Mondelez and Kraft: A Storied History


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Bloomberg News

While it’s far from a household name, few corporations in American history can claim a more storied history than Mondelez International Inc. Now, activist investor William Ackman is unveiling a $5.5 billion stake in the snack company and plans to push it to write a new chapter.

The latest twist has prompted MoneyBeat to revisit the company’s complicated family tree, which includes links with Philip Morris , General Foods, RJR Nabisco –and, most closely, Kraft Foods. Here’s a timeline of the complicated relationship between Mondelez, Kraft and some other food giants, past and present.

1903: James L. Kraft begins selling cheese from a horse-drawn wagon in Chicago. By 1914, his company begins manufacturing cheese on its own.

1924: The company changes its name to Kraft Cheese Co. from J.L. Kraft & Bros. Co. and goes public on the Chicago Stock Exchange.

1928: Kraft merges with Phenix Cheese, Continue reading “Mondelez and Kraft: A Storied History”

Gabelli, Schwarzman: Meet the Highest Paid CEOs on Wall Street


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Asset management can pay pretty well — especially if you found your own firm.

SNL Financial released its rankings of the highest compensated CEOs on Wall Street this week, from asset manager to broker dealers and investment banks. Seven of the 10 highest paid CEOs in 2014 came from the asset-management industry. In fact, the five Wall Street CEOs with the biggest pay checks last year all ran asset managers they founded.

GAMCO Investors Inc. CEO Mario Gabelli took top honors for the fifth straight year, with his total compensation reaching $88.5 million. A majority of Mr. Gabelli’s pay came from his role as a portfolio manager of a number of GAMCO funds. He also earned $14.4 million from a unique employment agreement that entitles him to an incentive-based management fee in the amount of 10% of the company’s aggregate pretax profits.

The biggest mover on the list

Continue reading “Gabelli, Schwarzman: Meet the Highest Paid CEOs on Wall Street”

From Buyout to Bankruptcy: Ranking the TXU LBO


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The Chapter 11 bankruptcy of Energy Future Holdings Corp., formerly TXU Corp., is the 8th-largest in history, according to BankruptcyData.com. But where does it rank on the list of the all-time biggest leveraged buyouts? Seven years after the deal was announced, it still tops the list, according to Dealogic. Eight of the 10 largest LBOs ever came between 2006 and 2007, during the buyout boom that preceded the financial crisis. The other two deals, the H.J. Heinz and Dell buyouts, took place last year. Here’s a look at the full top 10 and how they’re faring now.

Jos. A. Bank: Crazy Like a Fox?


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REUTERS

The board and executives of the suit retailer Jos. A. Bank look like they have been playing defense for months, doing anything it takes to ward off a takeover by their larger competitor Men’s Wearhouse.

But has Jos. A. Bank’s board instead been making all the right moves on the chess board?

“Jos. A. Bank’s was whiny and unsophisticated and not communicative with the Street,” said Richard Jaffe, an analyst at Stifel NicholasCK. “Yet they got the bid price up dramatically.”

In early October, Jos. A. Bank and Men’s Wearhouse were simply suit retailers, trying to undercut one another on price or on just how many suits they could give away for the price of one. Men’s Wearhouse’s stock was trading around $35 a share, while Jos. A. Bank’s shares hovered around $41.

Then, Jos. A. Bank struck. With the backing of private-equity firm Golden Gate Capital, Jos. A. Bank made an unsolicited bid for Men’s Wearhouse for $48 a share.

Men’s Wearhouse rejected the offer, but the idea of suit synergies had been planted. Men’s Wearhouse turned around and bid for Jos. A. Bank at $55 a share in late November. By late December, after being spurned once, Men’s Wearhouse came back to the table with a $57.50 offer. Jos. A. Bank wouldn’t take that offer either and said it undervalued the company.

Men’s Wearhouse and Eminence Capital, a 10 % shareholder in Men’s Wearhouse and a nearly 5% shareholder in Jos. A. Bank, each sued Jos. A. Bank in court for refusing to even negotiate with its competitor.

On Feb. 14, Jos. A. Bank announced what seemed like a bizarre acquisition, Eddie Bauer. The suit retailer claimed to see growth potential for both itself and Eddie Bauer and said it would spend $825 to buy Eddie Bauer. The deal has been viewed by the market as a poison pill designed to thwart any takeover by Men’s Wearhouse, which saw its stock drop more than 5% following the Eddie Bauer announcement. Jos. A. Bank’s stock closed slightly higher that day.

Yet could the Eddie Bauer deal have been the push Men’s Wearhouse needed to up its offer by at least $6 per share or roughly $180 million?

A week and a half later, Men’s  Wearhouse is back with a $63.50 per share offer for Jos. A. Bank that they said could be raised to $65 per share if they can conduct due diligence. That’s a premium of nearly 60% from where Jos. A. Bank traded in October before all this started.

“Investors would rather see $65 a share or even $63.50 a share immediately rather than just the possibility of shareholder growth from Eddie Bauer,” said Mark Montagna, a senior research analyst at Avondale Partners. “Eddie Bauer is a brand that people haven’t cared about for awhile. It’s hard for a brand to become relevant again when it reaches a certain level of disinterest from consumers.”

Investors seem to be giving more credit to Jos. A. Bank’s negotiating powers than Men’s Wearhouse. Jos. A. Bank’s stock is up more than 45% since the initial bidding began compared to 39% for Men’s Wearhouse.

Still, Jos. A. Bank can reject the offer from Men’s Wearhouse. The board said it will review the offer and make a recommendation to shareholders on how to vote for it in “due course.”

The clock is ticking though. Men’s Wearhouse’s offer expires on March 12. Meanwhile, Jos. A. Bank has said that it has launched a tender offer to buy back roughly $300 million of its shares at $65 each. Buying back those shares would basically end Men’s Wearhouse’s bid.

Should Jos. A. Bank complete its own tender offer and buy Eddie Bauer, it is expected to be subject to continuing litigation from Men’s Wearhouse and Eminence Capital. Still the Delaware courts could weigh in before March 12.

“If they accept the offer, the Jos. A. Bank board looks pretty clever,” said Mr. Jaffe. “If they reject it, they’re subject to prolonged litigation and a lot of risks turning around Eddie Bauer and their own company.”

Cengage Reaches Bankruptcy-Exit Settlement with Creditors


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Cengage Learning Inc. said Monday that it has reached a settlement with its creditors that paves the way for the textbook publisher to exit Chapter 11 bankruptcy next month.

The settlement provides second-lien creditors and unsecured creditors a share of $225 million in cash or stock based, according to a Monday press release. Cengage’s original Chapter 11 plan didn’t provide these groups–owed $1.3 billion– with a substantial recovery.

Cengage had said that three groups of assets–cash, a trove of copyrights and an equity stake in foreign subsidiaries–could be used to pay unsecured and second-lien creditors. However, the first lien group was fighting to keep these assets.

The settlement, reached through mediation led by U.S. Bankruptcy Judge Robert Drain, still provides first-lien lenders a substantial majority of the reorganized company’s equity, while cutting $4 billion in debt from Cengage’s balance sheet.

The plan requires bankruptcy court approval from Judge Elizabeth Stong of the U.S. Bankruptcy Court in Brooklyn, N.Y.

Cengage is in court Monday to request approval of up to $2 billion in exit-financing it needs to execute the plan. Unsecured creditors had objected to the financing, but are now consenting as part of this settlement.

Cengage, a textbook publisher, filed for Chapter 11 protection in July with a plan to swap billions in first-lien debt for 100% equity in the restructured company.

Apax Partners LLP and Omers Private Equity bought Cengage in 2007 in a $7.5 billion deal that loaded the company up with $5.6 billion in debt. The publisher’s business has been gutted by the rise in access to online texts and in the increasing popularity of textbook rentals.

Apax will see its ownership wiped out by the plan but will retain equity in the restructured company as a result of a first-lien debt position it acquired. Other companies with first-lien stakes being converted to equity include Searchlight Capital Partners, Kohlberg Kravis Roberts & Co., Oaktree Capital Management, Oak Hill Advisors, BlackRock Financial Management Inc. and Franklin Mutual Advisers LLC.

Cengage Reaches Bankruptcy-Exit Settlement with Creditors


This post is by Stephen Grocer from Private Equity Beat


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Cengage Learning Inc. said Monday that it has reached a settlement with its creditors that paves the way for the textbook publisher to exit Chapter 11 bankruptcy next month.

The settlement provides second-lien creditors and unsecured creditors a share of $225 million in cash or stock based, according to a Monday press release. Cengage’s original Chapter 11 plan didn’t provide these groups–owed $1.3 billion– with a substantial recovery.

Cengage had said that three groups of assets–cash, a trove of copyrights and an equity stake in foreign subsidiaries–could be used to pay unsecured and second-lien creditors. However, the first lien group was fighting to keep these assets.

The settlement, reached through mediation led by U.S. Bankruptcy Judge Robert Drain, still provides first-lien lenders a substantial majority of the reorganized company’s equity, while cutting $4 billion in debt from Cengage’s balance sheet.

The plan requires bankruptcy court approval from Judge Elizabeth Stong of the U.S. Bankruptcy Court in Brooklyn, N.Y.

Cengage is in court Monday to request approval of up to $2 billion in exit-financing it needs to execute the plan. Unsecured creditors had objected to the financing, but are now consenting as part of this settlement.

Cengage, a textbook publisher, filed for Chapter 11 protection in July with a plan to swap billions in first-lien debt for 100% equity in the restructured company.

Apax Partners LLP and Omers Private Equity bought Cengage in 2007 in a $7.5 billion deal that loaded the company up with $5.6 billion in debt. The publisher’s business has been gutted by the rise in access to online texts and in the increasing popularity of textbook rentals.

Apax will see its ownership wiped out by the plan but will retain equity in the restructured company as a result of a first-lien debt position it acquired. Other companies with first-lien stakes being converted to equity include Searchlight Capital Partners, Kohlberg Kravis Roberts & Co., Oaktree Capital Management, Oak Hill Advisors, BlackRock Financial Management Inc. and Franklin Mutual Advisers LLC.

Creditors Seek to Delay Cengage Exit-Financing Arrangement


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Cengage Learning Inc.’s efforts to line up $2 billion in bankruptcy-exit financing are facing headwinds from the committee representing its unsecured creditors, which says the financing is “premature and unnecessary.”

In court documents filed Monday, the official committee of unsecured creditors in the textbook publisher’s Chapter 11 case said it doesn’t support the payment of loan fees in connection with a bankruptcy-exit plan it believes “cannot be confirmed, or at best, has a real risk of not being confirmed.”

The committee long has argued that it doesn’t believe Cengage’s current plan for exiting Chapter 11 protection can be approved by the court. The company and its creditors have been in mediation, with the goal of resolving disagreements prior to Feb. 24, when Judge Elizabeth Stong is slated to consider confirmation of the plan, putting the company on track to emerge from bankruptcy in March.

But if mediation fails, the committee said, confirmation of Cengage’s bankruptcy-exit plan may get pushed back until April or May.

“During this time, the market may change or different arrangers may be more appropriate at the time of confirmation if the Plan is revised or confirmed with changes (which the Committee submits is required under any circumstances),” the committee said in support of its argument to delay the exit financing.

A lawyer for Cengage didn’t respond to request for comment Tuesday.

In late December, Cengage asked the court for permission to hire lenders to line up as much as $2 billion in financing, including a $250 million revolving facility and a term loan of between $1.5 billion and $1.75 billion. The lenders–Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Morgan Stanley Senior Funding Inc. and KKR Capital Markets LLC–would “use their commercially reasonable efforts to structure, arrange, and syndicate” the loans, according to court papers.

Cengage said it must syndicate the loan by Jan. 15 to exit bankruptcy in March.

The company also requested approval to file the engagement letter with the lenders under seal–a request that drew fire from the U.S. trustee, a U.S. Department of Justice official charged with monitoring the bankruptcy case.

William K. Harrington, the U.S. trustee for New York, said Cengage hasn’t shown that the engagement letter, which lays out the fees the company would pay the lenders for arranging the financing, contains trade secrets or confidential research that would allow for sealing under the Bankruptcy Code. Rather, he said, public policy favors public access to court records and recommended that the court deny Cengage’s request to keep the letter confidential.

Judge Stong will hear the requests Thursday in the U.S. Bankruptcy Court in Brooklyn, N.Y.

Cengage filed for Chapter 11 protection last July with a plan to swap more than $4 billion in first-lien debt for 100% of the restructured company’s equity.

There are three asset groups, including cash, copyrights and a subsidiary equity stake, that could be used to pay junior and unsecured creditors–together owed $1.3 billion–but Cengage’s first-lien lenders have argued they are entitled to those assets.