In Brief: CLO Edition
2018 Jul 21
Today's Top Story
Comcast Pulls Offer for Fox Assets, Ending Bidding War With Disney
Comcast has announced it will end its effort to acquire assets of Twenty-First Century Fox. Both Comcast and Walt Disney fought to acquire Fox's movie studio and television assets. Disney recently outbid Comcast's US$65 billion all-cash offer with a US$71 billion cash-and-stock counter bid, reports CNBC (19 July, Moyer). Comcast CEO Brian Roberts issued a statement congratulating Disney CEO Bob Iger and the Disney team. Comcast said it is now focusing on its offer for Britain's Sky, which is 39 percent owned by Fox. Fox has valued Sky at US$32.5 billion and Comcast has raised its offer to US$34 billion. Investors on Thursday reacted positively to Roberts' decision to pull out of the Fox race, sending Comcast's stock up 2.6 percent amid a broader market decline. The company's shares had been under pressure amid concerns about the deal's potential costs.
Filings Indicate CBS Directors Had Prior Talks on Contesting Redstone Control
Court filings show that even before the current battle over a possible merger with Viacom Inc., CBS Corp. executives and some directors discussed deploying a stock-dilution plan to wrest control of the media company from billionaire Sumner Redstone and his family. Some board members discussed a special dividend, designed to dilute the Redstones' majority stake, with Martin Lipton, the board's veteran corporate attorney. Larry Hamermesh, a Widener University law professor, observes, "They were being on guard and that's part of their jobs as directors." A trial has been scheduled for 3 October in Delaware over whether CBS's board had the power to approve the dilution plan, which reduced the Redstones' voting control of the company from 79 percent to 17 percent. Chancery Judge Andre Bouchard will also rule on whether the Redstones properly countered the board's move by changing CBS bylaws to require 90 percent of directors to approve the stock-dilution plan, reports Bloomberg (18 July, Feeley).
Labor and Employment
Companies Commit to Job Training in U.S. Government Initiative
On 19 July, President Trump signed an executive order aimed at spurring new investments for training Americans to help them secure jobs. More than 15 companies and associations signed the pledge to educate and train American students and workers. They included IBM Corp., FedEx Corp., General Motors, Microsoft Corp., Walmart, and Lockheed Martin Corp. The companies promised to expand apprenticeships, increase on-the-job training, and provide people with opportunities to develop skills to get stable jobs, reports the Wall Street Journal (19 July, Salama, Fuhrmans). In addition, the companies collectively pledged to hire or train more than 3.8 million people over the next five years.
Papa John's Investigating Reports on Corporate Culture
Papa John's is responding to media reports of a sexist corporate culture under founder and previous CEO John Schnatter with an internal investigation. The pizza chain says it will take action if it finds that Schnatter indeed oversaw a culture where women were subject to sexist behavior, reports CBS News (19 July). A Schnatter representative, meanwhile, insists the story contains "numerous inaccuracies and misrepresentations." Papa John's has hired a firm to audit its corporate practices and work culture. A story from Forbes read: "Based on interviews with 37 current and former Papa John's employees—including numerous executives and board members—Schnatter's alleged behavior ranges from spying on his workers to sexually inappropriate conduct, which has resulted in at least two confidential settlements."
Massive Wells Fargo Refunds Under Way
Wells Fargo is reportedly refunding tens of millions of dollars for add-on products, such as pet insurance or legal services, added to hundreds of thousands of customers’ accounts without their understanding. The Consumer Financial Protection Bureau is now investigating the matter. Last year, Wells Fargo disclosed it was reviewing the add-on products, but the number of customers affected was not clear at the time, reports the Wall Street Journal (19 July, Glazer). The add-on products refunds are the latest challenge for the company, which has battled numerous scandals in the nearly two years since it came to light that employees opened as many as 3.5 million accounts without customer knowledge.
U.S. District Judge Throws Out New York Climate Lawsuit
A U.S. federal judge has rejected New York City’s lawsuit to make fossil fuel companies help pay the costs of dealing with climate change. Judge John F. Keenan of United States District Court for the Southern District of New York wrote that climate change must be addressed by the executive branch and Congress, not by the courts. New York named Exxon Mobil Corp., Chevron Corp., BP Plc, Royal Dutch Shell Plc, and ConocoPhillips in its lawsuit, reports Bloomberg (19 July, Van Voris, Crowley).
Novartis Has Frozen Drug Prices in the United States
Novartis has confirmed that it will not raise prices this year in the United States, an announcement made just days after rival Pfizer came under pressure from the Trump administration and opted to defer raising prices on multiple drugs, reports CNNMoney (18 July, Petroff). Novartis CEO Vas Narasimhan commented, "We thought the prudent thing to do was to pull back on any further price increases in 2018 and evaluate as the environment evolves."
Microsoft's Revenue Gets Lift From Cloud
Microsoft has established itself as a viable cloud option for companies, helping it top US$100 billion in annual revenue for the first time. The company has persuaded customers who run Microsoft’s software in their own data centers to mix in cloud services, a business known as hybrid-cloud computing. Building out its cloud business has also driven up shares of the company more than 40 percent in the past year. For years, the company struggled as it wrestled with a slow-growing personal-computer business, which hindered its Windows operating-system franchise, reports the Wall Street Journal (19 July, Greene).
U.S. President Says He's 'Not Happy' With Federal Reserve Raising Interest Rates
U.S. President Donald Trump said he is not happy with the Federal Reserve raising interest rates and suggested the U.S. Central Bank is working at cross purposes with his administration's economic program. Trump added that he did not care that he was breaking precedent for presidents not to comment on the central bank so as to preserve its independence. The Federal Reserve has twice increased rates this year and is forecasting at least two more by the end of December, reports MarketWatch (19 July, Robb).
Executive Pay Surges in the U.S. Inland Northwest
Total compensation for executives at Inland Northwest-based publicly traded companies surged in 2017. According to the annual analysis by the Spokane Journal of Business, average annual total compensation for 40 executives at eight public companies headquartered in the Spokane-Coeur d'Alene area came to US$2.01 million, a 23 percent increase from total compensation for the same group a year earlier. Last year's results are skewed by one-time payments each of Gold Reserve Inc.'s executive officers received in the third quarter that resulted in triple-digit pay increases, ranging from 438 percent to 710 percent, reports the Spokane Journal of Business (19 July, Parish). In 2008, Venezuela expropriated Gold Reserve's primary mining asset, which was expected to be the biggest gold mine in South America once developed. Gold Reserve subsequently sued Venezuela's government, prompting a years-long legal battle that resulted in a judgment in the Spokane company's favor worth more than US$1 billion.
Royal Mail Shareholders Vote Against Executive Pay
Royal Mail’s shareholders rejected the U.K. postal group’s remuneration report at its annual meeting on 19 July. Shareholders are concerned with the contractual entitlements of Moya Greene, Royal Mail's retiring chief executive, who is set to receive a termination payout of more than £900,000. The company indicated another issue was the compensation of Rico Back, its incoming chief, who will have a base salary 17 percent higher than his predecessor at £640,000. Investors in London have shown greater willingness recently to target companies over perceived excessive pay, reports the Financial Times (20 July, Pooler, Mooney).
Corporate Social Responsibility
Starbucks' 'Signing Store' Will Allow Deaf Customers to Order Using Sign Language
In October, Starbucks is opening its first U.S. cafe staffed by employees who are partially or fully deaf and capable of communicating in American Sign Language (ASL). The company is converting an existing Starbucks location in the nation's capital near Gallaudet University into what it calls a "Signing Store." The chain will hire up to 25 people who know ASL. The National Association of the Deaf applauded the decision, reports USA Today (19 July, Meyer).