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Jun 16, 2016

DealBook Today's Top Headlines - June 16, 2016: Visium Hedge Fund Managers Charged With Insider Trading | Tencent Nears Deal to Buy Maker of Clash of Clans | Investors Bypass Private Equity

Thursday, June 16, 2016
VISIUM HEDGE FUND MANAGERS CHARGED WITH INSIDER TRADING Federal authorities filed criminal and civil securities charges against three current and former traders at Visium Asset Management, a multibillion-dollar hedge fund focused on health care, Alexandra Stevenson reports in DealBook. Prosecutors said that the fund had an inside view of the drug approval process at the Food and Drug Administration that gave it trading windfalls of $32 million.

Gordon Johnston, a former deputy director of the office of generic drugs who became a consultant, is accused of leveraging his F.D.A. contacts and abusing his role at the Generic Drug Trade Association, to glean information on behalf of Sanjay Valvani, one of Visium's top portfolio managers. The authorities said Mr. Johnston arranged speaking panels and teleconferences between F.D.A. officials and generic drug manufacturers to discuss issues that directly concerned his hedge fund client.

Mr. Valvani was able to reap nearly $32 million in illicit gains based on information about coming approvals for a generic version of a drug that helps prevent blood clots, according to court filings. Prosecutors also accused Mr. Valvani of passing on the tips to Christopher Plaford, a former colleague.

Mr. Plaford has pleaded guilty to trading on illegal tips. Mr. Johnston has also pleaded guilty and they are both cooperating with the government.

Mr. Valvani's lawyer, Barry H. Berke, said his client was innocent. "The prosecution of Mr. Valvani is yet another example of this United States attorney's office stretching the facts and law to try to transform entirely innocent trading decisions into a crime," he said.

The networks used by hedge funds to get an investing edge were the focus of a crackdown by Preet Bharara, the United States attorney in Manhattan, that resulted in the convictions of more than 80 traders, consultants and analysts.

Although Mr. Bharara's office was dealt a blow when a federal appellate court overturned two prominent convictions from 2014, it has gained momentum again in the last month.
TENCENT NEARS DEAL TO BUY MAKER OF CLASH OF CLANS Tencent is near a deal to buy Supercell, the Finnish game company that makes Clash of Clans, Michael J. de la Merced and Nick Wingfield report in DealBook. A person briefed on the matter said the transaction would value the company at more than $9 billion.

Tencent, with a market value of about $211 billion, controls the messaging service WeChat as well as a number of online games hosted on its QQ portal. A deal for Supercell would be the biggest takeover by any of China's so-called BAT trio of Baidu, Alibaba and Tencent, according to data from Standard & Poor's Global Market Intelligence.

Supercell has produced a string of hits like Clash of Clans, Hay Day and Clash Royale. It reported revenue of $2.33 billion for 2015, up from $1.78 billion the previous year. Its earnings before interest, tax, depreciation and amortization also rose to $964 million, from $592 million. Tencent is already China's dominant online game company, accounting for about 32 percent of revenue from China's online game market in 2015, according to the research firm Niko Partners.

Under the terms of the proposed deal, Tencent would buy the roughly 73 percent stake in Supercell that is held by SoftBank, the Japanese telecommunications provider, said a person briefed on the discussions. Supercell's founders would remain at the company.

The Wall Street Journal, which earlier reported the discussions, said that Tencent was also in discussions with financial investors, like Hillhouse Capital Group of Beijing, to join the deal as co-investors.
ON THE AGENDA Oracle will hold a call on its latest earnings at 5 p.m.
INVESTORS BYPASS PRIVATE EQUITY Sovereign wealth funds, pension funds and even private families have been flexing their deal-making muscles and taking stakes in companies themselves, Leslie Picker reports in DealBook.

These so-called emerging buyers are looking for investment gains without paying management fees to private equity firms. Over the last year and a half, they bought about 17 percent of the assets sold by private equity firms, up from 2 percent in 2007, according to Goldman Sachs data. They were even more active as buyers than private equity firms themselves.

They are investing in every sector around the world. Saudi Arabia's main investment fund took a $3.5 billion stake in Uber this month. JAB Holding Company, the investment arm of the Reimann family in Germany, led the acquisition of Keurig Green Mountain for about $14 billion in March.

The risks, however, are higher for these newcomers because they do not have the same people to find and vet deals that a private equity firm or a bank would have. But banks are stepping in - Goldman Sachs plans to expand its financial sponsors group to focus more on emerging buyers.

Emerging buyers are also taking steps to make their internal deal-making departments more professional. Three years ago, Abu Dhabi's sovereign fund created its own group, which now has 15 people, to focus on direct investments.

Emerging buyers are also making deals in conjunction with private equity firms, a practice known as co-investing. This gives private equity firms access to a larger pool of capital to make bigger acquisitions, while it allows investors, whom they call limited partners, to pay few or no fees. Of 140 limited partners surveyed last year by PricewaterhouseCoopers, 73 percent said they had co-invested in at least one deal.
A FanDuel-DraftKings Merger Might Be Worth a Chance There would be some obvious savings from turning two daily fantasy sports sites into one big one, Jennifer Saba writes in Breakingviews.
FireEye Said to Have Rebuffed Takeover Offers FireEye, the online security company, turned down at least two suitors, Bloomberg reports, citing people with knowledge of the matter. One of the potential buyers was Symantec.
Envision and AmSurg Health Care Companies to Merge Envision Healthcare Holdings and AmSurg agreed to merge in a deal that would create a company worth about $10 billion.
Business Booms for a Certain Breed of Wall Street Banker Turnaround experts are in demand, and banks like Lazard, Guggenheim Partners and Perella Weinberg Partners are hiring.

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Pablo Picasso's
Picasso Sculpture in Dispute Goes to Leon Black; Rival Owner to Receive Compensation The Gagosian had bought the piece from Maya Widmaier-Picasso in 2015 and sold it to Mr. Black; but the Qatari royal family said it bought the work in 2014.
A driver uses the Didi Chuxing app in Guilin, China. Didi has focused on technology that better predicts car arrival times, given China's unruly traffic.
Didi Chuxing's $28 Billion Valuation Shows High Price of China's Ride-Sharing Market The car-hailing app brought in $7.3 billion in its latest fund-raising round, giving it a valuation of almost half that of Uber, its main rival in China.
Zuckerberg Venture Makes Its First Investment The Chan Zuckerberg Initiative, formed by the Facebook founder Mark Zuckerberg and his wife, Priscilla Chan, plans to announce an investment in Andela, a start-up based in New York that trains software developers in Nigeria and Kenya.
Airbnb Adds $1 Billion to War Chest for Expansion Airbnb secured a $1 billion debt facility from some of the largest banks in the United States to help develop new services and fund growth initiatives, Bloomberg reports, citing people familiar with the matter.
A sign in the sidewalk outside the New York Stock Exchange.
Are Financial Markets Too Complacent About the Global Economy? Despite plenty of reasons to reflect anxiety, they've remained fairly calm.
Fed Holds Interest Rates Steady and Plans Slower Increases The central bank, which entered the year planning to raise rates four times, has scaled back those plans as economic growth has disappointed expectations.
Janet Yellen arriving for a news conference on Wednesday in Washington.
The Fed Is Learning Just How Hard the Exit From Easy Money Will Be If markets could talk, they'd be saying to the chairwoman of the Fed, Janet Yellen: "We don't think you'll raise interest rates as much as you say you will."
European Interest Rates Are Not as Low as They Look Negative rates may seem strange, but when adjusting for inflation, companies are still not getting cheap loans.
Redstone Says in a Letter He No Longer Trusts Viacom's Chief Sumner Redstone said in an emailed letter that he longer trusts Viacom's chief, Philippe Dauman, or the company's board.
Gawker Media founder Nick Denton in a courtroom in St. Petersburg, Fla. in March.
Gawker Founder Nick Denton Confident of Company's Future Mr. Denton expressed hope in a new owner, and the possibility that the court penalty will be reduced on appeal.
Iran Files Complaint to Recover $2 Billion "The government of the Islamic Republic of Iran officially complained about America to the International Court of Justice for the confiscation and theft of $2 billion of the property of the central bank," President Hassan Rouhani said.
Representatives Jason Chaffetz, Republican of Utah, seated at top right, and Elijah E. Cummings, Democrat of Maryland, left, during a House committee hearing to consider censure of John Koskinen, the head of the I.R.S.
House Panel Recommends Censure of I.R.S. Commissioner The Oversight and Government Reform Committee recommended that the House censure the commissioner, John A. Koskinen, accusing him of betraying the trust of Congress and the public.
Rebeca Mojica, a chainmaille jewelry maker, was audited in 2011. She ultimately owed the Internal Revenue Service nothing, but she said the audit motivated her to keep better records.
Why the I.R.S. Fails to Crack the Small-Business Tax Nut The government has been trying to figure out how small-business owners can be persuaded to report their earnings more accurately. More audits may not be the answer.
A playground on the grounds of an apartment complex in Hong Kong. With housing prices soaring, many in the city struggle even to afford a long-term mortgage.
Expiration Date on China's Promises Stokes Unease in Hong Kong Housing Most banks have yet to formulate mortgage policies beyond 2047, when an agreement guaranteeing the city a high degree of autonomy runs out.
To Secure Loans, Chinese Women Supply Perilous Collateral: Nude Photos Women are sending photos of themselves to peer-to-peer lenders, who then sometimes blackmail them when they cannot pay high interest rates, Chinese state news media reported.