Breakingviews

Coty will need to up its Avon game

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.Coty is going to need a bigger ring. Avon Products has rejected its $10 billion marriage approach, and the company this week hired a formidable new chief executive, Sheri McCoy. That rams home the point that Avon would rather go it alone than sell itself short. A new Breakingviews calculator shows just how much bigger Coty’s proffered engagement ring could be.

Coty, the maker of fragrances like Baby Phat, indicated it was willing to pay $23.25 a share, a 20 percent premium over Avon’s beaten-down stock price the Friday before the offer was made public. Avon’s shares have traded much higher even in the past year. The emergence of another possible suitor – privately-held U.S. investment firm Richmont Holdings, whose founder tried to take over Avon in the 1980s, is interested, according to Fortune – could mean even more pressure on Coty to raise its bid.

Facebook’s defensive Instagram M&A raises red flag

By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Facebook’s defensive purchase of Instagram raises a red flag. Online photos are supposed to be a core Facebook competence. Paying $1 billion for the popular picture-sharing app may boost the social network in mobile. But paying over the odds for revenue-free rivals is usually the hallmark of anxious, mature firms – not a growth company seeking to go public at a $100 billion valuation.

It’s impossible to say exactly what Facebook gets for the oodles of cash and stock it is handing over to Instagram, founded just two years ago by Kevin Systrom and Mike Krieger. Traditional metrics don’t apply – Instagram is just embarking on an actual business plan, and the firm was worth just $20 million a year ago. What it does have are lots of users – more than 30 million – and super-fast growth. More than 1 million more users signed up in 12 hours for its new Android app last week.

Avon CEO hire risks making corner office crowded

By Richard Beales

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Sheri McCoy, Avon Products’ new chief executive, should make a turnaround of the cosmetics firm a real alternative to a sale. After all, she has been running a big chunk of Johnson & Johnson, and Fortune ranked her the 10th most powerful woman in business last year. But Avon’s insistence on retaining Andrea Jung as executive chairman makes McCoy’s task look harder.

Corporate cash surplus will be easy to misspend

By Chris Hughes

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Everyone knows that companies worldwide are sitting on cash, generating cash, and have the capacity to borrow yet more. But where will it go? The optimistic answer would be into the real economy. The reality is probably into M&A and buybacks.

Avon’s hapless board opened door to Coty’s bid

By Agnes T. Crane and Rob Cox
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Coty needs another dash of powder to win over Avon shareholders with its $10 billion bid. But thanks to years of flawed stewardship by the iconic American cosmetics group’s board and management, attracting Avon’s shareholders shouldn’t be impossible for the privately-held maker of Playboy and Chupa Chups fragrances. It just needs to be more creative to seal the deal.

Int’l Power non-execs have some leverage over GDF

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The stock market has already done half the job for International Power’s independent directors. Two months of rumours of a full buyout from 70-percent owner GDF Suez have added something of a premium to the power generator’s shares. But now there’s official confirmation of a likely 6-billion-pound bid, IPR non-executives still have some power to push for a little more.

Taiwanese money can’t save Japan from Samsung

By Wayne Arnold

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Taiwanese money can’t save Sharp from Korea’s Samsung. Foxconn’s $1.6 billion investment buys Japan’s electronics company time. The deal gives Sharp cash and the promise of wider sales too, but does nothing to reduce a global glut in flat-panel screens. Like Sony, Panasonic and Toshiba, Sharp has for too long insisted on fighting for cutthroat markets where it’s no longer competitive. As Hitachi has shown, withdrawal may be the best option.

Dodger blue outshines gold after $2 bln deal

By Christopher Swann and Martin Hutchinson
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

The $2 billion deal for the Los Angeles Dodgers is a home run for sports owners everywhere. The near five-fold rise in the value of the West Coast baseball team since it last changed hands in 2004 underlines a surge in the value of top sports franchises. Only gold comes close to keeping pace as an investment. Rising television revenue is bringing in more cash. But it’s the swelling ranks of the ultra-rich in search of trophy investments that’s stoking prices.

These new owners usually stem from the ranks of high finance. Last year, Apollo co-founder Joshua Harris bought basketball’s 76ers in Philadelphia while Tom Gores and his buyout firm Platinum Equity snapped up the Detroit Pistons. And only last month, hedge fund manager Steven Cohen bought a 4 percent slug of the Mets.

Icahn gives Breakingviews a window into his method

By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.Carl Icahn gave Breakingviews a first-hand window into his methods. A recent column published about the 76-year-old activist investor irked him. His reaction echoed the tactics he has been using with corporate boards for decades. The experience makes it easier now to empathize with the American billionaire’s targets, but like some of those on the receiving end of his agitation, it also revealed a somewhat surprising alignment of interests.

At the outset, Icahn’s approach felt hostile, but it was by no means unsolicited. A Breakingviews columnist had telephoned Icahn to give him an opportunity to respond to a view that his future activist campaigns might be weakened because of a court examiner’s damaging findings at Dynegy, an energy group where Icahn also had meddled. Though Icahn tried to reach Breakingviews before publication, his messages were not received until later because of technical and human errors on our end.

Monopolies thrive when politicians go short-term

By Rob Cox
The author is a Reuters Breakingviews columnist and a Northeast Utilities customer. The opinions expressed are his own.

If there ever was a deal that elected officials should hate it’s the $17.5 billion proposal to create an electricity monopoly in New England. Last year Northeast Utilities, which wants to buy NSTAR of Massachusetts, proved to be a uniquely incompetent serial abuser of its dominant position. And yet authorities are now poised to give the merger the green light. The lesson: short-term political thinking benefits monopolies.

Hurricane Irene last August and a freak October snowstorm each left millions of Northeast’s captive customers in Connecticut without power for days while nearby rivals performed far better. An independent report painted Northeast as a hapless, unaccountable monopoly. But the power of money today speaks more loudly to politicians than the promise of greater competency tomorrow. Connecticut and Massachusetts have extracted pounds of flesh that offer significant political benefits to the two states’ governors in the short term. But they do little to ensure the new behemoth is held to higher standards of service or accountability.