[Deborah Marchini, Cnn Anchor:] The board of directors of Bestfoods met last night to consider Unilever's sweetened takeover bid. No word on their decision has been released yet.
[David Haffenreffer, Cnn Anchor:] For more on the proposed deal and the merger and acquisition environment as a whole right now in the marketplace we have M&A; specialist Wilbur Ross. He is chairman and CEO of WL Ross & Company. Welcome and good morning to you.
[Wilbur Ross, Wl Ross & Company:] Good morning.
[Haffenreffer:] Well, this is turning out to be a suspenseful story between Unilever and Bestfoods. Any ideas how it might play out?
[Ross:] I think it's very difficult for Bestfoods to pay a premium to buy Campbell's Soup when they're faced with a big premium for themselves to be acquired by Unilever. I think the bid from Unilever is a very, very good bid, probably take almost $1 billion of synergies for it not to be dilutive for Unilever. So if I were a betting man, I would bet on Unilever.
[Marchini:] The stock was down yesterday on the prospect that Bestfoods would take over Campbell's. Of course, Campbell's stock was up; they were sort of happy at the prospect of a takeover. What do you think the reaction of shareholders would be if they decided to go with Campbell's rather than Unilever?
[Ross:] Well, I think there would be a huge amount of litigation over it because there is around a 10-point spread between where Bestfoods' stock closed yesterday and the takeover bid by Unilever. It's hard to imagine that acquiring Campbell would have an immediate positive effect.
[Marchini:] In talking with Campbell, what do you think Bestfoods wants, its independence or more money?
[Ross:] Well, I it feels like they want independence more than more money. Unilever sent people here over the weekend; it's pretty clear they would have put something or other additional on the table if that were all that it took.
[Haffenreffer:] You mentioned litigation coming up as a result of it. You mean from shareholders of Bestfoods sort of trying to put the squeeze on management to accept the Unilever offer?
[Ross:] Yes, I think it's a very difficult situation to be put into, turn down a high premium bid; nobody else, even though they searched the woodwork came with anything like a better bid. So instead of taking that, to say, no, I want to pay a premium to buy someone else, I think is very tough.
[Marchini:] Another takeover in the news today: AT&T; apparently won preliminary approval from the Federal Communications Commission to acquire MediaOne; that's conditional I should say, not preliminary, but conditional approval requires it that sell one of two things apparently, either Libya Media Liberty Media or its 25-percent stake in Time Warner Entertainment. Any sense about which of those properties is likely to go on the block?
[Ross:] I would guess that they would be more likely to sell the 25-percent stake because that's a non-operating thing, they don't really have control over it. But either way, I think the important thing to them is to get their major deal done and participate in the reshaping of the telecom industry.
[Haffenreffer:] How has the market's, the stock market's, behavior affected the environment for a merger and acquisition activity? We just recently have seen a bit of a flourish come up, especially in the airline industry. But as you look at the markets, how do you see the landscape?
[Ross:] Well, acquisition premiums have tended to go up some as stocks, in general, have declined since the March period, and I think you would expect that because in an acquisition you're paying for true value as opposed to just where the securities have been trading. But I think, in general, the high multiples have facilitated deals, they make managements feel happier, they make them feel they have better currency to use, and therefore it helps to stimulate deals.
[Marchini:] Do you see more coming in the airline industry?
[Ross:] Well, there aren't that many airlines left.
[Marchini:] I know.
[Ross:] From the few who are left, yes, I think there will be a great rush, because the United Airlines decision, obviously, puts a huge amount of pressure on everyone else.
[Marchini:] Banking, also, ripe for consolidation...
[Ross:] Well, commercial banking with the dropping of Glass- Steagall and the general deregulation there, clearly, there will be a lot; clearly, in Europe there will be a lot to reflect Euroland and the dropping of borders; and certainly in Asia it is continuing because of the economic distress of some of the countries over there.
[Haffenreffer:] What's the best way for investors to play this, or should they be trying to buy up shares of companies that they think will be taken over?
[Ross:] I think the most attractive way to do it is what's probably the best investing anyway, try to find companies that are selling for less than their fundamental value, and then you'll probably be all right, whether it's a takeover or just normal market appreciation.
[Marchini:] All right, terrific. Wilbur Ross, WL Ross & Company, thanks for joining us this morning.
[Ross:] Thank you for having me.