Filed under: Deals, Google (GOOG), Yahoo! (YHOO), Time Warner (TWX), News Corp’B’ (NWS)

Joining the contest to see who will own the No. 2 search engine, Time Warner’s (NYE: TWX) AOL is reportedly in talks with Yahoo! (NASDAQ: YHOO). News Corp. (NYSE: NWS) is already in intense talks to see if it can arrange a deal that will block Microsoft’s (NASDAQ: MSFT) bid for Yahoo!

According to The Telegraph, “AOL’s determination to present itself as the most attractive of the white knights available to Yahoo! follows the formal rejection last week of Microsoft’s $31-a-share offer for Yahoo!”

With a market cap of $60 billion, Time Warner couldn’t buy Yahoo! outright because the portal company already has an offer for $44 billion from Microsoft. But, like News Corp., it could offer to put AOL into Yahoo! in exchange for a piece of the firm. With AOL currently valued at about $20 billion, this stake might be as big as 33%.

In a consolidation, AOL and Yahoo! could cut large numbers of staff and Yahoo!’s search could be the de facto product for all of AOL, greatly expanding its reach. Google (NASDAQ: GOOG) has this franchise now, but might give up its arrangement to stop Microsoft and Yahoo! from joining forces.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Press releases, Starbucks (SBUX), Media World

Independent record label Concord Music Group and Australian-based film company Village Roadshow Pictures Group, part of the media company Village Roadshow Ltd. (OTC: VRLDY), have merged to form Village Roadshow Entertainment Group, reported Billboard early last week. Village Roadshow will own nearly 40% of the new company, while the other majority split between two private equity firms based in New York and Los Angeles. According to Billboard, the two companies “had common owners in that Norman Lear and Hal Gaba’s Act III Communications and Tailwind owned Concord; and Act III and Clarity — through an entity called Crescent Entertainment — owned 50% of Village Roadshow Pictures group.”

The deal is nearly six months old, after being announced on September 3, 2007, and the Act III group paid close to $48 million to command more than 60% of the new company. Both companies will continue to operate as “separate entities, but some backroom functions like human resources and information technology likely will be combined.” Additionally, the report indicated that some cross-promotion opportunities are to be expected via the merger of film and music companies.

While this deal and the merger seem logical for the owners and participants involved, the only concern this consumer has about a private equity firm owning a majority stake in a music company is the problems that have plagued London-based EMI since Terra Firma bought out the music giant last summer. Clearly, Concord has enjoyed a positive relationship with its private equity owners for longer and with much more success. Furthermore, the label has gained significant signings in the last year while creating a new label with Starbucks Corp. (NASDAQ: SBUX) to release Paul McCartney’s first album after leaving EMI last spring (before the Terra Firma buyout).

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Filed under: Competitive strategy, Marketing and advertising, Books

Since the announcement on Oprah’s television program that Suze Orman’s financial advice book Money & Women would be available for free as an e-book from Oprah.com, more than a million copies in English have been downloaded, as well as an additional 19,000 in Spanish, according to a statement released Saturday. This puts it the same league as such other free download sensations as the 9-11 Commission Report and Stephen King’s “Riding the Bullet.”

Yet, the offer hasn’t kept people from buying the version of Money & Women published by a division of Random House last year. The book was ranked number 6 on Amazon on Saturday, behind Oprah Book Club selection A New Earth and just ahead of Barack Obama’s The Audacity of Hope. The 9-11 Commission Report remained a bestseller for months despite its availability for free online.

The big publishers remain skeptical about providing content for free online. While some see it as a valuable marketing tool, others suspect that it harms sales of traditional books. But the tide may be turning, albeit in baby steps. HarperCollins has announced plans to make available free electronic versions of some of its books, or portions thereof, the New York Times reported last week. They will not be downloadable, however.

Providing some free content is “like taking the shrink wrap off a book,” said a spokesperson for HarperCollins, which will allow consumers to sample the content. “I didn’t grow up buying every book I read,” added fantasy novelist Neil Gaiman, author of some of the free content. “I read books at libraries, I read books at friend’s houses, I read books that I found on people’s window sills.”

Suze Orman suggests that sales are a secondary concern for her in the Oprah offer. “This was not about getting people to buy the book, but getting them to read it, and that was the intention behind this offer.”

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Filed under: Private equity, Lehman Br Holdings (LEH), Blackstone Group L.P (BX)

When talking about Blackstone (NYSE: BX), people usually refer to Stephen Schwarzman. However, there is actually a cofounder of the firm; that is, Peter Peterson.

Although, he’s not a pure finance junkie. Some of his prior gigs include: Chairman of the Federal Reserve Bank of New York, the CEO of Lehman Brothers (NYSE: LEH), the CEO of Bell and Howell, and even the Secretary of Commerce (under President Richard Nixon).

And, of course, he’s a very wealthy man. He cashed out $1.8 billion from the Blackstone IPO.

OK, so what’s next? Well, he has formed the Peter G. Peterson Foundation. Basically, he wants to create a platform to deal with major issues, such as Social Security, budget deficits, education, energy, the environment, and the spread of nuclear weapons.

If anything, the foundation won’t lack for resources. After all, Peterson has pumped a cool $1 billion into it. Apparently, he’s prepared to pump more money into it.

Continue reading Blackstone cofounder wants to save the world

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Filed under: Deals, Google (GOOG), Yahoo! (YHOO), Time Warner (TWX), News Corp’B’ (NWS)

Joining the contest to see who will own the No. 2 search engine, Time Warner’s (NYE: TWX) AOL is reportedly in talks with Yahoo! (NASDAQ:YHOO). News Corp (NYSE: NWS) is already in intense talks to see if it can arrange a deal that will block Microsoft’s bid for Yahoo.

According to The Telegraph, “AOL’s determination to present itself as the most attractive of the white knights available to Yahoo! follows the formal rejection last week of Microsoft’s $31-a-share offer for Yahoo!.”

With a market cap of $60 billion, Time Warner couldn’t buy Yahoo! outright because the portal company already has an offer for $44 billion from Microsoft. But, like News Corp, it could offer to put AOL into Yahoo! in exchange for a piece of the firm. With AOL currently valued at about $20 billion, this stake might be as big as 33%.

In a consolidation, AOL and Yahoo! could cut large numbers of staff and Yahoo!’s search could be the de facto product for all of AOL , greatly expanding its reach. Google (NASDAQ: GOOG) has this franchise now, but might give up its arrangement to stop Microsoft and Yahoo from joining forces.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Law, Clear Channel Commun (CCU)

Private equity firms have begun to walk away from transactions to take a public companies private. In tight credit markets and facing a slowing economy, deals which looked good in early 2007 don’t look so hot now. In most cases the public company boards try to keep deals from breaking apart by lowering their asking price. Sometimes they take a break-up fee and allow the buyer out of its obligations.

Clear Channel Communications Inc. (NYSE: CCU) won’t take any of those “let the fish of the hook” routes. It has a deal with Providence Equity to buy its TV stations for $1.2 billion. The transaction was announced ten months ago and has not closed yet.

According to The Wall Street Journal (subscription required), “Clear Channel is suing Providence for ’specific performance,’ a legal term which typically addresses the ability of the seller to force the buyer to complete a deal agreement.”

Market observers and the press say that many banks and buy-out firms are being advised by their attorneys to turn their backs on transactions instead of getting burned by deals that have begun to look to rich between signing a buy-out agreement and actually closing. Clear Channel is willing to gamble that it can win its case for closing a deal in court.

Douglas A. McIntyre is an editor at 247wallst.com.

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As many of you are well aware of, the California budget is facing a drastic short fall. This isn’t anything new since we as a state always seem to have very little problem spending any money that comes into the revenue base. The problem that occurs is one that involves lack of planning. During the good times, we do not save any excess and as all economic cycles end, we enter the famine stage after feasting and gorging at the buffet of revenues. The past decade has hidden a lot of wasteful spending spurred by fiction based income. What we will be facing as a state is an enormous reduction in personal tax revenues because even the 2007 tax year will not completely reflect the entire picture. The credit crunch hit us in August and many counties in California did not hit peak prices until August and even September. What this means is that we will once again not see the entire collapse that occurred in the forth quarter since the first 8 months of the year were still seeing credit bubble spending. First, it will help to take a look at revenues:

You can already see the problem with the above projections. First, the two largest components which are personal income and sales tax, both vary greatly depending on the economic climate. We already know that unemployment particularly in California is jumping and real estate is declining at an unbelievable pace. We saw a 16 percent drop, a $92,000 nominal drop for Los Angeles County, from the $550,000 peak we reached in August of 2007. This drop is unprecedented both in speed and amount. Orange County is now off by $120,000 from its peak reached in 2007. With rising unemployment, it will be hard for people to pay income tax. And given that many of the high paying jobs in real estate and finance are now coming to a screeching halt, that means that these areas will be contracting for the foreseeable future. Also, we know that the wealth effect will take a major chunk out of the sales tax revenues because people that feel poorer because of real reasons (loss of job) or perceived reasons (less value in home) will both compound to drive revenues even lower.

Last week in Sacramento, politicians once again proposed to borrow and push the problems further into the future. It is a short term fix before the late spring budget comes out but doesn’t come close to addressing the true problems we will face. So where is all the above revenue going?

With the above, we have an $11.25 billion budget short fall. But really look at some of those expenditures. If we think much of our problems are being caused by rising unemployment, our labor and workforce development funding allocation is pathetic. Even with higher education, you know the place we need to train our future engineers and maintain our competitiveness in the globe, that amount pales to the first top two expenditures. Some areas such as general government, legislative, judicial, and executive spend about $14.1 billion. Isn’t that the size of our current short fall? Either way, you would think that a state pulling in $129 billion a year would have enough to stay afloat but apparently this isn’t the case.

If we look back at our revenue sources, the first three top money generating areas are extremely sensitive to market changes. So the upcoming recession is going to carve into these areas significantly and we can all assume that these projections are Pollyanna given that the bursting California real estate bubble only arrived in 2007. All we need to do is look at Florida and double the impact:

I love these charts that never show negative growth for more than one year. What is the reason for the all of sudden jump to the green in 2008-09? If we are to look at previous recessions, once the recession is official, say the first quarter of 2008, the effects of even a mild contraction will last 2 to 4 years; 2 years from the last recession in 2001 to 4 years to the one in the early 80s. This recession has the makings of something even larger than the 1980s recession so why are we to expect that we will be out of the woods this year? Again, these projections keep looking at massaged data that won’t materialize and after tax season, local municipalities will quickly realize that they are short on funds.  With so many Real Homes of Genius in the state, I’m sure there won’t be many more foreclosures.

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Related Posts:
■The Foreclosure Story Number 2: $136,000 a Year Income to Foreclosure.
■California Budget Woes: Balance the Budget by Gambling and Letting Inmates Out!
■California Examined: The Deep Budget Impact of the Mortgage Crises.
■Special Edition: Real State of Genius: Today we Salute you California with Our Real Home of Genius Award! 10 Homes throughout the Golden Bubble State.
■Real Homes of Genius: January Recap and Compton Prices Rising. At Least in Theory.

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