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Jun 7, 2016

DealBook Today's Top Headlines - June 7, 2016: A Jump in Law Firm Salaries | National Amusements Alters Viacom Bylaws to Prevent Paramount Sale | Who Decides 'Fair Value'?

Tuesday, June 7, 2016
TODAY'S TOP HEADLINES
By AMIE TSANG
A JUMP IN LAW FIRM SALARIES Cravath, Swaine & Moore, one of the legal industry's most elite law firms, has increased the annual salary for its first-year lawyers to $180,000, from $160,000, Elizabeth Olson writes in DealBook. Salaries for other associates have also been raised by as much as $35,000 annually, up to $315,000 for associates in their eighth year.


This will be good news to junior associates at major law firms, as it will signal to other firms that they should fall in line or lose the best new recruits. Other high-earning firms are likely to match the salary increases swiftly.

The salaries are also a benchmark of how major law firms are faring. Top names like Cravath that have demonstrated winning expertise in areas like litigation or intellectual property have been richly remunerated by clients like IBM and JPMorgan Chase. According to The American Lawyer, an industry publication, Cravath partners each earned, on average, $3.56 million in profits last year.

It has been nearly a decade since entry-level lawyer salaries were last increased. During this time, law firms have been buffeted by the economy and corporate clients have increasingly demanded billing discounts and refused to pay steep rates for junior associates to learn on the job. Partner profits have rebounded as corporations continue to use experienced lawyers to handle high-stakes - something that has stirred some dissatisfaction among lower-paid lawyers.

The legal website Above the Law reported that associates had raised the issue of salaries with C. Allen Parker, the firm's presiding partner, at recent meetings, pointing out that since the last associate pay raise in January 2007, the cost of living has risen greatly in New York City where most Cravath lawyers work.

Still, few law graduates turn down offers from big companies, so competition for jobs has remained fierce. And although changes to associate compensation at big law firms are closely watched, only a small slice of law graduates begin their practices earning salaries in the mid-$100,000 range.

A spokeswoman for Cravath declined to comment further on the move, which had surprised many in the legal world.
NATIONAL AMUSEMENTS ALTERS VIACOM BYLAWS TO PREVENT PARAMOUNT SALE National Amusements, the theater chain through which Sumner M. Redstone controls his media empire, said it had altered Viacom's corporate bylaws to prevent the entertainment company from selling any part of Paramount without the approval of the full board, Michael J. de la Merced and Emily Steel report in The New York Times.

National Amusements holds about a 10 percent stake in Viacom, but nearly 80 percent of the voting stock. This move is likely to delay any sale until the legal disputes are resolved.

Viacom said in February that it was considering a sale of part of Paramount after several buyers expressed their interest. Philippe P. Dauman, Viacom's chief executive, said that a sale would help share the costs of movie productions and improve the studio's distribution.

Paramount is a prized asset for Mr. Sumner and he has made known his objections to a deal.

Carl Folta, a Viacom spokesman, said, "These illegitimate actions stem directly from the invalid changes made to the National Amusements Inc. board and are completely at odds with good corporate governance." A Paramount spokesman declined to comment.

The move came after Mr. Dauman waged open warfare against Mr. Redstone, who dismissed Mr. Dauman and another director from the trust that will oversee Mr. Redstone's companies. National Amusement said that the decision regarding Paramount was not connected to that dispute and that it wanted to ensure that a sale of any part of Paramount was done as part of a sensible long-term strategy.
ON THE AGENDA Jeb Hensarling, the chairman of the House Financial Services Committee, will detail the Republican plan to replace the Dodd-Frank Act at the Economic Club of New York at 8 a.m. Valeant will hold a conference call on its first-quarter earnings and regulatory matters at 8 a.m. The Committee on Banking, Housing and Urban Affairs will hold a hearing on bank capital and liquidity regulation at 10 a.m. The Securities and Exchange Commission will hold a meeting to discuss information for bond market investors and financial disclosures at 11 a.m.
WHO DECIDES 'FAIR VALUE'? When Vice Chancellor J. Travis Laster decided that Dell had been sold for $6 billion too little, he highlighted that there had been no higher offer and that that board "and its advisers did many praiseworthy things." But he still ordered Dell to pay the shareholders who brought the lawsuit their portion of the difference.

The decision sent shudders all over Wall Street and the boardrooms of corporate America because the court had overruled "the market," Andrew Ross Sorkin writes in the DealBook column.

The decision means that a company doesn't just have a fiduciary duty to find a buyer willing to pay the highest price, because a judge may ultimately deem what the price should be.

Management buyouts like the one that Michael Dell pursued are often filled with conflicts, but it is startling that in this case, Mr. Dell and the directors were not found to have done anything underhanded, Mr. Sorkin writes. The judge even went out of his way to say, "It bears emphasizing that unlike other situations that this court has confronted, there is no evidence that Mr. Dell or his management team sought to create the valuation disconnect so that they could take advantage of it."

He explained that the board's actions "might pass muster for purposes of a breach of fiduciary claim and yet still generate a sub-optimal process for purposes of an appraisal."

Mr. Dell appeared to have tried to make the playing field even for bidders, spending more time with the Blackstone Group, which ultimately dropped its bid, than with the winning bid he led.

The case now raises questions for deal makers and shareholders about the appropriate way to determine a takeover price. It is also likely to make it harder to complete buyouts.

The case is part of a growing trend in which hedge funds and other investors jump into a company's stock after a takeover bid has been announced with the explicit plan of suing companies to claim the price was too low. The practice, known as appraisal arbitrage, is likely to be catapulted even further by this decision. Using courts to negotiate "fair value" has become a full-time industry for investment funds and lawyers looking for a quick score.

The implications are clear, wrote Martin Lipton, the famed takeover lawyer. "Private equity firms should be expected to ask whether they face routine appraisal exposure in Delaware, no matter how robust the auction, and therefore seek out alternative transaction structures to cap and price their risk (or exit the market entirely)."
MERGERS & ACQUISITIONS »
Verizon Said to Bid $3 Billion for Yahoo's Web Assets Verizon Communications planned to submit a second-round bid of about $3 billion for Yahoo's core internet business, The Wall Street Journal reports, citing a person familiar with the matter.
Lotte Chemical of South Korea Makes Bid for Axiall Lotte Chemical Corporation, an affiliate of South Korea's fifth-largest conglomerate, has submitted a bid for Axiall Corporation, a chemicals company based in Atlanta.
Tribune Vote Totals Show 40% Withheld Their Votes Regulatory filings show that more than 40 percent of Tribune Publishing's voting shareholders withheld support for the company's directors, suggesting that many shareholders favor a merger with Gannett.
Chinese Conglomerate Said to Consider Buying Brazilian Bank Shanghai Pengxin Group is in talks to take control of the mid-size lender Banco Insusval & Partners, Reuters reports, citing sources with direct knowledge of the matter.
INVESTMENT BANKING »
Goldman Sachs Investigated Over 1MDB Investigators are trying to determine whether Goldman Sachs broke the law when it did not sound an alarm about a suspicious transaction in Malaysia, The Wall Street Journal reports, citing people familiar with the inquiry.
Houlihan Lokey Restructuring Banker to Join Peter J. Solomon Derek Pitts, a restructuring executive at the investment bank Houlihan Lokey, is leaving to join the boutique firm Peter J. Solomon, where he will lead a team focused on corporate restructurings.
For the latest updates, go to NYTimes.com/DealBook
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HEDGE FUNDS »
Pine River to Shut Fixed Income Fund The hedge fund Pine River Capital Management will close its fixed income fund and return $1.6 billion to investors in a move to streamline its offerings, Reuters reports, citing a letter to clients.
I.P.O./OFFERINGS »
Hungry Start-Ups Look to I.P.O.s as Venture Capital Dries Up Nascent technology firms risk running short on cash, but a recent revival of initial public offerings could offer them hope, Robert Cyran writes in Breakingviews.
President Mauricio Macri of Argentina, who took office after a period of market isolation.
First I.P.O. in Three Years Buoys Argentine Investors Havanna, a confectioner, raised $11.47 million, pricing shares at the top of the marketed range as a result of high demand.
VENTURE CAPITAL »
No-Glamor Start-Up Becomes a Unicorn The latest fund-raising round for the start-up, SMS Assist, gives it a valuation of $1 billion, a company spokesman said.
Foreign Investors Excluded From Investing in Chinese Internet Bank Foreign investors were excluded from investing in WeBank, the internet bank backed by Tencent, after China's banking regulator expressed concerns about foreign ownership, The Wall Street Journal reports, citing people familiar with the situation.
LEGAL/REGULATORY »
Republicans to Unveil Plan to Revamp Dodd-Frank Representative Jeb Hensarling of Texas on Tuesday will outline the Financial Choice Act, which would roll back major elements of the regulatory law.
Janet L. Yellen, the Federal Reserve chairwoman, speaking in Philadelphia on Monday.
Yellen Indicates Fed Will Rethink Rate Increase A previous assurance that rates would be raised "in the coming months" was dropped from a speech that Janet Yellen, the chairwoman of the Fed, gave on Monday.
An idled West Virginia coal facility. Officials fear bankrupt coal companies are not setting aside enough to clean up Appalachia's polluted rivers and mountains.
Regulators Fear $1 Billion Coal Cleanup Bill Officials worry that failed coal companies will use bankruptcy courts to pay off debts to banks and hedge funds, leaving behind their environmental obligations.
The Deutsche Bank general meeting in Frankfurt, Germany.
Rate-Rigging at Deutsche Bank May Be Harder to Prove A recent court decision may present the Justice Department with a substantial hurdle to show that its evidence can support a conviction for wire fraud, Peter J. Henning writes in White Collar Watch.
Payday Lenders' Fight Against Regulator Would Be a Long Shot New guidelines from the Consumer Financial Protection Bureau are certain to face legal challenges, but those claims will probably fail, David Zaring writes in Another View.
The Rise and Fall of Valeant Pharmaceuticals In a new e-book, Breakingviews examines whether the embattled drug maker can clean itself up using the same sort of financial razzmatazz that got it into trouble in the first place.
Martin Shkreli Pleads Not Guilty to Latest Charge Mr. Shkreli, a former pharmaceutical executive who became a lightning rod for outrage over soaring prescription drug prices, pleaded not guilty on Monday to an additional criminal charge that federal prosecutors filed against him last week.
The building at 45 Rivington Street in Manhattan, once a nursing home, was sold in February to a condominium developer. Aspects of that sale are now under investigation by the state attorney general, Eric T. Schneiderman.
New York Attorney General Seeks to Halt Sale of 2 Nursing Homes Amid Inquiries The office of Eric T. Schneiderman said it was objecting to the sale of two centers to the Allure Group, citing "misrepresentations" by the company.
For His Latest Trick, John Oliver Forgives $15 Million in Medical Debt The host of HBO's "Last Week Tonight" has perfected the art of explaining complicated subjects.