Justice Dept. Offers Bank of America a Mortgage Deal

The Justice Department, building on a multibillion-dollar mortgage settlement with JPMorgan Chase last year, is now aiming for a deal with Bank of America.

In a move that raised the stakes for the government’s crackdown on banks that sold the troubled mortgage investments during the financial crisis, the Justice Department made Bank of America an opening settlement offer of roughly $20 billion several weeks ago, according to people briefed on the matter.

But that amount is a somewhat inflated starting point for negotiations, and Bank of America has not yet made a counteroffer, according to the people who were not authorized to speak publicly.

The initial offer, the people said, included money earmarked for a settlement with the Federal Housing Finance Authority, a regulatory agency. After the Justice Department made that offer, Bank of America reached a separate $6.3 billion cash deal with the regulator. Because of this, the Justice Department’s remaining request has shrunk significantly.

By one measure, Bank of America will ultimately pay about $16 billion to settle every investigation into its sale of mortgage securities before the 2008 financial crisis. That estimate, widely circulated among bank executives and lawyers, would include the $6.3 billion pact already reached with the housing regulator. The remainder would cover penalties to the Justice Department, as well as to state and federal regulators, and a few billion dollars aimed at providing relief to struggling homeowners.

Still, any settlement with Bank of America is not a foregone conclusion. If talks come apart, the Justice Department could file a lawsuit against the bank.

A spokeswoman for the Justice Department declined to comment, as did a spokesman for Bank of America. Bloomberg News reported certain details of the settlement talks earlier.

The settlement negotiations with Bank of America are playing out as the government is under pressure to extract eye-popping penalties from Wall Street for its role in the financial crisis. For the Justice Department, blamed for its slow response to the financial crisis, the latest civil investigations into JPMorgan and Bank of America suggest that the Obama administration’s crackdown on Wall Street is gaining some momentum.

At the center of the Justice Department’s investigations is Wall Street’s mortgage machine, which churned out billions of dollars in securities from 2005 to 2008. Many of those investments later imploded.

The JPMorgan case, announced in November, offered a template for future mortgage settlements. At the time, Tony West, the No. 3 Justice Department official, said that other cases could follow that model.

The scrutiny extends beyond JPMorgan and Bank of America, though their exposure to troubled mortgages eclipses that of the other banks. Citigroup and other big banks have yet to strike their own settlements.

According to an analysis widely circulated among banks and reviewed by The New York Times, Bank of America could face a higher tally than JPMorgan. The extra liability stems in part from Countrywide Financial, the troubled subprime lender it acquired in 2008.

Bank of America, including Countrywide, issued about $640 billion in mortgage-backed securities before the financial crisis â€" considerably more than JPMorgan’s $460 billion. As a result, government lawyers had more in bonds to target in their Bank of America investigations.

As with the Bank of America investigation, the Justice Department initially sought more than $20 billion from JPMorgan.

Last month, Bank of America said it had held preliminary discussions to resolve the government’s inquiry. According to the people briefed on the matter, the talks occurred at a meeting with Mr. West, who has taken the lead in negotiating the Justice Department’s mortgage settlements with Wall Street.

The bank and the Justice Department are negotiating a broad deal â€" referred to as a global settlement â€" that would resolve a number of outstanding investigations. If it reaches a multibillion-dollar penalty, Bank of America would put to rest an investigation into its sale of mortgage-backed investments and a separate mortgage-related lawsuit that the Justice Department filed in North Carolina in August.

The Justice Department investigations represent only a part of Bank of America’s legal troubles tied to the crisis, which have totaled tens of billions of dollars. In 2012, the federal government sued the bank over a “brazen” mortgage fraud. The bank recently lost that case at trial.

The inquiries have cut into earnings. In the first quarter of the year, the bank said it had $6 billion of litigation expenses.

It is not clear whether a larger-than-expected settlement with the Justice Department would prompt the bank to take more litigation losses in the coming quarters. Bank of America does not disclose the overall amount of money it has set aside as a reserve to pay for litigation expenses.

Schwab Agrees to Drop Effort to Prevent Class-Action Lawsuits

The discount brokerage firm Charles Schwab & Company has agreed to pay a $500,000 fine and give up an effort to prevent customers from participating in class-action lawsuits.

The Financial Industry Regulatory Authority, Wall Street’s self-regulator, said on Thursday that it had reached the settlement with Schwab. The decision resolves a regulatory action that was initially filed in early 2012.

For more than two decades, individual investors have generally been unable to file lawsuits for disputes with stockbrokers, forced instead to agree to arbitration. But Schwab went one step further in 2011, adding a clause to its customer agreement requiring investors to agree not to band together in class-action suits.

The regulator, known as Finra, filed a complaint against Schwab in February 2012, saying the clause violated its rules. Schwab challenged the decision and won at a panel hearing last year. Finra then appealed, sending the matter to its national adjudicatory council.

But the Finra board of governors, which has authority above the adjudicatory council, overturned the panel’s decision last year. The panel had said that a particular law, the Federal Arbitration Act, prevented Finra from enforcing these rules.

As part of the settlement, Schwab agreed to notify all of its customers that the clause requiring them to waive their right to class-action lawsuits had been withdrawn and was no longer in effect, Finra said on Thursday.

The case attracted attention from state securities regulators and Democratic members of Congress, Susan Antilla reported in DealBook in September. After the ruling in favor of Schwab, an advocacy group started an online petition, “Stand Up to Chuck: Demand That Charles Schwab Corporation Stop Denying Its Customers’ Rights,” and collected 17,000 signatures.

Case Closed in Securities Dispute, Until New Evidence Is Uncovered

A Long Island couple who lost $5 million at the hands of Mark C. Hotton, the former stockbroker notorious for defrauding Broadway producers, is arguing that his employer, Oppenheimer & Company, withheld critical evidence during an arbitration hearing and should be held liable.

Securities lawyers say that disputes over the production of evidence take place regularly and that the failure to turn over documents is an all-too-common problem in arbitrations. Rarer is a smoking-gun document that surfaces after the fact, as appears to be the case with Oppenheimer and Mr. Hotton.

Mr. Hotton made headlines in 2012 for defrauding the producers of the Broadway play “Rebecca” by collecting fees and commissions for lining up financing with an investor who did not exist. He pleaded guilty to money laundering and two counts of fraud last July and is being held in the Metropolitan Detention Center in Brooklyn, awaiting sentencing on May 9.

Separate from the “Rebecca” fraud, Mr. Hotton, who was known as “Hollywood” at his Oppenheimer branch, where he worked for a little more than three years, is accused of stealing millions of dollars from his brokerage clients. Despite a regulatory record of six- and seven-figure investor complaints against him, Mr. Hotton attracted no media attention until after he was accused of bilking about $60,000 from the “Rebecca” producers.

Two of his clients, Louis and Donna Pitch, filed a claim with the Financial Industry Regulatory Authority against Mr. Hotton and Oppenheimer in December 2009. Two days before the hearing was to begin in February 2011, Mr. Hotton filed for bankruptcy, leaving Oppenheimer as the sole respondent.

The arbitrators ruled early last year that the Pitches were entitled to recover only half of their losses. In the course of 69 hearings over 22 months involving the couple, Oppenheimer had argued that it had been properly supervising Mr. Hotton, who worked at the firm from November 2005 to January 2009. The firm said in a post-hearing brief in December 2012 that there was no evidence that it had been negligent in hiring, investigating or retaining Mr. Hotton and that it had properly supervised him in his dealings with the Pitches. Any claims about Mr. Hotton’s transgressions “came to Oppenheimer’s attention after he left,” the firm told Bloomberg News in October 2012.

That turned out to be false.

Five months after the arbitrators’ decision, the Pitches’ lawyer, Timothy J. Dennin of Northport, N.Y., opened a computer disk that was sent to him during the discovery phase of a separate case against Oppenheimer and found a letter from the Securities and Exchange Commission that discussed Mr. Hotton’s improper trading.

On Dec. 14, 2007, the S.E.C.’s Office of Compliance Inspections and Examinations had written to Oppenheimer’s chief compliance officer, Allen Holeman, to inform the firm that it had not properly supervised Mr. Hotton. He had traded improperly in 11 of his clients’ accounts, the agency said.

That evidence would have “completely demolished” the firm’s defense that it had not been aware of problems with Mr. Hotton, the Pitches said later. But the letter had not been produced in 2010, after the Pitches requested “all documents, regulatory correspondence, and/or communications with the S.E.C.” concerning Mr. Hotton for the previous five years.

By the time the letter was discovered, the period for asking a court to vacate their Finra award had expired, prompting the Pitches to make an appeal last December to Finra that it consider punitive damages in addition to the award.

Lawyers are often suspicious that they have not received all the documents they asked for during litigation, but it’s unusual for an aggrieved investor to uncover conclusive evidence after a case has been decided.

Securities lawyers say that disputes over discovery are a regular occurrence. The failure to produce documents “has always been a pervasive problem in Finra arbitrations,” said Jason Doss, president of the Public Investors Arbitration Bar Association, an association of lawyers who represent investors.

An Oppenheimer lawyer, William E. Mahoney Jr., argued in a letter to Finra on Feb. 7 that it would be “clearly inappropriate” for Finra to take a fresh look at the Pitches’ case and asked the authority to decline their request for monetary sanctions, punitive damages and legal fees. But on March 24, Finra wrote to Mr. Mahoney to inform him that his request had been denied. On April 18, Oppenheimer filed a complaint in New York State Supreme Court, asking that the Pitches’ December 2013 request be dismissed.

Mr. Dennin said that he learned during a discussion with a Finra official this month that it had opened a preliminary inquiry into the Pitches’ complaint. A Finra spokeswoman, Michelle Ong, said that she could not comment on the existence of any inquiry but that “we are aware of the allegations in this matter and are currently reviewing them.”

Oppenheimer declined to comment specifically on the discovery issue.

Oppenheimer and other brokerage firms have been sanctioned and fined in the past for withholding documents during arbitrations and investigations.

In 2007, Finra settled a case with Morgan Stanley DW, the bank’s broker-dealer subsidiary, after the firm falsely told investors during arbitration that it could not produce email records because they had been destroyed during the Sept. 11 attacks. It turned out, though, that the firm still had millions of emails. After a settlement with Finra, 2,100 investors shared a pool of $9 million financed by Morgan Stanley to compensate for the withheld evidence.

In 2004, Finra censured and fined Salomon Smith Barney, Merrill Lynch and Morgan Stanley DW for failing to produce documents in 20 arbitration cases from 2002 to 2004. In a separate action against a smaller firm, Finra threatened fines as high as $5,000 a day if it did not comply with a panel’s discovery orders.

Oppenheimer itself has been sanctioned in the past for failing to produce documents. It agreed to pay a $1 million administrative fine in a settlement with Massachusetts in 2007 for conduct that included “false and misleading” statements related to the production of emails during an investigation.

It paid another $1 million fine the same year for “knowingly, or at a minimum, recklessly” sending flawed data to Finra’s predecessor, NASD, according to the firm’s Finra records.

Mr. Dennin said that Oppenheimer was still withholding evidence. He received only two pages of a longer version of the 2007 letter in which the S.E.C. described Mr. Hotton’s unlawful trading. Mr. Dennin requested that Oppenheimer provide the balance of the letter but says he has not received it.

It was only a fluke that he wound up obtaining the S.E.C. letter at all, Mr. Dennin said. “If I didn’t have these other clients, this would never have come to light.”

This post has been revised to reflect the following correction:

Correction: April 24, 2014

An earlier version of this article misspelled the name of a brokerage firm fined by the Financial Industry Regulatory Authority in 2004. It is Salomon Smith Barney, not Solomon Smith Barney.

Warburg Pincus to Invest in PayScale, a Compensation Data Firm

When it comes to paying employees, companies keep a close eye on what rivals are doing. To that end, one private equity firm is betting that companies might want more precise data.

The firm, Warburg Pincus, said on Thursday that it would invest up to $100 million for a majority stake in PayScale, a cloud-based software company that collects compensation data and offers that information to its business customers.

The deal underscores investors’ appetite for cloud software companies that collect steady revenue from subscriptions. Warburg Pincus, for its part, struck a similar deal in February, agreeing to invest up to $100 million in Dude Solutions, a provider of cloud-based software to manage building maintenance services.

The firm has been particularly active in technology recently. Last week, it agreed to acquire Electronic Funds Source, a corporate payments company, and earlier this month bought a majority stake in mercator, an information technology services provider to the airline industry.

PayScale, which was founded in 2000 and is based in Seattle, says it has more than 3,000 business customers across 13 countries. It plans to use the new money to improve its product offerings and finance its growth.

“At a time when businesses increasingly seek sophisticated analytics about employee compensation, PayScale’s offerings enable its customers to make better, faster and smarter decisions related to attracting and retaining the talent to power their organizations in a cost-effective manner,” Justin Sadrian, a Warburg Pincus managing director, said in a statement.

Warburg Pincus to Invest in PayScale, a Compensation Data Firm

When it comes to paying employees, companies keep a close eye on what rivals are doing. To that end, one private equity firm is betting that companies might want more precise data.

The firm, Warburg Pincus, said on Thursday that it would invest up to $100 million for a majority stake in PayScale, a cloud-based software company that collects compensation data and offers that information to its business customers.

The deal underscores investors’ appetite for cloud software companies that collect steady revenue from subscriptions. Warburg Pincus, for its part, struck a similar deal in February, agreeing to invest up to $100 million in Dude Solutions, a provider of cloud-based software to manage building maintenance services.

The firm has been particularly active in technology recently. Last week, it agreed to acquire Electronic Funds Source, a corporate payments company, and earlier this month bought a majority stake in mercator, an information technology services provider to the airline industry.

PayScale, which was founded in 2000 and is based in Seattle, says it has more than 3,000 business customers across 13 countries. It plans to use the new money to improve its product offerings and finance its growth.

“At a time when businesses increasingly seek sophisticated analytics about employee compensation, PayScale’s offerings enable its customers to make better, faster and smarter decisions related to attracting and retaining the talent to power their organizations in a cost-effective manner,” Justin Sadrian, a Warburg Pincus managing director, said in a statement.

A ‘Corporate Raider’ Tries to Correct the Record

In 1985, T. Boone Pickens, a force in the burgeoning business of hostile takeovers, appeared on the cover of Time magazine. He was fresh off an audacious tender offer for Gulf Oil, and the cover illustration showed him playing poker with oil derricks printed on the cards.

He was identified with two potent words: “Corporate Raider.”

Almost three decades later, Mr. Pickens has objected to that designation. In the pages of Time magazine.

Mr. Pickens is the author of a blurb about a fellow investor, Carl C. Icahn, that appears among a list of 100 influential people in the latest issue of Time. While discussing his friend, Mr. Pickens takes the opportunity to talk about himself:

Carl Icahn and I have been friends for decades. We’ve been called a lot of names over the years. “Corporate raider.” “Asset stripper.” “Bloodsucking ghoul.” All tough stuff. All inaccurate.

These days, financiers who buy stakes in companies and then forcefully push for change are known by the more polite term “activist investor.” They include billionaire hedge fund managers like William A. Ackman and Daniel S. Loeb.

As the “activist” name suggests, these investors tend to argue that their work is good for the companies they go after. Mr. Pickens has this to say about Mr. Icahn:

Sure, Carl is about as smooth as a stucco bathtub. But he is the best thing going for corporate America. Call Carl what you want, but recognize him for what he is: a shareholder activist. And an effective one at that.

Mr. Icahn, for his part, appeared on the cover of Time last December. The headline was a little different: “Master of the Universe.”

Investors Enthusiastic About Zimmer’s Deal for Rival

American investors are seeing yet another big acquisition. Zimmer Holdings promises that its $13.4 billion deal for its rival, Biomet, will yield savings.

But these cuts aren’t sufficiently valuable to justify the 15 percent, or $2.3 billion, pop in Zimmer’s market value on news of the deal, before the stock slipped slightly. This time, enthusiastic share buyers are betting on growth.

Biomet made about $1 billion in Ebitda â€" or earnings before interest, taxes, depreciation and amortization â€" as adjusted by the company, in the year that ended May 2013, according to an initial public offering prospectus filed in March. The adjusted definition leaves out some fairly normal business expenses, such as stock-based compensation and litigation costs. But taken at face value and put on the same multiple as peers, it suggests the Biomet enterprise may be worth about $11.5 billion.

Zimmer thinks the deal should yield about $270 million of annual savings. Taxed and capitalized on a multiple of 10, these are worth almost $2 billion in present value terms. On paper, that covers the extra value Zimmer is paying over to Biomet’s private equity owners, Blackstone, Kohlberg Kravis Roberts, TPG and Goldman Sachs. But it doesn’t explain why the acquirer’s value rose sharply.

Over the past six years, buyers in M.&A. deals have met a mixed reception, with their stock going up only about half the time, according to Thomson Reuters data. Lately, though, the market has been kinder.

This year, there have been 34 American deals worth more than $1 billion. The acquirer’s stock has gone up in three-quarters of these situations. Fairly sensible deal-making is one reason, hefty cost savings are another. This time, though, investors and Zimmer’s managers are more excited about growth.

As Zimmer said during its conference call, hospitals are consolidating and using fewer vendors to save money. Buying a big competitor will give Zimmer more sway in negotiations as well as broadening its product range. The company thinks as a result of this merger it will expand at the same pace as the market over the next few years and then faster once it fully incorporates Biomet.

Growth from mergers is not, however, as bankable a promise as cost savings. The warm reception for Zimmer’s deal suggests a sense of optimism among investors. That, in turn, probably means more deals are coming.

Robert Cyran is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Legal Memo Defends Ackman’s Actions in Allergan Bid

In the wake of this week’s unusual hostile bid for Allergan, one of the most pressing questions has been whether William A. Ackman, the activist investor who runs Pershing Square Capital Management, engaged in insider trading.

By accumulating a large stake in Allergan while knowing a bid was imminent, Mr. Ackman clearly had an advantage over other investors. And when Pershing Square and Valeant Pharmaceuticals announced its plans, the value of Mr. Ackman’s $4 billion stake quickly rose by about $1 billion.

But because Mr. Ackman is part of the buying group, it appears he was well within his legal rights. The fact that the tactic was legal, however, does not mean it is not drawing scrutiny.

In a memorandum issued Thursday, lawyers at the firm Cleary Gottlieb Steen & Hamilton, who are not involved in the bid, reaffirmed the legality of Mr. Ackman’s actions, which resulted in his firm acquiring a 9.7 percent stake in Allergan.

“Based on public information, there is nothing to suggest insider trading,” they said. “First, it appears that neither Valeant nor Pershing Square had obtained any material non-public information from Allergan. Second, it has been long established that a prospective bidder can accumulate a stake in a target without disclosure of its own plans.”

They also said Mr. Ackman and Valeant likely did not run afoul of a special Securities and Exchange Commission rule that pertains to tender offers. That rule, Rule 14 e-3, stipulates that once a potential bidder has “taken a substantial step or steps to commence a tender offer,” no one who knows about the pending bid can buy shares in the target.

The bidders likely are safe here for two reasons. For one, the Pershing Square fund that bought the Allergan shares was associated with the buying group. And moreover, Mr. Ackman and Valeant may not actually begin a tender offer any time soon.

“It is highly likely that Valeant has been careful to avoid any actions that could be characterized as steps towards commencement of a
tender offer,” the Cleary lawyers write in the memo. “Instead, Valeant is likely to pursue the acquisition by making public merger proposals (‘bear hugs’) together with a proxy contest to change the board of directors.”

(The lawyers say that the S.E.C. rule pertains to tender offers only, instead of other acquisition structures, because “the Williams Act gave the S.E.C. authority to adopt rules regulating tender offers and this rule was adopted in 1980, at a time when tender offers were the principal means of acquisitions and there were concerns about people trading based on advanced knowledge of tender offers. This was during the era of ‘raiders,’ who often made tender offers, and well before the current era of ‘activists.’”)

Another issue receiving scrutiny in the wake of the bid for Allergan is whether or not Pershing Square and Valeant should have been forced to disclose the stake they were amassing sooner.

The S.E.C.’s so-called Schedule 13D window stipulates that investors who accumulate 5 percent of a company’s stock must publicly report their position within 10 days of crossing that threshold, but allows the stake to grow within those 10 days.

“For many years numerous market participants have urged Congress to shorten the window, noting that almost every other developed market
has a much shorter period to make filings disclosing large positions,” the Cleary lawyers write. And while the Dodd-Frank regulation in 2010 authorized the S.E.C. to close or shorten the 10-day window, it has not yet acted.

“While many commentators assumed that the S.E.C. would move quickly to do so, activist hedge funds and their supporters argued that
encouraging activism was good public policy (since it was a counterweight to ‘entrenched’ boards of directors) and that the ten-day window encouraged activism by permitting acquisitions of larger stakes without disclosure (and the resulting run-up in share price),” the memo says.

Finally, there is the question of whether Valeant and Pershing Square should have filed antitrust pre-notification under the Hart-Scott-Rodino Act, notifying regulators of a potential merger of rivals. But because Pershing Square mostly bought options, they did not have to report holding underlying shares. Therefore, the Cleary attorneys write, “it appears that no filing had been required.”

Though Pershing Square and Valeant appear to have stayed well within their legal rights in accumulating their 9.7 percent stake in Allergan, “this week’s high-profile events regarding Allergan may put pressure on the S.E.C. (and potentially Congress) to address a number of important policy questions,” the memo states.

Among them are whether the 13D window should be closed or shortened, whether substantial derivative positions should require additional disclosure, and whether the rule around limits on trading around tender offers should extend to other deal structures.

So far regulators in Washington have been quiet on the issue, but that may not be the case for long if corporations start lobbying for more protection against hostile bids and activists.

“These issues are part of a growing debate as to whether there are cases of ‘illegitimate’ imbalances of information beyond classic ‘insider trading’ that regulators should address,” the memo said.

Barclays Shareholders Vent Frustration Over Bonuses

LONDON - For nearly three hours on Thursday, shareholders of Barclays aired their grievances with the British bank’s top management, ranging from complaints about the security of debit cards to the length of the lines to get into its annual meeting.

But one sentiment was nearly universally expressed by the 20 or so shareholders who took the floor in a testy back-and-forth with Barclays executives and directors: employees at its investment bank are paid too much.

Barclays has faced intense scrutiny in recent weeks over its decision to increase the bonus pool for last year even as the bank had a steep loss in the fourth quarter.

On Thursday, one shareholder said the board’s compensation committee should be “sacked,” and questioned why anyone would need more than 1 million pounds (about $1.68 million) a year in compensation. Another asked why the bonus pool was two-and-a-half times larger than the bank’s dividend payment to investors.

David Walker, the Barclays chairman, defended the decision to increase the bank’s overall compensation pool, saying Barclays faced “very aggressive” competition from its rivals to attract and retain talent, particularly in the United States.

“We were faced last year, 2013, with a situation in which we were losing people who were crucial to the future of the investment bank in an extremely competitive environment in which total pay in some parts of the major U.S. investment banks rose by 15 percent or more,” Mr. Walker said.

“We saw significantly higher numbers of high quality people we wanted to recruit turning down our offers,” he continued. “In this situation, where there is a genuine threat to the health of the franchise, our duty of care is to protect value for shareholders. The challenge was the need for damage limitation and franchise protection.”

In February, Barclays reported a big fourth-quarter loss of £514 million, which was driven in part by restructuring costs and a £331 million charge for litigation and regulation penalties.

But despite that loss, the bank increased its pool for bonuses and other incentives to £2.4 billion in 2013 from £2.2 billion the previous year. That remained £1.1 billion lower than it was in 2010.

Banker bonuses have been a sore topic for politicians and the public, particularly since taxpayers injected billions of dollars into Barclays’ rivals in Britain during the financial crisis.

Barclays’ reputation suffered in 2012 after it became the first bank to settle with American and British authorities over manipulation of global benchmark interest rates, including the London interbank offered rate, or Libor. It paid $450 million in penalties.

Nearly a quarter of the votes cast at the annual meeting on Thursday were against the company’s compensation plan. Every other resolution on the agenda passed by more than 90 percent.

Shareholders repeatedly expressed their frustration on Thursday with the company’s compensation policies, particularly in light of the problems in recent years.

“We appreciate that there were competitive pressures during 2013, particularly in the investment banking business,” Alison Kennedy, the governance and stewardship director at Standard Life Investments. “Nevertheless, we are unconvinced that the amount of the 2013 bonus pool was in the best interests of shareholders, particularly when we consider how the bank’s profits are divided amongst employees, shareholders and ongoing investment in the business.”

John Sunderland, a director and the chairman of the bank’s remuneration committee, said the board made the difficult decision to increase compensation because Barclays was facing an “exodus of talent.”

Mr. Sunderland, who will have served on the Barclays board for nine years in June, has been a target among shareholders unhappy with the bank’s compensation practices. He is expected to step down as a director after the company’s 2015 annual meeting.

The bank is in the middle of a painful restructuring and plans to eliminate as many 12,000 jobs this year, or about 8 percent of its work force. Barclays is to provide an update on its business plan and expected changes within its investment bank on May 8.

“The future for Barclays will be as a strong, focused, international bank. And the investment bank will be an important part of that mix,” Antony P. Jenkins, the Barclays chief executive, said on Thursday. “A strong investment bank in Barclays is good for the business, good for shareholders and good for Britain.”

But that investment bank is likely to be smaller in the future, as Barclays focuses on higher-return, less risky businesses.

Mr. Jenkins pointed to the decision by Barclays to exit the physical commodities business as an example of an area where the bank was refocusing the use of capital.

The first quarter is likely to be another challenging one for Barclays, which is to announce results on May 6.

Mr. Jenkins said that the challenging trading environment in the second half of last year continued in the bank’s fixed income, currencies and commodities business in the first quarter, with “a significant year-on-year reduction” in income in the business. But, he said the company’s efforts to control costs helped offset lower income in that business.

Mr. Walker, the Barclays chairman, said the bank remained committed to reducing its compensation expense ratio as part of the overhaul, but said it might have gone a bit too far in trimming its bonus pool in recent years.

Mr. Walker said the bank faced stiff competition for employees last year from rivals in several business lines it considers crucial to its future. As an example, Mr. Walker said rivals tried to poach two-thirds of the bank’s bond trading desk in New York last year.

That did little to sway a group of vocal shareholders, who jeered one shareholder seeking to praise the bank’s management for its efforts to change the culture at Barclays.

“We are paying for Manchester United, but we are getting Colchester United,” another shareholder said.

Bob Evans Investor Agitates for Change, Again

The activist investor Sandell Asset Management is once again agitating for change at the restaurant chain Bob Evans.

On Thursday, Sandell nominated eight candidates to the Bob Evans board in its push for change at the company, which it said had “dramatically underperformed” various peer groups for years.

“To fix this woeful track record of underperformance, Bob Evans needs a fresh, independent, highly qualified board of directors that is able to provide effective management oversight and bring new perspective and ideas to the company as they seek to effect positive comprehensive change,” Sandell said in a statement announcing the nominations.

A representative for Bob Evans could not be reached immediately for comment.

Sandell’s choices include Doug Benham, the chief executive of the fast food chain Arby’s; Steve Lynn, the former chairman and chief executive of the hamburger group Sonic; and David Head, the former president and chief executive of the restaurant corporation O’Charley’s.

The other nominees are Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware; Annelise Osborne, senior credit officer at Moody’s Investors Service; Aron Schwartz, a former managing director of Fenway Partners; Michael F. Weinstein, former chief executive of the Triarc Beverage Group; and Lee Wielansky, chairman and chief executive of the Midland Development Group.

Sandell also proposed Joe Crace, the managing director of the Legacy Consulting Group, as an alternate nominee.

The Bob Evans annual meeting has traditionally taken place in August but has not been scheduled yet for this year.

Sandell, which owns 6.8 percent of Bob Evans Farms, has made rumblings about trying to change the company’s board for months. In late September, when Bob Evans faced weak profit and sales performance, Sandell disclosed that it wanted Bob Evans to consider other options including splitting itself up, borrowing against its real estate holdings and repurchasing stock.

Sandell made it clear that it was still pushing for Bob Evans to review investment proposals from third parties and to consider splitting off from BEF Foods, its subsidiary food service business.

Bob Evans, which runs 561 restaurants across the United States, has maintained that keeping the operations together is better for business.

Sandell has so desired to shake things up at Bob Evans that it brought the company to court. In January, Sandell filed a lawsuit against the company, accusing its board of trying to strip rights from its shareholders. Sandell later dropped the suit.

Daley, Former White House Chief of Staff, Joins Hedge Fund

William M. Daley, the former White House chief of staff, has joined an upstart hedge fund based in Switzerland in a return to the financial industry.

Mr. Daley, 65, who was a JPMorgan Chase executive before joining the Obama administration in 2011, has been named a managing partner and the head of United States operations at Argentière Capital, a Swiss hedge fund based in Zug. He will stay in Chicago.

The move is the latest career twist for Mr. Daley, who has moved between Washington and the business world over the last two decades. Having worked at big firms, including the telecommunications company that became AT&T, Mr. Daley said he was looking forward to life at a start-up.

“I figured the next thing I wanted to do was get into something that had the potential to grow, and be part of building something,” he said in an interview on Thursday.

His move lends credibility to the hedge fund while underscoring the growing clout of hedge funds in the financial world. Argentière Capital was founded last June by Deepak Gulati, a trader who left his job at JPMorgan as the bank sought to comply with the Volcker Rule, which limits banks’ ability to bet with their own money.

Mr. Gulati, formerly the global head of equity proprietary trading at JPMorgan, brought a team from the bank to set up the hedge fund, which has $500 million in assets under management. Mr. Daley will help the firm build a presence in the United States.

“The expertise and the experience that Bill has is the real asset for what we do,” Mr. Gulati said. “It gives us a far better understanding of the world.”

Mr. Daley’s new job was reported earlier by The Chicago Tribune.

Mr. Daley has spent his career at the intersection of government and business. He served as the commerce secretary in the Clinton administration for three years, after working as a lawyer and as president of the Amalgamated Bank of Chicago.

He joined JPMorgan as the bank’s Midwest chairman in 2004, after a period in telecommunications, and was later named the head of corporate responsibility, a role in which he oversaw JPMorgan’s lobbying efforts.

He spent just one year in the White House, resigning in 2012 amid a rare shake-up. In Washington’s ferociously partisan atmosphere, Mr. Daley struggled to find his footing, The New York Times reported then.

A member of a prominent political family in Chicago, Mr. Daley began campaigning last summer for governor of Illinois. But he abandoned the effort in the fall, saying he didn’t feel comfortable with the idea.

Earlier this year, he was introduced to Mr. Gulati through James E. Staley, the former head of investment banking at JPMorgan who now works at another hedge fund, BlueMountain Capital Management. Mr. Staley and Mr. Daley had both been on JPMorgan’s operating committee.

“I was talking to Bill about whether he wanted to do something entrepreneurial,” Mr. Staley, who is known as Jes, said on Thursday. “I think he’s going to have a lot of fun learning the buy side.”

Alstom Denies Report of G.E. Takeover Bid, but Its Shares Surge

Updated, 8:11 a.m. | PARIS - Shares of the French industrial conglomerate Alstom, which makes high-speed trains and energy turbines, soared on Thursday on a report that General Electric was seeking to buy the company for about $13 billion.

Alstom, which is seen in France as one of the crown jewels of the country’s industrial sector, initially rose about 17 percent on the Paris exchange, even after the company issued a brief statement before trading began saying that it was not aware of any takeover offer.

By early afternoon, the shares were up about 14 percent, giving the company a market value of about 8.5 billion euros, or $11.8 billion. General Electric has a market value of about $264 billion.

Bloomberg News reported late on Wednesday that G.E. was looking to make Alstom its largest-ever acquisition as G.E.’s chief executive, Jeffrey R. Immelt, tries turn to around G.E.’s moribund stock.

Alstom said in its statement: “In response to recent speculation in the economic press, Alstom is not informed of any potential public tender offer for the shares of the company. The group constantly reviews the strategic options of its businesses.”

David Cook, a G.E. spokesman, said the company frequently received questions about mergers and acquisition activity, “so we have a simple policy of not commenting on rumor or speculation.”

Bloomberg News did not identify the source of its information, which it attributed to “people with knowledge of the talks.” It said G.E. was looking to refocus its activities on core industrial areas and could use its foreign cash reserves, now about $57 billion, to finance a deal.

Alstom is a global leader in the areas of power generation, including nuclear and wind turbines, as well as in power transmission and rail infrastructure. It has been struggling to find its footing amid weak demand in Europe and increasing competition from Asia.

Alstom said this month that it would sell part of its thermal power business to the private equity firm Triton Partners for $1 billion. And it has been considering a spinoff of its rail unit to help raise cash at a time when large orders have been scarce.

Still, any takeover bid is certain to raise hackles in the French establishment. Facing bankruptcy in 2004, Alstom received a €2.2 billion bailout from the government of former President Jacques Chirac, in a deal led by Nicolas Sarkozy, the finance minister at that time. The state later sold the stake it gained in that operation to the French construction and engineering contractor Bouygues.

France’s current economy minister, Arnaud Montebourg, has made a name for himself in a series of highly public disputes with foreign investors, and it seems unlikely that he will be able to remain on the sidelines if a G.E. offer is forthcoming.

Prime Minister Manuel Valls of France dismissed the Bloomberg News report as “rumors” and referred journalists to Alstom’s statement, Agence France-Presse reported on Thursday.

“With Alstom, as with all the great French groups, we are attentive,” Mr. Valls told the news agency, adding that was particularly the case concerning questions of “jobs and technology, and where the decisions are made.”

Alstom said it would have more information about its plans when it announces its annual results on May 7.

Bouygues, which owns 29.3 percent of Alstom, did not immediately reply to a request for comment. Shares of Bouygues rose 4.9 percent in Paris on Thursday.

Cutting Costs and Plotting Mergers

“Visitors to the New Jersey offices of Valeant, the ambitious pharmaceuticals company, are confronted with an unusual sight when they walk through the front door: a basketball court,” David Gelles writes in DealBook. “The building was previously home to a Y.M.C.A, which deemed it too run-down to host community activities. So when the Y.M.C.A. moved to a new building, Valeant moved in.”

Rather than luxuriate in its $44 billion market capitalization and rising profile, Valeant â€" led by J. Michael Pearson, its chief executive, and Howard B. Schiller, its chief financial officer â€" prides itself on cutting costs. And, Mr. Gelles writes, “as Valeant pursues its unconventional $45 billion hostile takeover of the Botox maker Allergan with its newfound ally, the activist William A. Ackman, Valeant’s unusual corporate culture and iconoclastic leaders are coming into focus.”

In assessing targets, Valeant’s executives eschew conventional Wall Street wisdom, Mr. Gelles writes. For one, they do not use investment bankers to find deals. The company is known to conduct due diligence on a target in a matter of days and bring acquired companies into the fold with similar speed. And even as Valeant, known as a serial acquirer, continues to grow, it remains frugal: The company’s employees have a $50 limit on dinner expenses and it holds its meetings at Courtyard Marriott or Sheraton hotels at airports.

AUTO LENDER SUED UNDER DODD-FRANK  |  Benjamin M. Lawsky, New York State’s top financial regulator, is using a little-known weapon to enforce consumer protections: the Dodd-Frank law, Rachel Abrams writes in DealBook. On Wednesday, Mr. Lawsky’s office filed a lawsuit against the Condor Capital Corporation, a subprime auto lender based on Long Island, accusing it of violating certain provisions of the Dodd-Frank financial overhaul act.

“The move appears to make Mr. Lawsky the first state financial regulator and the second state regulator to take advantage of a weapon many of his peers may not have even known was in their arsenal,” Ms. Abrams writes. “And as officials across the country seek to appear tough on wrongdoers after the financial crisis, the action could encourage other state regulators to follow suit.” Dodd-Frank allows state regulators to enforce provisions that prohibit deceptive, abusive or unfair practices by financial companies and grants these regulators broader authority than they would have under state law.

Mr. Lawsky’s complaint contends that Condor siphoned millions of dollars away from the accounts of unsuspecting borrowers by shutting down their access to online accounts after a loan was repaid. This left the borrowers unable to see whether an insurance payoff, overpayment or other transaction had left excess money behind. Condor is also accused of having few or no standards for safeguarding its customers’ personal information.

LIVE-STREAMED SPINNING CLASSES  |  Peloton’s spinning classes may at first seem no different from those at better-known outfits like SoulCycle or Flywheel. But a session last Friday revealed something different: video cameras recording the instructor for the benefit of customers following along at home on their Peloton bikes, Michael J. de la Merced writes in DealBook.

Peloton, a two-year-old start-up, is betting that the key to success lies in persuading customers to spend nearly $2,000 for a cycle plus an additional $39 a month to pedal along to live-streamed or recorded classes from one’s home. The cost may seem high, but a few prominent investors are betting that the business model can shake up the fitness industry. Peloton plans to announce a $10.5 million fund-raising round on Thursday, representing the latest milestones by the start-up in its quest to become the next big exercise lifestyle brand.

ON THE AGENDA  |  Durable goods orders are out at 8:30 a.m. Weekly jobless claims are also out at 8:30 a.m. General Motors and Time Warner Cable report earnings before the bell. Amazon and Microsoft report earnings after the markets close. Sheryl Sandberg, the chief operating officer of Facebook, is on Fox Business Network at 10 a.m.

 

TPG CAPITAL GOES GREEK  |  Chobani, a Greek yogurt maker based in upstate New York, said on Wednesday that it had secured a $750 million loan from the private equity firm TPG Capital, William Alden writes in DealBook. The fresh capital is intended to help the company add new products and expand overseas. Though the money is in the form of a loan, TPG is also receiving warrants that may allow it to obtain an equity stake in Chobani of as much as 35 percent.

Chobani recorded revenue last year of more than $1 billion and plans to introduce new products, including a dessert and a yogurt mixed with steel-cut oats. Six potential investors had expressed interest in doing a deal with Chobani, but TPG emerged as the leader in late March.

 

Mergers & Acquisitions »

G.E. Said to Weigh Bid for Alstom of France  |  General Electric is said to be in talks to buy France’s Alstom, which makes power plants and trains, for more than $13 billion, Bloomberg News writes, citing unidentified people familiar with the situation. BLOOMBERG NEWS

Setback for VW in Bid for Scania  |  The Swedish pension fund Alecta, which holds about 2 percent of Scania’s capital, is the latest shareholder to reject Volkswagen’s $9.3 billion cash offer to take full control of the truck maker Scania. DealBook »

Etsy Buys Grand St., a Boutique Electronics Start-Up  |  Etsy is poised to acquire a Brooklyn start-up called Grand St., an online boutique for electronics. The company did not disclose terms of the deal, which is still closing, the Bits blog reports. NEW YORK TIMES BITS

Philadelphia Is Comcast Country  |  Philadelphia has become a company town where Comcast wields vast influence, Daniel Denvir, a senior staff writer at Philadelphia City Paper, writes in a New York Times Op-Ed. NEW YORK TIMES

INVESTMENT BANKING »

Felix Salmon to Take On Web-Based Role at Fusion  |  Felix Salmon, a prominent writer on finance who is leaving Reuters, will take up a web-based role at Fusion that runs across multiple media, The New York Times reports. NEW YORK TIMES

British Financial Regulator Adds 2 Senior Advisers  |  The Financial Conduct Authority has appointed two senior advisers - David Saunders, a former head of Britain’s Competition Commission, and Gunner Burkhart, a former executive at Goldman Sachs. DealBook »

Home Sales Surge in the Hamptons  |  Home sales in the Hamptons, known as a summer retreat for the moneyed elite, surged in the first quarter as stock market gains and Wall Street bonuses bolstered demand for luxury properties, Bloomberg News reports. BLOOMBERG NEWS

Deutsche Bank Under Pressure to Raise Capital  |  Deutsche Bank is facing pressure from investors to raise capital amid fears that the bank is still not strong enough to deal with a tougher regulatory environment and a slump in the global debt markets, The Financial Times writes. FINANCIAL TIMES

PRIVATE EQUITY »

Formula One Investment Haunts Norway Wealth Fund  |  Norway’s $850 billion sovereign wealth fund is facing questions from lawmakers over its expansion into private equity after an investment in Formula One backfired, Bloomberg Businessweek writes. BLOOMBERG BUSINESSWEEK

Ares Offering to Make Co-Founder Rich  |  Tony Ressler, who co-founded Ares Management in 1997, will have a net worth of about $1.5 billion if his company’s initial public offering prices at the midpoint of the range, Bloomberg Businessweek reports. Ares plans to raise up to $419 million in its I.P.O. BLOOMBERG BUSINESSWEEK

Clearlake Capital Cleared to Buy Ashley Stewart  |  A bankruptcy judge on Wednesday gave the go-ahead to Clearlake Capital, a private equity firm based in Los Angeles, to acquire the women’s clothing retailer Ashley Stewart in a deal valued at up to $23 million, The Wall Street Journal writes. WALL STREET JOURNAL

HEDGE FUNDS »

In Allergan Bid, a Question of Insider Trading  |  William A. Ackman is sitting on a paper profit of more than $1 billion, leaving some to wonder whether the windfall comes as result of what feels like insider trading, William D. Cohan writes in a news analysis in DealBook. DealBook »

Ackman’s Pershing Square Subsidiaries Hint at Future Moves  |  William A. Ackman’s hedge fund has recently created four subsidiaries â€" beyond the one that the billionaire activist investor used to build a stake in Allergan. DealBook »

S.E.C. Settles With Ex-Nvidia Employee in Insider Trading Case  |  Securities regulators said they reached a settlement with a former Nvidia employee who was the source of inside information about the chip maker’s earnings for two hedge fund traders who are appealing their convictions. DealBook »

Battle for the Boardroom  |  “More hedge funds today are styling themselves as activists and they are notching up significant victories,” The Financial Times writes. “The legal, regulatory and intellectual skirmishes taking place behind the scenes are setting the new rules, which are shifting the odds in favor of the activists and away from the corporations.” FINANCIAL TIMES

I.P.O./OFFERINGS »

Numericable Raises $10.9 Billion in Junk Bond Offering  |  The high-yield bond offering by Numericable, the French cable unit of Altice, is the largest in history and will help finance the acquisition of Vivendi’s mobile unit, SFR. DealBook »

Tough Sell for Chinese Pork Producer’s I.P.O.  |  The WH Group’s reluctance to reduce the share price won’t tempt investors turned off by the valuation, Una Galani writes for Reuters Breakingviews. DealBook »

Facebook Profit Tripled in First Quarter  |  Facebook reported 1.28 billion monthly users, most on mobile devices, and easily exceeded analysts’ expectations for revenue and profit, The New York Times writes. Facebook also announced that its chief financial officer, David Ebersman, who helped lead it through its initial public offering and first two years as a public company, planned to step down on June 1. NEW YORK TIMES

Britain’s Saga Could Announce I.P.O. Next Week  |  Saga, a British insurer for people older than 50, is set to announce its formal intention to sell shares next week in London in an offering that could value the company at about $5 billion, Reuters writes, citing unidentified people familiar with the situation. REUTERS

VENTURE CAPITAL »

Some Setbacks for the Sharing Economy  |  San Francisco sued two landlords who it says evicted tenants to cater to tourists, and New York State is investigating Uber for price-gouging during storms, the Bits blog writes. NEW YORK TIMES BITS

Uber Starts Service in Beijing  |  The car-ride service Uber now offers service in 100 cities, ReCode writes. RECODE

LEGAL/REGULATORY »

F.C.C., in ‘Net Neutrality’ Turnaround, Plans to Allow Fast Lane  |  Planned new rules would allow an Internet provider to negotiate separately with content companies and charge them for priority service, The New York Times writes. NEW YORK TIMES

G.M.’s Bankruptcy Will Probably Shield It From Most New Claims  |  It is hard to see how a court can allow any claims without altering the basic terms of a 2009 bankruptcy deal, Stephen J. Lubben writes in his In Debt column. DealBook »

Federal Prosecutor to Help Lead Justice Dept.’s Criminal Division  |  Marshall L. Miller, a longtime federal prosecutor in Brooklyn, will help oversee a broad caseload and about 600 attorneys at the Justice Department. DealBook »

Anti-Corruption Group Finds Fault With European Union  |  A report by Transparency International, calling for a more open approach to policy making, might provide fuel for the union’s critics, The New York Times writes. NEW YORK TIMES

I.S.S. Backs 2 Loeb Nominees for Sotheby’s Board

Updated, 8:21 a.m. |

Investors in Sotheby’s should vote for two of the three board nominees proposed by the activist investor Daniel S. Loeb, an influential shareholder advisory firm recommended on Thursday.

The report by the adviser, Institutional Shareholder Services, is nonbinding. But it is the biggest show of support yet for Mr. Loeb in his campaign to force change at the 270-year-old auction house.

That battle, one of the most closely watched on Wall Street, is heading to its final stages, as both sides lobby other shareholders ahead of the company’s annual meeting on May 6.

A victory for Mr. Loeb could pave the way for a shake-up of one of the world’s biggest auction houses, at a time when the art industry finds itself at a crossroads. “Sotheby’s is like an old master painting in desperate need of restoration,” he has argued, contending that it has failed to adapt to changes in the art world and to impose discipline upon itself.

But a loss for Mr. Loeb would be a rare black mark for one of Wall Street’s most feared activists, who is himself an avid art collector.

In its report, I.S.S. wrote that Mr. Loeb had made a “compelling” case that the company had underperformed financially. Its operating expenses have climbed 26 percent over the last three years, topping out at 74 percent of revenue last year.

Though I.S.S. described Mr. Loeb’s call for change somewhat broad, it agreed with some of his specific arguments for change. Sotheby’s practice of splitting its buyers commission with potential sellers of art, for instance, could limit the company’s strategic flexibility. And it needs to build out its online auction capabilities, it said.

I.S.S. ultimately concluded that two of Mr. Loeb’s nominees, himself and Olivier Reza, a former investment banker, would be of great benefit to Sotheby’s because both are active art collectors, unlike the candidates put up by the company. The third nominee is Harry Wilson, a restructuring expert who served with Mr. Loeb on the board of Yahoo.

Sotheby’s issued a statement urging its shareholders to support its slate of directors.

“Under the stewardship of Sotheby’s board of directors and management team, Sotheby’s has consistently delivered strong, long-term performance and superior value creation,” the statement said. “Now is not the time to diverge from Sotheby’s leadership and its strategic plan. We believe that replacing any of Sotheby’s director nominees with Mr. Loeb or any of his handpicked nominees could negatively impact shareholder value.”

Representatives of Mr. Loeb did not have immediate comment.

K.K.R. Profit Drops but Exceeds Expectations

The private equity giant Kohlberg Kravis Roberts reaped gains in the first quarter from selling some of its investments, reporting profit that beat Wall Street’s expectations on Thursday.

But the profit â€" measured as economic net income, which includes unrealized gains from investments â€" was slightly lower than it was in the period a year earlier, chiefly because K.K.R.’s investment portfolio appreciated less than it did in the first quarter of 2013.

The firm said first-quarter economic net income declined 2.7 percent, to $630 million. The earnings after taxes amounted to 82 cents a share, handily exceeding the estimate of 53 cents by analysts surveyed by Standard & Poor’s Capital IQ.

Like other big private equity firms, K.K.R. continued to take advantage of buoyant stock markets to sell its holdings. In the first three months of the year, it held an initial public offering of Pets at Home, a British retailer, and sold shares in an I.P.O. of Santander Consumer USA, the American auto-lending arm of the Spanish banking giant Grupo Santander. It also sold shares in companies it had already taken public, including Jazz Pharmaceuticals and the TV ratings company Nielsen.

Those sales and others helped K.K.R.’s distributable earnings â€" a measure of cash generated by the firm that can be given to shareholders â€" rise 54 percent, to $446.8 million, from the period a year earlier. It said the firm’s realized carried interest, its share of the profit from selling investments made by its funds, more than doubled.

Still, the relatively muted gains in K.K.R.’s investment portfolio put a damper on the results. Its unrealized carried interest, reflecting gains on investments not yet sold, came in at half of the number in the first quarter of 2013.

The firm’s private equity portfolio appreciated 4.5 percent in the first quarter, outpacing the Standard & Poor’s 500-stock index, which rose less than 2 percent, including dividends. A year earlier, however, K.K.R.’s private equity portfolio rose 5.9 percent.

“Our investment portfolio and balance sheet continue to perform, resulting in a 26 percent return on equity over the last twelve months,” Henry R. Kravis and George R. Roberts, co-founders and co-chief executives of K.K.R., said in a statement.

K.K.R. raised more money from investors and acquired a European credit manager, Avoca Capital, helping push its assets under management above $100 billion.

The private equity industry prefers to use nonstandard metrics to report earnings. According to generally accepted accounting principles, K.K.R. earned $210 million in the quarter, 8.6 percent more than a year earlier.

K.K.R. announced a first-quarter dividend of 43 cents a share.

K.K.R. Profit Drops but Exceeds Expectations

The private equity giant Kohlberg Kravis Roberts reaped gains in the first quarter from selling some of its investments, reporting profit that beat Wall Street’s expectations on Thursday.

But the profit â€" measured as economic net income, which includes unrealized gains from investments â€" was slightly lower than it was in the period a year earlier, chiefly because K.K.R.’s investment portfolio appreciated less than it did in the first quarter of 2013.

The firm said first-quarter economic net income declined 2.7 percent, to $630 million. The earnings after taxes amounted to 82 cents a share, handily exceeding the estimate of 53 cents by analysts surveyed by Standard & Poor’s Capital IQ.

Like other big private equity firms, K.K.R. continued to take advantage of buoyant stock markets to sell its holdings. In the first three months of the year, it held an initial public offering of Pets at Home, a British retailer, and sold shares in an I.P.O. of Santander Consumer USA, the American auto-lending arm of the Spanish banking giant Grupo Santander. It also sold shares in companies it had already taken public, including Jazz Pharmaceuticals and the TV ratings company Nielsen.

Those sales and others helped K.K.R.’s distributable earnings â€" a measure of cash generated by the firm that can be given to shareholders â€" rise 54 percent, to $446.8 million, from the period a year earlier. It said the firm’s realized carried interest, its share of the profit from selling investments made by its funds, more than doubled.

Still, the relatively muted gains in K.K.R.’s investment portfolio put a damper on the results. Its unrealized carried interest, reflecting gains on investments not yet sold, came in at half of the number in the first quarter of 2013.

The firm’s private equity portfolio appreciated 4.5 percent in the first quarter, outpacing the Standard & Poor’s 500-stock index, which rose less than 2 percent, including dividends. A year earlier, however, K.K.R.’s private equity portfolio rose 5.9 percent.

“Our investment portfolio and balance sheet continue to perform, resulting in a 26 percent return on equity over the last twelve months,” Henry R. Kravis and George R. Roberts, co-founders and co-chief executives of K.K.R., said in a statement.

K.K.R. raised more money from investors and acquired a European credit manager, Avoca Capital, helping push its assets under management above $100 billion.

The private equity industry prefers to use nonstandard metrics to report earnings. According to generally accepted accounting principles, K.K.R. earned $210 million in the quarter, 8.6 percent more than a year earlier.

K.K.R. announced a first-quarter dividend of 43 cents a share.

Zimmer Holdings to Buy Biomet for $13.35 Billion

Zimmer Holdings agreed on Thursday to acquire Biomet Inc. in a cash-and-stock deal valued at $13.35 billion, including debt. It will bring together two providers of orthopedic, surgical and dental products.

The deal, which has been approved by the boards of both companies, comes amid a wave of health care and pharmaceutical deals. This week, Novartis and GlaxoSmithKline announced $20 billion in deals, and Valeant made a $45 billion hostile takeover bid for Allergan.

It is also the latest successful exit for private equity. In 2007, Biomet was acquired for $11.3 billion by Blackstone, Goldman Sachs’s buyout group, Kohlberg Kravis Roberts and TPG Capital.

“We believe that current demographic and macroeconomic trends affecting the health care industry will reward companies that successfully partner with other key stakeholders to improve patient care in a cost-effective manner,” said David C. Dvorak, Zimmer’s chief executive. “Together with Biomet we will expand the scope of our innovation programs and will enhance our efforts to provide integrated services and comprehensive solutions that address the needs of our customers.

Zimmer will pay Biomet shareholders $10.35 billion in cash and stock worth $3 billion. Zimmer shareholders will own 84 percent of the combined company, with Biomet shareholders owning 16 percent.

Shares of Zimmer, which had been flat for the year, were up 11 percent in premarket trading.

“Biomet and Zimmer share a 36-year history of mutual respect,” said Jeffrey R. Binder, Biomet’s president and chief executive. “Both companies are deeply rooted in the communities in which we operate and believe that we can only be successful in business if we are successful in helping health care providers improve the lives of patients.

The companies together had revenue of about $7.8 billion last year, and Zimmer said it expected cost savings of at least $270 million by the third year after the deal’s completion.

The companies said the deal was expected to close in the first quarter of next year.

Also on Thursday, Zimmer reported net sales of $1.6 billion and net earnings of $221 million for the first three months of the year.

Zimmer was advised by Credit Suisse and received legal advice from White & Case. Biomet was advised by Bank of America Merrill Lynch and Goldman Sachs, and received legal advice from Cleary Gottlieb Steen & Hamilton and Weil, Gotshal & Manges.

Zimmer Holdings to Buy Biomet for $13.35 Billion

Zimmer Holdings agreed on Thursday to acquire Biomet Inc. in a cash-and-stock deal valued at $13.35 billion, including debt. It will bring together two providers of orthopedic, surgical and dental products.

The deal, which has been approved by the boards of both companies, comes amid a wave of health care and pharmaceutical deals. This week, Novartis and GlaxoSmithKline announced $20 billion in deals, and Valeant made a $45 billion hostile takeover bid for Allergan.

It is also the latest successful exit for private equity. In 2007, Biomet was acquired for $11.3 billion by Blackstone, Goldman Sachs’s buyout group, Kohlberg Kravis Roberts and TPG Capital.

“We believe that current demographic and macroeconomic trends affecting the health care industry will reward companies that successfully partner with other key stakeholders to improve patient care in a cost-effective manner,” said David C. Dvorak, Zimmer’s chief executive. “Together with Biomet we will expand the scope of our innovation programs and will enhance our efforts to provide integrated services and comprehensive solutions that address the needs of our customers.

Zimmer will pay Biomet shareholders $10.35 billion in cash and stock worth $3 billion. Zimmer shareholders will own 84 percent of the combined company, with Biomet shareholders owning 16 percent.

Shares of Zimmer, which had been flat for the year, were up 11 percent in premarket trading.

“Biomet and Zimmer share a 36-year history of mutual respect,” said Jeffrey R. Binder, Biomet’s president and chief executive. “Both companies are deeply rooted in the communities in which we operate and believe that we can only be successful in business if we are successful in helping health care providers improve the lives of patients.

The companies together had revenue of about $7.8 billion last year, and Zimmer said it expected cost savings of at least $270 million by the third year after the deal’s completion.

The companies said the deal was expected to close in the first quarter of next year.

Also on Thursday, Zimmer reported net sales of $1.6 billion and net earnings of $221 million for the first three months of the year.

Zimmer was advised by Credit Suisse and received legal advice from White & Case. Biomet was advised by Bank of America Merrill Lynch and Goldman Sachs, and received legal advice from Cleary Gottlieb Steen & Hamilton and Weil, Gotshal & Manges.