September 2008 Archive
ImClone is working towards what could be a dramatic climax to the battle over who will win its favors. The company has let it be known that it has a mystery suitor that could pay more than $6 billion to acquire ImClone and that the name of the silent bidder will be revealed later this week.
There’s still a distinct possibility that initial suitor Bristol-Myers Squibb, which already owns a minority stake in ImClone, could take home the cake, but thus far ImClone has turned its nose up at BMS’ overtures, including its latest $5.4 billion takeover offer. BMS could either up its offer before the deadline or wait to see if the second bidder’s proposal falls through.
ImClone has stated that the interested party’s identity will be revealed by the end of the day Wednesday when it either issues an official proposal or withdraws its interest. Rumored suitors have included pharma giants Eli Lilly and Pfizer, which has coincidentally said this week that it will focus its early stage R&D programs on high growth areas including cancer (ImClone’s area of expertise). The playing field for acquisitive drugmakers is wide as many companies are scrambling to secure their future success in a highly competitive industry.
For the moment, the future of ImClone, laden with a historical reputation of Martha Stewart and Carl Icahn stature, remains up in the air. Whether the company comes out with a smashing success story or a disappointing bust of a deal is yet to be seen.
The National Retail Federation released its annual holiday forecast on Tuesday and the news was not good. The NRF projected sales gains of just over 2% for November and December, exactly half the 10-year average of 4.4% holiday sales growth. The meager gain is also the smallest rise since 2002, when sales increased only 1.3%. Frankly, after listening to President Bush’s dire warning on the state of the US economy on Wednesday evening, I’m surprised that even a 2% increase is in the cards.
The pain will be widespread. While rising food and gas prices have already taken a toll on lower-income consumers, the crisis on Wall Street threatens to pull the plug on the luxury-goods market as the bonuses and brokerage accounts of the more affluent are diminished.
Merchants with a big New York presence are in double trouble. Upscale department store chain Saks, which generates more than 20% of its annual sales from its flagship Fifth Avenue store, and Tiffany up the street are particularly vulnerable as they rely on wealthy New Yorkers and tourists. Indeed, jewelry stores are the most vulnerable of retailers as they log about 30% of their annual sales during the holidays. While diamonds and pearls are nice gifts, they are among the most discretionary of items. Young women, who make up the majority of the seasonal retail workforce, are also less likely to find employment this year as retailers curtail hiring in expectation of a slow season.
If the NRF’s 2.2% projection is on target, 2008 holiday sales will be in the neighborhood of $420 billion. Why that’s not even enough to cover Henry Paulson’s bailout of Wall Street!
Barring a last-minute rescue of bankrupt Alitalia, Italy could be without a major international airline to call its own. Alitalia is suffering from some of the same trouble as the rest of the airline industry, such as high fuel prices and weakening demand. Plus, the carrier’s cost structure has become increasingly unsupportable. But if the Alitalia brand really does disappear from the skies, you can also blame the carrier’s reluctance (and that of the Italian government) to participate in the European trend toward multinational airline holding companies.
The largest of those holding companies, Air France-KLM, agreed to buy Alitalia earlier this year, but backed out when it was unable to win enough cost-cutting concessions from Alitalia’s unions. Alitalia would have retained its brand and its hub in Rome as part of the larger company, but the carrier’s fleet would have been reduced and a number of jobs would have been lost in the integration.
The approval of the Italian government, which owns 49.9% of Alitalia, also would have been required. Although the deal had the blessing of his predecessor, Prime Minister Silvio Berlusconi campaigned this spring against the prospect of Italy’s top airline falling into foreign hands. Berlusconi’s hoped-for Italian buyer surfaced in August, after the government ushered Alitalia into bankruptcy protection. But once again unions’ objections proved to be an obstacle.
Officials in the Netherlands, by contrast, saw the acquisition of the formerly state-owned KLM by Air France as a way to preserve the carrier’s status. Gaining approval from regulators wasn’t easy, but Air France and KLM made the case that the combined company would strengthen the European airline industry as a whole and would still have plenty of competition.
Which it does, primarily from British Airways and Germany-based Lufthansa. And both of those carriers have sought to follow Air France-KLM by making their own border-crossing purchases of other airlines. Lufthansa acquired SWISS, Switzerland’s primary international carrier, in 2007; in addition, it has agreed to buy a stake in Brussels Airlines that could lead to full ownership and has expressed interest in Austrian Airlines and UK-based British Midland. Lufthansa has even been floated as a potential acquirer of SAS, which by combining airlines from Denmark, Norway, and Sweden can be considered a pioneer of multinational ownership. For its part, British Airways is negotiating a merger with Iberia, Spain’s leading airline.
A buyer may yet emerge for Alitalia. But if none does, Italy may wish to reconsider the benefits of having an airline that flies under more than one national flag, vs. an airline with a flag that has nowhere to fly.
What if CEOs of public companies only got paid in stock? And when they retire, they can cash it all in. Sure would be an incentive to run a company responsibly, right? And if there’s stock manipulation and mismanagement a la Enron, they have to give it all back.
Okay, the stock thing is naive. But if we are going to nationalize the entire financial system, shouldn’t a CEO’s pay be the same as a government official’s? The president gets $400,000 a year. True, he also gets room and board. So make that $450,000. And he has a jet and a helicopter. $475,000, but that’s my final offer!
Anyone else have a disconcerting moment when they found themselves agreeing with Newt Gingrich on the bailout?
Did you get the American e-mail yet? I think my response could be described best as, “laughed hollowly.”
Hey, I know! “What would Warren Buffett do?!” Why didn’t Henry Paulson think of investing in Goldman? Instead, we got the companies with all the bad debt. I’m not sure that’s value investing.
At the 2008 Republican National Convention, former Maryland Lt. Gov. Michael Steele started the chant at the end of his keynote address, and former New York City mayor Rudy Guiliani picked up on it. Drill, Baby, Drill. It went down big with the audience present, but is Drill Baby, Drill — a variation of Presidential candidate John McCain’s earlier “Drill here, drill now” slogan — the answer that will bring down gasoline prices?
Veteran oil man turned wind power maven T. Boone Pickens advocates a bold plan that sees wind energy replacing natural gas as a power plant fuel, and natural gas replacing oil as a transportation fuel. He argues that the drill or not drill argument is a false one. An oilman, he falls on the drill, drill, drill side of the argument, but that the short term gain of a little more drilling cannot overcome the hard facts. The US has 3% of the world’s oil and gas reserves, but consumes 25% of its energy. His conclusion, “this is one problem the we can not drill our way out of .“
However, feeling the heat from public opinion polls that show a majority of Americans supporting new drilling, and from Democratic House members representing conservative areas where pressure for oil drilling is strong, the House of Representative held a vote on offshore drilling last week.
The bill lifted the 25-year old federal ban on offshore drilling for oil and gas. In sum, the House approved by a vote of 236-189 to open the waters 50 miles and farther out from the US coasts to offshore drilling, if the adjacent states agree to go ahead with drilling.
The bill also calls for rolling back $18 billion in tax breaks over the next 10 years for the largest oil companies (including Exxon Mobil, BP, and Royal Dutch Shell) and using the revenue for tax incentives to help commercialize alternative energy (solar, wind and biomass) and to support programs that promote energy efficiency.
Republicans protested, claiming that most of the significant oil finds are closer to the shore (citing an Interior Department report that concludes that 88% of the 18 billion barrels of oil believed to be available offshore are within that 50 miles of the US coastline) than the new drilling provision allows.
It is likely that they can save their breath. The Senate is in no mood to pass this or any similar legislation, and even if it did, several Republican-led states (California and Florida in particular) are very wary of offshore drilling, fearing that oil spills and unsightly rigs (especially if built at some future date in sight of land) would kill the multibillion coastal tourist industries in those states.
And even if a pro-offshore bill is finally passed by both chambers, actual production from new fields is probably at least a decade or more away, given the time it takes to get permits, conduct surveys, do experimental drilling, set up and develop fields, and get the oil or gas online.
Prices at the pump are affected by much more immediate circumstances, like consumer and industrial demand on the available oil supply, hurricanes shutting down refineries, and the fluctuating price of crude oil futures. Earlier this week, oil prices jumped more than $25 dollars, (its largest single day jump ever, before it fell back to a still record-breaking $16 rise on the session) as the dollar’s value melted in the wake of the financial services market crisis in the US.
If the US economy doesn’t get a soft landing at the end of the white-knuckle ride it is currently experiencing, then Drill, Baby, Drill may be a moot point.