Dealscape

Shapiro urges strategic review for Sparton

2008-08-28T20:00:11Z

Hedge fund manager Andrew Shapiro of Lawndale Capital Management LLC has escalated his activism campaign at electronic manufacturing services company Sparton Corp.--again. SEC filing disclosing a letter to Sparton's board that formally recommended four independent turnaround professionals for Sparton's nominating committee to add to Sparton's staggered 10-person board. At the same time, Shaprio gave the board notice of his alternative intent to elect them directly through a proxy contest, if necessary.

In addition to his nominees, Shapiro pressed Sparton to hire experienced turnaround management from outside Sparton and consider strategic options, such as a sale. The annual meeting date has not been set but is expected to be held the week of Oct. 20.

In March, Sparton announced that its CEO, David Hockenbrocht, was resigning from the firm, to be replaced by an interim executive, former Sparton CFO Richard Langley. This was good news for Shapiro who had been complaining about Hockenbrocht's management of the business for several years.

"The truth is that fiscal 2007 was not an isolated event, it was just worse than usual," Shapiro wrote in an October filing with the Securities and Exchange Commission. "Clearly Mr. Hockenbrocht and this board are out of touch. Shareholders have suffered long enough."

Shapiro also has argued that management had been mismanaging company capital in a self-serving manner. Shapiro said in a Jan. 11 SEC filing that the company was mishandling its defined benefit pension plan by maintaining an excessive amount of company stock in it and using those shares to entrench senior managers in the face of his insurgency. Additionally, in that filing, Shapiro argued that management had been misallocating the company's stock buyback plan, supporting insiders' option share sales inappropriately. To resolve these problems, Shapiro requested a series of governance changes including having the company conduct a full independent investigation of possible Erisa and fiduciary duty violations. - Ron Orol

See Dealscape: Lawndale wins another Sparton battle
See Dealscape: Shapiro winning Sparton battle
See Dealscape: Shapiro escalates battle with Sparton
]]>

Report: More job cuts at Lehman

2008-08-28T19:00:00Z

Beleaguered investment bank Lehman Brothers Holdings Inc. is reportedly bracing for a new wave of layoffs. According to a New York Times item Thursday, citing someone briefed on the plans, the investment bank will distribute as many as 1,500 pink slips, trimming its workforce by 6%. Lehman shares were up 4.33% to $15.42 by 2:30 p.m.

]]>
According to a Financial Times report Wednesday, buyout shops Kohlberg Kravis Roberts & Co., Hellman & Friedman LLC and Bain Capital LLC made bids for the bank's asset management arm, which includes money manager Neuberger Berman LLC, though Lehman may be reluctant to part with it. Another option is a deal for its commercial real estate portfolio, which the FT said last week was valued at nearly $40 billion. Bloomberg then reported Wednesday that Lehman is considering organizing a company to acquire depreciating mortgage assets tied to commercial real estate. Reports last week indicated Lehman had tried and failed to sell a stake to Asian investors. -- Carolyn Murphy

See story from the New York Times
See Dealscape: PE firms close in on Lehman's asset management unit
See Dealscape: Report: Lehman may create buyer for mortgage assets

In Whole Foods trial, FTC aims to keep ALJ moving

2008-08-28T16:30:39Z

The Federal Trade Commission is trying a new tack in its attempt to blow up Whole Foods Market Inc.'s year-old $700 million acquisition of Wild Oats Markets Inc.
To some degree that would probably please Whole Foods' legal team, lead by Paul Denis at Dechert LLP. Denis's team on Aug. 22 filed a request for Rosch to recuse himself as ALJ. The unorthodox notion of appointing a sitting commissioner to act as ALJ was set up for the FTC's recent case against a northern Virginia hospital merger but the parties canceled the deal before that proceeding got underway.

The purpose of Rosch setting the trial schedule would be to make sure the Whole Foods case proceeds at a rapid clip. But it's not clear how much leeway the ALJ would have to adjust Rosch's schedule or whether the judge would feel bound to abide by it anyway. Additionally, a final decision could bog down even if the ALJ sticks to Rosch's timetable. Even though FTC rules ostensibly require the ALJ to file an opinion within a set time period, the judge can claim extension for extra time to complete writing, without seeking approval from the commission.

Meanwhile, a parallel proceeding regarding the Whole Foods case continues in federal appeals court. The FTC is waiting to hear whether it will be asked to file a reply to Whole Foods' request for a rehearing by the entire circuit court. Whole Foods lawyers Tuesday asked the U.S. Court of Appeals for the District of Columbia Circuit to review the July 29 decision by a three-judge panel of the circuit court. Their ruling encouraged the FTC to jumpstart its in-house case. The FTC doesn't automatically get to reply; the agency has to wait for an invitation from the appeals court. A request for a reply, however, would likely be evidence that the appeals court is seriously considering a rehearing, which the FTC would surely oppose. -- Cecile Kohrs Lindell

See Aug. 27 story on TheDeal.com
See Aug. 25 story on TheDeal.com
]]>

Delistings, IPO dearth take toll on U.S. exchanges

2008-08-28T16:12:00Z

U.S stock exchanges are feeling the wrath of the financial crisis as a dearth of initial public offerings and a spike in delistings cut into revenue. ]]> Reuters. And with nary an initial public offering in sight, and listing fees making up 15% of their total revenue, the exchanges are feeling the pain.

Nasdaq has pushed out 54 companies to date this year, compared with 48 for all of 2007. Larger rival NYSE's data shows that 11 companies had been delisted due to noncompliance as of July 1. That compares to 21 delistings in all of last year and 14 in 2006, the news service said. -- Donna Block

See Reuters item

FGIC deal sends MBIA shares up

2008-08-28T16:07:00Z

Once again, the market breathed a sigh of relief Thursday as two major bond insurers improved their shaky financial position. Leading bond insurer MBIA Inc., which recently lost its AAA credit rating, agreed to reinsure $184 billion in municipal bonds for Financial Guaranty Insurance Co., the companies said in separate statements Wednesday. ]]>
It was a smidgen of good news for MBIA after the insurer's stock has lost about 80% of its value in the past year due to the lingering credit turmoil. The problem has mainly been that the company diversified from its core business of backing municipal bonds to guaranteeing collateralized debt obligations, which plunged in value during the subprime mortgage crisis.

MBIA climbed 18.4% to $14.18 in early trading.

The deal was brokered by New York State Insurance Superintendent Eric Dinallo, who has been working this year to ensure that the bond insurers survive the current turbulence.

Having lost $706 million in the first half of 2008, MBIA now has a credit rating of A2 at Moody's Investors Service and AA at Standard & Poor's. S&P affirmed MBIA's rating on Aug. 15 and said bond insurers are making moves to improve their business. - Peter Moreira

See Bloomberg story on MBIA-FGIC
See Reuters story on the deal
See TheDeal.com story on Warburg's loss on MBIA

Private equity malaise spreads to Europe

2008-08-28T16:00:00Z

As continental European banks struggle with the credit crunch alongside the U.K. and the U.S., their appetite for funding leveraged buyouts has dried up just as fast.

According to data from Nottingham University's Centre for Management Buyout Research, the buyout market in continental Western Europe and Ireland has fallen to its lowest level since 2004, reaching €22.7 billion ($33.37 billion) in the first six months of 2008, down 64.2% from €63.4 billion in the same period last year, while the number of buyout deals has fallen 19% from 401 to 325 in the same period. What's more, average deal size is just €70 million, well down on the €133 million average in January-December 2007.
]]> According to Christiian Marriott, a director of Barclays Private Equity, which co-sponsors CMBOR together with Deloitte, the figures confirm that what activity there is tends to be in the midmarket, with 41% of deals from family firms.

"With debt still difficult to find on larger deals and many potential buyers and sellers unwilling to blink until economic conditions improve, there's a sense of stalemate across the European market," he said, in a statement.

The number of exits, meanwhile, is down from 154 in the first half of 2007 to 89 this year.

By comparison, the U.K. had 312 buyout deals worth a combined €15.6 billion ($22.9 billion) from January through June, compared with 669 deals worth €67.3 billion in the whole of 2007 - and the average deal size halved to €50.1 million. - Jonathan Braude

Bankruptcy Update: AHM, SemGroup, SouthEast Waffles and more

2008-08-28T12:46:53Z

See TheDeal.com's bankruptcy channel or visit Bankruptcy Insider for more of The Deal's coverage of the latest bankruptcy news.
]]> AHM cleared to sell mortgage loans
Bankrupt American Home Mortgage Investment Corp. has won court approval to sell 243 mortgage loans to Vantium Capital Markets LP. According to debtor counsel Sean Beach of Young, Conaway, Stargatt & Taylor LLP, the total purchase price was more than $19 million. -- Jamie Mason

Mrs. Fields wins use of cash
Mrs. Fields Famous Brands LLC has taken the first step toward what could amount to a quick restructuring with a few key court rulings, including winning interim approval to finance its operations with cash collateral and having a date set for a combined confirmation hearing on its prepackaged reorganization plan. -- Ben Fidler

SemGroup keeps financial adviser
Despite objections from creditors, Blackstone Group LP will serve as financial adviser and investment banker to SemGroup LP in the oil storage and trading company's bankruptcy case. -- John Blakeley

SouthEast Waffles wins cash use
After being cooked by accounting irregularities, SouthEast Waffles LLC is looking to a Tennessee bankruptcy court to help iron out its problems. The company, which runs 113 Waffle House restaurants in the Southeast, has been operating under the shield of the automatic stay ever since Aug. 25, when it filed for Chapter 11. -- B.F.

See TheDeal.com's bankruptcy channel or visit Bankruptcy Insider for more of The Deal's coverage of the latest bankruptcy news.

Natixis rights issue in jeopardy

2008-08-28T12:35:40Z

Natixis SA's plans to raise €3.7 billion ($5.4 billion) by selling new shares suffered a setback Thursday, when its stock slumped 9% after it revealed a larger-than-expected second-quarter loss. ]]>
Shareholders in Natixis are due to meet Friday to vote on the share sale, which the bank's board says is needed to boost reserves. French daily La Tribune reported that the bank would discount the shares in its capital increase by 35% to 40%. Some shareholders have opposed the deal. See the full story on TheDeal.com for details on which shareholders are against the offering, and what they suggest instead. -- Paul Whitfield

German airlines weigh deal

2008-08-28T12:30:00Z

TUI Travel plc on Thursday confirmed it was in talks with Deutsche Lufthansa AG and Thomas Cook Group plc about combining their charter flyers into a discount German airline to take on upstart Air Berlin plc & Co. Luftverkehrs KG. ]]>
"However, no commercial terms have been agreed. There is no certainty that any transaction will result," TUI Travel said.

The announcement follows days of press speculation and marks a blow for Air Berlin, which abandoned an approach for Thomas Cook's Condor airlines last month. The talks are also part of a broader consolidation in Europe as high fuel prices and declining sales slam bottom lines. See full story on TheDeal.com for more on that consolidation. -- Andrew Bulkeley

CD&R buys Bodycote testing unit

2008-08-28T12:19:25Z

New York buyout shop Clayton, Dubilier & Rice Inc. said Thursday it would pay an initial £417 million ($768 million) cash for the testing division of Bodycote plc. ]]>
Bodycote shares rose 17.25 pence, or 8.2%, to 227.25 pence, giving a £731.1 million value to the whole group.

The testing business serves corporate clients in industries ranging from aerospace to food through over 130 laboratories in more than 25 countries. It had 2007 sales of £176.1 million and operating profit of £15.7 million.

CD&R is investing from its seventh fund. As well as £417;million in cash, the buyer will provide Bodycote with a loan note entitling Bodycote to the proceeds of the sale of 65 acres of land in Mississauga, Ontario. -- Laura Board

For the full story, including advisers, see TheDeal.com

CEO Mudd slings reform, Fannie Mae polishes up management

2008-08-27T22:25:02Z

It looks like Fannie Mae's management is cleaning house. CEO Dan Mudd is polishing up his team for top management that will be, "responsible for meeting the dual objectives of conserving capital and controlling credit losses while Fannie Mae continues to provide crucial liquidity to the U.S. housing and mortgage markets."

]]>

Peter Niculescu, once managing director and co-head of fixed-income research and strategy for Goldman, Sachs & Co., was named chief business officer, responsible for three divisions -- single-family mortgage guaranty, capital markets and housing and community development
David Hisey was named EVP and chief financial officer
Michael Shaw, of J.P. Morgan Chase & Co. pedigree, became chief risk officer
David Benson, who has been head of e-commerce in the fixed-income division at Merrill Lynch & Co., was promoted to executive vice president, capital markets and treasury

And there are some checkouts as well:

EVP and current chief business officer, Robert Levin, will retire. He checks out after 27 years with Fannie Mae
Current CFO Stephen Swad, who joined Fannie Mae in spring 2007, chose to leave the company to pursue other opportunities in private equity
Current chief risk officer, Enrico Dallavecchia, intends to leave the company to pursue opportunities in finance and risk management

The board said in a statement it was firmly committed to Mudd, the management restructuring and the strategic objectives around capital and credit he set forth on Aug. 8, when the company announced dismal second-quarter results.

The announcement comes as Fannie Mae sold $2 billion in short-term debt Wednesday, although at higher yields than in recent auctions, MarketWatch notes. The lender also announced its JV with REIT Mid-America Apartment Communities Inc. would stop making acquisitions. Fannie shares were up after trading Wednesday, which could quell rumors the mortgage giant may need a government bailout. - Baz Hiralal

Fannie Mae CEO Dan Mudd Announces Management Restructuring
Fannie Mae halts purchases for Mid-America Fund
Fannie Rises as Merrill Calls Bailout Talk Premature

Fannie and Freddie are still standing, and financials soar

2008-08-27T21:54:43Z

Another day and still no news of an awaited and feared government bailout of mortgage intermediaries Fannie Mae and Freddie Mac. No news is good news for the mortgage giants, as their shares rose for the third straight day on Wed., with Fannie gaining 15.30% to close at $6.48 and Freddie jumping 19.65% to close at $4.75.
Lehman Brothers Inc.'s shares had a big bump Wednesday, ticking up 5.13% to close at $14.75 as news surfaced about the potential take out of the battered bank's asset management unit. The Financial Times reported that potential bidders circling the potential deal include private equity firms Kohlberg Kravis Roberts & Co., Hellman & Friedman LLC and Bain Capital LLC. Lehman is still weighing the decision of whether or not to sell the unit.

Deal news also helped bolster stocks outside of the financial sector. Ikon Office Solutions Inc. climbed 9.25% to close at $17 per share on news that Japan's Ricoh Co. Ltd. said it would acquire Ikon for nearly $1.62 billion.

The broader market rallied on the Commerce Department report of a larger-than-expected 1.3% gain in durable goods orders for July. The Dow Jones Industrial Average picked up 89.64 points to close at 11,502.51. - Michael Rudnick
]]>

Business as usual for Mrs. Fields

2008-08-27T21:48:17Z

It'll be business as usual for Mrs. Fields Famous Brands LLC. The Salt Lake City cookie and frozen yogurt maker received the go-ahead to finalize its prepackaged reorganization plan during the first day's motions of its Chapter 11 bankruptcy court proceedings.

]]> press release.

Mrs. Fields filed a bankruptcy petition Sunday. It hopes to emerge from Chapter 11 within 45 days. - Maria Woehr

The Deal: Mrs. Fields files for Ch. 11
Dealscape: Mrs. Fields files for Chapter 11

Hiring: Societe Generale

2008-08-27T20:40:05Z

Good news for bankers looking for a job. There is at least one investment bank hiring. The bad news is that you have to speak French. Financial Times. The bank looks like it is making a comeback from last January's rogue trading scandal courtesy of Jerome Kerviel. The scandal cost the bank $7.2 billion, but now even Kerviel has begun the recovering process. He has since been hired by computer consulting firm Lemaire Consultants & Associates. - Maria Woehr

Roll Call: Kerviel's new gig
SocGen report No. 62: Kerviel still guilty, bosses still lax
FT report: SocGen to hire 5,500 staff ]]>

The clock is ticking for Adecco on Michael Page bid

2008-08-27T20:18:47Z

Tick tock, tick tock! Adecco SA has until Sept. 30 to announce if it's going to bid for Michael Page International plc, or else it has to walk away from the deal.
]]> Financial Times. If Adecco walks away from the deal, it will be prohibited from making an offer for Michael Page for six months.

Adecco, the world's largest staffing company, indicated Aug. 18 it could go hostile with its £1.3 billion ($2.4 billion) bid to buy Michael Page if it can't agree to a deal. Michael Page ended takeover talks with Adecco after rejecting a revised bid worth around 400 pence per share. - Maria Woehr

After rejection, Adecco still has eyes for Michael Page
Adecco may go hostile
Financial Times story
Michael Page denies Adecco