AT&T puts shareholders on hold for DirecTV 19 May 2014 Its $67 bln offer to buy the satellite TV operator comes with an unexpectedly robust $1.6 bln of cost savings. Even so, these don’t quite cover the 30 pct premium AT&T is paying and will be spent on rural broadband service anyway. Customers and regulators get the first call.
Take hedge fund exuberance with grain of SALT 16 May 2014 Amid moans about conference fatigue, a near-unanimous confidence emerged at SkyBridge’s annual Las Vegas confab. Long-awaited opportunities in M&A, bargains in Europe and collapsing correlations have finally arrived all at once. The consensus itself, however, is reason for pause.
Deutsche’s YouTube lecture deserves to be a hit 16 May 2014 Colin Fan’s video tirade against dumb language in communications beats watching a cat fall off a piano. And for all the investment bank chief’s awkwardness, it shows that the new bosses reject the old Deutsche’s rough edges. The video makes the point far better than memos could.
Red Lobster sale leaves fishy smell at Darden 16 May 2014 The restaurant conglomerate is selling its floundering seafood chain for $2.1 bln, pre-empting a non-binding vote on the separation forced by activists. Engaging with agitators doesn’t always bring harmony – ask Sotheby’s – but Darden’s siege mentality exposes its board and CEO.
Populism may come back to bite Argentine president 16 May 2014 Cristina Fernandez nationalized YPF to win votes and control the nation’s oil. A growing fight over fracking pits those two motives against each other. Caving to demands to stop shale drilling and curb foreign investment might be popular. But it would raise costs and hurt growth.
Two deals Alibaba could strike in America 15 May 2014 Yahoo’s holdings in the Chinese e-commerce giant and Yahoo Japan are valuable, but selling them brings tax pain. IPO hopeful Alibaba wants to reduce foreign internet groups’ stakes. Buying Yahoo could reduce both problems. Industrial logic, though, suggests an eBay deal instead.
Greenspan’s swipe at big bank bailouts misses mark 15 May 2014 The former U.S. Fed chair says the inevitable rescue of financial behemoths means government debt is understated. That ignores the tidy profit taxpayers made from saving Wall Street’s hide. Regulators deserve a lot more credit for limiting likely losses in future crises.
U.S. mega-fines threaten BNP more than Credit Suisse 15 May 2014 The French bank faces a $3 bln penalty for allegedly violating U.S. sanctions, while its Swiss peer could be fined $2 bln for claims it helped Americans evade tax. CS would wind up with a lower capital ratio. But BNP’s expansionist strategy would be more extensively derailed.
Bond bears’ ordeal will only get worse 15 May 2014 There is more pain in store for investors who have bet on falling bond prices. With the ECB likely to ease and the Fed and BoE unexpectedly dovish, higher rates are a way off. The result is an epic search for yield. Resistance looks futile, but surrender will amplify the trend.
Smaller markets ripe for less Anglo-Saxon activism 15 May 2014 The threat of proxy fights or proposals to borrow heavily won’t sway the family or government owners common in emerging-market companies. While hedge fund Cartica’s fight with Chile’s CorpBanca may remain a rarity, there’s still money to be made from more consensual agitation.
U.S. companies may find that "loser pays" doesn’t 14 May 2014 Boards can now try to recoup legal fees from investors who sue and fail, Delaware’s Supreme Court says. The idea is to deter litigation, but it may suppress worthy cases, hurting shareholder value and good governance. And the silly suits most want to avoid will probably thrive.
Now Dan Loeb, Sotheby’s director, has work cut out 14 May 2014 Christie’s just threw down the gauntlet with a $745 mln contemporary art sale, beating its own record. It’s one area where Loeb has criticized Sotheby’s, which holds its rival auction on Wednesday. Now he’s on the board, he can apply his smarts – and maybe his Rolodex – to help.
FCC needs thick skin to weather its moment in sun 14 May 2014 The U.S. telecom watchdog is tackling flashy issues on mergers, net neutrality and wireless spectrum. Resolving them won’t be easy, given the agency’s mandate to spark competition while also promoting efficiency and consumer choice. Current commissioners seem up to the task.
Hedge fund customers’ yachts washing further away 13 May 2014 The flood of money – now $2.7 trln – in hedge funds has squashed returns below public stock markets. Private equity doesn’t seem to be doing much better. Both investing styles intuitively offer finite opportunity, yet fees encourage managers to hoard assets. Investors beware.
AT&T will struggle to justify $70 bln DirecTV bid 13 May 2014 Expanding into satellite TV requires heroic assumptions to be financially viable. Just to cover its cost of capital, AT&T would need to find over $2 bln of synergies. That’s more than even Comcast pledges to squeeze from Time Warner Cable. The deal has a whiff of desperation.
Fannie, Freddie overlord sets back mortgage reform 13 May 2014 New housing finance watchdog Mel Watt is reversing his predecessor’s plans to shrink the U.S. government giants. That means Uncle Sam will probably stay on the hook for 90 pct of new home loans. Profits will remain high as a result, complicating Congress’ efforts for reform.
AstraZeneca saga reverts to UK takeover playbook 13 May 2014 Pfizer’s bosses were cast as villains in a grilling by lawmakers, while Astra’s played unpretentious scientists. Public antipathy raises the risks for the U.S. group of going hostile. With Astra’s CEO outlining the form of acceptable bid, Pfizer knows where it needs to convince.
Rob Cox: The worry now is a brewing M&A bubble 13 May 2014 The corporate urge to merge has gone into global hyper-drive. Activity has surged as investors egg companies on and bid up the shares of acquirers well beyond mathematical prudence. When new metrics to justify the irrational are trotted out, it’s time to exercise caution.
RBS may get punished by its U.S. Citizens 13 May 2014 The UK lender has filed for an IPO of its stateside arm. Even excluding a writedown, Citizens Financial’s performance looks dire. An ROE of just 3 percent suggests it’s worth less than half its $19 billion book value. That’s a lot less than RBS needs to fund its capital plan.
Review: A crisis-like evaluation of "Stress Test" 12 May 2014 To judge the merits of Tim Geithner’s reflections, six Breakingviews columnists digested different pieces in a short amount of time. Like the regulators who often lacked broader context, the assessments vary. Yet there’s also consensus it’s a useful tome for the financial library.