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Aug 23, 2016

DealBook | Today's Morning News on August 23, 2016: Prices of Ethanol Credits Surge, Hurting Oil Refiners

The New York Times

By Amie Tsang
“It’s a black pool of speculation that could cause bankruptcies in our sector.”
As if the collapse in oil prices hadn’t created enough doom and gloom for the energy industry, the soaring cost of credits for renewable energy has made the business of oil refining even harder.
Gasoline and diesel fuel refineries are required to add a certain amount of renewable fuel, like corn-based ethanol, to each gallon of petroleum-based fuel they refine. Refiners that do not do this must buy credits from refiners that do. The Environmental Protection Agency administers those credits, but an unregulated trading market has emerged, creating huge price swings.
Jack Lipinski, the chief executive of CVR Energy (and the person quoted above), has had to double what his company spends on credits — exceeding his total costs for labor, maintenance and energy. Other independent refiners like him say they are penalized by the system because their operations are equipped to process only petroleum products.
But the industry itself remains divided over who should be responsible for purchasing the credits — those who refine the gasoline (as is currently the case) or those who blend it with biofuels.
The Deal Professor’s Lessons from the Viacom Dispute
After Viacom’s ownership saga, Steven Davidoff Solomon offers some lessons that can still be put into use:
1. Remember what your end-game is and what is reasonable given your situation. Philippe P. Dauman, the outgoing chief executive, seems to have failed to have recognized that he faced an uphill fight — despite having practiced law himself. He also seemed to be unaware of the public-relations aspect of his fight over Viacom.
2. Be aware of your own loyalties — corporate officers are better off leaving their loyalty with the company, where it legally belongs.
3. Bad governance breeds bad conduct. In the case of Viacom, everyone shares the blame, but Sumner M. Redstone particularly so. He ran Viacom as his personal fief.
4. Litigation has its uses, but using it as a corporate weapon can lay waste to a company.
5. A dual-class stock system does not necessarily allow the founder to build a company. It can be abused as the founder’s ownership level declines and he gives himself private benefits. And a public corporation should not be run forever as a family business.
Let us now hope that those involved in the dispute devote just as much energy to fixing the company’s governance problems and ensuring Mr. Redstone is appropriately cared for.
Did Pfizer Overpay for Medivation?
Does Pfizer know something other companies don’t? Medivation is a good fit, but at $14 billion, it is expensive. Cancer therapies with fat margins are appealing for big drug companies, but Pfizer will have to share the rights to Xtandi, Medivation’s best-selling prostate cancer drug, with a Japanese company.
Medivation’s future drugs targeting other cancers could justify paying a 120 percent premium, or 11 times estimated sales for 2017. But for the moment, it still just looks like Pfizer is overpaying, Robert Cyran writes.
The Financial Times’ Lex column compares the pharmaceutical industry’s approach to business with the treatments it sells, arguing pointedly: “Both are often about staving off decline.”
At least this deal marks a welcome return, however, to the emphasis on the business of drug discovery.
Cinven to Buy Pharmaceutical Research Firm
The private equity firm agreed to buy BioClinica, a clinical trials company, for about $1.4 billion, including debt, highlighting the attraction of contract research organizations, which have benefited from cost cutting at pharmaceutical companies.
Bayer and Monsanto Said to Be Closer to a Deal
The companies have made progress toward agreeing on a purchase price and a termination fee, according to people familiar with the matter.
Deutsche Bank’s $10 Billion Scandal
A scheme to help Russians secretly funnel money offshore unravelled, but many current and former employees of Deutsche Bank cannot comprehend how the equities desk in a minor financial outpost came to taint the entire institution.
China Close to Launching Credit Default Swap Market
As China suffers a rise in company defaults and an increase in corporate downgrades, the need for a credit default swap market in the country has become more pressing.
Low Yields Create High Stress for Pension Funds
Income from bonds, especially government and fixed-income bonds, is a bedrock of pension investing. Years of declining bond yields have made it far harder for funds to buy an income for their members.
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A suit filed by Andrea Tantaros, a former Fox News host, says the network “masquerades as a defender of traditional family values, but behind the scenes, it operates like a sex-fueled, Playboy Mansion-like cult.”
Andrea Tantaros of Fox News Claims Retaliation for Harassment Complaints
The former host charged that top executives at the network punished her for complaining about sexual harassment by Roger Ailes.
Report on Renault Emissions Said to Have Omitted Crucial Details
A French government report omitted significant details about how Renault’s diesel cars were able to emit fewer deadly gases when subjected to official emissions testing, according to members of the state inquiry.
A lawyer for Melania Trump said news organizations had made “false and defamatory statements about her supposedly having been an ‘escort’ in the 1990s.”
Lawyer for Melania Trump Threatens Defamation Suits Against News Outlets
The lawyer warned that news organizations including The Daily Mail could face legal action for “defamatory statements” about Ms. Trump “supposedly having been an ‘escort’ in the 1990s.”
Activists Detail Plan for Fed Overhaul
The restructuring proposal involves bringing the 12 quasi-private regional Fed banks fully into government.
The Mitsubishi Regional Jet, now expected in late 2018, is being billed as an instrument of national pride and industrial renewal.
Japan, Seeking to Regain Manufacturing Might, Bets on Aerospace
The Mitsubishi Regional Jet has become a symbol of national pride and industrial renewal, but it is plagued by delays and cost overruns.

Tuesday, August 23, 2016