acquisitions

Citigroup watches peers soar

Jim Kim — Fri, 31 Oct 2008 11:38:35 -0400

You have to wonder what Citi CEO Vikram Pandit has up his sleeve. I mean he has to have something in mind. Right? He can't just sit back and watch the likes of JPMorgan Chase, Bank of America and even Wells Fargo zoom past it. Sadly, that may be exactly what happens. Pandit's tenure may well be defined by his inability to push the bank to a new plane in the credit crunch.

We'll long recall how Wells Fargo snatched Wachovia away from Citi with a bravado move that left it reeling. Unfortunately, the once-largest bank still has a lot of clean-up to do. The TARP funds allow it to pad its capital cushion a bit--solvency isn't an issue--but there will be more write-downs to come. In any case, clean up isn't a strategy. Will we see some big acquisitions? Some massive asset sales? Is it too late to renew talks of a break up? The world awaits.

For more:
- here's some background from Financial Week

Ken Lewis faces his future

Jim Kim — Tue, 30 Sep 2008 12:38:59 -0400

One of the most powerful men in finance resides and works in Charlotte, not Manhattan or London. Bank of America has been on quite a ride. From the doom and gloom of earlier this year, to the much-debated Countrywide acquisition, to the recent deal to buy Merrill Lynch. All of a sudden we're talking about a big three in terms of heft: Bank of America, Citigroup and JPMorgan Chase. For Bank of America CEO Ken Lewis, this is the crowning achievement of a career built on acquisitions. This, in many ways, is the bank he has always dreamed of, even as he tells Fortune that the golden age of financial services is over. His bank is no doubt poised to be a dominator. That assumes he can make it all work, which will be no small feat. Integrating the pieces will in itself be a challenge. Strategically, he must succeed where so many CEOs at Citigroup failed. Will the universalist model finally win? We'll find out.

For more:
- here's the Fortune article on Lewis

All-stock deals to make a return?

Jim Kim — Tue, 24 Jun 2008 21:41:52 -0400

We speculated a while back that all-stock deals may make a return. The idea is that financed deals will be difficult in this environment. Still, some companies with strong stocks have put themselves in a good position for acquisitions. As if on cue, Bunge has agreed to buy Corn Products International in an all-stock deal worth $4.4 billion. But Breakingviews.com notes that the market reacted skeptically, as the deal looks "slightly value destructive for shareholders." The article also points out that the deal could create up to $840 million in "cost cuts and incremental profits" annually, less than the premium paid. Finally, the article talks about a paper composed by academics Baruch Lev and Feng Gu that concluded that "stock-for-stock acquisitions tend to destroy value." Mr. Market may be onto something, which just could limit these deals going forward.

For more:
- here's the Breakingviews.com article

SPACs coming up short?

Mon, 12 May 2008 06:59:56 -0400

Is it a bad sign when an investment company has a former football coach get in front investment bankers and hedge fund managers for a little rah-rah? One could view it as a sign of trouble that some SPACs may be sensing the need for some investor hand-holding. Financial Week notes they are not faring well. Over the past three years, nearly 150 SPACs went public, raising $20 billion. But 17 of the 23 that went public in 2005 (and actually made acquisitions) saw their share prices decline. We've noted before that many are having trouble finding good acquisitions. We may be in for a spate of SPACs giving up and returning funds to investors, who are getting restless, to say the least.

For more:
- here's the Financial Week article

Hedge funds and the Kentucky Derby

Wed, 07 May 2008 06:59:55 -0400

International Equine Acquisitions Holding is currently in the process of raising $100 million for a hedge fund that will buy and breed horses, according to news reports. The timing couldn't have been much better, given that Big Brown--which the firm owns 75 percent of--just won the Kentucky Derby. The trick here is for the marketers to capitalize on all of this. Of course, a Triple Crown would be even better. You can imagine a lot of fun at the road show. Will the CEO ride in on the horse? Will everyone get roses? This would be the first hedge fund of its kind.

For more:
- here's the HedgeWeek article

Blank check companies still hot

Wed, 20 Feb 2008 06:59:55 -0500

We've noted recently that blank check companies are all the rage, fueled by the involvement of top banks. Now comes news from Financial News Online that Greenhill & Co. has priced shares of a blank check offering that will raise $400 million. Bank of America is underwriting the deal, which would be its second largest blank check deal ever. The issue now is what will the firm, GHL Acquisitions, will invest in? You can bet they have a very short list. Typically, blank check companies have a set period of time to essentially merge with a company. The lack of financing from traditional sources may make these sorts of deals more common. Stay tuned.

For more:
- here's a Financial News Online article

ALSO NOTED: Is the worst now over for investment banks?; No acquisitions for Wachovia this year; and much more...

Thu, 31 Jan 2008 06:59:50 -0500

Company News:
> No acquisitions for Wachovia this year. Article
> Wachovia, Visa renew partnership. Article
> Will BNP Paribas bid for SocGen? Article
> E*Trade insiders snap up stock. Article
> More on E*Trade's Super Bowl ads. Article
> PNC Vice chairman sells shares. Article

Industry News:
> Bond insurers breathing easier? Article
> Crisis ripples across Europe. Article
> Regional banks getting a boost? Article
> Is the worst now over for investment banks? Article
> More muni offerings in 2008? Article

And Finally... No urban legend after all: Kidney scam in India unmasked. Article

Oracle deals: No advisors

Wed, 23 Jan 2008 06:59:58 -0500

Over the years, big companies that make lots of acquisitions have tried to reduce their need for expensive advisors. Oracle is a great example. In its deal to buy BEA, it did not retain advisors, according to Financial Week. In the past two years, the firm engaged in 36 acquisitions (Zephyr). Oracle reported the use of financial advisers on five of those--Morgan Stanley, Merrill Lynch and Credit Suisse. Financial Week notes that Oracle's top two executives come from Wall Street. Charles Phillips was a software analyst at Morgan Stanley. Safra Catz was a banker with DLJ.

For more:
- here's the article

What will the private equity guys do in 2008?

Wed, 16 Jan 2008 06:59:54 -0500

It's going to be a bad year for big deals. No one disputes that. The issue is what will all the private equity executives do with their time. Investment Dealers' Digest notes that many will likely do some "style drifting," dabbling in things like PIPEs and smaller market deals that do not require so much financing. They'll also likely spend a lot of time on portfolio companies. Many seem to be planning add-on acquisitions by their existing companies. This is a great opportunity to get portfolio companies in top shape. It's all about 2009 and 2010. At some point, the industry will reflate. You've got to be ready.

For more:
- here's the Investment Dealers' Digest article

More bearishness about Citigroup

Thu, 01 Nov 2007 07:59:58 -0400

The hits keep on coming for Citigroup. The latest: Meredith Whitney of CIBC World Markets downgraded Citigroup to underperform and said the stock will likely come under more pressure soon. Her view is that it could fall another 25 to 30 percent. According to the New York Times, she has also pointed out a troubling fall in capital levels. They are at their lowest levels in decades after some acquisitions. Its tangible capital ratio is just 2.8 percent; that's about half of other banks. So the pressure on CEO Charles Prince is really intensifying, enough so that board members seem to be making a concerted effort to support him. You have to wonder when the board will make a change. Stanley O'Neal certainly wasn't given these opportunities to fail and recover.

For more:
- here's the New York Times article

Related articles:
- Pandit ready for Citigroup challenge
- The meaning of Citigroup's earnings

Read more on: Charles Prince l Citigroup