The Rumor Mill: Mergers and Acquisitions in Question, January 31

Rumors are often more fun than the deals themselves. (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:

  • Sara Lee (NYSE:SLE) is playing hard-to-get: suitors have been circling, but Sara rejected them all, saying that they will spin off their meat and coffee businesses separately!  Apollo Global Management (NASDAQ:APOL), Bain Capital, and TPG Capital made an approximate $20 bid for Sara Lee, which Sara Lee quickly slapped down.  Meanwhile, JBS, the Brazilian meat processor, worked with the Blackstone Group (NYSE:BX) to come up with a revised bid at $21 per share, wherein JBS would get the meat, and Blackstone the beverages. Sara Lee rejected this as well, but a private equity firm would be a good match because Sara Lee meets their criteria of “stable brands and abundant cash flow,” which may be why Sara Lee continues to keep its options open by encouraging higher offers.  You can’t have your cake and eat it too!  However, if the deal gets done, it would be the largest one since the credit crisis hit.
  • It looks as though no one else will rain on Rio Tinto’s (NYSE:RIO) parade as it plans to buy the coal mining company Riversdale for $3.9 billion.  Riversdale’s biggest shareholder, Tata Steel, which owns about 24 percent of the outstanding stock, recently expressed support for the bid.  Riversdale is a hot commodity due to its promising coalmines in Mozambique.  An Indian consortium may make a bid later in the month, but Riversdale representatives believe the former party isn’t that interested.
  • Innkeepers USA Trust, a bankrupt REIT that operates hotels under brands such as Marriott (NYSE:MAR), Hilton, and Hyatt (NYSE:H), is reportedly putting itself up for auction in order to pay off its debt.  Affiliates of Five Mile Capital and Lehman Brothers Holdings, which own a majority of Innkeepers’ secured debt, reached a preliminary agreement for the company at approximately $1.14 billion.  Will it find another “stalking horse” bidder?
  • Sanofi-Aventis (NYSE:SNY) and Genzyme (NASDAQ:GENZ) continue to inch towards finally striking the some $18.5 billion deal.  Rumor has it that Sanofi hired a search firm to identify possible candidates for Genzyme’s board.  The $18.5 billion tender offer expires February 15th, but Genzyme already rejected the $69-per-share offer as too low months ago.  Sanofi may inch up on the price a little, but it’s not afraid to wage a proxy battle to gain control of Genzyme’s board.
  • Carl Icahn extended his $6 per share offer for energy company Dynegy (NYSE:DYN) for two weeks, but the shareholders, notably Seneca Capital, won’t have any of it.  So far, Icahn is on a roll: his tender offer attracted about 4 percent of investors, a bit less than the 50 percent threshold required for approval.  On the other hand, no other firms are interested, even after Goldman Sachs (NYSE:GS) and Greenhill (NYSE:GHL) searched high and low for potential buyers.
  • The real estate market may be sputtering, but some big deals may be in the making.  ProLogis (NYSE:PLD), a REIT that operates warehouses and industrial distribution centers in North America, Europe and Asia, said that it is in merger talks with AMB Property Corp (NYSE:AMB), which does pretty much the same thing.  Why do this?  A larger company will mean more opportunities to offer convenient locations to their major clients, including (NASDAQ:AMZN) and Nike (NYSE:NKE).
  • Citigroup (NYSE:C) isn’t too happy with EMI, that British record-label company overwhelmed with debt:  after lending EMI’s private-equity owner Terra Firma billions, Citigroup wants to take control in order to minimize losses.  Guy Hands, who is in charge of Terra Firma, may lose control if and when EMI breaches its debt covenants in March.  Possible suitors include Warner Music (NYSE:WMG) and the Sony-sponsored (NYSE:SNE) venture, Syco.

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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