Rumor Mill: This Week’s Mergers and Acquisitions Whisperings

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Wall Street is closing some 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:

  • Rupert Murdoch’s News Corp (NASDAQ:NWSA) may end up buying the Shine Group, a production company run by Elisabeth Murdoch, Rupert’s daughter.  Rumor has it that the companies think Shine is worth about $674 million, including debt.  Shine produces high-quality TV shows such as “The Biggest Loser” and “MasterChef.”  The deal may not be about these shows: in fact, it seems that Rupert is simply trying to reunite his family.  Rupert’s sons James and Lachlan have also worked for him, the latter resigning in 2005.
  • In a shocking surprise, yet another influential shareholder has spoken out against J.Crew’s (NYSE:JCG) $3 billion sale to a group of private equity firms, including TPG Capital, Leonard Green and the CEO himself, Mickey Drexler.  ISS, the influential shareholder mentioned, believes the deal makes little strategic sense, and questions how the sales process was handled.  Remember that many shareholders have taken issue with Drexler, who decided to wait a few weeks before telling the board that the company was thinking about selling.  However, ISS does not have the most successful past in blocking corporate board actions, notably with Barnes & Noble (NYSE:BKS), Dynegy (NYSE:DYN), and Dollar Thrifty (NYSE:DTG).  Furthermore, there are a group of highly influential and wealthy shareholders on Drexler’s side, including John Paulson and the Ziff Brothers.  What does J.Crew have to say for itself? Well, management, namely Drexler, thinks the offer is a good one, considering sales are slipping.
  • Don’t think we can go through a week without more intrigue in the world of market exchanges. This week, NASDAQ OMX Group (NASDAQ:NDAQ) is becoming a little desperate, and may be mulling a counter bid for NYSE Euronext (NYSE:NYX).  If it doesn’t do this, it will either try to merge with another exchange, such as CBOE Holdings (NASDAQ:CBOE) or sell itself to IntercontinentalExchange (NYSE:ICE), because otherwise it won’t be able to compete.  It may hit quite a few regulatory snags if it decides to make a NYSE Euronext counter bid, because the two have too much overlap in U.S. equity options and U.S. equities.  The NYSE bid seems like a bit of a stretch, since it would have to be a joint deal with ICE or the CME Group (NYSE:CME), and the group would have to reimburse NYSE for the $337 million breakup fee.  The truth is, NASDAQ has some options. It could wait for the Singapore-ASX deal to fall apart and sell itself to the Singapore Exchange, or even merge with the London Stock Exchange after it acquires the TMX Group.
  • Speaking of the LSE-TMX deal, Canada’s regulators will launch a lengthy investigation as to whether or not such a deal will provide a net benefit to the country.  Remember, they rejected BHP’s (NYSE:BHP) bid for Potash (NYSE:POT) on the grounds that it was not in their national interest.  Opposition is mounting, but the head of TMX cautioned that Canada would risk its reputation for free trade if it blocks LSE’s merger with Canada’s stock exchange.  If the deal went through, the newly merged company would be the fifth-largest global exchange by volume.
  • Meanwhile, CBOE (NASDAQ:CBOE) says it now may be open for sale, even though it always has prided itself on its identity as a niche player.  What’s unique about CBOE? It is the larges to the nine U.S. options exchanges.  Problem is, if all the other exchanges are merging, CBOE will be left in the dust if it doesn’t follow suit.  After all, LSE’s CEO Xavier Rolet claims that there will be only four global exchanges in five years.
  • What about the NYSE Euronext-Deutsche Boerse deal? The EU’s antitrust probe will likely enter Phase II review, which essentially means more red tape over a longer time period.
  • Standard Microsystems (NASDAQ:SMSC), which put in a $.2.25 per share bid for Conexant (NASDAQ:CNXT), a small rival, decided not to raise the bid, which has allowed Golden Gate Private Equity to take the driver’s seat.  Conexant seems perfectly amenable to Golden Gate’s price, rumored to be between $2.35 and $2.45 per share, or a total of $196 million.
  • Rio Tinto (NYSE:RIO) hasn’t changed its mind yet! The miner extended its $3.9 billion bid for Riversdale Mining (PINK:RFLMF) after Tata Steel, Riversdale’s top shareholder with 24 percent ownership of shares outstanding, said it isn’t sure what to do with its stake.  CSN, Brazil’s top steel company that is another top shareholder with approximately 20 percent ownership, has the same issue.  This is a problem for Rio, because if these shareholders keep their stakes, Rio won’t be able to swallow the whole fish.
  • Speaking of natural resources, Valero Energy (NYSE:VLO) might buy Chevron’s (NYSE:CVX) U.K. refinery for $1 billion to $1.5 billion.  While these rumors may not come to fruition, Chevron does want to sell its Pembroke refinery in Wales, which can run discounted grades of crude oil and has export capabilities to the U.S. and other regions in the U.K., in order to cut its debt and refocus its spending on oil exploration and development in regions with greater prospects.  Meanwhile, this would be Valero’s first refinery acquisition in six years.
  • Talk about vultures circling a wounded animal! AstraZeneca (NYSE:AZN) put Astra Tech, the third-largest global dental implant producer, up for sale in November, and now may receive upwards of 20 bids in the $2 billion range!  The bidders may try to buy the separate arms of Astra Tech rather than the entire company.
  • Say what you will about Carl Icahn, but he’s not a quitter.  After his bid for Dynegy (NYSE:DYN) failed last week, he made a $1.91 billion offer for Mentor Graphics (NASDAQ:MENT), a chip-design software company.  He even suggested earlier this month that Mentor Graphics should put itself up for sale.  Well, we know why he did that! Thing is, Mentor Graphics just released some pretty positive earnings, which may make Icahn’s bid a lousy one.  Will there be other bidders?
  • News Corp (NASDAQ:NWSA), which was so eager to snatch up MySpace in 2005 for $580 million, is now opening the social networking site’s books to potential buyers.  MySpace will either be spun-off or sold to (most likely) a private equity firm, or another social networking site such as MocoSpace or Zynga.  It’s hard to imagine why any company would buy MySpace, given the dominance of Facebook.
  • While the MySpace deal may be its embarrassing uncle, News Corp is moving forward with its planned acquisition of British Sky Broadcasting (LSE:BSY) for $21.3 billion.  Its discussions with the Office of Fair Trading, the U.K.’s primary merger regulator, are reportedly going well, and the two may be able to make a compromise that would allow the merger and limit the reduced competition in the U.K.  Note that News Corp is simply trying to buy the 60.9 percent of BSkyB it doesn’t own.

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 >>

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