Tech IPO Offensive, M&A Retreat: Deals to Watch

NEW YORK ( TheStreet) - On the heels of Ubiquiti Networks' ( UBNT) initial public offering Thursday, Zynga ( ZNGA) is pushing ahead with its $1 billion listing, this time on the Nasdaq.

It's a sign that the past month's hyper volatility in markets hasn't entirely discouraged companies from going public. When the IPO happens it's expected to be one of the biggest of the year, and one of less than a dozen that's been announced at a size of $1 billion or more in 2011.

The online gaming and virtual goods seller, most popular for its Zynga Poker, FarmVille, Mafia Wars and CityVille games looks to be trying to catch a wave of both improved market conditions and prospects within the company. This week it announced a new product called Project Z, which will allow it to build an independent presence from its partnership with Facebook, the social networking site where millions of users play Zynga games.

According to a regulatory filing with the Securities and Exchanges Commission yesterday, Zynga also nearly doubled the number of patents it holds. According to the filing, the company's revenue has nearly doubled in the first 6 months of the year to $522 million, but its loss has expanded to $31.4 million.

Ubiquiti, the broadband wireless network infrastructure provider to remote areas sold just over 7 million shares at $15 apiece, according to Bloomberg data. In the weeks leading to its first day of trading, Ubiquiti cut its price expectations from over $20 a share to a range to $15 to $17. It was the first IPO since Sep. 1 when real estate investment trust American Realty Capital ( ARCP) sold just over 5.5 million shares for $12.50 a share.

According to quarterly data from Dealogic, Global IPO activity has totaled $142.5 billion so far in 2011, down 8% from last year's equivalent total. The third-quarter contribution of $27.6 billion was the worst since the second quarter of 2009 when the economy was emerging from the worst recession since the Great Depression. Fearful of volatile stock markets and the low valuations investors are willing to pay for shares, companies pulled 221 offerings to go public in the first 9 months of the year, the highest number of withdrawn or postponed IPOs since 2008 when the global economy hung on the precipice.

In September, Groupon pushed its plans to file a similar sized IPO back until 2012 to wait out market volatility and further explain to investors its earnings ability.

Hulu said late Thursday that it has decided to cancel its four- month auction of the online video company that has free content partnerships with NBC Universal shows like Saturday Night Live, and a $7.99 subscription movie and TV archive called Huluplus that has content from Fox, ABC, Sony Pictures ( SNY), Warmer Brothers ( TWX), Comedy Central and MTV.

The company part owned by News Corp ( NWSA), Walt Disney ( DIS) private equity firm Providence Equity Partners and Comcast ( CMCSA), which bought NBC Universal in 2010, announced the pulls of the sale in a blog post. The post said, "Since Hulu holds a unique and compelling strategic value to each of its owners, we have terminated the sale process and look forward to working together to continue mapping out its path to even greater success."

While on the shopping block, the online video distributor founded in 2007 as a joint venture between NBC Universal and News Corp drew bids from buyers like Dish ( DISH)as high as $1.9 billion. The company, which had other interested buyers like Amazon ( AMZN), Yahoo ( YHOO)and Google ( GOOG) expected to be sold for $2 billion or more.

At the time of the venture's founding then President of News Corp Peter Chernin said, "This is a game changer for Internet video." "Anyone who believes in the value of ubiquitous distribution will find this announcement incredibly exciting," added Jeff Zucker, then CEO of NBC Universal. He later sold a controlling stake in NBC, which was previously owned by General Electric ( GE) to Comcast in a merger valued at nearly $30 billion.

The pull of a Hulu sale may indicate the company has found its biggest game changer yet. This week Netflix ( NFLX)pulled back on a decision to split its streaming online video businesses from its mail-based movie rental business. The split, which lasted under a month, would have called independent mail-movie rental business Qwikster. On Sept. 15 Netflix cut its third-quarter subscriber projection by 1 million after nearly doubling monthly subscription prices.

In an October 5th blog post, Hulu Chief Executive Jason Kilar said that the company had grown its Huluplus subscribers to over 1 million, signaling future growth. "Based on our research, we believe this represents the fastest ramp ever to 1 million paid subscribers among any video subscription service in the US," said Kilar.

Yesterday, Teva Pharmaceuticals ( TEVA) and Cephalon ( CEPH) said they received approval from the European Commission to proceed with a $6.8 billion merger announced in May.

The EC approval requires Teva to divest Cephalon's marketing of a generic drug called Modafinil in France and give the acquirer of this marketing license additional distribution rights the entire European Economic Area.

With the approval, the Israeli and U.S. pharmaceutical giants have gained all regulatory passages to close their merger, which they now expect to close on October 14. Cephalon's $2.76 billion in annual revenue will be added to Teva's existing businesses of more than $16 billion in annual revenue.

Teva Pharmaceuticals May bid of $81.50 a share in cash trumped a previous $73 a share bid by Valeant ( VRX) and was a nearly 40% premium to Cephalon's stock prior to takeover bids.

Teva was looking for an acquisition to bolster future revenue. Prior to the merger, the Jerusalem-based company derived roughly 20% of overall revenue from the multiple sclerosis drug Copaxone; however its patent for the drug expires in 2014. The merger with Philadelphia-based Cephalon follows similar M&A activity to replace expiring pharmaceutical patents, which when they expire, allows generic drug makers to then begin selling drugs.

In 2010, Teva bought German drug maker Ratiopharm for roughly $5 billion. Its largest merger to date is a 2008 acquisition of Barr Pharmaceuticals for $7.5 billion that bolstered its generic drug revenue.

Activist investor Carl Icahn has taken a 9.8% stake in Navistar ( NAV) after not previously holding a position, according to a regulatory filing late Thursday.

The investment in the truck, bus and diesel engine maker follows Icahn's disclosure of a 9.5% stake in armored truck maker Oshkosh ( OSK) back in June.

Similar to the rationale he cited for the Oshkosh investment, Icahn said in the 13D filing with the Securities and Exchange Commission that he had "a "belief that the Shares were undervalued at current levels" and that he's "had conversations with management" to discuss the company's business" in reference to Navistar.

The filing also indicated that Icahn may seek representation on Navistar's board.

Navistar shares opened up more than 11% to $43.15, the stock is down more than 25% so far in 2011.

In its fiscal third quarter ended July 31, Navistar reported revenue of $3.5 billion and net income of $1.4 billion -- boosted by a tax benefit of over $1 billion. The Warrenville, Ill.-based company's adjusted earnings came in at $61 million, or 79 cents a share.

The average estimate of analysts polled by Thomson Reuters is for Navistar to report earnings of $3.16 a share in its fiscal fourth quarter ending this month with revenue seen reaching $4.5 billion.

-- Written by Antoine Gara in New York

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