Biggest Dividend

posted by Jonathan Keehner on Jul 13

Its been another tough week for the beleaguered world of private equity. Not only were there revelations of more fishy tax treatments by Blackstone and others, but a New York Law Journal article reviewed the torrent of litigation that has been unleashed against private equity deals. 

The new fear is that senior management may be incentivized to pave the way for a sale to a private equity firm without due regard for the interests of stockholders, wrote Weil Gotshal partner Joseph Allerhand. Management participation in these transactions has drawn sharp criticism from a number of commentators and even a  call by one for outlawing such transactions altogether.” 

The article, referencing Delaware court cases Lear and Topps, said: “The Delaware Court of Chancery has taken note of the rising tide of private equity transactions as well as seemingly new fiduciary duty issues raised by the participation of senior management in these buyouts.”With criticism of private equity popping up all over the place, its no surprise KKR opted to bury its own IPO under Fourth of July fireworks.

posted by Kenneth Li on Jul 12

Google co-founder Sergey Brin stopped to chat with reporters during a lunch break on Day 2 of Allen & Co.’s annual mogul retreat in Sun Valley. Google’s other co-founder Larry Page was scheduled to attend, but did not show up. Brin talked about how Yahoo and its former CEO Terry Semel caught a bad rap from the press. He also had something to say about one of the hottest topics this week: Facebook.

On whether Google was interested in buying  Internet social network Facebook:
“Facebook? I really like the Facebook guys … We dont really look at companies for acquisitions unless they are really interested . If they come to us, wed certainly be open to talking. But I think theyre building a great company of their own.”

On growth of social networks taking away attention from Google:
“Social networks are creating lots and lots of content, which was the subject of the panel, and thats for more for us to search. We certainly love to see lots of successful Web sites out there creating lots and lots of Web pages.”

On Yahoo’s performance:
“I think theyre a very successful company. If you look at their metrics, theyve done quite well over the past few years. Medias been unfair for them. Im not sure theyve done so poorly on search. Youre just comparing them to our numbers.”

But why was Semel pushed out by shareholders?
“(Yahoo CEO Terry) Semel left, I dont know that shareholders had anything to do with it.”

Any acquisitions in mind?
“Nothing comes to mind.”

Where’s Larry?
“He wasn’t feeling well, so I came. We’re interchangeable.”

(Photo: Amazon CEO Jeff Bezos, Google co-founder Sergey Brin,  Allen & Co. managing director Nancy Peretsman /Reuters/Rick Wilking)

posted by Brad Dorfman on Jul 12

    Restaurant companies have been prime targets for private equity investors. Wendy’s International has been rumored as a possible buyout candidate, Outback Steakhouse parent OSI Restaurant Partners Inc. and Lone Star Steakhouse & Saloon Inc. have both gone private and Applebee’s has also been fielding takeover proposals.
    But don’t put Yum Brands Inc. on the takeover menu.
    Chairman and Chief Executive David Novak said the company is happy being public.
    “I would say why would we mess with happiness? We have a great business. We like being a public company,” Novak said during a conference call with investors. “We like our opportunities over the long-term, and there is nothing that’s keeping us from continuing to be a great value for shareholders.”
    Novak’s comments were in response to a question by an analyst about the company’s capital structure. The company has touted its strong cash flow, which it expects will allow it to buy back more than $1 billion in shares this year, while also paying a dividend with about a 2 percent yield.
   David Palmer, analyst at UBS Investment Research, said in a note that he thinks the company will take on more debt to repurchase even more shares and that it could spin off part of its China business over the next 3 years in order to highlight the company’s break-up value.
   The company plans to make decisions on its capital structure by the end of the year.

posted by Kenneth Li on Jul 11

It’s Allen & Co.’s version of the high school cafeteria. If Sun Valley is the mating ground of deals to come, who’s splitting bread with whom is one of the few public clues on what could be around the corner.

Within a one-hour period, spotted near the swan pond today:

–Rupert Murdoch, wife Wendi Deng, the kids and the nannies, with CNN’s Anderson Cooper, on the same day Fox News announces the launch date of the Fox Business Channel (Oct. 15, 2007) Murdoch dodged a reporter’s question this morning on whether he would abandon the Dow Jones bid: “You never know.”

–Paramount CEO Brad Grey lunching with Time Warner COO Jeffrey Bewkes, Viacom CEO Philippe Dauman, and Yahoo nonexecutive chairman Terry “I’m here on vacation” Semel.

–BET founder Bob Johnson and Harvey Weinstein

–Warren Buffett and former Major League Baseball commissioner Fay Vincent.

–Former Viacom CEO Tom Freston (now founder of Firefly3) with new Joost CEO Mike Volpi in deep conversation.

–Jeffrey Bewkes and Terry Semel breaking off into a group.

–Time Warner CEO Richard Parsons, Bewkes, Terry Semel (former Warner Bros. Chief) and Tom Freston.

(Photo: Yahoo former CEO Terry Semel and Paramount CEO Brad Grey / Reuters/Rick Wilking)

posted by Jessica Hall on Jul 11

Warburg Pincus will likely raise its $3.67 billion bid to acquire Bausch & Lomb Inc., but it may still win the takeover battle for the eye-care company even if fails to top the competing $4.23 billion offer from Advanced Medical Optics Inc., analysts said.

“Warburg may only have to come within 10-15 percent of (Advanced Medical’s) offer,” Wachovia Capital Markets LLC analyst Larry Biegelsen said in a research report.

Advanced Medical’s offer is valued at $75 a share, of which $45 is in cash and $30 in stock. That offer compares with a $65 a share all-cash offer made by Warburg Pincus in May.

“Bausch’s financial advisor considered Warburg’s $65 offer fair from a financial point of view, and considering Warburg’s disciplined investment philosophy, we do not expect Warburg to increase its offer substantially,” Biegelsen said.

In addition to offering cash, Warburg also has the advantage of a faster closing to its deal, analysts said. Warburg won antitrust approval for its Bausch & Lomb bid on Tuesday, while Advanced Medical would likely face tough regulatory scrutiny since some of its businesses overlap with Bausch & Lomb.

“It’s money now versus cash and stock later. You’ll take slightly less to be able to pocket the money now,” said one trader who declined to be named.

Bausch & Lomb has said Advanced Medical’s proposal is reasonably likely to lead to a superior deal and it will continue negotiations with its new suitor. Still, Bausch & Lomb reaffirmed its support for the Warburg Pincus deal in a proxy filing on Tuesday.

It may be several days before either suitor makes its next move, sources familiar with the situation told Reuters. Stay tuned.

posted by Anupreeta Das on Jul 11

You’d think the Chicago Mercantile Exchange and the Chicago Board of Trade would take a honeymoon after tying the knot. 

But some traders and experts said the merger won’t stop CME Group, the new entity, from making more acquisitions.

“This is just the beginning,” said Lee Stern, a CBOT member since 1949.  “The city of Chicago will be the center of the futures industry.”

It could mean the Chicago Board Options Exchange, which Stern said “has been temporarily left at the post,” becomes a target.

Gilbert Bassett, who runs the University of Illinois at Chicago’s International Center for Futures and Derivatives, agreed that CBOE would fit right in. “One of the things that was trumpeted… is that the CME-CBOT merger makes Chicago the place in the world to do risk management,” said Bassett.

Since CBOE is the largest U.S. options exchange, “it makes sense to include CBOE,” he said.

Apart from raising antitrust concerns, a CBOE deal may not be that easy because of an ongoing battle between CBOT and CBOE over trading rights.

CME and CBOT executives at Monday’s conference were, of course, tight-lipped about further acquisitions.

“We will be very focused on this transaction and we will not look past this transaction trying to come up with what’s next,” said CME Chairman Terry Duffy.

Whether or not CME Group makes a bid for CBOE, it is unlikely to remain single for long, given how quickly exchanges are consolidating.

(Additional reporting by Doris Frankel and Christine Stebbins in Chicago)   

posted by Franklin Paul on Jul 11

I am a media mogul. I run/own/control one of the multibillion-dollar companies that makes your life better, or maybe more interesting. And I can darn well wear anything I please, thank you very much.

Such is the implied sartorial statement made by several of the leading players in the media world as they arrived at meetings at the Allen and Co. conference at the Sun Valley Resort in Sun Valley, Idaho.

Reuters Photographer Rick Wilking captured several of the media industry’s movers and shakers, looking a lot like you and I on our way to the mall on a lazy Sunday.

News Corp. chief Rupert Murdoch (above, left) and his wife Wendy Murdoch arrive for the first session of the Allen and Co. conference at the Sun Valley Resort in Sun Valley, Idaho July 11, 2007. Murdoch, who is pursuing a $5 billion bid for Dow Jones & Co., will be the center of attention when the world’s biggest media chiefs gather this week.

IAC/InterActiveCorp CEO Barry Diller (R) arrives with his wife, designer Diane von Furstenberg, for the first session of the Allen and Co. conference.

Meg Whitman (R), President and CEO of eBay, arrives with John Donahoe, President of eBay Marketplace, for the first session of the Allen and Co. conference.

Jim Wiatt, Chief Executive Officer of the William Morris Agency arrives for the first session of the Allen and Co. conference.

Reuters reporter Kenneth Li is also in Sun Valley, covering the event. Read his story here.

(Updated to show that James Wiatt is CEO of William Morris Agency)

(Photos: Rick Wilking, Reuters)

posted by Kenneth Li on Jul 11

Looks like there won’t be a News Corp. purchase of Dow Jones, at least not today … maybe. Rupert Murdoch, spotted last night by our sources at the welcome barbecue, was seen strolling into the Sun Valley Inn, where the meetings of minds and egos take place.

Reporters camped out at the 25th annual Allen & Co. meeting of media and tech elites will be keeping a close eye on Murdoch’s every move, every cellphone call, every bathroom break.

Murdoch’s wife Wendi Deng, recently named Chief of Strategy at MySpace China, a joint venture,  accompanied him.

Murdoch’s son Lachlan, who left the company in 2005 to start an Australia-based company Illyria, was also seen strolling into the meeting room this morning. Asked by reporters if his attendance signaled an imminent return to News Corp., he would only say: “It’s just a great place to come. I’m looking forward to it very much.”

Dow Jones has made a final pitch to cast for alternative offers to Murdoch’s $5 billion bid to buy the publisher of the Wall Street Journal. On Monday, Dow Jones met with supermarket magnate Ron Burkle and Internet entrepreneur Brad Greenspan, who the Journal reported, has lined up an offer with EchoStar and the venture capital arm of Intel to buy half of Dow Jones.

(Photos: Reuters/Rick Wilking)

posted by Kenneth Li on Jul 10

Swans are nesting in Sun Valley, Idaho and that can only mean one thing. Prepare for some deal-hatching at the 25th annual Allen & Co. mogul fest, which kicks off in earnest on Wednesday.

The Gulfstreams start landing this afternoon as moguls with their spouses, kids and nannies in tow are whisked away to Herb Allen’s welcome cocktails and barbecue.

I and Reuters photographer Rick Wilking will be here all week to chat up the big media, Internet and tech elite, who don questionable sportswear attire and talk big ideas.  

This year, Rupert Murdoch’s $5 billion offer to buy Dow Jones anchors the conference. Murdoch’s every bathroom break, cellphone call or huddle with his execs here will be interpreted as another sign the talks are advancing, even as Dow Jones attempts a last ditch effort to drum up a rival offer.

Meanwhile, Internet company executives like Facebook COO Owen Van Natta, Digg CEO Jay Adelson, Skype founders Janus Friis, Niklas Zennstrom and new Joost CEO Mike Volpi will vie for the title of newcomer darlings as they mingle with some 200 top executives for possible partnerships, investment or buyouts. Sling Media’s Blake Krikorian also returns this year to a much more partnership friendly atmosphere. His his company’s set top box, the Sling Box, looks more like the catalyst for new business models than a threat to established media’s lifeblood.

Check back here and on Reuters.com for our coverage.

posted by Jessica Hall on Jul 10

Michael Capellas, who sold both MCI Inc. and Compaq Computer Corp., will become chief executive officer of First Data Corp. when its $26 billion leveraged buyout is completed. But how long will he and First Data be around?

Capellas, who has made his career by cutting costs and sprucing up companies for sale, may be a perfect fit for First Data under the control of private equity firm Kohlberg Kravis Roberts & Co. Private equity firms typically acquire companies, refinance their debt, cut costs and sell them for a profit after three to five years.

First Data and KKR could not be immediately reached for comment.

“He’s never actually run a company. He just sells them. He sold Compaq to HP….He went to MCI and turned it around and sold it. He’s not an operational guy, he’s a salesman,” said one former coworker.

Capellas flips companies and pockets a lot of money on the way out. He sold Compaq to Hewlett-Packard and served as the combined company’s president for seven months. He walked away with a severance package of more than $14 million, while 17,000 employees lost their jobs in the merger. At MCI, he got a $39 million package for helping turn around the bankrupt company and selling it to Verizon Communication.

“His career is the classic case of ‘right place, right time,’” said another former coworker. “He was CIO of Compaq and the CEO there imploded and they needed someone to fill the slot. He moved into that job and then sold the company,” said the coworker, who declined to be identified by name.

Although Capellas typically cut costs at the companies he runs, his personal tastes may be well suited for the deep-pocketed world of private equity. Capellas has a preference for the Four Seasons Hotel in New York and he’s a wine snob, who doesn’t flinch at ordering $400 bottles of wine at dinner, former coworkers said.

The employees of First Data, which processes credit and debit card payments, will get a jolt of energy from Capellas. He tries to be a fun boss by tossing footballs around and playing rock music loudly on conference calls or at meetings, but former coworkers said that’s just part of his salesman shtick.

“He’s not a ‘tough’ manager — he’s just frenetic. He’s an emotional roller coaster,” said one former coworker.

First Data’s Chairman Ric Duques described Capellas more diplomatically: “Michael is by
any measure an accomplished, energetic and visionary CEO.”