with a blunt instrument. Using the threat of the IRS is simply thuggish. Both parties are at fault for not addressing this issue.
Walgreen becomes government whipping boy
By Jeff Macke
August 7, 2014
Yahoo Finance
We have met the enemy and he is us. Yesterday, in a series of hits as operatic and brutal as the last 15 minutes of the Godfather, the government effectively made inversion through corporate merger an offense punishable by corporate death.
Using the threat of an unlimited Treasury investigation, the President and Senator Dick Durbin stopped Walgreen ( WAG) from moving to Switzerland. The wreckage of some $10 billion in lost stock value for mostly Main Street investors was left as a grim reminder not to cross the government by, in this case, following the letter of our own stupid laws.
As a refresher, inversion is what it's called when a U.S. corporation buys a foreign outfit and in effect moves their headquarters to that country, which inevitably has a lower tax rate. It's not a classy move but it's legal because that's the way Congress wrote the tax codes. The U.S. has a 35% corporate tax rate but no one actually pays that much. If the government wanted to maximize its tax revenue you could write our whole tax code on a dinner napkin. Instead it's tens of thousands of pages. To those with the best accountants go the biggest savings.
No one likes inversion except investment bankers and accountants. A company like Walgreen has plenty on its plate trying to be the world's largest chain of pharmacies and employing 175,000 Americans full time. Still, they're public and that makes maximizing profits job number one. The check on that greed is supposed to be the law. Since Congress and the White House can't even agree to change rules that everyone hates we've been talking about countries stashing some $2 trillion overseas and doing another quarter of a trillion in inversion M&A deals since 2011.
It's demagogic blather to say it's unpatriotic to seek lower tax rates. This country was literally founded on a tax beef. "Taxation without representation." Ring a bell? The corporations are doing their job. The government is there to hold their greed in check. All of this has been debated and settled for hundreds of years. The U.S. has a Kant / Locke hybrid model that generally works pretty well.
Ironically the public had already stopped Walgreen. It's unlikely they would have moved simply given the PR nightmare it would have created, but we'll never know for sure. There was political capital to be had and this is an election year so the government more or less forced Walgreen to complete the merger in a wildly inefficient way. While the President walked around like he'd just won Wrestlemania, Walgreen shareholders got shelled to the tune of 15% and $10 billion. If your immediate reaction is "good!" you're getting played. The biggest shareholder of Walgreen isn't some evil rich guy. It's you and me. Vanguard has about 50mm shares. State Street has 37 million. Those are widow and orphan pension mutual fund companies. The government couldn't do it's job so it hammered Main Street investors and played it off like a triumph of good over evil.
It's easy to make big business the enemy but it's also wrong. The enemy is us and the people we elect. The villain here is ignorance. We'll all be richer in mind and money if we seek to hold the right folks accountable for our collective failings.
finance.yahoo.com |
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| To: Glenn Petersen who wrote (3730) | 8/8/2014 12:29:10 PM | | From: richardred | | | | I guess this still leaves the door open for foreign companies to buy US companies and bring surplus currency back to their home country at their lower tax rate.
P.S.
Aside from the Federal level.
IMO Tax breaks do play a role in corporate planning at the local level also. I think some of the high local tax states like NY are finding this out.
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| To: richardred who wrote (3731) | 8/8/2014 1:10:44 PM | | From: Glenn Petersen | | | | Tax breaks do play a role in corporate planning at the local level also. I think some of the high local tax states like NY are finding this out.
Absolutely. Illinois has also lost a large number of companies because of its high corporate and individual tax rates. Both Wisconsin and Texas have actually run ad campaigns in the state. Local municipalities try to offset the damage by offering various incentives, including relief on real estate taxes. |
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| To: Glenn Petersen who wrote (3732) | 8/8/2014 2:46:33 PM | | From: richardred | | | | | This reminds me of a small company I hold in Chicago called COBR-COBRA ELECTRONICS. They don't make a lot of money, but have tax loss carryforwards. These type of companies used to be targeted acquisitions by complimentary companies just for the tax loss carryforwards. Our represenatives took away the incentives for doing so many years ago. It's nice they make their products in America, but the lack of being competitive has dealt a blow IMO. |
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| To: richardred who wrote (3731) | 8/8/2014 3:04:47 PM | | From: Glenn Petersen | | | | I guess this still leaves the door open for foreign companies to buy US companies and bring surplus currency back to their home country at their lower tax rate.
An Inversion in All but Name
By JEFFREY GOLDFARB
DealBook
New York Times
August 8, 2014 2:08 pm
Behold the unversion.
United States-based data protection firm SafeNet may very well be able to slash its tax rate as part of a cross-border deal. Instead of doing so by acquiring an overseas company – a move known as an inversion – it is selling itself for $890 million to Dutch digital security outfit Gemalto. The deal shows the limitations of a possible Washington ban on inversions.
Corporations have been trying to leave the shores of the United States apace. Exploiting a portal in the tax code, they are buying smaller rivals in other countries as a way to change domicile and in some cases sharply reduce what they owe to Uncle Sam. The backlash, now joined by President Obama, has become strident. The decision by drugstore chain Walgreen to opt out of a potential inversion this week could be one notable consequence.
Sales of American companies to overseas buyers, though, are not in the cross-hairs. Yet SafeNet’s deal could have a similar effect to an inversion. Presumably its tax home can shift from Baltimore to Amsterdam, where its new $8 billion parent company is located. Over half SafeNet’s sales last year were generated outside the United States, Gemalto said on Friday, and would therefore be eligible for a reduced tax rate under a new domicile.
SafeNet was taken private in 2007 by buyout firm Vector Capital so recent financial information is not public. According to a prospectus filed as part of a plan to float again a few years ago, SafeNet indicated it may have some buffers to curb its tax bill temporarily. In its last annual report as a public company, however, the company reported an effective income tax rate of 36 percent in 2003, 42 percent in 2004 and 50 percent in 2005. Last year, Gemalto’s tax rate was 12 percent.
As mergers go, the SafeNet deal is relatively plain vanilla. The buyer’s shares even went up on the news, as often happens these days. For the anti-inversion crowd, though, it may signify something more important. A Washington crackdown won’t necessarily stop United States companies from emigrating. In lieu of seeking a target with a cheaper tax domicile, they may just hang out for-sale signs to attract foreign suitors.
Jeffrey Goldfarb is U.S. editor at at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
dealbook.nytimes.com |
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| To: richardred who wrote (2798) | 8/9/2014 12:10:14 PM | | From: richardred | | | | Siemens Can Reach Dresser-Rand With Record Bid: Real M&A
By Brooke Sutherland and Jennifer Surane August 08, 2014
Siemens AG (SIE) may have to offer a record price tag to finally get the oilfield equipment maker it’s been coveting for three years.
Dresser-Rand Group Inc. ( DRC:US) has hired Morgan Stanley after potential suitors expressed interest in an acquisition, according to people familiar with the matter. Siemens, which has evaluated Dresser-Rand as a takeover candidate since at least 2011, may be willing to pay more than $80 a share to add the $4.8 billion company’s dominant position in compressors as it seeks to expand in the energy industry, said Gabelli & Co.
“Siemens and Dresser-Rand are natural partners, particularly as Siemens pushes down this strategic path to build out an oil and gas offering,” Justin Bergner, a Rye, New York-based analyst at Gabelli, said in a phone interview. “Siemens has the most compelling business case and therefore a reason to pay the most.”
A bid at that $80-a-share price would value Dresser-Rand ( DRC:US) at almost 18 times its profit in the last year, surpassing the previous record multiple that General Electric Co. paid for Lufkin Industries Inc. in 2013. Dresser-Rand is worth the expense, according to William Blair & Co., which says buyers will be drawn to the Houston-based company’s promising new subsea technology and steady cash flow from maintenance services. Swiss pumpmaker Sulzer has also weighed making an offer, people familiar with the matter said.
Cash Pile After bowing out of the bidding for Alstom SA’s gas turbine business earlier this year, Siemens is armed with “huge” firepower for deals, Chief Executive Officer Joe Kaeser said in an interview last month. One preferred use for the conglomerate’s $12.5 billion cash stockpile -- which is poised to swell even more after the sale of two health-care units -- is energy acquisitions in the U.S.
Production in the country has soared as the combination of horizontal drilling and hydraulic fracturing, or fracking, unlocked supplies trapped in shale-rock formations. Siemens wants to take better advantage of that boom, Kaeser said.
“Our products are good, but our installed base is not that great,” he said in the interview. “If you’re not in the installed base it’s hard to get it in, because no one takes stuff out and puts your stuff in, there’s just too much at risk.”
Dresser-Rand would give Kaeser the largest system of compressors in America and complement Siemens’ pending $1.3 billion purchase of Rolls-Royce Holdings Plc’s energy aero-derivative gas turbine and compressor business, said Bergner of Gabelli, a unit of Gamco Investors Inc.
Worth It He estimated Siemens could bid more than $80 a share for the company, a 27 percent premium to yesterday’s close ( DRC:US). That would value Dresser-Rand at 17.6 times its earnings before interest, taxes, depreciation and amortization in the last year, a record for similar-sized oilfield equipment deals, according to data compiled by Bloomberg. GE paid about 16.6 times Ebitda for Lufkin last year.
“They’re worth the premium,” Chase Jacobson, a New York-based analyst at William Blair, said in a phone interview. “Being part of a larger company would open up new opportunities where it could be more price-competitive. It just gives them better negotiating power.”
Sulzer could also be a logical buyer, Bergner of Gabelli said. The company, which will get almost $1 billion in proceeds from the sale of a coatings unit, is seeking acquisitions in rotating equipment such as pumps and compressors, said CEO Klaus Stahlmann.
Cash Preference While Dresser-Rand would fit what Sulzer is looking for, Siemens has more cash and shareholders would probably prefer a sale to the German conglomerate, said one of the people familiar with the matter, who asked not to be named because the information is private.
Getting Dresser-Rand’s management to agree to a deal won’t be easy. CEO Vincent Volpe Jr. isn’t interested in a sale and is seeking defense advice from Morgan Stanley, one of the people said. In the past, Volpe’s high price expectations have been the biggest obstacle to a takeover, other people said.
Valued at 14.4 times Ebitda ( DRC:US), Dresser-Rand is already trading at a premium to the median multiple paid in oilfield equipment industry deals, according to data compiled by Bloomberg. The company may want as much as $90 a share in a takeover, which could be too much for potential buyers, said Daniel Leben, an analyst at Robert W. Baird & Co.
“The question is, can you find someone that’s willing to pay a significant takeout premium and the multiple it would require?” Leben said. “We just haven’t seen any transactions like that.”
For Siemens, it may be worth it to finally get a hold of Dresser-Rand. After losing Alstom to GE, it’s in a position to make a move.
A deal “makes a lot of strategic sense,” Bergner of Gabelli said. Siemens “clearly had a set of money that was prepared to be put to work in a major acquisition.”
To contact the reporters on this story: Brooke Sutherland in New York at bsutherland7@bloomberg.net; Jennifer Surane in New York at jsurane4@bloomberg.net
businessweek.com |
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| To: richardred who wrote (3638) | 8/9/2014 12:36:26 PM | | From: richardred | | | | Snyder’s-Lance reaches ‘key turning point’
8/8/2014 - by Eric Schroeder
CHARLOTTE, N.C. — The sale of its private label business and the acquisition of Baptista’s Bakery combined to make the second quarter of 2014 “a key turning point” for Snyder’s-Lance, Inc., the company’s top executive said.
“A lot has been achieved over the last 90 days as we execute day in and day out to build our overall business and improve our shareholder value,” Carl Lee, president and chief executive officer, said during an Aug. 7 conference call with analysts. “But even more important we’ve been able to continue to execute our strategic plan and achieve a couple of milestones that we truly think are noteworthy and really reposition our company for extended growth and a very bright future.”
Those milestones included the sale of the company’s private label business to Shearer’s and the acquisition of Baptista’s Bakery. During the conference call, Mr. Lee welcomed the opportunity to expand on why Snyder’s-Lance made a move to buy Baptista’s.
“A natural question I would have, maybe looking from the outside in, is why would you buy your contract manufacturer?” he said. “Why would you invest your hard earned capital there? For us it was an absolute strategic move because Pretzel Crisps is an important part of our overall future. And, with Baptista’s Bakery's capabilities, we’ve launched a number of new items here already. We’ve got a number of new items coming so it gives us a chance to continue to expand that brand and improve our overall margins. But what I’m really excited about even above that, which is important, is that we’ve got a lot of new items for 2015 that Baptista’s Bakery is making for our distribution business.”
Mr. Lee said the company will begin to roll out new items under the Snyder’s of Hanover and Cape Cod brands that are made at the Baptista’s Bakery facility. Doing so will allow the company to continue to tap into Baptista’s Bakery’s “unique” skill set and equipment that has been used to deliver on-trend, consumer driven new items.
“So that’s important,” he said. “I think the first big opportunity and win with Baptista’s Bakery is the innovation pipeline that we’re expanding, on the success we already have, using their capabilities.”
Mr. Lee also said Baptista’s Bakery adds critical mass and scale.
“It increases our purchasing scale, increases our chance to tie in with them and drive some synergies through logistics, purchasing, overhead, other areas,” he said.
Net income at Snyder’s-Lance in the second quarter ended June 28 was $11,677,000, equal to 17c per share on the common stock, down 10% from $12,979,000, or 19c per share, in the same period a year ago. Excluding special items, net income was $20,619,000, up from $16,903,000 a year ago. Net revenue totaled $399,596,000, up 6% from $378,489,000.
For the six months ended June 28, net income was $28,493,000, or 41c per share, down 13% from $32,822,000, or 47c per share, in the same period a year ago. Net revenue was $772,612,000, up 5% from $737,030,000.
Mr. Lee pointed to core brands as a driving force behind the sales growth during the first half of the year.
“We’ve had an incredible year so far with Cape Cod as we have strong growth in all these core markets, as we’ve had strong growth in some new channels and also as we begin to expand it out to the West coast,” Mr. Lee explained. “So Cape Cod has done a tremendous job of growing for us, and we’ve seen a long-term ability to continue to expand the brand. And we’re excited about tying it into popcorn. That’s performing quite well. And not only do we have a great kettle chip, we’ve had a great platform for some additional growth long term. Pretzel Crisps continues to do well. There’s more and more traffic going into the deli, and we’re right there to seize it with a direct sales force that’s in place to continue to expand our visibility, our distribution and to leverage our new items.”
The company’s Snyder’s of Hanover brand also has performed well.
“The innovation there, the Sweet and Salty, the Pretzel Spoonz and some of the other items have performed extremely well,” Mr. Lee said.
Overall, Mr. Lee said Snyder’s-Lance has “accomplished a lot in 2014.”
“We were aggressive,” he said. “We set milestones. We set very aggressive targets and we’ve achieved those and all of that’s been building to the transformation that we’re talking about now for our company. Today we are clearly a focused, branded snack company positioned at the center of consumer trends, which we welcome and we dig into deeper and deeper every day.”
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