Regulator of Wall Street Loses Its Hard-Charging Chairman

Gary Gensler squeezed into a Washington auditorium last month, mingling with the 300 guests at his farewell party and basking in the attention as a who’s who of finance recounted his campaign to rein in Wall Street risk-taking.

Treasury Secretary Jacob J. Lew, for one, described the chairman of the Commodity Futures Trading Commission as one of the leading reformers after the financial crisis, according to people who attended the event. Mark Wetjen, a commissioner at the agency who occasionally sparred with Mr. Gensler, remarked that a mutual friend was fond of calling him “a force of nature,” a depiction that elicited knowng nods from a crowd that included Ben S. Bernanke, the departing head of the Federal Reserve, and Jeffrey C. Sprecher, whose company owns the New York Stock Exchange.

But even as Mr. Gensler’s aggressive streak thrust the once-backwater agency into the front lines of reform, it also maddened colleagues and complicated his legacy. And now that his tenure is ending on Friday, the agency has reached an inflection point, prompting Wall Street to hope for a friendlier regulator.

President Obama has appointed Timothy G. Massad, a Treasury Department official with a blank slate for a regulatory agenda, as Mr. Gensler’s successor.

Aside from their slender frames and retreating hairlines, Mr. Massad and Mr. Gensler might bear little resemblance. While Mr. Gensler had his finger on every button, Mr. Massad is expected to take a more conciliatory stance. Mr. Massad, who oversaw the winding down of the bank bailouts, will also face renewed pressure to appease lobbyists and congressional Republicans.

“There’s no question Wall Street sees an opening to roll back reform,” said Dennis M. Kelleher, the head of Better Markets, an advocacy group. “But Massad is no fool; he knows he’s going to be judged by the very high standards set by Gary Gensler.”

At the time of Mr. Massad’s appointment, Mr. Lew praised him as “determined to pursue reform that safeguards and advances the interests of hard-working Americans.”

President Obama added, “I have every confidence that he is the right man to lead an agency designed to prevent future crises.”

But further underscoring the uncertainty surrounding the agency, Mr. Gensler’s exit will be followed within weeks by the departure of Bart Chilton, a fellow Democratic commissioner who is an even harsher critic of Wall Street. Sharon Bowen, a corporate lawyer who represents private equity firms and other financial institutions, is poised to take Mr. Chilton’s spot.

Still, a Wall Street résumé does not necessarily translate into deregulation. By most measures, Mr. Gensler would have been an unlikely reformer.

A native of working-class Baltimore, where his father was a cigarette and pinball machine vendor to local bars, Mr. Gensler pursued a career on Wall Street after graduating with his bachelor’s and master’s degrees from the Wharton School at the University of Pennsylvania. By 30, he and a colleague were selected as Goldman Sachs partners â€" the youngest in the firm’s history at the time.

After minting a small fortune as a star deal-maker in New York and Tokyo â€" he negotiated what was then a record television-rights deal for the National Football League â€" Mr. Gensler pursued a second act where many Goldmanites before him had gone: the Treasury Department. During his tenure there, Mr. Gensler helped enact legislation exempting from oversight broad swathes of derivatives trading, the same industry that was later at the center of the 2008 crisis.

Against that backdrop, his 2009 nomination to the C.F.T.C. was a tough sell. Two liberal senators placed a hold on the appointment. And in a closed-door meeting with Mr. Gensler, another Democratic senator encapsulated the unease over President Obama’s financial regulatory appointments, opining that “the president ran on change and you guys aren’t change.”

Within weeks of receiving Senate approval, Mr. Gensler largely silenced his liberal critics. He became a regular presence on Capitol Hill that year, lobbying lawmakers to bolster what ultimately became the Dodd-Frank Act, the regulatory overhaul passed in response to the crisis. The day in 2010 that Dodd-Frank became final he stayed past 4 a.m. to put the finishing touches on the law, stopping only to buy dinner at McDonald’s for his staff.

After Dodd-Frank took effect, he helped write dozens of new rules to reshape the derivatives industry. Dodd-Frank stretched his agency’s reach from the roughly $35 trillion futures business to the opaque $400 trillion swaps market.

He also selected David Meister, a former federal prosecutor, as his enforcement chief. Mr. Meister went on to file a record number of cases against some of Wall Street’s biggest banks. An investigation into the banking industry’s manipulation of benchmark interest rates, an examination that ensnared UBS and Barclays, extracted hundreds of millions of dollars in fines and underpinned Mr. Gensler’s calls to overhaul the rate-setting process.

“His aggressiveness was exactly what was necessary,” said Mary L. Schapiro, who was the chairwoman of the Securities and Exchange Commission for much of Mr. Gensler’s tenure.

The push by Mr. Gensler clashed with the staid culture of an agency once known as the “watchdog that didn’t bark.” A nine-time marathon runner who climbed Mount Rainier during his C.F.T.C. tenure, Mr. Gensler routinely demanded that staff work weekends and holidays.

After a fall in which he broke four ribs and punctured a lung, colleagues say, Mr. Gensler worked from his hospital bed. Then, five days after Mr. Gensler’s injury, his father died. But he soon returned to work, taking the stairs to his ninth-floor office.

As chairman, he was something of a micromanager, tweaking even obscure agency documents known as “no action” letters. “Gary is not a micromanager,” Mr. Meister said in jest at the farewell event last month. “He only called me on nights, weekends and holidays.”

Colleagues also recall seeing a personal side of Mr. Gensler. He recently held a holiday party for 45 agency colleagues and their spouses and attended a former staff member’s wedding. At an office Christmas party in 2012, he joined a rendition of a line dance known as the Wobble.

But his tenure also saw rare breakdowns in decorum. The tensions culminated last year when Mr. Gensler refused to budge on a July deadline to produce plans for stretching Dodd-Frank rules to trading overseas, a position that upset regulators in Washington and abroad.

At the time, a Republican commissioner at the C.F.T.C., Jill E. Sommers, declared that “no one has ever accused Gary Gensler of being reasonable.” Mr. Wetjen, who worried that the agency was acting hastily and could have unnecessarily disrupted markets, once became so frustrated with Mr. Gensler that he blurted to colleagues that they should tell Mr. Gensler where to go, using an expletive. (Mr. Wetjen, who has since called Mr. Gensler “a friend” and was the master of ceremonies at his farewell event, said that he did not recall saying that.)

But ultimately, on that plan and others, the agency formed a consensus. About 70 percent of the agency’s final rules and orders under Dodd-Frank received unanimous approval from the five-member commission.

To appease fellow commissioners, for example, Mr. Gensler softened a rule intended to encourage competition among banks in the swaps market. Rather than force asset managers like Vanguard to contact at least five banks when seeking a price for a swaps contract â€" as the agency initially proposed to do â€" he agreed to temporarily lower the standard to two banks before moving up to three.

“At the end of the day, he was a deal-maker,” Ms. Schapiro said. “Of course, it was really at the end of the day.”

Wall Street objected all the same. When a dozen lawyers and lobbyists arrived in his office last summer to press their case about the cross-border plan, Mr. Gensler, his loafers removed and his tie falling inches below his belt, flashed a smile. “Guys, I was one of you,” he remarked. “I know how the game is played.”

Last month, some of the same groups sued the agency. It was the fifth lawsuit since Mr. Gensler took over.

Mr. Gensler’s next step is unclear. In an interview, he said he planned to return to being a stay-at-home dad for the youngest of his three daughters. His wife, an artist, died of breast cancer in 2006.

“It’s been a tremendous honor to serve at this time,” he said. “I assume my professional life will sort itself out.”

Ebullience Over 2013 I.P.O. Market Spills Into New Year

The next 12 months may not prove as rich for initial public offerings as the last year. But to Wall Street bankers, 2014 still promises an abundance of opportunity.

And that could include what may be one of the biggest market debuts in years: that of Alibaba, the Chinese Internet behemoth.

Even as global merger activity turned in another lackluster performance, the business of taking companies public soared. The amount raised by I.P.O.’s in the United States last year jumped 40 percent over 2012, to $59.3 billion, according to data from Thomson Reuters.

Overall activity in equity capital markets banking totaled nearly $797 billion for the year, up 27 percent and one of the best years in recent memory. Fees for bankers in the field rose 34 percent from the previous year, to $17.9 billion, in what Thomson Reuters described as the highest level in three years.

The FTSE Renaissance Global I.P.O. Index, which tracks the returns of newly public shares, returned 31.7 percent last year through Dec. 17, outstripping the MSCI All Country World Index’s 15.4 percent.

Advisers are quick to caution that such a run â€" one with a number of big stock market debuts, like those of Hilton Worldwide, the animal health company Zoetis and, of course, Twitter â€" will be hard to duplicate. But as long as the economy holds up, so will the stock markets, prompting private companies to look to share sales to raise money.

“I would be surprised if the overall market is up 25 percent or more next year, but I’m optimistic and think it’s still trending upward,” John S. Daly, the head of Americas equity capital markets at Goldman Sachs, said.

Behind the I.P.O. boom are the usual factors, bankers say. Encouraging economic conditions drove impressive stock market growth, particularly in the United States. (Last year was the first time since 2004 that the highest share of I.P.O. proceeds were raised in North America, at 34 percent.)

Investors proved especially eager to buy into new stocks: The flow of money into stock mutual funds outpaced money going into bond funds this year, providing a big source of capital waiting to be spent on new offerings.

“What switched this year is that the economy is improving and that there’s a lot less risk of a big downward shock,” Cully Davis, a managing director of equity capital markets at Credit Suisse, said. “Investors’ risk tolerance changed.”

At the same time, Mr. Daly said, investors have been disciplined about what they have been willing to pay for I.P.O.’s.

The presence of ready buyers has prompted a slew of entities, including corporations looking to spin off divisions and private start-ups looking to seize on years of work and rising hype. Bankers say that the backlog of I.P.O.’s is strong, if not nearly bursting.

The boom has been fairly evenly spread, though financial and consumer companies were the majority, according to Renaissance Capital. Even sectors that had fallen out of favor, like biotechnology companies, look poised to recover.

For many investors, the most attractive type of investment remains companies that are poised for double-digit revenue growth. A new crop of technology start-ups that many analysts and bankers predict may go public in 2014 fits neatly into that mold, even if none will equal Facebook’s $16 billion offering or draw as much attention as Twitter’s.

Among them are Dropbox and Box, two of the big online storage companies, and the Lending Club, the biggest player in the peer-to-peer lending industry.

But the most highly anticipated offering is that of Alibaba, whose vast e-commerce operations make the company a Chinese amalgam of Amazon, eBay and a host of others. The Internet giant has not picked bankers for its forthcoming offering, according to people briefed on the matter, but that has not stopped an army of senior-level deal makers from making regular trips to Hong Kong to pay their respects to the company’s founder, Jack Ma, and its executive vice chairman, Joseph Tsai.

Fevered speculation about Alibaba’s potential market value has only increased, with bankers and analysts now guessing that the company could fetch a valuation of more than $150 billion.

Other companies expected to go public are not considered high-growth stories, but nevertheless have strong financial performance that could draw investors all the same. Ally Financial, the lender that once was General Motors’ financing arm, is among those weighing a potential I.P.O. to help repay its government bailout, according to people briefed on the matter. And General Electric plans to spin off its huge consumer finance arm.

Private equity firms have also been eager to seize on the roaring markets to sell their investments. Last year, the Blackstone Group took a number of its portfolio companies public, including Hilton and SeaWorld.

Such firms often do not sell any shares in the I.P.O.; Blackstone sold none of its shares in Hilton when the company went public last month. According to Philip Drury, a co-head of equity capital markets for the Americas at Citigroup, leveraged buyout shops have multiyear plans to sell off their holdings. Though investors had worried in the past that the firms would dump their investments, the firms now hold on to big stakes in their companies in hopes that the stocks will continue to rise.

Even as the enthusiasm for 2014 remains strong, advisers warn that any number of unexpected developments â€" a new war, uncertainty over a government debt impasse, an unforeseen market stumble â€" could damp the prospects for a prolonged renaissance in stock offerings.

“I think we’ve all understood that I.P.O. market windows open and close pretty quickly,” Mr. Drury said. “History has taught us to be somewhat cautious.”

Regulator Plans to Increase Visibility of Its BrokerCheck Website

Financial industry regulators are hoping to enact a rule this year that would make it easier for investors to find out if a broker pushing to sell them a stock, bond or other investment product has a clean record.

A year ago, the Financial Industry Regulatory Authority proposed a regulation that would require brokerage firms to include on their websites and social media feeds a link to the Finra BrokerCheck website, an online database that keeps a record of any disciplinary actions and securities arbitrations involving a registered investment adviser. The proposal was intended to make it easier for investors to research the background of a firm and its brokers before doing business with them

The rule was submitted the Securities and Exchange Commission for approval last January. But Finra, the brokerage industry’s self-regulatory agency, withdrew the measure in April to fine-tune it after receiving more than two dozen outside comments.

A person briefed on the matter, who was not authorized to speak about the matter, said Finra intends to reintroduce a revised version of rule later this year that would require investment firms to include a “prominent description” of BrokerCheck to encourage investors to visit the website.

“We have to change the level of public awareness about BrokerCheck,” said Richard Ketchum, Finra’s chairman and chief executive.

BrokerCheck, established in 1998, is the main public repository for the recording of disciplinary actions, arbitration and lawsuits filed against a broker or a firm. The Dodd-Frank Act, passed in response to the financial crisis, required regulators to develop way to make the free website more user friendly and more accessible to investors.

Mr. Ketchum, in an interview on Thursday, said increasing the visibility of BrokerCheck is in keeping with Finra’s push to more aggressively bring enforcement cases against brokers with multiple disciplinary violations.

In 2013, the industry regulator said it took actions to expedite enforcement actions against so-called recidivist brokers. And this year, Finra says it will create a dedicated enforcement team to prosecute those cases and to investigate whether firms that hire recidivist brokers are doing adequate due diligence.

Joseph Lieberman Joins Private Equity Firm

Over lunch in Manhattan several months ago, Brendan Carroll, a partner and co-founder of the private equity firm Victory Park Capital, had a proposition for his former boss, Joseph I. Lieberman, the former senator from Connecticut and onetime vice presidential candidate: Would Mr. Lieberman be interested in joining his firm?

Mr. Lieberman, who retired from the Senate last January after representing Connecticut in Washington for 24 years, was intrigued and eventually decided to join Victory Park as chairman of its executive board, the firm announced on Thursday.

“While in the U.S. Senate, I fought for policies that would allow small businesses to thrive,” Mr. Lieberman said in a statement. “I look forward to a long-term partnership with Victory Park Capital that will position the firm for continued growth.”

Mr. Lieberman’s appointment comes after his move to the law firm Kasowitz Benson Torres & Friedman in New York last summer.

Before being elected to the Senate in 1988, Mr. Lieberman, 71, served as attorney general in Connecticut for six years and as a state senator for 10 years before that.

Mr. Carroll, 36, worked as a staff assistant in Mr. Lieberman’s office while studying American government at Georgetown University in the mid-1990s. The two men kept in touch, and Mr. Carroll said he took a leave of absence from his job at the investment bank Robertson Stephens to join Mr. Lieberman’s 2000 vice presidential campaign.

“Obviously the personal relationship helped,” Mr. Carroll said. “But he did a lot of his own work to determine that this was something he wanted to do.”

Victory Park invests in mid-market companies across a range of industries, including oil and gas and airlines, and could benefit from Mr. Lieberman’s extensive regulatory expertise, Mr. Carroll said.

“I’ve been fortunate enough to be able to work for him and see what a great person and knowledgeable person that he is,” Mr. Carroll added.

Politicians have long been attracted to private equity firms, a love affair that has drawn criticism at times. Timothy Geithner, the former Treasury secretary, joined Warburg Pincus in November, a move some observers decried as being inherently conflicted. Mitt Romney’s ties to Bain Capital drew sharp criticism during his 2012 presidential bid, when opponents accused the firm of outsourcing American jobs.

Chrysler Deal Puts Fiat Chief in the Fast Lane

Sergio Marchionne could not have wished for a better start to 2014. On the first day of the new year, the boss of both Fiat and Chrysler managed to strike a deal allowing the Italian company to become the sole owner of Detroit’s third-largest automaker. And the $4.3 billion two-part pact he has made with Chrysler’s union trust fund puts him on top.

Firstly, the price is a reasonable one. Fiat is paying $3.65 billion for the almost 41.5 percent of Chrysler given to the trust as part of the 2009 U.S. government-sponsored bankruptcy. That values the Detroit automaker at just under $9 billion. That’s less than the $10.3 billion the fund had argued the company was worth.

But the two sides have also built in a face-saver for the trust. Chrysler has agreed to give an additional $700 million in cash to the trust over the next three years. That effectively increases the trust’s take from the sale to $4.35 billion, which is pretty much the minimum it always had as a target.

That implies Chrysler is worth around 5.4 times estimated earnings for 2013. With Ford Motor trading at just over nine times earnings, and with a far better pre-tax margin, that looks relatively fair. But it also shows how much progress - and concomitant value creation - Mr. Marchionne and Fiat’s owners the Agnelli family, still have to shoot for.

On top of that, Mr. Marchionne has put Fiat on the hook for only $1.75 billion of the purchase price - a handy trick as the Turin-based company, like its European mass-market rivals, needs all the resources it can marshal to combat a weak market. The other $1.9 billion will come as a special distribution from Chrysler’s so-called dividend basket. This contains half of the automaker’s earnings since the start of 2012 and Fiat is allowed to use the trust’s share of the cash to fund any equity purchases.

The agreement resolves a dispute over price between the two automakers and the trust that had been festering for almost 18 months. It involved court cases, and the fund had even resolved to fulfill a threat to take part of its Chrysler stake public - a messy proposition that would have left both sides unhappy. Mr. Marchionne can start his year without any of those distractions.

Antony Currie is an associate editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Shares of Fiat Surge on Chrysler Deal

The Chrysler logo is shown on a new Chrysler 200 on the showroom at the Massey-Yardley Chrysler, Dodge, Jeep and Ram automobile dealership in Plantation, Florida October 8, 2013.

Credit: Reuters/Joe Skipper

Repsol Completes Sale of Natural Gas Assets to Shell

LONDON - The energy company Royal Dutch Shell said on Thursday that it had completed its $5.4 billion acquisition of Repsol’s liquefied natural gas business outside North America, a deal originally announced last February.

The deal is slightly smaller than the initial $6.2 billion transaction because of adjustments to the value of assets, including reflecting the financial performance of the energy portfolio and the sale of Repsol’s 25 percent stake in a Spanish power plant to BP in October.

Shell, which beat out more than a dozen bidders, will now pay $3.8 billion in cash to the Spanish energy company and assume about $1.6 billion in leases related to ship charters.

The deal is a significant bet by Shell, already one of the world’s largest providers of liquefied natural gas, that demand for the fuel will continue to increase. The company said the charters are expected to “substantially increase” shipping capacity for its L.N.G. business.

Shell has said that it believes global consumption for liquefied natural gas will roughly double by 2025. The transaction, which includes L.N.G. capacity from facilities in Peru and in Trindad and Tobago, is expected to immediately contribute to Shell’s cash flow.

The deal’s completion also comes as Repsol has had to rethink its strategy after the nationalization of its stake in an oil producer in 2012 by President Cristina Fernández de Kirchner of Argentina.

In November, Repsol reached a tentative deal with the Argentine government over compensation related to the seizure of the producer, YPF, but the terms of the compensation are still being negotiated.

The Shell deal, as well the sale of Repsol’s stake in the Spanish power plant Bahía de Bizkaia Electricidad, is expected to reduce Repsol’s debt by $3.3 billion and to significantly strengthen its balance sheet.

Repsol has sold assets worth more than 5 billion euros, or about $6.86 billion, since 2012 as part of its strategy to reduce debt and sell noncore businesses.

Morning Agenda: Fiat Gaining Full Ownership of Chrysler

The Italian carmaker Fiat said on Wednesday that it had reached an agreement to take full ownership of Chrysler, the smallest of the three American automakers, in a $4.35 billion deal with the United Automobile Workers retiree health care fund. The deal to buy out the trust’s 41 percent stake, expected to close on Jan. 20, would make Fiat the world’s seventh-largest automaker, Jaclyn Trop reports in The New York Times.

The agreement allows Chrysler and the union to end months of negotiations over the value of the U.A.W.’s stake. Union leadership had been trying to force an initial public offering to cash out its shares amid arbitration in a Delaware court over the value of the trust’s stake. Fiat has held a majority stake in Chrysler since the automaker emerged from bankruptcy in 2009, and it has made no secret about its ambition to acquire the remaining stake.

Under the terms of the deal, Fiat is paying the trust $1.75 billion in cash, and Chrysler is making a $1.9 billion contribution. Chrysler also agreed to pay the trust $700 million in four annual installments once the deal closes. Ms. Trop writes: “The agreement to pay $1.75 billion to the U.A.W. means that Fiat will have paid a total $3.7 billion to acquire Chrysler, much less than the $36 billion Daimler-Benz paid for the company in 1998 or the $7.4 billion Cerberus Capital Management paid to acquire an 80 percent stake in 2007.”

MERGER ACTIVITY PICKED UP IN 2013  | The animal spirits appear to be finally returning to the corporate world in the United States, DealBook’s David Gelles reports. While global deal-making was basically flat for a fourth consecutive year, annual volume in the United States rose 11 percent in 2013 compared with the previous year, according to Thomson Reuters. Companies announced more than $1 trillion worth of deals during the year, the most since the financial crisis, with the United States accounting for 43 percent of all deals worldwide.

“There’s a feeling of a more stable backdrop that executives think will be with us for the foreseeable quarters,” said Blair W. Effron, co-founder of Centerview Partners, an independent investment bank. “I didn’t have a sense of that at the end of 2012 or 2011.”

And with markets buoyant, bankers and lawyers that advise companies on mergers and acquisitions say they are more optimistic than they have been in years. “From a macroeconomic perspective, we have a stronger economy, we have Congress behaving more responsibly, and we have all appearances of stability at the Fed,” said Scott A. Barshay, head of the corporate department at Cravath, Swaine & Moore, one of the top law firms on Wall Street. “C.E.O.’s can look forward and say, ‘I don’t see any near-term economic bumps.’”

ON THE AGENDA  |  The I.S.M. manufacturing index for December is released at 10 a.m. Gene Sperling, director of the National Economic Council, is on CNBC at 8:10 a.m.

A STOCK EXCHANGE EXPANDS ITS GLOBAL REACH  | In the future, the face of the global stock market may well be a squat suburban office building in Lenexa, Kan., outside Kansas City, where BATS Global Markets is based, Nathaniel Popper writes in DealBook. “While the New York Stock Exchange has recently been swallowed up by the InterContinental Exchange, a company that gets most of its revenue from trading derivatives, BATS, which was founded in 2005, has been doubling down on plain-vanilla stock trading and global expansion. That steady business has quietly moved it closer to the top of the list of the largest stock exchange operators in the world in terms of the value of shares traded.”

“In the coming months, BATS is set to complete its merger with another upstart company, Direct Edge, in a deal that will turn it into what will most likely be the biggest stock exchange company in the United States (at least on some trading days). In Europe, BATS is already the largest exchange after a rapid, and mostly overlooked, ascent that now has it hosting trading in nearly all the big economies on the Continent. As it continues to push in those existing markets, it is looking to take on other parts of the globe, including Canada and Japan.

“Everywhere it goes, BATS is aiming to serve as an evangelist for the American way of trading, focusing on low costs, competition and high-speed trading.”

Mergers & Acquisitions »

Owner of British Broadcaster Is Said to Explore a Sale  |  Richard Desmond, the owner of the British TV broadcaster Channel 5, “has asked advisers to work on a possible sale” that could raise more than 700 million pounds, or about $1.2 billion, The Financial Times reports. FINANCIAL TIMES

Chinese Businessman Seeks to Invest in Times Co.  |  Shares in The New York Times Company rose after Chen Guangbiao, a wealthy Chinese businessman and philanthropist known for his zany public stunts, said this week that he was leading a group of investors seeking to acquire a large or controlling stake in the company. NEW YORK TIMES

Chinese Company Bids for Fisker Automotive  |  Reuters reports: “China’s largest auto parts company made a surprise bid for Fisker Automotive just days before the bankrupt maker of the Karma plug-in hybrid sports car was to be sold to a Hong Kong tycoon, according to court documents.” REUTERS

How Newspapers Fare Under Berkshire Hathaway  |  Dozens of small newspapers are discovering the benefits of being owned by Warren E. Buffett’s company, The Wall Street Journal reports. WALL STREET JOURNAL

INVESTMENT BANKING »

A Bruising Year for Bond Investors  |  The Financial Times writes: “Bond investors are braced for a new year shock, with annual statements likely to show 2013 was the worst year for bond returns in well over a decade.” FINANCIAL TIMES

Buyers Return for Luxury Cars  |  “Luxury is not a dirty word anymore,” Robert Ross, an automotive consultant with Robb Report, a lifestyle magazine for wealthy readers, told Jaclyn Trop of The New York Times. “In 2008, luxury was a dirty word.” NEW YORK TIMES

For Stocks, an Amazingly Good Year  |  Despite turbulence in Washington, China and Europe, which threatened to pull the world into another recession, stock prices just kept rising in 2013. DEALBOOK

Global Optimism for 2014, With an Eye to Risks  |  The swiftness of the rebounds in equity markets in Japan and some European countries has created a palpable nervousness among investors, The New York Times writes. NEW YORK TIMES

Home Prices Rise, but the Ascent Could Slow  |  The last glimpse at the housing market for 2013 showed that home prices in major metro areas kept rising in October, with the year-over-year gain at 13.6 percent, The New York Times reports. NEW YORK TIMES

PRIVATE EQUITY »

Private Equity Reaps Big Gains  |  “Private equity firms are set to return a record amount of cash to their investors for 2013, after taking advantage of buoyant markets to sell hundreds of billions of dollars of investments,” The Wall Street Journal reports. WALL STREET JOURNAL

Private Equity Players Look Beyond the Buyout  |  Big buyout firms in the United States “are looking at deals such as minority investments in companies or partnerships with companies looking to make an acquisition â€" types of transactions that they largely shunned before the financial crisis of 2008,” Reuters writes. REUTERS

HEDGE FUNDS »

Cohen Cuts Price on N.Y. Apartment, to $98 Million  |  The hedge fund billionaire and trader Steven A. Cohen originally put the four-bedroom, five-and-a-half bathroom duplex up for sale in the spring. Its pricetag then: $115 million. DealBook »

Third Point Is Said to Buy Stake in Hertz  |  Third Point, the hedge fund run by Daniel S. Loeb, has taken a stake of less than 5 percent in the rental car company Hertz, CNBC reports, citing unidentified people familiar with the situation. CNBC

I.P.O./OFFERINGS »

Stock Sales to Resume in China  |  Bloomberg News reports: “China’s securities regulator approved the initial public offerings of five companies seeking to raise about $353 million, paving the way for share sales to resume after a freeze of more than one year.” BLOOMBERG NEWS

VENTURE CAPITAL »

New Venture for AllThingsD Journalists  |  ReCode, the new venture of Walter S. Mossberg and Kara Swisher, founders of the conference and news business All Things Digital, has backing from two minority investors, Windsor Media, an investment firm run by the former Yahoo chief executive Terry S. Semel, and NBCUniversal News Group, The New York Times reports. NEW YORK TIMES

LEGAL/REGULATORY »

Loan Monitor Accused of Ruthless Tactics on Student Debt  |  The Educational Credit Management Corporation, the main private entity hired by the Department of Education to fight student debtors who file for bankruptcy on federal loans, faces concerns that its tactics have grown ruthless, The New York Times reports. NEW YORK TIMES

De Blasio, Taking Office, Vows Action on Inequality  |  In his inaugural address, Mayor Bill de Blasio described social inequality as a “quiet crisis” on par with other urban cataclysms, The New York Times reports. NEW YORK TIMES

Kazakh Bank Accuses Former Chairman of Fraud  |  Mukhtar Ablyazov, the former chairman of Kazakhstan’s state-owned BTA Bank, is being held in a crowded prison south of Aix-en-Provence in France, as lawyers and judges debate his fate, The Wall Street Journal reports. WALL STREET JOURNAL

Fiat to Buy Rest of Chrysler

Fiat, in Deal With Union, Will Buy Rest of Chrysler

DETROIT â€" Chrysler, the smallest of the three American automakers, is set to be completely absorbed by an Italian company, Fiat.

Sergio Marchionne, chief executive of Fiat and Chrysler.

Fiat said on Wednesday that it had reached an agreement to take full ownership of Chrysler in a $4.35 billion deal with the United Automobile Workers retiree health care fund.

Fiat and the U.A.W. trust have shared ownership since Chrysler emerged from bankruptcy in 2009. The deal to buy out the trust’s 41 percent stake will make Fiat the world’s seventh-largest automaker.

“The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique in terms of mix of experience, perspective and know-how â€" a solid and open organization that will ensure all employees a challenging and rewarding environment,” Sergio Marchionne, chief executive of Fiat and chairman and chief executive of Chrysler Group, said in a statement Wednesday.

The agreement, which is expected to close on Jan. 20, will allow the carmaker and the union to end months of negotiations over the value of the U.A.W.’s stake. Union leadership had been pressing to force a public stock offering to cash out its shares on the open market amid arbitration in a Delaware court over the value of the trust’s stake.

Mr. Marchionne, who became Fiat’s chief executive in 2004, has been clear about his ambitions to create a company with a global scale to challenge the world’s leading automakers: General Motors, Volkswagen and Toyota. Fiat has held the majority stake in Chrysler since 2009 and has made no secret about wanting to acquire the remaining stake.

Fiat will pay the trust $1.75 billion in cash, and Chrysler will make a $1.9 billion contribution. Chrysler also agreed to pay the trust $700 million over four annual installments once the sale closes.

U.A.W. officials did not comment on the deal on Wednesday.

The merger will help both companies operate with a single set of financial statements, said Jack R. Nerad, the executive editorial director at Kelley Blue Book. “Their ability to move capital around is going to be a big advantage for them,” Mr. Nerad said.

The deal that awarded Fiat a 58.5 percent stake in Chrysler and the remainder to the union’s voluntary employee benefits association was a cornerstone of the Obama administration’s restructuring of the American auto industry in the recession.

“I have been looking forward to this day from the very moment that we were chosen to assist in the rebuilding of a vibrant Chrysler back in 2009,” said John Elkann, chairman of Fiat.

The agreement to pay $1.75 billion to the U.A.W. means that Fiat will have paid a total $3.7 billion to acquire Chrysler, much less than the $36 billion Daimler-Benz paid for the company in 1998 or the $7.4 billion Cerberus Capital Management paid to acquire an 80 percent stake in 2007.

Chrysler’s sales have soared recently with the success of new models including the Jeep Grand Cherokee, Ram pickup truck and Dodge Dart compact car. The company reported a quarterly profit during the first quarter of 2011 for the first time in five years, and repaid its government loans early.

Chrysler’s overall sales in the United States rose 9.3 percent through the first 11 months of the year, as the Fiat brand, still a fledgling here, fell 1.4 percent. The Ram brand has been a bright spot for the company, with sales rising 22.9 percent through November. The Ram pickup truck is the fourth-best-selling vehicle in the United States.

Together, Fiat and Chrysler sold 4.5 million vehicles globally in 2012, according to OICA, an international organization of vehicle manufacturers. Toyota is the world’s largest automaker, having sold 10 million vehicles, followed by General Motors, Volkswagen, Nissan-Renault, Hyundai and Ford. The merger will put Fiat and Chrysler just above Honda in size.  

Though Chrysler and Fiat have shared for years such resources as product development teams, and such production assets as single platforms that can be used to build several models, consolidated ownership will allow the company to move forward more smoothly, Mr. Nerad said.

The geographic diversity in the markets covered by Chrysler and Fiat will be a boon to the merger, he added.

“Often, one global market will be up while another’s down,” he said. “If you’re stuck in a single region, it can be a disadvantage to compete against global players.”

This article has been revised to reflect the following correction:

Correction: January 2, 2014

An earlier version of this article misstated the company that bought Chrysler in 1998. It was Daimler-Benz, not Daimler-Chrysler.

A version of this article appears in print on January 2, 2014, on page B1 of the New York edition with the headline: Fiat, in Deal With Union, Will Buy Rest of Chrysler.