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WSJ.com: Deal Journal

An up-to-the-minute take on deals and deal makers.

Deals of the Day: Former CEO Makes Millions on Collapse of AIGToday

By Heidi N. Moore and Stephen Grocer

Deals of the Day gathers all the biggest news of the morning related to mergers and acquisitions, bankruptcies, financing and private equity. You can also bookmark Deal Journal for easy visiting throughout the day at http://blogs.wsj.com/deals.

Today in the Bailout

Bummer, dudes: Auto executives who testified before Congress went home empty-handed. [Bloomberg]
Related: Some board members of GM also sit on the boards of firms that received bailout funds, including Morgan Stanley and Merrill Lynch. [Crain’s Financial Week]
Detroit feels pain, while the South may gain: Nonunion workers and more-advanced technology are helping Detroit’s rivals weather the downturn better. [WSJ]

Reykavictory: Iceland got its $5.1 billion bailout. How interesting is it that the entire nation of Iceland can be saved with $5 billion while the American auto industry needs $25 billion? [Financial Times]

Related: A full-court effort by U.S. auto makers to secure federal aid appeared to be on the rocks after the companies failed to con

Citigroup’s Troubled Tale of the TapeYesterday

The hits keep on coming at Citigroup. The firm’s stock is now trading at $6.40, a 24% drop in six and one-half hours of trading Wednesday. Here’s a by-the-numbers look at the latest goings-on at the bank.

$34.48 billion

Citigroup’s current market capitalization.

$126 billion

Citigroup’s market capitalization in April.

$178.59 billion

Citigroup’s market capitalization one year ago.

$80 billion

The value of risky “legacy” assets that Citigroup is moving off its trading portfolio and into its investment portfolio or marked “available for sale.” These assets include collateralized debt obligations, leveraged loans, mortgage securities and auction-rate securities, according to Bernstein Research. They likely would have qualified to be bought by the government under the first TARP plan to buy
troubled assets.

$8 billion

The value of legacy assets Citigroup kept in its trading portfolio.

$3.5 billion

The estimated fourth-quarter writedown that Citigroup might have to take on those $80 billion of assets when it transfers them, according to Bernstein Research.

$2.8 billion

Citigroup’s most recent loss, in the third-quarter.

$2.2 billion

Citigro

Evening Reading: Citigroup and the End of the SIV?Yesterday

Goldman Sachs Group’s stock is trading at levels not seen since the firm’s 1999 initial offering..

And yet Goldman still is outperforming rivals Citigroup, Bank of America and J.P. Morgan Chase, Felix Salmon points out over at Portfolio.com.

Citigroup, of course, is the worst performer. It closed down nearly 23%, after it announced it will buy the last $17.4 billion of assets in structured investment vehicles it advises. It now has a smaller market cap than U.S. Bancorp.

John Carney over at ClusterStock wonders if this is the way the great Citigroup SIV debacle ends: with a whimper, not a bang.

It’s all been one big embarrassment for Citi…All sorts of plans were hatched to rescue the SIVs. Perhaps the grandest was a liquidity syndicate of the major banks that was given the evil sounding name MLEC. None of them worked. Finally, it seems, the SIVs have been allowed to go the way of all things.

Salmon believes it is time for Vikram Pandit to resign:

The task facing Citigroup now is not to build a “global universal bank”; it’s to stay alive. And Pandit has given no indication he’s up to that part

Today’s Deal Strategy: Losing by WinningYesterday

You win some, you lose some–and in this financial crisis, you often do both at the same time.

Take three prominent cases where companies retained their independence in the face of takeover offers: Microsoft’s failed attempt to acquire Yahoo, Cliffs Natural Resources’ defunct proposed takeover of Alpha Natural Resources and Electronic Arts failed courtship of Take-Two Interactive Holdings. In each case, the target “won,” only to have its share price fall well below what had been offered.:

Microsoft-Yahoo
Takeover offer: $31 a share
Current Yahoo stock price: $9.13

Yahoo management, guided by the soon-to-be-former CEO Jerry Yang, worked for months to fend off a $44 billion takeover by Microsoft. Microsoft valued Yahoo at $31 a share and Yahoo reportedly held out for $37 a share. Yahoo shares started a long descent in May and slid further as Microsoft repeatedly refused to renew its courtship. Even Yang’s resignation announcement this week hasn’t swayed Microsoft, with the software giant issuing another blow to Yahoo’s shares today by quashing, once and for all, the chance of a takeover. That sent Yahoo’s shares down 18%.

Electronic Arts-Take Two
Takeover offer: $25.74 a share
Current Take-Two stock price: $10

Electronic Arts pursued Take-Two in a hostile offer that ended when the two companies could

Piracy v. Private Equity: A ComparisonYesterday

While every kind of legal deal making is down this year, one practice is up: Piracy. Pirate hijackings of oil tankers have surged 75% during 2008, according to the International Maritime Bureau’s weekly piracy report. (Who knew?) And they’re making good money — better money, this year, than most of the beleaguered money men of Wall Street.

Getty Images

In these upside-down days of credit crisis (and in part because they just sound kind of similar) we got to thinking. What makes for better returns: Piracy or private-equity?

The answer says a lot about the state of the buyout business, which spent hundreds of billions of dollars on deals that are today deeply underwater.

Here’s how the two compare.

Public Profile

Piracy: Treated with scorn in the past, as practitioners were called barbarians. Blamed for international wars such as the First Barbary War of 1801 to 1805. Illegal.

Private equity: Treated with scorn in the past. Famously dubbed Barbarians at the Gate in the 1988 book on KKR’s takeover of RJR Nabisco. Currently skirmishin