Gates joins in $15bn deal frenzy

A takeover wave worth more than $15bn (£8bn) swept through global markets yesterday, boosting US stock indices as large deals by investors such as Bill Gates and Kohlberg Kravis Roberts eased fears of a slowdown in merger activity.

The flurry of activity, dubbed "Takeover Monday" by analysts, was led by a $3.7bn bid by Mr Gates and Prince Alwaleed, the billionaire Saudi investor, for Four Seasons Hotels, the Canadian chain. Other big deals, including a €4bn (£2.7bn) takeover by KKR and Goldman Sachs of the forklift unit of Germany's Linde and the $3.2bn sale of the OSI restaurant chain to Bain Capital and Catterton Partners, were led by private equity groups.

The main exception was a $3.7bn offer by Abbot Laboratories, the drug maker, for Kos Pharmaceuticals, its rival.

The growing influence of buy-out funds, which have dominated recent activity thanks to their large cash resources and favourable debt markets, has led to fears over the privatisation of large portions of the global economy and the amount of debt taken on by private equity groups.

Equity investors, however, put those worries to one side and welcomed the raft of deals, sending the Dow Jones Industrial Average 100 points higher to close at 12,105.55 - its biggest one-day rise in a month. The broader S&P 500 and the technology-focused Nasdaq index also rose by more than 1 per cent.

The takeover offers for both Four Seasons and OSI, owner of Outback steakhouses, were supported by the companies' managements and founders. The trend has marked much of recent buy-out activity, raising concerns among corporate governance experts that the interests of companies' management might clash with shareholders' right to get the highest possible price.

The proposed Four Seasons deal would trigger a $288m payment to Isadore Sharp, chairman and chief executive, who opened the first Four Seasons hotel in 1960. He said the deal would provide "continuity and stability for owners, customers and employees for the long term". Prince Alwaleed and Mr Gates are already Four Seasons shareholders through their respective investment companies, Kingdom Hotels and Cascade Investment. Mr Sharp and his family control 65 per cent of the votes through multiple voting shares.

The three groups have offered $82 cash for each limited voting share, or a 28.4 per cent premium over Friday's closing price. The shares, listed in Toronto and New York, rose about 30 per cent to slightly above the offer price.