Large Colorado business deals shrivel in Q2
Statistics reflect tightening of financing reins
By David Milstead, Rocky Mountain News (Contact)
Published July 3, 2008 at 9:05 p.m.
Colorado mergers and acquisitions were down sharply in the second quarter of 2008 compared with 2007, when megadeals still ruled.
The three months ended in June saw 85 Colorado deals worth $2.7 billion, compared with 101 deals worth $59 billion in the second quarter of 2007.
The data comes from Bloomberg, which tracks deals when they're announced. Other reports, which track deals when they close, show different results. Bloomberg includes both corporate mergers and the acquisitions of assets.
In the second quarter of 2007, First Data and Archstone-Smith, two large Colorado public companies, agreed to sell themselves to private-equity firms for a combined $47.5 billion.
Yet even discounting those two deals, the dollar value of mergers and acquisitions fell more than 80 percent, year over year.
Bruce Hoyt, a managing director at Denver-based investment bank St. Charles Capital, said the Colorado numbers mirror national and international trends. In the first six months of 2008, he figures U.S. deal volume is down 22 percent, but the total U.S. deal value is down 46 percent
"Volume is down, but value is down even more because the deals not getting done are the megamarket deals," he said. "In Colorado, activity is down, but it's still active in the $25 million to $200 million range."
That's where many Colorado companies reside, and it's the specialty of local investment banks like St. Charles, Green Manning Bunch, Headwaters and W.G. Nielsen & Co. All have continued to work on deals, even as overall activity has declined.
The biggest Colorado deal of the quarter involved Rapid City, S.D.-based Black Hills Corp. selling seven power plants, including three in Colorado, to two investment funds for $840 million. One of Black Hills' Colorado plants, Fountain Valley, represented $240 million of the purchase price, Black Hills said. The three plants in Colorado represent nearly half the generating capacity of the deal.
The story for deals is the same as in the first quarter of the year: The roiling capital markets have made it difficult for buyers to obtain financing.
The continuing economic uncertainty is a counterbalance against business owners who might be more eager to sell for fear of escalating capital-gains tax rates in the next federal administration.
"People are looking into their crystal balls and guessing capital-gains tax rates aren't going lower and may go higher, whomever is elected," Hoyt said.
Finance Editor David Milstead can be reached at milstead @RockyMountainNews.com or 303-954-2648.
Big Q2 deals
Colorado deals worth at least $100 million in the second quarter:
* Rapid City, S.D.-based Black Hills Corp. sold seven power plants, including three in Colorado, to two investment funds for $840 million.
* Denver-based Whiting Petroleum bought interests in producing gas wells and development acreage in the Flat Rock Natural Gas Field in Uintah County, Utah, from Chicago Energy Associates LLC for $365 million.
* Williams Cos. bought interests in Colorado's Piceance Basin from Oklahoma City-based SandRidge Energy for $285 million.
* Denver-based Forest Oil bought 500 drilling locations in east Texas and north Louisiana from an undisclosed seller for $281 million.
* San Francisco-based Vista Equity Partners bought Greenwood Village-based Petroleum Place for $250 million.
* Waltham, Mass.-based Mac-Gray bought Denver-based Automatic Laundry from the Pace Cos. for $116 million.
* Denver-based Central Resources bought oil, natural gas and land interests in Canada from Apache Canada for $113 million.
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