Archive for September 2006

DealBook, The Abridged Version (9.27.06)

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Crime/Fraud/Legal/Investigations/Inquiries:
Kirk Kerkorian resumes back in court on Dailmer-Chrystler merger [legal]
GM wants billions from Renault-Nissan as price of alliance [legal]
Bioval demanded a Bank of America analyst be punished for “sell” rating [legal]
SEC tells lawmakers it is concerned about insider trading at hedge funds [legal]
H-P’s investigators made many attempts to get director George Keyworth’s cell phone records [legal]
Judge excludes AMD’s foreign commerce claims in suit against Intel [legal]
Citigroup trader pleads guilty [legal]
SEC investigating Pirate Capital [legal]
Mutual fund manager sued by AG Spitzer over trades [legal]
M&A: [? = not yet closed, problems with the deal, lingering questions, etc.]
Germans raise bid for Spanish utility following counter-offer
Warner Music + EMI:?
Volkswagon tells MAN to drop its id for Scania
Lions Gate hostile bid for Image Entertainment getting nasty
Vivendi Universal and Deutsche Telekom still fighting for control of Polska Telefonia Cyfrowa, a Polish mobile operator
Barrick still chasing Novagold
Woolworth picks up 10% of Warehouse Group
For Sale/ LBOs/ Going Private/ Auctions/ Offerings:
Danaher may join bidding for Vision Systems [Auction]
Crow Holdings sells$2.2 billion of its properties to G.E. Real Estate. [Sold]
Millenium wins Anormed auction [Sold]
Aer Lingus prices IPO [IPO]
Money Raising:
Intel commits $40M to Chinese startup [$$]
Goldman pours $18M into GridPoint’s $21M funding round [$$]
People & Moves:
Australian pols call for ouster of Telestra chief following a dispute between the government and company [CEO]
Shaper Image CEO tossed overboard [CEO]
Third Point calls for oust of Nabi Biopharmaceuticals Chief Executive Thomas McLain [CEO]
Miscellaneous:
Citigroup tops league tables for European deal; Goldman slides to second place [League tables]
Citigroup also tops league tables for capital markets and bond bookrunning [League tables]
KKR set to announce biggest buyout fund ever [Private equity]
LBO flood lifts cost of borrowing in Australia [LBO]
Wall Street bigs plan electronic trading platform for big block trades [Trading]
New York City’s Economic Development Corporation hires McKinsey & Company to compare the strengths and weaknesses of NYC and Londong’s financial service sectors [IPOs]

Opening Bell: 9.27.06

mapleleafrag.jpgCanada’s slipping on the world stage, WEF study shows (Globe & Mail)
Even with the commodities boom, and investors around the world converting their Dollars into Loonies so that they can invest in Alberta Oil Sands, Canada is in a long slow downward drift in terms of economic competitiveness. According to the World Economic Forum, Canada has fallen to 16th place from 13th place last year, and on a related survey that looks at business competitiveness, the country is in 15th. Of course, the country is still extremely rich by global standards, though people cite the chief reason for this as its proximity to the US. Then again, there must be something more, since it doesn’t seem to do a whole lot for Mexico. The US owns the #1 spot for business competitiveness year after year.
GM reportedly demands billions for tie-up (WSJ)
GM apparently has some self-image issues. It wakes up every morning and brushes its teeth while looking in a rose-tinted, slimming mirror. How else to explain the fact that the company reportedly wants billions to join a Nissan/Renault alliance. Sure GM is big, but nobody would be foolish enough to confuse size with stature. We’re not saying it needs Nissan or Renault, but it certainly looks like the more desperate party in all of this, and it’s really unlikely that Team Ghosn will shell out billions to have GM join it.
Qwest Beats the Odds, So Far (NYT)
Last year, when Qwest was competing with Verizon to buy the re-formed MCI, there was not amount of money that it could offer that would would convince MCI shareholders that it was the superior choice. Everyone assumed that this was a desperate last flail from a company that had no future. Either it would go bankrupt itself one day, or it would be force to sell off too many assets. But, the Times brings our attention back to the company and finds that it’s doing ok, socking away cash, cutting costs, and making a modest profit on a wireless reseller agreement that it has with Sprint. Now the company is trying to figure out what to do with its mountain of cash. It may buy a competitor, or perhaps it will send some cash the way of the shareholders. That being said, it’s not like Qwest is out of the woodwork or anything. There’s some major upheaval going on in its industry, and Qwest doesn’t seem particularly well suited to thrive in it. But, it’s done alright so far, and it’ll be interesting to see how long it can play its luck.
Vioxx Is Cleared in Heart Attack (Bloomberg)
Chalk another one up for Merck. The company had two things going for it in this trial. For one thing, the plaintiff isn’t dead. Yes, it sucks to have a heart attack, and there were probably a lot of medical bills and associated anguish. But it’s hard to get the full sympathy of the jury if your wife isn’t a widow, and your children aren’t half-orphaned. Here you are, standing there, plainly alive for everyone to see. The other factor in Merck’s benefit was that the man started using Vioxx after the company put a stronger warning label on the bottle, suggesting that the pills may increase the possibility of a heart attack. This was the first such case, and it’s going to be hard for any of the post- warning label plaintiffs to argue that the company was still acting irresponsibly at that point.

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  • 25 Sep 2006 at 8:26 AM
  • NatWest 3

Opening Bell 9.25.06

chery-wow-fronts.jpgReport: Chrysler could sell cars made by China’s Chery in U.S. (AP)
Would any red-blooded American drive around a Chery? Probably not; that’s why Daimler is in talks with the Chinese automaker to license one of its small, fuel-efficient models for sale in the US under the Chrysler name. Remember, Chery is the company that had been sued by GM for design piracy. It was only a matter of time before Chinese cars started hitting US streets. In general, there’s nothing pathetic about the emergence of the Chinese auto industry on American shores, and we’re not worried about the trade implications. But the fact that the American makers got caught so badly on the opposite side of trends — totally failing to anticipate any meaningful demand for fuel-efficient cars — and have to go out and license brands from upstart Chinese makers is a bit pathetic. And just in case you thought trade with China was getting to one-sided, Toys R Us is looking to open its first store in the country later this year.
Oil Falls Below $60 on Iran Talks, BP Plan to Restart Prudhoe (Bloomberg)
Whatever you think about the Iran situation — whether you think we should pursue a diplomatic solution or the bomb — we can all agree that it’s hard to put too much faith in what the country’s president has to say. He obviously wants Iran to have a nuclear program, and as an ideologue, it’s unlikely that any diplomacy he enters into will be done in good faith. Yet, ostensibly, the oil markets buy it hook-line-and-sinker, as price per barrel drop every time he says something about wanting to restart talks. So gullible. One analyst says the “Iran premium” has completely evaporated. Maybe. Or, we could just be heading into a recession, and demand for commodities is slowing. But it’s Monday, we can choose to look on the bright side.
Morgenson: blowing hot air on natural gas (Ideoblog)
One of our favorite weekend readings is Larry Ribstein’s weekly critique of the most latest Gretchen Morgenson column. The Time’s Gretchen Morgenson has the unfortunate combination of being singularly obsessed with a topic about which she’s poorly informed, or, at least open to a lot of criticism (we’ll opt with the former, but we’re hedging in case we run into her at a party). Typically, she writes about the evils of high CEO pay (snooze button please). But, in the wake of Amaranth, she uses the opportunity to agitate for more oversight and more regulations (duh). And she’s not averse to using some misleading hyperbole either. Ribstein accurately susses out the worst line “…as last week’s implosion of Amaranth shows, Enron’s’ troubling legacy lives on”. Ugh. It’s really not an exaggeration to say that there are many who want to criminalize failure. That’s a cliche, but an accurate one. If the Gretchen Morgenson’s of the world really set policy, any bankruptcy or loss of money would probably be a crime — or at least presumed to be one. We should be grateful she’s consigned to the Times, and that the paper of record’s influence is on the wane.
Inco backs all-cash takeover by Brazil’s CVRD (Globe & Mail)
This was pretty much expected. Nickel miner Inco has recommended to shareholders that they accept a buyout offer from Brazilian copper miner CVRD. After a pitched battle between CVRD, TeckCominco, and PhelpsDodge, CVRD remained the last mine standing. And after a month of looking in vain for an even more hostile bid to save it from CVRD, Inco relented. The finaly buyout price stands at $19.4 million.

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  • 22 Sep 2006 at 5:14 PM
  • Amaranth

Will Amaranth Dull Taste for Counter-Party Risk? Or Sharpen It?

One of our favorite sources just passed on more about Amaranth’s asset sales. It seems it’s not exactly a fire-sale. Despite its troubles, Amaranth is doing pretty well in selling some of its assets.

Just heard from other colleagues that Amaranth unwound their asset-backed “residuals” portfolio. Was marked in mid-$500 million valuation and it got sold at just under $500 million. Pretty decent realization for such an illiquid set of assets.
People’s first reaction to Amaranth blowing up is to say — and this seems like natural reaction — that counterparties are going to be a lot more cautious about hedge fund exposure. I think that the lesson may actually wind up to be the opposite. If a fund can blow up so hugely, losing 65% of its value in a couple of day, and yet get unwound in orderly fashion, counterparties (if not investors) may in fact become more relaxed about hedge fund exposure.
One aspect of funds counterparties have been showing concern about is the increasing level of illiquidity in HF portfolios. Well, if Amaranth can blow out of a large Asian convert book and half a billion dollars of asset-backed residuals in less than a week at discounts of less than 5%, then one might ask the question: how illiquid really are illiquid instruments?
In reality, it seems that illiquidity has less to do with the instrument in question than with the environment into which the holder needs to sell. Amaranth blowing up was a result of its own mistakes and not an exogenous shock that had a parallel effect on many funds. Plenty of funds were ready to pounce on Amaranth’s “illiquid” portfolio.

Anyone else have any tales to share from the Amaranth meltdown? Bought any Amaranth assets? Tried too? Let us know. Email tips (at) DealBreaker (dot) com. Thanks!

Write-Offs: 09.22.06

$$$It’s like we’ve always said: Millionaires = poor people. [DealBook]
$$$Sell on Rosh Hashana, buy on Yom Kippur, then party like it’s 5767 by blowing that hard earned cash on a limo full of strippers and a bottle of Manischewitz’s finest– nothing before 5750. [Seeking Alpha]
$$$Let out your inner B ‘n T: Two Bankers in North Jersey looking for 3rd tonight. [Craigslist]

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patriciadunn2.jpgThe story just flashed up at the Wall Street Journal. Patricia Dunn is not only stepping down as chairman, she’s off the board. As of now.

Hewlett-Packard said Patricia Dunn has resigned as chairman and board member, effective immediately, in the wake of the company’s ill-fated investigation of media leaks. She will be replaced as chairman by Chief Executive Mark Hurd…
H-P had earlier said Ms. Dunn, who authorized the leak investigation, would step down from the chair in January and be replaced by Mr. Hurd, but remain a member of the board.

H-P Chairman Dunn Resigns In Wake of Media-Leak Probe [Wall Street Journal]

  • 22 Sep 2006 at 4:30 PM
  • Amaranth

Rate the Press: Amaranth Meltdown Coverage

Like obituaries, the business pages used to be the sort of place you stored reporters who were hitting the bottle a little too hard. They couldn’t cause too much trouble there, the job was mostly just reporting from press releases, and nobody read anything from the business section besides the stock quotes anyway.
These days, however, the financial press takes itself a bit more seriously. The various financial news organizations compete for stories, pride themselves on scoops, and practice habits they picked up from other journalists—like fact checking. (Sometimes. Every now and then we feel like we’re back in the days of the gin soaked business hack calling his story in from the payphone Costello’s.)
But what’s the point of competing if you don’t have a winner? So today initiates our first ever DealBreaker Business Press Reader Poll. Here’s how it works. Every week we’ll take the biggest business story and ask which news organization covered it the best. Sometimes we’ll focus on the wires, sometimes on television, sometimes on the glossies. And sometimes we’ll mix it up.
Since this week was mostly about Amaranth that’s where we’re starting: Who Covered The Amaranth Meltdown Story The Best?

Who Covered The Amaranth Meltdown Story The Best?
Wall Street Journal
New York Times
Associated Press
Bloomberg
CNBC
Forbes.com
CNNMoney.com
BusinessWeek
MarketWatch
TheStreet.com
Other (explain in the comments)
  
Free polls from Pollhost.com

  • 22 Sep 2006 at 4:23 PM
  • Amaranth

Amaranth Meltdown: Chicago On-Campus Recruiting Cancelled

chicagogsb.jpgAmaranth has cancelled its cancelled recruiting presentation at the Chicago Graduate School of Business, according to a source. Even as Amaranth’s founder Nick Maounis said earlier today that he intends to keep the troubled hedge fund in business, there is widespread speculation that the fund may fold. Maounis acknowledged in a 12-minute conference call for investors that the fund has received many redemption notices, and rumors are circulating that fund employees have been emailing resumes and burning up phone lines looking to reach dry land before the fund sinks. The Chicago recruiting session was scheduled for Tuesday, according to our source.
Got any stories about recruiting season at your school? Send ‘em our way. Tips (at) dealbreaker (dot) com. Thanks!