Top Stories

See Rise in Termination, Reverse Break-up Fees Reflecting turmoil in the overall deal market, a growing number of buyers are walking away from contracted transactions by paying negotiated reverse break-up fees – in some cases making investments other than what was originally planned in order to stay out of court. “What we are seeing right now is an awful lot of negotiations over reverse break-up fees for deals signed and announced before debt tightened,” said James Abbott, a partner in the Business Transactions Group at the Seward & Kissel law firm in New York. “People are negotiating their ways out of deals that don’t make sense with the market the way it is. Normally the break-up fees we have in transactions are fees paid by the seller if he didn’t go through with the transaction. Buyers paying these fees was unheard of.” On Tuesday, Kohlberg Kravis Roberts & Co. and GS Capital Partners announced they had terminated their planned $8 billion buyout of Harman International Industries Inc, but would acquire $400M worth of bonds in a deal that precluded a court resolution.

For $240M, Microsoft Gets 1.4 Per Cent of Facebook
Microsoft said Wednesday it had agreed to pay $240 million for a 1.6 per cent share in Facebook, gaining a step over rivals Google and Yahoo in the rush into social-networking. As part of the deal, Microsoft will sell Facebook’s banner ads overseas and split revenue. The deal valued the not-yet-four-year-old Palo Alto company at $15 billion.

More at The New York Times

Cross Atlantic Capital Sells Navini to Cisco for $330M
Cross Atlantic Capital Partners, a venture capital firm in Radnor, Penn., said Tuesday it has sold its stake in Navini Networks, a wireless networking company, to Cisco Systems for $330 million in cash and assumed options. Cisco, which now owns the business outright, plans to transfer Navini's employees and assets into its Wireless Networking business unit.

More online at Information Week

Tribune Sells Two Connecticut Newspapers for $62.4M
Tribune Publishing, a division of Tribune Company (NYSE: TRB), yesterday announced the sale of its southern Connecticut newspapers, The Advocate of Stamford and The Greenwich Time, to the Hearst Corporation. The deal was valued at $62.4 million. The newspapers will be managed by MediaNews Group, Inc., under an existing joint venture agreement with Hearst. Additional media property divestitures are expected as Tribune sheds assets to pay off the Sam Zell acquisition completed earlier this year.

Ain’t Over ‘Til It’s Over: F.T.C. Still Battling Whole Foods
Two months after a federal district judge ruled against its efforts to block the $565 million merger between Whole Foods and Wild Oats, and six weeks after the deal itself went through, the Federal Trade Commission has dusted off its briefs and filed an appeal. The F.T.C. contends that the planned merger between organic grocers would hurt consumers by reducing competition. The F.T.C., staking a credible claim to being Washington’s most dogged bureaucracy, says the merger is not really complete and therefore it can still be halted. Perhaps it’s time for the F.T.C. to have some competition and help consumers that way.

CBA Consultants Funds Biotech Acquisition Strategy
CBA Consultants, an investment advisory firm based in New York, said Wednesday it has agreed to become lead funding partner for BrandQuest Development Group’s biotech division as it pursues a series of acquisitions. The letter of intent signed by the companies stipulates that CBA Consultants will provide a minimum of $20 million. The funds supplement preexisting commitments worth $50 million provided by an identified hedge fund, BrandQuest said. The company is currently in negotiations with several biotech companies.

More News
Nike Buys UK Soccer Apparel Label for $582M
Home Inns & Hotels Buys Top Star in China
Genesee & Wyoming Takes Over Maryland Midland Railway
ADC to Acquire LGC Wireless for $169M
Industrial Growth Partners Gains Control of Atlas Material Testing
Great Moments in Integration

The talk in M&A circles these days is all about buyers walking away from deals, like J.C. Flowers & Co. terminating its $25 billion Sallie Mae buyout. Nearly every M&A deal has a termination clause, and – as our lead news item points out this week –usually it was the seller paying the fee after changing his or her mind. Now, with credit tighter, it’s usually the buyer who walks – and pays.     The issue of termination fees moved from the wings onto center stage this summer, when credit became scarcer. As we all know, quite a few banks that had seemingly committed to deals pulled out. That left any number of transactions swinging in the wind – or crashing to the ground in a million pieces.    Dealmakers are not raising their collective hands helplessly and saying, in effect, game over. Many have addressed their considerable resources to the question of gluing the deal pieces back together again. We have run items reporting on how dealmakers found creative ways to put their deals back together with less reliance on credit, or found ways to access less expensive debt.     The fact remains, however, that many deals were predicated on a business model – cheap credit, widely available – that now seems very yesterday. For many deals, there simply proved to be no substitute for inexpensive debt. When bankers exited their commitments, and the No Deal signed flashed, quite a few sellers pulled out their contracts and lo and behold there in black and white were the material adverse condition clauses their lawyers had insisted on inserting in their contracts. At the time, with buyers chasing deals like mad, the clauses were moot. No one paid much attention.    Now, people are paying attention – in spades.   A while back I was invited to participate in a discussion on CNBC that addressed this very subject. Dennis Berman, the estimable Wall Street Journal reporter who covers private equity, argued that P.E. firms will not simply pay these termination fees, but rather will hold the financiers feet to the fire. More