Friday, September 29, 2006

Pension Funds File Access Proposal at H-P

Four pension funds this week submitted a resolution that seeks to allow shareholder-nominated candidates to run for seats on Hewlett-Packard's board of directors.

This was the first proxy access proposal filed after a Sept. 5 federal court ruling that the Securities and Exchange Commission improperly allowed American International Group to omit a 2005 access resolution by the American Federation of State, County, and Municipal Employees Pension Plan (AFSCME).

Thursday, September 28, 2006

Professor Larry Sonsini: Corporate Law Flashback

Rep. Anna Eshoo, the congresswoman whose district encompasses Palo Alto, Calif. (where HP is headquartered), isn’t normally a member of this committee but was invited to participate. Unsurprisingly, given her jurisdiction, she’s expressed more sympathy toward Dunn’s and Sonsini’s situation than some of the other committee members.

Moments ago, Eshoo asked Sonsini about the problem of boardroom leaks. She asked what is out there today in terms of our laws to deal with a director who leaked confidential information?

Sonsini, whose initial authoritative baritone during opening statements had waned throughout the day, suddenly perked up. Instead of discussing pretexting for the umpteenth time, he could play the role of corporate law professor, something he’s done for years at Boalt Law School. It’s a very good question, he commended his congresswoman. First of all, he said, it’s important that boards continually evaluate themselves. Second, it’s important that boards adopt guidelines to deal with fiduciary duties.

But aren’t there laws to regulate this stuff, asked the congresswoman? “It’s corporate law,” said Professor Sonsini, with authority. Sonsini said that corporate law requires directors “to exercise due care,” and if they don’t ” they don’t get the protection of the business judgement rule.”

Stormy Times at Pirate Capital

Thursday brought more trouble on the hedge fund front, as CNBC’s David Faber reported that more than half of the investment professionals at Pirate Capital have left the firm. The reasons for the exodus were not clear, but Mr. Faber said at least some of the departures came after a meeting including Pirate’s analysts and the head of the firm, Thomas Hudson, “failed to address concerns [the analysts] had about the fund’s dealings with regulatory issues.” Earlier in the week, The Wall Street Journal reported that the Securities and Exchange Commission was investigating whether Norwalk, Conn.-based Pirate properly disclosed changes in its holdings in some publicly traded companies.

In a letter to investors, cited by Mr. Faber as well as Reuters, Mr. Hudson said the head of the firm’s fixed-income portfolio and two analysts had resigned, and that he had asked for the resignation of two other analysts.

Signs of Leaks, and Pre-Deal Profits, in Tech Mergers

Is the recent increase in deals in the technology sector being accompanied by a rise in inside tips?

A report from BernsteinResearch indicates that it may be. Bernstein analysts, examining the past 10 years, compared the five days preceding announcements of deals with the five days following them, and found that shares have bested the market in the pre-announcement period more often in the past two years than in the preceding eight. “This suggests wider availability of pre-deal information (intended and unintended),” according to the report.

From 1996 to 2003, seven percent of “outperformance” was captured before the announcement date, the report concluded. From 2004 to the present, that share has risen to 14 percent. The reasons for the difference are “unclear,” according to the report. One on hand, regulations have restricted information flows in recent years. But:

On the other hand, company use of the media, both intended and unintended, may be increasing with the goal of gaining some advantage in negotiations. In addition, the buy-side community, driven in part by the greater role of hedge funds, may be able to react faster to near-term trading opportunities.

H.P. General Counsel Resigns

Hewlett-Packard’s general counsel has resigned, the embattled computer maker said Thursday as current and former executives prepare to testify before a Congressional subcommittee about its controversial leak investigation.

Ann Baskins, a 24-year veteran of the company, is the fourth figure to resign from the company within the past week. Last Friday, C.E.O. Mark V. Hurd said that Patricia C. Dunn, the chairwoman who authorized efforts to find a leaker on the board of directors, had stepped down from the board of directors. On Tuesday, a spokesman said senior counsel Kevin Hunsaker and global security chief Anthony Gentilucci had left the firm.

Media reports have labeled the four figures as key players in the operation.

Private Equity’s Fees Are Too High, Pension Fund Says

Fees earned by buyout firms such as Blackstone Group and Texas Pacific Group are too high and could dampen their enthusiasm to make money for clients, according to the manager overseeing Britain’s largest corporate pension fund.

The 2 percent management fee typically charged by private equity companies is too much guaranteed income when a fund can be as large as $15 billion of assets, said Mark Anson, Chief Executive Officer of Hermes Pensions Management.

Wednesday, September 27, 2006

"Kobi" Alexander Apprehended in Namibia

BROOKLYN, NEW YORK – Roslynn R. Mauskopf, United States Attorney for the Eastern District of New York, and Mark J. Mershon, Assistant Director-in-Charge, Federal
Bureau of Investigation, New York Field Office, announced the arrest earlier today of fugitive JACOB "KOBI" ALEXANDER, former Chief Executive Officer of Comverse Technology Inc.,in Windhoek, Namibia. The arrest was made pursuant to a provisional warrant issued by a Namibian court at the request of the United States government. ALEXANDER will be brought before a court in Windhoek, Namibia within 48 hours. The United States intends to seek ALEXANDER’s extradition to the United States to stand trial on the charges set forth in an indictment, which was unsealed today at U.S. District Court in Brooklyn, New York.

Centerbridge’s Big Debut: a $3 Billion Buyout Fund

In a sign that investors continue to crave a piece of the private-equity pie, newly formed Centerbridge Partners has raised $3 billion for its first fund. The Financial News reported Wednesday that the sum is $500 million more than firm originally expected to collect in its fundraising debut.
Centerbridge’s new fund will invest in leveraged buyouts and distressed debt, or debt of financially troubled companies.

Insider Trading Alerts Rise

WASHINGTON, Sept. 26 (Reuters) — The New York Stock Exchange’s regulatory unit said Tuesday that it expected to refer 140 potential insider trading cases to the Securities and Exchange Commission this year, up 26 percent from 2005.
“The last two years have seen a significant increase in the number and complexity of our insider trading referrals,” said Robert A. Marchman, executive vice president of NYSE Regulation, a unit of the NYSE Group.
Hedge funds are part of a growing number of insider trading cases, Mr. Marchman told the Senate Judiciary Committee. The panel’s chairman, Arlen Specter, Republican of Pennsylvania, said more regulation of hedge funds should be considered.

Johnson & Johnson Sues Boston Scientific, Guidant and Abbott Laboratories Over Deal

Johnson & Johnson filed suit against Boston Scientific, Guidant and Abbott Laboratories for $5.5 billion in damages. The suit claims that the three companies illegally shared information on their way to scuttling Guidant's agreement to sell itself to Johnson & Johnson for about $21.5 billion.

KKR to unveil world's largest buyout fund

Global private equity house KKR is set to unveil the largest buyout fund of its kind anywhere in the world. KKR is close to raising $16.5bn (£8.7bn) for its 2006 fund, outstripping the nearest private equity fund by £900m.

Monday, September 25, 2006

Private Equity, Public Feuds

THE cozy world of private equity is about to become a lot less comfortable.
For a preview of the coming chill, consider the recent takeover battle for Freescale Semiconductor, a maker of chips for cellphones that was spun off from Motorola. Just hours before an alliance of four firms led by the Blackstone Group was to buy the company for $16 billion, another team of private equity firms, led by Kohlberg Kravis Roberts and Bain Capital, swooped in with a competing offer.
After a short but tense showdown, Blackstone won the contest after raising its bid at the 11th hour by 10 percent, to $17.6 billion.

The Rebirth of Venture Capitalism

Venture capitalists, who faded from the limelight after the bursting of the dot-com bubble, have been making a comeback with a global focus, says Bob Higgins, founder and managing general partner of Highland Capital Partners, a venture capital firm in Lexington, Mass., and a senior lecturer at the Harvard Business School.
In a conversation with The New York Times, Mr. Higgins says that while in the near term V.C.’s will continue to focus on conventional technology sectors, the Internet and biotech, there is a globalization occurring, which includes a movement into new sectors.

At Hewlett-Packard, a Chief Wounded by Divided Attention

Mr. Hurd, the chief executive, had wanted to talk about the transformation inside Hewlett-Packard, how it was becoming a lean Silicon Valley growth company instead of a cash cow content to thrive on the high profit margins of its ink and toner cartridges.
But instead, in his first public interview since the spying operation was revealed in early September, Mr. Hurd needed to talk first about the spying investigation that has sullied the company’s reputation as well as his own.

Friday, September 22, 2006

Head of Amaranth Says His Fund Will Hang On

The improbable happens.
That was part of the message from Nicholas Maounis, head of Amaranth Advisors, to investors in his battered hedge fund on Friday. Amaranth’s funds have lost $6 billion, or nearly two-thirds of their value, in recent weeks as once-profitable bets on natural-gas prices suddenly turned bad. The debacle has left Amaranth’s investors — many of whom face restrictions on when they can redeem their funds — desperate for information about the fate of their holdings.
On Friday afternoon, Mr. Maounis gave a much-anticipated update. In a brief conference call at 2 p.m. Eastern time, he said that his fund had every intention of staying in business and expressed regret for its recent losses — though he stopped of apologizing for the debacle. He took no questions from people on the call.
“We lost a lot of our own money this month,” he said. “We lost more of your money. We feel bad about losing our own money. We feel worse about losing your money.”
On the subject of Amaranth’s ill-fated energy trades, Mr. Maounis suggested that Amaranth was blindsided by a rare turn of events. “Sometime even the highly improbable happens,” he told investors. “That is what happened in September.”
The fund was hit especially hard on September 14, Mr. Maounis said. In that single day, the fund lost about $560 million on its natural-gas positions.
Many investors have asked for their money back, and Mr. Maounis said his firm had hired a lawyer from Skadden, Arps, Slate, Meagher & Flom to evaluate these requests. Still, he held out hope that investors would hang on. “We are determined to win back your faith,” Mr. Maounis said.

Thursday, September 21, 2006

Warner Chilcott’s I.P.O. Prices Below Expected Range

The largest private-equity-backed initial public offering of the year made it out of the gate on Thursday, although the I.P.O. was smaller than expected.
Shares of drug maker Warner Chilcott Holdings priced at $15 apiece late Wednesday, below the forecast range of $17 to $19. The company sold 70.6 million shares, putting the value of the offering at $1.06 billion. Still, the price represented a heady profit — on paper, at least — for the company’s private equity sponsors, Bain Capital, DLJ Merchant Banking, J.P. Morgan Partners and Thomas H. Lee Partners. Regulatory filings show that these shareholders paid an average of just $5.77 a share for their stake in the company, which they took private in late 2004. About 31 percent of the company was sold in Thursday’s I.P.O.

At Los Angeles Times, a Civil Executive Rebellion

As Tribune faces the Chandler family at a board meeting Thursday, the newspaper industry is riveted by another skirmish inside the company: the growing rebellion at The Los Angeles Times.
After Jeffrey M. Johnson, the publisher of The Los Angeles Times, and Dean Baquet, the editor of the paper, openly defied their bosses at Tribune last week by refusing to make layoffs at the paper, Mr. Johnson was summoned to Chicago and spent Tuesday meeting with top executives.
Remarkably, however, Mr. Johnson and Mr. Baquet have not been fired. But while the crisis has been temporarily averted, it appears far from over.

As Icahn Wins ImClone Board Seat, A Fight Is Brewing

It was a win-some, lose-some day for Carl Icahn. ImClone Systems shareholders added Mr. Icahn and his slate of hand-picked nominees to the board, but the billionaire investor then lost a board vote to replace the current chairman.
Investors approved Mr. Icahn and two of his candidates today at ImClone’s annual meeting, setting the stage for a battle over who will manage the New York-based company. Later, the board refused to accede to Mr. Icahn’s demand that current chairman David Kies be replaced, voting to return him to the job.

Wednesday, September 20, 2006

Private Equity Flips Come Up Short, Study Finds

“Flipping” by private equity firms — defined as taking a company public within a year of acquiring it — fails to create long-term value for investors, according to a study cited Wednesday by The Financial Times. These initial public offerings tend to underperform other I.P.O.’s and the market as a whole, according to the study, by Josh Lerner of the Harvard Business School and Jerry Cao of Boston College.
Notably, though, the study also concluded that private-equity-backed I.P.O.’s as a whole tend to fare better than the broader market and more traditional offerings. It is just those taken public in less than 12 months that lag the market.

Shareholder suit accuses Tribune directors of 'suicide pill'

CHICAGO -- A shareholder lawsuit accused eight Tribune Co. directors Tuesday of trying to "maintain their dominion" over the big news media holding company with a stock repurchase plan it described as a "suicide pill" and other measures designed to ward off a takeover.

Tuesday, September 19, 2006

Hertz Adds Ford Bankruptcy Scenario to I.P.O. Filing

Apparently, Ford’s woes are worrying Hertz. In its latest amended prospectus, filed late Monday with the Securities and Exchange Commission, Hertz added several sentences describing how the car-rental company would fare if Ford should go bankrupt.
Such an event would have serious side effects for Hertz because of an agreement in which Ford will buy back used vehicles from Hertz at set prices.

A Hedge Fund’s Loss Rattles Nerves

Enormous losses at Amaranth Advisors, one of the nation's largest hedge funds, resurrected worries yesterday that major bets by these secretive, unregulated investment partnerships could create widespread financial disruptions. The scale of Amaranth's losses -- and how quickly they appear to have mounted -- was the talk of Wall Street, as was speculation on how much the bet was leveraged, or made on borrowed money. Still, there were no signs of ripples on the financial markets as a result.

Monday, September 18, 2006

A Ford-G.M. Merger?

Could the Big Three become the Big Two?
That is the far-fetched scenario raised Monday in the trade publication Automotive News, which reported that auto makers Ford and General Motors have discussed a merger or an alliance. Citing “several sources familiar with the talks,” the publication says the talks began soon after Nissan chief Carlos Ghosn suggested exploring a three-way alliance among Renault, Nissan and G.M. in July.

Blackstone Alliance to Buy Chip Maker for $17.6 Billion

In a rare buyout battle among the titans of private equity, the Blackstone Group has come away with a huge prize.
A Blackstone-led alliance that includes the Carlyle Group, Permira and the Texas Pacific Group announced yesterday that it had won the bidding for Freescale Semiconductor, a maker of chips for cellphones and cars, with a $17.6 billion deal. It is the largest leveraged buyout of a technology company ever, surpassing last year’s $11.3 billion buyout of SunGard Data Systems.

CA to face opposition from shareholders at Monday meeting

NEW YORK (Dow Jones/AP) -- Amid ongoing concerns about a declining stock price and financial-reporting errors, software maker CA Inc. faces opposition to members of the board and its independent auditor ahead of its annual shareholder meeting Monday.
Proxy advisery firms Institutional Shareholder Services and Glass Lewis & Co. are recommending shareholders withhold their votes for four CA directors including former U.S. Sen. Alfonse M. D'Amato. Glass Lewis is also recommending shareholders oppose the reappointment of CA's independent auditor, KPMG LLP, due to concerns about CA's recent financial restatements.

Wednesday, September 13, 2006

Justice Department Reviews Corporate Prosecution Rules

A Justice Department official on Tuesday defended the tactics used by federal prosecutors taking on corporations in the post-Enron era, but he also indicated that the agency might consider changes to the agency’s guidelines.
The comments by the official, Paul J. McNulty, a deputy attorney general, came before the Senate Judiciary Committee and were the first public response by a senior Justice Department official to mounting criticism from companies and lawyers that the tactics are being used as a bludgeon to force companies to cooperate with investigations.

Panel of Executives and Academics to Consider Regulation and Competitiveness

A committee filled with business leaders and academics was created yesterday to consider changes in the Sarbanes-Oxley Act and other laws and regulations governing securities markets and companies, with the intention of improving competitiveness for American markets.

The group, called the Committee on Capital Markets Regulation, has no official status but the announcement of its creation included praise from Treasury Secretary Henry M. Paulson Jr., who said that the issue of American competitiveness “is important to the future of the American economy and a priority for me.”

Tuesday, September 12, 2006

Hewlett-Packard Chairwoman Dunn Agrees to Step Down Next Year

Sept. 12 (Bloomberg) -- Hewlett-Packard Co. Chairwoman Patricia Dunn agreed to resign next year in an effort to diffuse a widening scandal surrounding the company's use of private investigators to access directors' phone records.
Chief Executive Officer Mark Hurd will take over as chairman of the world's second-largest personal computer maker in January, Palo Alto, California-based Hewlett-Packard said today in a statement distributed by Business Wire. Richard Hackborn will be lead independent director. Dunn will continue as a director.

Bristol-Myers' Dolan Resigns in U.S. Probe of 2005 Agreement

Sept. 12 (Bloomberg) -- Bristol-Myers Squibb Co. Chief Executive Officer Peter Dolan and the drugmaker's general counsel will resign after U.S. regulators called for their departures as part of a criminal investigation.
A federal monitor last night told the Bristol-Myers board that Dolan, 50, and General Counsel Richard Willard should be dismissed because their effort to protect sales of the company's top-selling heart pill Plavix broke the terms of a 2005 agreement that let the company avoid prosecution for inflating sales, said a person familiar with the investigation.

Earlier is Better for Venture Capital

So far, 2006 is shaping up as a very active year for early-stage companies to receive venture capital funding. According to the MoneyTree Report, a quarterly study put out by PricewaterhouseCoopers and the National Venture Capital Assn., 74 startup and seed companies raised money from venture investors during the second quarter of this year, up from 54 last year.

Monday, September 11, 2006

U.S. Attorney Begins Informal Inquiry into H-P Surveillance

Hewlett-Packard said Monday it has been ‘’informally contacted'’ by the U.S. Attorney’s Office concerning a company investigation into press leaks of confidential information.
The Palo Alto, Calif.-based maker of computers and printers said in a Securities and Exchange Commission filing that it is cooperating fully with the inquiry by the U.S. Attorney’s Office for the Northern District of California, along with an investigation by the California State Attorney General’s office, which requested similar information.

More merger reviews, fewer hurdles

The number of mergers reviewed by the federal antitrust agencies rose in 2005, but far fewer deals ran into trouble with regulators than in previous years.

Group Nears Record Deal for Chip Maker

A consortium of investment firms was near a deal late last night to acquire Freescale Semiconductor, a former unit of Motorola, for more than $16 billion, according to people briefed on the negotiations. The deal, if completed, would be the largest leveraged buyout ever in the technology sector, surpassing the $11.3 billion sale of SunGard Data Systems last year.

Friday, September 08, 2006

Court Decision Prompts S.E.C. to Revisit a Rule on Shareholder Proposals

A federal appeals court has at least temporarily cleared the way for shareholders to force companies to hold contested elections for directors, with rival candidates appearing on the ballots distributed by companies.
That is something that most companies strongly oppose. The Securities and Exchange Commission has until now allowed companies to refuse to allow shareholders to vote on such proposals.
The decision, issued Tuesday, led the commission to announce yesterday that it would take up the issue at a meeting on Oct. 18 and consider changing its rules. The S.E.C. chairman, Christopher C. Cox, did not say what action he favored, but promised that new rules would take effect in time for annual meetings in early 2007.

Riverside raises $250M

Riverside Co. said Thursday, Sept. 7, it has closed its submidmarket Riverside Micro-Cap Fund I at $250 million, sharply exceeding its initial $150 million target.
The fund will make majority stake purchases of North American micro-cap companies, businesses with annual revenues ranging from $5 million to $25 million and annual Ebitda of $3 million or less. It will aim to hold its investments for seven to 10 years, with the goal of increasing the companies' annual earnings to more than $10 million.

Thursday, September 07, 2006

Congress Is Urged to Hold Off Acting on Options and Pay

WASHINGTON, Sept. 6 — With an eye toward the coming midterm elections, two Senate committees asked top government officials on Wednesday whether there was more Congress could do to clean up the options backdating scandal and rein in soaring executive pay.
What they heard was that legislative action was only part of the solution — and that, for now, lawmakers should stay out of the way.

Ex-Officials of Justice Dept. Oppose Prosecutors’ Tactic in Corporate Criminal Cases

group of former top Justice Department officials have asked the United States attorney general to curtail the tactics of federal prosecutors that encourage companies and people to disclose legal communications to avoid indictment.
The unusual request, in a letter delivered Tuesday to Attorney General Alberto R. Gonzales, is the latest attack upon prosecutorial guidelines that were adopted after the collapse of Enron and other corporate scandals. Any revision to the guidelines would change the way the government pursues white-collar cases.

Wednesday, September 06, 2006

Key to sell McDonald Investments in $280M deal

KeyCorp will sell its McDonald Investments branch network to New York City-based UBS Financial Services Inc. in a $280 million deal.
The deal, which is expected to close in first quarter 2007, involves only McDonald’s branch network. McDonald’s former institutional businesses, including investment banking, debt and equity capital markets, public finance and research, will remain part of KeyBanc Capital Markets.

M&A Backlog Hit Record High in August

There was a lull in completed mergers and acquisitions in August, but researchers at Merrill Lynch are offering a more upbeat way to look at the numbers. A recent report from Merrill’s brokerage analysts found that the backlog of announced but still-incomplete transactions hit a record high last month. The backlog now consists of deals with a total value of $8.5 billion, promising a hefty slug of fees for investment banks when those deals close.

H-P Leak Inquiry Draws Scrutiny

Hewlett-Packard’s chairwoman, Patricia Dunn, ordered monitoring of its directors’ phones to determine the source of news leaks, prompting a furor in which one director quit and another rebuffed efforts to oust him.
The dispute was laid out in a document that Hewlett-Packard filed Wednesday with the Securities and Exchange Commission. In the filing, H-P said that it had been “informally contacted by the attorney general of the state of California requesting information concerning the processes employed in the investigations into the leaks” and said it plans to “cooperate fully.”

California's Legislature Passes Majority Vote Bill: What Will Arnold Do?

Recently, the California legislature passed SB 1207 (Alarcon) to allow some California corporations to adopt a form of majority voting. California law currently requires plurality voting for California corporations. The bill was co-sponsored by CalPERS and CalSTRS. Unless Governor Schwarzenegger returns the bill before September 30, it will become law and take effect on January 1, 2007. Voting on the bill in both houses of the legislature was sharply divided and bill supporters and opponents are making opposite predictions on the likelihood of a veto by the Governor.

Pay Plan at Dana Ruled Illegal

A plan to pay millions of dollars to the top officials of the Dana Corporation, the auto parts company, violates the new bankruptcy law and cannot go forward, a judge ruled yesterday.
Judge Burton R. Lifland of the Federal Bankruptcy Court in Manhattan said that the proposal was an illegal plan to retain Dana’s chief executive and other top executives. The plan had drawn objections from Dana’s creditors, shareholders and unions, as well as the United States trustee, a part of the Justice Department.

Report Estimates the Costs of a Stock Options Scandal

A new study estimates that the stock options backdating scandal, which has touched more than a 100 companies, may cost shareholders hundreds of millions of dollars. The study was released on the eve of two Senate committee hearings that plan to examine the scope of the widening investigation into improper options practices.

Tuesday, September 05, 2006

On Buyouts, There Ought to Be a Law

The sizzling market for leveraged buyouts may be making headlines, but it may not be making money for investors in the companies being taken private, according to one critic of these deals. Writing in The New York Times, Ben Stein makes a case for why management-led buyouts should be stopped before any more shareholders get bilked.