Deals: Hope Amid the Wreckage

In our M&A roundup for the period ended Sept. 14, the Merrill-Lehman-Fannie-Freddie carnage is a backdrop for sharply higher strategic dealmaking totals.

Even as disaster befell such once-solid entities as Merrill Lynch, Lehman Brothers, Fannie Mae, and Freddie Mac, last week produced a surge in strategic North American dealmaking — including multibillion-dollar purchases by tobacco company Altria Group Inc. and ConocoPhillips Co., the energy brand.

There were nearly half as many transactions as in the prior week, but the 28 deals that were struck as of Sunday, Sept. 14, were generally much larger, totaling $15.39 billion. In the week ended Sept. 7, 55 merger-and-acquisition agreements were signed, valued at $4.30 billion.

While that prior week’s biggest deal had been Coca-Cola Co.’s $2.36-billion purchase of Beijing-based China Huiyuan Juice Group Ltd., though, the list last week was topped by Altria’s $11.49-billion acquisition agreement with UST Inc., the Stamford, Conn.-based maker of smokeless tobacco and the producer of Ste. Michelle wines. Not far behind was Conoco’s $7.84-billion purchase of Sydney, Australia-based Origin Energy Ltd.’s coal seam gas assets, according to data on the top 10 North American transactions, provided to CFO.com by mergermarket..

Last week’s healthy dealmaking brought the total for the year to $667.19 billion, represented by 2,603 transactions. A year ago at this time, the 3,660 deals struck in that record year for M&A had totaled $1.28 trillion.

Altria Group Inc to buy UST Inc. for $11.49 billion

UST, the Stamford, Conn.-based holding company for U.S. Smokeless Tobacco Co. and Ste. Michelle Wine Estates Inc., definitively agreed to be acquired by Richmond, Va.-based Altria. Both boards approved the purchase by Altria, the holding company for Philip Morris USA Inc. and John Middleton, Inc., both engaged in the manufacture and sale of cigarettes and other tobacco products. Altria maintains a portfolio of leveraged and direct finance leases. And as of Dec. 31 it held a 28.6-percent interest in brewer SABMiller plc. Terms call for Altria to pay $69.50 a share, a premium of 2.9 percent. The equity value of the transaction is about $10.25 billion before assumption of debt.
Seller financial advisor: Citigroup; Perella Weinberg Partners
Bidder financial advisor: Centerview Partners; Goldman Sachs; and JPMorgan
Seller legal advisor: Skadden Arps Slate Meagher & Flom; Sullivan & Cromwell; and Weil Gotshal & Manges (Advising Citigroup)
Bidder legal advisor: Arnold & Porter; Hunton & Williams; and Sutherland Asbill & Brennan

ConocoPhillips Co. to buy the coal seam gas assets of Origin Energy Ltd. for $7.84 billion

Houston-based integrated energy company ConocoPhillips agreed to form a joint venture by acquiring a 50-percent stake in the Queensland, Australia coal seam gas assets of Sydney-based Origin Energy for cash. ConocoPhillips will make cash investment through initial payment of $4.94 billion, and additional contributions of $946.22 million, and of $493.68 million for each of four LNG properties. As a result, ConocoPhillips will get a 50-percent holding in Origin Energy CSG Ltd, a subsidiary that in turn owns 50 percent of the coal seam gas assets.
Seller financial advisor: Grant Samuel; Macquarie Group
Bidder financial advisor: Credit Suisse
Seller legal advisor: Clayton Utz
Bidder legal advisor: Allens Arthur Robinson; Wachtell Lipton Rosen & Katz

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