Wall Street Sees Hollywood as a Gateway to Sports and Entertainment

Two years ago, Egon Durban, a senior private equity executive, floated an idea with the co-chief executives of the William Morris Endeavor talent agency: Had they considered making a run at IMG, a 53-year-old peer with complementary businesses?

A year later, Mr. Durban’s firm, Silver Lake Partners, bought a 31 percent stake in William Morris Endeavor, and a merger of the two agencies was still at the top of his mind.

On Wednesday, Silver Lake and William Morris Endeavor made good on that aim, buying IMG for about $2.4 billion and disrupting the longstanding balance of power in Hollywood.

But the deal also reflects a shift in how Wall Street has paired up with Hollywood, especially the traditionally clubby world of agencies. While previous generations of financiers have viewed the talent business as a vanity project, newer deals show that investors are set on remaking the industry, expanding its size and scope.

Three years ago, Creative Artists Agency, the traditional powerhouse in the industry, sold a 35 percent stake to TPG Capital after talking with a number of prospective backers. As part of the deal, the two sides collaborated on efforts to invest in sports and digital entertainment.

Last year, William Morris Endeavor followed with its tie-up with Silver Lake. The union seemed unusual to some: The investment firm is known best for its technology deals like the takeovers of Skype and Dell. But Mr. Durban believed that the agency and its constellation of clients â€" a roster that includes Denzel Washington, Ben Affleck and Steven Spielberg â€" could serve as an important gateway to digital content.

While many have questioned whether simply being large would help an agency, William Morris Endeavor and Silver Lake have argued that scale, coupled with a push into advertising, Internet media and other technologies, was invaluable.

From the beginning, Silver Lake was determined to invest heavily in its new partner, which it saw as an ideal vehicle to buy into advertising, sports and other entertainment businesses, according to people briefed on the matter. Mr. Durban has praised William Morris Endeavor’s co-chief executives, Ari Emanuel and Patrick Whitesell, particularly in their moves to reshape Hollywood’s agency pecking order. But he has also aggressively pushed them to make acquisitions.

Adding IMG, whose strengths lie in representing sports talent, promoting fashion shows and managing musical talent like Justin Timberlake and Taylor Swift, would funnel more content through William Morris Endeavor.

“It’s a beachfront property asset,” said one person close to the transaction, who was not authorized to speak publicly about the matter.

Such an approach sometimes ran counter to how investors have treated talent agencies. Rizvi Traverse, a Michigan-based private equity firm, bought a stake in International Creative Management in 2005. But executives at the agency felt squeezed by Rizvi’s focus on the bottom line, creating tension between the two companies, according to people briefed on the situation.

Ultimately, I.C.M. executives bought out both Rizvi and Jeffrey Berg, the agency’s chairman and the man who brought in the private equity firm in the first place.

The monthslong auction of IMG â€" spurred by the death of its owner, the leveraged buyout mogul Theodore J. Forstmann â€" drew in a slew of private equity firms. Among them were Kohlberg Kravis Roberts, the Blackstone Group and Bain Capital, as well as sovereign wealth funds eager to own such a trophy.

But the buyout firms that made it to the final round had allied themselves with other agencies: Silver Lake with William Morris Endeavor; CVC Capital with Peter Chernin, a former top executive at the News Corporation; and I.C.M., this time allied with the Carlyle Group.

Despite the attractiveness of IMG, a number of suitors scoffed at paying anywhere near the more than $2.5 billion that bankers had sought. Several thought the agency’s business was performing worse than expected.

And one executive at a rival agency, who was not authorized to speak publicly about a competitor, said IMG’s core sports business had suffered setbacks. Colleges were pushing back on longstanding pricing models, while star athletes like Tiger Woods and Roger Federer had left.

CVC and Carlyle each ultimately bid less than $2 billion, people briefed on the auction have said. But Silver Lake was undeterred, with Mr. Durban repeatedly arguing that the firm’s investment proposition was built on making acquisitions. And for William Morris Endeavor, no other takeover target could provide the kind of size, scope and scale that IMG would.

Now that the two have prevailed, William Morris Endeavor and Silver Lake will get to work bringing their newest acquisition into the fold. For now, IMG will be run separately, though it will be eventually be merged in some fashion.

Rival Hollywood and Wall Street executives have speculated that a merger could provide William Morris Endeavor with the heft it needs to eventually go public. But Silver Lake invested in the agency with a time horizon of more than five years and is not yet thinking about an exit strategy, according to a person briefed on the firm’s plans.

Ken Belson contributed reporting.

More Employees Depart SAC Capital as Year End Nears

The slow exodus of traders and analysts continues from SAC Capital Advisors, the hedge fund founded by Steven A. Cohen.

In the wake of the firm’s recent guilty plea on insider trading charges, several traders and analysts have landed new positions at other financial firms.

Among the latest moves, BlueCrest Capital Management, a London-based hedge fund, has hired several employees over the last three months. They include Nicholas O’Grady, a former SAC oil and gas portfolio manager who joined BlueCrest in November after working nearly two years for the Sigma Capital division of Mr. Cohen’s hedge fund.

An energy analyst, Eugene Lipovetsky, joined him at BlueCrest soon after. BlueCrest, which manages $35 billion, has already hired Lia Forcina and Alidod Shirinbekov from SAC’s soon-to-be-closed London office.

SAC continues to be under pressure from the continuing insider-trading investigation. On Wednesday, one of the firm’s highest-ranking employees to be charged in the inquiry, Michael S. Steinberg, was convicted on five counts of securities fraud.

Hedge fund employment recruiters say they expect the pace of departures from SAC to quicken after the firm fully pays out year-end bonuses later this month and in February. SAC, which began the year with $15 billion and nearly 1,000 employees, is in the process of slimming down as it adjusts to running a family office that will mainly manage Mr. Cohen’s own money.

The firm is telling employees not to expect additional job reductions, yet it’s not clear how many of SAC’s remaining 300 traders and analysts will be needed going forward, or whether the firm will shutter other offices. The firm, which employed 950 people in late September, has since let go of about two dozen marketing and investor relations employees, roughly 50 people in its London office and at least a half-dozen traders and analysts in the United States.

The firm’s guilty plea, which was reached in November with federal prosecutors and is still being reviewed by a federal judge, requires SAC to stop managing money for wealthy investors, pensions and other institutional investors.

To that end, the firm recently signed a deal to sell its SAC Re reinsurance business and is continuing to return the $6 billion of outside money that was invested with the firm at the beginning of the year.

Mr. Cohen is likely to change the name of SAC once it completes the transition from a hedge fund to a family office, but no name has been settled on, said people briefed on the matter.

Jonathan Gasthalter, an SAC spokesman, reiterated an earlier statement that the firm was “focusing on our transition to a family office and our core investing business.”

But much about what SAC will look like after that transformation remains unknown. It’s not clear whether Mr. Cohen, an avid art collector, will keep all of the roughly $9 billion he already has with SAC invested with his family office and further reduce his daily trading activity.

Over the last two years, as the insider trading investigation into SAC began to heat up, Mr. Cohen gradually scaled back the amount of time he committed to trading in his own portfolio. Some have even suggested Mr. Cohen should stop trading altogether and simply serve as the new firm’s chief executive.

The level of uncertainty at the firm can be seen in the rise this year in the number of SAC employees who have posted profiles on LinkedIn, the job networking website. The number of SAC employees joining LinkedIn has roughly doubled this year, to 166 people. Recruiters say they often see a surge in LinkedIn postings when people are looking for jobs or worried about their jobs.

Even though the firm was in the midst of the investigation, 2013 was another profitable year for SAC. The firm’s main portfolio was up almost 16 percent as of the end of October, after charging some of the hedge fund industry’s highest fees. A person briefed on the matter said that the firm had generated about $4 billion in gross profit as of the end of October, or roughly two times the $1.8 billion in fines and restitution the firm has agreed to pay to federal prosecutors and securities regulators this year.

Still, the firm’s guilty plea will not necessarily end the scrutiny by regulators and law enforcement. Mr. Cohen still faces a civil administrative proceeding filed by the S.E.C., which has charged him with failing to properly supervise his employees.

Mr. Steinberg’s conviction could put more pressure on the firm, and affect the coming trial of Mathew Martoma, a former portfolio manager charged with using inside information to generate $276 million in profits and avoided losses for SAC in 2008. Jury selection is set to begin on Jan. 6 in his trial.

The Federal Bureau of Investigation is continuing to investigate allegations that some employees of SAC used inside information to make trades in shares and options of Weight Watchers, InterMune and Gymboree, according to a person briefed on the matter. In November, when the United States attorney in Manhattan, Preet Bharara, announced that SAC would plead guilty to securities fraud charges, he emphasized that his office was not finished investigating allegations of wrongdoing by employees of the hedge fund.

Ex-SAC Trader Is Convicted of Insider Trading

Michael S. Steinberg, the highest-ranking employee at SAC Capital Advisors to become ensnared in a sweeping insider trading investigation, was found guilty on Wednesday of trading on secrets gleaned from some of the nation’s largest technology companies.

The conviction deals the latest blow to SAC, the giant hedge run by the billionaire stock picker Steven A. Cohen. Coming on the heels of a record $1.2 billion deal SAC struck with prosecutors along with pleading guilty to insider trading charges - concluding a rare criminal case against a large corporation - Mr. Steinberg’s conviction further clouds the future of a hedge fund that was once the envy of Wall Street.

The conviction, which coincides with SAC’s effort to overhaul its image and change its name, might also embolden federal authorities at a turning point in the decade-long investigation. While an acquittal might have had a chilling effect on the investigation, Mr. Steinberg’s conviction instead raised the likelihood that Mr. Cohen, after avoiding criminal charges for years, would face another round of scrutiny.

The verdict came as something of a surprise, after Mr. Steinberg’s legal team poked holes in testimony from the government’s star witness, another former trader at SAC. Prosecutors also privately conceded that the case had flaws, as they relied on circumstantial evidence like emails and trading logs rather than the sort of incriminating wiretaps that underpinned past insider trading trials.

But after a monthlong trial in Federal District Court in Manhattan - a dramatic display that illuminated the culture of a hedge fund that prosecutors now view as corrupt - the jury took only two days to reach the guilty verdict against Mr. Steinberg. The jury of nine women and three men, including two accountants and a former Postal Service worker, found him guilty on five counts of securities fraud.

Mr. Steinberg, 41, a husband and father of a young family that lives on the Upper East Side of Manhattan, appeared to faint briefly as the jury filed in to render their verdict.

Judge Richard J. Sullivan sent the jury back to the deliberation room as Mr. Steinberg’s lawyers rubbed his back, his stricken wife looking on from the front row. The judge sent out for some juice and asked Mr. Steinberg if he could stand and walk.

Mr. Steinberg, his face ashen, complied.

“Yeah, I think I’m O.K.,” he said.

Mr. Steinberg’s brother, who is a doctor, also checked on him.

The verdict, which protects Mr. Bharara’s perfect record for insider trading trials, is the latest victory in the government’s campaign to root out illegal conduct on Wall Street trading floors. Since 2009, Mr. Bharara’s office has secured 76 insider trading convictions without losing a single trial, winning cases that penetrated some of Wall Street’s most high-flying hedge funds and America’s most illustrious corporations.

But for both the government and SAC, Mr. Steinberg’s case was particularly important.

Underscoring his symbolic and practical significance for the broader investigation, Mr. Steinberg was the first SAC employee to stand trial in the government’s decade-long investigation of the hedge fund. The trial also offered a rare glimpse inside the fund’s inner workings, with the government securing testimony from the firm’s chief compliance officer, chief financial officer and Jon Horvath, the star witness who once worked under Mr. Steinberg at SAC.

For his part, Mr. Cohen, the billionaire investor and avid collector of art and real estate, is well on the way to converting his 21-year-old hedge fund into a so-called family office that mainly will manage an estimated $9 billion of his personal fortune. The 57-year-old Mr. Cohen, friends say, is weary of the investigation, though he believes that federal authorities have unfairly made him and some of his 900 employees targets.

Mr. Steinberg was arrested at his Park Avenue apartment in the predawn hours of Good Friday in March after returning from a family trip to Disney World. The arrest signaled that the government was reaching into the higher ranks of SAC, pursuing a senior trader who had joined the hedge fund more than a decade ago, after he earned a degree in history and philosophy from the University of Wisconsin.

And while Mr. Cohen had tenuous ties to other SAC employees who had been charged with wrongdoing, he attended Mr. Steinberg’s wedding at the Plaza Hotel years earlier. The pair also shared a hometown, Great Neck, N.Y., on Long Island, and a love of art. Mr. Steinberg introduced Mr. Cohen to Sandy Heller, a childhood friend who became Mr. Cohen’s art adviser.

Unlike Mr. Steinberg, most SAC employees charged criminally have cooperated with the government. Of the eight SAC employees charged criminally, six have pleaded guilty to securities fraud, including Mr. Horvath. One other employee, Mathew Martoma, is fighting the charges and faces a trial in January.

But Mr. Steinberg’s case could alter the course of Mr. Martoma’s. Prosecutors are holding out hope that Mr. Steinberg’s loss at trial could prompt Mr. Martoma to rethink his strategy and cooperate with the investigation.

When authorities charged Mr. Martoma in November 2012 with trading on secret drug trial information, they appeared to be closing in on Mr. Cohen, saying for the first time that he authorized the trades in question. Mr. Cohen also held a 20-minute call with Mr. Martoma the night before SAC began executing the trades in the drug makers Elan and Wyeth.

But prosecutors have not claimed that Mr. Cohen knew of the confidential information that Mr. Martoma is accused of obtaining. And without Mr. Martoma’s cooperation, authorities are unsure what happened on that call.

Authorities had similar hopes to turn Mr. Steinberg into a cooperator. And yet, even after he refused their overtures, authorities carried out a whirlwind of investigative activity at SAC.

That effort culminated in July, when prosecutors and the F.B.I. announced an indictment of the hedge fund, pointing to a “systematic” insider trading scheme that spanned several employees and more than a decade. After months of negotiating, SAC agreed to pay the $1.2 billion payout, a record for insider trading, and to wind down its business of managing outside money for investors. Prosecutors had threatened to raise the price of the deal if SAC declined to settle before Mr. Steinberg’s trial opened in mid-November.

Mr. Steinberg is accused of trading the stocks of the technology companies Dell and Nvidia after receiving confidential information about their earnings â€" trades that reportedly generated profits of $1.4 million. In opening arguments, the assistant United States attorney leading the case, Antonia M. Apps, told jurors that the trial would provide a “unique window” into the world of insider trading and the “secret pipeline” that Mr. Steinberg had into the technology companies.

Over the following weeks, Ms. Apps highlighted scores of emails and instant messages from Mr. Steinberg. She also called 13 witnesses, none more important than Mr. Horvath.

The case hinged on his testimony. Mr. Horvath, who pleaded guilty to insider trading in September 2012, testified how he was pressured by Mr. Steinberg to come up with “edgy” and “proprietary” information about the technology stocks their group traded.

Mr. Horvath, 44, said he had interpreted Mr. Steinberg’s words as a directive to get inside information.

“I thought he wanted me to cultivate sources of nonpublic information,” that is, violate insider trading laws, Mr. Horvath said, adding that he feared for his job. “I thought he’d fire me.”

But Mr. Steinberg, who did not testify, was at the end of a five-person chain of information that started with an insider at Dell and wound its way to Mr. Horvath and then Mr. Steinberg. And doubts arose about the credibility of Mr. Horvath, who acknowledged that he was testifying against his former boss in hopes of evading jail time.

During a bruising cross-examination by Mr. Berke, the attorney for Mr. Steinberg, Mr. Horvath conceded that Mr. Steinberg never explicitly told him to break the law by getting inside information. In one of the more dramatic portions of the cross-examination, Mr. Horvath also acknowledged that he never explicitly told Mr. Steinberg that some of the information was improperly obtained by analysts working at other hedge funds whom Mr. Horvath had befriended.

Mr. Horvath, who was born in Sweden and faces deportation, also could not remember the specific day in summer 2007 on which he said Mr. Steinberg put pressure on him to get “edgy, proprietary information.”

But the emails proved damaging. In one email from August 2008, sent a few days before Dell’s quarterly earnings announcement, Mr. Horvarth wrote that he had “a 2nd hand read from someone at the company,” adding, “Please keep to yourself as obviously not well known.”

In reply, Mr. Steinberg wrote: “Yes normally we would never divulge data like this, so please be discreet.”

And when Mr. Horvath learned of Dell’s secret plans to announce a major cost-cutting venture, he again alerted Mr. Steinberg.

“I like the Dell chart,” Mr. Steinberg replied, indicating SAC should double down on the stock.

During the month-long trial, Mr. Steinberg kept a stoic demeanor, conversing during breaks with Mr. Berke and the large contingent of family members and close friends who have attended much of the proceedings. A constant presence during the trial was his wife, her parents and Mr. Steinberg’s parents, who were all seated in the courtroom gallery behind the defense table where Mr. Steinberg and Mr. Berke sat.

As the jury deliberated in recent days, Mr. Heller made an appearance in the courtroom, sitting with Mr. Steinberg’s family and friends, including at one point a rabbi.

 

Op-Ed: Stumbling Toward the Next Financial Crash

Stumbling Toward the Next Crash

LONDON â€" In early October 2008, three weeks after the Lehman Brothers collapse, I met in Paris with leaders of the countries in the euro zone. Oblivious to the global dimension of the financial crisis, they took the view that if there was fallout for Europe, America would be to blame â€" so it would be for America to fix. I was unable to convince them that half of the bundled subprime-mortgage securities that were about to blow up had landed in Europe and that euro-area banks were, in fact, more highly leveraged than America’s.

Despite the subsequent decision of the Group of 20 in 2009 on the need for rules to supervise what is now a globally integrated financial system, world leaders have spent the last five years in retreat, resorting to unilateral actions that have made a mockery of global coordination. Already, we have forgotten the basic lesson of the crash: Global problems need global solutions. And because we failed to learn from the last crisis, the world’s bankers are carrying us toward the next one.

The economist David Miles, who sits on the monetary policy committee of the Bank of England, may exaggerate when he forecasts financial crises every seven years, but most of the problems that caused the 2008 crisis â€" excessive borrowing, shadow banking and reckless lending â€" have not gone away. Too-big-to-fail banks have not shrunk; they’ve grown bigger. Huge bonuses that encourage reckless risk-taking by bankers remain the norm. Meanwhile, shadow banking â€" investment and lending services by financial institutions that act like banks, but with less supervision â€" has expanded in value to $71 trillion, from $59 trillion in 2008.

Europe’s leaders aren’t the only ones with these blind spots. Emerging-market economies in Asia and Latin America have seen a 20 percent growth in their shadow-banking sectors. After 2009, Asian banks expanded their balance sheets three times faster than the largest global financial institutions, while adding only half as much capital.

In the patterns of borrowing today, we can already detect parallels with the pre-crisis credit boom. We’re seeing the same over-reliance on short-term capital markets that ultimately brought down Northern Rock, Iceland’s banks and Lehman Brothers.

While the internationalization of the renminbi is opening up new opportunities for global investment in China, it is also increasing the exposure of the global economy to any vulnerability in its banking sector. China’s total domestic credit has more than doubled to $23 trillion, from $9 trillion in 2008 â€" as big an increase as if it had added the entire United States commercial banking sector. Borrowing has risen as a share of China’s national income to more than 200 percent, from 135 percent in 2008. China’s growth of credit is now faster than Japan’s before 1990 and America’s before 2008, with half that growth in the shadow-banking sector. According to Morgan Stanley, corporate debt in China is now equal to the country’s annual income.

Although sizable foreign reserves make today’s Asia different from the Asia that experienced the 1997 crash in Indonesia, Thailand and South Korea, we are all implicated. If China’s economy were to slow, Asian countries would be doubly hit from the loss of exports and by higher prices. They would face downturns that would feel like depressions.

And China’s banking system may not be Asia’s most vulnerable. Thailand’s financial institutions, for example, appear overdependent on short-term foreign loans; and in India, where 10 percent of bank loans have gone bad or need restructuring, banks will need $19 billion in new capital by 2018.

If the emerging markets of Asia and Latin America are hit by financial turmoil in coming years, will we not turn to one another and ask why we did not act after the last crisis? Instead of retreating into our national silos, we should have seized the opportunity to fix global standards for how much capital banks must hold, how much they can lend against their equity, and how open they are about their liabilities.

The Volcker Rule, now approved by American regulators, illustrates the initial boldness and ultimate weakness of our post-2008 response. This element of the Dodd-Frank financial reform law of 2010 forbids deposit-taking banks in the United States from engaging in short-term, proprietary trading. But these practices are still allowed in Europe. Controls are even weaker in Latin America and Asia.

International rules are needed for international banks. Without them, as the International Monetary Fund has warned, global banks will evade regulation “by moving operations, changing corporate structures, and redesigning products.”

When I was chairman of the G-20 summit meeting here in April 2009, our first principle was that future financial crises that started in one continent would affect all continents. That was why we charged the new Global Financial Stability Board with setting global standards and rules.

Nearly five years on, its chairman, the Bank of England governor Mark Carney, has spoken of “uneven progress” in recapitalizing banks and making them disclose their risks. The G-20 plan for oversight of shadow banking is, as yet, only a plan. While the world’s $600 trillion derivatives market is being regulated with new minimum capital and reporting requirements, global financial regulators must “find a way to collaborate across borders,” Mr. Carney says.

In short, precisely what world leaders sought to avoid â€" a global financial free-for-all, enabled by ad hoc, unilateral actions â€" is what has happened. Political expediency, a failure to think and act globally, and a lack of courage to take on vested interests are pushing us inexorably toward the next crash.

Gordon Brown, a Labour member of the British Parliament, is a former chancellor of the Exchequer and prime minister.

A version of this op-ed appears in print on December 19, 2013, in The International New York Times.

Bitcoin Mania Heads Into the Endgame

Common sense is catching up with the Bitcoin craze. In the process, it is bringing its backers financial losses and intellectual embarrassment.

As far as price is concerned, Bitcoin is behaving as it has for the last two years: with intense volatility. The dollar price of a Bitcoin rose from $5 at the beginning of 2012 to $1,200 in early December. As of Wednesday afternoon Beijing time, it was trading just above $500, having fallen by about a quarter during the day.

The catalyst for the latest collapse was news from a leading Chinese Bitcoin exchange that the government in Beijing had banned new purchases with renminbi.

Bitcoin enthusiasts may say the authorities are acting because they feared the growth of a currency free of the power of an oppressive state. Hardly. They saw a smuggler’s paradise - a means of exchange for illegal deals and a tool for dodging capital controls.

Lurking behind the recent falls are fundamental intellectual flaws. Bitcoin’s technological wizardry promises scarcity, which is a prerequisite for the existence of value. But demand is also important.

There are similarities between Bitcoiners and gold bugs: distrust of government being one. Unlike bullion, however, the community-run computer program is neither beautiful nor truly useful. The startling price volatility, meanwhile, undermines the belief that Bitcoin can serve as a medium of exchange. Users normally need assurance that currencies will hold their value - over short periods at least.

Speculation, not fundamental value, explains why Bitcoin nearly quadrupled in value in November. Buyers simply wanted to get in while the going was good. Now the Bitcoin story is turning sour, owners are trying to capture some of their gains, or cut their losses.

Compared with the peak, Bitcoin’s price is down more than 50 percent. The fall reinforces the message from Beijing: There is no good reason to own Bitcoins.

The electronic pseudocurrency has had a good run. Ideologues, speculators and scammers enjoyed the fun while it lasted. But now that the authorities are taking notice, the price has much further to fall.

Edward Hadas is economics editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

AMC Entertainment Rises in Market Debut

Shares of AMC Entertainment Holdings rose on their first day of trading, as the movie theater operator began life as a public company for the first time in nine years.

As of midday on Wednesday, AMC’s stock traded at $19.30, up 7.3 percent over their I.P.O. price of $18. The company and its advisers priced the offering at the bottom of the stock sale’s expected range.

Still, the theater operator raised $331.2 million, which the company plans to use to pay down debt and for future growth.

“It always feels good to retire debt, whether you’re a person or a company,” Gerry Lopez, AMC’s chief executive, said in a telephone interview. “Importantly, this also gives us the same financial flexibility that some of our competitors have had. Rapid expansion, acquisitions â€" if we wanted to explore those things, we now can.”

Like other theater operators, the company has sought ways to bolster revenue as more customers choose to watch movies at home. AMC has focused on improving the quality of its cinemas, like lifting the quality of food and offering dine-in services at some of its theaters.

It is also adding more screens capable of showing giant-screen formats like IMAX, which can command higher ticket prices.

AMC returned to the public markets only a year after being sold to the Dalian Wanda Group, the biggest movie theater operator in China. Wanda will retain an 80 percent stake in the company even after the I.P.O.

Mr. Lopez’s high spirits even extended to the big studios, which routinely lock horns with exhibitors over everything from in-theater advertising to release dates.

“We have big fights with them all the time, and they have big fights with us,” he said. “The fact is that neither of us would be in business without the other. And 2013 has been a very, very good year for everyone.”

Bitcoin Collides With Government Concerns

The rapid rise of Bitcoin is running into some crosswinds.

A recent succession of moves by governments around the world has cast doubts on the legitimacy of the virtual currency, and its price fell as much as 50 percent at one point on Wednesday morning from its high earlier this month. It later recovered some as the day went on.

The price volatility is underscoring Bitcoin’s sensitivity to decisions by government officials despite its promised status as the first global currency free of government intervention and oversight. Money, it turns out, is still a government prerogative.

“This tight regulation is really counter to what a lot of folks thought was going to happen,” said Mark T. Williams, a finance professor at Boston University who has been tracking Bitcoin. “Regulation is the future of e-currency, not decentralization as many had hoped.”

The most damaging news for the digital currency has come out of China, where the largest Bitcoin exchange, BTC China, said on Wednesday that it would no longer accept deposits in renminbi, the Chinese currency.

“For reasons we all know, BTC China has had to cease renminbi-account charging functions,” the exchange said in a message on its verified account on Weibo, China’s Twitter-like messaging service. It said that it would continue operating and that deposits denominated in Bitcoins and renminbi withdrawals would not be affected.

By Wednesday evening, the Shanghai-based BTC was quoting Bitcoins at about 2,300 renminbi, or about $380, each. That was a drop of nearly 40 percent from the price on Tuesday and less than half of the peak price of 7,395 renminbi on Dec. 1.

The development comes less than two weeks after the Chinese authorities barred mainstream financial institutions from dealing in the virtual currency and a series of moves that followed elsewhere.

While China had been the fastest growing part of the Bitcoin world, it is not the only place where government officials have started to address virtual currency. Over the last week, the authorities in Denmark, Norway, Australia, New Zealand and the European Banking Authority have all raised alarm about the speculative nature of the new online currencies.

The Danish Financial Supervisory Authority issued a warning on Tuesday that gave a long list of dangers, including that the “value of your virtual currencies can change very quickly and can in principle fall to zero.”

The warnings have pumped the brakes on the acceleration of Bitcoin after the price of a single coin rose nearly 500 percent in November, fueled by hopes that the currency could serve as a cheaper global payment system.

Bitcoins are created and traded according to an open-source program released in 2009. The decentralized network of computers that runs the system is set to release only 21 million Bitcoins, but they are worth only what someone will pay for them.

The volatility provides some vindication for critics who have recently been calling Bitcoin a bubble that was sure to pop. Earlier this month, Alan Greenspan, the former Federal Reserve chairman, said on Bloomberg Television that it had no “intrinsic value.”

Mr. Williams, the Boston University professor, said that Bitcoin had followed the trademark patterns of past asset bubbles and predicted that the value will fall as low as $10 next year.

But Bitcoin aficionados are far from accepting that the recent declines spell any sort of long-term trouble for the movement. Users took to Twitter to mount a defense. And the currency has survived past swings in value. In April, the value fell 70 percent in a matter of days but eventually recovered fully. Even after the recent declines, the price of Bitcoin is still up 180 percent from where it was in early November. During the day on Wednesday, the price had risen more than 40 percent from its morning low.

“If you look at charts going back for the last few years, this happens all the time,” said Greg Schvey, the founder of Genesis Block, a research firm that follows digital money. “The price is going to fluctuate, but more people know about it, more companies use it and more investment is going into Bitcoin. Bitcoin itself is stronger than it’s ever been.”

Some advocates for Bitcoin have actually been unhappy with the recent run-up in the price, which has caused many users to hoard their coins rather than spend them. This has led many people to say that Bitcoin cannot rightfully be called a currency.

Many of the recent announcements from the European authorities have questioned whether virtual currencies live up to their name. A Norwegian official told Bloomberg News last week that Bitcoin could not be called money and would be treated as an investment asset.

But the news out of Europe has not been all negative for the future of digital money. The warning from Denmark this week suggested that consumers would be free to use Bitcoins despite the risks. The United States has taken a similarly cautious but accepting attitude toward virtual currencies. Officials with the Treasury Department have indicated that virtual currency exchanges will be allowed to operate as long as they register as money-transmitting operations.

But there are questions about how successful a global decentralized currency can be if people in China, the world’s second-largest economy, are shut out.
According to Chinese news reports, the People’s Bank of China, the central bank, met Monday with more than 10 of the country’s biggest third-party payment processing companies, ordering them to stop all transactions involving digital currencies. Alibaba’s Alipay service, the country’s biggest processor of online transactions, was among the companies represented at the meeting, according to the reports.

On Dec. 5, the central bank and the four agencies jointly banned dealing in Bitcoin, saying the government was acting to “safeguard the interests and property rights of the public, protect the legal standing of the renminbi, take precautions against the risk of money laundering and maintain financial stability.”
“Within that region it’s hit a bit of a hurdle that will have to sort itself out,” Mr. Schvey said.

Jones Group Nears Deal to Be Sold to Sycamore Partners

The private equity firm Sycamore Partners is closing in on a deal to buy the apparel company Jones Group for $15 a share, according to people briefed on the matter.

A deal could be announced on Wednesday that would value the company at $1.2 billion. Its brands including Nine West, Anne Klein and Stuart Weitzman.

But people familiar with the process said the deal could still fall apart, even at the last minute. In midmorning trading, shares in the Jones Group were down 1 percent, at $14.46.

The Jones Group put itself up for sale this summer after the activist hedge fund Barington Capital Group bought about 2 percent of the company and began agitating for disposals of some of its brands. But instead of selling the brands individually, the company opted for a sale process after several private equity firms expressed interest.

The $15 a share price is about 11 percent above the stock’s price before news of a possible deal leaked in November. But it would still be below the nearly $18 a share the stock was trading at earlier this year, and its record high of more than $40 a share.

The private equity firm Kohlberg Kravis Roberts considered participating in the buyout, but is still expected to provide financing through MerchCap Solutions, a merchant bank it runs as a joint venture with Stone Point Capital.

All parties involved declined to comment.

This post has been revised to reflect the following correction:

Correction: December 18, 2013

An earlier version of this article misspelled the name of a hedge fund. It is the Barington Capital Group, not the Barrington Capital Group.

Jones Group Nears Deal to Be Sold to Sycamore Partners

The private equity firm Sycamore Partners is closing in on a deal to buy the apparel company Jones Group for $15 a share, according to people briefed on the matter.

A deal could be announced on Wednesday that would value the company at $1.2 billion. Its brands including Nine West, Anne Klein and Stuart Weitzman.

But people familiar with the process said the deal could still fall apart, even at the last minute. In midmorning trading, shares in the Jones Group were down 1 percent, at $14.46.

The Jones Group put itself up for sale this summer after the activist hedge fund Barington Capital Group bought about 2 percent of the company and began agitating for disposals of some of its brands. But instead of selling the brands individually, the company opted for a sale process after several private equity firms expressed interest.

The $15 a share price is about 11 percent above the stock’s price before news of a possible deal leaked in November. But it would still be below the nearly $18 a share the stock was trading at earlier this year, and its record high of more than $40 a share.

The private equity firm Kohlberg Kravis Roberts considered participating in the buyout, but is still expected to provide financing through MerchCap Solutions, a merchant bank it runs as a joint venture with Stone Point Capital.

All parties involved declined to comment.

This post has been revised to reflect the following correction:

Correction: December 18, 2013

An earlier version of this article misspelled the name of a hedge fund. It is the Barington Capital Group, not the Barrington Capital Group.

Morning Agenda: Talent Agency Deal to Reshape Hollywood Landscape

William Morris Endeavor was born of bold moves, the product of a merger between the old-line William Morris Agency and Ari Emanuel’s upstart Endeavor. Now the agency will make its biggest step yet: the takeover of another big name.

William Morris Endeavor is said to have won the bidding war for IMG, the huge sports and media talent agency, with an offer of about $2.3 billion, Brooks Barnes and David Gelles report. The deal will alter the balance of power in Hollywood’s business landscape.

Perhaps as important, the union of the two will thrust William Morris Endeavor into new areas like sports events, media and fashion, helping the agency move away from the increasingly troubled businesses of movies and television.

CHINESE EXCHANGE STOPS ACCEPTING BITCOIN Bitcoin prices were sent tumbling after China’s biggest Bitcoin exchange, BTC China, was required to stop accepting deposits in the virtual currency on Wednesday, Neil Gough reports in The New York Times.

The move comes less than two weeks after China’s central bank and four other government agencies that regulate finance and technology issued a joint announcement barring Chinese financial institutions from dealing in the virtual currency. By Wednesday evening, the Shanghai-based BTC was quoting Bitcoins at about 2,300 renminbi, or about $380, apiece. That was nearly 40 percent lower than where they had traded on Tuesday.

AMC PRICES I.P.O. AT LOW END OF RANGE AMC Entertainment priced its initial public offering at $18 a share, hitting the low end of its range as it prepared for the premiere of its stock.

At that price, the movie theater operator raised $331.2 million and will carry a market value of about $1.7 billion, DealBook’s Michael J. de la Merced writes. By contrast, its rival Regal Entertainment is valued at $3 billion.

The I.P.O. comes a year after AMC was sold to the Dalian Wanda Group, China’s biggest theater operator, which will retain an 80 percent stake. The company will begin trading on the Big Board under the ticker symbol AMC.

GEORGE SHINN, FORMER FIRST BOSTON CHIEF, DIES George L. Shinn, a former president of Merrill Lynch and chief executive of First Boston, died on Monday in Scarborough, Me., The New York Times reports. He was 90.

Mr. Shinn rose from the ranks of Merrill trainees to become president of the brokerage giant. But he quickly jumped to First Boston, where as chairman and chief executive he oversaw the beginning of the firm’s transformation into a powerhouse in mergers under Bruce Wasserstein and Joseph R. Perella.

Surprising Wall Street again, he retired at 60 in 1983 to pursue teaching and a love of flying.

Mergers & Acquisitions »

E.U. Set to Approve Omnicom-Publicis Merger  |  Omnicom and Publicis are set to receive approval from European Union regulators to complete a $35.1 billion merger that would create the world’s largest advertising agency, Reuters reports. Reuters

Despite Doldrums in Deal Activity, a Few Highlights This Year  |  The number of takeovers is down so far this year, but there were a few interesting ones. The Deal Professor grades the best and worst of them. Deal Professor »

Sysco Deal Leaves Money on the Table  |  The less-than-creative tax structure of the $3.5 billion deal for US Foods could cost the combined company $200 million. DealBook »

IQor to Buy Jabil’s Aftermarket Services Unit for $725 Million  |  The transaction â€" the biggest ever by iQor â€" is meant to combine the company’s own customer support capabilities and the Jabil unit’s services for electronics makers and retailers. DealBook »

Al Jazeera Said to Weigh Bid for Turkish TV Company  |  Al Jazeera is considering making a bid for a majority stake in Digiturk, a Turkish television operator, Reuters reports. Reuters

Sony Exploring Sale of Gracenote Software Ops  |  Sony has hired Qatalyst Partners, the investment bank started by the former star tech banker Frank Quattrone, to explore the sale of its Gracenote software business, Bloomberg News writes. Bloomberg

German Efromovich Said to Be Hunting for Deals  |  German Efromovich, the owner of the Colombian airline Avianca, is looking at possible airline deals in Europe, including the Italian airline Alitalia and the Polish airline LOT, Reuters reports. Any deal would be independent of the Colombian airline. Reuters

House of Fraser in Talks With French Retailer  |  Even as it prepares to list in London early next year, the British retailer House of Fraser is in discussions about being acquired by the French department store chain Galeries Lafayette, The Financial Times reports. Financial Times

INVESTMENT BANKING »

Europe Strikes Deal on Bank Bailout System  |  Finance ministers in Europe have reached a tentative agreement to provide an additional backup to the European Union’s new system designed to bail out banks in the event of another financial crisis, The Financial Times reports. Financial Times

Civil Charges Said to Be Planned Against Citi and Merrill  |  Reuters writes: “The Justice Department is preparing to file civil fraud charges against Citigroup and Bank of America’s Merrill Lynch unit over their sale of flawed mortgage securities ahead of the financial crisis, according to people familiar with the probes.” Reuters

Goldman Reducing Risk and Shrinking Balance Sheet  |  Goldman Sachs is reducing its riskier trading and shrinking its balance sheet amid stricter regulation and a bumpy market producing lackluster returns, The Wall Street Journal reports. Wall Street Journal

Swiss Banks Facing Dividend Pressure Amid Higher Capital Requirements  |  Regulatory requirements to hold capital are putting pressure on dividends by Switzerland’s largest banks, Bloomberg News reports. Bloomberg

Bloomberg L.P. to Give Banks Greater Control Over Chats  |  The Financial Times writes: “Banks will be given more control over traders’ instant messages, Bloomberg L.P. has announced, as the data provider tries to redeem the reputation of tools now associated with market manipulation.” Financial times

PRIVATE EQUITY »

No I.P.O. for Ares Anytime Soon  |  Despite expectations it will go public, the private equity firm Ares Management has so far spurned offers by Wall Street to pursue an initial public offering, Reuters reports. Reuters

Goldman May Face Fines in E.U. Investigation  |  Goldman Sachs could be fined as early as next year in an antitrust investigation by European regulators into underwater power cables, Bloomberg News writes. The move could test the European bloc’s powers to seek penalties against private equity investors. Bloomberg

Centrica to Sell 3 Texas Power Plants to Blackstone  |  The British energy company Centrica says that its North American unit plans to sell three natural gas-fired power plants in Texas to the private equity firm Blackstone Group for $685 million. DealBook »

HEDGE FUNDS »

Smaller Hedge Funds Can Still Succeed  |  Business Insider writes that starting a hedge fund with less than $300 million in assets under management will be hard in today’s market, but it is not impossible to succeed. Business Insider

Hedge Fund Presses Case for Breakup of Darden Restaurants  |  In an 85-page presentation, Barington Capital explains how it would create the most value for the owner of Olive Garden and Red Lobster restaurants. DealBook »

I.P.O./OFFERINGS »

Britain Lost £230 Million in Sale of Lloyds Bank Shares  |  The British government lost £230 million, or about $374.5 million, in the first sale of shares it held in the Lloyds Banking Group, The Financial Times reports, citing an analysis by government auditors. Financial Times

McClendon’s New Venture Echoes Dealings at Chesapeake Energy  |  A downside for investors, Christopher Swann of Reuters Breakingviews writes, is that they cannot rely on Aubrey McClendon’s attention or loyalty. DealBook »

VENTURE CAPITAL »

Treasury Warns Bitcoin Operators on Money-Transmitting Rules  |  Reuters writes: “The U.S. Treasury Department’s anti money-laundering unit is warning businesses linked to the digital currency Bitcoin that they may have to comply with federal law and regulation as money transmitters, a Treasury spokesman said.” Reuters

Microsoft Not Likely to Select New Chief Until 2014  |  There had been speculation that the board was trying to find a successor for Steven A. Ballmer by the end of the year, but the search committee’s chairman suggested that was not likely. Bits Blog »

LEGAL/REGULATORY »

JPMorgan Sues F.D.I.C. Over Washington Mutual  |  JPMorgan Chase has sued the Federal Deposit Insurance Corporation, seeking more than $1 billion related to the agency’s receivership of Washington Mutual, The Financial Times reports. The lawsuit comes just weeks after the bank agreed to pay $13 billion to settle a variety of government lawsuits over the selling of mortgages. Financial Times

Mississippi Sues JPMorgan Over Credit Cards  |  Mississippi’s attorney general sued JPMorgan Chase on Tuesday, arguing that the bank violated the state’s consumer protection laws in its “chaotic” and “disorganized” pursuit of credit card delinquencies. REUTERS

Law School Enrollment Drops  |  The Wall Street Journal writes: “First-year enrollment at U.S. law schools plunged this year to levels not seen since the 1970s as students steered away from a career that has left many recent graduates loaded with debt and struggling to find work.” Wall Street Journal

S.E.C. to Be More Selective in Cases  |  The S.E.C., which is looking to bolster its image as a regulator, is being more selective in pursuing cases, and its early-stage investigations are at the lowest level in decade, The Wall Street Journal reports. Wall Street Journal

High-Security Wine Cellar Ordered to Liquidate  |  Judge Robert E. Gerber of the United States Bankruptcy Court in Manhattan has ordered the Chapter 7 liquidation of WineCare Storage, which, because of damage from Hurricane Sandy, has been unable to provide most of its customers with access to their millions of dollars in chardonnay, pinot noir and cabernet. DealBook »

Cantor Fitzgerald Settles 9/11 Suit Against Airline  |  A major piece of litigation against the airline industry to emerge from the Sept. 11 attacks moved toward an end on Tuesday, as Cantor Fitzgerald revealed that it would settle its lawsuit against American Airlines for $135 million. DealBook »

BP Accuses Lawyer of ‘Brazen Fraud’ in Gulf Oil Spill Suit  |  The oil giant BP has accused Mikal C. Watts, a Texas lawyer, of falsely claiming to represent tens of thousands of seafood industry workers, thereby drastically inflating its settlement costs related to the 2010 spill in the Gulf of Mexico, The New York Times writes. New York Times

Harland Clarke to Buy Marketing Company Valassis for $1.8 Billion

Harland Clarke Holdings, the company that probably provided you with your checkbook and various business forms, announced on Wednesday that it would buy Valassis Communications, a publicly traded integrated marketing company, for $1.84 billion in cash.

Valassis, based in Livonia, Mich., provides direct-marketing products, including coupon dispensers in grocery aisles, newspaper inserts, social media promotions and online display advertising. Among its brands include RedPlum coupons. Valassis also partners with the National Center for Missing and Exploited Children to distribute pictures as part of the “Have You Seen Me?” campaign.

Harland Clarke, a subsidiary of Ronald O. Perelman’s MacAndrews & Forbes Holdings, said the deal would create a company with about $3.3 billion in combined revenue. Harland Clarke will pay about $34.04 a share in cash for Valassis, about 20 percent above that company’s closing price on Tuesday.

“The transaction provides Valassis stockholders with a significant and immediate cash premium for their shares,” Alan F. Schultz, the nonexecutive chairman of Valassis, said in a statement.

Harland Clarke said it would finance the acquisition with cash on hand and borrowing. It said it had received committed financing from Credit Suisse, Bank of America Merrill Lynch and Citigroup to complete the transaction.

Harland Clarke’s advisers include Bank of America Merrill Lynch and the Raine Group on the financial side, and Wachtell, Lipton, Rosen & Katz as legal adviser. Cleary Gottlieb Steen & Hamilton is serving as legal adviser to Harland Clarke for the financing. Valassis’s advisers include JPMorgan Chase, Kirkland & Ellis and McDermott Will & Emery.

Centrica to Sell 3 Texas Power Plants to Blackstone

The British energy company Centrica says that its North American unit plans to sell three natural gas-fired power plants in Texas to the private equity firm Blackstone Group for $685 million.