Almost everyone thought of the Penn National Gaming Inc. (NASDAQ: PENN) private equity LBO merger as dead money for quite some time. It only officially became a dead merger this morning. This was the last of the big multi-billion deals still officially on the books that was put together back before we had a full blown credit crunch.
PNG Acquisition Company Inc. was the buyout entity, which was indirectly owned by certain funds managed by affiliates of Fortress Investment Group LLC (NYSE: FIG) and Centerbridge Partners, L.P.
The buyout price of $67.00 per share was older than Methusela. Since January, this stock slid steadily from over $60.00 down to under $30.00. The deal was a known to be dead by everyone. But there is actually a silver lining here for the company. Penn National will get $1.475 Billion in cash out of this.
Affiliates of Fortress, affiliates of Centerbridge, affiliates of Wachovia, and affiliates of Deutsche Bank will all be holders of those notes. To top it off, Fortress Investment Group's Chairman & CEO, Wesley Edens, will join the Penn National Gaming Board of Directors.
Keep reading for on the fly analysis, guidance, and ramifications at 247wallst.com.
Microsoft Corp. (NASDAQ: MSFT) may try to buy Yahoo! Inc. (NASDAQ: YHOO) again, but it does not want the whole company. It finds the search business useful as part of its battle with Google (NASDAQ: GOOG). The content portal business does not have much attraction, and Redmond wants a company like Time Warner (NYSE: TWX) to pick up that piece. According toThe Wall Street Journal, Microsoft "approached other media companies in recent days about joining it in a deal that would effectively lead to Yahoo's breakup."
The new deal just might work. Yahoo! dropped below $20 yesterday, putting its stock back where it traded before the first buy-out offer. The No. 2 search company's shares reached as high as $33. Investors, especially Carl Icahn, are steamed that Yahoo! did not grab all of that extra money.
Even if Microsoft cannot find a partner to take the Yahoo! content business, it may move ahead. It only has 10% of the US search business. Yahoo! has about 20% and Google around 60%.
Microsoft still needs Yahoo!, and with its stock down by a third, Yahoo! needs a buyer.
Douglas A. McIntyre is an editor at 247wallst.com.
We already know the IPO market is nonexistent, but what about M&A? A report put out Tuesday by media-related investment banking firm the Jordan, Edmiston Group Inc. indicates that things aren't so bad in the online media and technology sector and the marketing and interactive services sector, though deal sizes have declined significantly.
According to the report, the total number of transactions for media, information, marketing services and related technologies increased to 404 in the first half of 2008 versus 397 in 2007. Deal value, however, was down dramatically to $23.2 billion from $65.8 billion in 2007.
The decline was most noticeable in $1 billion-plus transactions. There were four in the first half of 2008, accounting for $9.6 billion in value, versus 11 deals worth $46.3 billion in the same period last year, though a sizable amount of that came from Thomson Corp.'s $18 billion acquisition of Reuters.
Ever since Circuit City Stores (NYSE: CC) CEO Philip J. Schoonover sliced 3,400 sales people in March 2007 to save money, I have questioned the savvy of its management. That's because many of those fired sales people took their customers over to Best Buy (NYSE: BBY). As its stock lost 86% of its value, I was surprised that anyone would make a bid for it.
Yet Blockbuster (NYSE: BBI), the struggling video store chain, decided to buy. I don't know what got into Blockbuster's head to make it think that combining two struggling companies would make an agile competitor. The Richmond Times reports that it wanted to create a one-stop shop for movies, games, and electronic equipment. But that dream died when Blockbuster pulled its $1.3 billion offer after reviewing Circuit City's books.
Carl Icahn has said he would buy Circuit City. But it's losing money -- $164.8 million, or $1 a share, in its fiscal first quarter. This was $100 million more than its Q1 2007 loss. And Blockbuster's conclusion after a closer look at its financial statements does not bode well for Circuit City's future. Circuit City stock is down 7.8% in pre-market. Let's see whether any new bidders emerge.
There is a rather interesting deal out there that can be viewed as a glass half-full or glass half-empty depending on whether or not you are from the private equity side or from a public company.
Fiserv Inc. (NASDAQ: FISV) has announced a rather interesting move this morning. It is selling a majority interest in its insurance business operations for some $510 million in equity and debt to Trident IV, a private equity fund managed by Stone Point Capital LLC.
The company has announced that it will turn around and repurchase up to 10 million shares of common stock in a repurchase program.
Yahoo! Inc. (NASDAQ: YHOO) shares fell below the $20 mark in early trading on Tuesday and are approaching the stock's closing price of $19.18 reached on Jan. 31. That's the session before Microsoft Corp. (NASDAQ: MSFT) publicly came out with its $31 a share, $44.6 billion offer to acquire Yahoo! in a saga that is now in its sixth month.
The $20 threshold is significant, if mostly psychologically. Many analysts expected Yahoo! shares to find support ahead of that level on speculation that such a price makes the company vulnerable to another acquisition offer from a strategic or financial buyer. Yahoo! was in an "anyone-but-Microsoft" mode after the original offer and reportedly had talks with the likes of News Corp. (NYSE: NWS) and Time-Warner Inc. (NYSE: TWX), whcih could be interested in some kind of deal now that Yahoo! is cheaper. Indeed, there's talk Yahoo! may already be looking to revive talks with Time Warner-owned AOL L about combining the operations.
It didn't have to be this way. Had Yahoo! negotiated with Microsoft rather than fighting a deal at all costs, shareholders wouldn't be looking at a stock that is now 40% below Microsoft's reported last offer of $33 a share.
For deals of $2 billion or less, private equity firms are showing interest. However, the problem is cheap valuations.
This is what the board at Chemtura (NYSE: CEM) found out the hard way. Late last year, the company retained Merrill Lynch (NYSE: MER) to explore "strategic alternatives." While some private equity firms showed interest – like Blackstone Group LP (NYSE: BX) and Apollo Management LP -- there wasn't much appetite to pay a premium. So, Chemtura has ended the process. Instead, the company will focus on restructuring, such as divestitures.
Chemtura has an interesting mix of businesses, such as plastic additives, pool and spa products and the lubricant components. For 2007, the company generated $3.7 billion in revenues.
However, with the energy crisis, the environment has been particularly tough for Chemtura. Just look at rival Dow Chemical (NYSE: DOW), which has increased prices two times during the past month.
It's been tough for private equity firms to exit investments. Basically, the valuations are much lower – and the IPO market is particularly weak. And, with the credit crunch, it's really impossible to recap portfolio companies (such as with dividend payouts).
Despite all this, the Blackstone Group LP (NYSE: BX) may buck the trend. According to a report in Bloomberg.com, it looks like the firm may be able to sell one of its portfolio holdings, Groupe Vitalia, a hospital operator based in France.
In fact, it appears that Groupe Vitalia has attracted four serious bidders – and that the deal may come to $2.2 billion. Some of the bidders include CVC Capital Partners, LBO France, Gruppo Ospedaliero San Donato and Batipart SA. In other words, it's a mix of private equity players and strategic buyers.
Interestingly, Blackstone has been able to bulk up Groupe Vitalia with a variety of bolt-on acquisitions. All in all, it 's a smart strategy that may see a rare pay off.
More states have filed charges against Countrywide (NYSE: CFC) for aggressive marketing and giving loans which were highly risky. Washington and California have joined Illinois in the actions.
Up until now, Bank of America (NYSE:BAC), which is buying Countrywide, has been sticking to its story that it will close on its purchase of the mortgages company. The media has written a million times that the big money center bank might pull out of the deal. That actually became a bit more likely with the new states' actions.
According toThe Wall Street Journal, Kurt Eggert, a law professor at the School of Law at Chapman University said, "Countrywide could be required to give back its profit on all those loans and conceivably give back houses on which it has foreclosed." Since that number could be well into the billions of dollars, the potential damages are rising fast.
Countrywide could spend tens of millions of dollars on legal fees and countless hours in court over the next several years. That has become much clearer in the last few days.
BAC would be better off to let CFC go out of business and just buy its assets. Maybe the bank never intended to close the deal. Maybe that was its plan all along.
Douglas A. McIntyre is an editor at 247wallst.com.
Posted Jun 26th 2008 11:00AM by Tom Taulli Filed under: Deals
According to a variety of studies, Wall Street's initial reaction to a proposed buyout is a good indication of whether a deal will pan out or not. So, when Pier 1 Imports (NYSE: PIR) recently made an $88 million bid for Cost Plus World Markets (NASDAQ: CPWM), and the response from investors was immediately negative (the stock price fell 20%), it was probably telling.
I guess Pier 1 was listening. On Wednesday, the company said it was actually revoking its bid.
Funny enough, the CEO of Pier 1, Alex W. Smith, originally called the deal "compelling" and that it "would create significant value for the stakeholders of both companies."
Oops.
But now, according to Smith, it looks like the deal will be too expensive. After all, it appears that Cost Plus is going to fight.
Yet, why not try to fight back? Pier 1 does have some leverage. Plus, there are certainly cost synergies (basically, the industry really needs consolidation).
Then again, when it comes to Wall Street, sometimes it is easier to just give in.
Posted Jun 26th 2008 9:00AM by Tom Taulli Filed under: Deals
It's been about two weeks since InBev NV made its blockbuster $46.3 billion bid for rival Anheuser-Busch Cos Inc (NYSE: BUD). Yes, the silence has been deafening. And, of course, the rumors have been rampant.
In fact, InBev has been getting antsy. For example, this week the company reaffirmed its bid (it's the third letter from InBev's CEO, Carlos Brito).
There is also a lending group ready to pull the trigger. The banks include: Banco Santander, Bank of Tokyo-Mitsubishi, Barclays Capital, BNP Paribas, Deutsche Bank, Fortis, ING Bank, JP Morgan (NYSE: JPM), Mizuho Corporate Bank and Royal Bank of Scotland.
But according to the Wall Street Journal [subscription], it looks like the company's board is close to making an announcement, and it appears that the company will reject the deal. Essentially, Anheuser-Busch thinks the deal is too cheap.
That may be the case. But there's a problem: who can pay a higher price for the company?
Interestingly enough, it appears that Anheuser-Busch will make some restructuring moves (such as selling non-core assets). But why didn't it do this several years ago?
The fact remains that the company doesn't have a viable alternative – that is, unless InBev wants to bid against itself. But why?
Instead, it's a good bet that InBev will go directly to shareholders and pull off a hostile bid. In such a move, it will certainly put lots of pressure on Anheuser-Busch – which has few defenses – and perhaps get a deal done fairly quickly.
Yahoo! Inc. (NASDAQ: YHOO) shares were roughly flat in early trading on Wednesday after gaining 3% on Tuesday on word that the company was again talking deal with Microsoft Corp. (NASDAQ: MSFT). Though shares spiked on reports that talks were in progress, they settled down quickly because of conflicting reports as to the extent of the talks. While technology blog TechCrunch reported the two sides were in discussions on an outright acquisition of Yahoo!, other reports indicated the two had revived discussions of an acquisition of Yahoo!'s search business.
A source close to Yahoo! late Tuesday said the TechCrunch report was "miles off," but could not confirm the two companies were again talking about a deal for the search business. The source did note that when Yahoo! announced it would be outsourcing a portion of its search advertising business to rival Google Inc. (NASDAQ: GOOG), the terms did not preclude Yahoo! from selling all or part of its business.
It looks like we have another small information technology merger taking place this morning. This is a US company acquiring an Irish company.
Progress Software Corporation (NASDAQ: PRGS) has entered into a definitive agreement to acquire IONA Technologies plc (NASDAQ: IONA) in a cash buyout of $162 million and approximately $106 million net of cash and marketable securities reported on March 31, 2008. This will bring a cash buyout price of $4.05 per share for IONA holders.
The offer price per share is approximately 16% over the average price for IONA shares over the six months prior to the offer period announced by IONA on February 8, 2008. Unfortunately, the 52-week trading range is $2.01 to $6.28.
So far, IONA shares are trading up 9.4% at $3.94 and Progress shares are up less than 1% at $25.46 in the first ten minutes of trading.
IONA Technologies' board of directors unanimously approved the merger and each IONA Technologies director has entered into an agreement to vote in favor of the transaction. The merger is subject to regulatory approval in teh US and in Ireland and is also subject to IONA shareholder approval.
Progress Software is a global supplier of application infrastructure software used to develop, deploy, integrate and manage business applications. IONA Tech is an established supplier of software integration technology. The companies have both signed a definitive agreement to further the merger. IONA is based in Dublin, Ireland, so it looks like we have yet another cross-border tech and IT merger.
Put this in your "death by 1,000 cuts" file. Reports resurfaced today that Yahoo! Inc. (NASDAQ: YHOO) and Microsoft Corp. (NASDAQ: MSFT) have resumed talks over a possible deal. It's worth noting that the chatter is coming from a Yahoo! investor, who obviously may have a vested interest in the companies eventually clinching a transaction. But the rumors had enough teeth to drive Yahoo! shares up as high as $23.71, with the stock up 2.2%, to $21.92 in late afternoon trading.
Since the companies formally ended acquisition talks earlier this month, Microsoft has said repeatedly that it's no longer interested in acquiring all of Yahoo!. But with Yahoo! shares sagging, the software giant may think it can get the Internet portal on the cheap or at least for less than its last bid of $33 a share, or $47.5 billion offer. Other reports indicate the two sides could be reviving talks in which Microsoft would acquire Yahoo!'s search business for more than the $9 billion it was reportedly willing to pay previously.
Yahoo!'s situation has eroded since the talks ended. An announced deal to outsource some of its search advertising business to rival Google Inc. (NASDAQ: GOOG) provided only a modest lift to its shares. The company also has seen a number of high-profile executives leave over the past few weeks, and concerns are mounting about its second-quarter numbers. Oh, and Carl Icahn is still around, though he hasn't had much to say about his proxy fight for control of the company's board of directors of late.
Poor Yahoo! Inc. (NASDAQ: YHOO) can't seem to catch a break. The company took a lot of heat last week on news that a number of executives would be leaving the company in advance of a reorganization, though others are taking a more contrarian view and noting it might not be such a bad thing for Yahoo! to shed some of its talent. Today, its second quarter outlook is drawing fire.
Sandeep Aggarwal, an analyst with Collins Stewart LLC, in a research note on Monday writes says that the failed acquisition talks with Microsoft Corp. (NASDAQ: MSFT) has been a major distraction for Yahoo! and, worse, that economic factors are taking a toll on display advertising spending, while the aforementioned executive departures are causing project delays and execution hurdles. He also contends that the reorganization being discussed "only highlights the grass roots level problems and likely margin pressures at Yahoo!."
In addition, Aggarwal isn't impressed with the search deal Yahoo! struck with rival Google Inc. (NASDAQ: GOOG), arguing that an outright sale to Microsoft, or shipping its search business to to the software giant would have been a better alternative. He drops his forecast for Yahoo!'s second quarter revenues to $1.37 billion, from $1.4 billion, and adjusted EBITDA to $460 million, versus $467 million. He continues to rate the stock a "hold," but reduces his price target to $23 a share, from $26. Early in Monday's session, shares of Yahoo! were down less than 1% at $21.85.
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We already know the IPO market is 
Ever since 
For deals of $2 billion or less, private equity firms are showing interest. However, the problem is cheap valuations.
and 
. He also operates 
It's been tough for 
More states have filed charges against 
According to a variety of studies, Wall Street's initial reaction to a proposed buyout is a good indication of whether a deal will pan out or not. So, when 
It's been about two weeks since InBev NV made its blockbuster $46.3 billion bid for rival 
