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 corporate financing week
Exclusive news, views and analysis on global M&A activity, IPOs and private equity
www.corporatefinancingweek.com A PUBLICATION OF BUSINESS MONITOR INTERNATIONAL LTD.

december 06 2010
VOL. XXXVI, NO. 48
Market Leader
ISSN: 1064-1912
When is a BRIC not a BRIC?
Market Leader 1,5-7 Although it has become customary Brazil Blossoming
to bracket together Brazil, Russia, Brazilian M&A Activity In Volume (US$) And Deal Count

Deal Of The Week 1 India and China under the collective

70
Volume (US$bn) LHS
160

heading of BRICs, not all of these 60 Deal Count RHS 140

Global 2-4 economies display the characteristics 50 120

that give the group its perceived 100

Emerging Markets 5-7 40
common identity. 80

For CFW, the term BRIC really 30

US M&A Record 6 60
applies to a set of economies that 20
40
are fast-growing, drawing in foreign 10
Asia 7-9 20
capital and, crucially, are also in the
process of decoupling themselves
0 0
EMEA 10
Mar-01

Mar-02

Mar-03

Mar-04

Mar-05

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10
Sep-01

Sep-02

Sep-03

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10
from the West and becoming
Latin America 10-12 influential economic forces in their Source: BMI

Global Top 10 M&A 11
Key Market Views 12
Closing Bell 12
own right.
In corporate financing terms, this means that they should boast M&A across a
range of sectors – which in turn requires a fairly advanced degree of economic
diversification – and be engaged in cross-border deal-making that goes both ways.
These qualities are chiefly applicable to India and China. They apply less to Brazil,
and arguably not at all to Russia.

(continued on page 5)

Table of the Week Deal Of The Week

Leveraged Loan Issuance Y-T-D
Region/Nation Value Volume % Chg
The Private Equity Snow Forecast
(US$bn) y-o-y Winter is here! And with winter sports enthusiasts busy packing their skis and
Worldwide 455.3 1,213 28 heading off to the slopes, Denver-based private equity (PE) fund KSL Capital
Americas 377.2 1,074 61 Partners has skipped the lift lines and acquired a whole resort. Indeed, KSL
Africa 2.5 2 -62 has hit the slopes with the acquisition of the bulk of the shares in Squaw Valley
Middle East 0.2 1 -98 Development Company, the owner of California’s Squaw Valley USA ski resort.
Europe 55.5 81 -32 The buyout fund has committed itself to spending US$50mn over the next three to
Asia (ex. Japan) 12.3 41 -42 five years on the resort, which includes 2,850 vertical feet of skiing and the Village
Japan 7.6 15 156 at Squaw Valley. Interest in winter sports resorts appears to be snowballing: last
BRIC 10.1 21 -36 month Vail Resorts announced it was acquiring the Northstar-at-Tahoe ski area in
Source: Thomson Reuters a US$63mn deal. Squaw, which played host to the Winter Olympics back in 1960,
also becomes the second former games venue to fall into the hands of PE: Fortress
Investment Group LLC-owned Intrawest ULC currently operates Whistler
Blackcomb Ski Resort, which was home to the 2010 Vancouver Olympics.

Check our website www.corporatefinancingweek.com during the week for breaking news and updates
Corporate Financing Week www.corporatefinancingweek.com December 06 2010
Global
Pharma M&A: A Way Down From The Patent Cliff?
The headwinds facing the pharmaceutical industry could
lead to more leading drugs companies opting for M&A
as a route of expansion in 2011. Pharma companies are
facing a wave of patent expirations and challenges, dubbed
the ‘patent cliff’ by industry observers. Competition from
generic medicines, which can be 20-80% cheaper than
the branded original, could severely dent revenue streams
from lucrative product lines. Patents set to expire include
Pfizer’s US$7.5bn a year Lipitor (atorvastatin), Bristol-
Myers Squibb’s US$5.6bn Plavix and GlaxoSmithKline’s
US$4.7bn Advair Diskus (fluticasone and salmeterol). Eli
Lilly’s exposure to patent expiries, which include the loss
of its top-selling anti-psychotic Zyprexa (olanzapine), is
thought to amount to 40% of its sales, while that of the
UK’s GlaxoSmithKline could be 32%. Pharma companies’
ability to develop new drugs, a hit-and-miss process at the
best of times, is likely to be constrained by the slashing of
health and university spending across developed markets.
Switzerland’s Roche has announced that it is to cut costs by
CHF2.7bn, including a 6% staff reduction, while Pfizer will
be shedding 19,000 jobs.
Acquiring new products through takeovers has been a
popular stop-gap for many of the major pharmaceuticals
since the late-1990s. This is the thinking that drove last
year’s blockbuster pharma deals, including Merck &
Co’s US$41bn takeover of Schering Plough and Pfizer’s
US$68bn purchase of Wyeth. This summer, French
pharma giant Sanofi Aventis launched a US$18.5bn hostile
takeover bid for US biotech firm Genzyme, after cutting
its 2010 earnings forecast in July because US regulators
approved a generic version of its Lovenox (enoxaparin)
blood thinner. European biotech company Actelion has
said that it has been in ‘regular dialogue’ with industry
participants, triggering market speculation that it could
be acquired by US-based Amgen. Meanwhile Japanese
drugmaker Takeda has asked its US subsidiary to explore
M&A possibilities as part of its development strategy.
The chief caveat of a strategy that involves blockbusters
buying other blockbusters is that these deals often do little
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to diversify or innovate the group other than expand the
balance sheet. Roche acquired Genetench for US$47bn
last year, only for it now to be the main target of the parent
company’s cost-cutting and job-shedding drive. Any
acquisition of Actelion would be a leap of faith given that
its top-selling Tracleer (bosentan) hypertension drug falls
out of patent protection in five years. The buyer would have
to keep their fingers crossed that its late-stage compounds
fulfil their promise.
Deal premia for the sector can get a bit on the high
side, too. Johnson & Johnson paid a premium of 58%
in its acquisition of Crucell earlier this year, while in
May, Japan’s Astellas Pharma bought cancer drug
manufacturer OSI Pharmaceutical for 68% more than
the target’s average share price during the 30 days since
the announcement of the deal. For the moment, Sanofi
Aventis is refusing to budge from its US$69 per share
offer for Genzyme, despite the objections of the target
company’s board. The impasse could be broken if
Genzyme’s management is willing to explore settling for
a lower price provided additional rewards can be made to
the shareholders based on the performance of its leukaemia
drug Campath (alemtuzumab).
If big pharma is to go down the acquisition route, it may
make more sense to target the fastest growth areas, such as
generics and emerging markets. Indeed, some companies
have started doing this. In 2009, Pfizer bought 40% of
Brazil’s off-patent medicine maker Teuto, while last month
Sanofi Aventis acquired Chinese over-the-counter medicine
maker BMP Sunstone. The best way to secure growth for
the long-term is of course through the development of new
ground-breaking drugs, but for as long as these remain thin
on the ground CFW expects pharmaceuticals to settle for
acquisitions as the next best thing. Some of these will be in
EM, but the penchant for blockbuster-on-blockbuster M&A
is also likely to continue, if the past ten years are anything
to go by. That said, the pool of eligible large independent
biotechs is shrinking. Apart from Actelion and Genzyme,
there is basically only Amgen, Gilead and Biogen left.
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Corporate Financing Week www.corporatefinancingweek.com December 06 2010
Blackstone & Greenergy Emerge Bid For UK Downstream Assets
Private equity giant Blackstone Group and privately-held
fuels distributor Greenergy have emerged as potential
buyers for British downstream assets being divested by
Total, ExxonMobil and Murphy Oil, the Financial Times
reported on November 25 2010, citing sources close to the
matter. The FT said that both companies submitted first-
round bids in the auction of these assets.
Down With Downstream
Murphy Oil’s UK Refined Product Sales (b/d)
40,000
Gasoline
Kerosene
Diesel and Heating Oil
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2005
2006
2007
2008
2009
Source: Murphy Oil
French major Total said in September 2010 that it had
appointed JPMorgan to oversee the sale of 780 retail sites
in the UK, in addition to tankers and terminals. CFW has
previously suggested Lukoil as a potentially interested
party. Additionally, Murphy has appointed Goldman Sachs
to oversee its divestment of 430 British service stations
(which trade under the ‘Murco’ brand), some of its storage
terminals as well as its Milford Haven refinery. Meanwhile,
Exxon confirmed on November 21 that it intends to sell its
100 Scottish filling stations, while continuing to supply its
Esso-branded fuel to those sites.
Eurozone Weakness
The decision by these companies to downgrade their
presence in the British downstream segment fits into
the larger trend of divestment by majors of European
LBOs and Refinancing Woes: Mixed Fortunes For Buyout Funds
Buyout funds are finding their focus being stretched in
two different directions at present. CFW identifies that
while buyout funds will be revelling in 1) the renaissance
of leveraged buyouts (LBOs) : November recorded the
strongest month for LBO deals since the onset of the
financial crisis; they will also be acutely concerned that 2)
funds are facing a wall of refinancing: in Europe alone
EUR500bn of debt is set to mature between now and 2017,
according to Standard and Poor’s.
In line with CFW ‘s long-held view that private equity
www.corporatefinancingweek.com
refining and fuels retailing assets, in response to poor
refining margins, and reflecting a preference to invest in
high-growth areas such as unconventional and deepwater
exploration and production. Whereas PE investment in
the US upstream segment is an old story, there has been
little interest by the sector in downstream European assets
to date. Given its significant real estate investments,
Blackstone’s interest in the British downstream assets on
offer could be driven by their real estate potential. The
firm’s failure to acquire Dynergy in November 2010 makes
it easier for it to allocate acquisition cash.
Total Recall
Total’s Global Refined Products Sales (000 b/d)
1600
France Rest of Europe US
1400
1200
1000
800
600
400
200
0
2007 2008 2009
Source: Total
Greenergy’s interest in boosting its portfolio of British
downstream assets comes as no surprise. By its own
measure, the company’s share of the UK fuels market
has grown from less than 5% in 2005 to 20% in 2010 to
date. Impressively, Greenergy’s monthly sales grow 70%
between June 2007 and December 2009, through the worst
of the UK economic downturn. Currently, Greenergy
sources, blends and sells about 8bn litres of refined products
annually, but does not operate any retail stations. It remains
to be seen whether Greenergy will choose to become a
retail site operator or merely improve its efficiency through
the acquisition of tankage and terminals.
(PE) will return to its LBO origins, buyout shops are
finding it easier to ink deals once again. According to
Thomson Reuters data, last month saw LBO deal volume
total US$21.3bn from 76 deals, including the two largest
such deals of the year: the US45.21bn management buyout
of oil and gas producer Exco Resources and the US$5.15bn
acquisition of Del Monte Foods by an investment group
lead by PE giant Kohlberg Kravis Roberts (KKR). The
result was that the month of November recorded the largest
monthly volume for leveraged buyouts since July 2007,
3
Corporate Financing Week www.corporatefinancingweek.com December 06 2010

when LBO deal value reached US$63.6bn. they saw as offering a more mature and safer investment.
When borrowing was rife during the boom years, PE However, on the back of high-yield bonds soaring again
firms were able to make cash-heavy acquisitions, safe in this year, financing of deals is gathering steam once more.
the knowledge that debt investors would help them finance We need look no further than the buyout of US fashion
The Real Deal retailer J Crew Group by TPG Group and Leonard
Global LBO Deals Green & Partners to support this view. The deal for
25,000 140
Deal Value (US$mn) LHS J Crew is set to be financed with US$1.85bn in debt
financing, according to an SEC filing.
Deal Volume RHS 120
20,000
100 Despite the positive sentiment surrounding current deals,
15,000
80
buyout funds need not be reminded that trouble is only
just around the corner, with a wall of debt set to mature
10,000
60
over the coming seven years. The eye of the storm looks
40 to be 2014, when EUR100bn of leveraged loans will reach
5,000
20
maturity according to Nomura . It appears that the slew of
buyouts agreed in the run-up to the financial crisis, when
debt was cheap and growth seemed assured, may face
0
Mar-09

Jul-09

Mar-10

Jul-10
Jan-09

Jan-10
May-09

Sep-09

Nov-09

May-10

Sep-10

Nov-10

some turbulence. Although the banks have already pushed

Source: Thomson Reuters back the refinancing wall, partly by re-setting a number of
covenants, there is further work to be done. Indeed within
the rest. That leverage-buyout model soon unraveled during this, a number of firms which have completed a first round
the credit crunch, with PE forced to adapt, focusing on of refinancing and did not take enough off their balance
mid-market deals and growth capital investments, which sheets will be returning to do so for a second time.

European Sovereign Woes Impact On Corporates

Although the European corporate bond markets have been in the repo markets to obtain short-term funding. If the
very resilient throughout much of the past year’s eurozone sovereign deteriorates, this may no longer be possible.
sovereign debt crisis, there have recently been signs of The price of Banco Santander’s five-year credit default
contagion. The Markit iTraxx Europe index, which follows swap (CDS) – in other words, the cost of insuring Banco
the default risk premia of 125 investment grade European Santander paper against default – surged during November
companies, has risen to 117.0 on 1 December from 95.38 on to over 240.0, from 156.9 at the start of that month. CDS’
the 4 November. The Markit iTraxx Crossover index, which on core Eurozone countries have also been pulled higher.
tracks mostly high-yield corporate bonds, has climbed to This suggests that either investors are concerned about
421.4 from 431.10 on November 8. The uncertainty over French banks’ estimated US$41bn exposure to Portuguese
whether further sovereign bailouts are in store has also led banks or that they are distinguishing less and less between
to European companies holding back from issuing bonds. different types of European debt. On 1 December, France’s
Data provider Dealogic is aware of only one European Societe Generale’s five-year CDS was trading at 174.91
corporate or bank deal for the week starting November 29 compared to EUR116.0 at the start of November. Over
and that will be coming out of Switzerland. Meanwhile, the same period of time, similarly dated CDS for another
according to data from Bloomberg, corporate issuance has French bank, BNP Paribas, rose to 127.89 from 93.3.
slumped 29% year-on-year since November 15. Risk premia for non-financials risen as well. Spanish
Unsurprisingly, it is the banks that are suffering the energy firm Iberdrola ‘s five-year CDS was up at 212.6 on
most. In Portugal, which is widely believed to be the next 1 December, compared to 140.4 a month ago, while phone
country to need a bailout, banks have effectively been operator Telefonica had risen to 197.6 from 136.4 over the
frozen out of the credit markets. This, in turn, becomes a same period. Despite these spikes, the debts of Spain’s blue
problem for foreign banks with exposure to Portuguese chip utilities appear to be cheaper to insure than that of
sovereign bonds and banks. As of June, Spanish banks had similarly dated sovereign issuance, for which the five-year
US$78bn of exposure to Portugal, according to the Bank CDS was trading at 364.2 on 1 December. Barclays Capital
of International Settlements. Compounding matters further estimates that in Spanish and Italian high-grade corporate
for Spanish banks is the fact that there are doubts swirling debt have, on average, a lower yield than their respective
around Spain’s solvency too: Spanish banks have grown sovereignsm – another indication that they are perceived to
increasingly reliant on using sovereign paper as collateral be less of a credit risk.

4 © Business Monitor International 2010. Reproduction requires publisher’s prior permission.

Corporate Financing Week www.corporatefinancingweek.com December 06 2010

Emerging Markets
When is a BRIC not a BRIC?
(Continued from front page)

Brazil: The Benefit Of The Doubt
Brazil is undoubtedly a magnet for foreign investment. In
October, foreign direct investment (FDI) in Brazil leapt
26% year-on-year (y-o-y) to US$6.7bn, while year-to-date
inbound M&A activity has increased an astonishing 301%
to hit US$56bn. However, for an economy to achieve more
than common-or-garden emerging market status, deal-
making activity should involve a healthy mix of domestic
and foreign companies across a diverse range of industries.
In other words, a BRIC country should offer more more
than just a quarry or a gas field for Western companies.
In India, the largest M&A sector so far this year may
have been oil and gas, but the leading deal involved
Indian company Vedanta buying 60% of Cairn India
from its Edinburgh-based parent. After oil and gas,
wooden spoon. Unlike the other BRICs, Russia’s FDI
situation is dire, and has been for years. Over the first
nine months of the year Russian FDI plunged 17.8% to
US$8.2bn, according to Russia’s Federal Statistics Service.
Overall foreign investment, which includes inflows into the
capital markets for the first nine months of the year, was
down 13% on the same period in 2009. Foreign investors
have even less of an appetite for Russian companies than
they do for Russian securities. Inbound cross-border M&A,
that is to say foreign companies buying Russian ones, is
down 27% y-o-y at US$5.5bn. In stark contrast, Brazilian
inbound cross-border M&A was up 301% over the same
Russia In The Doldrums
Russian M&A Activity In Volume (US$) And Deal Count
40 300
Volume (US$bn) LHS

the busiest sectors have been telecoms, pharma and 35 Deal Count RHS
250

electrical goods. In China, the banking sector has led 30

the way in M&A with US$13bn of deals. China also has

200
25

a growing armada of corporate powerhouses venturing 20 150

into overseas acquisitions, from Cnooc’s acquisition of 15

Angolan oil blocks to Shanghai-based conglomerate Fosun 10
100

International’s purchase of a 7.1% stake in Club Med this 50

5
summer.
Brazil is certainly making strides towards this kind of 0 0
Mar-01

Mar-02

Mar-03

Mar-04

Mar-05

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10
Sep-01

Sep-02

Sep-03

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10
position. We are seeing the emergence of multinationals
that can make large strategic acquisitions overseas, Source: BMI

such as miner Vale, which acquired Canada’s Inco and

Ambev, which teamed up with Europe’s Interbrew to
buy Anheuser-Busch. However, raw materials remain the
main driver of the economy. Oil and gas is by some way
the biggest sector for deal-making so far this year, with
US$53.42bn of transactions compared with US$11.07bn for
telecoms, which was largely the result of one blockbuster
deal: Spanish telecom Telefonica’s US$9.6bn acquisition
of Brazilian mobile operator Brasilcel.
The third and fifth largest sectors for M&A in Brazil were
food, which in Brazil’s case essentially means sugar and
coffee, and mining. The tell-tale sign that Brazil’s economy
has not diversified to the same extent as India’s or China’s
is that it displays a far greater vulnerability to downturns in
the Western markets for its raw materials. Although it has
bounced back this year, Brazil’s economy contracted 0.2%
y-o-y in 2009, whereas India’s expanded 7.2% and China
grew by 8.7%.
Russia: A BRIC Too Far?
At least Brazil is moving in the right direction, which
is more than can be said for Russia, holder of the BRIC
period, reaching US$56bn.
It is not just foreign investors who lack faith in the
country’s economy. Russian companies cannot seem to get
their money out of the country fast enough. Bank Rossii
has raised its capital outflow forecast for 2010 to US$22bn
from US$8.7bn. Russian companies have made US$27bn
in foreign acquisitions so far for the current quarter, triple
the amount in the previous quarter, according to data
compiled by Bloomberg. This month, the TNK-BP joint
venture bought BP’s Vietnamese and Venezuelan assets
for US$1.8bn. Mobile operator Vimpelcom is looking to
merge with Egyptian entrepreneur Naguib Sawiri’s phone
assets in a transaction thought to be worth US$6.5bn,
while Rosneft plans to buy Petrolos de Venezuela’s 50%
stake in German refiner Ruhr Oel. The Russian domestic
M&A scene is threadbare compared with overseas activity.
Domestic deal-making has fallen to US$1.6bn from
US$6.9bn so far this quarter, and was down US$22bn in
the third. Although Russian President Dmitry Medvedev
has spoken of wanting to make Moscow a global financial
hub, the government’s actions seem to acknowledge

www.corporatefinancingweek.com 5
Corporate Financing Week www.corporatefinancingweek.com December 06 2010

that this is a distant prospect. Economy Minister Elvira
Nabiullina recently indicated that some of the IPOs in the
government’s US$57.4bn privatisation programme could
take place on foreign stock exchanges.
A combination of political and economic factors account
for this flight from Russia. One political factor, according
to Frederik Erixon of the Brussels-based European Centre
for International Political Economy, is that the Russian
government itself uses foreign acquisitions as a tool of
diplomacy, which helps skewer deal-making towards
outbound M&A: ‘A lot of money is taken out of Russia
by energy firms that are owned by or are close to the state,
such as Gazprom, and invested in countries on the eastern
rim of Europe.’ A second political factor is the instability
of Russia’s business environment. Russian companies
and wealthy individuals are concerned about the power
of the Russian state to expropriate assets without legal
redress. ‘There is no due process in Russia and this drives
Russians to take their money abroad where it won’t get
expropriated’, Erixon says, citing the example of Mikhail
Khordorkovsky, the previous owner of the former Russian
oil giant Yukos. He was imprisoned on what were widely
perceived to have been politically motivated charges of
fraud and tax evasion, which resulted in the asset-stripping
and dismantling of Yukos.
Concern that Russia cannot be relied on to honour treaties
and contractual obligations has also had a chilling effect
on foreign investment. Foreign companies, such as Royal
Dutch Shell and TNK-BP, have found themselves either
having to renegotiate deals or walk away altogether. As
a result, foreign investment is mainly confined to sectors
such as energy, financial markets and property, where

US Mergers and Acquisitions Record (November 18–November 30) Source: Capital IQ,
a division of S&P

Announced Company Name Transaction Size Buyer Seller Target Advisor Buyer Advisor
Date (US$mn)
11/30/2010 Gulfstream Natural Gas 329.97 Spectra Energy Spectra Energy Southeast Pipeline - -
System, L.L.C. (24.5%) Partners, LP; Spectra Corporation
Energy Partners GP, LLC
11/30/2010 " Ink & Adhesive Resins 120.0 Harima Chemicals Inc.; Momentive Specialty Chemicals Inc. - -
Business Mitsubishi Corporation
"
11/29/2010 Baldor Electric Co. 3,003.94 ABB Ltd. - UBS Investment Bank Citigroup, Inc. (Financial
(Financial Advisor) Advisor)
11/29/2010 UCI International, Inc. 1,142.02 Rank Group Investments - - Nomura Holding
Limited America, Inc. (Financial
Advisor)
11/29/2010 NPG Cable, Inc. 350.0 Cequel Communications, News-Press & Gazette Company RBC Daniels L.P. -
LLC (Financial Advisor)
11/29/2010 Interests in Bluebonnet 200.0 Chesapeake Energy Antares Energy Ltd.; San Isidro - -
project and Yellow Rose Corporation Development Company, L.C.
11/29/2010 Substantially All Assets 57.5 Fleetwood Homes, Inc. Palm Harbor Homes Inc. - -
11/28/2010 InterGen N.V. (50%) 1,232.0 China Huaneng Group GMR Energy Limited - -
11/28/2010 Telair International Inc., 94.0 TransDigm Group Telair International Incorporated - -
Actuation Business Incorporated
11/24/2010 Del Monte Foods Co. 5,318.33 Kohlberg Kravis Roberts - Barclays Capital Inc. BofA Merrill Lynch
& Co.; Vestar Capital (Financial Advisor); (Financial Advisor);
Partners; Centerview Perella Weinberg Morgan Stanley
Partners Management Partners LP (Fairness (Financial Advisor);
LLC Opinion Provider) J.P. Morgan Securities
Inc. (Financial Advisor);
Centerview Partners LLC
(Financial Advisor)
11/24/2010 CPI International, Inc. 523.83 Veritas Capital The Cypress Group J.P. Morgan Securities -
Inc. (Financial Advisor);
Moelis & Company LLC
(Financial Advisor)
11/24/2010 YoCream International, 106.33 Danone Columbia Ventures Corporation D.A. Davidson & Co. -
Inc. (95%) (Financial Advisor)
11/24/2010 Creative Services 70.0 Deluxe Entertainment Ascent Media Group, Inc. - -
and Media Services Services Group, Inc.
Businesses
11/18/2010 Pangea3 LLC 95.0 Thomson Reuters Sequoia Capital India; The GlenRock William Blair & -
Corporation Group, LLC Company, L.L.C.
(Financial Advisor)

For a complete Mergers and Acquisitions Record, please visit www.corporatefinancingweek.com

6 © Business Monitor International 2010. Reproduction requires publisher’s prior permission.

Corporate Financing Week www.corporatefinancingweek.com December 06 2010
potential returns are so high that investors are prepared to
take the risk. The speculative nature of inward investment,
Erixon explains, has impaired efforts to rebalance the
Russian economy towards manufacturing along the lines
of what has been achieved in India and China. ‘As a result,
Russia has not decoupled from the Western export markets,
which is why its economy contracted nearly 8% last year,
while India and China kept going despite their main export
markets going through a very tough time,’ said Erixon. ‘I’m
not sure that Russia should in the “BRICS” group, because
that category implies high-growth economies that are
independent of the West. Russia clearly is not there yet’, he
said.
There are some glimmers of hope that Russia may be
taking steps to open up its economy and uphold its legal
obligations. Last month, Russia and the EU reached
agreement on a range of issues including export taxes,
which should help pave the way towards World Trade
Asia
Caterpillar’s ‘Dim Sum’ Issue Feeds Hong Kong Debt Demand
China’s nascent offshore yuan bond market is deepening.
Caterpillar Financial Services, the subsidiary of
construction and mining equipment maker Caterpillar
has become the second US blue chip to offer a yuan-
denominated ‘dim sum’ bond, following in the footsteps of
fast food giant McDonalds Corporation’s issue in August
(see ‘Deal of the Week’, CFW, August 30 2010). Hungry
for capital and greater exposure in the Chinese market,
Caterpillar has issued a two-year CNY1bn (US$151mn)
note to institutional investors in Hong Kong. Caterpillar
set the coupon rate at 2%, undercutting the 3% yield on
McDonalds’ issue. Despite the aggressively low yield,
CFW expects interest in Caterpillar’s note to be strong
among investors due to pent-up demand for yuan debt due
to the limited supply of yuan-related investment options and
Hong Kong’s large pool of yuan deposits.
Although Caterpillar is still testing the waters as only the
second US corporate to issue a yuan-denominated bond,
we expect to see a growing number of overseas corporates
following a similar strategy, from both the US and beyond.
Despite being small on a nominal level, both the Caterpillar
and McDonalds bond issues are significant as they shows
that China’s ‘yuan plan’ is beginning to bear fruit. CFW
noted back in Q110 that after three years limited only
to issuance by Chinese banks, Beijing had amended the
rules and opened the dim sum bond market up to allow
foreign firms to issue yuan-denominated bonds through
Hong Kong. Away from the US, non-Chinese issuers of
yuan-denominated debt in Hong Kong have so far taken
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Organisation membership. The privatisation programme
is also a sign of a loosening of the state’s grip on the
economy, although this is so far only limited as the
government is expected to retain 50% control of the major
companies coming up for flotation.
Erixon says a major bellweather for any meaningful
change in the government’s attitude will be its response
should an international arbitration court find against the
Russian government in an action brought against it by
Yukos pension funds and other investors. Last year, a
tribunal at The Hague ruled that the Energy Charter Treaty,
which Russia signed but did not ratify, is nevertheless
binding in Russia, paving the way for Yukos shareholders
to seek compensation.
Until this happens, it is probably best to reserve
judgement about whether Russia is about to integrate itself
more fully into the international business mainstream or
whether this is just another false dawn.
advantage of this relaxation in policy include the Asian
Development Bank and the World Bank’s financing arm,
International Finance Corporation, while dual Hong
Kong and Paris-listed Russian aluminum giant Rusal
has also indicated its intention to sell yuan bonds in the
offshore resort.
Foreign Corporates Welcome
Chinese Yuan Debt Issuance, Deal Value (US$bn)
160
Corporate Volume
Other Volume 140
120
100
80
60
40
20
0
2006 2007 2008 2009 2010
Source: Dealogic
So, will this steady trickle of deals herald the age of a
new global debt market? It seems so, with Hong Kong
playing the host to this story. Indeed, the city is pitching
itself as the centre of offshore financing in the Chinese
currency, and bankers are confident that the market will
continue to grow as Beijing edges its currency towards
internationalisation. Given that more broadly speaking,
Chinese yuan-denominated debt volume stands at
7
Corporate Financing Week www.corporatefinancingweek.com December 06 2010
US$157.4bn in the year-to-date, down 22% compared to the
US$201.6bn issued in 2009 – according to Dealogic data,
the growing interest of foreign corporates in this strategy
will no doubt be welcomed by Beijing.
CFW expects to see those overseas corporates issuing
yuan notes to fall into two categories: 1) those with an
existing footprint in China; or 2) those seeking to have
exposure in China. Caterpillar falls under the first of these
two categories, with the proceeds from the issue expected to
be used to finance sales of its trademark heavy construction
machinery, and to back the local operations of multinational
mining companies active in the country. Indeed, as BMI’s
infrastructure team has recently been highlighting, China
is a key market for Caterpillar, accounting for half of the
growth this year in Asia (the company’s fastest-growing
market). CFW notes that the firm has been busy of late and
Is QR’s Listing Giving False Hope To Australian IPOs?
Rail road operator QR National ‘s US$4.9bn listing in
Sydney is a big deal, but in CFW ‘s view it is not a game
changer for the Australian IPO pipeline. Despite QR’s
IPO being Australia’s largest public listing since Telstra
Corporation raised US$10bn back in 1997, we expect
listings ‘down under’ to continuing enduring a torrid time
going forward. After all, so far this year, seven potential
listings have been withdrawn or postponed, compared with
just 61 successful issues. Moreover, the climate for new
issues is hardly appealing: the benchmark S&P/ASX 200
index is down 5.8% in the year-to-date, however we note
that the bulk of these loses were made earlier this year.
The fact that QR’s mammoth listing has helped push
overall Australian IPO activity to US$5.3bn – the highest
year-to-date level in five years, according to Bloomberg
data – is both good and bad news for potential listing
candidates in the pipeline. On the positive side, firms
waiting in the wings to go public may well see QR’s deal
as a ringing endorsement of investor sentiment for big-
ticker listings. The firm’s performance following its debut
also bodes well for future listings: QR’s shares jumped
3.9% in the one-day aftermarket. Taking a more sceptical
view of QR’s listing, however, we would argue that the
strong interest in the privatisation of the firm is a pure play
to the ongoing Chinese growth story and the need to feed
China’s growing demand for coal. QR plays a vital role in
the supply chain: it is the world’s largest transporter of coal
from mine to port for export. This alone makes QR’s listing
unique. While we may well see a string of smaller mining
industry companies successfully go public in Australia over
the coming quarters, CFW’s view is that one successful
high-profile listing certainly does not signal the ‘all clear’
for an IPO market which has been frozen over for the best
8 © Business Monitor International 2010. Reproduction requires publisher’s prior permission.
has adopted a more aggressive attitude towards expansion
since appointing Doug Oberhelman as CEO in July,
with the company now placing even greater emphasis on
emerging market growth. Caterpillar has since completed
its largest acquisition to-date, splashing out on mining
equipment engineering firm Bucyrus International
for US$7.6bn, representing a non-organic sector-based
expansion. Furthermore, November also saw the company
bolster its presence in China via organic means. Caterpillar
announced plans to add to the eleven manufacturing
facilities already operating in the country with a US$300mn
plant in Tianjin that will produce its 3500 series engines –
used in the oil and gas, marine and power sectors. Asia has
been a more stable market for the firm over recent years,
and we expect strong demand from the region to ensure
consistently high revenue growth over the next two years.
part of a year. After all, QR’s listing is the only deal ranked
over US$1bn so far this year. The deal also ranks as the
seventh largest IPO seen globally in 2010, one place behind
Petronas Chemicals Group ‘s US$4.2bn issue earlier
this month on Bursa Malaysia, the Kuala Lumpa stock
exchange.
Still Lagging Regional Peers
Australian IPOs, Y-T-D
8 250
Value (US$bn) LHS
7 Volume RHS
200
6
5
150
4
100
3
2
50
1
0 0
2010
2009
2008
2007
2006
2005
Source: BMI
It seems Australia is the exception to the rule with regards
to our key market view that Asia will continue to lead the
way with IPOs. The value of Australian new share issues
may well be up 145% year-on-year at US%.31bn, but
subtract the value of the QR listing (US$4.9bn) and just
US$0.41bn of activity remains – equivalent to an 81%
drop y-o-y, according to Bloomberg. Furthermore, even
following the completion of the QR listing, Australian IPO
value remains well below peaks seen in 2007 (US$6.54bn)
and 2005 (US$7.53bn). The volume of listings sits
significantly lower too: there have been just 61 firms go
public so far in 2010, compared with as 197 in 2007.
Corporate Financing Week www.corporatefinancingweek.com December 06 2010
Cnooc Expands Latam Foothold Through BP Asset Purchase
British oil giant BP has just come a step closer to its target
of raising US$30bn in asset sales to help cover the cost of
cleaning up after the Gulf of Mexico oil spill earlier this
year. By selling its 60% stake in Argentinian oil producer
Pan American Energy (PAE) for US$7.1bn to its partner
in the venture, Bridas, it has brought the total raised so far
to US$21bn.
Divestment Schedule
BP Asset Sale Timeline
Date Details
Jul-10 Apache agrees to pay US$7bn for Canadian gas,
Permian Basin and Egyptian exploration assets.
Aug-04 Talisman and Ecopetrol agree to pay US$1.9bn
for BP’s Colombian assets.
Sep-02 Petronas acquires BP’s Malaysian petrochemi-
cals business for US$363mn.
Oct-18 TNK-BP agrees to buy BP’s Venezuelan and
Vietnamese assets for US$1.8bn.
Oct-25 Marubeni agrees to buy BP’s stakes in four
producing deepwater fields in the US GoM.
Nov-15 Puma Energy acquires BP’s fuel retail network
in Namibia, Botswana and Zambia and agrees to
buy a 50% stake in BP Malawi and BP Tanzania.
Nov-28 The Chinese-Argentine JV Bridas agrees to pay
US$7.06bn cash for BP’s 60% stake in PanA-
merican Energy, bringing BP’s total divestment
programm to over US$21bn.
Source: BMI
As well as being in line with our view that strong
cross-border M&A activity is helping to fuel the overall
rebound in deal-making, the PAE deal also marks another
step in the overseas expansion of Chinese oil company
China National Offshore Oil Corporation (Cnooc),
which owns 50% of Bridas. Other overseas acquisitions
by Cnooc include a third of Tullow Oil’s assets in
Uganda as well as a 33% stake in Chesapeake Energy’s
Eagle Ford shale acreage in the US. So far, Cnooc has
spent US$5.8bn on overseas targets in 2010, the second
highest total for a Chinese oil company behind Sinopec’s
US$13.1bn. The total figure for all Chinese oil and gas
overseas acquisitions for the year to November was
US$24.6bn, according to research by the Financial Times.
Power Needy
Underpinning this wave of overseas expansion has been
the burgeoning energy demand stemming from its growing
economy, the same factor that is driving the country’s
coal majors to go hunting abroad (See ‘China Coal Quest
Heats UP Coal M&A’, CFW, November 29 2010). BMI’s
head of oil and gas research, Holly Pattenden, expects
Chinese oil demand to rise at a 4-5% annual growth rate
from a likely 9.22mn b/d in 2010 to 11.27mn b/d by 2015.
By 2020 demand will be 13.1mn b/d. As this demand
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cannot be met by domestic production alone, China is
having to rely more and more imports. In February, Saudi
Arabia reported for the first time that it was exporting
more oil to China than to the US. Concerns about energy
security mean that China would like to have as much of
this overseas production as possible in the hands of its
own companies.
The search for energy security is, however, taking
Chinese companies to some rather insecure places,
prompting ratings agency Standard & Poor’s to note that
many of Cnooc’s acquisitions are in places with fairly
high levels of sovereign and political risk. For example,
earlier this year, Cnooc jointly agreed with Sinopec to
develop the 2.5bn barrel Missan oil field complex in
Iraq with fellow Chinese oil producer Sinopec. The
combination of acute need for oil with state-backed
Chinese oil companies’ relatively easy access to finance
could also create a risk of overpayment for acquisition
targets.
That does not appear to have been the case with the
PAE deal itself, as BP relinquished the stake for less than
the US$10bn or so anticipated by analysts. Cnooc is,
however, considered to have paid above the odds for its
initial foothold in Argentina. It paid US$3.1bn for its 50%
of Bridas back in March, which energy consultants Woods
McKenzie valued at around US$2.1bn.
Making Amends
BP Share Price (GBp)
700
650
600
550
500
450
400
350
300
250
Mar-10
Jul-10
Jan-10
Apr-10
Jun-10
Oct-10
May-10
Feb-10
Aug-10
Sep-10
Nov-10
Source: Bloomberg
More buying opportunities for Chinese companies
could be in store. BP still has another US$9bn to raise,
which Pattenden says could include its Alaskan assets,
that are worth around US$12bn, and/or possibly its stake
in Russia’s state oil producer Rosneft , worth around
US$1bn. Even though they may not have the same
pressing clean-up needs as BP, other Western majors may
decide to follow BP in shedding far-flung non-core assets
to emerging market rising stars that are willing to pay
good money for them.
9
Corporate Financing Week www.corporatefinancingweek.com December 06 2010
EMEA
Heineken Unit To IPO And Kenyan Investors Invited
Rwanda is all set for its first initial public offering (IPO)
since the onset of the East African Community (EAC)
common market in July 2010. The government looks set
to sell a 30% stake in the dominant Heineken-owned beer
and soft drinks producer Brasseries et Limonaderies du
Rwanda (Braliwra), raising about RWF22.1bn (US$37mn).
This would value the company at more than US$120mn.
Kenyan investment into the listing is actively being
encouraged as the ongoing liberalisation of East African
capital markets kicks into gear.
The IPO is being managed chiefly by Kenyan investment
banks and interest from the EAC’s biggest economy is
expected to be quite strong. Although Braliwra is not
among the ten largest African beer companies by annual
sales, which is hardly surprising given that Rwanda has a
population of just 10mn (low by regional standards), its
growth prospects look particularly strong.
A monopolistic dominance in both beer and soft drinks
(it is a Coca-Cola franchise bottler) means its long-
term earnings prospects look bright, especially as beer
consumption in particular in both value and volume terms is
expected to grow considerably over the next few years.
Rwanda’s economic outlook continues to look strong
with real private consumption forecast to grow at an
average annual rate of 6.7% to 2015. This will certainly
feed through to both the beer and soft drinks industries and
given Braliwra’s total dominance, should bode well for
Latin America
Santos Approval Heralds Completion Of Ecopetrol’s Part-Privatisation
Colombia’s President Juan Manuel Santos has approved
state-run Ecopetrol’s plans to reduce the government’s
stake in the company further. The move was widely
expected, as Colombia’s fiscal deficit limits its financing
options as it looks to capitalise on its oil boom.
In a speech on November 25 2010, Santos said that
Colombia would sell a 9.9% stake in Ecopetrol as early
as H111. Santos said that the cash raised would be used
to fund national infrastructure projects, specifically
citing Colombia’s road network. Ecopetrol’s CEO, Javier
Gutiérrez, has said that the stake sale could raise up to
US$8bn, based on Ecopetrol’s current share price.
Colombia’s congress authorised the divestment of up to
20% of Ecopetrol’s equity in 2006. The following year,
Bogotá earned US$2.8bn through the sale of a 10.1% stake
in the company. The shares were sold to retail investors
through Colombian supermarkets. A successful sale of the
10 © Business Monitor International 2010. Reproduction requires publisher’s prior permission.
margins, making it an attractive proposition as the Rwandan
government looks to sell off its stake. As incomes rise, so
too will absolute consumption (as per capita consumption)
and at the top of the scale, a greater proportion of
Rwandans will be able to afford premium beers.
One Of The Region’s Fastest Growing Economies
Rwanda Real GDP & Private Consumption
16
14
12
10
8
6
4
2
2006
0
2007
2008
2009f
2010f
2011f
2012f
2013f
2014f
2015f
f = BMI forecast. Source: Rwanda Statistics Office, BMI
Heineken, whose majority stake in Braliwra will rise
to 75% (it is buying 5% of the 30% being sold by the
government), is actively strengthening in Africa. Over the
past two years, the African beer industry has thoroughly
outperformed the global industry as volumes for the most
part have continued to grow strongly.
remaining 9.9% stake would complete the part-privatisation
envisaged in 2006, although state control remains assured.
Investor interest has risen markedly in Colombia’s oil
and gas sector, spurred by an improved security situation,
favourable contractual terms and a reliable legal system.
Furthermore, the 2010 Macondo oil leak in the US Gulf of
Mexico (GoM) increased the attractiveness of Colombia’s
relatively safe onshore assets. Policy continuity was
cemented by Juan Manuel Santos’ victory in the June
2010 presidential run-off election. Days later, Colombia
successfully auctioned more than 100 blocks in its 2010
licensing round.
In order to capitalise on these gains and boost Colombian
oil output, Ecopetrol has announced an ambitious
US$80.3bn investment programme for 2011-2020, in
order to achieve its production goal of 1.3mn barrels of oil
equivalent per day (boe/d) by 2020. However, executing
Corporate Financing Week www.corporatefinancingweek.com December 06 2010

this investment programme requires the company to raise Energy has announced plans to broaden its investments in
US$23bn in debt. In fact, in order to execute its US$6.06bn Colombia’s infrastructure-related sectors, such as terminals,
2011 investment programme alone, the state-run company Bullish Expectations
authorised the issuance of corporate bonds worth COP1trn Colombian Oil Export And Reserve Forecasts
3,000
(US$530mn) to the local market on November 11.
Issuing larger amounts of debt, however, is an 2,500

undesirable option for Bogotá. BMI has recently revised

down its medium-term fiscal outlook for Colombia, as it 2,000

expects the government’s nominal deficit to come in at 1,500

4.3% of GDP in 2010, 4.1% in 2011 and 3.5% in 2012.
Santos’ initial target of achieving a balanced budget by 1,000

2014 is also looking unlikely, and implies that a sovereign 500

Oil Exports (000 b/d)
debt rating upgrade to ‘investment’ status could be held Oil Reserves (mn bbl)

back until the late-2011 or early-2012. Consequently, like 0

2008

2009

2010f

2011f

2012f

2013f

2014f

2015f

2016f

2017f

2018f

2019f

2020f
Russia, Colombia is choosing to sell a stake in its state-run
oil producer to be able to raise cash without issuing further f=forecast; Historical data from BP Statistical Review of World Energy; Forecasts: BMI

debt.
Such cash is essential for the infrastructure required to
boost output. About 20% of Ecopetrol’s 2011 budget is to
be spent on pipeline infrastructure, such as the Oleoducto
Bicentenario pipeline, while independent Pacific Rubiales
bunker fuels and asphalt. As oil output continues to rise
and the country’s road-building programme accelerates, we
see more investment flowing into Colombia’s energy and
transport sectors.

SABMiller Buys Argentine Brewer, CFW Cautious On Country Outlook

Beer giant SABMiller has announced the purchase of
Argentina’s third largest brewer, Casa Isenbeck, which is
currently owned by Germany’s Warsteiner. Casa Isenbeck
controls 7% of the local market and in 2009 generated
sales volumes of around 600,000 hectolitres (hl). Financial
details of the transaction have not been released, but with
the firm reporting gross assets of US$24.7mn and operating
just one brewery, with a capacity of 1.2mn hl, CFW would
be surprised if SABMiller’s valuation of the business
surpassed US$50mn.
The move widens the scope of SABMiller’s Latin
American business, launching the company into the
dynamic 40mn-strong Argentine market, and could be a
prelude to further expansion in Latin America, including
the highly competitive Brazilian market. However, the
firm will have to invest significant extra funds in order to
gain sufficient scale to compete with the current Argentine
market leaders.
Prior to the economic downturn, Argentina’s beer sector
was growing healthily, but in 2009 and early 2010 it
retreated in line with a reduction in consumer sentiment.
A young population, which has fuelled a move wine to
beer, means the sector has undoubted long-term potential.
However, in the medium term we think that, as with our
other food and drink indicators, consumption could be
affected by the unwinding of the imbalances that continue
to plague the Argentine economy.
Although the economy registered an impressive recovery

Global Top 10 M&A Record (November 24 – December 01) Source: Bloomberg

Deal Announce Target Name Acquirer Name Seller Name Announced Total Payment Deal
Type Date Value (US$mn) Type Status
DIV 28/11/2010 Pan American Energy LLC Bridas Corp BP PLC 7,060 Cash Pending
ACQ 25/11/2010 Del Monte Foods Co Multiple acquirers 5,098.61 Cash Pending
ACQ 30/11/2010 Baldor Electric Co ABB Ltd 4,146.4 Cash Pending
ACQ 24/11/2010 Korea Exchange Bank Hana Financial Group Inc 4,080 Cash Pending
DIV 25/11/2010 Trafford Centre Group/The Capital Shopping Centres Group PLC Peel Group/The 2,584.33 Stock Pending
DIV 29/11/2010 Multiple Targets Henan Shuanghui Investment & Dev. Co Ltd Rotary Vortex Ltd 2,521.31 Stock Pending
ACQ 29/11/2010 Henan Shuanghui Investment & Dev. Co Ltd Rotary Vortex Ltd 2,473.6 Cash Pending
DIV 29/11/2010 Intergen NV China Huaneng Group Corp GMR Infrastructure Ltd 1,232 Undisclosed Pending
ACQ 29/11/2010 UCI International Inc Rank Group Ltd 980 Cash Pending
DIV 29/11/2010 Oil & Natural Gas Properties/Canada Husky Energy Inc Exxon Mobil Corp 842.23 Cash Pending

www.corporatefinancingweek.com 11
Corporate Financing Week www.corporatefinancingweek.com December 06 2010

in the second half of 2010, CFW believes necessary Closing Bell

reforms are just around the corner – likely following the
Presidential election in October 2011 – and we think that
robust private consumption will not last into 2012. We
therefore believe that until the current policy mix comes
to an end, Argentina will fail to achieve sustainable
growth, and as a result will lag behind more politically and
economically stable regional peers.
Even with this subdued outlook for consumption, CFW
believes the Isenbeck deal, along with further expansion
into Argentina, could make sense for SABMiller over the
longer term. Isenbeck is one of the few brewers in Latin
America not controlled by a giant multinational, and
therefore represents one of the few remaining opportunities
for expansion. The acquisition puts SABMiller a distant
third place in beer sales volumes in the country, but with its
resources and existing Latin American experience it should
be able to expand its market share and eventually challenge
the current market leaders, Chile-based CCU and brewing
giant Anheuser-Busch InBev.
The deal also gives SABMiller a platform to expand into
neighbouring Brazil. SABMiller has a virtual monopoly in
four Latin American markets – Colombia, Peru, Ecuador
and Panama. However, in all four SABMiller has faced a
rise in competition and has begun to lose its monopolistic
grip on prices. Having failed to land the brewing assets of
Mexico-based FEMSA, losing out to Heineken, it is likely
to want build its position in the major markets where it
does not currently operate, and bolt on acquisitions in both
Argentina and Brazil are likely to be the firm’s favoured
route for building a presence in these two important Latin
American markets.
No sooner than CFW adds to its key market
views that it expects to see a wave
of banking sector restructuring
in the coming quarters, HSBC
announces that it is to sell off its
Asia PE arm. Not only that, but it
is also likely to wave goodbye to its
PE desks in the UK, Canada and the
Middle East. HSBC is following in the footsteps of Barclays,
which is spinning off its PE operations via a management buyout.
RBS is also selling its European project finance desk to Japan’s
Mitsubishi UFJ Financial Group and Lloyds Banking Group
is shedding its LDC PE arm. That Lloyds and RBS are being
cut down to size is not particularly surprising given that they
both required bail-outs during the crisis. HSBC and Barclays,
however, did not (although it has just emerged that Barclays did
draw heavily on emergency funding from the US Fed). These
two banks are acting now because they anticipate that tough
regulations are to come for deposit-taking banks that engage
in risky deal-making with their own money. Perhaps regulators
should cheer the fact that banks are taking the initiative. Adair
Turner, the chair of City watchdog the FSA, has in the past
suggested that the prospect of higher capital and liquidity rules
would bring about a de facto separation of retail from risky
banking far more effectively than crude legislation to break up the
banks. Yet regulators should also be mindful that by jumping the
gun, banks are able to carry out the spin offs on their own terms.
In the Barclays deal, for example, the parent bank will be paid by
a share of the PE company’s profits in the coming years. It will
therefore retain some exposure the group’s high risk activities.

Key Market Views

• A Continued Rise In Cross-Region Acquisitions Within M&A Rebound: Fuelled by a bounty of idle corporate cash on balance
sheet, we will see a rise in M&A across emerging regions. Within this, the fallout from the ongoing Eurozone debt crisis is
likely to trigger a wave of restructuring in the European banking sector via cross-border asset sales and industry consolida-
tion.
• Tailwinds Strengthening Behind PE Dealmakers: Buoyed by the expunged threat of protectionist regulation in Europe, we
expect to see fund managers focusing on M&A once more. Within this, 1) we expect PE to return to its LBO origins; and 2)
with investment deadlines fast approaching, funds will be looking to make deals instead of returning the cash to investors.
• Further Deleveraging Up Ahead, As Refinancing Needs To Be Addressed: With a wall of leveraged loans set to meet matu-
rity over the coming 5-7 years we expect to see a slew of the buyouts inked before the financial crisis, when debt was cheap
and growth seemed assured, facing problems refinancing their debt. This is likely to feed significant M&A opportunities
amongst restructured companies.
• Hong Kong And Asia To Lead The Way With IPOs: We expect to see China-based firms debuting in Hong Kong, Shanghai
and the US at a greater rate than US-based issuers over the coming months. More broadly speaking we see the IPO market,
which is primed to see very robust activity in Q410 and 2011, being characterised by strong pipelines but mixed receptions.

• Investors To Continue Flocking To Junk Bonds In Short Term: With credit markets offering an attractive alternative to equi-
ties, and with high-yield gathering steam, an opportunity has presented itself for risk-hungry investors seeking a higher yield
from their investments.

12 © Business Monitor International 2010. Reproduction requires publisher’s prior permission.