Blackstone Names Jonathan Gray as President and COO: DealBook Briefing
Happy Tuesday. Here’s what we’re watching:
• Blackstone names Jonathan Gray as president and C.O.O.
• Broadcom just moved the goal posts in its hostile takeover bid for Qualcomm.
• How market volatility has helped the Federal Reserve.
• A lawsuit peels back the curtain at Point72.
• More on the Trump infrastructure plan.
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Blackstone names Jonathan Gray as president and C.O.O.
The head of Blackstone’s real estate business has long been considered the likely successor to Hamilton “Tony” James, the firm’s president and chief operating officer.
Today that became a reality.
Blackstone announced that Mr. Gray will become the private-equity firm’s president and C.O.O., taking over the day-to-day operations of the firm. Mr. James was named executive vice chairman. Both will report to Stephen A. Schwarzman, Blackstone’s co-founder, chairman and chief executive.
Mr. Gray, 48, joined Blackstone straight out of college in 1992. He has led Blackstone’s real estate group since its creation in 2005.
Mr. James, 66, joined Blackstone in 2002 as vice chairman and C.O.O. He was named president in 2006.
“I have had a wonderful 15 years at Blackstone so far and still savor every minute of it. One of my most important responsibilities is succession, and I am blessed to have a spectacular leader and investor like Jon Gray to whom I can hand the reins,” Mr. James said.
The stock markets have done Jay Powell a solid
The Federal Reserve chairman took his position this year facing plenty of economic factors that could stoke inflation, including:
• Resurgent global economies
• Years of cheap and plentiful credit
• Joblessness falling to multiyear lows, making it easier for workers to get a raise or a bonus, which could push up companies’ costs
Then the Fed’s job got harder. Congress passed a large tax cut that will add a jolt of stimulus to an economy that no longer needs extra juice. The stock market loved it and kept zooming higher.
But turbulence hit. On Feb. 5, the Dow Jones industrial average plummeted over 1,100 points, or 4.6 percent.
That brought some much-needed caution
• Investors in the stock market, down 7.6 percent from its high, now know the party can’t go on uninterrupted.
• People are having a real debate about inflation.
In other words, nose-diving stocks did Mr. Powell a favor: They threw some cold water on the animal spirits that Congress whipped up.
The notes of caution
The best scenario for the Fed is that the rate hikes forecast for this year are enough to also limit the stimulus from the tax overhaul.
Meanwhile, to finance the deficit, the Treasury Department now has to sell more billions of dollars of extra bonds. The huge new government demand for credit could push up interest rates in the markets. The Fed may be fine with that, given that it is expected to raise interest rates this year. But if interest rates in the bond market spike higher than investors expect, or the Fed is happy with, Mr. Powell would face his first big challenge as Fed chairman.
— Peter Eavis
In brief prepared remarks at a ceremonial swearing-in on Tuesday, Mr. Powell said: “While the challenges we face are always evolving, the Fed’s approach will remain the same. Today, the global economy is recovering strongly for the first time in a decade. We are in the process of gradually normalizing both interest rate policy and our balance sheet with a view to extending the recovery and sustaining the pursuit of our objectives.”
Is the 30-year bull market in bonds over? Ray Dalio thinks so. The Bridgewater Associates mogul wrote on LinkedIn, “We don’t know exactly how far we are from the top in the stock market and then the economy, though it is clear that we are past the top in the bond market.” (Others disagree.)
More in markets: They jumped yesterday, but how will they react to the Bureau of Labor Statistics’ inflation report tomorrow? And who is “50 Cent,” the trader who made $200 million from last week’s volatility?
Broadcom just moved the goal posts in its hostile takeover bid for Qualcomm.
Broadcom announced on Tuesday that it is seeking only a majority of the chip maker’s board seats in next month’s shareholder vote.
Broadcom said that it was now pursuing the election of six nominees that it had put forward, rather than the full 11 it had originally named.
Mr. Tan essentially signaled that Broadcom would seek fewer board seats in an interview on CNBC on Monday.
“If at least a majority of our slate does not get in on March 6, then I guess we will get the message that this deal is not going to happen,” he said. We will walk.”
Both companies are expected to meet on Wednesday for the first time in months.
— Michael de la Merced
Peltz to leave Mondelez’s board.
After nearly four years on Mondelez International’s board, the activist investor Nelson Peltz is stepping down on March 1 to focus on his other board commitments.
The decision comes two months after Mr. Peltz won a seat on Procter & Gamble’s board in what was one of the largest, priciest and nastiest corporate proxy fights in history. He will join P.&G.’s board on March 1.
Mondelez said that Debra Crew, the Reynolds American chief executive, and Peter May, Trian Fund president, will be named to the board the same day as Mr. Peltz steps down.
Mr. Peltz joined Mondelez’s board in 2014 after he ended his push for a merger between Pepsi and Mondelez.
A sexual discrimination suit roils Steve Cohen’s new firm
As the billionaire prepares to get back in the hedge fund game with Point72 Asset Management, a lawsuit from a female executive, Lauren Bonner, has drawn back the curtain on what she describes as a toxic environment for women:
• Just one of 125 portfolio managers is a woman.
• Women were often excluded from meetings.
• For several weeks last year, a white board in one executive’s office had “pussy” written on it.
Mr. Cohen himself isn’t accused of wrongdoing, and Point72 denied the allegations.
The bigger picture: Point72 is expected to open as a full-fledged hedge fund this year, after Mr. Cohen’s ban from the securities industry expired in 2017. And Ms. Bonner’s lawsuit is an unusually prominent sexual discrimination case in the world of hedge funds.
The misconduct flyaround
• In his latest column, Andrew asks whether it helps Harvey Weinstein’s victims for the New York attorney general to block the sale of the Weinstein Company? (NYT)
• Betterworks Systems shows how hard it is for a Silicon Valley start-up to move on from a sexual harassment scandal. (Bloomberg)
• The C.E.O. of the U.S. Hispanic Chamber of Commerce, Javier Palomarez, was ousted amid allegations of financial impropriety and sexual harassment. (NYT)
What’s for sale in the Trump infrastructure plan
Among the assets that could be sold to private financiers if the White House got its $1.5 trillion infrastructure investment program:
• Ronald Reagan Washington National Airport and Dulles International Airport
• The George Washington and Baltimore Washington parkways
• The Washington Aqueduct
The thinking behind the plan
The administration believes private investors can do a better job of running highways, airports and railroads than the government, and states and local governments can do a better job of allocating money. But critics say its plan unfairly favors rural areas over liberal-leaning major cities. (Economists also say that it’s a “bizarre time” for such a stimulus, Ben White of Politico writes.)
An interesting point about infrastructure investment
Dan Primack of Axios points out:
The average level of return sought by infrastructure investment funds was about 10.6 percent in 2016, down from 14 percent in 2004, according to PricewaterhouseCoopers and the Global Infrastructure Investor Association. They’re generally considered a low-but-steady return asset class, which may be why they only raised about $200 billion from 2006 to 2016.
The big question: Can private investors fill in the $1.3 trillion required to fulfill the White House’s vision?
The Washington flyaround
• The White House’s $4.4 trillion budget (which lawmakers will likely ignore) would add $7 trillion to the deficit over the next decade. The Trump administration’s budget chief, Mick Mulvaney, conceded, “Does it balance? No, it doesn’t.”
• The administration is suffering from a 34 percent turnover rate, the highest for a White House in decades. (NYT)
• The controversy over Rob Porter again raised the issue of national security clearances at the White House — and why Jared Kushner’s still isn’t permanent. (NYT)
• “Reciprocal taxes” on countries the White House considers unfair trade partners won’t be simple to enact. (NYT)
• On immigration, the Senate is taking an unusual approach: an open-ended debate to build a bill from scratch on the legislative floor. (NYT)
• Republicans are pressuring Bob Corker to consider staying on, for fear of losing his Senate seat. (Politico)
How Facebook came to a reckoning
When Mark Zuckerberg said it was “pretty crazy” to think fake news on Facebook could tip an election, one executive feared that the company would head down the “pariah path that Uber was on.” Now, people say that he has faced a deeper realization about that ways that the platform can be abused.
Here’s a recounting of what Mr. Zuckerberg told employees last Thanksgiving about the company’s responsibility, from Nicholas Thompson and Fred Vogelstein of Wired:
According to one attendee, the remarks came across as blunter and more personal than any they’d ever heard from Zuckerberg. He seemed humble, even a little chastened. “I don’t think he sleeps well at night,” the employee says. “I think he has remorse for what has happened.”
More Facebook news: It’s losing younger users, eMarketer says. Its default privacy settings violate German law, a Berlin court says. And it’s experimenting with a news section on its video platform to help users find reliable sources.
The tech flyaround
• Scott Galloway of NYU’s Stern School of Business says that it’s time to break up Amazon, Apple, Facebook and Google. (Esquire)
• Amazon is laying off hundreds of employees in Seattle and internationally, unnamed sources say. (Seattle Times)
• Russia has threatened to block YouTube and Instagram if they don’t take down videos and photos relating to the oligarch Oleg Deripaska. (NYT)
• A cyberattack disrupted internet access and telecasts during the Winter Olympics opening ceremony. (NYT)
• The Trump White House has done little to counter China’s rise in A.I. research. (NYT)
• Google is selling access to its powerful A.I. chips. (NYT)
• Top university computer science courses are rushing to add ethics courses. (NYT)
• Who gets to experience 5G first? Pyeongchang’s wild boars. (Bloomberg)
What would make Broadcom walk away from Qualcomm
Broadcom’s C.E.O., Hock Tan, told CNBC what would stop him, as the companies prepare for a Valentine’s Day meeting:
• If Qualcomm’s shareholders don’t vote for a majority of the directors that Broadcom has nominated for its target’s board. “I guess we will get the message that this deal is not going to happen,” he said.
• If Qualcomm raises its bid for NXP Semiconductors beyond $110 a share. “We have made it very clear, it’s a clear transfer of value from Qualcomm shareholders to NXPI shareholders,” he said.
The deals flyaround
• Walgreens Boots Alliance has made a preliminary takeover bid for AmerisourceBergen, a drug distributor that it owns 26 percent of, unnamed sources say. (WSJ)
• Disney may need to raise its $52.4 billion bid for Fox to stave off Comcast. (Breakingviews)
• Fox has offered to insulate Sky News’s editorial staff as a concession to British regulators considering its bid for the satellite broadcaster Sky. (WSJ)
• Carl Icahn and Darwin Deason, two big investors in Xerox, urged their fellow shareholders not to “let Fuji steal” the company. (Reuters)
• General Dynamics’ $6.8 billion bid for CSRA highlights an era of increased military spending. (DealBook)
• Here’s the betting on who will buy Time Inc. titles from Meredith. (Vanity Fair)
• Equifax hired Jamil Farshchi as its chief information security officer, in the wake of its giant data breach last year. (WSJ)
• Snap’s head of sales, Jeff Lucas, is leaving as the company relies more on automated ad bidding. It’s the latest in a string of executive departures. (Bloomberg)
The Speed Read
• The gun maker Remington Outdoor said it would file for bankruptcy protection, a blow to Cerberus Capital, which acquired the company in 2007. (Bloomberg)
• Do the unprecedented penalties that the Federal Reserve imposed on Wells Fargo herald a broader crackdown? (NYT)
• Apollo’s Leon Black pocketed $191.3 million last year, 45 percent up on 2016. (Bloomberg)
• HNA is seeking to sell more than $6 billion worth of property as pressure intensifies over its debt. (Bloomberg)
• 3G Capital has made Kraft Heinz a much more efficient manufacturer, but it now faces a less familiar challenge: changing consumer tastes. (WSJ)
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