Deals: Private Equity Takes a Breather

In our M&A Roundup for the week ending July 22, a relative lull results from the dearth of LBOs in the top 10.

A slowdown in mergers and acquisitions last week resulted from what appeared to be something of a holiday for private equity practitioners.

Among the top 10 North American deals in the period ended July 22, the leader was a sale to a private buyer: Basell NV, which agreed to pay $20 billion for Houston-based Lyondell Chemical Co. Basell’s acquisition doubled the size of its unsuccessful attempt the prior week to buy another Texas outfit, Huntsman Chemical Co. Huntsman broke off its agreement with Basell after getting a higher offer from Apollo Management’s Hexion Specialty Chemicals Inc.

The week’s $43.66 billion of dealmaking was off from $70.45 billion in the prior seven days, but brought the year’s total to $1.21 trillion, according to data provided to CFO.com by mergermarket.

Citigroup advised four of last week’s top deals, the most of any investment bank. They included the Basell transaction, Houghton Mifflin Riverdeep Group’s $4-billion purchase of some Reed Elsevier plc Harcourt publishing operations, and IHOP Inc.’s $2.03-billion acquisition of Applebee’s International Inc.

Basell NV to buy Lyondell Chemical Co. for $20 billion

The definitive agreement, approved by both boards, calls for Houston-based Lyondell to be acquired for $48 a share, a premium of 19.6 percent. Lyondell is a global manufacturer of chemicals and plastics; a refiner of heavy, high-sulfur crude oil; and a significant producer of fuel products. Privately-owned Basell, headquartered in Hoofddorp, Netherlands, provides polypropylene and advanced polyolefins products. Its owner is Russian-born American Leonard Blavatnik’s Access Industries, which bought Basell from BASF AG and Royal Dutch Shell two years ago. Access is focused on natural resources and chemicals, telecommunications and media, and real estate. Basell was snubbed the prior week by Huntsman Chemical Co., which agreed to be acquired by private-equity company Apollo Management through its Hexion Specialty Chemicals Inc. unit for $10.16 billion, nearly $1.5 billion more than in the Basell-Huntsman deal that Huntsman broke off. The Lyondell-Basell transaction is expected to close in the fourth quarter.
Seller financial advisor: Deutsche Bank; Perella Weinberg Partners
Bidder financial advisor: Citigroup; Merrill Lynch
Seller legal advisor: Baker Botts
Bidder legal advisor: Skadden Arps Slate Meagher & Flom

Plains Exploration & Production Co. to buy Pogo Producing Co. for $5.79 billion

The definitive agreement to combine the Houston-based companies calls for $24.88 in cash and 0.68201-shares of Plains to be exchanged for each share of Pogo, which explores onshore and offshore for oil and gas. That represents a premium of 18.4 percent. Plains Exploration is an independent oil and gas company primarily engaged in the activities of acquiring, developing, exploiting, exploring, and producing U.S. oil and gas properties. Rationale & Synergies: Along with asset diversification and significant cost savings, the combined company will have a total estimated reserve potential of 1.4 billion barrels of oil equivalent. This transaction, combining reserves of 1.4 billion barrels of oil or equivalents, almost doubles Plains Exploration’s production. The transaction is expected to qualify as a tax-free reorganization, and will give Plains Exploration holders 66 percent of the combined company, with Pogo holders owning the remaining 34 percent. Close is expected in the fourth quarter.
Seller financial advisor: Goldman Sachs; TD Securities
Bidder financial advisor: Lehman Brothers
Seller legal advisor: Baker Botts
Bidder legal advisor: Andrews Kurth

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