October 22, 2017

DealBook: Indian Tire Maker’s Shares Tumble Over Deal for Cooper

An Apollo Tyres workshop in Mumbai, India.Vivek Prakash/ReutersAn Apollo Tyres workshop in Mumbai, India.

The proposed $2.5 billion acquisition of Cooper Tire and Rubber by Apollo Tyres speaks to the ambitions of an Indian company seeking to become the seventh-biggest tire maker in the world.

It would be the biggest takeover of a United States company by one based in India since the global financial crisis, according to Thomson Reuters data. And it is a deal intended to help the 41-year-old company compete better in a global automotive supply chain dominated by giants.

At home, however, the deal has run into something of a large road bump.

Shares of Apollo plummeted 25.45 percent in trading in Mumbai on Thursday, their first day of trading after the transaction was announced in the United States on Wednesday. The plunge came amid investor concerns about the amount of debt the company was taking on to finance the deal.

The all-cash acquisition is being financed entirely by new debt. Apollo has committed debt financing for $450 million from Standard Chartered, and nearly $2.4 billion in committed debt financing from Morgan Stanley, Deutsche Bank, Goldman Sachs and Standard Chartered.

Apollo Tyres

Analysts in India were scathing about the leveraged deal.

Noting that Apollo’s ratio of net debt to equity would go from negative 0.5 times equity to 4.8 times, analysts at IIFL Capital gave the stock a “sell” recommendation. “We highlight that a weakening balance sheet is a key concern,” they wrote.

Analysts at Emkay wrote: “We see this as a risky acquisition as the management would have little room for error given the high leverage, very little synergy benefits and the poor demand environment.”

Analysts at Ambit said they found the proposed acquisition of Cooper “aggressive” even while commending Apollo as “one of the best-managed tire companies in India.”

Still, they hastened to add that “over 80 percent of great companies in India self-destruct through a combination of overconfidence and unbridled expansion.”

Article source: http://dealbook.nytimes.com/2013/06/13/shares-of-indian-buyer-tumble-over-cooper-deal/?partner=rss&emc=rss

Searching for Capital: Do Your Board Members Represent Your Interests?

Searching for Capital

A broker assesses the small-business lending market.

Whenever small-business owners and entrepreneurs come to me looking for capital, I encourage them to think about the trade-offs involved in choosing debt or equity. Sometimes there is no choice, and they have to pick one or the other. But often there is a choice, and that’s when it’s especially important to think things through.

The decision gets trickier when a company already has investors, particularly if they are venture capitalists. In these cases, there is often a board, and the directors get to vote on whether there will be additional rounds of financing. That vote can prompt some interesting questions.

When the board members are venture capitalists, the vote can create potential conflicts. Are they voting based on what’s best for their own investment in the company or what’s best for the company? If the company is doing well, the investors generally would prefer there to be another round of equity investing — at a higher valuation than when they first invested. This way, the investors can show a return, even though the entrepreneur faces further dilution of his or her ownership stake.

This is what I call the venture capital treadmill. Once you’re on it, the investors always want the next round completed and the round after that. There are times when debt financing may be better for the entrepreneur, but that won’t help the venture capitalists prove that their investment is growing. The board members have a fiduciary responsibility to represent the best interests of the company. But how can they do this if their jobs are ultimately measured by the success of their own investments? Should board members with financial stakes in the company be prohibited from making these votes?

Above all, this is another reason that, if you choose to take on equity investors, you should interview them carefully. It’s not just about the money. As much as possible, you want to try to make sure that your interests and the investors’ interests are as closely aligned as possible. It’s a lot like getting married — both parties need to understand each other very well.

What do you think?

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2013/02/05/whose-interests-do-your-board-members-represent/?partner=rss&emc=rss

You’re the Boss Blog: Do Your Board Members Represent Your Interests?

Searching for Capital

A broker assesses the small-business lending market.

Whenever small-business owners and entrepreneurs come to me looking for capital, I encourage them to think about the trade offs involved in choosing debt or equity. Sometimes there is no choice, and they have to pick one or the other. But often there is a choice, and that’s when it’s especially important to think things through.

The decision gets trickier when a company already has investors, particularly if they are venture capitalists. In these cases, there is often a board of directors, and they get to vote on whether there will be additional rounds of financing. That vote can prompt some interesting questions.

When the board members are venture capitalists, the vote can create potential conflicts. Are they voting based on what’s best for their own investment in the company or what’s best for the company? If the company is doing well, the investors generally would prefer there to be another round of equity investing — at a higher valuation than when they first invested. This way, the investors can show a return, even though the entrepreneur faces further dilution of his or her ownership stake.

This is what I call the venture capital treadmill. Once you’re on it, the investors always want the next round completed and the round after that. There are times when debt financing may be better for the entrepreneur, but that won’t help the venture capitalists prove that their investment is growing. The board members have a fiduciary responsibility to represent the best interests of the company. But how can they do this if their jobs are ultimately measured by the success of their own investments? Should board members with financial stakes in the company be prohibited from making these votes?

Above all, this is another reason that, if you choose to take on equity investors, you should interview them carefully. It’s not just about the money. As much as possible, you want to try to make sure that your interests and the investors’ interests are as closely aligned as possible. It’s a lot like getting married — both parties need to understand each other very well.

What do you think?

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2013/02/05/whose-interests-do-your-board-members-represent/?partner=rss&emc=rss

DealBook: Chinese Companies Head for the Exit

HONG KONG–Fed up with slumping share prices, prickly regulators and aggressive short sellers, Chinese companies listed on American stock exchanges are increasingly heading for the exits.

The most recent case is also the biggest yet. On Wednesday, the directors of Focus Media Holdings, a display advertising company based in Shanghai, whose shares had come under attack by short-sellers, said they had accepted a sweetened $3.7 billion privatization bid from a buyout group that included the American private equity giant Carlyle Group, several Chinese private equity firms and the company’s chairman.

The deal would delist the company from Nasdaq. It includes $1.5 billion in debt financing from a consortium of Wall Street banks and mainly state-owned Chinese lenders and would rank as China’s biggest-ever leveraged buyout. Pending shareholders’ approval, the company expects the transaction to close in the second quarter of next year.

Including the Focus Media deal, which was first announced in August, Chinese companies began a record $5.8 billion worth of privatization bids in the first nine months of the year, according to the data provider Dealogic. That was a 42 percent increase from the same period a year earlier, and proposed Chinese delistings accounted for a record 16 percent of such transactions globally during the period, up from 6 percent a year earlier.

‘‘A lot of Chinese entrepreneurs want out of the U.S. markets. Share prices are depressed, and there are a lot of these deals in the pipeline,’’ said David Brown, greater China private equity practice leader at the auditing firm PricewaterhouseCoopers.

Valuations of companies from China that are listed in the United States have come under pressure in recent years after a wave of allegations of fraud and other accounting scandals. The Securities and Exchange Commission has deregistered the securities of nearly 50 China-based companies and has filed about 40 related fraud cases.

At the same time, a cross-border regulatory dispute over auditing procedures for Chinese companies listed in the United States escalated this month, when the S.E.C. charged the Chinese affiliates of the world’s four biggest accounting companies with violating securities law for failing to turn over documents related to their auditing work on businesses in China.

The standoff between United States and Chinese regulators over the auditing issue has raised concerns among multinational corporations that operate in both countries.

‘‘Failure to reach an agreement will create regulatory dead zones that harm investors and businesses,’’ the United States Chamber of Commerce said last week in a letter to securities regulators in Beijing and Washington. ‘‘The threat of retaliatory actions by regulators, on both sides of the Pacific, may create a regulatory protectionism that will harm both economies.’’

Article source: http://dealbook.nytimes.com/2012/12/20/chinese-companies-head-for-the-exit/?partner=rss&emc=rss

DealBook: European Banks Hunt for Ways to Raise Cash

Francois Lenoir/Reuters

LONDON — As Europe continues to grapple with its sovereign debt crisis, many of the Continent’s banks are facing increased financing costs and limited access to much-needed cash, according to the Bank for International Settlements, an association of the world’s central banks.

In its quarterly review to be published on Monday, the Swiss-based institution said European banks, including Commerzbank of Germany, BNP Paribas of France and Lloyds Banking Group of Britain, are selling assets and increasing customers’ interest rates in an effort to bolster their balance sheets.

The steps come as the European Banking Authority has increased the amount that it expects banks will have to raise to meet new capital requirements.

Last week, European authorities said financial firms must find an additional $153 billion of capital. That is up from a previous estimate of $141 billion. Banks are required to have a core Tier 1 capital ratio, a measure of a firm’s ability to weather financial shocks, of 9 percent by June 2012.

“Banks and other financial institutions in the euro area are in a difficult situation,” said Stephen Cecchetti, head of the monetary and economic department of the Bank for International Settlements, on a conference call with reporters. “On the asset side of their balance sheets, they face losses because of sovereign debt holdings. On the liability side, they face even more difficulty in finding funding.”

The lack of new financing will soon start to bite. Nearly $2 trillion of bank debt is due to be repaid by the end of 2014, according to data from the Bank for International Settlements.

European banks are likely to have varying degrees of success in raising new funds. Because of Germany’s continued economic resilience, banks in that country were able to tap the markets for a combined $47 billion of additional debt financing in the third quarter of 2011, the settlement bank said.

Yet lenders in France, which may soon lose its coveted triple-A sovereign debt rating, had net repayments to investors — the difference between money raised and repaid — reach $18 billion over the same period.

With debt financing difficult to come by, financial firms are turning to other means to increase their capital bases. That includes raising interest rates on customers, despite the European Central Bank’s reduction of its benchmark rate to 1 percent last week.

The Bank for International Settlements estimates that euro zone banks have increased customer interest rates, on average, by 1 percentage point in the 52-week period ended Sept. 30. In Greece and Portugal, institutions have pushed rates up by 2 percentage points over the same period.

Firms are also turning to asset sales to increase their capital reserves. Attention has focused on banks’ international operations, particularly in Eastern Europe, as they focus attention to their home markets.

According to the advisory firm Deloitte, European banks currently have $2.2 trillion in noncore and nonperforming assets on their balance sheets, much of which could be put up for sale.

“Deleveraging is a key objective of most banks’ strategic plans, which is likely to lead to increased divestment in 2012 and beyond,” Robert Young, a partner at Deloitte, said in a statement.

A reduction in European banks’ operations outside their home countries will likely have a ripple effect.

The Continent’s banks, for example, currently provide almost 50 percent of the funding for nonfinancial firms in Eastern Europe, according to the Bank for International Settlements. If European banks reduce their lending, these Eastern Europe companies may face dwindling sources of financing, which could hurt the region’s overall economy.

Banks already are cutting back. Commerzbank and UniCredit of Italy have said they plan to reduce their operations in Eastern Europe.

And authorities in Austria, whose financial firms have been very active in the region, want new loans to Eastern European companies to be matched by similar increases in local deposits. Their goal is to ensure Austrian banks remain well capitalized to provide lending for domestic customers.

“When banks pull back from outside the E.U., the hole they’re leaving is being filled by others,” said Mr. Cecchetti of the Bank for International Settlements. “But that may change if they continue to shed foreign assets and conditions in the financial markets change.”

Article source: http://dealbook.nytimes.com/2011/12/11/european-banks-hunt-for-ways-to-increase-capital/?partner=rss&emc=rss

DealBook: Providence to Buy Blackboard for $1.64 Billion

Michael Chasen, chief executive of Blackboard.BlackboardMichael Chasen, chief executive of Blackboard.

Providence Equity Partners agreed on Friday to buy Blackboard Inc., a maker of college coursework software, for $1.64 billion in cash, in the private equity firm’s latest foray into the education market.

Under the terms of the deal, Providence will pay $45 a share, a 3.7 percent premium to Blackboard’s closing price on Thursday. It is 21 percent higher than Blackboard’s stock price on April 18, the day before the company announced it was considering a sale.

Providence will also assume $130 million of Blackboard’s net debt.

“In Providence, we will have a partner who brings a deep understanding of the international education marketplace and shares our vision of providing educators with exceptional technology solutions and services to meet their evolving needs over the long-term,” Michael Chasen, Blackboard’s chief executive, said in a statement.

Founded in 1997, Blackboard is among the most popular makers of course management software for universities. Its products allow students to find their coursework online and submit their assignments electronically, as well as providing analytics and other services.

Providence already has a sizable presence in the education market, with investments in companies like two for-profit college operators, Education Management Corporation and Study Group, and another education software maker, Archipelago Learning.

The deal is expected to close in the fourth quarter, pending approval from Blackboard’s shareholders. The company will remain based in Washington and will keep Mr. Chasen and its existing management.

Providence has secured debt financing from Bank of America Merrill Lynch, Deutsche Bank and Morgan Stanley.

Blackboard was advised by Barclays Capital and the law firm Dewey LeBoeuf. Providence received legal counsel from Weil, Gotshal Manges.

Article source: http://feeds.nytimes.com/click.phdo?i=dfb118ac5ebb5c8bfd08a5bda07222a4