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| May 02 , 2008 |
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Top Stories A Block Deal: H&R Block Closes Sale of Option One
Lights Out: Black Hills Corporation to Sell Seven Independent Power Plants A Firm Sale: Owens Corning Sells Composite Plants Watch This: Macrovision Stockholders Approve Gemstar-TV Guide Acquisition Proposal Gifts That Keep On Giving: 1-800-FLOWERS Acquires DesignPac Gifts Now You See It: Honeywell Signs Agreement to Acquire Innovator of Scanner Technology
While some on Wall Street argue that the credit crisis is easing up, in a still tight credit market and a declining housing market, I am cautious. The economic indicators are mixed, with hiring down, blue chips up, and debt yields narrowing. One indicator that is not on Wall Street’s standard watch list is the hiring of government regulators. The Federal Deposit Insurance Corporation announced late March of this year that is hiring up to 140 new staffers for its Division of Resolutions & Receiverships—as government regulators prepare to manage a wave of bank failures that are tied to the subprime and credit market downturn. In late March, the FDIC delivered a “prompt corrective action” notice to California lender Fremont General, a branch bank that in recent years became the country’s fourth largest subprime borrower and had literally run out of capital. Facing government regulators, Fremont was forced to sell, as Capital Source agreed to pay $198 million for $5.6 billion in assets. Are other M&A deals likely to save the banking industry? Some analysts predict that more than 100 banks will shut down in the next several years as a consequence of the subprime collapse. One law firm that manages bank failures is Venable, LLP. The firm has handled some of the key bank and thrift failures of the 1980s and early 90s—having represented failed financial institutions, as well as their boards of directors, creditors and debtors.
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H&R Block Inc. announced that it closed the sale of the mortgage loan servicing business of its Option One Mortgage Corporation subsidiary effective April 30, 2008. As previously announced, the purchaser was American Home Mortgage Servicing, Inc. (“American Home”), an affiliate of WL Ross & Co. LLC. Proceeds of the transaction at closing were approximately $1.3 billion. Highlights of the deal include aggregate servicing debt of more than $980 million repaid in full; net cash proceeds of more than $230 million; and the company's short-term bank credit lines repaid in full. The transaction is not expected to result in significant gain or loss in reported financial results. 
Following a multi-month strategic review and auction process, Black Hills Corporation announced it has entered into a definitive agreement with affiliates of Hastings Funds Management Ltd (Hastings) and IIF BH Investment LLC, a subsidiary of an investment entity advised by JPMorgan Asset Management (IIF), to sell seven independent power production (IPP) gas-fired plants with a total capacity of 974 megawatts for $840 million cash, subject to certain working capital adjustments. Under the terms of the agreement, the Company has the right to retain ownership of the Fountain Valley power plant in Colorado in the event closing conditions for the Company's planned acquisition of utility assets from Aquila are not met. The purchase price for the Fountain Valley plant represents $240 million of the total $840 million purchase price. The closing of the IPP sale, pending customary regulatory approvals, is expected to occur late second quarter or early third quarter of 2008.
Owens Corning announced that it has completed the sale of two composite manufacturing plants to Platinum Equity. The facilities are located in Battice, Belgium, and Birkeland, Norway. The aggregate gross purchase price for the sale was euro 155 million ($242 million). After costs associated with the transaction and to position the business as an ongoing concern, Owens Corning expects to realize net proceeds of approximately $197 million, consisting of cash proceeds of $184 million plus the assumption of certain liabilities by the purchaser. As a result of the sale, Owens Corning recorded an additional impairment charge of approximately $10 million in the first quarter of 2008. 
Macrovision Corporation announced that at its special meeting of stockholders held this week, its stockholders approved the share issuance to complete the proposed acquisition of Gemstar-TV Guide. Gemstar-TV Guide stockholders also approved of the sale of Gemstar-TV Guide to Macrovision. The Company also announced that it has, along with its successor entity, Macrovision Solutions Corporation, arranged for the debt financing required to complete the Gemstar-TV Guide transaction, which includes a $550 million term loan and $100 million of senior unsecured notes. The net proceeds of the debt financing will be used to finance the Gemstar-TV Guide acquisition and related fees and expenses.
Honeywell has announced a definitive agreement to acquire Metrologic Instruments, Inc., a leading manufacturer of data capture and collection hardware and software, for approximately $720 million. The deal builds on Honeywell’s acquisition of hand held products. The agreement is subject to customary closing conditions, including regulatory review. Based in Blackwood, New Jersey, Metrologic is a global provider of laser and imaging bar code scanners, including high performance linear and omni directional laser scanners, fixed position and in-counter scanners, area imagers and rugged mobile computers. Metrologic sells its products in more than 110 countries and is majority-owned by Francisco Partners, a global private equity firm. Metrologic is to be integrated with Honeywell Security, part of Honeywell's Automation and Control Solutions (ACS) business. 
Joseph Lynyak, a partner at Venable, who has 30 years of experience in bank enforcement and regulatory matters says that “there is a general consensus that assisting a home owner to stay in his/her home and avoid foreclosure results in lower losses that the foreclosure alternative. Accordingly, most banks welcome the opportunity to work with home loan borrowers.” Lynyak says deal makers should know, however, that response to commercial lending is potentially different and is evolving, “[i]t depends upon the type of loan, the collateral and the economic situation in the area of the country where the [commercial] borrower is located—as to what types of assistance banks are giving creditors.” 
announced that their client Wellhead, Inc. was sold to Seaboard International. Industrial Growth Partners (IGP), a portfolio company, along with certain outside investors and IGP’s management provided the capital to complete the deal. 
Wellhead is a leading manufacturer of oil and gas pressure control equipment, based in Bakersfield, California. The company primarily produces wellheads, for oil and gas exploration, development, and production activities. Over the last 60 years, Wellhead has built a solid domestic and international presence through its innovative engineering and manufacturing of wellhead equipment. The company’s key brands are its Quick Lock Wellhead System®; QDF® and Q92® product lines.
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