Mergers and Acquisitions: Rewriting History...
By Ian Cooper
Should everything go according to plan, the TXU acquisition (pending shareholder approval) could go down in history as the biggest private equity deal ever. The deal, currently valued at $45 billion, easily overshadows the $38.9 billion Blackstone Group offer from Equity Office Properties; the $32.7 billion offer for HCA; and the $31.1 billion deal to buy RJR Nabisco in 1988.
Unbelievably, we’re only two months into 2007, and the amount of takeover dollars is already expected to exceed last year’s records. In the U.S. alone, according to Dealogic (as referred to by TimesUnion.com), “volume has soared 86 percent to $228.6 billion from last year, while global volume rose 36 percent to $477.4 billion.” This, after 2006 was witness to 31,825 M&A deals (valued at more than $4 trillion) thanks in part of a significant rise in our major U.S. indices.
We see no reason to believe that 2007 won’t be as stellar, too. And we’re not the only ones who think 2007 will be a grand year for M&A. According to The New York Times, Abby Joseph Cohen “expects merger activity to keep rolling in the New Year, thanks in part to the Federal Reserve’s halt in raising interest rates.”
As for who’s next on the LBO chop block, we’re hearing that Dow Chemical could soon be approached with a $54 billion offer from KKR, Blackstone, and Carlyle Group. But take that with a grain of salt. According to MarketWatch.com, “the Dow story is from a publication not well known for its mergers-and-acquisition coverage…” And it didn’t bother identifying any sources for the information.
This reminds me a lot of the Times of London report that BHP Billiton and Rio Tinto were working on bids that could value Alcoa at more than $40 billion. Unfortunately, the paper’s story credibility crumbled once Reuters (as referred to by USAToday.com) said, “Alcoa’s downstream business, such as consumer products, including packaging, are of no interest to BHP.” Plus, according to Bradford Research / Soleil (as referred to by USAToday.com), “‘Both BHP and Rio Tinto have shown no interest in downstream aluminum processing. Their interest has been primarily on the primary (metal) side and in fact both of them are significant players on the primary side…’”
While 2007 M&A news is overwhelmingly exciting, take some of it with a grain of salt. The Alcoa and Dow Chemical rumors responsible for the quick upside may also be responsible for the quick downside once validity is disproved.
Take care,
Ian L. Cooper, Editor, Early Alert Trader
For Your Reference:
Mirant, Dynegy May Be Prey for Buyout Firms After KKR-TXU Deal
http://www.bloomberg.com/apps/news?pid=20601087&sid=aP8obCEpFmV8&refer=home
TXU Corp Announces A Record-Breaking $45 Billion Buyout
http://www.allheadlinenews.com/articles/7006576365
Dow Chemical May Get $54B Takeover Bid – Tabloid
http://seekingalpha.com/article/28046
Dow Chemical shares surge on buyout speculation
http://www.marketwatch.com/news/story/dow-chemical-seen-target-buyout/story.aspx?guid={9CBE2B82-2850-4FFF-8C12-DD689BC9DC26}
U.S. Banking Sector Primed for M&A: UBS
http://www.banknet360.com/news/NewsAbstract.do?na_id=7676&service_id=1&bi_id=