More Kimberly-Clark deals likely; Telefonica bid favored for GVT; TransAlta plans quick close

By Cristal Cody

Tupelo, Miss., Oct. 9 - Kimberly-Clark Corp. said Friday it will acquire anesthesia therapy system manufacturer I-Flow Corp. for about $324 million, or $12.65 a share, in cash.

The deal is Kimberly-Clark's second transaction this week and more are likely ahead, an analyst told Prospect News.

In other situations, the counter bid from Spanish telecommunications company Telefonica SA for Brazilian telecom GVT Holding SA is likely to be successful, an analyst said Friday.

Meanwhile, a market source said that TransAlta Corp.'s takeover of Canadian Hydro Developers, Inc. for C$5.25 a share is expected to close soon after the tender offer expires on Oct. 20.

On Wall Street, stocks rose higher.

The Dow Jones Industrial Average added 78.07 points, or 0.80%, to close Friday at 9,864.94.

The Standard & Poor's 500 index rose 6.01 points, or 0.56%, to 1,071.49, and the Nasdaq Composite index closed up 15.35 points, or 0.72%, at 2,139.28.

Kimberly-Clark beefs up business

Kimberly-Clark said it will launch a tender offer to purchase I-Flow's outstanding shares for $12.65 a share in cash, which represents an 8% premium to the company's closing stock price of $11.76 on Thursday.

The companies value the deal at $276 million, which excludes acquired cash and cash equivalents.

I-Flow, a Lake Forest, Calif.-based health-care company founded in 1985 that develops low-cost drug-delivery systems for post-surgical pain relief, will operate as part of Kimberly-Clark's health-care division.

The transaction is expected to close in the fourth quarter.

Kimberly-Clark spokesman Kay Jackson told Prospect News on Friday that the main antirust clearance needed for the transaction will be the application under the U.S. Hart-Scott-Rodino Act.

"There's going to be very minor antitrust filings in other countries," she said. "To put it into perspective, the U.S. sales for I-Flow is 87%, so the rest of it is in Europe and Latin American countries. We don't expect it to be an issue."

I-Flow's market capitalization had grown too small for most analysts to cover, one analyst who dropped the company last year told Prospect News on Friday.

A second analyst who covers Kimberly-Clark, Connie Maneaty with BMO Capital Markets Corp., told Prospect News in an interview that the deal size follows the Kleenex tissue maker's acquisition pattern.

"It doesn't look expensive. It fits in strategically and it appears there are synergies they can capture," she said. "They have been using health care in general as an avenue to grow. That has faster growth potential at sometimes higher margins than the consumer products business."

Maneaty said Dallas-based Kimberly-Clark is focused on beefing up areas of its business and is likely to continue to explore situations.

The deal follows Kimberly-Clark's announcement on Monday that it acquired Montreal-based Baylis Medical Co.'s pain management business.

The I-Flow transaction is "not a big acquisition," Maneaty said "They make acquisitions when all the pieces come together. I do think there will be more acquisitions."

I-Flow's stock closed up 82 cents, or 6.97%, at $12.58.

Kimberly-Clark shares rose 20 cents, or 0.34%, to $59.26.

Three-way telecom battle

Telefonica, through its Brazilian subsidiary Telesp, launched the counter offer for Brazilian telecommunications firm GVT on Wednesday at R$48.00 per share, a 14.3% premium to French rival Vivendi's offer of R$42.00 a share.

"We believe that Telesp's offer has a greater chance of success than Vivendi's," an analyst said Friday. "The likelihood of Vivendi returning with a counter bid is low, as a bidding war could be a financial constraint on Vivendi and could affect its stated goal to retain its credit rating (BBB) and maintain dividends."

The offer from Madrid-based Telefonica, which also owns Vivo, Brazil's top wireless carrier, is fair for Curitiba, Brazil-based GVT, the analyst said.

"We believe that Vivendi is unlikely to achieve a similar level of synergies to that of Telesp given its minimal exposure to Brazil," the analyst said.

GVT's stock traded up 0.85% to end at R$47.25 on Friday.

Telefonica shares fell 0.18% to €19.18.

Vivendi's stock dropped 1.47% to €20.40.

Canadian Hydro takes quick exit

TransAlta said in a statement Friday that it sent a notice to Canadian Hydro shareholders to reflect the new offer of C$5.25 a share and Canadian Hydro's recommendation for the C$1.6 billion deal.

The Calgary, Alta.-based companies announced on Monday that they had reached an agreement after TransAlta raised its bid from C$4.55 a share.

The revised offer expires on Oct. 20.

"Canadian Hydro's CFO confirmed to us that the offer is expected to close on Oct. 20, in line with the bid expiry date," a market observer said. "We estimate settlement three working days after the close of the offer."

Power generator TransAlta operates geo-thermal, wind, hydro, natural gas and coal-fired facilities in Canada, the United States and Australia, while Canadian Hydro is a green energy producer with 21 renewable energy generation facilities in Canada.

Canadian Hydro shares closed unchanged at C$5.22.

TransAlta shares climbed 3 cents, or 0.14%, to $20.87 on Friday.

Mentioned in this article:

Canadian Hydro Developers, Inc. Toronto: KHD

GVT Holding SA Sao Paolo: GVTT3

I-Flow Corp. Nasdaq: IFLO

Kimberly-Clark Corp. NYSE: KMB

Telefonica SA Madrid: TEF

TransAlta Corp. NYSE: TAC

Vivendi Paris: VIV

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