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— Arbitrage —
Ongoing concerns about the financial condition of leading U.S. banks and the near-term results of the current phase of the evolving bailout continue to dog arbitrage spreads on what few large deals remain in the deal pool. So even deals with committed, fully negotiated and syndicated debt for mergers without financing conditions trade at wide risk premiums. NDS Group plc |NNDS Deal value $3.68 billion Spread 01/20/09 $4.95, or 8.5% Expected close 02/04/09 Annualized return 207% Shareholders of NDS Group plc, including majority owner News Corp., approved the $3.68 billion buyout of the company by News Corp. and Permira Advisers LLP, so the deal now needs only a sanction from a U.K. court.
NDS develops set-top box technologies for access and interactivity in digital satellite and cable broadcasting. News Corp. controls NDS through supervoting B shares and has a 74% economic interest. The buyout with Permira, announced in August, eliminates the company's dual class structure and reduces News Corp.'s stake to 49%, with Permira owning 51% of NDS. The deal allows News Corp. to monetize some of its holding in the company in a tax-efficient manner. With the shareholder vote, News Corp. reiterated its support for the deal on Jan. 13. The English High Court must approve it at two hearings, the first on Tuesday, the second Feb. 4. The rulings are fairly routine, particularly when the transaction has broad shareholder support. The buyout hinges on NDS having $724.9 million in cash from internally generated funds at the close. The proxy states that NDS has made arrangements to meet that obligation. The deal does not fall under the jurisdiction of the U.K.'s Panel on Takeovers and Mergers because management and control of NDS is considered to fall outside the U.K., but parties to the merger agreed to abide by U.K. takeover rules. That should make the financing of the deal more secure. Permira has said the transaction is proceeding well to a February close. Rohm and Haas Co. |ROH Deal value $15.2 billion Spread 01/20/09 $20, or 34.5% Rohm and Haas Co. said last week it would cut more jobs to address deteriorating market conditions, but it expects fourth-quarter earnings to exceed current analyst estimates. Dow Chemical Co. is acquiring the chemical company and it vetted the restructuring, which builds on cuts announced in June before the deal was signed. This merger was racked by Dow's failed joint venture with the Kuwait state Petrochemical Industries Co., which would have provided it with $9 billion to refinance bridge debt. The merger agreement, however, is not conditioned on financing and only allows Dow an out through a termination fee if the antitrust review drags out to October, which would seem a blatant breach of the contract. The Federal Trade Commission must still clear the deal but is expected to do so any day, after which Dow has two business days to close the merger. Roughly 32% of Rohm and Haas is in the hands of Haas family trusts, so any showdown over the timing of the deal's close or a price cut may come down to the comfort the Haas trustees have with their merger contract. |
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