DONE DEAL! Mergers and Acquisitions in the World of Business
M&A activity was big this week, and the rumors were exciting as well!
Here’s your Cheat Sheet to mergers and acquisitions completed last week:
- Remember that massive coalmine explosion last year? Well, it looks like the company responsible, Massey Energy (NYSE:MEE), has found a suitor in Alpha Natural Resources (NYSE:ANR), which announced that it will acquire Massey for $7.1 billion or $69 per share, a 21 percent premium over last Friday’s closing price. However, Alpha is really just trying to stay in the “in crowd”: deal making has skyrocketed in this space in recent years, as Asian economies heat up and demand more coal for mills and power plants. The newly combined company will be a “global player in metallurgical coal,” according to Alpha’s CEO Kevin Crutchfield. Plus, Alpha feels comfortable taking on the risks and aftermath of the tragedy, which has kept Massey embroiled in lawsuits and government investigations for months.
- Guess what finally happened? Comcast (NASDAQ:CMCSA) completed its merger with NBC Universal (NYSE:GE). We all thought it would take forever, which it did. What exactly happened? Comcast acquired a 51 percent stake in NBC Universal from GE, which after the approval of the FCC and Department of Justice, created a new and imposing beast of a firm, which will now control how movies and made and delivered to its 23 million video subscribers and 17 million internet subscribers.
- It was a rumor last week, and now it’s for real. Industrial real estate firms AMB (NYSE:AMB) and ProLogis (NYSE:PLD) officially will merge, but ProLogis shareholders aren’t going to get much bang for their buck, as the all-stock deal offers essentially no premium to the current stock price. The newly combined company will have an approximate $24 billion market capitalization. This is truly a silver lining, given that commercial real estate is both depressed and depressing. Does this mean the companies’ management expect some kind of recovery?
- Citigroup (NYSE:C) pulled a fast one this past week: instead of waiting for the owner of British music group EMI, Terra Firma Capital Partners, to default on its $5.4 billion loan, Citigroup decided to simply take EMI over, writing off 65 percent of its debt in exchange for complete control. This was a clever move on Citigroup’s part, because it won’t have to deal with the hand-wringing bankruptcy process and instead will probably sell EMI within the year. Warner Music Group (NYSE:WMG) is a possible candidate, but it may need to shift around and/or sell some of its own assets, such as the Warner/Chappell publishing business to cough up the cash to buy EMI.
- Just when you thought that Whole Foods Market (NASDAQ:WFMI) was so last year and that the food industry was becoming a bit bland, Nestle NESN has decided to shake things up a little bit with its acquisition of CM&D Pharma, a start-up that makes a chewing gum treatment for kidney disease. Why? We all know that Nestle basically produces a bunch of junk food, and as a result of the allure of the growth prospects of the health foods niche, Nestle established a new health science unit. We can therefore expect more acquisitions like this one in the future!
- Usually when we talk about a big deal, we mean a deal with nine zeros. Nippon Steel NISTY and Sumitomo Metal SMMLY just announced a big deal, but this one has TEN zeroes or at least holding places. The two steel companies announced that they plan to merge and create the world’s second-largest steel producer in a deal worth approximately $24.5 billion. Why create another lumbering behemoth? It’s all about competition, particularly from China, and rising commodity costs. A merger will allow these companies to compete more effectively with threats in East Asia, as well as gain bargaining power for costs and prices.
- Newmont Mining (NYSE:NEM), the largest U.S. gold miner, has chosen a new golden boy: this past week Newmont agreed to pay $2.3 billion for Fronteer Gold (AMEX:FRG), which is a 37 percent premium over the pre-announcement stock price. The motive? Fronteer’s extensive gold assets in Nevada. The land apparently may contain 4.2 million ounces of gold. Why do we care? It’s just interesting, given that gold prices have skyrocketed in the last few years, reaching a $1,431.25 per ounce on December 7th.
Not all deals get done. Don’t Miss: The Rumor Mill: Mergers & Acquisitions in Question >>