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M&A - A Weekly Recap


In the holiday-shortened trading week ending April 1, the deal scene became active as early as Sunday, with automaker Ford revealing its plan to sell Volvo to Chinese carmaker Zhejiang Geely Holding Group. The deal is expected to close in the third quarter.

On the same day, Royal Dutch Shell said it agreed to sell its downstream business in New Zealand to a consortium of Infratil Ltd. and the Guardians of New Zealand Superannuation. The deal will help Shell focus on larger, integrated assets in growth markets.

Private-sector coal firm Peabody Energy has offered to buy Australia's Macarthur Coal Limited for A$3.3 billion. Macarthur's board has rejected the offer in its current form.

Lihir Gold Ltd said Wednesday that it rejected an acquisition offer from Australia's largest gold miner Newcrest Mining Ltd. The cash and stock offer amounted to A$3.87 per share or about A$9.2 billion.

Ford Agrees To Sell Volvo To Zhejiang Geely Holding

Automaker Ford Motor Co. (F) is selling Volvo Car Corp. and related assets to China-based car manufacturer Zhejiang Geely Holding Group Co. Ltd for $1.8 billion, the company revealed Sunday. Ford said it has entered into a definitive agreement with Zhejiang regarding the sale.

F closed Monday's regular trade at $13.57, down $0.29 or 2.09%, on 158.22 million shares.

The value will be paid in the form of a $200 million note and the remainder in cash. The deal is expected to close in the third quarter and the company will continue to support Volvo, without retaining any ownership, in order to facilitate a smooth transition.

When the deal is complete, Volvo Cars will become a separate company with its own management team based in Gothenburg, Sweden.

Apart from customary closing conditions, the completion of the deal is also subject to finalizing of purchase price adjustments relating to pension deficits, debt, cash and working capital and receipt of applicable regulatory approvals.

Standard & Poor's Ratings Services said Monday that Ford's decision to sell Volvo would not affect the corporate credit rating on Ford and related entities. S&P has a B- rating and Stable outlook on Ford.

''Under the terms of Ford's credit agreement, Ford must use up to half of the proceeds from any Volvo sale to repay its secured term debt. We plan to reassess our issue-level and recovery ratings on Ford's secured debt once the company discloses the amount of net cash proceeds and resulting debt repayment,'' the ratings agency said.

Shell To Sell Downstream Business In New Zealand

Royal Dutch Shell plc (RDS-A, RDS-B, RDSA.L, RDSB.L) has agreed to sell its downstream business in New Zealand for NZ$696.5 million, the company said Sunday. The business is being sold to a consortium of Infratil Ltd. and the government's pension fund The Guardians of New Zealand Superannuation.

RDS-A settled Monday on the NYSE at $57.59, up $0.21 or 0.37%, on 1.07 million shares. On the LSE, RDSA.L ended lower by 13.50 pence or 0.70% at 1,912.00 pence on 2.52 million shares.

Shell has agreed to sell 17.1% shareholding in the 104,000-barrel per day refinery at Marsden Point as well as its network of over 220 retail stations. The sale includes Shell's retail, commercial fuels, bitumen, aviation, marine, chemicals, supply and distribution businesses in New Zealand, as well as the company's shareholdings in Loyalty New Zealand and New Zealand Refining Company.

In addition, the companies have agreed that Shell will continue to provide crude oil and refined products. Additionally, the consortium will operate retail service stations under the Shell brand.

The deal fits well with Shell's strategy of simplifying its global downstream portfolio and concentrating on larger, integrated assets in growth markets.

Avnet To Acquire Bell Microproducts

Computer hardware distributor Avnet Inc. (AVT) is acquiring peer Bell Microproducts Inc. (BELM) for an all cash consideration of $7 per share, the company said Monday. The total transaction value is about $594 million with an equity value of nearly $252 million and a net debt position of $342 million.

Following the news, Bell shares climbed more than 28% on the Nasdaq and Avnet shares were up more than 5% on the NYSE. AVT ended the regular trade Monday at $29.75, compared to the prior close of $28.37, and rose again the next day to settle at $30.53. BELM closed Monday at $6.91, up from the previous close of $5.38, and rose further to close at $6.96 on Tuesday.

Through the deal, Avnet expects to expand its storage and computing business as well as its presence in Latin American market. Excluding integration and transaction costs, the deal is to be immediately accretive to Avnet's earnings.

The transaction is expected to close in 60 to 120 days.

Further, Avnet lifted its earnings outlook for the third quarter, reflecting higher revenues and improved business mix.

Moody's Investors Service said Tuesday that Avnet's definitive agreement to acquire Bell does not impact the company's Baa3 senior unsecured rating.

UBS Tuesday said it maintains its "Buy" rating on Avnet and raised its price target to $35 from $32.

Yellow Media To Acquire Canpages

Yellow Media Inc. (YLO_UN.TO), a subsidiary of Yellow Pages Income Fund, has agreed to buy Canadian Phone Directories Holdings Inc. or Canpages for about C$225 million from an investor group led by private equity firm HM Capital Partners, the company said Tuesday.

YLO_UN.TO closed Tuesday's regular trade at C$6.21, slightly down from the previous day's C$6.22, on 2.64 million shares.

The consideration consists of C$75 million payable in cash at closing to settle third party debt obligations and the issuance of C$150 million of mandatory exchangeable promissory notes of Yellow Media.

Yellow Media owns Yellow Pages Group and the Trader Corp. The deal solidifies Yellow Pages' print position and provides it with a better opportunity to compete on the digital side. Currently, Yellow Pages reportedly has less than 20% of its revenues from digital businesses, compared to Canpages' 23%.

Yellow Media is also planning to sell its U.S. directory business, YPG Directories LLC, to Ziplocal LP. Financial terms of the deal, which will be in the form of an equity-for-equity swap, were not disclosed.

NAB bids for AXA's Australian, New Zealand businesses

National Australia Bank Ltd. (NABZY.PK,NAUBF.PK,NAB.AX) Tuesday said it agreed to purchase the Australian and New Zealand businesses of AXA Asia Pacific Holdings Limited for A$4.6 billion. French insurer AXA SA (AXAHY.PK) will buy the Asian businesses of AXA APH for A$9.4 billion.

NAB.AX settled Tuesday at A$27.80, compared to the prior close of A$27.70. AXA shares closed Tuesday's regular trade at EUR 15.93, compared to the previous close of EUR 16.03.

Melbourne-based wealth manager AMP Ltd has already placed a A$12.85 billion bid for AXA Asia Pacific. The Australian Competition and Consumer Commission is expected to announce its decision on both bids on April 22.

Peabody Energy makes bid for Macarthur Coal

Peabody Energy (BTU), the world's largest private-sector coal company, has made an unsolicited bid for Australia's Macarthur Coal Limited (MCC.AX). The company said late Tuesday that it offered to acquire Macarthur for A$13 per share in cash or about A$3.3 billion. However, the board of directors of Macarthur, which is trying to buy Gloucester Coal Limited, found the offer unattractive in its present form.

The announcement sent Macarthur's shares soaring on the ASX. The stock closed Wednesday at A$14.02, over 16% from the prior close. BTU closed Tuesday's regular trade at $45.67, down $0.40 or 0.87%.

Peabody says its offer represents a 34% premium to the price of Macarthur shares that are to be issued to Gloucester's largest shareholder Noble Group, as part of a deal. Macarthur, however, believes that the proposal does not represent an adequate premium to its recent trading prices and its average broker price target.

The deal is also conditional on Macarthur not proceeding with the Gloucester deal.

Following the announcement, FBR Capital Markets said Wednesday that the interesting aspect of Macarthur's rejection ''is the statement that the premium is too low and compresses the 30% premium to much lower levels using different measuring dates—essentially giving the appearance that a higher offer could create more dialogue.''

Maintaining its $65 price target on the stock, the brokerage said Peabody Energy remains its Top Pick in the space, given its Australian assets, growing trading revenue, the modest upside from its large U.S. footprint, and optionality to acquire in new Asian international areas, such as Mongolia.

FBR also believes that the offer highlights that the race to acquire strategic reserves is in full force and the primary benefits will be near the Asian growth areas.

Lihir Gold Rejects A$9.2 bln offer from Newcrest Mining

Lihir Gold Ltd (LIHR,LGG.TO, LGL.AX) Wednesday evening said it rejected an acquisition offer from Australia's largest gold miner Newcrest Mining Ltd (NCMGY.PK, NCM.AX). The cash and stock offer, received on Monday, amounted to A$3.87 per share or about A$9.2 billion.

Following the announcement, Lihir shares soared on the ASX. The stock closed at A$4.03, up A$1.00 or 33%, on 270.30 million shares. In the previous session, the stock had closed on a volume of 24.85 million shares.

LIHR closed Wednesday's regular trading session at $28.16, up $0.03 or 0.11%, but jumped $8.09 or 28.73% to $36.25 in after-hours trade.

NCM.AX settled at A$33.78, up A$0.96 or 2.93%, on 8.49 million shares, compared to the previous day's volume of 2.26 million shares.

With gold prices showing an upward trend, miners are trying to consolidate to increase production. Lihir had a rewarding 2009, with a 57% increase in underlying profit, over US$1 billion in revenue and a 27% growth in production. The miner has operations in Papua New Guinea, Australia and West Africa.

Lihir's board of directors said the offer, which was to be executed through a scheme of arrangement, did not represent good value for its shareholders, particularly due to the conditions and exclusivity arrangements that Newcrest proposed. The company believes the offer undervalues its existing business as well as its potential future value.

In what appears to be a compelling combination, coming together of Lihir and Newcrest is expected to create the world's fourth largest gold company, having operations in five countries with 10 mines across South East Asia and West Africa.

Meanwhile, Newcrest's chief executive Ian Smith reportedly said at a conference call that the company currently has no intention to make this a hostile affair.

Enterprise Products to buy natural gas assets from M2 Midstream

Enterprise Products Partners L.P. (EPD) has agreed to purchase two natural gas gathering and treating systems - the State Line system and the Fairplay system - from M2 Midstream LLC for about $1.2 billion, the midstream energy company said Thursday.

In Thursday's regular trading session, EPD is trading at $35.10, up $0.52 or 1.50% on 224,020 shares.

The deal is expected to close early next month. It is anticipated to be accretive to Enterprise's distributable cash flow in the second half of 2010.

Early this year, Enterprise Products completed its $3.3 billion merger with TEPPCO partners, L.P., an energy logistics partnership.


Daimler To Sell Maybach?

German carmaker Daimler may divest its Maybach luxury brand, speculative reports said Tuesday, pointing to Chinese car and battery maker BYD as its probable buyer. Both companies reportedly denied the news.

Astellas extends tender offer for OSI

Japanese drugmaker Astellas Pharma Inc. (ALPMY.PK, ALPMF.PK) Wednesday said it extended its $3.5 billion all-cash tender offer for OSI Pharmaceuticals Inc. (OSIP) to April 23. The offer of $52 per share was previously set to expire on March 31.

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