The Rumor Mill: Mergers & Acquisitions in Question, January 17

Not all deals get done. (See “DEAL DONE! M&A Activity of the Week“) So, here’s your Cheat Sheet to the top mergers and acquisitions in the rumor mill:

  • News Corp. (NYSE:NWSA) is allegedly exploring its strategic options with MySpace, which could include a sale, merger, or spin-off.  After firing half of its workforce (about 500 jobs), MySpace and its owner, News Corp., may split up, as Murdoch’s original $580 million deal with Viacom (NYSE:VIA.B) in 2005 doesn’t seem like much of a deal anymore, given Facebook’s prominence.
  • Sterling Bancshares (NASDAQ:SBIB) is now on the auction block: A potential deal, possibly with Comerica (NYSE:CMA) or BB&T (NYSE:BBT), will value the company at $8 per share or $825 million as early as next week.  Sterling is also currently facing a proxy fight from its largest shareholder.
  • Exco Resources (NYSE:XCO) is up for sale!  The natural-gas company plans to hold an open auction, and will consider the controversial $4.4 billion offer proposed by a group including Exco’s CEO, Oaktree Capital Management, Ares Management, and T. Boone Pickens (See “T. Boone Pickens Has Big Plans For Our Money“).  At the same time, the board adopted a poison pill and blocked any increase in the CEO’s stake in order to properly explore its “strategic alternatives.”
  • Baffinland Iron Mines will likely be acquired, but who will cough over the cash?  According to Reuters, competing bidders Nunavut Iron Ore and Arcelor Mittal (NYSE:MT) extended their bid deadlines until late January.  Will either sweeten their offers in order to gain control of Baffinland’s crown jewel, the iron ore deposit in the Canadian Arctic?
  • Sara Lee (NYSE:SLE) is garnering interest from parties other than JBS, the Brazilian meat processor that made an offer last month which Sara Lee considered too low.  Apollo and investor Dean Metropoulos formed a group of investors to explore an acquisition of Sara Lee, and KKR (NYSE:KKR) has renewed its interest since last year.  Sara Lee also has the option of spinning off one of its units, which it has done in the past with its North American bakery unit and global shoe care division.
  • Talks between Sanofi-Aventis (NYSE:SNY) and Genzyme (NASDAQ:GENZ) have been continuing for quite some time now, and despite reports that the two are discussing how to value one of Genzyme’s multiple sclerosis drugs, Sanofi claims “significant differences” roadblock a potential deal.  Sanofi’s $18.5 billion offer for Genzyme may potentially increase, if the two companies can bridge the valuation gap, partially with the drug’s promising earnings potential.
  • Diversification, smiversification! ITT (NYSE:ITT) decided it no longer wanted such a broad focus, and is planning to break apart into three distinct businesses in an attempt to latch onto the current value-focused mood of its investors.  Other industrial conglomerates, such as Illinois Tool Works (NYSE:ITW) and Tyco International (NYSE:TYC), are expected to consider following suit given that the market may be beginning to become skeptical of the efficiency of such huge firms.  The new companies will focus on industrial lines; water transportation, testing, and treatment; and military equipment.
  • Marathon Oil (NYSE:MRO) announced that it plans to break apart into a refining company and an oil exploration and production company.  Like ITT’s break-up, Marathon’s decision reflects the growing trend towards companies with focus rather than unwieldy conglomerates.
  • In order to give GM’s (NYSE:GM) dealers better wholesale credit access, GM may buy back the part of Ally Financial that comprises the GMAC auto loan business.  GM offered $5 billion six months ago, but was shot down by Ally.  Allegedly the sides haven’t officially discussed this option as of late, so it’s unclear whether Ally would go for it or not.

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 …

Don’t Miss: DEAL DONE! M&A Activity of the Week >>

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