The Rumor Mill: Mergers and Acquisitions in Question, Jan 23

This story from Wall Street Cheat Sheet

Rumors are often more fun than the deals themselves. (See “DEAL DONE! M&A Activity of the Week“) So, here’s your Cheat Sheet to the top mergers and acquisitions in the rumor mill:

• J.Crew (NYSE:JCG) is finding it difficult to attract a suitor, among other lawsuit-related problems.  Its agreement with TPG Capital and Leonard Green & Partners allowed J. Crew a two-month “go shop” period, during which it could solicit outside bids.  This period has been extended to February 15th.  Other potential bidders, including Sears Holdings (NASDAQ:SHLD) and Urban Outfitters (NASDAQ:URBN), took a peek at J.Crew’s books, but J.Crew CEO Millard Drexler’s support of TPG and Leonard pretty much make any such efforts fruitless.

• Yum! Brands (NYSE:YUM) is planning to get rid of a couple of its “non-core” businesses, namely Long John Silver’s and A&W All-American Food.  YUM is focusing on international growth, particularly in China, and the aforementioned domestic businesses simply aren’t bringing home the beef.  The likely buyers? Private equity shops.

• Regulators are turning up the heat on Caterpillar’s (NYSE:CAT) proposed $7.6 billion acquisition of Bucyrus (NASDAQ:BUCY), which aims to bring the latter’s mining equipment expertise into the former’s fold.  The Department of Justice issued a “second request,” which essentially implies the government is taking potential antitrust issues seriously.

• Wal-Mart (NYSE:WMT) is one step closer to taking over the world.  Massmart’s (PINK:MMRTY) shareholders agreed to Wal-Mart’s $2.3 billion takeover offer, which will potentially create tension with local South African unions, such as COSATU, which plan to launch “the mother of all boycotts” to oppose Wal-Mart’s grab.  Unions are a big deal in South Africa and would be able to have a say in whether or not the South African competition watchdog approves the deal.

• Giant fertilizer producer Mosaic (NYSE:MOS) may be acquired soon, thanks to agribusiness behemoth Cargill, which is planning a spin-off of its $24 billion majority stake in the company.  Who will acquire Mosaic? Mining companies such as BHP (NYSE:BHP) and Vale (NYSE:VALE) will likely be in the mix.  In fact, according to those familiar with the potential deal’s structure, Mosaic may be able to consider outside bids in lieu of the Cargill spinoff.

• It looks like Wendy’s is not “thinking Arby’s,” with its recent announcement that the Wendy’s/Arby’s Group (NYSE:WEN) plans to put up the sandwich chain for auction.  But wait, doesn’t Arby’s sell high-quality roast beef, and what about their delicious new chocolate turnover?  Apparently that just won’t cut it, as the chain is not performing that well relative to its rivals, even though the Wendy’s/Arby’s merger occurred only three years ago.  Looks like someone is being voted off the island.

• Again, Sanofi-Aventis (NYSE:SNY) plans to extend its $18.5 billion tender offer for Genzyme (NYSE:GENZ).  Sanofi is trying to play the nice guy and wants to make sure its offer is not viewed by Genzyme’s board as hostile.  The offer is currently $69 per share, but based on current prices, the market expects a deal in the mid-$70s or even $80s.  In sum, the two are still talking, but may have different ideas about what Genzyme is worth.

• Warner Music Group (NYSE:WMG), one of the world’s largest record businesses, officially hired Goldman Sachs (NYSE:GS) as an advisor to explore its options, which most likely will be a sale.  In the meantime, Warner will continue considering the British music company EMI, also with the help of Goldman.  According to an anonymous executive, K.K.R. (NYSE:KKR) recently expressed interest in potentially acquiring Warner.  Warner’s current private equity owners seem to want some kind of action, whether through a sale or an acquisition, especially since they’ve owned Warner for the past seven years.

• News Corp (NASDAQ:NWSA), which is currently facing scrutiny of its bid for British Sky Broadcasting (PINK:BSYBY), recently told the British government that it would be willing to exclude Sky News from BSkyB as part of the deal.  The British regulator’s beef with News Corp: such a deal may reduce competition in the broadcasting arena.

• China’s biggest bank is on the prowl and it’s not afraid to play hardball.  The Industrial & Commercial Bank of China will acquire a majority stake in Bank of East Asia’s U.S. subsidiary.  Although the price tag is in the low hundreds of millions, this deal is significant because it would mark the first time a Chinese financial institution acquires branches in the U.S., and could set a precedent for similar future deals.  The question now is whether or not the deal will make it through regulatory hurdles.

• After failing to sell itself in the past, Pep Boys (NYSE:PBY) will, again, give it the ole’ college try.  Pep Boys hired Bank of America (NYSE:BAC) as its advisor, and will likely consider bids from private equity firms.  Pep Boys might be a good bet for a buyout shop, since the company’s earnings have recently improved as a result of the relatively favorable economic environment for auto parts retailers.

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 …

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