3 Deals to Watch: Sony, Yahoo! and Barclays (Update 1)

Microsoft/Skype announcement added in first graph.

NEW YORK ( TheStreet) -- Confirming reports earlier this week, the European Commission today announced it has approved Microsoft's ( MSFT) $8.5 billion purchase of Skype.

The European Commission downplayed concerns that users of competitor services to Skype and Microsoft's consumer online video communications products would be harmed by a merger, citing the competitiveness of the overall market.

In a statement announcing the approval, the European Commission said, "In the area of consumer communications, the investigation found that the parties' activities mainly overlap for video communications, where Microsoft is active through its Windows Live Messenger. However, the Commission considers that there are no competition concerns in this growing market where numerous players, including Google ( GOOG), are present."

In June, the U.S. Federal Trade Commission also approved Microsoft's purchase of Skype because it saw other voice and video over internet competition to Skype from Google Talk and Apple ( AAPL) FaceTime.

Prior to the approval, Messagenet, an Italian internet video and voice communications competitor to Skype argued that in the merger Microsoft should unbundle Skype with Windows Live Messenger and disclose its code, which would allow rival internet communications companies to connect their users with Skype users. There was no indication any such recommendation was made by the Commission.

Skype, the internet video and voice company founded in 2003 by Niklas Zennström and Janus Friis was acquired by eBay ( EBAY) in 2005 for $2.6 billion. The company was then sold to a consortium of private equity investors led by Silver Lake in 2009 for roughly $1.9 billion. Ebay, which kept a small Skype stake and its private equity buyers profited significantly from Microsoft's acquisition. In its 2009 purchase, Silver Lake brought Zennström and Friis back to the company they founded, ending a dispute with Ebay.

As part of the approval, the European Commission said it assessed, "the possibility for Microsoft (i) to degrade Skype's interoperability with competing services and/or (ii) to tie its own products, in particular its leading Windows operating system, with Skype, thereby limiting other players' ability to compete." It found no such threat because, "Microsoft would not have an incentive to degrade Skype's current interoperability as it is essential for Microsoft that Skype's services are available on as many platforms as possible in order to maintain and enhance the Skype brand."

In its press release announcing the deal, the European Commission said that the "vast majority" of mergers aren't a threat to competition, and that it usually decides within 25 business days whether a deal will be approved or taken through in in-depth investigation. Sony ( SNY) is in talks to buy its mobile phones joint venture with Ericsson ( ERIC), according to Reuters. An anonymous source told the news service that Sony is in talks to buy out its 50% wireless handset joint venture entered in 2001, which created the world's sixth biggest mobile phone maker.

The buyout is seen to allow Sony to integrate its smartphone capabilities with its tablet, P.C. and handheld video games businesses. It's also seen as a way to stay in competitive stride with Apple and Samsung in new smartphone and tablet sales.

Analysts at J.P. Morgan ( JPM) told Reuters that a buyout of the JV could be valued at more than $1.3 billion.

On Thursday, the Wall Street Journal first reported that talks had begun about a potential JV buyout.

The Financial Times yesterday reported that Yahoo! ( YHOO) may be looking to sell its 35% stake in Yahoo Japan. Earlier this week, Yahoo! confirmed its hired Goldman Sachs ( GS) and Allen & Company to be advisers on strategic options, which have spawned rumors ranging from a Microsoft ( MSFT) takeover to a buyout from Alibaba, another Yahoo! venture or private equity firms Silver Lake and Hellman & Friedman.

Yahoo Japan is the U.S. online search and news giants second largest asset after its 40% holding in Chinese ecommerce company Alibaba. Currently Yahoo Japan is valued at $19 billion, making a 35% stake worth nearly $6.65 billion. Recently Yahoo's 43% stake in Alibaba has been valued at over $12 billion by new investors.

Currently, Yahoo has a total market cap of nearly $20 billion, almost equal to the two minority-owned assets rumored for sale.

The key to Yahoo's sale of a JV stake will be the tax implications of a deal. Earlier in the year, it had issues trying to sell its piece of Yahoo Japan but ran into complications with the IRS, according to Financial Times sources.

Yahoo, the largest U.S. website by viewers is reeling after its board voted to fire former Chief Executive Carol Bartz earlier this September and replace her with CFO Timothy Morse on an interim basis.

Yesterday, Barclays Capital ( BCS) and Del Monte Foods settled a shareholder dispute arising from a leveraged buyout sale of the 95-year old foods seller's pet foods division in 2010, putting an end to findings by the Delaware Chancery Courts that the two parties acted improperly in the pet foods sale to a consortium of private equity investors led by KKR ( KKR).

The lawsuit came after Barclays financed both the debt needed for KKR, Centerview Partners and Vestar Capital Partners to buy the California -based maker of Meow Mix and Milk Bone pet foods for $5.3 billion, or $19 a share. It also advised the Del Monte board on their sale to private equity investors. The deal, which closed in March, came under dispute by Del Monte shareholders who claimed that the company's sale was organized to lessen bidding competition. Shareholders depicted Barclays as playing on both sides of the deal by being a financing source to buyers and an adviser to sellers, which netted nearly $50 million in total fees for the investment banking arm of London-based Barclays ( BCS).

It shed a negative light on the potential conflicts that arise in leveraged buyout deals, where investment banks compete for both financing arrangements with buyers and advisory work with sellers.

According to an 8K filing with the Securities and Exchanges Commission, Barclays Capital and Del Monte Foods will split a $89.4 million payment by sending $23.7 million and $65.7 million respectively to Del Monte Foods shareholders. Upon the settlement both companies denied all wrongdoing.

The sale began in January 2010 when Barclays began pitched its buyout clients on the merits and availability of financing for a takeover of Del Monte Foods' pets foods business. After the it received interest from KKR for the transaction, Barclays bankers then began to court Del Monte management about selling its pet foods business -and it recommended doing a sale among only a small group of five private equity firms.

One bidder in the process, Vestar Capital Partners, wasn't adequately disclosed as a partner with KKR to the Del Monte board and its high bid wasn't paired fairly with the handful of other bidders, argued shareholders in their lawsuit. They also argued that overall the deal limited a competitive bidding process and Barclays acted deceptively in its dual role as financer and adviser. Barclays lawyers disputed that the bank's objectivity was compromised, saying it was one of nine lenders. The courts ruled in shareholders favor.

In the judgment in favor of shareholders earlier in the year, the judge on the case Vice Chancellor J. Travis Laster said, "although Barclays' activities and nondisclosures in early 2010 are troubling, what indisputably crossed the line was the surreptitious and unauthorized pairing of Vestar with K.K.R. In doing so, Barclays materially reduced the prospect of price competition for Del Monte."

-- Written by Antoine Gara in New York