Is M&A back?
With three new (well, depending on how you define Sun) deals this morning, I’ve read more than a few stories so far that M&A is back. And while three deals to start a Monday is promising, it seems a bit too optimistic to think that things will be as good as 2007, or even the earlier part of 2008. But as anyone who’s spent any time in journalism knows, three of any one thing makes for a trend and the three deals do add up to around $15 billion.
So let’s look at the three deals separately: Oracle’s (ORCL) announcement to buy Sun (JAVA) was the biggest of the three at $7.4 billion and also probably the most anticipated after the deal with IBM (IBM) broke down two weeks ago. One thing I kept hearing was that IBM balked over the hefty severance payments — nearly $40 million — to Sun’s top executives, under existing agreements. That question didn’t come up during this morning’s call because, well, there were no questions, which seems a bit unusual. One person I know who did listen in said that he couldn’t recall a time when Sun Chairman Scott McNealy sounded less enthused.
GlaxoSmithKline’s (GSK) deal to purchase privately held Stiefel for $2.9 billion is a bit harder to interpret, at least in terms of SEC filings, because Steifel is private and Glaxo’s reporting requirements as an ADR are a bit looser.
The other big deal this morning was PepsiCo’s (PEP) plan to acquire Pepsi Americas (PAS) and Pepsi Bottling (PBG) in a $6 billion deal. I spent the most time with these filings and one thing that was interesting was some language at both bottlers that noted that executives at both companies didn’t have employment agreements or change in control agreements. Pepsi Americas was particularly blunt in its recent proxy: “We do not enter into employment agreements or change-in-control agreements with our named executive officers. Our committee has reviewed the relative costs and benefits of these agreements, and has determined that the benefits to be derived are not worth the associated costs.” Maybe that has something to do with the fact that PepsiCo already owned over 40% of each bottler, but it still seems pretty interesting.