Deals: Without Dubai, It’s Downright Dry

In our M&A Roundup for the week ended Aug. 26, the Middle-East nation's investment in MGM Mirage accounts for 60% of the activity.

Dubai government investments totaling $5.86 billion in operations of MGM Mirage Inc. accounted for 60 percent of last week’s merger-and-acquisition volume, as North American deal activity continued the relatively languid pace of the past five weeks.

There were 36 transactions valued at a total of $9.68 billion, up from $8 billion the prior week and $6.49 billion the week before, according to data provided to CFO.com by mergermarket.

An examination of the top 10 North American deals showed that private-equity buyers were continuing the summer holiday from M&A occasioned by the sudden, severe crunch in the credit market, although they may well be busy searching for ways to negotiate lower prices
on the deals done during an overheated spring.

The year-to-date value of announced deals is $1.32 trillion, compared with the prior year’s $929.9 billion, although the number of deals this year stands at 2,998, compared with 3,203 over the same period of 2006.

Infinity World Development Corp. to buy CityCenter Holdings LLC from MGM Mirage for $2.7 billion

Infinity World, a Dubai-based holding company of Dubai World, a state-owned investment holding company, will acquire a 50-percent stake in MGM Mirage’s CityCenter Holdings LLC. CityCenter Holdings was established to own CityCenter, the mixed-use luxury residential, resort, and retail complex MGM Mirage is developing on the Las Vegas Strip, where MGM Mirage is headquartered. After closing, MGM Mirage will receive additional consideration of $100m, and the joint venture will obtain project-specific financing to fund remaining project costs. At the same time, Infinity World also agreed to purchase a 9.5 percent stake in MGM Mirage.
Seller financial advisor: UBS
Bidder financial advisor: Credit Suisse
Seller legal advisor: Christensen, Miller, Fink, Jacobs, Glaser, Weil and Shapiro
Bidder legal advisor: Paul Hastings Janofsky & Walker

Infinity World buy 9.5 percent of MGM Mirage for $2.39 billion

This purchase by the Dubai state-owned holding company is priced at $85 per share, a premium of 5 percent over the Aug. 22 closing price, and 14.4 percent above the Aug. 21 closing price. The acquisition aims to allow both companies to develop large-scale luxury properties and attract international clients, while benefiting from parent Dubai World’s real-estate experience. MGM Mirage believes the transaction will be accretive to long term earnings, and will profoundly impact its balance sheet.
Seller financial advisor: UBS
Bidder financial advisor: Credit Suisse
Seller legal advisor: Christensen, Miller, Fink, Jacobs, Glaser, Weil and Shapiro
Bidder legal advisor: Paul Hastings Janofsky & Walker

US Steel Corp. to buy Stelco Inc. for $1.54 billion

Hamilton, Ontario-based Stelco definitively agreed to be acquired by the Pittsburgh-based steelmaker, and both board approved the merger. The boards of directors of both companies have approved the merger. Stelco is one of Canada’s largest steel companies, while integrated producer U.S. Steel makes steel products in North America and central Europe. The acquisition especially will strengthen U.S. Steel’s position as a supplier of flat-rolled steel products to the North American market, and will generate annualized pre-tax synergies of more than $100 million by the end of 2008. It will also be accretive to earnings per share that year. The per-share price offered is a premium of 43 percent. Shareholders owning more than 76 percent of Stelco’s shares, including Tricap Management Ltd., Sunrise Partners LP, Appaloosa Management LP, and Stelco CEO Rodney Mott, agreed irrevocably to support the transaction. U.S Steel has $900 million in fully committed senior credit facilities underwritten by J. P. Morgan Securities Inc. and Scotia Capital. The transaction is expected to close before the end of the year. In June, Stelco said it was reviewing strategic alternatives in light of the continuing consolidation of the steel industry, and was working with CIBC World Markets and UBS it its review.
Seller financial advisor: CIBC World Markets; UBS
Bidder financial advisor: JPMorgan
Seller legal advisor: McCarthy Tetrault
Bidder legal advisor: Morgan Lewis & Bockius; Osler Hoskin & Harcourt

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