M&A Activity Around The Globe: RAH, SLE, Leighton Holdings, BHP Billiton, HSBC, COF

As the US stocks show strength on Tuesday ahead of the Fed statement on monetary policy, several M&A activities took place around the world. Some notable M&A activities are discussed here.

Ralcorp to Acquire Sara Lee Unit for $545 Million

Ralcorp Holdings Inc. (NYSE: RAH) said Tuesday that it has entered into a definitive agreement to acquire the North American private brand refrigerated dough business of Sara Lee Corp. (NYSE: SLE) for $545 million. Sara Lee’s refrigerated dough business is a leading manufacturer and distributor of a full range of private brand refrigerated dough products in the U.S. The acquisition is expected to be accretive on a GAAP basis by over $0.30 per share in year one, including synergies but excluding one-time acquisition related expenses. The acquisition is also expected to enhance Ralcorp’s cash flow and generate operational synergies of $6 million to $8 million annually after the third year post-closing, excluding one-time transition costs.  Ralcorp intends to fund the transaction through short term debt that will be repaid with the proceeds from the Post Foods separation. Ralcorp expects the acquisition to be completed in next 60-90 days. RAH is trading lower by 3.76 percent to $71.50, while SLE is up 1.63 to $17.41 a share.

Australia’s Leighton Holdings to Sell Pilbara Business Unit to BHP

Australian contractor Leighton Holdings Ltd. said that it has agreed to sell its iron ore business in Western Australia’s Pilbara region to global miner BHP Billiton Ltd. for about $727 million (A$705 million) in a move towards a cheaper owner-operator model. Cash-strapped Leighton, which has been hurt by project delays and writedowns, said on Tuesday it planned to sell HWE Mining which provides mining equipment, staff and assets to BHP’s iron ore mining operations in the Pilbara region. BHP said that the deal was a part of a previously-flagged move from a contract mining to owner-operator mining, a model which has also been adopted by rivals like Rio Tinto. By acquiring Pilbara business unit, BHP is looking to take full control of the mining workforce to improve safety following seven fatalities at its Western Australian operations in 2009 and one last month at Port Hedland. Leighton, which acquired HWE Mining out of administration in 2006, said cash from the sale would be re-invested into Leighton which expects to post a net loss of A$408 million this year following a near $1 billion profit downgrade in April.

HSBC in Talks to Sell US Credit Card Portfolio

HSBC Holdings plc is said to be in talks to sell its $30 billion-plus US credit card business to focus on faster-growing emerging markets and retail banking in the UK. The London-based bank did not provided any further details in its statement to the Hong Kong stock exchange except to say that “these discussions are ongoing and no decision has yet been made to proceed with any transaction.” However, Reuters reported that the banking giant is in talks with Capital One Financial Corp. (NYSE: COF), citing sources familiar with the situation. The deal could be announced soon, the source said. HSBC said in May it was looking to sell its U.S. card arm, which has about $31 billion of loans, as part of a radical overhaul and $3.5 billion cost-cutting plan under new Chief Executive Stuart Gulliver. COF is trading higher by 3.80 percent to $39.06 a share.

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