Unlimited bread sticks and disappointing shares helped contribute to the demise of the entire board of Darden Restaurants, Inc. on October 10, 2014. As Steven Davidoff Solomon, a professor at the University of California, Berkeley, School of Law simply put it, “We have an epic fail, the entire board replaced, which almost never, never happens.”
Traditionally, private equity investments such as buy-outs have been investment vehicles open to a restricted asset class—usually large pension funds, insurance firms, and university endowments. Recently, however, private equity fundraising platforms are looking to high-net-worth individual investors to supplement capital funds previously almost exclusively comprised of institutional investors.
On September 6, 2012, European Central Bank (ECB) President Mario Draghi announced a bond-buying program in an attempt to lower the borrowing costs of struggling Eurozone countries (e.g., Spain and Italy) and to prevent the potentially worst-case scenario of a currency breakup. The program, called Outright Monetary Transactions (OMT), targeted government bonds with maturities of one to three years and longer-dated debt with a remaining maturity of that length. Draghi emphasized that the ECB would not have seniority status on the debt and purchases would be fully sterilized, meaning a neutral impact on the overall money supply.
On Monday, October 13, Pershing Square Holdings Ltd., a fund managed by activist investor Bill Ackman, held its initial public offering on EuroNext Amsterdam. The offering, priced at $25 per share, raised $2.73 billion in capital for Pershing Square Holdings, raising its total assets to $3.07 billion and its value to $6.2 billion. Ackman’s Pershing Square Capital Management LP – the parent company of Pershing Square Holdings Ltd. – follows other hedge funds including Brevan Howard Asset Management LLP and Third Point LLC in selling shares of individual funds.
The latest salvo has been fired in the war between U.S. communications providers and the federal government regarding restrictions on how companies may disclose information about big brother’s surveillance of their customers.
Following the U.S. Department of Treasury’s recent announcement to reduce the tax benefits of corporate inversions, the Chicago-based pharmaceutical company AbbVie has advised its shareholders to reject the proposed acquisition of Dublin-based drug maker Shire. AbbVie’s proposed $54 billion acquisition would have been the largest inversion deal in U.S. history.
Blackstone Group LP, the world’s largest alternative asset manager, has announced plans to divest its merger advisory business. The recently announced plans will spin off Blackstone’s financial advisory business with the split expected to be finalized in 2015. Blackstone’s decision to spin off the firm’s oldest division came as somewhat of a surprise in the industry, as Wall Street firms have generally been reluctant to split in the past.
The Royal Bank of Canada was ordered to pay $75.8 million in damages to former shareholders of Rural/Metro for failure to disclose conflicts of interest during a buyout. Rural/Metro is a Scottsdale, Arizona based company that provides ambulance and firefighting services to about 700 communities in 21 states. New York-based private equity firm Warburg Pincus bought out Rural/Metro for $17.25 per share following recommendations from RBC investment bankers. Rural/Metro shareholders sued over the buyout, alleging that the company accepted an improperly low offer from Warburg due to advice from conflicted RBC bankers.
Last week, Illiad, a French telecommunications company, announced that it would end its four-month pursuit of T-Mobile, a U.S. wireless provider. This failed, $15 billion-deal ranks among the ten biggest failed deals of 2014 and is just the latest example in a series of failed transactions.
The first LIBOR scandal caused severe commotion in the banking industry after it unveiled the lack of scrutiny banks exercised with respect to the determination of daily interest rates. However, the international banking industry is now facing a potentially bigger scandal than the first LIBOR interest rate catastrophe. This time, the epicenter of the scandal is the FOREX market.