DealBook: Winners and Losers in Health Care Mergers | The Lonely Short-Seller | Signs of Progress in Greek Debt Talks | Martha Stewart's Empire Sells for Fraction of Former Value
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TUESDAY, JUNE 23, 2015TODAY'S TOP HEADLINES | ||||||||||||||||||||
M & A Sumitomo Mitsui Said to Be Interested in GE Capital Rail ServicesINVESTMENT BANKING Jimmy Lee of JPMorgan Chase Remembered for Shaping an IndustryPRIVATE EQUITY Blackstone Said to Buy Mall in Queens for $400 MillionHEDGE FUNDS Pershing Square Said to Issue $1 Billion Debt OfferingOFFERINGS PSAV Said to Prepare for $300 Million ListingVENTURE CAPITAL Hillhouse Capital Said to Lead Uber Funding RoundLEGAL/REGULATORY British Regulators Propose Bonus Clawback Period of Up to 10 Years | ||||||||||||||||||||
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BY DEALBOOK
WINNERS AND LOSERS IN HEALTH CARE MERGERS About a year and a half after the Affordable Care Act was signed into law, an analyst asked Mark T. Bertolini, Aetna's chief executive, about possible mergers in the health care industry. Mr. Bertolini said, "I expect and we expect that consolidation will continue going forward here as health reform shakes out winners and losers in the process." In the latest DealBook column, Andrew Ross Sorkin takes a look at the possible winners and losers as the health care industry moves toward consolidation on a large scale, especially as the country's biggest health insurers, like Anthem and Aetna, set their sights on smaller rivals.
It's not surprising that the Affordable Care Act would drive mergers in the health care industry, as the law is designed to encourage health care companies to cut costs. "The question, of course, remains whether the savings that might come from consolidation will trickle down to the consumer or will simply wind up in the pocket of shareholders," Mr. Sorkin writes. The American Academy of Family Physicians urged the Federal Trade Commission earlier this month to block the latest series of deals, arguing that "more often than not, consolidation increases costs and reduces options for consumers, and we believe this would hold true in the health insurance market." Mr. Sorkin also cites a study of the 2007 merger of the UnitedHealth Group and Sierra Health Services that found that consumers in Nevada saw their premiums rise after the two companies combined. One group of people who stand to benefit from all this takeover activity are the chief executives. "Virtually every one of them has planned large golden parachutes in anticipation that their companies could be taken over," Mr. Sorkin writes. According to data compiled by Bloomberg, Mr. Bertolini of Aetna stands to make $131.3 million in a takeover if he were pushed out; David Cordani of Cigna would make $58.7 million; and Bruce D. Broussard of Humana would receive $26.1 million. "Mr. Bertolini was probably right about winners and losers," Mr. Sorkin writes. "The big health insurers could win. Their shareholders could win. Their executives could win. On the other side, however, may very well be the consumers."
THE LONELY SHORT-SELLER After six years into a bull market run, the short-sellers have all but lost their voice, Alexandra Stevenson writes in DealBook. William A. Ackman, who has yet to prevail in a billion-dollar bet against Herbalife, said he would "think very hard" before making another short bet. "Short-selling is an incredibly lonely proposition," Mr. Ackman said in an interview.
As investors rush into the market for fear of missing out on the rally, hedge funds have abandoned, or pared back, their short positions. Overall exposure to long positions by hedge funds has reached a high not seen since 2007, a year before the financial crisis, Ms. Stevenson writes. Short positions, meanwhile, are much lower than they were at that time, according to research by Bank of America Merrill Lynch. Much of investors' optimism stems from their confidence in the Federal Reserve to save the day. "Every market has its own characteristics, they all have a story and narrative, and this one really is all about the central bank," said James S. Chanos, founder of the hedge fund Kynikos Associates. The narrative, he added, is that "the central bank has your back and that's embedded in everybody's psyche and portfolio." However, it would be a mistake to write off the short-sellers, Ms. Stevenson writes. Some, like Whitney Tilson and his bet against Lumber Liquidators, have been proved right on occasion. And others, like Bill Fleckenstein, are just waiting for the right time to jump back in. He had planned to start a short fund last year, but later decided it was not possible to do successfully while the central bank continued to pump money into the financial system. "You can keep the party going, but there is going to be a hangover," Mr. Fleckenstein said.
SIGNS OF PROGRESS IN GREEK DEBT TALKS Optimism appears to have taken hold of markets outside of the United States as well, as Greece and its creditors show signs of edging closer to a deal on a bailout,James Kanter writes in The New York Times. Although eurozone finance ministers said after a short meeting in Brussels on Monday that they would need to reconvene this week to fully assess the new proposals Greece had submitted, the head of the group, Jeroen Dijsselbloem, sounded more positive than he had after previous meetings, Mr. Kanter writes. Mr. Dijsselbloem said at a news conference that the Greek proposal appeared to be "broad and comprehensive" and a "basis to really restart the talks." Also, the European Commission president, Jean-Claude Juncker, said that he was aiming for a deal with Greece by the end of the week.
Global stock markets have been on the rise since Monday's developments, but the euro fell against the dollar in early trading in Europe on Tuesday. However, The Financial Times says that's a good sign: "When investors are feeling generally relaxed and happy about the world, they sell currencies that are cheap to borrow and go in search of higher-yielding/more exciting bets elsewhere. So, good news for the euro's survival as a union of countries including Greece is bad news for the euro's value."
ON THE AGENDA The Commerce Department will report on orders for durable goods for May at 8:30 a.m. and new home sales for May at 10 a.m. Markit releases its preliminary manufacturing purchasing managers' index for June at 9:45 a.m. Companies reporting earnings today include Darden Restaurants, Carnival Corporation, IHS and BlackBerry. In Washington, Jerome H. Powell, a Federal Reserve governor, participates in a discussion on monetary policy and the economic outlook at 8:30 a.m. Doug McMillon, Walmart's chief executive, is on the Fox Business Network at 8 a.m. and on Bloomberg Television at 9 a.m.
MARTHA STEWART'S EMPIRE SELLS FOR FRACTION OF FORMER VALUE Martha Stewart Living Omnimedia said it would sell itself to the Sequential Brands Group, a conglomerate whose brands include Jessica Simpson and the Franklin Mint, for just under $200 million - well below the $1 billion that Martha Stewart's media empire was once worth, Michael J. de la Merced writes. "It is in some ways a reminder ofhow far the company has fallen from its heights, when Ms. Stewart's particular vision of a perfectly decorated lifestyle commanded attention and investor dollars," he writes. The company had suffered a blow when Ms. Stewart went to prison in 2004 after being convicted of obstructing justice and lying about a stock sale, but more recently, Martha Stewart Living has been battered by the same changes in consumer tastes that have hurt other media companies.
MERGERS & ACQUISITIONS »
Sumitomo Mitsui Said to Be Interested in GE Capital Rail Services Sumitomo Mitsui Financial Group is interested in buying GE Capital Rail Services, General Electric's railway-leasing business in the United States, The Wall Street Journal reports, citing people familiar with the matter.
Breakingviews: A Taylor Swift Moment for Mergers and Acquisitions Cigna has rejected Anthem, while Williams has spurned Energy Transfer. In a hot merger market like this, love won't be unrequited forever.
INVESTMENT BANKING »
Jimmy Lee of JPMorgan Chase Remembered for Shaping an Industry Mr. Lee, who died on Wednesday, was responsible for securing some of the bank's most prominent deals.
A Divergence on Wall Street Bloomberg Markets explains how the differences of appearance, personality and style between Lloyd C. Blankfein of Goldman Sachs and James Gorman of Morgan Stanley are leading their investment banks in opposite directions.
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PRIVATE EQUITY »
Blackstone Said to Buy Mall in Queens for $400 MillionBlackstone Group has agreed to buy a shopping mall and parking garage in the Flushing neighborhood of New York City's Queens borough for about $400 million, Crain's New York reports, citing several people.
HEDGE FUNDS »
Pershing Square Said to Issue $1 Billion Debt Offering Pershing Square said Monday that it would offer senior notes, and people told The New York Post that the bond offering was about $1 billion.
I.P.O./OFFERINGS »
PSAV Said to Prepare for $300 Million Listing PSAV, a provider of technology and stage design for conferences that is owned by Goldman Sachs, is preparing for an initial public offering that could raise about $300 million, Bloomberg News reports, citing people familiar with the matter.
Planet Fitness Files to Go Public The low-cost gym chain aims to become a publicly traded company in about two months.
VENTURE CAPITAL »
Hillhouse Capital Said to Lead Uber Funding Round The Chinese fund manager Hillhouse Capital Group is leading an investment in Uber that involves purchasing bonds that would convert into shares at a discount to the company's initial public offering price, The Wall Street Journal reports, citing people familiar with the situation.
Ranking Venture Capital Firms by Unicorn-Spotting AbilitySequoia Capital topped Quartz's list of venture capital firms ranked by their early stage investments in start-ups that ultimately became billion-dollar companies.
Twitter's Board Hires Search Firm to Find Next C.E.O. The board of directors appointed Spencer Stuart, an executive recruiting firm, to help it identify and consider inside and outside candidates to run the social media company.
Alibaba to Sell American E-Commerce Subsidiary Alibaba Group is selling its American subsidiary, 11 Main, to the online marketplace OpenSky after the Chinese company's first major foray into the American online shopping market failed to gain traction, The Wall Street Journal reports.
Alibaba and Ant Financial to Invest $1 Billion in Local Services Start-Up Alibaba Group and its affiliate Ant Financial will invest nearly $1 billion in a joint venture that they hope can tap China's fast-growing local services market, Reuters reports.
LEGAL/REGULATORY »
British Regulators Propose Bonus Clawback Period of Up to 10 Years British regulators are pushing proposals that would allow them to claw back bonuses from the most senior executives at banks for as long as a decade, The Financial Times reports.
New York Taxi Agency Passes Rules on Price Estimates for Ride-Hailing Apps New Yorkers hailing rides through smartphone apps will get estimated fares for so-called surge pricing and itemized receipts.
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| June 23, 2015 | |
 Dreams Demolished: 10 Years After the Government Took Their Homes, All That's Left Is an Empty Field
News: Less than a year after moving to her piece of paradise, Susette Kelo found out the city of New London, Conn., wanted to take her waterfront property.
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 Mark Meadows to Fight GOP House Leadership: 'Sometimes You Have to Make Changes to the Coach'
News: The conservative lawmaker lost his chairmanship of a House subcommittee after voting against a procedural motion favored by Speaker John Boehner and his leadership team.
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 More Hillary Clinton Benghazi Emails Revealed
News: More than two-and-a-half years after the attacks, the House committee investigating Benghazi has finally obtained key emails exchanged through former Secretary of State Hillary Clinton's private server, reports Daily Signal senior independent contributor Sharyl Attkisson.
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