Bidding wars
Of late, we've seen a spike in bidding wars for mergers and acquisitions. Obviously, the negotiating process always involves playing one possible buyers against the other to get the best offer possible. It also involves refusing the first offered price, as happened with the Albertson's supermarket chain, where an initial bid of $9.5 billion was loudly and publicly refused, only to be followed xx months later by a successful $9.7 billion dollar bid, plus an acquisition of inventory and debt for a total of over $17 billion.
No, what seems to be happening more and more is that the management of Company A will accept the buyout bid from Company B and announce it as a virtually done deal. Then follows either buyer's or (more likely) seller's remorse, and a bid from Company C is "accepted." Then Company B outbids Company C, and so for several rounds until one makes an offer the other is unwilling to top. What's interesting is how all this is played out in public, with headlines in the business press and the stock market prices of all three companies yo-yoing up and down in response.
The Guidant-Johnson & Johnson-Boston Scientific is a good example. For over a year, the deals were on and off, as the melodrama was played out among the three companies. The twists and turns of the plot made for a great spectator sport with all kinds of random effects on the market value of the companies involved. Even a higher bid did not guarantee success, until Boston Scientific sweetened it even more. We believe the play is over, but who knows.
A similar process took place in the battle for Canadian steelmaker Dofasco, where alternate bids from Arcelor and ThyssenKrupp seemed to be accepted by the company, then tossed aside when a higher bid came in. Each bid made headlines and seemed to clinch the deal. Arcelor finally won at a price that had gone from around $3.6 to $4.8 billion.
Now comes the new twist in the plot. Mittal Steel, the #1 steel company in the world, made a hostile bid for #2 Arcelor right after the Dofasco bidding stopped. As part of its plan, Mittal has announced it would sell off Dofasco to - guess who? - ThyssenKrupp. There are serious doubts Mittal can pull off the merger, due to EU antitrust concerns, but the surprise announcement certainly grabbed headlines and will keep the steel sector of the stock market in flux.
Yet another such bidding war brewing with the sale of British port management and ferry company P & O. We reported that the company had agreed to be bought out by Dubai Ports in a $5.8 bid. The deal seemed closed. Now a second bidder has stepped in, Singapore-based PSA International and upped the ante to $6.25 billion.
PSA International, owned by Singapore's state-run investment company Temasek, is the #2 port management company in world, and the takeover would make it #1, (Dubai Port is #7). Now Dubai has sweetened its deal to around $6.9 billion. The bidding war had just begun, most experts agree.
11:32:28 AM 
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