March 28, 2024

DealBook: Casting Off Gloom, Deal Makers Are in a Frenzy of Activity

Worldwide volume in mergers and acquisitions is $1.8 trillion year to date, a 31 percent rise over last year at this time. Companies in deals announced on Monday include, clockwise from top left, Cargill, Bank of America, Time Warner Cable and Transocean.Clockwise starting upper left: Spencer Tirey/Getty Images, Chris Keane, via Bloomberg, Kevork Djansezian, via Getty Images and Derick E. Hingle, via Bloomberg NewsWorldwide volume in mergers and acquisitions is $1.8 trillion year to date, a 31 percent rise over last year at this time. Companies in deals announced on Monday include, clockwise from top left, Cargill, Bank of America, Time Warner Cable and Transocean.

Turmoil in the stock market. A downgrade of the United States credit rating. The economic crisis in Europe.

Such a vicious cocktail of bad news would normally cause Wall Street’s deal machine to grind to a halt. But Monday had a spate of multibillion-dollar mergers and acquisitions, surprising investors, who had expected deal activity to slow in the grim environment.

Leading the M.A. charge was Google, which said it was buying Motorola Mobility for $12.5 billion. The search company, which has made a business out of bucking conventional wisdom, does not seem deterred by the market tumult or the threat of a antitrust inquiry by the United States government.

Google’s acquisition of Motorola, by far its largest deal, would use some of the nearly $40 billion in cash on its balance sheet. Corporations, especially the leading technology companies, are sitting on record amounts of cash, a fact that deal makers have been hoping would spawn mergers and acquisitions even in difficult markets. Apple has about $76 billion in cash; Microsoft has $53 billion.

“Even intense market volatility won’t get in the way of strategic deals,” said Scott A. Barshay, a corporate partner at the law firm Cravath, Swaine Moore. “Well-capitalized companies are focused on the years ahead, not the last week of trading.”

Private equity has remained another reliable driver of deal activity. After struggling through the financial crisis, the world’s largest buyout firms are now on firmer footing and have been looking to sell their holdings to return cash to their investors. The private equity world had two large exits on Monday: Time Warner Cable bought Insight Communications, which is owned by the Carlyle Group and others, for $3 billion, and the agriculture giant Cargill said it would pay about $2 billion for Provimi, an animal feed producer owned by the European buyout shop Permira.

With Monday’s flurry of transactions — which also included a big oil-drilling deal and a large credit card disposition by Bank of America — worldwide M. A. volume totals $1.8 trillion year to date, a 31 percent increase over last year at this time, according to Thomson Reuters. And Monday was the biggest “Merger Monday” in the United States since April 4, Thomson Reuters says.

Cargill to Buy Feed Company

Cargill, the American agricultural giant, said Monday that it planned to buy a Dutch animal nutrition company, Provimi, for $2.1 billion from the private equity firm Permira.

One of the largest privately held companies in the world, Cargill said it made a binding offer for Provimi, which specializes in nutrition and supplements for farm animals, for 1.5 billion euros. The deal will help Cargill add vitamin mixtures and additives to its animal nutrition business and expand in Latin America, Russia and Asia, where Provimi operates.

The deal comes as food prices increase and demand for meat from developing economies rises. Provimi, based in Rotterdam, employs about 7,000 people and operates in 26 countries. It had sales of 1.6 billion euros in 2010 and earnings of 86 million euros in the first half of this year.

Cargill’s vice chairman, Paul Conway, said the acquisition was “a significant move for Cargill into the higher value added segments in the animal nutrition market. Provimi has world-class expertise, knowledge and strong technical know-how, an area that we believe is key to the future of the industry.”

JULIA WERDIGIER

Bank of America Sheds a Unit

Bank of America took steps on Monday to exit the international credit card business, agreeing to sell its $8.6 billion Canadian card venture to the TD Bank Group for an undisclosed amount and putting its remaining European card portfolio on the block.

With the announcements, Bank of America continued the push to overhaul its credit card business as the bank reels from hefty losses in its troubled mortgage division. While dumping the international card business, Bank of America has largely retained its card loans in the United States, among other core assets. The bank said it hoped the deals would shore up its capital ratios.

“Our strategy is clear: We have been transforming the company to deliver the franchise to our core customer groups, and building a fortress balance sheet behind that,” Brian T. Moynihan, the chief executive, said in a statement. “While the credit card remains a fundamental core product for our U.S. customers, an international consumer card business under another brand is not consistent with that strategy.”

Since Mr. Moynihan took over in early 2010, the bank has sold some 20 businesses for roughly $30 billion. One big deal was announced in May, as the bank shed its remaining stake in BlackRock for $2.5 billion.

The moves come as Bank of America, the nation’s biggest bank by assets, struggles to regain its footing in the aftermath of the financial crisis. The beleaguered bank announced an $8.8 billion second-quarter loss after it agreed to settle huge legal claims surrounding its ill-fated acquisition of the subprime mortgage lender Countrywide Financial.

The bank’s remaining European card portfolios are even bigger assets. The bank manages a combined $19 billion in credit card loans in Britain and Ireland, which it now plans to sell. That business employs about 4,000 people.

BEN PROTESS

Offshore Driller Builds Its Fleet

Transocean, one of the world’s largest offshore drilling contractors, said on Monday that it had bid $1.43 billion for Aker Drilling of Norway to expand its fleet by adding rigs and ships.

Transocean, which owned the rig lost in the oil spill disaster last year in the Gulf of Mexico, said it agreed to pay 26.5 Norwegian kroner ($4.80) in cash for each Aker share. The offer price is 62 percent higher than Aker’s average share price over 30 days before the offer, Transocean said in a statement. Transocean will also assume $800 million of Aker’s debt.

With the acquisition, Transocean will gain two ultra-deepwater rigs that are on long-term contracts in Norway to Statoil and Det Norske. It will also get two drill ships being built at a shipyard in South Korea. Transocean will have to pay $900 million for the ships upon delivery.

“Aker Drilling is an excellent strategic fit for Transocean,” the company president and chief executive, Steven L. Newman, said in a statement. “It allows us to enhance our position in Norway where we have enjoyed a long-term presence and excellent customer relationships.”

The board of Aker Drilling unanimously recommended the bid to its shareholders, Transocean said. Aker Drilling’s shareholders are expected to vote on the offer later this month.

JULIA WERDIGIER

Cable Operator Expands Reach

Time Warner Cable announced on Monday that it had agreed to buy Insight Communications, a large Midwestern cable television operator, for about $3 billion in cash.

“We believe in our business and its long-term prospects and have long thought that Insight’s well-run, technologically advanced systems would fit well with our Midwest operations,” Glenn Britt, chief executive of Time Warner Cable, said in a statement.

Insight is owned by the Carlyle Group and other private equity firms, including MidOcean Partners and Crestview Partners.

BRIAN STELTER

Article source: http://feeds.nytimes.com/click.phdo?i=36fed078fee3667add909b36254f681b