1. Wither Wetherell
We can't blame Barry Diller for liking
The IAC/InterActiveCorp (IACI) chief surprised Wall Street this week by unveiling a $1.85 billion plan to buy the No. 5 search engine. He wasn't stingy with his praise. "We think that this merger, the relationship of the Ask service and IAC services, can create an everlasting interactive company that has enormous amounts of reach, traffic, service to customers, et cetera," Diller said in a Monday morning conference call.
But we think Diller likes Ask Jeeves -- which bills itself as an "easier, more intuitive way to search" via questions in "natural language" -- for another reason. It gives him the search results that he hopes will come true.
Six years ago, remember, Diller was similarly on the verge of buying into the search-engine business. Diller's company, then called USA Networks, was all set to buy No. 3 search engine Lycos in a complicated merger creating an e-commerce giant valued at $18 billion.
But the plan collapsed when Lycos shareholders -- led by
chief David Wetherell, who held a 20% stake -- revolted over price. Wetherell, who is now chairman at Waltham, Mass.-based CMGI, didn't return a call left Wednesday at his office.
Diller hasn't blamed Wetherell for the breakup, but to this day he maintains he wishes the Lycos deal had worked out. "I wish we had gotten it," Diller said Monday in a TV interview.
Understandably, though, Diller remains wary that the Ask Jeeves plan could go up in smoke as well. "We are not expecting, by the way, to have any more -- I should not say it, God knows what could happen -- but we're not expecting to have any more conference calls" in the near future, he told analysts on Monday's call.
That in mind, Diller must be cheered by the answer Ask Jeeves returns for the question, "Where is David Wetherell?"
the first page of search results, it looks like he hasn't been seen in years.
Heat's on AIG
2. Modest to a Fault?
Sometimes you don't have to seek the limelight. Sometimes it seeks you.
That may be the lesson from this week's events in the government's ongoing probe of American International Group (AIG) - Get Report. The New York insurer has been swept up in allegations that it used questionable accounting to bolster its balance sheet. Last week state and federal investigators forced out longtime CEO Hank Greenberg. This week two more top executives stepped down in connection with the inquiry.
Lately the authorities have turned their attention to AIG's ties to the offshore tax haven of Bermuda. Investigators are trying to determine whether AIG exerted undue control over two companies, including one called Richmond Insurance, in a bid to rid itself of poor-performing insurance policies.
reported Tuesday that Richmond's president is a longtime AIG employee named Joseph C.H. Johnson.
To be sure, there is no indication that Johnson is himself under investigation or that he has been involved in any wrongdoing. Johnson's office said he wouldn't comment.
Curiously, though, the government's interest in AIG's ties to Richmond comes just a month after the Bermuda Insurance Institute honored Johnson with its 2004 Lifetime Achievement Award.
"Not one to seek the limelight, he has quietly, yet tirelessly, carved out a rarely paralleled half century of service to both his industry-leading employer and to the Bermudian community," a Feb. 11 press release from the institute gushes. "His quiet endeavors and unassuming manner have won him the respect and admiration of everyone with whom he has come into contact."
No question, an unassuming manner goes a long way if you happen to bump into Eliot Spitzer.
Synergy of State
3. Low Tide
It's probably good when public officials stand up for shareholders, but sometimes we wonder.
Massachusetts Secretary of State William Galvin is questioning Procter & Gamble's (PG) - Get Report $57 billion plan to buy consumer goods rival Gillette (G) - Get Report. Galvin thinks P&G needs to up the ante.
P&G says it continues to believe the value of the deal is fair to all parties involved. But Galvin hired Virginia commerce professor Rajesh Aggarwal to kick the tires. And Aggarwal says he found some discrepancies between the companies' internal and publicly made projections.
"The public statements of officers of Gillette and P&G seem to understate the value of the merger," Aggarwal says in a five-page report that Galvin's office sent us. "In addition, there seem to be errors in the way the value of the merger synergies was calculated. These errors underestimate the value of the merger."
It seems unusual, to say the least, that the companies are being accused of underselling their big deal. Still, what we can't figure out is why an official speaking on behalf of the people of Massachusetts would come out for synergies.
Synergies, after all, is corporate shorthand for mass layoffs. P&G and Gillette already say they'll lay off about 6,000 people out of a 140,000-strong combined workforce.
So is Galvin saying P&G should pay up and then make the deal work by firing more people? No, no, a thousand times no, says communications director Brian McNiff.
"The secretary is very concerned with the number of people who would be let go," McNiff said in a phone interview Wednesday. The lesson of the report, he adds, is that "stockholders should consider the deal is not the same value as was presented to them" when P&G and Gillette made their big plans known.
Fair enough. But with this fracas, the folks of Massachusetts should pray the execs don't feel obliged to prove just how big their synergies are.
4. Book Learning
More Emissions on MCI
The battle for MCI (MCIP) has spilled out of the boardroom -- and into the library.
MCI, the Ashburn, Va., long-distance telco, has been in play since Denver-based Qwest Communications (Q) made overtures last month. MCI subsequently chose an inferior bid from a stronger company, Verizon Communications (VZ) - Get Report -- setting off a wicked war of words between the two bidders and some MCI shareholders.
Last week the telcos traded barbs over the value of their respective merger proposals, and the market yawned. Not to be dissuaded, though, the companies' hard-charging CEOs were back at it this week.
Qwest chief Dick Notebaert questioned MCI's reticence to continue talks, saying, "The straw man being propped up to explain why MCI won't continue what has been a fruitful exchange of information with Qwest is that MCI's merger agreement with Verizon prohibits any discussions with Qwest." He questioned MCI's decision to "go dark" on talks. (Late Wednesday the companies resumed their discussions, with Verizon's blessing.)
We have to hand it to Verizon head Ivan Seidenberg, though. A week after he said Qwest's $8 billion bid for MCI didn't "pass a common sense test," Seidenberg was back at it. This time, he said of Qwest's improved $8.5 billion offer, "We have analyzed Qwest's synergy claims and believe the presentation might be more appropriately considered in the category of Modern Fiction."
He isn't called Ivan the Terrible for nothing.
5. Big Money
wants to improve its image, but let's not get carried away.
The world's biggest retailer grabbed the headlines last Friday by settling a federal suit. The company agreed to pay $11 million to settle Homeland Security Department claims that it used hundreds of illegal immigrants as janitors.
The Bentonville, Ark., retail giant neither admitted nor denied the charges. "No criminal charges filed against company or its associates," the company emphasized in its press release. Still, the fine sets a record in a civil immigration case, Homeland Security said.
"We acknowledge that we should have had better safeguards in place to ensure our contractors were hiring only legal workers," Wal-Mart spokeswoman Mona Williams told
The Associated Press
. "It is a lot of money, but I think that is because it is designed to get attention and remind businesses everywhere that they have a duty to ensure their outside contractors are following federal immigration laws."
We appreciate that Wal-Mart is intent on shedding a reputation, deserved or not, for putting profits ahead of the welfare of its workers or the communities where it operates. And yes, we know the government can't set fines based on a company's size.
Even so, saying that $11 million is "a lot of money" for a company of Wal-Mart's size doesn't really add up. At last year's selling pace, that fine amounts to about 20 minutes' worth of sales for the company.
Let's hope Wal-Mart keeps this lesson in mind for longer than that.
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