Ravi Madhavan's A&D Blog

Welcome to my Acquisitions & Divestment blog!

Welcome to my Acquisitions & Divestment blog, which is primarily meant for the community of Katz students and ex-students (MBA, EMBA and Exec Education) who have taken my Acquisitions & Divestment course over the last few years. Given the amount of ongoing interest in M&A, I hope this will grow to be a communication platform for us to keep in touch and help each other keep abreast of new developments in the field. This blog will focus on the strategy and general management views of Acquisitions & Divestment (as opposed to the (technical) financial or legal aspects). I will post here links to M&A events, commentary and resources, as well as share observations about the changing landscape of M&A. Come back often and let me know how we can make this interesting and useful for everyone!

Follow-ups: UPS/ TNT and Cove Energy

FT story here about ongoing UPS/ TNT talks, the latest turn being that an increased offer of €9 was rejected. Excerpt: 

UPS could bid as high as €15 without seeing higher borrowing costs, and US rival FedEx as high as €13, without requiring an issuance of equity, wrote analysts at Wolfe Trahan.

If it were successful in its bid, UPS is likely to hold talks with potential buyers, such as FedEx and PostNL, about buying assets it would need to divest to avoid the deal being blocked by the European Commission, two of the people said.

“UPS would likely have to divest some assets – to avoid European Commission antitrust issues – in countries like the UK, France, Belgium, Luxembourg and the Netherlands, assets which FedEx could acquire, but FedEx would still be boxed out from much of Europe,” said the Wolfe Trahan analysts.

Also, Shell's bid for Cove Energy is being contested by Thai oil and gas company PTT Exploration and Production, reports NYT DealBook.

Paying the price for the abortive AT&T/ T-Mobile deal

WSJ reports that AT&T CEO Randall Stephenson's incentive pay took a hit as a result of AT&T's failure to consummate its T-Mobile transaction. Excerpt:

AT&T Inc.'s failed $39 billion bid for T-Mobile USA cost the telecommunications giant $4 billion in assets and cash. It also cost Chief Executive Randall Stephenson.

AT&T said in a securities filing Tuesday that its board cut Mr. Stephenson's combined short- and long-term incentive payout by more than $2 million, due in part to the implosion of the deal. The company walked away from the offer in December amid regulatory resistance.

 

Shell > Cove Energy

Shell has made an offer valued at over GBP 1B for Cove Energy, a Mozambique-based producer. The news caught my eye because one doesn't often see large deals for targets in Africa. The Guardian says this may lead to more deals in the sector. 

Samsung LCD spinoff

WSJ report here on Samsung's decision to spin off its LCD business, apparently a signals that OLED investments are the future. Excerpt:

"(Shifting to OLED) is an inevitable trend now. There's no reason for Samsung to pour in more investment into its LCD business, and it would rather focus on raising its OLED technology," said HI Investment & Securities analyst Song Myung-sub[.]

Groupon/ Hyperpublic

NYT DealBook report on Groupon's purchase of Hyperpublic here. Excerpt:

Mr. Cooper said he could not speak specifically about Groupon’s future plans for Hyperpublic. But he noted that figuring out how local markets work and using public information from the social Web to understand consumer habits and interests is becoming a hot area for many companies. It’s not hard to imagine that Hyperpublic would be able to help Groupon better target subscribers in some of its coming products, including Groupon Now, a service that lets users see deals happening in real time, based on their location. It’s also an area that companies like Foursquare, Facebook and Google are widely thought to be eying as they continue to develop their mobile advertising strategies.

“The market that we’re playing in is one that Foursquare and Google are playing in,” Mr. Cooper said. “The better Groupon understands the people and local environment that they are trying to drive traffic to, the better they will do.”

 

UPS in growth mode

Following its earlier announcement of Brussels-based delivery firm Kiala this week, UPS has made a $6B+ unsolicited bid for TNT Express, which has turned it down. Talks are reportdely continuing. Bloomberg report here. UPS, Fedex, DHL, and TNT are the four leading players, so this would be a big consolidation move. The UPS investor relations site has several presentations that suggest a renewed focus on Europe; this bid would be in line with such a thrust.

Pringles redux

The big news today was that P&G will sell Pringles to Kellogg after the initial deal with Diamond Food fell through. NYT DealBook report here, Kellogg Company webcast here, and NYT Deal Professor's "Lessons Learned" here.  

Clean rooms in M&A

Here is an Accenture piece on clean rooms in the M&A process.

Sketch of a Chinese-acquired company in the Rust Belt

Very nice article in WSJ about Nexteer, a company in Saginaw, Michigna, now owned by Chinese investors. Excerpt:

SAGINAW, Mich.—This struggling city, staggered by a flurry of blows during the recession, is getting a lift from an unlikely place.

Nexteer Automotive, Saginaw's biggest remaining industrial employer, was on the verge of closing less than three years ago, its 3,000 or so jobs in danger of evaporating, when the Chinese showed up. "If their money helps rebuild the community, I'm cool with it," says Mayor Greg Branch.

In 2010, Pacific Century Motors, controlled by Aviation Industry Corp. of China and Beijing E-town International Investment Co., an investment arm of the city of Beijing, bought the money-losing auto-parts maker from its corporate parent, General Motors Co., for about $450 million. With that, this city went from being an exhibit of America's industrial decline to a case study in the impact of Chinese investment money on U.S. communities.

"There were a lot of concerns about the Chinese coming over and packing this place up" and moving the jobs to China, says Matt Beaver, a vice president of United Auto Workers Local 699. "People were really scared the Chinese would take the patents."

Today, few people in town are wringing their hands about the Chinese. Inside a 59-year-old factory at Nexteer's sprawling complex, contractors are ripping out antiquated machine lines and installing new equipment to produce an electronic steering system for the next generation of GM's large pickup trucks and SUVs. The company, for years known as Saginaw Steering Gear, has hired more than 100 engineers in Saginaw last year and is looking for 80 more this year.

 

ThyssenKrupp's sale of Stainless steel unit

NYT DealBook report of ThyssenKrupp's divestment here.The deal is noteworthy because of the way it involved negotiations with affected employees. Excerpt:

The sale of Inoxum to Outokumpu of Finland was widely expected after prolonged negotiations with ThyssenKrupp’s employees, who feared the deal would result in job cuts. Ultimately, ThyssenKrupp reached a compromise with its employees on Tuesday that would eliminate 850 positions in Germany.