Breakingviews

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.

Watchdogs could change Vivendi’s EMI tune

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

Vivendi’s Universal Music feels good. The purveyor of Lady Gaga hits is so confident of getting approval to buy rival EMI that it agreed to pay the full $1.9 billion price even if the transaction is blocked by trustbusters. But beyond outright success or failure, another possibility – being forced to sell various pieces – could prove costliest.

Amazon hedges against the rise of the machines

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

Is Amazon hedging itself against the rise of the machines? That’s one way to explain the kooky $775 million purchase of Kiva Systems. Either that or the online retailing giant’s founder Jeff Bezos has a robot fetish. It’s not clear what the deal offers Amazon shareholders. Automating Amazon’s warehouses makes sense. But buying Kiva droids, rather than their maker, seems the more rational approach.

Cisco’s John Chambers falls off the M&A wagon

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

Cisco’s John Chambers has fallen off the M&A wagon. Less than a year ago, the networking giant’s chairman and CEO, in an unusual mea culpa to employees, forswore big deals and promised discipline. Now, Cisco is shelling out $5 billion for NDS Group, a pay TV software firm. But this acquisition might just deliver justifiable returns and fit nicely with Cisco’s revised strategy.

Cisco had a long history of overstretching prior to last year’s shift. The company’s deals had transferred oodles of Cisco cash to other firms’ shareholders, hurting Cisco’s valuation and leaving the firm sprawling and a struggle to manage. That distracted executives from core businesses in routers and switches, which were under attack from rivals like Juniper Networks and Huawei. Profit warnings ensued with alarming regularity.

Youku-Tudou price pop not only about synergies

By Wei Gu

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

Investors are hooked on Internet video portal Youku’s plan to merge with smaller rival Tudou. The companies’ combined market capitalisation swelled by $1.5 billion after the unveiled merger. Cost savings of $50 million to $60 million a year only partly explain it. Other factors may include a squeeze on short sellers, a re-rating of the sector, and hopes that an enlarged Youku could itself be a bid target.

Splitting AT&T CEO and chairman roles a no-brainer

By Robert Cyran

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

Randall Stephenson’s botched plan to buy T-Mobile USA came with a $4 billion tab. The board didn’t see fit to hold him fully accountable. But shareholders can have their own say – and should vote to strip Stephenson of his chairman title and install an independent.

Glencore faces fight to land $5.5 bln Viterra deal

By Kevin Allison

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

Ivan Glasenberg seems to like difficult deals. The chief executive of commodity trader Glencore is still trying to win over shareholders in Xstrata to a proposed $90 billion merger with the miner. But he is potentially also in the market for a smaller but no less challenging acquisition, of Canadian grain handler Viterra.

Icahn targets given red alert by Dynegy debacle

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

Carl Icahn’s reputation already precedes him when he turns up to agitate. Now a court-appointed official has shredded a retooling at Dynegy, where the uppity investor meddled and installed directors. Companies on the receiving end of his tactics, like CVR Energy, have all the more reason to spurn Icahn.

Once a $13 billion powerhouse, Dynegy’s equity is now worth a mere $70 million. The 76-year-old raider-cum-activist has played a significant role in the latest step of the downfall, ever since he helped block a $600 million leveraged buyout by Blackstone at the end of 2010. With a stake of nearly 15 percent, he is the largest shareholder – and responsible for two of Dynegy’s six directors.

M&A lawyers lob stones at Goldman from glass house

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

M&A lawyers tossed stones at Goldman Sachs from a glass house. Debate over how the bank played both sides of the El Paso sale to Kinder Morgan drowned out other hot topics at this week’s dealmaker jamboree in New Orleans. Bankers and chief executives took beatings over other conflicts of interest, too. For an event organized by and for mainly attorneys, however, there was surprisingly little self-reflection.

Fortune 500 plays tough for home-court advantage

By Reynolds Holding

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

U.S. companies are playing tough for home-court advantage. Weary of fighting shareholders in multiple states, the Fortune 500 is forcing M&A lawsuits into its preferred forum, Delaware. But investors deserve a say in the matter. As the hot-button issue plays out before judges, deal-making lawyers and bankers will give it a hearing at their annual New Orleans confab this week.