What Putin wants matters less than what he doesn’t 7 Mar 2014 The Russian president fears real democracy in Ukraine as much as at home. And he’s afraid of a disruption of trade and financial ties if Kiev turns towards the EU. If the U.S. and Europe want Putin to back down, they have to convince him that he’s wrong on both counts.
Review: Why all you know about money is wrong 7 Mar 2014 Felix Martin says that money isn’t a commodity, but a system of credits. This insight allows his book to rewrite monetary history in an eye-opening way. It also suggests that the way economists approach finance and recessions is hopelessly wrong.
Safeway shopping cart comes up short at checkout 7 Mar 2014 In the Cerberus-led takeover, new equity and debt, cash, a stock distribution, future sales and even a tax break in theory get to $40 a share, or $9.4 bln. But investors marked Safeway shares down. Goes to show getting to knockout prices is tough for private equity these days.
EBay could have it both ways with PayPal 6 Mar 2014 The online merchant thinks owning a payments unit is symbiotic. But activist Carl Icahn says the businesses would be worth more separated. EMC garnered some of the best of both worlds by partially spinning off VMware. The same approach at eBay could defuse the tension.
Legal eagles find yet another path to turbulence 6 Mar 2014 Guaranteed payouts and possible crimes helped kill U.S. law firm Dewey. Now forays into 9/11 suits and Chevron’s spat with Ecuador threaten Washington lobbying shop Patton Boggs. The recent recession caused pain for many firms. But bets on big cases can add to the risk.
Big Oil faces no-win on rampant cost inflation 6 Mar 2014 Energy bosses at an industry shindig in Houston this week agreed that a doubling of labor and equipment prices over the past decade is their biggest headwind. Meanwhile, on recent form, they’ve struggled to keep production flowing. Cutting costs is likely to dent future output.
Elon Musk’s Gigafactory puts utilities on notice 6 Mar 2014 The Tesla CEO reckons he can kick off a virtuous circle by doubling world lithium-ion battery production. Musk expects that to slash costs by more than 30 pct and add a turbo boost to Tesla’s sales. It may also leave electric pylons looking as outdated as telephone poles.
Search for China’s “Bear Stearns moment” is flawed 6 Mar 2014 The country’s possible first bond default has prompted comparisons with the Wall Street firm’s failure. It’s tempting for investors to seek parallels with 2008. If the analogy fits at all, it’s only because it reminds the Chinese authorities which mistakes to avoid.
Moelis IPO hands valuable sales pitch to rivals 5 Mar 2014 The boutique adviser wants to leave its founder in control. Evercore, Greenhill and Lazard public offerings raised governance issues as well. But none of those firms was as stingy as Moelis in protecting new shareholders. That could give them an edge when competing for clients.
Peltz, Pepsi breakup arguments both a bit flat 5 Mar 2014 The soda maker reckons losing shared costs would offset gains from the activist’s plan to split the company. That’s not quite true. A breakup would generate more value. But only a rapid uptick in profitability would justify drastic surgery. That’s a tougher argument to make.
Edward Hadas: The ongoing ethics struggle of banks 5 Mar 2014 The boss of Credit Suisse blamed a few private bankers for recent U.S. legal problems. The Employees Association wants management to take more responsibility. Such blame-casting misses the point. In too many businesses, the culture encourages ignoring the voice of conscience.
Energy titans tap yet another dry well: inequality 5 Mar 2014 The industry’s grandees are gathered for their annual confab in Houston, celebrating shale and lamenting higher costs. Amid the hoopla, Chevron CEO John Watson said renewable policies hurt the poor while BHP boss Andrew Mackenzie claimed oil can help them. That’s all a bit rich.
Carlyle’s $1.9 bln Korea deal bets paranoia pays 5 Mar 2014 The buyout firm is purchasing Tyco’s security business in South Korea for three times revenue and 11 times EBITDA. That looks punchy. Koreans are reluctant users of alarm systems - even safer Japan has more. If incomes continue to rise and inequality increases, that will change.
Ken Moelis engineers the deal of his lifetime 4 Mar 2014 The investment banker is taking his eponymous 7-year-old firm public. It may be worth some $2 bln. By stretching the limits of corporate governance, Moelis will wield exceptional control. For potential investors this is a chance to grab onto his coattails – and not much more.
Freeport-McMoRan shows pay votes have some bite 4 Mar 2014 The copper miner is slashing base salaries for top execs including Chairman James Moffett after shareholders opposed pay practices twice in three years. Freeport needs to do more to put governance on a sound footing. But the changes show say-on-pay isn’t a toothless tiger.
Apple CFO handover shows off big company mettle 4 Mar 2014 Peter Oppenheimer’s exit and move to Goldman’s board look well orchestrated, especially for tech-land. Investors want that from a $470 bln company with $159 bln in cash. The trick is to not let an establishment mindset take hold. Apple’s success is based on disruptive products.
Wall Street sings from same dismal FICC sheet 4 Mar 2014 Jefferies has joined Citigroup and JPMorgan saying trading revenue is down by at least 15 pct this year. Some pain was expected. What’s odd is that banks seem to be suffering equally. It’s a potentially worrying sign if even having a distinctive business model doesn’t help.
Tobacco deal may work if survives regulatory fire 4 Mar 2014 Reynolds American might be mulling a bid for rival Lorillard. Similar deals suggest the Camel cigarette maker could sensibly stretch to offer a 30 pct premium. The strategic benefits are also fairly clear. But antitrust and other watchdogs may send any transaction up in smoke.
Mexican oil cash cow could go dry absent tax fixes 3 Mar 2014 Pemex’s quarterly pre-tax profit dropped 30 pct to $10 bln, but the energy giant had to pay $16 bln in government levies. Investment and production predictably suffered. President Peña Nieto’s revenue-raising reforms and plans to let in foreign cash can’t be enacted too soon.
Soaring corporate legal eagles on precarious perch 3 Mar 2014 Credit Suisse and others are eschewing costly outside counsel in matters ranging from big cases to CEO advice at U.S. Senate hearings. But as the ex-law chiefs at Pfizer and Wellpoint can attest, that puts pressure on in-house attorneys. They’re easy targets if things go awry.