Today's Top Stories Also Noted: Spotlight On... Another plea for breaking up banks News From the Fierce Network:
Today's Top News1. JPMorgan Chase board backing Jamie Dimon
The JPMorgan Chase board, which will soon face a shareholder vote on whether to split the CEO and chairman roles at the bank, has issued a statement in support of allowing Jamie Dimon to continue to serve in both capacities. It recommends that shareholders vote against the proposal put forward by union-affiliate shareholders groups. In a proxy statement, JPMorgan said the current "board leadership structure already provides the independent leadership and oversight of management." While Dimon currently holds the top three jobs--he serves as president as well--nine of the bank's directors are considered "independent," including Lee Raymond, who serves as the bank's "presiding independent director," notes FOX Business. Previously, the news service said that the board was pondering various options, including the possibility that director Lee Raymond, former Exxon CEO and an influential director, might become chairman. That possibility still exists, but it will have to come via a vote at the upcoming annual meeting. The board has faced this sort of vote before. Last year, about 40 percent of voting shareholders cast their vote in favor of a CEO/chairman split. This year, the environment in which the vote will take place is radically different, coming in the wake of a damning Senate report on the conduct of management, including Dimon, as the London Whale "hedging" fiasco unfolded. The media attention this year will be more intense, and perfunctory events may get more play. For example, ISS and Glass Lewis will likely come out in favor of passing the resolution. That would be entirely expected, but given the high profile nature of the vote this year, it might help generate even more media interest, all of which will play to the benefit of those in favor of splitting up the two jobs. Even if the board prevails, a high percentage of votes in favor of the proposal, may prompt it to act. For example, it could appoint a lead outside director or something similar. For more: Related articles: Read more about: chairman, CEO succession
2. More pressure on prosecutors to charge JPMorgan Chase
On the surface, JPMorgan (NYSE:JPM) is now in the same position that Goldman Sachs was in the aftermath of the contentious, quite damning report by a Senate subcommittee back in 2011. In both cases, investigators were convinced that crimes had been committed and made a public recommendation that prosecutors file charges. But there are some differences too. In the Goldman Sachs case, the recommendation was that the Justice Department file charges of perjury against Goldman Sachs executives for their testimony at various hearings, which seemed to contravene the finds of the Senate's investigation. CEO Lloyd Blankfein and others were forced to quickly hired defense attorneys. In the case of JPMorgan Chase, the notion that charges should be filed have less to do with perjury and more to do with other types of misconduct as the London Whale "hedging" fiasco unfolded. Bloomberg Businessweek reports that SEC officials "will now be able to draw on the 300-page report by the Senate's Permanent Subcommittee on Investigations—chaired by Michigan Democrat Carl Levin—as well as more than 90,000 e-mails and other documents, 200 transcribed telephone calls, and 25 interviews with bank officials compiled by the committee." The pressure seems to be building on the agency to file civil charges regarding executive mishandling of the incident, while the chances of criminal charges against the bank seem to be smaller at this point. Incoming SEC chairman Mary Jo White thus has a massive decision to make already. She would be wise to make this one of her first priorities. For more: Related articles: Read more about: JPMorgan Chase, Jamie Dimon 3. Dell board to make quick ruling on bids
When Michael Dell announced he would take his eponymous computer company private in an old-style management-led LBO, people doubted that a competing offer would be able to top it. After all, Dell himself was by far the biggest shareholder, Microsoft was deep-pocketed investor, and Silver Lake, a private equity form with deep roots in the technology industry, was seen as the ideal partner in the transaction. But to the surprise of many, two alternatives have formally been proposed. Both Blackstone Group and Carl Icahn have met the go-shop deadline and submitted competing bids. Both offers seek to exploit what might be the glaring weakness in the Dell-led offer, which buys out all the shares, effectively forcing many shareholders to swallow large long-term capital losses. Blackstone's offer, as outlined to Bloomberg, is valued at about $14.25 a share vs. $13.65 or the Dell-led offer. Blackstone and partners Francisco Partners and Insight Venture Partners would acquire Dell, but they would also give shareholders "a chance to roll some of their shares into a so-called public stub that would give them a piece of the company, said one of the people. There would be a cap on how much stock existing shareholders could keep, this person said." As for Icahn, his offer amounts to about $15 a share, and would involve an option that would leave some shares in the hands of current shareholders. He had previously been in favor of a massive special dividend. The Dell board's special committee must now determine, according to the Revlon rules, whether the bids will reasonably lead to a superior offer than the one currently agreed-to. It thus seems fait accompli that the Dell-led group will be forced to put forward a sweeter bid. The group will not give up without a fight---hopefully. The board could make a ruling within a day or two on this. One issue might be the tentative financing that has been set up by Blackstone, which has used the term "highly confident" to describe its commitments (or lack thereof), which to many will conjure images of the 1980s, when Drexel Burnham used the term so adroitly. For more: Related articles: Read more about: Blackstone, Dell 4. Will Michael Dell switch to Blackstone?
Most people had assumed that Michael Dell had cast its lots with Silver Lake and Microsoft, forming a solid group that put together the initial buyout offer for his eponymous company--one that has set in motion an amazing series of events. Speculation had been strong that the group would hike its offer to battle back competitors. But a twist has now cropped up. DealBook reports that Michael Dell is pondering a switch, giving up on the deal offer that he helped put together and casting his lot--and his considerable ownership stake--with Blackstone, which has submitted a competing proposal to the special committee running what has become an auction. That would be a stunning development, one that would not go down well with Microsoft or Silver Lake. One big issue at this point is whether Blackstone would be amenable to leaving Michael Dell in charge of the company. He built the company from a small dorm-room operation into a colossus, but the entire PC industry has been hit hard in recent years, as new forms of computing and networking take hold. One could easily argue that leaving the company in the hands of the founder would be unwise, especially if a strong alternative were to emerge. It's no secret that Blackstone had been reaching out to potential candidates to become CEO of the company, including Mark Hurd, of Oracle, who formerly was CEO of Hewlett Packard. My sense is that if the working with Dell would be the best way to win the auction, then Blackstone would do it. Everything is preliminary at this point, but Michael Dell clearly has a lot of decisions to make. The last thing he wants to do is give up control of his company. That, however, is still a possibility. For more: Related articles: Read more about: Dell, Silver Lake
No one thinks that Michael Dell will give up without a fight. So the attention in the riveting Dell Computer leveraged buyout drama has turned to what he will do next. At this point, the board's special committee is deciding whether the two competing proposals it received--from Blackstone and Carl Icahn--are reasonably likely to result in a superior offer for the company. Dell, from a gamesmanship perspective, has to assume that the committee will find as such. It will be incumbent on Dell himself to make a case for why his proposal is superior. Fortune reports, "The next step will be public release of a detailed proxy statement from Michael Dell and Silver Lake, laying out a case for why their offer actually is superior at a lower price." That was scheduled to take place early this week. "Michael Dell will argue that Dell has proven systemically unable to accurately predict financial performance in the midst of its transition from a PC giant to an enterprise services provider -- and that such volatility plays unnecessary havoc with publicly traded shares. So he instead will ask to assume the risk and work to transform the company as a private enterprise. Hard to imagine him signing onto a rival offer that would still require public equity participation -- let alone one that may not allow him to maintain control," Fortunte notes. The big question is how the fact that large shareholders will be forced to swallow large capital losses factors into the thinking of the special committee. Will the members consider only the raw value per share from each proposal, or will they consider more qualitative issues, such as the desire by some shareholders to retain some equity participation? This might represent an area in which Michael Dell and his team can get creative. They will likely boost the raw value per share of their offer--some think the offer will rise to $15 a share--but they might be wise to consider how they might give existing shareholder a way to retain some shares or participate in a future sale of the company in some way. In short, the best bid may combine elements of all bids: The participation of Dell himself, Microsoft and Silver Lake and a plan that overcomes the fear of large enforced losses. For more: Related articles: Read more about: lbo, Dell Also NotedSPOTLIGHT ON... Another plea for breaking up banks Would banks be better off if they were broken up, separating their deposit taking business from other, more risky businesses? The only way to soundly fund long-term risks with short-term debt (deposits) is to create a layer of safety that calls for public participation, which rankles lots of folks. A much expanded layer of equity financing by banks would perhaps solve the problem, but banks would be a far cry from the growth companies that they so desperately want to be. So some would say the best solution remains a break up, but that's not going to happen anytime soon. Article Company news:
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Tuesday, March 26, 2013
| 03.26.13 | Michael Dell must fight for his company
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