Ravi Madhavan's A&D Blog

Google/ Motorola Mobility

WSJ has some analysis on Google's Motorola Mobility acquisition. Definitely worth a read, as it brings up some of key issues surrounding which pieces of Motorola Mobility might make sense for Google.

Spotlight on breakups

A couple of items on corporate breakups: (1) NYT DealBook on Hartford's decision to sell life insurance and other non-core assets to focus on its core businesses (property and casualty, group benefits and mutual funds). (2) The Economist on the pressure being felt by Pepsi to split itself up (from a few months ago). 

A JPMorgan Chase split-up?

From NYT Deal Book:

A day before JPMorgan Chase’s annual investor conference, Michael Mayo, an analyst with Crédit Agricole Securities and author of “Exile on Wall Street,” is wondering aloud if the firm might be better off as firms, plural.

Mr. Mayo, who is known for taking aggressive stances on big banks, released a report ahead of the bank’s Tuesday conference titled, “Should It Get Broken Up?”

In the note, Mr. Mayo argues that while JPMorgan, the nation’s largest bank by assets as of Dec. 31, has fared better than its rivals in the last several years, it still might be worth more to shareholders as individual businesses than as one huge conglomerate.

In the note, Mr. Mayo estimates that “the pieces of JPMorgan are worth one-third more than the current market value (est) based on a sum-of-the-parts analysis,” and says that the bank should consider splitting off businesses that could flourish under separate ownership. He also notes that big banks are subject to “increasingly higher regulatory and capital requirements,” while smaller businesses are nimbler and subject to less regulatory hoop-jumping.

 

 

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[.]

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.