(Bloomberg) -- Executives at Citigroup Inc.’s Primerica Financial Services unit have approached private-equity firms including J.C. Flowers & Co., Blackstone Group LP, and TPG Inc. to gauge their interest in buying the division’s 100,000- person sales arm, said four people familiar with the matter.
The executives started the talks after Citigroup failed to find a buyer for the entire life insurance company in the past year, said the people, declining to be identified because the talks aren’t public. Citigroup, the recipient of a $52 billion government bailout, hasn’t endorsed the plan, the people said.
Citigroup canceled Primerica’s annual sales convention and a trip to the Bahamas for top agents after the government rescue last year. Primerica is part of Citi Holdings, created by Citigroup Chief Executive Officer Vikram Pandit to house “non- core” units that he wants to eventually sell or wind down as he undoes the legacy of former CEO Sanford “Sandy” Weill.
Citigroup spokesman Stephen Cohen declined to comment. Blackstone and TPG declined to comment through spokespeople, and J. Christopher Flowers, founder of the private equity firm that bears his name, didn’t return a call seeking comment. Primerica’s co-CEOs, John Addison and Rick Williams, declined to comment through spokesman Mark Supic.
Addison told employees in January that he planned to remove any reference to the parent company on Duluth, Georgia-based Primerica’s business cards, brochures, and marketing materials.
New Insurer
In one plan under discussion, the marketing arm would split from Citigroup and start selling policies backed by a new insurer, while Citigroup would retain assets and liabilities from Primerica policies that have already been sold, two of the people said. A transaction wouldn’t yield Citigroup much cash because there are few tangible assets associated with the marketing arm, they said.
Founded in 1977 by Arthur L. Williams, Primerica sells life insurance and investment products such as mutual funds through a mostly part-time sales force of independent agents. Weill’s Commercial Credit Corp. took control of the firm in 1988, using it as a platform to assemble the financial-services titan eventually known as Citigroup.
The division had $2.2 billion of sales last year and net income of $355 million, according to a fact sheet provided by the company.
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Tuesday, May 12, 2009
Fed Views Jump in Treasury Yields as Sign of Better Outlook
(Bloomberg) -- The Federal Reserve considers the recent jump in Treasury yields more as a reflection of a better economic outlook than a signal it needs to step up purchases of U.S. government debt, according to central bank officials who declined to be identified.
It’s too early to judge the effectiveness of the Fed’s $300 billion plan to buy Treasuries even after 10-year yields climbed 0.65 percentage point since the initiative began in March, the officials said. They added that the goal is to stimulate private lending, rather than to target government- bond rates.
The Fed officials’ stance contradicts the view of firms including BlackRock Inc. that have predicted the rise in yields will prompt the central bank to announce an increase in the size of the program as soon as next month.
“It would be very different if the economy still appeared to be in freefall and yields were backing up, but it’s not,” said John Ryding, founder of RDQ Economics LLC in New York and a former Fed researcher. Increasing Treasury purchases would “fight against what is in my opinion a recovery signal, or a signal that the recession is drawing to a close.”
Chairman Ben S. Bernanke said May 11 that the danger of deflation, or prolonged declines in consumer prices, is “receding” and earlier this month cited evidence the economy’s contraction is easing. The Treasuries market, along with stocks and some commodities, have reflected those shifts.
Inflation Expectations
Ten-year note yields closed at 3.18 percent late yesterday, up from as low as 2.46 percent after the March 18 announcement of the plan to buy long-term government debt. The gap in yields between the notes and 10-year Treasury Inflation Protected Securities, a gauge of the inflation rate expected by investors, hit a seven-month high of 1.64 percentage points last week.
The Standard & Poor’s 500 Stock Index closed at 908.35 yesterday in New York, up 21 percent from two months before. Crude-oil futures reached $60.08 yesterday, the highest level since November.
Fed policy makers committed to buy as much as $300 billion of Treasuries over a six-month period in their March 18 Open Market Committee statement. The aim was “to help improve conditions in private credit markets,” the FOMC said.
“The statement is pretty clear,” Richmond Fed President Jeffrey Lacker, who was the first FOMC member to vote for buying Treasuries this year, told reporters May 8. “It doesn’t say anything about a U.S. Treasury yield” as a target, he said after a Washington speech. “I would urge people to take it at face value.”
Fed’s Campaign
The Fed has bought $101.7 billion under the initiative so far, part of its campaign to cut borrowing costs by purchasing assets with the benchmark interest rate near zero. Policy makers in March also decided to boost purchases of mortgage securities this year to $1.25 trillion from $500 billion and buy $200 billion, double the previous amount, of federal agency debt.
Stuart Spodek, BlackRock’s co-head of U.S. bonds in New York, said in an interview last week the Fed “needs to consider increasing its purchases of Treasuries” to “stabilize” long-term yields. He told Bloomberg Television May 11 officials may announce an increase as soon as the June 23-24 meeting. Spokeswoman Melissa Garville declined to comment further.
Another fund manager, James Platz of Mountain View, California-based American Century Investments, expects the Fed to announce further purchases “at some point.”
Read more here
It’s too early to judge the effectiveness of the Fed’s $300 billion plan to buy Treasuries even after 10-year yields climbed 0.65 percentage point since the initiative began in March, the officials said. They added that the goal is to stimulate private lending, rather than to target government- bond rates.
The Fed officials’ stance contradicts the view of firms including BlackRock Inc. that have predicted the rise in yields will prompt the central bank to announce an increase in the size of the program as soon as next month.
“It would be very different if the economy still appeared to be in freefall and yields were backing up, but it’s not,” said John Ryding, founder of RDQ Economics LLC in New York and a former Fed researcher. Increasing Treasury purchases would “fight against what is in my opinion a recovery signal, or a signal that the recession is drawing to a close.”
Chairman Ben S. Bernanke said May 11 that the danger of deflation, or prolonged declines in consumer prices, is “receding” and earlier this month cited evidence the economy’s contraction is easing. The Treasuries market, along with stocks and some commodities, have reflected those shifts.
Inflation Expectations
Ten-year note yields closed at 3.18 percent late yesterday, up from as low as 2.46 percent after the March 18 announcement of the plan to buy long-term government debt. The gap in yields between the notes and 10-year Treasury Inflation Protected Securities, a gauge of the inflation rate expected by investors, hit a seven-month high of 1.64 percentage points last week.
The Standard & Poor’s 500 Stock Index closed at 908.35 yesterday in New York, up 21 percent from two months before. Crude-oil futures reached $60.08 yesterday, the highest level since November.
Fed policy makers committed to buy as much as $300 billion of Treasuries over a six-month period in their March 18 Open Market Committee statement. The aim was “to help improve conditions in private credit markets,” the FOMC said.
“The statement is pretty clear,” Richmond Fed President Jeffrey Lacker, who was the first FOMC member to vote for buying Treasuries this year, told reporters May 8. “It doesn’t say anything about a U.S. Treasury yield” as a target, he said after a Washington speech. “I would urge people to take it at face value.”
Fed’s Campaign
The Fed has bought $101.7 billion under the initiative so far, part of its campaign to cut borrowing costs by purchasing assets with the benchmark interest rate near zero. Policy makers in March also decided to boost purchases of mortgage securities this year to $1.25 trillion from $500 billion and buy $200 billion, double the previous amount, of federal agency debt.
Stuart Spodek, BlackRock’s co-head of U.S. bonds in New York, said in an interview last week the Fed “needs to consider increasing its purchases of Treasuries” to “stabilize” long-term yields. He told Bloomberg Television May 11 officials may announce an increase as soon as the June 23-24 meeting. Spokeswoman Melissa Garville declined to comment further.
Another fund manager, James Platz of Mountain View, California-based American Century Investments, expects the Fed to announce further purchases “at some point.”
Read more here
China’s Factory Output Grows Less-Than-Estimated 7.3%
(Bloomberg) -- China’s industrial production grew less than economists estimated in April as electricity output fell and exports tumbled. Retail sales climbed.
Output rose 7.3 percent from a year earlier, the statistics bureau said today, after gaining 8.3 percent in March. That was less than the 8.6 percent median estimate of 20 economists surveyed by Bloomberg News. Retail sales grew 14.8 percent from a year earlier.
The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries. Urban fixed-asset investment grew a more-than-expected 30.5 percent in the first four months of this year, while an export slump deepened in April, reports showed yesterday.
“The recovery is still quite fragile -- exports are still very weak,” said Isaac Meng,’’ a senior economist at BNP Paribas SA in Beijing.
Retail sales grew more than the economists’ median estimate of 14.5 percent, after climbing 14.7 percent in March.
The Shanghai Composite Index rose 0.7 percent as of 10:53 a.m. local time. The yuan traded at 6.8224 against the dollar, from 6.8226 before the data was released.
Read more here
Output rose 7.3 percent from a year earlier, the statistics bureau said today, after gaining 8.3 percent in March. That was less than the 8.6 percent median estimate of 20 economists surveyed by Bloomberg News. Retail sales grew 14.8 percent from a year earlier.
The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries. Urban fixed-asset investment grew a more-than-expected 30.5 percent in the first four months of this year, while an export slump deepened in April, reports showed yesterday.
“The recovery is still quite fragile -- exports are still very weak,” said Isaac Meng,’’ a senior economist at BNP Paribas SA in Beijing.
Retail sales grew more than the economists’ median estimate of 14.5 percent, after climbing 14.7 percent in March.
The Shanghai Composite Index rose 0.7 percent as of 10:53 a.m. local time. The yuan traded at 6.8224 against the dollar, from 6.8226 before the data was released.
Read more here
Monday, May 11, 2009
Kohn had Board backing for NY Fed waiver: official
(Reuters) - A waiver granted by Federal Reserve Vice Chairman Donald Kohn that allowed the chairman of the New York Fed's board of governors to stay in his job had the full backing of the Fed's Board of governors, including Chairman Ben Bernanke, a Fed official said on Monday.
The controversial waiver allowed Stephen Friedman to stay in his job as chairman of the board of governors of the New York Federal Reserve despite owning shares in Goldman Sachs (GS.N) ,which the Fed began regulating in September.
Friedman, a retired chairman of Goldman Sachs, resigned last week after it was reported in The Wall Street Journal that he had bought more Goldman shares.
The Wall Street Journal called in an editorial on Monday for Kohn's resignation, and said he had shown a tin political ear by allowing Friedman to stay at the New York Fed.
Goldman converted into a bank holding company last September in order to secure access to Federal Reserve lending facilities.
The U.S. central bank is comprised of a seven-member Board of Governors in Washington, and 12 regional Fed banks.
The Board of Governors selects some of the directors on the boards of each regional Fed, including Friedman, and these directors are banned from owning shares in Fed-regulated banks.
The Fed official said that it was unfair to single out Kohn, who had fully consulted with his board colleagues, including Bernanke, before the waiver was granted on January 21. It fell to Kohn because he heads up the committee on Federal Reserve bank affairs.
In addition, the Board of Governors in January voted to confirm Friedman as New York Fed chairman, the official said.
Read more here
The controversial waiver allowed Stephen Friedman to stay in his job as chairman of the board of governors of the New York Federal Reserve despite owning shares in Goldman Sachs (GS.N) ,which the Fed began regulating in September.
Friedman, a retired chairman of Goldman Sachs, resigned last week after it was reported in The Wall Street Journal that he had bought more Goldman shares.
The Wall Street Journal called in an editorial on Monday for Kohn's resignation, and said he had shown a tin political ear by allowing Friedman to stay at the New York Fed.
Goldman converted into a bank holding company last September in order to secure access to Federal Reserve lending facilities.
The U.S. central bank is comprised of a seven-member Board of Governors in Washington, and 12 regional Fed banks.
The Board of Governors selects some of the directors on the boards of each regional Fed, including Friedman, and these directors are banned from owning shares in Fed-regulated banks.
The Fed official said that it was unfair to single out Kohn, who had fully consulted with his board colleagues, including Bernanke, before the waiver was granted on January 21. It fell to Kohn because he heads up the committee on Federal Reserve bank affairs.
In addition, the Board of Governors in January voted to confirm Friedman as New York Fed chairman, the official said.
Read more here
Ackman says Target proxy not about him
(Reuters) - Hedge fund manager William Ackman introduced shareholders on Monday to his five nominees for the Target Corp (TGT.N) board, promising their expertise could make the retailer a better company.
"There is a lot to like, but that doesn't mean it can't be optimized," Ackman said at a town hall-style meeting in mid-town Manhattan.
While Target is well known for selling designer items, it is certainly not Gucci and the retailer, which sells the fashionable merchandise at discount prices, should be able to perform well even in difficult economic conditions, Ackman said.
For nearly two hours, the prominent investor, whose New York-based Pershing Square Capital Management owns a 7.8 percent stake in Target, downplayed fears he is only seeking a quick profit by launching this proxy contest and, instead, he played up the long resumes of his slate members.
"It's not about Bill Ackman. It's about how our directors compare with the existing nominees," Ackman said.
Target is Pershing Square's biggest single investment and Ackman lost a lot of money last year thanks to the retailer's poor performance.
Target's business faltered as shoppers, pressured by the recession, pulled back on buying trendy clothes and handbags and stuck to buying just the basics, such as food or medicine -- a trend that favored rival Wal-Mart Stores Inc (WMT.N). It is now trying to add more food to its merchandise assortment to lure shoppers into its stores more frequently.
But this year, Ackman is doing better, especially after the stock price jumped 45 percent since he announced his plan to replace four Target directors with five newcomers.
"We are the underdogs here," Ackman told about 150 people in the room and another 400 who registered to listen by webcast, according to Target's proxy advisers.
TOO CLOSE TO CALL
The outcome of this increasingly bitter proxy battle is too close to call since large shareholders such as State Street Global Advisors have not yet decided how to cast their votes before the May 28 annual meeting.
Ackman shared the stage with former Starbucks CEO Jim Donald; Richard Vague, the former CEO of Visa credit card issuer First USA; Richard Ashner, chairman and CEO of Winthrop Realty Trust; and Ronald Gilson, a law professor and corporate governance expert.
They sat in cherry red chairs -- mimicking Target's red bull's eye logo -- and answered questions about what they would do to help management perform better.
But Target has remained steadfast in defending its board members who are up for reelection.
"We believe that the four incumbent directors up for election are better qualified to serve the interests of shareholders than Pershing Square's nominees," a Target spokesman said.
Read more here
"There is a lot to like, but that doesn't mean it can't be optimized," Ackman said at a town hall-style meeting in mid-town Manhattan.
While Target is well known for selling designer items, it is certainly not Gucci and the retailer, which sells the fashionable merchandise at discount prices, should be able to perform well even in difficult economic conditions, Ackman said.
For nearly two hours, the prominent investor, whose New York-based Pershing Square Capital Management owns a 7.8 percent stake in Target, downplayed fears he is only seeking a quick profit by launching this proxy contest and, instead, he played up the long resumes of his slate members.
"It's not about Bill Ackman. It's about how our directors compare with the existing nominees," Ackman said.
Target is Pershing Square's biggest single investment and Ackman lost a lot of money last year thanks to the retailer's poor performance.
Target's business faltered as shoppers, pressured by the recession, pulled back on buying trendy clothes and handbags and stuck to buying just the basics, such as food or medicine -- a trend that favored rival Wal-Mart Stores Inc (WMT.N). It is now trying to add more food to its merchandise assortment to lure shoppers into its stores more frequently.
But this year, Ackman is doing better, especially after the stock price jumped 45 percent since he announced his plan to replace four Target directors with five newcomers.
"We are the underdogs here," Ackman told about 150 people in the room and another 400 who registered to listen by webcast, according to Target's proxy advisers.
TOO CLOSE TO CALL
The outcome of this increasingly bitter proxy battle is too close to call since large shareholders such as State Street Global Advisors have not yet decided how to cast their votes before the May 28 annual meeting.
Ackman shared the stage with former Starbucks CEO Jim Donald; Richard Vague, the former CEO of Visa credit card issuer First USA; Richard Ashner, chairman and CEO of Winthrop Realty Trust; and Ronald Gilson, a law professor and corporate governance expert.
They sat in cherry red chairs -- mimicking Target's red bull's eye logo -- and answered questions about what they would do to help management perform better.
But Target has remained steadfast in defending its board members who are up for reelection.
"We believe that the four incumbent directors up for election are better qualified to serve the interests of shareholders than Pershing Square's nominees," a Target spokesman said.
Read more here
GM says open to moving HQ from Detroit
(Reuters) - General Motors Corp is open to considering moving its headquarters from Detroit, selling U.S. plants and renegotiating its restructuring plan with its major union as it heads toward probable bankruptcy, the automaker's chief executive said on Monday.
CEO Fritz Henderson said it was more likely that GM was headed for bankruptcy by June 1 -- the U.S. government-imposed deadline for the automaker to restructure or face bankruptcy.
"It's more probable that we would need to accomplish our goals in a bankruptcy," Henderson said on a conference call with reporters. "There's still a chance for it to be done outside a court proceeding."
A move by GM to leave Detroit would represent another blow for the economy of a region already reeling from the bankruptcy of Chrysler LLC and the sharp downturn in auto manufacturing.
GM purchased its glass-towered headquarters building, known as Detroit's Renaissance Center, last year for $625 million. The 100-year-old automaker has been based there since 1996.
"As we look at the structure, look at the business, we're looking at everything, particularly as we slim down," Henderson said. "At this point, I don't have anything to report. We don't have any such plans, but if we did it would be motivated by business rationale, which would be cost-efficiency and speed.
GM needs to reach deals that would slash debt owed to bondholders and the United Auto Workers union and to win concessions from the union that would cut operating costs for its remaining U.S. plants by the end of this month under terms set by the Obama administration's autos task force.
Read more here
CEO Fritz Henderson said it was more likely that GM was headed for bankruptcy by June 1 -- the U.S. government-imposed deadline for the automaker to restructure or face bankruptcy.
"It's more probable that we would need to accomplish our goals in a bankruptcy," Henderson said on a conference call with reporters. "There's still a chance for it to be done outside a court proceeding."
A move by GM to leave Detroit would represent another blow for the economy of a region already reeling from the bankruptcy of Chrysler LLC and the sharp downturn in auto manufacturing.
GM purchased its glass-towered headquarters building, known as Detroit's Renaissance Center, last year for $625 million. The 100-year-old automaker has been based there since 1996.
"As we look at the structure, look at the business, we're looking at everything, particularly as we slim down," Henderson said. "At this point, I don't have anything to report. We don't have any such plans, but if we did it would be motivated by business rationale, which would be cost-efficiency and speed.
GM needs to reach deals that would slash debt owed to bondholders and the United Auto Workers union and to win concessions from the union that would cut operating costs for its remaining U.S. plants by the end of this month under terms set by the Obama administration's autos task force.
Read more here
Geffen offered to buy NY Times stake: source
(Reuters) - Media mogul David Geffen tried to buy a stake in the New York Times Co from hedge fund Harbinger Capital Partners, but was rejected, a source with knowledge of the matter said on Monday.
Geffen offered to buy the stake at market price, but Harbinger fund manager Philip Falcone wanted him to pay a premium, according to the source.
The two sides are not currently in talks, said the source, who spoke on condition of anonymity.
Fortune magazine first reported the news on its website in an article that said Times board member Scott Galloway, who was nominated by Harbinger, approached Google Inc co-founder Larry Page to try to get the Internet company to try to buy the Times.
Galloway and New York Times spokeswoman Catherine Mathis declined to comment.
Geffen's overture comes at a pivotal moment in the history of the New York Times Co, its namesake newspaper and the family that has controlled the company for 113 years.
One of the most venerated names in world journalism, the Times has fallen on hard financial times in recent years because of falling advertising revenue at its newspapers and looming debt payments that have forced it to borrow money at high interest rates.
Speculation is bubbling among media watchers that the Ochs-Sulzberger family might sell the paper rather than watch their empire shrivel. The move by the billionaire ex-movie producer and pop music label owner Geffen only fuels speculation that the family could bend to an attractive offer.
It also prompts speculation over whether Harbinger might give up its attempt to force the Times to change its business to survive in the 21st century. Interest in the stake has grown as the investment fund reels from losses in its funds.
Harbinger owned 19.94 percent of the Times Co as of March 6. At Monday's closing price of $6.81, the stake would be valued at about $194 million, far less than the $500 million that Harbinger paid for it.
Times shares have fallen along with other newspaper stocks, hurt by the slump in advertising spending and by circulation declines as readers turn to the Internet for free news and information.
Harbinger funded the fight against the Times, but its leader was Web entrepreneur Galloway, who convinced Falcone to front the money. To avoid a proxy battle, the Times expanded its board to allow Galloway and an ally on board.
The Times has made efforts to streamline its business, but Galloway's plan has proved a wash for Harbinger so far.
Read more here
Geffen offered to buy the stake at market price, but Harbinger fund manager Philip Falcone wanted him to pay a premium, according to the source.
The two sides are not currently in talks, said the source, who spoke on condition of anonymity.
Fortune magazine first reported the news on its website in an article that said Times board member Scott Galloway, who was nominated by Harbinger, approached Google Inc co-founder Larry Page to try to get the Internet company to try to buy the Times.
Galloway and New York Times spokeswoman Catherine Mathis declined to comment.
Geffen's overture comes at a pivotal moment in the history of the New York Times Co, its namesake newspaper and the family that has controlled the company for 113 years.
One of the most venerated names in world journalism, the Times has fallen on hard financial times in recent years because of falling advertising revenue at its newspapers and looming debt payments that have forced it to borrow money at high interest rates.
Speculation is bubbling among media watchers that the Ochs-Sulzberger family might sell the paper rather than watch their empire shrivel. The move by the billionaire ex-movie producer and pop music label owner Geffen only fuels speculation that the family could bend to an attractive offer.
It also prompts speculation over whether Harbinger might give up its attempt to force the Times to change its business to survive in the 21st century. Interest in the stake has grown as the investment fund reels from losses in its funds.
Harbinger owned 19.94 percent of the Times Co as of March 6. At Monday's closing price of $6.81, the stake would be valued at about $194 million, far less than the $500 million that Harbinger paid for it.
Times shares have fallen along with other newspaper stocks, hurt by the slump in advertising spending and by circulation declines as readers turn to the Internet for free news and information.
Harbinger funded the fight against the Times, but its leader was Web entrepreneur Galloway, who convinced Falcone to front the money. To avoid a proxy battle, the Times expanded its board to allow Galloway and an ally on board.
The Times has made efforts to streamline its business, but Galloway's plan has proved a wash for Harbinger so far.
Read more here
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