Jes Staley is taking over as head of investment banking at JPMorgan Chase & Co, in line to succeed Jamie Dimon as chief executive of the No. 2 U.S. bank.
“With the credit crisis largely behind us and the economy recovering, the timing was right to begin the succession process,” Dimon said in a statement Tuesday.
Staley, 53, who joined the bank in 1979, returns to the investment banking unit after stints at JPMorgan’s private bank and asset management operation.
JPMorgan said Bill Winters, 48, co-CEO of investment banking, is leaving the company.
The other co-CEO, Steve Black, 57, becomes executive chairman of the investment bank to oversee the transition to Staley as the new CEO.
Staley will report to Black, who will work through a transition period until the end of 2010, the bank said.
Mary Callahan Erdoes, 42, chief executive of JPMorgan’s private bank, succeeds Staley as head of asset management.
Winters and Black were deeply involved in the acquisition and integration of Bear Stearns Cos.
JPMorgan shares were up about 5 cents in premarket trading at $44.86.
(Reporting by Elinor Comlay; Editing by Derek Caney and John Wallace)
Whether or not you’re personally convinced that the recession is just about over, those in the big buck mergers-and-acquisitions game are believers.
Biotechnology stocks, for example, have made dramatic gains because investors consider them ripe for picking. Big drug companies want innovative products in place for an economic revival.
Bristol-Myers Squibb recently bought biotech group Medarex Inc. for $15 a share, or $2.4 billion, about a 100 percent premium for Medarex shareholders.
"There are all these biotechnology companies out there that have been dying throughout the recession and unable to get capital or funding," observed Richard Bove, banking analyst with Rochdale Securities of Stamford, Conn.
Other deals include Walt Disney Co. buying Marvel Entertainment Inc., PepsiCo Inc.’s purchase of Pepsi Bottling Group Inc. and, in energy, Baker Hughes Inc. acquiring BJ Services Co.
In pharmaceuticals, there’s been the Pfizer Inc. deal for Wyeth and Merck & Co. acquisition of Schering-Plough. In technology, there’s the Adobe Systems Inc. deal for Omniture Inc. and Oracle Corp. purchase of Sun Microsystems Inc. In candy, Cadbury Plc has been in play since Kraft Inc.’s hostile bid.
"It’s all a sign you can’t keep a good capitalist down, and eventually greed will overcome fear," said James Paulsen, chief investment officer for Wells Capital Management, Minneapolis. "People are saying, ‘Gee, not only are we not going to have a depression, but it looks like we’re actually going to have a recovery.’"
Stock is still available at a "30-percent-off sale price," and there is excess cash lying around, said Paulsen. "That boatload of cash is on hand at so many companies because nine months ago everyone was saying cash was king — even though they were earning nothing on it," he said.
While he doesn’t expect a red-hot M&A market the rest of this year, he thinks it will continue to noticeably improve.
"It seems like a lot is happening because finally, after the whole economic crisis, some deals are actually getting done," said Jonathan Marino of the M&A Journal in New York. "It’s not driven by availability of money because credit markets are just as frozen as they were in May, but many acquirers have cash on their balance sheets."
Cash lets firms avoid issuing stock or paying high loan costs, he said.
"Some of these deals are tacit indication that the companies can’t grow their businesses much beyond what they are now, so they’re looking to fill some holes with key partnerships," said Paul Nolte, director of investments for Hinsdale Associates in Hinsdale, Ill. "Certain companies reach a ceiling where they are limited in how fast they can grow their revenue organically."
Firms aren’t using their traditional sources of financing, said Nolte. In the case of Kraft, financing for the deal was lined up well in advance of an offer being made.
"It’s really a broad spectrum this year," he said. "We’ve seen deals in the food industry, entertainment, technology and oil industry."
There will be windfalls for some investors. Greatest gains typically fall to those holding shares of the company being bought, especially if there are several competitors due to a hostile bid. Meanwhile, the acquiring firm’s stock often suffers on worries over whether the merger is logical or could stretch finances too thin.
Investors are buying a variety of shares in the likely target industries. Much of the acquisition activity will take place in digestible smaller firms, along with some larger companies if they have strong product lines.
The fact that mining company BHP Billiton has built up $18 billion in cash, for example, has investors looking at its possible acquisition of Freeport-McMoRan Copper & Gold Inc., Potash Corp. or Anglo American Plc.
Nonetheless, everyone is still into low risk these days. Lenders aren’t over-lending, individuals aren’t overpaying for houses, most firms aren’t expanding their business, and assets are still priced for "the depression that wasn’t," Paulsen said.
The 2009 merger environment is "high risk and high reward," according to a recent report by the Transaction Services unit of PriceWaterhouseCoopers. It believes a number of deal makers, including private equity firms, are eager to get back to business. While some companies will merge for survival, others will simply decide it is a good time to combine with a partner to prepare for an uptick in the economy.
Here are the sectors best-positioned for mergers and worthy of monitoring by investors, according to the PriceWaterhouseCoopers partners:
— Technology is "poised for another wave" of consolidation because many of its companies have mature business models and healthy balance sheets.
— Energy is experiencing greater stabilization in crude oil prices. This industry features excellent cash flow and growth prospects that make it a "consolidation hot spot."
— Pharmaceuticals and health care are now in the merger "spotlight," no matter what type of reform may be passed in Washington. Drug companies are seeking to fill their product pipelines through acquisitions, while some health care companies will be realigning their business models to take advantage of a new industry environment.
— Financial services consolidation will be "rampant," driven by mergers of necessity based on the distressed circumstances of some competitors. There will a flight to quality banks in the top one-fourth of the banking industry because they aren’t so hamstrung by government oversight.
Last month, Missouri gambling regulators essentially put the President Casino’s license up for grabs.
Now the company that owns the casino is crying foul.
Pinnacle Entertainment has asked a state appeals court in Kansas City to overturn a ruling by the Missouri Gaming Commission that said Pinnacle must reapply for a license if it hopes to move the President or replace or repair the aging Admiral Riverboat on which it sits.
That ruling, Pinnacle argues in an appeal filed Thursday, essentially revokes the President’s license — one of just 13 allowed in the state — because it ties the casino to the Admiral, which is widely expected to fail its next Coast Guard inspection in July. Pinnacle would like the court to overturn the decision and give it time to fix the President.
It is the latest step in a long discussion over what to do with the casino, which Las Vegas-based Pinnacle bought for $45 million in 2006 as part of its development of Lumi
BlackBerry maker Research In Motion could see its share of the smartphone market eroded by competing devices like Apple’s iPhone, analysts warned on Friday as RIM’s shares plunged 15 percent in wake of a disappointing profit and outlook report.
Analysts again wondered whether RIM would be able to hold its own as it fights an increasingly intense battle for retail and corporate subscribers, even as the economy seems to be stabilizing.
Such worries first surfaced ahead of the iPhone’s launch in the summer of 2007, but RIM maintained it would be unshaken. It continued to post impressive subscriber gains and in late 2008 rolled out the touchscreen-based BlackBerry Storm, its answer to the iPhone.
Now, in wake of a profit and outlook report that fell short of expectations, analysts are again starting to doubt the Waterloo, Ontario-based company will be able to sustain its success.
“RIM is unlikely to maintain its over 50 percent share in North America in the face of increasing competition from Apple, Motorola, and Palm, among others,” Goldman Sachs analyst Simona Jankowski wrote in a note to clients.
“Even in a still-benign competitive environment and with two newly launched products, RIM lost share for the second consecutive quarter,” Jankowski added.
Goldman also cut its rating on the stock to “neutral” from “buy.”
Part of RIM’s strength in the smartphone market is its impressively sized distribution network. Retail consumers and corporate clients can buy the BlackBerry from more than 500 carriers and distribution partners in about 170 countries around the world.
But as the iPhone and other rivals expand their reach, RIM could find itself fighting for previously uncontested territory.
Canada, RIM’s home turf, is a good example. The iPhone is currently available from only one of the country’s Big Three carriers, Rogers Communications.
However, the other two big players — BCE Inc and Telus Corp — are working together on a network upgrade that could let them offer the iPhone as early as next year.
All three carriers currently offer the BlackBerry.
RIM has also historically reported strong growth outside North America, but Jankowski cautioned this could now be stalling.
“A second consecutive decline in international sales tempers our expectations for share gains overseas,” the Goldman analyst wrote.
RIM’s shares were down 15.6 percent at $70.10 on Nasdaq on Friday morning. In Toronto, the stock was down 15.4 percent at C$76.25. The company issued its latest earnings report after markets closed on Thursday.
Leaders of the world’s biggest countries meet on Thursday to seek ways to nurture the recovery from the worst recession since the 1930s and build safeguards against future catastrophes.
President Barack Obama, hosting his first Group of 20 summit, will lay out a massive agenda that includes tackling one of the thorniest problems facing the global economy — how to even out massive imbalances between export powerhouses such as China and the deeply indebted United States.
The sheer volume of problems the two-day summit is set to address — from the lopsided global growth model to climate change, tougher financial regulation and caps on bankers’ pay — means expectations for any near-term action are low.
European Central Bank Governing Council member Axel Weber said on Thursday he still expected the summit to agree on long-term changes to global financial structures, proving more productive than previous meetings.
“I am happy that G20 leaders and regulators have a broad consensus on the issues and on the agenda,” Weber, who is also the chief of the German central bank, told German radio.
The summit in Pittsburgh, which has seen its own economic hardship as its once mighty steel industry lost out to global competitors, is the third G20 gathering since the collapse of investment bank Lehman Brothers a year ago sparked the global recession.
For Washington, however, the top issue at the summit will be its call for coordinated policies that would reduce the world’s reliance on U.S. consumers by boosting consumption in top exporting countries, while debt-laden nations save more.
DON’T COUNT ON U.S. CONSUMER
U.S. Treasury Secretary Timothy Geithner, who is expected to meet with G20 officials on Thursday, said Americans had to save more, meaning that countries that were counting on U.S. demand to drive their own growth would have to look elsewhere.
“If they learn anything from this crisis, it’s that basic imperative,” he said on Wednesday.
Such rebalancing will take a monumental effort, given that China’s private consumption accounts for little more than a third of its economy, while it exceeds 70 percent in the United States or Britain.
By contrast, China’s households saved about 40 percent of their disposable incomes last year, while the U.S. savings rate was just over 3 percent.
Signs of growing support for the principles of a more balanced world economy and curbs on excessive risk-taking by banks have also yet to translate into agreement on how to achieve those goals.
China, whose $585 billion stimulus package largely focuses on boosting domestic investment and consumption, agreed with the idea of more balanced global economic development and more international cooperation on policies.
But Beijing distanced itself from the U.S. suggestion to make the International Monetary Fund responsible for regular monitoring and policy recommendations to G20 members.
Insurer American International Group Inc’s once-desperate financial state has started to stabilize, a government agency said on Monday, as an influential lawmaker said he would look at easing the terms of the insurer’s federal bailout once more.
AIG’s shares shot up, rising more than 16 percent in afternoon trade to $46.44.
AIG, the recipient of billions of dollars in government support, started to show signs of stabilizing in mid-2009, as financial markets improved, congressional investigators said in a report on the status of the government’s assistance to the company.
The insurer was rescued by the government in September 2008, after losing bets that it made on the U.S. housing market threatened to drive the firm into bankruptcy.
Rep. Edolphus Towns, a Democrat who chairs the Government Reform Committee, told staff to take a look at a proposal from former AIG Chief Executive Officer Hank Greenberg that could make it easier for the insurer to repay federal obligations, a committee spokeswoman told Reuters on Monday.
The proposal would cut the government stake in AIG from the current 80 percent and trim interest rates on AIG’s government loan. It also would extend the term of the loan, giving the company more time to repay, the spokeswoman said.
However, it is still unclear whether U.S. taxpayers would ever be repaid fully, or whether AIG could pull off the restructuring of its business, according to the report compiled by the Government Accountability Office (GAO), the investigative arm of Congress.
The GAO said the U allstate insurance.S. government remains exposed to risks, including credit risk and investment risk, which could result in the Federal Reserve and Treasury not being repaid in full. (The GAO’s full report is available here)
Towns’ spokeswoman said the congressman has not yet spoken with the U.S. Treasury Department or the Federal Reserve about Greenberg’s proposal.
A NEW START?
AIG’s total bailout package, already rewritten three times since September 2008, has swelled to as much as $182.5 billion. The rescue includes the government’s purchase of toxic assets to relieve the insurer of billions of dollars in liabilities, and a funding facility that the insurer has yet to draw in full.
AIG currently owes about $80 billion in federal loans.
To repay its debts, AIG has tried to sell off assets; but so far it has raised net proceeds of only $4 billion, hampered by tight credit markets and buyers looking for bargains.
The possibility of a fourth revision to AIG’s bailout appeared to spark the rally in AIG’s stock on Monday, said Jon Najarian, co-founder of optionmaster.com.
He said the bullish sentiment appeared to be driven by retail investors and day traders, with triple the normal volume taking bets that the shares could trade as high as $65 by next month.
Najarian said there were no signs that big institutions were involved in the surge in activity in the shares on Monday.
Neeraj Mehta likes saving money but is turned off by the ultra-low interest rates offered by Canadian banks.
The Richmond Hill resident is one of a growing number of Indo-Canadians seizing on more attractive savings rates at financial institutions in India. Instead of parking his money in a Canadian bank at a fraction of 1 per cent interest, he’s getting higher returns in the country he left more than 30 years ago.
"There you can get 7, 8 per cent," said Mehta, who has a handful of Indian-based accounts. He declined to say how much he has parked abroad and with which banks. But he estimates that people in the community generally send sums in the thousands of dollars.
Banks operating in India, sensing that hunger for higher returns, are actively wooing non-resident Indian clients from all over the world, including Canada. The worldwide Indian diaspora numbers over 25 million with large populations in North America, the United Kingdom and the Middle East.
More than 1.3 million people of South Asian ethnicity live in Canada, with the bulk identifying themselves as East Indian. The community’s biggest concentrations are in Vancouver and Greater Toronto.
Given the size of that potential market, many banks are building entire banking strategies around non-resident Indian, or NRI, clients that include services such as investing and wealth management. HSBC, Canada’s largest foreign bank, recently launched an office in Mississauga dedicated to serving non-resident Indians through its global operations, including its Indian subsidiary, HSBC India.
"The bank, as a whole, is looking at a global Indian strategy as much more than just Indo-Canada or Indo-U.K.," Naina Lal Kidwai, group general manager and country head for India, said during a trip to Toronto. "It is about the Indian who could be anywhere, who could have a business which straddles many continents and the ability for us to provide that for him or her."
Some Indian-based banks are even urging the Reserve Bank of India, that country’s central bank, to raise deposit rates on non-resident accounts more aggressively or to allow banks themselves to determine those rates, according to Indian press reports.
Some experts warn that such NRI savings schemes are not foolproof. Higher returns always entail higher risk, and they say Canadian-based consumers should be aware of that trade-off before sending their hard-earned money to banks overseas.
"They should not proceed down that road – period," said Wendy Dobson, a professor at University of Toronto’s Rotman School of Management. Dobson has written about India’s banking system and argues the average person cannot fully understand the risks posed by potential currency swings.
"The ordinary retail consumer needs a heck of a lot of sophistication to involve themselves in cross-border transactions," Dobson said, adding it would be "irresponsible" to encourage average consumers to partake in the trend.
Still, statistics suggest that growing numbers of non-resident Indians are taking the gamble even though interest rates have fallen during the global recession. Many have a bullish view of the Indian economy’s growth prospects and believe interest rates will begin rising again by the end of this year.
Neeraj Mehta says he’s aware of the risks, but says it’s still worthwhile. He doubts the value of the rupee will fall against the Canadian dollar, especially since India’s economy is forecast to grow by 7 to 9 per cent next year.
"Of course, some (currency) fluctuation is always there," he said, "but I don’t think it will be devaluing as it used to do before."
Non-resident Indians use either their Indian citizenship or a document known as a Person of Indian Origin card as permits to build a deposit base back home. The Indian government first introduced the PIO card in 1999 to give former citizens, along with eligible spouses and children, certain advantages including investment opportunities payday loan lenders. NRI accounts are open to both Indian citizens and PIO cardholders.
Recent data from the Reserve Bank of India show that non-resident Indians deposited $1.89 billion (U.S.) during the three months ended June 30, more than double the $813 million they deposited during the same period last year. Outstanding NRI deposits totalled $44.98 billion on June 30, compared with $42.38 billion at the end of April.
Some of the biggest players in the NRI market include State Bank of India, Bank of Baroda and State Bank of Travancore, along with foreign-based giants such as HSBC India and Citibank India. Others, such as Vijaya Bank and Union Bank of India, are also trying to increase their share of NRI deposits.
For its part, HSBC’s NRI Services has seen more than a 45 per cent increase in deposits from non-resident Indians around the world from June 2008 to June 2009.
In addition to its newly opened Mississauga office for NRI business, HSBC plans to open a similar centre in Australia by year’s end. It also has NRI centres throughout the Middle East, the U.K., the U.S., Hong Kong and Singapore, along with a network of 47 branches in India.
Blake Hellam, a senior vice-president at HSBC Bank Canada, refers to the target market for these services as "global cosmocrats," a trans-national citizenry whose business and personal interests span continents. He said the challenge is to "bank them" from start to finish, and NRI savings products are part of that strategy.
While there are many different types of NRI accounts, many opt for what is known as the non-residential external account, a savings account in Indian rupees. It is designed for clients who have a regular spending pattern in rupees, such as mortgage payments in India or other recurring expenses.
Account holders are able to deposit foreign currency earnings, such as those in Canadian dollars, into that type of account. Both the funds and interest are repatriable, meaning they can always be brought back to Canada. But even Kidwai suggests those account holders ought to be careful they are not doing it for the return alone.
"The person has to be very well-advised that, yes, you can get the high interest rate," she said. "But you also have to be conscious about the foreign exchange risks. And then you take the decision that you want to."
Foreign currency non-resident accounts, however, do not face those same exchange rate risks. Funds in those accounts can be held in foreign currencies.
HSBC also offers resident foreign currency deposits for expatriates moving back to India. Anecdotally, at least, there is some evidence that trend accelerated during the global recession.
"As the Indian economy continues to be vibrant, dare I say more vibrant than many parts of the world, it is attracting talent back far more so than in the past," Kidwai said.
And even though Canadian regulations prevent HSBC from offering Indian mutual funds and insurance directly to North American-based clients, it will readily sell those products to any NRI client who walks into an HSBC branch in India. For the most part, foreigners cannot readily invest in the Indian equity markets.
That’s partly because the rupee is not a convertible currency. NRIs, however, have a "ticket" to invest by way of their ethnic origins.
Even so, Kidwai stresses this clientele is not so foolhardy as to base savings and investment decisions strictly on affection for the motherland.
"They see the rest of the world, they know where they can invest," she said. "They are not investing in India because they love India.
"They invest because the products make sense and because they have the ability to invest."
Financier Danny Pang, who died last weekend while facing U.S. Securities and Exchange Commission charges that he ran a massive Ponzi scheme, likely committed suicide, police said on Friday.
A spokesman for Pang’s family called it “improper and premature” to suggest that he killed himself.
“It appears to be suicide,” Newport Beach Police Sgt. Evan Sailor told Reuters, although he cautioned that the death of Pang, 42, would not be officially classified as such until a formal coroner’s finding.
Coroner’s officials in Orange County, where Pang was pronounced dead at Hoag Hospital in Newport Beach on Saturday after being found unconscious at his home, have said that results from an autopsy were awaiting results of toxicology tests, which would take two to three more months.
An Orange County coroner’s spokesman has said there was no evidence of foul play in the case.
“This was self-ingested, it appears to be most likely some kind of medication,” Sailor said of Pang’s death. “This wasn’t a gunshot or a hanging or anything like that.”
Sailor declined to discuss the circumstances surrounding Pang’s death that led police to that conclusion or disclose whether a suicide note was found.
“Until the coroner actually classifies the death and they clear the case, we’re not going to release any information,” Sailor said.
Pang family spokesman Charles Sipkins said the financier had been taken to the hospital the night before his death because he was not feeling well.
“We will not speculate on the cause of his death,” Sipkins said. “And the speculation that he committed suicide is improper and premature. We look forward to working with, and hearing from, the Orange County Coroner’s Office when they complete their investigation.”
The Wall Street Journal, citing a person close to the investigation, reported in a story on its website that Pang had barbiturates and THC, the active ingredient of marijuana, in his system when he was rushed to the hospital.
Pang was accused by the SEC of operating a massive Ponzi scheme on mainly Taiwanese investors through his Private Equity Management Group LLC and Private Equity Management Group Inc, or PEMGroup.
He was charged in April with trying to hide about $300,000 in U.S. bank transactions from government currency reporting requirements and was free on $1 million bail.
Some of Pang’s personal assets had been frozen and his Irvine-based companies were being run by a court-appointed receiver as the result of an SEC civil lawsuit.
Pang’s trial date was recently pushed back until August 2010. He faced up to 10 years in prison in the criminal case.
(Editing by Bill Trott)
DETROIT — Chrysler Group LLC is getting back into the leasing business in an effort to boost sales, but don’t expect a return to the inexpensive lease deals of the past.
The automaker announced in a statement Wednesday that it will resume leasing for all 2010 Chrysler, Dodge and Jeep models starting today, and it will offer some special deals on selected vehicles through Sept. 30.
Chrysler brand CEO Peter Fong said in the statement that leases will give more options to consumers and will be competitive with the U.S. auto market low interest rate personal loans. The leases will be underwritten by Chrysler’s new preferred lender, GMAC Financial Services.
But the market isn’t as competitive as it once was. As recently as last summer, automakers were using cheap lease deals to clear dealer lots of unwanted cars and trucks.
But now most automakers have cut factory production to match lower sales, and most have record low inventories.
Dubai World, a Dubai government holding company, filed a lawsuit in the United States this week against the former head of a subsidiary it accuses of fraud costing the United Arab Emirates firm millions of dollars.
“This complaint is based on a sinister plan that was orchestrated and carried out by defendant Herve Jaubert,” said the court document. The suit was filed on Tuesday.
Jaubert was the chief executive of Dubai World subsidiary Exomos, which was established in 2004 to design and manufacture submarines, Dubai World said in a separate statement.
“Dubai World is fully confident that the U.S. court will come to the same conclusion as a Dubai court did in April 2009: that Mr. Jaubert misrepresented his ability to design and build submarines to obtain his position as CEO of Exomos, and then used that position to steal millions of dollars from Dubai World,” the firm said in the statement.
“The company is accusing him of fraud, theft and related charges linked to his time as CEO of Dubai World subsidiary Exomos,” it said, adding that the lawsuit was being filed in Florida because that is where Jaubert had fled to from the United Arab Emirates (UAE).
William Hess, a Florida lawyer representing Jaubert, said the allegations were false free credit report and score.
“I think that people are going to find it hard to believe that this multibillion corporation … was duped by Herve Jaubert and it took them years to figure it out,” he said by telephone from Stuart, Florida.
Hess said the lawsuit was little more than a “defensive” move, following Jaubert’s own suit against Dubai World, filed in a Florida state court last week.
Jaubert’s suit alleges Dubai World made promises that it did not keep in addition to false imprisonment, abuse of process and defamation.
Jaubert currently lives in the United States and is about to publish a book, “Escape From Dubai,” about his time at Exomos. (escapefromdubai.com).
Dubai, one of seven emirates in the UAE federation, has been hit badly by the financial crisis with many government and private sector firms facing financial straits.
Dubai World in June hired AlixPartners, turnaround experts advising on General Motors’ GM.UL bankruptcy, to help restructure the group as it faces $59 billion in liabilities.
(Writing by Raissa Kasolowsky; editing by Karen Foster)
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