Santa bringing lots of M&A goodies in his sleigh
A flurry of mergers and acquisition announcements made the Yuletide bright, at least for some. While some get a full Christmas stocking, others will get pink slips as the operations they work at get consolidated. After all, someone has to pay for the price of financing the deal. Here's a sample of the latest announcements,
Henkel buys more
German-based Henkel, which just announced an acquisition of Dial, now will acquire another US personal care company. The target company is California-based Advanced Research Laboratories, which sells hair care and hair styling products. The acquisition, along with the Dial move, will make Henkel the #3 hair care products company in the US. Dial is the maker of Breck shampoos.
As with the Dial deal, Henkel is desperate to build its position in North America and in specific market segments, to keep afloat against its top rivals. The Advanced Research Laboratories deal gives it premium products in the haircare segment, to complement a solid line of commercial products.
Peabody gets more coal in its stocking
Peabody Coal, the world's and the US's largest coal company, announced the purchase of several Australian coal mines from German firm RAG. Peabody also announced a preliminary agreement in buys mines in Colorado and Venezuela from RAG. RAG is in the process of selling all its foreign mines, while Peabody keeps following an aggressive course of expansion. The big keep getting bigger.
Drug store buyout
Duane Reade, one of the largest regional drug store companies
was purchased by an investment group, Oak Hill Capital Partners. According to analysts, this makes the sell-off of Eckerd Drugs; the #4 US drug store chain, all the more likely. Retailer J.C. Penney has announces that it is eager to get rid of the drug chain. According to a Reuters report (12/23/20003), "The Duane Reade leveraged buyout 'increases the probability of an Eckerd sale to 85 percent or more from 75 percent or more, as it indicates that financial buyers are currently on the prowl for drug chains,' said Merrill Lynch retail analysts in a report issued today." Like other retail chains, drug stores are desperately looking for ways to ward off Wal-Mart, so expect further consolidation.
Insurance merger
US insurer St. Paul Companies got a Federal go-ahead on acquiring Travelers Property Casualty Corp., a larger rival. The new company will become the #2 commercial property insurer in the US, second only to AIG. According to St. Paul executives, it will be the market leader in 22 states, #2 in 13 states and #3 in eight states. Travelers Property Casualty Corp. was spun off from the world's #1 financial corporation, Citigroup, in 2002. The St. Paul Companies is a 150-year-old firm, which also has services like asset management and specialty insurance. Both companies also have some international operations.
This $16 billion deal is the second largest insurance merger of the year, after the WellPoint/Anthem merger and the sixth largest ever.
Stalin turns over in his grave
Here's an acquisition that signals the change in the Russian and US economies. Up till now, it has been Western, and US, companies that bought into or partnered with Russian natural resource companies. Now Russian steelmaker Severstal has just bought bankrupt Rouge Industries of Dearborn, Michigan. That's the holding company for Rouge Steel, which is a major producer of rolled steel for the US auto industry. Severstal, the #2 Russian steelmaker, also specializes in rolled steel.
Rouge has a long history. It was started in 1923 as part of the Ford Motor Company, then later spun off. Along with the takeover of Chrysler by Daimler Benz and the rise of Toyota, it's an indication that the core American automotive industry is in the midst of a big multinational change.
Severstal won out in an auction against a number of US-based steelmaking companies, including US #1 US Steel. Severstal is planning for more expansion, according to a Wall Street Journal article ("Russia's Severstal Hopes to Revive Flagging Rouge," 12/24/2003)
"Severstal also is bidding on a steel mill being privatized in Hungary, and the officials said they'd be interested in buying a Ukrainian plant now being considered for privatization if the terms are acceptable.
The officials said the company wants to be a participant in what they said will be an increasing consolidation in the global steel industry, buying up operations in key consumer markets, like Rouge in the U.S., and building production capacity in low-cost countries like Russia."
The company plans to invest $100 to $200 million in the Dearborn plant to modernize it. Think of that -- a Russian company modernizing an American one. Such are the paradoxes of the new globalism.
