03 December 2010

Corporate raiders: a review of 2010’s hostile and unsolicited takeovers

A number of high value hostile takeovers in 2010 have kept corporate raiders in the headlines throughout the year, from Kraft Foods to GrainCorp and – the highest profile of the lot – BHP Billiton, with its failed attempt to buy Canada’s Potash Corporation.

According to Zephyr data, so far in 2010 there have been 49 deals globally where the bid was hostile or unsolicited – and this only includes the ones that have succeeded. This compares to 53 in the whole of 2009, 44 in 2008 and 44 in 2007. So, while global volume is generally down, the financial crisis has not weakened appetites for the most desirable investments.

The value of successful hostile takeovers so far this year is USD 73,445 million, almost a quarter more than the USD 59,018 million recorded for the whole of 2009 and 3 per cent ahead of 2008’s USD 71,591 million. These are deals where the bid was unsolicited or hostile either throughout, or at some point during, the purchase process. The implication is that buyers are pulling out all the stops to get the assets they want and this trend is particularly noticeable when considered against the current background of declining global M&A value.

Given the interest this year in agri-products, food and ancillary industries such as fertiliser, which can be linked to rising demand and prices, it is interesting to see that many of the highest value hostile takeovers involve resources and food companies. UK confectioner Cadbury was the target of 2010’s second largest hostile takeover, a USD 17,420 million buyout by Kraft Foods which was signed off after an increased bid.

Other relevant food-related targets include: US drinks companies Pepsi Bottling Group and Pepsi Americas; US fertiliser manufacturer Terra Industries; Australian wheat Exporter AWB; and Norwegian food company Rieber & Søn. With the exception of the latter two acquisitions, all these transactions have completed.

High growth sectors also feature among 2010’s blockbuster hostile and unsolicited bids. The largest by value is Sanofi Aventis’s USD 18,500 million purchase of US biotechnology and drug research company Genzyme, which was announced in October but is yet to close. Businesses that offer huge potential – such as miners Lihir Gold and Dana Petroleum – were also targeted. However, it is investments offering steady, non-cyclical returns that are the most frequent targets of high value hostile bids. Medical gases group Airgas, transport group Arriva and retirement villages operator Aevum are just a few.

© Zephyr