Month: June 2007

BCE won’t break LBO boom’s back

30 Jun 2007

Ontario Teachers and Providence bid C$51bn for the telco firm. That s a full price despite rules that made a competitive auction tricky. But so long as the buyers don t get greedy, the market should be able to swallow its $C37bn or so of debt.

Harley Davidson has room to rev its engine

29 Jun 2007

Rumours of a Honda bid for Harley sputtered out quickly. But the iconic American motorcycle company's valuation looks attractive. A buyout might be hard to pull off, but Harley has plenty of other ways to accelerate value for shareholders.

Commerce Bancorp bulls may have to wait

29 Jun 2007

The bank s shares popped Friday on news that it showed its scandaltinged founder the door and sorted out problems with regulator. Investors seem to think Commerce is now an attractive takeover target. But that depends on whether it can resume its fast branch growth. The bank s shares popped Friday on news that it showed its scandaltinged founder the door and sorted out problems with regulators.

ECB won’t be deterred by signs of slowdown

29 Jun 2007

It s too early to call the end to the eurozone recovery, but business seems to be losing confidence. France s Sarkozy thinks interest rates and the euro are too high. But with money supply surging, the central bank will ignore him.

Who holds all the toxic CDO risk?

29 Jun 2007

There are two big mysteries surrounding the CDO market: how much debt is outstanding, and who ultimately owns it? How the risk is distributed will determine whether current market wobbles quickly pass or turn into something more serious.

KKR’s Sun Micro deal provides a cautionary tale

29 Jun 2007

As investors weigh up a KKR IPO, they might consider the firm s own experience as a minority investor in a public company. The buyout firm made a $700m convertible investment in Sun Micro. After a disappointing quarter, the stock is 25% below the convert price.

Vodafone shouldn’t get caught up in iPhone hype

29 Jun 2007

Sure, the mobile operator could get a leg up by getting an exclusive deal on Apple s new handsets. They are likely to sell like hotcakes. But Vodafone shouldn t agree a deal on any terms. It risks cannibalising its own customer base and setting back its drive on 3G.

Memo from Gordon Brown

28 Jun 2007

The new UK Prime Minister looks likely to appoint an old ally to what could be the worst job in politics his successor as Chancellor. But it needn t be a poisoned chalice. There s a huge job to be done provided Brown allows him to do it. Here s the memo he should send. Breakingviews has unearthed a memo from Britain's new PM to his new Chancellor. In it, Brown tells his successor to undo the complexity he has introduced into the tax system and move to flatter, simpler, fairer taxes.

Newest type of LBO exit: sell to yourself

28 Jun 2007

Two big transactions this week Saga/AA and ProSieben/SBS have involved LBO houses selling firms to other companies they have stakes in. Such deals can allow working partners to cash in their carry. But limited partners need to make sure their interests are protected.

Investors should throw the switch on Pik toggles

28 Jun 2007

Buyout shops have been forced to drop or scale back these toxic provisions on a halfdozen recent LBO financings. They re hard to price and may let distressed borrowers burn assets that would otherwise go to lenders. The market is right to shun them.

Reed LBO rumours look overblown

28 Jun 2007

The £15bn AngloDutch publisher seemingly ticks all the right boxes: low debt, stable businesses and high earnings visibility. But Reed is very big. And publictoprivate deals are hard to do in the UK. So don t hold your breath.

Sarko’s latest reported Suez scheme is rich in irony

28 Jun 2007

The French government apparently wants it to get rid of its water business before merging with GdF. Not only would that remove the only thing that's really French in Suez; it is exactly what activist shareholders have long demanded.

Can the super-rich keep getting super-richer?

28 Jun 2007

If markets stay strong, this trend will continue. But, beyond a certain point, there could be a backlash which may lead to higher taxes. Those with over $30m grew their wealth 17% last year to $13 trillion, pulling away from the mere rich, who are moving away from the rest.

GM’s $5.6bn disposal highlights long road ahead

28 Jun 2007

Detroit s top dog snagged a good price for its transmission unit. That s worth a pat on the back, and the cash will come in handy. But the sale also shows how far the turnaround has to go. Allison accounts for just over 1% of GM s revenue, but over a quarter of earnings.

Sageview offers LBO firm lesson in public investing

28 Jun 2007

Blackstone and KKR, with investments in Deutsche Telekom and Sun Micro, gave a bad name to LBO firms investing in public securities. But Sageview s Guitar Center deal has shown that taking private equity expertise to public companies can rock investors portfolios.

John Foley delves into the littleknown world of equity bridges

27 Jun 2007

John Foley delves into the littleknown world of equity bridges, the risky but popular new LBO financing tool.

French watchdog hands Sacyr a E10bn bill

27 Jun 2007

This is the price the Spanish construction group is facing if all Eiffage investors tend their shares to the new bid it has to launch. Sacyr s attempt at a creeping takeover was clumsy. It must now explain to its own shareholders how it will finance the deal.

Best Buy overstretches with buyback and expansion

27 Jun 2007

The electronics retailer has seen its business hit by increasing competition and lacklustre consumer demand. Best Buys response is to buy back 25% of its stock and expand capital expenditure. The retailer s trying to have its cake and eat it too.

Oil majors adopt fight or flight expropriation strategies

27 Jun 2007

At first sight, it might seem US oil firms are responding more aggressively than Europeans to Russian and Venezuelan expropriation. On closer inspection, there s no obvious national style at work here it s more about a realistic assessment of each companies options.

Does Wall Street remember Irving Fisher?

27 Jun 2007

The Yale economist confidently predicted stocks had reached a permanently high plateau two weeks before the 1929 crash. It s hard not to recall this as Stan O Neal and Lloyd Blankfein wax rosily about the health of the credit markets and the buyout boom.

Brown brings business into his big tent

27 Jun 2007

The new UK Prime Minister s business advisory group is a glittering array of bosses from Britain s biggest and most successful companies. That s a huge vote of confidence from big business. But where are the small companies and entrepreneurs, who have different agendas?

ProSiebenSat pays up for SBS

27 Jun 2007

KKR and Permira, majority owners of both broadcasters, had always planned to scrunch the companies together. But the E3.3bn price equivalent to 14 times ebitda looks high and the synergies ambitious. At first blush the E3.3bn price akin to 14 times ebitda looks high. But add in the synergies, and the price looks more reasonable.

Will Italy’s popolari banks ever rationalise?

27 Jun 2007

The failed E12bn deal to merge the Milan and Emilia Romagna banks is a setback. Milan's shareholders won't mind: value would have been lost. Unfortunately, it was unions sitting on the board who reportedly sank it. That's worrying.

US Foodservice bond snarl-up highlights LBO risks

27 Jun 2007

Buyout shops have exploited a glut of liquidity to achieve evertighter pricing and advantageous structures. But investors are now fighting back. If LBO shops stay greedy, more deals like US Foodservice will trip.

Apple’s iPhone valuation calls for scepticism

26 Jun 2007

The prospect of the US group s new handset has tacked $34bn onto Apple s market value or about a third of Nokia s total value. Yet Apple hopes to sell 10m phones by 2008. The Finnish giant should sell about 550m. Either Nokia s crazy cheap or Apple s overvalued.

Brussels’ rejection of Ryanair deal is heavy-handed

26 Jun 2007

The deal would have created a de facto monopoly at Dublin airport. But there could have been less drastic remedies. One byproduct of the EU's action could be to further complicate Alitalia's privatisation. Its suitor, Air One, would also have a monopoly.

Who’s afraid of $25 trillion?

26 Jun 2007

The Germans are. They re worried about a megalocust attack from staterun foreign funds. No domestic company would be safe. The governments of China and the oil exporters may be looking for power rather than profits. Fair enough. But very few should be blocked.

Investors finally wake up to Blackstone’s value

26 Jun 2007

Just minutes into its third trading day, the private equity firm s shares dropped below their offer price. That shouldn t be too surprising. Founder Steve Schwarzman pushed the envelope in every way: valuation, size of the offering, governance. There's probably further to fall.

Offshoring works better in finance than software

26 Jun 2007

The risk for software developers and service providers is that cheap labour climbs up the value chain. That s less of a worry for financial. But while their franchises are protected by brand names and physical branches, many of their employees may see their jobs moved offshore.

Stork deal only a modest victory for shareholder activism

26 Jun 2007

The Dutch conglomerate's sale to Candover for a 19% premium ends its battle with two US hedge funds. But the big winner is Stork s bosses. They ll keep their jobs, their strategy and could even share in any upside by coinvesting.