No Obit: Why Trib Co. Won’t Fall to Hostile Bid

Even under pressure, Tribune Co. management is sitting pretty. Despite signs that a hostile suitor-possibly Texas-based Robert W. Bass Group-has taken a position in the Chicago media conglomerate, Tribune Co. is loaded with artillery that would make a hostile takeover of the company highly unlikely. A formidable chunk of its stock is closely held: 40% is in friendly hands after last week’s issuance of new preferred shares to an employee stock ownership plan (ESOP). Its moderate debt load gives it the ability to borrow money for a stock buyback, recapitalization or management buyout. (excerpt)
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O’Dea, Christopher R.

Full text: [Crain's Chicago Business] Apr 10, 1989

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The Money Magician at Philip Morris

Unlike the leveraged buyout of RJR Nabisco Inc., Philip Morris Inc.’s $129-billion acquisition of Kraft Inc. in October 1988 went smoothly. The unsung hero of the deal is Hans G. Storr, Philip Morris’ chief financial officer (CFO). Storr is one of the top 4 decision makers at Philip Morris, and he is highly ranked among CFOs. In that role, Storr is best known as a deft forecaster of currency fluctuations. In late 1984, assuming that the US trade deficit would soon undermine the dollar, he began shifting $2 billion into foreign currencies. Watching them rise for the next 3 years made $400 million for Philip Morris. According to Storr, all any CFO can do is to form an opinion on the major trends, monitor their currency risk closely, and diversify. Storr’s greatest challenge now is to make sure that Philip Morris’ shareholders benefit from acquiring Kraft. He should be able to pay down the $9.6 billion in Kraft debt in only 4 years because of Philip Morris’ stream of rich and certain cash flow.
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Nathans, Leah J.

Full text: [Business Week] Apr 10, 1989

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Is It Inflation? Recession? Or Just Spring Fever?

The February 1989 producer price index showed a 1% gain, which translates into a devastating 12.7% annual inflation rate. Investors can find explanations for both inflation and recession by what is happening in the stock market itself. Many investors read the sharp fall in computer stocks as proof that the economy is sagging. If oil and computer stocks are sending crossed signals about inflation and recession, the message of a diminished chance for a soft landing is being clearly heard. However, the Federal Reserve Board sees no reason to loosen monetary policy just yet. To some on Wall Street, this means that a recession is almost a certainty. Although investors are cool toward US stocks right now, the Dow Jones industrial average, at 2282, is generally expected to remain above 2100. Laszlo Birinyi of Birinyi Associates says the current weakness is merely the market consolidating after a 13.6% rise since the middle of November 1988. However, with the economy struggling with high interest rates and a business slowdown, this time the fears may be justified.
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Laderman, Jeffrey M.

Full text: [Business Week] Apr 10, 1989

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Somerset Banker Acquiring Regional Federal Stock

A prominent Southeastern Kentucky family that controls four banks in the commonwealth now is the second-largest stockholder in Regional Federal Bancorp Inc. of New Albany. Ward Correll of Somerset, Ky., and his relatives have acquired 38,300 shares, at an average price of $11.71 each, of Regional Federal Savings Bank’s parent company, according to documents filed with the Securities and Exchange Commission. The acquisitions, which account for 5.04 percent of the Southern Indiana thrift’s outstanding shares, were made through two family owned companies, Cumberland Lake Shell and Lancaster Life Reinsurance Co. (excerpt)
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Kamuf, Rachael

Full text: [Business First] Apr 10, 1989

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What Price Promise? Investors

Amgen Inc.’s anemia treatment, erythropoietin (EPO), is thought to be biotechnology’s next blockbuster drug. Recombinant EPO is a man-made form of a natural hormone that stimulates production of red blood cells. Anticipation of EPO approval lifted Amgen shares to an all-time high of $44.25 in March 1989. When EPO is approved, its initial users will be patients with end-stage renal, or kidney, disease, who often require blood dialysis several times a week. Other applications include anemia-afflicted cancer sufferers, rheumatoid arthritis patients, and acquired immune deficiency syndrome sufferers. Shearson Lehman Hutton puts the worldwide market for EPO at $3.5 billion in 1993, but some analysts disagree. Since Medicare pays for dialysis, the decision on how to fund EPO is crucial. Amgen also faces a fight with Genetics Institute, which holds rights to natural, highly purified EPO. Amgen holds rights to genetically engineered EPO and has been adamant in its refusal to consider cross-licensing the products.
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Wyatt, Edward A.

Full text: [Barron's National Business and Financial Weekly] Apr 10, 1989

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Getting a reaction from Wall Street // New events play tricks with stock prices; one trader’s earthquake is another’s yawn

When the Exxon Valdez tanker ruptured and leaked more than 10 million gallons of oil into Alaska’s Prince William Sound, the world was shocked but Wall Street hardly noticed. Exxon’s stock declined only a bit, despite the company’s massive potential liability. Expert traders on Wall Street confess that even they don’t know which corporate news developments will affect the price of a stock. Jack Baker, head trader at Shearson Lehman Hutton, says his first reaction to the Valdez incident was to sell Exxon stock.
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John Crudele

Full text: [Austin American Statesman] Apr 10, 1989

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Ford’s CEO passes Iococca in ’88 pay

Until 1988, [Donald Petersen] gained praise but relatively modest compensation for his success at raising Ford’s earnings and stock price. Ford was the most profitable U.S. automaker last year, earning $5.3 billion. And the proxy statement for Ford’s annual meeting, released Monday, shows Petersen, too, finally hit it big. He earned:
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Jay McCormick

Full text: [USA TODAY (pre-1997 Fulltext)] Apr 11, 1989

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Steinberg president slams plan for recapitalization

[Irving Ludmer] said breaking up Oxford, part of Oxford Development Group, ”might be an excellent idea” and Unicorp Inc. ”could be very busy” restructuring affiliate Union Enterprises before Oxdon took a shot at Montreal-based [Steinberg]. Oxdon, owned equally by subsidiaries of Unicorp, Oxford and Gordon Investment Corp., wants to break up Steinberg by selling the company’s grocery stores to Loblaws while keeping the real estate assets. Oxdon said the move would give shareholders the value that Steinberg’s management isn’t giving but Ludmer said dismantling a company just because the stock price is lower than its break-up value ”is one heck of a statement to make.”
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Full text: [The Ottawa Citizen] Apr 11, 1989

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Gulf & Western’s Stock Price Climbs After Announcement on Financial Unit

The stock of Gulf + Western Inc soared in the wake of its announcement that it has plans to sell its gargantuan consumer finance subsidiary and concentrate heavily on entertainment and publishing.
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Full text: [The Atlanta Constitution] Apr 11, 1989

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Deal Shows Seafirst Able to Expand

In its first significant expansion move this decade, Seafirst Bank bit off a big chunk of the Pierce County market by agreeing to swallow American Savings Financial Corp. Securities analysts said the acquisition of the parent of American Savings Bank could be the last major one in Pierce County for some time. The only remaining independent institution of size, Puget Sound Bancorp., is either too large for most admirers or too well-armed with anti-takeover defenses, they said. The rice of $68.6 million, or $30.05 a share in stock of Seafirst’s parent, BankAmerica, was judged steep. It could fluctuate higher (or lower), depending on how BankAmerica stock fares in the expected six-month wait for regulators’ and American shareholders’ approval. But that apparently didn’t tarnish the prize for Seafirst. (excerpt)
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Heberlein, Greg

Full text: [Seattle Times] Apr 11, 1989

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Old Stone reports several suitors Barnes, CEO, doesn’t expect any decisions to be made soon

[Theodore W. Barnes] said the plan would hopefully boost Old Stone’s stock price, which has lagged in the $19 to $21 range for months. Since Old Stone hired Blackstone – which has strong ties to Japanese investors and has put together major deals between U.S. and Japanese firms – some analysts and brokers have speculated that a Japanese buyer may make an offer for Old Stone. Old Stone also has been working for months to set up and capitalize a limited partnership in which Old Stone and Blackstone will serve as co-equal managing partners. The partnership will try to acquire troubled savings and loans – a business Old Stone has built in the past by buying thrifts in North Carolina, the Pacific Northwest and California.
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JOHN KOSTRZEWA Journal-Bulletin Business Writer

Full text: [Providence Journal] Apr 11, 1989

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CAMPBELL’S STOCK PRICE UP $4.875 DORRANCES DENY RUMORS OF A SALE

Rizzo reviews Quotron Open Windows, a professional trading tool based on Microsoft Windows from Quotron Systems. Quotron Open Windows consists of three specific applications: QuotTerm, QuotData and QuotChart.
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Dan Stets

Full text: [Philadelphia Inquirer] Apr 11, 1989

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Small Investors Hit the Big Time with Quotron Open Windows

Rizzo reviews Quotron Open Windows, a professional trading tool based on Microsoft Windows from Quotron Systems. Quotron Open Windows consists of three specific applications: QuotTerm, QuotData and QuotChart.
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Rizzo, Tony

Full text: [PC Magazine] Apr 11, 1989

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Penny-Stock Firm Charged

Stuart-James Co. Inc., one of the nation’s largest penny-stock brokerages, was charged yesterday with stock manipulation, making misleading sales pitches and failing to accept sell orders from customers. The Securities and Exchange Commission leveled the charges against the firm, as well as its two principals and nine current or former regional vice presidents, in an administrative proceeding. A hearing date has not been set. Stuart-James is based in Denver, a center for penny-stock business, and musters a sales force of 1,300 brokers working out of 52 sales offices in 22 states. Its five New York offices include two in New York City and one each in Roslyn, Melville and White Plains. (excerpt)
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Kuntz, Mary

Full text: [Newsday] Apr 11, 1989

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TDK to Buy Tustin Chip Maker

Silicon Systems, a Tustin-based microchip maker, has agreed to be acquired by Japan’s TDK Corp., the world’s largest manufacturer of audio and video tapes, for about $200 million. TDK, which will pay $20 for each of Silicon Systems’ approximately 10 million shares outstanding, said it plans to invest an additional $200 million in the company’s operations and its research and development division. No major increase in employment is expected, however. Stock Advances Silicon Systems’ Chairman Carmelo J. Santoro said the acquisition will help it become more competitive. In addition to the infusion of cash, Santoro said, Japanese ownership will enable the company to concentrate on international expansion and provide better access to Far Eastern markets, which currently account for about 25% of Silicon Systems sales. (excerpt)
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Tighe, John Charles

Full text: [Los Angeles Times] Apr 11, 1989

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MEDICAL ICN Takes Advantage of Stock’s Low, OKs Repurchase of 4 Million Shares

To take advantage of the company’s low stock price, directors of ICN Pharmaceuticals Inc. recently authorized the firm to purchase up to 4 million shares of ICN common stock. ICN said it will buy the shares over a 3-year period.
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Full text: [Los Angeles Times (pre-1997 Fulltext)] Apr 11, 1989

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SEC Slams Penn-Stock Firm

The Stuart-James Co., one of Denver’s leading penny stock firms, was hit with allegations of fraud and deceit Monday by the Securities and Exchange Commission. The SEC charges that Stuart-James illegally marked up prices of two companies, UMB Equities and Find SVP, by as much as 200 percent. Monday’s action against Stuart-James caps several months of promises by SEC officials that they would take a tough stand against abuses in the penny-stock arena. The SEC said that Stuart-James, with 1,300 brokers, has supplanted another metro Denver firm, ailing Blinder, Robinson & Co., as the nation’s biggest penny-stock firm. (excerpt)
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Sleeth, Peter

Full text: [Denver Post] Apr 11, 1989

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Random Thoughts

The consistently low stock prices of money center banks in recent times were due to the banks’ poor lending strategy and the collapse of the federally fueled inflation of the 1970s. Now, the banks have diffused their risks with smaller loans to many borrowers and by engaging in more syndications rather than being “permanent warehousers of large credits.” For instance, LBO exposure is less than that of foreign banks, the burgeoning market for corporate cash management services is now around $1 trillion, and the banks garner noninterest income from data processing services, as well.
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Rose, Sanford

Full text: [American Banker] Apr 11, 1989

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Random Thoughts

The stock prices of many of the money center banking institutions have been below their stated book values for the better part of the last 15 years. There have been numerous ad-hoc explanations of this phenomenon. Thus it is contended that the fiasco in lending to real estate investment trusts helped to depress market valuations in the mid-’70s. After the REIT debacle, there was the run-up in interest rates, which led to substantial amounts of unrealized depreciation in bond portfolios in the late ’70s. And following the interest rate explosion, there was, of course, the LDC debt crisis that began in the early ’80s and continues to the present. As a result, the money center banks have diffused their risks. They now make a lot of small direct loans to a large population of borrowers instead of massive loans to a small group of customers. And by functioning as syndicators rather than as permanent warehousers of large credits, they have further insulated themselves from unpleasant surprises. Notes Mr. [Richard X. Bove]: “If a Latin American style blowup develops in LBO lending, the big losers will be the foreign banks and pension funds that bought the syndications, not the money center banks that sold the positions.” (Going back still further, the exuberant expansion of the late ’70s was spawned by the draconian contraction of the mid-’70s, when the Fed, in response to President Ford’s Whip Inflation Now campaign, rather too vigorously sought to correct previous errors. As some contend, the Fed seems to know only two speeds – too fast or too slow.)
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SANFORD ROSE

Full text: [American Banker (pre-1997 Fulltext)] Apr 11, 1989

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Can Portfolios Be Recession-Proofed? — Some Say to Wait, Others Go to Cash

When a recession looms, say people such as money manager Martin Zweig and market historian Ned Davis, it is best to stay heavily in cash. Investors, they say, should bide their time in Treasury bills, money-market funds and the like. Then, when the recession is about half over, they add, investors can snap up stocks and bonds at bargain prices. Moreover, not everybody is pessimistic. Indeed, there is a vocal band of optimists who see a silver lining in an economic slowing. As the economy winds down, they figure, interest rates will fall. And lower interest rates are good fertilizer for stocks. Though they would prefer for the economy to escape a recession, they say they would recommend stocks even if they knew a recession was coming. Robert B. Ritter, chief technical analyst for Ladenburg, Thalmann & Co., says the stock market has already “taken into account a good part of the recession” that is yet to come. During the stock-market rally of the past year or so, he says, stock prices rose but price-earnings multiples (the ratio of a stock’s price to the company’s earnings per share) fell.
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