Conglomerates to Benefit From Improving Global Economy

NEW YORK, NY -- (Marketwire) -- 02/15/13 -- On Thursday, a number of M&A deals were announced, a sign that companies are more confident about the state of the global economy. Recent economic data from U.S. and China has been encouraging. In the U.S., the passage of the last-minute fiscal deal ended a great deal of uncertainty. As the global economic outlook continues to improve, conglomerates such as Leucadia National Corp. (NYSE: LUK) and Harbinger Group Inc. (NYSE: HRG) can expect a solid year ahead.

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As the global economy weakened, deal making activity took a hit as companies preferred to sit on cash rather than buy assets. However, deal making activity is on the rise. On Thursday, a number of major deals were announced, including Berkshire Hathaway's acquisition of consumer goods company H.J. Heinz. A rise in deal making activities suggests that companies are a lot more confident about the state of the global economy. Many conglomerates are sitting on huge cash piles and may look to acquisitions as the global economic outlook improves. With equity markets in the U.S. at multi-year higher, conglomerates may look to Europe, where they may find some attractive valuation. The economic outlook for Europe, notwithstanding Thursday's disappointing Eurozone GDP data, has been improving.

Shareholders of Leucadia National are scheduled to vote on the company's proposed merger with investment bank Jefferies later this month. Leucadia will hold its meeting on Thursday, February 28, 2013.

Another encouraging development for global conglomerates has been the rebound in the Chinese economy. In the fourth quarter of 2012, the Chinese economy grew more than expected. Manufacturing data from the world's second largest economy has also been very encouraging of late. In recent years, China has been the engine of global economic growth and with its economy seeing a rebound, conglomerates can expect a solid year ahead. In the U.S., the passage of the fiscal cliff deal has ended a great deal of uncertainty. However, there are concerns over the looming threat of sequester. Also, lawmakers need to reach an agreement on raising the debt ceiling.

Last Friday, Harbinger reported strong financial results for the first quarter of fiscal 2013. Phillip A. Falcone, Chairman and CEO of Harbinger, said that he is very pleased with the first quarter performance, which is a testament to Harbinger's ability to identify companies that will increase in value. Falcone said that the company remains sharply focused on building value for shareholders and executing on its strategy of acquiring and growing attractive businesses over the long-term.

In the first quarter of fiscal 2013, Harbinger reported total revenue of $1.2 billion, up 4.8% over the same period in the previous year. The company's net income for the quarter was $62 million, or $0.31 per share, compared to $23.8 million, or $0.12 per share reported for the same period in the previous year.

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