July 23, 2017

DealBook: Goldman, After Profit Doubles, Expresses Caution on Global Growth

Lloyd Blankfein, chief of Goldman Sachs, at the White House in February.Brendan Smialowski/Agence France-Presse — Getty ImagesLloyd Blankfein, chief of Goldman Sachs, at the White House in February.

6:24 p.m. | Updated The country’s improving economy gave a nice lift to second-quarter earnings at Goldman Sachs.

The bank posted profit on Tuesday that was twice what it reported in the period a year earlier, fueled by strong trading and investment banking results as companies looked to Goldman to arrange mergers and acquisitions.

Net income was $1.93 billion, or $3.70 a share, compared with $962 million, or $1.78 a share, in the period a year earlier. The performance beat analysts’ expectations for $2.82 a share, according to Thomson Reuters. Still, the results were not enough to propel Goldman shares higher. They closed at $160.24, down $2.76, or 1.7 percent. Investors, wondering if Goldman would be able to repeat the performance in coming quarters, opted to take some profit off the table rather than stick around and find out.

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Goldman itself, while expressing optimism about the United States economy, was cautious about growth globally. Harvey Schwartz, Goldman’s chief financial officer, said client activity improved during the quarter but was then damped a bit by “macro concerns” about countries like China.

“Ultimately our clients are assessing the broader global economy, specifically whether a recovering U.S. will offset potential slower growth in other economic regions,” he told analysts during a conference call.

Goldman’s results followed similar strong performances by JPMorgan Chase and Citigroup. Over all, Goldman’s revenue in the quarter rose to $8.6 billion, from $6.6 billion in the period a year earlier.

On Wall Street, the last couple of months were dominated by a sudden and sharp rise in interest rates after the Federal Reserve indicated it might wind down its big bond purchase program, which has helped the economy recover from the financial crisis.

A rise in interest rates can both help and hurt banks, depending on the businesses they are in. As rates rise, fewer borrowers are likely to refinance or buy a house, and that reluctance can cut into banks’ profit. Goldman, unlike its rival JPMorgan Chase, is not a big player in originating residential mortgages, but it does trade mortgages, and as rates increased, its revenue in this area fell. At the same time, the move by various central banks to raise rates ignited a flurry of currency trading, which helped Goldman and other banks.

On the analyst call, Mr. Schwartz, in response to a question, said investors needed to look into why rates were rising. If they are being driven by inflation, he said, that is more problematic than “returning to a normal world of more steady economic growth,” as many investors believe. “That is what we are rooting for,” he added.

Goldman Sachs

The surge in interest rates was felt most acutely in Goldman’s fixed-income, or bond, department. Net revenue in the unit was $2.46 billion, up 12 percent, reflecting what the company said was significant higher net revenue in currencies, credit products and commodities. Still, these increases were offset in part by significantly lower revenue in mortgages and interest-rate products.

The bank reduced the risk it was taking in products related to interest rates. The firm’s so-called value-at-risk in rates declined to an average of $59 million in the second quarter from $83 million in the period a year earlier and $62 million in the first quarter. Value-at-risk is a yardstick of the amount of losses that could be experienced in one trading day.

The firm’s annualized return on equity was 10.5 percent for the quarter, up from 5.4 percent in the period a year earlier. It was far below its performance in boom years like 2006, when its return on equity was 41.5 percent.

Revenue from investing and lending activities came in at $1.42 billion, up from just $203 million in the period a year earlier. The firm had a rather rocky second quarter in 2012, and its results in that quarter included a big loss on a significant investment in this unit.

Investment banking revenue rose 29 percent, to $1.6 billion, helped by significantly higher net revenue in debt and equity underwriting. Equity underwriting was a particular standout, jumping 55 percent, to $371 million. Debt underwriting rose 40 percent, to $695 million.

Goldman also disclosed that it had set aside $3.7 billion in the quarter for compensation, up 27 percent from the period a year earlier. The current accrual represents 43 percent of revenue, which is in line with other years. Banks like Goldman set aside compensation during the year but do not pay it out until they determine earnings for the full year.

Over the last year, Goldman has reduced its payroll to 31,700 employees, down 2 percent from the period a year earlier, as the firm continues to focus on cutting costs.

On the call, analysts also pressed Mr. Schwartz to disclose how close Goldman was to meeting leverage ratio requirements proposed recently by regulators — 5 percent for the big bank holding companies and 6 percent for insured deposit-taking subsidiaries. The leverage ratio calculates capital as a percentage of assets held as a buffer against losses when investments go bad.

“Our first assessment is we’re very comfortable with where we are,” Mr. Schwartz said. Not satisfied, a Morgan Stanley analyst, Betsy Graseck, took another run at the question. “What is your definition of comfortable?” she asked.

“Comfortable,” Mr. Schwartz responded. “I’m not trying to be cute with you. Look, it’s just come out. Our team has looked at it. Our early read is all of the things we’ve done on the balance sheet over the past several years have left us reasonably well positioned.”

Article source: http://dealbook.nytimes.com/2013/07/16/quarterly-profit-doubles-at-goldman-sachs/?partner=rss&emc=rss

DealBook: Thai Billionaire Offers $6.6 Billion for Discount Retailer

A group controlled by Dhanin Chearavanont last year completed the purchase of a 15.6 percent stake in the Ping An Insurance Group of China from HSBC Holdings.Chaiwat Subprasom/ReutersA group controlled by Dhanin Chearavanont last year completed the purchase of a 15.6 percent stake in the Ping An Insurance Group of China from HSBC Holdings.

HONG KONG – CP All, the Thai operator of 7-Eleven convenience stores owned by the billionaire Dhanin Chearavanont, said on Tuesday that it would pay more than $6 billion to acquire the discount retailer Siam Makro in the biggest takeover announced in Asia this year.

It is the second blockbuster acquisition in recent months for a company controlled by Mr. Dhanin, whose Charoen Pokphand Group in February completed the $9.4 billion purchase of a 15.6 percent stake in the Ping An Insurance Group of China from HSBC Holdings. That deal was announced in December.

The deal comes after a major buyout by another Thai billionaire, Charoen Sirivadhanabhakdi, a beverage magnate whose companies completed an $11.2 billion buyout in January of the Singaporean conglomerate Fraser Neave, the end of a long takeover battle that began in July 2012.

CP All, said it would offer 188.34 billion baht ($6.6 billion) for all the outstanding shares of Siam Makro, which operates 57 membership-club retail outlets around Thailand, as well as a chain of five small frozen food shops, Siam Frozen.

The deal is also the biggest globally within the retail sector. It brings the total value of mergers and acquisitions in the global retail sector this year to $25.6 billion, up 87 percent from the period a year earlier and the strongest year-to-date level since 2007, according to data from Thomson Reuters.

In a filing on Tuesday with the Stock Exchange of Thailand, CP All said it had reached an agreement to pay 787 baht a share for the 64.4 percent of Siam Makro owned by SHV Holdings, a private, family owned Dutch firm with businesses ranging from oil and natural gas production to private equity investing.

The offer is 15.4 percent above Siam Makro’s closing share price of 682 baht on Friday, when the stock was suspended from trading in Bangkok.

After the deal with SHV Holdings, CP All plans to start a general offer to public shareholders at the same price for the remaining 35.6 percent stake.


This post has been revised to reflect the following correction:

Correction: April 23, 2013

An earlier version of this article gave the incorrect figure in baht for the value of CP All’s offer. It is 188.34 billion baht, not 343.24 billion baht. An earlier version also incorrectly rendered the name of the Thai billionaire on second reference. As per Thai custom, it is Mr. Dhanin, not Mr. Chearavanont.

Article source: http://dealbook.nytimes.com/2013/04/23/bangkok-tycoon-offers-6-6-billion-for-thai-retailer/?partner=rss&emc=rss

DealBook: Amid Debt Crisis, Overseas Buyers Seek European Companies

WalgreensMichael Nagle/Bloomberg NewsThe American drugstore chain Walgreen Company agreed on Tuesday to buy a 45 percent stake in Alliance Boots, the European pharmacy retailer.

LONDON – Europe’s capital markets are in the doldrums. Uncertainty caused by the Continent’s financial crisis has led to a big fall in initial public offerings, while investors remain wary of buying sovereign and company debt.

Yet there’s one area where Europe is shining.

So far this year, the total value of mergers and acquisitions on the Continent by foreign companies has reached $101 billion, well ahead of the combined $73 billion spent in the United States by international acquirers, according to the data provider Dealogic.

While the total value of European deals this year has slipped 20 percent compared with the same period in 2011, the number of acquisitions by foreign suitors is back to the levels at the height of the financial boom in the mid-2000s. In contrast, the value of deals in the United States by foreign companies announced so far this year is still 50 percent less than the $144 billion recorded over the same period in 2007.

As the European debt crisis has been felt across capital markets, the asset prices of many local companies have tumbled. Analysts say this fall in equity values has made some Europe companies takeover targets for overseas companies. The Euro Stoxx 50 index, which comprises the largest companies in the euro zone, has fallen 20 percent over the last 12 months.

Faced with economic tumult, the Continent’s companies have been looking to offload assets to shore up their capital reserves. Local banks are keen to sell so-called noncore assets, like real estate loan portfolios, while industrial companies have been mulling the disposal of international units.

American companies have been taking advantage. Acquirers in the United States have spent a combined $43.7 billion on deals in Europe so far this year, or around 43 percent of the total value of takeovers on the Continent. If Canadian companies are included, North American companies represent just under 60 percent of the buyers of European targets.

On Tuesday, the American drugstore chain Walgreen Company agreed to buy a 45 percent stake in Alliance Boots, the European pharmacy retailer, for $6.7 billion, in a deal that will allow both companies to extend their worldwide reach. United Parcel Service also is acquiring TNT Express, a Dutch shipping company, for 5.2 billion euros, or $6.6 billion.

Despite the increase in deals, bankers say acquirers remain cautious about what acquisitions to pursue. So-called bolt-on deals in the same industry that have minimal risk connected to them have become the main focus of attention. Transformational deals into new sectors, which involve large amounts of debt financing and concerns about how successful they will be, face tough opposition.

Unlike acquisitions in the United States, which are focused in the healthcare, technology and food and beverage industries, deals for European companies are spread across a number sectors. Traditional takeover targets, like mining companies and energy utilities, remain popular, but other sectors, including telecoms and construction, also have recorded high volumes of deal activity, as international buyers look to take advantage of Europe’s financial woes.

Article source: http://dealbook.nytimes.com/2012/06/20/amid-debt-crisis-overseas-buyers-seek-european-companies/?partner=rss&emc=rss

DealBook: On Wall Street, a Renewed Optimism for Deals

A Kinder Morgan pipeline in Concord, Calif.Kinder Morgan, via European Pressphoto Agency A Kinder Morgan pipeline in Concord, Calif. Kinder Morgan’s $36.2 billion deal for the El Paso Corporation was one of the largest in 2011.

Before Europe’s debt crisis flared anew last summer, rattling markets and choking off a revival in mergers and acquisitions, huge corporate cash piles and cheap debt had fostered hopes that deal-making would recover strongly last year.


Graphic Graphic (Click to enlarge).

In the first half of 2011, the dollar volume of announced mergers worldwide neared its highest levels since the financial crisis. But that momentum proved fragile as deal volume tumbled 19 percent, to about $1.1 trillion, in the second half of 2011, compared with the same period the year before, according to Thomson Reuters data.

Now, with stock and credit markets steadier, deal makers are growing confident that 2012 will be better for business. Not only do they point to cheap financing and the large amounts of cash on corporate balance sheets, but they say that companies that have already cut costs may decide that they need to make acquisitions to drive growth in the face of a tepid economy.

“The dialogue has gotten back on track,” said Steven Baronoff, chairman of global mergers and acquisitions at Bank of America Merrill Lynch. “If Europe doesn’t go off the rails, you’ll see a return to long-term positive factors.”

According to a recent study by Ernst Young, 36 percent of companies plan to pursue an acquisition this year.

“We’re optimistic that the need and desire for growth will overcome the volatility headwinds, but that’s where the battle will be waged,” said Jim Woolery, J. P. Morgan’s co-head of North America mergers and acquisitions.

And there is pent-up demand among buyout shops. After a long stretch of tempered activity, many private equity firms are still feeling the pressure to deploy capital or engineer exits.

Still, companies that explore potential deals will most likely tread cautiously. For one, it remains unclear whether European leaders have done enough to ensure that the financial system remains stable on the Continent. And in the United States, 2012 is a presidential election year. With the White House at stake, companies in businesses like finance and health care may not pursue transactions until the outlook for regulation in those industries is clearer.

Many bankers expect to see notable deal activity in energy, industrials, retail, health care and technology. The energy and health care industries produced some of the largest transactions of 2011, like Express Scripts’ $34.3 billion purchase of Medco Health Solutions, Duke Energy’s $25.9 billion takeover of Progress Energy and Kinder Morgan’s $36.2 billion deal for the El Paso Corporation.

The outlook for mergers and acquisitions worldwide varies sharply by region, bankers say. The Americas, where deal volume rose 14.7 percent in 2011, will remain a bright spot, according to Mr. Baronoff of Bank of America Merrill Lynch.

Opinion is more divided over Europe, however. While economic and market woes will lead to some bargains and opportunities, deal-making may still be largely stifled by the persistent sovereign debt crisis.

“Europe is still a mess,” said David A. DeNunzio, vice chairman of Credit Suisse’s mergers and acquisitions group. “People thought there would be more divestiture activity as companies try to get more liquid, but that hasn’t happened yet.”

The disparities among regional economies is expected to fuel more cross-border transactions in 2012. While it is not a new trend for United States businesses to seek growth in emerging markets, bankers are starting to see a reverse in deal flow. After a string of strong quarters, cash-rich corporations in markets like Brazil and China are now bargain-hunting for established brands in developed markets.

“We weren’t having these conversations even three years ago,” said Mr. DeNunzio, who expects an increase of 10 to 15 percent in cross-border transactions.

“Many companies in China and Brazil see this as a once-in-a-lifetime opportunity to acquire world-scale brands at pretty attractive prices,” he said.

At the same time, companies are paying more attention to potential regulatory hurdles, whether their transaction plans are cross-border or domestic. The biggest setback in mergers and acquisitions of 2011 was ATT’s aborted $39 billion purchase of T-Mobile USA from Deutsche Telekom, which met opposition from the Obama administration.

A deal announced early in 2011, the merger of NYSE Euronext and Deutsche Börse, remains in regulatory limbo as European authorities seek additional concessions.

Though signs point to a stronger mergers and acquisitions market, there is at least one class of deals not ready for a comeback: the highly leveraged buyout.

In 2011, the private equity titans pursued more modest-size transactions, compared with the go-go years of 2005 to 2007.

Blackstone’s largest acquisition last year was the software maker Emdeon for $3 billion. Kohlberg Kravis Roberts’s biggest deal was even smaller, a $2.4 billion buyout of Capsugel. According to deal makers, buyout shops are still shopping, but banks are less willing to finance huge leveraged buyouts and boardrooms are hesitant to take on the risk. In the aftermath of the financial crisis, boardrooms are still worried that their companies will be left in the lurch if another Lehmanesque event happens.

“Boards used to say, ‘Yeah, go to lunch with L.B.O. firms when they call.’ Now they say, ‘No, you don’t have to do that,’ ” Mr. DeNunzio of Credit Suisse said. “Corporate directors have long memories.”

In 2011, the number of private equity deals announced was roughly flat, but the dollar volume fell 19 percent to $138.1 billion, according to a December report by Ernst Young.

“And as much as we and our brethren walk with a lot of swagger, the reality is, these institutions and their risk managers need to shed risk-weighted assets, and that makes these types of transactions more difficult,” Mr. DeNunzio said.

Nevertheless, deal makers have been encouraged by the evidence that investors look favorably on mergers and acquisitions as a growth strategy.

In the first six months of 2011, several acquirers recorded healthy gains in their stock prices on the day that deals were announced.

Notably, even Valeant Pharmaceuticals — which began a $5.7 billion hostile bid for the drug maker Cephalon in March — soared 10 percent on its announcement, a rare feat for a hostile buyer.

Over all, the global volume of mergers and acquisitions rose 7.6 percent last year, to $2.54 trillion, from 2010, according to Thomson Reuters.

“We have fragile momentum,” J. P. Morgan’s Mr. Woolery said. “We believe the market will reward prudent acquisitions; the market wants this capital deployed to achieve growth.”

Article source: http://feeds.nytimes.com/click.phdo?i=2a0392e479d4b36fe23ea9148cc5d9a0

DealBook: How the Google Deal Hampers Motorola

I previously pointed out some reasons why Google may have been O.K. with paying a large reverse termination fee in its deal to buy Motorola Mobility for $12.5 billion.

I postulated it was a way for the Internet company to stare down antitrust regulators. The $2.5 billion breakup fee was also probably driven by Google’s likely refusal of a “hell or high water” provision.

But while Motorola may have pushed for the high fee in exchange, the company must put up with a lot in the meantime. The acquisition agreement sharply regulates how Motorola can run its business in ways beyond normal deal terms.

It prohibits Motorola from:

1) terminating any employee at or above the level of corporate vice president without consulting Google

2) increasing salaries and benefits for employees at or above the level of corporate vice president by more than 5 percent in any year period

3) substantially changing Motorola’s option and other incentive plan systems no matter how many times headhunters call

4) making capital expenditures greater than $50 million individually and $225 million in the aggregate in 2012

5) making any acquisition of more than $150 million

6) incurring debt greater than $250 million

These are very tight restrictions and will keep Motorola on a very short leash, dependent upon Google until this acquisition closes.


Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions.

Article source: http://feeds.nytimes.com/click.phdo?i=283a5280dc29425ca5565efb1bb8d7c8

U.S. Stocks Return to Pre-Downgrade Level

A slew of mergers and acquisitions helped build a rally of more than 2 percent in the Standard Poor’s 500-stock index, leading some analysts to weigh whether it could signal a possible period of stability after last week’s steep losses and volatility.

Standard Poor’s downgraded the nation’s credit rating on Aug. 5, after the market had closed at 1,199.38. Stocks sold off the next week, with the S.P. 500 and the Dow Jones industrial average finishing the five-day period nearly 2 percent lower. On Monday, however, the broader market as measured by the S.P. 500 inched above the pre-downgrade level to close at 1,204.49, after gaining 25.68 points, or 2.2 percent.

The Dow was up 213.88 points, or 1.9 percent, at 11,482.90, also exceeding its pre-downgrade close of 11,444.61. The same was the case with the Nasdaq composite index, up 47.22 points, or 1.9 percent, at 2,555.20.

With gains of more than 3 percent in utility, energy and bank stocks on Monday, analysts were cautiously weighing whether the worst of the recent upheaval could now be over.

“For now it is clear that in essence there is a relief in the market,” said Quincy Krosby, a market strategist for Prudential Financial. “You can feel it.”

Still, given the unease that had set in even before the downgrade, stocks are still in a slump. The S.P. 500 is more than 10 percent below where it was as recently as July 22.

And even as shares climbed on Monday, Ms. Krosby and other analysts noted said there was plenty of new economic data in the week ahead that could upend the gains of the last three sessions, including jobless claims and the Consumer Price Index. In addition, Monday’s volumes were low.

“When the buying picks up, we like to see more buying,” she said. “It is an indication of more conviction.”

New deals helped propel Monday’s market. A multibillion-dollar Google deal, a rise in commodity prices and the perception that European leaders and the central bank would take measures including bond purchases to support heavily indebted member countries could be helping, analysts said, though such sovereign debt and economic problems are expected to remain a factor in the markets.

Financial stocks rose, including Bank of America, which was up 7.9 percent to $7.76. It took steps on Monday to exit the international credit card business, agreeing to sell its $8.6 billion Canadian card venture to the TD Bank Group for an undisclosed amount and putting its remaining European card portfolio on the block.

Citigroup was up 4.8 percent to $31.27.

Worries about the United States economy and the threat of a financial crisis in Europe have overwhelmed traders, but the downgrade proved to be a tipping point, sending stocks reeling in what turned out to be one of the most tumultuous weeks ever on Wall Street.

Analysts said that investors were taking a second look at some of the causes of the volatility from last week.

Investors’ attention was focused on a meeting Tuesday of Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France. The two leaders will be addressing the threat to the euro zone posed by low growth and teetering public finances in some euro members, their room to maneuver circumscribed by fears that France could be next in line for market attacks.

“People are taking a more rational view of the path ahead, that some of the problems in Europe can be addressed with additional spending restraint from some of the governments,” which will take time, said Russell Price, senior economist with Ameriprise Financial.

The euro rose against the dollar, a development that Ms. Krosby attributed to expectations for the Merkel-Sarkozy meeting.

The price of the benchmark 10-year Treasury note fell 14/32 to 98 12/32, and the yield rose to 2.31 percent, from 2.26 percent late Friday.

“Today was a day that people took a little bit of a rest to try to digest all the news that has happened and the volatility that has happened in the market recently,” said George Rusnak, national director of fixed income for Wells Fargo.

Broader commodity prices were up, and investors were probably doing some bargain hunting after last week’s declines, said Keith B. Hembre, the chief economist and chief investment strategist at Nuveen Asset Management.

“It is part of the market trying to find its feet,” he said. “Despite the bounce on Friday, this market has been really beaten up.”

European stocks showed modest gains. The FTSE 100 index in London was up 0.6 percent. The CAC 40 in France rose 0.8 percent and the DAX in Germany was up 0.4 percent. Asian shares rose, with the Tokyo benchmark Nikkei 225 stock average gaining 1.4 percent.

Ben Protess, David Jolly and Bettina Wassener contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=431835457d49853847cff33f1769cb55

DealBook: Morgan Stanley Posts $558 Million Loss but Beats Expectations

Despite showing improvement in its major divisions, Morgan Stanley reported a second-quarter loss of $558 million on Thursday, as it continued to deal with the aftereffects of the financial crisis.

The loss stems from a deal struck earlier this year with the Mitsubishi UFJ Financial Group, which had provided a much-needed cash infusion in the depths of the disaster. With the new agreement, Morgan Stanley freed itself of a costly continuing burden, but got saddled with a $1.7 billion one-time charge in the quarter.

The financial firm posted a loss of 38 cents a share. Still, the results were significantly better than a loss of 61 cents a share expected by analysts.

More important, Morgan Stanley’s underlying businesses all reported gains, and it posted revenue of $9.3 billion, up 17 percent from the first quarter. It was the first time since 2008 that Morgan Stanley’s quarterly revenue had exceeded that Goldman Sachs.

“While global markets remained challenging this quarter, the firm delivered higher year-over-year revenues across our three major business segments,” James P. Gorman, the bank’s chief executive, said in a statement.

Morgan Stanley’s largest business, Institutional Securities, got a significant boost from underwriting and deal-making activity.

The technology banking team, for example, has won coveted underwriting spots on the year’s hottest technology offerings, including LinkedIn, Groupon and Zynga. Underwriting revenues increased 57 percent in the period to $940 million.

Morgan Stanley has also been involved in some big mergers and acquisitions in recent months.

The firm represented BJ’s Wholesale in its deal to sell itself to a group of private equity firms for $2.8 billion. It also worked with Capital One Financial, which bought ING’s American online banking group for $9 billion. For the quarter, advisory revenue jumped 85 percent, to $533 million.

Morgan Stanley Smith Barney, the firm’s global wealth management division, continued to be a steady performer, posting net revenues of $3.5 billion this quarter, compared to $3.0 billion a year ago. Mr. Gorman tapped Gregory J. Fleming to run the division in January, as part of a move to beef up the firm’s less risky arms and make its bottom line less susceptible to market swings.

The bank also took steps this year to improve its asset management arm, which is also run by Mr. Fleming, and which has historically been a sore spot for the firm. This quarter, the division posted net revenue of $645 million, an increase of 57 percent over the same quarter last year. The increase was primarily due to gains in the firm’s real estate investments and higher results in its core asset management groups.

Article source: http://dealbook.nytimes.com/2011/07/21/morgan-stanley-posts-loss-of-558-million/?partner=rss&emc=rss

News Corporation Moves to Delay BSkyB Deal to Avoid Its Collapse

The News Corporation announced that it was prepared to submit its offer for the 61 percent of BSkyB it does not already own to the country’s Competition Commission, an independent group that considers mergers and acquisitions within the United Kingdom. The company had previously offered to spin off the Sky News channel to avoid referral to the commission, but now says it wants to keep Sky News and take its chances with the regulator.

“News Corporation is ready to engage with the Competition Commission on substance,” the company said in a statement, adding that it “continues to believe that, taking into account the only relevant legal test, its proposed acquisition will not lead to there being insufficient plurality in news provision in the U.K.”

The announcement gives the deal some breathing room, avoiding an emergency vote called by the opposition Labour Party for Wednesday, when politicians were likely to have dealt a fatal blow to the acquisition. In the longer term, the commission’s lengthy review process, which could take up to eight months, could give the News Corporation some distance from the political fallout of the hacking scandal.

But the move also raises the question of just how much the News Corporation might balance the prospects of the BSkyB acquisition, which would be the largest in the company’s history, with its newspaper business.

Mr. Murdoch built the News Corporation on newspapers — his first love and still where he devotes most of his time and energy — but the tabloid scandal has become a hindrance to his more lucrative digital and entertainment properties. With The News of the World already shut down, many observers wonder whether Mr. Murdoch would stomach selling or closing more papers.

David Bank, a media analyst at RBC Capital Markets in New York, said it was a decision that would win approval from investors.

“Investors would probably want nothing more,” he said. “It’s the worst business in the portfolio.”

But Claire Enders, a media analyst in London, said the News Corporation was still far from such a decisive move as jettisoning all of its British newspapers. “The newspapers are very dear to Mr. Murdoch’s heart,” she said. “You have also got to find a buyer for these things. They are barely profitable.”

The Murdoch family “is in a bunker,” according to one person who is close to the company but declined to be identified discussing confidential matters. But, this person added, the idea of the News Corporation getting out of the newspaper business was very unlikely.

Shares in the News Corporation fell 7 percent on Monday. Since the scandal exploded last week, shares in the company have declined 11.4 percent; shares of BSkyB have fallen more than 15 percent.

Thomas Eagan, an analyst for the London-based company Collins Stewart, said the pullback in the BSkyB stock price could actually help the News Corporation “to get it cheaper than it otherwise would have.”

Acquiring BSkyB would increase the News Corporation’s cash flow and improve its business mix, further reducing the significance of the company’s newspapers, which account for a smaller portion of its revenues than television or film.

BSkyB is firmly rooted across the British media marketplace. In the United States, it would be akin to rolling DirecTV, Turner Broadcasting and ESPN into one.

Like DirecTV, BSkyB beams channels to paying subscribers; it has 10 million in the United Kingdom, making it the biggest such service in the country. Like Turner, it operates news and entertainment channels, including Sky News. Like ESPN, it operates a suite of hugely popular sports channels.

“It is clearly embedded in the viewer’s media habits,” said Alex Degroote, a media analyst for Panmure Gordon Co. in London.

As the bid now comes before the commission, the referral is sure to delay the News Corporation’s 13-month-old effort. A spokeswoman declined to comment beyond the company’s statement.

However, the contentious bid is also the subject of a separate inquiry by the government media regulator, Ofcom, about the News Corporation’s status as “fit and proper” to hold a broadcast license after what looked like a rubber-stamp decision was thrown into doubt by the revelation that The News of the World had hacked into the voice mail of Milly Dowler, a 13-year-old girl who was abducted and killed in 2002.

Since then, the scandal has mushroomed to include allegations that the paper hacked into the accounts of dead soldiers and that the News Corporation-owned Sunday Times used subterfuge to get personal information about former Prime Minister Gordon Brown.

Deputy Prime Minister Nick Clegg on Monday became the most senior official to publicly urge Mr. Murdoch to abandon the takeover, deepening the hacking scandal that has been transformed from a long-simmering controversy into a full-blown crisis swirling around Mr. Murdoch’s British operation, News International, and its chief executive, Rebekah Brooks.

Mr. Clegg urged Mr. Murdoch to “look how people feel about this — look how the country has reacted with revulsion to the revelations” about the phone-hacking scandal. ”Do the decent and sensible thing, and reconsider, think again about your bid for BSkyB.”

Ed Miliband, the Labour leader, had already called for the bid to be stopped. While Prime Minister David Cameron has not gone so far, on Monday he said that “if I was running the company right now I think they should be focused on cleaning that up rather than on the next corporate move.”

Graham Bowley reported from London, and Brian Stelter from New York. Ravi Somaiya, Julia Werdigier and John F. Burns contributed reporting from London.

Article source: http://feeds.nytimes.com/click.phdo?i=cd599bd2772c88601ffb2de4aae12aef

Former Galleon Employee Is Next Target in Inquiry

On Monday, Mr. Goffer will appear in Federal District Court in Manhattan — this time as a defendant in his own insider trading trial.

He will be fairly familiar with the proceedings, having attended much of Mr. Rajaratnam’s trial, which concluded last week with a jury conviction on 14 counts of crimes related to insider trading.

Mr. Goffer is accused of leading an insider trading scheme that produced more than $20 million in illegal profits. His brother, Emanuel Goffer, and Michael A. Kimelman are being tried alongside him.

As in Mr. Rajaratnam’s case, phone wiretaps are expected to play a central role in the case. Federal prosecutors have told Judge Richard Sullivan that they plan to play as many as 60 audio tapes of conversations in which the defendants swap confidential information about publicly traded companies, including 3Com and Axcan Pharma.

Prosecutors accuse Mr. Goffer and his co-defendants of trading on illegal tips about pending mergers and acquisitions from three lawyers, who have already pleaded guilty to securities fraud. At least one of those lawyers, Brien Santarlas, formerly of Ropes Gray, is expected to testify for the government.

Lawyers for the Goffers did not respond to requests for comment. Michael Sommer, a lawyer for Mr. Kimelman, said his client “has pleaded not guilty because he is in fact not guilty.”

Mr. Rajaratnam is the central figure in a government investigation that has led to insider trading charges against 26 individuals. Of those charged, 22 have either pleaded guilty or been convicted. The Goffer brothers and Mr. Kimelman are three of the defendants still fighting charges. (The fourth, Deep Shah, a former analyst at Moody’s accused of leaking corporate secrets to traders, has been declared a fugitive.)

Zvi Goffer bounced around a number of firms before landing at Galleon in 2008. After nine months there, he started his own fund, Incremental Capital, with his brother and Mr. Kimelman.

Authorities say that Mr. Goffer, 34, earned the nickname “Octopussy” — a reference to a James Bond movie — among his fellow traders because his tentacles stretched deep into a vast network of tipsters.

Late last week, Judge Sullivan denied a request by Emanuel Goffer’s lawyer to delay the trial for a month. The lawyer argued that the swarm of publicity surrounding Mr. Rajaratnam’s conviction would taint the jury selection process and threaten Mr. Goffer’s right to a fair trial.

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DealBook: More Good Times Ahead for M.&A., Survey Finds

Deal-makers are by their very nature an optimistic lot. And as many of the top legal specialists in the field head down to the annual Tulane Corporate Law Institute in New Orleans on Wednesday, it appears that their confidence is rising.

Of the roughly 40 top M.A. bankers and lawyers surveyed by the Brunswick Group, a public relations firm, about 92 percent said they believed the rest of this year would bring continued strong growth in mergers and acquisitions.

Much of that was driven by a strong first quarter for deal-making, capped last week by ATT’s blockbuster $39 billion deal for T-Mobile USA. M.A. volume rose 58 percent for the quarter from the period a year earlier, in the best start since 2007, according to preliminary data from Thomson Reuters.

Roughly half of the deal-makers surveyed by Brunswick said they believe that the biggest contributor to rising M.A. was greater confidence among management teams and company boards. (Other factors include the improving economy and more buying firepower in the form of cash on corporate balance sheets and the availability of cheap credit.) That confidence could be seen in part through hostile deals, including an unsolicited $5.7 billion bid for Cephalon by Valeant Pharmaceuticals International announced on Tuesday.

According to those surveyed, the majority of deals seen this year will continue primarily to be domestic ones by emboldened strategic buyers. Still, Asia is considered to be the most fertile source of international buyers of American assets — so long as those would-be bidders are not stymied by regulatory hurdles, which 40 percent of respondents identified as the most likely obstacles to deals.

Much of the rest of this year’s survey mirrored the results of last year’s, including the most likely active sectors for deals (health care and energy) and the most likely problems for hostile bidders (overpaying and staggered boards, in which only a portion of directors are up for election in any given year).

But 57 percent of respondents said that they expected more deals to be done using just cash, more than double from last year. Part of that is likely a reflection of the tremendous stores of cash companies have built up, as well as the willingness of banks to lend. Part of it may also be some lingering uncertainty over the potential vicissitudes of the markets.

Yet it may also reflect even more bullishness, suggesting that the shares of potential acquirers still have some room to grow and therefore are not worth using as currency — at least not right now. In other words, the good times may continue to roll.


2011 Brunswick Group MA Survey

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