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EIN NEWS EDITORS' PICKS | SEPTEMBER 9, 2015
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WEDNESDAY, SEPTEMBER 9, 2015TODAY'S TOP HEADLINES | ||||||||||||||||||||
M & A Perdue Buys Niman Ranch, as It Expands in Specialty Meat BusinessINVESTMENT BANKING JPMorgan Hires Tech Banker Greg Mendelson From Bank of America Merrill LynchPRIVATE EQUITY Terra Firma Hires Justin King, Former J. Sainsbury C.E.O.HEDGE FUNDS JPMorgan's Client 'Steering' QuestionedOFFERINGS Japan Post I.P.O. Said to Seek $8.3 billion From IndividualsVENTURE CAPITAL How Billion-Dollar Unicorns Are Changing the Face of American EntrepreneurshipLEGAL/REGULATORY Challenges to S.E.C.'s Judges May Be Coming to a Head | ||||||||||||||||||||
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BY AMIE TSANG
YAHOO RETHINKS ALIBABA SPINOFF Yahoo is reconsidering its plan to spin off its $23 billion stake in Alibaba after the United States tax authorities declined to rule in advance on whether the transaction would mean huge capital gains taxes for Yahoo and its shareholders, Vindu Goel reports in The New York Times.
Yahoo said its own tax advisers believed the spinoff would be tax-free because it would be bundling a small-business division with the Alibaba stock into a new company called Aabaco Holdings. But its board is considering its options in light of the decision by the Internal Revenue Service. Yahoo shareholders have been eagerly awaiting the spinoff of the Alibaba stake, which analysts say accounts for more of Yahoo's stock price than its core advertising business. Yahoo continues to lose ground to Google and Facebook, and the Alibaba spinoff was intended to be a reward to its long-suffering shareholders. The spinoff could still proceed as planned. Shareholders would be relying on a legal-opinion letter from the law firm Skadden, Arps, Slate, Meagher & Flom reassuring them that the transaction would be tax-free. But if it isn't tax-free, it will be "a blood bath," Victor Fleischer writes in the Standard Deduction column. Yahoo would face a tax bill of about $7 billion on distribution of Aabaco to its shareholders - the same tax bill it would have faced had it sold the underlying Alibaba stock. Yahoo shareholders would not recognize dividend income equal to the fair market value of the Aabaco shares they received. They also would not receive any cash in the distribution. Some of them might have to sell the newly received Aabaco shares to pay the tax bill. Yahoo has protected itself with a line in Aabaco's registration statement, which says Aabaco will pay back Yahoo for any taxes that Yahoo has to pay as a result of the failed transaction. To cover the $7 billion tax bill, Aabaco might sell a third of its Alibaba stake or borrow the amount using the Alibaba stock as collateral. "I don't think there's a simple way for Yahoo to avoid paying taxes on the appreciation of its stake in Alibaba," Mr. Fleischer notes. "It would probably be better off selling the stock, paying the tax, distributing what's left to its shareholders and letting its management get back to concentrating on the core business."
VOLATILITY BUFFERS MAY HAVE DEEPENED MARKET TURMOIL Investment strategies that promise to insulate investors from risk are being seen as a contributor to the wild market swings in recent weeks, Landon Thomas Jr. reports in DealBook.
Investments aimed at avoiding falls in the market have boomed in popularity after global central banks pumped trillions of dollars into asset markets in a bid to spur economic growth. Now experts warn that the sums that flowed into so-called risk-parity funds and exchange-traded funds, or E.T.F.s, over the last five years have become so large that they have created a riskier, more volatile market. Risk-parity funds have used leverage to reduce the exposure that portfolios have to stocks, which tend to be more volatile, by loading up on emerging market and high-yield bonds. The idea is to give investors equitylike returns without the volatility and concentration risk that comes from making a big bet on stocks. E.T.F.s track an index linked to an investment style (stocks, bonds or commodities for example), but trade on exchanges and promise the investor instant liquidity and transparency. Trading in E.T.F.s now accounts for close to 20 percent of total volume for stocks in the United States. In the latest wave of market turmoil, bonds that were supposed to provide stability to investor portfolios have declined along with stocks. Central banks in China and other Asian countries, which for years have been large buyers of United States Treasury securities, have started to sell out of these positions to defend their weakening currencies. As many of these bonds are core holdings in E.T.F. and risk-parity portfolios, the downward pressure has been amplified. There is about $4 trillion tied up in these investment strategies and the fear is that as their returns suffer, a wave of investor selling will start a wider market rout as managers struggle to unload high-yield, high-return bonds and equities alike.
3 NOMURA TRADERS CHARGED A government investigation into Wall Street bond trading practices has led to charges against three traders who worked in New York for the Japanese financial firm Nomura, Peter Eavis reports in DealBook.
The Securities and Exchange Commission accused the three men ofmisleading customers about bond prices so they could earn illicit profits. Deirdre M. Daly, the United States attorney for Connecticut, also announced criminal conspiracy and fraud charges against the men, Ross B. Shapiro, formerly Nomura's head trader of mortgage-backed bonds in New York; Michael A. Gramins; and Tyler G. Peters. A lawyer for Mr. Gramins said his client had done nothing wrong: "This is a case that is not even on solid legal ground, given that several Court of Appeals judges have asked serious questions about the government's theory." Even if the government loses, money managers might welcome law enforcement efforts, which could help them get better deals from brokers. The markets for certain bonds have long lacked clear prices, making it hard for investors to know whether they are getting a fair price. Brokers make money by buying bonds for less than they sell them; the difference is known as a spread. A broker can artificially widen that spread by exploiting the ignorance of the investors on both sides of the trade. The S.E.C. contends that this happened in deals brokered by the Nomura traders. Other banks, including JPMorgan Chase, have said that law enforcement agencies are looking into their bond trading practices.
ON THE AGENDA Data on job openings and labor turnover for July will be released at 10 a.m. Apple will unveil new products at an event in San Francisco at 1 p.m.
MEDIA GENERAL TO BUY MEREDITH CORPORATION The Meredith Corporation, a magazine publisher and owner of television stations, has agreed to be sold to its competitor Media General for $2.4 billion, Michael J. de la Merced reports in DealBook. Meredith started off with a single magazine, Successful Farming, at the turn of the 20th century, but now it is being sold on the strength of its television operations.
Though perhaps best known for publications like Better Homes and Gardens, Meredith's television stations have enjoyed better growth. The local media division increased its sales by 32 percent in the 12 months ended in June, to $534 million. Its print magazine unit, by contrast, saw sales dip by 1 percent, to $1.1 billion. The combined company will be known as Meredith Media General and will be one of the largest owners of broadcast network affiliates in the United States, with 88 stations in 54 markets. The companies said that together, they would reach about 30 percent of American television households. Meredith has already explored a more television-focused strategy. It held discussions with Time Warner more than two years ago that fell apart because of concerns about the fate of publications like Time and Sports Illustrated. Media General has already sold the bulk of its newspapers to Warren E. Buffett's Berkshire Hathaway. It followed that move with transactions like the takeover of LIN Media last year, growing its television network to 71 stations. An arms race to consolidate is already underway within the television industry as content providers, station operators and cable companies try to gain negotiating leverage. The deal may have been well timed to catch a surge in political advertising spending for the 2016 presidential campaign, with the combined company owning stations in swing states like Florida and Ohio. The fate of Meredith's print publications may ultimately lie in a sale or a spinoff, according to a research note by Marci Ryvicker, an analyst at Wells Fargo. Meredith's chief executive, Stephen M. Lacy, suggested during a call with analysts that the newly combined company might still look for potential acquisitions to gain scale.
Contact amie.tsang@nytimes.com
MERGERS & ACQUISITIONS »
Perdue Buys Niman Ranch, as It Expands in Specialty Meat Business The purchase of Niman Ranch gives Perdue, a poultry producer, a bigger base in pork and beef.
Blackstone Agrees to Buy Strategic Hotels and Resorts Blackstone will acquire the owner and investor in high-end hotels and resorts for about $6 billion, including debt.
Concordia Healthcare to Acquire Drug Maker Amdipharm Mercury The deal is expected to expand Concordia's geographic footprint to more than 100 countries and give it access to 190 pharmaceutical products.
G.E. Gets European Regulators' Approval to Buy Alstom Power Unit After months of negotiations to allay European Union competition concerns, General Electric will now be able to acquire the prized energy business of the French company.
Aerojet Said to Bid for Boeing-Lockheed Rocket Venture Aerojet Rocketdyne Holdings has bid about $2 billion for United Launch Alliance, which is struggling to maintain its position as the premier supplier of rockets to the Pentagon, The Wall Street Journal reports, citing people familiar with the matter.
Heineken Buys Stake in U.S. Craft Beer Maker The Dutch brewing company Heineken has bought a 50 percent stake in Lagunitas Brewing to expand into the craft beer industry.
Breakingviews: Mylan's Hostile Bid for Perrigo Has Shortcomings Perrigo's investors may be tempted to take what they can get, but under scrutiny, the offer looks less compelling, Robert Cyran writes.
Goldman Sachs Names Six Healthcare Takeout Targets Goldman cites Clovis as the company with the highest probability of being acquired, but the Clovis's prospects rest on a drug for lung-cancer patients that is still in development.
Li Ka-shing Grabs Cash From Power Assets The infrastructure arm of Hong Kong tycoon Li Ka-shing's conglomerate said it planned to merge with its cash-rich power utility affiliate in an all-share deal, but a fight over Power Assets' cash could still lie ahead.
M.&A. Market Surges With $40 Billion in New Deals The number of deals unveiled since August shows that market swings have not been severe enough to clog what bankers say is one of the most robust pipelines for mergers and acquisitions in generations.
INVESTMENT BANKING »
JPMorgan Hires Tech Banker Greg Mendelson From Bank of America Merrill Lynch At JPMorgan, Greg Mendelson will focus on advising both tech services companies and private equity firms.
Walking Away From Wall Street A wave of veteran bankers has quit big banks to start boutique firms and they claim they are making more money free of the big banks' shackles. The rosy picture is helped by a resurgence in dealmaking.
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PRIVATE EQUITY »
Terra Firma Hires Justin King, Former J. Sainsbury C.E.O. Mr. King, who led the British grocer from 2004 until last year, will serve as vice chairman and head of portfolio businesses at Guy Hands' private equity firm.
Early Facebook Investor Seeks Retail Investors With New Listing HarbourVest Global Private Equity, an early investor in Facebook, will start trading on the main section of the London Stock Exchange on Wednesday, the latest attempt by a private equity firm to attract individual investors.
Quiksilver Files for Bankruptcy Protection in Delaware The surfwear chain Quicksilver has filed for bankruptcy in a deal that would hand control of the company to the investment firm Oaktree Capital Management.
HEDGE FUNDS »
JPMorgan's Client 'Steering' Questioned The Commodity Futures Trading Commission is looking into whether JPMorgan made proper disclosures when pitching its own hedge funds to its private-banking clients.
I.P.O./OFFERINGS »
Japan Post I.P.O. Said to Seek $8.3 billion From Individuals The postal and banking giant is targeting individual investors for at least 70 percent of its initial public offering, Bloomberg News reports, citing people with knowledge of the matter.
Eurozone I.P.O. Window Opens as Markets Calm There are signs of the European I.P.O. market sparking back to life with Bayer announcing that it would spin off its materials division, the car insurance company Hastings aiming for a 1 billion-pound float in Britain and Poste Italiene beginning a roadshow for its partial privatization.
VENTURE CAPITAL »
How Billion-Dollar Unicorns Are Changing the Face of American Entrepreneurship The axis of influence has shifted from its industrial roots to an economy centered on information, technology, and entertainment in one form or another, Andrew Ross Sorkin writes.
LEGAL/REGULATORY »
Challenges to S.E.C.'s Judges May Be Coming to a Head The federal appeals courts may be on a collision course that could require the Supreme Court to sort everything out.
Dewey & LeBoeuf Chairman's Lawyer Cites 'Fantasy Fraud' The lawyer for Steven H. Davis argued that prosecutors had failed to prove the former chairman of Dewey & LeBoeuf was aware of any wrongdoing before the law firm's collapse in 2012.
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 | September 9, 2015 | ||||||||||||||||
House Speaker Michael Madigan has made the unusual move of calling out two of his members over the House's failure to override Gov. Bruce Rauner's veto of a key labor bill last week.
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