The $612 million bid by the Weiss family to buy the American Greetings Corporation, the greeting card company the family controls, is not as well known as the headline-grabbing $24.4 billion bid by Michael S. Dell and the private equity firm Silver Lake to buy the computer company Mr. Dell founded. But both deals “illustrate the rising tide of shareholder power, as well as the devilish issues that emerge when management tries to buy a public company,†Steven M. Davidoff writes in the Deal Professor column. “And even though Dell’s board has changed the voting rules, both companies are being tested by shareholders who view the buyouts as undervaluing their companies.â€
Both companies are what Wall Street analysts charitably call a melting ice cube, Mr. Davidoff writes. In the case of American Greetings, whose stock traded at a high of $53.75 in 1998, the special committee of independent directors ultimately reached a deal with the bidders in March at $18.20 a share, after the Weisses initially offered $17.18 a share. But the announcement set off shareholder outrage. In the wake of complaints from TowerView, the investment company headed by Daniel Tisch and owner of 6.2 percent of the company, the Weiss family has raised the price to $19 a share. American Greetings shareholders will vote on Wednesday.
“In years past, shareholder power was a hollow one. Less than 1 percent of deals have been rejected by shareholders. American Greetings will be the first test of this new shareholder attitude,†Mr. Davidoff writes. “Will it be that these institutions finally step up and take the risk of running a business?â€
U.S. SUES BANK OF AMERICA OVER MORTGAGE SECURITIES Â |Â The Justice Department sued Bank of America on Tuesday, claiming the bank defrauded investors by vastly understating the risks of the mortgages behind about $850 million in securities, Jessica Silver-Greenberg reports in DealBook.
Unlike previous legal troubles stemming from the bank’s 2008 acquisition of the subprime lender Countrywide Financial, “the latest litigation centers on Bank of America’s own homegrown mortgage operations,†Ms. Silver-Greenberg writes. “And the loans at issue were represented as prime jumbo mortgages â€" at the time, 2007, loans of more than $417,000 for a single-unit dwelling â€" rather than subprime mortgages, which were at the heart of the mortgage crisis.â€
The lawsuit portrayed the bank’s mortgage operations as emblematic of Wall Street’s reckless practices in the days leading to the financial crisis. A spokesman for Bank of America contested the government’s characterization. “These were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that,†Lawrence Grayson, a spokesman, said in a statement.
A PROMISE OF INNOVATION AT WASHINGTON POST  | “The big news in newspapers â€" that Jeffrey P. Bezos is buying The Washington Post â€" was not even 24 hours old when shock and wisecracks about the unexpected $250 million deal began to give way to acceptance and even envy,†Jenna Wortham and Amy O’Leary write in The New York Times. “Now that he is the private owner of The Post, it would not be surprising to see him worry little about turning a quick profit and instead push to upend the often ossified world of newspaper publishing, just as he did with books more than a decade ago.â€
ON THE AGENDA Â |Â The Carlyle Group, AOL and Time Warner report earnings before the market opens. Mondelez International, Groupon and Tesla Motors report earnings this evening. Tim Armstrong, the chief executive of AOL, is on Bloomberg TV at 8:15 a.m.
CORY BOOKER’S TECH START-UP  | Cory A. Booker, the Twitter-using mayor of Newark who has hobnobbed with some of the biggest stars of Silicon Valley, has obtained money for an Internet start-up called Waywire from influential investors including Eric E. Schmidt, Google’s executive chairman, The New York Times reports. In a financial disclosure filed last month, Mr. Booker, 44, revealed that his stake in the company was worth $1 million to $5 million. His other assets, taken together, were worth no more than $730,000.
“That revelation, with just a week left in Mr. Booker’s campaign for the Democratic nomination for the United States Senate, shows how a few tech moguls and entrepreneurs, many of them also campaign donors, not only made a financial bet on the mayor’s political future but also provided the brainpower and financing to help create a company that could make him very rich,†The Times writes. “Waywire has also provided jobs for associates of Mr. Booker: the son of a top campaign supporter and his social media consultant, who is now on his Senate campaign staff.â€
AOL to Buy Video Advertising Platform for $405 Million  | AOL announced on Wednesday that it had agreed to acquire Adap.tv, a video ad platform, for $405 million in cash and stock. “The Adap.tv founders and team are on a mission to make advertising as easy as e-commerce and the two companies together will aggressively pursue that vision,†Tim Armstrong, the chief executive of AOL, said in a statement. NEWS RELEASE
Blackstone Said to Consider Sale of La Quinta  | The Blackstone Group is exploring a sale of La Quinta Inns and Suites, “a budget hotel chain it values at around $4.5 billion, a person familiar with the matter said on Tuesday,†Reuters reports. REUTERS
Wal-Mart May Bid for Hong Kong Supermarket Chain  | Wal-Mart Stores is considering making a bid for ParknShop, which is being sold by Hutchison Whampoa, Reuters reports, citing unidentified people familiar with the matter. REUTERS
Chinese Firm Said to Consider Bid for Hong Kong Bank  | Bloomberg News reports: “Yue Xiu Group, a trading arm of China’s Guangzhou city government, is considering a bid for Hong Kong family-run lender Chong Hing Bank Ltd., according to a person familiar with the matter.†BLOOMBERG NEWS
JPMorgan Is Sued in Aluminum Warehousing Case  | JPMorgan Chase, along with Goldman Sachs and Glencore Xstrata, were sued by a direct purchaser in Florida and an individual plaintiff over claims the firms drove up prices of aluminum, Bloomberg News reports. BLOOMBERG NEWS
UBS Agrees to Settle Federal Claims in Mortgage Case  | UBS, the giant Swiss bank, has agreed to settle federal accusations that it misled investors about a complex mortgage security. DealBook »
ING Profit Fell 39% in 2nd Quarter  | The Dutch financial services firm ING said net income in the second quarter fell to 788 million euros ($1.05 billion) from 1.29 billion euros a year earlier. BLOOMBERG NEWS
Deutsche Bank Hires Former Goldman Banker to Head Australian Unit  |Â
WALL STREET JOURNAL
TPG Asks for More Time to Spend Investors’ Money  | The private equity firm TPG asked investors in its $19 billion flagship fund for an extra year to spend $3 billion of capital that has not yet been used, The Financial Times reports. FINANCIAL TIMES
For Some Private Equity Investors, Bank Stakes Prove Lucrative  | The investors who have fared well in buying stakes in banks “are the ones who bought good franchises cheap, not distressed franchises very cheap,†said Joshua Siegel, managing principal and chief executive of StoneCastle Partners, according to The Wall Street Journal. WALL STREET JOURNAL
Billionaires’ Battle Over LightSquared Breaks Into the Open  | The hedge fund tycoon Philip A. Falcone accused the satellite television mogul Charles W. Ergen of colluding to prevent his company LightSquared from leaving bankruptcy. DealBook »
In Rejecting Loeb, Sony Cites Poor Record for Subsidiary I.P.O.’s  | In rejecting a proposal by hedge fund manager Daniel S. Loeb, Sony’s chief executive acknowledged the times when companies have regretted publicly listing part of a subsidiary. DealBook »
Sony Brushoff Leaves Loeb With Few Options  | There are some encouraging signs for the hedge fund tycoon Daniel S. Loeb: even after the latest sell-off, Sony shares are still 8 percent higher than when he started his campaign, Peter Thal Larsen of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS
Soros Endorses de Blasio for Mayor of New York  |Â
NEW YORK TIMES
Cinda of China Looks to Hire Banks for I.P.O.  | China Cinda Asset Management, which buys bad loans from China’s banks, “has invited bankers to submit proposals for its initial public offering in Hong Kong, which could raise around $2 billion, people familiar with the situation said on Wednesday,†The Wall Street Journal reports. WALL STREET JOURNAL
Soros Backs Telecommunications Company in Brazil  | A fund run by George Soros plans to invest $150 million for a majority stake in On Telecom, a Brazilian telecommunications company that offers connections over 4G networks, Reuters reports. REUTERS
In Washington, Little Progress on Housing  | “The stopgap nationalization of housing finance has hardened into one of the most enduring legacies of the Great Recession,†The New York Times writes. NEW YORK TIMES
For the S.E.C., Financial Crisis Investigations Wind Down  | The Wall Street Journal reports: “Securities and Exchange Commission enforcement officials have decided not to recommend filing civil charges against hedge fund firm Magnetar Capital L.L.C., which teamed up with Wall Street firms to create mortgage securities that suffered billions of dollars in losses during the financial crisis, according to people familiar with the situation.†It is a sign the S.E.C.’s investigations into “whether companies or individuals broke the law†ahead of the crisis are running out of gas, The Journal writes. WALL STREET JOURNAL
SAC Prosecutor Hits the Media Trail  | Preet Bharara, the United States attorney in Manhattan, discussed why his office indicted the hedge fund SAC Capital Advisors and not its owner, the billionaire Steven A. Cohen. DealBook »
Pension Reform Could Disrupt Investment Funds  | Shifting more responsibility to the private sector would cause some unintended consequences by cutting off an important source of financing for venture capital and private equity, Victor Fleischer writes in the Standard Deduction column. DealBook »
What We Should Have Learned From the Financial Crisis  | “The sprawling Dodd-Frank Act, which rewrote banking regulation in 2010, didn’t resolve things so much as inaugurate a process of endless rules-writing by regulators,†Adam Davidson writes in The New York Times Magazine. NEW YORK TIMES
S.E.C. Says Former Marine Defrauded Military Personnel  | The Securities and Exchange Commission said it had obtained an emergency asset freeze to halt a scheme by a former Marine who posed as a successful hedge fund trader, Reuters reports. REUTERS
