Wednesday, June 28, 2006

World Is Getting Smaller 2
M&A Deals Shaping Our World

Phelps Dodge - Inco - Xstrata - Falconbridge
Xstrata, the Swiss-based mining company who’s hopes to buy Falconbridge of Canada, began to fade when the copper miner Phelps Dodge agreed to acquire Falconbridge and its rival Canadian nickel producer Inco in a US$40 billion deal. Xstrata is not expected to abandon its pursuit of Falconbridge -– the Swiss company will emerge a winner either way, thanks to the premium it would receive on the 20 percent stake it holds in Falconbridge. By accepting Inco’s new offer, Xstrata will realize a profit of about US$2 billion on its Falconbridge investment, which it made last August. If it increases its bid for Falconbridge, then Inco and Phelps Dodge will probably counter it. BHP Billiton and Rio Tinto will have another heavyweight rival if the industry-transforming $US58 billion ($79 billion) merger between North American copper producer Phelps Dodge and nickel miners Inco and Falconbridge proceeds. The formation of a North American giant would rival the other two giants , BHP Billiton and Rio Tinto. This could lead to raids on other large miners such as Anglo American, Alcoa, Alcan or Teck Cominco. The Phelps Dodge deal points to the fact that it is more effective to be a buyer than a builder. BHP or Rio would probably stay away from the the North American battle, but many said their Anglo-Swiss rival, Xstrata, would attempt to thwart the giant deal. A BHP-Inco merger has been all but ruled out due to anti-trust concerns and while Rio is keen on adding a nickel division, its management team is regarded as too conservative to buy in at the top of the commodities cycle. And Phelps Dodge's copper assets are seen as too high-cost. .... What if the world's top 5 commodities are controlled by two or three companies .... hmmm... don't wonder, we are there already!

NYSE - Euronext - Tokyo Stock Exchange
The NYSE Group’s chief executive, John Thain, said he expects to have the agreement to purchase Euronext in front of the shareholders of both companies for a vote in the autumn and the merger closing in early 2007. Mr. Thain also repeated that he did not see anything in the modified rival offer from the Deutsche Borse to require the N.Y.S.E. to sweeten its deal with Euronext.
“We’re not going to change our proposal. We have a signed deal. We have a contractual deal with Euronext. So I expect us to move forward,” Mr. Thain told reporters. Last week, the Deutsche Boerse's supervisory board modified some structural details of its proposed offer, but left the financial terms of the bid unchanged. Thain said the deal makes sense and cited comments from Tokyo Stock Exchange head Taizo Nishimuro earlier this month that a merger between the NYSE and Euronext would create an attractive potential partner for the TSE. When asked if the combined NYSE-Euronext entity would be interested in future merger opportunities in Asia, Thain said it would be, but expects any partnerships to be a couple years down the road. This wave of consolidation would definitely force the proud but small Asia-Pacific bourses to start talks on "merging or combining their resources". As mentioned before, HKSE will never cede to Singapore Exchange. So, in all likelihood, a KLSE-SES tie up should be contemplated with a possible link up with Tokyo or Australia SE. These exchanges may have no choice but to link arms in order to survive.

Palm Wooing Research In Motion (RIM)
Gadget lovers love Palm. Research in Motion's got the lawsuits. Might this be a match made in heaven? A buzz is starting to build around the possibility that Palm and RIM might announce plans to merge soon. The two well-known mobile computing companies do complement each other. Palm has been searching for ways to connect with enterprise customers for years, finally agreeing to use Microsoft's Windows Mobile operating system on one of its Treo phones to improve its corporate chances. Office workers across the country have been dealing with management-by-BlackBerry for several years, but isn't a major player in the consumer market. But trade combinations that seem drawn from the fantasy sports world don't usually happen in the business arena. With a market capitalization of US$1.86 billion, Palm's an option for a company like RIM, which has a market cap of US$12.4 billion and more than US$700 million in cash. Earlier this year, a major investor in Palm wrote a letter to the company urging a sale to a larger company like RIM while Palm was still an attractive company. Freed from its legal battles with NTP over the patents to the BlackBerry technology, RIM might be looking to make a move, but it faces a fresh legal challenge from Visto, another wireless e-mail vendor. Buying Palm might be a way to reduce the legal battles as RIM could adopt and reinvent using Palm's technology to better its product. It will also act as a hedge should there be more legal battles on infringement on the BlackBerry.

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