DealBook: An Activist Investor Tries to Oust a Trump Confidant
Tom Barrack, the C.E.O. of Colony Capital and chairman of President Trump's inaugural committee, is being pressed by an activist investor to resign.
November 26, 2019
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Tom Barrack Henry Romero/Reuters
Blackwells Capital goes after Tom Barrack
Tom Barrack, the C.E.O. of Colony Capital and the chairman of President Trump’s inaugural committee, is being pressed by an activist investor to resign, DealBook has exclusively learned.
The activist investor, Blackwells Capital, sent a letter to Colony saying:
• “With Mr. Barrack’s track record and personal issues, no reasonable, fiduciarily-aware public company Board of Directors would select Mr. Barrack as C.E.O. of Colony or any other public company today.”
• “Mr. Barrack is undoubtedly distracted by at least two Congressional investigations and at least one reported criminal investigation into his political and personal activities, including as Chairman of the Inaugural Committee for President Trump and as a man who sought a special role within the Trump administration.”
Blackwells claims that Mr. Barrack “destroyed more than $775 million in just nine months.” So the investment firm, which is run by Jason Aintabi, is seeking to oust him, replace two board members, and press Colony to sell assets and repurchase shares.
Mr. Barrack has already announced plans for a successor, Marc Ganzi, in 2021. But Blackwells says that is not fast enough and noted that Mr. Ganzi is a personal friend of Mr. Barrack’s.
Blackwells owns just 1.85 percent of Colony, but has successfully mounted activist campaigns before, notably against Supervalu. And given Colony’s depressed stock price — it is down 18 percent over the past 12 months — Blackwells might be able to persuade other investors to join it in applying pressure.
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Today’s DealBook Briefing was written by Andrew Ross Sorkin, Jamie Condliffe and Gregory Schmidt.
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Calla Kessler/The New York Times
Can Schwab-Ameritrade look after the little guy?
Schwab announced yesterday that it planned to acquire a rival discount brokerage firm, TD Ameritrade, in an all-stock transaction worth $26 billion in a bid to remain competitive in an increasingly tough industry. But the new company will have a lot of work ahead of it.
• The discount brokerage industry has been undercut in recent years by fintech start-ups that provide automated portfolio advice.
• That’s why Schwab and Ameritrade both cut their trading fees to zero this year.
• And it’s also the motivation behind the merger, as the consolidation should allow considerable cost savings.
The new company would be the second-biggest provider of self-directed brokerage accounts, holding about 27 percent of the market, behind Fidelity, which holds about a third.
But is bigger necessarily better? “It’s an open question, though, whether Americans prefer to use a massive institution as a one-stop shop,” Brian Chappatta of Bloomberg Opinion writes. “It still feels like the average person would want to have someone holding their hand as they lay out a strategy to buy a house, or send children to college.”
Fidelity repeated those concerns. The new company “will likely be doubling down on revenue practices that directly disadvantage investors, including paying extremely low cash sweep rates and taking significant payment for order flow,” Kathleen Murphy, president of Fidelity Investments’ personal investing business, said in a statement. No surprise that she added: “These practices can easily outweigh any benefit of $0 online commissions.”
The merger “will almost surely bring more investors under Schwab’s tent,” Mr. Chappatta concludes. “It’s up to the company to convince them that even as an industry giant, it’ll always keep the little guy in mind.”
Jay Powell Steven Senne/Associated Press
Jay Powell’s rosy economic outlook
Striking an upbeat tone on the economy, Jay Powell, the Fed chair, said the labor market was strong but might still have more room to run, the NYT’s Jeanna Smialek writes.
• “The Fed can play a role in this effort by steadfastly pursuing our goals of maximum employment and price stability,” Mr. Powell said in a speech yesterday.
But don’t expect a change in monetary policy from the central bank.
• “Monetary policy is now well positioned to support a strong labor market and return inflation decisively to our symmetric 2 percent objective,” he said. “If the outlook changes materially, policy will change as well.”
Still, elected officials could do more to nudge the dial toward even fuller employment, he suggested.
• Policies “beyond the scope of monetary policy” could spur further progress by “better preparing people to meet the challenges of technological innovation and global competition and by supporting and rewarding labor force participation,” he said.
Companies want answers about a big change to international tax law
International tax rules for companies are set to be shaken up by the Organization for Economic Cooperation and Development. The problem, companies say, is that they are struggling to plan for the upheaval because it’s unclear what that’s going to look like, Nina Trentmann of the WSJ reports.
• The O.E.C.D. is developing a proposal for a standard tax rate that would allow governments to tax corporate profits above a threshold based on sales in each country.
• That would be a shift from rules focused on where companies are based.
• It is intended to apply to companies with annual revenue of more than $830 million in consumer-facing industries.
• The O.E.C.D. hopes its 36 member states will agree on the approach by next year, and it is holding a meeting to discuss the proposal later this week.
But companies are unhappy over a lack of details about plans that could transform their tax structures:
• Uber says that more information is necessary, Spotify wants the O.E.C.D. to “clarify a number of issues,” and Volvo has said that a lack of information is making it hard to assess the potential effect of the changes.
• “Seventy-nine percent of tax executives at global companies described the current tax environment as uncertain, according to a recent Ernst & Young survey,” Ms. Trentmann writes.
Google fires 4 workers who were active in labor organizing
The employees were fired “for clear and repeated violations of our data security policies,” according to a memo that was seen by the NYT. A Google spokeswoman confirmed the firings.
Tensions have mounted between management and workers at Google, as employees have “protested the company’s handling of sexual harassment, its treatment of contract employees, and its work with the Defense Department, federal border agencies and the Chinese government,” the reporters write.
Google has cracked down on its freewheeling work culture, and it recently began working with a consulting firm known for its anti-union efforts.
The changes are a remarkable turn for Google, which introduced many of the office perks and transparent relations between workers and management that are now common across Silicon Valley.
Monday’s merger mania
Yesterday brought a slew of mergers and acquisitions that made it feel as if the headwinds in the U.S. and global economy are nothing to worry about.
Let’s do some math: Schwab confirmed a $26 billion merger with TD Ameritrade, the luxury conglomerate LVMH said it was acquiring Tiffany for about $16 billion, Novartis announced it was buying the Medicines Company for $9.7 billion, and eBay announced that it was selling its StubHub tickets business for about $4 billion to Viagogo Entertainment. Including other deals announced Monday, that’s $70 billion worth of M.&A., the FT notes.
• And there are rumors swirling about KKR embarking on the biggest leveraged buyout of a company, by taking Walgreens Boots Alliance private for $54 billion.
Shocked? You’re not the only one. “The M.&A. market’s tenacity — in the face of a trade war with China, a spate of high-profile merger-related writedowns and deal duds and the possible impeachment of the leader of the free world — is pretty stunning,” Tara Lachapelle of Bloomberg Opinion writes.
But “companies need growth and that is a big driver for M&A,” Anu Aiyengar, who runs JPMorgan Chase’s M&A business in North America, told the FT. “Regulatory uncertainty, equity market volatility, elections and recession are all looming out there and could have a detrimental impact.”
The markets loved it, and the S&P 500 finished yesterday above a peak that it set a week ago.
Mark Makela/Reuters
Consumers are spending. Why are retailers struggling?
Retailers are caught up in a seemingly never-ending race against Amazon: The more they spend to compete, the more their profits are sapped, write Sapna Maheshwari and Michael Corkery in the NYT.
Some retailers’ strategies appear to be working. Many large chains like Kohl’s and Macy’s have stabilized lagging sales.
Their victories are short-lived, because Amazon responds with new ways of delivering inexpensive items as quickly and conveniently as possible.
And Amazon is not the only competitor. “Dozens of start-ups, backed by private investors not concerned with immediate profits, have been chipping away at department store offerings, section by section,” the reporters write.
But Amazon does seem to have most of the advantages. “It just continues this vicious cycle that retailers find themselves in,” an analyst said.
G.E. appointed Carolina Dybeck Happe, who was previously C.F.O. at the shipping giant A.P. Moeller-Maersk, to the same role.
The speed read
Deals
• EBay will sell the secondary ticket marketplace StubHub to a ticketing rival, Viagogo, for $4 billion. (NYT)
• Alibaba raised $11.2 billion in its secondary Hong Kong public listing, and its shares rose in their first day of trading. (NYT)
• The activist investor Starboard Value has reportedly taken a stake in CVS Health and held “amicable” talks with the company. (WSJ)
• Fiat Chrysler and PSA Group, Peugeot’s parent company, told employees that they would sign a binding merger agreement in the coming weeks. (Reuters)
• CBS was ordered by a Delaware judge to disclose internal records about its plan to reunite with Viacom to a shareholder who wants to investigate if the deal unfairly benefits Shari Redstone, who controls both companies. (Reuters)
Trump impeachment inquiry
• Democrats will deliver their report that makes a case for President Trump’s impeachment “soon” after lawmakers return from Thanksgiving break, handing off the inquiry to the Judiciary Committee. (NYT)
• A federal judge ruled that the former White House counsel Don McGahn must testify before impeachment investigators about the president’s efforts to obstruct the Mueller investigation. (NYT)
Politics and policy
• The Supreme Court blocked a lower-court ruling that required President Trump’s accounting firm to turn over financial records to a House committee. (NYT)
• In a rare display of political unity, Mr. Trump signed a bipartisan bill that makes acts of animal cruelty a federal crime punishable with fines and up to seven years in prison. (NYT)
• Michael Bloomberg started his campaign for the 2020 Democratic presidential nomination at a diner in Norfolk, Va., where he described himself as a political pragmatist skilled at wielding his wealth to win elections. (NYT)
Trade
• Senior U.S. and Chinese trade negotiators held a phone call to discuss their “Phase One” trade deal. (Reuters)
Tech
• Apple agreed to pay about $467,000 to settle allegations that it violated U.S. sanctions by dealing with a Slovenian software company that was blacklisted by the Treasury Department. (WSJ)
• The Seattle City Council unanimously passed a law that will introduce a minimum wage for Uber and Lyft drivers and increase per-ride taxes to pay for city programs. (GeekWire)
• A group of musicians plan to remove their music from Amazon to protest the company’s ties with the Immigrations and Customs Enforcement agency. (Verge)
• An Amazon fulfillment center on Staten Island, New York, reportedly has an injury rate that is three times the industry average. (Gizmodo)
Best of the rest
• McDonald’s agreed to pay $26 million to settle a long-running labor dispute over allegations that it underpaid workers in some California restaurants. (WSJ)
• Saudi Arabia is following in the footsteps of Qatar and the United Arab Emirates by investing billions of dollars to make its mark on the international sports industry. (FT)
• Tesla’s C.E.O., Elon Musk, will testify in his own defense against a defamation lawsuit brought by a British cave explorer. (FT)
• For all the talk of ditching fossil fuels to fight climate change, coal remains king in much of the world. (Bloomberg)
• The best places for a power lunch in Mayfair, London’s hedge fund heartland. (FT)
Thanks for reading! We’ll see you tomorrow.
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