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Nov 5, 2013 at 09:18 o\clock

BlackBerry Takeover Bid Collapses; CEO Heins Ousted

BlackBerry Ltd. (BBRY), coping with the collapse of your $4.7 billion buyout by Fairfax Financial Holdings Ltd. (FFH), will raise $1 billion in convertible bonds and seek a fresh chief executive officer with the struggling company.
BlackBerry shares fell up to 18 percent after Fairfax abandoned the takeover plan, opting instead for any bond deal and management shakeup. Fairfax, BlackBerry’s largest investor, will invest $250 million in the convertible debentures, according to an argument today. CEO Thorsten Heins will step down, while former Sybase Inc. chief John Chen becomes executive chairman, putting him in control of the business’s strategy.
The transaction, slated to be completed later this month, follows a six-week attempt by Fairfax to draw financing for its buyout bid, which might have the smartphone maker private. The $1 billion infusion may help stabilize the unprofitable company since it burns cash, though BlackBerry will still pursue other deals and is particularly now more ready to accept the thinking behind being dumped, people acquainted with the situation said.
“The main thing is, will be strategy?” said James Moorman, an analyst with S&P Capital IQ in Ny. “There is a chance, and they have more runway with all the additional cash, nonetheless they should start making some smart decisions.”
Stock Drops
BlackBerry shares fell the small sum of $6.40 in Big apple, sending the corporation’s cost below $3.5 billion. The stock had been down 35 % this coming year before today’s tumble, because company’s smartphones lost ground to Apple Inc. and Samsung Electronics Co.
Chen might be interim CEO while Waterloo, Ontario-based BlackBerry seeks a permanent replacement. The 58-year-old previously executed a comeback plan at Sybase, which has been acquired by SAP AG for $5.8 billion really.
The move to raise funds from convertible debentures, which is often became stock, underscores BlackBerry’s deteriorating cash situation. The company’s cash and short-term investments fell by almost $500 million last quarter to $2.3 billion. At that rate, the bucks are going to be gone by the end of next year. And further restructuring will make the funds go faster, said Alexander Peterc, an analyst with Exane BNP Paribas.
BlackBerry’s latest phones got a tepid response from consumers, and in many cases once-loyal customers for example large banks are generating upgrading towards the new software. Jabil Circuit Inc., one among BlackBerry’s top electronics suppliers, said in September that it's going to probably disengage from the relationship with all the company in coming months. That’s raised speculation that BlackBerry will get rid of making phones altogether.
‘Structural Decline’
“It’s not only a rough patch -- it’s really a structural decline,” Peterc said. “They’re basically losing their core business, and it also’s going to be expensive for redefine.”
Should the company stops making phones, it may consentrate on its enterprise business, which manages fleets of e-mail servers for corporate and government customers. Without its devices to think about, BlackBerry can support many different models equitably. Still, shrinking need for BlackBerry phones could have a toll on services revenue, said Anil Doradla, a Chicago-based analyst at William Blair & Co.
“The service business, which can be very associated with the handset business, could rapidly shrink in the near term,” he was quoted saying.
Within a breakup scenario, the enterprise business will probably be worth just as much as $1.1 billion, as outlined by Raymond James Financial Inc. BlackBerry’s patents also may have value them selves. The intellectual property could fetch $1.6 billion to $3 billion, in line with analysts’ estimates. Still, deficiency of interest among bidders suggests that the patent value might be lower, said Michael Genovese, an analyst at MKM Partners LLC.
Not Worth the cost
“The absolutely no. 1 key takeaway for me personally this is that this intellectual property is not worth lots,” Genovese said. “They don’t own intellectual property that’s worthy of fighting over.”
Fairfax, a Toronto-based fund, had until 5 p.m. right now to come forward with a more definitive offer for that Canadian smartphone maker, after having a preliminary takeover proposal it made five to six weeks ago. The company was struggling to attract the financing for your deal, in accordance with people accustomed to the deliberations. What's more , it never named any members of their takeover coalition.
Cerberus Capital Management LP, the newest York-based firm that are experts in purchasing distressed assets, also ended up seen as potential bidder. Cerberus continues to be discussing a joint offer with BlackBerry co-founders Mike Lazaridis and Doug Fregin and chipmaker Qualcomm Inc. (QCOM), a couple with familiarity with the situation said yesterday.
Goldman Sachs
Lazaridis, the inventor on the BlackBerry and former co-CEO of the company, said in October that she hired Goldman Sachs Group Inc. that can help him explore an agreement with Fregin, who utilized to run this company’s operations. Both men together own 8 percent of BlackBerry’s shares.
Lenovo Group Ltd., within Beijing, has expressed desire for BlackBerry too -- though a Chinese bid would face scrutiny from Canadian and U.S. regulators. Canadian Pm Stephen Harper said last month that BlackBerry must be cautious about any takeover offer that raises national-security concerns.
With not a concrete bid within the offing, investors at the moment are left with a less attractive future, Moorman said.
“It is a little disturbing given all of the talk of interested bidders,” he said. “I’ve always thought going private will be the right step on their behalf.”
BlackBerry kicked from the bidding process in August when it said hello would consider selling the company within a strategic review. Back then, Fairfax CEO Prem Watsa left the smartphone maker’s board so he could pursue an offer. He's going to easily be rejoining BlackBerry as lead director.
Going Private
Watsa said within a September interview that taking BlackBerry private would give the business the chance to reorganize outside the glare of analysts and the media. He gave little indication of that this turnaround works, though.
Fairfax, that has a portfolio worth about $24 billion, owns stakes in industries which range from Irish banking to Canadian cattle feed. The firm has made contrarian investments, including a profitable bet contrary to the U.S. housing business, and is now wagering on Greece’s recovery. Watsa recently spent $164 million euros ($222 million) to over double his investment in Athens-based Eurobank Properties Investment Co.
BlackBerry faces long odds in the smartphone industry. This company may be losing market share for years after being slow to add the sort of features and applications made available from Apple.
Doors Closing
“Seems as if doors are closing on BlackBerry, and perhaps they are gonna be look fewer options,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago, who helps manage $66 billion in assets. “Another company may choose to get yourself a jump in the handheld device business. Besides that, I'd say a last-ditch measure would be to sell intellectual property and patents.”
The business put itself in the street following new BlackBerry 10 OS never tackle the iPhone and devices powered by Google Inc.’s Android software. Today’s move marks the final outcome of BlackBerry’s strategic review. Included in the changes, Heins and David Kerr will weaken as directors. Barbara Stymiest, this company’s current chairman, will stay for the board because the head from the audit and risk-management committee.
“The BlackBerry board conducted a comprehensive writeup on strategic alternatives and pursued the path of action who's concluded consistantly improves desires of BlackBerry as well as constituents, including its shareholders,” Stymiest said inside statement. “This financing has an immediate cash injection on terms favorable to BlackBerry, enhancing our substantial cash position.”

Nov 5, 2013 at 09:12 o\clock

SAC Capital Agrees to Plead Guilty to Insider Trading

 The hedge fund titan Steven A. Cohen sat in the center of his vast trading floor on Monday, buying and selling stocks. In the sign of his enduring influence on Wall Street, he did business with major banks like Goldman Sachs and JPMorgan Chase.

Just last week, Mr. Cohen appeared relaxed courtside at Madison Square Garden while watching the modern York Knicks defeat the Milwaukee Bucks of their season opener. And the man has decided to be closely monitoring the auctions at Sotheby’s and Christie’s, that are selling about $80 million price of art from his vaunted collection, including two Warhol paintings along with a Cy Twombly sculpture.

To the 57-year-old billionaire, it is business as usual.
But on Monday, federal prosecutors announced that Mr. Cohen’s firm, SAC Capital Advisors, had agreed to plead guilty to insider trading violations and pay a list $1.2 billion penalty, becoming the first large Wall Street firm within a generation to confess to criminal conduct. The costa rica government has forced SAC to terminate its business of managing money for outside investors.

Insider trading at SAC was “substantial, pervasive and also on a scale without precedent inside the good reputation for hedge funds,” said Preet Bharara, america attorney in Manhattan. His office has criminally charged eight former SAC employees; six have pleaded guilty.

Mr. Cohen’s apparent nonchalance — all the while the firm bearing his initials admitted it was a criminal organization — reflects what on earth is missing through the plea deal. After greater than a decade of studying trading records, interviewing informants and issuing grand jury subpoenas, federal authorities haven't been capable to develop a case against SAC’s billionaire owner.

Without a real case, Mr. Cohen could always be a force on Wall Street, which includes long, deep relationships with SAC. Using its rapid-fire trading style, the hedge fund has been a top stock-trading client of the major banks, paying them quantities of dollars in commissions. Banks have likewise made big profits extending loans towards fund. On Monday, they each continued to do business with SAC.
Based on his friends on Wall Street, Mr. Cohen says which he has done nothing wrong and thinks the us government is bent on destroying him and his awesome firm. Mr. Cohen, the master of 100 % of SAC, has privately complained that she needs to pay more than $1 billion away from his own pocket for the crimes of rogue employees.
An announcement issued by SAC’s senior management on Monday did actually underscore Mr. Cohen’s frustrations, minimizing the extent of the wrongdoing and distancing Mr. Cohen through the misconduct.

“We assume responsibility for the couple of men who pleaded guilty and whose conduct gave rise to SAC’s liability,” the firm said. “The tiny fraction of wrongdoers won't represent these,000 honest males and females who may have worked for the firm in the past 21 years. SAC has not encouraged, promoted or tolerated insider trading.”

The statement, particularly the last sentence, angered officialdom since it contradicted SAC’s admission it committed insider trading crimes. After prosecutors made their displeasure seen to SAC, the firm issued a new statement that substituted the last sentence and replaced it with, “Even one individual crossing the cloths line into illegal behavior is simply too many and we greatly regret this conduct occurred.”

The son of any retail-clothing executive and also a piano teacher, Mr. Cohen grew up in Great Neck, N.Y. Today, he lives across Long Island Sound in Greenwich, Conn., within a 36,000-square-foot home with the indoor pool and a two-hole links course.
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Mr. Cohen started SAC in 1992 managing just $25 million. Because the hedge fund grew, Mr. Cohen created an unorthodox structure. He sits atop a decentralized firm during which about 140 small teams each have control over billions of dollars. The teams are instructed to share their utmost investment ideas with Mr. Cohen, who historically has managed the biggest account, worth several billion dollars.

SAC attracted ambitious, talented traders and promised them outsize pay providing they performed. In excitement, the fund’s top talent earned up to $100 million annually. In terms of Mr. Cohen, he reportedly earned about $900 million 1 year in 2006 and 2007.

Mr. Cohen could pay such mammoth compensation while he charged one of several highest annual fees in the hedge fund industry — 3 % of assets so that as much as 50 percent of profits. It commanded those fees after posting some of the best returns in the commercial — typically 30 percent annually.

Even though it branched into other strategies, SAC typically traded in stocks around market-moving events like earnings and big mergers. His traders became recognized for aggressively pumping sources for insights, and rumors persisted that this fund routinely crossed the queue into trading on confidential corporate information.

Since early 2011, government entities secured a few guilty pleas by former SAC traders that gave legitimacy to the rumors and ultimately underpinned the indictment from the hedge fund. Prosecutors have said that a type of traders, Mathew Martoma, spoke with Mr. Cohen about his questionable trades, but she has not cooperated and awaits trial.

In recent weeks, friends say, Mr. Cohen’s spirits happen to be high with the hope that the settlement would resolve an essential legal problem. But several challenges remain.

SAC’s plea deal won't incorporate a separate civil action the Securities and Exchange Commission brought against Mr. Cohen. The S.E.C. lawsuit has accused him of turning a blind eye to misconduct at his fund, and seeks to bar him from ever managing outside money, at SAC or elsewhere, people briefed involved said.

Criminal authorities also carry on and view Mr. Cohen along with SAC employees as targets. F.B.I. agents, individuals said, are examining SAC’s trading records and looking the cooperation of potential informants.

The investigation has exacted a substantial toll on SAC. Virtually all the fund’s investors have pulled their cash. But SAC was always more insulated than other hedge funds in the damaging connection between withdrawals as a result of $15 billion it managed at its peak, only $6 billion was externally investors. Niche belongs largely to Mr. Cohen.

There was speculation make fish an indictment of SAC could potentially cause the fund to collapse. Even so the government attemptedto limit the potential for collateral damage on the fund’s investors and trading partners. Prosecutors did not freeze SAC’s assets and encouraged brokerage firms to carry on to work with the fund.

SAC will now more than likely morph in to a so-called family office, with Mr. Cohen and a staff of hundreds investing his personal wealth. With billions at his disposal, Mr. Cohen may well remain a presence in the stock market.

His business associates are optimistic that she will a strong force on Wall Street.

“His attitude is excellent and that he is intending to place this behind him,” said a senior securities firm executive who trades with Mr. Cohen. “His personal money — 9 billionish — is going to be plenty big.”