Buyout beat, week of Dec. 10, 2007

Cerberus, H&R scrap deal

Cerberus Capital Management has scrapped its agreement to acquire Option One Mortgage Corp. from H&R Block Inc. (NYSE: HRB). The two sides had tried renegotiating as the sub-prime mortgage mess cut into the value of the troubled mortgage lending arm, but were unable to work out a deal.

H&R Block now says that Option One is accepting no new mortgage applications, will lay off about 620 employees, close three offices and take a $75 million restructuring charge as it shuts down operations. The company also said it plans to sell its mortgage servicing business.

Under the original deal, announced in April, Cerberus was to pay $300 million less than Option One’s net asset value.

Flowers considers Irish Nationwide

JC Flowers, a US private equity group headed by Christopher Flowers, is considering adding to its current tally of banking targets by making an offer for Irish Nationwide Building Society.

The Irish Times said that JC Flowers has partnered with Icelandic bank Kaupthing to run the rule over a bid of up to $2.2 billion for Irish Nationwide. Kaupthing is currently in the process of buying Dutch bank NIBC from JC Flowers.

The U.S.-based private equity firm is also understood to be in the running to buy the German state of North Rhine-Westphalia’s 38% stake in Germany’s Landesbank WestLB. Christopher Flowers is credited with the turnaround of Shinsei bank in the 1990s.

MS closes on Tops Markets

Morgan Stanley Private Equity has completed its purchase of the Tops Markets grocery chain from Ahold for $310 million. The 71 stores will continue to operate as Tops Markets and Martin’s Super Food Stores, with the same staff. Tops was founded as a neighborhood grocery chain in Buffalo in the 1960s. It was acquired by Ahold in 1991. In recent years, Ahold sold off some of its Tops stores in eastern New York, the Adirondacks and Ohio.