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Jul 1, 2016

DealBook Today's Top Headlines - July 1, 2016: Half of Williams Board Resigns | Hershey Rejects Mondelez Takeover Offer | Puerto Rico Debt Relief Stirs Colonial Resentment



FRIDAY, JULY 1, 2016
TODAY'S TOP HEADLINES
BY AMIE TSANG
HALF OF WILLIAMS BOARD RESIGNS About half the directors at the Williams Companies resigned over disagreements about the future of the pipeline operator, Leslie Picker reports in DealBook.

A board vote over whether to oust the chief executive, Alan Armstrong, came out 6 to 6, according to three people with direct knowledge of the matter. Those who voted against Mr. Armstrong's remaining on the board resigned.

The moves came after the $38 billion merger with Energy Transfer Equity was dismantled this week over a tax issue. According to The Wall Street Journal, which earlier reported the resignations, those who resigned felt that Mr. Armstrong was ill-suited to lead Williams on its new course without Energy Transfer.

The board members who stepped down included the activists on the board: Keith Meister of Corvex Management and Eric Mandelblatt of Soroban Capital Partners. Frank MacInnis, the independent director chairman of Williams, also stepped down, but largely because of personal reasons, these people said. They were joined by Steven Nance, president of Steele Creek Energy, Laura Sugg, a former senior executive at ConocoPhillips, and Ralph Izzo, the chairman of Public Service Enterprise Group.

Williams is also appealing the termination of the deal with Energy Transfer Equity. Its only real chance is to argue some legal errorSteven Davidoff Solomon writes in Deal Professor. But it comes down to whether the Delaware Supreme Court wants to intervene and agrees that "reasonable efforts" as a standard required more in this case.

These questions are valid, but it will be an uphill battle for Williamsgiven the fact-finding of the lower court judge and the penchant of the state's Supreme Court to defer to the lower court on these matters.
HERSHEY REJECTS MONDELEZ TAKEOVER OFFER Hershey, which has rebuffed numerous offers to buy it over the years, is facing one of its biggest challenges yet from a fellow chocolate giant, Michael J. de la Merced and Stephanie Strom report in DealBook.

Mondelez International, which makes Oreo cookies and Cadbury Chocolate, made a $23 billion offer, but Hershey is betting that it can remain independent or at least fetch a substantially higher price. It rejected the offer, saying that it "provided no basis for further discussion."

Hershey's impregnable defense has historically come from the charitable trust that controls about 81 percent of voting power, as Leslie Picker, Ms. Strom and Mr. de la Merced explain in DealBook. But many observers are asking whether this time its response will be different if Mondelez comes back with a higher offer.

The trust has already retained advisers separate from the Hershey Company itself as it weighs its own options. The Pennsylvania Attorney General's Office, which has raised concerns over the trust's deployment of funds, is seeking an overhaul of its board. If that were to happen, some believe Hershey's largest shareholder would be more apt to sell.

Mondelez has been mindful of the need to win over the trust - in its letter last week, it promised to maintain jobs and relocate the combined company's chocolate operations to Hershey, Pa.

The Mondelez offer has also raised questions about whether Hershey could attract other buyers or whether Mondelez itself may be put into play.

Putting the two together would create a powerful force in the business of sweets. Mondelez is the world's second-largest confectionery company - but it has very little business in the United States. Hershey has more than four-fifths of its sales in North America.
ON THE AGENDA Loretta Mester, the president of the Cleveland Federal Reserve, will speak at the European Economics and Financial Center at 11 a.m. The latest Manufacturing ISM Report on Businesswill be published at 10 a.m.
PUERTO RICO DEBT RELIEF STIRS COLONIAL RESENTMENTPuerto Ricans protested against the "junta," a federal control board that will soon direct the island's failing governance and finances, even as President Obama signed the debt relief law, Mary Williams Walsh reports in DealBook. "Junta" in Spanish just means board, although it has dictatorial connotations in English. Protesters converged after hearing that the debt relief law had passed the Senate.

Even Gov. Alejandro García Padilla seemed to join in, declaring a moratorium on paying the island's debts just a day before a big payment was due, even though the new law precludes him from making such a move.

Beneath the rhetoric, however, there was resignation and an awareness that Puerto Rico's own elected officials had let the island slip into a death spiral.

The need to pay the island's $72 billion debt has crowded out other governmental spending in Puerto Rico, leaving schools closed, fewer hospital beds, and homeless people squatting in abandoned houses. Officials also scared off tourists fearful of the Zika virus by warning that they would stop testing the water supply to save money.

In addition to imposing federal control, the so-called Promesa legislation gives Puerto Rico the power to unilaterally reduce its debts, something that a debtor can normally do only in bankruptcy. Federal law explicitly bars the Puerto Rican government from entering bankruptcy, an exclusion is seen as a slap in the face by Puerto Ricans.

Banners hung near the federal courthouse said, "The problem is not the junta, it's the colony."
The newsletter will be taking a break on July 4. We will be back onTuesday, July 5.
MERGERS & ACQUISITIONS »
Slowdown in Merger Deals Attributed to Political Uncertainty Bankers and lawyers for mergers and acquisitions pegged the decline to concerns about antitrust regulation, the United States presidential election and last week's vote in Britain to leave the European Union.
Lionsgate's Deal for Starz Bears Malone's Hallmarks The media mogul John C. Malone controls Starz with 48 percent of the votes, thanks to Class B stock that has 10 times the voting power of regular shares. That makes it hard for other shareholders to argue, Jennifer Saba and Richard Beales write in Breakingviews.
Apple Said to Be in Talks to Buy Tidal Apple is considering buying Tidal, the music streaming service run by Jay Z, to bolster its Apple Music service, The Wall Street Journal reports, citing people familiar with the matter.
Resort Operator Said to Explore Sale The operator, Apple Leisure, based in the Caribbean and Mexico, is exploring a sale that could value it at more than $1.5 billion after attracting interest from Chinese companies, Reuters reports, citing people familiar with the matter.
INVESTMENT BANKING »
Frankfurt, a major financial hub, was among the cities that prepared for the possibility that Britain would vote to leave the European Union.
As Britain Faces Uncertainty, Europeans Jockey for London's Business Just days after the vote in Britain, companies and cities across Europe hope to profit by luring businesses and helping those wishing to move.
London's days as the pre-eminent global financial capital may be numbered.
After 'Brexit,' Finding a New London for the Financial World to Call Home James B. Stewart handicaps the race for the biggest financial prize since London was thrust to the fore.
Britain May Need to Cut Rates, Bank of England Chief Says Mark Carney, the governor of the central bank, also shrugged off a suggestion that he might be forced to resign after a new prime minister was chosen.
After the 2011 tsunami and earthquake in Japan, the Nikkei stock index fell 16 percent over two days, but recovered within four months.
Why Will Markets Recover From Britain's Vote to Leave? Clues From Past Crises History provides some limited reassurance to the market turmoil after Britain's vote to leave the European Union, Jeff Sommer writes in Strategies.
UniCredit Brings Back Former Executive to Lead the BankUniCredit, Italy's biggest bank by assets, has lured back Jean-Pierre Mustier, its former investment banking chief, to become its next chief executive.
PRIVATE EQUITY »
  • China Opens Door to Foreign Private Equity Funds China will allow foreign private equity funds to set up asset management services and invest in domestic stocks in a move to open up its markets and financial sector.
VENTURE CAPITAL »
  • Zenefits Compensates Investors Over Past MisconductShareholders in Zenefits, a troubled human resources company, will get larger stakes as it tries to make up for the former chief executive's unlawful corner-cutting.
LEGAL/REGULATORY »
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    Housing Agency Overhauls Rules to Help Struggling Homeowners Agency officials said that private buyers of delinquent mortgages would have to consider options to keep struggling borrowers in their homes.
    The case involved the processing fees charged by Visa and MasterCard.
    MasterCard-Visa Settlement With Retailers Is Overturned A federal appeals court said the historic settlement was void because the same lawyers represented the retailers and the card processing companies.
    Battle for $40 Billion Empire Focuses on Redstone's Mental State As lawsuits for Sumner Redstone's $40 billion media empire continue, the judge questions both sides on Mr. Redstone's mental state and communication skills.
    Tax officials leaving Google's offices in Madrid on Thursday.
    Spanish Tax Authorities Investigate Google Officials visited the technology giant's offices in Madrid as part of their inquiry, broadening the scrutiny in Europe of how the company pays taxes.
    Oracle Ordered to Pay HP $3 Billion in Itanium Case A California jury ordered Oracle to pay Hewlett-Packard Enterprise $3 billion in damages in a case over HP's Itanium servers, an Oracle spokeswoman said on Thursday.
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    Self-Driving Tesla Was Involved in Fatal Crash, U.S. Says The federal highway safety agency said that the driver of a Tesla on "autopilot" died in a crash in May, thought to be the first death in a self-driving car.
    California Attorney General Said to Investigate Major Oil Refiners California's attorney general issued subpoenas to major oil refiners, including Chevron and Exxon Mobil, as part of an investigation into whether the companies artificially raised retail gasoline prices in the state, The Wall Street Journal reports, citing people familiar with the matter.
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    Justice Department Won't Alter Music Industry Royalty Rules Ascap and BMI, clearinghouses for royalties, say that modifying their consent decrees was urgently needed to adapt to the new world of online music.
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    Indictment Links Chipotle Executive to New York Drug Ring In another blow to Chipotle, its chief creative and development officer, Mark Crumpacker, was charged with drug possession.