Peter Oborne writes a must-read column for The Telegraph on how the Murdoch scandal is threatening, unnecessarily, to bring down David Cameron’s government.
The Conservatives don’t fully realize that Murdoch’s vice grip has been loosened, that for the few officials like Tom Watson and Vince Cable who refused to be corrupted, it looks like “their integrity has paid off and we are coming to the end of the Murdoch era, which was based around a cult of celebrity, collusion, criminality and deceit.”
For some reason, Mr Cameron and his close circle have emerged as the main public champions of News International. They are bravely - some would say wilfully - refusing to accept that the Murdoch system, as it flourished under Blair, Brown and early Cameron, is finished.
This posture first became apparent in February, when Michael Gove, the Education Secretary, launched an attack on the Leveson Inquiry while making a speech to journalists in the House of Commons. In a gigantic grovel to the Murdoch press, Mr Gove (a former News International employee) asserted that Leveson was in danger of producing a “cure that is worse than the original disease”. Yesterday, the Foreign Secretary, William Hague (who was paid a fortune for writing a News of the World column when the Conservatives were in opposition), was at it again, with a defence of the media tycoon on the BBC.
This, while the sourcing is awfully thin, is incredible if it’s only half true (emphasis mine):
A fresh embarrassment concerns Rebekah Brooks, who providentially retained the text messages she received from the Prime Minister, which I’m told could exceed a dozen a day. These may now be published, a horrible thought.
And I’d forgotten until Oborne’s piece that Tony Blair is godfather to Murdoch’s daughter. Amazing. He’s never asked a prime minister for anything, you know.
— Yet another study has found that mergers and acquisitions are usually a bad idea for shareholders.
Fortune’s Stephen Gandel looks at a new National Bureau of Economic Research report (emphasis mine):
Winning by Losing, which was released this week by the National Bureau of Economic Research, found that following an acquisition the stock of that company tends to underperform shares of similar companies by 50% for the next three years. Another finding of the study: Deals done in cash, which is often considered a more conservative way to pay for acquisitions, tend to do worse than deals done for stock. If an acquiring company doesn’t want its new owners’ shares, you shouldn’t either.
It makes sense. If you believe the stock market is halfway efficient, then it’s like to be a better gauge of value than some outside CEO. Sure, that CEO may be able to find some efficiencies, but the market has presumably already priced in the likelihood of an acquisition. The acquirer then has to pay 30 or 40 percent on top of that.
What does this mean for Wall Street? I-banks have been criticized for many of the things they did during the financial crisis. Some have questioned whether the dicing up of mortgages added any value to the economy. Perhaps on the first go around with mortgage bonds. But once Wall Street got to creating credit default swaps on synthetic tranches of mortgage collaterlized debt obligations, no way. If anything, the economy and the 99% ended up worse off because of all those Wall Street deals. Here, too, it’s not clear the I-banks’ M&A business is adding any real value to the economy. The good news is that there is no evidence that bankers are pushing companies to do these deals. CEOs are more than happy to launch into ill-fated combinations all on their own. Nonetheless, Wall Street is complicit in the game, and makes plenty of money off it.
— Deadspin’s John Koblin investigates how an ESPN columnist or her pals (or both) scammed people on an Internet venture they supposedly were launching.