In Business This Week
Edited by Monica Roman
Geraldine Laybourne: Fresh Air for Oxygen
Oxygen Media CEO Geraldine Laybourne has gained some breathing room. The past several months have been tough on her fledgling Internet and cable-television venture aimed at women. In early April, the company was forced to lay off 35 people at its Internet unit. But AOL Time Warner (AOL
), which holds a minority stake in Oxygen, has pumped new life into the New York-based venture. The media giant agreed to boost its stake in Oxygen, though neither company would disclose the percentage. It will also begin delivering the Oxygen cable channel to 10 million of Time Warner Cable's subscribers, which means that Oxygen now has commitments to be in 42 million cable homes by 2003. AOL also agreed to steer traffic to Oxygen's four Web sites.
Since Oxygen was founded in April, 1998, skeptics have predicted it would not survive. But Laybourne, who previously founded the Nickelodeon children's cable channel, remains confident. "We know we are doing the right thing for women," she says. "All I can say is, stay tuned."
By Tom Lowry
A Surprise Bid from AIG
So much for a done deal. On Apr. 3, Maurice Greenberg, head of insurance giant American International Group (AIG
), bid $23 billion in stock for Houston insurer American General. The surprise move could trump an earlier offer made by British insurer Prudential. By joining with American General, Greenberg wants to boost AIG's life-insurance and retirement-savings franchises. He also wants to save a potential $200 million in expenses over the next 12 months. Sounds good. But American General's board must approve Greenberg's bid. Prudential points out that American General might have to pay as much as $600 million as a breakup fee if it accepts another offer.
How Staples Aims to Avoid a Jam
The directors of Staples (SPLS
) voted on Apr. 3 to forgo personal profits on a stock buyback, after facing lawsuits and shareholder criticism. Last month, the retailer proposed paying nearly $7 a share to buy up shares in its Internet unit, Staples.com, which never went public. That's twice what venture capitalists paid for a stake in the dot-com in late 1999. Some Staples Inc. investors were irate because they saw the buyback as unfair. Staples Chairman Thomas Stemberg says the vote was designed "to avoid even the appearance of a conflict of interest." Staples still plans to go ahead with the buyback for Staples.com employees and venture investors.
FPL and Entergy: The Light Goes Out
Power companies have been hot stocks lately, but when it comes to dealmaking, they've been anything but electrifying. Case in point: FPL Group and Entergy (ETR
), which on Apr. 2 called off a megamerger that would have created the biggest electric utility in the U.S., with $15 billion in sales. The failure came less than a month after Consolidated Edison pulled the plug on its takeover of Northeast Utilities. FPL and Entergy, which had agreed last July to combine, each blamed the other for the rupture, though each forswore litigation.
Buffett Takes a Shine to the Gap
Billionaire Warren Buffett has been known to jest that he can make a tailored suit look bad. Now, he's going casual. On Apr. 2, Buffett's Berkshire Hathaway (BRK.A) disclosed that it had paid about $204 million for 8 million shares of retailer Gap (GPS
). Buffett has made a habit of successfully snapping up brands that he thinks have bottomed out. Could this signal that Gap and its other struggling brands, Old Navy and Banana Republic, are about to come back in vogue? Investors aren't buying it. Gap's stock rose a meager 70 cents, to $24.42, on the day Buffett's stake was disclosed.
Asbestos Still Haunts Grace
W.R. Grace (GRA
) hasn't put any asbestos in its chemicals or building materials since 1973 and has paid out $1.9 billion to settle health claims arising from exposure to asbestos in products it sold before the halt. But those measures weren't enough. As new injury claims pour in at a rate of 1,000 a week, the company, with annual revenues of $1.6 billion, filed for Chapter 11 bankruptcy protection on Apr. 2. Grace is the sixth big company pushed into bankruptcy by asbestos liabilities since Jan. 1, 2000. Investors worry USG might be next; its shares plunged 20% in the three days after Grace's filing. But USG insists it has plenty of liquidity to keep afloat until Congress finds a way to resolve the crush of asbestos lawsuits.
Et Cetera...
-- TheStreet.com (TSCM
) will cut its workforce by 20% to help save more than $15 million.
-- Target (TGT
) registered with the SEC to offer up to $3 billion in mixed securities.
-- Gladiator producer DreamWorks SKG is in talks with AOL Time Warner (AOL
).
Unlucky Lucent
Fears about Lucent Technologies' (LU
) health continue. Shares fell 13.6%, to $6.78, on Apr. 4 on rumors that the telecom-equipment maker would file for bankruptcy protection. The company called the rumors false and irresponsible. But analysts remain worried. "A liquidity crisis is not imminent, but liquidity could become an issue over the next few quarters," says telecom-bond analyst Bruce Hyman of Standard & Poor's.
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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