Category Archives: Research

Worldwide M&A activity reaches seven-year high

During the first few months of 2014, it quickly became apparent that major companies and corporations across the U.S. were interested in expanding their operations through aggressive mergers and acquisitions. We have reported extensively on many of the most noteworthy complex transactions to be undertaken within the nation, however, it seems that just as many landmark deals have been reached outside of the country, as well.

Global transactions total more than $1 trillion in Q2
In the latest bit of M&A news, the deal volume recorded during the second three-month period of this year has amounted to more than $1 trillion, according to Reuters. This figure marks the largest deal volume observed since the same time in 2007, and represents a significant improvement from the $680 million that changed hands during the first quarter of 2014.

“Companies have strategic imperatives to do deals, they have the cash to do deals, and they can borrow additional cash at record-low rates,” Frank Aquila, a mergers and acquisitions lawyer at Sullivan & Cromwell LLP, told the news source. “It really is a bit of a perfect storm when it comes to dealmaking.”

Multiple mega deals were completed during the second quarter, including agreements between Oracle and Micros Systems, Tyson Foods and Hillshire Brands as well as Sprint and T-Mobile.

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Caesars Entertainment And Caesars Acquisition Soar Amid Merger News

Shares of both companies soared in pre-market trading amid the news, with Caesars Acquisition Company up over 10 percent and Caesars Entertainment up over 26 percent.

According to the joint press release, “upon completion of the merger and the proposed restructuring of Caesars Entertainment Operating Company, Inc. (CEOC), the merged company will be well capitalized and positioned for sustainable long-term growth and value creation.”

The merger will also support the proposed restructuring of CEOC, a subsidiary of Caesars Entertainment, announced on Friday, to reduce debt and lower interest payments.

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GM Exodus Puts Australian Car Industry Step Closer to Extinction

According to Bloomberg,

Australia’s century-old automotive industry is stepping closer to extinction after General Motors Co. (GM) joined Ford Motor Co. (F) in deciding to stop making cars in the country.

Seven months after Ford announced it would pull out, GM said yesterday its Holden unit will cease production in 2017. That prompted the last holdout, Toyota Motor Corp. (7203), to say the  move will place “unprecedented pressure” on parts makers and  questioned the merits of remaining in the country. A stronger local currency and falling import tariffs have  driven down  sales of Australian-made cars by almost half since 2007.

The hollowing out of the nation’s auto industry has implications beyond the three companies as carmakers have about 150 suppliers that employ an estimated 42,000 people. The departure of Australia’s biggest carmaker also adds pressure on Prime Minister Tony Abbott, who’s facing rising unemployment and deteriorating consumer sentiment three months after winning an election by pledging to restore confidence in the economy.

“The Australian dollar has claimed an iconic brand of cars,” said Martin Whetton, an interest-rate strategist at Nomura Holdings Inc. in Sydney. “The announcement will be a major blow to confidence in the run-up to Christmas, as job losses will exacerbate an already heightened sense of insecurity.”

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How Risperdal Whistle-Blowers Made Millions From J&J ?

According to Bloomberg,

Judy Doetterl was a sales representative for Johnson & Johnson (JNJ) in 2004 when federal agents placed a hidden recording device on her and sent her to tape marketing presentations at a national company sales meeting.

U.S. prosecutors wanted to prove claims by Doetterl and others that J&J boosted sales by urging doctors to prescribe its antipsychotic drug Risperdal far beyond its approved use. Doetterl, then earning $150,000 a year, said she fretted for the two days she wore a wire at the meeting in a Dallas hotel.

“I was concerned that I would be found out accidentally and someone would see me go into a room to meet the agent,” Doetterl said. “I had to change battery packs every four hours. I knew in the end I was doing the right thing. They needed to know what was going on.”

The government spent nine more years investigating Risperdal before J&J, the world’s biggest seller of health-care products, agreed Nov. 4 to pay $2.2 billion to resolve criminal and civil probes. Doetterl, prosecutors and other lawyers offered an inside account of a decade-long probe that ended with eight J&J whistle-blowers making more than $20 million each.

The U.S. said J&J marketed Risperdal and two other drugs for off-label uses and paid kickbacks to doctors and pharmacists to boost sales. J&J’s Janssen unit pleaded guilty to misbranding Risperdal. The company also settled civil lawsuits filed under the False Claims Act, which lets citizens file sealed complaints on behalf of the government and share in any recovery.

Six Whistle-Blowers

Doetterl and four other former J&J employees filed such cases. They will each get about $29 million from the U.S. and state governments that claimed they overpaid through Medicare or Medicaid because of J&J’s practices. A sixth whistle-blower, Allen Jones, got $20.3 million last year when J&J paid $158 million to settle with Texas over Risperdal.

Two other whistle-blowers — Joseph Strom, who sued over marketing of the drug Natrecor, and Bernard Lisitza, who alleged kickbacks to Omnicare Inc. (OCR), a nursing home pharmacy — will get about $28 million each, according to the Justice Department. Whistle-blowers typically pay their lawyers about one-third of their award and pay taxes on the rest.

In settling the case, J&J signed a five-year corporate integrity agreement with the inspector general of the Department of Health and Human Services. J&J has “robust compliance programs that have been continually strengthened,” according to a company statement on Nov. 4.

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Obamacare Payment System to Insurers: Changed in Setback

According to Bloomberg,

Parts of the Obamacare enrollment system used to pay insurers are being pushed back from January in the latest technology delay for the president’s U.S. health-care overhaul.

The administration is setting up a temporary process to send companies the federal subsidies used to help millions of Americans buy coverage because the online system won’t be ready as planned, said Aaron Albright, a spokesman for the Centers for Medicare & Medicaid Services. Insurers will estimate what they are owed rather than have the government calculate the bill.

U.S. Health-Care (Bloomberg)

U.S. Health-Care (Bloomberg)

The rollout of the Patient Protection and Affordable Care Act has been marred by missed deadlines for small businesses, broken promises to consumers and sticker shock over coverage prices. Healthcare.gov, the main portal for consumers to shop for insurance plans, has been error-prone since its Oct. 1 debut and an administration official said this month that 30 percent to 40 percent of the online marketplace hasn’t been finished. Obama administration officials have said the troubled website will work for the vast majority of users by today.

“This temporary process, which is consistent with how payments have been made to issuers in the Medicare program, will ensure that issuers begin to get premium tax credits and cost-sharing subsidy payments on time, beginning in January,” Albright said yesterday in a telephone interview.

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London Gold Fix Calls: Draw Scrutiny Amid Heavy Trading

According to Bloomberg,

Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919. Now, dealers and economists say knowledge gleaned on those calls could give some traders an unfair advantage when buying and selling the precious metal.

The U.K. Financial Conduct Authority is scrutinizing how prices are set in the $20 trillion gold market, according to a person with knowledge of the review who asked not to be identified because the matter isn’t public. The London fix, the benchmark rate used by mining companies, jewelers and central banks to buy, sell and value the metal, is published twice daily after a telephone call involving Barclays Plc (BARC), Deutsche Bank AG (DBK), Bank of Nova Scotia, HSBC Holdings Plc (HSBA) and Societe Generale SA. (GLE)

The process, during which gold is bought and sold, can take from a few minutes to more than an hour. The participants also can trade the metal and its derivatives on the spot market and exchanges during the calls. Just after the fixing begins, trading erupts in gold derivatives, according to research published in September. Four traders interviewed by Bloomberg News said that’s because dealers and their clients are using information from the talks to bet on the outcome.

“Traders involved in this price-determining process have knowledge which, even for a short time, is superior to other people’s knowledge,” said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former economist at Barclays. “That is the great flaw of the London gold-fixing.”

Gold Capital

Barclays and HSBC Holdings Headquarters in London (Bloomberg)

Barclays and HSBC Holdings Headquarters in London (Bloomberg)

The U.K. capital is the biggest center for gold trading in the world, according to the London Bullion Market Association, which said more than $33 billion changed hands there each day in 2012, exceeding the $29 billion of futures traded on Comex, the New York commodities exchange, data compiled by Bloomberg show. Financial instruments including cash-settled swaps and options are priced off the London fix, according to the LBMA website.

In private meetings this year, the U.S. Commodity Futures Trading Commission, which regulates derivatives, discussed reviewing how gold prices are set, according to a person with knowledge of the talks. The FCA review is preliminary and not a formal investigation, another person said. The people wouldn’t say what’s being looked at or if regulators suspect wrongdoing.

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Health Law’s Birth-Control Rule Gets Supreme Court Review

According to Bloomberg,

The U.S. Supreme Court will take up a challenge to part of President Barack Obama’s health-care law by companies claiming a religious exemption to the requirement that they provide birth-control coverage for employees.

The justices said today they will hear two cases involving family-run businesses whose owners say they view some forms of contraception as immoral.

Prayer at the U.S. Supreme Court (Bloomberg)

Prayer at the U.S. Supreme Court (Bloomberg)

The dispute threatens to carve a hole in the 2010 health-care law already beset by problems on multiple fronts as its major provisions take effect. The clash will be the court’s first look at Obama’s biggest legislative accomplishment, the Patient Protection and Affordable Care Act, since a majority upheld the core of the law in 2012. The court will rule by July.

Both sides urged the justices to resolve the religious-exemption question, which the administration said was of “exceptional importance.” The issue has divided lower courts and sparked dozens of lawsuits by for-profit companies.

“Few issues are more important than the extent to which the government must recognize and accommodate the religious exercise of those it regulates,” argued one of the companies, Hobby Lobby Stores Inc., a craft-store chain whose owners say they run the company in accordance with the Bible.

The second case involves Conestoga Wood Specialties Corp., a woodworking business owned by a Mennonite family.

The court will consider whether companies can assert the same religious-freedom rights as people. A variation of that question drove an ideological wedge through the court three years ago in the Citizens United case, which centered on corporate speech. The court cleared the way for corporations and unions to spend unlimited sums on political campaigns.

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