Company News: UBS, Southwest, General Motors
UBS: A rare criminal plea
UBS must pay about $1.5 billion to U.S., U.K., and Swiss regulators for trying to rig global benchmark interest rates, including Libor, over a six-year period. UBS Securities Japan agreed to plead guilty to one count of wire fraud in relation to the manipulation—a rare criminal admission for a large bank. Two former UBS traders also face U.S. federal felony charges for their alleged roles in the rigging. Regulators said the bank’s traders made more than 2,000 requests to its own rate submitters, traders at other banks, and brokers to fudge submissions that help set the benchmark rates. The fines are equal to less than three weeks of UBS’s 2011 revenue.
Southwest Airlines: New fees for no-shows
Southwest Airlines, the discount carrier that advertises “Bags Fly Free,” is adding $100 million a year in new fees. The no-frills carrier resisted as competitors added charges; it had a liberal policy that let passengers receive full credit when changing or canceling tickets. Under the new rules, customers get only a partial refund if they miss their flight. Southwest is also raising prices for a third checked bag and for early-boarding slots. The new fees are part of the airline’s effort to increase revenue by $1.1 billion in 2013.
General Motors: Goodbye, Government Motors
General Motors will buy back $5.5 billion of its stock from the U.S. Department of the Treasury, moving the government a step closer to ending the bailout of the auto industry. After the buyback, Treasury plans to sell its remaining 300 million shares—about 19 percent of GM—within 15 months. The automaker received $49.5 billion from the U.S. in 2008 and 2009. The buyback represents 40 percent of the government’s stake, and may help the stock by reducing investors’ fears of the government flooding the market with shares.
Caribou Coffee: A new coffee master
The owner of Peet’s Coffee & Tea plans to acquire Caribou Coffee in an ongoing buying binge. On Dec. 17 the private Joh. A. Benckiser Group announced plans to purchase Caribou for about $340 million. In October, Benckiser bought Peet’s for $941.2 million, and raised its stake in Dutch coffee maker D.E Master Blenders 1753. Peet’s and Caribou will be independently managed. Combined they have about 800 shops, compared with Starbucks’s 18,000.
Knight Capital: Merging into a mega market maker
The market-making firm Knight Capital agreed to be taken over by Getco, a smaller electronic trading firm, in a $1.4 billion deal. The combined company will be the largest market maker on the NYSE. Knight, which processes about 10 percent of all U.S. stock trades, dodged bankruptcy last summer when incorrectly installed software bombarded U.S. exchanges with unintended orders that led to a loss of more than $450 million. Getco and five other financial firms rescued Knight with a $400 million infusion in exchange for shares.