Prominent activist hedge fund investor Barry Rosenstein of $5 billion JANA Partners won’t be investing in Canadian companies anytime soon. The JANA founder reflected this Tuesday on his recently failed proxy contest with Calgary-based fertilizer maker Agrium during a discussion of activist investing at the Milken Institute’s Global Conference in Los Angeles, saying the company’s actions had cooled his view of investing in the chilly country. “There’s a cost to what they did. There’s a cost to corporate governance in Canada. Will I think twice about going back to Canada? Yeah, I would. That’s not good for shareholders or values of Canadian stocks,” Rosenstein said of Agrium, of which JANA is still the largest shareholder. He said the company “bribed shareholders” by paying brokers 25 cents for a successful vote in the proxy contest, a legal but controversial tactic in Canada. Rosenstein also said that Agrium’s management team threatened to quit if JANA put one person on the board, which Rosenstein said is a violation of selective disclosure rules (JANA tried to put five directors on the board but was voted down by other shareholders April 9 after months of bitter debate with Agrium about the direction of the company)…Rosenstein said he also tries to be collaborative, but it’s not always possible. “The mafia says you have to shoot somebody every once in a while to know who you’re willing to deal with,” the JANA founder joked. [Absolute Return]
Spring Slowdown Paints Ugly Picture for Jobs: ADP (CNBC)
The gloomy news continued for jobs as ADP reported Wednesday that private companies created just 119,000 new positions in April. That was well below expectations and confirmation that the labor market is slowing heading into late spring and early summer. Economists surveyed by Reuters expected the ADP report to show the private sector created 150,000 jobs in April, down from 158,000 in March.
Fed Seen Slowing Stimulus With QE Cut by End of This Year (Bloomberg)
Chairman Ben S. Bernanke will probably reduce the Federal Reserve’s monthly bond buying in the fourth quarter to $50 billion from $85 billion as he begins to unwind record stimulus, economists said in a Bloomberg survey. Policy makers must find a way to slow the pace of purchases enough to signal confidence the economy is strengthening without prompting a sudden rise in interest rates, said former Fed economists Michael Feroli and Joseph LaVorgna.
High-Speed Traders Exploit Loophole (WSJ)
High-speed traders are using a hidden facet of the Chicago Mercantile Exchange’s computer system to trade on the direction of the futures market before other investors get the same information. Using powerful computers, high-speed traders are trying to profit from their ability to detect when their own orders for certain commodities are executed a fraction of a second before the rest of the market sees that data, traders say.
Fed weighs tighter cap on bank leverage (FT)
According to people familiar with the matter, Fed officials have discussed increasing the amount of equity capital banks are required to hold, setting the bar higher than the 3 per cent of assets level agreed internationally. The move is being considered amid growing scepticism about the Basel III capital accords, which impose higher capital requirements on banks around the world but allow them to vary the amount depending on the riskiness of individual assets. Officials are concerned that some banks are gaming the system. However, critics of a higher leverage ratio argue that it is a blunt tool that makes no distinction between safe securities, such as US Treasuries, and risky assets such as leveraged loans, and could result in banks taking on more risk.
Berkshire Hathaway to Buy Rest of IMC for $2 Billion (DealBook)
Berkshire Hathaway has agreed to buy the 20 percent of IMC International Metalworking Companies that it does not already own for $2.05 billion, giving it full control of the company. The deal was announced on Wednesday, just days before Berkshire holds its annual shareholder meeting, where Warren E. Buffett is expected to tell investors that he remains on the hunt for big deals. It is the second big acquisition by Mr. Buffett’s company this year, following the blockbuster $23 billion takeover of H.J. Heinz by Berkshire and 3G Capital.
Florida office manager accused of performing surgery on patient’s face (Fox)
Authorities in Florida say an office manager performed a surgical procedure on a patient’s face at her brother’s cosmetic surgery office. The Sarasota Herald-Tribune reported that 44-year-old Christine Patterson was arrested this week and charged with practicing medicine without a license. Sarasota County Sheriff’s officials said a patient went to Sarasota Surgical Arts for a follow-up visit with Dr. Alberico Sessa the day after surgery in April 2011. Patterson allegedly examined the patient and re-wrapped the bandages. The following day, the patient returned with a swollen face and Patterson allegedly decided to insert a drain to remove excess fluid, according to a sheriff’s office news release. Patterson contacted Sessa, who was out of town, prior to performing the procedure, the news release states. She allegedly told a co-worker on the day of the incident that she had seen the procedure done “plenty of times.”
Read more »
$$$ Cyprus Narrowly Backs Bailout [WSJ]
$$$ KKR Said to Discuss Hiring Former CIA Director Petraeus [Bloomberg]
$$$ Berkshire size, Buffett age cloud annual gathering [Reuters]
$$$ Happy Birthday, Mandy Drury! [Twitter]
$$$ NH Man Loses Life Savings On Carnival Game [CBS] Read more »
Well someone today did an entirely non-imaginary debt offering to fund a stock buyback so bully for them. Should we look at some things Apple’s debt deal is bigger than (most of them!) and other things its yield is smaller than (also most of them!)? I guess that’s a thing, I don’t know. It’s a big bond deal, but still, one should keep it in perspective. Apple sold more bonds than iPods, yes, but fewer bonds than iPads. This is not the category killer that iPrefs could have been.
I assume a termsheet will hit Edgar momentarily and I’ll have wasted my time and be slightly wrong but in the interim I made this list of what seems to have been on offer:1
That’s 5-10bps outside of where Microsoft priced last week. The deal seems to have been multiple times oversubscribed; presumably some buyers whose orders don’t get filled will console themselves buying Facebook shares or something. Read more »
The nation’s largest public-pension fund turned an investment conference into a career fair, asking attending representatives of the hedge fund industry to consider dropping it a résumé. Read more »
A Swiss banker has won a Florida vacation for (allegedly) helping some dual U.S.-Russian citizens skirt taxes in both countries. Read more »
Also, it’s pretty sure that it’s fixed the software glitch and that won’t probably won’t might not happen again. Read more »
Lloyd Blankfein Explains How, In Their Own Little Way, Commodities Are The Gay People Of Asset Classes
By Bess Levin
Attending Harvard, surrounded by classmates with trust funds and blue blood, who had no idea what it was like to grow up in the projects. His years with those same WASPs, many of whom had probably never met a Jew. The period in which there was a lot more Lloyd to love, which coincided with the ‘You can never be too rich or too thin’ era. All experiences that likely made Lloyd Blankfein acutely aware of the fact that he was different, and maybe made him feel like a little bit of an outsider.
None of them, however, can compare to the most ostracizing experience of his life: working as a young commodities trader in an investment bank. Some might say it was the equivalent of being gay in a world that is yet to fully accept homosexuality. Read more »
Herbalife Asks Investors To Close Their Eyes And Imagine That It Did A Big Debt-Financed Stock Buyback
By Matt Levine
A theme these days seems to be that if you can dream up a debt product, people will buy it, as long as the coupon is low enough. Take your pick of UBS’s 7.625% 10-year coco that is in some loose sense junior to its common equity, 2013 looking like a record year for covenant-lite loans, the return of private-label RMBS with weak reps and warranties, or the fact that Rwanda recently issued a 6.875% 10-year bond. Here’s something that won’t fly though:
Herbalife Ltd. recently halted plans for a debt offering that would have raised cash for stock buybacks after auditor KPMG LLP resigned earlier this month, Chief Financial Officer John DeSimone said Tuesday.
The nutritional-supplements company was in the process of “putting together a meaningful new debt arrangement that if done would be used to buy back stock,” Mr. DeSimone said on Herbalife’s quarterly earnings call.
Those plans were put on hold after KPMG abruptly resigned as the company’s auditor earlier in April following revelations that one of the accounting firm’s former partners had divulged confidential information about his clients to a friend who used it to trade. The resignation left Herbalife without audited financial statements.
“We were going down that path, and that path has now been blocked,” Mr. DeSimone said, adding that Herbalife is reviewing other options with banks.
Here is today’s earnings call on which DeSimone said that, and here is Herbalife’s sad 10-Q, with financial statements stamped “(Unaudited and Unreviewed),” which is … I’m sure not unprecedented but not quite contemplated by the SEC’s rules either.1 Perhaps it should be. Like, “if you’re filing unreviewed financials, you should print them in a different font, Comic Sans or something.” Read more »
UBS Records $1 Billion First Quarter Profit (DealBook)
UBS earnings for the first quarter beat analyst forecasts on Tuesday, helped by stronger performances at its wealth management and investment banking operations. Profit fell 5 percent to 988 million Swiss francs ($1 billion) from 1 billion francs in the first quarter of last year. A group of analysts surveyed by Bloomberg News had predicted earnings of 412 million francs. Sergio P. Ermotti, the chief executive, said in a statement that he was “very pleased” with the performance. He added that it was “too early to declare victory,” but that the earnings showed the company’s “business model works in practice.”
Eurozone jobless rate hits record high as inflation falls (FT)
The seasonally adjusted unemployment rate hit 12.1 per cent, up from 12.0 per cent in March and 11.0 per cent a year ago, Eurostat, the EU’s statistics office said. Youth unemployment was nearly double the headline rate and there was no sign of improvement in the worst-hit countries such as Spain and Portugal. In the short run, the latest data add to a growing list of reasons for the European Central Bank to cut interest rates when it meets on Thursday, even in the face of widespread doubts that a cut will do much to stimulate those economies still worst-hit by the debt crisis.
Japan household spending surges as “Abenomics” gains momentum (Reuters)
Japan’s household spending surged in March at the fastest pace in nine years in a sign that Prime Minister Shinzo Abe’s bold efforts to end two decades of stagnation are lifting consumer confidence and setting the stage for an economic revival. A recent run of data has provided encouraging early hope that Abe’s push for aggressive fiscal and monetary policies to get the world’s third-largest economy motoring is having the desired effect. Separate data on Tuesday also showed the jobless rate fell to the lowest in more than four years, providing another piece of evidence that domestic demand could play a critical role in underwriting economic growth in coming months.
Paulson Leads Hedge-Fund Lobby Push to Privatize Fannie (Bloomberg)
The improving finances of the two government-owned mortgage companies have kindled hopes among shareholders that they could be revived as private firms. Even as lawmakers from both parties and U.S. housing officials say that won’t happen, preferred shares of Fannie Mae have more than doubled in price since early March. They closed at $4.75 yesterday. … “There are funds that have taken very large positions, large hedge funds, and they are lobbying heavily,” Senator Bob Corker, a Tennessee Republican, said in an interview, declining to confirm any names. “I don’t give investment advice, but I don’t see how these are going to be worth anything down the road.”
Banker Roommates Follow Zuckerberg Not Blankfein With IvyConnect (Bloomberg)
IvyConnect is competing with the Ivy Connection, the Ivy Plus Society and IvyLife for Ivy League-themed dating, drinking and networking. … IvyConnect members aren’t all Ivy League alumni. The group borrows part of the conference’s name “to leverage the Ivy brand heritage,” said Meric, a 2006 Brown University graduate.
‘Ricin’ man put on ice (NYP)
J. Everett Dutschke, 41, dressed in an orange prison jumpsuit, said only, “Yes” and “I do” to procedural questions before a federal judge declared him “a flight risk and a danger to the community.” … Dutschke, who claims to be a member of the high-IQ Mensa society, is a failed congressional candidate who also describes himself as “a philosopher trapped in the body of an insurance agent.” He is due back in court for a detention hearing Thursday.
Read more »
$$$ Ratings Firms, Morgan Stanley to Pay $225 Million [WSJ]
$$$ Santander’s Embattled CEO Quits [WSJ]
$$$ Herbalife says results will prove Ackman wrong [Reuters]
$$$ Level Global to Pay $21.5 Million to Settle S.E.C. Case [Dealbook]
$$$ Owners of fashion-forward fidos in Manhattan’s toniest neighborhood are starting to beg groomers for temporary tattoos — reflecting a burgeoning international interest in dog body art, industry insiders tell DNAinfo.com New York. And the key player turning on tail waggers’ masters to the idea is Jorge Bendersky, a celebrity dog groomer whose clientele hails mainly from the Upper East Side. The tattoos are especially popular among owners of short-haired dogs, he explained. “In the summer, they cut the dogs’ hair short, so you’ve got to supplement the glamour,” he said. “Having no hair is no excuse not to be glamorous.” [DNAI] Read more »
Now that Goldman Sachs has succeeded in its mission of helping Apple fend off David Einhorn’s demand that it raise a two hundred plus billion dollars of preferred stock, I guess it’s time for someone at Goldman to sit down with Apple and say “now, guys, really, you ought to think about raising two hundred billion dollars of preferred stock, it’s just the sensible thing to do.” Or something. This debt-financed share-buyback plan doesn’t sound like too much fun for the bankers:
On April 23, Cupertino, California-based Apple said it would return an additional $55 billion in cash to shareholders to compensate for a stock that’s dropped on signs that the company’s growth is slowing. Although it has $145 billion of cash, Apple said it will use debt to help finance a total capital reward of about $100 billion to shareholders. …
Because investment-grade debt offerings typically pay low fees, banks may offer to do the transaction for little or no charge, [Sanford Bernstein analyst Brad] Hintz said.
“This is going to be a prestige-per-share, not an earnings-per-share, deal,” said Hintz, who worked as Morgan Stanley’s treasurer and as the chief financial officer at Lehman Brothers Holdings Inc. earlier in his career. “We’re really talking about a deal that’s going to be done as close to gratis as you can get.”
The amount Apple will be raising is a little unclear but $50 billion over the next three years is … possible? Maybe?1 Read more »
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