Biggest Dividend

posted by Chris Kaufman on Sep 12

“I think Mark Zuckerberg is doing just fine. I don’t think he has any intention of selling it, IPO’ing it or anything else.” — News Corp.’s President Peter Chernin (pictured left), commenting on the chances of Facebook founder Mark Zuckerberg putting the social networking site up for sale.

“By the end of the quarter, it will be different.” — SunTrust Banks Inc. CFO Mark Chancy, as the bank announced an estimated write-down in the value of some mortgage-related assets for July-August. 
 
“We don’t think this is a very good time to buy community   banks. The prices — I don’t know what to say — are not rational.” — BB&T CEO John Allison. 
    
“Judging from the current situation, we think there is still a chance we can buy KEB and are preparing for the possibility.” – Kim Ki-hong, Kookmin’s chief vice president, underlining persistent doubt about whether HSBC will be able to win necessary approvals from Korean regulators.

Picture: Reuters file

posted by Chris Kaufman on Sep 12

Alcoa, the world’s top aluminum maker, is selling its entire stake in Aluminum Corp of China for up to $2 billion, reaping a potential profit on its investment of as much as $1.9 billion. Alcoa will sell 700 million shares, with an option to increase the number to 884.2 million shares, at between HK$17.26 and HK$18.27 per share. That’s a discount of between 10.4 percent and 15.4 percent to the stock’s closing price of HK$20.40 on Wednesday. Goldman Sachs is handling the deal. (Alcoa’s chairman and CEO Alain Belda pictured left)
    
** Warren Buffett’s Berkshire Hathaway shed another chunk of its stake in top Chinese oil producer PetroChina, selling about 92.66 million shares in late August for $136 million. The sale cuts Berkshire’s holding of PetroChina’s freely tradable shares to 9.72 percent, or 2.05 billion shares, from 10.16 percent. PetroChina’s share price has risen about 35 percent over the past year on high oil prices and vigorous Chinese demand, although domestic rivals CNOOC and Sinopec have seen stock price rises of 56.5 and 76.5 percent over the same period.
    
** Russia’s cartel office rejected a bid from German industrial conglomerate Siemens to buy a controlling stake in Russian turbine maker Power Machines. Siemens owns 25 percent of the turbine maker and had said it was not aiming for a majority stake. Its past attempts to take control of Power Machines were blocked by Russian authorities citing national security reasons. Russia’s Interros, the investment vehicle of billionaires Vladimir Potanin and Mikhail Prokhorov, earlier said it signed a deal to sell its 30.4 percent stake in Power Machines to a Russian strategic investor, but did not name the buyer.
    
** Shares in ports-to-telecoms conglomerate Hutchison Whampoa surged as much as 8 percent and its bond spreads tightened after a report said it planned to sell its Italian 3G mobile operating arm, 3 Italia. The company is understood to have sent out an information memorandum in the hope of unearthing potential bidders for the Italian division, the largest of its third-generation businesses, the Times of London said in an online report.
    
** Top South Korean retail bank Kookmin reaffirmed its intention to buy the sixth-biggest local lender, Korea Exchange Bank, challenging a bid from UK-based HSBC, which said last week it had agreed to buy 51 percent of KEB from U.S. private equity firm Lone Star for $6.3 billion. The agreement came almost a year after Lone Star scrapped a $7.3 billion deal to sell the lender to Kookmin because of legal disputes in South Korea on whether Lone Star had acted illegally in the way it bought KEB in 2003.  will sell 700 million shares, with an option to increase the number to 884.2 million shares, at between HK$17.26 and HK$18.27 per share. That’s a discount of between 10.4 percent and 15.4 percent to the stock’s closing price of HK$20.40 on Wednesday. Goldman Sachs is handling the deal. 
   
Picture: Reuters file

posted by Jonathan Keehner on Sep 11

With bankers and private equity investors closely watching the loan market, a ray of hope appeared on Tuesday from the Allison Transmission deal.

A source told Reuters Loan Pricing Corp that Citigroup, Lehman Brothers, Merrill Lynch and Sumitomo Banking Corp. sold a $1 billion block of their previously unsold $3.5 billion bank loan for Allison Transmission at 96 cents on the dollar — which could help jumpstart the syndication of other deals. Banks know that they’re going to take a hit with the more than $300 billion of LBO debt they’ve got stuck on their balance sheet.

The question is, how big of a hit. Most banks would cringe at 90 cents on the dollar or lower, but suddenly, 96 cents doesn’t look so bad. Maybe there is hope for the pig in the python after all.

The Allison news comes as merger arbitrage spreads are tightening – meaning investors are continuing to bet that a number of high-profile LBOs will get done. Last month the spreads had widened when the credit crunch set in.

News that TXU cleared another hurdle and that KKR was willing to compromise on First Data terms likely brought in the spreads, which measure the difference between the current and offered price of an acquisition target. What may be driving the spreads on Tuesday is Allison hitting the “most significant pricing point for the loan market since mid-July,” according to Reuters LPC. 

A huge pile of LBO debt is still being held by banks and waiting for syndication. Allison’s loan sale could bode well for other syndications, but the market will dictate demand.

posted by Chris Kaufman on Sep 11

Australian healthcare group Symbion Health and suitor Healthscope plan fresh talks on a tie-up after shareholders rejected Healthscope’s A$2.9 billion ($2.4 billion) offer. Rival group Primary Health Care, voted its 20 percent strategic stake in Symbion against the deal. The bid won 73.9 percent votes in favor, but required 75 percent to pass. Primary has proposed buying some Symbion assets and has said it might make a private equity-backed bid for Symbion as the three companies jockey for position in a consolidating healthcare sector.
 
** The Carlyle Group has postponed the sale of cable-tv company Insight Communications, according to a source familiar with the matter. Tight credit market have curtailed bids from suitors interested in the cable company, which Carlyle bought for $2.1 billion in a December 2005 management-led leveraged buyout.
 
** London-based advertising conglomerate WPP Group acquired Schematic, an independent interactive agency based in Los Angeles, The New York Times reported. Details of the all-cash deal are not being disclosed.  WPP, which owns Grey Global, JWT and Ogilvy & Mather, has been in a race with rivals to acquire digital-media savvy companies. WPP bought 24/7 Real Media for $649 million in July.
    
** Private equity firms, including Bain Capital and Permira, have joined a big field of contestants for Japanese agrichemical company Arysta LifeScience, sources familiar with the matter said. They join Israel’s Makhteshim Agan Industries, the world’s biggest maker of generic agrichemicals, and Australian farm chemical maker Nufarm, the sources said. Private equity firm Olympus Capital Holdings Asia is selling Arysta in an auction that could raise more than $2 billion.
    
** The French government has hired British bank HSBC and consultancy firm McKinsey to review options for state-controlled nuclear group Areva, according to the French newspaper Les Echos. Without citing sources, the paper reported authorities favor a tie-up between Areva and French industrial power plant and high-speed train firm Alstom, and said a merger between the two firms would create a company with a market capitalization of 40 billion euros.

(Photo: Reuters file — Healthscope Managing Director Dixon laughs with Symbion Health Chief Executive Cooke after a media conference in Sydney)  
  

posted by Michael Flaherty on Sep 10

The leveraged buyout of Laureate Education closed before the credit crunch could scuttle it. Unfortunately for Goldman Sachs and other members of an underwriting group, the hard part may be just beginning.
   
A Goldman Sachs-led group is attempting to syndicate $775 million in covenant-lite term loans for Laureate Education, sources told Reuters Loan Pricing Corp on Monday. 

Covenant-lite you say? Yes, that covenant-lite. These are the loans with few to no restrictions that debt investors have all but turned their backs on. Restriction-free loans used to be the rage, and debt investors couldn’t get enough of them during the LBO frenzy. But debt investors got spooked by the subprime mortgage mess, and Cov-lite, as it became known, went the way of the dinosaur (at least for now), right there with its pal Pik-Toggle.

Since the Laureate deal has already been funded, the underwriters would not be able to increase the spread to Libor — the London interbank rates whose recent gyrations have been another symptom of credit jitters – to make it more attractive. The only tool available to sell the deal would be to sell at a discount to par.  The banks funded the term loan at a spread of 325 basis points over Libor

The Laureate LBO was closed last month and since then has been fully funded by the underwriters. The financing includes a $400 million revolving credit line and more than $1 billion in senior unsecured and subordinated debt. The banks are not planning to syndicate the revolver or the subordinated debt, according to Reuters LPC.

Now Goldman is left to try and sell down the loans to a less forgiving crowd. Laureate was bought earlier this year for $3.82 billion by an investor group led by the company’s chairman and chief executive, Douglas Becker. The buyout group, which featured private equity giant Kohlberg Kravis Roberts & Co. and high powered hedge fund SAC Capital, is putting in nearly $2.2 billion in equity.

The investor group also includes Citigroup Private Equity, SPG Partners, Bregal Investments, Caisse de depot et placement du Quebec, Sterling Capital, Makena Capital, Torreal S.A. and Southern Cross Capital. 
     
Goldman is also grappling with funding another mid-sized buyout, that of chemicals company Myers Industries Inc. The company said on Monday that its proposed  buyout by GS Capital Partners, Goldman’s private equity arm, was postponed until the fourth quarter due to financing conditions.
   
The $778 million deal, which was signed in April, becomes the credit crunch’s latest LBO casualty.

Reuters Loan Pricing Corp. reported at the end of July that GS Capital Partners had postponed until later this year the $950 million financing needed for the deal, which is worth $1.07 billion including debt. GS Capital Partners had also agreed to concessions on the debt, adding the financial targets that investors are demanding, RLPC reported.

(With reporting by Faris Khan at Reuters Loan Pricing Corp.)