Consolidated Media Holdings Ltd., Australia’s second-largest media company, is entertaining a very generous buyout offer from Lachlan Murdoch, eldest son of media tycoon Rupert Murdoch, and James Packer, Australia’s richest person and son of late media tycoon Kerry Packer.

The duo offered $2.9 billion to privatize Consolidated Media, which is 24% higher than the stock’s last traded price. Packer is the company’s executive chairman of the board and owns 38% of the company, Bloomberg reported.

Under the deal’s terms, Murdoch’s private company’s Illryia Pty. Ltd., and co-investors would own 50% of Consolidated Media. Consolidated Press, the Parker-led investment company, would control the other 50%. Lachlan, however, would become the company’s executive chairman.

"It’s a huge premium to pay but we’ll pay it because we like the businesses and I think I can add a lot of value," Murdoch said in an interview with The Wall Street Journal.

Consolidated Media has four operational segments: gaming, television, publishing and ticketing and events. It was formed last year from Packer’s former Publishing & Broadcasting unit when he split from his casino operations, the Journal said.

If Consolidated Media accepts the offer, it will expand the reach and influence of the famed Murdoch family’s media dynasty. Lachlan’s father is Chairman and CEO of News Corp. (NWS), which recently purchased the Dow Jones & Co., publisher of The Wall Street Journal. The company’s assets also include television stations, magazines and newspapers around the world as well as social networking site, MySpace.

Sensing media outcry, the Journal went out of its way to say that Murdoch’s Consolidated bid was independent of News Corp., as he quit his management role with the company in 2005, though he still remains on the company’s board.

The Journal even noted that the last time the younger Murdoch and Packer worked together was a failed mobile phone company, One.Tel Ltd., which lost hundreds of millions of dollars and declared bankruptcy in 2001.

The deal is subject to board approval then shareholder approval, as well as approval from Australia’s securities regulator.

News and Related Story Links:

• Reuters:
  K. Rupert Murdoch bio

• Wikipedia:
  Lachlan Murdoch

• Wikipedia:
  James Packer

• Wikipedia:
  Kerry Packer

• Wall Street Journal: 
  Lachlan Murdoch, James Packer Tie Up for Australian Media Firm

• Bloomberg:
  Lachlan Murdoch, Packer Offer to Buy Out Consolidated

Ingersoll-Rand Company Limited (IR) announced yesterday (Monday), a plan to purchase Trane Inc. (TT) for just over $10 billion.  Ingersoll will acquire all of Trane’s 200 million outstanding shares of common stock.  Existing shareholders will receive a combination of $36.50 in cash and 0.23 Ingersoll-Rand shares of common stock per each Trane share.  The deal represents a 29% premium for Trane shareholders based on Friday’s closing price.

"The combination of Ingersoll-Rand and Trane will create a global, diversified industrial company with projected pro forma 2008 revenues of $17 billion," Herbert L. Henkel, Ingersoll-Rand chairman, president and chief executive officer, said in a statement.

At a time when private equity has been dominating the headlines, this merger is one of the largest recent buyouts fueled by corporate dollars rather than private venture money. The recent sale of Ingersoll-Rand’s Bobcat tractor division to South Korea’s Doosan Infracore Co., Ltd. (042670) for $4.9 billion will fund some of the purchase.  The remainder will come from a combination of newly issued equity and debt.

New Jersey-based Trane is a global leader in air conditioning systems and services. Its acquisition will complement Ingersoll’s transport temperature-control division, which manufactures Thermo King refrigerated trucks. 
 
"Combining Trane and Ingersoll-Rand’s climate control operation creates a very strong business. With the size, strength and operational effectiveness of a $17 billion global industrial company, we believe this combination is best for our customers, employees and shareowners in the long term," Frederic Poses, Trane chairman and CEO, said in the Ingersoll statement.

Trane’s shares climbed 21% to close at $45.24, while Ingersoll-Rand’s dropped over 11% to $43.60 at Monday’s close.  Despite the initial negative impact to Ingersoll’s stock, most believe the buyout is a good move for the firm.

"This is totally complementary for Ingersoll," Nicholas Heymann, an analyst with New York-based Sterne, Agee & Leach Inc. told Bloomberg. "It’s not going to overstretch their balance sheet and it’s going to give them a tremendously better global footprint."

The deal still requires regulatory approval and a vote from Trane’s shareholders before being finalized.

News and Related Links:

• Bloomberg:
  Ingersoll-Rand Agrees to Buy Trane for $9.95 Billion

• MarketWatch:
  IR to buy AC-provider Trane in a $10.1 billion bid

In a move that will include an unspecified number of job cuts, the Mexico-based multinational cement giant Cemex SAB de CV, better known as Cemex (CX), said it will cut overall costs by 10%, an initiative made necessary by its June takeover of Australia’s Rinker Group Ltd., Cemex said this week.

Cemex, the world’s No. 3 cement producer – and the No. 1 player in the North American market – would not say how many of its 70,000 workers might be affected by the cost-reduction campaign, although a company spokesman who declined to provide his name told The Associated Press that it would be "much less" than the 10% cost-cutting target. Instead, Cemex will achieve its expense-reduction goals in numerous other areas, with the company noting that "savings opportunities imply more than just the withdrawal of personnel."

With its $15.3 billion buyout of Rinker, total Cemex debt soared to $19.2 billion as of Sept. 30. Even so, Cemex says that acquisition of the Australian company "strengthens our position throughout the value chain" and will allow for gains in savings and revenue.

Rinker had obtained about 80% of its income from the U.S. market, where the homebuilding sector has been badly stung by the subprime-mortgage crisis, causing defaults to soar and housing prices to plunge this year.

Early this month, the perceived risk of holding Rinker Group debt jumped after the new parent company halted asset sales that had a potential value of $4.25 billion, according to a report by Bloomberg News. Cemex was looking to sell assets to pare debt. Credit-default swaps on Rinker bonds increased 22 basis points – nearly a quarter of a percentage point – to 77.5 basis points, reported JPMorgan Chase & Co., (JPM).

A form of derivative debt instruments, credit-default swaps are formal financial contracts that rise as the perceptions of credit quality fall. On a derivative swap hedging $10 million in debt, every basis point [equal to 0.01 percentage points] equates to $1,000. The swaps have reached their highest level since Bloomberg began tracking the data in September 2003, the financial news service reported yesterday (Thursday).

Just last week, in a deal worth an estimated $250 million, Cemex sold some U.S. plants to Dublin-based CRH PLC (CRH). The divestiture was required by the U.S. Department of Justice Department as part of its approval of the Rinker acquisition.

However, when it announced the $250 million in facility sales to CRH, Cemex also announced it was calling off talks on a much-broader sale – one that would have generated debt-slashing proceeds of $4.5 billion. If it doesn’t get those debt-cutting divestiture talks back on track, Cemex could well be looking at a debt-rating cut, which in turn would trigger a rating downgrade on Rinker’s debt, Anita Yadav, head of credit and hybrid research with the Sydney office of UBS AG (UBS), told Bloomberg.

"In today’s environment and with the negotiations with CRH in doubt, people are questioning the chance of them being able to find another buyer and reduce the debt in the next 12 months,” Yadav told the news service. "The rating agencies may say Cemex hasn’t sold what they were expecting, so they will downgrade the company a notch while it finds its feet."

Both Rinker and Cemex, based in Monterrey, Mexico, have debt ratings of "BBB," the second-lowest rating from Standard & Poor’s Corp., that is still considered to be "investment grade."

Despite the heavy near-term news, Cemex has a very bright potential future heading forward. Back in October, Cemex said third-quarter sales rose 31% to $6.1 billion, with the newly acquired Rinker providing some of the fuel. However, since the buyout also drove up debt and financing costs, profits actually declined 7% to $780 million.

Largely due to Rinker’s strong U.S. presence, the third-quarter U.S. sales for Cemex soared 57%, The Associated Press reported. However, Cemex noted that "building-materials dynamics in the U.S. continued to be driven by the ongoing downturn in the residential sector." Sales rose by 6% the company’s home market in Mexico, by 16% in Spain and by 10% in the United Kingdom. Sales in the remainder of Europe were up 14% over the same period in 2006.

With operations in more than 50 countries, Cemex is one of the largest building-materials companies in the world. It has been increasing its global reach through expansion and acquisitions. Because cement is such a dense, heavy product, making it difficult and expensive to ship long distances, companies much locate operations inside any markets that they wish to serve.

[For a Money Morning Investment Research Report that details reasons to invest in Cemex - as well as two other potential plays on Mexico - please click here. The report is free of charge].

News and Related Story Links:

• CNNMoney.com:
  Mexico’s Cemex to Cut Jobs.

• Money Morning Investment Research Report:
  Three Ways to Profit South of the Border.

• Bloomberg News:
  Rinker Bond Risk Rises After Parent Cemex SAB Halts Asset Sales.

• RTTNews.com:
  Cemex Completes Sale Of U.S. Assets Required By DOJ Related To Rinker Acquisition.

• MSNMoneycentral.com/The Associated Press:
  Cemex 3Q Sales Up, Profits Fall.