In a move that surprised investors, Anheuser-Busch Companies Inc.’s (BUD) board voted to end more than 150 years as a family-controlled company, accepting a $70-per-share bid from Belgium’s InBev NV in a deal that puts a $52 billion price tag on the iconic American brewer.

The St. Louis-based Anheuser-Busch – which had appeared to be digging in for a long battle – and InBev approved the all-cash deal, according to a joint statement released yesterday (Monday).

Anheuser-Busch’s popular Budweiser and Bud Light beers will join an InBev stable that includes such well-known brands as Stella Artois, Beck’s, and Brahma. The resultant merger will produce the largest beermaker by volume, supplanting the current title-holder, Britain’s SAB Miller PLC (OTC: SBMRY).

"Together, Anheuser-Busch and InBev will be able to accomplish much more than each can on its own," InBev Chief Executive Officer Carlos Brito, who will helm the new company, said in a joint statement. "We have been successful business partners for quite some time, and this is the natural next step for us in an increasingly competitive global environment."

The takeover battle had been shaping up in both the boardroom and the courtroom since InBev launched its original $46 billion offer for Anheuser-Busch back in May. Fierce opposition from the board, led by Chief Executive Officer August Busch IV, was finally overcome by InBev’s bid increase of 7.7% and the Belgian brewer’s agreement to name the newly formed global entity Anheuser-Busch InBev.

"This is about giving InBev a U.S. presence and this is the most effective way they can see to achieve that," Grant Saligari, a beverage industry analyst at Commonwealth Securities Ltd. in Sydney, told Bloomberg News. "Consumers are very emotionally attached to their beers. A peaceful deal helps maintain that."

The Mexican Stumbling Block?

While Anheuser-Busch and InBev management might all be in agreement, there are still a few snags that could derail the deal. First, Anheuser-Busch shareholders have to approve the deal. That vote will probably come in about two to three months time. 

And while it’s unlikely to derail the planned merger, the U.S. Congress could get involved if there is an antitrust angle, or if a particularly "patriotic" senator, such as Senator Claire McCaskill (D-MO), has reservations about selling the 150-year-old American giant to foreign investors.

However, the biggest hurdle could come from Grupo Modelo SA de CV (OTC: GPMCF), the Mexico-based maker of Corona beer that is half-owned by Anheuser-Busch. 

In a statement released during yesterday’s early morning hours, Modelo asserted that it "has certain rights with respect to the potential transaction between InBev and Anheuser-Busch, including a consent right," The New York Times reported.

Modelo is referring to its right of first refusal if its shares, 50% of which are owned by Anheuser-Busch, are sold. There also is a provision in Modelo’s contract with Anheuser-Busch that restricts the American brewer from selling Modelo’s shares to a competitor – which InBev clearly is.

Modelo is currently in talks with InBev and most analysts feel the Mexican and Belgian brewers will be able to come to an amicable agreement.

"If I had to make a prediction, I would guess that after a relatively short period of time [Modelo is] going to accept the new status quo, which in some ways is the old status quo," Steve Dixon, manager of Global Beverage Fund at Arnhold & S. Bleichroeder Advisers LLC in New York, told Reuters.

Aneheuser-Busch and InBev Merger Just One of Many

This merger is the latest in a string of consolidations in the largely mature global beverage industry, as skyrocketing grain costs and softening economies have led struggling brewers to seek economies of scale. Two of the largest brewers, InBev and SAB Miller, are themselves creations of mergers that took place within the past 10 years, The New York Times reported.

In January, Carlsberg A/S and Heineken N.V. (HINKY) agreed to buy Scottish & Newcastle PLC for $15.4 billion. Late last year, British-owned SAB Miller PLC (OTC: SBMRY) and Canada’s Molson Coors Brewing Co. (TAP), agreed to merge their U.S. brewing operations.

Once InBev acquires Anheuser-Busch, it will leave The Boston Beer Co. Inc. (SAM), maker of the popular Samuel Adams beer brand, one of the last large domestic brewers still under U.S. ownership.

News and Related Story Links:

• The New York Times:
  Anheuser-Busch Agrees to Be Sold for $52 Billion

• The New York Times:
  Cracking Open the Anheuser Deal

• Bloomberg News:
  InBev Agrees to Buy Anheuser-Busch for $52 Billion

• Reuters:
  Mexico’s Modelo should warm to new partner InBev

• Money Morning:
  InBev Offers Anheuser $46.3 Billion, a Deal That Would the Create World’s Largest Brewer

• Money Morning:
  Global Beer Titan InBev to Make $46 Billion Offer for No. 1 U.S. Brewer, Anheuser-Busch

The U.S. buyout market is about to enter a new phase, as corporate takeovers pick up where private-equity firms left off last fall.

The deal-making market is a key to the health of the U.S. stock market. During much of 2006 and 2007, it was the steady stream of private-equity buyouts and corporate mergers and acquisitions (M&A) deals that propelled the key U.S. stock indices to one record high after another.

When the deals are flowing, investors are willing to pay more for their shares, figuring the odds for a nice payday are higher. And the deal market was white-hot through the middle half of last year. Private-equity firms had amassed huge war chests. They were buying stakes in big companies and were buying smaller companies outright.

But when the subprime-mortgage crisis morphed into a credit crisis, the financing spigot for private-equity funds was largely turned off. And the deal flow slowed to a trickle.

The tepid deal-making market has carried over into the New Year. Recent data from Thomson Financial (TOC) suggests that worldwide M&A deals slumped by nearly one third in the first quarter of 2008. But that doesn’t mean the M&A market is dead in the water.  Instead, it means that cash-laden corporations will be taking the baton from the private-equity firms and will re-ignite the buyout binge.

The one caveat: Companies, buyout firms and banks are being more selective about picking partners, and are looking for comprehensive, "perfect-fit" deals.

Louis Basenese, editor of The Takeover Trader, an investment newsletter dedicated exclusively to buyout deals, says the recent falloff in M&A activity is merely a shift in the balance of power.

In recent years, private equity firms have practically defined the M&A market by outbidding companies for assets. But it was those same buyout firms that led the collapse in first quarter deals, with a 77% drop in acquisitions. 

"What few realize is that M&A doesn’t need cheap financing to continue. Corporations are sitting with almost near record amounts of cash on their balance sheets," Basenese said. And with all that capital, they can "take advantage of the depressed stock prices of competitors without the fear of being outbid by overly aggressive private equity shops."

New Research Report

Thomson Financial said Friday that global M&A volumes plunged 31% to $661 billion in the first quarter of 2008. But that drop off comes after a banner year for M&A activity. Total global deal volume checked in at $4.5 trillion in 2007, up 24% from the previous high-water mark set in 2006. U.S. deal volume also hit record levels last year, jumping 9% to reach $1.61 trillion, Thomson said.

Since then, credit conditions have tightened significantly as many banks were burned badly by credit defaults. But while an era of "easy money" has come to an end, there is still ample opportunity for takeovers and tie-ups.

In fact, now that stock valuations have plummeted, many larger, blue-chip operations are using the opportunity to bargain hunt. A rush of opportunists such as Microsoft Corp. (MSFT), Time Warner Inc. (TWX) and JPMorgan Chase & Co. (JPM) have already taken advantage of market value and secured some heavy acquisitions.

Deals On The Docket

For instance, Microsoft made its move with an unsolicited $44.6 billion bid for Internet portal operator Yahoo! Inc. (YHOO). So far, Yahoo has done its best to thwart Microsoft’s advances, but most analysts believe Microsoft will get its way if it ups its $31 a share offer.

"We believe that a Yahoo sale to Microsoft – at a price likely higher than the initial $31 bid – is the most likely outcome," Citigroup Inc. (C) analyst Mark Mahaney wrote in a note to clients.

Yahoo has suffered eight straight quarters of declining profits, struggling to compete with Internet-search rival Google Inc. (GOOG). Microsoft and Yahoo considered various avenues of cooperation a year ago, but Yahoo rejected the notion of a takeover. Now, desperate to not let Google run away with the market, Microsoft has made its move.

If the buyout goes through, it will be the largest-ever acquisition in the high-tech sector, exceeding Kohlberg Kravis Roberts & Co.’s $26 billion buyout of First Data Corp.

However, Yahoo’s explicit opposition to the takeover makes it impossible to rule out a narrow escape.

"While we continue to see no other competing bidders, we believe Yahoo is aggressively pursuing strategic alternatives. One possibility is a tie-up with Time Warner, whereby Time Warner would contribute its online content assets to Yahoo in exchange for a stake. We believe this could serve as a forcing function to a higher Microsoft bid," Mahaney said.

Time Warner’s AOL recently made a move of its own, with its $850 million acquisition of Bebo Inc., a popular online social network. The San Francisco-based Bebo has 40 million members around the world and an especially strong presence in Britain. While social networking sites like Facebook and MySpace have the American market locked up, 60% of Bebo’s traffic comes from Europe and 16% from Asia.

A recent article in BusinessWeek, suggested eBay (EBAY) may be the next tech company to make a move in the M&A market. Lorraine McDonough, eBay’s mergers chief, told the magazine that her company is in a "good position to make acquisitions."

The company kicked off 2008 with a hasty purchase of payment-security firm Fraud Sciences for $169 million. And eBay isn’t stopping there. The company expects to make eight or nine more acquisitions this year.

Despite stagnating economic growth and abysmal credit conditions high-tech mergers and acquisitions have surged 132% this year through March 25. And the tech sector isn’t the only sector abuzz with M&A activity.

Deals are also taking off in the finance and steel industry.

BHP Billiton Ltd’s (BHP) attempted takeover of rival Rio Tinto PLC (RTP) in 2007 got the ball rolling in raw materials. The company’s revised $147 billion offer sent other smaller industry players scurrying to find deals of their own. 

Aluminum Corp. of China (ACH) and Alcoa Inc. (AA) surprised BHP by snagging a 12% stake in Rio Tinto. Another major player, Anglo American PLC (AAUK), responded by selling off gold, steel and paper assets and expanding in copper and iron ore. Several Latin American sources revealed that Anglo is looking to acquire a sizeable stake in Brazilian mining and metals company MMX Mineracao e Metalicos SA.

Earlier this month, the U.S. Federal Reserve had a huge assist in JPMorgan landing The Bear Stearns Cos. Inc. (BSC) for a bargain basement price of $1 billion. Now rumors are circulating that Lehman Bros. Holdings Inc. (LEH) could be next.

Lehman stock closed down more than 9% last Thursday after rumors that the fourth-largest U.S. investment bank could face a run similar to that of Bear Stearns surfaced.

Declines in Lehman’s shares on Thursday were "all being tied to fears of Bear Stearns," Robert Bolton had trader at Mendon Capital Advisors told Reuters. "Does another broker dealer go the route of Bear Stearns with regard to their solvency and the like"

Lehman responded, saying the rumors were "totally unfounded."

Regardless of whether Lehman is the next domino to fall, asset prices are plummeting in every sector. And with each dip the market takes those assets become even more enticing to hawkish industry leaders.

News and Related Story Links:

• Money Morning:
  M&A Activity May Add Some Sunshine to the Gloomy Markets

• BusinessWeek:
  Tech M&A: It’ll Be a Good Year

• Reuters:
  Global M&A volumes tumbled by a third in Q1: Thomson

• Reuters:
  Lehman’s stock drops amid rumors.

• FoxNews.com:
  Mergers Expected to Spur More Stock-Buying.

In a surprise move yesterday (Sunday), the U.S. Federal Reserve announced that it had cut the Discount Rate by a quarter of a percentage point – a key element of a three-point financial package that includes the takeover of troubled investment bank Bear Stearns Cos. Inc. (BSC) by JPMorgan Chase & Co. (JPM).

The central bank believes the moves made yesterday will keep the U.S. credit markets from seizing up.

“This is a serious crisis,” David Goldman, a senior portfolio strategist at Asteri Capital in New York and a former head of debt research at Banc of America Securities LLC (BAC), told Bloomberg News. The sale of Bear Stearns “tells us that something is systemically very wrong and we’re at a very dangerous moment,” he said.

The announcement comes just two days before central bank policymakers are scheduled to meet and consider a possible reduction in the Federal Funds Rate, the short-term interest rate that serves as the benchmark for commercial loan rates. The policymaking Federal Open Market Committee (FOMC) meets tomorrow (Tuesday) and analysts say that a Fed Funds Rate cut of three-quarters of a percentage point is possible – if not downright likely.

In a conference call late last night, Fed Chairman Ben S. Bernanke said the central bank’s three-point plan “will provide financial institutions with greater assurance of access to funds.”

The Fed’s moves consist of:

• A decision to pare the Discount Rate from 3.5% to 3.25%. The discount rate is the interest rate that the central bank charges on direct loans to Fed-member banks, using either government securities or some form of commercial paper as collateral. This process establishes a floor for interest rates, since banks set their lending rates just above the Discount Rate. By making this move, the central bank reduces the “spread” between the Discount Rate and the benchmark Fed Funds Rate to a quarter percentage point. The Federal Reserve Board also boosted the maximum maturity of Discount Rate loans from 30 days to 90 days.

• The approval of a financing arrangement in which JPMorgan Chase & Co. (JPM) will acquire The Bear Stearns Cos. Inc. (BSC) in a deal that’s valued at $236.2 million. JPMorgan is getting Bear Stearns for the equivalent of $2 a share, Reuters reported. As part of that arrangement, the Fed also agreed to fund up to $30 billion of Bear Stearns’ less-liquid assets. U.S. Treasury Secretary Henry Paulson said he believes the moves made yesterday will have a major – and lasting – effect on the U.S. capital markets.

• And creation of a lending package that would help keep the debt markets moving freely. The financing packages would allow the “primary dealers” to provide financing to participants in the asset-backed debt markets. Primary dealers are the relatively small group of banks or investment dealers authorized to buy and sell government bonds in conjunction with the Federal Reserve Bank of New York as it conducts operations designed to regulate the U.S. money supply. This credit package will be in place starting today (Monday) and may be collateralized by a broad range of investment-grade debt. The interest rate on these loans will be the same as the Discount Rate.

Art of the Deal

From the initial reaction in the financial markets, it’s not altogether clear that the Fed’s latest moves are inspiring investor confidence [For a report on the moves that the U.S. central bank has made during the past week, check out a related article in today’s issue of Money Morning. To read the article, please click here].

The takeover of Bear Stearns is an all-stock deal that values the investment bank at $2 a share, or $236 million. Bear Stearns’ shares plunged 46% on Friday, closing at $30.85 – meaning the fifth-largest U.S. investment bank had a market value of $3.5 billion. The shares hit a record high of more than $171 back in January 2007, according to Reuters.

Bear Stearns all but collapsed on Thursday when its cash reserves were drained as part of a customer exodus. On Friday, Bear received emergency funding through JPMorgan Chase in a deal that was arranged by the U.S. central bank.

With the deal that was outlined late yesterday, the Fed has agreed to provide special funding and to also fund up to $30 billion of Bear Stearns’ less-liquid assets. That’s allowing JPMorgan to exchange 0.05473 shares of its stock for one share of Bear’s stock – and to also guarantee the trading obligations of Bear Stearns and its subsidiaries.

“The fact that the Bear Stearns’ board is letting these assets go at such a deep discount brings into question the value of assets on a lot of corporate balance sheets,” Timothy Ghriskey, the chief investment officer at Solaris Asset Management in New York, told Reuters. “The main concern is what other financial institutions are worth in the current environment, given the discount [at which] JPMorgan is acquiring Bear.”

Bear Stearns Chief Executive Officer Alan D. Schwartz said the deal represented the “best outcome for all of our constituencies based upon the current circumstances.”

JPMorgan CEO James “Jamie” Dimon said that Bear’s “clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns’ counterparty risk.”

JPMorgan Chief Financial Officer Michael J. Cavanaugh said on a conference call last night that deal-related costs would total $6 billion – which includes the costs of litigation, debt-reductions, integration and severance costs from the reduction of some of Bear’s 14,000 employees. The deal should close in about 90 days.

However, once Bear Stearns is integrated into JPMorgan’s operations, the deal should be accretive to the tune of $1 billion. Cavanaugh said Bear Stearns’ debt exposure totaled $16 billion to commercially oriented mortgage-backed securities, $15 billion in prime mortgages and $2 billion in subprime debt.

Investors Skeptical?

The reaction has been swift and harsh.

All across Asia early today (Monday), stocks plunged, with financial shares from Australia to Japan leading the way. Hong Kong’s Hang Seng Index slumped more than 3%. In Japan, stocks plunged to their lowest point in more than two years, and analysts say that the deal was the problem. Financial stocks were hardest hit, Bloomberg News reported. That’s an indication that investors fear a growing global contagion.

The Nikkei 225 Stock Average sank for a third day, losing 4.5% to reach 11,691.00 as of 12:37 p.m. [Tokyo time]. That’s the stock index’s lowest point since July 13, 2005. The broader Topix index dropped 50.91, or 4.3%, to reach 1,142.32. All 33 of the industry groups on the benchmark declined.

Japan Securities Finance Co. Ltd. (PINK: JSFNF), that nation’s largest stock lender, dived 14%, the steepest drop in a decade. Nomura Holdings Inc. (NMR), Japan’s biggest brokerage, fell 4.3%, the lowest since Jan. 22.

“The $2 price for Bear Stearns tells everything about how bad the operating situation is for brokerages,” said Naoki Fujiwara, the chief fund manager in Tokyo at Shinkin Asset Management Co., said that “investors worry other securities companies are in a similar situation.”

The dollar plunged to a record low against the European euro and the Swiss franc. It hit a 12-year low against the Japanese yen, falling all the way to 95.76 yen early today from 99.09 yen in New York on Friday, putting the greenback at its lowest level since Aug. 14, 1995.

Gold rose to a record. In response to the dollar’s decline, gold for April delivery jumped 3.4% to a record $1,033.90 an ounce, as the dollar’s decline from the emergency rate cut boosted investor demand for a save haven from the greenback.

Sony Corp. (SNE), which gets a quarter of its electronics sales from the U.S. market, skidded 6.7%, hitting its lowest point since November 2005. Nomura Securities cut its rating on the company today by one level from its top grade, saying any additional gains in the yen will be impossible for Sony to absorb.

A 1 yen change against the dollar affects Sony’s operating profit by 6 billion yen a year, the company said on Jan. 31. Sony expects the yen to average 105 in the three months to March 31.
“The dollar is facing a credibility crisis,” Koji Fukaya, a senior currency strategist at Deutsche Bank AG’s (DB ) Tokyo-based Deutsche Securities, said in an interview. “All the markets are entering a vicious cycle.”

Investors in U.S. stocks can expect a rough day today. Treasuries surged as investors fled to safer assets. U.S. stock index futures plunged, guaranteeing a horrid start to the trading day on Wall Street today.

“I just can’t imagine it’s going to be a good day in financial markets [today] just because of fear, and not because of any particular knowledge, but just because of fear of what could be in or what’s not in all financial-service company balance sheets,” Solaris Asset Management’s Ghriskey said.

Standard & Poor’s 500 Index futures fell 21.20 points, while Dow Jones Industrial Average futures fell 119 points. Nasdaq 100 futures fell 27 points.

The Weak Week Ahead?

Don’t expect an improvement anytime, soon.

The central bank’s policymaking Federal Open Market Committee (FOMC) meets tomorrow (Tuesday) to consider reducing the benchmark Federal Funds Rate. The consensus estimate calls for a three-quarter-point rate reduction.

The Fed has slashed its rate by 2.25% in the past six months, taking the benchmark Federal Funds rate down to 3% from 5.25%. It’s a near certainty that Fed policymakers will reduce the rate again at tomorrow’s Federal Open Market Committee (FOMC) meeting. Futures on the Chicago Board of Trade show a 90% chance that the Fed will cut the federal funds rate by another 0.75% tomorrow.
And some economists believe that an even-more aggressive move will be necessary.

Citigroup Inc.’s (C) U.S. economists on Friday said that they anticipate Federal Reserve policymakers will lower the benchmark Fed Funds rate by a full percentage point, taking it down to 2% from its current 3%, and said “and more cannot be ruled out,” CNNMoney.com reported.

Economists led by Robert DiClemente said that “aggressive action is needed to stabilize the financial setting.” The economists said Friday’s near-collapse of Bear Stearns Cos. Inc. (BSC) “underscores the current fragility of the system.”

Indeed, that “fragility” has manifested itself in many economic reports – and probably will show up in the reports due out this week. The only indicator that hasn’t demonstrated weakness is inflation.

But the Fed’s move shows the stagnating economy and panic in the financial markets are still at the forefront of concern.

Let’s take a look at the week’s economic reports from last week:

• U.S. Shopping Spree: On Tuesday, the U.S. Census Bureau and U.S. Bureau of Economic Analysis released the trade balance report for January 2008. We had a trade deficit of $58.2 billion in January, a slight up tick from December’s figure of $57.9 billion. Even with a greenback at historically weak levels and a pullback in consumer spending, we’re still buying more than we’re selling.

• Government is Bad Business: On Wednesday, the Department of the Treasury released its monthly budget statement for February 2008. The U.S. government is running a huge deficit as outlays are far outpacing receipts to the tune of about $263 billion year-to-date for fiscal year 2008. You could never run a company with a balance sheet bleeding that badly.

• At Least Someone’s Working: On Thursday, the U.S. Department of Labor released its initial jobless claims report for the week ending Mar. 8, which was unchanged at 353,000 from the previous weeks figure. It brought the 4-week moving average down 1,250 to 358,500, a decrease from the previous week’s revised average of 359,750. This is good news, however slight.

• Scaling Back: Also on Thursday, the U.S. Census Bureau released its advance monthly sales for retail trade and food services report for February 2008. The figure came in at $380.2 billion, a decrease of 0.6% from January, but 2.6% above February 2007.

• Ramping Up Prices: On Friday, the Bureau of Labor Statistics released its Consumer Price Index for February 2008. CPI increased slightly by 0.3% over the prior month and was a mind-boggling 4% higher than February 2007. Year-over-year, it was down from 4.3%, but it still means everything from bread and milk to cars and vacations are costing American consumers 4% more this year than last year. Core CPI, which excludes volatile food and fuel prices and is the Fed’s chosen measuring stick, was down a tenth to 2.3%. But this is still a bit above the 2% or lower level the Fed would really like to see. And that means it is not good news for a Fed that has decided to focus on a slowing economy, rather than our escalating inflation.

News and Related Story Links:

• Money Morning: By All Indications: Telltale Signs of a Recession.
• Money Morning: Dollar in Dumps, Sends Commodities Soaring Higher.
• MSNBC.com: Fed drops lending rate a quarter-point.
• Reuters: JPMorgan to buy Bear Stearns for $2 a share.
• Federal Reserve Board Press Release: Federal Reserve on Sunday announced two initiatives designed to bolster market liquidity and promote orderly market functioning.
• Bloomberg News: Japan Stocks Fall to Two-Year Low on Bear Stearns Sale, Fed Cut.

Jeffrey Bewkes won’t even start his new post as chief executive of Time Warner Inc. (TWX) until Jan. 1, but he’s ready to sell assets – and perhaps even AOL – as the media giant wrestles with a 53% drop in third-quarter profits.

"We will be looking at anything that improves our strategic advantage," Bewkes said during a conference call with analysts yesterday (Wednesday), Bloomberg News reported . "That’ll be true for acquisitions and divestitures."

Interestingly, asset sales during the third quarter last year made this year’s profit losses seem bigger than they actually are. Time Warner sold stakes in both Time Warner Telecom and Warner Bros.’ Australian theme parks. It also received a $373 million tax benefit and wrote down $200 million in costs from the WB Network, which absorbed Viacom’s UPN Network.

But Time Warner’s excuses end there.

AOL lost 851,000 subscribers, causing profits to drop 24% to $295 million. And analysts are forecasting continued trouble for the Internet and media portal. AOL hopes its reported $340 million acquisition of online-advertiser Quigo Technologies Inc. will draw more revenue.

Time Warner is also the parent company for Time Warner Cable, HBO, New Line Cinema, Warner Bros. Entertainment, Time Inc. and Turner Broadcasting System (TNT, TBS, Cartoon Network, CNN and more).

Also interesting to note: CNNMoney’s version of the story doesn’t say a peep about declining profits, saying the firm’s third-quarter earnings report contained "no major surprises." It also quoted an analyst who advised Time Warner shareholders not to sell their stocks.

News and Related Story Links:

• Bloomberg:
  Time Warner’s Bewkes to Look at Sales as Profit Drops

• New York Times:
  AOL’s New Plan: It’s Not Working

• Reuters:
  AOL to buy Quigo as last big advertising deal

• CNNMoney:
  Time Warner preps for change

Goldman Sachs Group Inc. (GS) has its sights set on Japan.

Goldman and New York-based Aetos Capital LLC have joined forces and are looking to buy Japanese property company Simplex Investment Advisors for the equivalent of about $1.1 billion to $1.35 billion – a premium of about 65%. The bid is for at least 80% of Simplex, and it appears that Nikko Cordial, part of Citigroup Inc. (C) in Japan, is selling its 42.5% stake to the venture.

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Goldman Sachs has raised over $4 billion this year for property acquisitions. Japan experienced a property bubble of its own back in the late 1980s, and it’s only been in the past few years that the outlook for that market has improved. Goldman has been acquiring commercial and recreational properties in Japan for more than a decade, but this would mark a much-bigger move into the property market.

News and Related Story Links:

• Blogging Stocks: Goldman Sachs wants in on Japan’s Simplex Investment Advisors.

Bear Stearns Cos. Inc. (BSC) shares jumped almost 7.5% yesterday (Wednesday) after the New York Times reported that the investment bank is in talks to sell a minority stake to investors including Warren Buffett.

The firm is in "serious" talks with several outside investors and could sell as much as 20% of itself, the newspaper said, citing unidentified people briefed on the discussions. Other investors who have expressed an interest in investing in Bear Stearns include Bank of America Corp. (BAC), Wachovia Corp. (WB), and two China-based institutions, the Citic Group and China Construction Bank, the Times reported.

Bear Stearns declined comment, the newspaper said. The company’s shares climbed 7.37%, or $8.42 each, to close yesterday at $122.66. In the past 52 weeks, the stock has ranged between $99.75 to $122.61.

The revelation by the troubled investment bank comes only three weeks after it was revealed that British investor Joseph Lewis has acquired a 7% stake in Bear Stearns, buying a little more than 8 million shares in the last several weeks, the company said on Sept. 10.

Bear Market at Bear Stearns

Bear Stearns’s stock has declined more than 15% since mid-June when two of the firm’s hedge funds failed because of bets on mortgage-linked securities, damaging the respected "risk-averse" reputation of Bear Stearns Chief Executive Officer James "Jimmy” Cayne, 73. Two Bear Stearns Cos. hedge funds filed for bankruptcy back in early August while another had its assets frozen.

The Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd. and the Bear Stearns High-Grad Structured Credit Strategies Enhanced Leverage Master Fund Ltd. filed for protection under Chapter 15 of the bankruptcy code.

This was essentially the kick-off of the subprime mortgage crisis in the U.S. debt markets – which subsequently spread internationally, causing a global credit crunch that continues today.

Third-quarter earnings dropped in well short of Wall Street expectations after fixed-income sales and trading slumped 88%, thanks to "extremely challenging” market conditions. The implosion of the hedge funds hung a $200 million loss around Bear Stearns’ neck like an ox’s yoke. Chief Financial Officer Samuel Molinaro said Sept. 20 that "the worst is definitely behind us.”

The New Players

Rumored investors include China Construction Bank, that nation’s second-largest lender by assets, watched its shares rise 32% on Tuesday, its first day of trading on the Shanghai exchange. Citic Group’s Citic Securities Co. is the world’s fastest-growing brokerage, with a market capitalization of about $40.7 billion – greater than Bear Stearns and Lehman Brothers, Bloomberg News reported.

But, as usual, the real buzz follows super-investor Warren Buffett, head of Berkshire Hathaway Inc.(BRK.A, BRK.B).

Buffett, 77, and the billionaire chairman of Berkshire, contacted Cayne a month ago, the Times reported.

Although the Chinese banks would give Bear Stearns tremendous global cachet, Berkshire might be the ideal partner. Buffett has invested in troubled financial-services companies a number of times through the years – including American Express (AXP), when it was stung by a scandal involving phony salad oil that it accepted as collateral, and Salomon Brothers, which was stung by a bond-trading scandal. Made famous by the hilarious, but realistic bestseller called "Liar’s Poker," written by a young bond trader named Michael Lewis, Salomon’s raucous internal culture, and the lack of controls that led to its seemingly inevitable missteps and scandal. The book described Salomon’s raucous internal culture, and like the movie "Wall Street," and the two other books, "Barbarians at the Gate," and "Bonfire of the Vanities," helped define the 1980s as a decade of Wall Street-fueled largesse.

Buffett was able to overcome all that and help Salomon rebound. The company was sold to Travelers Corp., which is now Citigroup Inc. (C), in 1998.

With both Salomon and American Express, Buffett became personally involved, but not so much that management was kept from doing its job. Buffett provided a steadying influence internally, and his presence soothed Wall Street, and bought management time to make needed internal fixes.

Lewis to the Rescue?

Lewis, the U.K.-based investor, stepped in early this month. The aggregate purchase price for the shares he purchased, about $860 million, was paid out of working capital by several firms controlled by Lewis, a U.K. citizen and Bahamas resident, according to a Bear Stearns filing with the Securities and Exchange Commission. In the filing, the company said Lewis acquired the stake as an investment, and may purchase more stock in the future.

Punk Ziegel & Co. analyst Dick Bove told MarketWatch.com that Lewis is "a very savvy investor" who "sees significant value in holding a key block of stock" in Bear Stearns.

Bove told clients Monday that he had hoped that Bear Stearns would find a strong financial institution to step in and help provide support for its balance sheet.

"Bear Stearns has taken the position that it does not need this support, but virtually every investor I speak with would be delighted if new third-party money came into the firm from a financial institution," Bove said.

As of Sept. 10, according to the filing, Lewis and entities he controls owned 8.09 million shares, representing 6.97% of Bear Stearns’ 116.1 million outstanding shares. The shares were acquired by companies called Aquarian, Cambria, Darcin, Mandarin and Nivon, MarketWatch.com reported.

News and Related Story Links:

• MarketWatch.com:
  Bear jumps on report bank may sell minority stake; Buffett, Bank of America, Wachovia, Chinese groups interested, N.Y. Times Reports.

• MarketWatch.com:
  U.K. Investor Lewis Has 7% Bear Sterns Stake.

• Money Morning News:
  Two Bear Stearns Hedge Funds Declare Bankruptcy, a Third Freezes Assets.

• Money Morning Analysis:
  To Make a Small Fortune in Hedge Funds, Better Start With a Big One.

• Bloomberg News:
  Bear Stearns May Attract Investment From Buffett, Chinese Banks.

• Money Morning Investment Analysis:
  Warren Buffett’s Berkshire Hathaway is Riding the Rails Again.

• Wikipedia:
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• Wikipedia:
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From Staff Reports

Dublin-based CRH PLC (CRH) is eyeing a possible $3.5 billion to $4.5 billion acquisition of Cemex SAB’s (CX) concrete plants, cement division and pipe-making unit, the companies announced yesterday (Monday).

For CRH, the world’s second-biggest maker of building materials, it’s all about timing. The majority of the assets that the Monterrey, Mexico-based Cemex is unloading are operations and plants in Florida and Arizona that the U.S. Department of Justice required it to sell as a result of its acquisition of Rinker Group Ltd.

Also in the mix of negotiations is Cemex’s concrete pipe business, and related operations, across the country, as well as related assets in Spain, Austria and Hungary.

CRH seems to be anticipating skepticism from its shareholders, who have seen the company’s stock slide almost 25% in the past three months. It reassured investors that CRH is willing and able to make the purchases even as the credit crunch is torching the building and housing sectors.

"CRH has sufficient balance sheet capacity to debt-finance any transaction that might take place," the company said in a statement.

Analysts have mixed reactions.

Bloomberg News reports that Moody’s Investors Service and Standard & Poor’s both may downgrade their ratings on CRH, because the company is taking on too much debt at a critical time.

"The deal is strategically sensible and tactically the timing is correct," John Mattimoe, an analyst at Merrion Stockbrokers in Dublin, told Bloomberg. "But some investors aren’t happy with the company increasing its debt during the current credit market volatility and the increased risk exposure to the U.S."

He added that he rates CRH shares as a "buy."