Gravity Hits Highflying Tech Stocks

For much of the past year, Tesla Motors seemingly could do no wrong in investors’ eyes.

A nearly unbroken string of quarterly losses, ambitions to build a huge battery factory: no matter. Shareholders kept pushing the company’s stock up, by about 50 percent this year.

But on Friday, the market had second thoughts about its onetime darling, as Tesla shares tumbled nearly 6 percent.

That sudden turnaround played out again and again in the once-highflying technology and biotechnology stocks that propelled the markets for over a year. The Icarian tumble of beloved names, like NXP Semiconductor and the biopharmaceutical company Alexion, signals a potential shift in investors’ belief in chasing eye-popping growth.

What remains to be seen is whether the damage has been contained, or even if these stocks have finally hit earth.

All that is apparent now is that many “momentum” stocks, those that had drawn buyers because of their ascending trajectories, ran out of steam on Friday. While the three major market indexes were down that day, the Nasdaq composite index fell by more than double the descent of the Standard & Poor’s 500-stock index or the Dow Jones industrial average. The Nasdaq began to wobble a little before 11 a.m., and then commenced a full-on tumble, ending the day down 2.6 percent at 4,127.73.

Behind the index’s plunge was its very nature as the home of many of the highest highfliers, whose valuations have soared to spectacular levels. Over all, the Nasdaq trades at 31 times the reported earnings of its constituent companies, or nearly twice the ratio seen with the S.&P. 500.

“There is concern that we could be at a near-term market peak,” said Dane Leone, the head of United States market strategy for Macquarie. If that is true, he added, investors rightly worried about holding onto stocks that were correlated so closely with overall market performance.

For much of last year, shareholders favored rapid-growth stories, reflecting a hunger for high-risk, high-reward investments, especially as low interest rates kept bond investments relatively unpalatable. Technology companies, particularly Internet-based players, astounded with their booming businesses. And health companies, including technologists and biopharmaceutical drug makers, showed promise with new products.

Illumina, a maker of sophisticated gene-sequencing technology and one of the highest fliers, jumped 173 percent in the year through last Thursday. And Facebook shares at their 52-week peak reached $72.59, nearly double their initial offering price from May of 2012.

Those performances have also driven the market for initial public offerings to heights untouched in the United States since the boom year of 2000, according to data from Renaissance Capital. Internet and biotechnology start-ups have rushed to claim public listings, especially given some rich performances by notable debutantes. FireEye, a noted cybersecurity firm, had at its height nearly quintupled its I.P.O. price of $20 a share since going public last September.

But momentum stocks rely on investor exuberance to continue their growth. And as that enthusiasm evaporated, so too did those once-magical gains. FireEye slid 8 percent on Friday; Illumina fell nearly 6.7 percent.

NXP Semiconductor, whose 35 percent rise from Jan. 1 through Thursday made it one of the best performers in the Nasdaq, tumbled 7.4 percent.

Few analysts agree on what spurred the sell-off, though Mr. Leone hypothesized that biotech companies suffered from pressure on the prices of their products, especially after Congress asked one drug maker, Gilead, how it could justify the $84,000 cost of its hepatitis C treatment Solvadi.

Not all was doom and gloom, even on Friday. GrubHub, the online food delivery company beloved by financial industry employees, survived a wild ride to close 31 percent over its offering price, at $34 a share. IMS Health, a major seller of prescription drug data, closed up 15 percent over its I.P.O., at $23.

And less-supercharged technology stocks suffered far less. Shares in Intel, for instance, ended Friday down just under 1 percent. Those in Oracle fell even less, closing down about 0.7 percent.

Analysts are of two minds over what will happen next. Some believe that if investors continue to flee these momentum stocks en masse, the damage could bleed over into seemingly unconnected companies. Mr. Leone of Macquarie said that because many of these growth companies are widely held in various indexes and exchange-traded funds, a continued plummet could hurt others in those bundles.

He says he remains skeptical that investors have finished their selling.

“It’s hard to say that we’re really done,” he said. “There’s no valuation support for these stocks right now.”

One potential area that could be affected is the I.P.O. market, if the venture capitalists and private equity financiers who back many of the start-ups worry that they cannot get the sky-high valuations that had become the norm. Kathleen S. Smith, a principal at Renaissance Capital, noted last week that investors had been pushing back against pricing in some new stock issuances.

Nowhere was that more evident than with King Digital, the maker of the wildly popular Candy Crush Saga. The game maker priced its offering in the middle of March at $22.50, in the middle of its expected range, only to see the stock price sink below that almost immediately. King’s shares fell again on Friday, sliding nearly 5 percent to $18.96.

But others cautioned against expecting broader damage to the market. Momentum stocks could continue to gyrate for some time, but the broader market should remain relatively unaffected, said Matthew L. Rubin, the director of investment strategy at Neuberger Berman. In fact, investors have already shown a flight to safer havens in value stocks.

Moreover, some of the sell-off could be tied to benign reasons, including investors wanting to cash in gains ahead of tax season.

“I think this was isolated in the momentum stock arena,” Mr. Rubin said. “A pullback was sort of in order.”

Gravity Hits Highflying Tech Stocks

For much of the past year, Tesla Motors seemingly could do no wrong in investors’ eyes.

A nearly unbroken string of quarterly losses, ambitions to build a huge battery factory: no matter. Shareholders kept pushing the company’s stock up, by about 50 percent this year.

But on Friday, the market had second thoughts about its onetime darling, as Tesla shares tumbled nearly 6 percent.

That sudden turnaround played out again and again in the once-highflying technology and biotechnology stocks that propelled the markets for over a year. The Icarian tumble of beloved names, like NXP Semiconductor and the biopharmaceutical company Alexion, signals a potential shift in investors’ belief in chasing eye-popping growth.

What remains to be seen is whether the damage has been contained, or even if these stocks have finally hit earth.

All that is apparent now is that many “momentum” stocks, those that had drawn buyers because of their ascending trajectories, ran out of steam on Friday. While the three major market indexes were down that day, the Nasdaq composite index fell by more than double the descent of the Standard & Poor’s 500-stock index or the Dow Jones industrial average. The Nasdaq began to wobble a little before 11 a.m., and then commenced a full-on tumble, ending the day down 2.6 percent at 4,127.73.

Behind the index’s plunge was its very nature as the home of many of the highest highfliers, whose valuations have soared to spectacular levels. Over all, the Nasdaq trades at 31 times the reported earnings of its constituent companies, or nearly twice the ratio seen with the S.&P. 500.

“There is concern that we could be at a near-term market peak,” said Dane Leone, the head of United States market strategy for Macquarie. If that is true, he added, investors rightly worried about holding onto stocks that were correlated so closely with overall market performance.

For much of last year, shareholders favored rapid-growth stories, reflecting a hunger for high-risk, high-reward investments, especially as low interest rates kept bond investments relatively unpalatable. Technology companies, particularly Internet-based players, astounded with their booming businesses. And health companies, including technologists and biopharmaceutical drug makers, showed promise with new products.

Illumina, a maker of sophisticated gene-sequencing technology and one of the highest fliers, jumped 173 percent in the year through last Thursday. And Facebook shares at their 52-week peak reached $72.59, nearly double their initial offering price from May of 2012.

Those performances have also driven the market for initial public offerings to heights untouched in the United States since the boom year of 2000, according to data from Renaissance Capital. Internet and biotechnology start-ups have rushed to claim public listings, especially given some rich performances by notable debutantes. FireEye, a noted cybersecurity firm, had at its height nearly quintupled its I.P.O. price of $20 a share since going public last September.

But momentum stocks rely on investor exuberance to continue their growth. And as that enthusiasm evaporated, so too did those once-magical gains. FireEye slid 8 percent on Friday; Illumina fell nearly 6.7 percent.

NXP Semiconductor, whose 35 percent rise from Jan. 1 through Thursday made it one of the best performers in the Nasdaq, tumbled 7.4 percent.

Few analysts agree on what spurred the sell-off, though Mr. Leone hypothesized that biotech companies suffered from pressure on the prices of their products, especially after Congress asked one drug maker, Gilead, how it could justify the $84,000 cost of its hepatitis C treatment Solvadi.

Not all was doom and gloom, even on Friday. GrubHub, the online food delivery company beloved by financial industry employees, survived a wild ride to close 31 percent over its offering price, at $34 a share. IMS Health, a major seller of prescription drug data, closed up 15 percent over its I.P.O., at $23.

And less-supercharged technology stocks suffered far less. Shares in Intel, for instance, ended Friday down just under 1 percent. Those in Oracle fell even less, closing down about 0.7 percent.

Analysts are of two minds over what will happen next. Some believe that if investors continue to flee these momentum stocks en masse, the damage could bleed over into seemingly unconnected companies. Mr. Leone of Macquarie said that because many of these growth companies are widely held in various indexes and exchange-traded funds, a continued plummet could hurt others in those bundles.

He says he remains skeptical that investors have finished their selling.

“It’s hard to say that we’re really done,” he said. “There’s no valuation support for these stocks right now.”

One potential area that could be affected is the I.P.O. market, if the venture capitalists and private equity financiers who back many of the start-ups worry that they cannot get the sky-high valuations that had become the norm. Kathleen S. Smith, a principal at Renaissance Capital, noted last week that investors had been pushing back against pricing in some new stock issuances.

Nowhere was that more evident than with King Digital, the maker of the wildly popular Candy Crush Saga. The game maker priced its offering in the middle of March at $22.50, in the middle of its expected range, only to see the stock price sink below that almost immediately. King’s shares fell again on Friday, sliding nearly 5 percent to $18.96.

But others cautioned against expecting broader damage to the market. Momentum stocks could continue to gyrate for some time, but the broader market should remain relatively unaffected, said Matthew L. Rubin, the director of investment strategy at Neuberger Berman. In fact, investors have already shown a flight to safer havens in value stocks.

Moreover, some of the sell-off could be tied to benign reasons, including investors wanting to cash in gains ahead of tax season.

“I think this was isolated in the momentum stock arena,” Mr. Rubin said. “A pullback was sort of in order.”

Former Kaplan Chief Assembling a Digital Learning Company

For 14 years, Jonathan N. Grayer helped build Kaplan from a small test preparation company into one of the giants of the education business and the crown jewel of what once was The Washington Post Company.

Now, with a pair of acquisitions, Mr. Grayer will take a big step toward expanding his latest venture into a learning hub for the digital age.

Weld North, the company Mr. Grayer now runs as chairman and chief executive, plans to announce on Monday that it has acquired two digital learning businesses that will help expand the company into English-language education and school management. Terms of the deal were not disclosed, but people briefed on the matter said Weld North was paying a total of more than $150 million for the two companies, Imagine Learning and Truenorthlogic.

Private equity firms have been eager to jump into the $8 billion market for education technology, an industry that has drawn investments from the likes of Providence Equity Partners and Bain Capital. Media conglomerates like News Corporation and Bertelsmann are also pouring money into the education technology business.

The deals for Imagine Learning and Truenorthlogic are the latest by Weld North, an investment partnership backed in part by the private equity giant Kohlberg Kravis Roberts.

Though Weld North has its hands in a number of other businesses â€" it controls the specialty food provider Organic Avenue, for example â€" it has long had designs on competing with established education companies like Kaplan. (Kaplan is now part of Graham Industries, which changed its name last year from The Washington Post Company after it sold The Washington Post newspaper.)

Even after leaving Kaplan in 2008, Mr. Grayer wanted to remain involved in the for-profit education business. But he wanted to focus on digital learning, what he considered to be the future of schooling.

“Digital products have been around for a while, but they have proven to be a mainstay,” he said in an interview. “They’re getting to the point where schools, administrators and politicians are realizing that change has to occur.”

Weld North’s first purchase was Edgenuity, a specialist in helping students who have fallen behind academically catch up with their peers. Weld North also combined two smaller companies into Generation Ready, a provider of school improvement services.

To those, Weld North is adding two companies based in Utah’s “Silicon Slopes” technology community. Imagine Learning uses animation and games to help younger students learn English as a second language, a program now known as English Language Learner. Truenorthlogic provides cloud-based human resource software for schools in districts like New York City, Chicago and Los Angeles, and is intended to work together with Generation Ready.

The two latest additions will help Weld North create what it calls a $200 million platform for digital learning, one that focuses both on student programs and administrative services.

Mr. Grayer acknowledges that his company’s bet on learning carries some risks, including a drop in states’ education spending and the fact that schools tend to buy products only once a year. But he contends that Weld North now has the tools to compete against bigger, older rivals.

“We now have the best assets to build a digital education company,” Mr. Grayer said. “Legacy businesses alone are not going to solve all the needs of the new marketplace.”

Credit Suisse Is Said to Be Facing Double-Barreled Inquiries

After years of false starts and stops, the Justice Department is nearing the end of an investigation into the role Credit Suisse played in hiding American wealth offshore. But at the same time, a new investigation is beginning, threatening to entangle the giant Swiss bank for even longer.

The biggest danger to Credit Suisse, suspected of sheltering billions of dollars for American clients who evaded taxes, comes from federal prosecutors. While the Justice Department has considered a so-called deferred-prosecution agreement that would suspend any indictment in exchange for a large cash penalty and other concessions, it is also pushing for a guilty plea from a Credit Suisse subsidiary, people briefed on the case said, a punishment in some ways harsher that banks generally avoid in all but the gravest cases. The cash penalty, the people said, is expected to exceed the $780 million that Switzerland’s largest bank, UBS, paid to resolve a similar case in 2009.

The Credit Suisse case, the outcome of which depends on settlement talks in the coming weeks, will most likely strike a blow at overseas tax shelters, a hallmark of Switzerland’s banking system. And while the case will resolve a major liability for Credit Suisse, it won’t put the shelter problem to rest.

Just as the criminal inquiry is reaching its conclusion in Washington, a civil investigation has started from scratch in New York. Benjamin M. Lawsky, New York State’s top financial regulator, has requested documents from Credit Suisse and is expected to demand additional records this week, two people briefed on that case said.

Mr. Lawsky, who will examine whether Credit Suisse lied to New York authorities about engineering tax shelters, has also petitioned a Senate subcommittee for a trove of internal Credit Suisse documents.

The subcommittee questioned bank executives, including Brady W. Dougan, the bank’s American chief executive, at a hearing in February, and produced a scathing report exposing “a classic case of bank secrecy.” In late March, the Senate agreed to release the internal Credit Suisse documents to “a state regulatory agency.” The people briefed on the case, who were not authorized to speak publicly, identified that agency as Mr. Lawsky’s Department of Financial Services.

The developments, coming on the heels of Credit Suisse settling a related civil case with the Securities and Exchange Commission, might inject some competition into the investigative process. Mr. Lawsky, himself a former federal prosecutor, has squeezed settlements out of banks, as his Washington colleagues continued to investigate. And while the Justice Department’s investigation has evolved in fits and starts over several years, Mr. Lawsky’s agency has churned out cases in a matter of months.

The heightened scrutiny of Credit Suisse, from the Justice Department and Mr. Lawsky, might quiet critics in Congress like Senator Carl Levin, the Michigan Democrat who led the subcommittee’s investigation into Credit Suisse and complained that the United States government had let “them get away with it.”

The escalating Credit Suisse probe, along with some recent shifts in international law, might also provide momentum to the government’s uneven effort to collect taxes and punish the banks involved. While Credit Suisse will not be the first bank to settle with American authorities, a sweeping government response could send a message of deterrence to the shadowy world of Swiss bank secrecy.

A spokesman for Mr. Lawsky declined to comment, as did spokesmen for Credit Suisse and the Justice Department.

In the Senate subcommittee hearings in February, Credit Suisse executives apologized for the misconduct. But they also argued that the problems stopped in 2008 and were contained to a few low-level rogue bankers. The bank, which said it voluntarily adopted a number of controls against tax evasion, reported that there was no evidence that executive management knew of the problems.

“Some Swiss-based private bankers went to great lengths to disguise their bad conduct from Credit Suisse executive management,” Mr. Dougan testified at the hearing. “While that employee misconduct violated our policies and was unknown to our executive management, we accept responsibility for and deeply regret these employees’ actions.”

Like watches and chocolate, private banking is a staple of the Swiss economy. And for decades, as wealthy Americans concealed their assets through clandestine accounts, United States authorities took scant action.

That changed in the final years of the George W. Bush administration. Name a Swiss bank, and it was suspected of harboring American assets.

UBS was first in line to settle. Through a 2009 deferred-prosecution agreement, the bank struck a $780 million settlement and produced the names of about 4,700 accounts unknown to the Internal Revenue Service. The I.R.S. also formed a program that provided Americans immunity from prosecution in exchange for divulging offshore accounts â€" an effort that prompted some 43,000 taxpayers to pay nearly $6 billion in taxes and penalties.

All told, the Justice Department has charged 73 account-holders and 35 bankers, and has identified 14 banks as suspects. In 2011, federal prosecutors indicted seven Credit Suisse bankers for abetting tax evasion.

But the investigation into Credit Suisse dragged on. The quirks of international law prolonged the inquiry, requiring Swiss courts to review Credit Suisse documents before releasing them to the Justice Department.

Ultimately, the Justice Department gained access to many of the documents and interviewed bank employees. And by the time the Senate subcommittee convened its hearing in February, the Justice Department was closing in on a case.

Bracing for a settlement, the bank announced last week that it had set aside roughly $528 million for legal expenses. Credit Suisse, which in February paid about $200 million to settle with the S.E.C., said it had earmarked much of the new provision to pay any new penalty to the Justice Department. (In a separate matter, in late March the bank agreed to an $885 million settlement to resolve claims that it sold questionable loans to Fannie Mae and Freddie Mac.)

And Mr. Lawsky’s case could bring a fine of its own. In its investigation, the New York State Department of Financial Services is expected to examine what role, if any, the bank’s New York employees played in creating the tax shelters. The agency, the two people briefed on the case said, is also seeking to recover any lost tax revenue for New York.

The subcommittee’s report inspired Mr. Lawsky’s inquiry, the people said. After reading the report, aides to Mr. Lawsky contacted the subcommittee’s lawyers to seek some of the underlying evidence in their investigation: more than 100,000 internal documents from Credit Suisse and transcripts of interviews of nearly two dozen sources.

The materials, detailed in an inch-thick report that reads at times like a John le Carré spy novel, laid bare what the subcommittee described as a brazen attempt to dodge taxes.

The subcommittee’s report accused the bank of helping thousands of United States clients to set up Swiss accounts worth as much as $12 billion, though Credit Suisse has said the sum of unreported income is far lower and the Justice Department has cited a $4 billion figure when indicting Credit Suisse bankers. The effort spanned at least seven years, the report said, from 2001 to 2008.

The report also detailed the lengths that Credit Suisse bankers took to cater to their American clients. They established an office in the Zurich airport as convenience to American customers. They opened accounts in the name of shell companies. And to limit a paper trail, the bankers would travel to the United States to meet with clients.

On one occasion, a banker visited a client at the Mandarin Oriental Hotel. Over breakfast, the banker handed his client account statements in the pages of Sports Illustrated.

Weil Hires Senior Goldman Bankruptcy Specialist for London Office

A month and a half ago, Barry Wolf sat down for dinner at Babbo in London’s tony Mayfair district with two of his partners at the law firm Weil, Gotshal & Manges.

Joining them was Andrew Wilkinson, one of Goldman Sachs‘ top restructuring experts in Europe. And as the four men tucked into upscale Italian food, they quickly came to the realization that Wilkinson would make an ideal addition to their team.

On Monday, Weil plans to announce that it has hired Mr. Wilkinson as the newest high-profile member of the firm’s vaunted corporate restructuring and bankruptcy practice, serving as a partner in the London office.

The poaching signals Weil’s latest effort to maintain its status as one of the biggest bankruptcy legal advisers in the world, one that already counts among its members prominent veterans like Harvey R. Miller and Marcia L. Goldstein.

The firm ranked second among restructuring law firms last year, according to The Deal, having advised on cases representing $1.03 trillion in assets.

“When you can get someone this talented, it always makes sense, no matter how strong you are, to make the move,” Mr. Wolf, Weil’s executive partner, told DealBook in a telephone interview.

The hiring of Mr. Wilkinson also comes at a potentially opportune time for European restructuring practices. While Chapter 11 filings in the United States remain exceptionally low â€" low interest rates have helped many companies stave off their reckoning for some time â€" companies on the East side of the Atlantic Ocean have increasingly moved to reorganize their balance sheets and operations.

The move also represents a coming home of sorts for Mr. Wilkinson. Before joining Goldman in the spring of 2007, he was a practiced bankruptcy lawyer, having founded the practice at Clifford Chance and then served as the head of European restructuring group at Cadwalader, Wickersham & Taft.

Other bankruptcy lawyers have made the trip from the law to banking and back again. Mr. Miller went to the investment bank Greenhill & Company for five years before returning to Weil in 2007. And James H. M. Spraryregen tried his hand at Goldman for three years before heading back to Kirkland & Ellis in late 2008.

According to Mr. Wolf, Mr. Wilkinson had also wanted to resume practicing bankruptcy law and approached Weil a little over a month ago.

Already in Europe for a business trip, Mr. Wolf was able to bring in for recruiting help two of his London-based partners: Michael Francies, the managing partner of the office and a former colleague of Mr. Wilkinson’s at Clifford Chance, and Adam Plainer, the head of Weil’s restructuring practice in the office.

“Clearly, given our reputation in the global restructuring area, we were a top choice,” Mr. Wolf said. “It was a great match right from the beginning, and an easy decision for both sides.”

Sun Pharmaceuticals of India to Buy Ranbaxy, a Smaller Rival

Sun Pharmaceutical Industries, the Indian drug maker, said on Sunday that it would pay about $4 billion in stock for Ranbaxy Laboratories, a smaller Indian rival.

The combined company will be the largest pharmaceutical company in India and the fifth-largest speciality generic drug maker in the world, with operations in 65 countries.

Annual revenues are estimated to surpass $4.2 billion

“We see tremendous growth opportunities and are excited with the prospects to create lasting value for both our shareholders through a successful combination of our franchises,” Dilip Shanghvi, managing director of Sun Pharma, said in a statement.

Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for each of their Ranbaxy shares, representing an 18 percent premium over Ranbaxy’s 30-day volume weighted average share price. At Friday’s closing price, that values the deal at about 457.5 rupees per share, or $7.64.

The deal was unanimously approved by both companies’ boards and Ranbaxy’s controlling shareholder, Daiichi Sankyo, the Japanese drugmaker, which will become a big owner of Sun Pharma. Daiichi Sankyo acquired its stake in Ranbaxy in 2008.

Citigroup and Evercore Partners advised Sun Pharma, and Shearman & Sterling, Crawford Bayley and S. H. Bathiya & Associates, provided legal advice.

Ranbaxy received financial advice from ICICI Securities and legal legal advice from Luthra & Luthra Law and Amarchand & Mangaldas & Suresh A Shroff.

Daiichi Sankyo received financial advice from Goldman Sachs and legal advice from Davis Polk & Wardwell and Amarchand & Mangaldas & Suresh A Shroff.

BlackRock Elevates Executives in Succession Planning Move

BlackRock, the investment management behemoth, on Sunday announced a series of executive shifts that grooms a number of potential successors to the firm’s founder and leader, Laurence D. Fink.

While Mr. Fink, one of the most influential players on Wall Street, isn’t expected to leave anytime soon, the promotions are meant to groom a new generation of leaders.

“Periodically moving leaders to new roles as part of this process was a key rationale for the re-organization of the firm in 2012 and is a key driver of the management changes we are announcing today,” Mr. Fink wrote in an internal memorandum reviewed by DealBook. (A spokesman confirmed its contents.)

Charles Hallac, one of BlackRock’s first employees and the creator of the firm’s vast Aladdin trade management system, was promoted to co-president, according to the memo.

He will serve in that role alongside Rob Kapito, a BlackRock founder and the man most likely to take over the firm should Mr. Fink step down in the near term. Both men will continue to oversee the businesses for which they had been responsible before the executive changes.

But the move also comes as Mr. Hallac fights colon cancer, even as he regularly reports to work. His promotion was meant in part to reflect his 26 years of service to the firm as it grew to titanic size.

Replacing Mr. Hallac as chief operating officer is Rob Goldstein, the current head of BlackRock’s institutional client business. Even in his new role, he will retain oversight of BlackRock Solutions, the vaunted analytics consulting arm that has counted the Federal Reserve Bank of New York and the Greek government.

Other major players like Gary Shedlin, the firm’s chief financial officer and a respected former investment banker, will retain their current positions.

A spokesman for BlackRock confirmed the contents of the memo.

News of the executive shifts was reported earlier by The Financial Times.

Here’s the memo:

TO: ALL EMPLOYEES

FROM: LARRY FINK AND ROB KAPITO
RE: NEW SENIOR MANAGEMENT ROLES

One of the keys to BlackRock’s success - past and future - is developing people and embedding our culture. For the past five years, together with the Board, we have pursued a deliberate effort to build a deep bench of executive talent by mapping leaders to roles that present them with new challenges, broaden their horizons and maximize their impact with the firm and our clients. Periodically moving leaders to new roles as part of this process was a key rationale for the re-organization of the firm in 2012 and is a key driver of the management changes we are announcing today.

Talent is something we manage vigorously and review consistently with the Board. Our intensive approach has created a wide pool of leaders, some of whom grew up at BlackRock, some of whom came here through merger, and some of whom joined from other firms. What they share is a commitment to common culture and excellence it encourages. As strong a group as we have today, developing and challenging our people is something we can never stop doing if we want to build a great and enduring company. It remains a top priority for the firm.

Among our “home grown” leaders, no one exemplifies the values and spirit of BlackRock better than Charlie Hallac, our Chief Operating Officer. An initial architect of Aladdin, Charlie has been one of our most original and gifted leaders since joining the firm shortly after its formation in 1988.

· To reflect the central role that Charlie plays at the company and his focus going forward, Charlie will assume a new position as Co-President of BlackRock, effective June 1. Working with us, Charlie will focus on defining and driving our forward strategy, developing our broad bench of leaders and continuing to instill the BlackRock culture in everything we do. The client businesses, investment groups and product management will continue to report to Charlie and Rob Kapito.

o A vital component of the forward strategy is technology and how it continues to reshape our industry and the world around us. Our ability to leverage Aladdin even more is a tremendous and unique growth driver for us. So, we’ve asked Charlie to assemble and lead a working group to think through how BlackRock technology can further transform our company and industry.

As many of you know, Charlie is battling colon cancer. Yet, even while undergoing treatment, Charlie is at the office day after day, helping us to create and execute our vision with the same genius, humor and creativity that have defined him as a leader and colleague these past 26 years. We are grateful that BlackRock will continue to benefit from his leadership in this new role.

In addition to Charlie, several other senior executives will also take on new positions, while others will continue to lead from their current roles. To ensure time for smooth transitions of responsibilities, all the changes will become effective June 1. Please note that we are not making any changes to portfolio managers or client relationship managers. The changes we are making include:

· Rob Goldstein, currently Global Head of BlackRock’s Institutional Client Business (ICB) and BlackRock Solutions (BRS), will become Chief Operating Officer. Rob began his career at BlackRock as an analyst in the Portfolio Analytics Group 20 years ago and has played a key role in developing BlackRock Solutions, the Aladdin business and, most recently, leading our Institutional Client Business. As COO, Rob will work with Rob Kapito and Charlie overseeing the day-to-day global business of the firm and ensuring the necessary connectivity, coordination and operating processes across the organization.

o Rob will continue to lead BlackRock Solutions, where he has helped to drive double-digit growth and to develop its global client base since its founding.

· Rich Kushel will become our Chief Product Officer. We are elevating this role to reflect how vital our product strategy is to our future success. Rich’s leadership of the Strategic Product Management group has redefined our product development and management process, bringing strategic focus and executional discipline to our product portfolio. Now we must take it to the next level and drive innovation throughout the organization to offer solutions that meet our clients’ most vital needs. In addition to leading our product strategy, Rich will continue to oversee the BlackRock Investment Institute and our Corporate Governance and Responsible Investment team, and he will continue to work closely with Rob Kapito and Charlie on a broad range of firm-wide issues.

· Mark McCombe, who serves as Chairman of BlackRock Asia Pacific, will become Global Head of BlackRock’s Institutional Client Business, based in New York. As head of our APAC business, Mark has put the region on a sustainable growth path by attracting top talent and sharpening our focus on clients and investment performance. Mark also has been instrumental in developing relationships with some of the firm’s largest clients, including official institutions and financial institutions in Asia, which will be invaluable in his new role. To facilitate a smooth leadership transition in APAC, Mark will continue to serve as its Chairman through year-end.

o In addition, Mark will become Chairman of BlackRock Alternative Investors (BAI). Aligning BAI and our Institutional Business under Mark’s leadership will be highly accretive to our alternatives growth strategy. He will work with Andy Stewart and Matt Botein, who will continue to co-head the alternatives business, and Edwin Conway, who (in addition to leading ICB in the U.S. and Canada) is responsible for the Alternative Investors Strategy Group.

· Ryan Stork, Global Head of the Aladdin Business within BlackRock Solutions, will become Head of BlackRock Asia Pacific, based in Hong Kong. Ryan has broad global experience and a record of growing a strategic business. As head of the Aladdin client business since 2009, Ryan has driven rapid expansion of the business globally - broadening the international mix of clients on the platform including major new clients in both Europe and Asia. Earlier in his career, he played a key role in leading integration among our client businesses in Europe, the Middle East and Africa. He will work closely with Mark McCombe and succeed Mark as Chairman of Asia Pacific at year-end.

· Quintin Price, who has led the revitalization of Alpha Strategies, will be moving to New York. The strong performance achieved for our clients - with more than 70% of assets performing ahead of their benchmarks on a one, three and five-year basis - has been one of the firm’s most significant accomplishments in recent years. Quintin will lead this ongoing effort from New York and continue to spend significant time in EMEA and Asia.

· Ken Wilson, who has served as Chairman of BlackRock Alternative Investors since its creation, will become Chairman of Alpha Strategies, working closely with Quintin to leverage the team’s momentum and to further develop and reintroduce our Alpha platform to the marketplace.

· Patrick Olson, who is Global Head of Strategy and Planning, will become Chief Operating Officer of EMEA and join the EMEA Executive Committee. Patrick, who has expressed a desire to get more directly involved in operating a business, will work closely with David Blumer, Head of EMEA, to help manage the growing complexities of operating in the region, while also providing critical connectivity around the world.

o Investor Relations and Corporate Development, that were part of the strategy organization, will now become part of Finance reporting to Chief Financial Officer Gary Shedlin.

· Salim Ramji, a Senior Partner at McKinsey & Company, will join the firm later this month as Global Head of Corporate Strategy. Salim most recently led McKinsey’s Asset Management and Retirement Practice areas and is among the most thoughtful, strategic leaders helping to shape the future of our industry. Having worked with BlackRock as a strategic advisor for many years, Salim knows the firm and its people well and will be a tremendous addition.

· Sudhir Nair, currently Head of Business Development and Implementations & Delivery for the Aladdin Business, will become Global Head of the Aladdin Institutional Business. Sudhir has played an integral role in helping to build and develop our Aladdin business over the past 14 years, initially starting as an analyst in the Portfolio Analytics Group. His deep knowledge of Aladdin as a platform and of our client base will ensure a seamless transition and continued focus on our growth strategy.

o The existing Aladdin business is being renamed to highlight its focus on our institutional client base, while Charlie leads the working group described above in exploring other ways to leverage Aladdin, including for the firm’s retail clients.

We are fortunate to have so many gifted leaders across the firm, but that has not happened by chance. It has come through our deliberate approach to developing our people, continuously giving them new opportunities and challenges. That is something we are deeply committed to doing with talent at every level of the organization. It has allowed us to build a team of leaders capable of far more than any individual and is the only way to build a great and enduring company. Please join us in congratulating all of those taking on new roles, many of them in new businesses and new parts of the world.

Finally, we want to thank everyone across the firm for everything you are doing day in and day out to make BlackRock what it is today and what it can be in the years to come.

Sincerely,
Larry and Rob

Holcim and Lafarge Are Said to Have Agreed to Merge

PARIS - The boards of Holcim and Lafarge, two of the world’s largest construction materials companies, have agreed to merge, a person close to the discussions said on Sunday.

The boards of the companies backed the deal on Saturday, according to the person, who was not authorized to speak publicly. The person said a formal announcement was expected as soon as Monday.

Holcim, based in Jona, Switzerland, near Zurich, and Lafarge, which is based in Paris, rank among the world’s biggest suppliers of cement and related products like stone, gravel and sand. They had said on Friday that they were in advanced discussions to merge.

The two companies had combined worldwide revenue last year of more than $43 billion. Antitrust lawyers warn that it could be years before any fusion is achieved, as there would most likely be regulatory demands for asset disposals in several of the areas in which they operate.

Both Holcim and Lafarge have been hurt by weakness in the European economy and are seeking to fend off inroads from lower-cost Asian competitors.

“It’s not a question of being the biggest,” the person close to the discussions said, “it’s about being the most efficient.”

Competition authorities of the European Union were already investigating Holcim’s takeover of the northwestern European operations of Cemex, the Mexican cement giant. That was after they began investigating Cemex’s acquisition of Holcim in Spain.

Holcim had revenue of more than 19.7 billion Swiss francs, or $22.2 billion, last year. Lafarge’s full-year revenue was 15.2 billion euros, or $20.9 billion.