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2 Consulting Firms Merge in $3.5 Billion Deal – DealBook Blog – NYTimes.com

Two management consulting firms, Towers Perrin Forster & Crosby and Watson Wyatt Worldwide, on Sunday announced an agreement to merge into a new publicly listed company called Towers Watson.

The deal, valued at about $3.5 billion, will help the companies extend their global reach, the companies said in a statement, according to Reuters.

Under the terms of the agreement, Watson Wyatt shareholders would receive 50 percent of Towers Watson shares on a fully diluted basis. Towers Perrin shareholders and some of its employees would be entitled to 50 percent of the new company’s shares on that basis, the companies said.

Watson Wyatt’s chief executive, John Haley, will be the new company’s chief, while Towers Perrin’s chief executive, Mark Mactas, will serve as its president, the statement said.

Annual revenue for Towers Watson is seen at more than $3 billion and the company said it expects about $80 million in pretax annual synergies.

“Full realization of synergies” will take three years and cost about $80 million, according to the statement.

Towers Watson will also have significant noncash expenses during the first two years after the transaction is completed, the companies said. The transaction is expected to add to diluted per-share earnings within three years following the consummation of the deal.

via 2 Consulting Firms Merge in $3.5 Billion Deal – DealBook Blog – NYTimes.com.

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Ken Lewis applies for the Treasury job?

Rough week for stock, good week for business

To my teammates:

Public debate on the subject of potentially nationalizing some banks continues to put great pressure on our stock. And yet, our company continues to be profitable. I see no reason why a company that is profitable, with capital and liquidity levels that are very strong, and that continues to lend actively, should be considered for nationalization. Speculation about nationalization is based on a lack of understanding of our bank’s financial position as well as a lack of appreciation for the adverse ramifications for our customers and the economy.

Bank of America does not need any further assistance today, and I am confident we will not need any further assistance in the future. I believe our company has more than enough capital, liquidity and earnings power to make it through this downturn on our own from here on out.

Kenneth Lay Lewis

Insider screams dealjournal@wsj


There is no question that the recession is continuing to worsen and that rising credit costs will continue to put great pressure on our ability to generate earnings. But here’s the good news: Your hard work is producing results in businesses all across the company.

While I can’t divulge any specific financial results mid-quarter, I can tell you that activity in our trading business continues to be vastly improved over last quarter. The corporate debt markets are showing some signs of thawing in both high yield and high grade, and we’re already seeing some benefits in the market of our combination with Merrill Lynch, in terms of winning mandates to raise capital for new and existing clients. And Merrill Lynch Financial Advisors posted nearly a half billion dollars in CD sales in the first four weeks these products were available to their clients.

On the retail side, our customer satisfaction scores are up at a time when others are down. Our brand, which took a beating in January, strengthened in early February, as customers gave us high marks for trustworthiness and perception that money is safe with us. In the first week of February, our Go America, Save! promotion boosted CD sales 18% and IRA sales 10% over the prior week. We extended our industry record this week for number of active mobile banking customers, surpassing the 2 million mark. And this week, a consortium of banks, including Bank of America, launched the Help With My Credit campaign to raise awareness of the different ways credit card issuers can assist customers in managing their financial obligations.

I am really encouraged by what we’re seeing in our home lending business. The mortgage boom is so intense we actually pulled down some advertising for a brief period to give our teams a chance to catch up to the volume, but they are running at full tilt now and processing record volumes. Our decision to acquire Countrywide has put us in a great position to capitalize on the surge in this business. This is a very positive story as we lead up to the launch of our new Bank of America Home Loans brand in April.

Yesterday, I met with a group of about a hundred of our top leaders to discuss what’s going on in the businesses and listen to their thoughts and concerns. We talked about the great challenges we’re all facing in the marketplace. But we also talked about how encouraging it is to work with such strong teammates, to have the trust and support of our customers and clients, and to have the position in our markets that we do.

As we concluded the meeting, I told them that we have a clear challenge in front of us: to prove the cynics and the critics wrong. I know we can do that – in fact, I think we’re doing it now, in the work each of you is doing every day, and the business results you’re putting up on the board.

Thank you for that. Let’s keep the momentum going.

Ken

Barron’s Online | This is not just a recession..

via High Debt Service costs mean a long depression

Isn’t the process of restructuring under way in households and at corporations?

They are cutting costs to service the debt. But they haven’t yet done much restructuring. Last year, 2008, was the year of price declines; 2009 and 2010 will be the years of bankruptcies and restructurings. Loans will be written down and assets will be sold. It will be a very difficult time. It is going to surprise a lot of people because many people figure it is bad but still expect, as in all past post-World War II periods, we will come out of it OK. A lot of difficult questions will be asked of policy makers. The government decision-making mechanism is going to be tested, because different people will have different points of view about what should be done.

What are you suggesting?

An example is the Federal Reserve, which has always been an autonomous institution with the freedom to act as it sees fit. Rep. Barney Frank [a Massachusetts Democrat and chairman of the House Financial Services Committee] is talking about examining the authority of the Federal Reserve, and that raises the specter of the government and Congress trying to run the Federal Reserve. Everybody will be second-guessing everybody else.

So where do things stand in the process of restructuring?

What the Federal Reserve has done and what the Treasury has done, by and large, is to take an existing debt and say they will own it or lend against it. But they haven’t said they are going to write down the debt and cut debt payments each month. There has been little in the way of debt relief yet. Very, very few actual mortgages have been restructured. Very little corporate debt has been restructured.

The Federal Reserve, in particular, has done a number of successful things. The Federal Reserve went out and bought or lent against a lot of the debt. That has had the effect of reducing the risk of that debt defaulting, so that is good in a sense. And because the risk of default has gone down, it has forced the interest rate on the debt to go down, and that is good, too.

Debt servicing is more than 15% of the GDP, and that means it will be a long winter

Debt servicing is more than 15% of the GDP, and that means it will be a long winter

However, the reason it hasn’t actually produced increased credit activity is because the debtors are still too indebted and not able to properly service the debt. Only when those debts are actually written down will we get to the point where we will have credit growth. There is a mortgage debt piece that will need to be restructured. There is a giant financial-sector piece — banks and investment banks and whatever is left of the financial sector — that will need to be restructured. There is a corporate piece that will need to be restructured, and then there is a commercial-real-estate piece that will need to be restructured.

Is a restructuring of the banks a starting point?

If you think that restructuring the banks is going to get lending going again and you don’t restructure the other pieces — the mortgage piece, the corporate piece, the real-estate piece — you are wrong, because they need financially sound entities to lend to, and that won’t happen until there are restructurings.

On the issue of the banks, ultimately we need banks because to produce credit we have to have banks. A lot of the banks aren’t going to have money, and yet we can’t just let them go to nothing; we have got to do something.

But the future of banking is going to be very, very different. The regulators have to decide how banks will operate. That means they will have to nationalize some in some form, but they are going to also have to decide who they protect: the bondholders or the depositors?

Nationalization is the most likely outcome?

There will be substantial nationalization of banks. It is going on now and it will continue. But the same question will be asked even after nationalization: What will happen to the pile of bad stuff?

Let’s say we are going to end up with the good-bank/bad-bank concept. The government is going to put a lot of money in — say $100 billion — and going to get all the garbage at a leverage of, let’s say, 10 to 1. They will have a trillion dollars, but a trillion dollars’ worth of garbage. They still aren’t marking it down. Does this give you comfort?

Then we have the remaining banks, many of which will be broke. The government will have to recapitalize them. The government will try to seek private money to go in with them, but I don’t think they are going to come up with a lot of private money, not nearly the amount needed.

To the extent we are going to have nationalized banks, we will still have the question of how those banks behave. Does Congress say what they should do? Does Congress demand they lend to bad borrowers? There is a reason they aren’t lending. So whose money is it, and who is protecting that money?

The biggest issue is that if you look at the borrowers, you don’t want to lend to them. The basic problem is that the borrowers had too much debt when their incomes were higher and their asset values were higher. Now net worths have gone down.

The BofA split with the govt | Reuters

 

Bank of America Corp will receive $20 billion 13 billion pounds in fresh government investments and a federal backstop against $118 billion of bad assets it holds to help it absorb Merrill Lynch & Co, U.S. officials said on Friday.

As part of an emergency plan announced by the Treasury Department, the Federal Reserve and Federal Deposit Insurance Corp, Treasury will provide Bank of America, the largest U.S. bank by assets, with $20 billion in fresh capital from a government bailout fund in exchange for preferred stock.

The government also agreed to share in losses on the troubled assets, which Bank of America took on when it paid an estimated $19.4 billion for Merrill on January 1.

With the financial system foundering under a mountain of bad mortgage-related debt, officials feared a deteriorating capital base at Bank of America, which has already received $25 billion from the government, posed a risk to the financial system as a whole.

 The government backstop will cover only domestic assets originated before mid-March 2008 and will cover residential and commercial mortgage investments, derivatives and corporate debt.

via Bank of America obtains U.S. aid for Merrill deal | Reuters

FT.com / Companies / Banks – Deutsche Bank expects full-year loss

Deutsche Bank also announced that Deutsche Post, the part state-owned postal and logistics company, would take a short-term 8 per cent stake in the bank as part of a revised Postbank deal.

The two groups scrapped the terms of a Postbank deal agreed in September in favour of a “more capital-efficient” transaction for Deutsche Bank.

Deutsche Post, owner of Postbank, will get about 8 per cent of Deutsche Bank in return for a stake of 22.9 per cent in Postbank, valued at €1.1bn. The entire Postbank transaction is now worth €4.9bn.

It means Deutsche Post becomes Deutsche Bank’s biggest shareholder and sees the German government – whose development bank owns about 30 per cent of Deutsche Post – having an indirect stake in Deutsche Bank. Deutsche Post can sell the Deutsche Bank stake in two tranches from April onwards and people close to the bank on Wednesday rejected talk of part-nationalisation.

The revision of the Postbank deal is a further sign that Berlin wants the country’s banking consolidation to remain on track, after it supported Commerzbank’s takeover of Dresdner Bank. The government helped that deal through by giving Commerzbank more than €18bn in capital and taking a 25 per cent stake.

Deutsche Bank wants Postbank – which has more retail customers than any other German bank – to support its retail business and compensate for a big downturn in investment banking revenues.

Its decision to acquire Postbank had come under scrutiny since it was revealed last September, two days before Lehman Brothers’ collapse triggered widespread bank bail-outs and a fall in the value of financial institutions.

Postbank – which this week warned of bigger losses than expected for 2008 – now has a total market value of about €3bn. By contrast, Deutsche Bank first agreed to pay €2.8bn for just under 30 per cent of Postbank.

via FT.com / Companies / Banks – Deutsche Bank expects full-year loss.

 

Germany’s largest bank will make a net loss of about €3.9bn for 2008, compared with net profit of €6.5bn in 2007.

Citi break up – our questions!

Citi is alive Citigroup Inc, (C.N) struggling to contain losses, is separating assets into a “good bank” and a “bad bank,” a person close to the matter said.

The bad bank assets would stay on Citigroup’s balance sheet, but could be separately managed. They would include illiquid assets, including collateralized debt obligations. The good bank would include Citi’s main businesses, such as corporate banking, investment banking, securities underwriting, and trading of liquid securities for customers.

Citigroup would consider selling some businesses, such as Primerica Financial Services, the person said. Citi declined to comment.

via Citigroup to separate into good and bad bank: source | Reuters .

Citi’s deal with Morgan Stanley (check http://zyakaira.wordpress.com) confirms that when Vikram Pandit rode in the deal was already done in terms of the closing of Citi’s golden days as a group. That brokerage and investment businesses will continue to be a part of the worldwide retail business is a small consolation as also there is a question on its growth in emerging markets which are today the mainstay of any global corporation’s profit making strategies.

America didnt jump off the cliff – it was Bushed – Opinion – smh.com.au

We like our failed presidents to be Shakespearean, or at least large enough to inspire Oscar-worthy performances from magnificent tragedians. So here, too, George Bush has let us down. He is not a memorable villain so much as a sometimes affable second banana whom Will Ferrell can nail without breaking a sweat. He is smaller than life.

The last NBC News/Wall Street Journal poll on Bushs presidency found that 79 per cent of Americans will not miss him. He is being forgotten already, even if hes not yet gone. You start to pity him until you remember how vast the wreckage is, stretching from the Middle East to Wall Street to Main Street and even into the heavens, which have been a safe haven for toxins under his passive stewardship.

The one indisputable ability of his White House was to create and sell propaganda both to the public and the press. Now that bag of tricks is also empty. In what was intended as a farewell victory lap to show off Iraqs improved post-surge security, Bush was reduced to ducking shoes.

Iraq burned, New Orleans flooded, and Bush remained oblivious to each and every pratfall on his watch. Americans essentially stopped listening to him after Hurricane Katrina hit in 2005, but he still doesnt grasp the finality of their defection.

Bush is equally blind to the collapse of his propaganda machinery. Almost poignantly, he keeps trying to hawk his goods in these final days. Though no one is listening, he has given more exit interviews than either Clinton or Reagan. Along with old cronies like Karl Rove, he has embarked on a Bush “legacy project”, as Stephen Hayes of The Weekly Standard described it on CNN.

via America didnt jump off the cliff – it was Bushed – Opinion – smh.com.au.

BAC announces a high note for good byes

The reductions are designed to eliminate redundancies created as a result of the merger with Merrill Lynch MER, and to reflect the current recessionary environment,” the bank said in a statement. The weak economy “is affecting the level of business activity,” it added.

Still, the bank said it continues to do business actively with all of its clients and has attracted deposits and new customers. It also stressed that its still actively offering loans through all of its credit product lines.

Bank of Americas reductions represent one of the largest rounds of layoffs in the history of the financial-services industry. Citigroup Inc. C, said last month that it plans to cut about 50,000 staff.

Challenger Gray said last week that the financial sector cut 91,356 jobs in November, the second-worst month for industry layoffs since September 2001.

via Bank of America to cut up to 35,000 jobs over three years – MarketWatch .

The hum on the weekend

A bouyant new President starting his Odyssey just rewriting parts of the original Odyssey – I think its brilliant – not just boringly pragmatic – it’s simply amazing that a Richardson can be seen and heard after horse trading Mexicans ( Thats how they call it in the good old Orient) and before applying for Biden’s post next time. It’s great that Summers can’t hold TARP but we need him as Economic adviser and Timothy Geithner and the New York Fed come as a package for the bailout package – no transition required here and you were on the same table as Paulson ( I still think he did an ‘Okay Job’) and it’s greater news tht Hillary is still in the ring. Some nice weekend action and thankfully all before College Football and Sunday Football. I think we are all involved. Tom Dashcle was the best catch judging from the media attention, though I thought Summers would be even weightier, and of course Rahm Emmanuel was the best pick ever.

And the next fun’n’ games for the weekend were from that global follower of John Pierpoint Morgan’s legacy, our very own ever awake and ever advantaged Citi:

It isn’t the buzz really, more like a drone..a pain coming home to roost and Citibank making it clear ( as on November 21, my Saturday) that it does not want to sell Smith Barney. They are however not so clear about selling off their Global Transaction Banking and Cards units. But given you just mucked up your bank over three years, why exactly would I buy it – i am after all not a Bone collector, nor a fair weather sunny side breakfast for some rich Arab, I am a serious buyer who wants something that is worth at least 30 cents or maybe at least 70 cents for every dollar i pay in current earnings(sales) and a lot more down the line. If I am Citi, I have already flogged my profitable pieces and this weekend I am told i still will be doing a deal for my dream at $4 a share – doesn’t cut it at all.

Pandit does not want a deal with Goldman Sachs, no one bought the Citi’s profitmaking companies in India ( the deal with TCS was inked though, and it’s very much on) and the hedge funds need their billions to keep hope alive – which right now is owned by Mr Obama, realy busy weekend!$$

MarketWatch – Video

From marketwatch.com, a seminal book on the market games of the 90s (RJR Nabisco) now called into focus for the same wrong reasons to give a hint into the fiasco going down.

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