American Realty Capital Properties said on Wednesday that it had agreed to buy Cole Real Estate Investments for $11.2 billion in a deal that would create a giant real estate investment trust. American Realty is offering either 1.0929 shares of its stock or $13.82 in cash for each Cole share. The deal comes as investors are looking to gain exposure to the strengthening real estate market.
A CHANCE TO END A PRIVATE EQUITY TAX BREAK  | A court case involving the private equity firm Sun Capital Partners has given the federal government a chance to sidestep Congress and eliminate a major tax break for private equity, Steven M. Davidoff writes in the Deal Professor column. “The question is whether the Obama administration takes up the fight.â€
At issue is what is known as carried interest, the share of profits that a private equity manager makes from investing in companies. A subject of heated debate, such income is currently taxed at the capital gains rate of 20 percent instead of as income, which would put it at a maximum of 39.6 percent. The court case, which arose out of Sun Capital’s $7.8 million buyout in 2007 of Scott Brass, a manufacturer of high-quality brass and copper, has upended the treatment of carried interest, Mr. Davidoff writes. The court concluded that the Sun Capital funds were arguably involved in a “trade or business†through their ownership of Scott because the funds were “actively involved in the management and operation of the companies in which they invest.â€
The phrasing in the tax code is similar to the statute at issue in the case, Mr. Davidoff writes. “In order to take advantage of capital gains treatment for carried interest, private equity firms must also satisfy rules that they are not engaged in a ‘trade or business,’ operating the company they own.â€
IN DETROIT, ‘EXTRA’ PENSION PAYMENTS  | The federal judge dealing with Detroit’s bankruptcy is faced with a conundrum over extra pension payments that have been promised to workers and retirees. The extras have cost Detroit billions of dollars over the years, yet state laws say the extra payments must continue, Mary Williams Walsh reports in DealBook.
For years, the thinking behind the extra payments â€" with names like “the 13th check,†“the skim fund,†“the bump up†and “the waterfall†â€" was that the base pensions were too small. The pension board thought it found the money for these payments by skimming off “the excess†when returns on investments exceeded the plan’s target. But the pension fund also had years when its investments fell short of the target, and the extra payments meant the fund missed out on investment income that the money would have brought in.
“Earlier this month, a state labor judge ruled that Detroit illegally interfered with its pension system two years ago, when it stopped the extra payments in a last-ditch effort to save money and avoid bankruptcy,†Ms. Walsh reports, noting that the base pensions are still being paid.
ICAHN REDUCES NETFLIX STAKE  | Shares of Netflix may have fallen on Tuesday because Carl C. Icahn was cashing out, DealBook’s Michael J. de la Merced reports. The billionaire investor reported cutting his stake almost by half, to 4.5 percent, after growth in the company’s subscriber base helped spur a rise in the stock. Mr. Icahn sold 2.99 million shares at an average price of about $314.85, well above the $58-a-share average he paid last fall. In a post on Twitter, Mr. Icahn offered words of thanks to Netflix’s chief executive, Reed Hastings; its head of content acquisition, Ted Sarandos; and the star of “House of Cards,†Kein Spacey.
ON THE AGENDA  | The Nasdaq OMX Group reports earnings before the market opens, while AT&T announces results after the market closes. Alan Greenspan is on CNBC at 7:30 a.m. and Bloomberg TV at 9 a.m. Eric P. Lefkofsky, the chief executive of Groupon, is on CNBC at 8:10 a.m. Gary D. Cohn, Goldman Sachs’s president, is on Bloomberg TV at 11 a.m.
A KOCH BROTHER’S FIGHT OVER A WIND FARM  | “If the vast wind farm proposed for Nantucket Sound is ever built, William I. Koch will have a spectacular view of it,†Katharine Q. Seelye writes in The New York Times. “Of course, that is the last thing he wants. Mr. Koch, a billionaire industrialist who made his fortune in fossil fuels and whose better-known brothers underwrite conservative political causes, has been fighting the wind farm, called Cape Wind, for more than a decade, donating about $5 million and leading an adversarial group against it. He believes that Cape Wind’s 130 industrial turbines would not only create what he calls ‘visual pollution’ but also increase the cost of electricity for everyone.â€
But Jim Gordon, Cape Wind’s developer, who has spent $70 million of his own money on the project since 2001, vows that it will go forward. “This is a very sophisticated adversary,†Mr. Gordon said. “Koch has already spent a decade trying to push us off the path toward a better energy future.â€
Twitter Sheds a Light on Fast Growth of Its Newest Acquisition  | In an amended prospectus, Twitter disclosed that MoPub, an ad company it recently acquired, had soaring revenue. It also disclosed the pay package for its chief executive, Dick Costolo. DealBook »
Men’s Wearhouse Said to Weigh Bid for Allen Edmonds  | The retailer Men’s Wearhouse is weighing a bid for Allen Edmonds, even as it girds itself for a potential hostile takeover approach by Jos. A. Bank, people briefed on the matter said. DealBook »
EBay to Buy British Courier Service  | EBay is buying Shutl, a same-day courier service based in London, in an effort to improve product deliveries, The Financial Times reports. FINANCIAL TIMES
Gates Buys a Stake in Spanish Builder  | Bill Gates, the Microsoft founder, is the latest investor to make a bet on the recovery of the Spanish economy. DealBook »
JPMorgan Said to Face Another Potential Payout  | In talks that are separate from the tentative $13 billion agreement JPMorgan Chase is negotiating with the Justice Department, investors are seeking at least $5.75 billion from the bank over losses on mortgage securities, The Wall Street Journal reports, citing unidentified people. WALL STREET JOURNAL
Buffett Comes to JPMorgan’s Defense  | “If you’re a financial institution and you’re threatened with criminal prosecution, you have no ability to negotiate,†Warren E. Buffett said of JPMorgan Chase on Bloomberg TV. “Basically, you’ve got to be like a wolf that bares its throat, you know, when it gets to the end. You cannot win.†BLOOMBERG NEWS
Former R.B.S. Executive Named Head of Cyprus Bank  | John Hourican, who resigned from his position as head of investment banking at the Royal Bank of Scotland in the wake of the Libor scandal, has been tapped to lead the Bank of Cyprus, The Telegraph reports. TELEGRAPH
When Puerto Rico Turned to Wall Street  | “In the $3.7 trillion municipal-bond market, Puerto Rico and its agencies more than doubled their borrowing since 2004, to $70 billion this year,†Bloomberg News reports. BLOOMBERG NEWS
Safeway Said to Attract Interest of Private Equity  | Buyout firms including Cerberus Capital Management “are exploring a deal for all or part of supermarket chain Safeway,†Reuters reports, citing unidentified people familiar with the matter. A deal “could potentially shape up to be one of the largest leveraged buyouts since the financial crisis.†REUTERS
As Third Point Does Well, Loeb to Return Money to Investors  | Daniel S. Loeb said Third Point would return around 10 percent of its capital by the end of the year to try to “moderate†the hedge fund’s growth. DealBook »
SAC Capital Retrenches as Insider Trading Inquiry Drains Firm  | SAC Capital Advisors will close its London office and cut six portfolio management teams in the United States, the hedge fund’s management revealed. DealBook »
Moelis Said to Approach a Public Offering  | Moelis & Company, the boutique investment bank founded by Kenneth Moelis, “is moving closer to a potential initial public offering, according to people familiar with the matter,†The Wall Street Journal reports. “While no filing is imminent and the firm may decide against doing one any time soon, if at all, Moelis officials are entertaining pitches from possible underwriters of such an offering, the people said.†WALL STREET JOURNAL
Russian Credit Card Firm Jumps After I.P.O.  | The holding company for Tinkoff Credit Systems, which raised $1.1 billion in an I.P.O. in London, seeks to capitalize on Russians’ desire for easy access to credit cards as wages rise. DealBook »
Why a Stock Sale Could Be the Right Program for Netflix  | Selling stock, the author says, would give Netflix cash it could use to pay off obligations, sign more movie deals, keep for a rainy day - or buy back stock should sentiment turn against the company again, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS
Handybook, a Housecleaning Start-Up, Raises $10 Million  | The financing reflects continued interest in companies that aim to simplify fragmented industries with on-demand services. DealBook »
Weak Job Gains May Delay Fed Action  | The New York Times reports: “The relatively weak September numbers, the subsequent fiscal showdown, the lack of available data and the economic distortions created by temporarily closing government offices are all expected to further delay the Fed’s decision to begin scaling back on some of its efforts to stimulate the economy.†NEW YORK TIMES
Judge Orders Goldman to Pay Former Programmer’s Legal Bills  | A federal judge has ruled that Goldman Sachs must pay the legal fees of a former computer programmer, Sergey Aleynikov, accused of stealing code from the bank. DealBook »
European Central Bank Announces Plan to Scrutinize Lenders  | Reuters reports: “The European Central Bank vowed on Wednesday to submit the euro zone’s top banks to a comprehensive batch of tests next year, staking its credibility on a review that aims to build confidence in the sector.†REUTERS
Fine Expected for Rabobank Over Rate Manipulation  | The Dutch lender Rabobank is expected to face a fine of almost $1 billion “for the alleged manipulation of Libor and other benchmark interbank lending rates as early as next week,†The Financial Times reports. FINANCIAL TIMES
Deloitte to Pay $2 Million to Settle Charges  | Deloitte & Touche is settling charges that it violated federal audit rules, the Public Company Accounting Oversight Board said. REUTERS
