Author: Gordon Platt

BANKRUPT MALL OPERATOR WEIGHS OFFERS

By Gordon Platt

Simon Property Group, the largest US mall operator, is seeking to take over rival General Growth Properties and take it out of bankruptcy. The battle of the mall operators has taken a new twist, however, with General Growth announcing a competing plan last month to emerge from Chapter 11 with the help of one of its largest debtholders.

Chicago-based General Growth, which owns the South Street Seaport in New York and Fashion Show in Las Vegas, as well as upscale malls in Hawaii, filed for bankruptcy protection in April 2009, marking the biggest real estate failure in US history. The company piled up $28 billion in debt during an acquisition spree that included its 2004 purchase of Rouse Cos.

“Our core business remains sound and is performing well, with stable cash flows,” General Growth chief executive Adam Metz said at the time of the bankruptcy filing. “While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of Chapter 11,” he said.

Indianapolis, Indiana-based Simon Property owns hundreds of properties, including Roosevelt Field on New York’s Long Island and Sawgrass Mills Mall, located in a suburb of Fort Lauderdale, Florida. It offered $10 billion in February for General Growth in a deal that Thomson Reuters gave a rank value of $30 billion. Simon Property’s financial advisers are Lazard, J.P. Morgan and Morgan Stanley.

General Growth’s board rebuffed the offer. “We concluded based on our discussions with other interested parties that [the offer] is not sufficient to preempt the process we are undertaking to explore all avenues to emerge from Chapter 11 and maximize value for all the company’s stakeholders,” Metz said. General Growth would provide information about its properties and operations to other potential suitors, he added. General Growth’s financial adviser is UBS Investment Bank.

Brookfield Asset Management, a property firm based in Toronto, agreed to acquire a 30% stake in General Growth on February 24. Then, General Growth announced last month that it had received a proposal for nearly $4 billion in new equity capital from Fairholme Capital Management, one of its largest unsecured creditors, and Pershing Square Capital Management, its largest shareholder. Along with the proposed Brookfield investment, the proposal would provide more than $6.5 billion of new equity capital, according to General Growth. Any deal would have to be approved by the bankruptcy court.

Another major M&A; deal announced in February could also encounter hurdles. Akron, Ohio-based FirstEnergy agreed to buy rival Allegheny Energy in a stock-swap deal valued at nearly $9 billion that would create one of the largest power companies in the US, with 6 million customers in seven states. Regulators have blocked utility mergers in the fragmented US market in recent years, fearing higher power prices, job cuts and a lower quality of service.

Allegheny Energy, based in Greensburg, Pennsylvania, owns utilities Allegheny Power and Potomac Edison. It has 1.6 million customers in Pennsylvania, West Virginia, Maryland and Virginia.

The Louisiana Municipal Police Employees Retirement System asked a federal judge in Pittsburgh last month to stop FirstEnergy’s proposed takeover of Allegheny Energy. The retirement system, which owns an unspecified amount of Allegheny’s stock, says the deal does not provide value to shareholders.

FirstEnergy says the acquisition would give it a more diversified portfolio of power plants in adjacent geographic areas that could improve opportunities for growth while saving money. Both companies say the merger would improve their mix of power generation between nuclear power, coal, natural gas and renewable sources.

However, the combined company would still be dependent on coal for 70% of its power generation.

AMERICAS M&A;: TOP DEAL ADVISERS
Adviser

Rank Value

($billion)

Rank

% Mkt

Share

# of Deals
Credit Suisse 64. 3 1 30.5 12
Goldman Sachs 57. 2 2 27.2 15
UBS 54. 2 3 25.7 12
Morgan Stanley 49. 7 4 23.6 17
Lazard 48. 9 5 23.3 9
Industry Totals* 210.5* - 1,360
EUROPE M&A;: TOP DEAL ADVISERS
Adviser

Rank Value

($billion)

Rank

% Mkt

Share

# of Deals
Goldman Sachs 18. 6 1 33.6 7
J.P. Morgan 14. 8 2 26.7 10
Morgan Stanley 11. 8 3 21.3 13
Rothschild 11. 7 4 21.1 18
Credit Suisse 11. 5 5 20.8 15
Industry Totals* 55.3* - 1,801

ASIA M&A;: TOP DEAL ADVISERS

Adviser

Rank Value

($billion)

Rank

% Mkt

Share

# of Deals
Credit Suisse 38. 3 1 44.4 7
Citi 37. 7 2 43.6 7
Lazard 35. 5 3 41.1 2
J.P. Morgan 35. 5 3 41.1 3
Nomura 10. 2 5 11.8 20
Industry Totals* 86.4* - 1,551
January 1, 2010 -February 28, 2010

*Figures may not add up as more than one bank typically obtains credit for any one transaction.

Source: Thomson Reuters

Top Mergers & Acquisitions in February 2010

AMERICAS
Date Announced

Target Name

(Target Advisers)

Country

Acquirer Name

(Acquirer Advisers)

Country Description

Ranked Value

($billion)

2/16/10

General Growth Properties

(UBS Investment Bank)

US

Simon Property Group

(Lazard)

(J.P. Morgan)

(Morgan Stanley)

US Planned to launch an unsolicited tender offer to acquire real estate investment trust; includes assumption of $21.8 billion in secured notes. 30.00
2/11/10

Allegheny Energy

(Goldman Sachs)

US

FirstEnergy

(Morgan Stanley)

US Definitively agreed to acquire electric utility, in a stock-swap transaction.

8.97

2/5/10

Airgas

(Goldman Sachs)

(Bank of America Merrill Lynch)

US

Air Products & Chemicals

(J.P. Morgan)

US Planned to launch an unsolicited tender offer to acquire wholesaler of industrial, medical and specialty gases; includes $1.9 billion in liabilities.

6.70

2/1/10

Shell International Petroleum

(J.P. Morgan)

Brazil

Cosan’s Brazilian assets

(Banco BTG Pactual)

Brazil

Cosan signed a memorandum of understanding to merge its Brazilian assets with those of Shell International Petroleum.

5.23

2/24/10

General Growth Properties

(UBS Investment Bank)

(Miller Buckfire)

US

Brookfield Asset

Management

(Goldman Sachs)

(Barclays Capital)

US Agreed to acquire a 30% stake in real estate investment trust, in a privately negotiated transaction.

2.63

2/15/10

Nextel Mexico

(Lazard)

Mexico

Grupo Televisa

(Allen & Co.)

US Definitively agreed to acquire a 30% stake in provider of telecom services from NII Holdings.

1.44

2/10/10

Fosfertil

Brazil Mineracao Naque Brazil Unit of Vale was granted an option to raise its interest to 78.03% by acquiring a 20.27% stake from Mosaic, a unit of Cargill.

1.03

2/11/10

Cia Minera del Pacifico

(J.P. Morgan)

Chile

Mitsubishi

(Citi)

Japan Agreed to raise its stake to Agreed to raise its stake to stake in iron mining company.

0.92

EUROPE
2/15/10

VT Group

(Rothschild)

(Bank of America Merrill Lynch)

UK

Babcock International

(J.P. Morgan Cazenove)

(Evercore Partners)

UK Planned to launch an unsolicited tender offer to acquire provider of tender offer to acquire provider of defense and support services
1.98
2/11/10

Cimpor Cimentos de Portugal

(J.P. Morgan)

Portugal

Camargo Correa Portugal

(Credit Suisse)

(Bank of America Merrill Lynch)

(Banco BTG Pactual)

Portugal Planned to acquire a 22% stake in cement maker from Teixeira Duarte Engenharia in a privately negotiated transaction. 1.33
2/15/10

Cimpor Cimentos de Portugal

(Morgan Stanley)

(J.P. Morgan)

Portugal

Grupo Votorantim

(Deutsche Bank)

Brazil Agreed to acquire a 17.28% stake in cement maker from Lafarge. 0.98
2/24/10

Beltransgaz

Belarus

Gazprom

Russia

Raised its interest to 50% by acquiring a 12.5% stake in provider of gas transportation services.

0.63
2/11/10

Cimpor Cimentos de Portugal

Portugal

Grupo Camargo Correa

(Bank of America Merrill Lynch)

(Credit Suisse)

(Banco BTG Pactual)

Brazil

Agreed to raise its interest to 28.63% by acquiring a 6.46% to 28.63% by acquiring a 6.46% stake from Bipadosa.

0.38

ASIA

2/24/10

Laiwu Steel

China

Jinan Iron & Steel

(China International Capital)

China Unit of state-owned Shandong Iron & Steel agreed to merge with Laiwu Steel, in a stock-swap transaction. 1.45
2/15/10

Jupiter Telecom

Japan

Sumitomo

(Goldman Sachs)

(Daiwa Securities Capital Markets)

Japan Planned to launch a tender offer to raise its stake to 40.5% by acquiring a 12.77% stake in provider of cable TV services. 1.36

2/26/10

Resona Maruha Building

Japan

Nippon Oil

Japan Definitively agreed to acquire a 27% interest in the real estate beneficiary rights in office building in Tokyo.

0.47

2/3/10

Mitsui Oil Exploration Japan

Mitsui

Japan Agreed to raise its stake to 67.46% by acquiring a 12.85% stake for cash.

0.35

Source: Thomson Reuters