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Chrysler Adding More Jobs In Detroit Plants

by MLive on January 5, 2012

Huffington Post…

Ahead of the North American International Auto Show, one of the big three Detroit automakers is announcing increased production in the Motor City. Chrysler announced Thursday it would add a third shift to its Jefferson North Assembly Plant in Detroit to handle production of the Jeep Grand Cherokee there. The automaker announced last month that it would reopen the Conner plant to produce the SRT Viper . Together, the plants will provide 1,250 new jobs for both salaried and hourly workers. “We believe that investing in Detroit is not only the right thing to do, but it is a smart thing to do as we work to write the next chapter in our shared history,” said Chrysler Group Chairman and CEO Sergio Marchionne, in a release. Chrysler on Wednesday announced a 37 percent sales gain for December , and 26 percent for the year.

Link:
Chrysler Adding More Jobs In Detroit Plants

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Gary Liberson, PhD: Networking for Innovation

by on August 15, 2011

Huffington Post…

Networking and questioning are critical traits for C-Level managers at our most successful, innovative companies. These and other characteristics are discussed in a new book by Jeff Dyer, Hal Gregersen, and Clay Christensen (the latter the father of the term ” disruptive technology “) The Innovator’s DNA : Mastering the Five Skills of Disruptive Innovators . As they state: Innovative companies are almost always led by innovative leaders….The bottom line: if you want innovation, you need creativity skills within the top management team of your company. An excellent review of the book can be found in the latest Economist . The article lists the five characteristics of disruptive innovators: associating, questioning, observing, networking, and experimenting. Ultimately, it asks the question: Can innovation be learned? The plain fact is that the VCs, universities, and many large corporations have not shown much ability over the past 10 years to create new technologies that generate appropriate returns on investment. You can, of course point to successes in social media (e.g., Facebook, Linkedin) or the new wave of companies (e.g., Zynga , Gilt , Rue La La , One Kings Lane ) as examples of potentially significant VC returns. However, these companies are NOT why we support universities with billions of dollars in grants. Furthermore, these companies do not represent the innovations coveted by the DuPont’s and GE’s of the world. Just about every large pharmaceutical company is trying to rediscover that spark for creating new drugs. The entire portable computer and mobile device industry is trying to be Apple: But, large pharma has misplaced its mojo and no one is Apple. Perhaps the embodiment of The Innovator’s DNA is that Apple is now the avatar of Steve Jobs. We bemoan the silos we have created in large corporations so we go out in the world seeking to expand our perspective, but then we just fall into the trap economists would call ” path dependency ,” that is just another silo (e.g., where to do we look for innovation? Boston, Silicon Valley, San Diego). Networking for innovation is not meeting someone who knows three people you know, à la Facebook. It is befriending individuals outside your sphere and engaging them in a questioning exchange demonstrating your genuine curiosity; then applying that knowledge to your own enterprise. Many corporations are trying to break out of their silos by creating their own VCs. Unilever is setting up a fund in India and considering China. Flush with cash, many corporations are expanding their networks by partnering with other VCs or going it alone. A recent Bloomberg article’s botomline: With traditional VC investing at an eight-year low, corporations are stepping up their funding of smartphone apps, robotics, and more. The Innovator’s DNA notes: Pepsi came up with a different twist. Pepsi Refresh invites people to submit ideas on how to “refresh” their communities, making them a better place to live. Each month, the Web site accepts a thousand ideas about arts and culture, health, education, and so on. Online voting produces winning ideas, with grants ranging from $5,000 to $250,000. In 2010 alone, PepsiCo allocated $1.3 million each month to Refresh projects based on over 45 million votes cast. Pepsi Refresh’s Facebook numbers also topped 1 million by the end of 2010, and PepsiCo is now rolling out the program globally. Great networkers for innovation are “connectors” with an uncanny ability to find “mavens” in diverse fields. Malcolm Gladwell, in his book The Tipping Point , describes a “connector” as a person with a special gift for bringing the world together. A “maven” is a gatherer of information and impressions, and so is often the first to pick up on new or emerging trends. Instead of trying to break silos, we need to identify those individuals who naturally know how to connect them. Throughout The Innovator’s DNA , the authors identify successful, innovative CEOs who have quirky interests and curiosity for information far afield of their professional training or corporate niche. They are renaissance individuals. The ability to network for innovation and to question in a way that doesn’t threaten but instead conveys a natural curiosity is rare. Ultimately, the answer to the question posed by The Economist (Can innovation be learned?) is YES, but only for those with the right personality. The Innovator’s DNA is written with “tips” to help the reader up his game. The “tip” that is implied but never explicitly identified is that corporations need to expend more effort to identify those individuals in their organizations who are the great networkers for innovation. This, a trait not typically listed in their performance criteria.

Excerpt from:
Gary Liberson, PhD: Networking for Innovation

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How Pepsi Fell Behind Coke

March 23, 2011

Pepsi lost the cola war last week. It’s debatable whether the brand was defeated or unwittingly surrendered by abandoning tried-and-true advertising for generation-next marketing tactics, and it’s also unclear whether it will stay down for long. But this much seems certain: Pepsi blinked. Its flagship, the perennial No. 2 to brand Coke, dropped to the No. 3 slot as it was surpassed by Diet Coke. As a result, for the first time in two decades, PepsiCo ceded the soft-drink category’s two leading share positions to its legendary rival.

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New #2 In The Cola Wars

March 17, 2011

Coca-Cola is winning the fight for America’s soda drinkers. Diet Coke bubbled up into the second spot in the U.S. soft drink market, ending Pepsi’s decades-long run as the perennial runner-up to regular Coca-Cola. Coca-Cola sold nearly 927 million cases of its diet soda in 2010, to Pepsi’s 892 million, a report by trade publication Beverage Digest released Thursday said. Diet Coke was nearing a virtual dead heat with Pepsi a year earlier. Regular Coke remains the undisputed champion at 1.6 billion cases. For Coke, wresting the No. 2 spot from Pepsi capped a year in which it took more of the soda business from its rival. Diet Coke’s rise reflects a long-term trend toward diet sodas. Ten years ago, only two of the top 10 were sugar-free. Now, four are on the list: the diet versions of Coke, Pepsi, Mountain Dew and Dr Pepper. Overall, U.S. soft-drink sales have fallen for six straight years as consumers switched to healthier alternatives such as juices and tea and cut back on spending in the recession. While both Diet Coke and Pepsi sold less soda in 2010, the decline was more pronounced for Pepsi. The downward trend in U.S. soda sales intensifies pressure on the longtime rivals to compete. Coca-Cola has pumped up its traditional advertising, including online ads. PepsiCo, which has lost market share in recent years, maintained some traditional ads but also steered dollars toward it Pepsi Refresh Project, an online donation program meant to build brand awareness. Though the Refresh Project has proven popular, some have questioned whether it actually drives soda sales. Coca-Cola Co. sold 0.5 percent less soda in 2010. For PepsiCo, the figure fell 2.6 percent. The top 10 sodas in the U.S., in order of popularity, are: Coke, Diet Coke, Pepsi-Cola, Mountain Dew, Dr Pepper, Sprite, Diet Pepsi, Diet Mountain Dew, Diet Dr Pepper and Fanta.

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Dr. Sasha Galbraith: The New Reality — How The Davos Man Is Being Dragged Into The 21st Century

January 27, 2011

The World Economic Forum (WEF) kicked off this week in Davos, Switzerland. And while the world’s biggest “schmooze-fest” usually grabs headlines for its powerful sessions or high-profile participants, this year, the press is enamored with something else: the new quota system , whereby companies are being asked to include a woman among every five delegates. While there’s certainly been a lot of chatter around the new quota system, the reality is that there has been little action. In fact, Zoe Williams of The Guardian reported that women represent only 20 percent of Davos participants — a mere 500 out of the 2500 who attend. And I have to say I’m not all that surprised. After all, sighting a female senior executive in Switzerland is about as rare as seeing a cuckoo, and the changes at Davos seem to be moving about as fast as boardroom reforms in the U.S. But let’s look on the bright side; female participation at WEF is up and big names in business are making this happen — Kraft, Pepsi and DuPont among them. While this is only a drop in the bucket, female participation at this elite event has doubled, which is a great sign. Now for the big questions: Will this trend continue? And will this have an impact beyond WEF? Only time will tell.

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Anna Lappe: Taking Walmart’s PR Blitz With A Grain Of Salt

January 21, 2011

Walmart made big news yesterday with a press conference alongside the First Lady to announce new company commitments. Most of the mainstream media coverage of the Walmart announcement seemed to buy the company PR that it was taking valiant steps to improve the affordability and health qualities of the food it sells. Among these commitments, Walmart said it will be working with food suppliers to reduce sodium, sugars, and trans fat in certain products by 2015; developing its own seal to help consumers identify healthier products; and addressing hunger by opening Walmart stores in the nation’s “food deserts.” Do these Walmart promises really hold big upsides for health and food insecurity?The Times seemed to think so, running with this headline: “Wal-Mart Shifts Strategy to Promote Healthy Foods.” (Am I crazy or does that read remarkably like the Walmart press release: “Walmart Launches Major Initiative to Make Food Healthier and Healthier Food More Affordable”?) Had The Times been aiming for accuracy it might better have titled the article: “Walmart Launches PR Campaign Promoting Promises to Win the Hearts and Minds of Urban Consumers.” With little critical coverage in the mainstream media, we are left to ponder the impact of these Walmart commitments ourselves. Thankfully, we have the wisdom of experts like Marion Nestle, author of Food Politics and What to Eat, to shed light on these claims. (Check out her take here ). One of Nestle’s most important points is that Walmart’s promise to develop its own front-of-package seal is a clever preemption of work underway at the Institutes of Medicine and FDA to “establish research-based criteria” for such packaging and create regulations for the entire industry, with real oversight. Let’s dig deeper and look carefully at what the company is saying it is committing to doing. Specifically, Wal-Mart is pledging to “reduce sodium by 25 percent, eliminate industrially added trans fats, and reduce added sugars by 10 percent by 2015″ in some of the processed foods that it carries. Impressive? Not so fast. First, consider that it’s not unusual for a can of soup to contain as much as 2,291 mg, or more, of sodium. (For perspective, the Centers for Disease Control and Prevention recommend we consume just 1,500 mg a day). We need to reduce that sodium figure significantly more than 25 percent on many of Walmart products before we dare call them “healthy.” As for trans fats, public health advocates have long been advocating for all food producers to eliminate trans fats across the entire food supply. Finally, a 12 oz. can of Coke, for instance, bought at Walmart–and which the company notoriously pushes at steep discounts –will already contain 39 grams of sugars, the upper limit of what is often suggested as the total daily consumption for non-diabetics. In other words, Walmart’s nutritional commitments are really about making the unhealthy processed food it sells marginally better, at best; at worse, it’s offering the veneer of healthfulness to foods that should be considered bad for us. These nutritional promises are not only weak in their aspirational goals; they’re also non-binding, which means we’ve got to take the company on its word. These nutritional promises are not only weak in their aspirational goals; they’re also non-binding, which means we’ve got to take the company on its word. (The White House’s Sam Kass has stressed that all these proposals can be verified in an “open, transparent” manner. But with Walmart’s history of backroom deals–like its lobbying with other retailers against strict meth laws –I’m dubious). Corporate driven, non-binding promises like these are also the oldest trick in the food industry PR playbook. Just ask Michele Simon author of Appetite for Profit, who details how Pepsi, Kraft, and numerous other food companies have made similar promises and gotten big payback with good press even though they’ve done very little to actually improve the health qualities of their products. These commitments also receive great press at first–note the windfall for Walmart–but there is little accountability over time when the changes are supposed to be made. Now, let’s turn to the Walmart claim that the company wants to move into urban markets, and reduce the costs of some of its food items, to help low-income people access more affordable food. The New York Times writes that “that low-income people, especially those who receive food stamps, face special dietary challenges because eating healthy costs more and healthier food is harder to get in their neighborhoods.” Yet, the Times fails to mention the studies that have found that because of Walmart’s low wages and benefits, its employees rely on food stamps and other social services far more than the typical retail employee. While Walmart is spending a lot of time and money saying they plan to address food insecurity, the company is actually exacerbating its underlying root causes. The Times also mentions that Walmart will help address food deserts, defined as “a dearth of grocery stores selling fresh produce in rural and underserved urban areas,” by building more stores, the paper didn’t quote any community-based activists addressing these so-called food deserts on the ground. Do these community advocates think Walmart is the solution? Are they happy Walmart has set its eyes on Washington DC, New York City, Chicago, and other urban markets? Of those I’ve talked to, all are skeptical of the company’s promises and highly critical of the Walmart model: the anti-worker rights , low-wage, low-benefit way of doing business. We also have plenty of evidence now that when Walmart moves into town, the company puts small businesses out of business and sucks capital out of the community. For every dollar spent at a Walmart, only a small fraction stays to benefit the local economy. We’ve seen enough evidence, too, that the company has a long, dark track record of sex discrimination and workers rights abuses. Let’s be clear, expanding into so-called food deserts is an expansion strategy for Walmart. It’s not a charitable move. Making a big PR splash about improving the health qualities of its food is a smart tactic to deflect attention from the real impact of Walmart on the quality of life for Americans. (Is it a coincidence that this press conference occurred the same week a new study was gaining attention that tracked health and population data and found links between Walmart expansion from 1996 to 2005 and increased rates of obesity?) As far as I’m concerned, as long as the company depresses wages, exploits workers, violates workers rights, and pushes highly processed foods and sodas, Walmart is not only failing to address the problem of food deserts and food insecurity, the company is exacerbating their root causes. Originally published on CivilEats.org Anna Lappé is the author most recently of Diet for a Hot Planet (Bloomsbury USA 2010) and is a fellow of the Glynwood Institute for Sustainable Food and Farming and a former Food and Society Fellow, a program of the Institute for Agriculture and Trade Policy.

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Dan Dorfman: Market Shifts to the Turkey Trot

November 25, 2010

The Christmas holiday season is often a harbinger of happy events, but only partly this past week, which for investors turned out to be a week of gobblydegook. On Tuesday, for example, there were of a couple of external shockers–artillery fire between the Koreas and signs of a spreading European debt crisis (notably involving Ireland, Spain and Portugal). In response, it turned out to be a terrible Tuesday for investors as the Dow tumbled 142 points. As a result, the following day’s market showing–the day before Thanksgiving–should have been a turkey, or a wicked Wednesday, in continuing response to those shockers, as well as to recent revelations of October declines in new and existing home sales. But wicked Wednesday never came. Call it the case of the missing turkey. Instead, we had a turkey trot, as the Dow went on a tear that day, more than offsetting the previous day’s loss with a solid gain of nearly 151 points. This jump largely reflected a tasty news entree of growing personal income, strengthening positive consumer sentiment, the fourth consecutive month of consumer spending gains and lower than expected weekly jobless claims. So where does that leave the nation’s more than 80 million stock players? In good stead, according to some market pros, who see flickering green lights that we’re entering a period of renewed economic zip. In addition, some suggest, instead of the usual merry month of May, change that, at least for investors, to the merry month of December. One of them is Fred Dickson, the chief investment strategist of regional Northwestern brokerage biggie D.A. Davidson & Co. of Great Falls, Mont. “I would absolutely be a buyer of stocks now,” says Dickson, a former strategist at Goldman Sachs, who thinks it’s the wrong time for investors to be chicken and views the European debt problems and the current trouble between the Koreas as “passing thunderstorms that will move on.” He figures a year from now European debt problems will be about where they are today. “I’d guess Europe has four of five years of debt workouts to go,” he says. He also thinks China has too much to lose not to try to aggressively influence North Korea from doing something incredibly stupid, and, as such, he expects the Chinese to take action in this respect. A revival of positive economic momentum (also reflected in the recent upgrade of third-quarter GDP growth from 2% to 2.5%) and low interest rates are the chief reasons for Dickson’s market enthusiasm. “The economy,” he observes, “is like a car going 25 miles an hour in a 40-mile speed zone, but sooner or later it will shift into a faster gear.” It’s not a robust recovery, he says, but a slowing improving one. Given this outlook, he expects an essentially rising market for the balance of the year, with the Dow (now at 1187) wrapping up 2010 at around 11,500 and then following up with about another 10% or so advance in 2011. His favorite stocks are companies which have increased dividends for at least the past 10 years and sport above-average dividend yields. In this context, he favors PepsiCo., Procter & Gamble, AT&T, United Technologies, Emerson Electric, Kimberly-Clark and Automatic Data Processing. What about gold, the planet’s hottest investment? It has had a huge run, and appears to be expensive, Dickson says. He sees a continuing modest pullback near term, but he figures it’s likely to be higher a year from now. San Francisco money manager Gary Wollin, who manages a bit above $100 million of assets under the banner, Gary Wollin & Co., echoes some of Dickson’s bullish thoughts, especially on the economic front. As for those external shockers, Wollin thinks “we could see some war games and a lot of unrest in Europe, both of which could drive away potential buyers.” But he expects them to have a short shelf life in impacting the market, and predicts an 11,500-12,000 Dow by year-end. Still, he believes there’s always a chance “things could spiral out of control in Europe” via more riots in the streets. Another plus for the stock market–traditional muscle-flexing in December–is noted by Sam Stovall, the chief investment strategist at Standard & Poor’s. Since 1945, he points out, the S&P 500 registered its strongest monthly advance in December, rising 1,7%, versus 0.6% for all 12 months. What’s more, the market rose in 77% of all Decembers, versus 59% for the average of all 12 months. In other words, look for a merry Christmas for investors. What do you think? E-mail me at Dandordan@aol.com.

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Roderick M. Hills: Business Needs a Fair and Impartial Judiciary

October 14, 2010

In recent years there have been repeated efforts that threaten the independence of our state judiciary systems. Groups in Missouri, Arizona and Iowa, for example, have sought to replace long standing merit selection systems with the direct election of judges. Another group, the American Justice Partnership has criticized the Open Society Institute for supporting merit selection of judges on the ground that the Institute is attempting to take away the right to vote. Such efforts foolishly ignore the increasing number of politically charged judicial contests that are characterized by large campaign expenditures from groups or individuals who seek to influence judicial decisions. The business community has reason to be seriously concerned with this trend. A particularly egregious case involving a campaign contribution to a judicial election was highlighted by the decision of the Supreme Court of the United States in Caperton vs. Massey (2009) (reversing a lower court’s ruling for a company whose chief executive officer had made a $3 million campaign contribution to the judge who ruled for his company). The Committee for Economic Development (CED), joined by Intel, Lockheed Martin, PepsiCo, and Wal-Mart Stores, filed an amicus brief in the Supreme Court seeking reversal of the lower court’s decision. It seems doubtful however that the Caperton decision will protect companies from the bias of judges who favor those who have been regular contributors to their campaigns for reelection. Corporations that do business in multiple states are particularly vulnerable to plaintiffs who can choose the state where the judges are more likely to be favorable to them. There is today considerable concern in the business community with judicial elections. In 2007 the CED commissioned a poll by Zogby International that found four out of five business leaders worry that financial contributions have a major effect on decisions rendered by judges. The poll also found near universal concern that campaign contributions and political pressure will make judges more accountable to politicians and special interests then to the law. Finally, the poll found that 71% of business leaders support a merit or appointment system for the selection of judges. The 2010 US Chamber of Commerce State Liability Rankings Study found that two-thirds (67%) of businesses polled reported that a state’s litigation environment is likely to impact business decisions such as where to locate or do business. An independent judiciary is necessary to protect our free market economy. That independence is too often undermined by partisan elections that require judges to raise campaign funds. The bottom line is that businesses are increasingly enmeshed in contentious judicial political campaigns. A far better alternative is the merit selection of judges. Business is best when it operates in the market place and not the political arena.

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Happy Meal Toy Ban Under Consideration In San Francisco

October 3, 2010

SAN FRANCISCO — San Francisco has a long history of bold public health and environmental stances, going after everything from plastic bags in grocery stores to cigarettes to sugary drinks. The latest target: Ronald McDonald. A proposed city ordinance would ban McDonald’s from putting toys in Happy Meals unless it adds fruit and vegetable portions and limits calories. The proposal would apply to all restaurants, but the focus has been on McDonald’s and its iconic Happy Meals. Supervisor Eric Mar said he proposed the law to protect the health of his constituents, but McDonald’s has waged an aggressive fight to block the measure. A battery of McDonald’s Corp. executives showed up at city hall to argue that the legislation is a heavy-handed effort that threatens the company’s decades-old business model and the free choice of its customers. The proposed Happy Meal law is just the latest in a string of San Francisco ordinances aimed at regulating public health. The city recently expanded a law banning tobacco sales in pharmacies to include grocery stores and big-box stores that also have pharmacies. Mayor Gavin Newsom signed an executive order earlier this year banning sweetened beverages like Coca Cola and Pepsi from vending machines on city property. Local leaders considered but ultimately abandoned laws recently that would have imposed a fee on businesses that sell sugary drinks and alcohol. Newsom has slowed down in his support of some health measures after he was attacked by his opponent in next month’s lieutenant governor’s race, Lt. Gov. Abel Maldonado, for being the “food police.” Newsom vetoed the alcohol and soda fees, and he’s indicated he’ll do the same for Ronald McDonald. The Board of Supervisors could overturn a veto but needs the votes of eight of 11 supervisors to do so. Tony Winnicker, a Newsom spokesman, has said the mayor was opposed to the measures in part because of their negative impact on local businesses. “The mayor is always open to argument and evidence about a better way – he’s not ideological, he’s not wedded to one approach,” Winnicker said. “This is not the time to be considering new fees and taxes that would put San Francisco at a disadvantage to other counties around the state.” Mar said he expected his Happy Meal bill to pass out of committee Monday and receive a vote by the full Board of Supervisors later this month. McDonald’s vice president for nutrition and menu strategy, Karen Wells, said that denying a toy to a child would undermine the authority of parents to decide what their children should eat and would be difficult to execute. “It’s different from what we’re doing today and different from what we’ve done for 25 years, successfully,” Wells said. Responded Supervisor Sophie Maxwell in an exasperated voice, “Just because it’s different does not make it necessarily difficult. I mean, McDonald’s is an amazing institution. It’s been around for many years … because it’s able to change and to adapt to new circumstances and new things that people are eating so I think I have a lot more confidence in McDonald’s, I guess, than you do.” Cynthia Goody, McDonald’s nutrition director, said there was no evidence that childhood obesity would be reduced by requiring a fruit or vegetable with all meals. In response, a supervisor asked what mix of foods would lower childhood obesity. Goody said she would need to conduct more research to provide an answer. The Happy Meal ordinance is not all surprising given San Francisco’s famously liberal leanings. “San Francisco has a reputation – and it’s well deserved – of being a very progressive city,” said Alex Clemens, founder of Barbary Coast Consulting, a local political communications firm. “With that comes naturally, hand in hand, a reliance on government to encourage thoughtful change – that’s just tradition.”

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YOU Technology Appoints Industry Veteran as Vice President, Retail Business Development

September 1, 2010

Gene Wisniewski, Former Executive at MarketTools, Catalina, and Pepsi, to Spearhead Company’s Continued Expansion Into the Retail Industry

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SL Green Signs CBS & Healthfirst to Major Office Deals

July 27, 2010

It was another landmark week for SL Green. The office REIT inked long-term deals for CBS Broadcasting and Healthfirst in Manhattan, while one of its subsidiaries closed two leases for PepsiCo and Citigroup in the Westchester/Southern Connecticut region…

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Charles Kolb: The Value(s) of Wall Street

July 20, 2010

On January 22, 2008, the day when the Federal Reserve began to lower interest rates to address a looming economic downturn, the New York Times ran a Tiffany & Co. ad on page three. The ad featured a lovely pair of diamond teardrop earrings for $230,000. For most Americans, $230,000 is a lot of money. To put that figure in perspective: in 2007, the median American house price was $218,900, and the estimated average income for a family of four in 2008 was $65,900. An average American shopping for real value can have those earrings — or a house — by sending every cent earned for the next six years (after taxes) to Tiffany rather than feed and clothe the family. On Wall Street, however, at least until recently, $230,000 was not even chump change: it represented but a small fraction of the base pay and bonuses of the people who created the Great Recession. Many observers would have you think that the resulting liquidity crunch was the direct result of the economic illiterates who made the unwise decision to take out subprime mortgages on homes they could not afford. In reality, today’s problems are the result of decisions made by economic sophisticates who pushed these loans and dumped them in secondary markets where they were repackaged in mortgage-backed securities and other esoteric, synthetic instruments. Michael Lewis writes of a Mexican strawberry picker in California making $14,000 a year who qualified for a $720,000 home with not a penny down. Where, then, does the blame really lie? Not with the strawberry picker. The initial collateralization was helpful (as is the case with most normally functioning secondary markets which provide liquidity), but further spreading the risk through opaque financial instruments served only to fragment, and further obscure, the value and the risk of what was being sold. Wall Street’s reigning philosophy at the time, according to one former hedge fund trader, was “pump and dump”: pump out as much paper as quickly as possible, collect the origination fees, and then dump it at a discount somewhere else. The fundamental problem now facing our economy is not the value of the initial subprime mortgages (after all, those mortgages are still backed by tangible, real property) but rather the value of some of the financial paper that was ultimately spawned by the mortgage practices: the collateralized debt obligations, structured investment vehicles, and derivatives. Although our financial system is mending, this paper still has uncertain (but certainly low) value, and it inhibits a return to normalcy. Many holders fear that if they sell now, the value of the paper would still be so low that they would face undercapitalization coupled with an immediate requirement to obtain more funds from a still risk-averse system to avoid bankruptcy. It may take years to unravel these complex relationships and bring some value out of transactions which, from the outset, offered very little, if any, real value creation. How did this happen to our economy? Part of the answer has to do with Wall Street’s — and the country’s, for that matter — fixation on short-term values. Long-term value creation was replaced by an obsession with quarterly earnings and, ultimately, the short-term speculative frenzy that marks the end of a bubble. Our capital markets began to operate as casinos rather than as vehicles for providing capital that invested in America’s future. CEOs and others who bought into all of this were lavishly compensated by their boards, based on short-term indicators such as quarterly earnings. Most CEOs now stay in their jobs for far less time than they did 20 years ago. Among some, there’s a sense of “get in, get mine, and get out.” We’ve all seen the comparative figures: 30 years ago, average CEO pay was approximately 40 times the average worker’s compensation. In 2009, the CEOs of America’s 500 largest companies earned an average of $9.25 million apiece, roughly 319 times the average earnings of the American worker (and 140 times the earnings of that family of four). Ten years ago I had lunch in New York with a CEO who is now a principal at a prominent private-equity firm. We discussed CEO compensation, and he was worried then — long before the problems of Enron and Worldcom appeared — that if CEOs didn’t manage to police themselves, the federal government would step in and do it for them. When he proposed to some of his fellow CEOs that they meet to discuss possible voluntary action they might take, no one could find the time, a few doubted whether their views would matter, and one said, in essence, “you got yours; when I get mine, let’s talk.” Economists know that a price — whether for a currency, a stock, a commodity, or CEO talent — signals a measure of value, and that value ultimately rests on a level of confidence. The deleveraging in our financial markets signals, among other things, a loss of confidence in the underlying value of the paper generated by America’s housing market bubble. Value scales are being upended dramatically, and it is important that corporate leaders understand that “deleveraging” must, and will, apply to them too. The compact that existed 30 years ago between employers and employees no longer exists. Back then, the gap between the highest and lowest paid was much narrower, health care benefits were available through the workplace, and retirement security through defined benefit pension plans was far more commonplace. America’s business leaders need to drop their short-term fixation on immediate profits and, instead, focus on their companies’ long-term performance, recognizing that doing so also includes the long-term well-being of their employees and the communities in which those employees live. Their ability to do so will send an important signal about the value of long-term thinking, planning, and investing. This signal can, in turn, help move the entire country away from short-term behavior towards making the necessary investments in education, our physical infrastructure, our health care system, energy independence, and information technology. Dark as the headlines have been, there exists a silver lining. For much of the last decade, American business has been playing a defensive game and has earned increasingly lower approval ratings. Such negative views of business are bad for the country, for our economy, and for the entire business community. Smart CEOs and their boards will recognize an enormous opportunity to correct this problem immediately by demonstrating sincere concern for another kind of value: the important public policy issues now facing the country that will also impact long-term corporate profits. Forward-thinking CEOs like General Electric’s Jeff Immelt (taking GE “green” through “Ecomagination”), former Wal-Mart CEO Lee Scott (reorienting the company internally and externally on health insurance and prescription drugs), Safeway’s Steve Burd (championing a healthy workforce), PepsiCo’s Indra Nooyi (” Performance with Purpose “), and PNC Bank’s Jim Rohr (devoting $100 million of company money to its early education ” Grow Up Great ” initiative) understand the importance of repositioning business away from short-term thinking to a longer-term investment approach that benefits shareholders, employees, communities, and the country. We need more CEOs and boards to follow their examples. Only when that happens can we be certain that the values that have led to short-term economic bubbles have really changed for the better.

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Nancy Lublin: The Power of ZERO in Business: Branding

June 30, 2010

Not-for-profits know a lot about managing with zilch. That’s right. A bit counter-intuitive, eh? Cherished, valuable brands like Teach for America, Habitat for Humanity and Make a Wish could teach a lot to start-ups, government, even ginormous businesses about how to build brand equity… without taking a Superbowl ad or spending gazillions of dollars on a fancy Madison Avenue firm, focus groups, and pretty PowerPoints. Here are five simple lessons from terrific not-for-profits that will help you build a brand, without breaking the bank: 1. Open source your tagline . Ask your customer to describe your product or service in a sentence. 2. Rub up against your vendors/partners . Do some of these collaborators have shiny brands that appeal to your target market? Ask them to Tweet about you, publicly post you on their website, or have your CEO’s co-author an Op-Ed (or HuffPo piece). When DoSomething.org partners with Pepsi, we’re saying we’re a fighter brand. Another great example is the American Heart Association’s stamp of approval on Cheerios. 3. Write it down . Does everyone in your company know your key words? Your banned words? Even the tech guys and finance team at Nothing But Nets have a one-page version of their brand overview brief. It’s not just an email that was sent out by the head of marketing, it’s something everyone lives and breathes. 4. Be your target market . You should be your focus group. Your office should be full of people who actually use your product or service. Instead of constantly hiring focus groups and agencies, live it! Dress for Success often hires former clients and the CEO of Livestrong is a cancer survivor himself. Does your CEO — but also your receptionist, your legal counsel, and your mailroom clerk — love your product or service? 5. Look in the mirror . Do you only evaluate your brand position when there is a crisis? That’s like waiting to wash your face until you have a pimple. Great brand management requires daily use of Clean and Clear. Nancy Lublin is the CEO of DoSomething.org, the founder of Dress for Success, a columnist for Fast Company, and the author of Zilch: The Power of Zero In Business .

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Frank Cooper III: Harnessing Fan Support to Impact Your Bottom Line

May 24, 2010

One of the most valuable — yet underrated — assets any company has is the wisdom and passion of its most loyal consumers. Yes, it is true that you can find a larger pool of potential customers by looking at consumers who are undecided about your brand. Companies can tap into these potential consumers by providing the appropriate tools that facilitate engagement and empower them to offer insight and contribute ideas. At PepsiCo, we found that our consumers’ social relationships serve as the foundation for our most effective marketing. Once you engage your loyal consumers to help lead the evolution of your brand or products, those consumers communicate authentically within their real-life social networks about the meaning of your brands and the reasons others should love them too. The collaboration and innovation led by consumers will lead to word-of-mouth communications, which can influence revenue and profit. In fact, a 2009 Wetpaint/Altimeter study found that businesses widely engaged in social media surpass their peers in both revenue and profit. Similarly, we know that 90 percent of consumers trust recommendations from people they know and 70 percent trust consumer opinions posted online. Within the past year, PepsiCo has launched numerous campaigns that demonstrate how an open brand culture that empowers the most loyal consumers to make brand decisions deepens the connection between consumers and the brand. This also enhances the overall brand equity and leads to an increase in product purchases. Mountain Dew’s DEWmocracy and the Pepsi Refresh Project are both strong examples of the approach and the results that follow. Creating Meaningful Collaboration with Your Fans Mountain Dew’s DEWmocracy started with a simple question: What if we gave the power to our consumers to lead product innovation? In 2007, we launched the first DEWmocracy campaign, giving consumers the power to create the next Mountain Dew product through the story-based innovation which was essentially a video game. It directed consumers to a destination web site and created an immersive environment where consumers developed Mountain Dew products. This campaign resulted in Mountain Dew Voltage, one of the most successful product launches in PepsiCo beverage history, new consumers being brought into the DEW franchise and massive amounts of earned of media. As we know, the world has changed significantly since 2007, causing a critical evolution in our thinking and brand behavior. Thus, consumers not only expect to be involved in brand decisions, they want to lead. DEWmocracy 2, in response, shifted from “story-based innovation” to “consumer-led innovation.” In DEWmocracy 2, launched last year, we leveraged various social media tools to empower consumers to determine virtually every aspect of the next Mountain Dew product and lead the communications efforts relating to it. We evaluated options that would allow us to continue engaging our fans and empower them to make more key decisions on behalf of the brand. We collaborated with our fans throughout the entire product development process. By having our core fans involved in all steps of innovation using social media tools and networks like Facebook, Twitter and our own private social network, DEW Labs, as the connective tissue, we made it simple for fans to collaborate with one another and the brand. Taking it a step further, fans were also heavily involved in media planning and final media buy-ins, a first for PepsiCo. While it’s still too early in DEWmocracy 2 to see the results, we are pleased with a few early accomplishments. First, our Facebook base grew from 150,000 to more than 860,000 fans, a 500 percent increase in less than a year without any paid advertisement. Second, DEW Labs, which now has more than 4,000 members, provides an efficient way for us to reach and stay engaged with our fans. And, lastly, more than a million consumers have participated in at least one stage of the campaign. We believe that this support from consumers will lead to favorable returns in the market. Our consumers have been actively involved in this campaign for nearly a year now, fueled solely by their passion for DEW and interest in leaving their imprint on the future of the brand. What’s more, we have gained meaningful business insights into our brand and consumers that would not have surfaced during a traditional approach to product development and marketing. Create a Culture, Not a Product-Centric Campaign The Pepsi Refresh Project tapped into the “social relationships” of our consumers from a different perspective. Rather than focusing on how to sell the product attributes to our consumers, we looked to add value to a community or a real-life social network. To do so, we knew that we had to understand the values that connected our consumers. We knew that our consumers wanted to play a central role in developing and promoting ideas that they believed would move the world forward. It is a group bound by the belief that we can all contribute to the betterment of our world. While DEWmocracy focused, in a sense, on the “wisdom of crowds,” the Pepsi Refresh Project celebrated the power of the individual. We set aside over $20 million to fund ideas created by everyday people who want to make a positive impact on their communities. We have generated over three million unique visitors and 16 million votes on the Pepsi Refresh Project website: www.refresheverything.com . We have opened a mutually beneficial dialogue that gives greater ownership of the Pepsi brand to our consumers. Equally important, the Pepsi Refresh Project has expanded our consumers’ perception of what the Pepsi brand can be: Pepsi remains a fun brand that leads culture. However, it also has social responsibility – a sense of purpose – built into its behavior. What’s Next for Consumer Engagement? Both DEWmocracy and the Pepsi Refresh Project offer interesting insight into the future of marketing and consumer engagement. It is moving beyond the product itself and using the brand to serve as a catalyst or facilitator within cultural groups. Whether it is unleashing the creativity among a loyal fan base or empowering consumers to express their values, the core idea remains: harness the power of your consumer base and allow them to lead in brand decision making.

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CEO Pay Breaks Glass Ceiling as Bartz Gets $47.2 Million With ’09 Bonanza

May 13, 2010

By Alexis Leondis May 13 (Bloomberg) — Chief executive officers’ pay is shattering the glass ceiling. Boosted by a $47.2 million package for Carol Bartz of Yahoo! Inc. and $26.3 million for Irene Rosenfeld of Kraft Foods Inc., compensation for woman CEOs at the biggest U.S. companies is booming. Sixteen women heading companies in the Standard & Poor’s 500 Index averaged earnings of $14.2 million in their latest fiscal years, 43 percent more than the male average, according to data compiled by Bloomberg News from proxy filings. The women who were also CEOs in 2008 got a 19 percent raise in 2009 — while the men took a 5 percent cut. “When you see numbers like this, one can truly say that the glass ceiling in corporate America has been shattered,” said Frank Glassner , CEO of San Francisco-based Veritas Executive Compensation Consultants LLC. “I don’t remember seeing women ever getting paid more than men.” Graef Crystal , a pay expert who analyzed the data for Bloomberg News, said that “compensation committees are saying we don’t want to have any trouble” over underpaying women, “so if we err, let’s err on the side of giving them too much.” Darwinian competition is also playing a role, said Sheila Wellington, a professor of management and organizations at New York University who studies women business leaders. “These are the strongest, fittest and toughest who survive,” according to Wellington, who said she was offered half the salary of male peers for her first job at a mental health facility in 1968. “They’ve had to negotiate all the way up the ladder.” An Unusual Option Compensation consultant Todd Gershkowitz , senior vice president of Los Angeles-based Farient Advisors, said he couldn’t recall a female CEO ever receiving as much as the 61- year-old Bartz. Her package was bolstered when she joined in January 2009 by a five-million share options grant from Yahoo , valued at $27.2 million, and a $7.5 million share grant. The option is unusual in that it begins to vest, or become cashable, if Yahoo stock hits and stays above $17.60, or 50 percent above its $11.73 price on the date it was granted, for 20 straight trading days before 2013, Crystal said. Most options vest on a fixed timetable, irrespective of price. Yahoo, based in Sunnyvale, California, rose above the $17.60 level last month, falling before the option could vest. Resting Pythons “Welcome aboard” packages are standard fare for new CEOs. Yahoo went overboard when it added $7.4 million in additional stock and options to Bartz’s pay just 25 days after the initial award, Crystal said. “Why does she need to eat again 25 days after she swallowed an entire pig?” he said. “Some pythons need to rest before another meal.” The $42 million value attributed to the option and stock grants in Yahoo’s compensation disclosure wasn’t realized in 2009 and is linked to “increases in long-term shareholder value” and individual and company financial performance , said Dana Lengkeek , a Yahoo spokeswoman. In the broader workforce , women working at least 35 hours a week in the first quarter of 2010 received 79 percent of the wages earned by men, according to the U.S. Labor Department. Female heads of companies of all sizes made about 75 percent of what men did in a 2009 department survey of 1.1 million CEOs. About 24 percent were women. Pay riches for women CEOs at big companies may be “an important indicator, but not a milestone because of what happens down the line” among average workers, said Robin Ferracone, founder of Farient. Rosenfeld’s 41 Percent “Even at the CEO level, with equal pay comes equal scrutiny and a narrower band of acceptable behavior,” said Ferracone, whose clients have included Margaret Whitman , the former EBay Inc. CEO, and Carleton Fiorina , the former head of Hewlett-Packard Co. At Kraft , Rosenfeld received a 41 percent raise last year as the shares fell behind the S&P 500’s performance by 21 percentage points. In a Crystal model that adjusted pay for shareholder return, she would have taken an $18 million pay cut, and was rated as the 16th most overpaid CEO among 271 studied. Crystal looked at S&P 500 companies that had filed 2009 fiscal year proxies by April 16. (Click here to see a sortable table and other interactive graphics on CEO pay.) Rosenfeld, 57, was awarded $10.6 million in a performance- based bonus, which Kraft’s proxy attributed in part to her pursuit and acquisition of Cadbury Plc, which made Kraft into the world’s largest confectioner. ‘Dumb Deals’ To win Cadbury, Rosenfeld had to stand up to Warren Buffett , CEO of Berkshire Hathaway Inc., which has an 8 percent stake in Kraft. Buffett said Kraft made “dumb deals” by overpaying for Cadbury and selling its pizza brands. When asked about Rosenfeld’s pay at Berkshire’s annual meeting, Buffett said, “We’ve got a compensation system at Berkshire which I regard as quite rational and there’s a lot of companies in the U.S. that have different compensation systems,” according to the Daily Telegraph of London. Michael Mitchell, a spokesman for Northfield, Illinois- based Kraft, said company officials “strongly believe” the Cadbury acquisition was “absolutely the right decision” and will boost earnings. The pay package for Rosenfeld, who led Kraft to “strong operating results in 2009” in an “extremely volatile and challenging operating environment,” was driven by a payout from a 2007-2009 long-term incentive plan, he said. Extended Holding Requirements Other female CEOs in the S&P 500 considered overpaid in 2009 in the Crystal model were Susan Ivey of Reynolds American Inc. , Mary Agnes Wilderotter of Frontier Communications Corp. and Indra Nooyi of PepsiCo Inc. Shareholders at Reynolds last week defeated a resolution that would have required an extended holding requirement for stock awards. Ivey received $6.24 million in stock last year. A similar resolution is pending a vote at Frontier, where Wilderotter got $3 million in stock. “We’re concerned their high levels of stock compensation and lack of holding requirements could mean pay isn’t sufficiently tied to performance,” said Brandon Rees , deputy director of the office of investment for the AFL-CIO, a supporter of the resolutions. Debra Cafaro , CEO of real estate investment trust Ventas Inc. for the past decade, received $6.25 million last year, and was rated as underpaid in the Crystal model. She took an 18 percent pay cut in 2009. Ventas has been the best performing stock in the S&P 500 financial sector under her tenure, with a 35 percent compound annual return for shareholders. Twice as Likely “Once you’re in the CEO seat, I believe directors use a very even-handed approach to compensation,” Cafaro, 52, said. “But getting there can be a different story and women executives may be judged more critically.” Ventas returned 12 percentage points above the S&P 500 last year for shareholders. Cafaro’s base salary and non-equity incentive compensation were increased by 3.5 percent and 33 percent, respectively, while her equity awards decreased 34 percent. “The compensation committee believes the CEO should have the greatest alignment with our shareholders, and, therefore, her compensation structure was designed to reflect a higher sensitivity to our performance than the compensation structure of other named executive officers,” a company filing said. Women CEOs are almost twice as likely to have been named to the job from outside, as Cafaro was, than from within, according to a Harvard Business Review study by Herminia Ibarra, a professor of organizational behavior, and Morten T. Hansen, a professor of entrepreneurship. ‘Outside-the-Mold’ There is a strong market for “outside-the-mold” candidates today and not a huge supply, so there’s no surprise it’s reflected in their salaries, Ibarra said. Being brought in means they’ll be paid a premium, Farient’s Ferracone said. Companies are emphasizing diversity and having a woman at the helm fulfills that agenda, which can lead to an advantage when negotiating pay, Ferracone said. “Having a female CEO is an opportunity to blaze a trail, so some companies will say, ‘What do we have to do to get her?’” said Andrew Oringer, a compensation and benefits lawyer at law firm Ropes & Gray in New York. To contact the reporter on this story: Alexis Leondis in New York aleondis@bloomberg.net .

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CEO Pay Breaks Glass Ceiling as Bartz Gets $47.2 Million With ’09 Bonanza

May 13, 2010

By Alexis Leondis May 13 (Bloomberg) — Chief executive officers’ pay is shattering the glass ceiling. Boosted by a $47.2 million package for Carol Bartz of Yahoo! Inc. and $26.3 million for Irene Rosenfeld of Kraft Foods Inc., compensation for woman CEOs at the biggest U.S. companies is booming. Sixteen women heading companies in the Standard & Poor’s 500 Index averaged earnings of $14.2 million in their latest fiscal years, 43 percent more than the male average, according to data compiled by Bloomberg News from proxy filings. The women who were also CEOs in 2008 got a 19 percent raise in 2009 — while the men took a 5 percent cut. “When you see numbers like this, one can truly say that the glass ceiling in corporate America has been shattered,” said Frank Glassner , CEO of San Francisco-based Veritas Executive Compensation Consultants LLC. “I don’t remember seeing women ever getting paid more than men.” Graef Crystal , a pay expert who analyzed the data for Bloomberg News, said that “compensation committees are saying we don’t want to have any trouble” over underpaying women, “so if we err, let’s err on the side of giving them too much.” Darwinian competition is also playing a role, said Sheila Wellington, a professor of management and organizations at New York University who studies women business leaders. “These are the strongest, fittest and toughest who survive,” according to Wellington, who said she was offered half the salary of male peers for her first job at a mental health facility in 1968. “They’ve had to negotiate all the way up the ladder.” An Unusual Option Compensation consultant Todd Gershkowitz , senior vice president of Los Angeles-based Farient Advisors, said he couldn’t recall a female CEO ever receiving as much as the 61- year-old Bartz. Her package was bolstered when she joined in January 2009 by a five-million share options grant from Yahoo , valued at $27.2 million, and a $7.5 million share grant. The option is unusual in that it begins to vest, or become cashable, if Yahoo stock hits and stays above $17.60, or 50 percent above its $11.73 price on the date it was granted, for 20 straight trading days before 2013, Crystal said. Most options vest on a fixed timetable, irrespective of price. Yahoo, based in Sunnyvale, California, rose above the $17.60 level last month, falling before the option could vest. Resting Pythons “Welcome aboard” packages are standard fare for new CEOs. Yahoo went overboard when it added $7.4 million in additional stock and options to Bartz’s pay just 25 days after the initial award, Crystal said. “Why does she need to eat again 25 days after she swallowed an entire pig?” he said. “Some pythons need to rest before another meal.” The $42 million value attributed to the option and stock grants in Yahoo’s compensation disclosure wasn’t realized in 2009 and is linked to “increases in long-term shareholder value” and individual and company financial performance , said Dana Lengkeek , a Yahoo spokeswoman. In the broader workforce , women working at least 35 hours a week in the first quarter of 2010 received 79 percent of the wages earned by men, according to the U.S. Labor Department. Female heads of companies of all sizes made about 75 percent of what men did in a 2009 department survey of 1.1 million CEOs. About 24 percent were women. Pay riches for women CEOs at big companies may be “an important indicator, but not a milestone because of what happens down the line” among average workers, said Robin Ferracone, founder of Farient. Rosenfeld’s 41 Percent “Even at the CEO level, with equal pay comes equal scrutiny and a narrower band of acceptable behavior,” said Ferracone, whose clients have included Margaret Whitman , the former EBay Inc. CEO, and Carleton Fiorina , the former head of Hewlett-Packard Co. At Kraft , Rosenfeld received a 41 percent raise last year as the shares fell behind the S&P 500’s performance by 21 percentage points. In a Crystal model that adjusted pay for shareholder return, she would have taken an $18 million pay cut, and was rated as the 16th most overpaid CEO among 271 studied. Crystal looked at S&P 500 companies that had filed 2009 fiscal year proxies by April 16. (Click here to see a sortable table and other interactive graphics on CEO pay.) Rosenfeld, 57, was awarded $10.6 million in a performance- based bonus, which Kraft’s proxy attributed in part to her pursuit and acquisition of Cadbury Plc, which made Kraft into the world’s largest confectioner. ‘Dumb Deals’ To win Cadbury, Rosenfeld had to stand up to Warren Buffett , CEO of Berkshire Hathaway Inc., which has an 8 percent stake in Kraft. Buffett said Kraft made “dumb deals” by overpaying for Cadbury and selling its pizza brands. When asked about Rosenfeld’s pay at Berkshire’s annual meeting, Buffett said, “We’ve got a compensation system at Berkshire which I regard as quite rational and there’s a lot of companies in the U.S. that have different compensation systems,” according to the Daily Telegraph of London. Michael Mitchell, a spokesman for Northfield, Illinois- based Kraft, said company officials “strongly believe” the Cadbury acquisition was “absolutely the right decision” and will boost earnings. The pay package for Rosenfeld, who led Kraft to “strong operating results in 2009” in an “extremely volatile and challenging operating environment,” was driven by a payout from a 2007-2009 long-term incentive plan, he said. Extended Holding Requirements Other female CEOs in the S&P 500 considered overpaid in 2009 in the Crystal model were Susan Ivey of Reynolds American Inc. , Mary Agnes Wilderotter of Frontier Communications Corp. and Indra Nooyi of PepsiCo Inc. Shareholders at Reynolds last week defeated a resolution that would have required an extended holding requirement for stock awards. Ivey received $6.24 million in stock last year. A similar resolution is pending a vote at Frontier, where Wilderotter got $3 million in stock. “We’re concerned their high levels of stock compensation and lack of holding requirements could mean pay isn’t sufficiently tied to performance,” said Brandon Rees , deputy director of the office of investment for the AFL-CIO, a supporter of the resolutions. Debra Cafaro , CEO of real estate investment trust Ventas Inc. for the past decade, received $6.25 million last year, and was rated as underpaid in the Crystal model. She took an 18 percent pay cut in 2009. Ventas has been the best performing stock in the S&P 500 financial sector under her tenure, with a 35 percent compound annual return for shareholders. Twice as Likely “Once you’re in the CEO seat, I believe directors use a very even-handed approach to compensation,” Cafaro, 52, said. “But getting there can be a different story and women executives may be judged more critically.” Ventas returned 12 percentage points above the S&P 500 last year for shareholders. Cafaro’s base salary and non-equity incentive compensation were increased by 3.5 percent and 33 percent, respectively, while her equity awards decreased 34 percent. “The compensation committee believes the CEO should have the greatest alignment with our shareholders, and, therefore, her compensation structure was designed to reflect a higher sensitivity to our performance than the compensation structure of other named executive officers,” a company filing said. Women CEOs are almost twice as likely to have been named to the job from outside, as Cafaro was, than from within, according to a Harvard Business Review study by Herminia Ibarra, a professor of organizational behavior, and Morten T. Hansen, a professor of entrepreneurship. ‘Outside-the-Mold’ There is a strong market for “outside-the-mold” candidates today and not a huge supply, so there’s no surprise it’s reflected in their salaries, Ibarra said. Being brought in means they’ll be paid a premium, Farient’s Ferracone said. Companies are emphasizing diversity and having a woman at the helm fulfills that agenda, which can lead to an advantage when negotiating pay, Ferracone said. “Having a female CEO is an opportunity to blaze a trail, so some companies will say, ‘What do we have to do to get her?’” said Andrew Oringer, a compensation and benefits lawyer at law firm Ropes & Gray in New York. To contact the reporter on this story: Alexis Leondis in New York aleondis@bloomberg.net .

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JPMorgan’s Lee Helps United Air Seal Continental Merger Deal on Second Try

May 7, 2010

By Zachary R. Mider May 7 (Bloomberg) — The $3.1 billion merger of UAL Corp.’s United Airlines and Continental Airlines Inc. was only the year’s 38th-largest deal. That didn’t keep some of Wall Street’s top rainmakers from getting involved. James B. Lee Jr ., a vice chairman and veteran merger adviser at JPMorgan Chase & Co., and Goldman Sachs Group Inc.’s Michael Carr , a senior member of the firm’s merger leadership group, advised UAL Chief Executive Officer Glenn Tilton . Morgan Stanley’s Robert Kindler , head of global mergers and acquisitions, worked with Continental, alongside Lazard Ltd.’s Harry Pinson , a banker in the carrier’s home city of Houston. The merger, which creates the world’s biggest airline with almost 86,000 employees, was the second effort in two years to bring United and Continental to the altar. In April 2008, the airlines were hours away from approving a deal when Continental pulled out of talks and resolved to remain independent. “The deal executed last Sunday night was virtually the same transaction we negotiated two years ago,” Lee said in an interview with Charlie Rose published in Bloomberg Businessweek’s May 10 issue. “The seeds were planted quite some time ago.” United and Continental announced the merger on May 3 after signing the deal the night before at the offices of Cravath, Swaine & Moore LLP, United’s legal counsel. GE, PepsiCo JPMorgan’s team included Thomas Miles , Christopher Ventresca , co-head of North American mergers and acquisitions, and David Fox, head of Midwest investment banking. Goldman’s Patrick McClymont also advised Chicago-based United. Morgan Stanley’s Nelson Walsh and Josh Connor were part of the group advising Continental. The deal is the latest in a series of high-profile mandates for Lee and Kindler. Lee, 57, a longtime adviser to UAL’s Tilton, helped General Electric Co. sell a majority stake in NBC Universal to Comcast Corp. last year and led negotiations with the U.S. Treasury on behalf of Chrysler LLC bank-debt holders. Kindler, 56, advised PepsiCo Inc. ’s biggest bottler on its sale to the soda and snack maker last year, and helped CF Industries Holdings Inc. win a year-long battle to buy Terra Industries Inc. Carr has been helping Airgas Inc. defend against a hostile takeover bid from Air Products & Chemicals Inc. For legal advice, United is using Cravath’s Scott Barshay and George Zobitz. Continental’s CEO Jeff Smisek is using the law firm where he once worked, Vinson & Elkins, where Kevin Lewis is working on the deal. Jones Day’s Robert Profusek and Mark Metts and Freshfields Bruckhaus Deringer LLP are also advising. There have been 32 airline deals so far this year, with a total value of $7.7 billion, according to data compiled by Bloomberg. The largest was the $3.3 billion takeover of Japan Airlines Corp. by Enterprise Turnaround Initiative Corp. of Japan, the state-affiliated fund. Goldman Sachs is the biggest merger adviser this year, Bloomberg data show. JPMorgan is third, and Morgan Stanley and Lazard are fifth and sixth respectively. To contact the reporter on this story: Zachary R. Mider in New York at zmider1@bloomberg.net ;

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Brett King: Digital versus Traditional Advertising? Wrong Question – BANK 2.0

May 4, 2010

There is a debate that has been raging in Advertising quarters for almost a decade now – which is better Digital Media or Traditional Advertising. The fact that this question is being asked at all shows that most advertisers and institutions don’t get consumer behavior in the interconnected world. Considering that agencies are in advertising, you’d think they would get it right? Considering the declining ROI in traditional marketing approaches, you’d think marketing staffers would get it too right? Over the last couple of years the debate on Advertising spend has centered on where the money is going. In March 2008 General Motors shocked the traditional advertising world when they announced they were shifting US$1.5Bn of ad spend to the digital space and while some shift towards digital has been hailed as ‘game changing’ most advertising spend is still heavily biased towards traditional media . Susan Wojcicki, Google’s vice president of public policy and communications, was quoted in Digital Media Buzz as arguing that Ad spending has not caught up with consumer behavior. “U.S. users spend 12 hours per week online, which represents about 32 percent of their media time. However, online advertising makes up only 13.6 percent of advertising spend in the U.S.” Susan Wojcicki, VP – Public Policy and Communications, Google This is accurate, but what is holding back the shift? Long entrenched marketing behaviors, lack of digital skills in-house, lack of agency drive away from traditional media buy, or lack of understanding of changing consumer behavior… It’s probably a combination of all of these. The fact that most financial institutions, for example, have minimal social media or mobile advertising spend today shows either a complete lack of understanding of consumer behavior, a lag in internal adaptation of ‘digital’ or organizational inertia that is just too hard to shift? I think all of the above contribute, but the real problem lies in the ‘campaign’ mentality. Brand marketing is very well suited to traditional media, because it is about creating a ubiquitous recognition of your brand, logo, image or message. To fit broadcast mediums for product ROI advertisers created the campaign – really mini product or service branding initiatives designed to create recall at a time when customers are compiling their ‘evoked’ set of purchase alternatives. But while the campaign worked in the 70-90s utilizing broadcast, this is no longer the case in the digital world. The question over Digital or Traditional is the wrong question. The question should be, how do we better engage customers today so that they are compelled to buy? Campaigns on traditional media are struggling in the one area that digital is increasingly effective – measuring ROI. Measurability is a strong advantage in the new world because the ability to understand why, when and where customers need a product or service should be considered the Holy Grail. But traditional broadcast methods such as TVC, Radio, Newspaper, Direct Mail, and static outdoor, only work efficiently when it is a static message directed at a wide audience that doesn’t need to change. It was for this reason that Pepsi started its shift to Direct Response Marketing this year as they moved their entire SuperBowl TVC budget to online and social media . At the Sears Annual General Meeting on Tuesday, Edward Lampert explained that even a major retailer is having to conceptualize a shift away from broadcast methods to much more targeted conversations with customers, something that static media can’t deliver. “It’s not just us broadcasting to customers any more, he said. “It has to be interactive, and it has to be relevant.” Edward Lampert, Chairman of Sears Retail organizations, whether banks, financial institutions, or retailers like Sears need to understand that Brand advertising can survive and thrive with traditional media, but campaigns are effectively dead in the IP-conversation space. Companies need to re-gear their marketing teams toward conversations, not just telling their customers a message and hoping for brand recall at purchase time. In the next 5-7 years TVCs will largely disappear because consumers aren’t watching them, why? Because we’ll either be downloading or TiVo’ing and Ads won’t be a part of the experience. Newspaper will shift to digital format so that ads in that space will go from static to just like web banner Ads. Radio will survive, but perhaps be delivered differently based on subscription feed models. Billboards just like Newspaper will move to digital format also. The question over Digital versus Traditional is kind of redundant. The way media is morphing everything is going digital, even traditional. What marketers and advertisers need to work on is the conversation, not broadcast. It takes a lot more competency internally, and initially the cost of delivering conversation marketing is alot more expensive than traditional broadcast production. However, the ROI in direct response, permission or conversation marketing blows anything in the traditional media measurability space away. We have the technology now to target messages at customers at the right time, across the right channel, but we’re not using it because we can’t fit campaigns into this model. It’s tough – but reengineering our approach to customer engagement is the only way through this discussion. Marketing staffers better go back to school, and fast…

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Brett King: Digital versus Traditional Advertising? Wrong Question – BANK 2.0

May 4, 2010

There is a debate that has been raging in Advertising quarters for almost a decade now – which is better Digital Media or Traditional Advertising. The fact that this question is being asked at all shows that most advertisers and institutions don’t get consumer behavior in the interconnected world. Considering that agencies are in advertising, you’d think they would get it right? Considering the declining ROI in traditional marketing approaches, you’d think marketing staffers would get it too right? Over the last couple of years the debate on Advertising spend has centered on where the money is going. In March 2008 General Motors shocked the traditional advertising world when they announced they were shifting US$1.5Bn of ad spend to the digital space and while some shift towards digital has been hailed as ‘game changing’ most advertising spend is still heavily biased towards traditional media . Susan Wojcicki, Google’s vice president of public policy and communications, was quoted in Digital Media Buzz as arguing that Ad spending has not caught up with consumer behavior. “U.S. users spend 12 hours per week online, which represents about 32 percent of their media time. However, online advertising makes up only 13.6 percent of advertising spend in the U.S.” Susan Wojcicki, VP – Public Policy and Communications, Google This is accurate, but what is holding back the shift? Long entrenched marketing behaviors, lack of digital skills in-house, lack of agency drive away from traditional media buy, or lack of understanding of changing consumer behavior… It’s probably a combination of all of these. The fact that most financial institutions, for example, have minimal social media or mobile advertising spend today shows either a complete lack of understanding of consumer behavior, a lag in internal adaptation of ‘digital’ or organizational inertia that is just too hard to shift? I think all of the above contribute, but the real problem lies in the ‘campaign’ mentality. Brand marketing is very well suited to traditional media, because it is about creating a ubiquitous recognition of your brand, logo, image or message. To fit broadcast mediums for product ROI advertisers created the campaign – really mini product or service branding initiatives designed to create recall at a time when customers are compiling their ‘evoked’ set of purchase alternatives. But while the campaign worked in the 70-90s utilizing broadcast, this is no longer the case in the digital world. The question over Digital or Traditional is the wrong question. The question should be, how do we better engage customers today so that they are compelled to buy? Campaigns on traditional media are struggling in the one area that digital is increasingly effective – measuring ROI. Measurability is a strong advantage in the new world because the ability to understand why, when and where customers need a product or service should be considered the Holy Grail. But traditional broadcast methods such as TVC, Radio, Newspaper, Direct Mail, and static outdoor, only work efficiently when it is a static message directed at a wide audience that doesn’t need to change. It was for this reason that Pepsi started its shift to Direct Response Marketing this year as they moved their entire SuperBowl TVC budget to online and social media . At the Sears Annual General Meeting on Tuesday, Edward Lampert explained that even a major retailer is having to conceptualize a shift away from broadcast methods to much more targeted conversations with customers, something that static media can’t deliver. “It’s not just us broadcasting to customers any more, he said. “It has to be interactive, and it has to be relevant.” Edward Lampert, Chairman of Sears Retail organizations, whether banks, financial institutions, or retailers like Sears need to understand that Brand advertising can survive and thrive with traditional media, but campaigns are effectively dead in the IP-conversation space. Companies need to re-gear their marketing teams toward conversations, not just telling their customers a message and hoping for brand recall at purchase time. In the next 5-7 years TVCs will largely disappear because consumers aren’t watching them, why? Because we’ll either be downloading or TiVo’ing and Ads won’t be a part of the experience. Newspaper will shift to digital format so that ads in that space will go from static to just like web banner Ads. Radio will survive, but perhaps be delivered differently based on subscription feed models. Billboards just like Newspaper will move to digital format also. The question over Digital versus Traditional is kind of redundant. The way media is morphing everything is going digital, even traditional. What marketers and advertisers need to work on is the conversation, not broadcast. It takes a lot more competency internally, and initially the cost of delivering conversation marketing is alot more expensive than traditional broadcast production. However, the ROI in direct response, permission or conversation marketing blows anything in the traditional media measurability space away. We have the technology now to target messages at customers at the right time, across the right channel, but we’re not using it because we can’t fit campaigns into this model. It’s tough – but reengineering our approach to customer engagement is the only way through this discussion. Marketing staffers better go back to school, and fast…

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U.S. Stocks Retreat, Paring February Gain, as Confidence in Recovery Wanes

February 27, 2010

By Craig Trudell Feb. 27 (Bloomberg) — U.S. stocks declined this week, trimming the Standard & Poor’s 500 Index’s rally for February, as unexpected declines in consumer confidence and equipment orders signaled the economic recovery may lose momentum. American Express Co. and Caterpillar Inc. fell more than 2 percent after consumer confidence fell to the lowest level in 10 months and companies scaled back orders for durable goods, excluding transportation equipment. Coca-Cola Co. lost 5.4 percent as the world’s biggest soda maker agreed to buy Coca- Cola Enterprises Inc.’s North American bottler. H&R Block Inc. retreated 18 percent and Fluor Corp. lost 6.8 percent after saying 2010 earnings would miss forecasts. The S&P 500 decreased 0.4 percent to 1,104.49, posting the first slump in three weeks and paring its advance for the month to 2.9 percent. The Dow Jones Industrial Average slipped 77.09 points, or 0.7 percent, to 10,325.26. “Investors are coming to grips with the fact that maybe the economic recovery is not going to be as strong as they once thought,” said Greg Woodard , a strategist at Manning & Napier, which manages about $27 billion in Fairport, New York. “It’s going to be difficult for the consumer to pick up where monetary and fiscal stimulus left off.” As the U.S. economy recovered from its biggest contraction since the 1930s, the S&P 500 rallied as much as 70 percent from the 12-year low it reached in March. The equity rally stalled a month ago and the S&P 500 lost as much as 8.1 percent amid concern that the labor market isn’t recovering fast enough and that European budget deficits will slow growth. ‘Nascent’ Recovery Stocks rallied on Feb. 24, when Federal Reserve Chairman Ben S. Bernanke said the economy still requires low interest rates to spur demand given the “nascent” recovery. The Conference Board’s measure of consumer confidence fell to 46 in February, the lowest level since April. Its measure of current conditions decreased to 19.4, a 27-year low. Orders for durable goods excluding transportation fell 0.6 percent, the most since August, and sales of new homes declined 11 percent to an annual pace of 309,000, the lowest level on record. “The market is on hold until we get more convincing data that the recovery is still holding,” said Robert Baur , chief economist at Principal Global Investors, which oversees $215 billion in Des Moines, Iowa. Bernanke said during two days of testimony before the U.S. House Financial Services committee that slack labor markets and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate, which has been in a range of zero to 0.25 percent for more than a year, low “for an extended period.” Discount Rate Boost The testimony followed the Federal Reserve Board’s decision to raise the cost of direct loans to banks last week by a quarter-point to 0.75 percent. “We’re not going to see rates going up anytime soon,” Manning & Napier’s Woodard said. “There are lots of other steps the Fed can take prior to raising rates. That provides a nice backdrop for equities.” American Express, which generated almost half its 2009 revenue from U.S. credit cards, slumped 2.2 percent to $38.19 this week. Caterpillar, the world’s largest maker of bulldozers and excavators, fell 2.1 percent to $57.05. Coca-Cola lost 5.4 percent to $52.72. It agreed to pay $12.3 billion for the Coca-Cola Enterprises unit, more than six months after PepsiCo Inc. moved to bring its bottlers in-house to cut costs. Coca-Cola Enterprises surged 29 percent to $25.55. Unemployment H&R Block, the biggest U.S. tax preparer, plunged 18 percent to $17.28 after the company said unemployment curtailed tax returns and as TurboTax-owner Intuit Inc. won more business. Fluor, the largest publicly traded U.S. construction company, dropped 6.8 percent to $42.80 after lowering its 2010 earnings forecast . Monsanto Co. fell 9.1 percent to $70.65, helping send the S&P 500 Materials Index to a 2.4 percent for the week’s biggest drop among 10 industries . The world’s largest seed company said new genetically modified corn and soybeans it’s counting on to drive earnings this decade may be planted on fewer U.S. acres in 2010 than previously forecast. First Solar Inc. retreated 8.8 percent to $105.75 after Chairman Michael J. Ahearn sold more than 40 percent of his holding in the solar-panel maker. GameStop Corp. retreated 11 percent to $17.20 for the biggest S&P 500 decline behind H&R Block. The video-game retailer said Chief Financial Officer Catherine R. Smith resigned to join Wal-Mart Stores Inc., the world’s biggest retailer. Millipore Corp. soared 32 percent, the most in the S&P 500, to $94.41. Thermo Fisher Scientific Inc., the world’s largest maker of lab instruments, offered about $6 billion for Millipore Corp., seeking to expand its biotechnology business, according to two people close to the situation. Millipore is worth at least $115 a share, 21 percent more than the bid valued at about $95 from Thermo Fisher, Jefferies & Co. analyst Jon Wood said in a report. To contact the reporter on this story: Craig Trudell in New York at ctrudell1@bloomberg.net

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Dimon, Seidenberg Among Chief Executives Said to Dine With Obama Tomorrow

February 22, 2010

By Julianna Goldman and Nicholas Johnston Feb. 22 (Bloomberg) — Verizon Communications Inc.’s Ivan Seidenberg and JPMorgan Chase & Co.’s Jamie Dimon are among more than a dozen chief executive officers invited to dinner tomorrow night with President Barack Obama at the White House. The executives are in town for a meeting of the Business Roundtable , an association of executives from many of the biggest U.S. companies. Obama will speak to the group Feb. 24 as his administration works to combat perceptions that he is anti- business. Other CEOs invited to dine with Obama include David Cote of Honeywell International Inc., Antonio Perez of Eastman Kodak Co., Xerox Corp.’s Ursula Burns, Indra Nooyi of PepsiCo Inc. and Wal-Mart Stores Inc.’s Michael Duke, according to a partial list provided by an administration official. Many of the CEOs are members of the Business Roundtable’s executive committee . Honeywell’s Cote is also under consideration for membership on Obama’s new federal deficit commission, another administration official said last week. He and Seidenberg were among four CEOs the president said in a Feb. 9 interview with Bloomberg Business Week that he most admired. In Obama’s address to the business group, administration officials have said they expect him to highlight the influence of business executives on his economic policies. Investor Perceptions Perceptions that Obama is unfriendly to business are widespread in the investment community. In a Bloomberg poll in January, 77 percent of U.S. investors surveyed said they see the president as anti-business. In the Bloomberg Business Week interview, Obama attributed such sentiments, in part, to “a spillover effect” from criticism he has leveled at large banks. He also cited instances when he has clashed with specific industries such as insurance companies over his health-care plan, energy companies over climate change, and banks over an overhaul of U.S. financial regulations. He said each of the proposals would benefit American businesses as a whole. Obama predicted that he would sign legislation this year to cut corporate taxes by about $70 billion. “You would be hard-pressed to identify a piece of legislation that we have proposed out there that, net, is not good for businesses,” he said. To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net ; Nicholas Johnston in Washington at njohnston3@bloomberg.net

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Stocks Rise on Waning Chinese Inflation, Greek Aid Talks; Commodities Gain

February 11, 2010

By David Merritt Feb. 11 (Bloomberg) — Stocks rose and the yield premium on Greek government debt shrank to the lowest level in a month as inflation concern waned in China and European leaders met to discuss aid for Greece. Copper climbed. The MSCI World Index of 23 developed nations’ stocks rose 0.5 percent at 10:32 a.m. in London, its third day of gains. Emerging-market stocks posted the biggest three-day rally in a month. Futures on the Standard & Poor’s 500 Index added 0.4 percent. Copper advanced as much as 3.8 percent in London, the most since November. The premium investors demand to hold Greek 10-year bonds instead of benchmark German debt narrowed to the least since Jan. 13. “If investors believe that Germany is ready to step up to the plate, then the market may well be prepared to continue to fund Greece,” Gary Jenkins , a strategist at Evolution Securities in London, wrote in a research note. “If Greece is being left to solve its own problems, then watching the market reaction will be fascinating, and possibly frightening.” European Union leaders meeting in Brussels may take steps to help Greece tackle the region’s biggest budget deficit and defuse a crisis that prompted investors to shun high-yielding securities around the world. China’s consumer prices rose less than forecast in January, bolstering speculation the central bank will delay raising interest rates to cool the world’s fastest-growing economy. Rio, Total Europe’s Dow Jones Stoxx 600 Index rose 0.6 percent as basic-resources stocks rallied. Rio Tinto Group, the world’s third-largest mining company, increased 3.9 percent in London after earnings beat estimates. Total SA, Europe’s third-biggest oil company, added 2.4 percent in Paris as profit topped forecasts. Credit Suisse Group AG , Switzerland’s biggest bank by market value, rose 2.8 percent in Zurich after saying it had “strong start” to the year. Greece’s ASE Index climbed 1.2 percent, posting its biggest three-day rally in more than two months. The gauge has lost almost a third of its value since peaking in October. Greece is struggling to curb a budget shortfall that reached an estimated 12.7 percent of gross domestic product last year, with workers striking this week to protest against austerity measures shutting schools, hospitals and airports. Greek two-year yields fell 41 basis points to 5.08 percent, after dropping 79 basis points yesterday and 32 points on Feb. 9. Ten-year yields dropped 22 basis points to 5.79 percent. Credit-default swaps on Greece fell 12.5 basis points to 343.5 basis points, the lowest level since Jan. 26, according to CMA DataVision prices. Portuguese 10-year yields lost 6 basis points to 4.47 percent. Asian Rally The MSCI Asia Pacific Excluding Japan Index added 1.8 percent. Baoshan Iron & Steel Co., China’s biggest steelmaker, climbed 5.7 percent in Shanghai. Commonwealth Bank of Australia gained 2.3 percent in Sydney after the country’s employers added three times as many jobs last month as economists forecast. Markets in Japan and Taiwan were closed today. The gain in U.S. futures indicated the S&P 500 may rebound after yesterday’s 0.2 percent loss. A report due at 8:30 a.m. in Washington may show initial jobless claims fell to 465,000 last week from 480,000 in the previous seven days, according to the median estimate of 47 economists surveyed by Bloomberg. More than 300 companies in the S&P 500 have reported fourth-quarter earnings since Jan. 11, with about 76 percent beating analysts’ estimates, according to data compiled by Bloomberg. Marriott International Inc, PepsiCo Inc. and Viacom Inc. are among companies announcing results today. China, Metals The MSCI Emerging Markets Index rose for a third day, climbing 1 percent. The Hang Seng China Enterprises Index of Hong Kong-traded shares climbed 2.1 percent for the biggest rally among world equity indexes. Copper rose as high as $6,784.75 a metric ton on the London Metal Exchange, leading an advance in industrial metals. Gold rose 0.7 percent to $1,079.11 an ounce and crude oil added 0.4 percent to $74.79 a barrel in New York trading. The Australian dollar led gains in so-called commodity currencies, rising to a one-week high against the Japanese yen. The Aussie gained 1.6 percent against the yen and strengthened 1.5 percent compared with the dollar. New Zealand’s dollar appreciated 1.1 percent versus the yen and rallied 1 percent versus the U.S. currency. The South African rand gained 0.9 percent against the dollar and rose 0.9 percent versus the yen. Treasuries were little changed before a $16 billion sale of 30-year securities, the third this week, for a total amount of $81 billion. They slid yesterday after Federal Reserve Chairman Ben S. Bernanke said policy makers may raise the discount raise “before long,” a first step to a withdrawal of stimulus measures. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net .

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Kirin Scraps Suntory Takeover, Balking at Brewery’s $10 Billion Price Tag

February 7, 2010

By Naoko Fujimura Feb. 8 (Bloomberg) — Kirin Holdings Co. , Japan’s largest beverage company, ended talks to buy Suntory Holdings Ltd. that would have created the world’s fifth-biggest foodmaker after balking at a $10 billion asking price. Suntory President Nobutada Saji and other members of the founding family had been seeking a stake of at least 33.4 percent in the merged company, which would have given them veto power over major decisions, including takeovers. The companies started talks in July as a declining population and stagnant economy sapped demand for their products at home. “Kirin has been negotiating on the premise that the new entity would be managed as a listed company in order to ensure appropriate management independence,” the Tokyo-based brewer said in a statement today. Kirin shares extended their decline after the announcement, falling as much as 6.9 percent. The stock traded 4.9 percent lower at 1,372 yen as of 12:44 p.m. in Tokyo. Suntory wanted about 0.9 percent of a share for each Kirin share in a new holding company, a Suntory executive, who declined to provide his name, told reporters in Tokyo today. That would have valued closely held Suntory at 892 billion yen ($10 billion) based on Kirin’s last closing price. “It would have been difficult to create a new company as there were differences in opinions, including the merger ratio,” Suntory said in a faxed statement. Uniting the century-old beverage makers would have created a company with sales of $42.7 billion, surpassing Coca-Cola Co. ’s $31.9 billion and placing it behind Nestle SA , Unilever PLC, Kraft Foods Inc. and PepsiCo Inc. Japanese food and beverage makers have been expanding overseas to reduce their reliance on a population that’s forecast to shrink 10 percent by 2030. Overseas Expansion Kirin last year agreed to pay A$3.5 billion ($3 billion) to take full ownership of Lion Nathan Ltd., Australia’s second- largest brewer. It also bought almost half of San Miguel Brewery Inc. , partly funded by the sale of its holding in the Philippine brewer’s parent San Miguel Corp. Suntory purchased European drinkmaker Orangina Schweppes from Blackstone Group LP and Lion Capital LLP in November for an undisclosed sum, and Groupe Danone SA’s Australia and New Zealand drinks business Frucor for more than 600 million euros ($819 million) in 2008. Kirin ’s domestic beer sales dropped 0.9 percent by volume last year and Japan soft-drink sales plunged 7 percent. The brewer of Ichiban Shibori and Kirin Lager overtook Asahi Breweries Ltd. last year in Japanese beer sales for the first time in nine years. Suntory sells Brand’s health food and is the Japanese partner of Haagen-Dazs ice cream. Suntory is 89 percent owned by members of the founding family. Saji’s grandfather, Shinjiro Torii , started the company in 1899 and began building Japan’s first whiskey distillery in Osaka prefecture in 1923. To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

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Al Norman: Wal-Mart Billionaire Wants $8 Million Subsidy

January 31, 2010

Missouri is the “show me the money” state — where using public funds to bail out billionaires is considered good business. An entrepreneur who married into Sam Walton’s extended family, and is listed high up on the Forbes Wealthiest Americans list, is asking Missouri taxpayers to help him build a bigger Wal-Mart. Enos Stanley Kroenke married into a fortune when he wed Ann Walton, the daughter of Sam Walton’s brother “Bud.” But Kroenke, already a successful businessman before his marriage, now apparently needs millions in public welfare to carry out his latest development plans. Owner of the Denver Nuggets basketball team, and hockey’s Colorado Avalanche, Kroene is part owner of the St. Louis Rams and the English soccer team Arsenal. His development firm, THF Realty (the acronym stands for “To Have Fun”) has asked for a Tax Increment Financing (TIF) deal to build a Wal-Mart supercenter in the tiny community of Bridgeton, Missouri. THF Realty owns 100 properties comprising more than 20 million square feet of leaseable area in 23 states. A concentration of THF properties exists in Missouri, Illinois, Pennsylvania and West Virginia. The company says its mission is to be the “best private developer in America.” But THF needs a little TIF from its public friends. Kroenke is the 117th richest American, with an estimated worth of $2.7 billion in 2009. According to the St. Louis Business Journal , in 1995, Kroenke bought a major stake in the Rams and relocated them from Los Angeles to St. Louis. Five years later, Kroenke blocked out former Broncos quarterback John Elway to purchase the Nuggets, the Avalanche, and the Pepsi Center arena. The 61-year-old Kroenke owns a piece of the Colorado Rapids soccer team, and the stadium they play in, plus the Colorado Mammoth lacrosse team. Six years ago Kroenke went live with the Altitude Sports & Entertainment network, a 24/7 TV network that broadcasts the Colorado teams that Kroenke owns. The use of state tax breaks by billionaires is emblematic of the ‘bail out’ mentality that still pervades the real estate industry in America. Kroenke’s Wal-Mart plan for Bridgeton, Missouri is not a form of economic development. There already are 19 Wal-Marts within 25 miles of Bridgeton, including a Wal-Mart that sits on the border of Bridgeton and St. Ann. Bridgeton is a city that has lost 15% of its population since 1990, and any revenue it gains from another Wal-Mart will come from its neighbor, St. Ann. The existing Wal-Mart on the St. Ann border will shut down if Kroenke builds his superstore, draining the city of at least $100,000 in sales taxes. When Bridgeton officials issued a bid for development of the former Value City property on St. Charles Rock Road, Kroenke responded. The proposed supercenter will be 159,000 square feet — only 40,000 square feet larger than the existing Wal-Mart store located just minutes away. THF says the supercenter will employ around 300 workers — but most of these workers are already employed at the “old” store. Building Wal-Marts is a family affair for Kroenke. Over the years, Kroenke and THF have been at the center of many controversial Wal-Mart developments in St. Peters, Columbia, High Ridge, Maplewood, and North St. Louis County, Missouri, as well as Glen Carbon, Illinois, Wheeling, West Virginia, and Buffalo, Minnesota. In January of 2010, Kroenke’s group presented Bridgeton with a plan requiring as much as $8 million in Tax Increment Financing to build a Wal-Mart. According to Kroenke, the Wal-Mart project will generate roughly $7 million in sales and property taxes. But this welfare deal is not without its detractors. Officials in neighboring St. Ann are not pleased with the project. The “old” Wal-Mart initially was entirely within Bridgeton — but when Wal-Mart expanded its store, the footprint stepped across the line into St. Ann. Bridgeton’s gain will be St. Ann’s loss. Tax Increment Financing has been used by municipal officials nationwide for years to try to lure developers away from neighboring communities. To discourage this form of retail pilfering, the Missouri state legislature in 2007 changed the power to grant a TIF to require cities to use a countywide approach to granting TIFs — rather than a town-level process only. The use of this financing “gift” to developers since the reform has dropped dramatically. Kroenke’s request for a subsidy is only the second in St. Louis county since the law became effective in January of 2008. But Bridgeton Mayor Conrad Bowers has been promoting Kroenke’s scheme for months. “The store is going be larger, and have many more products, and the sales will be higher,” the Mayor told the St. Louis Post Dispatch . The TIF has to pass muster with the Tax-Increment Financing Commission, which is a combination of county, city and other officials. “In my judgment,” the Mayor told the Dispatch , ” I think that it (the supercenter) will happen because I really believe it’s good for the area, it’s good for the county. It’s not like we’re stealing this from another area — the store is in Bridgeton.” The Mayor says this supercenter cannot happen without TIF money because of the demolition costs on the site — which the city failed to get from the former property owners. Now city officials want taxpayers to foot the bill for the billionaire Kroenke. The $8 million in sales and property taxes that will be given back to the billionaire developer in the form of site infrastructure costs, is money the taxpayers could have used to pay for the on-going police and fire protection that this new superstore will demand. “The point is,” Mayor Bowers told the Dispatch , “Wal-Mart is going to build a Supercenter and I’m pleased they want to be in Bridgeton and at a site that needs to be redeveloped. As far as I’m concerned it’s the correct use of a TIF.” Even if the TIF Commission says No to Kroenke, the Bridgeton City Council gets the final say. If the City Council can muster a two-thirds vote to override the TIF Commission, the billionaire gets his bail out. Over the years, Wal-Mart has swallowed hundreds of millions of dollars in federal, state, and local subsidies — a form of welfare not available to its smaller competitors and Main Street businesses. The use of such public funding has been criticized as a blunt tool for economic development, because in the end, the TIF investment produces little or no jobs — and low-paying jobs at that. St.Ann officials were rattled earlier this month when they learned that in addition to the potential Wal-Mart closing, their community was one of only 5 towns in the country that was losing its Macy’s store. The St. Ann Macy’s was located in the huge 1.8 million square foot Northwest Plaza — which is now in jeopardy of losing more tenants. Kroenke’s group has told Bridgeton officials that it is ready to move dirt immediately if the TIF is approved. This unnecessary superstore built with welfare funding could be open for shoppers by the fall of 2011. Given the foul mood the public is in regarding bail outs for the rich, it’s a wonder this proposal has any legs left. Al Norman is the founder of Sprawl-Busters. His website is http://www.sprawl-busters.com. He has been helping communities fight big box sprawl since 1993. He is the author of Slam Dunking Wal-Mart.

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Kraft Snares Cadbury for $19.7 Billion

January 19, 2010

By Andrew Cleary, Zachary R. Mider, and Duane D. Stanford Jan. 19 (Bloomberg) — Cadbury Plc’s board agreed to an 11.9 billion-pound ($19.7 billion) takeover offer from Kraft Foods Inc. , ending more than four months of resistance after the U.S. company raised its bid. Cadbury investors will get 840 pence a share, including 500 pence in cash and the rest in stock, Kraft said in a statement today. Cadbury will also pay its holders an additional 10-pence dividend once the offer is unconditional. The revised bid is about 9 percent higher than Kraft’s previous bid of 769 pence, and consists of 40 percent stock and 60 percent cash. “This is a great deal for both parties,” James Bevan , chief investment officer at CCLA Investment Management Ltd., said in a Bloomberg Television interview today. “Cadbury shareholders should accept this,” said Bevan, who manages both Cadbury and Kraft shares at CCLA. Kraft Chief Executive Officer Irene Rosenfeld increased the original bid after Cadbury rejected it as “derisory” and Hershey Co. prepared to mount a rival offer. A purchase by Kraft would create a company with about $50 billion in annual sales, adding Cadbury’s Trident gum and Creme Eggs to Kraft’s Oreo cookies, Toblerone chocolate and Tang powdered drinks. Cadbury rose as much as 3.8 percent to 838 pence in London trading. Hershey is unlikely to top Kraft’s offer, two people familiar with the matter said before Kraft’s final offer was released. Kirk Saville , a spokesman for the Pennsylvania-based candy maker, declined to comment. Price Discipline As recently as Jan. 14, Cadbury called Northfield, Illinois-based Kraft an “unfocused conglomerate” with businesses in “unappealing categories.” Kraft had to raise its bid to at least 850 pence to win over Cadbury investors, according to a Bloomberg survey of nine holders. Rosenfeld faced pressure from her own shareholders to get the price right. Billionaire investor William Ackman last week joined Warren Buffett , Kraft’s biggest shareholder, in saying Kraft risked diminishing the merits of a Cadbury takeover by issuing too much stock to pay for it. The increased offer values Cadbury at 13 times 2009 earnings before interest, tax, depreciation and amortization, according to Kraft’s statement. Comparable deals in the industry valued the businesses at 14.3 times to 18.5 times, Cadbury said in its Jan. 12 defense document to shareholders. The acquisition is “the lowest multiple in the industry over the last decade,” said Andrew Wood , a senior analyst at Sanford C. Bernstein in New York. “A year from now, Kraft will be singing the praises of what a great deal they got.” Buffett’s Stake Kraft has informed Buffett of the revised deal with Cadbury, according to a person with knowledge of the matter. Buffett didn’t immediately return a request for comment sent to his assistant, Debbie Bosanek . Buffett’s Berkshire Hathaway Inc. said in a Jan. 5 statement it may support a Cadbury takeover if it concludes that the final offer “does not destroy value for Kraft shareholders.” Ackman’s Pershing Square Capital Management LP bought a $950 million stake in Kraft, or 2 percent of the company, Ackman said in a Jan. 15 interview. A purchase of Cadbury makes “tremendous sense,” he said. Kraft advanced 46 cents to $29.58 in New York Stock Exchange composite trading on Jan. 15. The stock didn’t trade yesterday because of a holiday in the U.S. Kraft said it no longer needs to have the deal approved by its own shareholders because it reduced the number of shares it plans to issue to less than 20 percent of its existing stock. Pizza Sale “It’s certainly a coup for Kraft,” said Simon Marshall- Lockyer , an analyst at Jefferies International Ltd. in London. An agreed deal is “a friendly outcome to what has been an acrimonious few months between the companies.” Kraft said this month it would sell pizza brands including DiGiorno and Tombstone to Nestle SA and use proceeds from the $3.7 billion deal to boost the cash component of its Cadbury bid. The Toblerone maker has until Feb. 2 to gain acceptance from a majority of Cadbury investors. “Kraft provides some strength in the U.S. that Cadbury doesn’t have, and Cadbury provides some strength internationally that Kraft doesn’t have,” said Don Yacktman , founder of Yacktman Asset Management Co., which holds Kraft shares. Lazard Ltd., Centerview Partners, Citigroup Inc., and Deutsche Bank AG are advising Kraft on the deal. Cadbury is using Goldman Sachs Group Inc., Morgan Stanley, and UBS AG. Cadbury CEO Todd Stitzer embarked on a week-long blitz in London and New York in December to persuade Cadbury shareholders not to accept Kraft’s offer, then worth about 733 pence a share. Rosenfeld also met with investors and said on a November earnings call that Kraft was well positioned for “top-tier performance” with or without Cadbury. Forbes List Some analysts had projected the U.K. company would fetch 900 pence a share after Kraft disclosed its offer in September. Those estimates began to drop when Kraft made its offer formal Nov. 9 without raising the bid and no competing ones emerged. Rosenfeld, 56, spent more than 25 years at Kraft, with a two-year interruption in 2004 to run PepsiCo Inc.’s Frito-Lay snack-food unit. Last year, Forbes magazine ranked her No. 6 on its list of the world’s most powerful women, three behind PepsiCo CEO Indra Nooyi . To contact the reporters on this story: Andrew Cleary in London at acleary7@bloomberg.net ; Zachary Mider in New York at zmider1@bloomberg.net ; Duane D. Stanford in Atlanta dstanford2@bloomberg.net .

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Kraft Agrees to Buy Cadbury for $19.5 Billion, Ending Four-Month Struggle

January 19, 2010

By Zachary R. Mider, Duane D. Stanford and Andrew Cleary Jan. 19 (Bloomberg) — Kraft Foods Inc. confirmed it is finalizing the terms of a recommended offer for Cadbury Plc after people with knowledge of the matter said it will raise its bid to about 12 billion pounds ($19.7 billion). Cadbury investors would get 840 pence a share, including 500 pence in cash and the rest in stock, under the new offer, said the people, who declined to be identified because the talks are private. Cadbury would also pay its holders an additional 10-pence dividend, the people said. The offer is about 9 percent higher than Kraft’s previous bid of 769 pence. “This is a great deal for both parties,” James Bevan , chief investment officer at CCLA Investment Management Ltd., said in a Bloomberg Television interview today. “Cadbury shareholders should accept this,” said Bevan, who manages both Cadbury and Kraft shares at CCLA. Kraft Chief Executive Officer Irene Rosenfeld increased the original bid after Cadbury rejected it as “derisory” and Hershey Co. prepared to mount a rival offer. A purchase by Kraft would create a company with about $50 billion in annual sales, adding Cadbury’s Trident gum and Creme Eggs to Kraft’s Oreo cookies, Toblerone chocolate and Tang powdered drinks. Cadbury rose 28 pence, or 3.5 percent, to 835.5 pence as of 8:36 a.m. in London. “A further announcement will be made shortly,” Kraft said in the Regulatory News Service statement today. Price Discipline Hershey is unlikely to top Kraft’s offer, two people familiar with the matter said. Kirk Saville , a spokesman for the Pennsylvania-based candy maker, declined to comment. As recently as Jan. 14, Cadbury called Northfield, Illinois-based Kraft an “unfocused conglomerate” with businesses in “unappealing categories.” Kraft had to raise its bid to at least 850 pence to win over Cadbury investors, a survey of nine holders of Cadbury showed. Rosenfeld faced pressure from her own shareholders to get the price right. Billionaire investor William Ackman last week joined Warren Buffett , Kraft’s biggest shareholder, in saying Kraft risked diminishing the merits of a Cadbury takeover by issuing too much stock to pay for it. Buffett’s Stake Kraft has informed Buffett of the revised deal with Cadbury, one of the people said. Buffett didn’t immediately return a request for comment sent to his assistant, Debbie Bosanek . Buffett’s Berkshire Hathaway Inc. said in a Jan. 5 statement it may support a Cadbury takeover if it concludes that the final offer “does not destroy value for Kraft shareholders.” Ackman’s Pershing Square Capital Management LP bought a $950 million stake in Kraft, or 2 percent of the company, Ackman said in a Jan. 15 interview. A purchase of Cadbury makes “tremendous sense,” he said. Kraft advanced 46 cents to $29.58 in New York Stock Exchange composite trading on Jan. 15. Based on that price, the original bid of 300 pence in cash and 0.2589 Kraft share was more than 60 percent stock. Kraft shares didn’t trade yesterday because of a holiday in the U.S. If Kraft reduces the number of shares it plans to issue to less than 20 percent of its current shares outstanding, it no longer needs to have the deal approved by its own shareholders. Kraft had scheduled a special Feb. 1 investor meeting to consider the matter, and Berkshire Hathaway had already voted its shares against the proposal. Pizza Sale Kraft said earlier this month that it would sell pizza brands including DiGiorno and Tombstone to Nestle SA and use proceeds from the $3.7 billion deal to boost the cash component of its Cadbury bid. At the time, it offered investors the option to substitute an additional 60 pence of shares with cash. Kraft has until today under U.K. law to modify its offer, and until Feb. 2 to gain acceptance from a majority of Cadbury investors. “Kraft provides some strength in the U.S. that Cadbury doesn’t have, and Cadbury provides some strength internationally that Kraft doesn’t have,” said Don Yacktman , founder of Yacktman Asset Management Co., which holds Kraft shares. Lazard Ltd., Centerview Partners, Citigroup Inc., and Deutsche Bank AG are advising Kraft on the deal. Cadbury is using Goldman Sachs Group Inc., Morgan Stanley, and UBS AG. ‘Derisory Offer’ On Nov. 9, Cadbury Chairman Roger Carr said the company’s board “emphatically rejected this derisory offer.” In a Jan. 12 defense document, Cadbury said the Kraft offer was worth 12 times Cadbury’s 2009 earnings before interest, tax, depreciation and amortization, while comparable deals in the industry valued the businesses at 14.3 times to 18.5 times. The reported deal is “the lowest multiple in the industry over the last decade,” said Andrew Wood , a senior analyst at Sanford C. Bernstein in New York. “A year from now, Kraft will be singing the praises of what a great deal they got.” Cadbury CEO Todd Stitzer embarked on a week-long blitz in London and New York in December to persuade Cadbury shareholders not to accept Kraft’s offer, then worth about 733 pence a share. Rosenfeld also met with investors and said on a November earnings call that Kraft is well positioned for “top-tier performance” with or without Cadbury. Some analysts had projected the U.K. company would fetch 900 pence a share after Kraft disclosed its offer in September. Those estimates began to drop when Kraft made its offer formal Nov. 9 without raising the bid and no competing ones emerged. Rosenfeld, 56, spent more than 25 years at Kraft, with a two-year interruption in 2004 to run PepsiCo Inc.’s Frito-Lay snack-food unit. Last year, Forbes magazine ranked her No. 6 on its list of the world’s most powerful women, three behind PepsiCo CEO Indra Nooyi . To contact the reporters on this story: Zachary Mider in New York at zmider1@bloomberg.net ; Duane D. Stanford in Atlanta dstanford2@bloomberg.net .

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Taco Bell Founder Dead: Glen W. Bell Dies At 86

January 18, 2010

RANCHO SANTA FE, Calif. — Glen W. Bell Jr., an entrepreneur best known as the founder of the Taco Bell chain, has died. He was 86. Bell died Sunday at his home in Rancho Santa Fe, according to a statement posted Monday on the Taco Bell Web site. The Irvine-based company did not release a cause of death. “Glen Bell was a visionary and innovator in the restaurant industry, as well as a dedicated family man,” Greg Creed, president of Taco Bell, said in the statement. Bell launched his first restaurant, called Bell’s Drive-In, in 1948 in San Bernardino after seeing the success of McDonald’s Bar-B-Que, the predecessor of McDonald’s, which was founded in the same city in 1940. Like McDonald’s, Bell’s restaurant sought to take advantage of Southern California’s car culture by serving hamburgers and hot dogs through drive-in windows. The World War II veteran next helped establish Taco Tias in Los Angeles, El Tacos in the Long Beach area, and Der Wienerschnitzel, a national hot dog chain. Bell launched Taco Bell in 1962 in Downey after cutting ties with his business partners and quickly expanding around Los Angeles. He sold the first Taco Bell franchise in 1964. In 1978, Bell sold his 868 Taco Bell restaurants to PepsiCo for $125 million in stock. Taco Bell is now owned by Yum! Brands and is the largest Mexican fast-food chain in the nation, serving more than 36.8 million consumers each week in more than 5,600 U.S. locations. Bell is survived by his wife, Martha, three sisters, two sons, a daughter and four grandchildren. A private funeral is planned.

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Corporate Bond Returns Rise at Fastest Pace in Decade, Led by AIG’s 3.62%

January 12, 2010

By Bryan Keogh Jan. 12 (Bloomberg) — Corporate bonds are providing the best returns in more than a decade, spurring sales by PepsiCo Inc. and Bayerische Motoren Werke AG as investors anticipate that earnings growth will make it easier for companies to meet debt payments. The Bank of America Merrill Lynch Global Broad Market Corporate Index returned 1.02 percent since Dec. 31, the biggest gain for the start of a year since rising 1.51 percent in the same period of 1998. Financial and energy companies are the top performers, with issues by New York-based American International Group Inc. rallying 3.62 percent, and oil refiners rising 2.18 percent, the index shows. Amid no signs that last year’s record rally will end soon, combined profits of companies in the Standard & Poor’s 500 Index likely rose 62 percent last quarter, according to more than 7,400 analysts’ estimates compiled by Bloomberg. Some $95 billion has been raised in the global corporate bond market in 2010, compared with $101 billion in the same period of 2009, Bloomberg data show. “We’re telling our clients get into the markets now, get some of your financing done now, don’t leave it all for later in the year because it could be more difficult to finance by the middle of the year or later in the year,” said Mark Bamford , the head of global fixed-income syndicate at Barclays Capital Inc. in New York. Barclays is the biggest underwriter of U.S. debt this year, according to data compiled by Bloomberg. Elsewhere in credit markets, interest-rate swap spreads narrowed for a third day as Treasuries gained and investors added to bets the Federal Reserve will keep its target rate for overnight loans between banks at a record low through at least mid-2010. Indonesia is preparing to raise about $2 billion of 10-year bonds, after scrapping plans to also issue 30-year debt. Mortgages, Swaps Corporate bonds rallied 16.3 percent on average in 2009, after losing 4.73 percent in 2008 as credit markets froze, according to the Merrill Lynch index, which tracks almost 8,500 securities. The extra yield investors demand to own the debt instead of Treasuries has fallen 15 basis points, or 0.15 percentage point, this year to 161 basis points. Last year, the spread narrowed 313 basis points. Corporate yields closed yesterday at 4.17 percent in New York, compared with last year’s high of 7.41 percent on March 17. PepsiCo , the second-largest soft-drink maker, sold $4.25 billion of securities yesterday to finance its acquisition of two bottlers, split between 18-month, 5-year, 10-year and 30- year bonds. Higher Rates The Purchase, New York-based company’s five-year notes were priced to yield 57 basis points more than Treasuries, compared with a spread of 180 basis points on securities of the same maturity debt sold in February. The older bonds last traded Jan. 5 at 103.95 cents on the dollar, up from 99.788 cents when they were issued. “Coming to market now versus later is a good move, because everyone is anticipating that by the end of this year, rates will be higher,” said Stephen Mahoney , a money manager at Glenmede Trust Co. in Philadelphia, who oversees $4 billion in fixed-income assets that includes PepsiCo bonds. The company’s outstanding bonds are trading “very rich,” signaling the time was right for PepsiCo to issue, he said. Investors added a record $153.2 billion to U.S. bond funds in 2009 as the economy began to recover from the first global recession since World War II, according to EPFR Global, a research firm in Cambridge, Massachusetts. John Lipsky , the first deputy managing director at the International Monetary Fund, said in a Bloomberg Radio interview on Jan. 6 that the agency may raise its 3.1 percent forecast for global growth. ‘Strong Liquidity’ “Asset managers need to invest a lot of money from pension funds, insurance companies and banks, so bond spreads are tightening,” said Santiago Rubio , who helps oversee about 14 billion euros ($20 billion) as head of investment funds at La Caixa’s asset-management unit in Madrid. “The strong liquidity on the buy-side will be matched by a no-less-strong volume of new issuance, so the spread tightening may stop.” Bamford said sales in the U.S. may decline about 10 percent this year from the 2009 record. “The number, though, will vary based on the number of mergers and acquisitions,” Bamford said. “If there are far more mergers and acquisitions, we would expect to see far more corporate issuance.” Nasdaq Borrowing Nasdaq OMX Group Inc. , the second-biggest U.S. equity exchange operator, said it will borrow almost $2 billion in bonds and loans. Bank of America and JPMorgan Chase & Co. are arranging two term loans of $500 million each and a $250 million revolving credit line, Nasdaq said yesterday in a regulatory filing. The New York-based company said it also plans $700 million of senior notes due 2015 and 2020. Proceeds will be used to repay the $1.7 billion Nasdaq owed in term loans as of Dec. 31 and to refinance a $75 million revolver with no outstanding debt, according to the filing. The transaction will extend Nasdaq’s maturities and provide it with looser debt terms, it said. Munich-based BMW , the largest maker of luxury cars, issued 2.5 billion euros ($3.6 billion) yesterday in the biggest bond sale in Europe by a non-financial company in almost three months, Bloomberg data show. The offering was split between 1 billion euros of notes due April 2013 that pay interest at 68 basis points more than the benchmark mid-swap rate and 1.5 billion euros of notes due January 2017 with a spread of 90 basis points. Indonesia Bonds Indonesia’s 10-year bonds may be priced to yield about 6 percent, or 2.2 percentage points more than similar-maturity U.S. Treasuries, according to people familiar with the sale. A sale of 30-year bonds was canceled. The debt would have yielded about 7.25 percent, or 2.54 percentage point more than Treasuries, according to the people. European governments are preparing to expand their funding sources. Spain hired banks to sell bonds as it starts raising a budgeted 211.5 billion euros this year. Austria is issuing at least 3 billion euros of seven-year notes, according to the country’s Federal Financing Agency. The rate at which companies defaulted on their debt fell for the first time in two years in the fourth quarter, Moody’s Investors Service said yesterday. The global speculative-grade default rate dropped to 12.5 percent, from 12.6 percent in the previous three months, Moody’s said in a report. S&P raised the ratings on 184 U.S. borrowers last quarter and cut 181, the first time upgrades exceeded downgrades since the three months ended June 30, 2007, Bloomberg data show. Swap Spreads Rising confidence can be seen in U.S. interest-rate swap spreads. The difference between the rate to exchange floating- for fixed-interest payments and Treasury yields for two years, known as the two-year swap spread, narrowed as much as 0.94 basis point to 26.25 basis points. That’s down from last month’s intraday high of 39.75 on Dec. 8. Swap spreads are based in part on expectations for the London interbank offered rate, or Libor, and are used as a gauge of investor perceptions of credit risk. Swap rates serve as benchmarks for investors in many types of debt, including mortgage-backed and auto-loan securities. The most-senior mortgage securities backed by option adjustable-rate mortgages jumped 9 cents on the dollar from mid- December to 58 cents at the end of last week, according to Barclays. That’s almost double the low of 33 cents in March. So-called non-agency home-loan bonds have been “leading the pack,” Barclays analysts led by Ajay Rajadhyaksha in New York wrote in a Jan. 8 report. Investors, who in December were trying to protect their 2009 gains and boost their year-end cash to show shareholders, regulators and clients, are now buying, according to Scott Buchta , head of investment strategy at Guggenheim Securities LLC in Chicago. ‘Demand for Assets’ “It’s cash that was on the sidelines at the end of the year coming in,” Buchta said. “You’re seeing huge demand for assets.” Yield spreads on the most-senior 10-year commercial- mortgage securities originally rated AAA narrowed 0.26 percentage point last week to 3.99 percentage points, according to Morgan Stanley data . Spreads have contracted from 4.88 percentage points in the week ended Dec. 11 and a record 14.26 percentage points in November 2008. In Australia, overseas borrowers are selling the most local-currency notes in almost three years to exploit the record-low cost of swapping the proceeds for U.S. dollars. Australian Banks So-called kangaroo bond sales jumped to A$9 billion ($8.4 billion) last quarter from A$5.3 billion in the three months ended Sept. 30, according to data compiled by Bloomberg. The sales were the highest since A$11.4 billion was raised in the first three months of 2007. So far this year, kangaroo bonds totaled A$1.75 billion. Financial institutions are benefitting as Australian banks increase overseas borrowing before a change in capital reserves regulations triggered by the global credit freeze. A sevenfold increase in U.S. dollar bond sales after the rules were proposed drove the cost of exchanging debt in greenbacks for Australian dollars to the highest on record, the five-year basis swap shows, meaning kangaroo bond sellers performing the opposite transaction are getting the biggest-ever discount. Borrowers typically use cross-currency basis swaps to exchange floating-rate payments in one currency to another. The Australian dollar basis swap measures the cost of switching interest charges pegged to the Libor for rates linked to Australia’s bank bill swap rate. The basis swap rose to 48 basis points on Dec. 2, the highest since 1997 when Bloomberg records began, and was last at 41 basis points after averaging 16 basis points in the first nine months of 2009. To contact the reporter on this story: Bryan Keogh in London at bkeogh4@bloomberg.net

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DirecTV Appoints Pepsi Vice Chairman White as Next Chief, Succeeding Carey

November 18, 2009

By Kelly Riddell Nov. 18 (Bloomberg) — DirecTV Group Inc. , the largest U.S. satellite-television provider, named PepsiCo Inc.’s Michael White as its next chief executive officer to strengthen the company’s brand amid escalating competition. White will take over Jan. 1, El Segundo, California-based DirecTV said today in a statement. White, vice chairman and CEO of PepsiCo’s international unit, said in September that he would retire this year from the world’s second-largest soda maker. PepsiCo CEO Indra Nooyi credited White, 57, with helping boost international sales to almost $20 billion, more than double the amount when he became head of the division in 2003. He joins DirecTV as cable and phone companies, such as AT&T Inc. , spur competition by offering Web, phone and TV services in one package. DirecTV has sought a new CEO since Chase Carey left in June to become News Corp.’s chief operating officer. “From Mike’s background at Pepsi, it makes a lot of sense,” said Matthew Harrigan , an analyst at Wunderlich Securities in Denver. “Pepsi is one of the greatest brands out there. Mike can continue to build what Chase started.” Capitalizing on DirecTV’s exclusive programming, such as NFL Sunday Ticket, will help lure more subscribers, said Harrigan, who recommends buying the shares and doesn’t own any himself. PepsiCo CEO “I know every PepsiCo associate across the globe joins me in congratulating Mike on his appointment,” Nooyi said today in an e-mailed statement. “We will miss Mike’s influence throughout PepsiCo, but we are thrilled for him as he begins a new chapter — taking on the opportunity of leading a world-class digital television organization.” White, who will also become a DirecTV board member, joined PepsiCo in 1990. Before that, he served in executive positions at Avon Products Inc. , Bain & Co. and Arthur Andersen & Co. White has a bachelor’s degree from Boston College and a master’s in international relations from Johns Hopkins University. He’s been a director at Whirlpool Corp. since 2004. “For any company that can land someone of that magnitude, they’re doing pretty darn good,” said Jack Russo , an analyst who follows the beverage industry for Edward Jones & Co. in St. Louis. “He was doing a great job” at PepsiCo, Russo said. White’s 2008 compensation of $10.1 million at the soda maker included a base salary of $1 million and stock and option awards, according to a company filing. Carey’s compensation at DirecTV last year totaled $12.3 million, including a base salary of $2.3 million. The company didn’t say how much White will be paid. ‘Thorough Search’ DirecTV’s sales last quarter climbed 9.7 percent to $5.47 billion from a year earlier, bolstered by demand for digital-video-recording services and high-definition TV. “After a very thorough search, we have found an exceptional leader with a sustained track record of success, profitably growing businesses and a reputation for making the impossible possible,” said John Malone , DirecTV’s chairman. In May, DirecTV announced plans to combine with Malone’s Liberty Media Corp.’s entertainment unit , reducing Malone’s voting power in DirecTV and giving it more freedom to pursue strategic initiatives. Shareholders are set to vote on the combination tomorrow. DirecTV rose 11 cents to $31.04 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have gained 35 percent this year. Pepsi, up 14 percent this year, fell 30 cents to $62.30 in New York Stock Exchange composite trading . To contact the reporter on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net

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DirecTV Appoints Pepsi Vice Chairman White as Next Chief, Succeeding Carey

November 18, 2009

By Kelly Riddell Nov. 18 (Bloomberg) — DirecTV Group Inc. , the largest U.S. satellite-television provider, named PepsiCo Inc.’s Michael White as its next chief executive officer to strengthen the company’s brand amid escalating competition. White will take over Jan. 1, El Segundo, California-based DirecTV said today in a statement. White, vice chairman and CEO of PepsiCo’s international unit, said in September that he would retire this year from the world’s second-largest soda maker. PepsiCo CEO Indra Nooyi credited White, 57, with helping boost international sales to almost $20 billion, more than double the amount when he became head of the division in 2003. He joins DirecTV as cable and phone companies, such as AT&T Inc. , spur competition by offering Web, phone and TV services in one package. DirecTV has sought a new CEO since Chase Carey left in June to become News Corp.’s chief operating officer. “From Mike’s background at Pepsi, it makes a lot of sense,” said Matthew Harrigan , an analyst at Wunderlich Securities in Denver. “Pepsi is one of the greatest brands out there. Mike can continue to build what Chase started.” Capitalizing on DirecTV’s exclusive programming, such as NFL Sunday Ticket, will help lure more subscribers, said Harrigan, who recommends buying the shares and doesn’t own any himself. PepsiCo CEO “I know every PepsiCo associate across the globe joins me in congratulating Mike on his appointment,” Nooyi said today in an e-mailed statement. “We will miss Mike’s influence throughout PepsiCo, but we are thrilled for him as he begins a new chapter — taking on the opportunity of leading a world-class digital television organization.” White, who will also become a DirecTV board member, joined PepsiCo in 1990. Before that, he served in executive positions at Avon Products Inc. , Bain & Co. and Arthur Andersen & Co. White has a bachelor’s degree from Boston College and a master’s in international relations from Johns Hopkins University. He’s been a director at Whirlpool Corp. since 2004. “For any company that can land someone of that magnitude, they’re doing pretty darn good,” said Jack Russo , an analyst who follows the beverage industry for Edward Jones & Co. in St. Louis. “He was doing a great job” at PepsiCo, Russo said. White’s 2008 compensation of $10.1 million at the soda maker included a base salary of $1 million and stock and option awards, according to a company filing. Carey’s compensation at DirecTV last year totaled $12.3 million, including a base salary of $2.3 million. The company didn’t say how much White will be paid. ‘Thorough Search’ DirecTV’s sales last quarter climbed 9.7 percent to $5.47 billion from a year earlier, bolstered by demand for digital-video-recording services and high-definition TV. “After a very thorough search, we have found an exceptional leader with a sustained track record of success, profitably growing businesses and a reputation for making the impossible possible,” said John Malone , DirecTV’s chairman. In May, DirecTV announced plans to combine with Malone’s Liberty Media Corp.’s entertainment unit , reducing Malone’s voting power in DirecTV and giving it more freedom to pursue strategic initiatives. Shareholders are set to vote on the combination tomorrow. DirecTV rose 11 cents to $31.04 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have gained 35 percent this year. Pepsi, up 14 percent this year, fell 30 cents to $62.30 in New York Stock Exchange composite trading . To contact the reporter on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net

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Faith-Based Investors Target Members Of U.S. Chamber Of Commerce

November 10, 2009

Prominent faith-based institutional investors are pressuring several of the Chamber of Commerce’s biggest members — including Merck, Walmart, McDonald’s, AT&T, IBM and General Electric — to state publicly if they agree with the chamber’s campaign to defeat health care reform. All of the 36 companies have agreed to “embrace health care principles that are now inconsistent with the anti-reform stance of the U.S. Chamber of Commerce on health care legislation,” reads the press release from the 275-member Interfaith Center on Corporate Responsibility (ICCR) . The three dozen targeted companies are (in alphabetical order): Aetna; American Express; AT&T; Bristol-Myers Squibb; Cardinal Health; Cisco Systems; Duke Energy; DuPont; Eli Lilly; Exxon Mobil; General Electric; General Mills; Goldman Sachs; Home Depot; IBM; Kellogg; Kohl’s; Manpower; Marriott; McDonald’s; Medco; Merck; Peabody; Pepsi; Pfizer; Safeway; Staples; Starbucks; Target; 3 M; UnitedHealth Group; United Technologies; Verizon; Walmart; Wellpoint; and Xerox. The letter to the companies reads: “Does the U.S. Chamber of Commerce speak for [your corporation] when it opposes healthcare reform? As members of the faith community and concerned investors we have been troubled by the efforts of the U.S. Chamber of Commerce to undermine efforts to curb global warming. We are equally concerned that the same tactics seem evident in the Chamber’s attempts to undermine efforts to bring about a just health care system available to all citizens. Given the position that the Company has taken in endorsing core precepts for healthcare reform, we are asking you in this letter to communicate in a clear public voice whether or not the Chamber has your ‘proxy’ when it comes to healthcare reform policy… As shareholders in major companies threatened by a broken health care system, we are united in our view that that the status quo in health care is unsustainable. It has runaway cost increases, presents great risk for employers as well as employees and leaves millions uninsured … Given the current campaign of the Chamber of Commerce, we ask you to provide answers to these questions: (1) Does the Company agree with the Chamber’s campaign in opposition to health care reform? (2) Will the Company publicly distance itself from the Chamber’s position in opposition to health care reform? (3) What are the Company’s plans to contribute in a constructive way to the health care debate going forward?” Last month, the Huffington Post asked readers to send along names of members of the Chamber of Commerce.

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Xunlight Appoints Chief Financial Officer

October 26, 2009

TOLEDO, OH–(Marketwire – October 26, 2009) – Xunlight Corporation, a leader in the development of low-cost and flexible thin-film silicon solar modules, today announced the appointment of David Swank as the Company’s Vice President and Chief Financial Officer. Mr. Swank joins Xunlight as a seasoned business professional with nearly 30 years of experience. Before joining Xunlight, Mr. Swank served as a member of the Board of Directors and Chief Financial Officer at Diomed Holdings, Inc., a publicly-traded developer of medical laser systems. Mr. Swank’s prior experience also includes Chief Financial Officer at Telxon Corporation, a publicly-traded global manufacturer of mobile computing systems; Regional Controller, Asia/Pacific at PepsiCo Foods International; and Audit Manager at Peat, Marwick, Mitchell & Company (currently KPMG), an international big four accounting firm.

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Joel Epstein: Hey, Who Doesn’t Want to Be a Millionaire?

October 9, 2009

In my last blog I took a lot of flack for citing a study showing a correlation between obesity and Coke or Pepsi consumption. At the risk of losing my last shred of credibility as someone able to critically interpret a research finding, here’s another study to chew on. And like the aged, marbled steaks at Peter Luger’s in Brooklyn or Jar in Los Angeles this is one you can really sink your teeth into. According to a recent Boston Consulting Group (BCG) report the number of millionaire households around the world fell from around 11 million in 2007 to only 9 million last year. If my math is correct, that’s an approximate 18% decline; not including the poor fellas at Goldman Sachs (which expects to pay record bonuses in 2009). The report also cited the only region of the world going the other way — Latin America, where wealth actually increased in 2008 by 3 percent. Ahhh, to be a general contractor on the Rio Olympic bid or a GM dealer in Sao Paulo… So, what’s my point? Being rich, or simply earning more than you need to live on, has its obligations. These include giving back, and not only because it may make sense tax wise. The fact is, even with the Great Recession, the world is still full of lots of folks who have more money than they know what to do with. And the thing about money is, as even those who slept through Capitalism, a Love Story can tell you, the rich really do keep getting richer. Hey, who doesn’t want to be a millionaire? Whether you made your fortune the old fashion way or inherited a bunch of dough through the lucky sperm club or when you chose to come out of the right birth canal, you still need to ask yourself what you’ve done lately for the less fortunate around you. And then you need to figure out how to give it away. Unfortunately, ahem , not all of us are lucky enough to live in Kansas City where the Greater Kansas City Community Foundation has created an enviable giving resource. The Foundation’s free searchable database of charities includes hundreds of organizations it has already professionally vetted. These detailed reviews include critical financial information from the charity’s IRS filings (990s), mission and background statements, summaries of the staffing and management team, organization governance, and other supporting documentation. As with all “investments,” notes the Foundation, donors should look for programs that adhere to two key values: transparency and accountability. Leadership is also essential. Since I have a feeling that most of us are not in Kansas anymore and since giving effectively is not as easy as it looks, I’ve put together a little primer with some easy rules to follow in making your own charitable contributions. These suggestions draw heavily on the wisdom of Los Angeles-based charitable giving professional Laura Borsecnik and the American Institute of Philanthropy (AIP), as well as on my own experience. Rule Number One (and Two), answer the question, “why do I want to give and what is the purpose of my giving?” Change your address, disconnect your phones, decide on some clear giving objectives, and stick with them. Know your charity and never forget where you came from. Research online or request written documentation with the charity’s latest annual report figures including a list of the board of directors, a mission statement, and the most recent audited financial statements with accompanying notes. Understand what you are paying to support. In most cases the charity should be spending at least 60 percent of its revenue on programming and less than 40 percent on general administration and fundraising. Don’t be pressured into giving on the spot and always follow the sage advice of Nelson Algren. Keep records of your donations, never give cash, and never give your credit card number to a telephone solicitor or website you don’t know. Get a receipt of your donation for tax purposes. For contributions under $250 a bank record, cancelled check, or letter from the charity will do, but for all tax-deductible contributions of $250 or more, the IRS requires you to get a receipt from the charity. Recognize that “Tax exempt” means the organization does not have to pay taxes. “Tax deductible” means the donor can deduct contributions to the charity on his or her federal tax return. If the charity can’t provide a letter from the IRS indicating its tax exempt status, you cannot claim your contribution as a tax deduction. Think, “What’s in a Name?” Some questionable charities use names that closely parallel respected organizations. Do your homework and don’t be lured in by depressing tales of woe. Nearly all non-church charities must file financial information annually with the IRS. If the charity is not registered move on to one that is. Beware of charities bearing gifts. Don’t feel that you have to make a contribution to keep this stuff. It’s against the law for a charity to demand payment for unordered merchandise. Remember that money spent sending you junk could have been spent providing services. Skip the quid pro quo thing. No, you don’t need to support every charity your friends are working for or being honored by. Get a backbone! Finally, be a Slumdog Millionaire. Take your time, do this right and whatever you decide; give, and get involved in some small or larger way in your community. It makes a difference and who knows, maybe if you do someone will mistake you for one of those people who made their money the old fashion way.

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Pepsi "Gay Rights" Ban: Religious Group Advocates Banning Company Over "Religious Advocacy"

October 6, 2009

A group that advocates “traditional family values” claims it has the signatures of 500,000 people who have pledged to boycott Pepsi over what it says are the company’s activities promoting gay rights.

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PepsiCo Taking `Very Disciplined’ Approach to Acquisitions, CEO Nooyi Says

September 30, 2009

By Jennifer Sondag Sept. 30 (Bloomberg) — PepsiCo Inc. Chief Executive Officer Indra Nooyi said the company has a “very disciplined” approach to acquisitions and doesn’t see many large purchases that make sense. “Transformational acquisitions have to be looked at very carefully,” Nooyi said today in an interview on Bloomberg Television.

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Unilever to Buy Sara Lee Unit for $1.88 Billion in Biggest Deal Since 2000

September 25, 2009

By Duane D. Stanford and Jeroen Molenaar Sept. 25 (Bloomberg) — Unilever , the maker of Dove soap, agreed to buy Sara Lee Corp. ’s personal-care and European detergent unit for 1.28 billion euros ($1.88 billion), gaining Sanex shower gel in its biggest purchase in nine years. Unilever, based in London and Rotterdam, will pay cash for the business, which makes Duschdas and Radox soap and had sales of more than 750 million euros for the year ending June 2009, according to a statement today. Sara Lee, which has been shedding units to focus on coffee and food, said the proceeds would help it buy back up to $1 billion in stock. The purchase is the largest by Chief Executive Officer Paul Polman since he took the reins at Unilever at the start of the year. He focused the company on winning back cash-strapped shoppers and boosting sales volumes by cutting prices, and was rewarded as the company unexpectedly posted volume growth in western Europe in the second quarter. “We’re not convinced that this is the greatest collection of assets, but another acquisition shows Unilever is still moving from the back foot — cost cutting, disposals — to the front foot — volume growth, acquisitions,” Credit Suisse analysts said in an e-mailed note. The deal is Unilever’s biggest acquisition since buying SlimFast Foods Co. and Ben & Jerry’s Homemade Inc. for a combined $2.6 billion in April 2000. Unilever’s brands besides food include Vaseline and Axe deodorants. Comparable Valuations “This transaction builds on our portfolio in Western Europe and also in Asia,” Polman said in the statement. “The Sara Lee brands enjoy strong consumer recognition, offer significant growth potential and are an excellent fit with Unilever’s existing business.” Unilever dropped 10 cents to 19.19 euros in Amsterdam trading at 11 a.m. local time. The shares have added 11 percent this year. Sara Lee, based in Downers Grove, Illinois, rose 40 cents, or 3.7 percent, to $10.94 in German trading. Unilever’s offer price values Sara Lee’s body-care operations, which also include Zwitsal baby shampoo and Zendium toothpaste, at 1.7 times annual revenue. In 2006, L’Oreal SA bought Body Shop International Plc for 1.5 times its sales. The transaction needs regulatory approval and the companies will consult with European employee works councils, Unilever said today. To entice cash-strapped European consumers, Polman has also increased ad spending, boosted promotions and accelerated new product introductions since he took over as CEO. Unilever is taking “quicker actions where we’re feeling that our brands are out-positioned or at a disadvantage, where we’re losing share,” Polman said in May. He said he’s fighting an “inherited assumption that the company will not grow.” “This is a show of confidence” by Polman, said Julian Hardwick , a Royal Bank of Scotland analyst in London who recommends investors hold Unilever stock. “It fits very well with their personal-care categories.” Sara Lee Chief Executive Officer Brenda Barnes, a former PepsiCo Inc. executive who took over as CEO in 2005, has sold off clothing lines in the U.S. and Europe, as well as a U.S. coffee unit. To contact the reporters on this story: Duane D. Stanford in Atlanta at Dstanford2@bloomberg.net ; Jeroen Molenaar in Amsterdam jmolenaar1@bloomberg.net

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Stitzer’s M&A Lawyer Roots Signal Cadbury-Kraft Fight to `Knock-Out’ Price

September 14, 2009

By Andrew Cleary Sept. 14 (Bloomberg) — Todd Stitzer engineered more than 40 transactions after joining Cadbury Plc as a Harvard- and Columbia-trained mergers and acquisitions lawyer. Now as chief executive officer, he’s testing his skills playing defense. Stitzer, fighting a $16 billion unsolicited bid from Kraft Foods Inc., is seeking to prove to shareholders Cadbury can do better alone. Both Stitzer and Kraft CEO Irene Rosenfeld are set to make speeches this week after Cadbury, the maker of Trident gum and Dairy Milk chocolate, rejected Rosenfeld’s proposal as an “unappealing prospect” from a “low-growth conglomerate.” His desire to stay independent is belied by investors such as Mario Gabelli from Gamco Asset Management Inc., who said he wants Kraft to pay more. Cadbury’s shares are trading above Kraft’s bid price on speculation a higher offer will emerge. “Todd does not want to be the CEO under which Cadbury was sold,” said Ken Hanna , who was Stitzer’s finance chief for five years before stepping down in March. “He will defend this until it becomes indefensible, until there is a knock-out price.” Cadbury shares closed at 755.5 pence last week, while Kraft’s cash-and-stock offer is currently worth 705.7 pence per share. Analysts from Evolution Securities, Investec and Panmure Gordon have said Kraft’s interest may draw rival bids from PepsiCo Inc. or a combined Nestle SA-Hershey Co. approach, upping the pressure on Stitzer. Outbidding Nestle Stitzer is expected to give more details of his takeover defense when he addresses investors at a Sanford C. Bernstein analyst conference in London on Sept. 16. “He’s not done yet,” said Chris Patten , a Cadbury director since 2005, the U.K.’s last governor of Hong Kong and chancellor of Oxford University. “He absolutely has the backing of the board.” Patten declined to comment specifically on Kraft’s approach, while London-based Cadbury declined requests to interview Stitzer or Chairman Roger Carr . Kraft’s Rosenfeld may shed more light on her plans to engage Stitzer when she speaks tonight at the University of Toronto’s Rotman School of Management . It wasn’t long ago that the Pennsylvania-raised, 57-year- old Stitzer was the predator in a takeover battle, outbidding Nestle SA for chewing-gum maker Adams Inc. in 2003 to make Cadbury the world’s biggest confectioner. Cadbury held that rank until it was displaced by Mars Inc.’s $22.6 billion purchase of Wm Wrigley Jr. Cos. last year. The $4.2 billion Adams purchase, which Patten says made Cadbury a “true global company,” ensured Stitzer’s promotion to CEO in 2003. Stagnant Shares Though Cadbury shares jumped 60 percent in Stitzer’s first three years, they stagnated in 2006 after a U.K. salmonella scare and a Nigerian accounting scandal that led to an investor lawsuit. Cadbury also scrapped its profitability target in 2006. In 2007, billionaire investor Nelson Peltz demanded the breakup of the company, and the U.S. drinks arm was later spun off into what is now Dr Pepper Snapple Group Inc. after the credit crunch derailed the sale of the division. Cadbury would have been “bid-proof” if Stitzer had kept Dr Pepper, according to Graham Jones , an analyst at Panmure Gordon in London. “If Todd had really wanted to resist, he could have. Instead, he effectively put Cadbury into play.” To rekindle investors’ enthusiasm, Stitzer focused Cadbury’s growth on emerging markets including India, Brazil and Mexico. Kraft cited that prowess in emerging markets as one of the rationales for its bid. ‘Zero to Hero’ “Stitzer has been able to build Cadbury back up again, but he’s gone from zero to hero to zero to hero,” said Andrew Wood , a Sanford Bernstein analyst in New York who worked at Nabisco Holdings Corp. as it was being absorbed by Kraft. The first non-Briton to run a 185-year-old company founded by social reformist Quakers, Stitzer also fired more than 10 percent of the workforce and plans to close another 15 percent of Cadbury factories. The CEO also sold food labels from Smash mashed potatoes to Cadbury Schweppes jams, focusing on core brands such as Dairy Milk and Trident. He “started off with a lot of skepticism from investors, and proved himself over his first two to three years,” Wood added. “Then he fell off a cliff. He now has the chance to walk away with his head held high and his company on the up. There’s no shame in that.” Carr, the chairman, says Stitzer will fight instead, responding to Kraft’s Rosenfeld in a letter released over the weekend. “We are committed to the delivery of optimum value to our shareholders, and our board remains convinced that this is achieved through continuing to deliver our standalone, pure-play confectionery strategy,” he wrote. Stitzer, who lives in the Home Counties commuter belt outside London, says he eats Cadbury confections every day. He works the calories off through daily exercise, and paid for law school by playing on the professional tennis circuit. Legal Career, Ed Koch Fresh out of Harvard, he learned finance at Lord, Day & Lord , an upscale New York law firm with roots dating to 1818 that was dissolved in the 1990s. Prominent Lord, Day lawyers have included President Dwight Eisenhower’s attorney general, Herbert Brownell , and clients included Cadbury, Coca-Cola Co. and New York Times Co. Some of Stitzer’s early work included advising Ed Koch , the former mayor of New York, on restructuring the city’s $3.2 billion debt pile after it approached bankruptcy in the 1970s. While the legal training was “valuable for deal-making,” it will also help shape Stitzer’s tactics in fending off Kraft, said Hanna, his former CFO, who’s now chairman of car dealer Inchcape Plc and a director of Tesco Plc. ‘Rollercoaster Ride’ Stitzer’s allies include the company’s largest shareholder, insurer and asset manager Legal & General Group Plc , which said Kraft offered too little and that the Cadbury CEO’s efforts to lift profitability “have much further to run.” He may have a harder time convincing other shareholders to stay the course because many are ready to reap the rewards after a multi-year “rollercoaster ride,” said Bernstein’s Wood. The stock has never regained its high of 800 pence reached in May 2007, when equities were still in a bull market and a multi-billion dollar sale of Dr Pepper looked likely. Stitzer’s “Vision Into Action” cost-cutting and business- development plan, announced as Stitzer managed the fallout from the scrapped Dr Pepper sale, has started to pay off. About a month before Kraft announced its bid on Sept. 7, Cadbury raised its profitability forecast after cutting expenses and raising prices to offset higher ingredient costs. “He has proven very effective at brand building, which is a lot harder to do than just acquiring assets,” said Karen Connell, a consultant at brand agency 1HQ, who spent four years in marketing at Cadbury and has also advised Nestle and Kraft. “He can still push more into the U.S. and emerging markets, and I wouldn’t underestimate him in that.” To contact the reporter on this story: Andrew Cleary in London at acleary7@bloomberg.net .

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Russia’s Foreign Direct Investment Falls Record 45% as Economy Contracts

August 21, 2009

By Alex Nicholson and Paul Abelsky Aug. 21 (Bloomberg) — Russia’s foreign direct investment plummeted an annual 45 percent, the most on record, to $6.1 billion in the first six months of the year as the economy of the world’s biggest energy producer contracted at a record pace. Overall foreign investment, including credits and flows into the securities markets, was $32.2 billion, 30.9 percent less compared with the same period a year ago, the Moscow-based Federal Statistics Service said in an e-mailed statement today. The office started collecting the data in 1999. “Though assets are cheaper, the fact that FDI is falling sharply means that companies aren’t rushing to use this drop in price,” Natalia Orlova , chief economist at Alfa Bank in Moscow, said by phone. Gross domestic product shrank a record 10.9 percent in the second quarter following a slump in the price of oil, its key export earner. This year’s economic decline ended a decade of expansion that averaged almost 7 percent. President Dmitry Medvedev has made developing an “innovative economy” a priority during his term in an attempt to wean Russia off its dependence on oil, natural gas and metals exports. Investment in the retail industry, which received the most funds in the first six months of 2008, dropped almost 41 percent to $8 billion. Ikea, the world’s biggest home-furnishings retailer, had the opening of its outlet in Samara delayed almost two years after a disagreement with local officials. The retailer has faced at least four disputes with authorities since entering the Russian market in March 2000. Lost Competitiveness The country risks losing competitiveness as foreign investment dries up and the global economic crisis prompts the government to raise its stakes in corporate stocks. State ownership of corporate stocks reached 45 percent held at the end of 2008, the Moscow-based Institute of Contemporary Development said in a February report. More than half of the Russian stock market is controlled by the state, a setup that investors should approach with caution, according to Troika Dialog, Russia’s oldest investment bank. The decline in Russian FDI compares with 35.7 percent slump in China’s inflows in July, the Commerce Ministry said on Aug. 17, as companies stalled expansion plans. Russia’s manufacturing industry received the largest amount of investment in the first six months, according to the Statistics Service. Foreign investors brought $9.2 billion into the industry, including stock and bond purchases. Lending Failure The Netherlands was the largest foreign investor in Russia in the first six months, followed by Cyprus and Luxembourg. The U.S. was the eighth-biggest investor. PepsiCo Inc., the world’s second-largest soft-drink maker, and Pepsi Bottling Group Inc. said on July 6 that they plan to invest $1 billion in Russia over three years in anticipation of a resurgence of consumer demand. So far the central bank’s five interest-rate cuts since April 24 have failed to spur lending as banks hold back on concern borrowers can’t repay loans. Retail sales declined 8.2 percent in July, the most in almost 10 years, as households cut back spending after incomes dropped and consumer borrowing declined. — With assistance from Zoya Shilova in Moscow. Editors: Tasneem Brogger , Chris Kirkham . To contact the reporters on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net ; Paul Abelsky in St. Petersburg at pabelsky@bloomberg.net .

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PepsiCo Agrees to Buy Two Biggest Bottlers for $7.8 Billion in Cash, Stock

August 4, 2009

By Zachary Mider and Doron Levin Aug. 4 (Bloomberg) — PepsiCo Inc. , the world’s second- largest soda maker, agreed to buy the rest of Pepsi Bottling Group Inc. and PepsiAmericas Inc

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U.S. Stock-Index Futures Fall as Morgan Stanley, Wells Fargo Shares Drop

July 22, 2009

By Daniela Silberstein July 22 (Bloomberg) — U.S. stock futures fell, indicating the Standard & Poor’s 500 Index may drop from the highest level since November, as earnings at Morgan Stanley trailed analysts’ estimates and Wells Fargo & Co. said credit losses may increase

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