The holiday-shortened week offered little surprises in terms of deals. With companies looking outside the U.S. or targeting private firms, there were fewer announcements linking companies listed on the stock exchanges in the U.S.
During the week, Allied World Assurance Company Holdings Ltd. revealed an agreement to acquire Darwin Professional Underwriters, Inc. in a $550 million all-cash deal. The deal is expected to enhance Allied's reach in the healthcare market.
After a series of offers and counter offers, U.K-based British restaurant-equipment maker Enodis Plc is finally going to be part of foodservice equipment manufacturer Manitowoc Co. Enodis has been the centre of a bidding war between Manitowoc and Illinois Tool Works Inc.
Other companies that made acquisition-related announcements during the week include Smithfield Foods, Inc., Blackstone Group LP, CIT Group Inc., Dominion Resources Inc. and Informa Plc.
Allied World Assurance to buy Darwin Professional Underwriters
Allied World Assurance Company Holdings Ltd. (AWH), an insurance and reinsurance company, Monday said it agreed to acquire 100% of specialty insurance group Darwin Professional Underwriters, Inc. (DR) for about $32.00 per share, totaling $550 million, in an all-cash deal.
Allied stock closed Monday's regular trading session at $39.62, down from the previous close of $41.47. Shares of Darwin finished at $30.80, up from Friday's close of $30.20.
The purchase price represents a premium of about 6% on Darwin's stock price as of the previous close on June 27. The transaction is expected to be completed during the fourth quarter of 2008.
The acquisition will complement Allied World's large account and improve the company's presence especially in the healthcare market. It is expected to be accretive to earnings in the first full year after the closing.
Following the news of the acquisition, Lehman Brothers maintained its "Equal Weight" rating on Allied, while raising the estimates for the company. However, analyst Jay Gelb reduced the target price to $45 from $49, reflecting contraction in valuation multiples and deterioration in the P&C market trends.
Meanwhile, Tuesday, Standard & Poor's Credit ratings agency said it placed ratings of Allied on a negative credit watch. Though acquisition of Darwin would diversify Allied's operations, it would also increase its risk profile through the introduction of a relatively new book of business and client profile, the agency said.
Smithfield Foods unit to combine with Campofrio Alimentacion
World's biggest pork processor Smithfield Foods, Inc. (SFD) Monday said its European unit Groupe Smithfield Holdings, S.L., a joint venture with funds controlled by Oaktree Capital Management LLC, has agreed to merge with Campofrio Alimentacion, S.A., Spain's largest meat-processing company. The deal, valued at about 450 million euros, is expected to create Europe's largest meat processor.
The announcement sent the Spanish company's shares down 17% before recovering to a 5.4% drop at 8.59 euros in Madrid. SFD shares, which opened at $20.00 on Monday's regular trade, closed lower at $19.88.
Smithfield also announced the sale of nearly 5% of its stock to Chinese agricultural processor COFCO Ltd, and saw its stock tumble to a five-year low Tuesday. The shares dropped $2.43 or 12.2% and closed Tuesday's regular trade at $17.45.
The merger, expected to close in Smithfield's third fiscal quarter, will result in annual savings of $63 million.
Smithfield currently owns 24% of Campofrio and will own 36% of the company, post merger. Oaktree will own 24% of the new company. It will have sales of $3 billion.
The combined entity will have presence in Spain, France, Belgium, Portugal, the Netherlands, Romania and Russia. Groupe Smithfield Holdings has net debt of 264 million euros, twice as much as Campofrio.
Last week, analysts at DA Davidson downgraded SFD to "Underperform" and reduced the target price to $14 from $28.
Blackstone inks pact with Hicks Acquisition for Graham Packaging
Leveraged buyout firm Blackstone Group LP (BX) said Monday it intends to sell its Graham Packaging Holdings Co. to Hicks Acquisition Co., a special purpose acquisition company, in a $3.2 billion transaction. Blackstone shares closed Monday's regular trade at $18.21, down from Friday's close of $18.73.
Graham Packaging manufactures plastic containers, automotive lubricants as well as household and personal-care products. The company had about $2.5 billion in revenue in fiscal year 2008.
The deal values Graham Packaging's equity at about $1.2 billion. The remaining value is in the form of assumption of debt.
Blackstone Group owns about 79% of Graham Packaging, with the remaining interest held by MidOcean Capital Investors LP, executives and the family of the company's founder Donald Graham.
Once the deal is through, Hicks Acquisition will have 66% holding in Graham Packaging, while Blackstone-led investors will retain 34%. Graham Packaging will also be traded on the New York Stock Exchange.
Manitowoc wins bid for Enodis
Putting an end to a two-and-a-half-month-old bidding war, U.S. foodservice equipment manufacturer Manitowoc Co. (MTW) Monday beat Illinois Tool Works Inc. (ITW) to win an auction to buy British restaurant-equipment maker Enodis Plc (ENO.L), a supplier of cookers and refrigerators to McDonald's Corp. (MCD). Manitowoc made a bid of 1.21 billion pounds or about $2.41 billion.
Manitowoc closed Monday's regular trading on NYSE at $32.53, up from the previous close of $32.19, but dropped 43 cents in the extended trade. Enodis ended the day's regular trading session on the London Stock Exchange at 318.5 pence, up 1.1% from the prior close.
On a per share basis, the offer is for 328 pence in cash for each share, a premium of over 200% on Enodis' closing stock price of 141.5 pence on April 8, when Manitowoc made the initial offer of 955 million pounds.
The purchase will help Manitowoc increase its food-equipment sales, and have hot-food appliances and customers in Europe and Asia. The transaction is likely to close in the fourth quarter and is accretive to earnings in 2009.
Tuesday, analysts at Robert W Baird said they maintain their "Neutral" rating on Manitowoc shares, while reducing the target price to $44 from $52. In a research note, the analysts said the company's overall risk profile continues to be unfavorable due to deteriorating global macroeconomic fundamentals, potential rise in financial leverage and divestment of certain ice machine assets.
On the same day, analysts at Sterne Agee reiterated their "Buy" rating on Manitowoc shares, while reducing the target price to $38 from $51.
CIT to sell Home Lending Business
In an effort to raise cash, commercial finance company CIT Group Inc. (CIT) Tuesday revealed two sales - of its home lending business and manufactured housing portfolio. The home lending business is being sold to private equity firm Lone Star Funds for $1.5 billion, while the manufactured housing portfolio will be bought by Vanderbilt Mortgage and Finance, Inc. for about $300 million.
Lone Star will also assume $4.4 billion of debt and other liabilities of the home lending business. The business comprises $9.3 billion in assets and servicing operations. Vanderbilt Mortgage is a unit of Warren Buffett's Berkshire Hathaway. The manufactured housing portfolio consists of about $470 million of assets.
Following the news, CIT shares climbed around 12.19% in the pre-market activity on the NYSE. The stock surged about 30% during the regular trade Tuesday to close at $8.83, up from the previous close of $6.81.
The business lender's efforts at raising cash comes after four straight quarters of loss. The sale of the portfolios is scheduled to be completed in July, while the transfer of the servicing platform is expected to be completed by the first quarter 2009.
Noting that ratings agencies have frequently highlighted the company's home lending business as CIT's greatest risk, Lehman Brothers said Wednesday that the additional liquidity, reduced earnings drag, and ability to focus on core operations should open more funding opportunities for the company. After removing the effects of the business being sold, analyst Bruce Harting raised the firm's earnings per share estimate for 2009 by $0.25 to $1.75.
Dominion Resources to sell two gas units
Dominion Resources Inc. (D) is selling its natural gas distribution companies, Dominion Peoples and Dominion Hope, to Babcock & Brown Infrastructure Fund North America for $910 million, the company said Wednesday.
Dominion shares, which opened Wednesday's regular trade at $47.86, closed the day at $47.49, down from the previous close of $47.68.
Dominion Hope has about 115,000 customers in West Virginia, while Dominion Peoples has nearly 359,000 customers in Pennsylvania.
After-tax proceeds from the sale, estimated at about $675 million, are to be used to pay down debt. The transaction is expected to close in 2009.
Informa confirms takeover approach
Confirming speculations, UK-based B2B media company Informa Plc (INF.L, INFMF.PK) Wednesday said it received a preliminary takeover proposal of 506 pence per share from a consortium of U.S.-based private equity firms last week. The private equity firms include Providence Equity LLP, Carlyle Group, and Hellman & Friedman.
The announcement sent Informa shares up by over 12% on the London Stock Exchange. The stock surged 49.25 pence to 427.5 pence in London.
The U.S. consortium reportedly values Informa at GBP 2.15 billion or about $4.29 billion. The offer price marks a 34% premium over Informa's closing price of 378.25 pence per share Tuesday and a 21% premium over the 418 pence closing price on June 25, when the news was initially reported.
Informa, publisher of the maritime publication Lloyd's List, owns more than 2,000 trade publications. The company was created by the merger of IBC Group PLC and LLP Group PLC in 1998.
Sweden sells Vasakronan
The Swedish government Thursday agreed to sell property firm Vasakronan to property group AP Fastigheter for 41.1 billion kronor or about $6.9 billion. AP Fastigheter, owned by state-run Swedish pension funds, owns and manages commercial properties and residential buildings in Stockholm, Uppsala and Gothenburg. The company will now change its name to Vasakronan.
Vasakronan owns 171 properties as of 2007, with a value of 45.2 billion kronor. The properties are for office as well as retail use in Stockholm, Gothenburg, Malmoe, Uppsala and Lund, including Kista Science Tower, Sweden's tallest office building. The state will retain those buildings of Vasakronan that are of national interest.
The combined entity is expected to create a high-quality property company with significant development potential. The government intends to utilize the proceeds to amortize public debt.
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