December 5, 2021

Supreme Court Rules Human Genes May Not Be Patented

The patents were challenged by scientists and doctors who said their research and ability to help patients had been frustrated. The particular genes at issue received public attention after the actress Angelina Jolie revealed in May that she had had a preventive double mastectomy after learning that she had inherited a faulty copy of a gene that put her at high risk for breast cancer.

The price of the test, often more than $3,000, was partly a product of Myriad’s patent, putting it out of reach for some women. The company filed patent infringement suits against others who conducted testing based on the gene. The price of the test “should come down significantly,” said Dr. Harry Ostrer, one of the plaintiffs in the case decided Thursday. The ruling, he said, “will have an immediate impact on people’s health.”

The court’s ruling will also shape the course of scientific research and medical testing in other fields, and it may alter the willingness of businesses to invest in the expensive work of isolating and understanding genetic material.

The decision hewed closely to the position of the Obama administration, which had argued that isolated DNA could not be patented, but that complementary DNA, or cDNA, which is an artificial construct, could. The patentability of cDNA could limit some of the impact on industry from the decision.

Myriad’s stock price was up about 10 percent in early trading, a sign that investors believed that Myriad had retained the ability to protect its business from competition.

“I think everybody that was paying close attention to this case pretty much guessed what they were going to do,” said Robert Cook-Deegan, a research professor at Duke University’s Institute for Genome Sciences and Policy, who has closely followed the case and the issue of gene patenting.

Dr. Cook-Deegan said he thought Myriad would now face competition for testing for the breast cancer risk genes.

“I think there might be some blustering or saber rattling, but I would be really surprised if they sue anybody for patent infringement for a diagnostic test,” he said about Myriad.

He said that there were only a small number of diagnostic companies that relied on isolated DNA patents to protect their business, and that the impact of the decision on the broader biotechnology industry might be limited.

The central question for the justices in the case, Association for Molecular Pathology v. Myriad Genetics, No. 12-398, was whether isolated genes are “products of nature” that may not be patented or “human-made inventions” eligible for patent protection.

Myriad’s discovery of the precise location and sequence of the genes at issue, BRCA1 and BRCA2, did not qualify, Justice Clarence Thomas wrote for the court. “A naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated,” he said. “It is undisputed that Myriad did not create or alter any of the genetic information encoded in the BRCA1 and BRCA2 genes.”

“Groundbreaking, innovative or even brilliant discovery does not by itself satisfy the criteria” for patent eligibility, he said.

But manipulating a gene to create something not found in nature, Justice Thomas added, is an invention eligible for patent protection.

He also left the door open for other ways for companies to profit from their research.

They may patent the methods of isolating genes, he said. “But the processes used by Myriad to isolate DNA were well understood by geneticists, ” Justice Thomas wrote. He added that companies may also obtain patents on new applications of knowledge gained from genetic research.

Andrew Pollack contributed reporting from New York.

Article source: http://www.nytimes.com/2013/06/14/us/supreme-court-rules-human-genes-may-not-be-patented.html?partner=rss&emc=rss

DealBook: After a Vote, Dimon Moves to Mend Bank’s Fences

Jamie Dimon shored up his influence at JPMorgan.J. Scott Applewhite/Associated PressJamie Dimon shored up his influence at JPMorgan.

A resounding shareholder endorsement of Jamie Dimon has done what JPMorgan Chase’s robust profits and soaring stock price could not: it helps the nation’s largest bank and its chief executive move beyond a multibillion-dollar trading loss that has dogged the bank for more than a year.

At JPMorgan’s annual meeting in Florida on Tuesday, some 70 percent of the shares voted to keep Mr. Dimon as both chairman and chief executive. It was the culmination of one of the most closely watched corporate contests in recent memory — one that pitted a small but vocal group of shareholders against the most powerful banker in America.

His victory secure, Mr. Dimon is now redoubling his efforts toward repairing JPMorgan’s frayed relationships with regulators, fortifying risk controls and bolstering the bank’s businesses, people briefed on the matter say.

While the shareholder resolution to split the jobs of chief executive and chairman was pitched as improving corporate governance, it soon became tangled up in how Mr. Dimon handled last year’s trading blowup. The surprising loss at the chief investment office unit in London felled some of Mr. Dimon’s top lieutenants and helped lay bare broad risk and control weaknesses throughout the vast bank.

Before the vote, Mr. Dimon complained to executives within the bank that the seemingly unrelenting fascination with the shareholder proposal was an unfortunate distraction that siphoned energy and resources, according to several people close to the bank.

Hastily leaving the annual meeting in Tampa, Mr. Dimon expressed that exasperation to reporters, saying, “We really don’t want any more press.”

Afterward on Tuesday, in an e-mail to employees, the chief executive wrote: “There has been a lot of talk around this topic over the past few weeks, and in some cases, it was distracting. In spite of that, you stood tall and maintained your focus on the business and did the job we are all here to do.”

JPMorgan’s Trading Loss

With the decisive shareholder endorsement, Mr. Dimon has bolstered his influence at the helm of JPMorgan, while the proxy advisory firms that advise investors on corporate governance issues saw their influence wilt. The tally demonstrated that more investors, especially mutual funds, are doing their own work on proxy questions instead of simply relying on the recommendations of firms like Institutional Shareholder Services or I.S.S.

“Mutual funds are paying close attention to these contested elections, especially because there are fewer publicly traded companies now that make up a greater share of the funds’ portfolios,” said Gerald Davis, a professor of management and organizations at the University of Michigan. “It pays to really pay attention.”

Matrix Asset Advisors Inc, which holds roughly 619,000 JPMorgan shares, was one such institutional investor that broke ranks with I.S.S. In principle, Matrix supports a separate chairman and chief executive, said Jordan Posner, its managing director, but in the case of JPMorgan, those rules shifted and it voted against the shareholder proposal.

“We think that pragmatically, it made more sense for Jamie Dimon to continue in both roles,” Mr. Posner said. “He has done an outstanding job.”

The outcome of the vote, coming on the heels of aggressive lobbying by JPMorgan to secure a victory, also pointed, some observers say, to how Wall Street tackles shareholder discontent as if it were a political campaign.

Through meetings and calls to investors, JPMorgan successfully won the support of a handful of investors who backed Mr. Dimon in this year’s closely watched contest, but voted to divide the roles last year, according to two people with knowledge of the matter.

Now Mr. Dimon plans to marshal the momentum from the shareholder victory to try to strengthen the bank’s compliance and audit controls, according to several people with knowledge of the matter. That cleanup work was already under way, but the victory gives him more of a mandate to tackle it head on, these people say.

As part of that push, JPMorgan is beefing up the staff under Matt Zames, JPMorgan’s chief operating officer, according to several people close to the bank. Mr. Zames was initially chosen by Mr. Dimon to take over the chief investment office in the aftermath of the troubled bets. By the end of the year, JPMorgan is on track to hire as many as 1,000 employees charged with compliance and controls.

Top bank executives are increasing the frequency of their trips to meet with regulators in Washington, the people close to the bank said. Gordon A. Smith, who is chief executive of JPMorgan’s community and consumer banking, has taken about one trip to Washington each month.

Mending the frayed relationships with Washington will be difficult, however, as the bank continues to contend with a series of regulatory missteps.

In January, the Office of the Comptroller of the Currency took an enforcement action against JPMorgan, faulting it for lapses in how the bank controls against the flow of tainted money. The Comptroller is also investigating whether JPMorgan failed to tell federal authorities of its suspicions about Bernard L. Madoff, subsequently convicted in the largest Ponzi scheme in history. The agency is now weighing a move against JPMorgan for using questionable documents to collect overdue credit card bills, according to officials with knowledge of the investigations.

“The regulators are not going away and JPMorgan still has a target on its back,” said Michael Mayo, a banking analyst for CLSA.

And despite the blessing of the bank’s shareholders, some regulators remain skeptical that Mr. Dimon and JPMorgan can truly overhaul a bank and a culture where requests from regulators were sometimes met with outright resistance.

Still, the people close to the bank say that Mr. Dimon is working to improve the bank’s culture, encouraging executives to provide regulators with a wide window of information that anticipates their questions.

A version of this article appeared in print on 05/23/2013, on page B1 of the NewYork edition with the headline: After a Vote, Dimon Moves To Mend Bank’s Fences.

Article source: http://dealbook.nytimes.com/2013/05/22/dimon-after-winning-support-moves-to-mend-banks-fences/?partner=rss&emc=rss

DealBook: Apple Raises $17 Billion in Record Debt Sale

Timothy Cook, the chief of Apple.Eric Risberg/Associated PressTimothy Cook, the chief of Apple.

With a $145 billion cash hoard, Apple could acquire Facebook, Hewlett-Packard and Yahoo — and still have more than $10 billion left over.

Despite its uncommonly flush balance sheet, Apple borrowed money on Tuesday for the first time in nearly two decades. In a record bond deal, the company raised $17 billion, according to a person briefed on the deal, paying interest rates that rival those of debt issued by the United States Treasury.

Apple’s corporate-finance maneuver raises a riddle: Why would a company with so much cash even bother to issue debt?

The answer has a lot to do with the frenzied state of the bond markets. Companies are issuing hundreds of billions of dollars in debt to exploit historically low interest rates and strong investor demand for bonds as an alternative to money market funds and Treasury bills that paying virtually nothing.

“If you look at these big companies like Apple and Microsoft doing these big, low-cost bond offerings, it’s a way for them to raise money in an effort to create better returns for their shareholders,” said Steven Miller, a credit analyst at SP Capital IQ. “The bond markets are practically begging these corporations to issue debt because of how cheap it is to raise money.”

But Apple’s move also reflects the challenges of a highly successful business with a flagging stock price. In an effort to assuage a growing chorus of concerned and disappointed Apple investors, the company is issuing bonds to help finance a $100 billion payout to its shareholders. It will distribute most of that amount over the next two and a half years in the form of paying increased dividends and buying back its stock.

While Apple’s shareholders and analysts welcome the company’s financial tactics, they say that the maker of iPhones, iPads and iMacs must continue to innovate and fend off increasing competition.

“This is a substantial return of cash, and it’s the right thing to do on many levels,” said Toni Sacconaghi, an analyst at Bernstein Research. “But, ultimately, the company has to execute. This is no substitute for that.”

By raising cheap debt for the shareholder payouts, Apple will also avoid a potentially big tax hit. About two-thirds of Apple’s cash — about $102 billion — sits overseas in lower-tax jurisdictions. If it returned some of that cash to the United States to reward its investors, the company could have significant tax consequences.

“We are continuing to generate significant cash offshore and repatriating this cash would result in significant tax consequences under current U.S. tax law,” said Peter Oppenheimer, Apple chief financial officer, during an earnings call last week.

In some ways, the bond issue on Tuesday was made necessary by Apple’s tax strategies.

“They have been so successful with their tax planning that they’ve created a new problem,” said Martin A. Sullivan, chief economist at Tax Analysts, a publisher of tax information. “They’ve got so much money offshore.”

The $17 billion debt sale by Apple is the largest on record, surpassing a $16.5 billion deal from the drugmaker Roche Holding in 2009. Apple joins a parade of large companies issuing debt with astonishingly low yields. Last week, the shoe company Nike sold bonds that mature in 10 years that yielded only 2.27 percent. Last July, Bristol-Myers issued five-year debt yielding 1.06 percent. In November, Microsoft set the record for the lowest yield on a five-year bond, issuing the debt at 0.99 percent.

Despite Apple’s $145 billion cash pile, the credit-ratings agencies did not award the company their coveted triple-A rating, citing increased competition and a concern that its future product offerings could disappoint. Moody’s Investors Service gave the company its second-highest rating, AA1, as did Standard Poor’s, rating the company AA+. (The four companies awarded the highest credit ratings by both Moody’s and S.P. are Microsoft, Exxon Mobil, Johnson Johnson and Automatic Data Processing.)

“There are inherent long-run risks for any company with high exposure to shifting consumer preferences in the rapidly evolving technology and wireless communications sectors,” wrote Gerald Granovsky, a Moody’s analyst.

Apple’s less-than-perfect rating did not drive away bond investors on Tuesday. The offering generated investor demand well in excess of the $17 billion raised, according to person briefed on the deal. Goldman Sachs and Deutsche Bank led the sale of the issuance.

Desperate for returns in a yield-starved world, all types of investors — including individual, pension funds and mutual funds — are snapping up corporate debt. The demand appears to be insatiable: this year, through last Wednesday, a record $55 billion has flowed into mutual funds and exchange-traded funds that invest in corporate debt with high-quality ratings, according to the fund data provider Lipper.

The last time Apple sold debt was in 1996, when the Internet was in its infancy and sales of Apple’s niche computers were struggling. Facing an uncertain future and struggling with a weak balance sheet, Apple had a junk credit rating and was paying 6.5 percent on its debt.

Article source: http://dealbook.nytimes.com/2013/04/30/apple-raises-17-billion-in-record-debt-sale/?partner=rss&emc=rss

Time Warner Raises Dividend on Higher Earnings

The television business drove the quarter’s performance as revenue there grew 5 percent, offsetting declines elsewhere. The Warner Bros. studio business had a weaker release lineup in the most recent quarter, though it managed to report an operating profit with expense reductions. The Time Inc. magazine business, the smallest of the three, has announced layoffs to reflect reduced demand for print editions.

Time Warner said net income was $1.17 billion, or $1.21 a share, for the fourth quarter, up from $773 million, or 76 cents a share, a year earlier.

Adjusted for one-time items, earnings came to $1.17 per share. That beat the $1.10 per share that analysts surveyed by FactSet expected.

Revenue edged down to $8.16 billion from $8.19 billion a year ago. Analysts expected revenue of $8.22 billion.

Time Warner also said Wednesday that it is raising its quarterly dividend by 11 percent to 28.75 cents per share. It’s payable March 15 to shareholders of record as of Feb. 28. It also said the company’s board has authorized $4 billion in stock buybacks, which tend to increase the stock price for remaining shareholders. The new authorization replaces prior buyback plans, which resulted in $3.5 billion in buybacks from Jan. 1, 2012, to Feb. 1, 2013.

Time Warner’s stock increased $1.42, or 2.8 percent, to $51.38 in premarket trading about a quarter-hour ahead of the market opening.

Time Warner is estimating $60 million in charges this year related to an announced layoff of about 500 employees at the magazine business, or about 6 percent of the division’s global staff of 8,000. The company has been trying to cut costs to reflect decreases in revenue and the need to invest in more ways to deliver content on multiple platforms and devices.

In the fourth quarter, revenue at Time Warner’s TV business grew 5 percent to $3.7 billion.

That business has gotten stronger in recent years as U.S. cable and satellite operators have been paying more to carry channels such as TNT, TBS and CNN on their lineups. The company also had more U.S. subscribers for the HBO premium channels and saw growth internationally across the TV business, despite unfavorable currency-exchange rates. Revenue from those distributor and subscription fees rose 7 percent.

Ad revenue at the networks increased 3 percent because of better rates, more NBA games shown on Time Warner channels and increased viewership at CNN during the presidential election season. Licensing and other content revenue fell 9 percent mostly because of a shutdown of TNT operations in Turkey.

At the Warner Bros. studio business, revenue fell 4 percent to $3.7 billion, largely because of a weaker lineup. The same quarter in 2011 had revenue from the home release of the final Harry Potter movie and the video game “Batman: Arkham City.” Theatrical releases of the first “Hobbit” movie and “Argo” in most recent quarter weren’t enough to offset those declines. But operating income increased 29 percent to $552 million partly because of lower marketing and other expenses from the timing of movie releases.

The Time Inc. magazine business saw revenue fall 7 percent to $967 million as ad revenue fell and the company no longer had money from a school fundraising business sold in early 2012. Subscription revenue was flat.

The company expects 2013 adjusted earnings to be up in the low double-digit percentage, an estimate that reflects the anticipated restructuring charges at Time Inc. It was $3.28 per share in 2013, meaning the projected range is $3.61 to $3.77. Analysts had expected earnings of $3.66 per share for 2013.

Article source: http://www.nytimes.com/aponline/2013/02/06/business/ap-us-earns-time-warner.html?partner=rss&emc=rss

News Analysis: The Challenges of Taking Dell Private

Michael Dell, the chairman and chief executive of Dell.Kimihiro Hoshino/Agence France-Presse — Getty ImagesMichael Dell, the chairman and chief executive of Dell.

By exploring the possibility of going private, Dell appears to hope that it can finally fix the problems that have led to a 40 percent plunge in stock price over the last five years.

There’s one problem, however: Going private may not be all that easy — or help out the company in the end.

The effort is under way, people briefed on the matter have confirmed to DealBook, with Dell talking with private equity firms and exploring obtaining bank financing. It’s unclear how long it will take to reach a completed deal, though reports have suggested it may take nearly two months.

But a leveraged buyout of a company as big as Dell would be no small feat, and it would be dependent on overcoming hurdles specific to the private equity industry and the company itself.

As of Friday, before Bloomberg News reported the discussions with private equity, the company was valued at about $18.9 billion, based on a stock price of $10.88. Applying a 31 percent takeover premium, which was the average paid for high technology L.B.O.’s last year, according to Thomson Reuters, to that number would lead to a potential deal being valued at about $24.8 billion.

Dell

Of course, Dell’s stock has gone up higher since, reaching $12.60 by early Tuesday afternoon.

Many private equity executives, and the advisers who clamor for their business, have been longing for the return of bigger buyouts. No private equity deal has come close to the deals struck during the height of the credit boom that ended in 2007; a Dell takeover would be the biggest since the $25 billion takeover of Hilton Hotels in July of 2007.

To date, no leveraged buyout since the financial crisis of 2008 has topped the $7.2 billion that Kohlberg Kravis Roberts and others paid for the Samson Investment Company a year and a half ago. And many advisers say that it’s hard to consider completing a deal above $10 billion.

Partially, that’s a matter of logistics. Leveraged buyouts require private equity firms to put some money down, in the form of an equity check totaling on average somewhere around 30 percent of the overall deal. The rest would come from financing from bank loans and junk bonds.

And over the last five years, private equity shops have been loath to partner together on “club deals.” Investors in these firms have complained that the practice essentially multiplies their exposure to a particular transaction. And L.B.O. firms aren’t fond of them because they essentially erase distinctions from competitors, potentially making it harder to persuade investors to give them money for new funds.

A company of Dell’s size would almost surely need more than one investor, because private equity firms are limited in the amount of equity that they can put into any single transaction.

And then there is the matter of debt financing. A Dell transaction is likely to require at least $16 billion from bank loans and junk-bond sales, a seemingly daunting amount.

That said, some deal makers think the money is there for the taking, pointing to the hunger of investors for debt that yields even a few percentage points more than Treasury bonds. The co-head of JPMorgan Chase‘s global debt capital markets, Jim Casey, told CNBC in October that his firm could raise $15 billion to $25 billion in noninvestment-grade debt for a single transaction.

Then there’s the matter of Dell itself. Helping would-be buyers is the fact that the company’s founder, Michael S. Dell, controls a nearly 16 percent stake. That’s represents at least $3 billion worth of stock that he could contribute to a deal.

And the company also had about $11.3 billion in cash and short-term investments on its balance sheet as of Nov. 2. That’s a big pile of money that could go toward paying off any debt taken on in an L.B.O.

But in its most recent annual report, Dell said that only about 10 percent to 20 percent of its cash pile was held in the United States, meaning the company would take a potentially big tax hit if it were to bring that money back onshore. Because of that, analysts at Goldman Sachs estimated in December that the return on an L.B.O. could be as low as 8 percent. Avoiding the tax man could bolster that return to 31 percent.

(That may less of a problem, according to the investor Wilbur L. Ross, who told CNBC on Tuesday that the company could sell eurodollar bonds, which may avoid incurring a steep tax charge.)

Dell also had almost $5 billion in long-term debt as of Nov. 2. That means the newly private company would be highly indebted, though analysts at the ISI Group and Mizuho point out that the company has respectable cash flow, generating about $3.7 billion in cash from operations during that time.

The bigger question for the company is whether going private would solve any of the issues it has faced for years. Its traditional business of making and selling personal computers has become less and less profitable, and Dell has already been trying to move into the more lucrative and stable market of providing hardware and software services for corporations. That’s not something that requires Dell to be private, however.

And there’s also the question of whether a newly private Dell, forced to spend much of its revenue on paying down its debt, would have money to invest in its business or pay for new acquisitions. (Last year alone, the company struck 10 deals, including the $2.4 billion purchase of Quest Software.)

Mr. Ross said on CNBC that he believed the chances of a deal coming together were about 50-50. But there’s still a lot of work and finagling that needs to be done to get to that point.

Ben Protess contributed reporting.

 

Article source: http://dealbook.nytimes.com/2013/01/15/the-challenges-of-taking-dell-private/?partner=rss&emc=rss

Media Decoder Blog: Disney Unexpectedly Reveals Movie Write-Down and Sluggish Ad Revenue

Jay Rasulo, Disney's chief financial officer, in a 2005 photo.Michael Tweed/Reuters Jay Rasulo, Disney’s chief financial officer, in a 2005 photo.

James A. Rasulo, Disney’s chief financial officer, unexpectedly revealed two important tidbits at a gathering of Wall Street analysts on Thursday: The company will take a $50 million write-down at its movie studio, and summer advertising revenue at ABC was softer than expected.

Mr. Rasulo’s remarks, which came at a conference organized by Bank of America Merrill Lynch, prompted some brief volatility in the entertainment conglomerate’s stock price. By midday, however, Disney shares were trading at $52.35, up about 1.2 percent, on par with the broader market.

Mr. Rasulo did not specify what will prompt the movie write-down, saying only, “After looking at it, we’ve decided we don’t want to continue with it.” Studio insiders said the loss pertains to one project — an untitled stop-motion animation film from Henry Selick, best known recently for directing “Coraline.”

About 150 people had been working on the movie. Pulling the plug marks one of the first major decisions of Alan F. Horn, who took over as Disney’s movie chairman at the beginning of the summer.

Mr. Rasulo also discussed weakness at ABC, which is entering a crucial fall period with the opportunity to take advantage of weakness at Fox and ongoing problems at NBC. “We did not see the kind of rebound after the Olympics that we thought we would see,” Mr. Rasulo said. “We did not have great ratings over the summer.” He added that expectations for the fall remain robust, however.

Additionally, Mr. Rasulo addressed concerns by some analysts about Disney’s reduced stock buyback in its fiscal third quarter. Disney bought back $373 million of its stock in that period, down from a pace of about $800 million in prior quarters and $1.4 billion in its year-ago third quarter.

“We still believe that we’re very much in line with what I have been talking about for a long time in terms of how we invest our cash, what we do with our capital,” Mr. Rasulo said. “My expectation is that by the end of the fourth quarter, which is a week and a half from now, that we will have repurchased three billion dollars of stock in fiscal 2012.”

Article source: http://mediadecoder.blogs.nytimes.com/2012/09/13/disney-unexpectedly-reveals-movie-write-down-and-sluggish-ad-revenue/?partner=rss&emc=rss

DealBook: Coty Files to Go Public

Jennifer Lopez, with Bernd Beetz, chief of Coty, has promoted the beauty products maker for the past 10 years.Christopher Polk/Getty Images for CotyJennifer Lopez, with Bernd Beetz, chief of Coty, has promoted the beauty products maker for the past 10 years.

Coty filed to go public on Friday, revisiting a strategic plan it had formed before trying to buy Avon Products for $10.7 billion this year.

The beauty products maker hired Bank of America Merrill Lynch, JPMorgan Chase and Morgan Stanley to lead its initial offering. While the company listed a $700 million fund-raising target to determine listing fees, people briefed on the matter had previously said that it might seek to raise up to $1 billion.

By going public, Coty would give its parent, the German conglomerate Joh. A. Becker, a chance to cash out on its investment. Founded in 1904 as a perfume company, it has grown into a global seller of fragrances and high-end nail polishes, with brands promoted by the likes of Beyoncé and Jennifer Lopez.

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The company said that it earned $61.7 million in net income last year, atop $4.1 billion in revenue.

Known as a serial deal maker, Coty tried its biggest-ever transaction when it sought to buy Avon, after months of unsuccessful merger talks. Coty offered $24.75 a share, a premium to its target’s stock price.

But Avon repeatedly rebuffed the proposal, insisting on managing a turnaround on its own and hiring a veteran Johnson Johnson executive as its chief executive. Coty walked away in late May.

Article source: http://dealbook.nytimes.com/2012/06/29/coty-files-to-go-public/?partner=rss&emc=rss

DealBook: Martin Marietta Materials Unveils $4.6 Billion Hostile Bid for Vulcan

Martin Marietta Materials on Monday began a hostile bid for Vulcan Materials, beginning an exchange offer worth more than $4.6 billion for its rival in an effort to combine the two biggest producers of crushed stone and gravel in the United States.

Under the terms of its bid, Martin Marietta is offering half a share of its own stock for each Vulcan share. As of Friday’s closing price, that bid was worth $36.69 a share, 9 percent above Vulcan’s stock price that day.

Martin Marietta also intends to name five nominees to Vulcan’s board and has begun a lawsuit in Delaware’s Court of Chancery to increase the pressure on Vulcan.

The hostile move came after more than a year and a half of fruitless private discussions between the two companies, Martin Marietta said.

“Martin Marietta’s board of directors is, and I personally am, disappointed that despite these substantial benefits, Vulcan has been unwilling to move ahead towards a definitive agreement,” Ward Nye, Martin Marietta’s chief executive, wrote in a public letter to Vulcan’s chairman and chief executive, Donald M. James.

Underpinning the company’s interest in Vulcan, according to Mr. Nye’s letter, are the uncertain prospects for economic recovery and for government spending on infrastructure. Combining the two would allow for at least $200 million in annual cost savings and shore up Vulcan’s financial health with a stronger balance sheet and greater scale.

Vulcan said in a statement that it would review the offer and make a recommendation to its shareholders in 10 business days.

Both companies have been under pressure in recent years, harmed by lower construction spending. But Vulcan has been hurt more, in part because of an aggressive expansion strategy that included taking on $3.1 billion in debt to buy Florida Rock in 2007.

Martin Marietta Materials, by contrast, has taken on less debt and remained focused on the Northeast and Mid-Atlantic, according to an October research note by Moody’s Investors Service.

A deal for Vulcan would be the biggest for the company since it was spun off from Martin Marietta in 1994.

Martin Marietta Materials is being advised by Deutsche Bank, JPMorgan Chase and the law firm Skadden, Arps, Slate, Meagher Flom.

Vulcan is being advised by Goldman Sachs and the law firm of Wachtell, Lipton, Rosen Katz.

Article source: http://feeds.nytimes.com/click.phdo?i=e244a5cf2813b778c9ac9ae1386686e4

DealBook: Eastman Kodak Mulls Bankruptcy

The Kodak film factory in Rochester, New York. Kodak is trying to move away from film and into digital businesses like inkjet printers.David Duprey/Associated PressThe Kodak film factory in Rochester, New York.

9:12 p.m. | Updated

Eastman Kodak is considering filing for bankruptcy as it explores ways to lift its sagging fortunes, according to a person briefed on the matter.

Kodak said on Friday that no bankruptcy filing was imminent, but it did say that it had hired the law firm Jones Day, which has a prominent restructuring practice, to provide advice.

The news of the hiring, just a week after Kodak unexpectedly tapped its credit line, heightened worries about the viability of the company’s turnaround plan. With investors again rattled, Kodak’s stock price plunged 54 percent on Friday.

“It’s one of those cascading effects,” said Chris Whitmore, an analyst with Deutsche Bank Securities. “They are kind of cascading over the waterfall.”

The chief hope for Kodak, which has reported only one full year of profit since 2004, has been its planned sale of 1,100 digital imaging patents, which the company said accounted for about 10 percent of its total patent portfolio.

While the sale of patents was announced in July, the process is taking longer than expected, a person close to the sales process said, despite a burgeoning market for intellectual property. The phone maker Motorola Mobility, for example, was able to get a $12.5 billion takeover deal from Google in large part because of its expansive patent collection. Kodak has said that it has no timeline on the patents sale.

Kodak responded to the talk about bankruptcy on Friday afternoon after first The Wall Street Journal reported the hiring of Jones Day and then Bloomberg News said that a bankruptcy filing was among the options being considered.

“As we sit here today, Kodak has no intention of filing for bankruptcy,” Gerard K. Meuchner, a Kodak spokesman, said in a statement. “There has been no change in our strategy to monetize our intellectual property.”

The company added: “It is not unusual for a company in transformation to explore all options and to engage a variety of outside advisers, including financial and legal advisers.”

Founded 131 years ago by George Eastman and based in Rochester, Kodak became famous for its yellow packages, and its film at one time dominated the market. But the company has struggled to reinvent itself for decades, as digital technology has replaced film.

The current chief executive, Antonio M. Perez, has tried to reinvigorate Kodak by focusing on inkjet printers, commercial printing and the firm’s vast portfolio of patents, which the company has licensed and is trying to sell.

Mr. Perez’s strategy has caused the company to burn through cash, and Shannon Cross, an analyst with Cross Research, said it was only a matter of time before the cash ran out.

“I’ve had a sell on the stock for almost 10 years figuring this day would come if they weren’t able to make significant changes in their cash burn,” she said in an interview on Friday. “We took the price target down to a dollar. We were anticipating that the equity was virtually worthless.”

The company had $957 million in cash and short-term investments as of June 30, and says it has enough liquidity to meet its obligations for now. The spokesman said Kodak intended to pay a $14 million debt coupon payment due on Saturday.

As recently as July, Mr. Perez predicted that Kodak would be a profitable and sustainable digital company by 2012. But the surprise announcement last week that Kodak had tapped its credit line for $160 million shook investor confidence in Mr. Perez’s turnaround effort.

On Tuesday, Moody’s lowered Kodak’s ratings even further into junk status, saying the downgrade “reflects the company’s weak financial performance and the challenges Kodak faces in achieving sustained profitability and positive cash flow over the intermediate term.”

Moody’s said the $160 million withdrawal was especially troubling since it occurred right before the fourth quarter, typically a strong period for Kodak’s cash flow.

Analysts have questioned whether potential bidders are hesitating to participate in the patent portfolio auction because of concerns that a sale would be deemed fraudulent if Kodak were to later file for bankruptcy. (Creditors would be entitled to sue the buyer for what is known as “fraudulent conveyance.”)

Mr. Meuchner, the Kodak spokesman, said, “We’re not concerned about fraudulent conveyance in regards to the sale of our I.P. portfolio.”

The investment firm Lazard, which is advising Kodak on its patent sale, declined to comment, as did James L. Wamsley III, a lawyer at Jones Day.

Evelyn M. Rusli contributed reporting.

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DealBook: Goldman’s Shares Tumble as Firm Hires Top Lawyer

Goldman Sachs hired Reid Weingarten, a prominent criminal defense lawyer, as it expects its executives, including Lloyd C. Blankfein, below, the firm's chief, to be interviewed by the Justice Department.Michael Stravato for The New York TimesGoldman Sachs hired Reid Weingarten, a prominent criminal defense lawyer, as it expects its executives, including Lloyd C. Blankfein, below, to be interviewed by the Justice Department.Andrew Harrer/Bloomberg News

8:57 p.m. | Updated

Goldman Sachs’s actions during the financial crisis returned to haunt it with a fury on Monday afternoon.

In late trading, shares of Goldman tumbled nearly 5 percent, knocking $2.7 billion off the firm’s market value, after a report that the firm’s chief executive, Lloyd C. Blankfein, had hired a prominent criminal defense lawyer, Reid H. Weingarten.

Goldman, when confirming the hiring, portrayed it as routine, given the several government investigations faced by the firm. But the sharp reaction in the stock price showed the fragile nerves of investors, who are worried that potential legal liability could damage the firm and its earnings power.

A spokesman for Goldman said executives at the firm were expected to be interviewed by the Justice Department. The agency is conducting an inquiry that stems from a 650-page report produced earlier this year by the Senate Permanent Subcommittee on Investigations. That report said that Goldman had misled clients about its practices related to mortgage-linked securities.

“As is common in such situations, Mr. Blankfein and other individuals who were expected to be interviewed in connection with the Justice Department’s inquiry into certain matters raised in the P.S.I. report hired counsel at the outset,” Goldman Sachs said in a statement.

While investors apparently feared the worst on Monday, a person close to the matter said that Mr. Blankfein had not been subpoenaed and that no Goldman executive had received an individual subpoena. Goldman is cooperating with the Justice Department investigation.

Still, Monday’s stock fall underscored just how vulnerable Goldman’s stock would continue to be until the Justice Department and other authorities finished their investigations.

“Until Goldman resolves its legal issues, the company and the stock are vulnerable to all sorts of perceptions, real or perceived,” said Michael Mayo, an analyst with Crédit Agricole Securities.

With about 20 minutes left in the trading day, Reuters, citing an unidentified government source, reported that Mr. Blankfein had hired Mr. Weingarten. Mr. Weingarten has defended Bernard J. Ebbers, the former chief executive of WorldCom, and Mike Espy, a former agriculture secretary. Goldman’s stock price quickly tumbled, falling to its lowest level since March 2009. Its shares closed at $106.51.

The stock move also reflected the support Goldman shareholders had for Mr. Blankfein despite the problems the firm’s problems under his stewardship. At Goldman’s stakeholder meeting in May, shareholders voted 97 percent in favor of his leadership. Any suggestion that Mr. Blankfein’s legal woes were mounting, or that he might leave the firm, would be seen as a negative for the stock.

Goldman investors have been on a roller-coaster ride since April 2010, when the Securities and Exchange Commission accused Goldman of duping clients by selling mortgage securities that were secretly created by a hedge fund firm to cash in on the housing market’s collapse.

Since then, it has been dogged by investigations and speculation about investigations, all of which have taken its toll on stock. Goldman shares were trading near $180 a share before the S.E.C. filed its lawsuit. Goldman settled that suit a few months later, but its troubles were far from over.

This year came the Senate report, which led to a Justice Department inquiry. And in June, Goldman received a subpoena from the office of the Manhattan district attorney, which is also investigating Goldman’s role in the financial crisis.

Mr. Blankfein’s decision to hire his own lawyer is not unusual. Legal experts say that it is now common for a company’s chief executive to retain separate counsel from the corporation. It has become rare for a lawyer or law firm to represent both a company and its executives in a government investigation.

Mr. Weingarten, 61, is considered a skilled trial lawyer, having won acquittals for Mr. Espy, the former agriculture secretary, and Mark A. Belnick, the former general counsel at Tyco. He has also suffered his share of courtroom defeats. Mr. Ebbers, the head of WorldCom, was found guilty and was sentenced to 25 years in prison.

On Monday, Mr. Weingarten was in the Federal District Court in Manhattan with his client Anthony Cuti, the former chief executive of Duane Reade, the drugstore chain. A judge sentenced Mr. Cuti to three years in prison for a scheme to falsely inflate the income and reduce the expense that the company reported. A jury convicted Mr. Cuti in June 2010.

Mr. Weingarten did not respond to request for comment on Monday. A spokeswoman for his law firm, Steptoe Johnson, declined to comment.

Steptoe is not the firm most closely associated with Goldman. The bank’s primary outside law firm is Sullivan Cromwell, a prominent and old-line New York law firm. Sullivan represented the firm in its $550 million settlement with the S.E.C. Also, when Mr. Blankfein testified as a witness earlier this year in the insider trading trial of Raj Rajaratnam, the former hedge fund manager, lawyers from Sullivan coached him on his testimony and accompanied him to court.

A native of Newark, Mr. Weingarten is a graduate of Cornell and the Dickinson School of Law at Penn State. Before becoming a criminal defense lawyer, he spent several years as a deputy district attorney in Pennsylvania and then joined the Justice Department’s Public Integrity Section.

While at the Justice Department, he spent years bringing cases against corrupt politicians and worked with another young prosecutor, Eric H. Holder. Mr. Holder, now the attorney general of the United States, remains one of Mr. Weingarten’s closest friends.

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