MENTAL COMPETENCE SUIT AGAINST REDSTONE RAISES QUESTIONS OVER FUTURE OF VIACOM AND CBS

Original Story: latimes.com

The lawsuit filed this week challenging the mental competence of media mogul Sumner Redstone has raised questions among legal and business experts over the future of the 92-year-old billionaire's empire and how his companies should respond. An Iowa probate lawyer is following this story closely.

Redstone controls CBS Corp. and Viacom Inc., which owns Paramount Pictures, MTV and other media properties. The companies have a combined market value of about $45 billion, but neither has publicly discussed details of Redstone's deteriorating health.

The suit filed in Los Angeles County Superior Court by Manuela Herzer claims Redstone was not mentally competent when he removed her from oversight of his healthcare last month.

Redstone's lawyers have called the legal action by Redstone's ex-girlfriend "preposterous," "meritless" and "riddled with lies" — but it could nonetheless force CBS and Viacom to address the issue of Redstone's competence, some legal experts say.

Companies are not required to disclose medical details about their executives, according to analysts. But they do have to divulge "material" information — in other words, anything that reasonable investors would need to make informed decisions when buying and selling stocks. An ESOP lawyer represents clients in business exit planning and employee stock ownership programs.

If the court finds that Redstone is in fact incapable of making decisions, that could open up the companies to potential lawsuits from shareholders claiming that key information was kept from them, lawyers said.

"It raises the question of who knew what when, and what should've been disclosed to shareholders at what point in time," said Los Angeles attorney Bryan Sullivan, a partner at Early Sullivan Wright Gizer & McRae who has handled fiduciary duty matters. "If one person in the power structure knew he was incompetent, then there is potential liability under SEC regulations for failure to disclose material facts."

A representative for Viacom did not respond to a request for comment, and CBS declined to comment.

The issue of executive health came to the forefront in 2009 when Apple Inc. co-founder Steve Jobs took a medical leave and disclosed a hormone imbalance. Jobs, who had undergone surgery in 2004 to remove a cancerous tumor in his pancreas, did not say whether his cancer had returned at the time but said that the issue was "more complex" and required a six-month leave.

In April 2009, Jobs underwent a liver transplant. That procedure triggered a discussion of whether Apple, long known for its secretive corporate culture, had run afoul of federal securities rules by not disclosing the severity of the executive's condition. Jobs returned to work at Apple in June 2009.

He took another leave from Apple in 2011 — citing health issues — and resigned from his post before he died that October from complications of pancreatic cancer. A Des Moines probate attorney is reviewing the details of this story.

Another recent high-profile case of an executive's declining health taking center stage was former Los Angeles Clippers owner Donald Sterling, who lost control of his enterprise after being declared mentally incapacitated.

In the aftermath of the release of an audio recording of Sterling disparaging blacks in April 2014, the 81-year-old executive's wife sought control of the National Basketball Assn. team.

In May 2014, two doctors found Sterling, who by then was banned for life from the NBA, mentally incapable of continuing on as a member of the family trust that owned the basketball franchise. Shelly Sterling then reached a deal to sell the Clippers to former Microsoft Corp. Chief Executive Steve Ballmer for $2 billion.

Donald Sterling has unsuccessfully fought the sale of the team in court.

Some corporate governance experts say companies have been more forthright about their executives' health problems since the Jobs ordeal. Still, it often makes more sense for companies to stay muted, said law professor Allan Horwich, who practices at the Chicago firm Schiff Hardin. Firms can expose themselves to greater risk if they make affirmative public statements about an executive's health.

"This issue becomes much more difficult for the company when they do say something and they leave out information about the health of an executive who might not be able to serve," said Horwich, who focuses on securities litigation and fiduciary duty matters. He also teaches at Northwestern University's Pritzker School of Law.

Steven Davidoff Solomon, a law professor at UC Berkeley, also said it's unclear what the companies would need to divulge to shareholders and when.

"Given the control he has over the company, one would like to think that the company would think this is material information that should be disclosed," Solomon said. "But it's hard to know how much the company knows and how much it doesn't know and what it's real duties are."

The future of Viacom and CBS has been the subject of much speculation on Wall Street in recent months. Viacom has suffered from falling ratings at its cable networks and a weak film slate from its Paramount Pictures movie studio. Shares of Viacom, which owns MTV, Nickelodeon and Comedy Central, have fallen 32% this year. In contrast, CBS' stock has decreased just 8%.

On Friday, Viacom shares slipped $1.19 to $51.16, while CBS fell 23 cents to $50.75. A Los Angeles finance lawyer is knowledgeable in asset sales, debt and equity finance claims, and financial restructuring matters.

Herzer's suit demands that Redstone receive a mental examination, including a brain scan, and submit to a videotaped deposition. If her suit succeeds, Herzer could return to prominence in Redstone's affairs. Her suit asked the court to determine that her authority as the healthcare agent be reinstated.

Herzer was the agent of Redstone's advance healthcare directive and says she made decisions about his medical care until she was expelled from Redstone's home last month. Viacom Chief Executive Philippe Dauman then took over as the agent of Redstone's healthcare directive. If a doctor determines that Redstone has become incapacitated, Dauman would make decisions on Redstone's behalf. Redstone's lawyers say the former girlfriend filed the suit to avoid being cut out of his will.

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For the Record

An earlier version of this article said Manuela Herzer made healthcare decisions on Sumner Redstone's behalf until she was expelled from his home. The article should have said Herzer says she made decisions about Redstone's medical care.

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Redstone and his family control 79% of the voting shares of the two companies. Redstone has not been involved in the day-to-day functions of Viacom or CBS for some time. CBS is run by CEO Leslie Moonves.

When Redstone dies, the Sumner M. Redstone National Amusements Trust will determine what happens to his controlling interest in the companies. The companies each have a two-tier stock structure, with most shareholders owning nonvoting shares.

Still, a fraught and protracted legal battle could harm the Redstone empire even if the court finds the allegations to be meritless, said David Becher, a professor of finance at Drexel University.

"Even if it is a frivolous suit and there's nothing going on, I think the distractibility is going to hurt the company," Becher said.

WHOLE FOODS DIVES AFTER RESULTS; ANNOUNCES $1B BUYBACK

Original Story: cnbc.com

Shares of Whole Foods plunged as much as 9 percent after the company released fiscal fourth-quarter earnings Wednesday.

Whole Foods also announced a $1 billion stock buyback program, dividend increase and capital structure plan. An ESOP lawyer is reviewing the details of this story.

The grocery chain posted quarterly revenue of $3.44 billion, missing analysts' expectations for $3.47 billion, according to Thomson Reuters. Whole Foods reported GAAP earnings per share of 16 cents. Adjusted for one-time items, the retail chain reported earnings per share of 30 cents, missing the 34-cent mark analysts had been expecting.

The shares later recovered slightly to a drop of 6 percent in extended trading.

Comparable-store sales — a key metric for the company — decreased 0.2 percent during the quarter. Analysts had expected growth of 0.7 percent, according to consensus estimates from Consensus Metrix. An Atlanta securities lawyer has extensive experience representing broker-dealers, registered representatives, investment advisers, and financial planners in securities matters.

The company attributed the big miss to competition among its own stores and mainstream retailers as well as negative publicity surrounding a New York City overcharging scandal.

Whole Foods, which is battling to lower prices while maintaining its position as a high-quality retailer, has become one of the biggest turnaround stories in the U.S. food sector.

"In this dynamic and increasingly competitive marketplace, we recognize we need to move faster and go deeper in creating a solid foundation for our long-term profitable growth," Co-CEO Walter Robb said on the earnings conference call.

"Promotions and price investments are an integral part of our conversation, but we are not participating in a race to the bottom."

Robb also told investors that comps could "get marginally worse before they get better [in fiscal 2016], with an inflection point later in the year." Restructuring costs could also lead to a decline in operating margin of up to 75 basis points from the 6.1 percent Whole Foods reported a year ago.

The deceleration in same-store sales has troubled investors in Whole Foods, which is fighting to keep a grip on the natural and organic grocery category it pioneered and long dominated. An Albany restructuring lawyer is following this story closely.

"They've been pushing the buyback lever for a while here," Leigh Drogen, CEO of open financial estimates platform Estimize, told CNBC. "The problem here is not anything that Whole Foods actually has an ability to change, it's just the total addressable market issue. They've saturated the market with what this product is, and there's really nothing for them to do at this point."

The $1 billion buyback would bring the company's total share repurchase program to $1.3 billion. Whole Foods also declared a 4 percent increase in the quarterly dividend, payable in January.

Last month, the company announced a minority stake in the upscale sandwich chain Mendocino Farms. It did not disclose the size of the investment.

The news came about a month after Whole Foods said it would cut its staff by 1.6 percent as it works to lower prices and better compete in the food retail industry.

The specialty food company's shares have declined nearly 40 percent this year amid growing competition from mainstream retailers who have increased their natural and organic food offerings.

In comparison, the S&P 500 food and staples retailing industry group, which includes shares of Whole Foods, Wal-Mart and Costco Wholesale as well as other retailers, has declined just 6 percent on the year.

PELTZ'S TRIAN FUND TO INVEST $2.5B IN GE

Original Story: cnbc.com

Trian, the $13 billion activist hedge fund run by Nelson Peltz, on Monday unveiled a roughly $2.5 billion investment in General Electric.

"We invested in GE because it is undervalued and underappreciated by the market despite what we believe is a transformation that will allow its world-class industrial businesses to drive attractive shareowner returns, "Nelson Peltz, CEO and a founding partner of Trian, said in a statement. "Our recent discussions with Jeff and his team have solidified our belief that they are highly motivated to fully deliver on GE's transformation and share much common ground with Trian on ways to improve long-term shareowner value." A San Diego securities lawyer is reviewing the details of this case.

The GE investment is the largest in Trian's history, but unlike many of the fund's more combative positions, the stake in GE and Trian's approach towards it is being described as supportive of current management.

Trian, which has been in active discussions with GE's chief executive Jeffrey Immelt, has not asked the company for a board seat and has made it clear it supports the current strategy being pursued by Immelt.

That strategy has focused GE as an industrial infrastructure company that will derive more than 90 percent of its earnings from those businesses once the divestment of GE Capital is completed in the next two years.

Trian believes GE's share price does not reflect the drastic change in its profile or the consistent earnings growth that change will bring.

Ed Garden, Trian's chief investment officer and a founding partner, said in a statement: "Trian believes GE has significant long-term potential and that its implied target value per share, including dividends,could be $40 to $45 by the end of 2017 based on our view that GE can deliver EPS of at least $2.20 in 2018." An ESOP lawyer is following this story closely.

GE's stock price continues to trade well below the level it was at prior to Immelt's ascension to CEO more than fourteen years ago and has a offered total return of only 10 percent over the past 10 years. (Get the GE latest quote here.)

Those lousy numbers are not lost on Immelt, who has been frustrated with the relatively tepid response GE shares have received from investors since the company announced its decision to largely exit its financial business last Spring.

It was GE's decision to divest most of the assets of its GE Capital unit that attracted Trian to its stock.

Trian's investment, while welcomed by GE, is not without risk for current management. While Trian has taken a number of so-called friendly positions through the years, it is far better known for its fights.

Its most recent battle, with chemicals giant Dupont, left Trian without any board seats after a bruising proxy fight that could be revisited in the not too distant future.

In its paper explaining the GE investment, Trian asks that management continue cost reductions so that operating margins reach at least 16 percent by 2018. It asks management to commit to roughly $20 billion of incremental leverage and explore share repurchases beyond GE current guidance and it notes that, while it did not ask for a board seat, it "expects management to deliver on its commitments."

GE has not publicly shared margin targets for 2018 or discussed further repurchases of its shares beyond the current plan.

In a statement on Monday, GE's Immelt said: "We welcome Trian's significant investment in the Company. GE maintains an open dialogue with our shareholders and enjoys productive, collaborative relationships with them. I have known Trian Principals Nelson Peltz and Ed Garden for many years. Trian has a strong track record of working with companies to build long-term shareholder value, and has been an engaged shareholder. We appreciate their perspectives and look forward to a constructive ongoing dialogue with Trian as we execute our strategy to reshape the Company.

Immelt added: "GE is focused on improving margins and returns,reducing costs and the size of corporate, returning capital to shareholders and realigning our portfolio, most recently with the announced exit of most of GE Capital. Significantly, we have a plan to return more than $90 billion to investors through 2018 and are on track to complete our goal of closing $100 billion of GE Capital asset sales in 2015. We are transforming GE into a focused infrastructure and technology company, leading the intersection of the physical and analytical worlds. "Our businesses are performing well in a volatile environment. In the second-quarter earnings announcement, GE raised its full-year Industrial operating earnings per share guidance to $1.13-1.20 and is on track for that goal. We are confident our strategy will further enhance shareholder value and continue to position GE for long-term growth and success."

More On GE

CLEVELAND, Ohio -- General Electric announced Wednesday that it will start a new company called Current, an energy company that integrates LED, solar, energy storage and electric vehicle businesses. An environmental lawyer represent clients in litigation and regulatory and permitting issues.

Maryrose Sylvester, who is president and CEO at GE Lighting at Nela Park in East Cleveland, has been selected to lead the new enterprise, according to a press release from GE. Sylvester will continue to oversee the local GE Lighting operations as well. 

It is unclear at this time what other impact, if any, that Current may have on the East Cleveland icon.

"We are still working through the details, but there are no plans to make any significant changes at this time," said Christopher Augustine, director of global communications and public affairs for GE Lighting. "Over the coming months we will work through the transition plans and share updates as appropriate."

Sylvester has been leading the 100-plus-year-old GE Lighting, a $3 billion enterprise, since 2011. In her new role, she is expected to scale Current from a $1 billion startup to a $5 billion business by 2020, the press release read.

Current will be headquartered in the greater Boston metropolitan area, with an additional presence in the Silicon Valley. It is expected to create roughly 200 new jobs focused on software, selling and energy product management over the next few years.

"Current combines GE's products and services in energy efficiency, solar, storage, and onsite power with our digital and analytical capabilities to provide customers – hospitals, universities, retail stores, and cities – with more profitable energy solutions," said Jeff Immelt, chairman and CEO of GE in a written statement. "The creation of a new company within GE reinforces our commitment to take energy to the next level, focusing on custom outcomes for our Commercial & Industrial customers, municipalities and utility partners, and delivering a platform that can be upgraded as technology advancements are made."

Current will begin with more than $1 billion of revenue and build on GE's legacy in energy and deep roots in technology.

Walgreens, Simon Property Group, Hilton Worldwide, JPMorgan Chase, Hospital Corporation of America (HCA), Intel and Trane, a brand of Ingersoll Rand, are already signed on as Current customers, the press release read.