News, Bloomberg

Bloomberg: $100 Billion Deal Day Evokes 1998’s Exxon-Mobil: Real M&A

By Brooke Sutherland and Tara Lachapelle

The last time two mergers this huge were announced on the same day, Exxon was targeting Mobil and Bill Clinton was still in the White House.

Halliburton Co. (HAL) and Actavis Plc this morning announced a combined $100 billion in takeovers. It’s rare to see two deals of $20 billion or more hit the tape at once — so rare, it hasn’t happened in 16 years, according to data compiled by Bloomberg. That’s when energy giant Exxon Corp. agreed to buy Mobil Corp. and two European drugmakers struck the merger that created Aventis SA. The two takeovers added to what has already been the busiest year for deal making since the record in 2007.

“There’s a little bit of coincidence involved in this, but the broader stroke that I would paint is confidence is getting stronger,” said Scott Rostan, founder of Training The Street, an educational firm that teaches topics such as M&A to clients including new investment bankers. “These two deals being announced on the same day is going to give people a little bit more of a skip in their step to go back to clients and say, ‘Look, now is the time to strike.’”

There have been 11 corporate takeovers valued at more than $20 billion announced so far this year, including Comcast Corp.’s purchase of Time Warner Cable Inc. and Medtronic Inc.’s acquisition of Covidien Plc. Total deal volume for 2014 is already the highest since the financial crisis and more takeovers could still be coming. Valeant Pharmaceuticals International Inc. could now bid for animal-health company Zoetis Inc. after losing out on Allergan Inc. to Actavis.

Two Hours

Just before 7 a.m. New York time, Halliburton said it had reached a deal to buy Baker Hughes Inc. for about $34.6 billion in cash and stock. About two hours later, Actavis announced a $66 billion takeover of Allergan.

There have been $100 billion-deal days before. Time Warner Inc. and America Online Inc. agreed to a more than $100 billion merger in 2000, while Verizon Communications Inc. paid $130 billion to buy out the rest of its wireless joint venture with Vodafone Group Plc. Still, no two companies have announced deals valued at more than $20 billion on the same day since 1998.

“You tend to see large deals or megadeals increasing in buoyant conditions,” Steven Kaplan, a professor at the University of Chicago’s Booth School of Business, said in a phone interview. “It’s a sign that the economy is at least stable enough for these companies to be willing to forecast in the future that these are good deals.”

The U.S. economy has expanded at a rate of 3.5 percent or more in the past two quarters. In the fourth quarter of 1998, growth was humming along at a 6.7 percent pace.

This year has seen a flurry of large deals across industries including health care, food and cable-TV. The activity is attracting an increasing amount of money to the investing strategy known as merger arbitrage.

Evidence of the interest can be seen in the record number of shares that have been created for theIQ Merger Arbitrage ETF (MNA), managed by IndexIQ in Rye Brook, New York. The ETF’s share count has more than tripled in the past year.