United States of America

Pampered board shares blame for Chesapeake fiasco

9 May 2012

On paper the gas company appears to have a good mix of directors. But they didn’t just fail to stop CEO Aubrey McClendon’s excesses - they often approved. Time constraints and bumper pay and perks may have helped keep them subservient and led to them failing shareholders, too.

Judges can be tough without getting personal

9 May 2012

Few can chill U.S. business spines faster than Delaware’s Leo Strine. He honors a tradition of tart lectures from the state’s bench. But his scolding of Martin Marietta and its spin doctors, though on target, sounded catty. Too much of that and he could leave his audience cold.

GSK’s hostilities may follow Genentech playbook

9 May 2012

Britain’s biggest drugmaker is bypassing the Human Genome Sciences board with its $2.6 bln offer - and has implied the price is firm. The GSK-HGS links probably rule out a white knight. But echoes of Roche’s 2008 tilt at Genentech suggest there may yet be a sweetener.

Boardroom gamblers roasted by their own hubris

9 May 2012

Shareholders’ guardians ought to have some skin in the game. But the chairman and lead director of coffee maker Green Mountain threw caution to the wind by piling leverage on their holdings. Their downfall should be a lesson to others.

Cash-flow drain puts Chesapeake on fire-sale alert

8 May 2012

The ailing gas driller once again promises financial discipline and is braced for $20 billion of asset sales. But the firm’s forecasts for gas prices, capital expenditure and cash flow are both too rosy and too contradictory. That means more family silver will have to go.

U.S. mortgage vehicles need to come out of shadows

8 May 2012

The Fed’s low interest rates are manna for mortgage REITs that borrow cheaply to buy home-loan bonds guaranteed by Fannie Mae and Freddie Mac. But the $265 bln sector relies on short-term repo borrowing - widely exposed as dangerous in the 2008 crisis. Something has to give.

Facebook reality tops out near bottom of IPO range

8 May 2012

The social network is aiming for an IPO at $28-$35 a share, for a value up to $96 bln. Though the final price could go higher, that’s a ratcheting down of expectations. But an update of Breakingviews’ DCF calculator shows that sanity is still at the low end of the valuation scale.

Carlos Slim pays up for foothold in Europe

8 May 2012

The Mexican tycoon wants to boost his stake in KPN to 28 pct and offers a 23.5 percent premium in a $3 bln-plus deal. Investors in the ailing Dutch telecoms operator haven’t had such good news in a while. But Slim’s move is hard to read: KPN stock is cheap for good reasons.

Wall Street bigwigs show good side of greed

7 May 2012

Lloyd Blankfein, CEO of long-term greedy Goldman Sachs, and hedgie Steven Cohen are among those aboard the Intrepid in New York discussing how to help U.S. veterans. Though it’s occasionally just PR, even away from the spotlight many among the 1 pct do try to spread the wealth.

Outside backers could tame U.S. law firm excesses

7 May 2012

Big shops like Dewey & LeBoeuf run on an eat-what-you-kill basis, rewarding self-interest over loyalty. Investors prefer more stability and financial discipline. Giving non-lawyers stakes in firms would require new ethics rules, but might help avert Dewey-like train wrecks.

When shareholder democracy trumps the real thing

7 May 2012

Motions on the ballots at BofA and 3M this week give investors an opportunity to rectify the Supreme Court’s flawed Citizens United decision. Moreover, voting to restrict the use of corporate money in political campaigns isn’t just morally right, it’s also good business.

Chesapeake and partner wobble together

7 May 2012

The troubled gas firm needs cash. But its woes make it harder to tap one of its favorite sources, Chesapeake Midstream, a partnership it controls. Last year it bought $900 mln of its parent’s assets. Chesapeake’s governance and liquidity concerns may limit its ability to help.

China joins Europe as weak link in Asian trade

7 May 2012

Asia’s exports to the U.S. are rebounding, offsetting a sharp slide in shipments to Europe. Recovering American demand normally means more exports to China’s factories. But as Beijing reins in the economy, it needs fewer raw materials, parts and machinery from its neighbours.

India and U.S. try for uneasy alliance over Iran

7 May 2012

A visit from Hillary Clinton on the same day as a trade mission from Tehran highlights the diplomatic tightrope that New Delhi is on. While good U.S. relations are important, India’s trade deficit makes Iran’s cheap oil too attractive to pass up. A compromise looks likely.

Buffett Rule divides Berkshire Hathaway faithful

6 May 2012

Ideological squabbling marred the annual Omaha love-fest this year. Ice-cream bars and newspaper tosses weren’t enough to distract shareholders angry about the politically charged tax plan with Warren Buffett’s name on it. It may even be an unplanned liability to Berkshire.

M&A spin doctors take a thumping on the record

6 May 2012

Judge Leo Strine has called them out for blabbing confidential data in Martin Marietta’s hostile $5.3 bln offer for rival Vulcan. The sand and gravel outfit will pay the price of an order blocking the bid. But the reputation of deal flacks may also take a lasting hit.

Review: Exxon’s shareholder fetish, good and bad

4 May 2012

A single-minded devotion to shareholders has helped the oil giant earn high returns. But Steve Coll’s “Private Empire” shows how this obsession also made it easy to make some bad decisions: cozying up to nasty regimes and a crusade against global warming science.

Too much transparency could muddy trading waters

4 May 2012

Wall Street critics tout more disclosure as a universal good. Often, they’re right. But new rules for the $700 trln derivatives market could prove the exception. These risk handing savvy traders some easy profits while pushing up costs for others. That loophole needs plugging.

China throws a juicy bone to foreign brokers

4 May 2012

The likes of Goldman Sachs and Morgan Stanley will be able to own 49 percent of their China securities ventures, from 33 percent. It still doesn’t match the heavy lifting they do, but is progress. Given the securities market’s potential, the extra investment should be worth it.

U.S. gains leverage from Chen Guangcheng fight

4 May 2012

Chinese leaders may be irritated at the American willingness to protect the blind lawyer, and Beijing doesn’t want the U.S. embassy to become a refuge for dissidents. But fear of global shaming on human rights will make Beijing more pliable in economic and political conflicts.