10-19_Watercooler.qxd 4/6/09 5:37 PM Page 14Water Coolerwhat players in the midmarket are talking aboutTomorrow’sDealsTaking s<strong>to</strong>ck ofwhat dealmakersare looking atWE WON’T BE UNDER SOLD! Before the governmentauthorized a bailout for the au<strong>to</strong>makers, theBig Three had <strong>to</strong> put forth plans on how they willstabilize their businesses. As it turns out, M&A figured prominentlyin the respective stabilization blueprints.Ford Mo<strong>to</strong>r Co. was the most specific, identifying that it iscurrently exploring the possible sale of Sweden-based Volvo CarCorp. The review, Ford chief Alan Mulally testified, is in linewith previous efforts <strong>to</strong> “focus on the Ford brand,” which includedsales of As<strong>to</strong>n Martin, Jaguar, Land Rover and its majoritystake in Mazda.General Mo<strong>to</strong>rs was a bit more vague, saying only that itwould look <strong>to</strong> implement a “reduction in brands, nameplatesand retail outlets” <strong>to</strong> concentrate more closely on the company’sprofitable operations. The company has signaled, however, thatboth Saab and Hummer are candidates for possible divestitures.Chrysler’s Bob Nardelli didn’t discuss any divestitures, thoughhe alluded <strong>to</strong> the possibility of a larger deal. “Further partnership,restructuring and consolidation would make the US au<strong>to</strong>On blocksindustry even more viable and competitive in the long run,” hetestified, a statement that would seem <strong>to</strong> be in line with rumorsin December that Chrysler had rekindled deal talks with GeneralMo<strong>to</strong>rs. Spokespeople from Chrysler and GM refuted the rumor,which was first published in the Wall Street Journal.NO SALE Weyerhaeuser Co. has experienced some luck with divestituresconsidering its $6 billion sale of its container-boardpackaging and recycling business <strong>to</strong> International Paper. However,the company’s smaller sale processes haven’t been as well received.In light of this, Weyerhaeuser has discontinued its efforts <strong>to</strong> sell its WestwoodShipping Line, which operates a fleet of seven vessels used <strong>to</strong> shipover-sized cargo <strong>to</strong> more than 20 ports in Japan, Korea, China and NorthAmerica.“We did not feel that the current market conditions would allow us <strong>to</strong>recognize a reasonable value for our assets and operations,” Guy Stephenson,Westwood Shipping Line president, said in a statement. The companyfirst announced plans <strong>to</strong> sell the business in May.Timber!The aband<strong>one</strong>d auction does not affect Weyerhaeuser’s efforts <strong>to</strong> sellits four regional short-line railroads. The railroads, which run throughArkansas, Oklahoma, Mississippi and Washing<strong>to</strong>n, are used by the company as well as select third-party cus<strong>to</strong>mers.Weyerhaeuser, like many, has struggled in the face of the global economic downturn. The company, in December, cut its dividendand trimmed its 2009 capital spending budget by roughly 50 percent. These efforts, along with other cost saving initiatives,are targeting $375 million in expense reductions.14 MERGERS & ACQUISITIONS February 2009
10-19_Watercooler.qxd 4/6/09 5:37 PM Page 15Water Coolerwhat players in the midmarket are talking aboutFounder seeks liquidityBACK IN THE FOLD Vinod Gupta, the founder ofmarketing company infoGROUP, is pushing for a saleof his former business, saying that he would considereither buying thecompany himselfor would sell his40% stake in apossible deal.“I am exploringworking withan equity partner<strong>to</strong> make a cashproposal for thecompany <strong>to</strong> theboard of direc<strong>to</strong>rs,”he said in astatement, adding, “I want <strong>to</strong> emphasize that I would alsobe willing <strong>to</strong> sell my shares for liquid s<strong>to</strong>ck or cash if thatproves <strong>to</strong> be the best transaction for all the s<strong>to</strong>ckholders ofthe company.”Gupta has retained the Blackst<strong>one</strong> Group as a financialadviser and tapped Latham & Watkins as legal counsel.The company, meanwhile, responded by saying that “inthe regular course of discussions,” the board has already considered“various opportunities.” Company chairman BernardReznicek noted that the economic environment and the conditionof the capital markets would make it “a challengingtime” <strong>to</strong> seek a sale.Reznicek, however, acceded <strong>to</strong> Gupta’s demands, saying,“Nevertheless, because the company founder and major shareholderhas expressed an interest in selling the company, theindependent direc<strong>to</strong>rs will review...our present and projectedresults of operations and general market conditions <strong>to</strong> determinewhat is in the best interests of all our shareholders.”Evercore Partners will advise the board in the review.Gupta, who founded the company in 1972, stepped downas its CEO and chairman last year as part of a settlement related<strong>to</strong> a shareholder lawsuit. He was accused of misspendingmillions of dollars on things such as homes, cars and a yacht.He also hired former president Bill Clin<strong>to</strong>n as a consultant, anexpense that the lawsuit claimed benefited Gupta as opposed<strong>to</strong> the company. He also got in<strong>to</strong> hot water over advertisementsthat ran during Super Bowl XLII for Salesgenie, a divisionof infoGROUP. Gupta, himself, authored the ads, whichcritics said conveyed negative stereotypes.Seeking Alpha noted that Gupta’s motivations seem suspect,speculating that if he was intent on buying the company,announcing his objective would only serve <strong>to</strong> pushthe price higher. The blog noted that he committed almosthalf of his stake in infoGROUP <strong>to</strong> be used as collateral fora loan, which could play a role in his desire for liquidity, oralternatively, he may need the cash <strong>to</strong> repay the company $2.2million, a sum determined as part of his settlement withshareholders.FALLBACK PLAN When BHP Billi<strong>to</strong>n’s unsolicited$66 billion deal for Rio Tin<strong>to</strong> fell apart, the publiclyheld UK mining and resources company wasforced <strong>to</strong> move along <strong>to</strong> Plan B, which alongside layoffs <strong>to</strong>taling14,000 employees includes an effort <strong>to</strong> pursue moredivestitures than originally planned.Struggling under a burden of about $40 billion in debt,Rio Tin<strong>to</strong> plans <strong>to</strong> reduce its debt by $10 billion by the endof 2009. The companyhas not signaled whichbusiness units it is con-Rio Tin<strong>to</strong> mines for interestsidering divesting,though the company’sstatement in the secondweek of December signaledthe divestitureswould be extensive.Chief executive TomAlbanese said the company“will expand furtherthe scope of assetswe are targeting for divestment”<strong>to</strong> include “significant assets not previously highlightedfor sale.”In an analyst report obtained from Thomson One Analytics,Merrill Lynch’s Daniel Fairclough noted that themove <strong>to</strong> expand the scope could be because Rio has not seeninterest in the previous assets offered for a sale. In addition,divestitures may now include assets that are more crucial <strong>to</strong>Rio’s business, such as bulk commodities, which could entice“Chinese interests” as a possible buyer.Rio, meanwhile, will focus on developing ventures thatserve emerging economies with large populations, includingChina and India.As part of Rio’s cost-saving initiatives, the company willlook <strong>to</strong> refinance its existing debt, combine various offices,increase IT outsourcing, and defer exploration projects.February 2009 MERGERS & ACQUISITIONS 15