Summer of Synergies and the Rumor Mill
We had our previous post explain our position on the Summer of Synergies and give you a lot of announced and planned deals. Here are the speculative deals that given the synergistic environment tend to make the casual observer believe that there is a lot of potential that the following rumored deals will close eventually.
More proof that we spotted a synergistic trend before many others did is that Reuters is confirming the busiest August M&A month since 1999. August alone had $262 billion worth of deals completed. Many of the deals below are not yet completed but are still in early stages. We still have a few more weeks before summer leaves us so we can expect a few more big deals to come out of the wood work here. S&P 500 firms still have $1.63 trillion cash left to spend how they please, which is the highest on record.
Of course in the fast moving world of business in time I pushed out my first part of the Summer of Synergies some of the deals that I had listed as more speculative firmed up, and are now final deals lets take a look at these deals.
3M buys Cogent Inc
Price: $900 million. *3M says the deal really cost about $400 million taking into account the cash that Cogent had on its balance sheet.
Synergies found: discounted purchase when taken into account cash on hand, eliminating corporate compliance officers between 2 companies to maintain a publicly traded company.
VMWare buys Integrien and Tricipher
Both companies acquired by VMWare are in the very hot cloud computing business. Clearly these days if you have some computers and half baked software technology and are looking to exit the market just brand yourself as a cloud computing expert, someone will buy you out.
Price: $ Undisclosed. Given the price tag of cloud computing 3PAR at over $2 billion the prices were likely quite large.
Synergies found: Instant market into cloud computing.
These deals are more speculative in nature at this point. They are speculative because they are in some sort of bidding war, proxy war, or other hold up. The story is the same, hundreds of millions of dollars being spent to increase corporate profitability and increase shareholder returns does not create jobs. It does please shareholders, at least the ones that don’t have to worry about their jobs.
Dollar Thrifty bought by unknown suitor
In another transportation deal of sorts Hertz is looking to purchase Dollar Thrifty car rentals. Hertz is the second largest car rental company in the industry and Dollar Thrifty is the fourth largest. Then Avis Rental came in and offered some more money to Thrifty to start a bidding war, much like the 3PAR story this company will get sold but the final price may go for more money.
Price: $1.1 billion in cash and stock offered from Hertz. Avis offered more.
Synergies found: better volume pricing for fleet purchases of vehicles, decreased parts bin costs for repairs, decreased competition, eliminating corporate compliance officers between 2 companies to maintain a publicly traded company.
Sanofi-Aventis tries to buy Genzyme
The French company Sanofi-Aventis wants to buy American Genzyme the already large pharmaceutical makers are looking to hook up in another huge deal for the summer. This bid is smaller than had been speculated about in July it was talked bout Genzyme potentially being purchased for upwards of $20 billion. Genzyme has rejected the $18.5 billion cash offer from Sanofi-Aventis. Genzyme isn’t against being acquired just not for a paltry $18.5 billion or $69 a share.
Price: Likely over $20 billion if closed.
Synergies found: more exposure to tax shelters, more corporate friendly employment climate in the United States than in France, immediately adds revenue to the bottom line, replacement of lost revenue from patent expirations and competition from generic drugs, access to 5 new drugs that Genzyme is about to release.
BHP Billiton Limited trying to buy Potash Corporation of Saskatchewan
This deal doesn’t have as significant of impact to USA dealings as both companies are not based in the United States; they represent yet another piece to what giant companies are doing with their war chests. This is an ongoing battle, which I sense is not over. BHP offered to purchase Potash for $38.5 billion, Potash said it was not enough money and rejected the offer. BHP decided it would offer more money, Potash rejects the hostile takeover bid. We’ll see how this plays out hostile takeover bids can be successful if you have a big enough war chest.
Price: $39 billion +.
Potential Synergies found: maximizing the potash mining to decrease market prices, and increase BHP market share. Decreased Canadian tax bill as a result of lower prices, eliminating corporate compliance officers between 2 companies to maintain a publicly traded company.
Websense and ?
The CEO of Websense has put the company up for sale to be acquired by any potential suitor who has the cash to do so. This follows on the Mcafee and Intel deal, it is possible that a company swoops in to make this deal. I suppose this makes sense as there seems to be a fever in the technology sector to buy companies for billions of dollars, no one wants to be the company that didn’t buy a company this summer.
Value: likely in the billions, as the market capitalization of Websense is $840 million.
In a little bit different light these next acquisitions are in the form of total shareholder buyout by private parties, of course these actions will look to cut costs dramatically, to increase the return on investment.
Burger King and 3G Capital Private Equity
Everyone’s favorite King might be getting a new fortress behind the spotlight of being a public company once again. It had only become public back in 2006 so the party was short lived. Of the private equity deals in the portion this is the only one that is a done deal, the others mentioned are still rather speculative in nature.
Price: $4 billion.
Billionaire Carl Icahn vs Lions Gate Entertainment
One of the richest men in the world wants to buy Lions Gate Entertainment, the owner of TV Guide Channel, the hit TV show MadMen and the current blockbuster The Last Exorcism. He has been stalking Lionsgate for months but his latest offer of $7.50 per share might just seal the deal.
Price: $1 billion cash.
CKXE, inc and Private Equity
The company is the owner of 19 Entertainment which owns rights to American Idol, IDOL’s franchise, and TV show So You Think You Can Dance. CKXE also owns the controlling rights to the Elvis Presley name and likeness, and has a large portion in Muhammad Ali. There are rumored to be two or three groups looking to buy the company, one of whom is the ex-CEO and founder of the company Robert Sillerman. American Idol creator Simon Fuller is also said to be leading a group of investors to purchase the company.
Price: $500-600 million.
Saks Fifth Avenue and private equity
Winona Ryder’s favorite store is going to be stolen from the NYSE listing for a rumored $11 per share.
Price: $1.7 billion.