This is could likely because P&G was happy to move on from the Diamond acquisition deal and pursue another one of its potential buyers. In fact, this week a new deal for Pringles was announced. Kellogg, a food giant most well-known for its Frosted Flakes cereal and Eggo Waffles, has announced its desire to acquire Pringles in a $2.7 billion deal. This is a much more favorable deal for P&G as the acquisition price with Diamond was only $1.5 billion.
]]> Kellogg currently owns Cheez-It and Keebler's Club crackers. It is hoping that with the addition of Pringles it will expand is salty snack portfolio. Kellogg believes that there is a strong and healthy market for such snacks and that packaged foods will continue to increase in popularity, because of the fast-paced lifestyles of many people who simply do not have the time to prepare foods themselves.Kellogg also hopes to expand into a more international marketplace with the acquisition of Pringles, as the popular brand is already sold in more than 140 countries and earns a majority of its revenue internationally.
It is expected that the sale will be completed sometime during the summer. Hopefully for P&G this new deal for Pringles will not fall through like it did with Diamond. But if it does, maybe there will be another potential suitor ready to snatch it up.
Source: The Palm Beach Post, "With Pringles, Kellogg looks to expand overseas," Michelle Chapman, Feb. 15, 2012
]]>It is expected that Amazon.com will announce a joint venture with Viacom Inc. to increase its Web video portfolio. Viacom owns TV shows and movies from MTV networks, Nickelodeon and Paramount Studios, and Amazon hopes to expand its video options by partnering with Viacom.
]]> Viacom is the latest in a long list of major studios who have agreed to allow Amazon to license its programming. These include:Prime Instant Video is already available for Amazon Prime members. However, Amazon is hoping to expand this service to non-Prime members.
Amazon also hopes that expanding its available video resources will help with sales of its tablet, the Kindle Fire. Amazon sold approximately five million of its Kindle Fire in its fourth quarter, and its video streaming option was very popular during that time period. With an even wider array of shows, movies and apps, it is hoping that even more consumers will want to purchase its tablet.
Amazon is not the only company hoping to compete in the video streaming market. Verizon Communications is also planning to team up with Coinstar Inc.'s Redbox to launch a video streaming service. In addition, it has also been reported that Google Inc. hopes to get in on the action as well. So it looks like Netflix will have some competition in the near future.
Source: Reuters, "Amazon and Viacom close to Web video deal," Yinka Adegoke, Feb. 7, 2012
]]>If the deal goes through, it will be for $1.5 billion and P&G shareholders would own a majority of Diamond's stock.
]]> However, with the recent news that Diamond has misrepresented earnings for the past two years due to an accounting discrepancy, its stock dropped in value significantly. In addition, Diamond has placed its CEO and CFO on leave because of this recent news.P&G was anxiously awaiting the outcome from the recent investigation into Diamond's accounting procedures. P&G was obviously hoping for a more favorable outcome of the probe into Diamond's accounts.
With these disappointing results, P&G is considering its next step, and whether they should continue with the purchase and sale agreement with Diamond, or if they should work towards rescinding the contract. P&G has had interest from other potential buyers, so selling this valuable asset is not the concern. P&G would like to walk away from the purchase and sale agreement it entered into with Diamond so that it can be assured of receiving the full value for Pringles from another buyer. However, the concern is whether Diamond will agree to such an exit, or whether Diamond will hold P&G to the contract.
Source: Bloomberg, "P&G to Terminate Pringles Sale to Diamond," Jeffrey McCracken and Lauren Coleman-Lochner, Feb. 9, 2012
]]>Now, it is up to the SEC to decide whether such language will undermine shareholders' rights. If the SEC allows the offering to go public, it would set an extraordinary precedent, encouraging more companies to follow their lead while placing shareholders at risk. This is because arbitration proceedings generally allow less discovery for plaintiffs, and once a decision is made, there are limited opportunities to appeal those decisions.
]]> The long-standing rule by the SEC is that businesses are not allowed to go public if their governing documents limit the ability of shareholders to protect their rights. Carlyle's arbitration requirement would leave millions of investors at risk if their ability to enforce their rights through class-action lawsuits is limited. Class-action lawsuits by investors have, in fact, been successful in holding corporate executives accountable for their actions.If the SEC blocks the stock sale, then it is possible that Carlyle will take its case to the Supreme Court, which may disagree with this long-standing SEC ruling. The high court appears to favor arbitration methods for resolving disputes. This may be because arbitration requirements reduce the cost of litigation for all involved, including shareholders. The court may reason that since shareholders generally collect very small amounts from class-action lawsuits, shareholders may actually be better off with an arbitration system.
It is important to note that Carlyle is a limited partnership, and as such it has more flexibility than a regular corporation in the restriction of its fiduciary duties to shareholders, making such a restriction on class-action lawsuits a possibility.
It should also be noted that, if Carlyle succeeds in restricting its shareholders' ability to file suit, that move will not come without a price tag. The move should affect the price that potential shareholders are willing to pay for such stock. Is this a risk worth taking from a business standpoint? Apparently, Carlyle believes it is.
Source: Bloomberg, "Carlyle Curbing Shareholder Rights Irritates Lawmakers Who See Precedent," Miles Weiss, Jan. 25, 2012
]]>Delta Air Lines Inc. currently ranks second in terms of total airline traffic, and it appears that the industry giant wants to compete for first place. In 2008, Delta acquired Northwest Airlines, which significantly increased its operation.
Now, Delta, along with its financial advisors, is considering its options concerning the acquisition of yet another airline. By acquiring another airline, Delta would further consolidate the airline industry and arguably eliminate some of its competition.
]]> Among its options, Delta is rumored to be considering the acquisition of the parent of AA, AMR Corp., currently the third-ranked airline. Delta is also considering US Airways Group as another possible acquisition target.At the same time, US Airways could also become involved in a possible merger with AMR. If that were to transpire, the combination could give Delta a run for its money. Currently, US Airways is operating in the fifth spot in terms of total airline traffic. Combining its business with AA would certainly help it to compete with Delta.
On the other hand, US Airways is also apparently willing to work with Delta and is not opposed to being acquired by its industry rival.
Though these possibilities are only in the planning stages, it appears that these three major airlines are looking to perhaps change the landscape of the airline industry yet again.
Source: The Wall Street Journal, "Delta Weighs a US Air Deal," Gina Chon, Anupreeta Das and Susan Carey, Jan. 28, 2012
]]>The 90-year-old company originally went public in 1946 and its shares are traded on the New York Stock Exchange. Pep Boys recently agreed to an acquisition by a private investment firm, The Gores Group. This acquisition agreement comes after a seven-year long search for a buyer for the company, during which time it has underperformed. In fact, its stock price has dropped about 25 percent during the past ten years.
]]> The company's underperformance has been disappointing for shareholders and management alike. Because of the economic downturn, consumers have been less likely to purchase new cars, but instead have been more willing to repair the cars they own. In fact, the average age of cars and trucks continues to rise, and was 10.8 years in 2011, a record-setting number. In general, this trend has translated into increased sales and income for auto parts stores. Despite this reality, Pep Boys has consistently struggled for some time, unlike its competitors.The agreed upon acquisition price is approximately $791 million. This amounts to $15 per share for the 53 million outstanding shares. This amount represents a 24 percent premium on its stock closing price as of last Friday. The news of the acquisition resulted in another 24 percent increase in its price per share.
During the next 45 days Pep Boys still has the option to accept a better acquisition offer from another investor. After that time period lapses, the deal will move forward as there is no financing contingency and The Gores Group has already secured financing. In the meantime, Pep Boys' board of directors has unanimously approved the acquisition. A vote must also go before the company's shareholders in order to approve the acquisition deal.
Source: stltoday.com, "Pep Boys agrees to be acquired for about $791M," Jan. 30, 2012
]]>Both Apple and Google have approached Dropbox's owner and inventor about the purchase of his company. However, for now he has declined those offers because his vision is more than simply about a purchase and sale for his hard work. Instead of being acquired by Google or Apple, the inventor behind Dropbox hopes to compete with them.
]]> As part of the company's business planning it will have to take into account the fierce competition it will face from the high-tech world. Currently, the service is free for a certain amount of storage, which may be why it has become so popular so quickly. Even still, it is estimated that the value of Dropbox is $4 billion.Certainly, Dropbox will need to stay ahead of Microsoft and other similar competitors that are ready to take over this market if they could. Innovation and strategic planning may be the key to success for Dropbox.
The owner of Dropbox is hoping to do just that. He has big dreams of making Dropbox into the Internet's file system so that Dropbox will be the way that everyone shares files, listens to music or shares photos.
So what does the future hold for Dropbox? Only time will tell, but in the meantime, this California start-up will be facing lots of important business decisions in the coming year.
Source: Los Angeles Times, "Dropbox inventor determined to build the next Apple or Google," Jessica Guynn, Jan. 15, 2012
]]>Facebook holds its user's information and has translated that into an invaluable resource for advertisers. Currently, it is unknown how much money Facebook actually makes, but it is suspected that the California-based company earned $4.2 billion in 2011. Once the prospectus becomes public, Facebook's financial information will be detailed for the public to see.
]]> Some analysts speculate that Facebook's IPO would be the largest IPO of the decade because of the excitement that has already been generated. A Facebook IPO may be just what the stock market needs to get those investors who have been concerned over volatility back into the stock market with what is generally believed at this point to be a very strong and wise investment.In addition, the state of California is hoping to alleviate its budget problems with revenue that would be generated by the IPO in terms of capital gains taxes that can be earned from the transaction.
As part of the sale of stock to shareholders, Facebook would raise $10 billion. It is further expected that on opening day, the share price of Facebook will skyrocket. So what does Facebook plan to do with the money it earns by selling stock to investors? Apparently, it hopes to wage a competition against Google and Apple for domination of the Internet.
The IPO can be expected approximately three months after the papers are filed with the SEC. The owner and inventor of Facebook believes that an IPO makes sense as the company continues to expand. It is expected that he will retain control over the company through the use of a dual-class stock system.
Source: Los Angeles Times, "Wall Street clicks 'like' on Facebook IPO," Jessica Guynn and Walter Hamilton, Jan. 26, 2012
]]>Specifically, the lawsuit alleges that Netflix made misleading statements about its business practices and license agreements so that its share price would be maintained at an artificially high price.
]]> In fact, in July of 2011, Netflix shares did hit an all-time high of nearly $300 per share. During that same time period certain officers and directors also sold off hundreds of thousands of shares for almost $100 million.At issue is whether management knew that the company's short-term content license agreements were about to expire and whether this information should have been disclosed to the public. Once these licenses expired, it became necessary for Netflix to increase Netflix's subscriber prices.
The lawsuit claims that management knew that disclosing this information would result in a drop in the value of Netflix stock, so they decided to sell off a large portion of their stake in Netflix before the price increase and corresponding drop in share prices. The price of Netflix shares plummeted by more than 75 percent in the fall of 2011, after the necessary price increase went into effect.
The focus of this shareholder rights lawsuit is whether the Netflix executives breached their fiduciary duties and injured their shareholders as a result. It is also unclear whether insider trading charges will arise out of the facts of this lawsuit.
Source: Home Media Magazine, "Class-action Lawsuit Filed Against Netflix," Erik Gruenwedel, Jan. 16, 2012
]]>Apparently, Anobit was seeking a much larger sum for its acquisition - more in the range of $500 million. The international negotiations, however, resulted in the much lower acquisition price that Apple will have to pay in the deal. Apple is not disclosing the details of the transaction, and failed to discuss the purpose or the plans for this relatively small technology company.
]]> Because Apple buys the most amount of flash memory worldwide, what is clear is that with this acquisition, Apple has secured a key component for the iPhone and the iPad.Interestingly, this is the first time the California company has made an acquisition in Israel, even though other rival tech firms have already established business operations in Israel.
Also of interest is that Israel actually has the second largest number of startups per capita in the world, along with the most companies traded on the Nasdaq Stock Market outside of North America, second only to China.
This relatively smaller acquisition is in line with Apple's previous approach of making strategic acquisitions of smaller privately-held companies. With these types of transactions Apple is able to get exactly what it wants, whether it be key employees or a certain technology, both of which are expected to blend into Apple's business model, rather than as an expansion into a new area.
Source: Bloomberg, "Apple Said to Acquire Israel's Anobit Technologies for About $390 Million," Shoshanna Solomon and Jonathan Ferziger, Jan. 11, 2012
]]>Now, Bristol-Myers has recently agreed to purchase Inhibitex Inc., for approximately $2.5 billion in cash. Inhibitex is the second maker of hepatitis C drugs acquired in the past two months.
]]> According to the terms of the deal, shareholders will receive about $26 per share. This premium represents around 126 percent of its trading price over the past 20 days, the second largest premium paid on record for a business acquisition of this size.So why was Bristol-Myers willing to pay such a high price for this drug company? Apparently, Bristol-Myers was willing to pay such a high premium because of the recent acquisition of another hepatitis C drug company by California-based Gilead Sciences Inc., which we discussed in a November post. Bristol-Myers is now hoping that it will be able to compete in what is predicted to be a $20 billion market for these types of drugs.
Hepatitis C is a deadly virus transmitted by exposure to infected blood that is carried by as many as 170 million people worldwide. More than 350,000 of those infected will die from complications related to the hepatitis C virus. The newer versions of drugs that are being developed by these two pharmaceutical companies are hoping to be better able to cure the virus, but with fewer side effects than the drugs that are currently on the market.
Source: Bloomberg Businessweek, "Bristol Buys Inhibitex for $2.5 Billion to Compete in Hepatitis," Jan. 8, 2012
]]>According to chain-venue principles, which Panda Express followed in maximizing profits for its food outlets, standardizing products and services creates consistency and dependability. The San Gabriel Valley entrepreneurs who utilized that principle for Panda Express now hope to tap into a market that is known for anything but its consistency: Dry cleaning.
]]> Typically, the dry cleaning industry is fairly localized. In fact, 90 percent of the nation's 39,000 dry cleaning operators have only one facility. This means that consumers can only feel sure of the services at their particular dry cleaner, because quality and service can vary greatly even among different locations operated under the same name. This also tends to leave consumers with very little understanding of acceptable business practices in the industry, including those relating to quality and price.With Panda Express's new venture Panda Dry Cleaning, it hopes to create a dominant national brand -- Tide Dry Cleaners -- and give a fresh look to the dry cleaning business nationwide. They currently plan to open as many as 200 new stores across the nation in the next five years. The first franchised storefront for Panda Tide Dry Cleaners recently opened in Henderson, Nevada, although a large number of the new stores are expected to open in California.
With a new business model, they hope to elevate the industry by through chain-value standardization and by improving the physical environment, eliminating routine errors with garment care and employing better stain removal techniques.
Will this Asian food company become the next McDonalds of dry cleaning? They certainly believe that there is untapped opportunity here for doing so.
Source: Los Angeles Times, "Panda Express owners to move from fast food to dry cleaning," Tiffany Hsu, Dec. 28, 2011
]]>San Diego mergers and acquisitions attorneys note from news reports that Alexion, which is best-known for developing a treatment for a rare blood disease, will pay Enobia $610 million in up-front cash. The remaining $470 million will be withheld and paid out after Enobia achieves various regulatory and sales goals prior to completing the acquisition.
]]> The deal is expected to be finalized sometime in the first quarter of 2012.Enobia currently owns a treatment for a rare condition called hypophosphatasia, which is marked by severe muscle weakness, organ damage and bone deformities. It is about halfway through the regulatory trail period required prior to gaining approval for use in the United States. It would be the first-such treatment for the disease.
Alexion is buying Enobia with the expectation that the drug will perform well in test trials and be cleared for sale in the near future.
Alexion is paying for the deal with available cash as well as about $300 million in bank debt. According to Bloomberg, the company had $445 million in cash as of September 30.
Over the past year, Alexion's share values have increased 76 percent. Just before the deal was announced, the company's shares experienced a negligible decline of less than one percent.
Source: Bloomberg Businessweek "Alexion to Pay as Much as $1.08 Billion to Buy Enobia Pharma" Dec. 29, 2011
]]>The most recent merger is that of Encino-based California United Bank with Anaheim-based Premier Commercial Bancorp. This merger is expected to be worth $38.1 million according to the Orange County Register. The merger was approved by both banks' boards and is California United Bank's most recent takeover since it acquired California Oaks State Bank last December.
]]> "Premier Commercial Bank has a history of strong credit quality and a tradition of relationship banking which will combine well with California United Bank's commitment to these same values," said California United Bank President and CEO David Rainer. Premier was founded in 2001 primarily as a bank that was committed to small-business lending.The new bank from the California United Bank and Premier merger will have about $1 billion in deposits, $772 million in loans and $1.2 billion in assets. Regulatory approval is still pending and the deal is expected to close in Q2, 2012.
"The capabilities of a larger institution will enable us to better penetrate our markets and expand our menu of services," said Kenneth Cosgrove, chairman and CEO of Premier. "California United Bank has built a strong franchise and we look forward to being a part of its future. I am pleased to be continuing on the Board of Directors of the combined company after the merger."
Source: Orange County Register, "O.C. bank sold for $38.1 million," Jan Norman, Dec. 9, 2011
]]>