July 6, 2022

A.I.G. Tells Shareholders Stock Sale Still Planned

The Treasury Department has been planning to sell some of its shares for months, as the Obama administration has worked to return the big insurer to the private sector. But questions about the size and the price of the deal have mounted, as A.I.G.’s share price has been sliced in half this year.

No specific selling price was quoted by top company executives, who answered questions about the insurer’s planned return to the private sector at the company’s annual meeting. But the planned offering of 300 million shares would yield about $9 billion at the stock’s current price, much less than anticipated just a few months ago.

The Treasury, which now owns 92 percent of A.I.G.’s common stock, aims to sell 200 million of its 1.66 billion shares, leaving it with 77 percent of the company, according to an offering document filed Wednesday. At the same time, A.I.G. plans to sell 100 million new shares.

A person familiar with the company’s plans said some of the proceeds would be used to increase the company’s available cash and capital, allowing it to eliminate a line of credit from the Treasury.

Several factors have depressed the company’s shares. In recent months, A.I.G.’s biggest remaining operating unit, renamed Chartis, has posted losses on earthquake claims from Japan and New Zealand. It has had to bolster its reserves too.

The company’s share price has also fallen sharply since the issuance in January of a warrant that allowed shareholders to buy stock for $45 a share. The warrant had been announced in October to encourage investors to hold the stock while the Treasury executed a series of restructuring transactions. Until January, the value of the warrant was included in A.I.G.’s stock price.

“You’re now selling this stock at one-half of what it was selling for just a few months ago,” Kenneth Steiner, the owner of 600 A.I.G. shares, told the board at the annual meeting. “What’s happened here is a real shame and a real tragedy, and it’s only being made worse now by this dilutive offering.”

From a 2011 high of $61.18 in January, A.I.G.’s stock closed at $30.65 on Wednesday in regular trading, up $1.03 for the day.

Treasury officials have said that taxpayers will break even as long is A.I.G. can sell its stake for at least $28.72 a share. The price on the first tranche will be determined in part by demand as the company and its bankers begin a road show to market the shares. The big banks underwriting the deal are said to want a lower price, in hopes of maximizing how much they will make on the sale.

Mr. Steiner, the investor, said he considered it unfair for the company to announce stock offering terms suddenly at an annual meeting, depriving investors of information that they could analyze to decide whether to support the current management.

He said that the stock would be offered at two-thirds of A.I.G.’s book value, about $47 a share, “way below what most insurers would have sold their stock at.”

A.I.G.’s chairman, Steve Miller, said the board had decided to go ahead because a broader shareholder base would be helpful. The stock would then be less vulnerable to the sharp price swings that plague thinly traded stocks. That, in turn, could encourage more investors to buy, and the stock would eventually rebound.

He added that the Treasury’s portion of the sale was not dilutive, because it would not increase the number of shares outstanding — it would simply shift a block of shares from the government to many owners.

Along with paying down the Treasury line of credit, the company said that $550 million of its proceeds would go to settle a lawsuit filed by three Ohio pension funds in 2004.

The current chief executive, Robert H. Benmosche, said the company could not begin paying dividends to shareholders until all the Treasury’s holdings were sold. He suggested shareholders might recover some value as soon as 2012 or 2013, when A.I.G. could begin to buy back some of the shares now being put on the market.

Article source: http://feeds.nytimes.com/click.phdo?i=6282ab53dc4450196fec0703a8b9ed78

DealBook: Teva to Buy Cephalon for $6.8 Billion

Teva Pharmaceutical Industries said on Monday that it had agreed to buy the biopharmaceutical company Cephalon for $6.8 billion, a deal unanimously approved by the boards of the two companies.

The announcement comes just weeks after Cephalon rejected a $5.7 billion takeover bid from Valeant Pharmaceuticals, calling it too low and opportunistic.

Teva’s cash bid of $81.50 a share is 39 above Cephalon’s share price on March 29, the last trading day before Valeant’s unsolicited offer was announced, and 6 percent above the closing price on Friday.

Teva expects $500 million in annual cost savings from the deal, which it says will be accretive to earnings immediately upon closing. The acquisition will expand Teva’s presence in areas like oncology and the treatment of respiratory diseases, as well as pain management.

The combined company is expected to have $7 billion in sales of branded drugs, as it works to bring to market 30 compounds already in late-stage trials. Cephalon had $2.8 billion in revenue last year.

“Our significantly broader portfolio will permit marketing and sales synergies and enhance profitability,” said Shlomo Yanai, head of Teva, the world’s largest generic drug maker.

Teva bought the German generic drugmaker Ratiopharm last summer for 3.6 billion euros, then worth about $5 billion, as VEM Vermögensverwaltung sold off assets after the suicide of its founder, Adolf Merckle. Mr. Merckle killed himself after losing hundreds of millions of euros in Porsche’s short squeeze on Volkswagen shares in 2008.

Cephalon had bought the Swiss generic drugmaker Mepha earlier in the same liquidation of VEM units, and the deal announced Monday brings the two units once again under the same roof.

Teva, headquartered in Israel, will finance the Cephalon deal using cash reserves, credit lines and bond issuance, the company said. It hired Credit Suisse as its financial adviser and Kirkland Ellis as legal counsel.

Cephalon, based in Frazer, Pa., was advised by Deutsche Bank and Bank of America Merrill Lynch and the law firm Skadden, Arps, Slate, Meagher Flom.

Article source: http://dealbook.nytimes.com/2011/05/02/teva-to-buy-cephalon-for-6-8-billion/?partner=rss&emc=rss

DealBook: Endo to Acquire American Medical for $2.9 Billion

Endo Pharmaceuticals agreed on Monday to buy American Medical Systems for $2.9 billion in cash to continue adding to its treatments for urology and pain.

Under the terms of the deal, Endo will pay $30 a share for American Medical’s outstanding stock and convertible securities, 34 percent above American Medical’s closing share price on Friday. Endo will also assume and pay off $312 million of American Medical’s debt.

The deal is Endo’s third in 12 months. The company announced last May that it would buy HealthTronics for $223 million, and in September said it would acquire Qualitest for $1.2 billion.

In American Medical, Endo will gain what it described as promising medical devices and services, including treatments for erectile dysfunction, incontinence and prostate problems.

The combined company will have 4,000 employees and is expected to generate about $3 billion in revenue and $1 billion in profit this year.

American Medical, based in Minnetonka, Minn., reported $542.3 million in revenue and $87 million in net income last year. It has 1,255 employees.

Endo said that it had financing commitments from Morgan Stanley and Bank of America Merrill Lynch to help pay for the deal. It also received legal advice from Skadden, Arps, Slate, Meagher Flom.

American Medical was advised by JPMorgan Chase and the law firm Latham Watkins.

Article source: http://feeds.nytimes.com/click.phdo?i=916be81bb6dc7ea4a4ac828de3c3d65f

Japan Weighs Nationalizing a Stricken Utility

TOKYO — Japanese lawmakers publicly debated nationalizing the Tokyo Electric Power Company on Tuesday, as there seemed no end in sight to the problems at the company’s crippled nuclear power plant.

The prime minister’s office said the government was not considering a takeover of Tokyo Electric “at the moment.” But the plunging stock price indicated investors were abandoning hope that the company could cope with the cost of its rebuilding and the potential liabilities from its nuclear disaster.

The share price plunged an additional 19 percent Tuesday with virtually no buyers, and trading was suspended by an automatic stop.

The closing price of 566 yen ($6.86) was the stock’s lowest close since at least 1974. The day before the March 11 earthquake, the shares closed at 2,153 yen (about $26). The stock collapse has already erased more than 2.5 trillion yen ($30.3 billion) in market value.

“There’s room for debate on the future of Tokyo Electric,” Koichiro Gemba, a member of the lower house of Parliament, said at a news conference. Mr. Gemba represents Fukushima Prefecture, home to Tokyo Electric’s damaged plant, Fukushima Daiichi. He is also the national strategy minister in the cabinet of Prime Minister Naoto Kan.

Mr. Gemba spoke not long after the country’s largest newspaper, Yomiuri Shimbun, cited unidentified people as saying the government was considering a plan to temporarily acquire a majority stake in the company, help it shoulder the liabilities that are likely to be incurred, and then eventually take it private again.

But fearing that a debate about the future of the company could create a divisive and costly distraction at a time of crisis, Mr. Kan and his chief spokesman, Yukio Edano, sought to tamp down the speculation.

“At the moment, the government is not considering” nationalization, Mr. Edano said Tuesday in a televised news conference. He added: “The first priority is the accident response. Then it needs to help those who’ve been affected.”

If the government were to acquire a majority stake, Tepco — as the company is known — would presumably issue new stock to the state, diluting existing shareholders.

The utility’s image has been hurt by the rolling blackouts it has imposed to cope with the loss of generating capacity after the earthquake and by the fact that its president, Masataka Shimizu, was not seen for several days after the quake. Tepco said Monday that Mr. Shimizu had been sick but has since returned to work.

Taxpayers outside the greater Tokyo area that the company serves are likely to balk at the cost of what could be seen as a bailout.

But with no end in sight to its nuclear problem, Tokyo Electric will have to lean on the state for support, analysts say.

“If you were the government, would you let it go bust?” said Paul J. Scalise, a former financial analyst who is writing a book on Japan’s electric power system. “I think the answer is no. The effect on the larger economy at a critical time would be too great.”

Estimates in the Japanese news media had already put the damage from the radiation leak to local homes, businesses and farms in the trillions of yen, even without knowing if anyone would suffer health damage. But it is impossible to calculate what the ultimate cost to the company will be. That is partly because the crisis appears to be far from over, and partly because it is not clear how much of the liability will actually be Tepco’s to bear.

Mr. Scalise said that under Japanese law governing compensation for nuclear damage, companies were liable for the cost of all nuclear accidents resulting from reactor operations except when the accidents were provoked by a “grave natural disaster of an exceptional nature or by an insurrection.” The company might plausibly seek to avoid liability altogether within that definition, he said.

Nicholas Benes, a former investment banker who is head of the Board Director Training Institute of Japan, an executive training group, said Tepco’s legal liability related to the Fukushima Daiichi plant would be covered by private and government insurance up to 120 billion yen, and even over that amount the government had wide latitude to provide financial assistance.

“I just don’t see the case for nationalization at this point,” Mr. Benes said. “Unless it’s for safety reasons — for example, if you think the company is utterly incapable of managing itself. But even then you’d have to assume that a bunch of nuclear engineers put together hodgepodge by the government would do a better job than the company’s own management. I don’t think the bureaucrats possibly believe that, or would want the responsibility.”

He and others said that Mr. Kan might also prefer to keep the company at arm’s length to avoid having it serve as a lightning rod for criticism of his administration.

Kazuma Ogino and Toshihiro Uomoto, credit analysts at Nomura Securities, suggested in a report that what was under discussion might best be described as “a virtual nationalization,” in which the state would provide the company “with the means of paying compensation on almost all fronts.”

If the state is going to end up paying most of the cost anyway, they wrote, “it would make more sense to temporarily nationalize Tepco” to “move ahead with the recovery work, rather than just paying compensation.”

The decline in the stock does not immediately endanger Tepco’s survival, although its cost of capital is tied to its share price. Tepco is in negotiations for loans of as much as 2 trillion yen ($24.25 billion), a person close to potential lenders said last week.

Article source: http://www.nytimes.com/2011/03/30/business/global/30tepco.html?partner=rss&emc=rss