The Banking and Strategy Initiative

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The Deal Economy: BATS listed, CBOE investigated, AIG Criticised, Deals net $4 bln! | Deal Insight

The Deal Economy showed up fatigue even as Temenos got tired of bidding for Misys and CBOE was put under investigation for its large bank clients misusing multiple platforms including its New Jersey offices of CBSX. CBOE also recently bought the National Stock Exchaange. BATs is owned by a group of Traders/Brokers(Investment Banks) including Citi, Credit Suisse FB, Morgan Stanley and BofA

Nevertheless, like the low margin stockbroking business (BATS earned $23 mln on a $1 bln in revenues last year) The Deal Economy has again shifted to some smaller deals last month and this week including the $2 bln Asahi bid to buy Zoll in the US, the Molycorp purchase of Neo Materials ; The making of Asian You Tube in a Youku – Tudou merger worth $864 mln and even the Auction of Private Label Ice Cream RR across the pond, likely worth $1 bln

Fees from the half a dozen deals this week would hardly reach a quarter of a million, probably a fraction of that as Asian companies and lower deal tabs become the norm and break up fees’ drive away big business. Aeroprts de Paris snagged Turkishj Airport operator Havalimanlari for all of $864 mln in another low margin long run business getting popular. In good fortune on large deals, $21 bln Kinder Morgan deal with El Paso was approved by El Paso shareholders despite the lawsuits

It is much like our working class heroes who now survive in a lower paying job just to stay inside the underwater mortgage they own with the few and far in between deal business keeping profits alive for Global Banks. The Treasury was criticised by the Congressional Oversight Panel for the Bailout funds incl Liz Warren, for allowing AIG a special provision carrying forward $19 bln in Operating losses which the insurer is now counting as equity.

Glenstrata spawns new Commodities Corner Deal bug

Glencore’s new mining major with Xstrata aside, the firm went ahead and seemingly bid for Canadian grain distibution company Viterra. Viterra, itself worth $5.1 bln also got a bid from grain specialist Cargill. Wheat production is likely to be 1.4% lower this year and thus a great bull story is foretold in the cereal. The WSJ Blog breaking the news points out Archer Daniels Midland could also be interested and with Viterra going public with the bids, a deal on Viterrs is likely sooner than later.

Of course Xstrata miners are unlikely to bless the Glencore side bet on grains when they have a large need for Capital for their expansion in Iron and Nickel among others.

Alberta based AIMCo owns 16% in Viterra. Viterra had earlier invested C$1.4 bln in buying Aussie ABB Grain

Dynegy follows MBIA into controversial restructuring

Dynegy’s own restructuring announced days ahead of bankruptcy is facing court challenges much like MBIA’s bid to save the muni bond guarantee business from its adventures in MBS in the middle of the crisis. The examiner appointed in response to a creditors’ challenge found Dynegy’s bid to restructure its subsidiary Dynegy holdings ahead of filing a bankruptcy claim for the subsidiary, a failure of fiduciary duty on Dynegy’s behalf and “wilful misconduct” on behalf of Dynegy Holdings’ Directors.

Carl Icahn and Seneca Holdings, large investors in Dynegy handpicked the subsidiary’s Directors. Two coal plants worth $1.25 bln were transfered from the subsidiary to the Holding company at a grossly undervalued price and was labeled “Fraudulent Conveyance” by the Bankruptcy court appointed Examiner.

Another small Bank deal

I am not so sure Community banks have indeed become free with their Capital enough to start lending operations but they are definitely more active among the banks. In a symptom of the times though the successful transaction to be reported is California based Union Bank using defered tax assets of the acquisition Pacific Capital to present a $46 a share offer for Pacific Capital. Interesting JP Morgan is a poor #3 in the state but is planning to grow by adding branches organically. Union Bank has moved in to a hair breadth from JP Morgans 7% in Deposits as it was already at 6.53% of Deposits . Union Bank is owned by Mitsubishi EFJ Financial an dalso owns Santa Barbara Bank & Trust

Pacific Capital has $5.9 billion in assets and 47 branches, compared with Union Bank parent UnionBanCal’s nearly $90 billion in assets and 414 branches.(comparable with ING that sold $81 bln in Deposits to CapOne and HSBC which still has 350 branches after its exit from Buffalo/New York

BATS IPO makes it third listed IPO

BATS is also part of a SEC investigation of banks using different exchange rules to make money for large clients. Each exchange is required to make sure discriminatory pricing is not adopted by the trading members to favor larger clients. The trading members ( banks)  use different rule books at different exchanges to execute different orders for big clients in exchange for larger business because of the better price offered.

Nevertheless BATS ( also the ticker) has a not so laughable 11% share of US securities business and another 5.7% across the pond with BATS Europe. The BATS IPO will price between $16 to $18

Erstwhile Lehman Bros entities will sell 3 mln shares into the IPO joined by promoters Citi, BofA, CSFB and Morgan Stanley




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