Cross-border mergers and acquisitions kept up their blistering pace in the third quarter. The value of deals done in the first nine months already exceeded the whole of 1998, which was itself a record year.

The total value of M&A deals rose by more than 50 per cent in the first nine months against the same period in 1998, increasing from $384bn to $608bn, according to KPMG Corporate Finance. This compares with $544bn in the whole of 1998.

UK companies dominated, making up a third by value of all global acquisitions, although there were signs of this slowing. "Global M&A markets are ending the millennium with a bang," says Stephen Barrett, head of M&A at KPMG Corporate Finance. "The UK has a commanding lead, continuing its spending spree in the US."

The highlight of the quarter, however, was the £6.7bn bid by Wal-Mart, the US retailer, for Asda, the UK's third largest supermarket chain. It was by far the largest deal in the UK. The US retail giant's all-cash offer topped a £5.8bn all-paper bid from Kingfisher, the UK general retailer.

The other two big deals were both in the media sector. After more than a year of on-off talks, Trinity and Mirror Group agreed a merger to create the UK's largest newspaper publishing group. The deal, structured as a takeover of Mirror, valued the tabloid newspaper publisher at £1.24bn, or 267p a share. Shareholders in Trinity and Mirror were left with 48.4 per cent and 51.6 per cent respectively of the enlarged capital.

The deal came a month after Gannett, the US publisher of USA Today, launched a £904m bid for Newsquest, the UK regional newspaper group that publishes such titles as the Northern Echo and Oxford Mail.

The period also saw one of the first big mergers in the quoted biotech sector - where analysts expect more deals. Celltech and Chiroscience formed a new company with a market capitalisation of about £700m. The deal was made on the basis of 62 Celltech shares for every 100 Chiroscience shares, leaving Celltech's shareholders with 52.4 per cent of the new company.

Private equity investors continued to be prominent in the third quarter. The largest public to private deal was the purchase of Hillsdown Holdings by Hicks, Muse, Tate & Furst of the US. The US group won the food group's hand with an offer at 147p a share, after a bidding battle with Candover, a rival UK private equity fund. Hicks, Muse had earlier offered 127p a share.

UK firms invested most heavily in the US, acting as purchasers in 181 deals totalling $128bn in the first nine months, some 60 per cent of the UK's total. But KPMG notes that companies in continental Europe, particularly in France, Germany and Sweden, are also becoming aggressive acquirers, supported by a recovering European economy and stimulated by the need to restructure to compete in the single market with a single currency. The telecoms sector has been the most active internationally but chemicals, food, drink and tobacco, oil and gas and banking and finance sectors have all seen a large number of deals.

In terms of inflow, the UK was second to the US with acquisitions of local firms worth $78bn in the first nine months. Of this, $45bn came from the US, followed by Germany with $15bn and France with $10bn.

Tabular Information in Adobe PDF format - Mergers & Acquisitions, Q3 1999


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