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MONDAY, NOVEMBER 23, 2015TODAY'S TOP HEADLINES | ||||||||||||||||||||
M & A Pearson's Big Paydays Defy the Odds Against Print MediaINVESTMENT BANKING Wall St. Ties Linger as Image Issue for Hillary ClintonPRIVATE EQUITY Pensions Taking Closer Look at Private Equity Performance FeesHEDGE FUNDS Hedge Funds Seek Computer ScientistsVENTURE CAPITAL LivingSocial Offers a Cautionary Tale to Today's UnicornsLEGAL/REGULATORY Fairness of S.E.C. Courts Questioned | ||||||||||||||||||||
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BY SEI CHONG
PFIZER AND ALLERGAN REACH $150 BILLION DEAL Pfizer has reached an agreement to merge with Allergan in a deal worth more than $150 billion, Michael J. de la Merced reports in DealBook. The boards of both Pfizer and Allergan voted on Sunday to approve the transaction, one of the people briefed on the matter told Mr. de la Merced, confirming anearlier report by The Wall Street Journal.
The merger, which is expected to be announced on Monday, is best described in superlatives, Mr. de la Merced writes: It is one of the biggest takeovers in the health care industry, and it is the largest acquisition yet in what is shaping up to be a record year for deal-making activity. But Pfizer's takeover of Allergan, which is based in Ireland, is especially notable because it is the largest transaction "aimed at helping an American company shed its United States corporate citizenship in an effort to lower its tax bill, in this case by billions of dollars," Mr. de la Merced writes. The Obama administration has been trying to discourage these kinds of deals, known as a corporate inversion, which have cost the government billions of dollars in tax revenue over the past few years, and the Treasury Department released rules last week intended to limit such mergers. But Pfizer and Allergan are structuring the deal to sidestep the Treasury rules altogether by making Allergan the buyer, according to the people briefed on the matter, even though Pfizer has a market value of $199 billion to Allergan's $123 billion. The Treasury rules on inversions apply only to American companies that buy foreign ones. Yet Pfizer is expected to take the lead at the combined company, withPfizer's chief executive, Ian Read, retaining that role after the merger, these people told Mr. de la Merced. Allergan's chief executive, Brent Saunders, is expected to take a top deputy role and a board seat. Pfizer shareholders would still own the majority of the merged company. Under the terms of the proposed deal, Allergan shareholders would receive 11.3 Pfizer shares for each of their holdings, the people briefed on the matter said. That is worth about $363.63 a share, or 16 percent higher than Allergan's closing price on Friday. That may cause consternation among some of Allergan's biggest investors, who told The Financial Times last week that anything below $400 a share would be selling the company at a discount. One investor told the newspaper: "If you had said at the start of the year that Allergan would be sold for something that didn't start with a four, no one would have believed you." If the deal is completed, the merger could potentially lead to a breakup of Pfizer, Mr. de la Merced reports. "The bigger drug maker has weighed whether to split into two companies: one dedicated to higher-growth, brand name treatments and one focused on slower-growing mature drugs that face pressure from generic counterparts," he writes. Mr. Saunders of Allergan would be in line to take over one of those companies if Pfizer ultimately chose to break up, the people briefed on the matter said.
PUERTO RICO'S CREDITORS OPEN TO DEBT EXCHANGE Over the weekend, some of the biggest holders of Puerto Rico's debt expressed their support for a government's proposal to exchange the island's existing bonds for new debt that would be less burdensome to Puerto Rico, Michael Corkery reports in DealBook. With a $354 million payment due on Dec. 1, Puerto Rico has been looking for ways to cut deals with the holders of billions of dollars of general obligation bonds in order to avoid a default.
Its proposal, presented at a meeting with advisers to creditor groups on Friday, would roll up most of the island's current debt and restructure it into a new "superbond," people briefed on the plan told Mr. Corkery. As part of that new bond, general obligation holders would have the first claim on government revenue. It is unclear whether bondholders, in return, would be asked to buy into the superbond at a discount, however. A group of about half a dozen hedge funds and other investment firms that own general obligation bonds signaled support for the concept of the government's debt exchange, according to people with direct knowledge of the group's position. Included in that group are Monarch Alternative Capital, Fundamental Credit Opportunities and Autonomy Capital. One of the people briefed on the hedge funds' position said the group saw the proposed debt exchange was "a constructive first step toward forging a solution." Yet the government still has to win over many other creditors and hash out the details of the exchange, so a deal is "far from certain," Mr. Corkery writes.
ON THE AGENDA Tyson Foods will hold a conference call on its fiscal fourth quarter earnings at 9 a.m. GameStop , the video game retailer, will hold its conference call on third-quarter earnings at 11 a.m. The National Association of Realtors releases data on existing home sales for October at 10 a.m.
PETCO CLOSE TO $4.7 BILLION SALE TO CVC AND CANADIAN PENSION FUND CVC Capital Partners and the Canadian Pension Plan Investment Board are near an agreement to buy Petco for $4.7 billion, according to a person briefed on matter, Leslie Picker reports in DealBook. The deal, which is likely to be announced on Monday, was earlier reported by The Wall Street Journal.
If the deal is completed, this would make it the second time that TPG Capital and Leonard Green & Partners have sold the pet food and supplies retailer. The first time they owned the company was in 2000, when they acquired it for $600 million, then took it public two years later. They bought it back in 2006 for $1.68 billion and took it private. Petco had filed to go public in August but was pursuing a sale of itself at the same time. The company's revenue had risen 12 percent in the 26 weeks through Aug. 1 from the same period a year ago, the filing showed, while net income jumped about 43 percent. The company has more than $2 billion in debt.
Contact sei.chong@nytimes.com
MERGERS & ACQUISITIONS »
Pearson's Big Paydays Defy the Odds Against Print Media The sales of The Financial Times and The Economist for about $2 billion cumulatively raise questions about whether the deals will pay off financially for the buyers.
Why Time Warner Should Let Go of HBO James Surowiecki of the New Yorker argues that HBO's current success makes this the perfect time for Time Warner to spin off the company in an initial public offering.
INVESTMENT BANKING »
Wall St. Ties Linger as Image Issue for Hillary ClintonAt a time when liberals are ascendant in the party, some Democrats believe Hillary Rodham Clinton's time representing Wall Street as a senator could become a vulnerability.
Hong Kong Securities Firm Can't Contact Its Chief Shares in Guotai Junan International Holdings, the Hong Kong unit of one of China's biggest securities firms, plunged 12 percent in Hong Kong after the brokerage firm said it could not contact Yim Fung, its chairman and chief executive, Bloomberg News reports.
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PRIVATE EQUITY »
Pensions Taking Closer Look at Private Equity Performance Fees Public pension funds are expected to reveal that private equity firms' performance fees are much larger than previously disclosed, The Wall Street Journal reports.
HEDGE FUNDS »
Hedge Funds Seek Computer Scientists Hedge funds and asset managers are trying to hire computer scientists to sift through "unstructured data" like Internet searches, social media and satellite images, and find overlooked trading opportunities, The Financial Times reports.
Intel Lawsuit Questions Place of Hedge Funds in Retirement Plans A former employee sued the computing giant, saying that big bets on hedge funds and private equity increased costs and hurt participants in the plans, Gretchen Morgenson writes in the Fair Game column.
In Rebuke to Kirchner, Argentines Elect Opposition Leader as President The opposition leader, Mauricio Macri, the 56-year-old mayor of Buenos Aires, has said that he would negotiate with hedge funds over nearly $100 billion of bonds that Argentina defaulted on in 2001.
Money Managers Gloomy on China Prominent money managers, like David Tepper of Appaloosa Management, are losing faith in China's ability to revive its economy, Bloomberg News reports.
VENTURE CAPITAL »
LivingSocial Offers a Cautionary Tale to Today's Unicorns A former darling of the start-up world, the company offers a glimpse of what some of today's biggest start-ups might look like several years down the road.
Start-Up Leaders Embrace Lobbying as Part of the Job Today's tech companies have accepted lobbying as an essential part of doing business.
Saving the World, Startup-Style Governments have spent trillions of dollars helping the poor, without finding a foreign-aid strategy that works. What if they learned to invest more nimbly?
LEGAL/REGULATORY »
Fairness of S.E.C. Courts Questioned Defendants worry they cannot get a fair hearing in an internal court system where the Securities and Exchange Commission wins more often than it does in federal court, The Wall Street Journal reports.
Cuomo Is Said to Struggle Finding Successor to Regulate BanksGov. Andrew M. Cuomo is finding it difficult to line up a permanent successor to lead New York State's Financial Services Department five months after Benjamin M. Lawsky stepped down, The New York Post reports, citing sources.
Bipartisan Bill Would Protect Service Members' Right to Avoid Arbitration A Senate bill would allow service members to opt out of arbitration and challenge repossessions or foreclosures with a lawsuit.
Lynn Tilton's Firm Files Involuntary Bankruptcy for Fund Lynn Tilton's Patriarch Partners XV filed involuntary Chapter 11 bankruptcy petitions against Zohar CDO 2003-1, seeking court protection from the bond insurer MBIA, The Wall Street Journal reports.
John E. Zuccotti, Urbanist and Financier, Dies at 78Mr. Zuccotti was a street-smart urbanist and an unsung hero of New York City's fiscal crisis in the 1970s.
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