Backers of the Buyout Boom Seem to Be Backing Out

BUYOUT TROUBLES On several fronts, things are looking down for the buyout business. The investors who have fueled the boom in recent years have begun to show resistance on some private equity deals as interest rates have risen and banks have insisted on tougher lending terms. Shares of the buyout shop Blackstone Group, which went public last week, sank below their opening price on Tuesday and stayed there all week. Congress, meanwhile, is considering bills that would increase taxes on income earned by private equity managers.

Seven deals were reported on Monday, the day of the week that typically has the most merger announcements, down from 43 on the prior Monday and 84 on Monday, June 4, according to Thomson Financial.

The rest of the week had similar news. The discount chain Dollar General withdrew part of a debt offering it had planned to help finance its $6.9 billion buyout by Kohlberg Kravis Roberts. ServiceMaster may have to pay higher interest rates on loans it is seeking to finance its buyout by Clayton, Dubilier & Rice. And U.S. Foodservice, the American division of the big Dutch food outfit Royal Ahold, postponed a bond offering.

There are several big debt offerings in the works to finance some of the largest buyouts in history, including those of the First Data Corporation, Chrysler and the Texas utility TXU. A pullback by bond investors could spell more trouble for the buyout industry.

DOW JONES ACCORD Negotiators on Tuesday reached a tentative accord aimed at protecting the editorial integrity of The Wall Street Journal, opening the way to final negotiations for the News Corporation of Rupert Murdoch to acquire Dow Jones & Company, which owns the newspaper.

A person close to the talks provided a copy of the agreement to The New York Times on Friday. Under its terms, an independent, five-member committee would be formed that could block the hiring and firing of top editors, go to court to enforce the agreement, and conduct internal investigations and publish the results on the newspaper’s editorial page.

The Bancroft family, which holds a controlling interest in Dow Jones, has stated that it wants an independent editorial board — with most of the initial members chosen by the family — to oversee The Journal’s news operations and prevent Mr. Murdoch from exerting his influence on the newspaper. The proposed agreement, according to people who have been briefed on the talks, calls for initial committee members to be chosen jointly by Dow Jones and the News Corporation. Those members would then vote on replacements when vacancies occur. The family has so far not reacted publicly to the tentative deal, which was negotiated by a committee of the Dow Jones board.

It is still unknown whether the Bancrofts will try for a sale price higher than the $5 billion Mr. Murdoch has offered. Reuters quoted Mr. Murdoch as saying a final agreement would be reached “in the next two, three weeks’ time or not at all.” And he mused to Time magazine about the possibility of discontinuing the paper version of The Journal and publishing solely online.

QUESTIONABLE IMPORTS Pet food, toothpaste, toy trains, tires and now, seafood. Worries over the failure of Chinese imports to meet American health and safety standards were heightened Thursday when the Food and Drug Administration effectively blocked the sale of five types of farm-raised seafood from China because of instances of contamination from unapproved animal drugs and additives.

China is the biggest producer of farm-raised fish and the biggest supplier of seafood to the United States. Included in the F.D.A.’s “import alert” were shrimp; catfish; eel; basa, which resembles catfish; and dace, which is somewhat like carp.

The listed seafood can be sold in the United States only if importers provide independent documentation that it does not contain the contaminants, which are mostly antibacterial and antifungal agents used to prevent disease in fish.

Earlier in the week, federal officials ordered a small New Jersey retailer to recall 450,000 radial tires after it was discovered that a Chinese manufacturer had stopped including a safety feature that prevented the treads from separating.

Some in Congress called for a federal food-safety agreement with China to protect American consumers.

SLOW CONNECTIONS As Apple prepared to put the iPhone on the market, the chief executives of both Apple and AT&T defended their decision to use AT&T’s Edge wireless data network for the product’s Internet connections. Edge is widely accessible, but comparatively slow. Product reviews of the iPhone, which so far have been mostly positive, have noted its slow network connections.

Apple’s chief, Steven P. Jobs, and Randall L. Stephenson, the chief of AT&T, said that the iPhone works well on local Wi-Fi hotspots and that Edge was chosen for cellular connections because it was more widely available, especially in rural areas, than AT&T’s faster HSDPA network.

Now that the highly anticipated introduction of the iPhone is past, the question is whether demand for the $500 and $600 gadget will meet expectations.

PRICE PACTS GET AN O.K. The Supreme Court struck down a 96-year-old antitrust rule forbidding manufacturers and distributors to agree on minimum retail prices. The 5-to-4 decision will give manufacturers considerably more power to determine prices and restrict the flexibility of retailers to discount merchandise.

The old rule held that resale price maintenance agreements violated the Sherman Antitrust Act. The court on Thursday instructed judges to apply a case-by-case approach to assessing the impact on competition of such agreements. Opponents of the old rule said that in many cases it actually stifled competition.
Source : http://www.nytimes.com