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Apr 30, 2012
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Sirius XM could yet reclaim the soul it sold

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

Sirius XM sold its soul and could pay a hefty price to retrieve it. When the U.S. satellite radio service stared down bankruptcy in 2009, it beat a rescue path to John Malone’s door at Liberty Media. For a financial lifeline, Sirius pledged a 40 percent stake and power over most big decisions to the wily cable magnate. But now he has come to collect.

Apr 18, 2012
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Buffett at least learned one thing from Steve Jobs

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

Warren Buffett seems to have learned something from a fellow corporate titan. The 81-year-old investing icon disclosed on Tuesday he was diagnosed with early-stage prostate cancer last week and pledged to keep shareholders updated about his health. The candor is a refreshing contrast to the way in which Steve Jobs guarded details of the illness that eventually killed him. Unfortunately, Buffett is shrouding his succession plan in the same sort of mystery the Apple boss did.

Apr 16, 2012
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Brazilian billionaire banker tests investor mettle

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

Andre Esteves is testing just how badly investors want a piece of his hot, Brazilian investment bank. The billionaire boss of BTG Pactual showed no signs of retreating from an initial public offering in the coming weeks despite a 350,000-euro fine against him by Italy’s financial watchdog for insider trading. The risks are looking big for this high-flyer.

Pactual’s allure owes much to Esteves’ dealmaking reputation. He sold his boutique to UBS at the top of the market and then bought it back a couple of years later in 2009 for a knockdown price when the Swiss bank ran into trouble. Since then, Esteves has attracted funds from a who’s who of global investors, including the Rothschild and Agnelli families, while retaining almost a quarter of the bank for himself. In the past three years Pactual’s value has increased six-fold to some $15 billion.

Apr 12, 2012
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Oaktree IPO gets marked to Howard Marks

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 By Jeffrey Goldfarb

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

Oaktree Capital’s initial public offering was marked to Howard Marks. In the run-up to Wednesday night’s share sale, the outspoken co-founder of the debt-focused private equity firm made clear that accumulating assets would never be his top priority. Public investors, who have been conditioned to prize management fees from investment firms like Oaktree that have gone public, took the message to heart.

Mar 27, 2012
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Icahn gives Breakingviews a window into his method

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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.

Mar 26, 2012
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Wall Street can relate to Hollywood underdog tale

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

The dystopian kill-or-be-killed world of “The Hunger Games” isn’t the film’s only apt metaphor for Wall Street. This weekend’s smash box-office debut of the teen lit sensation makes Lions Gate the studio equivalent of a boutique investment bank landing the year’s biggest deal. And Walt Disney’s coinciding flop “John Carter” raises questions about Hollywood’s bulge bracket. Independents from both industries are fighting to stay in the spotlight.
 
Lions Gate is deservedly the talk of the town. In the first few days of its release, “The Hunger Games” delivered $155 million of U.S. and Canadian ticket sales. That makes it the biggest non-sequel opener ever, and leaves it third behind only later chapters in the “Harry Potter” and “Batman” series. It’s a coup for a relative tiddler, especially when a goliath rival announces a $200 million loss on an epic fail even by Tinseltown’s larger-than-life standards, as Disney just did for its own fantastical book adaptation.
 
What’s more, in a banker’s terms, “The Hunger Games” is like having an acquisition-hungry client with an abundance of capital available. Lions Gate plans to release three sequels based on the Suzanne Collins trilogy of bestsellers, so it’s a gift that should keep on giving.
 
But competing against rivals owned by deep-pocketed conglomerates is as hard on the West Coast as it is on the East. Even with the lucre raked in so far from “The Hunger Games,” Lions Gate won’t crack the top five in the studio league tables, according to Box Office Mojo figures. Legendary moguls Harvey and Bob Weinstein have struggled similarly, producing a steady slate of critical successes via their eponymous indie house – including this year’s Oscar winner “The Artist” – that often fail to achieve blockbuster status financially.
 
Smaller shops on Wall Street have capitalized on the misfortunes of their larger peers. Greenhill, for example, is valued at over 16 times expected 2013 earnings, according to Thomson Reuters data. And despite losing money over the last few years, Lions Gate trades at a forward multiple of 15.
 
After spurning the advances of activist Carl Icahn last year at about half the current share price, Lions Gate spent over $400 million to buy “Twilight” producer Summit. That gives it the ability to release more films, on a par with the likes of Paramount. That’s important in a business that feeds on big hits. Just as banking supermarkets can no longer ignore the boutiques nipping at their heels, “The Hunger Games” means Hollywood must pay heed to the Lions Gate mouse that roared.

Mar 23, 2012
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Watchdogs could change Vivendi’s EMI tune

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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.

Mar 14, 2012
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New York Times pay structure isn’t fit to print

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

The New York Times Co’s pay structure isn’t fit to print. The venerable U.S. newspaper group revealed a bonus structure that rewards bosses with 175 percent of their target payouts for achieving a mere 2.5 percent return on invested capital. That’s a fraction of the company’s cost of funds, and much lower than its own previous standard. A high bar for journalists doesn’t seem to extend to management.

Feb 23, 2012
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Twitter revolt could march next on proxy season

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By Jeffrey Goldfarb

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

The revolution is being Tweeted. Social media have enabled political uprisings in the Middle East, the global Occupy movement and even a swift blowback against banking fees in the United States. A logical next step would be for Facebook, Twitter and their ilk to intensify the voice of the investing masses.

Feb 22, 2012
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AT&T board lets CEO off hook for bad call

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

AT&T’s board has let its chief executive off the hook for his bad call. Randall Stephenson’s total compensation fell to $22 million last year from just over $27 million in 2010. That’s a light slap for the badly botched bid to buy T-Mobile USA from Deutsche Telekom. AT&T had to take a $4 billion charge for the break fee related to the deal’s collapse. Though complicit directors factored the monetary costs into their decision, they didn’t hold Stephenson properly accountable for failure.

The T-Mobile takeover plan scrapped by regulators unquestionably took its toll. In 2010, AT&T’s free cash flow was atop its target range and earnings per share surpassed it. Last year, free cash flow settled back into the middle of its range while EPS barely scraped the bottom. Even had the T-Mobile costs been excluded, earnings would have fallen short of target. And while on a longer, three-year horizon, AT&T’s total shareholder return of 9 percent outperformed the broader market, it was near the bottom of its own self-described peer group. That all suggests T-Mobile proved a bigger distraction for AT&T management than even the hefty immediate costs imply.