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Is Comcast Going to Crash Disney’s Deal With Fox?: DealBook Briefing
Good Monday. Here’s what we’re watching:
• Is Comcast going to play spoiler?
• Why bitcoin tumbled from its highs at the end of last year.
• Apple is just $80 billion shy of $1 trillion.
• Elliott Management offers to buy Athenahealth.
• Catch up on the highlights from Berkshire Hathaway’s annual meeting.
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Is Comcast going to play spoiler?
Shares of 21st Century Fox jumped more than 4 percent Monday evening after Reuters reported that Comcast is preparing to upend Disney’s $52 billion deal to acquire most of Fox’s assets.
According to Reuters, Comcast is holding discussions with investment banks about financing an all-cash deal, but the cable giant is waiting on a judge to rule next month on the Department of Justice’s suit to block AT&T’s acquisition of Time Warner before submitting an offer, Reuters reported.
Context
Rupert Murdoch spurned Comcast last year in favor of Disney. Comcast made an offer for the Fox assets that was 16 percent higher on a per-share basis than the deal Fox struck with Disney. Mr. Murdoch’s camp ultimately decided that a transaction with Comcast “carried a qualitatively higher level of regulatory risk, including the possibility of an outright prohibition, than such a transaction with Disney,” according to a filing with the Securities and Exchange Commission.
Since then, Comcast has moved to complicate Fox’s plan to sell the bulk of its businesses to Disney.
As part of that deal, Disney would buy Fox’s 39 percent stake in the British Broadcaster Sky. Late last month Comcast formally unveiled a $30.7 billion takeover bid for Sky, which Fox had bid $16 billion for the 61 percent it does not already own. Comcast’s bid caused the British broadcaster to withdraw its recommendation for the Fox deal.
Robert Iger, Disney’s chief executive, has described Sky as Fox’s “crown jewel,” and has left Fox with few good options: Revise the terms with Disney to exclude Sky or enter into a bidding war.
Now Fox may soon have another option.
Why bitcoin tumbled from its highs at the end of last year
On Dec. 17, 2017, the price of bitcoin hit a high of $19,511. That capped a remarkable 10-month run for the cryptocurrency, which traded below $1,150 on Feb. 22, 2017.
Since mid-December, the price of bitcoin has retreated. It bottomed out below $6,000 in early February and is currently down more 50 percent from its high.
What triggered the tumble? Researchers at the Federal Reserve Bank of San Francisco blame it on the CME Group’s decision to list bitcoin futures, which allowed investors to bet against the price of bitcoin rising. Bitcoin futures began trading on the CME on Dec. 17, 2017, the same day its price peaked.
The researchers write:
“The advent of blockchain introduced a new financial instrument, bitcoin, which optimistic investors bid up, until the launch of bitcoin futures allowed pessimists to enter the market, which contributed to the reversal of the bitcoin price dynamics.”
“This one-sided speculative demand came to an end when the futures for bitcoin started trading on the CME on December 17. Although the Chicago Board Options Exchange (CBOE) had opened a futures market a week earlier on December 10, trading was thin until the CME joined the market. Indeed, the average daily trading volume the month after the CME issued futures was approximately six times larger than when only the CBOE offered these derivatives.”
Countdown to $1 trillion is back on.
Shares of Apple have risen nearly 16 percent, including a 1.9 percent gain on Monday, the past six sessions. That rally has pushed the iPhone maker’s market value back above $900 billion and just $80 billion shy of $1 trillion.
By Bloomberg’s calculations, Apple’s shares need to climb another 8.6 percent to $203.48 to reach that milestone, a first for a company listed on an American exchange.
Apple’s shares had stumbled late last month as investors grew increasingly concerned that sales of iPhone’s would disappoint. But revenue from the iPhone proved stronger than feared, and the company announced a $100 billion buyback plan.
News that Warren Buffett’s Berkshire Hathaway had increased its stake in the company by $12.5 billion in the first quarter added to the gains.
Apple’s recent run has pushed its market value well above that of its next two biggest rivals in the race to become the first $1 trillion company. According to Bloomberg, Amazon is $222 billion away from $1 trillion, while Google parent Alphabet is $264 billion shy.
Elliott Management offers to buy Athenahealth
Elliott Management offered on Monday to buy Athenahealth for $160 a share, or $6.5 billion.
The offer was made in a letter Elliott sent to the board of the health care software company. The activist hedge fund led by Paul Singer also said it may be “able to substantially improve the proposed price with additional, private diligence.”
Elliot disclosed a year ago a roughly 9 percent economic interest in the company through its ownership of shares and derivatives and said that there were “numerous operational and strategic opportunities to maximize shareholder value.”
In Monday’s letter, Elliott said: “Athenahealth’s potential will never be realized without the kind of operational change that the company seems unable to deliver.”
“Unfortunately, we are faced now with the stark reality that Athenahealth as a public-company investment, despite all of its promise, has not worked for many years, is not working today and will not work in the future. Given Athenahealth’s potential, this reality is deeply frustrating, but the fact remains that Athenahealth as a public company has not made the changes necessary to enable it to grow as it should and to create the kind of value its shareholders deserve.”
Elliott said it approached Athenahealth about the company going private in November.
Shares of Athenahealth rose 18 percent to $149.24 on the news.
In other activist news
Shares of Citigroup rose 1.7 percent after the close on a WSJ report that ValueAct had built a $1.2 billion stake in the lender.
Citigroup has a market value of $175 billion, so ValueAct owns about 0.7 percent of Citigroup.
“The letter doesn’t call for any significant strategic changes, though it does suggest the bank could increase its plan to return cash to shareholders to about $50 billion from $40 billion,” The WSJ reports, citing ValueAct’s letter to its investors.
Berkshire Hathaway is (slightly) less about Buffett
Saturday was the day for the “Woodstock of capitalism” — Berkshire Hathaway’s annual meeting, and a celebration of Warren Buffett — and Andrew joined shareholders, analysts and other journalists seeking to ask the Oracle of Omaha about virtually anything.
Of course, one of the big topics was succession. Mr. Buffett (half-) jokingly said that he was “semiretired,” given that Ted Weschler and Todd Combs now manage about $25 billion, while Ajit Jain and Greg Abel do more day-to-day oversight of the business. But Mr. Buffett still runs about $300 billion worth of investments. Charlie Munger, his longtime business partner, added, “Not much has changed.”
Andrew has more from the meeting: Shareholders applauded a question — which they rarely do — that was critical of Berkshire’s ownership of Wells Fargo. And Mr. Buffett’s response to a gun question and a critique of Elon Musk caused lots of chatter.
Some other highlights from DealBook:
• Mr. Buffett is sticking with Wells Fargo despite its current troubles, and said that its current C.E.O., Tim Sloan, “is correcting mistakes made by other people.”
• He loves Apple — but wants the company, of which Berkshire owns about 5 percent, to keep buying back shares. He had less-kind words for cryptocurrencies, which he said will “come to bad endings.”
• He defended business with the gun industry, reiterating, “I do not believe on imposing my political opinions on the activities of our businesses.”
Behind Nestlé’s $7.2 billion deal with Starbucks
Why is the food giant paying billions in cash for the right to sell Starbucks products in non-Starbucks locations worldwide? Because coffee is Nestlé’s fastest-growing product line — it’s also why it bought a majority stake in Blue Bottle last year — and buying the royalties to Starbucks products will supercharge its efforts.
There’s another possible reason, according to Corinne Gretler of Bloomberg:
The alliance underlines Nestle’s efforts to capture more upscale java drinkers in the U.S., where the maker of Nespresso and Nescafe has been outpaced by JAB Holding. The investment company of Europe’s billionaire Reimann family has spent more than $30 billion building a coffee empire by acquiring assets such as Keurig Green Mountain and Peet’s.
How Michael Cohen made his millions
The federal raid and investigation into President Trump’s fixer has cast a spotlight on Mr. Cohen’s side businesses. Among the most notable aspects is Mr. Cohen’s expansive taxicab empire, encompassing several dozen medallions in New York and Chicago — and racking up tens of millions of dollars in debt.
Then there was this, from the NYT:
In 2016, Mr. Cohen went so far as to dabble in financial engineering. He spoke to investors about pooling distressed loans that financed taxi medallion purchases, repackaging them and selling them to investors, according to a person with direct knowledge of the discussions. He also explored buying up such loans at a bargain price in anticipation that their value would recover, the person said. The outcome of those discussions was not clear.
Another must-read: How the Trump Organization spent over $400 million in cash — much of it apparently from its own coffers — on properties in the nine years before Mr. Trump became president.
In other Trump investigation news: Rudy Giuliani had another, um, freewheeling TV interview. Mr. Trump knew about the $130,000 payment to Stormy Daniels months before denying any knowledge of it. Tom Barrack was questioned by the special counsel’s team. Meet George Conway, Kellyanne Conway’s husband, Wachtell Lipton lawyer and frequent Twitter pundit.
The political flyaround
• The Affordable Care Act isn’t gone, despite the president’s assertions. In some ways, the Trump administration is enforcing it more aggressively than the Obama administration did. (NYT)
• State budgets are looking rosier thanks to the improving national economy, but any lift from the tax cuts may be temporary, analysts say. (WSJ)
• The pharmaceutical industry is preparing to fight a move to rein in prescription drug prices (NYT)
• A closer look at Patagonia’s legal battle with the Trump administration over Bears Ears National Monument. (NYT)
• Don Blankenship, the former Massey Energy C.E.O. now running for a U.S. Senate seat in West Virginia, has been surging in recent Republican polls. (Politico)
• The Trump administration reportedly hired Black Cube, the Israeli investigative firm used by Harvey Weinstein, to collect information on Obama administration officials who worked on the Iran deal.
• As negative press piles up, Scott Pruitt, the E.P.A. chief, has reportedly bunkered down. An E.P.A. official reportedly tried to shop around negative stories on Interior Secretary Ryan Zinke.
What’s next in the U.S.-China trade fight
The Trump administration delegation left Beijing last week without a deal, as expected. But while President Trump continued to call for changes in the trade relationship, China appeared to soften its own combative tone somewhat.
Two new hot spots: China’s ordering 36 airlines to purge their websites of references to Hong Kong, Macau and Taiwan as separate countries, and the setting of global industrial and tech standards.
Elsewhere in China news: ZTE has asked for relief from a U.S. ban on American businesses selling to the Chinese telecom company. WaPo looked at the Chinese operations of Erik Prince, the Blackwater founder. Washington is worried about a wave of U.S. patent applications from Chinese citizens, many reportedly filled with false information.
The oil market flyaround
• Exxon Mobil’s stock may be down, but it is poised to benefit from a recovery in global oil prices. (Barron’s)
• Oil futures hit multiyear highs today as prices cracked $70 a barrel. Saudi Arabia wants oil to reach at least $80 a barrel this year.
What about that other Facebook data?
Aleksandr Kogan wasn’t the only academic to harvest data from Facebook users: Researchers have collected information from the site for more than a decade. But the proliferation of these data sets has made it easier to identify some of the millions of individuals whose information was collected.
More from Sheera Frenkel of the NYT:
One 2015 paper published in the journal Science looked at credit card spending data and found that data scientists could pinpoint 90 percent of the shoppers by name with just four random pieces of information from sites like Facebook, Instagram and Twitter.
Elsewhere in data privacy: What Europe’s new law, the General Data Protection Regulation, means for you. For Margrethe Vestager, antitrust is about data, not market power.
Elsewhere in tech: The YouTube host whose questions Elon Musk preferred over research analysts’ took a shot at Wall Street. Mr. Musk hung up on the chairman of the National Transportation Safety Board amid an investigation into a Tesla crash and also trolled Warren Buffett. The veteran venture capitalist John Doerr speaks on management and A.I.
The deals flyaround
• SoftBank’s talks to invest in Swiss Re are reportedly close to collapsing. (FT)
• Glencore and Qatar aren’t selling their stake in Rosneft to CEFC China Energy after all. (WSJ)
• Investors have quickly soured on Good Doctor, the health care arm of Ping An that went public last week. Shares in the cybersecurity firm Carbon Black rose 26 percent on Friday, their first day of trading.
• Dan Loeb’s Third Point wants United Technologies to consider breaking itself up. The expiration of Jana Partners’s standstill agreement with ConAgra may mean renewed pressure on the food maker.
• Brompton Bikes, the maker of popular fold-up bicycles, has snubbed traditional investor firms for crowdfunding platforms. (FT)
• More than 1,500 items from the estate of Peggy and David Rockefeller are going up for auction, which Christie’s estimates could fetch over $500 million. (Bloomberg)
• Money hasn’t made Steve Schwarzman universally beloved. (NYT)
• How the mission to rebuild Puerto Rico’s power grid stumbled badly.(NYT)
• A legal secretary from Brooklyn left the Henry Street Settlement $6.24 million — the largest single gift from an individual to the social service group in its 125-year history. (NYT)
•The National Rifle Association asked members attending its annual convention in Dallas to “steer clear” of a local restaurant that said it would donate proceeds to help end gun violence. (NYT)
• Robocalls are getting worse. (NYT)
• Should you stop drinking Venezuelan rum? (NYT)
We’d love your feedback. Please email thoughts and suggestions to bizday@nytimes.com.
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