Two would-be suitors — Bristol-Myers and Walgreen — walked away from attractive targets this and avoided potentially costly bidding wars at a time of difficult deal financing and daily hits to the financial markets.

Although Bristol-Myers and Walgreen walked away from their respective deals for different reasons, the decision to bow out marks a sign of caution by even strategic buyers in the nervous economy.

Bristol-Myers on Monday walked away from its offer to acquire the 83-percent of ImClone Systems it did not already own after Eli Lilly and Co trumped its bid with a $6.5 billion deal. Bristol-Myers decided against counter-bidding and instead cashed in its 17-percent stake in ImClone for about $1 billion.

Meanwhile, Walgreen on Wednesday withdrew its $75 per share cash offer to acquire Longs Drug Stores, avoiding a bidding war with Longs’s existing merger partner CVS Caremark.

Walgreen said it decided to walk away due to the recent deterioration in the economy, Longs’s refusal to hold merger talks, and the uncertainty of leaving its bid in limbo for an extended period of time.

At a time when arbitrage spreads on deals that already have committed financing continue to remain wide, perhaps avoiding costly bidding wars and bowing out is a smart move?

The Wall Street Journal reports National City is in talks with a number of banks about a possible sale. It says Pennsylvania’s PNC Financial Services and Toronto-based Bank of Nova Scotia are among the potential bidders. In late September, NatCity said it had no need or plan to raise capital. A lot has changed since then.
 
In July, Merrill Lynch analyst Guy Moszkowski speculated that Wall Street giant Goldman Sachs would buy a deposit-taking bank to help it fund its businesses. By the fall, Goldman was no longer an investment bank at all, opting to become a deposit-taking bank holding company under heavy pressure from the Fed and the Treasury.
 
Goldman has been National City’s financial advisor, so there is a relationship to work on. Mozkowski said it was clear Goldman had considered a move to buy an old-world bank, but that it was not likely to go for it over the summer. Now Goldman has a big mid-western partner in the form of billionaire, Warren Buffett, who bought a $5 billion chunk of the Wall Street titan. It’d be interesting to see what the oracle of Omaha thinks about such a deal. If nothing else, trading at $2.23 a share on Wednesday, it’s not like they would be getting fleeced. 
 
But Ohio is one of the hardest hit of the Midwest states suffering from the economic malaise, and so may be one of the last to see any traction in a bank recovery. It may take incentive beyond National City’s low stock price to tempt a buyer. 

* ING Direct, the online banking arm of ING Group, said it is acquiring more than 3 billion pounds ($5.3 billion) worth of British deposits from Icelandic online savings providers icesave and Kaupthing Edge.

* Oil and gas exploration company Denbury Resources said it shelved its $600 million Conroe Field acquisition due to turbulent capital markets, even as it enhanced its bank credit line and trimmed its 2009 capital budget to preserve liquidity.

Deals of the day:

* Icelandic bank Glitnir said it would sell its holding in its Swedish daughter company. 

* Gerber Scientific, a supplier of automated manufacturing systems, reaffirmed its offer to acquire all outstanding shares of Canadian Virtek Vision International for C$35.1 million ($31.67 million) in cash.

* Martin Sorrell’s WPP Group declared victory in its acquisition of British market research firm Taylor Nelson Sofres, securing support from 82 percent of the target’s investors.