DealBook: Return of the 'King of Cable' | Vox Media Acquires ReCode | Deutsche Bank to Pay $55 Million in Derivatives Inquiry | Shareholder Advocate's Poor Corporate Governance

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Wednesday, May 27, 2015
TODAY'S TOP HEADLINES

M & A Hormel Foods to Buy Applegate Farms for $775 Million

INVESTMENT BANKING Charter's Advisers Stage a Comeback

PRIVATE EQUITY Carlyle Group Raises 656 Million Euros for Europe Tech Fund

HEDGE FUNDS Tech Companies Feel Pressure From Activist Investors

OFFERINGS 3SBIO Planning $712 Million I.P.O. in Hong Kong

VENTURE CAPITAL Google and Yahoo Said to Be Among Flipboard's Suitors

LEGAL/REGULATORY Jury Is Still Out on European Central Bank's Stimulus Program

For the latest updates, go to NYTimes.com/DealBook
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By DEALBOOK

RETURN OF THE 'KING OF CABLE' John C. Malone's name was not mentioned in Charter Communications' announcement of the acquisitions of Time Warner Cable and Bright House Networks, nor did the Charter stakeholder participate in the investor call that followed. "Yet there is little doubt that Mr. Malone is behind the scenes, orchestrating an upheaval of the industry he helped create two decades ago," David Gelles writes in DealBook. The way Charter eventually acquired Time Cable Warner - patiently looking for the right time to come in with a winning bid even after a series of setbacks - reflected Mr. Malone's style of deal-making. "Malone is like an alligator," said Mark Robichaux, author of "Cable Cowboy: John Malone and the Rise of the Modern Cable Business." "He is perfectly content to wait for the right opportunity for a long time, then will pounce with a ferocity that knows no bounds."

Mr. Malone, now 74, earned the "king of cable" moniker for his role in shaping the American cable television industry in the 1980s and '90s, selling TCI - which he built into the country's largest cable operator - to AT&T for $48 billion in 1999. He left the business to invest in other ventures and pursue his interest in buying up land, but his passion for the cable industry never faded. "He regretted getting out of the U.S. cable industry," said Mr. Robichaux. "He sat on the sidelines and watched AT&T squander everything he bequeathed them. Then he saw what Comcast created."

With Charter's acquisition of Time Warner Cable, Mr. Malone is about to reclaim the title of "king of cable," but regulators still need to clear the purchase of Time Warner Cable. Charter expressed optimism that its case would not draw the same resistance from regulators as Comcast's $45 billion bid for Time Warner Cable did, but Jonathan Mahler of DealBook contends that regulatory approval is not a sure thing. In Charter's case, as in Comcast's, the government is likely to focus on how the merger will affect the public's high-speed Internet access. Diana L. Moss, president of the American Antitrust Institute, said a Charter-Time Warner Cable merger would create a "duopoly" over high-speed Internet access, with the new company and Comcast together controlling well over half the American market. Also, regulators may pay close attention to the stance taken by Netflix, one of the biggest providers of streaming services and a critic of the Comcast-Time Warner Cable merger, Mr. Mahler writes.

VOX MEDIA ACQUIRES RECODE ReCode, the news website led by the veteran journalists Walt Mossberg and Kara Swisher, joins Vox Media's expanding empire in the latest shake-up of the digital media sector, Sydney Ember writes in The New York Times. Despite developing a reputation for consistently breaking tech industry news, ReCode has struggled to draw significant traffic, receiving 1.5 million regular monthly visitors, according to comScore. Vox Media's larger readership (53.2 million unique visitors in April) was a particular draw for Ms. Swisher and Mr. Mossberg, who plan to stay at ReCode after the merger. For Vox, ReCode's growing conference business, which grew out of its earlier birth as a site called AllThingsD and became known for hosting tech leaders like Steve Jobs and Mark Zuckerberg, was an attractive part of its portfolio.

The all-stock deal, whose terms were not disclosed, reflects "the turmoil among digital organizations focused on covering the tech industry," Ms. Ember writes. Companies like BuzzFeed, Vice and Vox have rapidly expanded while attracting tens of millions of dollars in venture capital, but other digital media start-ups have struggled, like Gigaom, which abruptly closed in March and was acquired by the start-up Knowingly Corp., and Circa, which is trying to sell itself after failing to raise more venture capital.

DEUTSCHE BANK TO PAY $55 MILLION IN DERIVATIVES INQUIRY Deutsche Bank agreed to pay the Securities and Exchange Commission a $55 million fine, without admitting or denying wrongdoing, to settle claims that the bank overstated the value of a portfolio of derivatives by $1.5 billion during the height of the financial crisis, Matthew Goldstein reports in DealBook. The settlement, which was announced Tuesday, "closes the door on a five-year investigation into claims raised in part by former Deutsche Bank employees that the bank mispriced assets held in a large portfolio of derivatives to hide potential trading losses in the credit markets during the crisis," Mr. Goldstein writes. Deutsche has long denied the allegations, and the bank noted in a statement on Tuesday that there was no industry standard at the time of the crisis for measuring risk in the derivative's portfolio. Deutsche said it had cooperated with regulators throughout the investigation and said the settlement "will have no impact on previous financial reports."

ON THE AGENDA The Federal Deposit Insurance Corporation releases its quarterly report on the banking industry's financial performance at 10 a.m. Companies reporting earnings today include Costco, Toll Brothers and Tiffany. Jamie Dimon, chief executive of JPMorgan Chase, and Brian T. Moynihan, chief executive of Bank of America, are among the speakers at Sanford C. Bernstein's Strategic Decisions Conference, which begins at 8 a.m. in New York and runs through Friday.

SHAREHOLDER ADVOCATE'S POOR CORPORATE GOVERNANCE Mario J. Gabelli, who runs the investment firm Gamco Investors, is known as an aggressive advocate for shareholder rights, which "would be acceptable, and perhaps even laudable, except that Gamco's own corporate governance is on par with that of a Roman emperor, giving all the power to Mr. Gabelli," Steven Davidoff Solomon writes in the Deal Professor column. The dual-class stock structure at Gamco, which manages $47.5 billion, gives Mr. Gabelli 94 percent of the voting power, which he has converted to his personal benefit. In 2014, Gamco paid Mr. Gabelli $88.5 million in cash, eclipsing the $23.8 million paid to Laurence D. Fink, the chief executive of BlackRock, the world's largest asset manager. Directors on Gamco's board include one of Mr. Gabelli's sons and his daughter.

"This would all be just another story of an entrenched chief executive who treats the company as his own playground were Gamco not an asset manager, which is a fiduciary to the ordinary people who give Gamco money to invest," Professor Solomon writes. "Not only is it an asset manager, it is an active one, pressing companies to improve their corporate governance. In other words, Gamco appears to be a shareholder advocate for everyone but itself."

MERGERS & ACQUISITIONS »

Hormel Foods to Buy Applegate Farms for $775 Million The deal was Hormel's largest acquisition ever and signaled even more clearly the efforts of Jeffrey M. Ettinger, its chief executive, to diversify the company.

The Rock in Rio USA festival in Las Vegas this month. SFX reduced its earnings forecast for the year to reflect up to $5 million in losses related to the festival.

SFX Reaches $774 Million Deal for Founder to Take Company Private The music festival company's founder and chief executive, Robert F.X. Sillerman, will acquire the shares he doesn't already own at $5.25 each in cash.

Comcast tried to acquire Time Warner Cable and was met with resistance from federal antitrust regulators. The companies abandoned the merger plan last month.

Breakingviews: Time Warner Cable Finds That Money Covers Charter's Flaws Last year, Time Warner Cable balked at the leverage, cash and stock on offer from Charter. Those terms haven't changed much, but the price has shot up.

Passengers disembark from a Ryanair plane in Marignane, France. The company reported a jump in net profit.

Irish Government Votes to Shed Stake in Aer Lingus The cabinet backed an offer by the parent company of British Airways for Dublin's 25 percent stake, a move toward the airline's full privatization.

Tobacco Merger Gets Regulator Approval The Federal Trade Commission allowed Reynolds American to proceed with its $25 billion acquisition of Lorillard, The Wall Street Journal reports.

AOL Discloses It Had 3 Suitors Besides Verizon It's unclear who the mystery bidders were before the Internet company decided to sell itself to Verizon for $4.4 billion.

INVESTMENT BANKING »

Charter's Advisers Stage a Comeback The $56.7 billion cable deal provides a big boost to the boutique investment banks involved.

At 90, Greenberg Won't Give Up When Maurice R. Greenberg, the former American International Group chief executive, was asked by Bloomberg News if he's mellowed with age, he set his jaw, locked his eyes straight ahead and said the interview should end. "You have no idea the things that I'm thinking about," he said.

For the latest updates, go to NYTimes.com/DealBook
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PRIVATE EQUITY »

Carlyle Group Raises 656 Million Euros for Europe Tech Fund The Carlyle Group has raised 656 million euros, or $716 million, for its third Carlyle Europe Technology Partners buyout fund, The Financial Times reports.

HEDGE FUNDS »

Tech Companies Feel Pressure From Activist Investors Scott Kupor of Andreessen Horowitz says that some tech executives are making short-term moves to increase share prices while neglecting broader technology shifts, The Wall Street Journal reports.

I.P.O./OFFERINGS »

3SBIO Planning $712 Million I.P.O. in Hong Kong The biotech company 3SBIO, which delisted from the Nasdaq two years ago, is planning an initial public offering in Hong Kong to raise as much as $712 million, Reuters reports.

Snapchat C.E.O. Says I.P.O. Plan in Works Evan Spiegel, Snapchat's chief executive, said at ReCode's conference in California that the company is planning an initial public offering and will spurn buyout offers to remain independent, The Financial Times reports.

VENTURE CAPITAL »

Google and Yahoo Said to Be Among Flipboard's Suitors Google and Yahoo have both held early discussions with Flipboard about acquiring the maker of a newsreader app, The Wall Street Journal reports, citing three people familiar with the matter.

LEGAL/REGULATORY »
Former investors in Banco Espírito Santo, a failed Portuguese bank, march to a European Central Bank forum to demand their money back.

Jury Is Still Out on European Central Bank's Stimulus Program The bank's bond buying has coincided with an improvement in the European economy, but there is reason to question how long the good times can last.

Supreme Court Rules on Whistle-Blower Case and Bankruptcy Judges The court said that a suit against Halliburton and KBR Inc. had been filed too late, and it also expanded the power of bankruptcy judges.

Frenetic Trading of 3 Stocks Confounds Hong Kong Market The scale of the mysterious activity in the last week, which wiped out and restored billions of dollars in value, is baffling even veteran investors.

Mitt Romney told a group of hecklers at the Iowa State Fair in 2011 that

Treating Corporations as People Courts have ruled that the Fifth Amendment privilege against self-incrimination does not apply to corporations, but a recent case challenged that notion, Peter J. Henning writes in the White Collar Watch column.

Ex-employees of Dewey & LeBoeuf, Steven Davis, second from right, Joel Sanders, third from right, Zachary Warren, third from left, and Stephen DiCarmine, left, arriving in court in March.

Trial Opens in Collapse of Dewey & LeBoeuf Firm Accused of accounting tricks to defraud lenders, three former executives instead blamed "greedy" lawyers who took clients, hastening the firm's demise.

Tom Hayes leaving court on Tuesday in London. He has pleaded not guilty in the rate-rigging.

Ex-Trader Is Painted as 'Ringmaster' at Libor-Rigging Trial British prosecutors say Tom Hayes provided 82 hours of testimony over five months and admitted to adjusting global benchmark interest rates.

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