Cingular won the bidding war for AT&T Wireless, beating Vodafone with an offer of $41 billion. Regulators are expected to approve the deal to create the largest U.S. wireless company. As usual, the Wall Street Journal (subscription required) is all over the story, and the NY Times also has extensive coverage on the merger.
Houston based El Paso Corporation disclosed that it is reducing the value of its estimated proven reserve base of its oil and gas properties by 41%. Proven reserves represent what an oil and gas company can reasonably expect to produce based on economic conditions and technology. As a result, El Paso will record a one-time, non-cash charge against its fourth-quarter earnings of about $1 billion on a pretax basis, which, under federal securities rules, must be taken to reflect the decline in value of the proven reserve base on El Paso’s books.
El Paso’s move comes on the heels of Royal Dutch/Shell Group‘s announcement last month that it was reducing the value of its proven reserve base by 20 percent and El Paso’s warning to investors earlier this month that it expected to make a material negative revision in its proven reserve estimates.
El Paso continues to struggle under a heavy debt load. It has also been liquidating a number of assets over the past year to raise cash and reduce debt.
Update: The Houston Business Journal this afternoon reports that El Paso’s stock price was hammered today on the report of the reserve write down. The HBJ article includes analysis on El Paso from John Olson of the Sanders Morris Harris investment firm. Mr. Olson gained local fame when he was one of the only investment analysts who was bearish on the stock of Enron Corp. well before Enron melted down in late 2001.
Southwest Recreational Industries Inc., the Leander, Texas-based maker of the sports field surface AstroTurf, has filed bankruptcy and has requested a Georgia Bankruptcy Court that that it be allowed to liquidate on orderly basis under chapter 11, the Austin American Statesman reports here. SRI’s initial motion to use cash collateral describes a surprisingly highly-leveraged business that essentially choked under a combination of high debt service payments and the costs associated with installing its product. SRI’s initial bankruptcy docket can be reviewed here. Although SRI’s corporate offices are in Leander, Texas (25 miles northwest of Austin), its manufacturing operations are in Georgia where the bankruptcy case was filed.
Walt Disney Co. has rejected Comcast‘s initial takeover offer. Inasmuch as Comcast’s offer was low-ball, this is no surprise. However, Comcast will likely sweeten the offer and ultimately Disney’s board will likely be forced to allow shareholders an opportunity to accept a Comcast tender offer. Stay tuned for developments.
Meanwhile, the Wall Street Journal has an excellent editorial (subscription required) today, a part of which points out the following:
Whatever the outcome, Comcast’s bid for Disney shows that the mere threat of takeovers can have benefits. Even if it fends off Comcast, Disney’s board is finally going to have to address the company’s failings.
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Research shows that when shareholders are a dominant management influence, companies do better.
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Our own hope is that Disney’s board lets its bosses — the shareholders — first decide who they want running the company. With that out of the way, Disney can then work on the details of recapturing its former financial glory.
Houston-based Garden Ridge has filed its initial operating report in its pending chapter 11 case. Also, the U.S. Trustee has filed its notice of appointment of the Creditors’ Committee in the case. Prior posts regarding the Garden Ridge case may be reviewed here, here and here.
The LA Times reports today that Disney has hired longtime mergers and acquisitions specialist, Martin Lipton, to advise the Disney Board regarding Comcast‘s recent bid. Mr. Lipton is credited in legal circles as being one of the lawyers who devised the poison pill strategy, which Professor Bainbridge explained recently here. However, my sense is that Disney will not be adopting a poison pill strategy in defending against the Comcast bid. The Board has already been heavily criticized for its unwavering support of CEO Michael Eisner despite Disney’s lagging stock price. A poison pill strategy would be widely viewed as the Board again supporting a strategy mainly benefitting Mr. Eisner and an unproductive management team at the expense of Disney’s shareholders. However, Mr. Lipton is a heavyweight in defending these matters, so Disney is clearly signaling to Comcast its willingness to rumble by retaining him.
Sound email policies are important for any business. If you don’t believe it (or even if you do), then you need to read this.
One of Texas’ great business success stories–Southwest Airlines–is causing heartburn to U.S. Airways in the Philadelphia market with Southwest’s tried and true formula of low fares and prompt service.
Virtually every major newspaper is all over the Comcast bid for Disney. My vote for best coverage so far is the Wall Street Journal (subscription required), although the LA Times and the NY Times are doing a good job, too. Past posts about the proposed merger are here and here.
Professor Stephen Bainbridge of the UCLA School of Law made the interesting observation in his blog yesterday that the absence of a poison pill in Disney’s corporate takeover defense strategy may ultimately play an important role in the success of Comcast or some other company’s bid for Disney. In so doing, Professor Bainbridge provides an excellent summary explanation of poison pills and how they are used to fend off hostile takeovers.
Houston-based Plains Exploration & Production Co. has agreed to buy Houston-based Nuevo Energy Co. in a stock deal valued at almost $600 million. If completed, Plains will issue about 37.5 million shares to Nuevo shareholders (based on Plains’ $15.89 per share Wednesday closing price), and assume $350 million of debt and convertible securities. The deal is scheduled to close in the 2nd quarter of this year.