Deals: Meltdown at Least Warms the Week’s M&A

In our M&A Roundup for the week ended Sept. 28, Berkshire Hathaway infusion into Goldman and the Chase purchase of WaMu assets give a boost to an otherwise tepid period.

Fallout from Wall Street’s financial meltdown warmed up last week’s North American merger-and-acquisition activity, as Berkshire Hathaway’s infusion into Goldman Sachs and JP Morgan Chase’s purchase of Washington Mutual assets from the Federal Deposit Insurance Corp. added $7 billion to the dealmaking.

But three other deals of more than $1 billion also helped keep week-to-week activity from disappearing completely, compared to the $60.25 billion of deals the prior week, when Bank of America paid $44.35 billion to purchase Merrill Lynch & Co. The second-largest deal of last week was Bristol-Myers Squibb Co.’s $4.17-billion agreement to buy ImClone Systems Inc., according to data provided to CFO.com by mergermarket.

Dealmaking in North America totaled 47 transactions, worth $12.95 billion, bringing the year-to-date results to 2,876 deals with a value of $753.23 billion. For the same period last year, 3,836 transactions totaled $1.31 trillion.

A positive note for the state of M&A came from a report based on Thomson Reuters data that showed hostile takeovers more than doubling so far this year in the U.S. The report cited falling stock prices and weakened corporate defenses as the reason.

U.S. hostile deal activity reached a record high of $211 billion so far this year, the report said, up 140 percent from a year ago.

“Given the volatility in the equity markets and the number of companies trading at distressed levels, companies with strong balance sheets are trying to be opportunistic and go after targets that may be temporarily depressed,” according to Stefan Selig, Bank of America Corp.’s vice chairman of global investment banking and head of global mergers and acquisitions. Unfriendly deals, including unsolicited and hostile deals, have accounted for 22.1 percent of all U.S. mergers, compared with 12.1 percent for all of 2007, according to the company’s FactSet MergerMetrics branch.

Hostile deals crossed international boundaries, as foreign companies such as InBev NV made major moves. InBev, of course, paid $60.4 billion for Anheuser-Busch Cos Inc.

Berkshire Hathaway Inc. to buy an undisclosed interest in Goldman Sachs for $5.00 billion

Omaha-based holding company Berkshire Hathaway, controlled by billionaire investor Warren Buffett, agreed to acquire an the stake in New York City-based investment bank Goldman under terms giving Berkshire perpetual preferred shares paying an annual dividend of 10 percent. Goldman Sachs will have the right to buy back these shares any time at a premium of 10 percent. In addition to the preferred shares, Berkshire will receive warrants, exercisable over a five-year term at a strike price of $115 per share.
Seller financial advisor: Internal
Bidder financial advisor: Not Available
Seller legal advisor: Sullivan & Cromwell
Bidder legal advisor: Munger Tolles & Olsen

Bristol-Myers Squibb Co. to buy ImClone Systems Inc. for $4.17 billion

New York City-based global biopharmaceutical company ImClone received an unsolicited proposal from New York City-based global biopharmaceutical company Bristol-Myers Squibb, which currently has a 16.6 percent stake in ImClone. Terms call for a $62-a-share price offering a premium of 4.4 percent.
Seller financial advisor: JPMorgan; Lazard
Bidder financial advisor: Citigroup; Credit Suisse; Morgan Stanley
Seller legal advisor: Davis Polk & Wardwell (Advising JPMorgan)
Bidder legal advisor: Cravath Swaine & Moore

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