October 26, 2011 at 4:41pm
M & A wrap: Dollar Thrifty’s hard-earned lessons
Dealpolitik lists the key lessons learned from Dollar Thrifty’s merger saga.
Rio Tinto signaled a major retreat from its aluminum business on Monday, putting an estimated $8 billion worth of assets up for sale across six countries, only four years after buying aluminum giant Alcan for $38 billion.
Kinder Morgan struck a $21 billion deal to buy rival El Paso, combining the two largest natural gas pipeline operators in North America in a huge bet on the fast-growing market for that fuel. The NYT takes a look at dealmaker Richard D. Kinder and how he has shaped Kinder Morgan.
October 17, 2011 at 5:04pm
UPDATE 1-Applied Industrial names Cooper Industries executive as CEO
The company, whose product catalog includes bearings, power
transmission components and fluid power components and systems,
said Schrimsher joins from Cooper Industries , where he
was the executive vice president.Schrimsher, 47, replaces David Pugh who served as the CEO
since January 2000.Shares of the Cleveland, Ohio-based company, closed at
$29.70 on Monday on the New York Stock Exchange.
3:06pm
Citi Q3 net rises, boosted by accounting gain
Even stripping out the accounting gain, the results were better than some analysts had expected, and Citi shares rose as much as 3.8 percent in early trading. At mid-morning they were up 1.4 percent to $28.79.Like its rivals, Citigroup was hit by the European debt crisis and the sluggish U.S. economy. Investment banking fees dropped, and its loan book fell 2 percent. Operating expenses rose, in part because of investments the bank is making to boost its business.Citigroup’s extensive overseas operations helped the bank during the quarter, particularly in Asia, where income from continuing operations at its consumer banking business rose 14 percent.”The bets they’re making in the international markets are paying off,” said Michael Holland, founder of Holland & Co LLC in New York.Citigroup, the third-largest U.S. bank by assets, reported net income of $3.77 billion, or $1.23 per share, up from $2.17 billion, or 72 cents per share, in the same quarter last year.The third-quarter results included a pre-tax gain of $1.9 billion, or 39 cents per share after taxes, due to the bank’s widening credit spreads during the quarter. When a bank’s debt weakens relative to U.S. Treasuries, it can record an accounting gain because it could profit from buying back debt.Excluding that gain, Citi earned $2.6 billion, or 84 cents per share.Revenue at the bank’s continuing securities and banking business fell 12 percent excluding the debt value adjustment, to $4.84 billion, hurt by declining underwriting and merger advisory fees.JPMorgan Chase & Co also reported declines in investment banking fees when it reported third-quarter results last week. JPMorgan also reported an accounting gain identical to Citi’s.Overall operating expenses for Citigroup rose 8 percent from a year earlier. Operating expenses were $12.46 billion and have been hovering around that level since the fourth quarter of 2010. From the beginning of 2009 through the third quarter of 2010, quarterly operating expenses were typically closer to $11.9 billion.It was not immediately clear if the quarterly earnings were comparable to analysts’ average forecast of 81 cents per share, according to Thomson Reuters I/B/E/S. But several analysts said earnings of 84 cents per share excluding the accounting gain beat the Street.Citi, which received three U.S. government rescues at the height of the financial crisis, is seeing its problem loan portfolio shrink.Nonaccrual loans fell to $7.95 billion from $12.46 billion a year earlier.The bank’s share price has fallen about 40 percent this year, in line with declines for other large banks.
October 14, 2011 at 5:46pm
Pentagon turns to Silicon Valley for leads
By Sarah McBrideSAN FRANCISCO, Oct 14 (Reuters) - When the Department of
Defense decided it needed a device that could detect heartbeats
from hundreds of feet away, it didn’t know where to look. So it
turned to some tech-savvy friends: venture capitalists.Using its little-known “DeVenCI” — Defense Venture
Catalyst Initiative — the Department of Defense can tap into a
network of venture capitalists when it needs new ideas. The
reasoning: Pentagon types aren’t experts in ferreting out
emerging technology, and companies with technology that might
help the Pentagon don’t know how to reach it.Enter Silicon Valley matchmakers who serve as consultants
for two-year terms. Through their colleagues, they get to hear
about companies and technologies they might not otherwise be
aware of, and the Pentagon gets to tap their expertise. Since
the program launched in 2006, partners from firms including
Kleiner Perkins, Greylock Partners, and the Mayfield Fund have
participated.”The government is looking for solutions beyond what they
typically find from defense contractors,” said Matt Howard of
Norwest Venture Partners in Menlo Park, California, one of the
25 venture capitalists currently working with DeVenCI. His
recommendations include Sentilla, a company that helps data
centers reduce energy use, and Avere, which provides data
storage.Conceived in 2005, DeVenCI was intended to look for ways to
slash the cost of building equipment from scratch. Many of its
needs since have tended toward the prosaic — efficient data
centers and renewable energy for instance. But some aren’t,
such as heartbeat-sensors, which eventually led the program to
Virginia-based Digital Signal.Then this week, the hitherto obscure five-year-old
initiative received a little unwelcome attention. The Wall
Street Journal reported one of its advisers — Kevin Kopczynski
of RockPort Capital — had pitched a company from his firm’s
own portfolio: Solyndra, the failed solar firm at the center of
a controversy over the government’s renewable energy financing
programs.Solyndra went bankrupt last month after receiving a $535
million Department of Energy loan in 2009. Critics have
questioned the White House’s close ties to investors in the
company.But the fledgling program dodged a bullet. Solyndra made it
through months worth of vetting before the Pentagon learned the
company was on the verge of bankruptcy and dropped the solar
firm from consideration for a $1 million pilot program, the
Journal reported. A Navy spokeswoman confirmed Solyndra’s
participation in its DeVenCI workshops.PURCHASES, NOT INVESTMENTSClose shaves aside, defense department officials think they
might have the beginnings of a formula to go high-tech.The program’s VCs specialize in a broad range of investment
areas and serve as unpaid consultants for two-year terms. They
in turn work with a small team of full-time DeVEnCI staff
members.Not all of the program’s needs are geared towards direct
warfare and more efficient bloodshed. It was the call for solar
technology earlier this year — to power, say, army bases —
that provided RockPort’s opening.Because the government is increasingly facing the same
problems as enterprise — including malware and dealing with
large amounts of data — it makes sense to look in the same
places businesses often find solutions, VCs argued.”There had to be commercial technologies that went a long
way toward solving problems the DOD faced,” said DeVenCI
adviser Roger Novak of Novak Biddle in Bethesda, Maryland.Typically, advisers recommend companies outside their own
portfolios, VCs involved with the program say, but it’s not
unheard-of to pitch one of their own bets.Unlike an in-house INQTel fund at the Central Intelligence
Agency that invests directly in companies, the DeVenCi program
seeks to purchase field-ready products and services rather than
investing.”The goal is not to provide R&D funding,” a DeVenCI
spokeswoman said. She said the program is contracting with
about 25 companies that it found through the program.Around Silicon Valley, there’s not much concern about the
government snooping around companies and getting an early look
at their technology, said Geoff Yang, a partner at Redpoint
Ventures who is not involved in DeVenCI. The biggest concern is
that a young company might end up tailoring its product to the
military, he said, in a way that wouldn’t be applicable to
other customers. “The government is a market of one,” he said.VC’s VISIT MILITARY BRANCHESIt took a year or two for the program to find its feet, and
identify appropriate VCs, given that the freewheeling culture
of Silicon Valley can clash with the rigid practices of the
military.One venture capitalist experienced in the ways of
Washington recalled a presentation dealing with computer
systems attached to the Global Information Grid, a military
communications initiative, when another venture capitalist
unfamiliar with the military chimed in with a complaint.”This is so general,” the more experienced VC recalled his
novice colleague complaining. “I need to know how many
computers you run, and what’s connected to what.” A stunned
pause ensued before the presenter composed himself and told the
VC he couldn’t disclose that information. The less experienced
VC left the group after a single two-year term.Another early glitch involved sending the VCs reams of data
to pour through, until the DeVenCI office realized it made more
sense to have the participating VCs visit various branches of
the military and evaluate their needs.Sometimes, the visits provide vivid illustrations of those
needs. Don Rainey, a partner at Grotech Ventures in Vienna,
Virginia, recalls a group of VCs attending a training session
for marines in Twenty Nine Palms, Calif., in the hope the
excursion would spark ideas for technology for use in hostile
environments.The VCs watched the exercise unfold in a Hollywood-like set
designed to look like a street in the Middle East, complete
with actors playing locals.As Marines patrolled, shopkeepers quickly started closing
up their stores, and then an abandoned car blew up. An actress
who was also an amputee flew through the air screaming, fake
blood pouring from her missing leg.”It’s so moving, to think of what they do, the risks
they’re subjected to,” Rainey said of the Marines.
2:33pm
US’s Geithner: will prosecute Wall Street infractions
“That’s not true,” he said.”You’ve seen very, very dramatic enforcement actions already
… across the U.S. government and I’m sure you’re going to see
more to come. You should stay tuned for that,” Geithner added
without elaborating.He said there was “a lot of resistance” to government
efforts to put in place more stringent rules to try to prevent
recurrences of the severe crisis that drove the U.S. economy
into recession from which it is only slowly recovering.However, the government was determined to implement reforms
that will offer more protection for consumers, he said.Earlier this week, hedge-fund tycoon Raj Rajaratnam was
ordered to serve 11 years in prison, the longest sentence ever
in an insider-trading case.Geithner said the Occupy Wall Street protests, which have
swollen in size and spread to other cities, reflect “a general
sense across the country of concern that the U.S. economy is not
growing faster”.He said the Obama administration was focused on working with
Congress to try to get measures passed that will spur growth and
hiring while also bringing budget deficits down over time.
October 12, 2011 at 6:02pm
UPDATE 1-UTC’s Pratt to buy Rolls share of engine venture
Oct 12 (Reuters) - Pratt & Whitney said on Wednesday that
it is buying Rolls Royce Holding Plc’s share of the
International Aero Engines consortium, which produces the
engine that powers the Airbus A320 plane family, for
$1.5 billion.Pratt said it intends to offer a portion of the Rolls
shares it is buying to other IAE partners: Germany’s MTU Aero
Engines and Japanese Aero Engines Corp.Pratt, a unit of United Technologies Corp , and
Britain’s Rolls Royce also said they would form a new company
in which each partner will hold an equal share to develop new
engines for mid-size aircraft. The companies added the venture
will focus on high-bypass ratio geared turbofan technology.Rolls Royce will also make a “modest financial investment”
in the geared turbofan engine made by Pratt that is an option
for the Airbus A320neo narrowbody program.Pratt’s geared turbofan engine has secured more than 1,000
orders.
