Category Archives: Business – General

Banning the live bloggers

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Live%20blogging.JPGThe National Collegiate Athletic Association’s dubious regulation of intercollegiate athletics has been a frequent topic on this blog, but I must admit that this absurd example of overwrought regulatory control from last weekend’s NCAA Super-Regional baseball series surprised even me:

Everybody can watch a game on TV and put their musings online. But don’t try blogging from a press box at an NCAA championship.
After the NCAA tossed Louisville Courier-Journal reporter Brian Bennett for doing just that at an NCAA baseball tournament game Sunday ó actually revoking his media credential during a Louisville-Oklahoma State super regional game ó it said Monday that it was just protecting its rights.
Like rights to live game radio or TV coverage, suggests NCAA spokesman Erik Christianson, live coverage online is a longstanding “protected right” that is bought and sold. Blogging reporters can report about things such as game “atmosphere,” he says in an e-mail, but “any reference to game action” could cost them their credentials.
Christianson says those online “rights” were packaged into media deals with CBS and ESPN ó which aired the game. Monday, ESPN spokesman Dave Nagle said “our rights are the live TV rights. We didn’t ask them (to take the reporter’s credential.) And they didn’t ask us.”

A similar incident occurred at the Rice-Texas A&M Super-Regional in Houston.
Howard Wasserman analyzes the speech restriction issues, while Rich Karcher reviews it from an intellectual property standpoint. And the NY Times is reporting today that the Courier-Journal is weighing whether to mount a legal challenge to the NCAA’s action on First Amendment grounds.
What on earth are these NCAA-types thinking?
By the way, not everyone is pleased with the way in which Rice won the Houston Super-Regional.

What’s at stake in Stoneridge

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golfplated%20scales061107.jpgI’ve been meaning to pass along this Peter Wallison/American.com article that does an excellent job of summarizing what is at stake with regard to the U.S. Supreme Court’s review of the Stoneridge Investment Partners v. Scientific-Atlanta case involving the issue of secondary liability for companies that do business with a company that commits securities fraud:

It is an old legal saw that hard cases make bad law, but Stoneridge should not be a hard case. The legal principle advanced by the plaintiffsóthat persons unrelated to the statements that constituted securities fraud could be held liable for the plaintiffsí lossesówould be impossible to restrict or cabin in any effective way. Every party that engaged in ordinary commercial transactions with a public company in the United States could later be accused of participating in a securities fraud if the commercial transaction itself could be characterized as fraudulent or deceptiveóeven if the commercial transaction was not understood by the defendant to be part of a securities fraud.

Like this.

It’s not been a good week for federal agencies

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fcc.GIFFirst, it was the dubious decision of the Federal Trade Commission to sue to enjoin the proposed merger between natural foods grocers Whole Foods Markets and Wild Oats Markets.
Then, as this Daniel Drezner post notes, Federal Communications Commission chairman Kevin Martin chose a rather interesting way to criticize the Second Circuit Court of Appeals decision this week striking down the FCC’s policy governing “fleeting expletives” on television.
So it goes in the wacky world of governmental regulation.

Why these shareholders?

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wholefoods060507.jpgThis Bloomberg article on Austin-based Whole Foods’ proposed acquisition of Wild Oats Markets confirms that officials at the Federal Trade Commission do not have enough to do:

U.S. antitrust regulators plan to file suit to block the proposed merger between Whole Foods Market Inc. and Wild Oats Markets Inc., the largest and second- largest natural-foods grocers. [. . .]
The agency is concerned that the combined company will control too much of the U.S. natural-foods market and increase prices. . .
“If Whole Foods is allowed to devour Wild Oats, it will mean higher prices, reduced quality, and fewer choices for consumers,” Jeffrey Schmidt, director of the FTC’s Bureau of Competition, said in a statement. “That is a deal consumers should not be required to swallow.”
The commission voted 5-to-0 to authorize staff to seek a temporary restraining order.

I mean, what on earth are these people at the FTC thinking? Since they haven’t moved to block a retail merger in a decade that it’s time to try and block one? What else could explain attempting to block a relatively small $600 million deal that would result in a combined company with just over 300 stores? Besides, it’s not as if Whole Foods is doing all that great, anyway.
The FTC seems to be saying that Whole Foods and Wild Oats are in a different market than conventional grocery chains. But that’s just plain silly. Not only will customers move to non-organic products if Whole Foods and Wild Oats price an organic alternative too high, virtually every retail grocery operation is now offering their own organic section in their stores. For goodness sakes, even Wal-Mart is offering an organic product section in many of its grocery stores these days.
Dana Cimilluca over at the WSJ DealJournal speculates that the FTC action is a pure political move to chill the overheated merger market. Maybe so, but that’s sure a petty reason to deny a relatively small group of shareholders an opportunity to realize some increasingly rare equity upside in the brutally competitive grocery business.

Texas’ medical licensing logjam

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texas_doctors_comp.jpgThe number of insurance companies offering medical malpractice insurance policies has dramatically increased and malpractice insurance premiums have substantially decreased since the 2003 legislation enacting medical malpractice caps in Texas, but the med mal caps have contributed to at least one unanticipated problem:

. . . about 2,250 license applications await processing at the Texas Medical Board in Austin. The wait could be as long as a year for some of the more experienced doctors because it takes longer to review their records.
The fear is that some doctors will give up on Texas and go elsewhere instead of waiting. A $1.22 million emergency funding request was approved during the last days of Texas legislative session for the Texas Medical Board, which licenses physicians. That is on top of the $18.3 million regular biennial appropriation, said Jane McFarland, the board’s chief of staff.
The board plans to add nine new employees to its 139-member staff, seven of which will help chop away at the backlog of license applications.

Competing with the NFL? Or with NCAA football?

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Mark%20Cuban%20on%20stage.jpgMark Cuban’s Shareslueth speculative venture has not exactly been going gangbusters, so his announcement last week of a new professional football league to compete with the National Football League probably does not have the NFL owners quaking in their very well-heeled boots. Phil Miller has a good rundown on the basic economics behind Cuban’s football venture, not the least of which is the current cost of an expansion NFL franchise — probably $800 million or so to the other NFL owners even before absorbing other startup costs.
But is the NFL the real competition for this new venture? It seems to me that NCAA football will be the new venture’s main competition, particularly for players. Could Cuban’s venture be the professional minor league football league that could spur NCAA members to reform big-time college football toward the college baseball model that has been so successful over the past couple of decades?

$12 million = Billions in damages

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golfplated%20scales.jpgAmerican Enterprise Institute’s Ted Frank provides this excellent WSJ ($) op-ed on the stakes involved in the upcoming Supreme Court decision in Stoneridge v. Scientific-Atlanta, which could seriously erode the Central Bank rule against holding financial institutions secondarily liable for damages in providing financing for a company that defrauds its investors. As usual, Professors Ribstein and Bainbridge do a fine job of explaining why it would be poor public policy to undermine the Central Bank rule, while J. Robert Brown makes the case for expanding secondary liability.
But policy reasons aside, there is a practical reason why the Supreme Court should uphold the Central Bank rule. The Court is currently considering whether to expand the Stoneridge v. Scientific-Atlanta case to include the review of the denial of class status to the plaintiffs in the main securities fraud lawsuit against several investment banks that provided financing for Enron. One of the myriad of claims in that case is one based on the much-discussed the Nigerian Barge transaction that has already resulted in the unjust conviction and imprisonment of four former Merrill Lynch executives. The plaintiffs in that Enron securities fraud case contend that Merrill should be held liable for billions of dollars in damages resulting from Enron’s demise because Merrill purchased an interest in the barges that allowed Enron to book $12 million in allegedly false earnings.
So, the Enron securities fraud case provides a preview of what we will get from erosion of the Central Bank rule: Help arrange $12 million in earnings = liability for billions of dollars in damages.
I don’t see the Supreme Court buying that math.

We have a winner for EGL

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Ceva.jpgAfter four months of bidding, CEVA Group PLC — a UK public limited company owned by affiliates of New York City-based Apollo Management LP — has emerged as the winner for Houston-based logistics company EGL, Inc. over the management led-private equity bid championed by EGL chairman and CEO, Jim Crane (prior posts here). Although his private equity buyout failed, Crane is certainly not a loser on the deal. His 17.4% stake in EGL has increased in value by about 60% over the past four months, which means his EGL stock has increased in value by about $125 million to around $337 million. Not exactly a bitter pill to swallow.
Although the winning bid in this type of competition is always interesting, a fascinating development was revealed yesterday in a Schedule 13D/A that EGL filed with the Securities and Exchange Commission. Get a load of this:

EXPLANATORY NOTES: This Amendment No. 8 to Schedule 13D (this “Amendment”) is being filed by James R. Crane and the other reporting persons (collectively, the “Reporting Persons”) signatory hereto as identified in the Schedule 13D filed on January 22, 2007, . . .
The Reporting Persons wish to make clear that Mr. E. Joseph Bento, who was one of the signatories to the Schedule 13D filed on January 22, 2007 and to Amendments No. 1 through 7 thereof as previously filed, was not a signatory to Amendment No. 8 to the Schedule 13D and is not a signatory to this Amendment.
The Reporting Persons have excluded Mr. Bento as a signatory and as a member of the group because they believe, based on reliable information, that Mr. Bento, while purporting to cooperate with the Reporting Persons in their offer to acquire the Issuer, in fact has been secretly and improperly cooperating with Apollo Management VI, L.P. and its portfolio company, CEVA Group Plc (collectively, “Apollo/CEVA”) in the competing offer by Apollo/CEVA to acquire the Issuer.
The Reporting Persons further believe, based on reliable information that, while holding himself out to the Reporting Persons as a person cooperating with the Reporting Persons’ bid for the Issuer, Mr. Bento in fact has, without the prior knowledge of or permission from the Reporting Persons, improperly shared confidential information relating to the Reporting Persons’ bidding strategy and other confidential information regarding the Reporting Persons’ offer to acquire the Issuer. The Reporting Persons cannot give any assurance that prior statements of Mr. Bento in the Schedule 13D as to his intentions were in fact truthful and accurate.
The Reporting Persons intend to explore all appropriate remedies, including legal action for damages and other relief, that they may have against Mr. Bento.

Well, you certainly don’t read excerpts like that every day while perusing SEC filings!
It’s a bit difficult to know at this point what the claim against Berto would be. It would not appear that EGL or its shareholders have been damaged by anything the Berto is alleged to have done. Although Crane’s group may have been hurt in its effort to become the winning bid by information that Berto supposedly provided to Apollo/CEVA, it’s not as if Crane and his group were prevented from continuing to bid on the company. That Crane and his group might have been the successful bidder at a lower price but for Berto’s supposed leaking of confidential information doesn’t seem like much of a basis for a lawsuit because that lower bid would have come at the expense of EGL’s shareholders to whom Crane and his management team still owed a fiduciary duty. So, we’ll just have to stay tuned on that potential litigation front.
At any rate, one has to tip their hat to EGL’s Special Committee of the Board of Directors, its counsel (Andrews & Kurth) and its financial advisors (Deutsche Bank) — they really played these two competing bidders off on each other brilliantly. Although at first CEVA/Apollo appeared to be a tire-kicker, they turned out to be a motivated buyer because EGL represented a special opportunity to acquire a substantial freight forwarding business that could be integrated with CEVA’s existing contract logistics business. On the other hand, EGL was Crane’s baby, so the board knew that his group would also fight hard to retain control. In the end, Apollo/CEVA paid an extremely favorable price for a company that has not been doing all that well over the past couple of years and certainly was not considered a hot property in the marketplace. EGL shareholders did not quite get their 52-week high stock price of $51.49, but they did end up receiving almost a 60% premium on their $29.78 share price when this all started.
Suffice it to say that such a premium would have been realized had Ben Stein been calling the shots.

More on that little boondoggle

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Houston%20Dynamo.jpgCharles Kuffner has an interesting post about the John Lopez column noted earlier here that suggested that the $80 million or so in public financing for the proposed downtown soccer stadium is a political payback to the minority groups that have given certain civic leaders a pass for supporting the two more expensive downtown stadiums, Minute Maid Park ($286 million) and the Toyota Center ($250 million). Kuff goes on to observe about the location of the proposed stadium:

If it’s going to be in Houston and not Sugar Land or the Woodlands, then I think downtown is fine. It will be both more convenient and more attractive than Robertson Stadium, where I presume they’re at least drawing enough of a crowd to be viable. I just think they ought to pay for that downtown stadium themselves.

Norm Chad, as an aside to his funny column regarding the Dodgers’ stadium seats that come with free food, makes the following observation about the number of folks who are really watching MLS soccer:

Column intermission: “Beckham Fever” is contagious. This month, MLS games have attracted throngs of 7,426 in Kansas City, 7,802 in New York and 9,508 in New England. One fan in Houston even thought she sighted David Beckham, but it just turned out to be a good-looking grad student from Rice wearing a Subway sandwich board.

Come to think of it, has any civic leader bothered to ask how many folks are attending Dynamo games?

Super bidding

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Roger%20Staubach.jpegDallas Cowboys owner Jerry Jones is pulling out all of the stops today to convince the other NFL teams owners to award Dallas Super Bowl XLV in 2011 — Hall of Famer QB Roger Staubach will assist Jones in Dallas’ presentation to the team owners. Dallas’ main competition is Indianapolis, which at least is better for Dallas than competing against Miami or San Diego.
But the fact of the matter is that a Hall of Fame pitch man and new stadium isn’t enough anymore for being assured of a Super Bowl. Texans’ owner Bob McNair learned that the hard way in connection with making Houston’s presentation for the most recent Super Bowl. As a part of that presentation, McNair promised the other NFL owners a trip to a South Texas ranch for some quality quail hunting, which in these parts is a pretty powerful inducement.
Unfortunately, Dolphins’ owner Wayne Huizenga, who headed up Miami’s competing presentation, one-upped McNair. He offered each owner the use of a yacht while they were in Miami for Super Bowl week.
The owners voted for Miami by a landslide.
“Don’t worry, Bob,” Huizenga reportedly told McNair after the vote. “We’ll serve quail on the yachts.”
Update: North Texas lands its first Super Bowl.