In Brief: CLO Edition
2018 Sep 22
Today's Top Story
Proxy Fights in Canada Heat Up
The number of proxy fights in Canada is increasing this year as activist investors attempt to gain control of underperforming companies, according to Kingsdale Advisors. Canada has had 29 proxy battles over the past year, 13 of which have yet to be determined, according to the advisory firm, which advises both activists and boards of directors. By this time in 2017, there had been 21 public contests and there were 32 in the entire year, reports the Toronto Globe and Mail (20 September, Jones). Activists have been successful in achieving their objectives half the time this year, down from 63 percent in 2017, the firm said. Meanwhile, in the United States, activists have come out the winners 72 percent of the time, Kingsdale said.
Ford Told to Pay Thai Customers for Transmission Woes
Ford Motor must pay 291 customers a total of about US$720,000 in compensation for selling cars with faulty transmissions, according to a Thai court order. Most of the plaintiffs in the class action suit will get payments of US$800 to US$8,000 each depending on the number of times and length of time their cars took to be repaired, reports the Associated Press (21 September, Vejpongsa). In a statement, Ford said it respected the court’s verdict.
Mergers and Acquisitions
AT&T Seeks to Have Merger Challenge Rejected
AT&T has asked a federal appeals court to reject the U.S. Department of Justice’s (DOJ) challenge to its acquisition of Time Warner, reports Reuters (20 September), saying the government had offered no basis for second guessing key conclusions of a ruling upholding the transaction. The DOJ is appealing U.S. Judge Richard Leon's ruling earlier this summer that AT&T’s US$85.4 billion acquisition of Time Warner could proceed. Opponents have argued that it would result in higher prices for the general public and was illegal under antitrust law. AT&T has pledged to manage Time Warner's Turner cable television networks as part of a separate business unit until either February or the conclusion of the government's appeal. AT&T's legal brief said the government had not met its burdens.
Adobe to Buy Marketo
Adobe Systems has inked a US$4.75 billion deal to acquire Marketo from private equity firm Vista Equity Partners Management, reports Reuters (20 September, Sharma, Baker). Adobe is sharpening its focus on the rapidly growing cloud business currently dominated by Microsoft, Oracle, and Salesforce. Marketo's business-to-business marketing applications will complement Adobe's digital marketing business. The deal is on track to close in the fourth quarter of Adobe's fiscal year 2018. Marketo CEO Steve Lucas will join the company's senior leadership team and continue to head the Marketo team.
C-Suite Exodus Worsens at Tesla
Bloomberg (20 September, Hull) reports that another Tesla vice president is exiting the company, as Elon Musk struggles to contain an exodus of senior executives. The latest departure is that of Liam O'Connor, vice president of global supply management. O'Connor joined the electric-car maker in March 2015 from Apple Inc. He is at least the fifth senior executive to have resigned from the company within the span of a few weeks. Tesla has lost its chief accounting officer and heads of human resources and communications this month. Justin McAnear, vice president of worldwide finance, is slated to leave early next month as well.
Labor and Employment
Companies Under Review in Victoria Over Workers Rights
The Victorian Government has announced an inquiry into home-delivery services companies like Uber Eats and Deliveroo. These companies have expanded rapidly in Australia and they are part of the emerging gig-economy and on-demand industry; however, they often lack the protections that those in more established sectors have. For example, Icce Mejia was one of the top ranked delivery bike riders with the now defunct Foodora. Mejia, who was required to have a business number and provide his own bike, worked at least 50 hours a week. However as he was racing to deliver more orders—since staff are paid per order—he was involved in an accident when the door of a parked car was opened onto him. The injury happened on the job, but he was given no compensation, as he "didn't work for them" and so had no entitlements or insurance. "As long as we are independent contractors, they use that us against us, whenever something like this happens," Mejia said. The goal of the Victorian Government's investigation is to figure out what legislation is required to better protect workers and consumers, reports abc.net.au (21 September, Willingham).
EU Tells Facebook to Update Its Fine Print
Facebook must change its “misleading terms of service” by the end of the year, or face consumer-protection authorities sanctions, warned Vera Jourová, the European Commissioner for Justice, Consumers and Gender Equality. “We have been in dialogue with Facebook almost two years,” Jourová said. “I want to see not progress—that is not enough for me. I want to see results.” A Facebook spokesman said it has made changes to its terms based on regulators, but will continue to make updates, reports the Wall Street Journal (20 September, Pop, Schechner). Facebook updated its terms of service in the spring, but Jourová said they remain insufficiently explicit about how the company monetizes users’ data.
Lawmakers Pressure Google Over Children's Data
This week, two House members sent a letter to Sundar Pichai, Google’s chief executive, expressing concern that the collection practices of Google subsidiary YouTube may not comply with the Children’s Online Privacy Protection Act, known as Coppa. The letter came after a complaint in April by more than 20 advocacy groups, which wanted an investigation by the Federal Trade Commission. Google is also facing pressure from the New Mexico attorney general on how it may collect children’s location data, claiming that they were sharing children’s data without their parents’ permission. YouTube has said its practices are in line with Coppa. YouTube’s terms of service state that its main app and website are meant only for viewers 13 and older, which means that the site does not have to comply with Coppa. The company directs those under 13 to the YouTube Kids app, which prohibits “interest-based advertising” and ads with “tracking pixels.” Still, advocates argue that YouTube is aware that many children watch videos on the main site, reports the New York Times (20 September, Maheshwari).
Court Overturns Patent Judgment Against Samsung
On 20 September, the New York State Court of Appeals overturned a US$115 million judgment against Samsung Electronics Co Ltd. MPEG LA, a group that owns a pool of patents used in television sets, sued Samsung in 2015 on allegations that the electronics maker had improperly terminated contracts with the group. In January, MPEG LA won a US$115 million judgment against Samsung, reports Reuters (20 September, Nellis). The New York State Court of Appeals overturned the judgment, stating that Samsung’s termination of the contracts was “proper under the plain language of both agreements.”
The Netherlands Proposes Tax Reform
The Netherlands allows big multinational companies to move global profits through Dutch subsidiaries, drastically lowering their tax payments. However, the Dutch position as a tax avoidance center could change soon, reports the New York Times (20 September, Ewing). This week the Finance Ministry submitted proposals to Parliament that would shut down the benefits that made the Netherlands appealing for international corporations—especially American ones, like Netflix and Nike. Under the proposals, the Netherlands plans to enforce levies on profits being transferred to tax havens and to block companies from exploiting inconsistent national laws to take the same deduction twice. “We must be fair in recognizing that some companies are misusing the open tax system that the Netherlands has,” said Menno Snel, the Dutch state secretary for finance. Debate on the measures is expected to continue through December.
EU Leaders Reject May's Post-Brexit Economic Proposal
EU leaders rejected the British government's proposal for how to maintain economic relations with the bloc post-Brexit, reports the Wall Street Journal (20 September, Norman), adding pressure on Prime Minister Theresa May. May went into this week's summit in Salzburg with high hopes the EU would agree to her post-Brexit offer, which would permit British companies "frictionless access" to EU goods and agricultural markets. However, that economic plan was rejected Thursday by the EU. European Council President Donald Tusk said Britain's proposed economic framework "will not work, not least because it risks undermining the single market," adding this was a unified position of all of the other EU member states. May has countered that her proposal is the "only serious and credible proposition on the table."
Amazon Bids for Retail Space in India
Several months ago, Walmart paid US$16 billion for a 77 percent stake in one of India’s top e-commerce sites Flipkart. However, Amazon.com Inc. has upped the ante in its battle with the retailer by partnering with a local private-equity firm that is acquiring one of the largest retail chains in the South Asian nation for more than US$500 million. Amazon said it had joined with India-based Samara Capital to invest in Witzig Advisory Services Pvt., a company that focuses on training and providing facilities staff, reports the Wall Street Journal (20 September, Abrams). According to the announcement at the Mumbai stock exchange, Witzig, which is controlled by Samara, has bought a 99.99 percent stake in Aditya Birla Retail. The deal could give Amazon a claim to the more than 500 stores of Aditya Birla Retail. Still, local regulations restrict Amazon from owning 51 percent or more of a local retailer.