Mergers, Acquisitions Proliferate Globally

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Qatar Investment Fund hikes its stake in French oil and gas giant Total SA.
Qatar Investment Fund hikes its stake in French oil and gas giant Total SA.

Mergers and acquisitions are proliferating globally as low interest rates, large cash piles and depressed asset prices create opportunities for expanding market share.

The deals come despite at least one study showing business sentiment for mergers and acquisitions remains low -- despite improving conditions. Ernst & Young said Monday in a report that while the financial environment for doing deals is improving many businesses remain cautious. Less than a third of 1,500 senior business executives in 57 countries said they expected to pursue an acquisition in the next 12 months, according to the survey.

Nevertheless, big deals are announced daily.

The Qatar Investment Authority (QIA) said Monday it will go on a $30 billion spending spree this year, funded by high energy prices in recent years that have skyrocketed the value of the sovereign wealth fund to much more than $100 billion, according to the head of the fund.

QIA's acquisitions are expected to focus on Europe. The sovereign wealth fund recently upped its stake in French oil and gas company Total SA (NYSE: TOT) to 3 percent.

QIA has made other French investments, in communications and media company Lagardere SCA (MMB: FR), raising its share to nearly 13 percent, and luxury goods group LVMH Louis Vuitton Moet Hennessy (MC: FR) to over 1 percent. Last year it acquired 70 percent of the capital of football club Paris Saint Germain.

Last week, QIA's investment arm acquired Smeralda Holding, which operates luxury resorts in Sardinia. In February the fund bought the London headquarters of Credit Suisse, of which it hold a 6 percent stake.

In some cases the merger and acquisition activity entails a European entity as buyer. Anglo-Swedish drug company AstraZeneca PLC (NYSE: AZN) said Monday it agreed to pay $1.26 billion for San Diego-based Ardea Biosciences Inc. (Nasdaq: RDEA). The deal, which is expected to close in the second or third quarter, calls for Ardea shareholders to get $32 per share.

Ardea's stock price closed Friday at $20.85 but was trading Monday morning at $31.57.  

Vodafone Group Plc., the world's largest wireless operator, agreed on Monday to acquire Cable & Wireless Worldwide Plc. in a $1.7 billion (1.04 billion pounds) deal that would add a fixed line network to its cell phone based business.

The purchase would give Vodafone the U.K.'s biggest fiber network dedicated to business, as well as an international cable network that spans the European continent and Asia.

The deal would offer 38 pence per share of London-based Cable & Wireless, but may be in jeopardy after the company's largest shareholder, Orbis, refused to approve the deal. The fund management company claims the offer undervalues CWW stock, despite offering a 92 percent premium on the previous day's closing price.

Vodafone estimates the deal would add $10.92 billion to its annual revenue.

The acquisition of Cable & Wireless Worldwide would create a leading integrated player in the enterprise segment of the UK communications market and could bring cost savings to our U.K. and international operations. We look forward to working with the management and employees of Cable & Wireless Worldwide to combine our expertise for the benefit of our customers and shareholders, said Vodafone CEO Vittorio Colao in a statement.

Vodafone shares in London closed down 48 cents to $275.79, while Cable & Wireless rose $7.15 to $58.70.

U.S. companies also are increasing mergers and acquisitions. San Diego-based diabetes drug maker Amylin Pharmaceuticals Inc. (Nasdaq: AMLN) is reportedly reaching out for a new buyer, and the news sent its stock price up over 10 percent Monday.

The company hired Credit Suisse and Goldman Sachs to assist in seeking a buyer, Reuters said. The company is being sued by Bristol-Myers Squibb Co. for rejecting a buyout offer earlier this year.

Earlier this month SXC Health Solutions agreed to buy Lisle, Ill.-based Catalyst Health Solutions for about $4.4 billion in cash and stock, creating one of the U.S.'s biggest independent drug benefits managers.

Deerfield, Ill.-based Beam Inc. (NYSE: BEAM) announced on Monday plans to acquire White Rock Distilleries' Pinnacle Vodka and Calico Jack brands, along with other assets in a $605 million deal that would expand the recently spun-off company's offerings.

Beam said the deal, which is expected to be completed in the company's second quarter, would affect the company's earnings in 2013, expecting it to add 5 to 10 cents per share.

Beam needs inroads into the vodka market. It already has a strong presence in the bourbon and whiskey market, with its Jim Beam and Maker's Mark brands. Privately-owned White Rock's Pinnacle Vodka is expected to move over 3 million cases this year.

Pinnacle is an excellent strategic fit for Beam, giving us a strong and exciting growth platform in the sweet-spot of the attractive vodka category, said Matt Shattock, president and chief executive officer of Beam, in a statement.

Shares in Beam Inc. were down $1.29 to $55.73 in afternoon trading.

Asian companies also are in play. Late last month India's Tech Mahindra Ltd. Announced plans to buy Satyam Computer Services Ltd. in a deal worth more than $1 billion. Also, Guthrie GTS Ltd. agreed to buy Heartland Retail Holdings Pte. Ltd., and Citizen Holdings Co. Ltd. announced plans to purchase Prothor Holding SA.

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