Bloomberg ? this is "taking stock" for monday, july 29, 2013. i'm pimm fox.
This hour, we will focus on emerging.
Not just the business world but art, music, and technology.
We examine each sector and what it says for overall mergers and acquisitions.
And the race to produce a social media hit, a gaming executive tells us why designing your own concert will become the next farmville.
Music meets art, the tribute to punk.
The dow jones industrial average losing 36 points, the s&p 500 closing at 1685. the nasdaq fell 14. let's take a look at the u.s. bond market.
3.67% for the long bond.
Let's go right to olivia.
We sought another chapter in the fight for adults.
The founder telling bloomberg news that his current bid is the best and final offer.
They say that the board must go, he scheduled a shareholder vote is for this friday.
Reporting earnings after the close of trading, backing second quarter profit and raised the earnings forecast for the year.
Shares are rising after hours right now.
Heading to vegas, caesars said their outlook narrowed amid increased competition.
The largest owner reported a net loss of $212 million.
Mergers and acquisitions, the acronym of the day.
A d.o. with a market value of $35 billion.
The partner and chairman of the practice helped advise on this deal and i want to bring in the chief executive, an extensive quiet roster.
Good to have you with us.
Talk about this combination.
Is this a world in which digital advertising is pulling this deal together?
Or is it really that they are saving themselves because they realize their margins are getting crushed and they don't have a bigger advantage when it comes to digital advertising business?
That is definitely a large part of it.
They can't collect the fees from the past, so they're looking at consolidation.
What is interesting is that we will see further consolidation.
The answer is not getting better for these guys, it is becoming smarter with a big data and more analytical.
It is going to help them become competitive with the likes of google and other players.
This deal will create the biggest ad agency in the world, knocking them off of this perch.
We are shaping the players and we could see more deals out of this.
We do have a piece of sound from the interview earlier today.
This is what he had to say.
The dog draper creative guys are not going away.
They are important part of the portfolio companies we have.
Google sometimes is competitive with us, sometimes not competitive with us.
We want to make certain we can give our people the tools so that the dawn draper of the future knows who to write a spot for.
They seem very happy on camera.
He started on may, and more recent the publicist.
You were working on this kind of d.o.. what is the rationale?
Is it a scale?
We have saved money and we are fighting a digital battle?
It is efficiency and resources.
That is a margin impact, had revenue opportunity with the rest of it.
If i get too big, the little guys will be eating my lunch, that is not how it works.
The airline industry, you have all these other people that serve different markets.
Having there is room for all sorts of possibilities here.
Does that mean the little guy is dead?
Of course not.
I understood that you had to take one home the other day.
There is room for everybody, but there is synergy and a merger.
It might have something to do with round rock, texas.
How do you think this is really good for their clients?
Does this make sense?
I think it is not some much the mergers save the company money, but it is what they spend the money on.
What will they invest in?
I think that corporations are getting a lot of efficiencies reaching the consumer.
They have much more efficient ways to reach the consumer.
If the big agencies can marry john draper with great efficiency to deliver that message to the consumer, is a big win.
I think it is what they must do.
This is challenged.
Will they have a higher different types of people living in these big pieces of hardware?
I don't think they will have to store the data there, but i think it will have to hire a lot of different types of people that really understand big data, technology, and officially deliver the idea so that the brand gets a great value.
Is this a mile-marker that you look at in the future and say, we saw these combinations of technology companies, which saw the emergence of social media.
This is now a battle and unless the advertising companies have a relationship and get bigger and more powerful, they will get out run by the smaller digital competitors.
These are great companies in the first place that have been going digital for quite some time.
This enables them to do it better.
It doesn't mean the little guys are irrelevant, it just means this is a better way to do it.
It is not like madmen on tv, it is about technology and all of those things.
It is not about good bourbon?
It probably has some relevance but it is about bringing relevance together.
It is the product of a merger itself.
The independent agencies, this is the natural progression of things.
Will you see combinations?
There are sometimes reactions, it might not be equal reactions to things, but today was a pretty average year, a blowout day.
More stories that i can keep track of.
There is a lot going on.
What were the other two?
The optical space.
It was a huge day.
Does this mean anything?
We have been saying that mergers and acquisitions ought to be hotter, but the reality is thinking that interest rates are going up.
Buyers have been pretty disciplined on price, that is what is holding up a lot of the deal activity, the fear of overpaying.
Especially since the fed has said they will taper.
All markets are driven by a combination of everybody's perception of everything.
It is not animal instincts, but a positive.
If you look at sales over $1 billion, the premium of the number of deals that have got at a premium above 50%, a small handful of deals as opposed to last year but had 17 deals that went for a premium of over 50%. there is a lot of the buyer discipline out there.
They want to keep the deals and line.
The dow bumped up 16,000, as well.
I want to thank our deals reporter and driver media chief executive.
We will focus on retail.
It is the oldest corporation in north america.
One of the most prestigious luxury retailers.
? ? consolidation in the retail industry today.
Morgan taylor announcing it will buy saks for about $2.4 billion in cash.
With the details of the deal, we have julie hyman, and bob from jones day, they have advised on many deals globally this year.
Also find out what this means for the retail industry and the chief adviser of driscoll advisers.
Tell us about the details of this $2.4 billion deal.
The oldest north american commercial corporation?
Started as a traitor for for in 1670 and involved in to our retail corp., the largest in canada.
It is not well known except through the iconic canadian brand.
People refer to it as the day in canada.
You have 320 stores total, talking about a division between department stores, held at stores, and home stores.
What it gives is a portfolio of different levels with saks on top then hudson's bay and lorden taylor.
You see them lagging some of their competitors.
And higher sales per square foot.
They have been struggling to some extent because the of an opening a lot of stores.
They have had to cut back on that and shot some of the underperforming stores.
It is under those conditions that sells itself.
You have not said anything about the shoe departments.
8500 square feet and it has its own zip code.
Mary, what do you think about this deal?
Why would the folks sell?
Because they got a sale price.
They have done a lot over the last few years to try -- a recently enacted a $100 million deal.
For the customer shopping across the multiple platform on line, it is four times as great as someone who is just shopping in the store.
They have been investing more heavily in the online and on the channel strategy.
What about the merchandising?
Are they good merchants?
They are, the recently said that story over $75,000 -- jewelry over $75,000 is not selling.
Hard to believe with the stock market up 18% this year.
Will we see this idea of on the channel retailer n.y. -- omni- channel retail?
This back office functionality.
I think it is going to be all of the above and that is what this seems to indicate.
You have to be nimble and all of those places.
This is particularly true in retail and you have to get more efficient.
The margin has to be protected and you want more revenue lines.
You have to push for efficiency as part of the story.
What about the actual bricks and mortar buildings?
That must be valuable, the property.
The property is valuable and there is talk on a conference call that they could potentially look at optimizing a structure.
Hudson bay owns a lot of real estate as well.
In the whole omni-channel thrust, stores confirm to d.c.'s. direct chanel?
That is what the whole effort is about.
They are using the store's most efficiently.
Learning a lot about omni -channel, thanks.
Two companies join forces and a reorganization.
What it means, next on "taking stock." ? ? i have explored advertising and retail, let's take a look at health care.
It for more than $9 billion, fizor says it will split up the internal business.
I will bring in olivia sterns, covers the section for bloomberg news.
Let's start with the deal having to do with pharmaceuticals based in ireland.
Several big companies have been in hot pursuit and the basic reason is the tax benefits.
The tax rate in ireland is 12.5%. michigan is paying the corporate tax rate of 35 present time.
The merger could bring potential savings of $150 million in total.
Is this a done deal?
Is there a chance someone will come in and make a bid?
Irish companies are very interesting.
It was on the table for a little while.
Ultimately, it won't materialize and other people have questioned this d.o.. -- this deal.
Think they were down about 6% or 7%. they paid about $12.50 in cash and stocks.
Also in the news of the d.o. of having to do with another high one.
They are living -- and putting down the groundwork for pfizer.
The ceo says that is his intention.
They sold off the nutrition business to nastily and spun off animal health.
Now today they are going to buy the major company, brand-name drug units and a generic unit.
The question is if they will take the ultimate step.
A branded a drug company and cash generating generics.
Thank you both for joining us.
Helped pull when it comes to the health industry, experts in health care and pharmaceuticals.
It is time for on the markets.
The s&p 500 losing six.
Closing at 1685. the dow jones industrial average lower by 36. the nasdaq down 14 points.
Accused of u.s. regulators of manipulating the power market.
? this is "taking stock." i am pimm fox.
For the headlines, let's go to mark crumpton.
Said chairman ben bernanke will be required to testify in a lawsuit brought by hank greenberg.
The case involves the u.s. government's 2008 bailout of aig.
Hank greenberg calls it the seizure of property that violated shareholder rights.
Pending sales of deviously home -- owned homes -- previously owned homes fell .4% and the shift signals rising mortgage rate might be restraining the housing market the one economist from louise says it is a bump in the road.
The securities and exchange committee has rested its case against former goldman sachs trader from restore.
-- fabrice tourre.
Closing arguments are scheduled to begin tomorrow.
Tonight, we look at the crackdown on wall street.
I will be joined by william: -- cohan.
Hope to see you then.
Thank you read amazon.com is going on a hiring spree.
A plan to add more than 5000 full-time jobs to their warehouse operations ahead of a president obama visit to an amazon warehouse in tennessee.
That will take place tomorrow.
For more on the growing workforce, we bring in "bloomberg west" editor at large cory johnson who recently visited a fulfillment center.
Talk about this new addition to the human resource department of amazon.com.
This has been fueled by wall street because the company is not enormously profitable.
They have sold a lot of stock in raise money in that fashion, but the build on for amazon, you can see it in all sorts of aspects of their business that the headcount is one of them.
The headcount is one of them.
Add to that the web services businesses, and you have a company that is well over 15 years old but is in a major expansion.
A company with 88,400 employees at the end of last year is a nearly 60% increase from the previous year.
The company is growing by leaps and bounds.
How does this reflect any change in amazon's actual business?
They are pushing for it to expand the distribution business.
When they have decided to embrace local and state sales taxes it changed strategy of having distribution at the film and centers being -- fulfillment centers being closer to consumers.
They are getting closer to major cities as opposed to major distribution hubs and the result is a lot more building and more hiring, and allow more spending.
The capital expenditures for this company are enormous and growing at an incredible pace.
They have spent more in the first six months of this year in capital expenditures than they did in all of two years ago.
The growth in expenditures is so big, but that is also on the cash flow statement.
When those bleed into the income statement overtime, the operating margins of the business are falling.
It is barely profitable because of all the spending and all of the hiring.
The president will speak at this amazon warehouse tomorrow in tennessee.
Do we know if these are union workers or if they get full benefits like health care and what kind of pay they actually get?
Asked i would doubt they are union workers -- i would doubt they are annual -- union workers.
It is important to note they do a lot of seasonal hiring.
The fourth quarter is huge for any retailer, amazon especially.
Temporary hiring happens at these places all over the world, and again, they are opening these fulfillment centers all over the world, not just in the u.s., which is where the biggest expansion is public.
Thank you, cory johnson.
A reminder to catch "bloomberg west" on bloomberg television coming up at 6:00 p.m. and 11:00 p.m.. bmw wants a part of the electric car market, so should tesla be worried.
We stacked the new bmw i3 against the tesla model s. ? ? we have been comparing the new bmw i3 against the tesla model s and we are joined by the law -- villa marks of bloomberg news.
You have the pleasure of being able to compare them.
One of the key things is range.
How far can i go with the electric car -- will i run out of electricity, and bmw does not have a big range.
It is about 100 miles, which is about one.
Of the range of the tesla model s, which is a big concern.
Where is the market for the bmw i -- i3 if it will only have a range of 100 miles question mark it is the -- miles?
It is designed for people that do not need to drive a lot but they like the brand.
The environment is also a factor when it comes to the actual body of the bmw i3. some of the doors are actually made from plant-based materials?
They redesign the car from scratch.
It is not an existing model.
They decided to build it from the ground up, and one of the most important things for that is keeping it light weight because the batteries will only go so far.
The battery is about 450 pounds.
To make that valuable, they have to make sure that the other components are like weight and that includes the hemp fiber and the carbon fiber underneath the frame.
It is supposed to be 20% lighter than a steel or aluminum version.
We have seen that in the airlines.
Like the boeing 787 dreamliner.
They want to get more bang for their buck.
$45,000 for a fully equipped bmw i3 for more than $70,000 -- versus more than $70,000 for a tesla model s. it is a lot less than the tesla, as you say, and people will have to decide in terms of style, acceleration.
It is not the ultimate driving machine, but it is not too bad.
Have you ever had range anxiety?
I used a previous before in the uk and there is always a station where you can start them up.
When it is just electric, it will concern a lot of people.
When does the bmw i3 actually reach the market?
It depends on where you are.
China will be a big market next year.
They are looking for them around here this year.
Thank you, willem marx, comparing the tesla model s and the bmw i3. coming up, when musicians are hoping virtual concerts transition into real and dollars.
This is "taking stock" on bloomberg.
I am pimm fox.
Now to the merge it -- merger between music and social gaming.
The game founder and chief executive joins us.
We also have the chief executive of keep, a digital advertising and marketing services company.
They help connect his visions to fresh sources of revenue.
We all like fresh sources of revenue.
What is the trend when it comes to music and reaching the actual audience?
Is it not just about a direct relationship between the musician, the composer and the person listening?
They also want to create an interactive robert he that people can spend time on, and engage more as a fan.
You see more musicians on social platforms and mobile, creating additional ways for consumers to express their love for musicians and what they represent as an artist.
John, it explained the idea of creating a game on facebook.
We wanted to create a platform where the artist could interact directly with their fans.
What makes the game unique is that the artist, in the process of doing that, is creating a brand-new revenue stream with virtual goods.
A fan can interact with an artist, create a concert, select their favorite music and the virtual items around it, and at the same time, the artist is collecting a new form of revenue.
What would be an example of something like this?
Pick an artist and the way a fan would connect with them online.
They are taking the artist, their favorite music, and then they are creating the concert, corriere -- choreographing the dance moves, handling the light, the sounds, and that concert is posting to the facebook timeline for their friends to experience and interact with.
Where is the music right now?
What musical interests are taking off?
We started over -- with over 70 major artists including lil wayne, rick ross and all of their songs.
Brian wong, would you sign up for something like this?
Do you want individual artist do your dance moves and sing your songs?
People want every method possible to get closer to the artist an hour on -- on our site you have apps that rewards are part of.
There is electronic dance music.
The angle -- being part of the modern consumer, the people in that category are socially enabled.
How could we bring them closer?
Virtual goods, in making people feel like they are closer is a big deal.
When you say virtual goods, i think of e-mail or messages you receive if you play an online game that says you have not been back for a while.
Is that what we are talking about?
It can be that, and a virtual hat or a virtual t-shirt.
At the end of the day, it could be very real to have exclusive access to download a song.
Not only are they rewarding people with actual schwenk, but virtual things.
In and -- and edm musician has app that puts things on pictures.
The idea is there could be virtual things you can add.
Hair on your face, lots of fun things like t-shirts and things like that.
Maybe you could give me hair.
They can be one of the positive things.
John, what age group does this go after?
We launched last week, and we found the majority right now are males under 34 years old.
This is on facebook.
What kind of technology is involved?
It is all 3-d-powered.
We are in real 3-d. thank you, john acunto, the chief executive of play gig-it and brian wong the chief executive of kiip.
For what wall street has on the agenda tomorrow, we go to olivia sterns.
Tomorrow we get consumer confidence data entry s&p case shiller index card in chattanooga, tennessee, the president will speak about the economy and in washington, sec chairman mary joe white and gary gensler was testified before the senate taking committee.
They will address the implementation of new aspects of frank geared toward improving -- of god frank geared toward improving the ability -- and dodd frank geared toward improving stability.
Thank you, olivia sterns.
Moving from the digital stage to the fashion runway, i will show you a cultural movement that has changed the world of entertainment and tell you how you can witness it all by the end of the summer.
? this is "taking stock" on bloomberg.
I am pimm fox.
From king's road marissa mayer on the red carpet, punk fashion is more than just a nostalgia trip.
For more on how the cultural movement became part of our own history, andrew bolton is the curator of the exhibit, thank you for coming in.
Explain for people that might not be familiar with the exhibition what is it and how long is it on at the metropolitan museum?
It looks at the impact of punk on high-fashion and it is closing on the 14th of august.
What are the highlights?
It focuses on the impact of punt on high-fashion, and we start with the origin of punt.
We -- punk.
We start in london and new york city.
In new york, we focused on the nightclubs where punk was really essential.
We are talking about things like the sex pistols, the clash.
Blondie, great bands, and in new york it was a music movement, and in london, more of a fashion movement which was a -- set up around a store on kings road.
What characterizes punk when it comes to fashion?
The idea of do-it-yourself.
That is the lasting impression.
The idea of ripping your close.
Black, spiky hair.
It is very aggressive and chaotic.
I am glad you said aggressive . when this happens in the 1970's and early 1980's, a lot of parents were worried.
It was a shocking development.
It was terrifying.
When you saw punks walking down kings road, you had not seen anything like it before.
It was a complete departure from hippie fashion.
It was new, original and it was all about provocation and confrontation.
That has changed because it has become mainstream when you look at things like everyone wearing black or started fashion.
Once any sub culture movement hits mainstream fashion, it is sanitized and it loses its original potency and it has a different meaning.
What about they influence of -- what about the influence of media?
You cannot replicate this in big cities like london and new york, but now this is mass-market culture, in almost every mall in america.
It is funny that you mention the impact.
Punk was all about do it your self, and the main form that it is happening is on the internet, blogging or reading -- it is really -- tweaking -- it is really an extension.
As far as the exhibition, what kind of reception have you had?
It has been extraordinary.
It attracted diverse people.
Young people who did not experience of the first time engage with the high-fashion components, and those that did experience it are the static for the origin story.
There were a lot of t-shirts.
They were the main vehicle in which the ideas manifest themselves.
We have a section on the original t-shirts created in the mid-1970's. is there a punk movement outside of the united states in the developed world?
For punk to occur, it needs an establishment to react against.
It is not really in the west.
It is happening more perhaps in the east and non-western cultures where kids are reacting against the establishment and the status quo.
Everyone can catch the exhibit at the metropolitan museum until august 14. thank you very much.
It is 56 minutes past the hour.
Time for on the markets.
The s&p 500 loses six points today.
1685. the dow jones industrial average is lower by 36 and the nasdaq fell by 14. shares of caterpillar rose by 1%. they said they would buy back one billion dollars of common stock from societe generale.
That does it for "taking stock ." i am pimm fox.
Thank you for "taking stock" and good night.
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