What Will Trump Do in Davos, if He Comes: DealBook Briefing

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What Will Trump Do in Davos, if He Comes: DealBook Briefing

2018-01-22 17:17:31

John Kelly, H.R. McMaster and Gary Cohn (if Mr. Trump goes)

That’s a big delegation for a populist leader to send to a hotbed of global elitism.

Hot topics at Davos

• Populism — though, Mr. Trump aside, anxiety is on the wane (NYT)

• How long the world’s economies can continue to expand (NYT)

• How to respond to cyberwarfare by the likes of North Korea (NYT)

• How to improve women’s standing in the world, with several top women leaders in attendance (NYT)

• Big tech companies’ image woes (FT)

• France’s efforts to woo business leaders, including a pre-Davos summit at Versailles that will be attended by Jamie Dimon and Sheryl Sandberg (Reuters)

Morgan Stanley’s statement on Harold Ford:

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Dan Loeb keeps the pressure on Nestlé

Since Mr. Loeb’s Third Point emerged as an investor in the Swiss food giant, Nestlé has sold off its U.S. confectionary business, named new directors and bought Blue Bottle coffee.

All of those have been great moves, according to the hedge fund. But there’s more to be done, Third Point wrote in its latest letter to investors.

From the investor letter:

These actions are important steps in the right direction that make it clear that Nestlé is responding to calls for action. While we recognize that Nestlé has certain unique cultural and structural constraints, we hope now that Dr. Schneider has completed his first year and there is new blood on the Board, the company is able to move with greater alacrity.

What Third Point wants

• Better demonstrate that the company is focused on “nutrition, health and wellness,” with the implication being to divest products like ice cream and frozen pizza.

• Buy back more shares.

• Again consider selling the L’Oreal stake, something Nestlé has been loath to do historically.

— Michael J. de la Merced

Charles Kushner isn’t worried about Robert Mueller

The father of Jared Kushner, who is again working at the family real estate business — this time without a title — told the WaPo in an interview that the Kushner Companies hasn’t been a target of the Russia investigation so far and hasn’t had problems getting financing.

More from the article by Michael Kranish of the WaPo:

“All I know is that we are not at all concerned, and we are cooperating,” Kushner said in a half-hour interview at his headquarters at 666 Fifth Avenue. “And they can knock themselves out for the next 10 years reading those papers as far as I’m concerned.”

The elder Mr. Kushner also lamented the amount of criticism that his son, a senior presidential adviser, has taken:

“I try not to focus in my life on the haters but it’s just, I have never seen anything like this,” Kushner said.

— Michael J. de la Merced

A.I.G. becomes a big acquirer once again

The insurer’s $5.56 billion deal to acquire Validus Holdings signals that the company is increasingly looking outward, instead of inward, as it had done since its bailout during the global financial crisis. Validus is A.I.G.’s biggest acquisition by far over the past decade, according to Standard & Poor’s Global Market Intelligence.

The transaction is expected to bolster the A.I.G.’s general insurance business, by adding a reinsurance platform, an insurance-linked securities asset manager and “a meaningful presence” at the Lloyd’s of London marketplace.

Here’s what Brian Duperreault, A.I.G.’s chief executive, said:

“Validus is an excellent strategic fit for AIG, bringing new businesses and capabilities to our General Insurance operation, expanding the bench of our management team and deepening our underwriting expertise.”

The details

• Validus shareholders would receive $68 a share in cash.

• Shares of Validus closed Friday at $46.72, meaning the deal represents a 46 percent premium.

• The transaction is expected to close in mid-2018.

The advisers

For A.I.G.: Citigroup, Perella Weinberg Partners and the law firm Debevoise & Plimpton

For Validus: JPMorgan Chase and the law firm Skadden, Arps, Slate, Meagher & Flom

— Chad Bray

Celgene continues its deal streak with Juno

In offering to buy the Juno shares that it doesn’t already own for about $9 billion, Celgene is adding a maker of blood disease treatments. Perhaps more notably, it shows that the biopharmaceutical company is still on the hunt for more acquisitions.

Remember that earlier this month, Celgene agreed to pay up to $7 billion for Impact Biomedicines, which also makes a treatment for a kind of blood cancer.

Celgene, which is based in Summit, N.J., already owns about 9.7 percent of Juno’s shares.

Here’s what Mark Alles, Celgene’s C.E.O., said:

“The acquisition of Juno builds on our shared vision to discover and develop transformative medicines for patients with incurable blood cancers.”

The details

• Celgene would pay $87 a share in cash for each share of Juno.

• Juno’s shares closed on Friday at $67.81, meaning the deal is at a 28 percent premium.

• The transaction is expected to close in the first quarter.

The advisers

For Celgene: JPMorgan and the law firms Proskauer Rose and Hogan Lovells

For Juno: Morgan Stanley and the law firm Skadden

— Chad Bray

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Zach Gibson for The New York Times

Why markets should worry about a long shutdown

From a recent note by analysts at Pantheon Macroeconomics:

We would be astonished if Congress could not cobble together a majority of the sane in order to prevent a default. But astonishment has been quite common in response to events over the past couple of years, so investors would be well-advised to rule out nothing, however outlandish.

Here’s more on the damage from a prolonged shutdown from the NYT.

Where things stand

A group of moderate lawmakers is still working on a compromise. The Senate majority leader, Mitch McConnell, has scheduled a vote on a temporary funding bill for noon E.T. today, though it’s unclear whether it will pass.

Elsewhere in Washington

• Wilbur Ross has fallen from Mr. Trump’s graces because of a perceived inability to strike good trade deals and a propensity to sleep in meetings. (Axios)

• How Jared Kushner became a focal point for China’s diplomatic outreach to the U.S. — and stirred up the worries of U.S. officials. (New Yorker)

• Deutsche Bank has flagged bank accounts tied to the Kushner family for “suspicious transactions” and referred the matter to German authorities — and may send its information to Robert Mueller as well, according to Manager Magazin of Germany. (Manager, Mother Jones)

Corporate profits are shrinking. What gives?

The tax overhaul signed into law last month is muddying the fourth-quarter earnings picture.

Improving corporate profit have been a pillar of the current rally, and analysts have forecast robust earnings growth in the coming months as the global economy gained momentum.

Yet with 11 percent of S&P 500 companies having reported four-quarter results, profits have slipped 0.2 percent from a year ago. That’s well below the 10 percent analysts expected ahead of earnings season.

So what gives? The tax law.

Large financial firms, which have made up the bulk of companies reporting thus far, have taken big one-time, tax-related charges. Profits for financial firms in the S&P 500 fell $29.2 billion, or 57 percent. Citigroup accounted for 73 percent of that decline. John Butters, a senior earnings analyst at FactSet, writes:

“Prior to the earnings release, many analysts had not updated their EPS estimates to reflect the impact of the charge. However, since the majority of analysts covering Citigroup provide EPS estimates to FactSet on a GAAP basis, the tax charge was included in the actual EPS for comparison.”

Exclude Citi, and the earnings growth rate for the S&P 500 would improve to 7.9 percent from -0.2 percent.

Two points of note:

“While some of the biggest banks are reporting fourth-quarter earnings hits stemming from the new tax law, they see rich benefits over the long term, including effective tax rates that are even lower than the new 21 percent corporate rate,” as NYT’s Jim Tankersley reported last week.

As the fourth-quarter earnings growth rate has fallen over the last week for S&P 500 companies, profit expectations for 2018 have risen.

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Dado Ruvic/Reuters

Facebook isn’t certain it’s good for democracy

Here’s what Samidh Chakrabarti, a product manager at the tech giant, wrote in a post on the company’s Hard Questions blog:

Facebook was originally designed to connect friends and family — and it has excelled at that. But as unprecedented numbers of people channel their political energy through this medium, it’s being used in unforeseen ways with societal repercussions that were never anticipated.

Mr. Chakrabarti added that while the company was slow to address Russian interference in the 2016 presidential election, it’s working to prevent it happening again.

More news from Facebook

• It spooked some publishers again by saying it would let users rank the trustworthiness of news outlets. (NYT)

• And its recent News Feed changes may reflect its video ambitions, some ad agencies said. (NYT)

The tech flyaround

• SoFi is courting Anthony Noto, Twitter’s chief operating officer, who is its most senior full-time employee. (Recode, WSJ)

• Inside Amazon Go, the e-commerce giant’s cashierless Seattle store, where our colleague tried unsuccessfully to shoplift in the name of journalism. (NYT)

• Marc Benioff of Salesforce said of noxious cultures at start-ups, “When I see that product is the number-one thing, the only thing that matters, that’s a real red flag.” (FT)

• Tim Cook, visiting a school in Britain, told pupils he wouldn’t let his nephew use social media. (Guardian)

The deal flyaround

• The luxury goods maker Richemont offered as much as $3.4 billion to buy the rest of Yoox Net-a-Porter. (NYT)

• Archer Daniels Midland has made a takeover approach to the agriculture trader Bunge, potentially creating a showdown with Glencore, according to unidentified sources. (WSJ)

• Elliott Management is pushing for a higher takeover price for Starz than the $4.4 billion Lionsgate agreed last year. (NYP)

• The French drug maker Sanofi will buy Bioverativ, which makes a hemophilia drug, for more than $11.5 billion. (WSJ)

• Carl Icahn has teamed up with Xerox’s third-biggest investor, Darwin Deason, to push for a sale, according to unidentified sources. (WSJ)

• Ferrero’s $2.8 billion deal to buy Nestlé’s U.S. confectionary brands is a clear sign of a generational and cultural change at the Italian company. (FT)

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Lucas Jackson/Reuters

Someone believes in Jes Staley

It’s Tiger Global. The American hedge fund has quietly acquired a 2.5 percent stake in Barclays, worth more than $1 billion, according to the FT.

More from the FT’s Martin Arnold and Miles Johnson:

Tiger Global appears to back Mr. Staley’s view that the bank’s 40 percent discount to book value is unjustified after it recently completed its multiyear restructuring and sold off most of its African operation to address longstanding concerns about its capital levels.

UBS’s turnaround hits a bump

The Swiss bank reported 488 million Swiss francs ($508 million) in fourth-quarter pretax income, missing analyst expectations.

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Thousands of protestors went to the National Mall in Washington on the one-year anniversary of the Women’s March.

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Leah Millis/Reuters

Has #MeToo made inroads on Wall Street?

Omeed Malik, one of Bank of America’s top liaisons to the hedge fund world and a confidant of Jon Corzine, has left the firm after an internal investigation into a young female analyst’s accusation of inappropriate sexual conduct.

More from Jessica Silver-Greenberg and Matt Goldstein of the NYT:

Officials from human resources interviewed as many as a dozen people who have worked with Mr. Malik. He left roughly two weeks before annual bonuses were to be handed out.

Why haven’t more Wall Street cases come to light? Arbitration, primarily. But a discrimination lawyer told the WSJ, “We’re getting quadruple the calls ever since Harvey Weinstein.”

The misconduct flyaround

• How to practice so-called gender-lens investing and support women in the workplace. (CNBC)

• The Sundance Film Festival, Harvey Weinstein’s old stomping ground, is now a showcase for women. (NYT)

• Representative Patrick Meehan, a Pennsylvania Republican who has taken a leading role in fighting sexual harassment in Congress, used taxpayer money to settle a misconduct complaint of his own. (NYT)

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An employee at a Bitmain facility in Inner Mongolia, one of the biggest Bitcoin farms in the world.

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Giulia Marchi for The New York Times

Can Bitcoin mining go green?

Right now, the computation to “produce” a new Bitcoin uses as much energy as an American household consumes in two years, according to analysts at Morgan Stanley and the economist Alex de Vries. Some in the virtual currency community are looking for ways to reduce that figure.

Here’s what Vitalik Buterin, the creator of Ethereum, told Nathaniel Popper of the NYT:

“I would personally feel very unhappy if my main contribution to the world was adding Cyprus’s worth of electricity consumption to global warming.”

Some, however, say an independent, decentralized monetary system is worth the cost.

The virtual currency flyaround

• Louis Dreyfus has teamed up with ING and ABN Amro of the Netherlands and Société Générale of France to create a blockchain platform for agricultural trading. (Bloomberg)

• Bitcoin could lose 90 percent of its current value, predicts Peter Boockvar, a veteran Wall Street investor. (CNBC)

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Boone Pickens on his Mesa Vista Ranch

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Tom Fox/The Dallas Morning News, via Associated Press

Quote of the day

“I truly believe I was put on this Earth to make money, but also to be generous with it.”

— T. Boone Pickens to the NYT, as the investing tycoon steps back from business and focuses on philanthropy.

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