The Rumor Mill: M&A Whisperings on Wall Street

Wall Street does deals, (See “DONE DEAL! M&A Activity of the Week“), but it also spreads rumors. Here’s your Cheat Sheet to the top mergers and acquisitions in the rumor mill:

  • It looks like Sanofi-Aventis (NYSE:SNY) may have to bite the bullet and will raise its valuation of Genzyme (NASDAQ:GENZ).  This past Monday morning, sources reported that the two companies were still hammering out a deal, which at this point is rumored to be $74 per share (versus the original $69 per share), along with a performance-based fee, or “contingent value right,” tied to the performance of one of Genzyme’s drugs.  Genzyme is a good match for Sanofi, because the latter company would be able to reduce its exposure to generic-brand drugs by entering Genzyme’s area of specialty, rare diseases.
  • Big Lots (NYSE:BIG), the discount chain store that competes with Wal-Mart (NYSE:WMT) and various “dollar” store chains, is allegedly thinking about selling, after receiving some advances from private equity firms.  Possible candidates include Thomas H. Lee Partners and Bain Capital.  After the rumor spread, Big Lots’ stock price rose 15 percent to around $39 per share, and the price will likely continue upwards, given that some analysts believe Big Lots could receive as much as $54 per share.  Given the defensive nature of this industry, Big Lots would be a prime target for private equity firms looking for little debt and strong cash flow.
  • We could be looking at a bidding war:  California-based semiconductor producer Conexant Systems (NASDAQ:CNXT) claimed Golden Gate Private Equity offered it $2.35 to $2.45 per share, which trumps Standard Microsystems’ (NASDAQ:SMSC) $2.24 offer from the previous day.  Granted, the total sum is chump change: around $300 million.  Nevertheless, a small bidding war is always better than no bidding war!
  • You would never think that you’d find a drama-infused tale in the container leasing industry, but that’s exactly what we have with Triton Container International, one of many reasons for the Pritzker family’s claim to fame and fortune.  The family will sell Triton to Warburg Pincus and Vestar Capital Partners in part of their struggle to sell off illiquid assets as the Pritzker descendants fight over who owns what.  The deal could be worth about $3 billion, including debt, particularly because shipping containers are in short supply.
  • St. Joe’s (NYSE:JOE), a company that owns residential and commercial real estate and timberland in northwest Florida, is allegedly looking at its strategic options with the help of Morgan Stanley (NYSE:MS).  Not surprisingly, the company hasn’t fared that well through the real estate downturn, which prompted one of St. Joe’s largest shareholders, Bruce Berkowitz of Fairholme Capital (NASDAQ:FAIRX), to aim to restructure the company’s board, hire a financial advisor and turn the company around in half a year.  Those of you who have read The Big Short by Michael Lewis would appreciate this: David Einhorn of Greenlight Capital (NASDAQ:GLRE) is one of the hedge funds shorting St. Joe’s, which isn’t surprising given its prominence in the real estate industry.
  • The London Stock Exchange (LSE:LSE) will acquire the owner of the Toronto Stock Exchange, TMX Group (PINK:TMXGF), for $3.2 billion, but the deal still has a ways to go before anything is certain.  Many traditional exchanges are rapidly losing market share to alternative exchanges, and mergers provide a means of consolidating costs.  Plus, this deal would create a new exchange strong in natural resources and clean energy listings.  Regulatory approval could be an issue, since the Canadian government must give the go-ahead.  It recently blocked BHP’s (NYSE:BHP) bid for Potash (NYSE:POT), and given that this would be the largest foreign takeover of a Canadian financial services company, the deal is likely to hit roadblocks.
  • Just when you thought that deals in the world of bourses couldn’t get more exciting, they just did.  NYSE Euronext (NYSE:NYX) is currently talking with Deutsche Boerse (XETRA:DB1) about a possible merger.  Such a deal would create a formidable rival to alternative trading platforms, as the newly formed company would be one of the world’s largest equity and derivatives trading platforms.  This deal would also face regulatory hurdles, but this time from the European commission.  There is an interesting catch though: Deutsche will own 60 percent of the combined company’s shares.  An insult to American dominance?  Everyone has something to say about this deal, including Bloomberg!
  • Tech boom déjà vu?  Media and corporate attention on social networking sites such as Facebook and Twitter have drawn attention to their potentially hefty valuations.  Twitter recently has taken part in low-level talks with Google (NASDAQ:GOOG) and Facebook.  What would Twitter be worth? Between $8 billion and $10 billion, according to those familiar with the discussions.  This is quite a lot, considering its revenue was $45 million last year, and its recent round of venture capital financing valued the company at approximately $3.7 billion.  Will Twitter remain private while building up its brand, or will management cash out asap?
  • SRA International (NYSE:SRX), a U.S. defense consulting company, is reported to be in the process of finding a financial buyer.  SRA Chairman, Ernest Volgenau, holds 70 percent of the firm’s voting stock, and wants a financial buyer in particular because he would like to keep the company intact and control who buys, even if he receives a lower price as a result.  What a trooper.  The viable candidates are a mystery at this point, but the following private equity firms showed interest in the past:  Providence Equity, General Atlantic, Veritas Capital, Carlyle Group, Bain Capital, and the Blackstone Group (NYSE:BX).
  • Instead of filing for bankruptcy, Blockbuster plans to put itself on the auction block.  It doesn’t have much of a choice anyway, since its creditors recently disagreed on plans to give the company money to help it exit bankruptcy protection.  The potential bidders? Carl Icahn, and a group led by Monarch Alternative Capital.  The deal could value the company at about $300 million.
  • Based on its stock’s 9 percent surge on February 10th, American Eagle Outfitters (NYSE:AEO) may be a takeover target.  If the company were bought out, it would probably be the target of a private equity firm, because American Eagle has the name brand teens love, as well as plenty of cash flow.
  • After paying $1.65 billion for YouTube in 2006, many of Google’s (NASDAQ:GOOG) investors are concerned that the acquisition is not contributing that much to its income.  Now, partly because of this pressure, Google is currently in talks to buy video producer Next New Networks, which has created internet comedy shows that have appeared on Saturday Night Live, such as “I’ve Got a Crush on Obama.”  If Google wants to compete with other web content providers such as Hulu, Netflix (NASDAQ:NFLX), CBS (NYSE:CBS) and ABC, it needs to provide better content than the rest of them, which will help drive advertising revenue.  Google sees Next New Networks as a means of improving the quality of videos through partnerships with smaller providers.

Interact: Which deals do you think will get done? Which are just PR from hedge funds and traders? Let us know in the comments below …

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