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By Marine Cole
One of the largest deals of the week came in the equity market with the announcement of a planned $25 billion rights issue by Brazilian oil company Petrobras.
The proceeds from the issue--which could come as early as next month-will be used to develop "pre-salt" oil fields, which are located deep beneath the sea bed under a hard layer of salt.
Brazil's Senate approved rules this month giving the company a minimum 30 percent stake in all new oil projects in the pre-salt region of the South Atlantic. The new money will be used to finance up to $220 billion in investments through 2014, the largest spending plan of any oil company, according to Bloomberg.
The potential rights issue would break many records, according to Thomson Reuters. The issuance would be the largest oil and gas offering, the largest issuance from a Brazilian company and the second largest rights issue on record, it said in a report.
The largest rights issue on record is a $36.7 billion transaction by Nippon Telegraph & Telephone in 1987.
Despite recent woes with BP related to the massive oil spill in the Gulf of Mexico, oil and gas equity issuance is on the rise. It totaled $19 billion so far in 2010, up 5 percent from the $18 billion in the same period last year. So far this year, oil and gas equity issuance represents 6.8 percent of total volume, a touch higher than in the same period last year.
Also in equity, this week ended up being the largest week for US initial public offerings by value since Dec. 2009. There were four IPOs, including a $588 million offering from Oasis Petroleum and a $390 million offering from the Chicago Board Options Exchange.
The total value of IPOs in the US this year has reached $7.7 billion, the best start by value since the same period in 2008 and up nearly three-fold from 2009 levels. Offerings from the financials and energy and power sectors account for 46 percent of all US IPO activity this year.
In the mergers and acquisitions world, some of the main deals of the week included the $13.7 billion unsolicited offer from News Corp. to purchase shares in satellite TV company British Sky Broadcasting it doesn't already own. BSkyB rejected the price as too low but said its shareholders could be interested in a higher offer.
But overall, the state of M&A activity in the US isn't too rosy, despite earlier predictions of a bounce back this year.
After declines of 41 percent in 2008 and 22 percent in 2009, the value of announced deals in the US so far in 2010, at $322 billion, is just a fraction off last year's pace, Reuters BreakingViews reported this week.
It's no surprise. Although the economy may be in recovery and many companies have hoarded cash in the last few years, unemployment is still high and volatility is back in credit markets on the heels of the European sovereign debt crisis.
But apparently, it's nothing to worry too much about. Thomson Reuters data shows that the last two recessions were also followed by two to three dry years of M&A activity. So considering the depth of the latest recession, flat is the new up, concluded Reuters BreakingViews.
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