$109bn takeover deals point to a record 1996

John Shepherd,Business New Editor
Thursday 04 April 1996 23:02

Records for takeovers and mergers on both sides of the Atlantic are set to be broken again this year. More than $109bn (pounds 71bn) of deals were struck in the US and almost pounds 6bn worth of takeovers were completed in the UK in the first quarter of 1996.

The frenetic activity in the US this week, which saw almost $36m of deals struck, has silenced even the strongest cynics on Wall Street.

"We're in a cycle where everyone is convinced that bigger is better," Mort Pierce, an attorney specialising in mergers at the law firm of Dewey Ballantine, said.

The second quarter of the year began with a bang on Monday when three blockbuster deals were announced within a few hours of each other. They were SBC Communications' $23.8bn acquisition of Pacific Telesis Group, Aetna Life and Casualty's $8.9bn purchase of US Healthcare, and Allegheny Ludlum's $3.2bn pact to buy Teledyne. While takeover activity in the UK pales into comparison with that in the US, there are strong signs that 1996 will be a record-breaking year.

Philip Healey, editor of Acquisitions Monthly, said: "It was evident at the end of the first quarter when the pounds 8.8bn total value of UK deals contrasted with the pounds 15.8bn, which included the pounds 9.1bn Glaxo Welcome deal, that only one mega-deal would be needed during the remaining nine months to put 1996 in reach of 1995's all-time high."

He added that "that now looks a distinct possibility" with BT and Cable & Wireless heading towards a pounds 35bn merger.

Top adviser on UK deals this year is UBS, which completed five deals worth pounds 4.4bn in the first quarter of 1996. Mr Healey said: "It will be interesting to see whether UBS will hold leading positions in the league tables in the months ahead and, if it does, whether this will be a result of it capitalising on the continuing problems at SBC Warburg."

On Wall Street, dealers are convinced that many more deals are on the way, especially in the telecommunications sector, where recent federal legislation has broken down previous barriers to corporate combinations.

"The pace is as heavy as it was last year. It might even be heavier, especially in the large deal area," Don Smith, merger expert at Los Angeles- based investment bank Houlihan Lokey Howard & Zukin, said.

There were widespread market rumours this week of more big deals being imminent. Speculation surrounded Bally Entertainment Corp, which was viewed as a possible target of Hilton Hotels Corporation or ITT. The three firms have declined comment. The burst of merger activity this week came even as Wall Street was still assessing record first-quarter data.

Another indication that the pace is unlikely to slow came this week from Lehman Brothers Holdings, which announced a shuffling of its top officers.

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