Looking at Some Corporate Tax Loopholes Ordinary Citizens May Envy

It’s Tax Day.

That means accountants across the country are working furiously to meet the midnight deadline for submitting individual returns.

In corporate America, however, many accountants are already done. The deadline for corporate returns this year was March 17, though companies could seek a six-month extension.

While individuals have long sought to take advantage of dozens of deductions and loopholes, corporations have famously excelled at this game.

How well? Companies paid an average effective federal tax rate of 12.6 percent in 2010, the last time the Government Accountability Office measured the rate. That compares with the nominal federal tax rate of 35 percent, so all those accountants appear to have done their jobs in exploiting the loopholes in our tax code.

The chairman of the House Ways and Means Committee, Representative Dave Camp, a Michigan Republican, proposed a vast reform of our tax code this year, eliminating a lot of the Swiss cheese that makes it so porous and, arguably, unfair. Mr. Camp’s proposal, as you might imagine, isn’t gaining a lot of traction.

In recognition of Uncle Sam’s payday, it’s only proper to take note of some of the most egregious corporate tax loopholes and some unexpected beneficiaries.

â–  For the last seven years, a debate has raged over the “carried interest” benefit taken by private equity and hedge fund executives. Instead of paying ordinary rates on much of their income â€" typically 35 percent for the highest bracket (39.6 percent for this tax year) â€" these executives pay the capital gains rate of 15 percent. It’s a clear loophole that is plainly unfair. Despite repeated efforts to repeal it, the loophole has remained, in part because of well-financed industry lobbying in Washington.

But much of the lobbying isn’t coming from the private equity industry â€" it’s coming from another beneficiary that often goes overlooked: the real estate industry. The carried-interest loophole is related to what is known as partnership accounting. Any company that uses such treatment can take advantage of the loophole. That means not just private equity and hedge funds, but also venture capital and much of the oil and gas industry. The National Association of Industrial and Office Properties, which has lobbied against the repeal of the loophole, says that “41 percent of all investment partnerships are real estate related.” When Mr. Camp announced his tax reform proposal, guess which industry was exempted? Real estate.

â–  If individual taxpayers are arrested, admit guilt and reach a civil settlement with the government, they cannot deduct the costs from their returns. But amazingly, a company is allowed to claim those costs as a business expense. JPMorgan Chase, for example, which has agreed to pay billions of dollars in fines for various transgressions, can deduct a large portion â€" and all the legal expenses â€" from its taxes.

“Ordinary citizens don’t deduct their parking tickets or library fines from their taxes,” U.S. PIRG, the federation of state public interest research groups, said in a statement. “Corporations like JPMorgan shouldn’t be able to deduct their settlements for wrongdoing either. The settlement loophole costs taxpayers billions each year.”

In one case, at least, JPMorgan has agreed to forgo this benefit. It will not take a deduction on its $1.7 billion fine related to its actions regarding Bernard Madoff’s Ponzi scheme, saving the taxpayers about $600 million.

And it’s not the only one. This year, Toyota, which admitted it hid safety defects from the public, agreed as part of a $1.2 billion criminal penalty with the United States government that it would not “file a claim, assert or apply for a tax deduction or tax credit.” The U.S. PIRG said this one line saved taxpayers $420 million.

Still, the U.S. PIRG highlighted a study conducted by the Government Accountability Office in 2005 that found that of 34 settlements worth more than $1 billion, 20 companies took advantage of tax rules to deduct all or part of the settlement costs.

â–  A tiny but symbolic loophole still persists. Companies that own aircraft can depreciate their planes more quickly than airlines â€" over five years instead of seven â€" and claim the deduction. In total, closing the loophole is worth $3 billion to $4 billion over a decade.

â–  A much larger loophole involves the deduction of executive stock options by the company issuing them. Inexplicably, many of Silicon Valley’s newest star companies will be able to shelter a large portion of their profits as a result. Citizens for Tax Justice estimated late last year that a dozen technology companies, including Twitter, LinkedIn and Priceline, “stand to eliminate all income taxes on the next $11.4 billion they earn â€" giving these companies $4 billion in tax cuts.”

The effect is enormous and has significantly changed the bottom line â€" and tax rates â€" at some of the largest companies.

“This tax break allowed Amazon to reduce its federal and state income taxes by $750 million between 2010 and 2012,” Citizens for Tax Justice estimated. “The company’s combined federal and state effective tax rate over this period was just 9.4 percent; absent the stock option tax break, the combined tax rate would have been 40.4 percent.”

The ordinary taxpayer, rushing to the mailbox, can only dream of this sort of break.

TIAA-CREF to Buy Nuveen for $6.25 Billion

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Capturing on Canvas the Downfall of Wall Street’s Criminals

Bernard L. Madoff was handcuffed and whisked into a cell. Michael R. Milken, head in palm, wept. Martha Stewart simply stared straight ahead.

If not for one person, these moments might be lost to memory. But when the mighty stumble, the court illustrator captures it forever. For Elizabeth Williams, who has spent more than three decades depicting criminals in court through her drawings, the job is a study of character.

Ms. Williams has covered the trials of terrorists and murderers, but she finds white-collar criminals the most fascinating. “I think it’s the greatest soap opera there ever was,” she said.

Ms. Williams has drawn notorious Wall Street criminals, including Ivan F. Boesky, one of the world’s most powerful financiers in the 1980s, who was convicted of masterminding Wall Street’s biggest insider trading scandal at the time, and Raj Rajaratnam, the hedge fund manager and Sri Lanka’s richest man, who was at the heart of a network of insider traders in the 2000s.

“To get so far in life, you’d think these fellows have to be really smart â€" and then they do these things that completely defy what they are about,” Ms. Williams said.

Her drawings are often the only recorded images from these trials. Federal courtrooms are one of the few places left where, until recently, cameras were not allowed. A few courts have experimented with allowing cameras, but most trials remain closed to photographers.

Together with Sue Russell, Ms. Williams has written “The Illustrated Courtroom: 50 Years of Court Art,” which brings together the work of five courtroom illustrators who chronicled famous trials of the last half-century, including those of David Berkowitz, the so-called Son of Sam; Charles Manson; the Watergate burglars; and O. J. Simpson. The artists â€" Howard Brodie, Aggie Kenny, Bill Robles, Richard Tomlinson and Ms. Williams â€" have brought financial chieftains, psychopaths and petty criminals to life for the world outside the courtroom. Some of their work from the book will be on display at the World Trade Art Galleryin Manhattan from April 22 to April 29.

Ms. Williams started her career as a fashion illustrator, working for Hollywood designers like Michael Travis, who made Liberace’s feather capes. The work paid little, and she soon turned to court sketching at the suggestion of a teacher. In a chance meeting, Ms. Williams met Mr. Robles, already a well-known courtroom illustrator, at a trial and he gave her the introduction she needed.

The Wall Street soap opera witnessed by Ms. Williams over the years has been filled with a colorful cast of defendants, including beauty queens, domestic divas and presumed upstanding community leaders. Consider Danielle Chiesi, an analyst who was caught on tape by the F.B.I. passing on illegal tips to Mr. Rajaratnam.

“Being in her presence is memorable,” Ms. Williams said, recalling the former beauty queen’s pink silk sleeveless dress, matching pink pumps and pearls that she wore on the day of her sentencing. “It was so out of place for court.”

Ms. Chiesi is best remembered for comparing the feeling of passing on illegal information to an orgasm. “It’s mentally fabulous,” she told the jury during her trial.

Ms. Williams also captured the moment when Robert W. Moffat Jr., one of Ms. Chiesi’s lovers and a former senior executive at IBM, sobbed as he was sentenced to six months in prison while his disabled wife and children looked on.

“You can’t be faint of heart in this job â€" you’ve got to get these moments,” she said.

On March 12, 2009, in the split second after Mr. Madoff admitted to running a $65 billion Ponzi scheme, the judge remanded him, and courtroom guards swooped in to handcuff him and take him away. Ms. Williams was the first to catch it on her canvas. Later, outside the courthouse, she ran into one of Mr. Madoff’s victims, a woman in her late 30s, who kissed her fingers and touched the image, telling Ms. Williams, “That’s just what I wanted to see.”

Then there are the brief instances when Wall Street titans, caught at their most vulnerable, strike an image incongruous with their usual demeanor. Ms. Williams recalled the day when Michael S. Steinberg, a portfolio manager at the hedge fund SAC Capital Advisors, was brought before a Manhattan judge to be read the insider trading charges against him.

The police escorted him into the Lower Manhattan courthouse through the main elevators rather than the usual back way leading into the courtroom. When Mr. Steinberg emerged from the main elevators, there was a look of utter shock on his face.

“Being caught is so out of their wildest dreams,” she said.

Martha Stewart, the entrepreneur, remained aloof during her insider trading trial. Every day, she would glide into the courtroom flanked by bodyguards, called Team Martha. She rarely interacted with anyone but her lawyers. But one day, Ms. Stewart brought a duffel bag to court and handed out homemade seat cushions to each of her courtroom supporters.

There is one character who still baffles Ms. Williams â€" the one who commits a crime for no financial benefit. Rajat Gupta, the former global chairman of McKinsey & Company and a former director of Goldman Sachs, was sentenced to prison for tipping his friend Mr. Rajaratnam off about a $5 billion investment that Warren E. Buffett’s Berkshire Hathaway planned to make in Goldman. Mr. Rajaratnam pocketed $900,000 from trading on the tip.

For his crime, Mr. Gupta received two years in prison. “He didn’t do it for money,” Ms. Williams said. “How do you wrap your head around that?” In her collection of drawings is an image of Mr. Gupta embracing his wife and four daughters after the jury announced its guilty verdict.

Then there are scenes that never make it into the papers or onto a canvas. Etched in Ms. Williams’s memory is the testimony of Lloyd C. Blankfein, the former chief executive of Goldman, at Mr. Gupta’s trial.

He was funny and engaging, captivating the jury with his charisma, she recalled, but he was also maddeningly difficult to draw because he never stopped moving. During part of his testimony, he played with a rubber band, rolling it around his fingers, until he noticed Ms. Williams drawing him. He smiled and stopped.

Then during a long sidebar, when the lawyers were conferring with the judge, he turned to the microphone. He tapped it a little, then he tapped it some more before finally in one dramatic gesture, he pulled off the foam cover, releasing a sudden “whoam!” The room went silent.

Flipping through the three decades of courtroom drawings by Ms. Williams, one gets the sense that history repeats itself. The actors change, but the characters stay the same.

“These guys get up on the stand and say how hard they worked,” Ms. Williams said. But then they throw it all away, she continued, adding, “What does it all come to?”

Citi’s Stock Seems Priced for More Mediocrity

Citigroup’s stock looks perfectly priced - for more mediocrity.

The bank’s $3.9 billion first-quarter net income was no disaster. And, unlike JPMorgan, Citi beat analysts’ estimates. Its bad bank, Citi Holdings, is no longer much of a drag. And the bank even managed to use a chunk of its substantial tax breaks and thus increase capital.

For now, though, shareholders don’t have much more to cheer about. Citi’s shares jumped as much as 4.4 percent on the better-than-expected earnings report. But even with that, the bank is trading at just 83 percent of its tangible book value, the only major financial firm currently stuck at less than its net worth.

The discount makes sense based on Citi’s reported earnings. Annualized return on equity for the first three months of the year was 7.8 percent, below the 10 percent rule-of-thumb threshold for banks to cover their cost of capital.

Yet Citi, led by Michael L. Corbat, is not the only player with subpar numbers. Bank of America and Morgan Stanley are also saddled by single-digit return on equity. The difference is that those fellow laggards have more tools for trying to change that.

First, the Federal Reserve has approved their plans to increase dividends - fivefold, in Bank of America’s case - or to buy back stock, or both. The former raises the total return to shareholders, while the latter improves return on equity simply by reducing the amount of equity. The Fed delayed Citi’s plans to return cash to investors because the regulator wasn’t satisfied with the bank’s method for measuring and reporting risk.

The latest scandal to hit Mr. Corbat’s firm underlines that issue. Last month, Citi revealed a $400 million hit at Banamex, its Mexican unit, stemming from fraudulent loans extended to a major supplier of oil giant, Pemex. Citi confessed on Monday that it had found another perpetrator, though this one may have cost it less than $30 million.

That’s a worrying sign for a bank that needed government bailouts to stay afloat in the financial crisis. Fold in its inability to return capital to investors and a lack of options for increasing earnings, and it’s a stretch for Citi to join peers above book value.

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

GrafTech Drama Headed for Proxy Fight

The war of words between GrafTech International, a small steel company, and its largest independent shareholder, Nathan Milikowsky, is heating up, and a proxy fight is on the horizon.

Mr. Milikowsky was ousted from the GrafTech board last year, after the company accused him of leaking confidential information to a hedge fund. Mr. Milikowsky said he was forced out because he was questioning the competency of the company’s chief executive, Craig S. Shular.

But even after Mr. Milikowsky was gone, GrafTech made one of the biggest changes he had requested â€" replacing Mr. Shular, which it did earlier this year.

That might have been the end of it. After all, the company was under new leadership, which was Mr. Milikowsky’s stated goal.

But in recent months, Mr. Milikowsky has revived his fight by nominating five new nominees to GrafTech’s board, and lobbying for his own reinstatement to the board. To address the company’s concerns about his own fitness to serve, Mr. Milikowsky proposed that the board hire a new law firm to review the investigation that led to his ouster.

On Monday, GraftTech responded with yet another settlement proposal. It offered to take two of Mr. Milikowsky’s proposed directors. And it said it would consider reinstating Mr. Milikowsky, but only after an arbitration process that could take many months, if not a year or more.

If Mr. Milikowsky were not reinstated after that, the company would bring on another mutually agreed-on director. And the company said that the former chief executive officer would leave the board after this year’s annual meeting, which is set for May 15.

That proposal is unlikely to appease Mr. Milikowsky, who is expected to wage a proxy fight to elect himself and his fellow nominees. Both he and the company will probably file definitive proxy statements in the coming day or two.

That sets up one of the few proxy fights of the season, and poses a question for shareholders who will have to vote on dueling slates of directors: Is Mr. Milikowsky still waging a battle to save the company, or just a campaign to clear his name?

Third Point Defends Its Fight Against Sotheby’s

Last week, Sotheby’s defended itself against the activist investor Daniel S. Loeb by questioning both his strategy and â€" perhaps just as galling to him â€" his credentials in the art world.

On Monday, Mr. Loeb sought to rebut criticisms of both.

In a 30-page document, Mr. Loeb’s Third Point hedge fund laid out its case to shareholders about why it should win three seats on the auction house’s board. It lacked some of the clever visual puns embedded in his firm’s activist campaign website, but the document sought to show that Sotheby’s has underperformed over recent years.

The PowerPoint presentation comes as the battle over Sotheby’s board heats up. The company put up its own slides last week, and both sides have now made their cases to Institutional Shareholder Services, the big investor advisory firm, according to people briefed on the matter.

A recommendation from I.S.S., whose support can often influence the outcome of a proxy fight, is expected as soon as next week.

In Third Point’s presentation, the hedge fund argued that even though Sotheby’s sold more art last year than it did at its last peak in 2007, the auction house generated less revenue and spent more money to accomplish that. Third Point also argued that Sotheby’s management has failed to produce steadily rising returns for shareholders, pointing to the stock’s swings over the past 15 years.

Over all, according to Mr. Loeb’s firm, the company’s $1.88 in earnings per share last year were down 42 percent from 2007.

Behind that lagging performance, Third Point reiterated, was a mix of poor corporate governance and management, including a failure to seize on private art sales and improving technology. The hedge fund also argued once more that the board members together owned less than 1 percent of Sotheby’s stock, a fraction of the roughly 10 percent that it controls.

Sotheby’s, the hedge fund argued, has failed to take advantage of a booming market for luxury goods to bolster its returns.

“Given the global tailwinds in the marketplace, this performance is unacceptable and we believe it can be linked back to failed leadership of the Sotheby’s board,” the hedge fund wrote.

Third Point also devoted an entire page to what it called “misleading” attacks by the auction house, including questions about Mr. Loeb’s experience in the art world. Here’s what the hedge fund wrote about its founder’s experience:

In the art/auction and luxury spaces, Mr. Loeb is a leading collector of modern and contemporary art, has been recognized by ARTNews as one of the “200 Top Collectors” each year since 2005, has had portions of his personal collection exhibited at the MoMA in New York and in other global museum retrospectives and shows, and is a trustee of the MOCA in Los Angeles.

A climax in the fight is less than a month away: Sotheby’s annual meeting is scheduled for May 6, though both the company and Third Point are in court battling over shareholder defenses that the board put in place this year.

Morning Agenda: Silicon Valley’s Funding Feast

There can never be too much money in the bank. Such appears to be the thinking behind a new dynamic that is reshaping Silicon Valley. Start-ups, already flush with cash, are piling on investment dollars, David Gelles and Michael J. de la Merced write in DealBook. Of the 100 largest venture capital fund-raising rounds on record, 88 were issued within the last five years, according to CrunchBase, which tracks venture funding. Each delivered more than $50 million to the companies.

Several factors are driving the proliferation of big late-stage investments. Technology start-ups are staying private longer, venture capital firms are looking to put idle money to work, and institutional investors are chasing returns in fast-growing private companies. For technology companies hoping to achieve the highest possible valuation on the road to a sale or an initial public offering, this means it is easier than ever to raise large amounts of money. “There’s a Silicon Valley expression: Eat when the food is passed,” said one start-up’s chief executive.

At the same time, the influx of money is inflating the valuations of young companies and stoking fears of another dot-com bubble. And some venture capitalists warn that the current rush of big late-stage funding could reduce entrepreneurs’ discipline. But venture capitalists are not the only ones writing big checks. Increasingly, the firms are being joined by hedge funds and private equity firms chasing huge returns. Even mutual funds are jumping in, given access to promising start-ups with the understanding that they would remain investors even after an I.P.O.

WALL STREET EARNINGS SEASON RECAP  |  Wall Street earnings season kicked off on Friday, with JPMorgan Chase reporting an 18.5 percent slump in first-quarter profit, hurt by steep revenue declines in its trading machine. The bank’s fixed-income trading fell roughly 26 percent, to $3.76 billion, from $4.75 billion in the period a year earlier. In contrast, first-quarter earnings at Wells Fargo rose 14 percent, spurred in part by a surge in auto lending and loans to corporations.

Looking ahead, Citigroup reports results on Monday at 8 a.m., followed later in the week by Bank of America, Morgan Stanley and Goldman Sachs.

At first glance, the contrasting fortunes of JPMorgan and Wells Fargo point to the ascendancy of Main Street over Wall Street, Jessica Silver-Greenberg and Michael Corkery write in DealBook. The growth in Wells Fargo’s car loan business underscores the shifting strategies between the bank and JPMorgan. In the first quarter, Wells Fargo said it originated $7.8 billion in auto loans, a 15 percent increase from the period a year earlier. JPMorgan’s auto loans grew by only 3 percent in the same time period.

But, Ms. Silver-Greenberg and Mr. Corkery write, “Wells Fargo’s relative strength in a banking landscape where millions of consumers are still grappling with troubled credit, and many businesses remain wary of hiring new workers, raises questions about whether the bank is delving into more risky lending to bolster its bottom line.” Wells Fargo executives say the credit quality of its loans has not slipped, but some financial analysts are questioning whether part of the increase is built on loans to financially troubled borrowers.

POOLED PENSIONS TEETER AND FALL  |  “The pensions of millions of Americans are being threatened because of trouble in a part of the retirement world long considered so safe that no one gave it a second thought,” Mary Williams Walsh writes in DealBook. The pensions belong to people in multiemployer plans, which are big pooled investment funds with many sponsoring companies and a union.

Pensions in multiemployer plans were once believed to be extremely reliable because, when one company in a multiemployer pool failed, the others were required to pick up its “orphaned” retirees, Ms. Walsh writes. But today, the aging of the work force, the decline of unions, deregulation and two big stock crashes have left vulnerable the pools and the federal insurance plan meant to support them. Dozens of multiemployer plans, which cover 10 million Americans, have already failed, and some giant ones are teetering.

In February, the Congressional Budget Office projected that the federal multiemployer insurer would run out of money in seven years, which would leave retirees in failed plans with nothing. Ms. Walsh writes: “So far, efforts to keep multiemployer plans from toppling, and taking the federal insurance program down with them, are giving rise to something that was supposed to have been outlawed 40 years ago: cuts in benefits that workers have already earned.”

ON THE AGENDA  |  Retail sales for March are released at 8:30 a.m. Business inventories for February are out at 10 a.m. Citigroup reports first-quarter earnings at 8 a.m. Shaquille O’Neal , the former N.B.A. star, is on CNBC at 3:30 p.m. Passover begins at sundown.

HERBALIFE PLUNGES ON CRIMINAL INQUIRY NEWS  |  Herbalife shares plummeted on Friday afternoon after The Financial Times reported that federal prosecutors and the F.B.I. were investigating the diet supplements company, Ben Protess and Matthew Goldstein write in DealBook. The stock finished the day down nearly 14 percent, at $51.48. The hedge fund manager William A. Ackman has staked a billion-dollar bet that the company is a pyramid scheme.

The criminal inquiry coincides with civil investigations by the Securities and Exchange Commission and the Federal Trade Commission. But it is unclear whether the F.B.I. investigation has gained much momentum. An official briefed on the matter told The New York Times that the inquiry had continued for several months without Herbalife receiving a subpoena. It is possible that the authorities will close the case without taking action against Herbalife, the official said. For its part, Herbalife cast some additional doubt, saying that it was unaware of any criminal inquiry.

 

Mergers & Acquisitions »

Chinese Consortium Buys Peru Mine for $6 Billion  |  Glencore Xstrata said it had agreed to sell its Las Bambas copper mine in Peru to a group of state-owned Chinese companies. DealBook »

Saab in Talks to Buy ThyssenKrupp Shipyard Operations  |  The Swedish military contractor Saab has signed a nonbinding memorandum of understanding on the possible acquisition of ThyssenKrupp Marine Systems. DealBook »

Franken’s Campaign Against Comcast Is No Joke  |  After a failed attempt to block the Comcast-NBC Universal merger, Senator Al Franken again finds himself playing a trustbusting role in Washington, The New York Times reports. NEW YORK TIMES

Alibaba to Acquire Chinese Mapping Firm as Buying Spree Continues  |  AutoNavi Holdings, which holds a rare mapping license from the Chinese government, has agreed to sell itself to the Alibaba Group in a deal that values it at $1.5 billion. DealBook »

Michael Foods Nears $2.5 Billion Sale  |  The Michael Foods Group is said to be in advanced talks to sell itself for close to $2.5 billion, Reuters writes, citing unidentified people familiar with the situation. Tyson Foods and Post Holdings have emerged as final contenders for the deal. REUTERS

INVESTMENT BANKING »

The Poetry of the Trading Floor, Going Beyond Bears and Bulls  |  Popular opinion has it that bankers think of nothing but profit, but their brains are fixated on linguistic creativity, Mark Forsyth writes in The New York Times. NEW YORK TIMES

After the Squall, Chop Remains for JPMorgan Chase  |  In its first quarter without significant special items, JPMorgan Chase still could not make a case for clear sailing, Jeffrey Goldfarb of Reuters Breakingviews writes. DealBook »

Wall Street’s Work Habits Could Be Hurting All of Us  |  “You might feel no sympathy for young bankers and the punishing hours they work. But you might want to pay attention, because their bad work habits could be contagious,” Jillian Berman writes in The Huffington Post. HUFFINGTON POST

PRIVATE EQUITY »

For Falcone, No Joy in the Sale of Manischewitz  |  Philip A. Falcone suffered a loss when his hedge fund sold its position this week to Sankaty Advisors, people close to the matter said. DealBook »

Ardian to Sell Food Ingredients Maker to Symrise for $1.8 Billion  |  Symrise, a German maker of flavors and scents, said it had made a binding offer to acquire Diana from the private equity firm Ardian, which was spun off from the French insurer AXA Group last year. DealBook »

K.K.R. Said to Be Selling Ipreo  |  The Blackstone Group and the investment arm of Goldman Sachs are set to acquire Ipreo, a capital markets data and software provider for banks, from the private equity firm Kohlberg Kravis Roberts in a secondary deal that values Ipreo at $975 million, The Financial Times reports, citing unidentified people familiar with the situation. The planned sale comes barely three years after K.K.R. acquired Ipreo for $425 million. FINANCIAL TIMES

Morgan Stanley Said to Be Near Deal to Sell Learning Care  |  Morgan Stanley’s private equity arm is said to be in advanced talks to sell the Learning Care Group, North America’s second-largest for-profit child care provider, to the buyout firm American Securities, Reuters writes, citing unidentified people familiar with the situation. REUTERS

HEDGE FUNDS »

A Chance for a Market’s Wallflowers to Bloom  |  The market sell-off is providing a rare moment in the sun for so-called value investors, who focus on out-of-favor stocks with relatively low valuations, James B. Stewart writes in the Common Sense column. NEW YORK TIMES

Hedge Fund Rival Says Loeb’s Sotheby’s Campaign Could Fall Flat  |  Christopher Tsai, who runs the New York hedge fund Tsai Capital and collects art, said that any change driven by the activist investor Daniel S. Loeb’s campaign against the auction house Sotheby’s “could wind up taking a long time before paying off in a meaningful way,” The New York Post writes. NEW YORK POST

I.P.O./OFFERINGS »

Italian Asset Manager Raises $961.5 Million in I.P.O.  |  Anima priced its offering near the top of the expected range at 4.20 euros a share, giving it a market capitalization of €1.26 billion, or about $1.75 billion. DealBook »

China’s Jumei Files for $400 Million U.S. I.P.O.  |  Jumei International Holding, a Chinese online cosmetics retailer backed by the venture capital firm Sequoia Capital, filed to raise up to $400 million in an initial public offering, Reuters reports. Jumei operates through its website Jumei.com and sells beauty products and perfumes. REUTERS

Parsley Energy Makes I.P.O. Plan Public  |  Parsley Energy, an oil and natural gas company, made public its plan to raise up to $400 million in an initial public offering of Class A common stock, Reuters reports. REUTERS

Chinese Dairy Firms Hope to Raise Up to $1.3 Billion in I.P.O.’s  |  Two Chinese dairy firms â€" China Shengmu Organic Milk and Beijing Sunlon â€" are planning to raise up to $1.3 billion combined from Hong Kong initial public offerings this year, The Wall Street Journal writes. WALL STREET JOURNAL

VENTURE CAPITAL »

The Art of ‘Something From Nothing’  |  By producing and investing in a series of successful start-ups like Expedia, Zillow and Glassdoor, Richard Barton has managed to accomplish something few others have done, The New York Times writes. NEW YORK TIMES

The Most Dangerous Word in Tech  |  We see “innovation” almost as a force of nature, a relentless outcome by the work of tech entrepreneurs. In the process, several economists warn, we’re losing sight of social realities about innovation, Quentin Hardy writes in the Bits blog. NEW YORK TIMES BITS

The Problem With Profitless Start-ups  |  “While some of the money used to fund money-losing start-ups comes from rich Silicon Valley investors, some large amount of it comes from public pensions, college endowments, and other, more modest sources,” Kevin Roose writes in New York magazine. NEW YORK MAGAZINE

Tinder Stake Sale Puts Valuation at $500 Million  |  The Silicon Valley investor Chamath Palihapitiya recently sold his 11 percent stake in the online dating application Tinder to IAC for about $55 million, valuing the start-up in the $500 million range, ReCode writes. RECODE

LEGAL/REGULATORY »

Executive Pay: Invasion of the Supersalaries  |  The compensation of corporate chief executives, up again in 2013, is drawing more scorn as an engine of income inequality, Peter Eavis writes in The New York Times. NEW YORK TIMES

Pay for Performance? It Depends on the Measuring Stick  |  Many companies’ pay metrics are ineffective in motivating executives to create shareholder value, Gretchen Morgenson writes in the Fair Game column. NEW YORK TIMES

Still No. 1, and Doing What He Wants  |  Larry Ellison, the chief executive of Oracle, may not care what you think about his $78.4 million in 2013 compensation, the highest in the Equilar 100 C.E.O. Pay Study, The New York Times reports. NEW YORK TIMES

Finance Officials Push for Bold Action to Sustain Economic Growth  |  At the World Bank and International Monetary Fund annual spring meetings, finance ministers and central bankers also discussed the possibility of new penalties for Russia, The New York Times writes. NEW YORK TIMES

Detroit Wins Judge’s Nod for Contract Settlement  |  A federal judge held up the bankrupt city’s settlement as an example of “the very spirit of negotiation and compromise” that he hoped other creditors would follow. DealBook »

Buyers Find Tax Break on Art: Let It Hang Awhile in Oregon  |  A lucrative, little-known tax maneuver has produced a startling pipeline of art moving across the United States as collectors cleverly â€" and legally â€" exploit the tax codes, The New York Times writes. NEW YORK TIMES

Ardian to Sell Food Ingredients Maker to Symrise for $1.8 Billion

LONDON - Symrise has offered to buy Diana Group, a maker of food ingredients, from the private equity firm Ardian for 1.3 billion euros, or about $1.8 billion.

Symrise, a German maker of flavors and scents, said Monday that it had made a binding offer and entered into exclusive discussions to acquire Diana, which is based in Vannes, France.

The deal is expected to expand Symrise’s offerings, including in the pet food market. The transaction is expected to close in the third quarter.

“With Diana we will be able to significantly diversify our portfolio for natural ingredients, tap into new business segments, strengthen our raw material supply and meet the requests for traceability from our customers,” Heinz Jürgen Bertram, the Symrise chief executive, said in a statement. “The planned integration of Diana will create an unparalleled set-up, which will offer us new opportunities for profitable growth beyond our current market and establish an excellent position to generate value in the future.”

The transaction is subject to regulatory approval.

Diana posted revenue of €415 million in 2012 and employs more than 1,640 people in 23 countries.

“Symrise is an ideal owner for Diana to continue developing and growing its business,” Philippe Poletti, a senior managing director at Ardian, said in a statement.

Ardian, which was spun off from the French insurer AXA Group last year and was formerly known as AXA private equity, acquired Diana in 2007. Ardian has about $46 billion in assets under management.

Symrise, based in Holzminden, Germany, operates in 35 countries and posted sales of €1.8 billion in 2013.

Stamford Partners advised Symrise, and Lazard advised Ardian.

Saab in Talks to Buy ThyssenKrupp Shipyard Operations

LONDON - The Swedish defense contractor Saab said on Monday that it was in talks to buy ThyssenKrupp’s shipbuilding operations in Sweden.

Saab and ThyssenKrupp, a German steel maker and engineering company, have signed a nonbinding memorandum of understanding concerning the sale of ThyssenKrupp Marine Systems, which has operations in the Swedish cities of Malmo, Karlskrona and Musko.

The marine unit used to be called Kockums, and traces its roots to a shipyard and naval base that opened in 1679.

The negotiations are at “an early stage,” Saab said, and the transaction would be subject to regulatory approval.

No financial terms were released.

The deal, if reached, would expand Saab’s naval operations. The talks come as the Swedish Defense Matériel Administration has asked Saab to study the measures that what would be required for it to produce the next generation of Swedish submarines.

ThyssenKrupp has about 1,100 employees in Sweden, including around 920 at its shipyard in Malmo.

Chinese Consortium Buys Peru Mine for $6 Billion

HONG KONG â€" A consortium of state-owned Chinese companies led by China Minmetals Corporation, one of the country’s biggest metals miners, announced on Monday an agreement to buy a giant copper mine in Peru from Glencore Xstrata for more than $6 billion.

In a deal that demonstrates how Chinese regulators are influencing global mergers and acquisitions far beyond China’s borders, Glencore said it would sell its Las Bambas copper mine project to the Chinese group for $5.85 billion in cash plus development costs. The sale of the mine was a key condition stipulated last year by China’s Ministry of Commerce before it approved the $30 billion purchase by Glencore International, a Swiss commodities trader, of the mining company Xstrata.

MMG Limited, a subsidiary of China Minmetals that is listed in Hong Kong, leads the buyers’ consortium with a 62.5 percent stake. Guoxin International Investment Corporation, a state-owned infrastructure and resources company, has a stake of 22.5 percent, while Citic Metal, the metal trading unit of the state-owned Citic Group conglomerate, owns 15 percent.

In addition to the $5.85 billion price tag, the buyers have also agreed to cover all costs of developing the mine between the start of this year and the formal closing of the transaction, which is expected to take place by the end of September â€" a deadline imposed by Chinese regulators. Glencore said that so far those expenses amounted to $400 million in the first quarter of this year.

China’s Commerce Ministry, which enforces the country’s antimonopoly law, took more than a year before finally approving the merger of Glencore with Xstrata in April 2013. Citing antitrust concerns, the regulator ordered the divestment of the Las Bambas project, an open-pit mine in the advanced stages of construction that is expected to have initial production of 2 million tons of copper per year.

In addition, the Commerce Ministry required Glencore to agree to guarantee the supply of copper, zinc and lead to Chinese companies through 2020 by signing long-term supply contracts.

Ivan Glasenberg, chief executive of Glencore, said that since the Xstrata deal was completed in May, “our team has taken decisive steps to de-risk Las Bambas, which has culminated in this compelling offer from the consortium.”

“Our willingness to sell reflects the level of the offer and our conviction that we can utilize the sale proceeds to create additional shareholder value,” Mr. Glasenberg said.

MMG Limited is being advised by Bank of America’s Merrill Lynch unit and Citigroup and will receive debt financing from China Development Bank, the Industrial and Commercial Bank of China and the Bank of China. China Minmetals was advised by Deutsche Bank. Glencore was advised by BMO Capital Markets and Credit Suisse.

Glencore said the sale of the mine to the Minmetals-led consortium is subject to shareholder and regulatory approvals, including approval by China’s Ministry of Commerce.