Sunday, November 30, 2008

Carl Icahn raises his stake in Yahoo

Billionaire investor Carl Icahn invests an additional $67 million into Yahoo

NEW YORK (AP) -- In a move likely to fuel speculation over Yahoo Inc.'s search for a new chief executive, activist investor Carl Icahn has bought up close to 7 million additional shares of the Internet company, according to regulatory filings.

Icahn, a billionaire hedge-fund manager who threatened to oust Yahoo's board this summer after it rejected a deal with Microsoft Inc., snapped up about $67 million worth of shares over three days this week, according to a filing with the Securities and Exchange Commission.

Icahn bought 6.8 million shares for an average of $9.92 each in three batches from Monday through Wednesday, bringing his total stake to 75.6 million, or nearly 5.5 percent of the company, according to the filing made Wednesday.

In his original $1.5 billion investment in Yahoo, Icahn paid an average of about $25 dollars per share.

Yahoo's stock rose 93 cents, or 8.8 percent, to $11.51 Friday.

Yahoo is looking for a new chief executive after co-founder Jerry Yang said earlier this month that he will step down as soon as the board finds a successor.

Icahn has been among the loudest voices arguing for a new direction at Yahoo. He threatened to nominate a new slate of directors after the Sunnyvale, Calif., company rejected a $47.5 billion takeover offer from Microsoft this summer. Yahoo gave him a seat on its board and two other slots for members of his choosing.

Microsoft head Steven A. Ballmer, after making two unsuccessful bids, now says he isn't interested in buying the whole company, though he has expressed interest in the search business.

Clearwire and Sprint unit close WiMax merger

Clearwire and Sprint unit close merger in deal promising faster network for wireless users

Associated Press

KIRKLAND, Wash. (AP) -- Clearwire Corp. has completed its merger with the unit of Sprint Nextel Corp. that is building a new wireless data network, the companies said Friday.

The company formed by the merger keeps the Clearwire name. It aims to create a network that uses WiMax, a new wireless technology that promises faster data speeds than most current cellular broadband networks, and make it available to 120 million to 140 million people.

Clearwire already has about 400,000 customers on a network that uses similar technology. The new company will absorb Sprint's existing Baltimore-area WiMax network, which the company developed under the Xohm brand, in addition to Sprint spectrum covering much of the country.

Sprint, based in Overland Park, Kan., will own 51 percent of the company while investors in the original Clearwire, founded by cellular pioneer Craig McCaw, will own about 22 percent.

The remainder of the company will be owned by investors including Comcast Corp., Intel Corp., Time Warner Cable Inc., Google Inc. and Bright House Networks, which have put in a total of $3.2 billion in cash.

The deal was announced in May.

Clearwire's headquarters will remain in Kirkland.

Clearwire shares rose 60 cents, or 10 percent, to $6.62, while Sprint's stock jumped 29 cents, or 12 percent, to $2.79.

Report: Citigroup to sell Japan trust banking unit

Report: Citigroup to sell trust banking unit in Japan as part of restructuring

TOKYO (AP) -- Citigroup Inc. plans to sell its Japanese trust banking unit as the ailing U.S. banking giant struggles to survive the global financial crisis, media reports said Sunday.

Citigroup plans to begin tender offers next week to determine the buyer of NikkoCiti Trust and Banking Corp., its trust banking operation in Japan, for about 40 billion yen ($416.7 million), the Nikkei business newspaper reported.

Several major Japanese trust banks, including Mitsubishi UFJ Trust & Banking Corp., Sumitomo Trust & Banking Co. and Mizuho Trust & Banking Co., are expected to place their bids, the Nikkei said, without citing sources.

Officials at Nikko Citigroup and NikkoCiti Trust were not available for comment Sunday.

Citigroup also plans to cut jobs through early retirements at its Japanese brokerage unit Nikko Cordial Securities Inc., and to further trim its Japan operations, the Nikkei said.

Citigroup is among U.S. banks hardest hit by the downturn in the credit and mortgage markets. The bank has been rushing to wind down its assets backed by risky debt.

Citigroup said earlier this month it planned to cut 53,000 jobs, on top of 22,000 cuts previously announced. It also sold off its retail banking unit in Germany.

Early data shows strong Black Friday shopping

By Ashley M. Heher, AP Retail Writer
Preliminary sales figures show stronger-than-expected Black Friday; sales up 3 percent

CHICAGO (AP) -- The holiday shopping season got off to a surprisingly solid start, according to data released Saturday by a research firm. But the sales boost during the post-Thanksgiving shopathon came at the expense of profits as the nation's retailers had to slash prices to attract the crowds in a season that is expected to be the weakest in decades.

Sales during the day after Thanksgiving rose 3 percent to $10.6 billion, according to preliminary figures released Saturday by ShopperTrak RCT Corp., a Chicago-based research firm that tracks sales at more than 50,000 retail outlets. Last year, shoppers spent about $10.3 billion on the day after Thanksgiving, dubbed Black Friday because it was historically the sales-packed day when retailers would become profitable for the year.

But this year, many observers were expecting consumers to spend more time browsing than buying, amid contractions in consumer spending and growing fears about economic uncertainty and trouble in the global financial markets.

"Under these circumstances, it's truly amazing when you think about all the news that led into the holiday season, it certainly appears that consumers are willing to spend more than most expected," said ShopperTrak co-founder Bill Martin. "Everybody wants value for their dollar, so we saw a tremendous response to the discounts."

While it isn't a predictor of overall holiday season sales, Black Friday is an important barometer of people's willingness to spend during the holidays. Last year, it was the biggest sales generator of the season while the Thanksgiving shopping weekend of Friday through Sunday accounted for about 10 percent of overall holiday sales.

Still, experts, who predict this year's overall holiday shopping period will be the weakest in decades thanks to an overall contraction in spending, caution that this year's sales growth may be hard to sustain.

Also complicating matters is a shorter buying season -- 27 days between Black Friday and Christmas -- instead of 32 last year.

Across the country, sales in the South were up 3.4 percent from last year while they climbed 2.6 percent in the Northeast as shoppers began scouring store aisles at midnight hoping to snag the best selection on early morning specials, some as much as 70 percent off. Elsewhere, sales rose 3 percent in the Midwest and 2.7 percent in the West.

Patty Saal, 60, of Mogadore, Ohio, began her Black Friday shopping at 5 a.m. when she and her daughters went to a Sam's Club to purchase iPods.

"We're doing fine," she said.

Fifth-grade teacher Daphna Stepen, 42, spent Black Friday hunting for deals inside Macy's and at the Limited Too clothing store and headed out again Saturday. The Chicago resident said she was surprised by the discounts as well as how many coupons she'd received from stores, which helped her save even more money on already marked-down items.

"You can get almost 40 percent off stuff if you work the coupons," she said.

Separately on Saturday, J.C. Penney Co. Inc. said business was strong in its sites across the country as customers responded to sales. Some of the department store's best sellers were smaller electronic gadgets and practical gifts, such as sweaters, boots, coats and luggage.

But the chain said it wouldn't provide specific sales figures.

"In light of the challenging and volatile economic climate, and shifts in this year's retail calendar, we don't believe that reporting sales data for any one day (or weekend), including Black Friday, would provide a meaningful barometer of our business," the Plano, Texas company said in a statement released Saturday afternoon.

AP Retail Writers Anne D'Innocenzio in New York and Emily Fredrix in Aurora, Ohio contributed to this report.

Wednesday, November 26, 2008

Infosys could turn sights on SEAL Consulting in wake of failed Axon bid, sources say

* SEAL's SAP development capabilities attractive to Indian IT companies
* Other potential suitors could include HCL Technologies, Ramco Systems, Patni Computer systems and L&T Infotech
* Infosys has worked with ABN AMRO, Royal Bank of Scotland, Ashurst, and Linklaters in the past
Infosys (NASDAQ:INFY), based in Bangalore, India, could set its sights on SEAL Consulting after having lost its bid for Axon to HCL Technologies, said industry sources. 
SEAL, an SAP services provider based in Edison, New Jersey, has similar capabilities to Axon, the sources agreed. With 400 employees, it is about one-fourth the size, but could still provide a suitor with a decent market entry and client list, one industry executive explained. A banker estimated SEAL’s revenue at just under USD 100m. 
Infosys, with a USD 14bn market capitalization and USD 1.9bn in cash, would be open to acquisitions in the SAP space or other subsectors, a company insider said. The company will continue to seek acquisitions in SAP-related spaces, CFO V Balkrishnan said in the company’s most recent earnings call. SAP is one of the fastest-growing segments of its business, he added. 
But SEAL CEO Badal Patel said the company is not actively seeking a sale, and would only be interested in selling under very specific circumstances. "We have to have a right fit, the acquirer would really have to understand us and the deal would have to give our employees growth and career opportunities." 
SEAL’s capabilities are attractive to potential suitors, said a second industry executive. Installing, integrating and customizing SAP’s enterprise resource planning (ERP) software is a long-term engagement that provides stable and ongoing cash flows. 
Along with Infosys and HCL, an Indian banker identified Indian-based companies Ramco Systems, Patni Computer Systems and L&T Infotech, a subsidiary of conglomerate Larsen & Toubro, as other potential bidders for SEAL. 
But Infosys is the most logical bidder, as 12% of its revenues come from its SAP-based business, an Indian-based analyst said. HCL Technologies could be distracted by the Axon deal, Ramco may not have sufficient funds to make an acquisition, and if SEAL were to ask for more than two times revenues, in line with the Axon deal, Patni might find the valuation too high, the analyst added. 
SEAL’s Patel stressed the company was not for sale and is doing well in the soft market. "We have always thought that either we become part of another name brand and grow through that, or we take a different route, making our own acquisitions." 
The Axon bid was a bold move for the two Indian bidders, US bankers agreed, particularly as the final acquisition price of GBP 440m represented a multiple of more than two times revenue. Industry sources said they expect to see continued pursuit of US or European companies in the SAP service space. 
Infosys has worked with ABN AMRO, Royal Bank of Scotland, Ashurst, and Linklaters in the past. 

Renew Life Formulas rumored to be for sale, sources say

Renew Life Formulas, a Tampa Bay, Florida-based natural health products company, is rumored to be for sale, said two industry sources. 
Renew declined repeated requests for comment or an interview.
The privately-held company, worth roughly USD 100m, has been for sale for some time, but a sale probably has not happened because private equity buyers are struggling to get financing on deals, said a banker claiming knowledge of the situation. 
Renew has probably reached its peak in terms of growth potential, and now may be looking to sell to a larger player to continue company growth, said an industry executive. 
Recently another supplement company similar in size to Renew Life sold at 6x EBITDA, and the USD 100m valuation might also fetch that multiple, the industry banker said. 
According to a private equity executive, however, valuations in the space are about 2x revenue. 
Though private equity may have a hard time buying Renew, a smaller group of strategic buyers could be interested, the banker said. 
NBTY is “an 800 pound gorilla” in this industry, and may be interested in Renew; however, it typically buys brands for cheap, the industry executive said. 
Enzymatic Therapy also may see value in acquiring Renew, the industry executive added. CEO Randy Rose of Enzymatic declined to comment on whether his company would be interested in Renew or if he had heard if Renew Life was for sale. 
Optimum Nutrition, BSN and Universal Nutrition may acquire brands to supplement organic growth, added the private equity executive. 
Acquiring an established brand has greater value than creating a new brand, the industry executive explained.
The industry is also recession resistant because of its dedicated customer base, said the private equity executive, adding that this makes a nutritional supplement company a solid investment for private equity or strategic players. 
Renew Life is a maker of natural digestive care and cleansing dietary supplements. 

Navistar could sell foundry business, CEO says

* Japan's Hino and Isuzu Motors, and India's Amtek, Hinduja and Mahindra & Mahindra could bid, industry sources say 
* Castwell Products, TMB Industries, All-American Holdings, and Advanced Metals Group could also bid, banker says 
Navistar International (NYSE:NAV), the Warrenville, Illinois-based truck, engine and auto parts manufacturer, could sell its foundry business, said CEO Dan Ustian in an interview. The business, consisting of one foundry in Indianapolis, Indiana, and another in Waukesha, Wisconsin, produces cylinder heads and small ductile iron components for trucks and diesel engines. Ustian said the business is lagging because of labor costs, and Navistar "can't manage" it. He added that a larger domestic player could have gone for it by now if not for the credit crunch. 
The company, which does not break down its foundry revenues, declined to comment on the valuation of the business. Navistar's market capitalization is USD 1.48bn. 
Navistar's financial advisors are Credit Suisse and Bank of America, said Ustian. 
One potential bidder for the foundry business, according to Ustian, could be listed, Brazil-based Tupy. A Navistar spokesperson added that the company has engine manufacturing facilities in Brazil.
A US-based industry banker said that domestic players would also be interested in the segment and could get financing for a deal even in the current financial environment. Such companies include Castwell Products, owned by Texas-based private equity firm Hunt Special Situations Group, and Illinois-based private equity group TMB Industries, which is actively trying to build up its foundry platform. The banker said that Georgia-based All-American Holdings, run by two investors, is interested in corporate divestitures, and would "take a hard look" at assets that may be distressed. Pennsylvania-based Advanced Metals Group also likes to look at corporate carve-outs, the banker said. 
The foundry industry has an advantage when it comes to financing, as companies generally have a high level of assets to leverage, noted the banker. However, valuations have come down, and if the business is underperforming, Navistar could probably expect a valuation of only around 3x to 4x EBITDA, said the banker. 
In terms of foreign bidders, Indian foundry groups have been moving into Europe and North America and could be logical buyers, the banker said. He mentioned listed Amtek Auto, Hinduja Foundries and Mahindra & Mahindra as potential bidders. Mahindra currently has a distribution joint venture with Navistar. 
Isuzu Motors, the listed Japanese truck and engine manufacturer, could consider pursuing US foundry segments if a company such as Navistar approached, said an Isuzu insider. Isuzu's listed subsidiary, I Metal Technology, manufactures cast iron parts for vehicles, the insider said. The company does not have sales and production bases in the US, according to Isuzu's website. 
Listed, Japan-based Hino Motors could also target the foundry segment to strengthen its US business, said a Japan-based analyst. A Hino insider, however, said the company does not have immediate acquisition plans due to a shortage of funds. The insider added that Hino only sells about 5,000 trucks annually in the US. 
Navistar's stock is trading at a near 52-week-low of USD 20.74 per share. Recent news reports noted that the stock fell 19.4% after the company's announcement earlier this week that it was restructuring its truck parts segment into four separate units and cutting jobs in that segment. 
The company also reported losses in its diesel engine unit in its latest 10-K filing. Ford, one of its major diesel parts customers, purchased 25.5% fewer units compared to 2006, a result of its stricter purchasing requirements. In spite of the downturn, Ustian said that Navistar does not plan to sell the diesel engine unit, adding that pickup truck companies, whom the product is targeted at, are unlikely to spend money for the segment. 

Rent-A-Center will continue to buy competitors, plans to acquire 50 stores this year, CEO says

Rent-A-Center (NASDAQ:RCII), a Plano, Texas-based rent-to-own company, will acquire smaller competitors, said Chief Executive Officer Mark Speese. These could be companies with as few as two or three locations or as many as 75, he said. Rent-to-own companies rent furniture, appliances and computers at weekly or monthly rates and will transfer ownership to the renter after a specified period of time. 
The company, with a market capitalization around USD 807m, has a 40% market share; its only significant competitor is listed, Georgia-based Aaron Rents, with a USD 1.18bn market capitalization. Speese said that Rent-A-Center (RAC) could be interested in acquiring its next largest competitors, including Florida-based Buddy's Home Furnishing, Texas-based Bestway, Virginia-based Premier Rentals, and Indiana-based American Rentals, "if they came to us." Each of these companies has 75 or fewer locations. 
In 2006, RAC acquired Rent Ways for about USD 567m and Bear Stearns advised on the transaction. Speese said that the company may not hire a banker for smaller transactions, but would work with any banker that brought a deal to it. Its law firm is Fulbright & Jaworski. 
RAC has USD 99m in cash on its balance sheet and will have USD 100m to 120m in free cash flow next year, all of which may be used for acquisitions, to pay down debt or for share repurchase. The company usually acquires opportunistically when it is approached by potential targets, said Speese. 
Stores can be valued at six to 12 times monthly revenue each, and revenue can go from USD 35,000 to 70,000, said Speese. Sometimes RAC will close an acquired location and transfer its accounts to an existing store. 
RAC recently added check cashing, money transfers and other financial services to about 350 of its stores. 

ADA-ES would be excellent fit for Albemarle, says CFO

ADA-ES (Nasdaq: ADES), the Littleton, Colorado-based specialty chemicals company, would be an "excellent" acquisition candidate for Albemarle Corp, said ADA-ES's CFO Mark McKinnies. 
ADA-ES's activated carbon is used to reduce mercury emissions from coal-fired power plant boilers, an area that Baton Rouge, Louisiana-based Albemarle strengthened after its USD 22m acquisition in June of Twinsburg, Ohio-based Sorbent Technologies. 
Asked if he thought ADA-ES could interest Albemarle, McKinnies said: "Perhaps. They [Albemarle] have to buy their activated carbon from some place because they don't manufacture it. Obviously, with private equity partners [involved in ADA-ES], they're not the longest term holders. They're going to look at selling at some point in time and Albemarle would be an excellent candidate." 
Private equity firm Energy Capital Partners (ECP) is poised to own about 35% in ADA-ES if shareholders approve their 50/50 joint venture to construct an activated carbon plant. 
ADA-ES has a market capitalization of USD 25m, although its stock price is trading at a third of its level in June. 
McKinnies said management was not concerned that ADA-ES's low share price could draw a takeover bid, saying any would-be acquirer would have to pay ECP a breakup fee of a couple million dollars plus ECP's legal fees of USD 1.5m. He added that the board would perform its fiduciary responsibility and evaluate offers. 
ADA-ES's joint venture with New Jersey-based ECP, announced in October, is for a USD 350m plant that can produce 125 to 175 million pounds of activated carbon per year and expected to come on-line in 2010. Perella Weinberg Partners and Cargill subsidiary Black River Asset Management LLC were among those showing interest in a process run by Credit Suisse, but they only wanted to buy shares at the corporate level while ADA-ES wanted to find a participant in the activated carbon project. 
The facility will be funded with 40% equity and 60% debt. ECP and ADA-ES will have to stump up USD 70m each for the equity part, with USD 45m coming from ECP's purchase of convertible preferred shares in ADA-ES and another USD 25m coming from a prior PIPE transaction. 
To fund the debt portion of the activated carbon project, Credit Suisse was mandated to raise USD 210, expected to be a mixture of senior secured and mezzanine funding. ADA-ES expects to get a low B from rating groups and place that debt by the end of the first quarter next year, said McKinnies. If it fails to raise the debt, ADA-ES's alternatives include equity financing from ECP, said McKinnies. 
Neither of ADA-ES’s direct competitors, Holland-based Norit nor Pittsburgh, Pennsylvania-based Calgon Carbon, were as aggressive as ADA-ES felt they needed to be to meet the growth it expects in activated carbon, he added. 
ADA-ES also sells powdered activated carbon injection systems, mercury measurement instrumentation and provides mercury emission control services. The company also develops refined coal technology and sells other chemicals for coal-fired boilers.

Cronos seeking buyer for equity stake, source says

Cronos, a privately held container leasing company based in San Francisco, is seeking buyers for an equity stake in the company, according to a source familiar with the situation. It is also contemplating a public listing in 2009 and has not hired financial or legal advisors.
The company wants to find a buyer for the interest now primarily owned by BNP Paribas, the source said. Cronos was taken private in a management buyout last year for approximately USD 133.7m, and is currently 37%-owned by five members of management. The rest of Cronos was sold to Fortis, which in recent months was partially nationalized and partially sold to BNP Paribas.
Cronos may sell at least a 49% equity stake to an outside investor, and could lever up to 1.6x EBITDA, the source said. The size of the investment could range from USD 30m to USD 60m, and Cronos would prefer an investor with an 18 to 24 month horizon. The person said the investment could offer a double digit IRR in two years.
Potential buyers will likely be located outside the US, and could include a large German bank or an infrastructure firm, the source said.
The company ultimately aims to list on an Asian exchange, preferably Singapore, in mid to late 2009, and later do a secondary listing in Hong Kong.
Cronos would hire a firm like Macquarie or a bank familiar with the Asian markets to advise on a public offering. It works with a local law firm in San Francisco and has informal contacts at Proskauer Rose in New York. 
Cronos provides intermodal marine container leasing services, supplying dry cargo, refrigerated and tank containers. Its containers are about 25% generic and 75% specialized, or designed around specific cargo. Its customers include major agricultural and chemical companies.
It manages 800 cost-equivalent units (CEU), generates USD 160m in revenues per year and has 80 employees globally, the person said. Its competitors include three listed companies: Textainer, based in Bermuda, TAL, based in New York, and CAI International, based in San Francisco. 

Procter & Gamble could make further divestitures in battery, food and other units, sources say

* Duracell could be sold once market conditions improve 
* Pringles, Braun electric shavers and toilet paper business also potential sale candidates 
* P&G may prune some haircare products, but is unlikely to sell any major brands 
* Company used Morgan Stanley, the Blackstone Group, Davis Polk & Wardwell, Jones Day and Cadwalader, Wickersham & Taft LLP on Folgers divestiture 
The Procter & Gamble Company (NYSE:PG), in divestiture mode, could sell brands in its battery, food, appliances, toilet paper, and hair care units, industry experts said. 
Businesses that could go on the block include: Duracell, Pringles, Braun electric shavers and the company's toilet paper business, said the experts. 
The Cincinnati, Ohio-based company, which recently sold Folgers, its coffee business, for USD 3bn, is likely to continue divesting, two industry analysts said. 
After making a number of major acquisitions, the company is probably more likely to be a seller than a buyer of assets, P&G CFO Clayton Daley said, speaking during a Q&A session at a Deutsche Bank conference this June. 
Two units that appear primed for sale are P&G’s battery business, Duracell, and its one remaining snack business, Pringles. The company hired the Blackstone Group to review Folgers, Pringles and Duracell in 2007, according to a prior report from this news service. 
Duracell could be next on the divestiture list, as it has seen a decline in sales, said the first analyst. Whereas for the fiscal year 2008, volume for batteries was up mid-single digits, it was flat for the the company’s latest first quarter. Further, in the quarter, global market share of general purpose batteries declined about one point. However, P&G is waiting for the financing markets to revive before spinning off or selling Duracell, because the most likely buyers for Duracell are private equity firms, a first banker said. 
Pringles could have a harder time finding potential buyers, because it would have to be sold through a Reverse Morris Trust, a transaction structured to allow a tax-free merger between two companies, because it has a higher tax basis than Duracell, said another banker. Finding a Reverse Morris Trust partner can be difficult given size requirements for the procedure. For instance, Kraft Foods has been thought to be interested in Pringles, but would be too large for a trust merger, the banker explained. 
Besides Duracell and Pringles, other units likely be moved to the divestiture list include Braun electric shavers, said a second industry banker. Proctor & Gamble CEO AG Lafley told analysts in the company's latest earnings call that P&G has been shutting down and “moving away” from some parts of the Braun appliance portfolio. The company divested its Braun thermometer and blood pressure monitors last year. 
Another business P&G is likely to review is its toilet paper business, a third industry banker said. P&G owns Charmin toilet paper, as well as Bounty kitchen towels and Puff facial tissues. 
As with any of its segments, P&G may prune small brands within its hair care division, which has limited growth prospects, two of the bankers agreed. But it is unlikely to sell any of its larger brands. In the past, Alberto-Culver has sought to buy the Aussie brand from P&G, but P&G has not been open to a sale, the second banker noted. 
On its Q1 earnings call, P&G's Lafley noted subpar performance on the part of Wella, the company’s German salon hair care subsidiary. However, he said P&G was working on turning Wella around, and defended P&G’s other hair care brands, saying that they were the best performers in the sector. 
The company has spent too much money assembling its hair care portfolio to abandon it, the first banker said. It recently bought Frederic Fekkai, a high-end salon and retail brand, another noted, and so seems inclined to fix its hair care business right now. P&G is probably shifting toward the high-end hair care spectrum, as is evident in its purchase of Frederic Fekkai, the first banker noted. 
Proctor & Gamble’s entire hair care unit is doing poorly versus its peers such as Alberto-Culver, noted the second industry banker. For the fiscal year ended June 2008, the company reported that its global hair care market share was in line with the prior year's level. Professional hair care volume, however, declined by mid-single digits, with the decline in care and styling offsetting the growth in color products. In the company’s latest Q1 results, it reported that globally all major hair care brands contributed to volume growth. But Professional hair care saw a low single digit volume decline. Hair care is included in P&G’s beauty segment, and the company does not break out sales and earnings for hair care. 
Proctor & Gamble tends to make big divestitures every two years, the second banker noted. The company spaces out its divestitures in case such sales dilute the company’s results, the second banker explained. 
The company seems unlikely to divest its pet care business, focusing more on trying to turn it around, this news service recently reported. According to the first analyst, the company recently brought in new management to try and revive the brand, and seems committed to staying in pet care for a longer term. 
Proctor & Gamble, which has a market capitalization of about USD 192bn, declined requests for comment. It used Morgan Stanley, the Blackstone Group, Davis Polk & Wardwell, Jones Day and Cadwalader, Wickersham & Taft LLP on the Folgers divestiture. 

AGCO attempting buyout of Chinese manufacturer, CEO says

* In talks with Foton Lovol Heavy Industries, says company insider 
* Company will look at privately-held opportunities with fewer obstacles, banker says 

AGCO (NYSE: AG), a Duluth, Georgia-based agricultural equipment manufacturer, is considering buying out a privately-owned Chinese manufacturer, said Chairman and Chief Executive Officer, Martin Richenhagen. The company is in talks with Foton Lovol Heavy Industries, said a Foton Lovol insider. 
“Basically we are working in two directions,” said Richenhagen in an interview with this news service during a visit to Brazil. “One is a greenfield factory for manufacturing drive trains for tractors under 100 kW, which will help us have low-cost components for our factories all over the world.” The second direction is the takeover of a privately-held company, currently under negotiation, he added. 
AGCO expects to end the year with about USD 600m in cash and almost USD 9bn in revenues, said Richenhagen, adding that the company also plans to make a large acquisition of up to USD 3bn in six months, as previously reported by this news service. 
In China, AGCO uses an advisor that is familiar with the financial situation that also provides good due diligence, said Richenhagen, declining to name the firm. “We typically use an auditor, a financial advisor and a legal advisor.” 
There are not many options in China for tractor acquisitions, commented an industry source, who is CEO of an international agricultural equipment manufacturer in Brazil, and knows AGCO's movements. The Chinese Tractor Owners Association reported nine tractor manufacturers as members: Beiqi Foton Motor Co. holding of Foton Lovol Heavy Industries; Benye Tractor Corp.; Dongfeng Agricultural Machinery Group Co. (DFAM); Hubei Shenniu Tractor Co.; Jiangsu Jiangdong Group Co. Ltd.; Jiangsu Yueda Yangcheng Tractor Plant; Jiangling Tractor Co.; Shandong Tractor Works, and Weifeng Machine Works. 
Deere & Co, the Illinois-based maker of agricultural equipment, acquired Benye Tractor last year. Among the other options is Foton Lovol Heavy Industries, whose executives have said that they could consider M&A moves. Foton Lovol (formerly known as Shandong Foton Heavy Industries) is the biggest manufacturer of tractors and combine harvesters in China, registering CNY 9.5 bn (USD 1.39 bn) in 2007 sales, and is a subsidiary of Beiqi Foton Motor Company Limited. According to a past report on this news service, the company had IPO plans and was considering long-term M&A moves in 2006. 
A Foton Lovol insider said the company has been in talks with AGCO for business cooperation for a while, which includes a possible M&A transaction. The source declined to reveal how long the two companies had been negotiating, but said the two parties are trying to work out a plan that can achieve synergies for both sides. The source said the major issue that slowed down the talks is whether Foton Lovol would let AGCO take a controlling position: “AGCO seeks a buyout, or at least a controlling stake, while we would rather not sell a controlling stake.” Beiqi Foton would oversee the final process, because the company is its subsidiary, but Foton Lovol would negotiate the specific terms, said the source. 
A Chinese banker said AGCO tried to takeover several listed Chinese agricultural equipment makers in the past few years, but the deals have failed for the same reason. “AGCO is often interested in takeover deals. But most listed agricultural equipment makers in China are state-owned, and they are not likely to accept takeover bids from overseas counterparts.” The source said that AGCO is looking now at targets in the private sector rather than state-held industries, because they would encounter fewer obstacles in negotiations. 
In a report published by this news service in September, Richenhagen said he had identified several candidates and was expecting to complete a deal by the end of the year. In January 2007, Richenhagen confirmed its interest in China-based First Tractor, and in Case New Holland (CNH) or German Claas, but both companies informed at the time they were not for sale. 

Acesco vigilant for opportunistic buys in Peru, Mexico and the US; sale not ruled out, export director says

Acerias de Colombia (Acesco), the family-owned Colombia-based steel group, could take advantage of the global turmoil to make opportunistic buys, preferably in Peru, Mexico or the US, export director Rafael Rosso said. 
According to Rosso, Acesco has annual revenue of roughly USD 5bn and has some 500 employees. When asked if it would look towards an IPO in the future, he said it would remain a family-owned company in the short term, but it could seek an IPO on the Colombian bolsa within the next five years. 
“We have an acquisition department inside the company, which is always looking for opportunities, that shows Acesco´s acquisition interest. We have special interest in the Peruvian, Mexican and US markets,” he noted. 
Acesco has experience in M&A, having acquired several Costa Rica-based companies like Metalco, a galvanized steel products company. Two years ago it bought Ecuador-based Rooftec, which produces steel construction products. 
According to Rosso, Acesco has been approached several times with takeover and stake sale offers. “It has been difficult to accept an offer because there are three generations involved in the decision-making, but it is a matter of time. The global trend is inclined towards mergers, especially in the metals sector, I don't see how we can stay behind,” Rosso said. 
Before the financial crisis, Acesco and Brazil-based Votorantim announced it was planning to build a steel plant in Colombia with an investment of USD 1.5bn. When asked if the project would move forward, Rosso said that “there is no perfect time to invest in a steel plant, the perfect time is when companies decide to do it. This is the correct time for the benefit of our country and for South American metal companies,” Rosso added. 
A US industry analyst said he did not see the current M&A market as conducive to deals. Buyers with capital may be looking opportunistically for targets but sellers are not plentiful, he said. He questioned whether the company was looking at hostile deals and what kind of gunpowder it had if it were to set off on making buys in this market. Steel companies interested in acquiring could be making wish lists right now as far as targets, but as far as timing is concerned it could be a while before it was possible to conclude a major transaction, he said. He added that he expects to see the market bottom at some point in the first half of 2009, but cautioned that it could be some time before a buyer and seller would likely see eye-to-eye on value. 
When asked if Votorantim could present itself as a suitor for Acesco, Rosso declined comment, saying it has not happened yet. 
For upcoming deals, as well as for its past acquisitions, the company hires several law and accounting firms, which Rosso declined to name. He said it would hire international and local advisors for any future M&A transaction. 
A Votorantim spokesperson did not return calls for an interview. The Brazilian conglomerate reported in October losses on derivative investments, and after that sold CanaVialis and Alellyx to Monsanto. It is in talks to sell Banco Votorantim and cancelled its planned stake purchase in Aracruz. The Brazilian group concluded the 85% acquisition of Peru-based zinc and lead miner, Atacocha on 31 October. If the conglomerate completes the sale of Banco Votorantim, it will recover its cash position and could pursue new acquisitions, commented a Brazilian sector analyst. 
“The only potential target in Peru is Corporacion Aceros Arequipa,” said a Peruvian analyst, adding that the only other Peruvian steelmaker is Siderperu, owned by listed Brazilian conglomerate Gerdau (NYSE: GGB). “The entrance of Gerdau into the Peruvian market, and the international turmoil could push the company to seek new capital,” said the analyst. According to the analyst, Aceros Arequipa announced last year a USD 80m investment to expand its production from 550,000 tons to 900,000 tons, after refusing several approaches from big players like Arcelor-Mittal (NYSE: MT), Argentina-based Techint and Brazil's Gerdau. “However, that happened last year, and now, with the crisis, it could be different,” said the analyst. 
Established in 1966, Corporacion Aceros Arequipa produces corrugated iron, wire, profiles, and other steel products for the construction sector. The company registered approximately USD 500m in revenues last year. 

Lawn Doctor could consider strategic options more actively when markets improve; has held preliminary conversations with two banks, exec says

Lawn Doctor has drawn interest from financial as well as strategic suitors, said Scott Frith, vice president, marketing and franchise development. 
But though open to approaches, at the moment the USD 90m in revenue company is not actively pursuing them, he said. “The multiples would not be as attractive.” Interest has been expressed for a minority, majority, or an outright buy of the Holmdel, New-Jersey-based lawn-care franchise. 
The company could, however, consider a buyer more actively when markets improve, said Frith. If it were to consider a sale, the owners would want to continue to own a minority stake in the business and participate in its growth, he added. Robert Magda and Russell Frith, his father, are the primary owners of the closely held business. 
Lawn Doctor has had preliminary meetings with two investment banks that would represent the company in any potential transaction. It uses DLA Piper as its law firm. 
The company has received strong interest from private equity players who like the scalability, free cash flow and predictability of a franchise business, added Frith. Though financial buyers, who understand the franchise business, continue to be interested, access to capital has been restricted and multiples are lower, he added. 
There are pros and cons associated with each suitor, said Frith. Whereas private equity firms tend to run companies as going concerns with access to resources, there is also the strategic advantage of partnering with a franchise company that has other such businesses. 
Founded in 1967, Lawn Doctor currently has around 475 franchise locations nationwide. Business has been slow for franchisers as the main sources for funding a franchise, which include converting 401k into equity, home equity and SBA lending, are drying up, Frith noted. However, the retail consumer or homeowner part of the business has been healthy for Lawn Doctor, he said. The company has an affluent consumer base, and people still want their homes to look good, he added. 
Lawn Doctor could look at acquiring smaller independent lawn care businesses through its franchises as part of its growth plans going forward, said Frith. Though the decision has not been made as yet, there is the opportunity as a number of independents get squeezed out of business, he added. The company would look at making acquisitions in markets where demand for its services exceeds its market share. Lawn Doctor, which has a strong balance sheet, would extend financing to its franchises for making such acquisitions, he added. 
With the price of goods and fuel increasing, the company does expect to increase prices, said Frith. It also expects to be bundling more services together to provide a better value proposition for its customers. Services provided by the company include lawn and landscape care, as well as pest control. 

Sunday, November 16, 2008

Sun Bancorp seeks several small or one large acquisition, CEO says

Sun Bancorp (NASDAQ:SNBC), a more than USD 3.4bn asset-size bank based in Vineland, New Jersey, is interested in making several small, or one large, acquisition, said CEO Thomas Geise. 
He said Sun Bancorp, holding company for Sun National Bank, finds central New Jersey markets attractive in which to acquire, due to high demographics, and could look to increase market share within its current footprint, including in Cumberland County and Cape May County markets in the southern part of the state. 
He said Sun is evaluating whether to apply for the federal government’s Troubled Assets Relief Program, under which it could get USD 90m, but is “well positioned” to make acquisitions, including a larger one, without that money. “It is fair to say,” that Sun is in relatively good shape, given the current state of the economy and the financial services market, said Geise. 
Past financial advisors to Sun, whose current market capitalization is nearly USD 230.9m, have included Janney Montgomery Scott, according to regulatory documents. It had been represented by the law firm of Malizia Spidi & Fisch, and its current auditor is Deloitte & Touche, also according to regulatory documents. 
Two industry sources agreed with Geise that Sun was in a relatively good position to make one or more acquisitions, despite its third quarter where bad loans cut into its profit. They noted that Sun appears to have just received proceeds from the sale of its six Delaware branches to WSFS, completed this week, and that Sun could potentially greatly benefit from acquisitions. 
In Cumberland County, a potentially well fitting acquisition of some scale, said the sources, could be Vineland, New Jersey-based Colonial Bank. With more than USD 501.7m in assets and owned by NASDAQ-listed Colonial Bancshares, it has deep roots in the community and could potentially work very well for Sun there, said the sources. 
A larger potentially well fitting acquisition, said the sources, could be Cape Bank, which, with more than USD 1.2bn in assets, is the largest community bank in Cape May and neighboring Atlantic County, where Sun also has a substantial presence. 
For a central New Jersey acquisition in a high demographic area, said the sources, a potentially good fit for Sun could be Oakhurst, New Jersey-based Central Jersey Bank. With more than USD 534.5m in assets and owned by NASDAQ-listed and Long Branch, New Jersey-based Central Jersey Bancorp, it is located in Monmouth County, at or near one of the 50 highest income US counties, according to government figures. The sources said Central Jersey's operations could fit well with Sun’s goals and added that Central Jersey Bancorp too is in relatively good shape. Central Jersey Bancorp had record net income in this year’s third quarter of USD 1.03m, and had net income of USD 2.3m for the first nine moths of this year, according to regulatory filings. Central Jersey Bancorp’s market capitalization is just over USD 58.8m. 
Sun Bancorp reported net income of USD 4.1m in this year’s third quarter, down from USD 5.9m in last year’s third quarter, according to regulatory documents. 
Colonial, Cape, and Central Jersey did not comment. 

Old National could look at National City branches, other acquisitions after approval for treasury capital injection, CEO says

Old National (NYSE:ONB), the Evansville, Illinois-based bank, could look at acquisitions if it decides to take the USD 150m capital injection that has been approved by the Treasury, said Chief Executive Officer Bob Jones. 
The bank, whose market capitalization is currently more than USD 1.2bn, is waiting for the Treasury to issue details of the plan before it decides whether or not to take the capital, said Jones. "We want to make sure we understand the covenants and restrictions involved," he said. 
If it decides to participate, it would use some of the funds for lending and some for acquisitions in its core markets of Indianapolis, northern Indiana, and the area between Indianapolis and Louisville, said Jones. 
Old National has worked with a number of legal and financial advisors in the past, and would decide on advisors for potential deals "depending on the deal, depending on the market," said Jones.
For its last acquisition, that of Mishawaka, Indiana-based St Joseph Capital, an approximately USD 500m asset-size bank purchased for USD 75.6m, which closed early last year, Old National was advised by Sandler O'Neill & Partners and its legal counsel was Ice Miller, according to regulatory documents. Old National's auditor is Crowe Chizek and Company, also according to regulatory documents. 
Jones told this news service in April that branches of National City that would be divested after it was taken over, would be of interest to Old National. If branches of National City are divested as a result of PNC's purchase, Old National is interested in them, said Jones.
The Louisville market is not highly concentrated, according to government Herfindahl-Hirschman Index calculations, thus compelled divestitures may not be occurring on the basis of high concentration, industry sources familiar with regulation and market concentration issues said. However, National City ranks number one there in terms of deposit market share, with more than USD 3.9bn in deposits, while PNC ranks third with more than USD 2.1bn, according to industry figures, thus giving rise to the possibility of divestitures, either voluntary or otherwise, said the industry sources. A spokesperson for National City told this news service last week "that there will be some divestitures of branches with strong market share" and that Louisville was one of the markets where there is "overlap." 
Old National could also look at acquiring regional banks that are having problems, said Jones. 
When asked about acquisition multiples, Jones pointed to the PNC/National City deal at just over book value as a possible barometer for future deals, while saying that in the end, the market will determine deal values. 
In Fort Wayne, Indiana's second largest city, Old National could likely benefit adding to its one-office presence there through a potentially opportune acquisition, such as Tower Bank & Trust, said the sources. With nearly USD 691.3m in assets as of 30 June, according to regulatory documents, Tower Bank, owned by NASDAQ-listed and Fort Wayne-based Tower Financial, is concentrated in Fort Wayne, an important Indiana market, and can be seen as trading at less than 0.9 price/book, the sources said. Tower has a market capitalization of USD 34.55m. Its shares closed today at USD 8.46, down from a 52-week high of USD 14.24. Tower did not comment. 
A bank that could be seen trading at about 1.15 price/book, based on its current price and most recent quarter, which could potentially fit well with Old National, said the sources, is Bloomington, Indiana-based and NASDAQ-listed Monroe Bancorp. Monroe has the number one deposit market share in the Bloomington market, and could boost Old National in other areas, including adding a presence in Noblesville, just north of Indianapolis, where Old National has a significant presence. The sources said the fact that Old National holds the number four - a fairly relatively distant number four - market share position in Bloomington may not preclude any deal based on regulatory grounds. A deal could be greatly beneficial to Old National. Monroe has a market capitalization of more than USD 63.2m. Monroe CEO Mark Bradford declined to comment. 
Old National has 20 days from the date of approval by the Treasury, which was 27 October 2008, to decide whether or not to use the funds. 
The company has not decided how much of the capital would be allocated for acquisitions and how much would support bank business, such as lending and the development of its local communities. "We have an important role to play in economic development," said Jones. 

InBev could divest Labatt to mitigate antitrust concern in Anheuser-Busch deal, sources say

InBev, the Belgian brewing giant, may need to divest Ontario, Canada-based Labatt in order to complete its acquisition of Anheuser-Busch, according to industry sources. 
Once InBev completes its acquisition of Anheuser-Busch, it will control 50% of the US market, a level which could raise antitrust concerns with regulators, said an industry executive. While the executive had no knowledge of plans to divest the Labatt brand, he described such a move as a logical maneuver to scale back InBev’s North American presence and placate regulators. 
Anheuser-Busch has distributed InBev products since 1 February 2007 without raising any antitrust flags, though InBev’s Canadian portfolio, including Labatt, was excluded from that arrangement. Another industry source speculated that the exclusion of the Canadian brands was likely borne out of the companies’ concern that antitrust regulators would get involved. Now that all products will be coming under one umbrella, the source thought that the companies must deal with the antitrust implications that they had likely attempted to sidestep. 
As previously reported, an industry source said that the Department of Justice (DoJ) was “intensely scrutinizing” issues regarding Labatt market share in New York. This signals that Labatt would be a likely divestiture candidate, as there would be significant market overlap in the northeast between Anheuser and Labatt. 
This would not be the first time InBev has had to divest a brand in order to gain approval for an acquisition. In 2001, InBev sold its UK-based Carling brand to Coors in order to gain approval for its acquisition of UK-based Bass Brewers. 
The Canadian beer industry is dominated by Labatt and Coors and a likely acquirer would be a beer company looking for an entry into the Canadian market, said the executive. 
The industry source suggested that San Antonio, Texas-based Gambrinus Company; Wall, New Jersey-based Crown Distributors; and White Plains, New York-based Heineken USA could be interested in acquiring Labatt. None of them returned calls for comment. 

Akeena Solar could be targeted by partners Suntech or Kyocera in early 2009, sources say

Akeena Solar (NASDAQ:AKNS), the Los Gatos, California-based solar power system designer and installer, could be targeted by business partners Suntech or Kyocera in early 2009, according to industry sources.
CEO Barry Cinnamon said Akeena is looking at all opportunities and would do what is in the best interest of the shareholders when asked if the company could be acquired. He said Akeena is in ongoing dialogue with Japan-based Kyocera, which manufactures Akeena’s Andalay solar panels, and China-based Suntech Power Holdings, which distributes the Andalay panels in Europe, Australia and Japan. He added that Akeena, which has a USD 84m market capitalization, has what foreign solar manufacturers are looking for -- a good footprint in the US and a solid product.
Cinnamon, who owns 30% of the company, said Akeena has in-house counsel and uses DLA Piper as its legal advisor. He added that the company has worked in the past with a number of investment banks and advisors, but is not looking to hire any at this time.
A US analyst said Akeena will have a tough time getting the capital it needs in today’s paralyzed capital markets, and said he could see the company being acquired in the first half of 2009. Akeena has a good product that makes it more attractive than its competitors, the analyst added.
In the last year, Kyocera and Suntech have signed licensing agreements with Akeena, allowing them to manufacture Akeena’s Andalay solar panels and distribute them around the world. That would make a strong case for either of the Asian photovoltaic manufacturers to acquire Akeena, said the analyst.
A recent analyst report valued the company at USD 6 per share, which "reflected the likelihood that Akeena will have far fewer options in 2009." Akeena is currently trading at USD 2.92, up from its 52-week low of USD 1.90 a share a few weeks ago, but down dramatically from its 52-week high of USD 16.80.
A Suntech source said: "We indeed have the intention to talk with Akeena about any acquisition possibility. In the meantime, we now have enough funds to do some overseas acquisitions." The source declined to disclose whether Suntech has appointed a financial advisor for the possible acquisition of Akeena.
Wuxi-based Suntech, which has a USD 2.17bn market cap, had 2007 net income of USD 171m.
A Kyocera company insider said the Kyoto-based company does not have immediate M&A plans, but could always look for M&A opportunities to expand its sales channels and technological expertise, adding that it could grow its solar business in North America.
A Japanese analyst said Kyocera’s first priority is to improve its financial situation and given this could not look for M&A opportunities. However, the analyst could not rule out the possibility of Kyocera speaking to Akeena about its solar business.
Kyocera posted group sales of about JPY 1.2trn (USD 12bn) in the year ended in March 2008 and its market capitalization is about JPY 1trn (USD 10bn). 

Coty could look to expand presence in emerging markets through opportunistic acquisitions, CFO says

Coty could seek opportunistic buys in emerging markets to boost its fragrance, skin care and color cosmetics portfolio, CFO Michael Fishoff said in an interview. The company is a New York City-based perfume business. 
Current market conditions are favorable for deal making. “There are values to be had,” Fishoff said. The move is expected to contribute to the privately-held company’s immediate goal of reaching USD 5bn in revenues. Coty has USD 3.3bn in revenue and is owned by German consumer goods company Joh A Benckiser. 
Coty is equally interested in fragrance, skin care, and color cosmetics buys with revenues of USD 50m or more, said Fishoff. The company wants to fill small voids in its fragrance portfolio, a 60% sales generator, and there is also potential for color cosmetics and skincare. 
Attractive targets should have a presence in emerging markets such as Russia, India and other parts of Asia where Coty’s presence is underdeveloped, Fishoff explained. Europe generates 55% of sales, America 33% and Asian and other markets contribute 12% of sales. 
Coty will also continue to look at buys domestically, Fishoff said. The company has identified a few targets, but has not yet completed due diligence. “If a good opportunity came along we would acquire immediately,” he said. Murad and Bare Escentuals, both based in California, could be possible targets, said Fishoff, when questioned. 
In India, the skin care and fragrance brands of listed majors Hindustan Unilever (HUL) and ITC could be of interest to Coty, said a Mumbai-based analyst. But it is unlikely either company would consider divesting those units at this point, he added. 
Coty’s Fishoff said it was his understanding that Unilever had no plans to dispose of HUL’s skin care and fragrance business. He was not familiar with ITC. 
ITC told this news service previously that it was seeking acquisitions in the FMCG space. An HUL spokesperson declined comment on HUL’s acquisition strategy. 
Another option for Coty could be to engage in a joint venture with a domestic brand after partnering with a strong distributor, said an Indian banker. “Why does Coty want to come to India?” the banker asked. “Does it want to sell a few products at high volumes or many products at lower volumes?” Especially if Coty is after the latter, it would need to partner with a national retail chain with a strong distribution network, he said. 
While larger companies might not be willing to sell at this time, many small companies could see advantages from a tie-up – especially one with a global player, a second banker said. He pointed to Emami’s October acquisition of Zandu Phamaceuticals Works as evidence of M&A interest in the space. 
But those companies may not meet Coty’s size requirement, the analyst said. In India, not many companies hit USD 50m in sales for their skincare and fragrance brands alone, he explained. The entire skincare market in India is thought to be worth about USD 500m, with the fragrance and deodorant market accounting for a lot less. Potential deals could be done at 1x-2x sales, the analyst added. 
JPMorgan has been mandated by Coty for past M&A deals, but new advisor approaches would be considered, said Fishoff. “We are constantly looking at acquisitions and that [identification of targets] is a challenge for bankers right now.” It has used law firm Covington & Burling for past deals. 
Acquisition financing would be generated via existing cash flow, reserves from parent Benckiser and tapping the financial markets, Fishoff said. “There is available capital for deals, especially with interest rates down.” 
Outside of opportunistic buys, the company plans to grow through international alliances and organic growth. Deloitte & Touche provide accounting services. 

BRS Labs to shop for a banker in January, expects to sell to larger company in six to nine months, chairman says

BRS Labs, a private Houston, Texas-based company that specializes in using artificial intelligence for video surveillance, plans to look for a banker in January, said Chairman and CEO Ray Davis. 
The company is not ready to hire a banker today, as it is in the midst of proving its technology’s commercial viability. Still, BRS Labs is progressing “very quickly” and expects to sell to a larger entity in six to nine months, he said. 
BRS Labs has contracts in the pipeline worth USD 100m, Davis said. However, the company expects to be valued based on its intellectual property and on the potential uses of its technology, rather than on its revenue. BRS Labs expects an exit north of a billion dollars, Davis said. 
An industry analyst said, and an industry banker agreed, that New York-based L-3 Communications is one company that could take a look at BRS Labs. The reason, according to the analyst, is that L-3 is always looking at companies that can add to its portfolio of security technology. 
Among L-3’s products are surveillance and reconnaissance systems. The company’s customers include the Department of Defense. 
The industry banker said that another company that could find the technology of BRS Labs fitting, is NYSE-listed and Melbourne, Florida-based Harris Corporation. Harris too, has a focus on the government sector, including the Department of Defense and NASA, and is also known for helping to provide a secure White House/Kremlin link during the early days of the Cold War, said the banker. Harris has a market capitalization of more than USD 5bn. 
The banker described a sales price tag of USD 1bn or more seemingly "a best case scenario," but said he could not rule it out either. He said that at a lesser price range, BRS could be a potential fit with a company such as Fairfax, Virginia-based and NASDAQ-listed ManTech International. With a market capitalization of nearly USD 1.9bn, ManTech provides technology and solutions for national security programs for the intelligence community and the Department of Defense. 
Davis founded BRS Labs in November 2005 - this is his eighth company. The company has received funding of USD 23m. The company’s business plan is to build a product, prove its viability, and then sell to a larger company, he said. 
Behavioral Recognition Systems (BRS) Labs is a software company that developed an adaptive learning video surveillance algorithm called AISight. The patented software analyzes video feed and makes observations about normal behavior based on the activity in that environment and then flags events that are out of the ordinary. 
BRS Labs’ technology is used for surveillance of subways, military targets, borders and embassies. The technology has fewer false positives and requires less human intervention than standard surveillance programs, Davis said. 
BRS has more than 35 engineers working in the area of artificial intelligence.