This Bear Won't Come Quite So Cheap
Jamie Dimon chipped in more dimes on Mar. 24 as his firm, JPMorgan Chase (JPM), upped its offer for crippled rival Bear Stearns (BSC) to $10 a share in stock from the original $2. Dimon had to act fast because Bear was hemorrhaging both talent and customers as shareholders resisted the deal at its original fire-sale price, set on Mar. 16. At the same time, Bear agreed to sell JPMorgan new shares accounting for just under 40% of the firm's value—probably ensuring that a majority of the outstanding shares will vote yes on the deal despite grumbling from those who bought in nearer Bear's early 2007 peak of $171. In a neat trick, Bear got the New York Stock Exchange (NYX) to let it issue the new shares without shareholder approval. The Federal Reserve is hip-deep in the deal, too, lending $29 billion secured by assets of questionable value.
Consumers in a Funk
How depressed are Americans about the economic outlook? The most since 1973, the days of Watergate and the first Arab oil embargo. That's according to the expectations component of the Conference Board's Consumer Confidence Index for February. Housing, of course, is part of the problem: The National Association of Realtors said on Mar. 24 that the national median price for existing homes sold in February was down 8.2% from a year earlier, though the number of sales actually rose a bit from January. And orders for durable goods fell a seasonally adjusted 1.7% in February from the month before.
Scraping to pay the bills: Such is the state of fiscal affairs at jumbo lender Thornburg Mortgage (TMA) and mortgage insurer MGIC Investment. (MTG) Both beleaguered firms announced on Mar. 25 that they will try to raise badly needed sacks of cash through a combination of debt, shares, and options. Investors applauded the Thornburg method, sending its stock 20% higher over the next two days. They saw the MGIC route as more costly to the firm and sent its shares down 15%.
From Countrywide to
Stanford Kurland, former president of troubled mortgage lender Countrywide Financial (CFC), on Mar. 24 launched a new company, Private National Mortgage Acceptance, or PennyMac, to buy distressed home loans from banks. With backing from money-management outfits BlackRock (BLK) and Highfields Capital, Kurland says he'll be able to restructure loans so borrowers can stay in their homes.
See "They Can Go Home Again"
A Radio Deal Sputters
This time it's the banks, not the buyers, who seem to be getting cold feet. Sixteen months after radio giant Clear Channel (CCU) announced plans to go private for $19.4 billion, banks that agreed to finance the debt may be balking. At press time it was unclear whether the banks, led by Citigroup (C), were simply looking to win better terms or back out. Clear Channel and its partners in the deal, private equity outfits Thomas H. Lee Partners and Bain Capital Partners, filed suit on Mar. 26.
A Mining Merger Flops
This is the way the big deal ends—not with a bang but a whimper. Brazilian mining giant Vale (RIO) on Mar. 26 said it had stopped takeover talks with Anglo-Swiss rival Xstrata after the two couldn't come to terms. The cash-and-stock deal was expected to come in as high as $90 billion. Vale—formerly Companhia Vale do Rio Doce—said it might make another pass.
Happy, Mr. Icahn?
Under fierce pressure for months from Carl Icahn and other ticked-off shareholders, Motorola (MOT) said on Mar. 26 it will split into two publicly traded companies, spinning out its mobile-phone business from the rest of its operations sometime in 2009. The move comes two months after Motorola started a strategic review. Icahn wants four seats on the board and on Mar. 24 filed a lawsuit demanding access to internal documents pertaining to the management of the phone unit.
Office Funny Business
A virtual office is a creative way for a small business to appear much bigger than it really is. For as little as $100 a month, a business can give the appearance of having a spacious suite in a gleaming office tower in Manhattan, London, or Los Angeles. But there's a dark side to virtual offices. Securities regulators and prosecutors say the spaces sometimes provide cover to scam artists, and nowhere more than on Wall Street.
As emerging markets around the world have opened their doors to multinationals, virtually everyone assumed that the big global outfits would obliterate their local competitors. But in many countries, local enterprises have been more than holding their own. Among the secrets of their success: deep knowledge of domestic customers, using the latest technologies, and using low-cost labor instead of automation. (Harvard Business Review)
Are you ready for 4G? Cable giants Comcast (CMCSA) and Time Warner (TWX) are "about 90% done" on an agreement with SprintNextel (S) and Clearwire (CLWR) to form the nation's first WiMAX network to offer next-generation wireless broadband, or 4G, to mobile devices. Although the deal could still fall through before a self-imposed Apr. 1 deadline, Comcast will provide $1 billion, with Time Warner and Google (GOOG) likely to chip in for what would be a $2.5 billion rollout by 2010.
Ford Makes a Sale
Detroit's No. 2 has to be breathing a sigh of relief. After losing billions on Jaguar and Land Rover since acquiring them in 1989 and 2000, respectively, the company said on Mar. 26 that it finally has a deal to sell them to Indian automaker Tata (TTM) for $2.3 billion. BusinessWeek broke the news last fall that Tata was the leading bidder. Ford (F) is trying to bolster cash reserves and refocus its worldwide business on the Ford brand.
See "Jaguar: Finally Ready to Roar?"
Sirius and XM Get a Nod
Howard Stern, shake hands with Bob Dylan. On Mar. 24 the Justice Dept. blessed a merger between Sirius (SIRI) and XM (XMSR) that would put the two star satellite radio performers under one dish. Rather than consider satellite a sector unto itself, antitrust officials said the "relevant market" was the audio entertainment industry, which includes terrestrial and online music stations, streaming music Web sites, and download services such as Apple's (AAPL) iTunes. The deal faces one more regulatory hurdle: the FCC, which should make its call this spring.
See "Sirius and XM Get the Justice Go-Ahead"
A Blog Goes Awry
An anonymously authored blog called Patent Troll Tracker captivated lawyers, even as it generated controversy. When its creator was finally outed in late February, the world learned that he works for a tech industry giant whose interests his blog advanced. Corporations of all stripes are rushing to embrace the blogosphere, but the experience of Troll Tracker, replete with death threats, offers a cautionary tale.
Weiss Will Plead
Presumably few tears were shed in boardrooms as Melvyn Weiss, grey eminence of the shareholder trial bar, agreed to plead guilty to participating in a scheme to pay kickbacks to clients of his firm. For decades the firm pummeled corporations with suits alleging securities fraud, winning hundreds of millions in settlements. The Mar. 20 plea agreement, in federal court in Los Angeles, calls for a sentence of 18 to 33 months and requires Weiss, 72, to pay $10 million. Weiss is the fourth member of the firm, now known as Milberg, to admit criminal conduct.
Squabble in Vegas
It's still under construction, but the Cosmopolitan Resort Casino has a pack of leading hotel companies in a catfight. The $3.9 billion project by New York developer Bruce Eichner has defaulted on loans amid rising costs and a glut of condos in Las Vegas. Global Hyatt loaned money to the project and wants control. According to The Wall Street Journal on Mar. 22, so do Starwood Hotels (HOT) and developer Related Cos., now negotiating with lender Deutsche Bank (DB), which recently started foreclosure proceedings. Said Eichner in a statement: "We remain optimistic there will be a successful resolution."
China: Fading Magic?
The nation's role as preeminent exporter to the world is under threat as never before. A labor law that took effect on Jan. 1 is raising costs for manufacturers of everything from electronics and toys to shoes, clothes, and furniture. Spiking commodity and energy prices, plus Beijing's cancellation of preferential policies for exporters, are all adding to the pain. Mix in the rise of the Chinese currency, and thousands of companies, many of them run by Hong Kong and Taiwanese entrepreneurs, are teetering towards bankruptcy. Others are decamping for locales such as Vietnam. This signals huge changes for the Pearl River Delta region of South China's Guangdong province, long a stronghold for China's export-led economy.
Fox Won't Pay Up
So much fuss over a little skin. And no one loves to rattle the system like News Corp. (NWS) CEO Rupert Murdoch, who is once more stiffing the FCC on its efforts to police what it sees as indecency on TV. Murdoch's Fox Broadcasting refused to pay a $91,000 fine to the FCC, which found offensive scenes in a 2004 episode of Fox's Married in America that showed digitally blocked out views of whip-cream-covered strippers. Fox, which asked the FCC to reconsider, has a case before the Supreme Court involving fines it incurred in 2002 and 2003 for not blocking the use of four-letter words on a pair of awards shows.
Troubles at the aSun-Times
Since its start 60 years ago, the Chicago Sun-Times has made its name from investigative reporting and straight-talking columnists. Now the feisty tabloid might not make it through another year. The money-losing Sun-Times is being hurt by forces crumpling papers across the U.S. But if it dies, the main culprits will be press baron Conrad Black and his sidekick, David Radler, both serving prison sentences for looting the media company while in charge.