Tag Archives: Wall Street

The new rules of M&A attraction

BRUCE WASSERSTEIN was probably the most famous mergers and acquisitions (M&A) banker on Wall Street in the 1980s and 1990s. Yet “Bid ‘em up Bruce”, who died in 2009, was ambivalent about his trade. The best rainmakers were capable men, he once wrote, but dealmaking also attracted “hustlers and swaggering mediocrities”. And whereas takeovers made the business world more dynamic, they also led to “pain, dislocations and blunders”.

Whether dealmaking is sensible is once more an important question, because M&A are back with a vengeance, after a lull following the financial crisis. Worldwide, $3.6 trillion of deals have been announced this year, reckons Bloomberg, an information provider, approaching the peak reached in 2007. In pharmaceuticals (see article) and among media firms the activity is frantic. Deals worth more than $10 billion are again common. America and Britain, with their open markets for corporate control, account for a disproportionate share of the action. So do cross-border deals, which have risen from a sixth of activity in the mid-1990s to 43% today.

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Benzinga’s M&A Chatter for Tuesday December 16, 2014

The following are the M&A deals, rumors and chatter circulating on Wall Street for Tuesday December 16, 2014

Report Pantry Close to $1B Sale

The Rumor:
Shares of The Pantry, Inc. PTRY 3.58% rose 12% after-hours Tuesday, on a Wall Street Journal report that the company is close to a deal to be acquired for as much as $1 billion, according to sources.
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Volcker Rule Ushers in Era of Increased Oversight of Trades

According to Bloomberg,

Wall Street faces more intensive government scrutiny of trading after U.S. regulators issued what they billed as a strict Volcker rule today, imposing new curbs designed to prevent financial blowups while leaving many details to be worked out later.

The Federal Reserve, Federal Deposit Insurance Corp. and three other agencies formally adopted the proprietary trading ban. The rule has been contested by JPMorgan Chase & Co., Goldman Sachs Group Inc. and their industry allies for more than three years.

Wall Street’s lobbying efforts paid off in easing some provisions of the rule. Regulators granted a broader exemption for banks’ market-making desks, on the condition that traders aren’t paid in a way that rewards proprietary trading. The regulation also exempts some securities tied to foreign sovereign debt.

At the same time, regulators said the final version imposed stricter restrictions on hedging, providing banks less leeway for classifying bets as broad hedges for other risks. To pursue a hedge, banks would need to provide detailed and updated information for review by on-site bank supervisors.

Limiting Risks

 

“This provision of the Dodd-Frank Act has the important objective of limiting excessive risk-taking by depository institutions and their affiliates,” Fed Chairman Ben S. Bernanke said in a statement. “The ultimate effectiveness of the rule will depend importantly on supervisors, who will need to find the appropriate balance while providing feedback to the board on how the rule works in practice.”

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Warren Hits Banks, Expands Base to Solidify Senate Power

According to Bloomberg,

Elizabeth Warren, in her first year as a U.S. senator, has captured headlines by pressuring such industry titans as Goldman Sachs Chairman Lloyd C. Blankfein for transparency, including a Dec. 4 call for Wall Street banks to disclose their contributions to policy groups that provide financial analysis to Congress.

With less fanfare, she’s forging alliances with Republican Senate colleagues, expanding her political network in Massachusetts, and tapping her backers to help Democrats running for re-election in other states.

It’s a strategy that sounds a lot like one adopted by another woman who entered the chamber with a national profile that made her a lightning-rod for praise and derision as she was dogged by questions about her presidential aspirations.

“I think she’s followed a path not unlike that of Hillary Clinton, which is learn how to be a senator,” said Ross Baker, a political science professor at Rutgers University in New Brunswick, New Jersey.

“Clearly, she has decided not to be a liberal Ted Cruz, to learn the ropes, particularly in the area that she cares most about, which is financial services,” Baker said, contrasting Warren with the Texas Republican freshman senator whose push to defund the 2010 health-care law helped lead to the partial government shutdown in October.

Future Contests

Warren, 64, is building relationships that could be helpful in future races, nationally or statewide. While she has said she won’t run for president in 2016 and signed a letter encouraging Clinton to do so, she’s also seizing on speculation about her future to advance her causes.

Asked by reporters on Dec. 4 if the presidential speculation hurts or helps her consumer-oriented legislative proposals, she said: “I’m glad to see any possible energy put behind those fights.”

Related: Elizabeth Warren Versus the Think Tanks

After rising to prominence as a critic of the housing and financial industries during the 2008 financial collapse, Warren became the architect for the Obama administration of the Consumer Financial Protection Bureau, created by the 2010 Wall Street Reform and Consumer Protection Act. After she failed to secure the top job at the bureau, Warren won her Senate seat by challenging Republican incumbent Scott Brown in 2012.

At her first appearance as a member of the Senate banking committee in February, she asserted that Wall Street firms had become “too big for trial” and, at a March hearing, she criticized regulators because no one went to jail after HSBC Holding Plc operations in the U.S. admitted to enabling Mexican and Caribbean drug cartels to launder billions of dollars.

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Wal-Mart names McMillon to replace Duke as CEO

(Reuters) – Wal-Mart Stores Inc (WMT.N) named the head of its international division, Doug McMillon, to replace Chief Executive Mike Duke, who will retire on January 31 after five years at the helm of the world’s largest retailer.

McMillon, a 47-year-old Wal-Mart veteran, will take charge after the holiday shopping season at a time when the company is facing intense competition from dollar stores and other discounters, such as Target Corp (TGT.N).

Doug McMillon, President and CEO, Wal-Mart Stores Inc. International, speaks to shareholders during Wal-Mart Stores Inc's annual general meeting in Fayetteville, Arkansas in this file photo from June 3, 2011. REUTERS/Sarah Conard/Files

“McMillon was responsible for the growth area for Wal-Mart – international sales – and that’s why he got the nod,” said Walter Loeb, president of retail consultancy Loeb Associates.

Wal-Mart, whose shares rose 0.5 percent in early trading, has missed Wall Street estimates for U.S. comparable sales for three quarters in a row.

McMillon, currently CEO of Wal-Mart’s second-largest operating unit, will start in his new role on February 1, the company said in a statement on Monday.

Originally from Jonesboro, Arkansas, McMillon joined Wal-Mart in 1984 as a summer employee in a distribution center. After studying for an MBA degree, he rejoined the company in a Tulsa, Oklahoma store in 1990.

He was promoted to his current role as head of Walmart International in January 2009. Prior to that, he was president and CEO of the company’s retail warehouse chain, Sam’s Club.

“McMillon has done just about every job there is (at Wal-Mart),” said Joe Feldman, analyst with Telsey Advisory Group.

“He’s a good fit culturally and, as a young 47-year-old, there’s an opportunity to be there for a long time,” he said.

Duke, 63, will continue as chairman of the executive committee of the board and stay on as an adviser to McMillon for a year.

During his five-year tenure as chief executive, Wal-Mart’s share price has risen by just over half, underperforming a more-than doubling of the S&P 500.

Duke’s salary for the fiscal year ended January 31, was $1.3 million, while his total remuneration was $20.7 million, according to a regulatory filing in April. McMillon’s total compensation for the period was $9.6 million.

Wal-Mart did not give details of his future salary as CEO.

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Gensler Rushes to Lock in Swap Rules as Wall Street Pushes Back

According to Bloomberg,

Gary Gensler has only weeks left as chief of the Commodity Futures Trading Commission. His message for Wall Street: I am not leaving quietly.

As the clock ticks down, Gensler has issued more than a dozen advisory opinions directed at reining in the largest financial firms and swap traders without votes by his fellow commissioners. He’s also insisting on tightening the Volcker rule ban on proprietary trading by banks, making last-minute demands that could derail a regulation that must be approved by five U.S. agencies.

Banks reeling from his final push have consulted with lawyers about whether to take the CFTC to court, according to four people briefed on the matter.

Gensler, 56, has fought a five-year battle with the industry over how to draw up a safer and more open marketplace for derivatives, the products that helped push the world economy to the precipice in 2008. Gensler is trying to cement his legacy, said Fred Hatfield, a former Democratic commissioner at the agency.

Gensler is “trying to do an awful lot in a very short amount of time,” said Hatfield, who now works at Patomak Global Partners LLC, a regulatory consulting firm in Washington. “He’s leaving as little to chance as could be possible.”

President Barack Obama has nominated Timothy Massad, 57, a Treasury Department official, to succeed Gensler, whose term has expired and must leave by the end of the year.

Chess Match

The activity in recent weeks has set up the equivalent of a high-stakes chess match between Gensler and the financial industry, which was holding off negotiating on some rules until he left, according to two people involved in the discussions. They and the others interviewed for this story spoke on condition of anonymity because their meetings were private.

The agencies that must sign off on Volcker also have been dealing with Gensler’s last-minute bargaining tactics. All five regulatory agencies don’t have to issue the rule simultaneously, and in light of Gensler’s questions some have discussed whether to press ahead and publish the rule without waiting for the CFTC to act, the Wall Street Journal reported yesterday, citing sources familiar with the process.

A former Goldman Sachs Group Inc. partner, Gensler is well-schooled in the ways of Wall Street and has emerged as one of its main adversaries in Washington. In implementing the derivatives rules mandated by the 2010 Dodd-Frank Act, he often takes an issue to the brink before striking a deal that is more amenable to the industry than what he first proposed.

 

 

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Forget data and rhetoric, Fed liquidity’s the only show in town

(Reuters) – For all the fevered speculation about when the Federal Reserve will begin scaling back its monetary stimulus, market volatility has been taking a leisurely nap, suggesting investors see no major shocks on the horizon to derail their bets.

Low market volatility is a sign markets expect no “taper” any time soon, or that they are steeled for a reduction in the pace of the Fed’s bond-buying if it comes.

The sun rises to the east of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

The sun rises to the east of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

The sting of the taper has been gradually sucked out of markets since the Fed’s surprise decision not to start withdrawing stimulus in September.

Since then, implied volatility in U.S. Treasuries, stocks and key dollar exchange rates has sunk close to its lowest in months, or in some cases years.

This might come as a surprise, given the noise surrounding the latest relatively upbeat U.S. employment and economic growth figures and the keenly awaited congressional testimony from Fed Chair-elect Janet Yellen last Thursday.

But the Fed’s $85 billion-a-month asset purchase program trumps everything, and as long as the liquidity taps are open, the economic data will only have a real impact on markets if it changes the Fed’s thinking.

“We’re not trying to follow the twists and turns of the very short-term investment cycle,” said Kevin Gardiner, head of global investment strategy at Barclays Wealth in London.

The same goes for data or Fed commentary, he said. Only if they “dramatically changed” the Fed’s policy outlook would he consider altering his strategy.

Market pricing and indicators suggest he’s not alone. Wall Street last week posted record highs on an almost daily basis, and the S&P 500 .SPX and Dow Jones Industrials .DJI have risen for six consecutive weeks.

This has been fuelled by a collapse in volatility from the unusually high levels around the U.S. debt ceiling and government shutdown crisis in early October. The VIX index .VIX of implied volatility for the S&P 500 fell to a three-month low on Thursday.

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