Ravi Madhavan's A&D Blog

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.

 

RIM's future

This Reuters.com article suggests that one option for RIM's urvival may be to give up on the BlackBerry handsets to focus on its "secure and highly respected network."

Details of Kraft split

WSJ report here.

ITT breakup completed

ITT split into three companies this week - a legacy unit with several industrial businesses, and two new units serving the defense and water equipment, respectively. Here's an excerpt from a WSJ report: 

ITT launched the tax-free spinoff of the two businesses to shareholders under the belief that the sum of its parts would be worth more than the $52 a share the ITT stock was trading at in early January.

In preliminary trading used to determine starting prices on Tuesday, the three stocks closed at a split-adjusted combined value of about $55. That's below some analysts' long-term combined value.

Analysts say the strategy behind the breakup remains valid, but value originally envisioned will take longer to achieve.

Investors' enthusiasm for water-equipment company Xylem—which is seen as having the best growth outlook —is being tempered by pessimism for new defense gear manufacturer Exelis and the remaining ITT, which will consist of a variety of industrial component businesses. Moreover, the $500 million pricetag for engineering the breakup was higher than analysts had expected and dragged down ITT's profit in recent quarters.

Xylem is interesting because of the potential promise of the water sector. In a world marked by population growth, urbanization, increasing consumption rates and resource shortages, water technologies represent an important, and profitable, need (more on this here.) Here's one take on Xylem.

 

HP will keep PC division

NYT report here.

League table for breakup advisors

This NYT Deal Book story reports the standings:

This year, spinoffs worldwide have reached their highest level of activity since 2008. Leading the league table of spinoff advisers is Lazard, with 11 deals to date this year, according to Thomson Reuters. No. 2 isGoldman Sachs with nine deals, with Credit Suisse in the third spot, with eight. Morgan Stanley is seventh, with 4 deals.

Kodak restructuring on the cards...

WSJ reports that Kodak has hired restructuring advisors. Excerpt:

Kodak's next moves remained unclear, as did the specific work it has hired Jones Day to do. While Jones Day's restructuring lawyers have advised major companies on bankruptcies, they also advise clients on a range of other paths for improving their finances. Those possibilities include raising new debt or equity, and asking creditors to forgive debt in exchange for ownership stakes in a company.

I was in Rochester, NY last weekend, and admired the iconic Kodak building from a distance. (The image below is from Wikimedia Commons.) It will be interesting to see what is ahead for the equally iconic company.

Kraft's split-up: Is there a kernel of a trend here?

WSJ reports here on Kraft Foods CEO Irene Rosenfeld's defense of the company's decision to split itself into two. Excerpt:

Kraft Foods Inc.'s chief executive defended the timing of the food company's planned split-up, saying that a separate North American grocery unit and a global snacks business can yield improved performance faster on their own.

Irene Rosenfeld, speaking at a Barclays Capital investor conference Wednesday, said the time is right for the split-up because of the improved performance Kraft-owned brands are showing across the globe. She said the separate companies will have different growth profiles that will be best-served by separate operating models that allow the snack company to focus on growing overseas and the grocery business to manage itself for steady cash flow and dividend payments.

Kraft last month announced it planned to split itself into two companies, a fast-growing global snacks business that includes Oreo cookies and Cadbury candy and a slower-growing North American grocery business with Maxwell House coffee and Kraft cheese, by the end of 2012. The announcement was a surprise move that came as several activist investors were considering pressuring Kraft to do so.

"By operating each separately, we will achieve peak performance even faster," Ms. Rosenfeld said Wednesday.

The actual presentation is available here.

Bulding on the "espoused logic" in this case, here's an idea to play with: Since the European/ North American and Rest-of-the-world segments of most global enterprises possess demonstrably different growth profiles, does it make sense for more of them to embrace a similar split-up model? 

 

Deal reel

Several interesting developments in the day's press: The Conoco Phillips split-up, and Borders facing liquidation (both NYT reports). On the tech side, rumors of an Amazon tablet (WSJ) and contemplating the possibility of demise for BlackBerry maker RIM (BGR).

On the Amazon tablet front, I can see why Amazon would want a tablet as a way to sustain multi-market leverage with Apple, since the latter's online sales machine is clearly a threat, possibly existential, to Amazon. However, it remains to be seen if Amazon has the design and tech skills to compete credibly in tablets.

On the RIM front, the pictures looks increasingly more bleak, from all accounts. In some ways, it's a mystery why this should have been the endgame. With a superb business communication device well entrenched in the enterprise and government sectors, where the iPhone as a consumer device is at best a poor fit, how did RIM end up in this situation? At some level, is this a story of lost focus? What strategic options must they be considering in Waterloo, ON?

Corporate strategy in action

The fallout from the British tabloid hacking story has been fascinating, from a corporate strategy standpoint. NYT reports that Rupert Murdoch will close the tabloid. Lest anyone jump to the conclusion that Murdoch is doing this to seek expiation, the report goes on to say:

The move to close The News of the World was seen by media analysts as a potentially shrewd decision: jettisoning a troubled newspaper in order to preserve the more lucrative broadcasting deal and possibly expand the company’s other British tabloid, The Sun, to publish seven days a week.

"[T]he more lucrative broadcasting deal" referenced is to Murdoch's takeover of BSkyB, which may be endangered if UK regulators conclude that Murdoch's corporation is not a "fit and proper" owner. Here's more on that. 

The rapid and dramatic sacrifice of the offending piece of the empire is a perfect illustration of Murdoch's decisive leadership style. When I teach the BSkyB case (one of my favorites), I tend to show excerpts from Ken Auletta's "Who's afraid of Rupert Murdoch?" - if you've watched that portrayal, you would not be surprised by this turn of events.