Rumor Mill: This Week’s Mergers and Acquisitions Rumors

Wall Street is closing quite a few deals this week, (See “DONE DEAL! M&A Activity of the Week“), but it also is speculating about others. Here’s your Cheat Sheet to the top mergers and acquisitions in the rumor mill:

• Equinox Minerals (EQXMF) outbid Inmet Mining (NYSE:IMN) for Lundin Mining (LUN), a Canadian producer of copper and zinc.  Equinox offered C$8.10 per share or C$4.8 billion total, an offer that Inmet will propose to its shareholders.  Inmet’s C$3.6 billion offer isn’t looking too great right now, considering Lundin has access to copper and lead mines in Sweden and Ireland, and a stake in a copper and cobalt venture in the Democratic Republic of Congo.

• Berkshire Hathaway (BRK.B) i.e. Warren Buffett, is ready for some deal-making, hopefully the kind that brought him the Burlington Northern success he’s experienced in the past year.  Buffett is serious: his “trigger finger is itchy” for new acquisitions in the $5 to $20 billion range.  He sets out a full set of criteria for his dream acquisition (found here).  The question is, which company will it be?  The Wall Street Journal has some suggestions: Illinois Tool Works (NYSE:ITW), Automatic Data Processing (NASDAQ:ADP), Kennametal (NYSE:KMT), Expeditors International of Washington (NASDAQ:EXPD), Schindler Holding Corp (SHLAF), and W.W. Grainger (NYSE:GWW).

• Well that’s slightly embarrassing!  Pep Boys (NYSE:PBY), an auto-parts dealer based in Philadelphia, will not longer be trying to sell itself because it can’t get a high enough price.  Pep Boys wanted a price in the low teens.  What did they get? $10 to $11 per share.  What’s even more embarrassing is that Pep Boys has failed to sell itself in the past, namely five years ago.

• Now for some tasty rumors: PAI Partners is selling a 50 percent stake in Yoplait, and General Mills (NYSE:GIS) and Nestle (NSRGY) may be the notable competing bidders, along with a slew of private equity firms, such as Axa Private Equity, and other random companies, such as Bright Dairy & Food of China and Fromageries Bel SA (FBEL) of France.  General Mills and Nestle’s bids value the company at approximately $2.2 billion.

• Lloyds Banking Group (NYSE:LYG) will sell a 600-branch network, but management isn’t sure when.  It was supposed to be sold in 2013, but now the CEO Antonio Horta-Osorio says they will start selling soon.  Eric Daniels, the previous CEO, said that they would not sell until the merger of Lloyds and HBOs was complete.  They have to sell the Cheltenham & Gloucester and Lloyds TSB units because it is one of the European Commission’s conditions for aid during the crisis.  Who will buy them? Possible bidders include Virgin Money and NBNK Investments (NBNK).

• It looks like the J.Crew (NYSE:JCG) deal may just be a real deal: on Tuesday of this past week, a majority of shareholders voted in favor of the deal.  According to the Wall Street Journal’s Deal Journal, it was all about the money, or shareholders’ fear that they would  lose money.  Mickey Drexler, the CEO of J.Crew who irked quite a few people and hedge funds, got what he wanted with this deal, even after all of the drama, as did TPG and Leonard Green, the buyers, because they did not have to jack up the price.

• Yahoo (NASDAQ:YHOO) is thinking about selling its 35 percent stake in Yahoo Japan (a joint venture) to Softbank Corp (SFTBY), which already holds a 42 percent stake.  Then, it’s likely that Yahoo will try to figure out what to do with its 40 percent stake in China’s Alibaba Group (ALBCF), an Internet company.  This move would be a bit controversial, given the explosive growth of the Chinese market.  Why is Yahoo selling out? It wants to free up about $8 billion in cash to compete with Google (NASDAQ:GOOG) and Facebook, and needs to figure out what’s going on with its various Asian partnerships.

• News Corp (NASDAQ:NWS) has some good news! The Brits have finally given them the go-ahead to take over British Sky Broadcasting (BSY), Britain’s biggest pay television company, on the condition that News Corp spin off Sky’s news division in an attempt to prevent a reduction in “media plurality,” in the terms of Jeremy Hunt, Britain’s culture secretary.  This one’s a little tit-for-tat: if News Corp obliges, Hunt won’t refer the deal to the Competition Commission.  News Corp also owns The Times and The Sun, so this concern is not unfounded.  Now they will have to agree on price (which has been difficult recently as BSkyB shareholders are mobilizing to extract all they can from Murdoch), and continue to wade in murky political waters.

• The hawks are circling Citigroup’s (NYSE:C) consumer-lending unit, and they are ready to pounce.  This time, they’re in teams:  BlackRock (AMEX:BKR), KKR (NYSE:KKR), Warburg Pincus, and possibly Santander (NYSE:SAN) are in talks to make a bid, as are at least three other groups.  For Citigroup, this is all part of the plan to shed a bunch of assets after its $45 billion bailout.

• On this past Thursday, Alcatel-Lucent (NYSE:ALU) shares soared on rumors that a Chinese firm was thinking about making a bid.  Huawei Technologies, one of the Chinese companies in question, denies everything.  Eric Savitz of The Tech Trade (Forbes) makes a good point: such a deal would not fly with U.S. regulators, considering they aren’t too keen on allowing Chinese companies to own our key tech assets.

• Ironically, Family Dollar Stores (NYSE:FDO) thinks it’s worth more than Nelson Peltz’s Trian Group offered.  $7 billion, or $55 to $60 per share, just isn’t enough.  Trian owns approximately 8 percent of Family Dollar, as well as significant stakes in Wendy’s/Arby’s Group (NYSE:WEN) and Legg Mason (NYSE:LM).

• This past Thursday, share of KeyCorp (NYSE:KEY) jumped more than 3 percent on rumors that Toronto Dominion Bank (NYSE:TD) might want to buy it, possibly between $10 and $11 per share.  Guess what? KeyCorp still hasn’t paid you back yet for the bailout.  Would such a deal mean that they would?   Whether or not that happens, a deal could happen given that KeyCorp is not faring too well.

• Just when you thought you could get by without reading about more market exchange drama, they pull a fast one.  The Singapore Exchange (SGXL) should be happy as of this past Friday, since a key Australian MP is supportive of its $7.7 billion bid for ASX (NYSE:ASX).  This is relatively significant, given that some politicians aren’t too keen on foreign ownership of this exchange.  Next in line are Treasurer Wayne Swan and Parliament, both of whom may or may not end up supporting the deal, depending on the political winds.

• Meanwhile, there is some concern that a deal between the London Stock Exchange (NYSE:LSE) and the TMX Group (NYSE:X) of Canada could be simply a means of creating a lightening rod that would spread a crisis more rapidly across the pond.  When I say, “some concern,” I obviously am referring to the lecture given by Jon Aikman of the University of Toronto’s Rotman School of Management.  This may be one issue, but foreign ownership seems to be the real underlying problem, given that previous foreign takeovers of Canadian assets haven’t fared that well.

Interact: Which deals do you think will get done? Which are just PR from hedge funds and traders? Let us know in the comments below …

Don’t Miss: DONE DEAL! M&A Activity of the Week >>