Report Identifies Companies Vulnerable to Activist Takeovers

Looking for a juicy takeover candidate

A new report suggests you might find one at Fifth Third Bancorp, the utility holding company Ameren or ConAgra Foods. Those are among the big companies most vulnerable to takeover based on an analysis of stock holdings at institutional investors and other major shareholders

The vulnerable companies make the list because any activist shareholder that acquires a 14 percent stake would have a high likelihood of winning a takeover battle, according to a report released Wednesday by Rotary Gallop, a research and consulting firm that helps companies and investors quantify the odds in proxy fights.

On the flip side, some companies have very dominant shareholders, making it difficult for any potential activist investor to start a takeover battle. Among those are Hormel Foods, Reynolds American, Wal-Mart Stores and Campbell Soup. The report also names companies where existing big shareholders would be the dominant voice in any takeover vote, including AutoNation, Morgan Stanley, BlackRock and Kellogg.

In essence, control over a company’s fortunes boils down to more than just how many shares each investor owns. A relatively small shareholder could wield outsize influence if other shareholders are even smaller. Or an investor with significant stock holdings could prove to be a runt among giants.

“Even though you’ve got maybe just 10 percent of the ownership, your vote still decides the outcome over 80 percent of the time” at some companies, said Travis Dirks, a former research physicist who co-founded Rotary Gallop and now serves as its chief executive.

To prepare the report, Rotary Gallop analyzed share ownership at 459 of the companies in the Standard & Poor’s 500-stock index â€" essentially all those without multiple share classes. It then used December 2012 share ownership data from FactSet Research to model millions of hypothetical up-or-down votes, determining which shareholders could most often tip the outcome one way or the other.

To analyze vulnerability to activist investors and takeover efforts, Rotary Gallop modeled the likelihood that a hypothetical activist shareholder â€" with a stake of up to 14 percent â€" could expect to swing the outcome of the vote.

In another analysis, Rotary Gallop considered the how often major existing shareholders, or whales, were able to dictate the outcome of the vote. Whales are less significant at many of the same companies that are resistant to takeover efforts.

Rotary Gallop also analyzed how often insiders at each company â€" including executives and directors â€" were likely to swing shareholder votes. Companies with powerful insiders largely mirror those that are safest from sharks and whales â€" explaining much of that protection, Mr. Dirks said. (Other protection comes from sheer size: Because Rotary Gallop capped investment by a hypothetical activist investor at $2 billion, very large companies like Wal-Mart and Apple are less vulnerable to takeovers.)

The report doesn’t evaluate whether it’s a good idea to try to take over any particular company, or whether a takeover at any given company would be financially attractive.

The influence of major shareholders sometimes seems obvious, particularly when they hold a stake approaching 50 percent of shares outstanding. But effective control can be less obvious, Mr. Dirks said.

At Caterpillar, for example, State Street owns about 10.9 percent of shares outstanding â€" but decides any given shareholder vote about 82 percent of the time, Mr. Dirks said. PNC Bank owns 21 percent of BlackRock’s shares, but determines the outcome of a vote about 71 percent of the time.

The calculations were straightforward, but complex, Mr. Dirks said.

“You could sit down and do it yourself for a very small company,” he said. “The difficulty is that the number of permutations you have to deal with are two to the number of shareholders â€" it just blows up very fast.”

Dell â€" which faces competing bids from management, Carl C. Icahn and the Blackstone Group â€" has some 900 shareholders that have publicly disclosed their ownership stakes, so the potential vote possibilities would number 10 followed by 271 zeros, Mr. Dirks said.

By comparison, the atoms in the known universe are believed to number about 10 followed by 80 zeros.

Most vulnerable to existing big shareholders

AutoNation
Republic Services
LyondellBasell Industries
Morgan Stanley
BlackRock
Kellogg Company
Lockheed Martin
VF Corporation
J.C. Penney
Nasdaq-OMX Group

Least vulnerable to existing big shareholders

Wal-Mart
Hormel Foods
Titanium Metals
Campbell Soup Company
Oracle
Microsoft
ExxonMobil
Bank of America
General Electric
Intel Corporation

Most vulnerable to activist investors

Windstream
Wisconsin Energy
Fifth Third Bancorp
Ameren Corporation
Regions Financial Corporation
ConAgra Foods
Consolidated Edison
Tyco International
ADT Corporation
Pepco Holdings

Least vulnerable to activist investors
Hormel Foods
Reynolds American
Titanium Metals
Wal-Mart
Campbell Soup Company
Franklin Resources
Oracle Corporation
Amazon
Apple
ExxonMobil

In the Markets, at Least, Fannie and Freddie Still Astound

The mortgage giants Fannie Mae and Freddie Mac continue to astound â€" and not in a very encouraging way.

The share price of each company has tripled in the last few months, pointing to the foolishness of Wall Street, this time with an assist from the federal government. When zombie stocks show signs of life, you know you are in trouble.

Some of you may be scratching your heads, wondering how Fannie Mae and Freddie Mac can even have stocks that still trade. After all, weren’t Fannie Mae and Freddie Mac taken over by the government during the financial crisis, gobbling up almost $200 billion worth of federal money in the process And hasn’t the Obama administration said it wanted the two companies wound down

Well, yes. The weird half-life of the mortgage finance giants is a result of the hoops the government went through during the financial crisis to avoid having the $5 trillion in debt being held by or guaranteed by the companies added to the actual federal debt.

The government could have fully nationalized and liquidated the companies. But if it did so, the government would have been legally deemed the owner or guarantor of the debt.

To avoid having to put the two companies on the government’s balance sheet, the Treasury Department, led by Henry M. Paulson Jr., decided instead to put the two into a legal purgatory known as a conservatorship. Fannie Mae and Freddie Mac were placed under the supervision of their regulator. Despite being public wards, the companies have been largely run like private businesses, including paying their executives millions of dollars in compensation.

There was one exception, however. The government changed them from commercial entities with a goal of making money for stockholders into quasi-public service companies intended to help the housing mortgage market function. The government also expressly stated its goal was to eliminate the two companies and replace them with a new system of mortgage finance.

As part of all of this, the government lent the two entities almost $200 billion and received a right to acquire 79.9 percent of each company’s stock. (It was set at this limit to avoid that pesky debt consolidation problem.)

All of this meant that while the companies were now under the government’s thumb, the stocks still traded, left out there in an accounting maneuver worthy of the biggest multinational.

Since that time, the government has tried to damp down talk that the stocks might have any worth. They were delisted from the New York Stock Exchange, but still trade over the counter.

And boy do they trade. On an average day, Fannie Mae and Freddie Mac stock have a combined volume of about 25 million shares. If the stocks were back on the New York Stock Exchange, they would be top-traded stocks.

Until a few months ago, the shares of the two companies traded like penny stocks in a range of 20 cents to 30 cents. That’s a far cry from 2004, when both stocks were trading over $70 a share.

Since the beginning of the year, however, Fannie Mae shares have surged 238 percent, to more than 86 cents. Freddie Mac shares are up 211 percent year to date, at 81.9 cents. Both surges have come in the wake of Fannie Mae posting an annual 2012 profit of $17.2 billion and Freddie Mac also putting up a big profit number of $11 billion.

The companies’ combined equity value is now about $7 billion according to S.& P. Capital IQ, although $5 billion of that is attributable to the government.

Still, $2 billion is nothing to laugh at, and the number stands despite a government that has gone out of its way to make the stocks worthless. The companies have eliminated voting and dividend rights on the shares. Not only that, as Fannie Mae states in its public filings, “instead of being run for the benefit of shareholders, our company is managed in the overall interest of taxpayers, which is consistent with the substantial public investment in us.”

The federal government even has agreements with both Fannie Mae and Freddie Mac that say that through 2017 they will turn over a set measure of profits to the government. After that, they will give all of their profits to the government.

Let’s face it, what value is there in a stock where you have no vote, right to dividends or profits Let alone the fact that each company is in debt to the government by over $160 billion. Then there is the government plan to shrink them, perhaps into nothing. The recent profits are rather meaningless in this light.

Yet the trading continues.

It’s not an entirely new phenomenon. There are companies in bankruptcy whose stocks trade until the bankruptcy process is completed. The old General Motors, for example, traded for a couple of years as the Motors Liquidation Company before becoming worthless. In most circumstances, the equity then disappears without value, but along the way trading continues and the company still files reports with the Securities and Exchange Commission. This practice has never been halted, and out of foolishness or pure speculation, shareholders continue to trade bankruptshares.

Now, neither Fannie nor Freddie is in bankruptcy. But at least in bankruptcy cases there is a small chance that a shareholder may recover some money. With Fannie and Freddie, the government is deliberately allowing trading to go on in stock that the government is going out of its way to make worthless.

So here we have a situation where an investor buys something of no value in the hope of selling it for a greater amount to someone who believes the same. Isn’t that usually called looking for the greater fool

It’s mostly day traders and small investors who are buying the Fannie and Freddie shares. Institutions hold only 0.26 percent of the two companies’ shares, according to Capital IQ. The largest institutional holder, according to Capital IQ, is the American Funds’ $78 billion Capital Income Builder fund, which owned about 12.5 million Fannie Mae shares as of Jan. 31.

Why is a mutual fund that says it specializes in buying income-producing securities and “companies with proven records of increasing dividends” owning these stocks, even if they are a pittance of the fund’s assets When I asked a representative of American Funds, that person cited a policy of not commenting on particular investments.

In any event, individual holders of these stocks are most likely trading to speculate. It’s been quite profitable so far, but as we have seen again and again, trading based on froth and not on value almost always ends badly.

When asked for comment, Freddie Mac referred me to its regulator, the Federal Housing Finance Agency, which referred me to the Treasury Department. The department did not respond to a request for comment, nor did Fannie Mae. Perhaps you can see why we’re still having these problems.

The zombie stocks, meanwhile, lumber on. Fannie Mae and Freddie Mac played a part in the tragedy of the financial crisis. Now they are playing a part in a farce.

For Former Regulators, a Home on Wall Street

The consulting firm is filled with so many former bureaucrats and political insiders that it has become known as Wall Street’s shadow regulator.

Nearly two-thirds of its roughly 170 senior executives worked at agencies that oversee the financial industry. The founder, Eugene A. Ludwig, is a former comptroller of the currency and a law school friend of Bill Clinton; the latest hire, Mary L. Schapiro, ran the Securities and Exchange Commission until late last year.

Building off those connections, the Promontory Financial Group has emerged as a major power broker in Washington, helping Wall Street navigate an onslaught of new rules and regulatory scrutiny. Promontory accompanied Morgan Stanley when the bank urged regulators to rethink limits on risky trading, records show. It also joined Bank of America, Citigroup and other big banks at the Treasury Department to discuss plans for dismantling failing financial firms.

But Promontory and other consultants are now facing scrutiny in Congress, amid growing unease over their influence and their close ties to federal authorities. The Senate Banking Committee is set to hold a hearing on Thursday to examine whether regulators inappropriately “outsource” oversight to consultants like Promontory, which are paid billions of dollars by the banks.

“This process raises troubling questions,” said Senator Sherrod Brown, the Ohio Democrat leading the Senate hearing. “By shining a light on these practices, I hope we can prevent this kind of fragmented and frustrating effort in the future.”

Promontory rejects the notion that it is beholden to Wall Street. Promontory says that when it is hired by a bank, it reports to the board, not management.

“I consider my client to be the board members, who are keenly aware of their responsibilities and want an unvarnished and independent view,” said Peter Bass, a managing director at Promontory. Mr. Bass, once a State Department official, added that he was “in the business of telling inconvenient truths.”

Over the last decade, Promontory has secured lucrative deals to clean up bank misdeeds like foreclosure abuses and money laundering, according to public records and interviews with regulators and executives. The firm has also advised the government of the United States and those of far-flung locales like Cameroon and Iceland.

Behind the scenes, the firm acts as an advocate for banks, helping draft letters that challenge crucial rules and discussing reforms with regulators. While Promontory has not registered as a lobbyist since 2009, the firm’s executives have met with regulators at least 10 times in the last two years on thorny issues like the so-called Volcker Rule that curbs risky trading, according to an analysis of data from the Sunlight Foundation, a nonprofit organization that tracks government disclosures.

“Promontory does not seek to influence regulators and does not lobby,” the firm said. “This does not mean we never attend a government meeting with clients.”

Some lawmakers and housing advocates question the quality of the consultants’ work. Promontory, they note, was one of several firms that stumbled in the recent review of foreclosure abuses. In 2008, MF Global hired Promontory to improve its risk controls after a rogue trading blowup; three years later, the brokerage firm collapsed.

Banks are also privately raising concerns about Promontory and its steep fees, which can total as much as $1,500 an hour, according to people with knowledge of the matter. Bank executives, who were not authorized to speak publicly, said they sometimes hired Promontory to appease regulators, who think highly of the firm’s expertise.

Promontory defends its work, noting that it has helped turn around dozens of troubled banks. The firm, Mr. Bass said, continues to win new business, as part of “a flight to quality.” For example, the firm is working on Project New BAC, the broad cost-cutting effort under way at Bank of America.

“They have a lot of first-class people who know the problems facing the banking business, and who know the regulations extremely well,” said Robert G. Wilmers, the chief executive of M&T Bank.

Still, Promontory says there are limits to its authority. It cannot control whether banks disregard the firm’s advice and continue to run afoul of the law.

“The recommendations are sometimes challenging to implement,” Mr. Bass said.

From the beginning, Mr. Ludwig cemented the firm’s ties to Washington and Wall Street.

Just months after Promontory opened its doors in 2001, Mr. Ludwig invited Fed governors and other top officials to a party at his 13,000-square-foot Washington home, replete with a tennis court and a modern art collection, according to two people with knowledge of the event. Since then, Mr. Ludwig, a former executive at Bankers Trust, has hosted other such gatherings at the $11.5 million estate. In New York, Mr. Ludwig is a regular at the Four Seasons restaurant, where he is known by name and salad order.

Promontory said that Mr. Ludwig entertains regulators on occasion but that “there is no discussion of current matters.”

According to people with knowledge of the matter, Mr. Ludwig regularly travels by private jet and earns more than $30 million annually, making him better paid than top executives at many big banks. He has shared some of his fortune with a range of philanthropic causes, including the National Academy Foundation, Yale Law School and community groups like the Neighborhood Assistance Corporation of America.

Through Promontory and other companies, Mr. Ludwig has a vast reach, overseeing a private equity firm that invested in struggling banks during the financial crisis and another business that helps banks bundle mortgages and other consumer loans. He also started the Promontory Interfinancial Network, an independent firm that splits up companies’ large bank deposits into multiple $250,000 chunks so that the F.D.I.C. will insure the cash. The business processes more than $1 billion a week in customer funds, according to court filings.

Mr. Ludwig has recruited among the regulatory elite, including Susan Krause Bell, a onetime senior official at the Office of the Comptroller of the Currency, and Patrick M. Parkinson, who spent three decades at the Federal Reserve. The revolving door spins both ways: the former Promontory executive Amy Friend recently returned to the comptroller of the currency’s office.

Promontory notes that conflict-of-interest rules prohibit its employees “from working on matters that were their responsibility in government.”

With its regulatory ties, Promontory was well positioned to guide the industry through the financial crisis. In 2006, the firm lobbied for General Motors as the carmaker sought government permission to spin off its sinking lending division. When regulators sanctioned banks for foreclosure abuses, Bank of America, Wells Fargo and PNC hired Promontory to assess loans for problems.

“He thinks banks ought to play by the rules, but he’s not antibanking,” said Alice M. Rivlin, a former vice chairwoman of the Federal Reserve and a longtime friend of Mr. Ludwig.

Ultimately, the foreclosure review proved a headache for Promontory and other consultants. Lawmakers faulted the consultants for farming out much of the work to lower-paid contract employees. Promontory, according to people briefed on the matter, relied on contractors scattered across the United States and the Philippines.

Promontory said it was “accepted practice in the industry” to employ “third-party personnel.”

Consultants also remain dogged by concerns that their work does not always remedy Wall Street’s problems.

After a rogue trader cost MF Global $141 million, Promontory came in to bolster certain areas of the firm’s risk controls. By 2010, Promontory reported to MF Global’s board that the brokerage had “successfully and effectively implemented” most of the recommendations, according to court filings. The consultant lauded MF Global’s management for setting “a tone at the top.” Promontory noted on Tuesday that its purview did not extend to the parts of MF Global that imploded in 2011.

Promontory also worked with banks ensnared by a broad money-laundering investigation, including HSBC and Standard Chartered. In the case of Standard Chartered, Promontory helped the bank assess the amount of illicit money funneled to nations like Iran. The consultant estimated $14 million. But in a statement announcing a settlement with the bank in August, Benjamin M. Lawsky, New York’s banking regulator, said, “The parties have agreed that the conduct at issue involved transactions of at least $250 billion.”

Promontory said that the firm “stands by the methodology, assessments and recommendations for improvement in its report to Standard Chartered.”

A Solution for Penney May Be to Sell Itself, or Some of Its Assets

Two years ago, William A. Ackman, a newly minted board member of J. C. Penney, quietly met with the man he hoped would lead the struggling retailer to a brighter future.

Ron Johnson, then the much-lauded head of Apple’s retail arm, hesitated at first. A turnaround plan would probably require taking the company private, he told Mr. Ackman, according to a person with direct knowledge of the meeting. Yet Mr. Johnson ultimately agreed to become chief executive.

With Mr. Johnson’s ouster this week, Penney, a 111-year-old retail chain, is scrambling to ensure that it has a future at all. And the solution may be a sale of some or all of the company.

The most promising option may be trying to profit from Penney’s real estate â€" the actual property or leases of its 1,104 stores, of which it owns 429. Analysts have estimated the value of the real estate assets from $5 billion to $10 billion. The stock market value of Penney is only $3 billion.

“The vultures have been circling for a while,” said Margaret Bogenrief, a partner at ACM Partners, a boutique crisis management and distressed investing firm. “One of the problems with turnarounds is that it’s really hard to turn around a multibillion-dollar company with hundreds of shareholders.”

Penney’s woes have been another black mark in the retail investment record for Mr. Ackman, a hedge fund manager who won big with his bet on the mall operator General Growth Properties, but missed badly on investments in the Borders Group and Target. His hedge fund, Pershing Square Management, first built up its now nearly 18 percent stake in Penney in late 2010 at an average cost of $29.50 a share. On Tuesday, shares of J. C. Penney closed at $13.93, down 12.2 percent on the day.

It is not unclear what Mr. Ackman will do next. He did not respond to requests for comment.

When he began wooing Mr. Johnson, his goal was to help a big name in retailing that had fallen seriously behind the likes of Macy’s and Kohl’s. Sales lagged expectations, while expenses had crept too high.

At that time, Mr. Ackman had argued that with the backing of his fund and Vornado Realty Trust, which together owned nearly 30 percent of the stock, Mr. Johnson â€" a fellow Harvard M.B.A. like Mr. Ackman â€" would have the room he needed to follow up his time at Apple with an even bigger success story.

But the plan Mr. Johnson devised â€" overhauling hundreds of stores and eliminating coupons â€" instead pummeled Penney’s revenue and shares, culminating in a disastrous $552 million fourth-quarter loss that stunned Wall Street. Mr. Johnson publicly apologized for his missteps in February, even as he insisted that his plan would finally bear fruit.

By last week, however, Penney’s board appeared to have lost patience and decided to move on. Even Mr. Ackman publicly excoriated his man, saying at a conference last Friday that the “criticism was deserved,” according to Reuters.

For now, the company has brought back Mr. Johnson’s predecessor, Myron E. Ullman III. A longtime retail executive who had led Penney for seven years, analysts regard him as a calming presence who can still Penney’s turbulent waters for at least some time.

“He must be viewed as an interim appointment, meant to stabilize the situation,” Michael Exstein, an analyst with Credit Suisse, wrote in a research note late on Monday.

Shares of Penney have fallen so far under Mr. Johnson that the company may be a tempting target for some private equity firms. By some measures, the company could support the financing necessary in a leveraged buyout. It carried $930 million in cash and short-term investments as of Feb. 2.

But with about $2.9 billion in long-term debt, the margin for error may be perilously thin.

In a research note, Standard & Poor’s analysts said they expected the company would seek additional capital or would borrow to finance operations given its “less than adequate” liquidity. Penney has said that it has access to over $1.8 billion from its main credit line.

Other retailers would have little incentive to bid for all of the company, according to analysts. Rivals like Macy’s and Kohl’s have significant geographic overlap with Penney’s stores and would most likely be interested in buying only pieces.

A combination of those moves may be necessary to plug what could become an enormous hole in Penney’s finances. The company could burn through as much as $1 billion this year, according to analysts at Piper Jaffray.

Penney has few other immediate financial problems, however. It still can borrow several hundred million dollars from a revolving credit line, and faces no significant short-term debt maturities.

William Frohnhoefer, an analyst at BTIG Research, said that the company could also sell equity to raise additional cash.

Mr. Frohnhoefer speculated that Penney could divest some of its real estate properties, selling off the land and lease it back, or subleasing some of its holdings.

Most vital for Penney’s future, analysts say, is for Mr. Ullman to devise a sound new strategy, and quickly. “The balance sheet has a number of resources that can be used to create operational success,” Mr. Frohnhoefer said. “It’s operational success that has been elusive.”

J.C. Penney Shows How the Market Overvalues the C.E.O.

The debacle at J.C. Penney exposes a glaring inefficiency in how the market values corporate chieftains. When the struggling retailer hired Apple whiz Ron Johnson in 2011, the company’s equity value spiked by more than $1 billion. On Monday evening, news of his departure added $350 million. The return of Michael Ullman - the man Mr. Johnson replaced - swiftly erased some $700 million. Such big swings make no sense.

Less than two years ago, Mr. Johnson was given a savior’s welcome. William A. Ackman, a board member and hedge fund manager whose Pershing Square Capital Management is J.C. Penney’s biggest shareholder, championed the recruitment and touted Johnson’s retail success at Apple and Target. Apple, in particular, always looked a shaky comparison. J.C. Penney lacks the desirable products, focus and brand image of the iPhone and iPad maker.

As it turns out, J.C. Penney’s shares are trading at less than half the price they were when Mr. Johnson took over. A year and a half isn’t long enough to forge a major turnaround. Even Mr. Ackman, though, realized things weren’t going well. He bluntly acknowledged the problems at a conference last week.

Even if Mr. Johnson’s ideas had been the right ones, big organizations with entrenched people and cultures are hard to turn around. That made the market exuberance for his arrival excessive. By the same token, the large discount applied to Mr. Ullman’s second attempt is probably overdone.

Part of the rap against Mr. Johnson is he tried to do too much, changing sale policies and alienating traditional customers. In that sense, a blast from the past might not be so bad. Although Mr. Ullman’s seven-year tenure cost J.C. Penney 15 percent of its value - as Mr. Ackman liked to point out - the pressure from online rivals, the intervening recession and the more dramatic decline under Mr. Johnson make that record look less bad.

J.C. Penney, now a $3.1 billion company, has struggled to keep up in a challenged industry. That may be where Mr. Ullman can help. If anything, the fickle market has provided him with one advantage over Mr. Johnson: low expectations

Richard Beales is assistant editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Bird Flu Concerns and North Korean Jitters

China has now confirmed 28 cases of infection with the bird flu virus H7N9. Eight people have died. The government has learned many lessons from the 2003 SARS outbreak and subsequent cover-up and so far the World Health Organization has publicly praised China’s handling of this new flu variant.

Liang Wannian, an official at China’s National Health and Family Planning Commission, told reporters Monday that “any doctors who fail to disclose cases promptly and accurately will be prosecuted.”

Beijing has allowed remarkable transparency in official and social media coverage of the H7N9 outbreak, though given its track record of information management many here doubt the apparent transparency. Managing pandemic fears in the social media age would test any government.

Living in Beijing, I have to hope the transparency is real. During the 2009 H1N9 outbreak, Beijing required schools and many public venues to check temperatures before allowing entry. As of this morning my kids’ school, a public Chinese elementary school, did not have the thermometers out. The Beijing Municipal Government appears to not yet be as concerned as it was four years ago about H1N1.

Yum Brands, owner of KFC, probably has reason to be concerned, as Chinese have been told to change poultry eating habits and there are reports of significant declines in KFC’s business in Shanghai, the city with the most reported cases.

This new virus has exposed at least one virulent pundit. Dai Xu, a Chinese Air Force Colonel and frequent, hawkish media commentator, has taken to Sina Weibo to claim that H9N7 is a U.S. conspiracy designed to sow panic. Many microbloggers have attacked Colonel Dai but he remains unbowed, writing this afternoon that his critics are “dogs” who “should be killed.” Do not be surprised to see Colonel Dai disciplined for these destructive diatribes.

The Korean Peninsula is a bit of headache for Beijing right now. First, researchers at Chinese Academy of Sciences say the likely source of the H7N9 mutation is a virus carried by wild birds that migrated from South Korea. Second, North Korea continues its escalating threats leading to concerns missile and nuclear tests may be imminent.

THREATS FROM NORTH KOREA are not new and historically have been used to shore up domestic control and extort aid while reminding the world of the threat Pyongyang poses with the goal of spurring engagement with the U.S. North Korea is neither “crazy” nor “suicidal” but Kim Jung-eun is a young, untested leader and the region is tired of these tactics.

China is North Korea’s closest ally and largest trading partner but it has less ability to shape Pyongyang’s actions than many believe. Beijing appears more frustrated with Pyongyang than any time in recent memory, but while there have been calls from scholars and some media outlets for a change in China’s policy toward North Korea there have been no official signs of a shift. Greg Kulacki, a China expert at the Union of Concerned Scientists, argues in a recent blog post that reports of a “subtle change” in China’s thinking about North Korea are exaggerated:

…the idea that China would change its policy on North Korea because of security concerns is so well-entrenched in the minds of U.S. officials and reporters that this “subtle change” in China’s thinking about North Korea was taking place in a 2003 episode of “The West Wing.”

President Xi Jinping of China said in a speech over the weekend at the Boao Forum that “no one should be allowed to throw a region and even the whole world into chaos for selfish gain”. Some interpreted President Xi’s ambiguous comment as targeted at North Korea, though it is more likely directed not just at the DPRK but also toward the U.S., Japan and other countries on China’s periphery.

China’s official position, as reiterated Monday by the Foreign Ministry spokesman is that “China opposes any action that would undermine peace and stability on the peninsula” and engagement and dialog through the six party talks is the only effective approach. Beijing wants neither a reunified Korea that is a U.S. ally or a failed state streaming refugees across its borders.

Expect it to work hard to return to the Korean Peninsula to the status quo. But a true provocation by North Korea that results in any armed response from South Korea or the U.S. might prompt the change towards Pyongyang that many hope Beijing is considering.

Investors should be concerned as the risks for miscalculations are increasing and costs of a Kim comedown increase every day he ratchets up the rhetoric. North Korea’s leader has invested much of his credibility in these recent threats; a retreat with nothing to show to his military and country could be very difficult.

However this current crisis resolves, it will provide yet another reason for countries around the reason to increase their defense budgets, and prove a boon for investors in defense firms with exposure to the region.

Former British Bank C.E.O. to Give Up Knighthood

LONDON - For some British bankers, a knighthood is not for life.

James Crosby, the former chief executive of HBOS, said Tuesday he would ask authorities to remove his knighthood in light of a damning report published last week that blamed him in part for the mortgage lender’s 2008 collapse.

“Shortly after I left HBOS, I received the enormous honor of a knighthood in recognition of my own â€" and many other people’s â€" contribution to the creation of a company which was then widely regarded as a great success,” Mr. Crosby said in an e-mailed statement. “In view of what has happened subsequently to HBOS, I believe that it is right that I should now ask the appropriate authorities to take the necessary steps for its removal.”

Frederick A. Goodwin, the former chief executive of Royal Bank of Scotland, was stripped of his knighthood last year because of his role in the failure of the bank, which had to be bailed out by the government.

Pressure on Mr. Crosby, who stood down as chief executive of HBOS in 2006, mounted after a parliamentary report last week specifically blamed him and two other former managers for the HBOS collapse. The report called on regulators to consider barring the three men from taking any roles in the financial sector.

Mr. Crosby said he was “deeply sorry for what happened at HBOS” and that he “always tried to act with integrity.” “I would like to express my sincere regret for events,” he wrote in the e-mail.

He also said that he would give up 30 percent of his pension, which currently is about 580,000 pounds (or $887,700) per year.

Former British Bank C.E.O. to Give Up Knighthood

LONDON - For some British bankers, a knighthood is not for life.

James Crosby, the former chief executive of HBOS, said Tuesday he would ask authorities to remove his knighthood in light of a damning report published last week that blamed him in part for the mortgage lender’s 2008 collapse.

“Shortly after I left HBOS, I received the enormous honor of a knighthood in recognition of my own â€" and many other people’s â€" contribution to the creation of a company which was then widely regarded as a great success,” Mr. Crosby said in an e-mailed statement. “In view of what has happened subsequently to HBOS, I believe that it is right that I should now ask the appropriate authorities to take the necessary steps for its removal.”

Frederick A. Goodwin, the former chief executive of Royal Bank of Scotland, was stripped of his knighthood last year because of his role in the failure of the bank, which had to be bailed out by the government.

Pressure on Mr. Crosby, who stood down as chief executive of HBOS in 2006, mounted after a parliamentary report last week specifically blamed him and two other former managers for the HBOS collapse. The report called on regulators to consider barring the three men from taking any roles in the financial sector.

Mr. Crosby said he was “deeply sorry for what happened at HBOS” and that he “always tried to act with integrity.” “I would like to express my sincere regret for events,” he wrote in the e-mail.

He also said that he would give up 30 percent of his pension, which currently is about 580,000 pounds (or $887,700) per year.

Regulators to Send First Batch of Checks to Troubled Borrowers

The nation’s top banking regulators have some good news for some troubled homeowners: the checks will be in the mail soon.

Months after brokering a multibillion dollar settlement with banks over foreclosure abuses, the Federal Reserve and the Office of the Comptroller are set to dole out roughly $1.2 billion in the first batch of payments. By April 12, the regulators expect to mail 1.4 million checks. An additional round of checks will be sent out by the middle of July, according to the regulators.

The settlement, which scuttled a deeply flawed review of millions of loans in foreclosure, will ultimately provide $3.6 billion in cash relief to borrowers who entered foreclosure in 2009 or 2010.

Among those borrowers in the first group to receive relief are the 1,082 service members who banks foreclosed on illegally. Under the settlement, each borrower will receive roughly $125,000, the largest amount of relief.

Homeowners who were foreclosed on even though they never missed a single mortgage payment will also receive a check in the first round of payments. The Comptroller’s Office said that 53 such borrowers. whose homes will receive $125,000. Another 626 homeowners who were wrongfully foreclosed on will be get between $5,000 and $15,000 in relief because the foreclosure wasn’t completed or it was reversed .

The largest category of borrowers slated to get cash are the more than half a million homeowners who were deprived of loan modification or other loss mitigation assistance. The 568,476 borrowers that fall into that group will receive $300 each.

For millions of Americans battling to save their homes, the checks are the first federal lifeline in years, according to housing.

In January, the Comptroller’s office scuttled the foreclosure review, which was hobbled by delays and inefficiencies. Instead, the regulator brokered a $9.3 billion settlement, comprised of $3.6 billion cash payments and other forms of relief. The review, which was hastily dismantled, was ordered by bank regulators in 2011 amid mounting concerns that banks were churning through piles of foreclosure files without reviewing them for accuracy.

But the independent consultants, hired to pour over millions of loan files, only reviewed a sliver of the foreclosed loans. As homeowners languished, regulators opted to end the review in favor of the settlement. Even so, many homeowners have been waiting to receive relief.

The announcement of the payments comes just days before the Senate Banking Committee is scheduled to hold a hearing on the foreclosure review. Last week, the Government Accountability Office issued a scathing report that took aim at the Federal Reserve and the Office of the Comptroller of the Currency.

The regulators, the report found, created a dizzying bureaucratic process that ultimately slowed relief to homeowners. Problems with the review began almost from the outset in November 2011, the report said.

Regulators to Send First Batch of Checks to Troubled Borrowers

The nation’s top banking regulators have some good news for some troubled homeowners: the checks will be in the mail soon.

Months after brokering a multibillion dollar settlement with banks over foreclosure abuses, the Federal Reserve and the Office of the Comptroller are set to dole out roughly $1.2 billion in the first batch of payments. By April 12, the regulators expect to mail 1.4 million checks. An additional round of checks will be sent out by the middle of July, according to the regulators.

The settlement, which scuttled a deeply flawed review of millions of loans in foreclosure, will ultimately provide $3.6 billion in cash relief to borrowers who entered foreclosure in 2009 or 2010.

Among those borrowers in the first group to receive relief are the 1,082 service members who banks foreclosed on illegally. Under the settlement, each borrower will receive roughly $125,000, the largest amount of relief.

Homeowners who were foreclosed on even though they never missed a single mortgage payment will also receive a check in the first round of payments. The Comptroller’s Office said that 53 such borrowers. whose homes will receive $125,000. Another 626 homeowners who were wrongfully foreclosed on will be get between $5,000 and $15,000 in relief because the foreclosure wasn’t completed or it was reversed .

The largest category of borrowers slated to get cash are the more than half a million homeowners who were deprived of loan modification or other loss mitigation assistance. The 568,476 borrowers that fall into that group will receive $300 each.

For millions of Americans battling to save their homes, the checks are the first federal lifeline in years, according to housing.

In January, the Comptroller’s office scuttled the foreclosure review, which was hobbled by delays and inefficiencies. Instead, the regulator brokered a $9.3 billion settlement, comprised of $3.6 billion cash payments and other forms of relief. The review, which was hastily dismantled, was ordered by bank regulators in 2011 amid mounting concerns that banks were churning through piles of foreclosure files without reviewing them for accuracy.

But the independent consultants, hired to pour over millions of loan files, only reviewed a sliver of the foreclosed loans. As homeowners languished, regulators opted to end the review in favor of the settlement. Even so, many homeowners have been waiting to receive relief.

The announcement of the payments comes just days before the Senate Banking Committee is scheduled to hold a hearing on the foreclosure review. Last week, the Government Accountability Office issued a scathing report that took aim at the Federal Reserve and the Office of the Comptroller of the Currency.

The regulators, the report found, created a dizzying bureaucratic process that ultimately slowed relief to homeowners. Problems with the review began almost from the outset in November 2011, the report said.

Big Dell Shareholder Prefers Two Rival Bids

One of the most vocal critics of Dell’s proposed $24.4 billion sale to its founder has clearly not been swayed by the argument for the buyout made in the company’s recent proxy statement.

Southeastern Asset management says that two preliminary proposals â€" from the Blackstone Group and Carl C. Icahn â€" are superior to the $13.65-a-share offer from Michael S. Dell and the private equity firm Silver Lake.

In an open letter to the special committee of the Dell board that has overseen the sale process, the investment firm â€" the biggest Dell shareholder other than Mr. Dell â€" says that the proxy statement “fails to make a case for shareholders to accept” the buyout offer.

The investment firm notes that under a stock buyback program over the last two years, Dell has repurchased 224 million shares at an average price of more than $15.25 a share.

The proxy statement, filed on March 29, showed that advisers to Dell directors spoke to 71 potential bidders in an effort to find an alternative to the buyout offer. Only two preliminary bidders emerged: Blackstone with an offer of more than $14.25 a share and Mr. Icahn, with an offer of $15 a share. Neither offer, however, is for the entire company.

Southeastern said in its letter on Tuesday that it views these proposals as superior “primarily because each offers shareholders the opportunity to remain owners of Dell while also offering a higher cash price to owners who choose to exit their investment.”

The letter faults the proxy statement for not making a compelling argument for taking the company private. It writes:

In the entire proxy statement, we found only one page (page 82) devoted to Mr. Dell’s plans for the company following the transaction. That single page is consistent with the company’s prior public statements, and nothing about these plans requires that the company be private.

In fact, in an interview with ZDNet two weeks ago, John Swainson , head of Dell’s software unit, essentially confirmed that it doesn’t matter whether Dell is public or private. He said, “the corporate structure of Dell doesn’t make a difference on how customers interact with our products or how we develop or sell them.” We note that many companies, including I.B.M., were able to successfully transform their businesses as public companies.

KPMG Said to Resign as Herbalife’s Auditor Over Investigation

Herbalife is poised to disclose on Tuesday that KPMG will have to resign as the company’s auditor, after the accounting firm fired a senior partner, according to a person briefed on the matter.

Herbalife shares were halted for trading because of news pending on Tuesday morning.

KPMG disclosed late on Monday that it had fired the partner, who was based in Los Angeles, for providing inside information to an unidentified individual who then traded in shares of several West Coast companies. The firm did not name the fired partner, but described the person as having led accounts for some clients in the region.

The accounting firm did not name the companies whose confidential information was disclosed as part of the scheme.

A call to a spokesman for Herbalife was not immediately returned.

SeaWorld Seeks Up to $540 Million in I.P.O.

SeaWorld Entertainment is looking to make a showy market debut, as the theme park operator seeks to raise up to $540 million in its forthcoming initial public offering.

In an amended prospectus on Tuesday, the company said that it planned on selling 20 million shares at between $24 and $27 apiece. Half of the shares sold will come from its owner, the Blackstone Group.

At the midpoint of that range, SeaWorld would be valued at nearly $2.4 billion.

If the company â€" home to Shamu the killer whale and a few financially minded penguins â€" succeeds in meeting its fund-raising goal, its I.P.O. will be among the five biggest offerings in the United States so far this year, according to Renaissance Capital.

The theme park company, which Blackstone bought from Anheuser-Busch in 2009, is hoping to take advantage of growing appetite for I.P.O.’s. Companies raised $22 billion in their trading debuts in the first quarter this year, up 27 percent from the same time a year ago, according to data from Thomson Reuters.

In nearly four years under private equity ownership, SeaWorld has grown its annual revenue by almost 17 percent, to $1.4 billion. Last year it earned $77 million, as the its 11 parks drew in more visitors through an improving economy and more attractions. Though it draws the majority of its revenue from admissions, the resort operator also said that it has stepped up its merchandising and licensing efforts.

SeaWorld plans to list itself on the New York Stock Exchange under the ticker symbol “SEAS.” Blackstone will continue to own about 70.5 percent of its stock.

J.C. Penney Ousts a Leader Ackman Championed

The hedge fund manager William A. Ackman had bet on Ron Johnson as the man to revive the fortunes of J.C. Penney. But on Monday the embattled retailer ousted Mr. Johnson, its chief executive of 17 months, going back to the previous C.E.O., Myron E. Ullman III.

The replacement is a “curious move,” Stephanie Clifford writes in The New York Times. “It was dissatisfaction with where Mr. Ullman was taking the company that led Mr. Ackman to look for another leader in the first place.” But Mr. Johnson, who had engineered Apple’s retail strategy, oversaw a 52 percent drop in J.C. Penney’s stock price, as his new ideas failed to improve profit. After publicly supporting Mr. Johnson since he became chief executive in 2011, Mr. Ackman seemed to withdraw support on Friday.

Mr. Ullman was in charge when Mr. Ackman’s hedge fund, Pershing Square Capital Management, and Vornado Realty Trust suddenly emerged as large shareholders in 2010, DealBook’s Michael J. de la Merced writes. Though Mr. Ullman was surprised by the move back then, he began briefing the investors and eventually gave them board seats.

In an interview with The Times, Mr. Ullman said it was premature to say which of Mr. Johnson’s efforts he would continue. “Some things are working well, others maybe not, but I deserve a chance to be on the ground.” He said he received a call this weekend from J.C. Penney’s chairman, Thomas Engibous, asking him if he would consider returning. That was the first he had heard of it, but his answer was “absolutely,” he said.

BATTLING OVER TROUBLED ENERGY BUYOUT  |  The private equity owners of Energy Future Holdings, which was purchased for $45 billion in 2007, “are trying to make sure they don’t walk away empty-handed” from the increasingly troubled deal, Julie Creswell reports in The New York Times. The company, whose buyout still ranks as the biggest ever, may be able to put only part of the business, the retail energy and power-generation operations, into bankruptcy while holding on to a safer division, analysts say. “Still, as much as Energy Future Holdings may want to tie a reorganization into a neat little bow, some creditors, including seasoned hedge fund investors in distressed debt, are certain to make this a fight of junkyard dogs,” Ms. Creswell writes.

“Those investors have amassed big chunks of the senior debt of the segment of Energy Future Holdings that houses the retail and power-generation business. The loans, which currently trade around 70 cents on the dollar, put the investors first in line to convert their debt into equity in a restructuring of the power-generation assets.” Some hedge funds are “hoping to force a default” and put the company in bankruptcy, said Andrew DeVries, an analyst with the research firm CreditSights.

WHITE CONFIRMED AS S.E.C. HEAD  |  Mary Jo White overcame concerns about her close ties to Wall Street banks, as the Senate confirmed her on Monday as the new leader of the Securities and Exchange Commission. Ms. White, a former federal prosecutor who went on to defend clients like JPMorgan Chase, is expected to join the agency in the coming days, replacing Elisse B. Walter. “The agency is under pressure from Congress to complete new rules for Wall Street and take aim at financial fraud,” Ben Protess writes in DealBook. “It also must confront the growing world of high-frequency trading, a business that continues to confound the agency, and money market funds, which the S.E.C. is seeking to rein in.”

ON THE AGENDA  |  The City Council of Oakland, Calif., votes at 12:30 p.m. on whether to continue doing business with Goldman Sachs, after the firm refused to drop a fee to let the city out of an interest rate deal. Bill Gross of Pimco is set to auction off some items from his collection of rare United States stamps. Scott Sperling of THL Partners is on CNBC at 7:15 a.m.

THATCHER’S LEGACY IN EUROPE  |  Margaret Thatcher, who died on Monday at 87, had doubts about a “European superstate” that resonate today, nearly a quarter century after she left office as prime minister, The New York Times writes. “She correctly predicted in her memoirs that Germany’s historical fears about inflation would lead to slow-growth policies that would deepen the problems of the euro zone’s weaker, less efficient economies, which could no longer rely on devaluation to solve their problems.”

“Mrs. Thatcher’s prescription for Britain in the 1980s â€" faith in market forces, willingness to impose short-term austerity in the service of long-term prosperity, and skepticism or even hostility to the fiscal and social costs of the welfare state â€" prefigured some of the policies Germany and European regulators are still recommending, wrongly in the view of many economists, for the struggling Southern European countries.”

Mergers & Acquisitions »

G.E. to Buy Lufkin Industries for $3.3 Billion  |  The deal is the latest by General Electric’s oil and natural gas unit, one of the fastest-growing parts of the conglomerate. DealBook »

With Lufkin Deal, G.E. Continues to Plumb the Oil Patch  |  With its $3.3 billion takeover of Lufkin Industries, General Electric is bolstering its presence in the drilling services sector. DealBook »

Not So Pumped Up About G.E.’s Latest Deal  |  Lufkin Industries, whose technology helps increase production for aging oil wells, is a strong player in a growing sector. But G.E.’s previous deals did little for margins, and the latest acquisition doesn’t come cheap, Christopher Swann of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Lagardere Says It Sold EADS Stake for $2.97 Billion  | 
REUTERS

Occidental Board to Defend Search for New Chief  |  The oil producer Occidental said its directors unanimously supported the plan to find a successor to its chief executive, Stephen Chazen, amid reports of discord within the board. DealBook »

INVESTMENT BANKING »

Exchanges Are Moving to Curb Private Trades  |  The chief executives of the three largest stock exchanges are joining forces for the first time to push regulators to rein in the increasing amount of trading that is moving off public exchanges and onto platforms like so-called dark pools. DealBook »

State-Run Banks in Russia Gain Market Share  |  Investment banks controlled by the Russian government “are squeezing out foreign competitors, helped by a bailout of the country’s richest men five years ago,” Bloomberg News reports. BLOOMBERG NEWS

JPMorgan’s Dimon Buys Another Apartment in His Building  | 
THE REAL DEAL

Bernanke Says Stress Tests Show Healthier Banks  |  In a speech on Monday, Ben S. Bernanke, the Federal Reserve chairman, discussed the importance of the central bank’s recent stress tests, saying they had improved since the financial crisis, and that they showed banks growing healthier. ASSOCIATED PRESS

Bank of America Executive in Asia Departs  |  Ashish Malhotra, who recently was promoted to head of debt capital markets for Asia, has left Bank of America Merrill Lynch, according to The Wall Street Journal. WALL STREET JOURNAL

In Sydney, Barclays Hires Former Citigroup Executive  | 
WALL STREET JOURNAL

PRIVATE EQUITY »

THL to Buy CompuCom, a Technology Services Firm  |  THL Partners agreed on Monday to buy CompuCom Systems, a privately held information technology consultancy. The deal values CompuCom at about $1.1 billion, according to a person briefed on the matter. DealBook »

Carlyle Group Reports Quarterly Gains in Its Funds  | 
BLOOMBERG NEWS

HEDGE FUNDS »

Hedge Funds Gained Modestly in March  |  A broad index of hedge funds rose 0.92 percent in March, but many equity funds in the United States trailed stocks, according to Absolute Return. ABSOLUTE RETURN

I.P.O./OFFERINGS »

SeaWorld Aims to Raise $500 Million in I.P.O.  | 
REUTERS

Citigroup Said to Be Seeking Recovery of Facebook Losses  |  Citigroup plans to file a claim seeking compensation from Nasdaq over trading losses in Facebook’s debut last year, The Wall Street Journal reports, citing unidentified people close to the discussions. WALL STREET JOURNAL

VENTURE CAPITAL »

Start-Up Helps Teachers Know if You’ve Done the Reading  |  Professors at Texas A&M are beginning to use technology from a Silicon Valley start-up, CourseSmart, allowing them to measure how diligently their students are reading digital textbooks, The New York Times reports. NEW YORK TIMES

Clean Power Finance Raises $37 Million  |  Clean Power Finance, an online platform that provides software and financial services to solar professionals and investors, has raised a fresh $37 million, in a sign that enthusiasm for the solar sector has not dimmed entirely. DealBook »

LEGAL/REGULATORY »

KPMG Says It Fired Partner Over Insider Trading  |  The audit firm KPMG said it had fired a senior partner in Los Angeles after discovering that he had given inside information to someone “who then used that information in stock trades involving several West Coast companies,” The New York Times reports. NEW YORK TIMES

A.I.G. Seeks to Bar Greenberg From Suing U.S. on Its Behalf  |  A.I.G. has formally requested that its former chief executive, Maurice Greenberg, be barred from suing the federal government on the insurer’s behalf, after the company decided not to join his lawsuit. DealBook »

Volcker Warns Over ‘Unorthodox’ Monetary Policy  |  Paul A. Volcker, a former Federal Reserve chairman, said on Monday that central banks around the world, including the Fed, could eventually do harm with their economic stimulus efforts. CNNMONEY

Fisker Automotive Prepares to File for Bankruptcy  | 
WALL STREET JOURNAL

In Europe, a Fresh Antitrust Protest Over Google  |  A group of Google’s competitors filed a complaint in Europe over Google’s Android operating system. NEW YORK TIMES

The Fine Line Between Political Intelligence and Insider Trading  |  The imprecise rules governing insider trading are an ineffective means to regulate how political intelligence firms operate, Peter J. Henning writes in the White Collar Watch column. White Collar Watch »

New Firm Plans to Invest in Lawsuits  |  Gerchen Keller Capital has raised $100 million to invest in high-stakes litigation between companies, becoming the latest investment firm to dive into the relatively new sector. DealBook »

Japan’s Monetary Effort Has Global Ramifications  |  The New York Times reports: “The Bank of Japan’s new antideflation policy made waves throughout the global financial system on Monday, driving down the yen and lifting share prices in Tokyo, but economists said the effect had yet to be fully felt overseas.” NEW YORK TIMES

Billabong in Talks Over $300 Million Takeover

Billabong International is trying to avoid a total wipeout.

The Australian surfwear company, whose shares have fallen around 65 percent since it rejected a $824 million takeover offer from the private equity firm TPG Capital last year, said on Tuesday that it was in talks to sell itself for $300 million.

Billabong said the discussions were with a group led by its former American chief executive, Paul Naude, and the buyout firm Sycamore Partners Management, and would last for 10 days.

The consortium has offered to buy the struggling retailer for 60 Australian cents a share (about 63 American cents), an 18 percent discount on Billabong’s closing share price on April 2 before the stock was suspended.

Billabong has fallen on difficult times because of changing consumer tastes and the financial crisis. It has closed stores and sold assets as part of an effort to restructure the company.

Billabong in Talks Over $300 Million Takeover

Billabong International is trying to avoid a total wipeout.

The Australian surfwear company, whose shares have fallen around 65 percent since it rejected a $824 million takeover offer from the private equity firm TPG Capital last year, said on Tuesday that it was in talks to sell itself for $300 million.

Billabong said the discussions were with a group led by its former American chief executive, Paul Naude, and the buyout firm Sycamore Partners Management, and would last for 10 days.

The consortium has offered to buy the struggling retailer for 60 Australian cents a share (about 63 American cents), an 18 percent discount on Billabong’s closing share price on April 2 before the stock was suspended.

Billabong has fallen on difficult times because of changing consumer tastes and the financial crisis. It has closed stores and sold assets as part of an effort to restructure the company.

Billabong in Talks Over $300 Million Takeover

Billabong International is trying to avoid a total wipeout.

The Australian surfwear company, whose shares have fallen around 65 percent since it rejected a $824 million takeover offer from the private equity firm TPG Capital last year, said on Tuesday that it was in talks to sell itself for $300 million.

Billabong said the discussions were with a group led by its former American chief executive, Paul Naude, and the buyout firm Sycamore Partners Management, and would last for 10 days.

The consortium has offered to buy the struggling retailer for 60 Australian cents a share (about 63 American cents), an 18 percent discount on Billabong’s closing share price on April 2 before the stock was suspended.

Billabong has fallen on difficult times because of changing consumer tastes and the financial crisis. It has closed stores and sold assets as part of an effort to restructure the company.

J.C. Penney Ousts a Leader Ackman Championed

The hedge fund manager William A. Ackman had bet on Ron Johnson as the man to revive the fortunes of J.C. Penney. But on Monday the embattled retailer ousted Mr. Johnson, its chief executive of 17 months, going back to the previous C.E.O., Myron E. Ullman III.

The replacement is a “curious move,” Stephanie Clifford writes in The New York Times. “It was dissatisfaction with where Mr. Ullman was taking the company that led Mr. Ackman to look for another leader in the first place.” But Mr. Johnson, who had engineered Apple’s retail strategy, oversaw a 52 percent drop in J.C. Penney’s stock price, as his new ideas failed to improve profit. After publicly supporting Mr. Johnson since he became chief executive in 2011, Mr. Ackman seemed to withdraw support on Friday.

Mr. Ullman was in charge when Mr. Ackman’s hedge fund, Pershing Square Capital Management, and Vornado Realty Trust suddenly emerged as large shareholders in 2010, DealBook’s Michael J. de la Merced writes. Though Mr. Ullman was surprised by the move back then, he began briefing the investors and eventually gave them board seats.

In an interview with The Times, Mr. Ullman said it was premature to say which of Mr. Johnson’s efforts he would continue. “Some things are working well, others maybe not, but I deserve a chance to be on the ground.” He said he received a call this weekend from J.C. Penney’s chairman, Thomas Engibous, asking him if he would consider returning. That was the first he had heard of it, but his answer was “absolutely,” he said.

BATTLING OVER TROUBLED ENERGY BUYOUT  |  The private equity owners of Energy Future Holdings, which was purchased for $45 billion in 2007, “are trying to make sure they don’t walk away empty-handed” from the increasingly troubled deal, Julie Creswell reports in The New York Times. The company, whose buyout still ranks as the biggest ever, may be able to put only part of the business, the retail energy and power-generation operations, into bankruptcy while holding on to a safer division, analysts say. “Still, as much as Energy Future Holdings may want to tie a reorganization into a neat little bow, some creditors, including seasoned hedge fund investors in distressed debt, are certain to make this a fight of junkyard dogs,” Ms. Creswell writes.

“Those investors have amassed big chunks of the senior debt of the segment of Energy Future Holdings that houses the retail and power-generation business. The loans, which currently trade around 70 cents on the dollar, put the investors first in line to convert their debt into equity in a restructuring of the power-generation assets.” Some hedge funds are “hoping to force a default” and put the company in bankruptcy, said Andrew DeVries, an analyst with the research firm CreditSights.

WHITE CONFIRMED AS S.E.C. HEAD  |  Mary Jo White overcame concerns about her close ties to Wall Street banks, as the Senate confirmed her on Monday as the new leader of the Securities and Exchange Commission. Ms. White, a former federal prosecutor who went on to defend clients like JPMorgan Chase, is expected to join the agency in the coming days, replacing Elisse B. Walter. “The agency is under pressure from Congress to complete new rules for Wall Street and take aim at financial fraud,” Ben Protess writes in DealBook. “It also must confront the growing world of high-frequency trading, a business that continues to confound the agency, and money market funds, which the S.E.C. is seeking to rein in.”

ON THE AGENDA  |  The City Council of Oakland, Calif., votes at 12:30 p.m. on whether to continue doing business with Goldman Sachs, after the firm refused to drop a fee to let the city out of an interest rate deal. Bill Gross of Pimco is set to auction off some items from his collection of rare United States stamps. Scott Sperling of THL Partners is on CNBC at 7:15 a.m.

THATCHER’S LEGACY IN EUROPE  |  Margaret Thatcher, who died on Monday at 87, had doubts about a “European superstate” that resonate today, nearly a quarter century after she left office as prime minister, The New York Times writes. “She correctly predicted in her memoirs that Germany’s historical fears about inflation would lead to slow-growth policies that would deepen the problems of the euro zone’s weaker, less efficient economies, which could no longer rely on devaluation to solve their problems.”

“Mrs. Thatcher’s prescription for Britain in the 1980s â€" faith in market forces, willingness to impose short-term austerity in the service of long-term prosperity, and skepticism or even hostility to the fiscal and social costs of the welfare state â€" prefigured some of the policies Germany and European regulators are still recommending, wrongly in the view of many economists, for the struggling Southern European countries.”

Mergers & Acquisitions »

G.E. to Buy Lufkin Industries for $3.3 Billion  |  The deal is the latest by General Electric’s oil and natural gas unit, one of the fastest-growing parts of the conglomerate. DealBook »

With Lufkin Deal, G.E. Continues to Plumb the Oil Patch  |  With its $3.3 billion takeover of Lufkin Industries, General Electric is bolstering its presence in the drilling services sector. DealBook »

Not So Pumped Up About G.E.’s Latest Deal  |  Lufkin Industries, whose technology helps increase production for aging oil wells, is a strong player in a growing sector. But G.E.’s previous deals did little for margins, and the latest acquisition doesn’t come cheap, Christopher Swann of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Lagardere Says It Sold EADS Stake for $2.97 Billion  | 
REUTERS

Occidental Board to Defend Search for New Chief  |  The oil producer Occidental said its directors unanimously supported the plan to find a successor to its chief executive, Stephen Chazen, amid reports of discord within the board. DealBook »

INVESTMENT BANKING »

Exchanges Are Moving to Curb Private Trades  |  The chief executives of the three largest stock exchanges are joining forces for the first time to push regulators to rein in the increasing amount of trading that is moving off public exchanges and onto platforms like so-called dark pools. DealBook »

State-Run Banks in Russia Gain Market Share  |  Investment banks controlled by the Russian government “are squeezing out foreign competitors, helped by a bailout of the country’s richest men five years ago,” Bloomberg News reports. BLOOMBERG NEWS

JPMorgan’s Dimon Buys Another Apartment in His Building  | 
THE REAL DEAL

Bernanke Says Stress Tests Show Healthier Banks  |  In a speech on Monday, Ben S. Bernanke, the Federal Reserve chairman, discussed the importance of the central bank’s recent stress tests, saying they had improved since the financial crisis, and that they showed banks growing healthier. ASSOCIATED PRESS

Bank of America Executive in Asia Departs  |  Ashish Malhotra, who recently was promoted to head of debt capital markets for Asia, has left Bank of America Merrill Lynch, according to The Wall Street Journal. WALL STREET JOURNAL

In Sydney, Barclays Hires Former Citigroup Executive  | 
WALL STREET JOURNAL

PRIVATE EQUITY »

THL to Buy CompuCom, a Technology Services Firm  |  THL Partners agreed on Monday to buy CompuCom Systems, a privately held information technology consultancy. The deal values CompuCom at about $1.1 billion, according to a person briefed on the matter. DealBook »

Carlyle Group Reports Quarterly Gains in Its Funds  | 
BLOOMBERG NEWS

HEDGE FUNDS »

Hedge Funds Gained Modestly in March  |  A broad index of hedge funds rose 0.92 percent in March, but many equity funds in the United States trailed stocks, according to Absolute Return. ABSOLUTE RETURN

I.P.O./OFFERINGS »

SeaWorld Aims to Raise $500 Million in I.P.O.  | 
REUTERS

Citigroup Said to Be Seeking Recovery of Facebook Losses  |  Citigroup plans to file a claim seeking compensation from Nasdaq over trading losses in Facebook’s debut last year, The Wall Street Journal reports, citing unidentified people close to the discussions. WALL STREET JOURNAL

VENTURE CAPITAL »

Start-Up Helps Teachers Know if You’ve Done the Reading  |  Professors at Texas A&M are beginning to use technology from a Silicon Valley start-up, CourseSmart, allowing them to measure how diligently their students are reading digital textbooks, The New York Times reports. NEW YORK TIMES

Clean Power Finance Raises $37 Million  |  Clean Power Finance, an online platform that provides software and financial services to solar professionals and investors, has raised a fresh $37 million, in a sign that enthusiasm for the solar sector has not dimmed entirely. DealBook »

LEGAL/REGULATORY »

KPMG Says It Fired Partner Over Insider Trading  |  The audit firm KPMG said it had fired a senior partner in Los Angeles after discovering that he had given inside information to someone “who then used that information in stock trades involving several West Coast companies,” The New York Times reports. NEW YORK TIMES

A.I.G. Seeks to Bar Greenberg From Suing U.S. on Its Behalf  |  A.I.G. has formally requested that its former chief executive, Maurice Greenberg, be barred from suing the federal government on the insurer’s behalf, after the company decided not to join his lawsuit. DealBook »

Volcker Warns Over ‘Unorthodox’ Monetary Policy  |  Paul A. Volcker, a former Federal Reserve chairman, said on Monday that central banks around the world, including the Fed, could eventually do harm with their economic stimulus efforts. CNNMONEY

Fisker Automotive Prepares to File for Bankruptcy  | 
WALL STREET JOURNAL

In Europe, a Fresh Antitrust Protest Over Google  |  A group of Google’s competitors filed a complaint in Europe over Google’s Android operating system. NEW YORK TIMES

The Fine Line Between Political Intelligence and Insider Trading  |  The imprecise rules governing insider trading are an ineffective means to regulate how political intelligence firms operate, Peter J. Henning writes in the White Collar Watch column. White Collar Watch »

New Firm Plans to Invest in Lawsuits  |  Gerchen Keller Capital has raised $100 million to invest in high-stakes litigation between companies, becoming the latest investment firm to dive into the relatively new sector. DealBook »

Japan’s Monetary Effort Has Global Ramifications  |  The New York Times reports: “The Bank of Japan’s new antideflation policy made waves throughout the global financial system on Monday, driving down the yen and lifting share prices in Tokyo, but economists said the effect had yet to be fully felt overseas.” NEW YORK TIMES

J.C. Penney Ousts a Leader Ackman Championed

The hedge fund manager William A. Ackman had bet on Ron Johnson as the man to revive the fortunes of J.C. Penney. But on Monday the embattled retailer ousted Mr. Johnson, its chief executive of 17 months, going back to the previous C.E.O., Myron E. Ullman III.

The replacement is a “curious move,” Stephanie Clifford writes in The New York Times. “It was dissatisfaction with where Mr. Ullman was taking the company that led Mr. Ackman to look for another leader in the first place.” But Mr. Johnson, who had engineered Apple’s retail strategy, oversaw a 52 percent drop in J.C. Penney’s stock price, as his new ideas failed to improve profit. After publicly supporting Mr. Johnson since he became chief executive in 2011, Mr. Ackman seemed to withdraw support on Friday.

Mr. Ullman was in charge when Mr. Ackman’s hedge fund, Pershing Square Capital Management, and Vornado Realty Trust suddenly emerged as large shareholders in 2010, DealBook’s Michael J. de la Merced writes. Though Mr. Ullman was surprised by the move back then, he began briefing the investors and eventually gave them board seats.

In an interview with The Times, Mr. Ullman said it was premature to say which of Mr. Johnson’s efforts he would continue. “Some things are working well, others maybe not, but I deserve a chance to be on the ground.” He said he received a call this weekend from J.C. Penney’s chairman, Thomas Engibous, asking him if he would consider returning. That was the first he had heard of it, but his answer was “absolutely,” he said.

BATTLING OVER TROUBLED ENERGY BUYOUT  |  The private equity owners of Energy Future Holdings, which was purchased for $45 billion in 2007, “are trying to make sure they don’t walk away empty-handed” from the increasingly troubled deal, Julie Creswell reports in The New York Times. The company, whose buyout still ranks as the biggest ever, may be able to put only part of the business, the retail energy and power-generation operations, into bankruptcy while holding on to a safer division, analysts say. “Still, as much as Energy Future Holdings may want to tie a reorganization into a neat little bow, some creditors, including seasoned hedge fund investors in distressed debt, are certain to make this a fight of junkyard dogs,” Ms. Creswell writes.

“Those investors have amassed big chunks of the senior debt of the segment of Energy Future Holdings that houses the retail and power-generation business. The loans, which currently trade around 70 cents on the dollar, put the investors first in line to convert their debt into equity in a restructuring of the power-generation assets.” Some hedge funds are “hoping to force a default” and put the company in bankruptcy, said Andrew DeVries, an analyst with the research firm CreditSights.

WHITE CONFIRMED AS S.E.C. HEAD  |  Mary Jo White overcame concerns about her close ties to Wall Street banks, as the Senate confirmed her on Monday as the new leader of the Securities and Exchange Commission. Ms. White, a former federal prosecutor who went on to defend clients like JPMorgan Chase, is expected to join the agency in the coming days, replacing Elisse B. Walter. “The agency is under pressure from Congress to complete new rules for Wall Street and take aim at financial fraud,” Ben Protess writes in DealBook. “It also must confront the growing world of high-frequency trading, a business that continues to confound the agency, and money market funds, which the S.E.C. is seeking to rein in.”

ON THE AGENDA  |  The City Council of Oakland, Calif., votes at 12:30 p.m. on whether to continue doing business with Goldman Sachs, after the firm refused to drop a fee to let the city out of an interest rate deal. Bill Gross of Pimco is set to auction off some items from his collection of rare United States stamps. Scott Sperling of THL Partners is on CNBC at 7:15 a.m.

THATCHER’S LEGACY IN EUROPE  |  Margaret Thatcher, who died on Monday at 87, had doubts about a “European superstate” that resonate today, nearly a quarter century after she left office as prime minister, The New York Times writes. “She correctly predicted in her memoirs that Germany’s historical fears about inflation would lead to slow-growth policies that would deepen the problems of the euro zone’s weaker, less efficient economies, which could no longer rely on devaluation to solve their problems.”

“Mrs. Thatcher’s prescription for Britain in the 1980s â€" faith in market forces, willingness to impose short-term austerity in the service of long-term prosperity, and skepticism or even hostility to the fiscal and social costs of the welfare state â€" prefigured some of the policies Germany and European regulators are still recommending, wrongly in the view of many economists, for the struggling Southern European countries.”

Mergers & Acquisitions »

G.E. to Buy Lufkin Industries for $3.3 Billion  |  The deal is the latest by General Electric’s oil and natural gas unit, one of the fastest-growing parts of the conglomerate. DealBook »

With Lufkin Deal, G.E. Continues to Plumb the Oil Patch  |  With its $3.3 billion takeover of Lufkin Industries, General Electric is bolstering its presence in the drilling services sector. DealBook »

Not So Pumped Up About G.E.’s Latest Deal  |  Lufkin Industries, whose technology helps increase production for aging oil wells, is a strong player in a growing sector. But G.E.’s previous deals did little for margins, and the latest acquisition doesn’t come cheap, Christopher Swann of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Lagardere Says It Sold EADS Stake for $2.97 Billion  | 
REUTERS

Occidental Board to Defend Search for New Chief  |  The oil producer Occidental said its directors unanimously supported the plan to find a successor to its chief executive, Stephen Chazen, amid reports of discord within the board. DealBook »

INVESTMENT BANKING »

Exchanges Are Moving to Curb Private Trades  |  The chief executives of the three largest stock exchanges are joining forces for the first time to push regulators to rein in the increasing amount of trading that is moving off public exchanges and onto platforms like so-called dark pools. DealBook »

State-Run Banks in Russia Gain Market Share  |  Investment banks controlled by the Russian government “are squeezing out foreign competitors, helped by a bailout of the country’s richest men five years ago,” Bloomberg News reports. BLOOMBERG NEWS

JPMorgan’s Dimon Buys Another Apartment in His Building  | 
THE REAL DEAL

Bernanke Says Stress Tests Show Healthier Banks  |  In a speech on Monday, Ben S. Bernanke, the Federal Reserve chairman, discussed the importance of the central bank’s recent stress tests, saying they had improved since the financial crisis, and that they showed banks growing healthier. ASSOCIATED PRESS

Bank of America Executive in Asia Departs  |  Ashish Malhotra, who recently was promoted to head of debt capital markets for Asia, has left Bank of America Merrill Lynch, according to The Wall Street Journal. WALL STREET JOURNAL

In Sydney, Barclays Hires Former Citigroup Executive  | 
WALL STREET JOURNAL

PRIVATE EQUITY »

THL to Buy CompuCom, a Technology Services Firm  |  THL Partners agreed on Monday to buy CompuCom Systems, a privately held information technology consultancy. The deal values CompuCom at about $1.1 billion, according to a person briefed on the matter. DealBook »

Carlyle Group Reports Quarterly Gains in Its Funds  | 
BLOOMBERG NEWS

HEDGE FUNDS »

Hedge Funds Gained Modestly in March  |  A broad index of hedge funds rose 0.92 percent in March, but many equity funds in the United States trailed stocks, according to Absolute Return. ABSOLUTE RETURN

I.P.O./OFFERINGS »

SeaWorld Aims to Raise $500 Million in I.P.O.  | 
REUTERS

Citigroup Said to Be Seeking Recovery of Facebook Losses  |  Citigroup plans to file a claim seeking compensation from Nasdaq over trading losses in Facebook’s debut last year, The Wall Street Journal reports, citing unidentified people close to the discussions. WALL STREET JOURNAL

VENTURE CAPITAL »

Start-Up Helps Teachers Know if You’ve Done the Reading  |  Professors at Texas A&M are beginning to use technology from a Silicon Valley start-up, CourseSmart, allowing them to measure how diligently their students are reading digital textbooks, The New York Times reports. NEW YORK TIMES

Clean Power Finance Raises $37 Million  |  Clean Power Finance, an online platform that provides software and financial services to solar professionals and investors, has raised a fresh $37 million, in a sign that enthusiasm for the solar sector has not dimmed entirely. DealBook »

LEGAL/REGULATORY »

KPMG Says It Fired Partner Over Insider Trading  |  The audit firm KPMG said it had fired a senior partner in Los Angeles after discovering that he had given inside information to someone “who then used that information in stock trades involving several West Coast companies,” The New York Times reports. NEW YORK TIMES

A.I.G. Seeks to Bar Greenberg From Suing U.S. on Its Behalf  |  A.I.G. has formally requested that its former chief executive, Maurice Greenberg, be barred from suing the federal government on the insurer’s behalf, after the company decided not to join his lawsuit. DealBook »

Volcker Warns Over ‘Unorthodox’ Monetary Policy  |  Paul A. Volcker, a former Federal Reserve chairman, said on Monday that central banks around the world, including the Fed, could eventually do harm with their economic stimulus efforts. CNNMONEY

Fisker Automotive Prepares to File for Bankruptcy  | 
WALL STREET JOURNAL

In Europe, a Fresh Antitrust Protest Over Google  |  A group of Google’s competitors filed a complaint in Europe over Google’s Android operating system. NEW YORK TIMES

The Fine Line Between Political Intelligence and Insider Trading  |  The imprecise rules governing insider trading are an ineffective means to regulate how political intelligence firms operate, Peter J. Henning writes in the White Collar Watch column. White Collar Watch »

New Firm Plans to Invest in Lawsuits  |  Gerchen Keller Capital has raised $100 million to invest in high-stakes litigation between companies, becoming the latest investment firm to dive into the relatively new sector. DealBook »

Japan’s Monetary Effort Has Global Ramifications  |  The New York Times reports: “The Bank of Japan’s new antideflation policy made waves throughout the global financial system on Monday, driving down the yen and lifting share prices in Tokyo, but economists said the effect had yet to be fully felt overseas.” NEW YORK TIMES