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

John Stumpf may be easing his way onto the soapbox. The Wells Fargo chief executive runs the biggest U.S. bank by market value, at $210 billion, but has kept a lower profile than many of his peers. Lately, though, he has been critiquing regulation more, tiptoeing into a role filled until recently by JPMorgan boss Jamie Dimon.

Wells Fargo, with its Midwestern roots and San Francisco headquarters where Old West stagecoaches are displayed, deliberately distances itself from the image of the slick East Coast banker. “I’m not one of you New York guys with your fancy products,” Chairman Dick Kovacevich said at a 2008 gathering of bank bosses as a massive bailout took shape, according to the book “Too Big To Fail.”

Even after acquiring Wachovia and its investment bank, Stumpf has carried on the tradition of his predecessor, maintaining a healthy separation – at least publicly – from policy debates the other side of the country. It’s evident in his yearly letter to shareholders, a forum commonly used by corporate chieftains to express their viewpoints. In JPMorgan’s 2011 annual report, for example, Dimon devoted eight of his 38 pages to global regulation. Stumpf barely mentioned the subject in a missive that was only eight pages total.

Now, though, Stumpf appears to be trying on the statesman hat for size. Quarterly earnings calls are another opportunity for a bank chief to take a stand. Stumpf has rarely used his for that purpose, but during Wells Fargo’s latest, he wrapped up his prepared introductory remarks with an attack on the growing outcry for new rules targeting big banks. “Some claim that we receive a subsidy or have an unfair advantage from being perceived as too big to fail,” Stumpf said. “We disagree.”

Stumpf may feel a greater responsibility as he serves a one-year term – the first for a Wells Fargo boss – as chairman of the Financial Services Roundtable lobbying group. It also wouldn’t be surprising if industry colleagues wanted Stumpf to speak up. Dimon has been quieter since the failures associated with JPMorgan’s “London Whale” losses came to light and is fighting a shareholder move to split the chairman and CEO roles. Citigroup’s Michael Corbat is new in the job. Lloyd Blankfein is carefully rehabilitating Goldman Sachs’ image.

What’s more, Wells Fargo is besting large U.S. rivals in terms of return on equity and price-to-book valuation. That makes Stumpf the most credible bank CEO on the stump.

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

By Jeffrey Goldfarb

NEW YORK, May 16 (Reuters Breakingviews) – John Stumpf may
be easing his way onto the soapbox. The Wells Fargo (WFC.N: Quote, Profile, Research)
chief executive runs the biggest U.S. bank by market value, at
$210 billion, but has kept a lower profile than many of his
peers. Lately, though, he has been critiquing regulation more,
tiptoeing into a role filled until recently by JPMorgan (JPM.N: Quote, Profile, Research)
boss Jamie Dimon.

Wells Fargo, with its Midwestern roots and San Francisco
headquarters where Old West stagecoaches are displayed,
deliberately distances itself from the image of the slick East
Coast banker. “I’m not one of you New York guys with your fancy
products,” Chairman Dick Kovacevich said at a 2008 gathering of
bank bosses as a massive bailout took shape, according to the
book “Too Big To Fail.”

Even after acquiring Wachovia and its investment bank,
Stumpf has carried on the tradition of his predecessor,
maintaining a healthy separation – at least publicly – from
policy debates the other side of the country. It’s evident in
his yearly letter to shareholders, a forum commonly used by
corporate chieftains to express their viewpoints. In JPMorgan’s
2011 annual report, for example, Dimon devoted eight of his 38
pages to global regulation. Stumpf barely mentioned the subject
in a missive that was only eight pages total.

Now, though, Stumpf appears to be trying on the statesman
hat for size. Quarterly earnings calls are another opportunity
for a bank chief to take a stand. Stumpf has rarely used his for
that purpose, but during Wells Fargo’s latest, he wrapped up his
prepared introductory remarks with an attack on the growing
outcry for new rules targeting big banks. “Some claim that we
receive a subsidy or have an unfair advantage from being
perceived as too big to fail,” Stumpf said. “We disagree.”

Stumpf may feel a greater responsibility as he serves a
one-year term – the first for a Wells Fargo boss – as chairman
of the Financial Services Roundtable lobbying group. It also
wouldn’t be surprising if industry colleagues wanted Stumpf to
speak up. Dimon has been quieter since the failures associated
with JPMorgan’s “London Whale” losses came to light and is
fighting a shareholder move to split the chairman and CEO roles.
Citigroup’s (C.N: Quote, Profile, Research) Michael Corbat is new in the job. Lloyd
Blankfein is carefully rehabilitating Goldman Sachs’ (GS.N: Quote, Profile, Research)
image.

What’s more, Wells Fargo is besting large U.S. rivals in
terms of return on equity and price-to-book valuation. That
makes Stumpf the most credible bank CEO on the stump.

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CONTEXT NEWS

– Wells Fargo Chief Executive John Stumpf addressed the
issue of some banks being “too big to fail” during the bank’s
latest quarterly earnings conference call with analysts.

– “We do not need additional legislation aimed at big
banks,” he said on April 12. “Important and significant
regulatory changes have been made since the financial crisis and
we need to give existing regulations a chance to work especially
now when all of our energy should be focused on creating growth
and new jobs.”

– Wells Fargo first-quarter earnings call transcript
link.reuters.com/byp28t

RELATED COLUMNS

JPMorgan vs JPMorgan [ID:nL2N0CZ0GA]

Deep Wells [ID:nL1E9CB2F2]

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can click on [GOLDFARB/]

(Editing by Richard Beales and Martin Langfield)

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the Reuters group of companies around the world.

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

Carl Icahn may have a secret admirer. The uppity billionaire fired his latest salvo in the battle over Dell late last week, proposing a half-baked leveraged recapitalization. The plan could be a ploy to get Silver Lake Partners and founder Michael Dell to sweeten their $24.4 billion bid. It’s hard not to wonder, though, if the buyout firm isn’t quietly rooting for Icahn.

Not long after Silver Lake launched its offer in February, the bad news started flowing. Dell slashed by nearly half its annual forecast for adjusted operating income. Then research firm IDC reported the worst quarterly decline in worldwide PC shipments since it started tracking them on that basis almost two decades ago.

It was enough to spook one suitor. Blackstone Group, which had Dell’s former head of strategy advising it and had already sounded out other potential chief executives, opted not to proceed with a bid, citing the industry data and the company’s “eroding financial profile.”

Even if Silver Lake was similarly rattled, backing out would be tough. By association, Michael Dell’s position at the company would be jeopardized, and the terms of their agreed deal contain an unusually constraining material adverse change provision. It excludes anything that affects the industry, the economy or even the company’s ability in most cases to meet its own forecasts. What’s more, Silver Lake would have to pay a $750 million breakup fee, more than half the amount of capital it’s planning to use in the deal.

The firm specializes in technology buyouts so could be more confident than Blackstone of the turnaround possibilities. But the coming weeks could be telling. Bidders trying to win hard-fought takeover battles don’t necessarily raise their offers, but they often try to win over shareholders with public statements, letters and even newspaper ads.

Of course, Icahn’s newest proposal, with Southeastern Asset Management, is flaky. It isn’t fully financed and involves risky stub equity. Silver Lake may not feel the need to dignify it with a full-throated response. Then again, if shareholders vote against a sale to Silver Lake and Dell does a different deal in the next 12 months, the company would have to pay Silver Lake at least $180 million and as much as $450 million. That’s a lot of reasons to scrutinize Silver Lake’s body language.

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

By Jeffrey Goldfarb

NEW YORK, May 13 (Reuters Breakingviews) – Unseemly
conflicts of interest are not confined to Wall Street. Goldman
Sachs (GS.N: Quote, Profile, Research) and its peers regularly take heat for playing all
sides of a trade. Now a furor involving Bloomberg reporters
using private customer data has, this time, spared the blushes
of bankers.

Goldman attracts more scrutiny than other financial
institutions for treading a fine line. Breakingviews, whose
parent company is Thomson Reuters (TRI.TO: Quote, Profile, Research)(TRI.N: Quote, Profile, Research) – a Bloomberg
competitor – has mentioned “Goldman” and “conflicts” in the same
view about 100 times since 2000. Goldman’s many tentacles led
Rolling Stone magazine to brand it a “great vampire squid” and
conflicts underpinned Securities and Exchange Commission
allegations over the Abacus collateralized debt obligation that
the firm settled for $550 million in 2010.

This time, it was Goldman that spotted a potential conflict
at Bloomberg, according to the New York Post, when a reporter
let on that an inquiry about a partner’s employment status had
been triggered by a lack of activity on his Bloomberg terminal.
The news and information flowing through the company’s
$20,000-a-year machines has made the company founded by New York
Mayor Michael Bloomberg something akin to the Goldman of
financial data – nigh on indispensable for users as they make
decisions worth billions of dollars every day.

Both organizations also foster ambitious cultures designed
to maintain their pre-eminence. That may help explain why
tactics are accepted internally that, once aired publicly, seem
to go clearly too far. Just as Goldman has sometimes taken hits
for its perceived conflicts, Bloomberg is now admitting it made
a mistake by allowing reporters to have access to certain
customer information.

The episode has reverberated across trading floors,
executive suites and even the halls of the Treasury Department
and the Federal Reserve, which are also worried their Bloomberg
activity may have been monitored. Questions about conflicts are
particularly pointed given Bloomberg’s crusade for transparency
at the Fed, which it has sued for the release of information.

Bloomberg’s misstep may have brought bankers a rare chance
to garner empathy. It is unlikely, however, to reshape public
opinion. In a Gallup survey conducted in November, 24 percent of
respondents rated the honesty and ethical standards of bankers
low or very low. Thirty percent said the same of journalists.
The financial data firm interacts with banks in other ways, too,
for instance with research and trading infrastructure, including
a part share in a so-called dark pool operator called BIDS
Trading. As is the case at a complex investment bank, conflicts
at Bloomberg are not so easily avoided.

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CONTEXT NEWS

– Bloomberg LP President Daniel Doctoroff on May 10 said the
company had made a mistake with a longstanding policy of
allowing journalists to have access to “limited customer
relationship data.” The company said it changed its policy last
month, following a complaint from a client, so that reporters
only have access to the same customer relationship data as
clients.

– The New York Post reported on May 9 that Goldman Sachs had
confronted Bloomberg over concerns about data access on the
terminals. In one instance, a Bloomberg reporter asked a Goldman
executive if a partner at the bank had recently left, “noting
casually that he hadn’t logged into his Bloomberg terminal in
some time,” the newspaper reported, citing unnamed sources.

– In an editorial published on May 12, Bloomberg News Editor
in Chief Matthew Winkler wrote: “The error is inexcusable.” He
explained that Bloomberg journalists could see a user’s log-in
history and “high-level types of user functions on an aggregated
basis, with no ability to look into specific information.”

– He added: “At no time did reporters have access to
trading, portfolio, monitor, blotter or other related systems.
Nor did they have access to clients’ messages to one another.
They couldn’t see the stories that clients were reading or the
securities clients might be looking at.”

– Winkler, who wrote “The Bloomberg Way” guide for reporters
and editors, said the practice dates to the early 1990s when
reporters used the terminal to find out the kind of news
coverage customers wanted.

– Bloomberg statement: bloom.bg/xUdsLv

– Matt Winkler column: bloom.bg/12sWb68

– Reuters: Bloomberg’s top editor calls client data policy
‘inexcusable’ [ID:nL2N0DU1NV]

RELATED COLUMN

Money talks [ID:nL1E8KB710]

– For previous columns by the author, Reuters customers
can click on [GOLDFARB/]

(Editing by Richard Beales and Martin Langfield)

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Keywords: BREAKINGVIEWS GOLDMAN/BLOOMBERG

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and the Reuters sphere logo are registered trademarks and trademarks of
the Reuters group of companies around the world.

By taking a big bite out of the American stock market, Apple is inadvertently seeding the appetite for equity. While the iPad maker’s recently supersized $50 billion buyback program may be unique in its scale as the largest of all time, it also typifies one of the big challenges facing investors seeking to deploy their money.

Since the post-crisis trough of major stock indexes, companies have binged on themselves. According to Thomson Reuters data, boards of U.S. companies have given the go-ahead to slurp $1.4 trillion of their own shares out of the market during the last four years. Over the same span, the amount of new stock issuance, either by way of initial public offerings or follow-on sales, only adds up to about $820 billion.

The buyback boom signals a dearth of sensible investment opportunities and transfers the onus of finding them from chief executives to fund managers. Stock repurchases generally mean companies don’t think capital expenditures or takeovers will deliver the same level of returns as shrinking their share counts. The belief is so pervasive that even those who have failed spectacularly with the strategy in the past – buying high and selling low – are trying it again.

The return of so much cash occurring simultaneously with the elimination of so much stock not only drives up prices but also reduces choices. Combined with the cheap liquidity provided by central banks, the phenomenon creates rising demand for new equities. Investors have, for example, lapped up highly indebted IPOs from the likes of satellite operator Intelsat and theme park operator SeaWorld as well as risky ventures like Russian payment system Qiwi.

It’s no wonder Leon Black says Apollo Global is “selling everything that is not nailed down.” The buyout firm this week filed to take Claire’s public despite the specialty retailer carrying debt of over seven times adjusted EBITDA. Nearly a dozen new stocks were debuting in New York this week. Perfumer Coty is on deck. Neiman Marcus and Ares Management are among those seen getting ready to go public. It’ll take all those and then some to fill the gap created by share-cannibals like Apple.

Former junk bond king Michael Milken has more leverage than ever. Three decades after mastering the art of raising money, the man whose indictment on securities violations brought down Drexel Burnham Lambert now trades more heavily in intellectual capital.

This year, Carlos Slim, the world’s richest man, and one-time British Prime Minister Tony Blair joined familiar faces from his Drexel days at his annual Beverly Hills jamboree. These growing introductions and networks in areas such as education and healthcare arguably make Milken even more powerful than when he was the hub of high-yield debt.

The Milken Institute Global Conference and its approximately 3,000 attendees may as well be a giant game of Six Degrees of Michael Milken. Though his own program biography understandably omits any reference to Drexel and his time in jail, the panels are populated by the defunct investment bank’s vast diaspora. Among them: Joshua Friedman, co-founder of Canyon Partners; Jonathan Sokoloff, managing partner of Leonard Green; Ted Virtue, chief of MidOcean Partners and; Andrew Whittaker, vice chairman of Jefferies.

Beyond that is a long list of former clients roaming the halls of the Beverly Hilton, including media mogul Rupert Murdoch, casino magnate Steve Wynn and oil tycoon T. Boone Pickens. Some connections aren’t as immediately apparent.

A session about retail in a digital world, for instance, wasn’t an obvious link to Milken. He was sentenced to prison before the Internet had even been commercialized. Yet even here there was a connection. One speaker was the CEO of Claire’s Stores, owned by private equity firm Apollo,which was founded by former Drexel managing director Leon Black and where Milken’s son Lance is a partner. He also serves on the board of Claire’s.

And while Milken’s philanthropic efforts can help lure such luminaries as Bill Gates, the institute’s program staff has over the years helped steadily widen the guest list far beyond Milken’s Rolodex. In the 16-year run of the conference, sitting heads of state who generally prefer to schmooze in Davos have been rare, but Rwandan President Paul Kagame showed up for this one. Among the unexpected panels was one entitled “The Rise and Decline of Nations and Civilizations” with professors Jared Diamond, Niall Ferguson and James Robinson.

Financial, industrial and academic celebrities are accompanied by the Hollywood and Washington variety. NBA legend Magic Johnson talked AIDS research. Milken himself grilled U.S. House Majority Leader Eric Cantor and Senate Majority Leader Harry Reid together. Hockey icon Wayne Gretzky was on the program to discuss the business of sport with bankers. Lionel Richie and Paul Anka performed at an evening gala.

The ability to assemble each year leaders from so many walks of life with the custodians and managers of trillions of dollars is a rare accomplishment. The networking almost certainly enables capital to flow to biotech, education, technology and developing-nation projects they might not otherwise reach. In one small but visible example, Milken appeared to shock Blair during their one-hour interview by pledging $1 million to a multicultural school project being spearheaded by the former prime minister’s foundation – and on multiple occasions challenged the audience to raise the other $5 million being sought.

Even so, at least one of Milken’s relationships remains suspect. Earlier this year, Guggenheim Partners, which is underwriting the conference, said the Securities and Exchange Commission was investigating its ties to Milken, who accepted a lifetime ban from the securities industry in 1990. It’s a reminder of how Milken manages to embody the notion that some forms of crony capitalism are unsavory, while others can actually be quite productive.

Cracking down on M&A leaks may only make them more tempting. Merger practitioners say fresh research showing that news is trickling out less often about companies for sale can partly be attributed to tougher rules and enforcement. Though loose lips come with less chance of deals closing, they also coincide with much higher premiums. Some bankers will always fancy that mix of risk and reward.

Discretion has spread post-crisis, according to a study by London’s Cass Business School commissioned by Intralinks, a provider of virtual data rooms. Between 2008 and 2009, there was “significant pre-announcement trading” in the stock of a target company in 11 percent of cases. Over the following three years, the rate fell to 7 percent. Reduced merger activity overall may have played a part, but the UK Takeover Panel’s recent disclosure rules and closer scrutiny of market abuse in the United States also probably have had an effect.

The report suggests the financial hazards of gossip have grown. In the boom years from 2004 to 2007, 88 percent of deals that were leaked, either accidentally or intentionally, went on to close. That was roughly on a par with non-leaked transactions. Between 2010 and 2012, only 80 percent of tipped deals reached the finish line, while nearly nine out of 10 of the ones kept quiet made it.

The rewards of indiscretion, however, have increased. Five years ago, the researchers discovered little difference in the takeover premiums paid for the two sets of deals from 1994 to 2007. Over the last few years, leaked deals attracted a sharply larger premium – 53 percent versus 30 percent. There’s no indication of causality, especially as unauthorized disclosures can come from either sellers or buyers. Yet the implications won’t be lost on advisers.

All else being equal, a $1 billion company being sold quietly would, according to the findings, fetch $1.3 billion. The price tag for a leaked deal would be $1.53 billion. Assuming a 3 percent fee, a banker would either have an 88 percent chance of pocketing $39 million or an 80 percent chance of $46 million. The second option is worth $2.5 million more. Wall Street’s collective ego will find that calculus enticing.

Even losers could emerge as winners from the Dell takeover battle. Blackstone Group, Silver Lake Partners, the Dell board and founder Michael Dell could stand to benefit from the impression of a hard-fought auction. A Potemkin fight, if that’s what it turns out to be, just may not help shareholders quite so much.

It’s what Wall Street calls “the optics” of the deal. For the buyout firms, a backdrop for the $24 billion Dell sale is an antitrust lawsuit that a judge earlier this month narrowed but allowed to proceed. Shareholders of acquisition targets from 2003 to 2007 accuse Blackstone, TPG and other private equity shops of conspiring to drive down prices by agreeing not to outbid each other.

One potentially damaging piece of evidence is an email from none other than Blackstone President Tony James to KKR co-founder George Roberts: “We would much rather work with you guys than against you. Together we can be unstoppable but in opposition we can cost each other a lot of money.”

While the Dell deal will have no direct bearing on the case, Blackstone’s counterbid seems to undermine such allegations. The eleventh-hour offer for the PC maker is a rarity. Go-shop periods almost never lead to a higher bid. In the context of helping to shift perceptions about private equity firms being in cahoots, even Silver Lake might welcome Blackstone’s approach.

New suitors could also help Dell’s board avoid a J Crew stigma. In the clothier’s 2010 sale, the board succumbed to a leveraged buyout hand-stitched by Chief Executive Millard “Mickey” Drexler. After being kept in the dark for over six weeks that Drexler and the lead director’s private equity firm, TPG, were teaming up on a bid, independent directors used a go-shop period as a governance fig leaf.

Similarly, if Michael Dell winds up working with Blackstone, or even negotiates in good faith with the firm, he could come out looking better than Drexler, who only grudgingly agreed to work with other potential buyers.

Blackstone, or even Carl Icahn, might succeed with their bids, but it’s just as likely all the maneuvering won’t bring a better deal for Dell investors. Others involved will at least come away keeping up appearances.

M&A bankers and lawyers telling a PR firm that specializes in deals they expect to see more merger activity makes for sweet echo-chamber music. The survey released by Brunswick Group to coincide with an annual U.S. dealmaker powwow found three out of four practitioners expecting more M&A globally this year than last. They’re more bullish than ever about North America, with 97 percent anticipating growth in the region. A discount needs to be applied to all the optimism.

It’s a known fact that deal pipelines are almost always backlogged, no matter how bleak the environment. In the dark days of early 2008, nearly 60 percent of those polled either said the market had hit a trough and would turn around in 12-18 months or it was just a short-term blip. As it turned out, the trough was two years away. Merger volume tumbled 30 percent to $2.9 trillion that year – and another 30 percent in 2009, to $2 trillion.

Even pessimistic M&A advisers have proven to be overly cheerful. Five years ago, four out of 10 respondents – and seven out of 10 in 2009 – told Brunswick they reckoned it would take five years to get back to the 2007 peak level of $4.1 trillion. That would be a neat trick. The announced volume in 2012 was $2.5 trillion, roughly where it has been for the last three years, according to Thomson Reuters data. It would take a spurt of over 60 percent to get there.

A recent spate of multi-billion-dollar deals last month involving Dell, Heinz, American Airlines and Comcast undoubtedly will have inspired some of the rosy attitudes evident in this year’s poll, conducted from Feb. 25 to March 4. And yet only at the eleventh hour did last week narrowly avoid being the first in over 11 years without a $1 billion transaction. Year-to-date activity is up just 3 percent from 2012, after dipping 1 percent last year. In the world of M&A, a premium of 30 percent is often layered onto the observable value. The same is probably true of what dealmakers say about their business.

The brief history of Time is a truly epic M&A tale. The gold standard of U.S. magazine publishing proved the ultimate foundation for a giant media conglomerate. Time Warner’s decision on Wednesday to spin off the legacy of Henry Luce’s 1920s vision represents the last step in dismantling the empire.

From a single news weekly started 90 years ago for some $86,000, or about $1.2 million in today’s money, the company eventually grew to be valued at almost $250 billion in 2001. One of Luce’s first deals, buying Architectural Forum about a decade after founding Time, was only a small sign of things to come. An eventual standout in Time Inc’s stable, Life magazine, was the result of an acquisition, too.

Long after Luce retired in 1964, the collection of publications he started, which came to include Fortune and Sports Illustrated, proved a powerful acquisition currency. It was put to use on a grand scale in 1990 when Time Inc bought Warner Communications. What started as a stock swap turned into a cash deal “because of that son of a bitch at Paramount,” as Luce’s son described Martin Davis, the studio boss who interrupted with a hostile bid for Time Inc. A stretch of market-lagging returns ensued for Time Warner.

The purchase of Turner Broadcasting System in 1996 expanded the sprawl. That $7.5 billion deal more prudently relied on Time Warner’s stock for funding, but it also provoked still more resentment throughout the company. These deals set the stage for one of the biggest merger transactions in corporate history: the $180 billion sale of Time Warner to AOL.

Strategically flawed and timed just right for the dot-com collapse, it remains one of the most value-destructive deals ever conceived. Time Inc’s magazines nevertheless proved a steady source of considerable profit. In the decade to March 2003, encompassing both boom and bust, Time Warner’s total shareholder return hit 5,812 percent, according to Thomson Reuters.

The conglomerate that existed then has since been taken apart. The book and music divisions were sold, along with sports teams. AOL and the cable TV operations have been spun off. All told, including the estimated $2.5 billion value of a separated Time Inc, the assets will have generated some $20 billion of proceeds. Despite a 130 percent total return over the past 10 years, Time Warner is worth only a little more today – some $53 billion – than it was a decade ago. It may not be what it once became, but is still quite a story to be spun from a single magazine.