Archive for July, 2008
Posted by: in Latest News
Filed under: Deals, Industry, Private equity, CIT Group (CIT), Merrill Lynch (MER)
 Lately, there’s been lots of dire talk about the private equity world. Returns are likely to be much lower and perhaps there will be many firms that shut down.
Indeed, such things might turn out to be true.
However, whenever there’s extreme turbulence and a pervasive credit crunch, there are also big opportunities to make money. Just look at Apollo Management and Cerberus Capital. Both firms made a killing during the rough early 1990s.
Fast forward to today, and we might be seeing something similar with one of the top beneficiaries possibly being Lone Star Funds. Yes, this week the fund purchased a collateralized debt portfolio from Merrill Lynch & Co. (NYSE: MER) at 22 cents on the dollar [subscription required]. The face value on it? About $30.6 billion.
This isn’t a one-off deal as it looks like Lone Star is hungry for high-risk debt. For example, the firm recently bought the mortgage division of CIT Group Inc. (NYSE: CIT) and acquired Bear Stearn’s mortgage segment. There was also the buy of Accredited Home Lenders Holding Co. for $295 million.
All in all, this is risky stuff, but the chief of Lone Star, John Grayken, has lots of experience with structuring complex deals for distressed financial institutions. During the early 1990s, he worked for Robert Bass — a Forth Worth billionaire — and made a variety of deals for ailing S&Ls.
Then, in 1995, he started Lone Star, where he focused on troubled financial institutions in Japan and South Korea.
Lone Star’s recent dealmaking does not necessarily mean that the credit crunch is thawing and the housing/mortgage markets are coming back. After all, private equity firms can hold investments for several years.
Then again, such investments are a good sign since they show that the smart money does see value in the marketplace.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements . He also operates MergerBook.com.
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Filed under: Deals, Law, Whole Foods Market (WFMI)
If a new legal ruling forces Whole Foods to reverse its Wild Oats buy-out, WFMI shares could soar.
A federal appeal court has decided that the FTC’s challenge of the merger between Whole Foods (NASDAQ: WFMI) and Wild Oats should have gone forward. A lower court has said the FTC had to cease its investigation into whether the marriage was anti-competitive.
According to The Wall Street Journal, “Jeffrey Schmidt, head of the FTC’s competition bureau, stated the bureau is hopeful the ruling will ultimately grant the FTC to undertake a full review of competitive issues raised by the combined companies.”
Whole Foods ended up with 74 Wild Oats stores which it plans to cut down to 50. The FTC could ask the new company to close other locations in areas where the new parent has two stores, and, perhaps a monopoly for that region.
The FTC could also argue that the entire merger constitutes an antitrust threat. That news could not be better for WFMI shareholders. If Wild Oat has to be spun back out, it would need to re-brand it stores, add pricey management, and undertake its own marketing, In other words, it would be a severely weakened competitor for Whole Foods instead of a thorn in the side of WFMI shareholders.
Shares in WFMI are off well over 40% this year. Stocks in many other major food retailers are closer to flat. Part of the might be due to the concern that premium products do poorly in a recession. But, part may have to do with the fact that Wild Oats stores were considered weaker as a group than the original Whole Foods chain.
If WFMI gets to rid itself of the company it got in the buy-out, its shares might get back from $22, near their 52-week low, to the $30 to $40 range.
Douglas A. McIntyre is an editor at 247walls.com.
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Posted by: in Latest News
Filed under: Earnings reports, Deals, Merrill Lynch (MER)
It is not right to say that management misleads investors. That’s too crass.
But the coarse language might come out when Wall Street talks about what Merrill Lynch (NYSE: MER) did today. After the bell, MER “said it expects to take a $5.7 billion pretax write-down in the third quarter due to losses on the sale of mortgage assets and plans to raise at least $8.5 billion by selling new common shares,” according to Reuters. Well over $3 billion of that’ll come from Singapore’s Temasek Holdings. It put some money into Merrill before, and this evening’s news may have left it with a bad taste. But it stepped up anyway, probably to protect the cash it had already put in.
The trouble is this. John Thain, Merrill’s CEO, has kept saying that the worst was behind the company. He stated he’d engined a solution by selling Merrill’s stake in Bloomberg and by taking what were supposed to be the lion’s share of the writedowns last quarter. Thain’s credibility bled out onto the floor late this day.
The SEC will get to take something away from this day. Merrill’s stock began to sell off sharply at about 11 AM. By the end of the day, it was down over 11%. Someone knew something when they should not have.
Douglas A. McIntyre is an editor at 247wallst.com.
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Filed under: Deals, Cisco Systems (CSCO)
 Over the years, homes have been getting smarter — with cool networking technologies. And, one of the leading providers in the space is Pure Networks, which is a privately-held firm in Seattle.
Well, recently the company agreed to sell out to Cisco Systems, Inc. (NASDAQ: CSCO) for $120 million. Both companies already have an OEM deal — through Cisco’s Linksys division. Essentially, the deal is a part of Cisco’s vision of the so-called “connected life.” And, no doubt, it should be a massive market opportunity (yes, I’m sure our toasters will eventually be hooked up to the Net).
However, this vision will require some extremely complex technologies. And at the same time, it needs to be easy to use for the consumer. But it looks like Cisco has had some success with Pure, which should help with the integration process and minimize some of the technology risks going forward.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the web Guide to Decoding Financial Statements. He also operates MergerBook.com.
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Filed under: Deals, Competitive strategy, Procter and Gamble (PG), Unilever ADR (UL)
 Unilever (NYSE: UN, UL), the Anglo-Dutch consumer products giant, stated Monday it was selling its laundry business in the U.S., Canada and Puerto Rico to private equity firm Vestar Capital for $1.45 billion. Included in the deal are the All, Wisk, Sunlight, Surf and Snuggle brands.
Selling mature or non-core businesses to focus on fast-growing units has been part of Unilever’s current strategy. Interestingly enough, though, the European laundry business has not been sold. Patrick Cescau, Unilever’s CEO stated that “Laundry remains an important category for Unilever outside North America.” The sale will grant Unilever to concentrate on a “leading position” in Europe, Asia, Africa and Latin America, Cescau stated.
Only last week, Unilever sold its Bertolli olive oil and vinegar business for $998 million to Grupo SOS SA and before that it sold its Turkish olive oil business. All part of a strategy to dispose of non-strategic brands, with collectively more than €2 billion ($3.14 billion) in turnover. It has made 19 divestments so far. The other parts of the plan include job cuts and other cost slicing measures. Unilever wants to concentrate on higher-priced products to boost profit, attempting to catch up to Procter & Gamble Co. (NYSE: PG).
Like other companies, particularly food companies, Unilever has been hit by rising commodity prices of corn, edible oils and milk. It is no surprise then its stock has suffered, down 18% year-to-date as not only the U.S. economy is experiencing a slowdown, but consumer demand is also slowing in Europe and emerging markets.
Analysts, though, have been happy with the prices Unilever has been getting for its divestments and it seems investors approve as well as Unilever (UN) rose 47 cents, or 1.6% to $29.68.
In addition, there have been reports Cescau told the board he would step down in Might of next year, but that hasn’t been confirmed. So far, he’s been mostly responsible for the company’s divestment and cost cutting plan, a plan that is working far superior than most strategic plans I’ve seen lately.
Before becoming a lead editor on BloggingStocks, Melly Alazraki worked as an equity analyst and as an international institutional salesperson with various investment banks.
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Filed under: Before the bell, Earnings reports, Analyst reports, Analyst upgrades and downgrades, Deals, Google (GOOG), Apple Inc (AAPL), Motorola (MOT), XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI), Market matters, Verizon Communications (VZ), Amgen Inc (AMGN), iPhone, Economic data, Kraft Foods’A’ (KFT), Unilever ADR (UL), Lehman Br Holdings (LEH)
 U.S. stock futures were lower early Monday as investors concerns over the banking sector grew. Federal regulator seized two more banks, 1st National Bank of Nevada and First Heritage Bank, which were scheduled to reopen on Monday as Mutual of Omaha Bank branches. The Senate also passed a major housing bill over the weekend, and this could actually give a boost to mortgage lenders like Fannie (NYSE: FNM). Meanwhile, oil prices rebounded as European markets declined. As of 8:00 a.m., it seems Wall Street would start weak.
Reporting earnings this day are Kraft Foods (NYSE: KFT) - Kraft reported 58 cents earnings per share excluding items, beating estimates of 50 cents; Verizon Communications (NYSE: VZ) - Verizon reported earnings of 67 cents per share, excluding items, beating estimates by 2 cents; and after the close of trading, Amgen (NASDAQ: AMGN).
Amgen (NASDAQ: AMGN) stock is jumping over 17% in premarket trading after announcing late Friday its experimental osteoporosis drug, denosumab, significantly reduced the danger of bone fracture in post-menopausal women in a massive trial. Rodman & Renshaw and Jefferies & Co both upgraded Amgen to Market Outperform and to Purchase respectively.
Unilever NV (NYSE: UL) will sell its North American laundry detergents business to private equity investor Vestar Capital Partners for $1.45 billion (euro924 million). Unilever said the sale consistent with its strategy of divesting non-core businesses and concentrating on a few core ones.
Motorola Inc. (NYSE: MOT) will reorganize its home and networks mobility unit — its second largest — by splitting it into three separate businesses. This could facilitate future sales should Motorola tries to divest any business units.
Private equity firm Kohlberg Kravis Roberts & Co. will go public on the New York Stock Exchange through a takeover of its Amsterdam-listed investment fund KKR Private Equity Investors LP. The original plan for a
$1.25 billion initial public offering didn’t pan out due to credit market turmoil.
Sirius Satellite Radio Inc. (NASDAQ: SIRI) shares are gaining over 1.5% in premarket after announcing preliminary results. It said it anticipates its adjusted loss during the second quarter to narrow to $24 million from $79 million as revenue rose 25% to $283 million. Sirius said it’s planning to sell $375 million of its own stock and up to $65 million more from time to time. Only a few days ago the FCC has finally approved the merger of Sirius with XM Satellite Radio Holdings Inc. (NASDAQ: XMSR), in which Sirius would take over XM.
Ryanair Holdings (NASDAQ: RYAAY) dropped as much as 26% after it reported a surprising 85% drop in first-quarter profit on Monday, citing the high cost of fuel and recessionary fears. It also warned it could post its first-ever annual loss.
According to The Wall Street Journal, the Securities and Exchange Commission is probing four rumors regarding Lehman Brothers (NYSE: LEH).
Could Cuil be the search engine that threatens Google Inc. (NASDAQ: GOOG)? Cuil Inc. is a startup founded by engineers from Google and other tech giants. Cuil is stated to cover three times as many Web pages as Google and aims to deliver better results than other major search engines. The site’s results page resembles an on the internet magazine.
The USA Today says Apple Inc. (NASDAQ: AAPL) is “experiencing serious Microsoft-type growing pains with its launch of the new iPhone that went on sale two weeks ago.” The problems it lists include not enough supply to satisfy demand and a longer procedure to activate the phone.
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