548 WSJ Readings Spring 2007
February 20, 2007
“Sirius and Xm Agree to Merge, Despite Hurdles” (A1) – Big merger in new industry raises
interesting issues concerning value of combining to firms, an example of an investment
decision which is the focus of the first half of this semester
“Future of Chrysler Rests With Zetsche” (A2) – Provides insights into a divestment decision and
the role of investment bankers
“Airbus Delays Overhaul Amid Four-Nation Dispute” (A3) -- Corporate governance issues
illustrated when governments, politics, and unions get involved in decisions affecting
shareholders’ wealth
“Emails Reveal Backdating Scheme” (A4) – How executives covered tracks in not serving
shareholders’ interests, another corporate-governance issue as we discussed in class
February 21, 2007
“Renault, Nissan Not Interested in Chrysler” (A3) – Valuation of acquisition falls short of costs
for two major auto firms
“Warner Is Closer to EMI Deal” (A4) – Acquisition entailing valuations like we are performing
in this class essential to developing strategy through mergers and are well illustrated in
this story; see also “Roundy’s Supermarkets” and Mittal Mill…” stories on the same page
“Nike and Sealed Air Buck Trend of Fewer Stock Splits” (B5D) – We discuss cash versus stock
splits later in the semester and the story illustrates their use
“What’s Aiding Buyout Boom: Toggle Notes” (C1) – Interesting story illustrates the flexibility of
design in fixed-income securities (bonds) that we have discussed, that we will study, and
that are part of the group project
[Stories for the following dates will be added later.]
February 23, 2007
“Mutual Funds and the Buyout Boom” (C1) – Example of the benefits of the market for corporate
control for mutual fund holders, benefiting smaller shareholders and savers
“A Landmark Vote in Japan: Shareholders Finally Say No” (A1) – Extension of U.S. types
corporate governance to Japan has been slow; story contrasts corporate governance in
different countries
“Herbalife Returns to Spotlight” (A12) – Large shareholder attempts to take public firm private
and share price drops, another corporate governance and valuation story
February 24-5, 2007
“Buyout Firms Seek Utility TXU For $32 Billion” (A1) – Important acquisition story about
possibly largest ever leveraged buyout illustrates importance of valuation techniques we
study and apply this semester and the role of private-equity firms we discussed in class 2
548 WSJ Readings Spring 2007
February 26, 2007
“Bidders Try to Pre-empt Gridlock in TXU Deal” (A1) – Non-economic and financial
considerations (politics) discussed
“Station Casinos Accepts Revised $5.5 Billion Offer” (A3) – Story again illustrates the
importance of estimates of market values used, not only of stock but also of the debt
assumed in the transaction as we use in group project, in an acquisition and also
demonstrates the growing role of private equity
“Shareholders Push for Vote on Executive Pay” (B1) – Growing debate on executive pay is
having major impact on the corporate governance debate we have been discussion in
class
“New Predator in Takeovers” (C1) – Good description of hostile takeovers (involving private
equity), discussed in class 2
February 27, 2007
“In TXU Deal, Texas Regulador Has Few Levers to Pull” (A3) – Role of regulation in major
acquisition illustrates potential of government policy to influence values
“EADS Clears Airbus Restructuring Plan” (A13) – Story provides contrasts between U.S. and
European corporate governance that we have been discussing early in the semester
“Peltz Uses 5.5% Tiffany Stake To Push for Broad Changes” (A13) – A good illustration of
minority shareholder attempting to influence corporate strategy through the use of board
politics
“Halliburton Moves to Cast Off Rest of KBR, Become Pure Play” (A14) – Story illustrates
importance of sale price and valuation in divestiture, and also is good example of the
words “pure play” we will use in discussing Chapter 12
“TXU Buyout Proposal’s Mixed Effect” (C8) – Very good story on the effect of increased
leverage in acquisition on bondholder’s investment values, a topic we discuss at the end
of the semester
February 28, 2007
March 1, 2007
“As Market Fell, Some Big Names Won Their Bets” (A1) – Story illustrates the activities of
hedge funds and their speculative strategies
“”Market’s Fall May Augur Waning Appetite for Risk” (A2) – Story discussed impact on value
of securities of perceptions of risk, which we will relate to the discount rate on fixedincome securities in class 5
548 WSJ Readings Spring 2007
“Ford Overhaul Will Cost $11.2 Billion” (A6) – Story illustrates impact of downsizing costs on
accounting numbers and discussed the sources of those costs
“Manny Happy Returns” by Jeremy Siegel and Jeremy Schwartz (A12) – Op ed piece contains
very good background discussion of S&P 500 index that we will discuss in Class 6
“Best of Times Is Worse For Investment Bankers” (C1) – Very good story discusses daily
challenges of investment bankers and describes the competitive world they operate in,
where firms develop their own valuation expertise (that you are learning) and privateequity firms change the environment for deals
March 2, 2007
“GM Delays Filings, Stoking Doubts” (A3) – GM delays filing 10-K, illustrating how markets
react to late disclosures on operations
“Opinion: The Compliance Board” (A11) – Director at Hewlett-Packard provides inside view of
corporate governance issues we have discussed this semester
“Oracle Adds Business-Intelligence Firm Hyperion” (B3) – Another illustration of a corporate
acquisition demonstrating the importance of valuation
“A ‘Brazen’ Insider Scheme Revealed” (C1) – Insider trading is a focus of many discussions in
advanced finance classes and this is a very good story present the issues with a current
example of the problem
“Picky Pickers Advise Patience” (C2) – Story defines and illustrates “value investing,” something
we discuss in class 5
“ISS Backs H-P Proxy Push to Boost Big Holders’ Clout” (C2) – Story illustrates influence of
Institutional Shareholder Services (ISS) in advising shareholders on how to vote their
proxies and is a very good illustration of the importance of institutional investors in
corporate governance, as discussed in the first week of classes
March 3-4, 2007
“Middle East Telecom Deal Hits $3.7 Billion” (A3) – Large international telecom deal illustrate
foreign mergers and acquisitions (M&A) activity
“The Weekend Interview with Myron Scholes: Risk Manager” by Holman Jenkins (A9) – An
interview with an important academic responsible for important financial theories we
discuss later this semester and a current hedge-fund manager, providing insights into risk
and hedge funds
March 5, 2007
“New Exotic Focus For Hedge Funds: Uranium Market” (A1) – Insights into types of trading
strategies followed by hedge funds, a form of private equity discussed earlier in the
semester
548 WSJ Readings Spring 2007
“Alltel Is Calling Potential Buyers” (A3) – Divestiture illustrates importance of valuation and the
role of strategic acquisitions; see also “Gordon Gaming to Sell Famed Sahara Casino”
(A11)
“New State Awaits J.P. Morgan’s Dimon” (C1) – Good story on how executives of corporations
court shareholders in effort to gain approval for strategies, an illustration of the
importance of corporate governance we have stressed
“Summit Snubs Takeover Bid From Paladin” (C3) – Example of role of valuation in fighting
takeover attempts
March 6, 2007
“RIM Sets Restatement, Shake-Up On Board in Backdating Fallout” (A3) – The option
backdating issue raises questions concerning corporate governance and accounting
“In France, Airbus Takes Center Stage” (A12) – Good story discussing problems with corporate
governance when private investors don’t control the board or strategy
“Toshiba Corp.: Plant to Boost Output Of Flash Memory Chips” and “SafeNet Inc.: Investors
Agree to Buy Firm for $634 Million” (both A13) – Little examples of importance of
capital investment valuations needed for corporate decisions
“At Citigroup, Crittenden Plans to Look for Levers” (B4) – Great story on challenges facing the
chief financial officer in a new job in poorly performing firm, a potential hero for this
course
March 7, 2007
“Making Connections: Verizon’s Network Bet Relies on Games, TV” (A1) – A good illustration
of the “real options” discussed in a few weeks associated with a major capital investment,
discussed in Chapters 7 and 8 materials
“Companies Say Backdating Used In Days after 9/11” (A1) – Another story building on original
Wall Street Journal breaking the use of backdating and raising the questions of fairness
and corporate governance issues (see also Op Ed piece by Holman Jenkins, “The
Backdating Molehill,” p. A16)
-------------------------------------------------March 8, 2007
“French Twist: Attention, Shoppers: Europe’s Stores in Play” (A1) – Minority shareholder,
private equity firms, and family owners all contest control of retail assets, including land,
in contest over corporate strategy
“GM CEO Says Mergers Unlikely” (C3) – Corporate strategy and acquisitions in context of
Chrysler sale and auto restructuring describe possible sources of value from acquisitions
“Take-Two Shareholders Are Plotting Board Battle” (B4) – Story illustrates a hostile proxy
contest over control of firms plagued with option-backdating scandal
548 WSJ Readings Spring 2007
“Options Fines: A Hard Call” (C1) – Good article reviews costs and damage to shareholders of
back-dating of options and provides illustration of SEC securities law enforcement
March 9, 2007
“Carrefour Studies Its Real-Estate Options With Goals of New Shareholders in Mind” (A3) –
Sale of firm’s fixed assets become control issue of minority shareholders
“Standards Deviation” by Arhtur Levitt, Jr. (former SEC chairman) (A15) – Great review of
accounting standards oversight and regulation, affecting the quality and reliability of
disclosures analysts (like you) rely on
“Why ETFs Can Have Outsize Impact on Small Stocks” (C1) – Quantitative investors not driven
by fundamental analysis have an impact of small-firms’ (like most of you are analyzing)
trading and prices
“Extendibles Continue to Grow” (C9) – New types of ‘fixed incomes’ illustrates creativity and
flexibility in design of debt issues
March 10-11, 2007
“Applebee’s Tries to Move On As Talks With Breeden Fail” (A2) – Board battle illustrates
shareholder politics in corporate financial management
“KKR, Boots Insider Plot $18.7 Billion Bid” (A3) – Discussion of private equity takeovers and
value creation in story about another bid requiring valuation techniques you are applying
in group project
March 12, 2007
“”Ford Nears Sales of Aston Martin” (A3) – Major asset value important in sale by auto-maker to
raise cash
“New York Times Hear Key Holders’ Complaints” (A3) – Dual share structure (like Nike has)
causes institutional investor problems, board hears complaints as example of board
politics and dual-share structure in corporations
“General Motors: Bylaws Amended to Allow For change in Board Seats” (A9) – Change in
corporation’s bylaws affecting corporate governance discussed in good story
March 13, 2007
“Tech Companies Bleeding Red Ink Pursue IPO Goal” (A1) – Valuation of firms with losses (and
no profits ever) characteristic of dot-com era, discussed
“The Insiders: How Five New Players Aid Movement to Limit CEO Pay” (A1) – Corporate
governance issues on CEO pauy and role of institutional investors described
“Offers to Buy Chrysler Could Come by Month’s End” (A2) – Major restructuring raises many
issues on how to realize maximum value from a firm’s assets and their sale
548 WSJ Readings Spring 2007
“KKR Spots Cash in Dollar General’s Till” (A10) – Good story of private-equity firm acquisition
and where they see value in an acquisition
“United Health’s Quest” and “Alliance Boots Rejects Offer” (both A12) – Good stories on
acquisitions as part of corporate strategy, and role of private equity in restructuring
“Boston Scientific Unit IPO?” (A14) – Sale of 20% of unit creates new shareholders in multidivision firm, making division a “pure play” as discussed later this semester
“Take-Two, Investors Lock Horns” (A19) – Board battle illustrates fight for corporate control
“Buyout Shops: Sharks Serving Vital Function” (C1) and “KKR Hunts for a Bargain” (C16) –
Stories describe operations of private equity firms in detail
March 14, 2007
“After Delay, GM to Post Results for All of 2006” (A2) – Late filing example, relevant to the
availability for use of audited financials in your group analysis
“Beijing Clears Intel Chip Plant, Marking a Potential Milestone” (A4) – Great descriptyion of a
fixed investment (a chip-making plant or ‘fab’), illustrate corporate investment decision
we discuss in Chapter 7 discussion
“Merck KGgA Draws Bidders For Generics” (A9) – Sale of unit illustrates necessity of valuation
in a spin-off or divestiture of firm’s assets
“Peltz Shows a taste for Cadbury” (A10) – Minority investor urges conglomerate food company
to restructure, illustrating corporate governance issues and finance of divestitures
“Power-Grid Firms Gain Backers” ( B11B) – Venture capital’s role in new technology financing
described, illustrating one type of private-equity firm
“Out of Space, retailers Trim Growth Plans” (C4) – Good story on corporate use of cash in either
fixed investment or returning it to shareholders, a discussion we have later this semester
“A Summit on U.S. Rules: ‘Too Gosh-Darn Complex’” (C4) – good review of debate on U.S.
capital-market regulation (e.g. Sarbanes-Oxley) with many important dignitaries quoted
[See also: Full page advertisement to Caremark Shareholders about how to vote on CVS merger]
March 15, 2007
“H-P Leaks Case Fizzles in Court” (A3) – Anticlimactic end to widely covered corporate
governance issues raised by spying on directors thought to be leaking information
“Unlike U.S. Rivals, Freeport Expands” (A8) – Good story on merger strategy and how
valuations like you are doing for the class project are done and the role they play in
strategy
548 WSJ Readings Spring 2007
“Carrefour’s Defense” (A9) – Background on corporate governance with family and institutional
shareholders fighting for control and good description of the part investment banking
firms play in these disputes
March 16, 2007
“Secret Signals: Ex-Telecom CEO Fields ‘Black Box’ Trail Defense” (A1) – Good background
story about government prosecution of “inside trading,” something we do not discuss this
semester but often raised in advanced finance classes and a very controversial subject
“In Breakup, CEO of Cadbury Faces His Biggest Deal” (A1) – Shareholders force management
to consider breakup of company to increase shareholder value, illustrating corporate
governance and importance of valuations
“CVS Expected Is to Win Caremark” (C3) – Disappointed shareholders expected to tender shares
in a hostile takeover, illustrating the importance of value creation to maintain power in
corporations
“Carlyle Group Plays It Safe” (C14) – Discussion of investment strategy of one of the most well
known private equity firms, background for understanding evolution and current state of
this industry segment of asset-management
March 17-18, 2007
“Big Buyout Firm Prepares to Sell Stakes to Public” (A1) and “Why Blackstone IPO?” (B4) –
Private-equity management firm (not to be confused with the pools created by rich
limited partners themselves), Blackstone Group, considers goingt public, another
development in the private-equity market we have discussed (note: management firms are
typically general partners, not like institutional or wealthy investors, who are limited
partners in the pools)
“Caremark Holders Approve CVS Bid” (A6) – good example of shareholder vote approving sale
of their company’s assets to management team hostile to the firm’s managers
“The Smart Way to Tell Firms How to Operate” (B1) – Discussed details of voting proxies abnd
challenges this poses for institutional and retail shareholders
--------------------------------------------------------March 19, 2007
“Blackstone Plan Could Reshape Private Equity” (A1) – Blackstone’s plan to go public is
discussed in context of changes in the private-equity market we have discussed this
semester
“Qantas Offer Gives Investors Pause” (A8) – Private-equity investment in airline raises questions
about valuation of take-over offer, demonstrating changes in valuations we study
“Community Health Nears Triad Deal” (A8) – An operating firm competes with private-equity
firms in acquisitions, illustrating differences in intrinsic values to different buyers, as
discussed in class
548 WSJ Readings Spring 2007
“Daimler Unions Vow to Fight Bid” (A9) – Great example of problems for investors when
workers represented on boards, an alternative corporate-governance model in European
countries
“More Outside Directors Taking Lead in Crises” (B1) – Good story on distressed firm’s board
politics and the role of outside directors in these situations, illustrating advantages of
representation outside of management in crisis
“EGL Nears Buiyout Led By Its Chief” (B6) – Good example of a management buyout to avoid
public ownership problems discussed as part of the story
“Borrowing Without Limits” (C12) – Story illustrates the importance of debt covenants in
determining the costs of outside financing and their role in borrowers bargaining with
lenders
March 20, 2007
“Driller Hercules Offshore to Buy Todco” (C3) and “Petrobas Leads Group in Purchase of
Ipiranga” (C7)– Goods examples of corporate acquisitions with shares and cash as part of
an industry restructuring (in oil services)
March 21, 2007
“Paper Chase: How a Money Manager Battled New York Times” (A1) – Great story follows
step-by-step attack by an institutional investor against corporate governance structure and
famous family-dominated newspaper firm, illustrating many aspects of problems of
corporate goal being met for minority shareholders
“Icahn Gets His Way at Blockbuster As Chief Antioco Calls It Quites” (A3) – Another major
investor ousts management due to questions about performance and compensation,
another demonstration of the importance of corporate governance
“Why Be Public?” by Holman W. Jenkins, Jr. and “CEOs and Their Millions” an editorial (A18)
– Editorial page discussion of issues related to executive pay and costs and benefits of
private versus public ownership of corporations, hot topics we have discussed in class
March 22, 2007
“Shelf Life: As Its Brands Lag at Home, Unilever Makes a Risky Bet” (A1) – Good story
illustrating role of establishing asset values for sale and projecting future revenues as part
of a required strategic shift, tasks confronting you this semester
“Motorola, Facing Handset Woes, Predicts Loss; Shakes Up Suite” (A4) – Poor share
performance forces strategy and management changes
“Borders Business Plan Gets a Rewrite” (B1) – Another strategic shift requiring careful analysis
of new investments, like we study in Chapter 7 discussion
548 WSJ Readings Spring 2007
“Kraft Sets Path for Overseas Expansion” (B4) – CEO establishes plan for multiple acquisitions
and extends search for investments down the organization structure, showing how
corporate-wide acquisition standards must be established to discipline investment growth
“Hedge Funds Vote (Often)” (C1) – Interesting strategy by private-equity funds to influence
shareholder votes illustrates a potential problem or issue in corporate governance on
behalf of long-term investors
“Credit-Ratings Firms Get Caught Up in Subprime Meltdown” (C2) – Good insight into
challenges facing debt rating firms, whose ratings you have relied on for Part 1 of project
March 23, 2007
“Blackstone Aims To Keep Control As Public Entity” (A1) and “At Blackstone, James Builds A
Following” (C1) – Background pieces on how hedge fund contemplating initial public
offering is structured and details of how the IPO will affect current owners and investors,
important in following the widely-discussed developments in private equity in U.S.
“Motorola’s Call For Help” (A6) – Great story illustrating how not building shareholder value
causes problems for management as board power increases to change tactics
“Cadbury-Hershey Alliance May Be Tasty for Investors, but Challenges Persist” (C12) –
Analysis of corporate efforts to restructure business strategy, and discussions highlights
use of P-E ratios we discussed with Chapter 5 discussions
March 24-25, 2007
“Tribune Seems to Favor Zell Offer” (A3) – Restructuring in newspaper business led to auction
of company, illustrating asset sales and central role of valuation in business strategy
“Carrefour Holders Get Backing for Board Seats” (A3) – Good story on corporate governance
challenge evolving over this semester
“Convertibles Flood the Market” (B5) – Story discusses current trend to issue convertible debt,
illustrating concepts covered in Chapter 20 and relevant to some groups’ debt valuations
“Valuing Blackstone Group” (B14) – Good illustration of use of P-E multiples in valuation,
applied here to IPO value of major private-equity firm
March 26, 2007
“Gradual Ascent: Burned by Last Boom, Boeing Curbs its Pace” (A1) -- Great story about
familiar firm and relation between production, revenues, and costs, relevant concerns for
valuation in analyses similar to the group project this semester
“Tribune Suitors Criticize Auction” (A10) – Example of corporation selling itself and how it can
favor certain potential acquirers
“Beckman to Acquire Test Maker Biosite” (A10) – Acquisition requires analysis and valuation
similar to group project
548 WSJ Readings Spring 2007
“Funding Deals On the Cheap Grows Harder” (C1) – Discussion of how private-equity takeovers
are financed and depend on cheap debt characteristic of recent years
March 27, 2007
“Xtrata Agrees to Buy Lion Ore” (A10) – Corporate acquisition illustrates key role played by
valuation in implementing corporate strategy
“Delta to Submit List of Directors” (A11) – Airline in bankruptcy submits list of board members
to credit committee, illustrating problems to management in bankruptcy
“How Borrowing Yields Dividends At Many Firms” (C1) – Great article illustrating the dividend
decision, a major topic at the end of the course.
March 28, 2007
“SEC Is to Get More Sway Over FASB” (C1) – Securities Exchange Commission (SEC)
oversight of FASB accounting rules body, governing data we use in analysis, changed to
increase SEC’s influence
March 29, 2007
“Cerberus Adds to Detroit Bets With tower Automotive Deal” and “The New Hound of Detroit”
(C18) – Private-equity firm is buying auto parts maker for $1 billion, already owns 51%
of GMAC (auto finance) and has offered to buy Delphi (auto electronics) and is
contending for purchase of Chrsyler; article describes private equity role in auto industry
restructuring
“Chinese Puzzle: Is Loan Valid, or Shell Game” (C1) – Story illustrates dangers of opaque
corporate governance in foreign jurisdictions and how shareholders’ interests may be
harmed
March 30, 2007
“Take-Two Holders Succeed in Board Coup” (A3) – Good example of institutional investors’
influence in board fights
“U.S. Steel Bulks Up With a Defensive Move” (A8) – American steelmakers join world-wide
movement to consolidate in recent acquisition
“Herbalife Panel Advises Against Takeover Offer” (A8) – Boards rejects offer because it falls
short of own valuation of firm’s asset value
“Clear Channel: No Passage” (C14) – Details on private equity deal preserving founder’s
interests with privatization, describing “stub equity”
March 31-April 1, 2007
“Tribune Board to Consider Offers” (A2) – Major sale of firm reveals how board weighs
potential offers
548 WSJ Readings Spring 2007
“The Price of Buying Chrysler” A5) – Another corporate sale and discussion of the complexities
in selling a major division as part of a restructuring
“Iberia Gets $4.55 Billion Takeover Offer” (A5) – Airline restructuring in Europe, in part due to
change in regulations, requires valuations of many entities in acquisitions
“Bond Investing Gets Friendlier” (B1) – Changes in the retail fixed-income market follows
development of NASD Trace system you used for Part 1 of project
“The LBO Boom’s Real Fuel” (B14) – Conflicts of interest in management purchase of stakes in
their firms with private-equity assistance
--------------------------------------------------------April 2, 2007
“Starwood CEO Heyer to Leave” (A3) – Board ousts CEO without business reasons, mainly
clash of personalities, an interesting wrinkle in corporate governance structured to
maximize shareholders’ wealth
“KKR Is in Talks to Acquire First Data” (A3) – Another private-equity acquisitions, illustrating
importance of valuation and financing we discuss later in the semester
“Tribune Appears to Be Nearing a Deal with Zell” (A3) and “Tribune Staff Would Bear Risk in
Financing Buyout” (A13) – Restructuring of newspaper firm as a result of founder-family
boardroom feud uses innovative financing, including employees’ pension funds that the
second story explains (with historical precedents) in the clearest detail I have found
“Mergers Hit Record, With Few Stop Signs” (C11) – Current mergers and acquisition wave is
described
April 3, 2007
“Final Edition: Zell Wins Tribute in Bid to Revive a Media Empire” (A1) – The apparent end of a
story beginning with a shareholder complaint about value creation ends with purchase
using complicated financing (see below cited stories)
“Tangled Network: Behind Telecom Italia Fight, Business and Politics Meet” (A1) and “Aeroflot
to Make Bid for Alitalia” (A3) – Good comparisons of corporate governance issues in
U.S. and Continental Europe (Italy)
“Daimler Rift May Complicate Plans” (A11) – European corporate governance with labor board
representation makes sale of Chrysler unit more complex, illustrating differences in U.S.
and Continental European rules
“Shareholders Say ‘No’ in China” (C3) – Increasing power of shareholders in China where state
owns large stakes in many public companies
“Buyouts Batter Debt Ratings” (C6) – Good illustration of role of rating agencies and leverage in
bankruptcy risk, a topic we discover in the last weeks of class
548 WSJ Readings Spring 2007
April 4, 2007 April 2, 2007
“Starwood CEO Heyer to Leave” (A3) – Board ousts CEO without business reasons, mainly
clash of personalities, an interesting wrinkle in corporate governance structured to
maximize shareholders’ wealth
“KKR Is in Talks to Acquire First Data” (A3) – Another private-equity acquisitions, illustrating
importance of valuation and financing we discuss later in the semester
“Tribune Appears to Be Nearing a Deal with Zell” (A3) and “Tribune Staff Would Bear Risk in
Financing Buyout” (A13) – Restructuring of newspaper firm as a result of founder-family
boardroom feud uses innovative financing, including employees’ pension funds that the
second story explains (with historical precedents) in the clearest detail I have found
“Mergers Hit Record, With Few Stop Signs” (C11) – Current mergers and acquisition wave is
described
April 7-8, 2007
“Starwood CEO’s Ouster Followed Battle with Board Over His Conduct” (A1) – CEO is fired by
board for personality and leadership reasons, not poor performance: they didn’t like him
“Telecom Italia Chairman Quits After Biggest Holder Shows a Lack of Support” (A6) – Minority
shareholder causes board chairman to resign, a corporate governance example from Italy
n’t like him
“Telecom Italia Chairman Quits After Biggest Holder Shows a Lack of Support” (A6) – Minority
shareholder causes board chairman to resign, a corporate governance example from Italy
---------------------------------------------------April 11, 2007
“Electric Attraction: For Europe’s Utilities, A Frenzied Power Grab” (A1) – Great background
story on German E.On’s attempt to snatch a Spanish electric utility from domestic gas
company’s acquisition attempt, describing the role of the Spanish government, the
European Common market, private investors, and other competitors, resulting in a
doubling of the original offer price, providing another example of the importance of
valuation we apply in group project
“Daimler to See Bidders – Minus Kerkorian” (A3) – Good insights into bidding process for a sale
of a major business unit, requiring extensive valuation analysis, and politics in dealing
with bidders
“Unibail to Buy Rodances In $14.96 Billion Deal” (A10) – Cross-border acquisition and friendly
“merger of equals” in Europe
“Oppenheimer’s Revolt Shows Mutual Funds’ ‘New Mood’” (C1) and “Emerging-Market
Investors Seek More Influence” (C3) – Institutions investors become more active in
corporate governance as illustrated by actions in U.S. and abroad, containing a
representative list of firms under pressures from shareholders’ activity currently
548 WSJ Readings Spring 2007
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
April 12, 2007
“Nestle to Get Long-Sought Gerber” (A3) – Restructuring involves sale of assets and valuations
of buyers and sellers differ (their intrinsic values differ), as discussed in class
“SK Seeks Split of Firm to Aid Transparency” (A10) – Korean firm decides to split into two
divisions to increase accountability and transparency
[
“Sainsbury Deal’s Collapse Throws Focus on Rivals” (A10) -- Private equity firm offers don’t
always work out, this story describes a breakdown in a deal
“A Second Wind for Nike” (C14) – Story on firm used as example in class, providing background
into how analysts change their assumptions
April 13, 2007
“Kraft’s Hearty Dividends Buy It Time to Recharge” (C1) – Great example of the dividend/cash
disbursement decision we discuss in two weeks
April 14-15, 2007
“Icahn Steps Up Efforts In Bid to Win Election to Motorola Board Seat” (A6) – Notorious
corporate raider and activist wants board seat on underperforming firm
“Cash Flows May be Drying Up” (B5) – Aggregate “free cash flow” we emphasize in valuation
may be falling in the U.S.
April 16, 2007
“Stage Managing the Annual Meeting” (B1) – Interesting background on role of annual meetings
in corporate governance from management’s point of view
“Investors May Get More Say In Selection of Directors” (B3) – Trying to open board elections to
shareholders to avoid confrontations is described as emerging corporate-governance issue
in the U.S.
April 23, 2007
“MedImmune Nears Big Payday” (A3) – Major pharmaceutical acquisition illustrates central role
of valuation in restructuring of an industry and also illustrates use of multiples in
discussion specific valuations
“UAW Group, Tracinda Discuss Bids for Chrysler” (A14) – Critical role played by unions in auto
restructuring affects ability of private-equity firms to participate in bidding and raises
unions’ bargaining power
“An Unrelated Story: U.S., Global Stock Markets Increasingly Take Separate Paths” (C1) –
Excellent example of low correlation between asset classes being used to reduce portfolio
risk
548 WSJ Readings Spring 2007
April 24, 2007
“Paired Up: Merger Challenge: Unite Toothbrush, Toothpaste” (A1) – Great story illustrates
problems companies have in realizing cost and revenue synergies from a merger that
appears to make sense
“AstraZeneca Hopes Purchase Breaks New-Product Slump” (A8) – Merger seen as strategic
means to solve corporate strategy issues as part of industry restructuring
“Delta’s Quarterly Loss Narrowed” (A9) – Good example of firm in bankruptcy, illustrating some
of the principles we discuss next week
“Dr. Z’s Chrysler Predicament: Selling Unions on Sacrifice” (C1) – Non-financial issues
affecting sale of corporate unit and illustrating corporate governance problems raised by
worker bargaining power
April 25, 2007
“Coca-Cola Is in Deal Talks With Glaceau” (A3) – Another acquisition story illustrating the
critical significance of valuation theory in corporate strategy
“Amazon Finds Happy Balance Of Revenue, Spending Growth” (A10) – Analysis of
determinants of corporate cash flow illustrating the kinds of analysis you performed in
Part 2 of the group project
“Behind Stocks’ Run at Record” (C1) – Story analyzes as well as can be done why the Dow is at
a new record
“IBM to Spend $15 Billion In Expanded Stock Buyback” (C2) – Good example of corporate use
of cash as discussed in Chapter 18
April 26, 2007
“Wendy’s Considers Possible Sale” (A2) – Another corporate restructuring placing valuation at
the center of the analysis and simultaneously illustrating the importance of minority
shareholders in corporate governance
“Alcoa to Shed Units, Boosting Takeover Buzz” (A4) – Restructuring by focusing on core
businesses, selling units requiring valuation analysis
“Materials, Research Costs Catch Up With Honda” (A12) – Another example of how costs affect
margins, as you discovered in Part 2 of the project
“Lucky 13000: Dow Hits Record” (C1) – Two stories provide a good review of stock-market
performance as well an another attempt to explain its current record high and a relation of
market to economy-wide performance (as assumed in the CAPM one-risk model)
April 27, 2007
“Dropped Call: How Motorola Fell A Giant Stop Behind” (A1) – Good story on how a
company’s share suffer from missteps in sales and product development
548 WSJ Readings Spring 2007
“Unusual Buyout Offers a Piece to Shareholders” (A1) – Innovation in private-equity acquisition
describes “stub equity” and changing takeover tactics
“Microsoft Reaps Vista’s Dividends” (A3) – Good story on relation between accounting numbers
and product introductions, and how changes in accounting for revenue can be a problem
for analysts (like you)
“Is Harman Buyout Sound?” (C12) – Good discussion of issues associated with above story about
“stub equity”
April 28-29, 2007
“In Telecom Italia Struggle, Telefonica Aims to Own Share” (A3) – Complexities in acquisitions
in European market
“Choosing Accounting Lets Firms Play Even More Games” (B3) – Accounting issues and their
relevance to analysis of performance are discussed
April 30, 2007
“Outer Limits: As Funds Leverage Up, Fears of Reckoning Rise” (A1) –Excellent but technical
demanding article on non-debt sources of leverage in the capital markets, with a good
discussion of derivatives and how they work to increase leverage
“Yahoo Will buy the Rest of Right Media” (A3) – Yahoo increases its confrontation with Google
by strategy of acquisitions, requiring valuations like we are doing
“Mazda”s Remodeling Makes Progress” (A11) – Corporate restructuring to improve operating
margins illustrates what new management or approach can do to increase earnings and
value, possibly a goal of your team in group project
“Irrational Complacency” by Burton Malkiel (A15) – Great opinion piece on valuation of the
stock market relying on the types of simple valuations we discussed in Chapter 5 and
raising issues about changes in the risk premium (that the book pegs at 8.5% for the
CAPM) with changes in market conditions. Highly recommended,
“$650 Billion Tax Hike” by Stephen Moore (A15) – Another opinion piece discussing likelihood
of changes in dividend and capital gains tax treatment, factors we will discuss in the last
two classes
“Goliaths Gain Momentum on Davids” (C1) – Good discussion using large versus small stock
performance in comparison
“What’s Better in Accounting: Rules or ‘Feel’?” (C1) – Critical issue in accounting standards, an
issue you may better appreciate after using reported data in this semester’s project
548 WSJ Readings Spring 2007
May 1, 2007
“Icahn Bid for Motorola Seat Takes More Critical Tone” (A4) – A hostile effort to gain board
representation on underperforming firm’s board detailed, a good example of corporate
governance issues raised by vocal and organized minority shareholders
“Higher Private-Equity Tax Is Explored” (A4) – Dramatic change in tax could alter
compensation and incentives of private-equity firms whose gains are now taxed at capital
gains rate, not the income tax rate
“TPG Considers Selling 20% Stake, With Pension-Fund Twist” (C1) – A new wrinkle in sale of
stock in private-equity management firms, with TPG considering sale of stock in itself to
its clients, pension funds
“Does Pact Overvalue ISE” (C12) – Good illustration of ‘back-of-the-envelope’ valuation of a
firm, in this case a publicly held options exchange
May 2, 2007
“Making News: Murdoch’s Surprise Bid: $5 Billion for Dow Jones” (A1) – Amazing
development in the restructuring newspaper business, offer is 67% premium over
previous price, represents major financial information asset with possible synergies for
New Corporation business reporting
“Cablevision Nears Deal With Dolans To Go Private for at Least $10.5 Billion” (A1) – Another
taking of public corporation private, with a good discussion of free cash flow, important
in the group project
“Dow Jones: the Premium Question” (C1) – Two major articles discuss Murdoch’s offer for Dow
Jones, includes interesting history of the Wall Street Journal and importance of Bancroft
family with a dual-share structure
May 3, 2007
“Cablevision Deal Faces Hurdles” (A4) – Minority owners are upset with Dolan family purchase
of the firm
“Ahold Agrees to Sell U.S. Foodservice Unit” (A4) – Sale of division to private-equity
consortium requires valuation of the division’s assets
“Bond Investors’ Lamaent” (C1) – Good story on how bonds are downgraded, causing losses to
investors as yields increase, illustrating bond valuation principals studied earlier
“Independence Can Pay Off” (C14) – Great discussion of role of independent directors forcing
higher value in sale of Comcast to family and private-equity firms