Cyberattacks Seem Meant to Destroy, Not Just Disrupt

Jung Yeon-Je/Agence France-Presse â€" Getty Images

Officials at a South Korean security agency study an attack that disabled 32,000 computers.

American Express customers trying to gain access to their online accounts Thursday were met with blank screens or an ominous ancient type face. The company confirmed that its Web site had come under attack.

The assault, which took American Express offline for two hours, was the latest in an intensifying campaign of unusually powerful attacks on American financial institutions that began last September and have taken dozens of them offline intermittently, costing millions of dollars.

JPMorgan Chase was taken offline by a similar attack this month. And last week, a separate, aggressive attack incapacitated 32,000 computers at South Korea’s banks and television networks.

The culprits of these attacks, officials and experts say, appear intent on disabling financial transactions and operations.

Corporate leaders have long feared online attacks aimed at financial fraud or economic espionage, but now a new threat has taken hold: attackers, possibly with state backing, who seem bent on destruction.

“The attacks have changed from espionage to destruction,” said Alan Paller, director of research at the SANS Institute, a cybersecurity training organization. “Nations are actively testing how far they can go before we will respond.”

Security experts who studied the attacks said that it was part of the same campaign that took down the Web sites of JPMorgan Chase, Wells Fargo, Bank of America and others over the last six months. A group that calls itself the Izz ad-Din al-Qassam Cyber Fighters has claimed responsibility for those attacks.

The group says it is retaliating for an anti-Islamic video posted on YouTube last fall. But American intelligence officials and industry investigators say they believe the group is a convenient cover for Iran. Just how tight the connection is â€" or whether the group is acting on direct orders from the Iranian government â€" is unclear. Government officials and bank executives have failed to produce a smoking gun.

North Korea is considered the most likely source of the attacks on South Korea, though investigators are struggling to follow the digital trail, a process that could take months. The North Korean government of Kim Jong-un has openly declared that it is seeking online targets in its neighbor to the south to exact economic damage.

Representatives of American Express confirmed that the company was under attack Thursday, but said that there was no evidence that customer data had been compromised. A representative of the Federal Bureau of Investigation did not respond to a request for comment on the American Express attack.

Spokesmen for JPMorgan Chase said they would not talk about the recent attack there, its origins or its consequences. JPMorgan has openly acknowledged previous denial of service attacks. But the size and severity of the most recent one apparently led it to reconsider.

The Obama administration has publicly urged companies to be more transparent about attacks, but often security experts and lawyers give the opposite advice.

The largest contingent of instigators of attacks in the private sector, government officials and researchers say, remains Chinese hackers intent on stealing corporate secrets.

The American and South Korean attacks underscore a growing fear that the two countries most worrisome to banks, oil producers and governments may be Iran and North Korea, not because of their skill but because of their brazenness. Neither country is considered a superstar in this area. The appeal of digital weapons is similar to that of nuclear capability: it is a way for an outgunned, outfinanced nation to even the playing field. “These countries are pursuing cyberweapons the same way they are pursuing nuclear weapons,” said James A. Lewis, a computer security expert at the Center for Strategic and International Studies in Washington. “It’s primitive; it’s not top of the line, but it’s good enough and they are committed to getting it.”

American officials are currently weighing their response options, but the issues involved are complex. At a meeting of banking executives, regulators and representatives from the departments of Homeland Security and Treasury last December, some pressed the United States to hit back at the hackers, while others argued that doing so would only lead to more aggressive attacks, according to two people who attended the meeting.

A version of this article appeared in print on March 29, 2013, on page B1 of the New York edition with the headline: Cyberattacks Seem Meant to Destroy, Not Just Disrupt .

An Easy Way to Capture Live Video of Your iPhone’s Screen

As alert readers might have discovered, my videos are back. They’re called “60 Seconds with David Pogue,” and they illustrate whatever my column is about. I make one about every other week. (Here is last week’s, on light bulbs.)

The thing is, more and more often, creating tech videos requires filming the screen of the phone, and that’s a nightmare. There’s grease, there are reflections, there are exposure problems. And there are blocking problems â€" as you demonstrate some phone feature for the camera, you can’t help your hand getting in between the camera and the phone, blocking the very thing you’re trying to film. (The camera starts focusing on your hand instead of the screen, and things just keep getting worse.)

If you saw my video about Google Maps, you might have noticed that I’ve solved this problem. I’ve found a way to capture the live video from the iPhone’s screen â€" brilliantly, clearly, easily and without using a camera at all.

It’s a $13 Mac program called Reflector (a time-limited trial is available), and it transmits the iPhone/iPad/Touch’s video image to the screen of your Mac or PC. From there, you can record it or project it.

The clever part is how it works. AirPlay is Apple’s wireless video-transmission technology. Most people use it to view their Mac, iPhone or iPad’s screen image on a big TV â€" for example, to watch a Netflix or Hulu show on the TV screen instead of the laptop. (Your TV requires an Apple TV box, about $100.)

But Reflector turns AirPlay inside out. It tricks the iPhone into thinking that your Mac or PC is an Apple TV.

Both have to be on the same network. When you’re ready to project the iPhone to the computer, you double-press the Home button. The usual app switcher appears. Scroll it to the right until you see the AirPlay button. Tap it, choose Reflector’s name, and boom: the iPhone’s live video image shows up on the computer’s screen, with incredibly high resolution and clarity. (It also works with the iPad or iPod Touch.)

Reflector transmits audio, too. In other words, the computer plays whatever the phone is playing.

You can opt to see a frame around the image, representing the body of the phone or tablet itself. You can even specify which iPhone/iPad color you want that frame to be.

There’s a Start Recording command right there in the menu. It creates a movie of whatever you’re doing on the phone, which is handy for people who make tech videos (ahem).

I couldn’t believe how simple and smooth the answer was to the problem I’ve had for years. Reflector is terrific for anyone who wants to make videos, but it’s also great for trainers, teachers or product demos. It means that, for the first time, there’s a high-quality way to project the phone’s image onto a big screen (via a projector attached to the computer) â€" and to amplify its sound.

I haven’t researched Android equivalents â€" if they exist, maybe you can let us know in the comments to this post. But for iPhone and Mac, Reflector is a brilliant solution to a sticky problem.

As Pace of China’s Junk Bond Sales Grows, So Do Worries

HONG KONG â€" It has an all-too-familiar ring. Investors, in search of better rates, rush to risky, high-yield bonds, raising worries that the market is overheated.

But the concerns â€" which have already been voiced about the $120 billion of European and American junk bonds issued this year â€" are now being applied to the fledgling Chinese market.

While American and European companies have been selling high-yield debt for decades, Chinese businesses only recently started to tap into the junk bond market in earnest.

It’s a sign that the Chinese capital markets are growing up. As the country’s economy continues to open up, private sector businesses have looked to foreign investment to finance their expansions efforts, rather than relying on hard-to-get loans from the state-controlled banks.

The junk bond market in China took off this year. Although the deals still accounts for a small share of the global total, Chinese companies have sold $8 billion of high-yield bonds to overseas investors since January. That’s up from $2.3 billion during the same period a year earlier, according to figures from Dealogic.

“Bond markets are booming because companies have had difficulty getting the level of debt they want out of banks onshore or offshore, and in tapping equity markets,” said Nick Gronow, a senior managing director at FTI Consulting in Hong Kong and an expert in Chinese bankruptcies. “So bonds have really taken up the slack.”

But the pace of growth is troubling to some analysts.

As investors have plowed into junk bonds across the globe, yields have plummeted. In the United States, rates on junk bonds have dipped below 6 percent, compared with the historical payouts of roughly 10 percent or more.

The trend is similar in the China.

Country Garden, a builder based in the southern city of Guangzhou, raised $750 million in January by selling 10-year bonds that paid 7.5 percent a year. In 2011, the company sold $900 million of seven-year bonds at a much higher 11.125 percent.

The borrowing costs for Kaisa Group Holdings, a commercial real estate company in the southern city of Shenzhen, have also dropped rapidly. In September, it sold $250 million of five-year bonds at 12.875 percent. By January, it was able to sell $500 million of bonds at 10.25 percent. This month, it issued new bonds at 8.875 percent.

“Chinese real estate issuance is happening for structural reasons: 50 percent of the population needs to be urbanized and housed, traditional funding from banks may be more restricted now, and global appetite for yield is on the rise,” said Gregorio Saichin, the London-based head of emerging markets and high-yield, fixed-income portfolio management at Pioneer Investments. “When you combine all the above factors with a massive refinancing exercise by Chinese property developers, you get this type of outcome.”

But it’s a slim difference in yields for such disparate markets.

Chinese high-yield bonds have many of the same characteristics â€" and risks â€" as American debt. They tend to be sold by companies looking to finance ventures in new or untested areas or businesses that compete in industries where earnings are subject to volatile swings.

But the Chinese market has its own set of potential problems, and some analysts worry that investors aren’t being properly compensated for the added layer of risks.

For one, the bulk of the high-yield bonds in Asia this year â€" roughly half â€" come from Chinese real estate companies. The fear is that the housing market, which has been booming, is a bubble that will eventually burst.

The industry is especially uncertain, given the periodic government intervention. On March 1, Beijing announced new measures to curb excess in the market, including the strict enforcement of a 20 percent capital gains tax on the sale of preowned homes.

“With the new leadership in China, people are still not sure which way things will go in terms of property policies,” said Suanjin Tan, an Asia fixed-income portfolio manager based in Singapore at BlackRock. “That also adds to the desire among these guys to remain cashed up, so they can take advantage of any wobbles in the market to pick up land on the cheap.”

Chinese junk bonds also have a unique structure, which could leave investors vulnerable.

Mainland China’s domestic bond market remains largely off limits to foreign buyers. So most investors buy offshore Chinese bonds, which are issued through holding companies headquartered in places like the Cayman Islands.

The bonds tend not to be backed by the actual businesses and underlying assets in mainland China. That means foreign bondholders may have little legal recourse if a company defaults on its debt, especially if local banks or other Chinese creditors make claims.

Bondholders are now facing such difficulties with the bankruptcy of Suntech Power.

Earlier this month, Suntech, the world’s largest solar panel maker, stopped making payments on $541 million in convertible bonds largely held by foreign investors, including Pioneer Investments. On March 21, a court in Wuxi, a city in eastern China, accepted a bankruptcy petition filed by eight Chinese banks against Suntech’s main operating unit in China, a group that’s seeking to recoup some of the money it lent to the company.

If previous Chinese bankruptcies are any indicator, those local banks will take priority in the so-called liquidation process, while foreign bondholders may lose everything. “The greatest difficulty the bondholders have, when things go wrong, is what leverage do they actually have against the company” Mr. Gronow of FTI Consulting said.

The answer, usually, is not much. Mr. Gronow cites the case of Asia Aluminum, a manufacturer in the small southern city of Zhaoqing that collapsed in 2009 after accumulating more than $1.7 billion in debt.

After several months of often strained negotiations between the company, mainland and Hong Kong banks, foreign bondholders and the government, Mr. Gronow and his co-workers, acting as liquidators, worked out a deal that gave back Asia Aluminum’s bank creditors in Hong Kong 100 percent of their capital.

Others were not so lucky. The owners of bonds issued by one offshore subsidiary received about 20 cents on the dollar. And investors in riskier “payment-in-kind” notes, a sort of hybrid bond where interest payments can be made by selling more debt, received only about 1 cent on the dollar.

“The thing you face as a liquidator dealing with these situations is how to maximize the recovery,” Mr. Gronow said. “Clearly, getting that sort of return, they were not very happy about it.”

Judge Questions S.E.C. Settlement with Steven Cohen’s Hedge Fund

How can a hedge fund pay the government a roughly $600 million penalty to settle insider trading accusations but not have to admit that it did anything illegal

Judge Victor Marrero raised that question at Federal District Court in Manhattan on Thursday, as he considered whether to approve the landmark settlement between the Securities and Exchange Commission and the hedge fund SAC Capital Advisors, which is owned by the billionaire stock picker Steven A. Cohen.

“There is something counterintuitive and incongruous about settling for $600 million if it truly did nothing wrong,” Judge Marrero said.

Martin Klotz, a lawyer for SAC, said that his client made a business decision in agreeing to pay such a large fine.

“We’re willing to pay $600 million because we have a business to run and don’t want this hanging over our heads with litigation that could last for years,” Mr. Klotz said.

Judge Marerro reserved judgment on approving the settlement, which related to accusations that SAC made $276 million in profits and avoided losses by illegally trading two pharmaceutical stocks after a former portfolio manager obtained secret information from a doctor about clinical drug trials. But the judge made it clear that he was troubled that, as part of the agreement, SAC did not have to acknowledge wrongdoing.

The Greenwich, Conn. hedge fund has emerged as a major focus of the federal government’s long-running inquiry into criminal activity at hedge funds. Earlier this month, it agreed to settle two insider-trading cases - one for $602 million, which was at issue on Thursday, and the other for $14 million.

At least nine SAC employees or former employees have been tied to insider trading while at the fund. Among them is Mathew Martoma, the former portfolio manager who was criminally charged with illegally trading in the drug stocks, Elan and Wyeth. Mr. Martoma, who has pleaded not guilty, did not attend Thursday’s hearing, but his lawyer, Charles A. Stillman, made an appearance, as did Mr. Martoma’s wife.

The Martoma case has increased scrutiny of Mr. Cohen, as he was directly involved in trading Elan and Wyeth alongside Mr. Martoma. Mr. Cohen has not been charged or sued by the government, and has denied any wrongdoing. In recent days, he made headlines for embarking on a shopping spree amid his legal woes, agreeing to pay $60 million for an oceanfront estate in East Hampton and purchasing a Picasso painting for $155 million.

Thursday’s hearing, which focused heavily on the “neither admit nor deny wrongdoing” language in the S.E.C. settlement with SAC, comes as federal judges across the country have expressed concerns over whether government agencies are letting defendants off easy by not forcing them to admit liability. Most prominently, last year Judge Jed S. Rakoff rejected the settlement of a fraud case brought against Citigroup by the S.E.C. that let the bank avoid an acknowledgment that it did anything wrong.

Judge Rakoff’s decision - and the question of whether he exceeded his authority in rejecting the settlement - is now under review by a federal appeals court, and on Thursday, Judge Marerro hinted that he might condition any approval of the SAC settlement on the outcome of the Citigroup appeal.

“That decision will be very much pertinent to what the court has been asked to do here,” Judge Marrero said.

Mr. Klotz, the SAC lawyer, argued that the decision from the United States Court of Appeals from the Second Circuit would be limited to Judge Rakoff’s ruling within the context of the specific facts of the Citigroup case, which relate to the bank’s sale of a complex $1 billion mortgage bond deal. Therefore, he said, Judge Marerro was well within his authority to approve the S.E.C.’s settlement with Citigroup. (Coincidentally, Mr. Klotz’s co-counsel in representing SAC in this matter is Daniel Kramer of Paul Weiss Rifkind Wharton & Garrison, the same law firm defending Citigroup in its case against the S.E.C.)

Judge Marerro noted that other federal judges across the country had recently followed Judge Rakoff’s lead and cast skepticism on the “neither admit nor deny language,” in some cases demanding greater accountability before approving settlements.

Charles D. Riely, a lawyer for the S.E.C., also urged Judge Marerro to approve its settlement with SAC, despite the pending appeals court decision.

“There is always a risk to the legal landscape shifting,”
Mr. Riely said.

“But the ground is shaking,” Judge Marerro said. “There are tremors.”

Ruth Porat Withdraws Name From Deputy Treasury Race

Ruth Porat is staying put.

Morgan Stanley‘s chief financial officer  informed the White House on Wednesday that she wanted her name withdrawn as a candidate for deputy Treasury secretary, according to people familiar with her plans but not authorized to speak on the record.

Ms. Porat, a long-time Morgan Stanley banker who in early 2010 was named the bank’s chief financial officer, decided to take her name out of the running in part because she did not want to face questions about her finances and was worried about a highly charged environment in Washington against Wall Street bankers, according to these people.

Ms. Porat’s exact net worth is not known, but she made more than $10 million in 2011 alone, the most recent year for which her compensation is available. Jack Lew, the man who would have been her boss had she been confirmed as Treasury Secretary, faced pointed questions during his confirmation about the compensation he received while working on Wall Street.

Mr. Lew worked at Citigroup from 2006 to 2008. Under the terms of his contract with Citi, compensation worth as much as $500,000 that had been previously granted to him but had not yet vested was awarded to him because he left the firm for a senior government position.

Ms. Porat withdrew her name early in the process; she hadn’t gone as far as to submit her tax returns to the White House, according to these people.

There are now no clear front-runners for the job of deputy Treasury Secretary and the White House is potentially months away from naming a candidate. One Washington insider suggested the White House may select a candidate already in the administration. This will allow them to sidestep, at least temporarily, a confirmation hearing.

Possible candidates already in the administration include Mary Miller, currently a top treasury official, and Lael Brainard, the under secretary of the Treasury for international affairs.

At Morgan Stanley, the news that Ms. Porat is staying will end months of speculation there about who was going to succeed her.

Bloomberg News reported earlier that Ms. Porat was no longer in the running for the Treasury job.

John Malone’s Ziggo Stardust

John C. Malone’s latest swoop in the cable sector is true to form.

The cable tycoon’s Liberty Global was sitting on a paper profit of over 40 million euros hours after buying a 12.7 pct stake in Dutch cable company Ziggo from Barclays on March 28. Malone has shrewdly exploited a forced seller, after Barclays was lumbered with the millions of Ziggo shares it failed to sell for the company’s private-equity owners days earlier. What’s more, he has plenty of experience in using blocking stakes as a takeover strategy.

Barclays has suffered unwelcome publicity from the episode but it will still be pleased with the outcome. The bank’s bungled share sale was a reminder of how risky it is to sell big blocks of stock for clients and commit to achieving a set price. Not that a reminder was needed. Placings in German satellite operator ProSieben, Spanish travel software group Amadeus and French voucher company Edenred all left banks saddled with unwanted stakes.

Barclays’ Ziggo stake dwarfed these: it was equivalent to about 1.5 percent of the bank’s Basel III core capital. The sale to Mr. Malone should shake regulators off its back.

Furthermore, the 25 euros a share paid - financed by existing Liberty funds and a loan from another bank - is only a 5 euro cent discount to what the British bank paid for the block on March 18. Factor in fees and a hedge and Barclays may have even made money.

Ziggo shareholders should have mixed feelings. Mr. Malone’s stake is a deterrent to a bid for the company, and could thereby deprive them of a tasty takeover premium. True, he was the natural bidder anyway. But it’s not clear that even a low-ball takeover offer from him could come any time soon. Liberty has yet to digest its $20 billion takeover of Britain’s Virgin Media.

Further out, Mr. Malone is in pole position to snap up the remaining 17.1 percent combined stake held by buyout shops Warburg Pincus and Cinven. There may be valuable synergies from mashing Ziggo into UPC, another Dutch cable company he owns. But if he fails, he will still wield influence. The chief executive of Belgium’s Telenet - in which Mr. Malone also took a big stake - resisted Liberty’s overtures. Not long afterward, he was replaced - with a former Liberty group executive.

Dominic Elliott is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

MetroPCS: At Least One Proxy Adviser Likes Our T-Mobile Deal

While the biggest proxy advisory firm around may have recommended that shareholders reject MetroPCS‘ planned merger with T-Mobile USA, the cellphone service provider hasn’t lost hope yet. Another firm is on board with the deal.

MetroPCS said on Thursday that the transaction had won the blessing of Egan-Jones, a consolation prize of sorts after Institutional Shareholder Services criticized the T-Mobile merger as not in the best interests of shareholders.

Another proxy advisory firm, Glass Lewis, is expected to make its recommendation soon.

Announced last year, the union would create one of the biggest low-cost cellphone service providers in the country and provide more competition for the likes of Sprint Nextel. MetroPCS has argued that the deal would help provide it with necessary spectrum, the radio pathways that gird wireless data transmissions.

“While we are disappointed in ISS’ report, we are gratified that Egan Jones’ recommendation supports our belief that this proposed combination is the best strategic alternative for the company and its stockholders and will maximize value for MetroPCS’ stockholders,” the company said in a statement

I.S.S.’ report, published Wednesday night, sided firmly with arguments made by vocal opponents of the telecom merger. They include two hedge funds, Paulson & Company and P. Schoenfeld Asset Management, that together own over 12 percent of MetroPCS’ stock.

Among the chief objections to the current deal are the high level of debt that the combined company would owe, as well as what the dissident investors argue are too-high interest rates. The shareholders also contended that MetroPCS shareholders should own more than the 26 percent of the merged entity that the deal currently proposes.

Shares of MetroPCS climbed nearly 4 percent by midday on Thursday after I.S.S. published its report, trading at $10.92.

In its response on Thursday, MetroPCS argued that it had carefully considered alternatives to the T-Mobile deal and reiterated that shareholders would be better off agreeing to the merger than risking the company faltering as an independent concern.

“Although we are pleased that I.S.S. recognizes the thoroughness of the process undertaken by the MetroPCS board of directors, we strongly believe that I.S.S.’ report contains material flaws and reaches the wrong conclusion,” MetroPCS said.

A vote on the deal is scheduled for April 12.

MetroPCS: At Least One Proxy Adviser Likes Our T-Mobile Deal

While the biggest proxy advisory firm around may have recommended that shareholders reject MetroPCS‘ planned merger with T-Mobile USA, the cellphone service provider hasn’t lost hope yet. Another firm is on board with the deal.

MetroPCS said on Thursday that the transaction had won the blessing of Egan-Jones, a consolation prize of sorts after Institutional Shareholder Services criticized the T-Mobile merger as not in the best interests of shareholders.

Another proxy advisory firm, Glass Lewis, is expected to make its recommendation soon.

Announced last year, the union would create one of the biggest low-cost cellphone service providers in the country and provide more competition for the likes of Sprint Nextel. MetroPCS has argued that the deal would help provide it with necessary spectrum, the radio pathways that gird wireless data transmissions.

“While we are disappointed in ISS’ report, we are gratified that Egan Jones’ recommendation supports our belief that this proposed combination is the best strategic alternative for the company and its stockholders and will maximize value for MetroPCS’ stockholders,” the company said in a statement

I.S.S.’ report, published Wednesday night, sided firmly with arguments made by vocal opponents of the telecom merger. They include two hedge funds, Paulson & Company and P. Schoenfeld Asset Management, that together own over 12 percent of MetroPCS’ stock.

Among the chief objections to the current deal are the high level of debt that the combined company would owe, as well as what the dissident investors argue are too-high interest rates. The shareholders also contended that MetroPCS shareholders should own more than the 26 percent of the merged entity that the deal currently proposes.

Shares of MetroPCS climbed nearly 4 percent by midday on Thursday after I.S.S. published its report, trading at $10.92.

In its response on Thursday, MetroPCS argued that it had carefully considered alternatives to the T-Mobile deal and reiterated that shareholders would be better off agreeing to the merger than risking the company faltering as an independent concern.

“Although we are pleased that I.S.S. recognizes the thoroughness of the process undertaken by the MetroPCS board of directors, we strongly believe that I.S.S.’ report contains material flaws and reaches the wrong conclusion,” MetroPCS said.

A vote on the deal is scheduled for April 12.

Benckiser Offers to Buy Rest of D.E. Master Blenders to Bolster Coffee Empire

Joh. A. Benckiser has quite the caffeine craving, it seems.

The German consumer products conglomerate has offered to buy the 85 percent of D.E. Master Blenders 1753, a European coffee company, that it doesn’t already own, D.E. Master Blenders disclosed on Thursday.

Benckiser has offered 12.75 euros a share, valuing the target at close to $9.8 billion. The bid is about 33 percent higher than D.E. Master Blenders’ closing price on Wednesday.

If a deal is struck, it would be the third coffee takeover that Benckiser will have announced in 12 months. Within the span of half a year, the German company announced plans to spend $1.3 billion buying Peet’s Coffee & Tea and the Caribou Coffee Company, forming the beginning of a nascent java empire.

But while Peet’s and Caribou primarily run coffee shops, D.E. Master Blenders focuses on products for homes. Spun off from Sara Lee last summer, the company makes coffee pods for Nespresso machines and owns the Douwe Egberts and Pickwick brands.

Beyond coffee, Benckiser has shown an enormous appetite for mergers. An investment vehicle for the wealthy Reimann family of Germany, the conglomerate is run by three veteran consumer products executives with a taste for wheeling and dealing. Benckiser already owns a huge swath of well-known brands, including Jimmy Choo shoes and Sally Hansen nail polish.

Last year, the company made its biggest takeover bid to date, offering $10.7 billion for Avon Products Inc. through its Coty cosmetics subsidiary. Avon successfully fended off the hostile takeover, despite Coty’s partnering with Warren E. Buffett.

Benckiser Offers to Buy Rest of D.E. Master Blenders to Bolster Coffee Empire

Joh. A. Benckiser has quite the caffeine craving, it seems.

The German consumer products conglomerate has offered to buy the 85 percent of D.E. Master Blenders 1753, a European coffee company, that it doesn’t already own, D.E. Master Blenders disclosed on Thursday.

Benckiser has offered 12.75 euros a share, valuing the target at close to $9.8 billion. The bid is about 33 percent higher than D.E. Master Blenders’ closing price on Wednesday.

If a deal is struck, it would be the third coffee takeover that Benckiser will have announced in 12 months. Within the span of half a year, the German company announced plans to spend $1.3 billion buying Peet’s Coffee & Tea and the Caribou Coffee Company, forming the beginning of a nascent java empire.

But while Peet’s and Caribou primarily run coffee shops, D.E. Master Blenders focuses on products for homes. Spun off from Sara Lee last summer, the company makes coffee pods for Nespresso machines and owns the Douwe Egberts and Pickwick brands.

Beyond coffee, Benckiser has shown an enormous appetite for mergers. An investment vehicle for the wealthy Reimann family of Germany, the conglomerate is run by three veteran consumer products executives with a taste for wheeling and dealing. Benckiser already owns a huge swath of well-known brands, including Jimmy Choo shoes and Sally Hansen nail polish.

Last year, the company made its biggest takeover bid to date, offering $10.7 billion for Avon Products Inc. through its Coty cosmetics subsidiary. Avon successfully fended off the hostile takeover, despite Coty’s partnering with Warren E. Buffett.

Sprint and SoftBank Pledge to Forgo Huawei Equipment, Lawmaker Says

Sprint Nextel and its Japanese suitor, SoftBank, have assured lawmakers that they will not use equipment from China’s Huawei Technologies in Sprint’s cellphone network, the chairman of the House intelligence committee said on Thursday.

Representative Mike Rogers, the chairman of the committee, said in an e-mailed statement that both Sprint and SoftBank of Japan had pledged not to use Huawei equipment in the existing Sprint network. The two also said they would move to replace Huawei products in the network of Clearwire, a high-speed data service provider that Sprint is in the process of acquiring.

Mr. Rogers added that he expects both companies to make similar assurances to the Committee on Foreign Investments in the United States, a government body that oversees national security concerns in business transactions.

“I am pleased with their mitigation plans, but will continue to look for opportunities to improve the government’s existing authorities to thoroughly review all the national security aspects of proposed transactions,” he said in the statement.

The statement by Mr. Rogers highlights one of the government’s concerns about Sprint’s sale of majority control to SoftBank for $20.1 billion. SoftBank, one of Japan’s biggest cellphone service providers, uses equipment from two Chinese manufacturers, Huawei and ZTE, in its own networks.

The United States government has been exceedingly wary of potential national security issues posed by using equipment from Chinese companies. Yet that may put some telecom companies in a bind, as Huawei is one of the biggest manufacturers of networking equipment in the world.

SoftBank’s chief executive, Masayoshi Son, told DealBook in an interview last fall that his company’s use of Chinese networking equipment was limited, and that he would take steps to assuage the United States government’s concerns.

New Era for British Financial Regulators Is About to Begin

LONDON - As most of Britain shuts down for the Easter holiday, workers at the Financial Services Authority will be busily putting the final touches to the largest overhaul of the country’s financial regulation in more than a decade.

Over the weekend, the last signs at the Financial Services Authority’s headquarters in the Canary Wharf financial district in London will be taken down. In their place will stand the logo of the Financial Conduct Authority, the new consumer protection agency that starts work next week.

And across town, many of the British regulator’s staff have spent much of the last three months moving to their new offices next to the Bank of England, the country’s central bank. The 1,300 employees will form part of the Prudential Regulatory Authority, a new watchdog that will oversee Britain’s largest banks.

The major regulatory changes signal the end of the Financial Services Authority.

Set up in the late 1990s to respond to the growing complexity of Britain’s financial industry, the regulator has been severely criticized for its failure to deal with the recent financial crisis. To make amends, the Financial Services Authority has tried to bolster its enforcement work, doling out multimillion-dollar fines related to the rate-rigging scandal and pursuing more insider trading prosecutions.

“The last 13 years have been a roller coaster ride,” said David Scott, a regulatory partner at the law firm Freshfields Bruckhaus Deringer in London.

As part of the overhaul, the Financial Services Authority’s banking supervision and consumer protection divisions will be split into separate regulators. By dividing the work between the Financial Conduct Authority and the Prudential Regulatory Authority, British officials are acknowledging that regulators became overstretched.

With around 4,000 regulators to police all of Britain’s financial industry, analysts say the Financial Services Authority routinely shifted its emphasis from guarding against major financial shocks to protecting consumers against potential fraud.

The dual role had significant drawbacks.

At the beginning of the financial crisis, British regulators admitted responsibility for failing to spot risky lending practices at the British bank Northern Rock, which had to be saved by local taxpayers. In 2011, the Financial Services Authority also took partial blame for the failure of Royal Bank of Scotland, which received a multibillion-dollar bailout in 2008. The firm’s failure resulted, in part, from a lack of regulatory oversight, according to a report from British authorities.

“Between prudential and conduct regulation, one tended to dominate the other,” said Andrew Bailey, the new chief executive of the Prudential Regulatory Authority. “To be effective, regulation needs to be focused.”

In the face of growing criticism, British regulators have been trying to clean up their act.

Alongside greater scrutiny over how banks operate, attention also has centered on increased prosecutions and fines for illegal behavior, particularly as a number of recent scandals have tarnished London’s reputation as a financial hub.

Those include a $2.3 billion loss from illegal activity in London by a former UBS trader, Kweku M. Adoboli, and a $6 billion trading loss at a London-based unit of JPMorgan Chase.

In response, the Financial Services Authority has been seeking larger fines for wrongdoing. The total amount of financial penalties for the 12 months through March 27 rose more than fivefold, to £423 million, or $640 million, compared with the same period a year earlier.

The largest fines have related to the manipulation of the London interbank offered rate, or Libor. In December, the Financial Services Authority secured its largest-ever payout from the Swiss firm UBS as part of a global Libor settlement worth a total $1.5 billion. The Royal Bank of Scotland and Barclays also received the second- and third-largest ever financial penalties, respectively, from the British regulator in connected to the rate-rigging scandal.

And in one final settlement before the Financial Services Authority closed its doors, the British regulator fined the local insurer Prudent £30 million on Wednesday for failing to tell authorities about its plans to buy the rival Asian insurance company AIA Group.

The show of muscle has extended to criminal prosecutions. After criticism that it did not pursue enough white-collar crimes, the British authority has won 22 convictions for insider trading since 2009, with another six individuals awaiting trial.

In its most recent conviction, Richard Joseph, a self-employed trader, was sentenced to four years in prison this month after he made around $1 million from illegal tips that he received from contacts inside JPMorgan Chase and UBS, according to court documents.

“This verdict should send a clear message about the consequences to anyone else who might be tempted to do the same,” said Tracey McDermott, director of enforcement and financial crime at the Financial Services Authority.

For Cohen, Another Big Purchase

FOR COHEN, ANOTHER BIG PURCHASE  |  Steven A. Cohen has been in a harsh spotlight as he contends with an insider trading investigation into his hedge fund SAC Capital Advisors. But that hasn’t stopped the billionaire from going shopping: He reached a deal last week to pay $60 million for an oceanfront property in East Hampton, DealBook’s Peter Lattman reports. At the same time, he has put his duplex apartment on the East Side of Manhattan up for sale, seeking $115 million, Mr. Lattman reports, citing a person with direct knowledge of the matter.

The news comes after reports that Mr. Cohen purchased Picasso’s “Le Rêve” for $155 million from the casino owner Stephen A. Wynn. Mr. Cohen’s new Hamptons property, on Further Lane, has an ocean view and is down the road from a home he already owns. (It is unclear whether he is selling that first house.) The $60 million price is among the most expensive real estate sales on Long Island’s South Fork. If Mr. Cohen gets the $115 million asking price for his residence in the Bloomberg Tower, it would be the most expensive sale to date of a Manhattan apartment, Mr. Lattman notes.

On Thursday morning, a judge is set to consider the $616 million deal that SAC recently reached with the government to resolve accusations of illegal trading, though Mr. Cohen is not expected to attend the hearing. If that settlement is approved by Judge Victor Marrero of Federal District Court in Manhattan, the payment will effectively come out of Mr. Cohen’s pocket.

CYPRUS BANKS REOPEN  |  Banks in Cyprus are opening on Thursday for the first time in nearly two weeks, but with strict measures limiting withdrawals. “The measures, which are supposed to be in effect for only a week but are widely expected to be extended in some form well into the future, will prohibit electronic transfer of funds from Cyprus to other countries. In addition, individuals will not be allowed to take more than 3,000 euros (about $3,860) in cash outside the country, well below the current ceiling of 10,000 euros,” The New York Times’s Liz Alderman writes. These restrictions are “more reminiscent of Latin America or Africa,” said Bob Lyddon, the managing director of IBOS, an international banking association.

Though depositors are set to lose a portion of their savings to help pay for the country’s bailout, Joe Nocera, a columnist for The New York Times, will be shedding few tears. Much of the money held in the Cypriot banking system is Russian, benefiting from lower taxes. “Corrupt officials who embezzle money have long found Cyprus to be a friendly haven,” Mr. Nocera writes. “To put it another way, the henchmen of Russia’s president, Vladimir Putin, who have gotten rich by trampling over the rule of law, are now getting a taste of their own medicine.”

DELL SAID TO BE REIMBURSING BLACKSTONE  |  Dell is picking up the tab for due diligence costs as the Blackstone Group considers making an offer for the company, according to Fortune’s Dan Primack. The private equity firm, which examined Dell’s books as part of a “go-shop” process, “repeatedly requested the concession, threatening to otherwise walk away from the table,” Mr. Primack writes, citing unidentified people close to the situation. The special committee of Dell’s board, obligated to encourage any rival bids to the $24 billion offer from Michael S. Dell and Silver Lake, “eventually favored the move, believing that it would increase the odds of getting a superior offer,” the report says.

“If you’re trying to get a higher bid for a $24 billion or $25 billion company, offering up $25 million probably doesn’t seem like too steep a cost,” one unidentified private equity executive not involved in the process told Fortune, by way of explanation.

ON THE AGENDA  |  A revised estimate of gross domestic product in the fourth quarter is out at 8:30 a.m. Accenture reports earnings before the market opens. Pinnacle Foods is set to begin trading after pricing its I.P.O. at the top of its expected range. Jim O’Neill, chairman of Goldman Sachs Asset Management, is on Bloomberg TV at 7 a.m. Wilbur Ross is on Bloomberg TV at 11 a.m. John Donahoe, eBay’s chief executive, is on CNBC at 3:10 p.m.

BREUER’S RETURN TO THE PRIVATE SECTOR  |  Lanny A. Breuer is going back to his old law firm, Covington & Burling, after four years leading the Justice Department’s criminal division, DealBook’s Ben Protess reports. Mr. Breuer is set to become the law firm’s vice chairman, a role created especially for him, and is expected to earn about $4 million in his first year. In addition to representing clients, he will act as an ambassador as the firm looks to grow overseas, Mr. Protess says. “There’s a strong emotional pull to the firm,” Mr. Breuer said. “It’s my professional home.”

Mergers & Acquisitions »

I.S.S. Recommends Against MetroPCS’s Planned Merger With T-Mobile  |  Institutional Shareholder Services largely agreed with major shareholders who have objected to both the debt that the merger would place on the combined company and the stake that MetroPCS shareholders would own of the new entity.
DealBook »

Bankruptcy Judge Approves Airline Merger  |  American Airlines and US Airways got permission to combine into the world’s biggest airline.
ASSOCIATED PRESS

Longtime Chief of Hearst to Step Down  |  Frank A. Bennack Jr., who oversaw an expansion of the privately held Hearst Corporation over his 30-year tenure, announced that he is stepping down as chief executive, to be replaced by the company’s chief operating officer.
NEW YORK TIMES

H.J. Heinz Sets Shareholder Date for Deal  |  H.J. Heinz on Wednesday set April 30 as the date for a shareholder vote on a proposed $23 billion takeover of the company.
DealBook »

Aeon to Increase Stake in Japanese Supermarket Chain Daiei  | 
WALL STREET JOURNAL

INVESTMENT BANKING »

Jefferies Chief Sues to Protect His View  |  Richard Handler, the chief executive of Jefferies, is suing the landlord of a building near his Manhattan penthouse, trying to stop the construction of a rooftop restaurant, The New York Daily News reports. The lawsuit says Mr. Handler faces “light impingements from the project.”
NEW YORK DAILY NEWS

Bank of America Forever  |  It has not been the easiest of jobs, but Brian T. Moynihan, told Charlie Rose that he would like to be chief executive of Bank of America for the rest of his life, Bloomberg News reports.
BLOOMBERG NEWS

Hair on the Street  |  One of the biggest growth areas on Wall Street It may just be on the faces of some executives. Carl Icahn has now joined Lloyd Blankfein as one of the bearded elite of finance.
DealBook »

Son of Wells Fargo Director Receives $1.4 Million  |  Scott P. Quigley, whose father has been a Wells Fargo director since 1994, works as a manager in the bank’s principal investments group, Bloomberg News reports.
BLOOMBERG NEWS

Nomura Hires Former Bank of America Merrill Lynch Banker  |  Nomura has hired Yasuhiro Fujiwara, a former high-ranking investment banker at Bank of America Merrill Lynch, to serve as the bank’s new head of equities for Asia excluding Japan.
DealBook »

JPMorgan Names Regional Heads for Asian Operations  | 
REUTERS

PRIVATE EQUITY »

Chesapeake’s Departing Chief Ponders His Next Move  |  Aubrey K. McClendon, who is stepping down from Chesapeake Energy after scrutiny of his unusual compensation plan, is “meeting with private-equity investors and others to discuss potentially teaming up for new ventures, according to several people familiar with the discussions,” The Wall Street Journal reports.
WALL STREET JOURNAL

Buyout Firms Circle Carestream Health  |  Bain Capital, the Carlyle Group and Thomas H. Lee Partners are among firms competing for Carestream Health, which could sell for as much as $3.5 billion, according to Reuters.
REUTERS

K.K.R. Said to Plan $1.5 Billion Energy Fund  |  The private equity firm K.K.R. is looking to raise a fund to invest in oil and gas development, Bloomberg News reports, citing two unidentified people with knowledge of the matter.
BLOOMBERG NEWS

HEDGE FUNDS »

Hedge Funds Focused on Bonds Turn to Stocks  |  The shift is “the latest sign of investor concern over the health of the long bull market in debt prices,” The Wall Street Journal writes.
WALL STREET JOURNAL

Loeb’s Strong Start to the Year  |  Daniel S. Loeb, the hedge fund manager who runs Third Point, has logged a gain of 12.42 percent in one fund this year through March 13, Reuters reports, citing data from HSBC’s private bank.
REUTERS

I.P.O./OFFERINGS »

Pinnacle Foods Prices I.P.O. at Top of Range  |  The company, owned by the Blackstone Group, raised $580 million after pricing its shares at $20 apiece, for a valuation of about $2.3 billion, Reuters reports.
REUTERS

LEGAL/REGULATORY »

Banks Seek to Overturn Judge’s Ruling in Critical Mortgage Case  |  The nation’s largest banks, facing a torrent of lawsuits over shoddy mortgage securities, are pushing to overturn a series of tough rulings in a high-stakes case filed by the Federal Housing Finance Agency in 2011.
DealBook »

A.I.G. Board Adopts Clawback Policy  |  A.I.G. said its board adopted a policy last week to claw back compensation in the event of mistakes or wrongdoing, Reuters reports.
REUTERS

I.R.S. Videos Come Under Fire  |  Videos based on “Gilligan’s Island” and “Star Trek” have emerged on YouTube and have drawn criticism from a senator.
DealBook »

Alfa Group to Offer Rival Bid for Russian Cell Phone Operator

LONDON â€" A bidding war has broken out for the cell phone operator Tele2 Russia.

The Russian investment firm Alfa Group said on Thursday that would offer up to $4 billion to buy the local cell phone operator. It announced the bid after the the Swedish telecommunications company Tele2 earlier agreed to sell its Russian unit to local bank VTB Group for $2.4 billion, plus debt.

Alfa Group, whose chairman is the Russian billionaire Mikhail Fridman, said VTB’s offer for Tele2 Russia undervalued the cell phone operator, adding that it was also considering an offer to buy the rest of Tele2’s operations.

Alfa Group “is interested and willing to agree to a purchase price for the remaining assets of Tele2 over a very short period of time,” the Russia company, which also holds a majority stake in the Russian cell phone company Vimpelcom, said in a statement on Thursday.

Shares in Tele2 rose 3.5 percent in morning trading in Stockholm on Thursday.