Mega-Merger Cancelled: Surveillance (05/09)

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May 9 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Sir Martin Sorrel, Michael Holland, Richard Falkenrath, Irwin David Simon, Rafi Mohammed, Robert Bryce, and Daniel Birnbaum. (Source: Bloomberg)

This is "bloomberg surveillance." vladimir putin may review the russian fleet off the coast of his crimea.

The merger is dead.

We speak with martin sorrells.

And apple stuns the tech world.

Tim cook wants to dance with dr.

Dre.

Good morning.

This is ". bloomberg surveillance." joining me as scarlet fu and erik schatzker.

Adam johnson is off today.

It is a friday brief.

What on earth am i doing here?

Here is some overnight data for you.

China's inflation has decelerated to the lowest point in 18 months.

In europe, u.k. manufacturing grew .5% more than forecast.

There is some economic data.

10:00, the job openings -- we will also get wholesale inventories are it.

Hilton worldwide will have its first report is a public committee.

We will also have a report from ralph lauren.

We know that the toronto maple leafs are playing golf.

Right now, equities, bonds, currencies -- ten-year yields, 2.61%. nymex is at 0.82. vicks, 13.43. the two year yield is the yellen headline.

We have to get wonky.

82 is the difference between the 10 year note and a 30 year debt.

Let's go to the monitor them at the bloomberg terminal.

Mr.

putin in crimea -- a quiescent move into the weekend.

The navy is presenting off the coast.

We still do not know one putin wants.

We will talk about ukraine later.

We scoured the front page.

It was completely jumbled last night.

Everything changed.

The top story had to do with the advertising juggernaut.

This would have been the biggest advertising firm . the board voted to end the advertising deal.

All of the delays created uncertainty for everyone involved.

Shareholders, employees -- the fact that we a re not realizing a dream does not mean that we do not have dreams.

It is disappointing that we have this dream, which is not going through.

Do not go to the church right after going to the judge.

We're divorcing before getting married.

I look at the times -- the two of them were announcing a planned merger.

Look how happy they are.

Embracing each other back in july.

Just a disaster.

In just a few minutes, we will get a take from one of the biggest advertising firms.

Let's move on your second rampage -- front page story.

Apple is about to use some of its cash.

It is going to make one of the biggest mergers ever.

It is looking to buy beats elec tronics.

Matt miller has a pair.

Why am i not surprised?

The price tag is $3.2 billion.

Carlyle has tripled their investment.

There's some real wish back here -- push back here.

Apple has lost its cool factor.

For so long, they were eno ugh.

If they buy beats, do they keep the beats thname?

From an outsider's perspective, it seems like a watershed moment.

Maybe apple does not know what to do next.

Let's get right to the twitter question.

Why does apple need dr.

Dre?

He did eminem.

1998. he said here is this white guy from detroit.

Ok, yeah.

Let's get to the third front page.

You shocked me with that.

We are moving over to ukraine.

Pro-russian separatists are goi ng ahead with preparations for a referendum on sunday.

What is surprising is that vladimir putin says the referendum should be delayed.

Meanwhile, russia is showing off its might in a parade, marking the defeat of germany in world war ii> . a lot of pageantry wrapped around the politics.

And putin is likely to go to crimea to review the black sea sleeve.

So, those are the front page storyies.

The guest host is michael holland.

A great day to talk about the banking industry.

Richard falkenrath is with the too.

The imagery i saw from london this morning of the -- celebration of the axis.

Does vladimir putin want a non-soviety union?

? he is not trying to re-create the soviet union, but he does want a sphere of influence.

For him, parts of ukraine are in that.

How do you respond to what we heard rum jp morgan?

There can be a common ground between a russia and the united states.

Over the fears of an islamis t south.

We have had challenges there.

Shouldn't we find a common ground?

That has been articulated a lot in the last two decades.

It has not worked out in practice.

In part, because of a disk unit over what really counts as is lamic terrorist.

We saw a concerted effort to brand domestic separatists who happened to be muslim.

Our other guest host is michael holland.

Investors pulled back from risk last week.

Are we going to continue to see that?

You saw the ten-year treasury be the best barometer of people's fears.

To richar'dsd's comments, the market does not believe that things will be ok.

They view it as a serious-- syria like situation.

If putin is ready to go in, the market will take a hit.

He has not shown his hand yet.

Moldova is the next risk.

The baltic states are not at risk.

He will have to deal with ukraine before he can get to moldova.

We will talk more about this.

Right now, the great merger.

It is decidedly dead.

The publicist at omnicom agreed to disagree so much that they broke off a agreement.

Maurice levy made martin sorrells's day.

Sir martin joins us by phone.

Is this a surprise to you?

You never believed the hugs and kisses in front of the arc de t riomphe.

I have been on your program one or two times.

We cut the deal would fall apart.

We did not think it would fall apart so quickly.

We thought they would wait until july 27. and they risks that $500 million break fee.

They got so painful that they decided to call it quits early.

The deal crumbled.

They must've spent $100 million each or thereabouts.

What does it say about the greater advertising industry?

We look at traditional advertising and media and the new digital space.

Is there a message there?

I do not think there is a message in that.

Both sides are trying to say that this is as good as if they came together.

Why have they been spending 10 months trying to come together.

Publicis has admitted that during the course of these discussions, they created -- omnicom has admitted that publicis is better in a digital sense.

It helps with the focus on markets.

There was a slack first quarter, up strongly in april.

The business as a whole is strong.

I think we feel good about fast growth markets.

Digital is the second pillar.

In both cases, we wants them to be 45% of our business.

And date,a, we have a real data business.

It is strong and growing.

That is of fundamental import ance.

Fourth, getting our people to work together.

Those four propositions -- it may also say something about don draper is not dead.

Ego and -- ? hold on.

Power is still important.

I know you are in beijing.

I need to get a straight answer from you.

Is joan dead?

If don draper is not dead, is joan dead?

She is a partner.

Never.

It is not as of mergers and acquisitions are or into the advertising business.

Look at the young and rubican.

What was it about omnicom and publisis that made it a challenge?

I think it was german for reasons surrounding power and ego.

Neither company addressed the strategic issues.

Neither company could deal with the clunky solutions.

This is difficult to execute.

Maybe you could think of a situation where ceos have functioned well together.

Mergers do not work.

One company has to take over another.

Practically, they do not work.

I think, at the end of the day, they put the deal together to unseat us as number one.

So, it was driven more for those reasons, rather than strategic.

A ttt the end of the day, eye is bigger than tummy.

Thank you so much.

We greatly appreciate your attendance.

We have a lot more coming up.

Apple tries to recapture its cool.

Why they are ready to make beats their biggest purchase ever.

? good morning.

I am tom keene.

Will you be on a 10:00? you are awesome.

6:00 to 8:00, then 10:00 to 12:00. let's do a data check.

Futures are at -3. a uighur euro -- weaker euro.

Fruit oil over 100 as well.

Scarlett, do you have more gainers than losers?

Barclays closed higher.

Up from 12,000 cutes ins in february.

They want to shift away from commodities trading.

Utility like banking.

Criminal charges against credit suisse may be announced.

Can a bank still operate under a criminal charge?

Eric holder says there is no such thing as too big to jail.

Is there?

Michael holland is with us.

He is an investor in banks.

Carrie geiger joins us as well.

How scary is the thought of a criminal charge or indictment to a banking ceo?

Carrie is an expert.

I believe it could put them out of business.

That is not a good thing.

Eric holder and his cadre will not go that extra step.

They will do things short of that.

On the other hand, there is a broader issue.

These are two non-u.s. banks.

Why do they go after the shareholder's money?

Those are my two issues.

Carrie -- this notion that a bank would fail, would be forced out of business.

It is an assumption that has not been tested.

Right.

That is why this is such a big deal.

We do not know what is going to happen.

These two cases are big cases.

They have gotten a lot of attention.

We do not know if they will charge the parent companies or holding companies are different subsidiaries.

There are ways to shield the bank from complete fallout or collateral damangge.

If you had a cocktail and you're talking to somebody.

What is the single piece of information i need to know abou ttht this criminal issue?

What has your issue -- curisotiy here/ ? will they get a guilty plea with the settlement?

That is what credit suisse wants.

They want to have a sealed deal.

At that point, we will sue a happens.

Weather creates counter party risk.

If there were an indictment, that is potentially a far worse situation.

That is probably not the most likely scenario.

They will have some kind of deal done on this.

Are they going to get a guilty plea?

This is tim geithner with the book rollout.

You wonder if this is locking on this issue.

I'm fascinated by the phone calls going on between the justice and the prosecutors.

Keri, you mentioned that we do not know what is going to happen.

What this justice want to happen?

Are they putting u.s. banks in the same position?

This is what everyone is calling a test condition.

If they can survive and they keep going, we might see the justice department to more of this.

However, if that is the case, why do we need to keep going down this path?

Would we have to do to deter bad behavior of banks?

If this does not do it, what is the next step that the justice department will have to take?

How bothered are you by the hypocrisy on display by the justice department here?

For the benefit of the viewers, look at the hsbc case.

They settled a couple of years ago.

As a result of these failures, at least 881 million dollars in drug trafficking proceeds -- including drug trafficking by the cartel in mexico, were laundered through hsbc bank without being detected.

And there is more.

So let me translate.

Hsbc was outrageous and what they did.

This is not even close.

We're talking about putting a company out of business.

Why is hsbc not involved?

When year ago, the department of justice supported the idea that banks were too big to jail.

We are seeing something different now.

The complete sea change from them.

Whether these conditions are worse, i do not know.

Maybe hsbc is too big to jail.

That is a possibility too.

This is lewis carroll stuff.

This is a government.

Let's go back in history -- arthur anderson, 10,000 people lost their jobs for the malfeasance of 10 people.

Regulators went nuts.

Arthur andersen did not do that that of the job.

10,000 jobs were limited.

I believe that the supreme court validated that.

10,000 people lost their jobs and they did nothing.

Here, you have hsbc, truly bad actors.

None of the bad actors for -- were indicted.

Island about the context.

The financial system cannot withstand a criminal indictment.

Wouldn't this trip up the eceo onomy?

The government shied away from coming down on banks hard during the financial crisis.

These are both foreign banks.

The banks we have seen in trouble, including jp morgan, which has paid off fines, is us bank.

These cases have nothing to do with the financial crisis.

If people are still wanting to get retribution, these cases do not necessarily match up.

And know you are in a difficult position.

Let mr.

Holland said is critical.

Is this a shakedown?

We will have to see.

We have to see what happens to these two bansk.ks.

See how they operate.

People have described the approach on jp morgan as a shakedown.

It does make sense.

Jpmorgan got in a lot of trouble for a lot of things.

There were a lot of issues spread out there.

The criticism is, of course, that money comes out of shareholder value.

It does not deter future bad behavior.

What does it take to get banks to fall in line with how shareholders want them to operate?

And how the public wants them to participate?

When do we have a resolution?

When do i get to start talking about this?

Probably a couple of weeks.

Not two years/ ? [audio deleted] yeah.

Fingers crossed.

He wanted this behind them as soon as possible.

Is brady dugan's job threatened?

Most delegations took place before 2007. the board has stood by him.

He has done a job.

Keri, thank you for joining us to talk about the infinite unanswerable questions of the banks too big to jail.

Lots of pondering.

If you have a job on wall street, hang on tight.

They are going fast.

? good morning everyone.

Coming up, the omnicom collapse.

Jon hamm will be with us on "market makers." no joan, though.

He has a new movie.

"million dollar arm." they want to appeal to the emerging markets, especially india.

I am tom keene, with a scarlet fu and erik schatzker.

Erik has the top headlines.

It was a day for vladimir putin to flex military muscles over the crisis in ukraine.

Troops marched across red square as they celebrated their victory over germany in world war ii.

The european union is ready to expand sanctions to some russian companies.

It looks like an overhaul of fannie mae and freddie mac may not take place this year.

Six key democrats will not support the proposal without major revisions.

And, in the nfl draft, houson ton made clowney the number one pick.

He was greeted by roger goodell.

Johnny football went at number 22. cleveland browns.

I cannot believe they drag this out into three days.

I don't get it.

It is a reality tv show.

We must do a single best chart.

This is a stark reality in new york.

It shows a decline in the number of traders and investment bankers.

Securities industry employment is at a new low in march.

The lowest since the government began keeping track in 1990. two waves down.

Thanks to bloomberrg data.

Our guest is michael holland.

We are so far from the romance of that music and that tickertape.

Yeah.

That chart was reminiscent onf the 1970's. and also -- the bubble we have today is bubble talk.

People are worried about is going negative.

Do you believe in the resiliency of wall street?

Can they rebound?

Absolutely.

One only has to go to history.

Maybe this will be the first time it never does it.

If the financial services industry is not a growth business -- that chart shows us that for some time, it was.

Show that concern us?

In the intermediate term, yeah.

We talked earlier about apple.

It is being replaced by other things in the economy.

Within your reporting, erik, there was an outlandish friction of layoffs.

Do you see more rationalizations of labor day?

A lot of banking jobs are hard to justify.

The amount of money that these are people are getting paid.

There are some positions that remain high value.

Banks still play an important role as creators of credit.

How were the first 45 days of the quarter?

Jpmorgan was a harbinger.

On the trading side, it is hard for people to justify the jobs they have got and the money they have made.

Critically, in the next crisis of liquidity, will there be enough platforms to give us some kind of sane market?

Wonderful question.

What we have seen in the history of the new york stock exchange and the changes they have made -- probably not.

In the federal reserve, our reporter brought this up yesterday.

Flash crashes a preview of the future.

We will have crazy stuff going on because of the crazy stuff we are talking about now.

Businesses far less profitable.

We talked about too big to jail.

Jamie dimon has to spend so much money on lawyers.

Michael kavanagh -- left for carlyle.

That company just made $1 billion on its apple trade.

So, he's going to a place where it is really profitable.

I saw david rubenstein in central park this weekend.

With the headphones on?

A lot of bankers are ditching their 90 hour work weeks to go to startups in silicon valley.

And have fun.

Yeah.

We have a lot more coming up.

In the next segment, eastern ukraine separatists are seeking referendum.

How kiev and moscow are responding.

Richard falkenrath ways in.

? this is "bloomberg surveillance." adam johnson is off today.

Let's get some company news.

A setback for snapchat.

They have settled ftc claims that they deceived users.

Now, they have agreed to add more privacy features.

Big payday for qualcomm chairman.

They have given him $45 million worth of restricted stock.

Last december, he said he would step aside as ceo.

And hacking attacks are boosting sales at symantec.

They issued a revenue forecast that thebeat estimates.

Equipment or will rise -- 10%. it is difficult to keep up.

There are two elections.

Kiev will hold a presidential election on sunday.

Pro-russian separatists desire a referendum.

Meanwhile, prudent -- opputin watched army drills and made attend a naval procession.

What are you most focused on in the cacophony?

The question is, what is putin's game?

We don't know he has been very difficult to read.

This was yet another move.

He comes out of the meeting and says yes, i am for dialogue.

Within your expertise and reading of the literature, who is the cap?

-- vcabinet?

Is he acting alone?

They have receded into the woodwork.

You almost never hear from them.

He does have someone, who is now prime minister.

He calls the shots.

Is he a despot?

He is not authoritarian leader.

He is not a democrat.

He is adept and with the old-school power politics.

Who or what has leverage?

China has been silent in all this.

Do the oligarchs play a role?

That is a good question.

It is not clear.

All the biggest leverage is russian energy sales to the west.

And financial transfers.

Really serious, worldwide sanctions against those two sectors.

Financial sector and energy sector.

Could have an impact.

Within this conversation, i go holland is with us as well.

People talk about the strategic oil reserve and thus destabilizing the cash flow to russia.

The likelihood of that having any impact on russian energy sales is zero.

What we're doing now?

Zero.

And the likelihood of europe and merkel going along is zero.

If there's a war.

If there is a full on invasion come i think you may have to reconsider that.

Is he that stupid?

I don't think so.

I don't think he wants that.

Could you stumble into it?

He was reactive in his annexation of ukraine.

He deposed his puppet in kiev.

Erik, jump in here.

The russians survived the siege of stalingrad.

Can they survive an embargo on oil and gas?

First, let's be clear.

The soviets survived that.

It was not just russians.

It was kazaks and ukrainians.

It unifies field stayed around them.

There is nothing close to the x essential threat.

26 million soviet citizens died in world war ii.

In the day that is being celebrated today, it was a cataclysm.

Where would you put the odds of any just --disruption?

If you just freeze everything, zero.

The europeans are the ones who have to decide that.

They're not ready to bear the cost.

The sunday talk shows reign supreme.

What do you expect will be the messaging of the administration as they go to their referendum?

They will talk about other things.

They don't have anything to sigh.

They are in a weight -- wait and see mode.

When in doubt, change the topic.

Thank you so much for coming on short notice.

Thank you for defining our walls of lori.

Let's look at the forex market.

That is identifying where the markets are.

102, 101.74. sterling -- 1.79 is a testament to the u.k.. backing up a little on the ruble.

Coming up, erwin simon will join us as guest host.

We will be back in two minutes.

? pro-russian separatists prepare for a sunday referendum -- vladimir putin may reviewed the russian fleet off the coast of his crimea.

Tell the band cancel the marriage -- the merger is decidedly dead.

Apple stuns the tech world -- tim cook wants to dance with dr.

Dre.

Good morning, this is "bloomberg surveillance." it is friday, may 9. joining me is scarlet fu m and&m lover erik schatzker.

Erwin simon is our guest host for the hour.

He does organic stuff with hole.

-- what whole foods.

Here's her friday brief.

Some overnight data to tell you about -- chinese deflation decelerated to the lowest amount in months.

Economic data in the united states -- nothing to get too concerned about.

At 10 a.m., we will get job openings and wholesale inventories.

Before the bell, hilton worldwide reports earnings.

It was taken public by blackstone in a blockbuster deal and rob laurent reports this morning.

Just now across bloomberg, we have vladimir putin traveling to the crimea.

There has been a hedge on the early u.s. morning and now we can say he has arrived in crimea.

Vladimir putin is reviewing his russian fleet.

Let's get to an incredibly busy company news.

We start with the merger that would have created the biggest advertising agency.

It is now off.

They have abandoned their plans $35 billion merger3. the companies could not agree on key management roles and organizational issues.

First-quarter sales come up short at cbs.

They posted a 12% decline in revenue.

Part of that was because of the cbs broadcast of the super bowl and fox had the rights this year.

Apple may go into business with dr.

Dre.

Apple is in advanced talks to buy beats electronics.

The price tag is 3.2 billion dollars which would be the biggest apple acquisition ever.

For more on this top story, we will turn to scott kessler at s&p capital iq.

He joins us on the phone.

Is buying this a sign that apple is out of ideas and cannot come with a strategy?

Wow.

I don't know if i would agree with that supposition.

A couple of developments last week could portend for this transaction potentially being consummated next week.

It is not confirmed at this point.

The former ceo of burberry, angela arents joined up the last week and number two is apple posted a requisition for a buzz marketing manager.

When i think of what beats offers come i think about luxury and i think about celebrity.

By the way, they hired the former ceo of yves saint laurent last year as well.

Those are the things we are talking about.

The acquisition of cool - samsung is cool, android is cool , the kids are using the bigger screen -- is this a essentially a transaction hiring cool people to do crunches while they listen on their headphones?

For those on surveillance radio, i'm doing my workout this morning.

It's about buying cool, isn't it?

It seems like this is something that apple, over the last week, has demonstrated publicly that they are more focused on.

They acknowledge that maybe samsung has done more and done better things when it comes to cultivating this image.

I think apple wants to respond.

I think that donna couple of things more recently to try to raise the level of visibility that the company has and the brand has in terms of it being a luxury offering the world over.

When you think about the most recent iphones that were sold, everyone was talking about the gold iphone.

This is exactly what we are talking about.

That's the one you have.

I don't use an iphone.

He is a blackberry loyalists.

Since 1976 and the founding of apple, it has been a one brand company.

Is apple going to become a house of brands like facebook?

If that facebook, instagram, whatsppapp, is that were apple is going?

I don't know if apple wants to go much beyond the core apple brent.

They have done an excellent job of doing one jet -- one thing and that is building other ancillary brands underneath apple.

A lot of that has to do with all the tremendous innovation and inventions they have been responsible for over the last 10-15 years.

When you think about iphones and ipads, those are brands they have developed.

I acknowledge that i think they see an opportunity to do more with brand, two-doo -- to do more with marketing and try to gain a level of recognition with folks on that luxury kind of celebrity category that has been somewhat lacking especially relative to competition.

We thank you for your analysis.

Scott kessler joining us from s&p capital iq.

That brings us to our twitter question of the day -- we really appreciate your many twitter responses.

America -- all of america, hopefully they are going organic, that's the hope and dream of the organic food industry.

There is doubt over whether america will pay up for organic meat and potatoes.

Erwin simon is a chief executive officer of hains celestial.

They are decidedly on the cutting-edge of organic.

Within the framework of the business, do you believe we will all eat organic kale?

You are eating it and look out good you look.

It is not just organic kale.

There's a movie coming out tonight called " fed up" which shows how much sugar is in products.

I compare a lot of foods like tobacco.

Look at the ingredients in food.

It's not just organic, it's cleaning up the ingredients.

High fructose syrup, food colors -- if you want to buy pesticides for your garden, put yourself in an armored suit but it's ok to spray it on your food.

Can you see an adaptation of the big food companies like general mills and the others?

Will they get behind what you have been doing for decades?

They have been and i cannot do it alone.

Look at coco cola and the ingredients they will take out of coke and pepsi.

Here are these big companies that have been responsible and they know have that -- they have been putting certain ingredients and products that are bad for you, certain collaring, certain i judge invited projects.

Just certain hydrogenated products.

It is like putting poison in their.

We by our white sugar.

We may delude ourselves we don't but we like it or what sugar.

I like my white sugar.

I take it over high fructose corn syrup and older -- and over artificial sweeteners.

How many calories in a tease than of white sugar?

Bfd.

If you look at soda today -- there is nothing in there with just one teaspoon.

It's not the one teaspoon that is affecting you.

It's the multiple teaspoons.

What can you tell us about the outlook for the trend in organics?

You made a recent acquisition of rudy's bakeries because of the need for grain.

What is next on the horizon?

We are talking about white bread, white flour and the whole thing about processed flowers.

Brett is a big category.

The gluten-free category, there is so many consumers today that have allergies toward wheat.

It comes from genetically modified ingredients within the wheat.

I look at the u and we have big business there where the fresh market is moving.

If you walk into a supermarket in the u.k. and look for frozen foods, it's near the washer/dryer.

Is that where we will be in five years?

Absolutely, i have a 19-year-old daughter who is not buying frozen foods bridge she is walking whole foods buying prepared foods.

We are in a hurry and not sitting down and making breakfast and more.

I have four kids but they are not home having their serial.

They're ready to go to school and moving on.

From a convenience sake, from a health say, that's where we are moving toward.

I will never give up my trix.

Let me do a data check.

-3 on the s&p 500. i am watching the 30 year bond as well.

The pros are focused on the difference in yield between the 30 year and the tenure and nymex crude is above 100 as well.

Don't forget mmario draghi and what he said yesterday.

Coming up, organic foods go mainstream and we were just talking about whole foods and where does that leave them.

This is "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire.

? good morning, everyone.

Our guest host iserwib erwin simon.

Last week in an exclusive, we did a juice cleanse and i survived.

It was partial.

The kale, the parsley, sage, rosemary and thyme was better than good.

It tasted good.

It was a freestanding bottle of blueprint.

It actually tasted good.

If you drank a 16 ounce bottle of soda, you would not feel as good.

Blueprint is organic and it is cold pressed.

If you bought those vegetables in the store, it's worth about $20 and that's about $10 that you paid.

Is it a zero sum game and beverages where europe lays coke plastic or can you grow on top of what the giants are doing?

Blueprint is a meal replacement.

You can fill in some snacks along the way with lettuce.

They did not tell me that.

It's a cleanse.

Lettuce and celery and carrots -- in the middle of the day, if you need that good pick me up and it will last you for a few hours, it's a great juice.

Go back and look at other juices with the amount of sugar in it versus the blueprint cleanse.

It is organic and you're are getting a tremendous amount of nutrients.

Compare this with v8 which has a lot of the a's and salt that they reduced that.

V8 goes through pasteurization.

It is killing a lot of the nutrients.

Blueprint goes for a cold pressed where you are basically pressing all the ingredients in their so you are not cutting it up.

It is distribution.

It is no different than how do you sell more beets?

It's what the younger consumer wants today.

Is the price point going to come down on healthy juices to compete in a major grocery store?

The big thing is the prices coming down.

We have a farm and the hampton this summer to grow more kale and beats.

It is supplied is at a minimum.

$20 -- if you went to buy -- $20 if you want to buy all those products and made them yourself.

We will continue this discussion.

I'm trying to imagine a farm in the hamptons.

An organic farm.

Martha stewart is in charge of that.

Coming up, we look at it busted marriage of omnicom.

? good morning, everyone.

Our world headquarters will come to a quiet at 9:55 a.m. this morning.

There will be a migration of a portion of our world headquarters staff.

Erik schatzker m stephanie ruhle will interview jon hamm.

He's got a new movie out as well.

He will be on "market makers." he and 1500 women in manhattan.

This is "bloomberg surveillance." it is sort of like when george clooney comes by.

That place was packed.

The world also stops for that stud, erik schatzker when he gives you top headlines.

It was a day for russian president vladimir putin to flexes military muscles.

Troops marched across red square as russia celebrates its victory over germany in world war ii and the european union is ready to extend sanctions.

There are more protests in bangkok were demonstrators are demanding that the thailand caretaker government step down.

They want to bring up the prime minister that she abused her power.

On charges.

In the nfl draft, jadedaveon clowney was the top deck.

-- top pick.

Thank you so much.

We thank hans schroeder yesterday.

He called a television reality show.

Boston beat montreal last night, it was heartbreak.

We will see if the rangers can do it tonight.

A rough week for whole foods shareholders were the company lost more than $3 billion market value after cutting its forecast.

Organics are going mainstream and competition is rising.

Can whole foods sir five -- survived at its= current rising?

I think about starbucks because both whole foods and starbucks were kind of early movers in their respective fields.

How is whole foods like starbucks as it tries to dig itself out of its problem?

Good morning, starbucks is a different experience.

This is an affordable pleasure every day and they are selling proprietary products as opposed to whole foods which is a shopping experience and they are selling other peoples products.

That is a big difference and that eliminates some insulation against price competition.

The key that whole foods need to focus on is changing its poor brand image with respect to price.

I know about your phd at cornell.

If you go to l myra, new york, will you tell me that overpriced organics will sell their?

I know they sell in boston.

Will they move in elmyra, new york?

I know erwin is focused on the growth of whole foods but as they grow into markets like l myra, they need to change the concept of that that whole foods concept may not resonate in some of the growth areas.

It's a common strategy that hotels use.

Erwin simon, you sell stuff to whole foods, do you sell more stuff to the kroger's and targets in walmarts of the world?

We have 2200 items in whole foods today.

We are their largest supplier.

Not everything is organic.

We sell a lot of natural progress in gluten-free products.

How many do you have a kroger?

We have 1700 products but there is 3300 kroger's around the world so there is more kroger's. at the end of the day, price is important.

If you go back and look on a percentage asis and cook -- and food costs, they keep rising.

And summers will make their choice on organic and i think it is so important the difference between price between conventional and organic is 15% and prices have gotten out of whack and i think what whole foods has to do is look at pricing and compare it to conventional products.

Erwin mentioned price and that is the biggest factor for most customers.

For whole foods customers, selection is what they determined as the most important buying decision.

As organics go mainstream and is whole foods tries to broaden its base, does whole foods need to reduce its selection?

[no audio] [inaudible] i think we lost him, we have technical difficulties.

This is critical when you look at where whole foods goes in the next 12 months.

What does it mean for you if whole foods east to focus on price?

We supply food around the world.

I am on my way to china on monday.

There is 1.3 billion people in china.

We just opened up a big office in india, 1.3 billion people there.

We are doing was moderate rice -- basmnati rice.

When you come back to organic a be food, it is baby food.

We own two of the biggest brands and organic baby food.

Consumers will spend that extra dollar or extra $.50 to buy organic and certain categories.

If you think today that health and wellness is our number one key, will you spend for it?

We will come back with this.

I will pay for fancy meet.

I am not buying fancy pickles.

People are differentiating.

That is true.

Here is the number for you -- 40% is how coal accounts for worldwide production.

This is "surveillance." ? this is "bloomberg surveillance." let's get you some company news.

Pfizer is now seeking -- seeing a backlash in the united states over plans to buy astrazeneca.

The governors of maryland and delaware said they fear the deal will lead to job losses in their states.

Senator carl levin wants to block u.s. companies from shifting headquarters overseas to avoid taxes.

That's what pfizer has proposed in his bid to acquire astrazeneca.

Another roadblock for tesla which wants to sell its cars directly to consumers.

The state senate in missouri passed a bill that required consumers to buy cars from franchised dealerships and tesla is appealing a similar ban in new jersey.

The headquarters of the new fiat car company will be in london.

Sergio marchionne says they will be there.

They have some presence in the u.k. to take advantage of the lower corporate taxes.

That is today's company news.

Jon hamm will join us later this morning on "market makers" at 10:00 this morning.

We now go to matthew campbell and london.

-- in london.

Let me go to the gossip right away.

How bad did the french screw this up?

This is not the outcome anyone was looking for.

Clearly, there was a severe clash of egos for this deal getting done.

At the companies are being pretty honest about that.

They are not catching this and a lot of legalese or jargon.

At the end of the day, they said they could not come to an agreement and they bailed out.

It's better than going through with that, i suppose, if it was not going to work.

The human capital goes down the elevator each night in the elevator business.

Was this about the c-class officers?

What kind of bodies was he fighting about?

I think there were disputes on all sorts of matters particularly who would fill some of the top roles, the chief financial officer being one of them, treasurer, general counsel all the way down.

It was billed as a merger of equals and we had the chief executive of publicis sing it came -- it became like an omnicom takeover.

I'm sure they will have something else to say about that.

There are certainly some bad blood perhaps between these two companies that there wasn't nine months ago when they announced this merger.

We will have to see what happens next.

As you talk to your sources like bankers and lawyers, i wonder if the collapse of this merger will slow the steady flow of mergers and acquisitions we are seeing now particularly in the media/telecom space.

That's a good question is how much will this affect other transactions.

Merger of equals are never easy to pull off.

A lot of investment bankers are quite cautious about them for that reason.

We had some very big egos here.

The ceo of publicis is something of an advertising legend.

This was seen as so unlikely that when bloomberg news broke this deal nine months ago, for the first 36 hours, nobody believed it.

Everyone said you must've gotten this wrong.

This is always a long shot.

What goes on from here?

What is next for these two big companies?

I think both of them will have to stay out of dealmaking mode for a while.

They have lost their license to do that bubbly after taking their investors and employees down this track for the better part of a year.

There is no question there will be consolidation in the ad space and because if you talk to people in these big companies, they see the likes of google, facebook, twitter, apple, that's who they are worried about so they need scale.

Thank you so much.

This goes tojon hamm -- this goes to jon hamm on "market makers." this is no longer the 1960's. it's not even 2005. it's all digital space.

I wonder how the customers feel.

They were confused when the deal was going to happen because the competitors thought they were the same company.

Are they breathing a sigh of relief?

You can see the comments from sir martin sorrell on bloomberg plus.

They will stick to their business plan at wpp.

He said he thought this would never work.

He is taking a victory lap.

He could barely contain his joy.

This deal is not happening because of a big culture clash print let's get to a data check.

In terms of economic data, not a whole lot coming out before the market opens.

At 10 a.m., we have wholesale inventories and we have futures trading lower at of that.

Good morning, everyone, "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire.

There are a lot of other pathways.

Our guest is this hour is irwin simon, chief executive officer of pains select -- of haynes galaxy.

Is there really a war on coal and what does that mean for america's future of energy?

We have the senior fellow at the manhattan institute.

Welcome.

Good morning.

Is there a war on coal.

I would say in the was there is but globally, it's clear this is the fuel that has been drawing the fastest since 1973. in the last 10 years, growth in the global coal market is equal to gas, hydro, combined.

The chinese have been producing as much coal powered electricity as they can because it was the fastest route to get them or they wanted to be but nobody is investing more in alternatives and renewables than china.

That may be true on a dollar basis.

It's true on every basis.

More solar capacity, nor would does more wind capacity than any country in the world.

Renewables are being dwarfed by what is coming on stream in coal.

Look at what's happening in vietnam and india and the blackouts that occurred in india about two years ago are i. the indian government said they would produce more coal and import more.

You are a lightning rod for criticism about the industry.

I want you to explain the benefit of coal versus the zeitgeist that is out there.

It produces electricity, that's the point.

That's the point i make in my book.

Nothing is smaller and faster and lighter than electrons.

If you look at the developing world vs the undeveloped world, it is electricity.

Right now i can't breathe in shanghai or beijing.

Do i blame that on: china?

That's the challenge we face today.

How do we clean up the emissions?

I'm not a believer in carbon caption in sequestration.

This is a big deal.

What does shanghai do this morning according to your very good research and your support of coal?

I am reporting the facts.

This is what's happening.

Ideally with the u.s. can do is export the technologies that allow cleaner combustion and particularly supercritical technology that will allow us to get more power out of the energy in each kilogram of coal.

If we can produce energy from wind turbines cheaper than coal, why shouldn't we just be putting in more wind?

The problem with wind energy is low power density.

It's a measure of energy flow that can be harnessed given an area of volume.

The problem with biofuels and wind energy is you cannot produce enough power from the land required.

You get energy sprawl.

The word is scalability.

Coal is a great positive.

Chem nuclear reactors get to that scalability?

I am very bullish on nuclear.

It faces huge challenges and cost is a big one.

How are we going to do with climate change in the long-term, natural gas to nuclear.

I want to have a good conversation about this.

I want to have robert on what somebody who is less amenable to call.

The last time it was in china, i blew my nose because it was black because of the: china.

Their coal dependence is a normally -- is abnormally high.

Coming up, demand for sugary drinks is in decline so how does so the string -- how does a sodastream keep their business model going?

? good morning, everyone -- good friday morning, "bloomberg surveillance turcott." adam johnson is taking a day off.

What is that?

Eric has our top headlines.

I will begin with an overhaul of fannie mae and freddie mac.

That looks like it will not take place this year.

Six key senate democrats decided it will not support the proposal without major revisions.

The plan calls for replacing fannie mae and freddie mac with a reinsurance operation of sorts.

House democrats have their own problems to deal with.

How to address the new republican investigation into the attack in benghazi.

The gop says it is looking for the truth and democrats call it nothing more than politics and they will meet to form a strategy.

The winkle lost winds -- the winklevoss two ends listed on the nasdaq.

These are the twins and their fight with mark zuckerberg over proceeds from the proceeds from facebook.

They claim mark zuckerberg stole their idea to start his company.

Those are your top headlines.

10:00 a.m., erik schatzker and stephanie ruhle and scarlet fu and betty liu and a cast of others -- courtney collins-- the entire control room will be out at 10 a.m. because jon hamm joins us.

Before that, betty liu will try to focus.

What do you have on tap for us?

There is this huge trend.

We have seen retail ceos and some of their heads roll given what has gone on in the industry but also target and the data breach.

The former ceo of sears holdings will be joining us to speak about what it so hard to find the right ceo in the retail industry.

The other person we have on is the coo of board got to --borgata who will respond to the sheldon adelson interview yesterday.

Did you dress up for jon hamm.? i think tom is more excited than the entire control room.

We forget what a big deal "madmen" was.

I watched one episode that played the commercial for his new movie every single break.

It was the most shameless plug.

The most shameless of shameless plug's happens here on the show.

Calling it out.

Betty liu, thanks for joining us on her show will begin at 8:00 a.m. do you have anything to say to betty?

He is silent.

Apple is trying to recapture its cool it makes dr.

Dre a billionaire in the process.

It's a possible $3.2 billion acquisition.

This is "bloomberg surveillance." ? we need to hear from you right now about our twitter question -- jimmy iovine and dr.

Dre have a heritage in music and apple is curious about dr.

Dre.

I like that eric said it needs to recapture its cool.

In fact, tom asked the question two years ago -- is apple cool anymore?

Can you imagine steve jobs doing this?

I cannot get there.

He would build it himself.

He would not buy it.

This is the post-steve jobs apple.

The ceo of sprint was on "market makers" a couple of days ago.

This is not a shameless love because it happened in the past.

Sprint has joined with spotify and htc and also harman cardin to develop a phone.

The point he was making is that there is a market for this phone because apple blew it on music.

Two days later on what we learned that apple plans to buy beat not just for the headphones but the streaming music service.

The amount of money my family spends on that stuff is incredible.

Let's get to company news.

We start with a set block -- a setback for snapchat.

They settled claims that it deceived users by falsely promising a photo message which disappeared.

Snapchat has agreed to add more privacy features.

A big payday for qualcomm executive chairman paul jacobs.

He has gotten $45 million worth of restricted stock.

Last december, he said he would step aside as ceo.

Hacking attacks are boosting sales at symantec.

It issued a revenue forecast for the fiscal first quarter.

Research says spending on security software and equipment will rise from nine percent this year.

Good morning, everyone," bloomberg surveillance." you look at the technology space and where we are going in 2014 and i think you see on the calm and the rest of it, it's just a jumble, completely wrapped around cheap money.

Part of the jumble is leadership in the ceo suite.

We have a chief executive officer who is much more of an entrepreneurial business than the blue chips, irwin simon is with us.

How would you describe haynes celeste teal?

I am founder, ceo and president.

I was there day one when it started.

What we are about and what companies missed today is you have to build around brands.

With apple, brand cannot go into so many different categories.

You're talking about whole foods.

As a founder, i'm a visionary and one of the big rings is how did i grow hain with great people and expand into different geographies and take risks?

It's about taking risks.

Bring this to tim cook and dr.

Dre, how do you delegate authority to younger managers?

There is a lot of smart, young kids coming out of school today.

You need to throw them into the fire.

Let them make decisions.

You talk about alibaba, mistakes that were made -- i have made more mistakes than good decisions.

I'm sorry, the management of the toronto maple leafs will not let the franchise make mistakes.

They are so afraid to be the huge successful maple leafs a franchise that they run it more conservatively than montreal or boston.

They sell a lot of tickets.

The leaves were owned by a pension fund -- the leafs were owned by a pension fund.

They just spent as many -- as little as possible.

They now have new ownership.

They were selling tickets hand over fist and they did not care what was on the ice.

We have an important guest only go to scar fu on scar jo.

What about homemade carbonated drinks?

Sodastream is counting on lipservice from scarjo.

The ceo joins us from tel aviv.

Good afternoon to you.

I want to start with how health critics attack high sugar content in soda and how sales are slowing down in the united states.

How do you position yourself as a company?

It is clear that the soda industry is going through it dramatic transformation as we speak.

Soda is down three percent in the united states last year as a category.

The diet sodas are down even more, almost seven percent.

This represents the opportunity to sodastream is that sparkling water is up 33% and sparkling flavored water is up 64%. those are driven by sodastream and other brands like skinny girl.

The consumer is moving away from the old soda with sugar and water looking for healthier choices.

I look at what you're doing and i'm glad you're working with skinny girl.

Take a question from fat guy -- with sodastream, you are talking about the bubbles.

How can you be more espresso -- like.

I like the idea of you guys replicating the espresso success.

How will you do that?

I think it is a risky business to parallel the coffee industry in soda.

In coffee land, if you want a good cup of coffee at home, you will have to make it.

You cannot open up the refrigerator and pull one out.

In soda land, you have a can of coke in the fridge but what the consumer wants is not that convenient.

The consumer wants to get away from the sugar, away from the artificial sweeteners, they want a healthier choice.

We do not aspire to be espresso.

We aspire to bring to the consumer what they want, healthier beverage, easy, convenient that could save money.

I want to talk to you about the israeli startup culture.

Sodastream is an israeli company.

The star of culture started in the tech space and has expanded above and beyond.

What is israel doing right that other countries need to start doing beyond getting someone like scarlet johansson on your team?

That it is a lot of elements that go into the israeli startup culture.

It's a combination of the values of the israeli people, the existential reality we live in every day to fight for our existence, our legitimacy, and even more so, this generation that has emerged from the ashes of the holocaust, this generation is determined to live a life of meaning and purpose and make every day count.

We challenge things and we invent things and we create things and we are not afraid to fail.

I think you call that c hutzpah.

I love how we book ended everything with that.

It is not being afraid to fail.

Also curbs.

--curves.

You have to head over to radio.

Let's get to our twitter question of the day -- three point $2 billion barely makes a dent in their cash flow.

I have an iphone and i have beats headphones.

My kids walk around with them and you think of the accessories that you sell along with your iphone.

As i've said before, we have close to 50 brands.

Your bracelet makes you look like a roster fire him.

--rastafarian.

I think they are great quality headphones.

These come from different countries i visit.

We just went out and bought a bread company.

We could have done but gluten-free bread.

Thank you so much for joining us this morning, ceo of hain celestial.

Have a great weekend everyone, "bloomberg surveillance" on radio continues.

?

This text has been automatically generated. It may not be 100% accurate.

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