Morgan Stanley Nearly Doubles C.E.O. Pay to $18 Million

Mark Lennihan/Associated PressJames P. Gorman, chairman and chief executive of Morgan Stanley, nearly doubled his compensation last year when compared with 2012.

A hefty long-term incentive award helped nearly double the compensation for Morgan Stanley’s chairman and chief executive, James P. Gorman, to $18 million for 2013.

Mr. Gorman was given a $6 million long-term equity award, which he will receive if the firm meets certain performance benchmarks over the next three years, according to a filing with the Securities and Exchange Commission on Friday. Mr. Gorman also received $12 million in base salary and bonus awards in 2013.

In 2012, he earned $9.75 million, a 7 percent drop from 2011.

Morgan Stanley has been trying to move away from its riskier trading business to focus on the relatively more stable wealth management unit, and Mr. Gorman’s pay raise is a clear indication that the firm’s board likes the progress that it has seen. The company’s stock price rose 64 percent in 2013.

The bank’s wealth management unit posted net revenue of $3.7 billion in the fourth quarter, up from $3.5 billion in the fourth quarter of the previous year. Its pretax margin rose to 19 percent, from 17 percent, in the same period.

Net revenue in the bank’s fixed income and commodities unit, meanwhile, fell 15 percent. Morgan Stanley has also been tightening its belt in its institutional securities business, which houses its trading and mortgage operations.

As per the S.E.C. guidelines, the firm reports its compensation based on how much executives actually received in any given year. Using those guidelines, Mr. Gorman’s pay rose to $14.4 million, up from $10.6 million in 2012.

Cavanagh to Receive $39 Million in Pay for Joining Carlyle

Michael J. Cavanagh, the longtime JPMorgan Chase executive who is preparing to join the Carlyle Group, will make $7 million in salary and bonus in each of his first three years at the private equity giant, a regulatory filing on Friday showed.

Mr. Cavanagh, who this week was named the new co-president and co-chief operating officer of Carlyle, is also set to receive $32 million in restricted stock when he joins the firm, to replace unvested compensation that he gave up by leaving JPMorgan. His 933,416 restricted shares will vest over a three-year period.

In addition, Mr. Cavanagh will participate in a new compensation program aimed at retaining senior talent, the filing said. Under that program, he will receive restricted stock equal to 0.5 percent of the investment profits collected by Carlyle, known as carried interest, on investments the firm makes in a given year. The program is intended to push rewards years into the future, as Carlyle typically takes five years or so to start harvesting a given investment.

Glenn A. Youngkin, a 19-year veteran of Carlyle who is Mr. Cavanagh’s new partner as co-president and co-chief operating officer, will also get restricted stock worth 0.5 percent of carried interest under the new retention program. Adena T. Friedman, the chief financial officer, will get stock worth 0.1 percent of carried interest, the filing said. The stock vests over six months for all three executives.

Mr. Cavanagh, whose departure from JPMorgan came as a shock to Wall Street, may be taking a pay cut, based on his salary and bonus alone. His compensation last year was not made public, but a report in The Financial Times said it was $17 million.

Over time, however, he may be able to cash in at Carlyle, particularly as he builds an equity stake in the firm. Of his $7 million annual pay, $2 million is in restricted stock that will vest over five years.

The three founders of Carlyle, David M. Rubenstein, Daniel A. D’Aniello and William E. Conway Jr., together earned about $750 million last year, including dividends on their holdings and profits from personal investments in Carlyle’s funds.

Cavanagh to Receive $39 Million in Pay for Joining Carlyle

Michael J. Cavanagh, the longtime JPMorgan Chase executive who is preparing to join the Carlyle Group, will make $7 million in salary and bonus in each of his first three years at the private equity giant, a regulatory filing on Friday showed.

Mr. Cavanagh, who this week was named the new co-president and co-chief operating officer of Carlyle, is also set to receive $32 million in restricted stock when he joins the firm, to replace unvested compensation that he gave up by leaving JPMorgan. His 933,416 restricted shares will vest over a three-year period.

In addition, Mr. Cavanagh will participate in a new compensation program aimed at retaining senior talent, the filing said. Under that program, he will receive restricted stock equal to 0.5 percent of the investment profits collected by Carlyle, known as carried interest, on investments the firm makes in a given year. The program is intended to push rewards years into the future, as Carlyle typically takes five years or so to start harvesting a given investment.

Glenn A. Youngkin, a 19-year veteran of Carlyle who is Mr. Cavanagh’s new partner as co-president and co-chief operating officer, will also get restricted stock worth 0.5 percent of carried interest under the new retention program. Adena T. Friedman, the chief financial officer, will get stock worth 0.1 percent of carried interest, the filing said. The stock vests over six months for all three executives.

Mr. Cavanagh, whose departure from JPMorgan came as a shock to Wall Street, may be taking a pay cut, based on his salary and bonus alone. His compensation last year was not made public, but a report in The Financial Times said it was $17 million.

Over time, however, he may be able to cash in at Carlyle, particularly as he builds an equity stake in the firm. Of his $7 million annual pay, $2 million is in restricted stock that will vest over five years.

The three founders of Carlyle, David M. Rubenstein, Daniel A. D’Aniello and William E. Conway Jr., together earned about $750 million last year, including dividends on their holdings and profits from personal investments in Carlyle’s funds.

Pleas by ‘Dewey Seven’ Reveal Details on Financial Manipulation

The seven former employees of Dewey & LeBoeuf who pleaded guilty to participating in a scheme to manipulate the law firm’s finances came from much different backgrounds than many of the high-powered lawyers at the once-prominent New York firm.

None of the seven employees, whose guilty pleas were unsealed on Thursday and Friday, was a lawyer. Most either had college degrees in accounting or had taken a few courses in accounting at a New York-area community college.

Just one of the former employees was a certified public accountant and none had an undergraduate degree from an Ivy League college.

Cyrus R. Vance Jr., the Manhattan District Attorney, is counting on the testimony and cooperation of the seven former back-office employees to support a 106-count indictment filed earlier this month against the law firm’s three top executives, all of whom are lawyers. The former employees, four of whom pleaded guilty to misdemeanor charges, provided prosecutors with detailed statements outlining their role in the manipulation scheme and who at Dewey instructed them to break the law.

The indictment, approved by a New York grand jury, charged Steven Davis, Dewey’s former chairman; Stephen DiCarmine, the firm’s onetime executive director, and Joel Sanders, the firm’s former chief financial officer, with orchestrating a four-year scheme to manipulate the firm’s finances in an attempt to keep Dewey in business and persuade investors and banks to provide it with badly needed financing.

Also indicted was a fourth man, Zachary Warren, a low-level employee who worked in client relations, who later went on to graduate from Georgetown University School of Law and clerk for a federal judge.

The authorities contend that the scheme, which fell apart when Dewey collapsed in bankruptcy in May 2012, cost investors $150 million to $200 million. The scheme began shortly after the completion of the 2007 merger of Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae, a move that created a firm with more than 1,300 employees but too many high-priced lawyers under contract. Within a year, as the economy started to collapse, the firm was having trouble weathering the sharp decline in revenue.

The unsealed pleas from the former employees reveal that most are prepared to provide testimony directly linking Mr. Sanders to allegations that the firm made improper year-end adjustments to its revenues and expenses and lied about those adjustments to the firm’s auditor from Ernst & Young. Several of the employees said they believed Mr. Davis and Mr. DiCarmine were aware of the financial manipulation, but some also said they had little direct dealings with the two men.

Only one former employee, Francis Canellas, the firm’s former director of finance, even mentioned Mr. Warren in the statements accompanying the guilty pleas.

In return for the cooperation of the seven former employees, Mr. Vance’s office is prepared to recommend that five of them not be sentenced to any jail time and simply do community service. In the case of Mr. Canellas, the plea deal provides that prosecutors will recommend a sentence of two to six years for his guilty plea to a felony charge of grand larceny. In the case of Thomas Mullikin, the firm’s former controller who pleaded guilty to a felony, the recommendation would be up to five months in jail.

Mr. Canellas, whose plea was unsealed on Thursday, offered the most direct evidence against Mr. Davis. In his statement, he said Mr. Davis was nervous before a meeting with the firm’s auditor to review the 2010 financial statements because he thought the firm’s former chairman was worried the inappropriate accounting adjustments would be discovered.

Also pleading guilty to a single felony charge was Jyhjing “Victoria” Harrington, the firm’s former accounting manager and the lone certified public accountant to plead guilty in the investigation.
Both Mr. Mullikin and Ms. Harrington pleaded guilty to a charge of scheme to defraud.

Mr. Canellas and Mr. Mullikin face civil securities fraud charges in a parallel lawsuit filed by the Securities and Exchange Commission, which also names Mr. Davis, Mr. DiCarmine and Mr. Sanders as defendants. The S.E.C. charges that the five men misled investors in a $150 million debt offering in 2010 about the financial well-being of the law firm.

The other former employees who pleaded guilty and cooperated with the investigation, Dianne Cascino, Ilya Alter, David Rodriguez and Lourdes Rodriguez, all pleaded to misdemeanor charges. All of those former employees worked in the firm’s finance division and were either responsible for client billing, budgeting or revenue collection.

Mr. Rodriguez, who was responsible for working with the firm’s top lawyers on their compensation, said in his statement that he was directed by Mr. Canellas to make false reclassifications in partner distributions “to make the firm’s net income appear higher than it really was.” He said one of the partner distributions that he was instructed to reclassify was a payment to Mr. Davis.

The statement by Mr. Rodriguez was one of the few that directly tied Mr. Davis to any wrongful conduct. Mr. Mullikin, in his statement, said he never met Mr. Davis and dealt “infrequently” with Mr. Sanders and Mr. DiCarmine. Mr. Mullikin said most of his dealings were with Mr. Canellas, whom he reported to.

The statements, taken together, suggest that in building their case, prosecutors are using a typical strategy of getting guilty pleas from lower-level employees as they work their way up the chain of command. Many of the employees who pleaded guilty reported to Mr. Canellas, who, in turn, reported to Mr. Sanders.

Prosecutors also have email evidence to bolster their case. The indictment and the S.E.C. civil lawsuit cited numerous emails in which Dewey’s top executives were talking openly about things like managing to trick the firm’s “clueless auditor” or getting tired of “cooking the books.”

Mr. Davis, Mr. DiCarmine, Mr. Sanders and Mr. Warren have all pleaded innocent to the charges. Lawyers for the men said it’s not surprising that prosecutors would get guilty pleas from former employees who are hoping to minimize the potential for jail time in return for their cooperation.

The investigation into the collapse of Dewey, which also involved agents with the Federal Bureau of Investigation, began around the time the firm was spiraling toward bankruptcy. The case has captivated the New York legal community because Dewey, which was partly named for Thomas Dewey, the former governor of New York, who began his legal career by prosecuting organized crime, was once one of the city’s top law firms.

Weekend Reading: March Madness, Wall St. Edition II

This week we look at some second, and third round matches in the Wall street edition of March Madness.

As promised, here are completely unscientific results of recent court battles, mergers and financial fights.

A look back on our reporting of the past week’s highs and lows in finance.

FRIDAY

Pleas by ‘Dewey Seven’ Reveal Details on Financial Manipulation | The unsealed pleas of seven former lower-level employees of Dewey & LeBoeuf indicate that they came from much different backgrounds than many of the high-powered lawyers at the once-prominent New York firm. DealBook »

Memphis and Cardinals Partner in Deal to Revitalize Ballpark | The City of Memphis tapped the municipal bond market to finance the $19 million purchase of AutoZone Park, the home of the Memphis Redbirds, a farm team that the St. Louis Cardinals will buy for $15 million. DealBook »

THURSDAY

Failing Stress Test Is Another Stumble for Citigroup | The broader question hanging over Citigroup is one that has dogged it since it was created nearly two decades ago: that the bank may be simply too big to manage. DealBook »

I.P.O. to Cut Ill-Fitting Ad Business From CBS | “Outdoor doesn’t quite fit with us because it’s sales, but not content,” said Leslie Moonves, chief executive of CBS. “The synergies didn’t really exist.” DealBook »

Ex-Finance Director of Failed Law Firm Says Its Chairman Feared Audit | Francis J. Canellas, the former finance chief of the bankrupt law firm, spoke to New York prosecutors after pleading guilty this year to taking part in a scheme to manipulate the firm’s financial statements. DealBook »

A Nasty Corporate Divorce, With Insults Traded on Twitter | The split between Bumi, a London-listed coal company, and its co-founders is turning unpleasant and public, with a war of words hurled across social media. DealBook »

WEDNESDAY

Fed Rejects Citigroup’s Payout Plans, Citing Concerns Over Capital | The Fed’s decision is prompting calls for another round of changes at the top of the bank’s management and questions over whether the bank should break up its far-flung operations. DealBook »

Inheriting a Mortgage Pain | The loans that promised to help older people stay in their homes in retirement are, in some cases, now pushing their children out. DealBook »

Law Firms Are Pressed on Security for Data | Large American corporations are pressing their law firms to increase cyber security to deter hackers from gaining access to confidential information. DealBook »

App Maker Buckles on First Day of Trading | After pricing at a midpoint that still valued the company at $7 billion, the shares of King Digital had a treacherous first day out, spiraling down almost 16 percent. DealBook »

Bank Agrees to Settle Mortgage Lawsuit | The lawsuit arose out of troubled mortgage-backed securities that the bank cobbled together and sold to Fannie Mae and Freddie Mac in the run-up to the financial crisis. DealBook »

Alibaba to Make Movies With Crowdfunding Idea | The Chinese e-commerce giant Alibaba’s most recent push into innovative finance gives investors, for as little as $16, a small role in getting films produced. DealBook »

Britain Gains Renminbi Trading Deal | The agreement by the Bank of England and the People’s Bank of China is the first outside of Asia and a victory for the British government in its efforts to make London a leading Western hub for Chinese trading. DealBook »

TUESDAY

Facebook in $2 Billion Deal for Virtual Reality Company | Facebook sees the future â€" a 3-D virtual world where you feel as if you are hanging out with your friends rather than staring at their pictures. The New York Times »

Heir Apparent Is Leaving JPMorgan Chase | The exit of a top banker shows how how easy it is for powerful private equity firms with less regulatory burdens to poach executives from big banks. DealBook »

For Carlyle, Recruiting an Outsider Is Not Unusual | The company hired Michael J. Cavanagh of JPMorgan Chase to be co-president with Glenn A. Youngkin, continuing a trend of going outside the firm for hiring. DealBook »

I.R.S. Takes a Position on Bitcoin: It’s Property | Some financial experts view the move as a way to push Bitcoin away from the fringes and into the mainstream financial system. DealBook »

King Digital Set to Trade At $22.50, A Midpoint | It will remain to be seen if investors are convinced that the company, valued at more than $7 billion when it starts trading on Wednesday, can come up with new hits. DealBook »

Federal Court Rejects Gupta’s Appeal for New Trial | A federal appeals court found that there was “ample evidence” that Rajat K. Gupta took part in a wider criminal conspiracy. DealBook »

A Start-Up Is Offering an Online Way to Invest in Hollywood | The JOBS Act, which opened up new ways for companies to raise money, will be used by Junction. DealBook »

MONDAY

Jury Decides 5 Employees of Madoff Knew Score | A federal jury in Manhattan has found five associates of the convicted swindler Bernard L. Madoff guilty on 31 counts of aiding one of the largest Ponzi schemes in history. DealBook »

Hurt in Crisis, TPG Pursues Smaller Deals | The private equity firm is taking a new approach, moving beyond the gigantic acquisitions and, instead, looking more at buying minority stakes. DealBook »

DealBook Column: A Question of What’s a Reasonable Reward | A money manager claims Coca-Cola allocated as much as $24 billion toward stock-based rewards for its senior people. DealBook »

In Battle of Billionaires, Icahn Gains Three Seats on the Herbalife Board | The nutritional supplements company Herbalife will nominate three directors proposed by Carl C. Icahn, allowing its biggest shareholder five seats on the board. DealBook »

Under Scrutiny, Top JPMorgan Chase Executive in China to Leave | Fang Fang, the bank’s chief executive for China and a focus of a federal bribery investigation in the United States, announced his desire to retire in an internal memo sent to staff. DealBook »

Having Identified Blogger, Hedge Fund Drops Lawsuit | Having discovered the identity of “Valuable Insights,” David Einhorn, head of Greenlight Capital, considers the matter resolved. The firm did not name the blogger. DealBook »

SUNDAY

Data Firm Actifio Hits $1 Billion Value Mark | Actifio has announce that it raised $100 million in new financing, valuing the entire company at $1 billion. DealBook »

WEEK IN VERSE

‘Warm Water’ | Stressed out, Citigroup? Chill out with the soothing sound of Banks. YouTube »

A Solid Rally on Wall Street

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Legendary Deal Maker Criticizes Investors With Short-Term Interests

NEW ORLEANS â€" No discussion of shareholder activism can happen without invoking the name Martin Lipton. He’s the lawyer who has defended corporate America for decades.

Speaking at the Tulane Corporate Law Institute here on Friday, the legendary deal maker held fast to his belief that companies’ boards should be protected so they can look out for the long-term interests of shareholders.

For Mr. Lipton, who invented the poison pill defense against activists and hostile bidders as a founder of Wachtell, Lipton, Rosen & Katz, the duty of corporate directors is to transcend the short-term desires of investors.

“My view of corporate governance is that the board of directors should be responsive to the long-term interests of the shareholders of the company,” he told his interlocutor, Andrew Ross Sorkin of DealBook.

He recounted why he created the poison pill. Properly known as a shareholder rights plan, the maneuver triggers a flood of shares if an investor buys more than a certain amount of stock, diluting the aggressor’s holdings.

“The poison pill was developed because of my frustration with the inability of subjects of hostile takeovers to deal,” he said.

Still feisty at 82 years old, Mr. Lipton noted that hostile takeovers aren’t always in the best interests of the company being pursued. He pointed to the unsolicited bid by American Express for McGraw-Hill in 1979, worth nearly $2.6 billion in today’s dollars. Now, McGraw-Hill is worth roughly $24 billion, counting the education division that it has sold off.

Mr. Sorkin pressed the lawyer on the rise of “shareholder democracy” in the United States, as boards have become more responsive to their investors over time. That’s not necessarily because of activist investors, but Mr. Lipton still identified that as a problem, with investment managers, in general, looking at too short a time frame for their investments.

But he praised people like Laurence D. Fink of BlackRock, who called on companies to reinvest and not merely take on debt to buy back stock â€" a phenomenon that Mr. Lipton attributed to short-termism.

That said, the deal maker isn’t completely opposed to activists. When asked by Mr. Sorkin whom he liked, Mr. Lipton first said that he respected, and perhaps sometimes even liked, the following activists:

- Ralph V. Whitworth and David Batchelder of Relational Investors

- Nelson Peltz and Peter May of Trian Partners

- Barry Rosenstein of Jana Partners

He was much more direct about some of the others.

“I don’t like Carl Icahn,” he said. “I don’t like Paul Singer at Elliott; I don’t like Dan Loeb at Third Point; and I don’t like Bill Ackman.”

Why? For Mr. Lipton, those hedge fund managers are out to make a profit for themselves, and sometimes other investors, but potentially at the expense of a company’s long-term interests.

Despite the early hour â€" 8 a.m., after what was, for many, a long New Orleans night â€" many merger advisers still packed a conference room to hear Mr. Lipton speak. Even Leo E. Strine Jr., Delaware’s newly minted chief justice and a sometime sparring partner, made a surprise roast-as-introduction for Mr. Lipton.

“Part of the reason why so many of us have so much respect for him is his belief that the capitalist system should work for all,” Justice Strine said.

He then presented Mr. Lipton with an honorary Delawarian award, jokingly adding, “The best thing is, you get all the benefits of being a Delawarian without living there.”

Shares of CBS Outdoor Rise on Debut

The second big initial public offering of the week has gotten off to a more auspicious start than the first.

The billboard business may be less sexy than a hot, rainbow-colored gaming app, but shares of CBS Outdoor opened 7 percent higher from their I.P.O. price on Friday morning.  That was in stark contrast to the disappointing debut of King Digital Entertainment on Wednesday. King, the maker of Candy Crush Saga, opened sharply lower and ended its first trading day down 15.6 percent.

Shares of CBS Outdoor opened around $30, up from its I.P.O. price of $28 in trading on the New York Stock Exchange.

The new public company raised about $560 million in the offering.

The CBS subsidiary is one of the largest advertising companies in the country, operating thousands of billboards, airport signs and digital displays from New York to Los Angeles. But as David Gelles reported on DealBook, the business hasn’t been quite a seamless fit within what is largely a television company:

“As much as we like that business, we are really a content company â€" that’s where our future is and our growth is,” said Leslie Moonves, chief executive of CBS. “Outdoor doesn’t quite fit with us because it’s sales, but not content. The synergies didn’t really exist.”

CBS will still own about 83 percent of CBS Outdoor, or 81 percent if underwriters exercise their option to buy all of their additional shares, for at least the next six months. When CBS eventually fully divests its stake, CBS Outdoor will convert into a real estate investment trust, a tax-efficient structure that is required to return most profits to shareholders.

CBS Outdoor competes with JCDecaux, Clear Channel Outdoor and Lamar Advertising.

Goldman Sachs, Bank of America Merrill Lynch, JPMorgan Chase and Morgan Stanley are leading the underwriting of the offering. Citigroup, Deutsche Bank and Wells Fargo are acting as book runners.

Memphis and Cardinals Partner in Deal to Revitalize Ballpark

The City of Memphis is inheriting a once troubled minor league baseball stadium in an unusual deal orchestrated by a New York private equity firm.

The deal, which was announced Friday, culminates a more than three-year bet by the firm, Fundamental Advisors, that it could turn around AutoZone Park in downtown Memphis.

In 2010, when Fundamental bought the municipal bonds used to build the stadium, attendance had declined and the stadium’s owner at the time was in default on its debts.

With a focus on investments in distressed municipal debt, Fundamental bought the bonds at steep discount and began investing in upgrading the park to increase ticket sales. As the stadium’s largest creditor, Fundamental was looking for ways to stabilize the stadium’s business and earn a return on its investment.

The minor league team that plays at the stadium, the Redbirds - and their major league affiliate the St. Louis Cardinals â€" are beloved in Memphis, while the ballpark is considered vital to the city’s downtown rebuilding efforts.

Fundamental’s ultimate strategy involved finding buyers for both the ballpark and the Redbirds.

As part of the deal signed on Friday, the St. Louis Cardinals agreed to pay Fundamental about $15 million to buy the Redbirds, one of their farm teams.

The city borrowed new money in the municipal bond market to purchase the stadium for about $19 million. The city used proceeds from the recently issued bonds to pay off the debt owned by Fundamental.

“This isn’t your typical private equity play of levering up an asset and letting the public markets take it out,’’ said Laurence Gottlieb, a former Citigroup municipal debt trader who co-founded Fundamental in 2007. “This asset touches the community in a very meaningful way.”

Until it hit a rocky patch, the park had come to symbolize the city’s efforts to reverse generations of “white flight”â€"predominately white residents fleeing Memphis for the suburbs, said the city’s mayor,  A C Wharton Jr.

“There are white families who claimed they would never go down into downtown Memphis,’’ Mr. Wharton. “But the one thing they don’t have in the suburbs is a minor league baseball stadium.”

Alternative investment firms like Fundamental are relatively new to the municipal bond market, but they have shown up more frequently as municipal issuers face default. Fundamental also runs a hedge fund strategy and the firm has invested in Puerto Rico debt as that island faces deep financial troubles.

The involvement of a distressed debt investor raised concerns among some in Memphis that the firm would look for ways to take advantage of the city. So city officials hired a financial advisers to assess Fundamental’s expected return on the deal. The analysis concluded there was “nothing extraordinary” about the return, the mayor said.

Fundamental expects an internal annual rate of return on its Memphis investment of about 6 percent, though for some of its investors, the return could prove higher because of the tax advantages of the municipal bonds.

“This is America,’’  Mr. Wharton said. “It is the willingness to take a risk and put your money out there that makes this country turn.’’

The deal didn’t exactly sale through, though. Some officials worried that taxpayer would be responsible for the ballpark debt.

“Like many big cities, we have pension problems and increasing healthcare costs,’’ said the City Council’s chairman, Jim Strickland. “I didn’t want to take money away from public safety and put it into baseball.”

The debt will be paid partly through tax rebates generated by food, beverage and other sales at the park. The Cardinals will make lease payments to the city for use of the ball park. The Cardinals chairman, William DeWitt Jr., said buying the farm team and leasing the stadium in Memphis was part of the Cardinals strategy to develop talent. Many major league clubs don’t own their farm team affiliates.

“We want to make sure that when our players are being developed in the minor league, they are in good cities and in first-rate ball parks,’’ Mr. DeWitt said.

The deal also added some other protections for the city, Mr. Strickland said.

If that revenue should fall short, the Cardinals have agreed to chip in $100,000 to backstop the debt payments. Memphis-based AutoZone, the car part retailer, is also providing a backstop if needed.

British Insurance Stocks Fall as F.C.A. to Conduct Review

LONDON - Shares of British insurers slumped Friday after the Financial Conduct Authority confirmed it planned to conduct a review later this year on whether long-standing customers were being treated fairly by their insurers.

The authority, which regulates financial firms, said Friday that it would officially announce the review on Monday as part of its business plan for the year.

The review comes just over a week after the British government announced plans to radical change its pension and savings policies, including allowing consumers to take their state retirement as a lump sum or a draw down over time, rather than being forced to buy an annuity at retirement. Consumers also will be able invest up to 15,000 pounds, or about $24,940, a year in cash accounts or stocks tax-free as part of the changes.

Insurance stocks here have been weaker since the pension changes were outlined by George Osborne, the chancellor of the Exchequer, as part of the government’s 2014 budget on March 19.

“The work on fair treatment of long standing customers in life insurance is a supervisory piece of work that will give us a better understanding of how this area functions,” the F.C.A. said in a statement on Friday. “We are not planning to individually review 30 million policies, we will be speaking to firms about how we can undertake that review.”

The Daily Telegraph, a British newspaper, first reported in its editions on Friday that the review would include life insurance and other retirement products that were sold by salesman door-to-door on commission and carried hefty exit fees if a consumer wanted to move to another retirement planning provider.

“As a forward looking regulator, we want to examine areas that are of interest and relevance to consumers and to firms and assess whether there is an issue that requires any action,” the F.C.A. said. “No conclusions have been reached as work has not started.”

Still, news of the review sent several insurers that make up the FTSE 100 index on the London Stock Exchange lower on Friday. Shares of Resolution, the owner of Friends Life, was hit the hardest, dropping 13.8 percent to 275 pence, in trading on Friday afternoon.

Aviva fell 7.4 percent, while Legal & General declined 6.6 percent. Prudential was off 4.3 percent and Standard Life was down 3.9 percent. Old Mutual was off 0.9 percent.

In his budget announcement last week, Mr. Osborne, the British chancellor, said that consumers would be able to put up to £15,000 a year in so-called individual savings accounts that can either be all-cash, all-stock or a mix of the two. The accounts are used to supplement retirement savings and differ from a traditional savings account.

Previously, there was a limit of £11,520 and no more than half of that could be in cash. The amounts also were required to be held in separate accounts.

He also announced a government-backed bond plan in which people 65 years old and older would be able to invest as much as £10,000 annually and scrapped rules that forced retirees to invest their state pension savings in annuities.

The changes are expected to severely pressure annuity sales by insurers by providing consumers more options to ensure a steady income stream in their old age.

A Boom Now, but Hurdles Ahead for Activist Investors

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A Boom Now, but Hurdles Ahead for Activist Investors

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Intesa Sanpaolo Posts Steep Fourth-Quarter Loss

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Intesa Sanpaolo Posts Steep Fourth-Quarter Loss

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Aviva’s Asset Manager to Sell One of Its U.S. Businesses

LONDON - The British insurer Aviva said on Friday that its asset management arm had agreed to sell one of its businesses in the United States, River Road Asset Management.

Affiliated Managers Group will purchase the institutional investment management firm River Road for an undisclosed amount, Aviva said.

The asset management business, Aviva Investors, remains committed to the American market, with its business based in Chicago, the company said.

“The transaction is in line with Aviva Investors’ strategy of simplifying its business and moving towards an integrated operating model and organizational structure,” said Jason Windsor, the Aviva group chief strategy and development officer.

The sale of River Road is expected to be completed in the third quarter.

Aviva Investors acquired River Road, which is based in Louisville, Ky., in 2009. River Road had about $11 billion in assets under management as of Dec. 31.

By comparison, Aviva Investors, the asset management arm, has about 241 billion pounds, or about $400.7 billion, in assets under management.

Over all, Aviva, the insurer, reported an operating profit of £2.05 billion in 2013. The company employees about 28,000 people worldwide.

Aviva’s Asset Manager to Sell One of Its U.S. Businesses

LONDON - The British insurer Aviva said on Friday that its asset management arm had agreed to sell one of its businesses in the United States, River Road Asset Management.

Affiliated Managers Group will purchase the institutional investment management firm River Road for an undisclosed amount, Aviva said.

The asset management business, Aviva Investors, remains committed to the American market, with its business based in Chicago, the company said.

“The transaction is in line with Aviva Investors’ strategy of simplifying its business and moving towards an integrated operating model and organizational structure,” said Jason Windsor, the Aviva group chief strategy and development officer.

The sale of River Road is expected to be completed in the third quarter.

Aviva Investors acquired River Road, which is based in Louisville, Ky., in 2009. River Road had about $11 billion in assets under management as of Dec. 31.

By comparison, Aviva Investors, the asset management arm, has about 241 billion pounds, or about $400.7 billion, in assets under management.

Over all, Aviva, the insurer, reported an operating profit of £2.05 billion in 2013. The company employees about 28,000 people worldwide.

Bitcoin at a ‘Fork in the Road,’ Analyst Says

The guidance that the Internal Revenue Service provided on Tuesday that  Bitcoin should be treated as property rather than as currency for tax purposes has prompted a fair amount of commentary, including a Standard Deduction column by DealBook’s Victor Fleischer.

Steven Englander, the chief foreign exchange strategist for Citigroup,  sees the I.R.S. decision as ending “a couple of Bitcoin mythologies”  and possibly nudging  virtual currencies toward becoming mainstream payment systems. In a note sent out on Thursday night, Mr. Englander  said that the belief that one can operate outside the financial system and conduct transactions of any significant size anonymously has been shattered.

He also pointed to “a real fork in the road between the bitcoin as an asset and bitcoin as a transactions medium.”

Many consumers and retailers may use the generic Bitcoin transactions technology, saving on the transactions charge from conventional credit card and money transfer companies, but avoiding the I.R.S. reporting burden. So they will want to transact in Bitcoin, but not hold it, and they will be pretty much indifferent which [digital currency] they use. Exposure will be infinitesimally short.

Mr. Englander argues that it is difficult to see how Bitcoin itself can have value “when consumers and businesses actually seek to avoid holding it as an asset.”

We come back to the view that if Bitcoin will evolve into a payments technology, it will be simpler to have $coin and €coin which will suffice for almost all transactions. In the same way that the exposure to Bitcoin can be made infinitesimally small in transactions, FX exposure can be made similarly small in cross-border transactions.

Italy’s Anima Receives Regulatory Approval for I.P.O.

LONDON - The Italian asset manager Anima said Friday that it had received approval from Italian regulators to list on the Borsa Italiana.

Anima expects to publicly float about 63.25 percent of its share capital. The initial public offering could value the company up to 1.35 billion euros, or about $1.85 billion.

The company said it expects to price its shares between €3.50 and €4.50 a share.

The offering is another in a flurry of European floats this year, fueled in part by private equity firms looking to exit potential companies amid buoyant stock markets.

There have been 58 offerings in Europe, the Middle East, India and Africa that have raised $14.4 billion so far in the first quarter, according to a report released earlier this week by Ernst & Young. That’s a 9 percent increase in the number of floats over the prior-year period.

Overall, the global I.P.O. market is the strongest its been since first quarter 2011, with 239 deals raising around $44.3 billion, according to Ernst & Young.

Anima is owned by the Italian private equity firm Clessidra and the Italian banks Monte dei Paschi di Siena and Banco Popolare di Milano. They are expected to remain shareholders in Anima following the sale.

About 90 percent of the offering is expected to be allotted to institutional investors.

The book runners on the offering are Goldman Sachs, Banca IMI, UniCredit and UBS.

Citi’s Blues

TOO BIG TO MANAGE?  |  A day after Citigroup’s capital plan failed the Fed’s stress test for the second time in three years, the bank’s executives were still struggling to understand the Fed’s decision and how best to respond. But the regulator’s rebuke should not have come as a complete surprise, Michael Corkery and Jessica Silver-Greenberg write in DealBook. With the Fed’s decision, a question that has dogged Citigroup for nearly two decades has resurfaced: Is the bank simply too big to manage?

Most of the nation’s largest banks operate globally, but few banks have the reach of Citigroup. The bank has a physical presence in more than 100 countries, generating roughly half of its total revenue from countries outside the United States. More than many of its peers, Citigroup also lends directly to consumers and companies outside the United States, a strategy that may have contributed to the $400 million fraud recently uncovered in Citigroup’s Mexican banking unit, Banamex.

Citigroup’s failure was a personal blow to Michael L. Corbat, the bank’s chief executive, who has been praised for improving the bank’s relations with regulators. His predecessor, Vikram S. Pandit, was pushed out after the bank failed to pass the stress test in 2012. Mr. Corbat has vowed to restructure the bank by cutting costs and shedding unwanted businesses. But alas, as if to underscore the bank’s global sprawl, Mr. Corbat found out about the bank’s failure from a hotel room in South Korea.

I.P.O. TO RELIEVE CBS OF AN AWKWARD FIT  |  When CBS Outdoor begins trading on the New York Stock Exchange on Friday, its parent company, CBS, may breathe a sigh of relief, David Gelles writes in DealBook. CBS Outdoor is among the largest advertising companies in the country, but its core focus â€" operating billboards, airport signs and digital displays â€" was an awkward fit for CBS, best known for its broadcast television network. CBS Outdoor’s shares were priced on Thursday at $28 apiece.

“Outdoor doesn’t quite fit with us because it’s sales, but not content. The synergies didn’t really exist,” said Leslie Moonves, chief executive of CBS. After the initial public offering, CBS Outdoor, which will be renamed in the coming months, will be a stand-alone advertising company with a market capitalization expected to be about $3.3 billion. Jeremy J. Male, chief executive of CBS Outdoor, said the spinoff will allow his company to be able to make its own capital decisions without having to fight for capital allocation. For his part, Mr. Moonves said CBS Outdoor would be “a fabulous stand-alone company.”

FACEBOOK GETS INTO DRONES  |  In his second mind-boggling announcement of the week, Mark Zuckerberg, the co-founder and chief executive of Facebook, revealed on Thursday that the company was creating a new lab charged with figuring out how to beam Internet from the sky. To that end, Facebook is buying a small British company called Ascenta, which makes solar-powered drones, Vindu Goel writes in The New York Times. The deal comes only days after Facebook announced that it would spend at least $2 billion to buy Oculus VR, a maker of virtual reality headsets.

Facebook’s new lab is part of Mr. Zuckerberg’s Internet.org project, which aims to bring Internet to the two-thirds of the world’s population without Internet access. The company envisions using satellites, drones and lasers to reach the 10 percent of the world’s population that are in areas difficult to reach via traditional Internet solutions.

Facebook’s recent initiatives have prompted some to wonder whether the company is trying to keep up with its bigger Silicon valley rival, Google, which already has its own head-mounted computing project, Glass, and is trying to bring the Internet to the middle of nowhere. (Google, however, is trying to do so through a network of high-flying balloons).

ON THE AGENDA  |  Personal income data for February is out at 8:30 a.m. The Thomson Reuters/University of Michigan consumer sentiment index for March is released at 9:55 a.m. Michael Carr, the head of Goldman Sachs’s mergers and acquisitions group in the Americas, is on CNBC at 8:10 a.m. Leslie Moonves, the chief executive of the CBS Corporation, and Jeremy J. Male, the chief executive of CBS Outdoor Americas, are on CNBC at 9:45 a.m. Richard W. Fisher, the president of the Dallas Fed, is on CNBC at 7 p.m. John S. Chen, the executive chairman and chief executive of BlackBerry, is on Bloomberg TV at 11:30 a.m. Sunday Morning Futures with Maria Bartiromo debuts on the Fox News Channel on Sunday.

MYSTERIOUS DEWEY SEVEN REDUCED TO SIX  |  In a statement unsealed on Thursday, Francis J. Canellas, the former finance director of the bankrupt law firm Dewey & LeBoeuf, pointed fingers at his former co-workers, Matthew Goldstein writes in DealBook. Mr. Canellas is one of seven former Dewey employees who pleaded guilty to taking part in a four-year plan to manipulate the financial statements of the once-mighty law firm, but whose identities and plea agreements were being kept under wraps by New York prosecutors. The pleas of most of the other employees are expected to be unsealed on Friday.

The cooperation of Mr. Canellas and some of the other former employees is regarded as crucial in the criminal case against the firm’s former chairman, two other former top executives and a low-level employee, who were indicted this month by a New York grand jury on multiple counts of grand larceny and falsifying business records. The four men have pleaded innocent to the charges. The unsealing of Mr. Canellas’s plea deal came after The New York Times filed a motion asking the judge to unseal the cases.

Mergers & Acquisitions »

A Nasty Corporate Divorce, With Insults Traded on Twitter  |  The breakup of an Indonesian coal company and its co-founders is turning out to be nasty, culminating with a tirade of schoolboy insults hurled across Twitter.
DealBook »

Shareholders of Brazil’s Oi Approve Capital Increase  |  The telecommunications company takes a step closer to a merger with Portugal Telecom.
DealBook »

Adviser on Dell Buyout Questions a Tumultuous Process  |  At the Tulane Corporate Law Institute, an adviser on Dell’s leveraged buyout wondered whether the myriad steps the board took to ensure the integrity of the sales process could have been improved.
DealBook »

Big Deals Drive Global M.&A. Recovery  |  A spate of big transactions drove the value of global mergers and acquisitions activity up by 54 percent in the first quarter compared with the same period a year ago, Reuters writes.
REUTERS

A Buying Spree for Tech  |  Deep pockets and ambition are fueling one of the biggest buying and investing sprees for the technology industry’s giants â€" including Facebook, Google and Amazon â€" since the dot-com era of the late 1990s, The Wall Street Journal writes.
WALL STREET JOURNAL

INVESTMENT BANKING »

Intesa Sanpaolo Posts Steep Fourth-Quarter Loss  |  The Italian lender took a €5.8 billion impairment on the goodwill of some of its business and set aside more than €3 billion for bad loans in the quarter.
DealBook »

Backlash for the Fed Over Stress Test Results  |  Bank executives and investors criticized the Federal Reserve on Thursday after the results sent Citigroup’s share price tumbling, The Financial Times writes.
FINANCIAL TIMES

Bank of China to Sell Soured Loans to Investment Bank Unit  |  The Bank of China, one of the country’s state-owned banks, has started unloading troubled loans to its investment banking unit, The Wall Street Journal writes, citing unidentified people familiar with the situation. The unit is expected to try to restructure the debt in hopes of recovering more than it paid for the loans.
WALL STREET JOURNAL

PRIVATE EQUITY »

TPG Said to Be in Talks to Invest in Chobani  |  Chobani, the yogurt maker, has been in discussions with potential investors to help it grow internationally, and TPG, the private equity giant, is now apparently the lead bidder.
DealBook »

Tiger Global Looks to Invest in Start-Ups  |  Tiger Global Management is among the investment firms turning to Silicon Valley, as an increasing number of technology companies hold off on initial public offerings, Reuters reports.
REUTERS

Ares Management Said to Prepare to File I.P.O.  |  The Los Angeles investment firm Ares Management, which oversees $74 billion in credit and private equity, is said to be preparing to sell shares in the biggest initial public offering of an alternative asset manager since the Carlyle Group went public in 2012, Bloomberg Businessweek writes, citing unidentified people familiar with the situation.
BLOOMBERG BUSINESSWEEK

El Pollo Loco Planning to Go Public  |  The private equity owners of the fast food chicken chain El Pollo Loco are planning an initial public offering of the company’s shares, The Wall Street Journal reports.
WALL STREET JOURNAL

HEDGE FUNDS »

Falcone Accused of Using Company Assets in Cash Crunch  |  Faced with investor redemptions in the weeks after an S.E.C. settlement, Philip Falcone used his publicly listed company to “bail himself out,” an investor contends in a lawsuit.
DealBook »

A Boom Now, but Hurdles Ahead for Activist Investors  |  “A lot of people coming to this space where I question their skills,” says an adviser at the Tulane Corporate Law Institute. “I do have concern about less-than-intelligent activists.”
DealBook »

Distressed Debt Investors Gear Up for Energy Future Restructuring  |  Distressed debt players, including hedge funds and sell-side trading desks, have been taking positions in Energy Future Holdings in the last year in anticipation of a debt restructuring or a filing for Chapter 11 bankruptcy protection, The Wall Street Journal writes.
WALL STREET JOURNAL

SAC Urges Approval of Insider Trading Settlement  |  Steven A. Cohen’s hedge fund, SAC Capital Advisors, urged a federal judge to approve its $1.8 billion insider trading settlement with the government, Bloomberg News reports.
BLOOMBERG NEWS

Bernanke Seen Dining with Hedge Fund Billionaires  |  Ben S. Bernanke, the former chairman of the Federal Reserve, was spotted on Wednesday enjoying dinner with several hedge fund billionaires including David Einhorn, Louis M. Bacon and Larry Robbins, Forbes writes.
FORBES

I.P.O./OFFERINGS »

U.S. to Shrink Stake in Ally Financial  |  The Treasury Department plans to sell 95 million shares of the former financing arm of General Motors in an initial public offering.
DealBook »

Specialty Insurer Brit Raises Nearly $400 Million in London I.P.O.  |  The insurer, which is based in the Netherlands, is the latest private equity-owned company to seek to publicly float its stock in recent months.
DealBook »

Baxter to Split Into 2 Health Care Companies  |  Baxter International plans to spin off its biopharmaceuticals business to shareholders by the middle of next year.
DealBook »

Conscious Uncoupling for Drug Makers  |  In the wake of Baxter’s split, Merck, Bayer and Johnson & Johnson may find it hard not to jump on the bandwagon, Robert Cyran of Reuters Breakingviews writes.
DealBook »

Spotify Said to Be Planning I.P.O.  |  The music streaming service Spotify is said to have participated in informal talks with investment banks likely to seek a role in a potential initial public offering, Quartz reports, citing unidentified sources familiar with the situation.
QUARTZ

VENTURE CAPITAL »

Andreessen Horowitz Raises Another $1.5 Billion Fund  |  The venture capital firm Andreessen Horowitz has closed it fourth fund at $1.5 billion, Reuters writes.
REUTERS

Intel Exits a Data Analysis Business and Invests in Another One  |  Intel said on Thursday that it was making a “significant” equity investment in Cloudera, which produces the most popular version of the Hadoop software framework for big data analysis, the Bits blog reports. Intel is also turning over to Cloudera its own version of Hadoop and would seek to move its customers over to Cloudera.
NEW YORK TIMES BITS

Tweets About Music to Get a Billboard Chart  |  Twitter and Billboard plan to create the Billboard Twitter Real-Time Charts: continuously updated lists of the songs being discussed and shared the most on Twitter in the United States. For Billboard, the deal adds some Silicon Valley cachet as it tries to reinvent itself as a more consumer-oriented publication, The New York Times writes.
NEW YORK TIMES

LEGAL/REGULATORY »

Judge Urges Dismissal of Mortgage Suit Against Bank of America  |  The recommendation to toss out a Justice Department lawsuit over a soured mortgage deal at Bank of America could inspire other banks to test their luck in court.
DealBook »

S.E.C. Official Criticizes Proxy Proposals on Social Issues  |  Daniel M. Gallagher, an S.E.C. commissioner, argued that the agency must clamp down on the filing of shareholder proposals unrelated to the long-term interests of corporations, such as those relating to climate change or sustainability.
DealBook »

Appeals Court in Gupta Case Chooses Not to Admonish Bad Behavior  |  The court hearing the appeal of Rajat Gupta, former managing director of McKinsey & Company, did not take up the opportunity to make a statement about improper business conduct, David Zaring writes in Another View.
DealBook »

With Banking, What Happens in Europe Does Not Stay in Europe  |  The creation of a Single Resolution Mechanism to resolve a failing bank in Europe is an important step forward, but it faces a number of hurdles, writes Mayra Rodríguez Valladares in an Another View column.
DealBook | Another View »

Congress Approves $1 Billion in Aid for Ukraine  |  The measure passed after the White House dropped efforts to tie it to an overhaul of the International Monetary Fund negotiated by President Obama, The New York Times writes.
NEW YORK TIMES

Disabled Borrowers Trade Loan Debt for a Tax Bill From the I.R.S.  |  The Internal Revenue Service may count a forgiven debt as income, leaving some disabled borrowers with tax bills they cannot pay, The New York Times reports.
NEW YORK TIMES

Growth in the Fourth Quarter Is Revised Up a Shade, to 2.6%  |  The Commerce Department’s final revision for gross domestic product growth in the fourth quarter of 2013 ticked up to 2.6 percent, slightly higher than previously estimated, The New York Times writes.
NEW YORK TIMES

Shareholders of Brazil’s Oi Approve Capital Increase

SAO PAULO â€" Shareholders of the Brazilian telecommunications company Oi have overwhelmingly approved a capital increase and other measures, moving it closer to merging with Portugal Telecom.

In a filing on Thursday, Oi, Brazil’s largest fixed-line provider and fourth-largest mobile phone operator, said that just over 88 percent of the votes cast were in favor of four measures, including trying to raise as much as 14.1 billion reais, or about $6 billion, in new capital, in part by using shares based on a valuation of Portugal Telecom’s assets, which was also ratified.

The meeting took place at Oi’s headquarters in Rio de Janeiro, which will  be home to the new company.

With the vote, as well as with approval on Thursday from the Brazilian telecommunications  regulator,  the two companies  are closer to forming the largest telecommunications company in Portuguese-speaking countries. The merged company will seek to take on competitors Telefonica and America Movil, which is owned by Carlos Slim Helu.

The merger, announced on Oct. 2, has been contentious and faced scrutiny for unusual complexity. Significant cross-ownership already exists between the two companies. Since 2010, Portugal Telecom has had a 22.3 percent stake in Oi. And Oi already owns a stake in Portugal Telecom. They share the same chief executive, Zeinal Bava, who is also set to head the new company.

Minority investors in Oi, which has long been heavily indebted, have contested that its controlling shareholders are trying to shift their debt burden.

“In essence, what is going on is the transfer of the debt that is held by the controlling shareholders to the minority owners of Oi via the overvaluation of Portugal Telecom’s assets.” Mauro Cunha, head of Brazil’s Association of Investors in Capital Markets, or AMEC, said in an interview with DealBook earlier this week.

He said that “compensates Portugal Telecom shareholders for that assumption of debt but not the shareholders of Oi.”

AMEC as well as Rio de Janeiro-based independent asset manager Tempo Capital, have argued that the controlling shareholders have conflicting interests and should not be allowed to vote on the valuation of Portugal Telecom’s assets and asked the securities regulator to intervene.

But on Tuesday, it ruled in favor of Oi’s controlling shareholders, clearing the way for the vote on Thursday.

The companies were expected to embark on a roadshow on Friday, according to Brazilian newspaper O Estado do S. Paulo and visit the United States, Chile, Canada, France, and Germany.

But the securities regulator has suspended Oi’s new capital offering for 30 days, citing possible violations to  quiet period rules.

Oi expects to price its new shares on April 16 and close the offer on April 23. Brazilian investment bank BTG Pactual is leading a consortium, according to securities filings and has already committed 2 billion reais.

Specialty Insurer Brit Raises Nearly $400 Million in London I.P.O.

LONDON - The specialty insurer Brit said Friday that it raised 240 million pounds, or about $400 million, as part of an initial public offering on the London Stock Exchange.

Brit is the latest private equity-owned company to seek to publicly float its shares in recent months amid buoyant stock markets eager for new listings.

The insurer, which is based in the Netherlands, priced its I.P.O. at 240 pence a share, giving it a market capitalization of £960 million. The company’s shares were trading up slightly at 240.25 pence early Friday.

Brit was taken private by Apollo Global Management and CVC Capital Partners in 2010.

“I am pleased that our offering has been well received by investors,” said Mark Cloutier, the Brit chief executive. “Having transformed Brit into a successful global specialty insurer operating solely through Lloyd’s of London, we have built a strong foundation for future profitable growth and continued success.”

Since going private, the company has sold several business lines, including its general insurance business in Britain in 2012.

It now focuses on specialty insurance and reinsurance for businesses, and it has a large presence in the Lloyd’s of London underwriting marketplace.

In 2013, Brit posted a 20.1 percent increase in profit, to about 102 million pounds, or $169 million.

Private equity firms have engaged in a series of sales and I.P.O. announcements of their portfolio companies in the past year as stock markets have recovered.

Earlier this month, Poundland, a British discount retailer that sells everything for £1 or less, ISS, a Danish outsourcing company, and Pets at Home, a British pet supply retailer, all went public.

Apollo and CVC will remain Brit’s largest shareholders following the I.P.O.

JPMorgan Chase was sole sponsor and served as global co-coordinator and bookrunner with UBS on the offering.