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2014/10/24

Sears Has Passed The Point Of No Return

Sears will probably not recover from its decades-long decline. 
"As a retailer they're at the point of no return," said David Tawil, cofounder of Maglan Capital and an expert in distressed retail companies. "The real question now is when does it all end?" 
Sears recently confirmed reports that it was planning to close more stores and lay off workers. The company, which has currently has 800 namesake stores and 1,100 Kmart stores, has lost $6 billion since 2012. Suppliers are growing concerned that they won't receive payments for merchandise. 
Sears is lacking the cash or vision to make a turnaround possible, said Tawil, who has invested in many struggling retailers.
"Sears hasn't invested any money into stores, which makes it difficult to retain or attract customers," Tawil said. "The company doesn't seem to have a plan to fix this, making a turnaround impossible." 
Company chairman and CEO Eddie Lampert will need to spin off additional brands, as he did with Sears Auto and Land's End, to generate more cash, Tawil said. 
While this strategy might raise money in the short-term, it also leaves Sears a skeleton of what it once was and does nothing to attract new customers.
Retail analyst and author Robin Lewis believes Sears' inevitable decline started decades ago
He says that Sears spent too much time investing in side businesses and ignored the competition.
 "This did not have to be fatal; however, it actually starved those resources (capital and management) from the retail business, leaving it unable to respond and adapt to the needs of the evolving consumer and marketplace," Lewis writes.sears mapMorgan StanleySears and discount brand Kmart still have a considerable retail footprint, but the brand isn't investing in the future and plans to close more stores.
Sears felt invincible, and it didn't respond to competitors like Wal-Mart, T.J. Maxx, and J.C. Penney Co., according to the book "The New Rules Of Retail," co-authored by Lewis and Michael Dart. 
Between 1998 and 2010, the number of competitors within a 15-minute drive from any Sears grew to 4,300 stores from 1,400, according to Lewis.Sears could have fended off competitors by altering its strategy. Instead, the company became complacent, leading to a massive loss of market share.Dead SearsNicholas EckhartA former Sears store in East Lake, Ohio, now sits empty. It is one of the hundreds of locations to close in recent years.
Former Sears executive Steven Dennis believes the company will cease to exist in a few short years. 
"Just about every action that has been taken over the last 10 years has weakened Sears competitive position," Dennis wrote on his blog. "And the horrific results make this plain for all to see. The world does not need a place to buy a wrench and a blouse and a toaster oven."

NOW WATCH: Ikea Says Its New Furniture Only Takes 5 Minutes To Assemble — Here's The Truth

Sears will probably not recover from its decades-long decline. 
"As a retailer they're at the point of no return," said David Tawil, cofounder of Maglan Capital and an expert in distressed retail companies. "The real question now is when does it all end?" 
Sears recently confirmed reports that it was planning to close more stores and lay off workers. The company, which has currently has 800 namesake stores and 1,100 Kmart stores, has lost $6 billion since 2012. Suppliers are growing concerned that they won't receive payments for merchandise. 
Sears is lacking the cash or vision to make a turnaround possible, said Tawil, who has invested in many struggling retailers.
"Sears hasn't invested any money into stores, which makes it difficult to retain or attract customers," Tawil said. "The company doesn't seem to have a plan to fix this, making a turnaround impossible." 
Company chairman and CEO Eddie Lampert will need to spin off additional brands, as he did with Sears Auto and Land's End, to generate more cash, Tawil said. 
While this strategy might raise money in the short-term, it also leaves Sears a skeleton of what it once was and does nothing to attract new customers.
Retail analyst and author Robin Lewis believes Sears' inevitable decline started decades ago
He says that Sears spent too much time investing in side businesses and ignored the competition.
 "This did not have to be fatal; however, it actually starved those resources (capital and management) from the retail business, leaving it unable to respond and adapt to the needs of the evolving consumer and marketplace," Lewis writes.sears mapMorgan StanleySears and discount brand Kmart still have a considerable retail footprint, but the brand isn't investing in the future and plans to close more stores.
Sears felt invincible, and it didn't respond to competitors like Wal-Mart, T.J. Maxx, and J.C. Penney Co., according to the book "The New Rules Of Retail," co-authored by Lewis and Michael Dart. 
Between 1998 and 2010, the number of competitors within a 15-minute drive from any Sears grew to 4,300 stores from 1,400, according to Lewis.Sears could have fended off competitors by altering its strategy. Instead, the company became complacent, leading to a massive loss of market share.Dead SearsNicholas EckhartA former Sears store in East Lake, Ohio, now sits empty. It is one of the hundreds of locations to close in recent years.
Former Sears executive Steven Dennis believes the company will cease to exist in a few short years. 
"Just about every action that has been taken over the last 10 years has weakened Sears competitive position," Dennis wrote on his blog. "And the horrific results make this plain for all to see. The world does not need a place to buy a wrench and a blouse and a toaster oven."

NOW WATCH: Ikea Says Its New Furniture Only Takes 5 Minutes To Assemble — Here's The Truth


Read more: http://www.businessinsider.com/sears-future-is-uncertain-2014-10#ixzz3H5J5ZCPD

How to use that $900 billion of offshore cash to create U.S. jobs

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  • One of the stories that firms deserting our country like to tell is that by moving their corporate domicile (but not their actual headquarters) outside the United States to duck taxes, they will be able to use cash they currently have parked offshore to expand their operations in the U.S.
    So when the new rules the Treasury issued in September upended the biggest proposed corporate “inversion” in history—Illinois-based AbbVie’s  ABBV 0.84%  $54 billion takeover of Ireland-based Shire—there was whining about how the Treasury is killing prospective American jobs.
    To which I say: give me a break. Under current law, it’s already relatively simple, inexpensive, and profitable for an American company to use its offshore cash for productive and job-adding U.S. projects. And as I think you’ll see, the method we’re talking about, which Standard & Poor’s has dubbed “synthetic cash repatriation,” looks like a better long-term deal for shareholders than paying a multi-billion-dollar premium to buy an offshore company in an inversion deal.
    In an inversion, a U.S. company buys a foreign company, technically sells out to it, and thus transforms itself into a non-U.S. company to avoid high U.S. taxes, but continues to benefit from being in our country. That’s why I (and subsequently President Obama) have taken to calling these inverters “deserters.”
    U.S. companies rarely bring home the profits they earn in other countries, because that would subject them to the 35% U.S. corporate income tax, less the tax (if any) paid where the money was earned. As of June 30, S&P estimates that the U.S. companies whose credit it rates held $906 billion of cash offshore, money that would be subject to U.S. tax if companies brought it home directly.
    UN-AMERICAN BILLIONS Corporate America says it can’t use that money to expand in our country without inverting. Sorry, that’s not the case.
    But there’s a simple and obvious way for companies to use the cash indirectly to fund U.S. investments. Think of it as “clever borrowing.”
    Here’s how it would work. It’s a play in three acts.
    Act One We start with something I learned from tax expert Edward Kleinbard, a University of Southern California law school professor and a prolific, witty, and effective polemicist whose new book, We Are Better than This: How Government Should Spend Our Money, is a must-read for anyone who wants to be educated about taxes and social policy.
    Kleinbard told me something that I should have known but didn’t: American companies are required to pay U.S. income tax on interest and dividends earned on their offshore cash, regardless of whether that income is repatriated to the U.S. (For details, ask a tax techie about Subpart F.) That’s something that very few people know, but it’s really important for our analysis.
    Act Two Last April, S&P issued a nifty report showing how some big U.S. companies are indirectly using their offshore cash to facilitate cheap borrowing in the U.S. That’s the practice that S&P dubs, quite cleverly, “synthetic cash repatriation.” In case you’re interested—and you should be—offshore cash is 60% of the total cash that S&P-rated companies had on their books as of June 30, up from 44% at year-end 2009.
    Companies' Offshore CashNow, let’s combine Acts One and Two. Because the income earned on firms’ offshore cash is taxable in the U.S., there’s no penalty for repatriating that income into our country. So a company with offshore cash can borrow in the U.S. and use the income earned on its offshore money to pay some or all of the (tax-deductible) interest that it incurs on its U.S. borrowing.
    If the interest rates at which a company invests its surplus cash offshore and borrows in the U.S. for projects here were identical, the offshore interest income would totally offset the U.S. interest expense. But in the real world, the money a company would borrow to fund a productive, job-creating project would typically have a longer maturity than the short-term securities in which firms generally stash their offshore cash. Therefore, money borrowed in the U.S. to fund a project here would carry a higher interest rate than what the offshore cash earns.
    So let’s say a company is earning 1% on its offshore cash and pays 3% to borrow here. After taxes—remember, interest paid in the U.S. is deductible to the borrower—that 2% spread costs the company only 1.3%.
    Act Three The grand finale: A big company that wants to make a capital investment in the U.S. typically has a “hurdle rate”—a minimum return that it expects to earn on that investment—of at least 10% after taxes.
    If an investment isn’t likely to earn at least the hurdle rate return, the company probably won’t make it, regardless of where the cash to pay for it comes from. If the projected profit exceeds the hurdle rate, the company will make the investment. Shelling out 1.3% after tax to finance an investment expected to earn double digits after tax is a no-brainer.
    Using offshore cash to borrow cheaply in the U.S. strikes me as a better long-term deal for shareholders than having a company shell out big money to buy an inversion partner, and then having to make that corporate marriage work. (The acquisition has to be sizable, relative to the inverter’s stock market value, for the deal to qualify for inversion treatment under the tax code.)
    There’s no question that a 1.3% annual cost makes “financial engineering” maneuvers, such as using U.S. borrowings to pay dividends and buy back shares, less lucrative for shareholders than they would otherwise be. However, as we’ve seen, if a company wants to use synthetically repatriated cash to expand and grow, that 1.3% isn’t a big deal.
    My conclusion: the idea that a U.S. company with offshore cash has to invert and desert our country in order to make an investment here is nonsense. Up with intelligent borrowing. Down with whining.
    This is an expanded version of a column that will appear in the November 17, 2014 issue of Fortune.

    How ready is New York City for Ebola?

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  • This post is in partnership with Time. The article below was originally published at Time.com.
    By Alexandra Sifferlin, TIME
    Doctors Without Borders physician Dr. Craig Spencer tested positive for Ebola on Thursday, Oct. 23, at Bellevue Hospital in New York City, immediately testing the strength of the city’s preparation for the deadly disease.
    Given the mistakes made during the first case of diagnosed Ebola in the United States—Thomas Eric Duncan in Dallas—New York City has more fears to quell and also more to prove. Can it do better than Dallas?
    Its leaders certainly think so.
    New York City has been prepping and drilling its hospitals for the possibility of an Ebola patient since July 28, when it was confirmed that Americans Dr. Kent Brantly and Nancy Writebol had contracted Ebola in Liberia. “I wanted to know that our staff was able to handle [a possible Ebola patient],” says Dr. Marc Napp, senior vice president of medical affairs at Mount Sinai Health System.
    “We’ve prepared for a variety of different things in the past: anthrax, H1N1, small pox, 9/11, Hurricane Sandy,” Kenneth Raske, president of the Greater New York Hospital Association (GNYHA) told TIME. “This preparation is not unusual.”
    New York City is also one of the first cities to adopt a new system that designates one hospital within a region—Bellevue in this instance—to be the headquarters for Ebola care. If there’s a patient who is a risk, like Spencer, Bellevue will take the patient. Should a potential Ebola case walk into the emergency room of another hospital, those patients can be transferred to Bellevue.
    This is not the first time New York officials have responded to a possible Ebola case. In early August, Mount Sinaiannounced it had a patient with a travel history and symptoms that were a red flag for Ebola. The emergency room isolated the patient and the hospital sent blood for tests to the Centers for Disease Control and Prevention (CDC)—tests that ultimately came back negative.
    The city wasn’t as lucky with Spencer, who had been self-monitoring since returning from Liberia. Spencer notified Doctors Without Borders when he ran a temperature on Thursday morning. Staff from New York’s Bellevue hospital were soon at his doorstep in hazmat suits, ready to take him in for treatment to the hospital.
    “We were hoping [this] wouldn’t happen but we were realistic,” New York Governor Andrew Cuomo said in a press conference at Bellevue Thursday night. “We can’t say this was an unexpected circumstance.”
    Cuomo noted that New York City had the advantage of learning from Dallas’ experience and its mistakes. Texas Presbyterian Hospital failed to diagnose Duncan with Ebola right away, despite his Ebola-like symptoms and the fact he’d been in Liberia.
    “The trigger went off again when the nurses got sick in Dallas,” says Mount Sinai’s Napp. New York officials worked closely with the CDC and local health departments as well as with JFK Airport to ensure procedures were in place for identifying people who may be at risk for Ebola at every point of entry to the country. On Oct. 21, the cityhosted an Ebola education session that was run by area health experts, with members of the CDC who demonstrated the proper donning and doffing personal protective equipment (PPE). Over 5,000 health care workers and hospital staff members took part.
    “As a result of the missteps in Dallas, there were a whole new series of protocols,” says Dr. Robert Glatter, an emergency medicine physician at Lenox Hill Hospital in New York City.
    There are some challenges—New York has spent time and energy preparing based on now outdated CDC guidelines. The new CDC guidelines for PPEs were only announced on Oct. 20, which doesn’t give the city much time to “practice, practice, practice” them as CDC director Dr. Tom Frieden has suggested.
    And New York City has the challenge of sheer size and density. New Yorkers live in very close quarters with one another. Thankfully, Ebola isn’t an airborne disease, so even though Spencer traveled Brooklyn to go bowling, since he wasn’t symptomatic, anyone he might have encountered is at very low risk of contracting the disease.
    For now, New York City has just one patient, and it plans to get it right. Doing so might restore American confidence in the system—but failure would be devastating.

    Chinese house price slump continues

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  • The decline in China’s housing sector continued in September, with prices for new homes falling in all but one of 70 major cities surveyed.
    The National Bureau of Statistics said that prices for new homes fell by up to 1.9% in the cities surveyed, with drops of 0.7% in Beijing and 0.9% in Shanghai. Prices for existing homes fell in all 70 cities, with drops of between 0.5% and 2.0%.
    The figures suggest that recent measures by the People’s Bank of China to support the market haven’t succeeded in turning it round, at least yet. The central bank recently cut downpayment requirements for those buying a second property to 30% from over 60%, the same level as first-time buyers enjoy.
    The numbers add to unease about the unwinding of a speculative bubble in the country’s real estate sector, which analysts fear may lead to a big rise in bad loans among its banks.
    China Construction Bank Corp  CICHY 0.17%  said Thursday bad loans rose to 1.13% of its total portfolio in the third quarter, from 1.04% at the end of the second quarter. While that’s still well below the level that analysts would consider stressed, the increase of 0.09% was faster than the 0.02% reported in the previous three months. Overall bad loans in the sector were at their highest in three years in June, according to the PBoC at 1.08%.
    Analysts worry, however, that official data may not capture the full picture, as much of the credit to the real estate sector goes through the informal, or shadow, banking sector.
    New loans through such shadow banks have fallen sharply in recent months, as most regions struggle with excess supply after years of over-building.
    A survey by China’s Southwestern University of Finance and Economics in June said that more that 20% of homes in urban areas were actually vacant, while as of August, around $674 billion was owed on empty properties.
    In the last six weeks, the PBoC has injected an extra $100 billion in liquidity to the country’s largest banks in the form of three-month loans to ensure that a slowdown in the real estate sector doesn’t make credit markets seize up.
    The real estate slowdown has contributed to the economy’s overall growth rate falling to its slowest in five years. The government said earlier this week that gross domestic product grew only 7.3% year-on-year in the third quarter, short of the government’s 7.5% target.

    Ford earnings down on sales skid

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  • A day after rival General Motors posted increased earnings and put out some generally good vibes, Ford’s earnings are way down and the mood is bleaker in Dearborn. Ford’s pre-tax earnings stood at $1.2 billion, a significant drop-off from $2.6 billion for the third quarter of 2013. The statement from the company did note that the upcoming car releases were on track, including the highly anticipated new F-150 truck.
    What you need to know: The biggest reason for the decline in profits? Quite simply, Ford  F -4.31%  was just not able to move as many cars as they did last year. Sales for the three months stood at 1.49 million, down from 1.55 million for the same quarter in 2013. Additionally, margins were way down. Operating margin for the automotive sector was 2.5%, compared with 7% last year. Not to constantly compare Ford to their Motor City neighbor, but GM  GM -1.68%  was posting margins closer to 10% yesterday. Ford also blamed “higher warranty costs and adverse balance sheet exchange effects” for the decrease in profit.”
    The big number: For manufacturers, production rate can be as important as sales; after all, if you can’t produce cars quickly and cheaply, it doesn’t really matter how good you are at selling them. Last quarter, Ford rolled 1.49 million cars off the line, 57,000 fewer than in 2013 and 45,000 less than the guidance said Ford expected to produce. Thing’s aren’t expected to get all that much better in the fourth quarter, with Ford expecting to make 1.54 million cars, down 35,000 from last year. The company says planned shutdowns to various plants are the reason for this decrease.
    What you may have missed: While the manufacturing and selling side of the business wasn’t so hot, Ford’s financial services sector was actually doing better year-over-year. Ford Motor Credit is what is called a captive finance company, a wing of a manufacturer that provides financing to customers buying cars from that automaker. Ford Motor Credit’s pre-tax earnings were $498 million, up from $427 million the year before. Higher volume of financed deals is the main reason given for this increase.

    6 bumps in the road automakers still face

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  • With car sales headed for a fourth year of growth in 2014, automakers should be uncorking the champagne. By the time the year concludes, total sales are expected to approach 16.5 million units, the most since 2007.
    But if you take a look beyond this year’s bubbly sales, there are plenty of reasons to put the celebration on hold. While manufacturers are guilty of many missteps – producing too many cars, over-indulging on incentives, installing faulty ignition switches and dangerous airbags – they also face an assortment of circumstances that are mostly beyond their control. More than most industries, automakers can become victims of collateral damage.
    From the outside, the auto business looks simple – design, engineer, build, market, and distribute appealing cars and trucks. But it is so large, so complex, and so essential to so many people’s lives that it is buffeted by a variety of forces that it often cannot control. Here are six outside forces that could put the brakes on the auto industry recovery.
    Falling gasoline prices
    Paying less at the pump should be an unalloyed blessing for nearly everyone. After all, cheaper gas represents a price cut that leaves money in the pockets of overstretched consumers and gives them an opportunity to spend it somewhere else.
    But falling gas prices also create industry havoc, both in today’s sales and tomorrow’s planning. Reason: it demolishes the appeal of alternative fuel vehicles and makes it more difficult for automakers to meet federal mileage requirements. Fuel-gulping trucks and SUVs are surging this year while hybrids, plug-ins and all-electric cars are in slump. For instance, sales of Toyota’s pioneering Prius are off 11% to 165,490 units for 2014’s first nine months, while the Chevy Volt, called “game–changing” and “revolutionary” when it first came out, is down 13% to a mere 14,500 cars for the year.
    Silicon Valley
    Two of the biggest automotive innovations in recent years have come not from Detroit—or Stuttgart or Toyota City, for that matter—but Silicon Valley. The battery-powered Tesla Model S  TSLA -1.24%  has become a must-have automotive accessory for high rollers—and its manufacturer a darling of investors—while Google  GOOG -1.06%  has established itself as the leader in developing self-driving cars. Nor are these merely one-shot efforts. Tesla is getting ready to start production of its second volume product, the Model X crossover. For its part, Google is busy signing up automakers and suppliers for its Open Auto Alliance effort to make the Android operating system the dominant force in car-based communication. Meanwhile, Detroit intiatives like General Motors’  GM -1.66%  OnStar and Ford’s  F -4.31% Microsoft-based  MSFT 1.99%  InTouch seem to be faltering.
    Urbanism
    A lot of ink has been spilled decrying the lack of interest by the millennial generation in driving or owning cars when the reason may be a simple case of economics. More durable and likely more devastating is the movement away from the car-friendly suburbs to more congested cities. By 2050 approximately 90% of the North America’s population is expected to live in urban areas, a shift that will drive wrenching change in the auto industry. According to Deloitte’s 2014 Global Automotive Consumer Study “Overcrowding, the realities of traffic, and new capabilities enabled by technology are all leading to more collaborative approaches to transport: for example, the ‘sharing economy,’ driverless cars, and improved public transportation.” When consumers are asked why they are giving up car ownership, the report finds, lifestyle is the primary reason. More people prefer living in a neighborhood that has everything within walking distance, are willing to relocate closer to work to reduce their commute, and are willing to use car-sharing, car-pooling, or similar services if they are readily available and convenient.
    China
    China has quickly become the 800-pound gorilla of the auto industry, and by its sheer size is influencing decisions made far beyond its borders. GM counts China as its biggest market, and figures it sold 3.16 million cars there last year, about one-third of its worldwide total. Ford Motor Co., which got a late start in China, saw its deliveries there surge 49% to 935,813 units. But the good times are in danger of being squeezed out by congestion and pollution. Pressure is building on the Chinese government to restrict sales and licensing as pollution chokes residents and traffic congestion turns roads into parking lots. “As more and more big cities put in place restriction measures, automakers will have to count on smaller cities and inland areas for growth,” Harry Chen, a Shenzhen-based analyst with Guotai Junan Securities Co. told Bloomberg foreign automakers will have to work harder for their China sales.
    Lawsuits
    When safety issues come to trial, nobody looks good. Automakers appear to be covering up, suppliers look slipshod, government regulators seem asleep, and juries appear to be either vindictive or naïve. Every car on the road represents a potential lawsuit. Toyota recently was ordered to pay $12.5 million in a California accident involving a drunken driver, a gravely injured passenger wearing a lap-only seatbelt, and a 1996-model SUV. Even though a shoulder strap was not required by law, the Supreme Court has ruled that automakers can be sued for not providing them.
    “Toyota and other manufacturers have known for decades that lap-only belts are needlessly dangerous, [yet] they have failed to recall or warn about those existing older vehicles still on the road,” said a plaintiff’s lawyer quoted in Automotive News. “These older vehicles are ticking time-bombs.” Still to come: more lawsuits surrounding the 29 fatalities attributed to GM’s faulty ignition switches, not to mention the recall of 7.6 million cars by several makers for defective airbags. Of course this is only the first step of a long process,”said Karl Brauer of Kelley Blue Book. “With so many vehicles being recalled, it will take years to address the danger.”
    Distribution
    Long protected by state franchise laws that block competitors, the business practices of new car retailers are coming under attack from three directions:
    • Tesla has been challenging state laws that bar manufacturers from selling direct to customers, though so far with limited success. In the latest skirmish, Michigan reaffirmed a law that effectively keeps the car maker out of the dealership business, becoming the fifth state to do so. Tesla vows to keep fighting.
    • The consolidation of dealerships into super-groups accelerated when Warren Buffett got into the business by buying the fifth largest chain. As the groups become more powerful, they have the potential to upset the traditional balance between factory and dealer.
    • Consumers are replacing Saturday tire-kicking with keystrokes from home. Armed with more data, they are making smarter decisions and detouring around traditional haggling over price and options. Still in the future: the day when customers can order cars on-line and manufacturers build them to order.

    Airbnb's valuation set to reach $13 billion after employee stock sale

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  • Airbnb is prepping an employee stock sale that would end up boosting the startup’s valuation to $13 billion, up from $10 billion earlier this year.
    That would make the online rental site the second most valuable private company in Silicon Valley, with only private-car service Uber worth more, reported the Financial Times.
    Airbnb CEO Brian Chesky, who topped Fortune’s 40 under 40 list this year (coincidentally tied for the top spot with Uber CEO Travis Kalanick), has been expanding the site amid unclear regulations worldwide. New York City recently said it would crack down on the service, which is in murky legal territory locally. At the same time, San Francisco put legislation forward that would legitimize and regulate Airbnb and other non-traditional hotel options.
    The company is letting employees cash in on some of their stock and talking to existing investors about potentially buying back large potions of shares. Airbnb may offer investors tens of millions of dollars worth of buybacks. Those funds would then go to employees, not towards new capital for the company, sources told the FT.
    Airbnb closed a $475 million funding round in July which valued the company at $10 billion at the time. Sequoia Capital and Andreessen Horowitz, a longtime investor in the company, both participated in the round. Uber, the top valued private startup in the Valley, became worth $17 billion this summer after a $1.2 billion funding round.

    Video: Conan O'Brien on Christian Bale as Steve Jobs

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  • Last week it was just a rumor. This week it’s a Hollywood fact, confirmed by the movie’s famous screenwriter — Aaron Sorkin (The West Wing, The Social Network).
    But even before the cat was fully out of the bag, Team Conan was having its fun with the idea of Welsh-born method actor and three-time Batmen Christian Bale (The Fighter, The Hustle) as the big-screen version of Walter Isaacson’s Steve Jobs.
    Below: The clip, via YouTube.
    Thanks John Paczkowski for the tip.

    Chiquita proves to be a slippery takeover target

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  • Shareholders of banana producer Chiquita Brands International have voted down a tax inversion deal with Irish-based Fyffes, an offer that has now been terminated and clears the way for a rival all-cash offer to succeed.
    Chiquita  CQB 3.42%  on Friday said it now plans to enter into talks with juice maker Cutrale Group and Brazilian investment firm Safra Group, which on Thursdaysweetened its bid to by Chiquita for $14.50 a share, a transaction valued at about $681 million and a 14% premium to Chiquita’s closing price on Wednesday.
    “Given today’s results, we have determined to terminate the agreement with Fyffes and to engage with Cutrale / Safra regarding its revised offer,” Chiquita President and Chief Executive Edward Lonergan said in a prepared statement.
    Chiquita found itself as a potential takeover target at a time when the company was generating stronger sales from bananas, while sales from the salads and healthy snacks that it sells have been less stellar. Comparable banana sales totaled $1.04 billion for the first six months of 2014, up 1.5% from a year ago, while salads and healthy snacks sales slid 4.3% to $479 million.
    The investors vote sent a signal to Chiquita’s board that shareholders didn’t want a stock-for-stock tie-up with Fyffes, a deal that had a lower initial value than the Cutrale-Safra offer but one that could have resulted in a higher valuation over time if the Fyffes-Chiquita combination had performed well. Chiquita’s board had favored the Fyffes deal, saying the competing offer wouldn’t adequately compensate shareholders.
    Investors also ignored the advice of some observers, as shareholder advisory firm ISS earlier this month changed its recommendation and advised its clients to vote for the Fyffes bid. ISS said the actions of the Chiquita board–which included getting better offers from both sides ahead of a shareholder vote–indicated that there was not any credible evidence that the board wasn’t acting in shareholders’ best interests.