QUOTE OF THE DAY
“The first-quarter results show a continuation of the recovery in the banking industry.”
Martin Gruenberg, FDIC chairman
Article, 1D
Apple to buy Beats brand for $3 billion
CUPERTINO, Calif. — Apple Inc. said Wednesday that it was buying Beats Electronics, the rising music brand, for $3 billion, in a move that will help it play catch-up with rivals that offer subscription-based music services.
Apple and Beats executives said Wednesday that the companies would work together to give consumers worldwide more options to listen to music. The Beats brand will remain separate from Apple’s, and Apple will offer both Beats’ streaming music service and premium headphones.
Apple said that iTunes, which sells individual songs and albums and offers a streaming radio service, would continue to be offered alongside the Beats music service.
The purchase of Beats means Jimmy Iovine, a longtime music executive, and Dr. Dre, the rapper, will work under Eddy Cue, Apple’s executive in charge of Internet services. Dr. Dre and Iovine, who founded Beats, join other prominent executives whom Apple has added to its roster, including Angela Ahrendts, the former chief of Burberry, and Paul Deneve, the former chief of Yves Saint Laurent.
Apple is paying for the deal with $2.6 billion in cash and $400 million in stock. The company expects the deal to be approved later this year.
Goldman chief: Trades abnormally low
Goldman Sachs Group Inc. President Gary Cohn said low volatility and interest rates that are holding in tight ranges have resulted in an “abnormal” trading market.
“The environment for all the firms is quite difficult right now,” Cohn, 53, said Wednesday at an investor conference in New York. “What drives activity in our business is volatility. If markets never move or don’t move, our clients really don’t need to transact.”
Citigroup Inc. Chief Financial Officer John Gerspach, 60, said Tuesday that second-quarter trading revenue could fall as much as 25 percent from year-earlier levels, and JPMorgan Chase & Co. estimated a 20 percent drop earlier this month. Cohn stopped short of forecasting the decline for New Yorkbased Goldman Sachs.
“We think, at the end of the day, it’s economic in nature,” Cohn said of the cause of lower client volume. “We don’t have clear vision of economic growth or lack of growth.”
Cohn said while his firm has been gaining market share among clients in the trading business, the lack of activity has kept that from translating into higher revenue.
Low interest rates and the Federal Reserve’s program of quantitative easing have resulted in reduced volatility, Cohn said. He pointed to the Chicago Board Options Exchange Volatility Index, a gauge of U.S. stock volatility known as the VIX, which is trading 40 percent below its historical average.
Firm says Target should ax 7 directors
Target Corp. shareholders should vote against seven of the company’s 10 board members because they failed to do enough to prevent the retailer’s Christmas-season data breach, a proxy advisory firm said.
Members of the board’s audit and corporate-responsibility committees should be voted out because they failed to recognize the potential threats to the company’s data, Institutional Shareholder Services Inc. recommended in a report.
The second-largest U.S. discount retailer has been trying to regain its footing as it copes with the theft of 40 million payment-card numbers by hackers during the crucial Christmas shopping season. The company has since hired a new chief information officer and ousted its chief executive officer.
“The data breach revealed that the company was inadequately prepared for the significant risks of doing business in today’s electronic-commerce environment,” Rockville, Md.-based ISS said.
Target “views risk oversight as a full board responsibility” and believes the company is ranked among the best in retail in data security, Eric Hausman, a Target spokesman, said Wednesday in a statement.
— Bloomberg News
Court tells BP to make payments
BP PLC must pay hundreds of millions of dollars in damage claims while it seeks U.S. Supreme Court review of disputed payments in its $9.2 billion accord over the 2010 Gulf of Mexico oil spill, a court ruled. The U.S. Court of Appeals in New Orleans Wednesday rejected the U.K.-based energy company’s request to maintain a temporary halt on payments to businesses that can’t prove they were directly damaged by the spill. BP settled with most private-party plaintiffs in 2012, initially estimating the cost of the agreement at $7.8 billion. The company contends a flawed interpretation by the claims administrator helped raise the price to $9.2 billion or more. A trial judge in December suspended payments to all businesses harmed by the spill, even those with losses unquestionably linked to the disaster, while the appeals court weighed BP’s concerns. On May 19, the court refused to reconsider its earlier rejection of BP’s complaint that its claims administrator was misinterpreting the accord and approving hundreds of millions of dollars in “fictitious” claims. “We are disappointed and will seek review by the U.S. Supreme Court of this ruling,” Geoff Morrell, a spokesman for the London-based company, said in an email.
— Bloomberg News
Koch buys propylene firm for $2.1 billion
Koch Industries Inc., the holding company controlled by billionaire brothers Charles and David Koch, agreed Wednesday to buy PetroLogistics LP for about $2.1 billion including debt to gain raw materials used to make plastics. Koch’s Flint Hills Resources LLC unit will pay $12 a share for the stock held by private-equity firm Lindsay Goldberg LLC, York Capital Management LP, PetroLogistics’s chairman and its chief executive officer. The rest of the shares will be purchased for $14 apiece, PetroLogistics and Flint Hills said in a statement Wednesday. PetroLogistics uses propane, a natural gas liquid, to make propylene at its Houston plant, the country’s only facility dedicated to producing the chemical. The acquisition provides Flint Hills with a key raw material it uses at plants in Texas and Michigan for making polypropylene, a polymer found in bottle caps, auto parts, carpet and clothing. “PetroLogistics built this facility from the ground up,” Flint Hills Chief Executive Officer Brad Razook said in the statement. “Its capabilities are well aligned with our existing chemical and refining business.” The deal is expected to close before the end of the year. Shares of PetroLogistics rose 10.6 percent to close Wednesday at $14.30.
— Bloomberg News
Business on 05/29/2014