June 6, 2023

DealBook: Bid for Invensys Gives Investors Appetite for More

LONDON – Invensys, the British maker of industrial control products and software that has long been the subject of takeover speculation, is in talks to be acquired by Schneider Electric of France for about $5 billion. But investors are indicating that they expect a competing offer.

Schneider, which provides low- and medium-voltage electrical equipment and services, offered to pay 5.05 pounds a share in cash and new shares for Invensys, valuing the company at 3.3 billion pounds, the company said late Thursday. While the talks are at an early stage, Invensys said it was likely to accept such an offer.

“The board of Invensys has indicated to Schneider that it is likely to recommend a firm offer at the offer price,” Invensys said in a statement.

The proposed price is 15 percent above Invensys’s closing share price on Thursday. The company’s shares jumped 16 percent, to 5.1 pounds, in London on Friday on expectations by some investors that Schneider would increase the offer or face competition from another bidder. Shares of Schneider fell more than 4 percent in Paris.

According to takeover rules, Schneider has until Aug. 8 at 5 p.m. to make a formal offer.

Invensys has been considered a takeover target since at least last year when takeover discussions broke down with Emerson Electric, which is based in St. Louis. Invensys had been shackled by pension liabilities of more than $700 million at the time. But the company sold its rail-infrastructure business to Siemens of Germany in May, which not only allowed it to ease its pension burden but also made it a more attractive takeover target. In addition to Schneider, other potential suitors could include General Electric and ABB, analysts have said. G.E. and ABB declined to comment.

Juho Lahdenpera, an analyst at Nomura, said Invensys was the most obvious takeover target in its industry and that it was unlikely that Schneider’s takeover approach would touch off a wave of other deals in the sector.

“Valuations are quite high and managers are generally still hesitant because of the economic situation,” Mr. Lahdenpera said. He added that he was skeptical that another bidder would emerge for Invensys. “It’s a full price, fair for Invensys and given what Schneider can do with these assets, it would be surprising to see another bidder,” he said.

Schneider said last summer that it was back on the acquisition trail after completing and integrating a string of takeovers that included companies in Spain and India. It said the strategic and financial rationale for buying Invensys was “compelling” and that an “enlarged group would significantly expand its access to key electro-intensive segments.”

A takeover would give Schneider access to Invensys’ large customer base in the oil and gas industries for which it provides control and safety systems. Invensys also sells heating and ventilation controls to large manufacturing companies as well as room thermostats and other temperature control systems to private households.

Schneider’s products include emergency lighting, fuse switches, weather observation hardware and charging devices for electric vehicles. Schneider said it expected the takeover would create “significant cost savings.”

Article source: http://dealbook.nytimes.com/2013/07/12/bid-for-invensys-gives-investors-appetite-for-more/?partner=rss&emc=rss

DealBook: Man Group Announces More Cost Cuts as Assets Decline

Peter Clarke, chief of Man Group.Sebastien Nogier/ReutersPeter Clarke, chief of Man Group.

LONDON – Shares in Man Group, the world’s largest publicly traded hedge fund manager, rose sharply on Tuesday after the firm announced a new round of cost cuts aimed at stemming the continuing decline in its assets under management.

Man Group said it would find an additional $100 million of cost savings by the end of 2013, according to a company statement. The announcement builds on a plan unveiled in March to cut costs by $95 million.

Despite the cost reductions, investors continue to pull money out of the hedge fund group. By the end of June, Man Group said its assets under management had fallen 26 percent, to $52.7 billion, from the period a year earlier.

“Against a turbulent market and economic background, Man’s funds under management have declined in the period principally as a result of continued net outflows and the deleveraging of our guaranteed products,” Man Group’s chief executive, Peter Clarke, said in a statement.

Amid the financial crisis, Man Group has suffered from a crumbling stock price and poor market performance. Analysts have also speculated that the firm, based in London, could become a takeover target for a buyer looking to pick up an asset manager on the cheap.

Investors, however, reacted positively on Tuesday to Man Group’s new round of cost savings. The firm’s share price, which has fallen about 69 percent in the last 12 months, rose as much as 12 percent in early trading in London. By the afternoon, Man Group’s shares had given up some of their gains, but were still trading 4 percent higher.

Man Group on Tuesday reported a $164 million pretax loss in the first six months of the year because of write-downs connected to its GLG division and fund-of-funds unit. Man Group merged with GLG, another multibillion-dollar hedge fund, in 2010.

As part of an executive shake-up, Man Group said last month that Jonathan Sorrell, who joined the firm last summer as head of strategy after his departure from Goldman Sachs, would succeed Kevin Hayes as its finance director.

Article source: http://dealbook.nytimes.com/2012/07/24/man-group-announces-more-cost-savings-as-assets-fall/?partner=rss&emc=rss

DealBook: Europe’s Woes Continue to Hamper Takeovers

Traders at the bourse in Madrid on Tuesday.Andrea Comas/Reuters

LONDON – When is the right time to initiate a takeover?

That question is confronting companies looking for acquisitions amid the European debt crisis. Despite a growing number of opportunities, the market volatility and the weak financing environment continue to thwart efforts across the Continent to complete deals.

The outlook remains bleak. So far this year, the combined value of European takeovers has fallen 23 percent, to $266 billion, compared with the same period last year, according to the data provider Thomson Reuters.

The drop in deals comes despite efforts by international companies to find bargains resulting from Europe’s financial woes.

As shares prices in Europe have plummeted, local companies have become takeover targets for overseas rivals eager to scoop up undervalued businesses. And many private equity firms, which are facing problems refinancing debt-laden deals struck before the financial crisis began, also want to offload companies to new owners, often at discounted prices.

“People are traveling around Europe, kicking the tires on businesses in the hopes of finding a good deal,” said a leading banker at an investment bank in London, who spoke on the condition of anonymity because he was not authorized to speak publicly. “The problem is knowing what the right price should be. Every day, the financial crisis throws up a new obstacle, and that makes valuing a takeover target almost impossible.”

The deal uncertainty is linked to growing skepticism that Europe will not be able to weather the crisis. Greek voters go to the polls on June 17, which may lead to the country turning its back on austerity measures that are conditions of its multibillion-dollar bailout. Investors are concerned that Spain and Italy may also be unable to meet their debt obligations. The problems facing these Southern European countries are likely to be felt across the rest of the Continent.

Faced with such dire economic conditions, companies are wary to spend their cash in Europe. Analysts say they are fearful that asset prices will continue to fall because of the Continent’s financial problems. So far this year, the Euro STOXX 50, an index of leading companies in the euro zone monetary union, has fallen 23 percent. Further drops in share prices are expected, as companies struggle from a reduction in consumer spending and concerns about countries’ abilities to pay their debts.

Amid the volatility, companies and financial firms are preferring to take a back seat until there’s more certainty about how to value potential acquisitions, according to another London-based investment banker.

“It’s better to sit tight than spend money on a deal that could have been cheaper if you had waited,” said the banker, who spoke on the condition of anonymity because he was not authorized to speak publicly.

Despite the uncertainty, some companies are pushing ahead. Investment bankers say deals have primarily focused on so-called bolt-on acquisitions in industries, which offer companies short-term financial benefits with minimal risk.

In March, for example, United Parcel Service agreed to buy the Dutch shipping company TNT Express for 5.2 billion euros, or $6.8 billion, in an effort by the American company to increase its market share in Europe and open inroads into China. Last month, the Canadian computer services company CGI Group also acquired the British information technology company Logica for £1.7 billion, or $2.6 billion, as CGI expanded its footprint in Europe.

Beyond these deals, however, the pipeline for new acquisitions is expected to remain weak until companies have more clarity on Europe’s economic future.

Article source: http://dealbook.nytimes.com/2012/06/08/europes-woes-continue-to-hamper-takeovers/?partner=rss&emc=rss

DealBook: BATS Global Markets Files for $100 Million I.P.O.

Joe Ratterman, chief executive of BATS Global Markets.Natalie Behring/ReutersJoe Ratterman, chief executive of BATS Global Markets.

8:21 p.m. | Updated

BATS Global Markets filed on Friday to go public, after a wave of industry consolidation that has raised speculation that BATS could become a takeover target.

The company, an upstart operator of an electronic exchange, said it planned to sell an estimated $100 million in stock in its initial public offering and use the proceeds for “general corporate purposes.”

BATS, which is the third-largest stock exchange operator in the United States, after Nasdaq OMX and NYSE Euronext, is going public as many of its peers are seeking partners. NYSE Euronext, the owner of the New York Stock Exchange, recently agreed to be acquired by Deutsche Börse. That proposed $10.3 billion deal spurred an aggressive counterbid by two rivals, Nasdaq OMX and the IntercontinentalExchange, which have promised to take their hostile $11 billion offer to NYSE shareholders.

In this shifting landscape, there is increasing pressure on smaller exchange operators, like BATS, to raise capital and expand their businesses. A stock offering could help BATS bulk up, according to analysts.

“This is the next stage for them,” said Daniel T. Fannon, a Jefferies Company analyst. “Getting a public offering afloat gives them brand recognition and currency to expand into foreign markets.”

BATS, based in Lenexa, Kan., has grown rapidly since it was founded in 2005 as a response to the rising power of the Nasdaq and the New York Stock Exchange. At the time, the industry was undergoing significant consolidation. In 2005, both the Nasdaq and the Big Board acquired major electronic trading networks, raising concerns among traders about pricing.

The top shareholders of BATS include Citigroup, Morgan Stanley, Credit Suisse First Boston and Bank of America.

Since it was started, BATS has steadily taken business from its larger rivals. It is now the No. 3 player in the United States, with a 10.8 percent market share of domestic equity trading.

It has also become ambitious abroad. The company recently agreed to buy Chi-X Europe to bolster its trading operations on the Continent, a move that would make it one of the largest electronic exchanges in Europe.

Last year, BATS posted revenue of $834.8 million and profits of $19.8 million.

“They are part of the exchange scene, but they’re on the smaller side; in order for them to continue to grow they need capital,” said Sang Lee, a managing partner of the Aite Group, an advisory firm.

One possibility, according to analysts, is the sale of BATS, which could be an attractive candidate to an international exchange.

“If a foreign exchange wanted to get into the U.S. equity markets, it would buy BATS,” Michael Wong, a Morningstar analyst, said. “It would be a manageable deal that would instantly diversify them by asset class and geography.”

Article source: http://feeds.nytimes.com/click.phdo?i=9bad1bab1d60627ece40908b1133470e

DealBook: Buffett Takes Sharper Tone in Sokol Affair

Warren Buffett, left, said that David Sokol Left, Daniel Acker/Bloomberg News; Nati Harnik/Associated PressWarren Buffett, left, said that David L. Sokol “violated the code of ethics.”

OMAHA — The billionaire Warren E. Buffett offered on Saturday his sharpest criticism yet of a former top lieutenant at his investment company, Berkshire Hathaway, saying that David L. Sokol had violated company trading policy and calling Mr. Sokol’s actions “inexplicable and inexcusable.”

Addressing a gathering of thousands of investors at Berkshire’s annual shareholders meeting here, Mr. Buffett spoke at length publicly for the first time about the controversy involving Mr. Sokol, who resigned from Berkshire a month ago after it was revealed that he had bought shares in the chemical maker Lubrizol before pitching that company to Mr. Buffett as a potential takeover target.

“I don’t think there’s any question about the inexcusable part,” Mr. Buffett said. “He violated the code of ethics. He violated our insider trading rules. He violated the principles I lay out every two years.”

Since disclosing Mr. Sokol’s trades one month ago, Berkshire has conducted what it says are more thorough inquiries into the matter and found more of what Mr. Buffett called “pretty damning evidence” that it has forwarded to the Securities and Exchange Commission.

A lawyer for Mr. Sokol, who was the chairman of Berkshire’s MidAmerican Energy Holdings, said in a statement last week that his client “would not, and did not, trade improperly,” and did not violate Berkshire’s policies.

Still, Mr. Buffett, 80, conceded that he had erred in not asking more questions of Mr. Sokol about his investment in Lubrizol, especially as Mr. Sokol was presenting the company as a possible acquisition. “I obviously made a big mistake by not saying ‘well, when did you buy it?’ ” Mr. Buffett said.

Mr. Buffett said he first grew concerned about the Lubrizol deal after a conversation with a longtime Berkshire broker, John Freund of Citigroup, who mentioned the investment bank’s role in highlighting the chemical company to Mr. Sokol as a potential acquisition for Berkshire. That began a series of inquiries by Berkshire and its outside law firm.

The cloud hanging over Berkshire in the aftermath of Mr. Sokol’s departure lent a more serious tone to the annual meeting, which in most years is a lighthearted celebration of the conglomerate’s astoundingly consistent success.

More traditional elements of Berkshire shareholder meetings were present earlier in the day. Mr. Buffett took a tour of exhibitions in the Qwest Center, including those set up by Burlington Northern Santa Fe, See’s Candy and Dairy Queen, all owned by Berkshire. Over 100 shareholders and photographers pressed close to the Berkshire chief, with passersby straining to get even a blurry photo of themselves next to the back of Mr. Buffett’s head.

During a stop at the Justin Brands booth for college-themed cowboy boots, Mr. Buffett was greeted by four University of Nebraska cheerleaders, who chanted “Go Big Red.”

While the reporters on stage, including one from The New York Times, appeared to ask most of the questions about Mr. Sokol, shareholders appeared focused on broader questions about investment strategy and Berkshire’s performance.

Among their biggest concerns is the performance of a core Berkshire profit engine, its reinsurance business. Because of this year’s run of natural disasters — including the Japan and New Zealand earthquakes and the recent plague of tornadoes that has swept across the South —Berkshire’s insurance operations are likely to post an underwriting loss for the year, Mr. Buffett added.

Still, the Sokol affair has provided the biggest challenge to Mr. Buffett’s reputation since the billionaire came to the rescue of Salomon Brothers 20 years ago when the investment bank was battered by a bond trading scandal. The Salomon bailout yielded one of the clearest and harshest statements on business ethics that Mr. Buffett has ever uttered: “Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless.”

But in disclosing Mr. Sokol’s trade last month, Mr. Buffett wrote in a public letter only that he did not view the actions as unlawful, and his uncritical response was widely criticized for being too tame.

Last Wednesday, Berkshire’s board took a much tougher stance, accusing Mr. Sokol of intending to deceive and mislead Mr. Buffett. The directors wrote in a lengthy report that they were considering suing Mr. Sokol and were fully cooperating with regulators. The Securities and Exchange Commission is already looking into the matter, people briefed on the matter have said.

On Saturday, though he was harsh in his assessment of Mr. Sokol’s trading actions, he pointedly declined to personally attack Mr. Sokol, instead highlighting the executive’s years of service and good performance.

Mr. Sokol, according to his now-former boss, once turned down an additional $12.5 million in compensation, instead asking that it be given to his second-in-command at MidAmerican Energy, a unit of Berkshire Hathaway. Mr. Buffett wondered aloud what could drive an executive who turned down $12.5 million to make improper trades a decade later that yielded $3 million.

Mr. Buffett acknowledged that his initial press release on Mr. Sokol’s departure might have seemed too supportive of his former lieutenant. “What I think bothers some people is that there wasn’t some big sense of outrage” in the news release, Mr. Buffett said. “I plead guilty to that. But this fellow had done a lot of good.”

Both Mr. Buffett and his longtime business partner, the Berkshire vice chairman Charles Munger, said that by the time the board delivered its report on Mr. Sokol, the company had already turned over evidence to the S.E.C. and had saved the firm money by not firing him.

“I feel like you don’t want to make important decisions in anger,” Mr. Munger said, defending Berkshire’s press release. “You can always tell a man to go to hell tomorrow.”

In resigning, Mr. Sokol said that he never aspired to succeed Mr. Buffett, again leaving open the question of who would eventually take over Berkshire. Mr. Buffett was characteristically vague about his plans, except that his son Howard would eventually become Berkshire’s unpaid chairman. As to who would eventually become chief executive, Mr. Buffett told one shareholder. “The guy who’s the leading candidate now, I would lay a lot of money on the fact that he’s straight as an arrow.”

Later in the meeting, Mr. Buffett repeatedly praised one perennial candidate: the head of Berkshire’s reinsurance operations, Ajit Jain, whom he described as exceptionally loyal and having a mind “like a machine.”

Article source: http://dealbook.nytimes.com/2011/04/30/buffett-takes-sharper-tone-in-sokol-affair/?partner=rss&emc=rss