Apologies – this post should have happened yesterday, but I had a little weekend away.
What you may have missed last week (and what I missed over the weekend):
After 40 years of appearing together in American takeaway lunches*, there’s been a bit of a corporate divorce.
*although, apparently, only Americans in Pittsburg and Minneapolis. But I’m pretty sure that the McDs here in Johannesburg have Heinz ketchup. Perhaps that’s not such an issue to the Americans…
The reason: Heinz just hired a new CEO (Bernardo Hees). And he’s the former CEO of Burger King.
Which seems a bit bizarre, does it not? Yes – Heinz has changed management (and ownership – Warren Buffett’s Berkshire Hathaway partnered with Brazilian private equity firm 3G earlier this year) – but that hardly seems to be enough to change ketchup suppliers. Is Heinz seriously going to, what, sabotage the tomato sauce because its CEO used to work for the competition?
What the headlines really ought to be mentioning is that 3G bought out Burger King in 2010… And that Bernardo was the Brazilian CEO brought out by 3G to manage Burger King after they bought it.
So Heinz is owned and effectively managed by the (Brazilian?) competition. And whatever we might say – suppliers are always more in touch with a customer’s plans than anyone else. After all, they’re the ones getting the orders…
2. Blackberry takeover falls apart.
The proposed buy-out by Fairfax has collapsed after Fairfax failed to raise the $4 billion of capital required.
Instead, Blackberry is going to raise money through a $1 billion convertible bond issue, and another Heins (the current Blackberry CEO) is biting the dust. It’s shopping around for a replacement CEO. And (it seems) shopping around to sell itself off in parts (a handset business here, an intellectual patent there…).
Can I make an observation though? I recently downloaded BBM for my iPhone. Sure, it’s not whatsapp. But you know what it offers that whatsapp and iMessage don’t? Relative anonymity.
It’s just a PIN. You can use it anywhere. It means that you can give someone a way to contact you without having to give them your phone number. Which has two benefits (that I can see): firstly, if you’re travelling, you don’t have to keep updating for your number; and secondly, if you’re dating, you don’t need to change your number each time someone goes all stalker on you.
If I were a Blackberry advisor, I’d be saying that the radical thing to do would be to redefine as an offerer of security and encryption. Forget operating systems and hardware – focus on the software protection. Sure, it’s smaller. But I think it’s something that people want that no one else is offering on a mass scale.
3. Oh SAC Capital… You didn’t just “plead guilty to end the case”!
SAC Capital has agreed to plead guilty to insider trading, pay a $1.8 billion fine (the largest securities fraud fine ever), and close its investment advisory arm.
The insider trading conspiracy started in 1999. A fun quote from the FBI:
“[SAC Capital] focused on hiring the best talent, talent [sic] who was equipped with extensive networks to circumvent traditional lines of communication, talent who would be prepared to get confidential information to fuel their illicit trades.”
I look forward to reading the book that will inevitably come of it.
4. Batista and the OGX bankruptcy
For some reason, my “Keeping It Current” posts regularly seem to feature an item on the continuing demise of Eike Batista. Maybe it’s because his name sounds like a WWE superstar participant. Anyway, here’s an infographic:
Last week, his firm OGX, the oil and gas company that listed itself in 2008 on the basis of its exploratory prospects (it has stakes in offshore oilfields and the like), filed for the Brazilian version of bankruptcy protection, after failing to make a $45 million payment to bondholders within the 30 day grace period after the payment had fallen due. OGX now has a few short months to negotiate a recovery plan with investors.
It just goes to show that owning an oil field (or a mine) is a risky business – because firstly, there’re no guarantees that the oil/minerals are there; and secondly, even if they are, it is a serious cash flow crisis to try and extract them.
OGX bonds are now trading at 8% of face value, and the share price is down 99% from its IPO price.
But I think I’d point something out here: bonds trading at 8% of face value? It implies that if the company went bankrupt, creditors would only recover 8 cents in the dollar.
Seems a little over-reactive to me… If worst comes to worst, by the time that the liquidators are done disposing of assets and such, I reckon that the creditors would get a little more than that. The Latin American average recovery is 35 cents on the dollar (see this article here).
I’d take that bet.