Monday, November 20, 2006

$70 Billion Merger Monday

Investment bankers have plenty to be thankful for in this holiday-shortened week, which began with several megadeal announcements with a combined value of more than $70 billion. There was the Blackstone Group’s record-breaking agreement to buy Equity Office Properties Trust, the nation’s largest office-building owner and manager, for about $36 billion in cash and debt. That deal, announced Sunday night, ranks as the largest leveraged buyout in history, surpassing the $33 billion buyout earlier this year of hospital chain H.C.A.
In a research note published Monday, Sri Nagarajan of RBC Capital Markets called Blackstone’s offer “attractive” for Equity Office’s shareholders and said he thought competing bids were unlikely. By targeting Equity Office, Blackstone is probably betting that it can further reduce corporate overhead at the company and profit from a rise in office rents in late 2007 or early 2008, Mr. Nagarajan wrote.
Also on Sunday, mining giant Phelps Dodgesaid it would be acquired by smaller competitor Freeport-McMoRan Copper and Gold in a cash and stock deal worth $25.9 billion. Earlier this year, Phelps Dodge unsuccessfully tried to arrange a three-way transaction with two Canadian miners.
John Tumazos of Prudential Equity Group suggested Monday that Freeport-McMoRan is getting a bargain in the proposed transaction, which calls for each Phelps Dodge’s share to be swapped for $88 in cash plus 0.67 of a Freeport-McMoRan share. Mr. Tumazos wrote in a research note Monday that the offer is “not the full or maximum value that [Phelps Dodge] could obtain,” even though it represents a 33 premium over Phelps Dodge’s closing price on Friday.
Early Monday, Nasdaq unveiled a $5.1 billion offer for the London Stock Exchange, marking its second attempt to buy Europe’s largest stock market. And Charles Schwab said Monday morning it would sell its U.S. Trust wealth-management unit to Bank of America for $3.3 billion in cash.

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