Buffett's Berkshire Hathaway Increases Bet on Apple

August 17, 2016, 12:00 am

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The Wall Street Journal (Aug. 16, Stynes) confirms that Warren Buffett's Berkshire Hathaway sharply increased its bet on Apple Inc. during this year's April-through-June period, bringing its interest in the iPhone maker to about $1.5 billion. Though Buffett's reputation has been built on investments in insurers, financial companies, and industrial businesses, Berkshire disclosed earlier this spring that it had made a $1 billion wager on Apple stock. Since then, the tech giant's share price has advanced more than 20 percent. "Berkshire added 5.42 million Apple shares to its position in the second quarter," confirms the Journal, "bringing the firm's total stake to 15.2 million shares, worth $1.46 billion at the end of the period." By comparison, Soros Fund Management exited its position in Apple during those three months and Greenlight Capital cut its stake by 17 percent.

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Univision to Buy Gawker Media for $135 Million

August 17, 2016, 12:00 am

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Univision has emerged as the winning bidder in the auction to purchase embattled online publisher Gawker Media, confirms the Hollywood Reporter (Aug. 16, Jarvey, Cullins), agreeing to pay $135 million for all seven of Gawker's websites. This will bring to an end of more than a decade of independence under founder and CEO Nick Denton. Denton confirmed the sale, issuing a statement that read: "I am pleased that our employees are protected and will continue their work under new ownership -- disentangled from the legal campaign against the company. We could not have picked an acquirer more devoted to vibrant journalism." Bids were due by the close of business Monday. As it turns out, the only two contenders were Univision and Ziff Davis.

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Cintas to Buy G&K Services in $2.2 Billion Deal

August 17, 2016, 12:00 am

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Corporate uniform supplier Cintas Corp. and G&K Services Inc. on Monday entered into a definitive agreement, states RTTNews (Aug. 16), under which the former will purchase all outstanding shares of the latter for $97.50 per share in cash. The deal has a total enterprise value of around $2.2 billion, including acquired net debt. The final purchase price represents a nearly 19 percent premium to G&K Service's Aug. 15 closing stock price. "The combined company will provide products and caring service to over 1 million business customers," notes the publication. "Cintas has had strong organic growth over many years, and the merger with G&K Services will provide access to additional processing capacity."

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Cubic Senior VP and General Counsel Edwards Recognized as NACD Governance Fellow

August 17, 2016, 12:00 am

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Cubic Corp. on Tuesday announced the recognition of James Edwards, its senior vice president and general counsel, as NACD Governance Fellow by the National Association of Corporate Directors (NACD), reports Business Wire (Aug. 16). The NACD Fellowship program of study has become the standard to credentialing directors and governance professionals. "I look forward to being a part of the NACD Fellows community, as it is a vast resource of knowledge with leaders coming from large and diverse companies around the world," comments Edwards. "The NACD Fellowship will be a great asset to the Cubic organization as we continue to dedicate ourselves to the highest standards of corporate governance." Candidates for the Fellowship program are required to complete a robust foundation course that focuses on committee-specific issues and topical matters.

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Some Firms Intensify Push for Gender Parity at Board Level

August 17, 2016, 12:00 am

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A growing number of American companies are stepping up their efforts to increase the ranks of female on their boards, the Wall Street Journal (Aug. 16, Lublin) observes. Such initiatives are bearing fruit as companies revamp the way they recruit women corporate directors. Some firms have started to restrict initial searches to females. Others insist on interviewing at least one woman for each open board slot. Ecolab Inc., Symantec Corp., Johnson & Johnson, Voya Financial Inc., Pinterest Inc., and Nucor Corp. are among those pursuing such strategies. "The system produces white male candidates unless board leaders deliberately do something different," remarks Karen Horn, chair of the National Association of Corporate Directors. "People are beginning to figure out how recruiting more women to boards is done." Horn has served on nine public-company boards.

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Check Board Performance, Not Just the Box

August 17, 2016, 12:00 am

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NACD's custom, facilitated board evaluations have helped hundreds of boards confidentially assess their composition, their group’s dynamics, and the individual and collective engagement and performance of their members. Our unique approach serves as the foundation for building and maintaining a strategic-asset board. To discuss how NACD can customize an evaluation for your board, please contact Steve_Walker@NACDonline.org, or call 202-572-2081.

Viacom, Redstone's National Amusements Resume Deep Settlement Talks

August 17, 2016, 12:00 am

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"Viacom Inc. and Sumner Redstone’s National Amusements Inc. are back in deep talks toward a settlement that would end their litigation, reshape the company’s board, and lead to the exit of Viacom Chairman and Chief Executive Philippe Dauman," Wall Street Journal (Aug. 17, Sharma, Flint) sources state. The two sides are talking again after failing to reach an accord in July. Under the terms reportedly being discussed, Viacom COO Tom Dooley would succeed Dauman as CEO. One of the big sticking points to a deal getting done is that several Viacom board members are negotiating terms of their exit from the board. Some even want to stay on for at least several months after a settlement is reached, the Journal sources insist. Besides Dauman, other board members who would be replaced include George S. Abrams, Blythe J. McGarvie, Frederic V. Salerno, and William Schwartz. "In their place," the newspaper reports, "National Amusements has said it would elect Kenneth Lerer, managing partner of a venture-capital fund and chairman of BuzzFeed; Thomas May, chairman of Eversource Energy; Judith McHale, a former senior executive at Discovery Communications Inc.; Ronald Nelson, chairman of Avis Budget Group Inc.; and Nicole Seligman, a former president of Sony Entertainment."

The Los Angeles Times (Aug. 16, James) adds that another issue still up for debate is whether to permit the Viacom board to vote on Dauman's plan to sell 49 percent of Paramount Pictures to an outside investor. "Dauman had hoped a deal with a deep-pocketed investor, believed to be Dalian Wanda Group of China, would boost Viacom's stock price and give the movie studio and Viacom's TV channels inroads into China," according to the Times. However, the Redstones believe that Paramount is essential to both Viacom's current operations and its future. The family has said they would want the new directors to weigh in on any Paramount deal.

Reuters (Aug. 17, Toonkel, Levine), meanwhile, has learned that Dauman's employment contract runs through December 2018. Under the terms of that agreement, he is eligible to receive up to $72 million in cash if he is terminated without cause or he resigns "with good reason," regulatory filings show. According to compensation consultant Equilar, he could potentially receive almost $90 million in severance. "A Massachusetts judge has set a Sept. 19 trial date for the litigation over Dauman's removal from Redstone's trust," concludes the wire service.

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Rent Matches Eight-Year High as Building Boom Doesn't Keep Up

August 18, 2016, 12:00 am

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July housing rents matched an eight-year high, as an apartment construction boom has yet to put a lid on costs, MarketWatch (Aug. 16, Goldstein) reports. Rents rose 0.3 percent last month, reaching the highest level since January 2008. The aftershocks of the housing crisis have weakened demand for homeownership and credit has been tight, contributing to rising rents. Despite investment in the market, there is still a lack of supply, and the Urban Institute finds that no U.S. county has struck a balance between extremely low-income households and affordable and available rental units.

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Why Companies Are Filling Job Openings Faster

August 18, 2016, 12:00 am

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"The labor market is picking up so much that companies are hiring faster these days," declares Money (Aug. 17, White) magazine, "a welcome change for candidates used to a long, drawn-out hiring process." In this year's second quarter, the number of days a job stays vacant fell by one day, reported USA Today using data from staffing company DHI Group. Researchers indeed found that the average duration of a vacancy dropped to 28.3 days by the end of June. In addition, companies are interviewing fewer candidates and making job offers faster today due to the 4.9 percent unemployment rate, which has made it tougher to find qualified workers for all sorts of jobs. "The rush for workers is taking place throughout the labor pool," concludes Money, "as companies try to fill everything from warehouse jobs to IT management positions."

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Northern Oil and Gas Fires CEO Michael Reger, Who Is Under Federal Investigation

August 18, 2016, 12:00 am

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"Northern Oil and Gas on Tuesday announced the firing of its CEO, Michael Reger," states the Minneapolis Star Tribune (Aug. 16, Hughlett), "after federal regulators indicated they are pursuing an enforcement action against [him] for possibly violating securities law." The 40-year-old was a major participant in an investment deal that is now under federal investigation for suspected stock manipulation. The transaction in question involves a separate company called Dakota Plains Holdings, in which Northern says it has never held any ownership stake. Reger has been "terminated" as Northern Oil's chief executive and is no longer a member of its board of directors, effective immediately. "The company does not believe that Mr. Reger will be entitled to any severance payment in connection with his separation from the company," a Northern Oil statement read. CFO Thomas Stoelk has been named interim CEO.

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Target Adding Single-Stall Bathrooms at All Stores

August 18, 2016, 12:00 am

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Target on Wednesday announced that it will add single-stall bathrooms at all of its stores where that option is not presently offered, reports USA Today (Aug. 17, Bomey), reflecting a direct response to the debate that erupted earlier this spring over its new transgender-bathroom policy. According to Target CFO Cathy Smith, the company will invest $20 million to add the single-stall bathrooms. The big-box retailer already has single-stall bathrooms that anyone can use at roughly 1,400 of its 1,800 locations. "Target is not altering its transgender bathroom policy, which allows people to 'use the restroom or fitting room facility that corresponds with their gender identity,' states the newspaper. Target spokesperson Katie Boylan said the chain decided to add single-stall, lockable bathrooms in all of its stores "because we're listening. We get it. Some like it, some don't. We're committed [to offering a welcoming environment [for all]."

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Activist Investor Seeks 'Fresh Talent' at Buffalo Wild Wings

August 18, 2016, 12:00 am

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The Minneapolis Star Tribune (Aug. 17, Ramstad) has learned that the activist investor who emerged in July with a sizable ownership interest in Buffalo Wild Wings Inc. has urged the company's board of directors to seek "fresh talent," criticizing the way the restaurant operator's executives spend money. Richard McGuire, founder of Marcato Capital Management, wrote in a letter to directors that the company's growth objectives have become muddled and that top management seems to be making decisions that are not supported by data. Buffalo Wild Wings says its executives, corporate directors, and outside investors have met with Marcato several times in recent weeks. A company statement read: "Our board and management team will continue to engage constructively with Marcato, and we will also consider the input of our other shareholders." Marcato has a 5 percent interest in Buffalo Wild Wings.

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Deutsche Bank Must Weigh Scrapping 2016 Bonus, Sewing Says

August 18, 2016, 12:00 am

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"Deutsche Bank AG's supervisory board should discuss scrapping bonuses for top executives for a second year after Germany's largest bank put dividend payments on hold," reports Bloomberg (Aug. 17, Comfort) in quoting consumer banking chief Christian Sewing. The size of any such payouts depends on the company's performance. There is a good chance Deutsche Bank may fail to return to profit in 2016 as it takes charges to trim payroll and builds provisions for fines and lawsuits. "It's clear that if we don't pay our shareholders a dividend, then our own bonus needs to be up for debate as well," Sewing, who sits on the bank's 10-member management board, stated.

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Performance Sports Group Faces Canadian, U.S. Regulatory Probe

August 18, 2016, 12:00 am

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Canada's Performance Sports Group Ltd. confirmed early Wednesday that it is facing investigations by both American and Canadian securities regulators, reports Reuters (Aug. 17, Gayathri). The announcement came two days after the sports equipment maker announced that it was conducting its own internal probe into its financials. "Performance Sports Group lost more than half of its market value on Monday after the company said it could default on its debt due to a delay in filing its annual report as a result of its internal investigation, recalls the wire service. The annual report was due that day.

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Judge Invalidates Patent for Johnson & Johnson Rheumatoid Arthritis Drug

August 18, 2016, 12:00 am

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"A cheaper version of Johnson & Johnson's top-selling drug, the expensive rheumatoid arthritis treatment Remicade, could be available in the United States two years early after a federal judge ruled that a key patent on the drug is invalid," reports the New York Times (Aug. 17). Johnson & Johnson has vowed to appeal the summary judgment issued by the District of Massachusetts federal court in its high-stakes patent battle with competitor Pfizer Inc. The appeal process could take more than a year. "Pfizer likely will make the somewhat-risky move of launching its competing version, called Inflectra, within a few months," states the Times. "That could bring patients and insurers savings analysts have estimated at 15 to 30 percent." Remicade costs roughly $1,600 a month or more without insurance, depending on several factors. Pfizer has yet to announce a price for Inflectra.

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SEC Pursues Companies for Restricting Whistleblowers

August 18, 2016, 12:00 am

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The SEC has penalized Health Net Inc. for restricting the rights of whistleblowers, the Wall Street Journal (Aug. 16, Rubenfeld) reports. The insurance provider violated regulations by amending severance agreements to waive employees' rights to file for whistleblower awards. Health Net has agreed to pay a $340,000 penalty and will inform former employees who had signed severance agreements from 2011 to 2015 that they will not be prohibited from seeking whistleblower awards. This SEC action is the third case in about a year; in each one, companies sought to prevent employees from reporting wrongdoings to the SEC. Whistleblowers are eligible to receive 10 percent to 30 percent of a penalty from a securities violation if the penalty exceeds $1 million.

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MSG Co. Acquires 12 Percent Stake in Townsquare

August 18, 2016, 12:00 am

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“The Madison Square Garden Co., which owns the New York Knicks and the NBA team's home arena, said Wednesday that it had taken a 12 percent stake in Townsquare Media,” according to USA Today (Aug. 17, Snider). MSG purchased about 3.2 million shares of Townsquare, which also owns 310 radio stations and more than 300 websites and operates about 550 live events a year. MSG's stake in the company is valued at around $30.3 million. The two companies plan to work together to expand their live events.

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Staples Swings to Loss on Nearly $1 Billion Charge

August 18, 2016, 12:00 am

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Staples Inc. swung to a loss in the second quarter on almost $1 billion in charges, reports MarketWatch (Aug. 17, Jamerson), partly due to its failed plan to merge with Office Depot Inc. "The charges were primarily related to the impairment of European goodwill and other assets, as well as costs associated with the termination of the Office Depot merger agreement," confirms the publication. Staples was forced to pay smaller competitor Office Depot a $250 million break-up fee. An increasingly digital workplace continues to dent Staples' sales. Sales at existing stores declined 5 percent in the most recent reporting period, under the 3.1 percent decline analysts surveyed by Consensus Metrix projected. Comparable sales, which includes stores and Staples.com, fell 4 percent.

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Board Lens

August 18, 2016, 12:00 am

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Setting Strategy and Goals in a Slow-Growth Economy
Economic growth in the United States and other developed countries has slowed significantly over the past 15 years. The New York Times reports that the U.S. per capita GDP has only increased an average of 0.9 percent annually since 2001, falling short of the average 2.2 percent annual growth rate from 1947 to 2000. And this low-growth trend is likely to continue. Boards, therefore, should reassess their organization’s long-term strategy. Both boards and management should consider using the upcoming planning cycle to pressure-test existing growth models and built-in assumptions. Similarly, compensation committee chairs should evaluate whether executive compensation plans reflect changing economic conditions. For practical goal-setting advice, download the publication NACD Advisory Council on Effective Goal Setting Practices and Using Nonfinancial Metrics and review the Report of the NACD Blue Ribbon Commission on the Board and Long-Term Value Creation. Greg Ip, chief economic commentator for the Wall Street Journal, discusses in this NACD video how the current environment may affect U.S. companies. Join Ip, former U.S. Senator Olympia Snowe, and political scientist Ian Bremmer at the 2016 NACD Global Board Leaders’ Summit for even deeper insights on the U.S. economy and globalization.

Cisco Systems Announces Layoffs for 5,500 Employees

August 18, 2016, 12:00 am

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"Cisco Systems is laying off 5,500 employees," confirms the New York Daily News (Aug. 18), "as the Internet gear maker scrambles to adapt to a technology upheaval that has triggered similar cutbacks to other storied tech companies." The shake-up means that nearly 7 percent of the San Jose-based company's approximately 74,000 employees will lose their jobs starting late this summer. The purge is the latest fallout from an ongoing march of innovation that has compelled some of the world's oldest and largest technology firms to look in new directions for revenue growth. Other companies that have been pink-slipping thousands of staffers include Hewlett-Packard, Intel, and Microsoft.

According to the International Business Times (Aug. 18, Goenka), Cisco has made it something of a habit to trim payroll around the time it posts its annual earnings. Indeed, the company announced 6,000 layoffs in August 2014, dismissed another 4,000 workers in August 2013 and slashed 6,500 jobs in July 2011. For its entire fiscal year, Cisco recorded revenue of $48.7 billion, up 3 percent from $47.3 billion the previous fiscal year. "Net income grew 20 percent to $10.7 billion," the Times added, "while [earnings per share] jumped 21 percent to $2.11."

The Wall Street Journal (Aug. 18, Clark) states that Cisco will record pretax charges of up to $700 million for severance and termination benefits as a result of this latest round of job cuts. Company executives plan to reinvest the savings from the cuts into businesses that it expects to grow, most notably its own software and service offerings. "Cisco has long held a dominant share of sales of the routing and switching equipment used to funnel data over the Internet and between computers in data centers," the Journal notes. "Though the company has diversified its business significantly, those two hardware categories remain its largest sources of revenue." Unfortunately, their sales have been on the decline lately.

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