The bank that seems to be everywhere in New York city is being bought by TD Bank, creating the fifth largest bank—with $312 billion of deposits—in the US. TD Bank will pay $8.5 billion of cash and stock for Commerce.
Commerce Bank was the fast food chain of banking. It’s founder Vernon Hill, who is said to own the largest private house in New Jersey, started as a fast-food franchise owner before starting up Commerce Bancorp in 1973.
Commerce shareholders will get 0.412 shares of TD Bank and $10.50 in cash. That works out to a 6.6 percent premium, although some would argue that the bank was already trading at a premium after Hill resigned and speculators began whispering that the bank was in play.
TD Bank is Canadian. So, you know, blame Canada.
Deal Press Release [Newswire]
Keith Hahn
Posts by Keith Hahn
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Posted in:
Citi
Sounds like at least one job at Citi is still safe. Somehow.
Sponsored by the Financial Times. Which you can now read online for free. More or less.
Is it already October? It seems like it was just yesterday that we were sitting in the Gowanus Yacht Club sipping Duff’s and contemplating the plight of the quant funds, leveraged buyouts and wondering whether or not Citigroup’s Chuck Prince was headed the way of Bonnie Prince Charlie. Oh, right. That was yesterday. Seasons are changing but the song remains the same. And so does our favorite outdoor Brooklyn bar.
So. Markets. What happened today? Right. The Dow Jones Industrial Average set a new record, breaking through 14000, the S&P 500 hit record numbers and NASDAQ climbed closer to the dot com one point oh bubble levels. The Dow tape read 14087.55 at the close. On the New York Stock Exchange Monday, 2,476 stocks rose and 786 fell. Volume was relatively light, with 938.1 million shares traded on the exchange.
The factor most responsible for the climbing indexes was the aggregate buying and selling of equities measured and weighted by the indexes.
Our random index of the day is the Bombay Stock Exchanges Sensex. Here’s what the action looked like. A rise at the open slipped quickly into a decline. Late in the day things bounced back, bringing it to a record high. The rally didn’t last, however, and the index closed more or less flat for the day.
Takeover rumors swirled around Travel Zoo, while shares and options climbed though the roof and jumped into orbit. Representatives of Travelzoo and Priceline aren’t commenting, which is only fueling the feeding frenzy.
And in bank run news, the Bank of England has asked KPMG to be on standby to be the administrator of Northern Rock should it fail. Banking M&A types continue to run spreadsheets trying to figure out a rescue plans for the crippled bank.
The best part of waking up is FT Alphaville in your cup.
We’ve got two weeks to wait until the Fox Business Network is launched on television. But it’s already up on the web.
Or at least partially.
Today FBN unveiled its new website. It’s short of business content but has a crisp look, and none of the busy-ness that makes CNBC.com look so cluttered. They’re also clearly playing up the glamour shots of the network’s hotties, such as reporters Jenna Lee and Shibani Joshi.
It seems that reporters and anchors will also be blogging on the site. Lee makes a play for your hearts and minds by writing on her blog, “I don’t dread reporting any aspect of business news, except job cuts. It seems so easy to rattle off those numbers like a play-by-play and forget that the data represents individuals. Layoffs are a big deal, and I know about job cuts firsthand.”
Joshi tops her, though, by touching on two subjects that are really close to the hearts of DealBreaker’s staff: endless work weeks and “the bars that never close.” We’re definitely going to be looking out for Joshi at our favorite afterhours bar soon.
The site does seem a bit buggy right now and is not easy to navigate. We couldn’t get some of the blogs to scroll and some videos didn’t seem like they wanted to play. The lack on internal links to individual stories or blog items will definitely cut down on its usefulness. Hopefully this is just a micro-website for promotional purposes.
Fox Business Website [FoxBusines.com]
So UBS has said it will shed 1,500 jobs in its investment bankuildup. Early signs of trouble was the news earlier this month that the chairman of European investment banking at UBS was blting to Lazard after more than 30 years with the swiss bank and the sudden, mysterious departure in July of its Chief Executive, Peter A. Wuffli. Wuffl has overseen a big expansion of leveraged lending at the bank, something which looked great during the “golden age” of private equity buyouts but now has many banks with morning after regrets.
Next up with job cut announcements: Citi.
Send your pinkslip tips, rumor or speculation to DealBreaker! Tips@dealbreaker.com. Thanks.
Credit crisis strikes UBS, Citi, Credit Suisse [Reuters]
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Posted in:
Leveraged Buyouts
Another One Bites The Dust: Acxiom Buyout Called Off
ValueAct Capital Partners LP, Silver Lake Partners, Merrill Lynch and UBS To Pay Break-Up Fee
By Keith Hahn
Blood from the burgeoning buyout bust continues to flow. This morning Axciom Corp announced that the private-equity buyers who had agreed to a $2.25 billion purchase of the company had called off the deal.
Apparently, the buyers, the banks financing the deal and the company have reached an agreement to pay a portion of the original breakup fee. According to Acxiom they will pay just $65 million, down from the original $110 million.
Perhaps most surprising, two of the banks that were financing the buyout are paying a portion of the breakup fee. This suggests that the banks had put pressure on the buyers to scuttle the deal. This is the first time we’ve ever heard of banks paying part of a buyers breakup fee. If it sets a precedent for more deals, it could make the unwinding of some of the troubled LBO deals easier than many feared.
Acxiom Buyout Plan Is Canceled [Wall Street Journal]
On the eve of the official deadline for comments on the two conflicting shareholder access rules, the SEC is not closer to reaching consensus that it was when the controversy started several months ago, according to the Wall Street Journal.
Mr. Cox voted with the commission’s two Democrats for a proposal that would allow shareholders with a 5% stake in a company to propose changes to bylaws governing the election process. He said he favored this rule. Still, he voted with the two Republican commissioners for a rule that would do the opposite and allow companies to reject such proposed bylaw changes.
By putting both rules out for comment, Mr. Cox sought to foster more debate and buy time for the commission to work out a compromise before his self-imposed year-end deadline. But the commissioners are no closer — perhaps are further apart — and public comments, which are due tomorrow, aren’t expected to point the way toward middle ground.
Apparently, the retirement of one of the Democratic appointees to the commission has shifted the balance of power on the issue. The commission is scheduled to vote on the issue in November but a replacement for the retired Democratic appointee won’t be made until after that. Some are urging the SEC to scrap both rules and just start over.
Update: Larry Ribstein points out that there’s no reason this issue needs to be a political football at the federal level. Why not let state corporate law handle this?
Can SEC’s Cox Win Playing the Middle? [Wall Street Journal]
With seventy percent of Americans telling pollsters that they would like to see the US pull out of Iraq within 12 months, the insistence by our military leaders and the White House that it will take much longer—maybe as much as 20 months—is frustrating. What’s the hold up? Why can’t the military speed things up?
We thought about these questions watching the Sunday morning political shows and found ourselves thinking that the intellectual exercise of how to improve the withdrawal was a lot like the kind of questions we used to ask when we were working on private equity turnarounds. Managers often have confused priorities based on poor incentive structures. New ownership can spur rapid change by changing these priorities.
We’re not sure how to fix the incentives for the military to pull out more quickly, though. But we’re sure it can be done. According to Greg Cochran writing in the American Conservative, one of the reasons that the withdrawal is expected to take to so long is that the military is trying to figure out how to remove all the stuff we’ve brought to Iraq.
From this point of view, decisions about moving day become straightforward. For example, what should we do about the vast amount of non-combat materiel in Iraq? We’ve accumulated dentist chairs, chapel pews, swimming-pool filtration systems, office complexes, multimillion-dollar fitness centers, air-conditioners, refrigerators, prefab latrines, Coke machines, even 50-inch plasma TVs. We have stockpiles of 50-gallon oil drums full of battery acid, contaminated oil, and industrial solvents. We’re being told that it all has to be shipped home. I have a better idea: leave it all behind. I’m sure that the Army bureaucracy thinks that we’ve got to move these refrigerators, got to move these TV’s. They’re wrong. Maybe they fear that leaving a single vending machine behind means that they will have to personally answer to the Coca-Cola Company.
The longer we stay, the more men we lose. How can anyone believe that piles of junk are worth anyone’s life?
The private equity chiefs we know would instantly slash plans to engage in non-essential activities like removing air-conditioners from Iraq. Iraq is not a national park. We’re not camping. We don’t have to carry out what we carried in. Instead we should concentrate on what Cochran emphasizes: removing weapons and people. All the junk gets left behind.
But we still can’t figure out how to change the incentives inside the military that have people making stupid decisions like remaining there for an extra 8 months just to remove junk. Any suggestions on how to improve the pullout performance from you turnaround guys out there?
Easy Out [American Conservative]
The myth of shareholder democracy holds a powerful sway over public opinion. The comments we’ve received on our two articles on the proxy access rules now up for comment at the Securities and Exchange Commission demonstrate that people continue to be bedeviled by the misguided analogy with democratic political regimes.
One of the mental levers the mythologists of shareholder democracy use to make their case is a kind of demonology of corporate managers. Although corporate insiders, especially chief executives, have demonstrably lost power in recent years to shareholders and independent directors while the risks of running a public company have increased, the continued climb of executive pay seems to have convinced many that executives are somehow fleecing shareholders. The evidence for this is underwhelming, however. While bad characters exist in executive suites and board rooms, they hardly justify enacting wide-ranging corporate governance reforms. Bad CEOs make bad law.
It’s important to remember that our system of corporate governance has generated enormous wealth for shareholders and workers over the years, bringing us unprecedented prosperity. We should exercise caution when seeking major reforms, especially when the costs of those reforms will be difficult to measure and the reforms will be next to impossible to reverse. By creating a uniform, national rule for proxy access, the proposed reforms would shut off jurisdictional competition and experimentation between the states. Worse, the proxy access reform is clearly viewed by many of its proponents as a first step in what they view as a revolution in corporate governance. There will be more to come. The proxy access reforms are precedent not a final resting place.
Some of the most thoughtful criticism of our first essay came from Beth Young, who I believe is the author of the Shareholder Proposal Handbook and a senior research associate at the Corporate Library.
We rough up Young’s objections to our articles after the jump.
The New York Stock Exchange has released it’s calendar for 2008 and 2009. Get excited because in 2008 there will be two extra trading days! It’s a leap year, giving us an extra day in February. And there is one less holiday on the schedule—this year we honored the death of Gerald “stagflation” Ford by refusing to work. Unless a former president dies this year, we should have one more day of trading.
Leap years tend to outperform other years, with particularly strong Augusts. Of course, leap years are also presidential election years, which may have more to do with market performance than that extra day in February.
Click chart for larger version.
NYSE Euronext Holidays & Hours [NYSE]
Sears Holdings doesn’t seem to be working out. Eddie Lampert was supposed to be the next Warren Buffett, and Sears Holdings the next Berkshire Hathaway. But this week shares in the company hit a new 52-week low after investors digested poor earnings performance, bad news on same store sales and worries that we might be entering a rough sector for the entire retail sector.
The logic that boosted Sears Holdings from a $50 per share company to a $200 per share was built on the value of its real estate. Lampert was said to have a plan to leverage the underlying real estate assets of Sears Holdings to make other investments, basically turning an old fashioned retailer into a twenty-first century hedge fund or private equity firm. But with consumer sentiment down and real estate deflating, the real estate to investment company play looks a lot less feasible.
Even as short interest in most NASDAQ stocks fell in September, short interest in Sears Holdings shot up by almost 15 percent. Short positions stood at about 13.7 million shares in mid-September, nearly 10 percent of the outstanding stock in the company. This puts it up there with short favorites, for lack of a better term, like Crocs, Lulumon and Pet Smart.
So does Lampert, who Business Week once called an “investment wizard,” have some magical plan for Sears Holdings? Will Skull & Bones somehow rescue the company with a Dear Island strategy? Lampert is supposedly obsessed with protecting his downside. So when we think about the future of Sears Holdings we can’t help but ask: What Would Eddie Do?
Well, if we can’t have Sears Holdings, at least we’ll always have the Mets, right? Hello? Anyone still listening?
