Winners & Losers 2009: Dealmakers

The mergers and splits that shook the business landscape.

Return to ” Winners & Losers 2009

Suncor buys Petro-Canada

When Suncor Energy cut its capital spending plans yet again earlier this year amid falling oil prices, some observers thought the company had given up on growth. It turned out CEO Rick George was just taking a breather. In March, he revealed his true ambitions by announcing a merger with Petro-Canada. Closed in August, the $19-billion all-stock deal created Canada’s largest energy company. George appealed to nationalism: ‘If you don’t have some very strong companies that can actually compete in our own backyard,’ he said, ‘what you’re going to end up with is a lot of foreign companies in here.’

Suncor was among the few companies well-poised to exploit weakness in oil markets to make a major deal. George plans to stay focused on Alberta’s burgeoning oilsands resources, and auction off a significant chunk of the natural gas assets inherited from Petro-Canada next year.

Telus buys Black’s photography

Telus added 113 new retail outlets in September by buying Black’s, a chain of photography stores concentrated in Ontario that has been in business for nearly 80 years. The telecom giant paid $26 million to the private equity firm that owned the chain, and will add the Black’s locations to its network of 4,000 dealers selling its phones and services. The deal, in addition to Telus’s newly upgraded wireless network, all seems part of a big push into the central Canadian market.

Bloomberg buys BusinessWeek

BusinessWeek writer Jon Fine likely didn’t realize he was covering his publication’s future owner in 2008 when he wrote about the troubles of Bloomberg, the financial information behemoth. Bloomberg writers Serena Saitto and Greg Bensinger were likely similarly oblivious in July when they reported that McGraw-Hill had become impatient with BusinessWeek (which lost US$43 million in 2008) and had put the title up for sale. Interest at auction was low. Bloomberg eventually won, and the magazine is to be renamed Bloomberg BusinessWeek. Reports say the new owners may fire as much as a third of the magazine’s 400 employees. Fine has already departed.

Manulife Financial buys AIC

‘Buy. Hold. And Prosper’ was the oft-repeated mantra of AIC, one of Canada’s most successful mutual fund companies during the 1990s. But by this year, the slogan seemed hollow, as AIC was beset by unceasing redemptions by investors who had lost faith. AIC had become too small to compete, so founder Michael Lee-Chin did what many thought he would never do: he sold the company to Manulife Financial for an undisclosed amount in shares, adding AIC’s funds to its own lineup. The irrepressible Lee-Chin, who shrugged off the sneering over AIC’s fate, will now focus on portfolio management with his private firm, Portland Investment Counsel.

Warren Buffett buys Burlington Northern Santa Fe Corp.

The world’s most respected (and most watched) investor went all-in this fall. After several years of building a sizable minority stake in Burlington Northern Santa Fe Corp., Warren Buffett’s Berkshire Hathaway bought the rail business outright in November. ‘This is all happening because my father didn’t buy me a train set as a kid,’ Buffett told The New York Times. If so, it was an expensive oversight: Buffett paid US$26 billion to acquire the three-quarters of the company he didn’t already own. For that, he gains control over more than 50,000 kilometres of track, 40,000 employees, 6,700 locomotives and well over 80,000 freight cars.

AOL and Time Warner split up

Ending what has been called one of the most disastrous mergers in corporate history, media giant Time Warner cut loose its moribund Internet arm, AOL. Their union was consummated in 2001 at the height of the tech boom, when AOL was valued at more than US$150 billion, and observers hailed it as a dream marriage of old-economy content with new-economy distribution. The two cultures clashed immediately, and the benefits of the deal never materialized. Time Warner erased AOL from its name just two years into the relationship. The unhappy couple finally called it quits this May. Recent estimates peg AOL’s value at perhaps $5 billion.

Onex buys the Tropicana

Intrigued by Las Vegas’s recessionary troubles, private-equity kingpin Gerry Schwartz’s Onex Corp. formed a partnership with Alex Yemenidjian in 2008. After trolling the globe for opportunities, the new partners settled on the Tropicana, a faded 1,700-room hotel with a 50,000-square-foot casino located on the Las Vegas strip. With the property in bankruptcy, the partners began buying up the senior debt of its owner, later converting it into equity to acquire total control. Yemenidjian then embarked on a US$75-million renovation expected to be completed next year. The plan is for a South Beach MiamiAC“themed resort, with a new casino floor.

CPP buys into Skype

Joining forces with an investment group, the Canada Pension Plan Investment Board bought from eBay a significant minority stake in Skype Technologies, developer of software used to place free video and voice calls over the Internet. CPP placed its money alongside investment firms Silver Lake Partners and Andreesen Horowitz (the latter headed by web browser pioneer Marc Andreesen.) The purchase valued Skype at US$2.75 billion. However, its terms had to be amended after the technology’s founders sued and obtained a settlement granting them equity in their old company. Skype is one of several major deals executed by the Toronto-based pension fund this year.

Ticketmaster tries to merge with Live Nation

Rightly or otherwise, large live-entertainment ticketing companies often find themselves accused of gouging consumers and performers alike. That perception proved a substantial liability last February when the world’s two largest, Ticketmaster and Live Nation, announced plans to merge by year’s end. Ticketmaster CEO Irving Azoff said the deal would allow the merged company, Live Nation Entertainment, to save $40 million in inefficiencies and invest the proceeds in innovation. Critics, many of whom feared the combined entity would favour auctioning tickets to the highest bidders rather than selling them at fixed (and lower) prices, didn’t buy it. Industry-watcher TicketNews said the deal ‘could rock the foundation of what fans see, where they see it and when.’ Artists like Bruce Springsteen and Trent Reznor (of Nine Inch Nails fame) expressed concerns that they would have no alternative but to deal with the behemoth, which would also own dozens of arenas and amphitheatres. Many U.S. congressmen and senators actively opposed the union, while some consumer groups called it a ‘disaster.’

Antitrust regulators in the U.S. and Britain became immediately involved and the companies pushed back the target date to complete the merger to the first quarter of 2010. Speculation over possible divestitures proliferated during the fall. So far, though, it appears that both companies have fallen victim to their own perceived clout.

Return to ” Winners & Losers 2009