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).

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.

"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.

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.

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.

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.

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.