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 RESIGNSAbout 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 error, Steven 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.
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."
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 AGENDALoretta 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.
Slowdown in Merger Deals Attributed to Political UncertaintyBankers 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 HallmarksThe 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 SaleThe 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.
As Britain Faces Uncertainty, Europeans Jockey for London's BusinessJust days after the vote in Britain, companies and cities across Europe hope to profit by luring businesses and helping those wishing to move.
Britain May Need to Cut Rates, Bank of England Chief SaysMark 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.
Why Will Markets Recover From Britain's Vote to Leave? Clues From Past CrisesHistory 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.
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.
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.
Housing Agency Overhauls Rules to Help Struggling HomeownersAgency officials said that private buyers of delinquent mortgages would have to consider options to keep struggling borrowers in their homes.
MasterCard-Visa Settlement With Retailers Is OverturnedA 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 StateAs lawsuits for Sumner Redstone's $40 billion media empire continue, the judge questions both sides on Mr. Redstone's mental state and communication skills.
Oracle Ordered to Pay HP $3 Billion in Itanium CaseA 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.
U.S. Warns Honda and Acura Owners to Replace AirbagsThe transportation secretary, Anthony Foxx, said certain 2001-3 Hondas and Acuras needed to be repaired immediately because of faulty Takata airbags.
Self-Driving Tesla Was Involved in Fatal Crash, U.S. SaysThe 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.
Justice Department Won't Alter Music Industry Royalty RulesAscap and BMI, clearinghouses for royalties, say that modifying their consent decrees was urgently needed to adapt to the new world of online music.
Court Halts Construction of Hudson River Park Backed by Barry DillerConstruction is delayed on a proposed $130 million waterfront park until an appeals court examines why a previous lawsuit against the park was dismissed.