Happy 4th of July

Happy 4th of July to all of you and your families. I want to thank you for your support of this blog. I really appreciate the feedback after posting on this site for over five years now.

The birthday of America is a special day, and for all of the service members in our military forces I thank you in a special way. Thank you for your sacrifice for us, so that we may live in peace and freedom.

I just finished recording a 4th of July podcast for Life Coach Radio Network. Some of you know that I host a podcast series called, “Undivided” and the show is one year old now. It has been a blessing to reach people with messages of hope, unity, harmony and peace.

My latest episode was on America: Individualism versus Community. Many people think that individualism is a “good thing” and certainly individual freedoms are the core of American society and should be celebrated.

However, it has come at the expense of our communities and our sense of community. We have lost that collective and shared responsibility for one another, that sense of community, was once a bedrock of American society.

There are many causes for that disconnection: technology, the economic phases, and other sociological situations. The podcast looks at the role of the individual contrasted against the collective. It provides concrete ways to move beyond your own individual focus and find pathways to increased community involvement.

I invite all of you to listen to my podcast and I hope it helps you to foster better connections to your community. That is how we can truly move America forward in unity and harmony.

Please use this link to listen:
http://www.blogtalkradio.com/lifecoachradionetwork/2018/07/03/undivided-episode-25–america-individualism-versus-community
Thank you all for your support. I wish you and your families a safe and Happy 4th of July!

Follow Up: Toys R Us Comeback / Mergers Roundup

In a follow up to a recent post, bankrupt Toys R Us may make a comeback under a new plan outlined by a former CEO of their company, Jerry Storch, who is working to revive the brand.

Mr. Storch, according to CNBC, has been in talks with Credit Suisse and Fairfax (the group which successfully bid for the Toys R Us Canada division) to put together financing and a strategic plan to bring back a “few hundred” Toys R Us stores. The chain had 800 locations in the U.S. that are all in the final stages of shutting down at this time.

The plan being formulated by Mr. Storch would include former executives from the company in a new leadership team. It would, according to reports, place Toys R Us and Babies R Us in the same physical retail space under one large floorplan. The original way that the company operated was with two separate physical retail locations for each of those brands.

This would streamline operations, shipping, and receiving. It would also streamline hiring and provide other cost controls which were lacking in the original version of the brand.

The former Toys R Us corporation will be holding the final piece of business before it fully dissolves: an auction for their intellectual property. That auction will be held next week, and Mr. Storch plans to win the auction so that he can utilize that intellectual property in the “reboot” of the brand.

This situation merits watching as the entire toy industry would benefit from some sort of presence from Toys R Us in the future. The impact of the revival of Babies R Us would be helpful to parents, particularly new parents, and toddlers throughout our country.

Mergers Roundup

In other mergers and acquisitions news, the rumor that Kraft Heinz was looking to purchase Campbell Soup sent the share price of Campbell up significantly on Tuesday. The analysts on Wall Street, for the most part, feel that this merger does not make sense for Kraft Heinz or Campbell to do at this point.

The view of “the Street” is that Kraft Heinz needs to grow internationally and should focus their next acquisition on expanding their global business presence. The expense needed to purchase and recalibrate Campbell would be better used on a different purchase in the view of many analysts.

My own perspective is very different, in my experience in the food industry and having worked for a supplier to both those major companies, Kraft Heinz has some definite synergies with Campbell that would help both parties to grow. The expertise of Kraft and their distribution system could absolutely take Campbell in a whole new direction and create some great new product innovations for the consumer.

Furthermore, I think that Kraft Heinz can do both: they could purchase Campbell and still obtain a Mondelez or another company with a large international footprint.

The other aspect to watch here is that there are powers within Campbell that may not want to sell off the entire company, it may sell a piece to Kraft instead. This rumor is worth paying attention to because then the whole other area involved is what do you call the company? Do they part ways with the Campbell name that has been around since just after the Civil War?

Campbell is in disarray and has no CEO, the company is in need of a major overhaul and Kraft Heinz could be the right fit for them to ensure their survival.

ConAgra and Pinnacle Foods merged today in a deal worth somewhere between $8 and $10 billion depending on what report you access. That proposal came up quickly to the public (no doubt the behind the scenes channels have been at work here for a while) and it became finalized relatively fast.

This merger represents an aggressive push from ConAgra to keep expanding into the frozen foods area. They have made other smaller consolidation moves to support this new strategic growth area, but this Pinnacle move is a major gain by ConAgra.

I have watched ConAgra closely the last several months as they look to recalibrate their brand portfolio. They are chasing Nestle in the frozen food space, and this supports demographic trend data that reflects that millennial consumers are more likely to purchase frozen products.

Pinnacle has some other brands that make this move interesting from shelf stable products, and gluten free options because they purchased Boulder Foods recently who is a big producer of bread for those seeking gluten free alternatives.

The final merger rumor in the roundup today is the news of CBS and Amazon potentially joining forces. The news comes as a surprise to some, as no surprise to others, and as a “long shot” to still others with knowledge of that situation.

The “face value” of the proposal makes sense, Amazon needs more video content it is losing out to competitors for that reason. CBS has some of the most watched TV content in the mainstream broadcast categories, and would be the most cost effective merger target. CBS wants to merge with someone in “new media” to survive in the new TV landscape.

The acquisition of CBS would be the largest deal Amazon would have done to this point, if it does indeed ever come to fruition. The roadblock is the court activity surrounding the lawsuit between CBS and their parent company, National Amusements, (which I have covered previously on Frank’s Forum) over the Viacom merger.

The general industry sentiment is that CBS is going to have a hard time winning that suit to get out from under National Amusements in order to negotiate their own deal for acquisition.

The alternative way this could go is that the situation gets so acrimonious between CBS and their parent company (we are basically there now) that National Amusements may choose to sell off CBS. They would then take that money and invest it either into Viacom and their other holdings or make a series of other smaller moves to restructure their holdings.

The CBS – Amazon potential, in my view, has some merit to it. I still maintain though as I have for a while now that CBS is still more likely to become part of Verizon. That could be a very good merger for both parties involved.

These and other mergers will be covered as the summer rolls on. I can express one sentiment most will agree with me on: I am rooting for Toys R Us to come back for the next generation of kids.

Follow Up: Disney & Comcast Bidding War Round 2

In a follow up to an earlier post on this topic, the bidding war between Disney and Comcast over the assets of 21st Century Fox entered round 2 on Wednesday.

Disney announced that they have increased their bid to Fox up to $71.3 billion with the ratios being half cash/half stock instead of an all cash bid. This represents an increase from the $31.00 per share offer Disney originally made for Fox to reflect a new valuation of about $38.00 per share.

The new Disney bid is also 10% higher than the bid that Comcast made recently. The financial news media has been buzzing about this activity all day in the most recent in a long series of events involving this potentially huge acquisition.

However, the perspective that is intriguing is the seemingly increasingly conflicted viewpoints from those in the industry about what Comcast should do and how they should respond. Some anticipate a new bid from Comcast, a counter punch to Disney which is rumored to be around $41.00 per share.

Then, there are others who maintain that Comcast should let it go, that they should walk away and let Disney acquire Fox. The rationale being that it is going to become an expensive and exhaustive process with Disney that will leave Comcast over-leveraged. The ultimate value of Fox will be offset by the damage it will do to Comcast in both the short-term and long-term through the process they would take to obtain the Fox content/assets.

In my perspective I can see both sides of the argument and can understand why Comcast could push even further into the bidding war, or why they could ultimately surrender their position. The question of value will certainly come up in the next week or so while this plays out: What is the value of Fox and what it can provide my business?

The answer to that question looms largely over Comcast HQ in Philadelphia today. The content that Fox holds is certainly intriguing, and content is the new currency in the media industry, as it has been explained on Frank’s Forum in the past.

Moreover, Disney has deep pockets and is a larger entity than Comcast. The impetus for Disney is all of the ways they can maximize new streams of revenue through the rights to the content that Fox currently holds. Disney is the best in the industry at taking characters and marketing/merchandising them to their maximum potential.

In addition, Disney can afford a bidding war here for Fox, where Comcast could be left with some damage from a war with Disney. Disney, as reported by CNBC, also needs the content for their new streaming app service. Comcast has content in the pipeline and has video on demand services for their customers.

The anti-trust regulations are another potential trouble spot for Comcast in this bid. My most recent work detailed the AT&T merger with Time Warner and the differences between horizontal and vertical mergers.

The U.S. federal regulators according to Bloomberg News are likely to approve the Disney bid for Fox. The rationale, as I have written previously, is because they view Disney as a content company that has no stake in telecommunications/cable TV services or broadcast television.

Conversely, the regulators view Comcast as a horizontal threat to create a monopoly because their core business is telecommunications and cable/broadcast television service. That perception is a big issue for Comcast in this bidding war.

In the end, some industry people have predicted that this bidding war will go another round with Disney winning the bid at $45.00 per share valuation of Fox. The other faction believes that this will not go another round, that either Comcast will announce that they have quit, or Fox will state that the Disney bid on the table is acceptable to their shareholders.

The fact will remain that it looks like Disney will get even larger as a result of this deal. They will have a treasure trove of new content and could have tremendous influence on how we, as consumers, gain access to content. The implications of this merger will have a profound impact on the media landscape in the future.

Comcast has the next move, and time will tell how “conflicted” they are over this potential acquisition.

Follow Up: Court Allows AT&T – Time Warner Merger

The merger proposal seeking to join AT&T and Time Warner has been surrounded by controversy almost from the time it was first announced. This proposed merger of a telecommunications and media distribution giant and one of the largest media content creation companies in the world has been the subject of several prior pieces on Frank’s Forum.

The blockbuster $85 billion merger was being held up by a lawsuit brought by the Department of Justice over anti-trust concerns. The government was very concerned about AT&T’s ownership of DirecTV and the impact that the merger with Time Warner would have on the costs for rival cable companies to carry channels such as HBO, CNN, TNT, and TBS.

The government was pushing for certain conditions such as having any disputes over high cable prices in light of the AT&T – DirecTV connection be directed to 3rd party arbitration to determine a fair judgement on price. The other condition centered upon blackout rights.

However, the judge in the case, Judge Leon, approved the merger without any conditions attached. The judge viewed the case strictly in terms of a vertical merger between two companies with different core strengths.

The precedent in anti-trust suits very often favors vertical mergers versus horizontal mergers. Some recent examples of horizontal mergers of two entities in the same type of industry are Office Depot and Staples and Walgreens and Rite Aid, both of those mergers failed due to anti-trust concerns over pricing of office supplies or pharmaceuticals, respectively.

The next steps for the government are unclear. The judge, Judge Leon, asked the Department of Justice to not appeal or seek a stay on the decision. His basis for this request is that both sides have spent an exorbitant amount in the case in legal fees and court fees in the “tens of millions”. The view of the court is that AT&T and Time Warner do not compete with one another currently and that the same opinion will be found by another court proceeding.

Some feel that the judge is right on point with this decision on this case. The other sentiment is that the conditions should have been attached to the decision to protect the consumer from hiked cable prices.

In my view, I maintain that the judge neglected to recognize the connection with DirecTV and the potential for the Time Warner properties in the cable television realm could be manipulated to make an unfair advantage for DirecTV. This becomes a bigger issue when certain customers cannot have a satellite dish where they reside. It could result in them paying more for cable or premium channels such as HBO.

The domino effect from this merger will impact potential merger opportunities in the works right now which have been featured on this blog in the past. The big story of the day on Wednesday is the impact this merger decision will have on the Comcast proposal for the assets of 21st Century Fox.

Comcast had stated publicly that they would not get involved in the bid for Fox unless the court gave the green light to AT&T in this case. Comcast was seeking to avoid a protracted lawsuit. The wild card here is that should Comcast make a bid for Fox, the government could get involved because they are both in the same business. The court could see a case for the government because it will be viewed as a horizontal merger, which could become a long slog in the courts for Comcast.

Disney and their bid for Fox has a slightly different perception because they view Disney as a content creator and entertainment company which does not have any expertise in delivering telecommunications services or with cable equipment. They are seen as having a potentially easier path to potentially obtaining Fox.

The stock price outlook for Comcast has been slashed by major investment banks and fell to about $30 per share this morning. This signals that if they do make a play for Fox and get in a bidding war with Disney, they will eventually have to buy back shares. The maneuvers have a direct impact on the valuation of the company.

This merger also brings new traction for CBS and Verizon as a potential opportunity to join forces in the future. CVS also gained from this decision because they are seeking to buy Aetna and this court decision on Time Warner proves that CVS has some viable evidence that this play for Aetna can be seen as a vertical merger opportunity.

This mega merger will make AT&T a much larger player in the media landscape which also brings to the forefront the battle between “old media” versus “new media”. The reality is that if old media outlets do not join together they will be destroyed by the new media giants such as Amazon, Google, Netflix, and Facebook.

The other reality is that the court looked at this merger with the perspective that cable television services will have to drop prices in order to compete with new media so they are going to allow it to move forward.

The next big prospective M&A prospects are Fox and CBS. The Viacom scenario was a disaster and CBS is looking to move forward to partner with someone else to gain competitive traction as other entities are getting larger.
The effects of this merger will be felt for a long time to come. The way that AT&T handles the marketing and promotion of the former Time Warner channels when they are provided to other cable TV providers such as Fios, Comcast, and Dish.

The domino effect on the other mergers in play right now will also create conditions where the precedent could be difficult for the government to try to protect against the anti-trust implications involved.

In the end, this merger sets the stage between old media versus new media and how that will play out will have a definite impact on the American consumer.

Bayer Announces End To Monsanto Name After Merger

The mega merger between Bayer and Monsanto was approved last week by the U.S. Justice Department ending months of anti-trust scrutiny. Bayer will have to sell off an unprecedented $9 billion in industry assets in order to clear the regulatory hurdles and the deal is expected to close on Thursday.

The news on Monday was that Bayer will end the Monsanto name after the merger due to the negative public image it has with consumers. The news is not surprising given the backlash Monsanto has received for years from the American public and the farming industry.

The news that the merger was going to move forward is a surprise to many people, the companies are both huge and have very diverse product portfolios. However, those product portfolios are clustered in the same types of industries especially when comparing the agriculture products holdings of both companies.

Therefore, that necessitated the big sell-off of assets by Bayer to make this merger happen. The precedent for a merger this large to actually be approved will have a tremendous impact on future M&A activity.

The Bayer – Monsanto merger will clear the path for mega-mergers to take place in other industries in the future. This is a merger that makes Dow-DuPont look small and that is a frightening prospect.

In my view I think the “Big Pharma” industry and the major media companies are going to try to capitalize on this merger with attempting to push through M&A proposals of their own in similar scale. The biotech field could also use this merger as an example of precedent for their own consolidation activity.
Furthermore, this merger between two titans in the agricultural industry will have an impact on the Disney bidding war with Comcast over the remaining assets of 21st Century Fox. That is a big decision that federal regulators will eventually have to make which will have an impact on the consumer who spends time watching TV or movies.

The Bayer – Monsanto deal is far more significant because, even though the Monsanto name is being erased from history, the products they manufacture will remain. The brand names such as Roundup will remain active and the merger with Bayer will not change anything, it is business as usual. This is bad news for the consumers, the farmers, and just about everybody.

Monsanto has built a negative public perception and an even worse brand image on the unabashed manufacturing of pesticides, herbicides, weed killers, and GMO containing seeds for food crops. The company has continued to make products that have been linked to certain cancers, autoimmune diseases, asthma, autism, and a host of other maladies.

The perception of Bayer in the U.S. is one that largely is shaped by the eponymous brand name of aspirin that is very popular as well as Alka Seltzer and some other branded products in the drug store channel. Those brands enjoy a largely positive image in America, and in my conversations with many people about this topic another theme came to the surface.

That theme is that German companies have a perception of integrity and for producing goods of high quality. The people I spoke with had the impression that Bayer would “turn around” Monsanto and that European influence would be for them to start making organic, environmentally friendly, and non-GMO containing seeds.

Unfortunately, from all the public statements we have from Bayer in Germany that will not be the case in this merger. They plan on keeping the U.S. headquarters for the new conglomerate in St. Louis, and they plan to continue to make those same products that Monsanto is producing currently. This is not to imply either that Bayer lacks integrity or that European companies are losing that sense of common values because that would be an inaccurate generalization.

Bayer is a microcosm of society: it creates some things that make the world better and it creates some things that make the world worse. It is also a perception versus the reality, some people feel that GMOs are safe and that having a good-looking lawn is more important than not using chemicals on the grass.

That strategic direction may surprise some people, especially Americans, but it is to be expected. Bayer will inherit brands from Monsanto that make billions of dollars in revenue each year. The American consumer and the farmers lose out here because this merger creates less competition in the seed and other agricultural products areas. The American consumer loses because the GMO and genetically altered food fight just became more difficult to win.

In the end, Bayer might enjoy a positive public perception in America right now, but it remains to be seen how that might change in the months and years ahead. The name Monsanto might be retired from the ranks, and Twitter is going to take the place of Monsanto in the S&P 500 this week, but Bayer is now tied to the legacy that Monsanto has built, and it is a rather negative one at best.

Bayer has made statements that they plan to “engage the consumer in new ways” I have no idea what that means. I do know that it does not include the discontinuation of Roundup or any of the other harmful chemical products produced by Monsanto.

This merger will have a direct impact on the American food supply, on the prevalence of genetically engineered ingredients in food, and on the future of mega-mergers. The effects of this merger will be seismic and will be felt for a long time to come.

MLS Expansion: Cincinnati Named 26th Franchise With An Assist From The Uncertain Future of Crew SC

The domestic soccer world learned on Tuesday that Cincinnati has been granted admission into MLS (Major League Soccer) as the 26th franchise in the top circuit in North America. The “race to 28” which is the expansion plan by the league to get to 28 franchises by the year 2020, has long been detailed here on Frank’s Forum.

The Cincinnati club will begin play in 2019 and will fill a void in that area of the map for MLS as they look to expand their reach into new markets for soccer. The bid was successful based on a variety of factors: they have an established fan base as the current USL team there has shattered attendance records averaging over 24,000 fans per game and frequently selling over 30,000 tickets to home matches, they have a stable investment group of local business leaders, and they have plans for a new stadium with government support.

However, in my view, the Cincinnati bid for expansion was fast-tracked because of the uncertainty surrounding a current MLS franchise (an original franchise no less) the Columbus Crew SC. Some fans of MLS may already be aware, but for those who are unaware, the situation in Columbus is this: the franchise operator Anthony Precourt wants to move the team to Austin, TX and they are in the middle of a lawsuit in Ohio with a group that aims to keep the team from relocating.

The desire to relocate to Austin was not pulled out of the ether, the impetus for the move was due to a common theme in pro sports in America: a dispute over a new stadium. The Crew play in the first soccer specific stadium to be built in MLS in Columbus, which was a key component of their bid back in the mid-1990s to get one of the original bids for franchise ahead of Cleveland, which had no plan for a dedicated stadium for a soccer team.

However, that facility in Columbus is now viewed as outdated compared to other state of the art facilities that have been constructed by other MLS franchises in the two decades since the Crew SC were born into the league. The plan hatched by Mr. Precourt was to use Austin as leverage against Columbus and see which city gave him the best deal on a new stadium; which is a move that has been used by other owners in other sports for years.

Columbus officials felt that the residents would not approve any measure allocating public funds (tax revenue) towards the construction of a new soccer facility for the team. They countered with a plan to renovate the existing stadium to make some enhancements that would benefit both the players and the fans.

Mr. Precourt balked at the renovation, and according to reliable news outlets, began privately ratcheting up his negotiations with Austin public officials stating that he intends to move the team to the Texas capital city. This brought about the court action which has taken several twists and turns in the past few months. It also angered the investment groups bidding for expansion teams in other markets because they were seen to be ahead of Austin in the running for a spot and saw this maneuver as Austin trying to “cut the line” and gain a team without going through the full expansion process.

In my perspective, the circumstances surrounding Crew SC provided the conditions for Cincinnati to gain an expansion bid ahead of other cities because MLS was looking at the prospect of having no franchise presence in Ohio. The population demographics and the geographic location of Ohio makes it a critical market for any professional league from a business standpoint.

The Cincinnati entry into MLS next year “covers their bases” if Precourt moves Crew SC to Texas. The bid for Cincinnati had a leg up on other bids because they do not have to wait for a stadium to be built – they are going to play in their current home, Nippert Stadium on the campus of the University of Cincinnati for a few years. This enables the club to join and begin play seamlessly in 2019 because they are not rebranding the USL club colors.

This is to take nothing away from the investment group in Cincinnati or the Mayor or other public officials there who put together a very organized bid compared to other cities who have struggled (Sacramento, Detroit, and St. Louis jump to mind). The plan for the West End stadium is very bold and innovative and will seek to achieve what so many other MLS stadiums have been commissioned to do in the past: turn around a blighted neighborhood of a major American city.

The league now will have a presence in Ohio regardless of what happens in Columbus which will appease the major national sponsors and the league’s TV partners: ESPN, Fox Sports, and Univision. FC Cincinnati will have a natural rival with the new Nashville expansion team which will be joining MLS soon as well, so if Columbus does lose the Crew, the regional rivalry can be easily ramped up with Nashville.

The demographics for Cincinnati and Austin are similar, both are attracting young professionals starting their careers or under 35 years old: MLS targets this demographic and covets it. The officials in Austin have big plans for a stadium there for soccer and they would have built-in rivals with FC Dallas and Houston Dynamo both playing in the Lone Star State currently for MLS.

The court action has damaged the business for Crew SC this season, with bad weather and fan apathy playing a part in dwindling home crowds for the matches held there so far this season. I was watching past games via the ESPN+ app which has the streaming rights to all the MLS games, and the home match I saw with Crew SC had camera angles showing an nearly empty stadium.

The court proceeding has played out very publicly in Ohio throughout the media. The latest tactic by the group in Columbus was to attempt a court injunction using the “Modell rule” which was adopted after Art Modell moved the Baltimore Colts NFL franchise in the middle of the night to Indianapolis. The rule seeks to prevent a current team owner from relocating a team without first providing another group in the team’s current local area from putting together a competing proposal to purchase the team.

The counterpoint argument by Mr. Precourt’s attorneys was very smart. I have written in the past that MLS is a single entity model structure which means that MLS owns all of the teams and the local groups are “operators” of the franchises. The legal argument was that MLS was the owner of Crew FC, not Precourt Sports Group, and MLS owns many teams in many states, so as operator of a franchise Mr. Precourt was essentially just following orders.

In the end the court will decide and that ruling could be appealed to a federal court because it is considered interstate commerce and a bunch of other legal jargon being thrown around will serve as a distraction. It will serve as a distraction from the fact that MLS wants to be in Austin because they think it provides a better long- term demographics forecast in the future than Columbus. The translation: they can make more money in Austin and play in a new facility with better revenue controls than the deal they have in Columbus.

Those factors all benefitted a Cincinnati group which was a little late to the expansion table, to get a seat ahead of other entrants who have been working for many years to put all the pieces together for a successful bid. The MLS walks away a winner because the Cincinnati team will be very successful at drawing fans because they have proven that already, they potentially gain access to the untapped Austin marketplace without giving up an expansion spot to another city, which means the league will still be able to add two more teams to get to 28 franchises.

The situation in Columbus is fluid as are the developments in Detroit with the land swap deal with the site of the jail, Sacramento and their quest for a stable “operator” to join the investment group, Phoenix trying to get their act together overall, and St. Petersburg trying to convince MLS that a third Florida franchise makes long-term business sense.

The league is growing, my own view is that I hope it does not grow too large that it collapses due to over expansion, only time will tell.

Red Nose Day 2018: Fighting Child Poverty

The annual event known as Red Nose Day will be held for the fourth time in the United States on Thursday, May 24th. The fundraising and awareness event seeks to combat the effects of child poverty both in the U.S. and throughout the world.

The entire day features activities aimed at connecting people to both the cause and to others within their respective communities. The goal being to raise funds for trusted partner organizations that work within our neighborhoods to provide food, medical care, and educational services to children in need.

The Red Nose Day fundraising special night of programming will air once again on NBC (for the fourth straight year) which will feature special editions of primetime programs similar to their approach last year. Then, at 10 PM Eastern/ 9 PM Central the Red Nose Day Special will air with Chris Hardwick hosting for the second consecutive year. The 2017 event raised $40 million according to the press release.

In the last three years the event has raised $100 million and helped over 8 million American children living in poverty. The event sponsors from last year have all renewed their commitments for 2018: Mars Wrigley Confectionary Company (M&Ms brand is a main sponsor), Walgreens, NBC, and The Bill & Melinda Gates Foundation. Comic Relief USA is the non-profit organization behind the entire Red Nose Day operation, both in the United States, the United Kingdom, and throughout the world in 34 different countries.

This is the fourth straight year that this blog has dedicated a post for this event and that is because of the important group that it serves: children. The world is filled with disadvantaged, impoverished, and malnourished children. The streets are filled with homeless children with no means of supporting themselves.
The Red Nose campaign has provided 32 million meals to children in the United States, has provided care for 60,000 homeless children, and provided medical services to 6.7 million children globally.

The Red Nose campaign has been in existence since 1988 and continues to benefit programs in a focused and local level to reach children very effectively. The Walgreens partnership has been very strong in pushing the event to the American audience through signage in their retail pharmacy locations, their website, and through media buys in print, radio, as well as television.

Please check out home.rednoseday.org for more information about events in your local area on Thursday, May 24th. The NBC primetime special programs will air that evening culminating with the special celebrity-filled event hosted by Chris Hardwick.

Please consider donating either through the Red Nose Day website, at your local Walgreens, or during the live fundraising event on Thursday night on your local NBC affiliate.

Your donation will go toward helping the most vulnerable within our population: children. Thank you for your support of this wonderful fundraising effort.

Follow Up: Larian Ditches Bid To Buy Toys R Us

In a follow up to earlier posts here on Frank’s Forum the news on Tuesday is that billionaire Isaac Larian has ditched his bid to buy Toys R Us. The bid would have saved some of the store locations in the once-iconic chain and would have saved some of the several thousands of jobs being lost in the liquidation.

The original offer was believed to be made for around $675 million and the negotiations broke down when the court refused the offer on the table. Larian also found out this week that his bid to purchase the mammoth toy maker, Mattel, has also failed.

The toy industry is bracing for a U.S. industry landscape that does not include Toys R Us, which averaged $11 billion in toy sales which is a 50% market share of the $22 billion domestic toy business. Mattel and Hasbro have both seen tremendous losses in value since the announcement of the liquidation of Toys R Us.

Hasbro spent money in recent days to purchase the Power Rangers brand name and retail rights. The other toy manufacturers are quickly adjusting their distribution patterns and working with brick and mortar retail giants such as Wal-Mart and Target, which are both increasing their toy orders.

The emergence of toys in other more obscure regional chains will increase as well to fill the void left by Toys R Us. The major players mentioned earlier and Amazon will also be working together to grab larger pieces of the pie in the industry space.

Meanwhile, the last of the Toys R Us store locations are winding down their operations to close in the next few weeks. The future for the Toys R Us brand is completely unknown at this point, if there is a future at all. The bid from Larian was the only major bid for the business that is even known to be out there and that has fallen apart. The entry of another group of investors is certainly plausible but the amount of capital it will take to reinvent the brand and create a significantly better customer experience are two big mitigating factors in my view which could doom the brick and mortar presence of the brand.

The one viable potential opportunity for Toys R Us to get a reboot is if it is purchased by one of the major toy brands, such as Hasbro. The major toy makers have a great deal to lose in the reality of Toys R Us leaving the U.S. toy industry space. Mr. Larian, as I previously wrote about believes that the toy industry will collapse without Toys R Us. These toy makers have a big stake in the situation and could decide to try their hand at rebuilding the brand.

The other alternative is that Toys R Us will be purchased by another entity to be used as an online only retail presence. In my perspective, I have felt since this news broke on the liquidation of the once-dominant chain, that this route was the most likely scenario for the future of the brand. The shifts in the retail space toward the online shopping experience could make a lot of sense to an investment group or private equity group.

The Toys R Us name still has a value and a consumer visibility that would translate well into a strictly online presence. The potential investors would be far more likely to go that direction than to take on the significant costs of rebuilding a brick and mortar chain. The sad reality is the loss of jobs, and that is why I was rooting for Mr. Larian to be successful in his bid.

The next five to six weeks will be critical to the future of the Toys R Us brand, in that time period another bid could emerge, or the business may be sold off in pieces until there is nothing left but the memories most of us have from our childhood. It is a sad narrative that those memories could not be passed on to future generations.

Follow Up: CBS, Viacom, A Lawsuit, & Verizon

In a follow up to the earlier coverage on this merger, the drama around CBS and National Amusements (parent company of both CBS and Viacom) took a disastrous turn on Monday. The board at CBS took a harsh tactic in the negotiations by suing National Amusements in a Delaware court to block the potential merger with Viacom.

The suit seeks to dilute the authority that National Amusements has in CBS by reducing their voting stock percentages and other high level business machinations which are involved in certain situations when a company is going into a defensive mode to avoid consolidation.

The lawsuit also involves CBS seeking the protection of the CBS Board of Directors from being altered by National Amusements at any point now or in the future. This is a maneuver intended on preventing Shari Redstone from removing certain board members at CBS who have indicated that they are against the Viacom merger, and having her “stack the deck” with people aligned with her in pushing through the merger.

Furthermore, the suit also seeks protection for CBS so that they essentially do not have to accept a “bad merger” deal. This news on the lawsuit comes from Forbes, CNBC, and USA Today. Redstone, has stated that she had no intention of making changes to the CBS board, and both sides are pointing fingers.

This situation is getting ugly, to say the least, and it is unusual too because National Amusements has a hand in both entities already. The normal circumstances of other mergers or acquisitions are between two sides that have no prior affiliation. The ruling of the court in this situation will provide some insight into the potential path that this merger will take in the months ahead.
The court ruling will also provide a legal precedent for the future for M&A activity of this type. In my earlier feature length piece on this merger, the variables were presented regarding the differences of strategic vision that Ms. Redstone and Les Moonves (who runs CBS) had regarding the future of the company.

The merger makes some degree of sense because the assets of Viacom, particularly the cable television outlets, would provide CBS with more content to control and also a wider footprint in cable TV. The recent industry report that was published yesterday touts that cable television revenues have increased by about 10% nationally would seem to indicate that this potential merger is timely for CBS.

However, in my experience covering M&A activity, I kept returning to the rationale behind why CBS would take the option on Monday to sue National Amusements (which some in the media call “the nuclear option”). The only scenario that made sense to me was that CBS had another deal forthcoming or another potential partner for a deal they were trying to work out in back channels.

The one potentially fit in my mind was Verizon, because it had been rumored before, and I wrote about that possibility in an M&A “roundup” type piece I did on media companies. The synergy between Verizon and CBS makes sense for both parties given the other acquisitions and consolidations surrounding both of those entities.

Verizon is under pressure from AT&T, who is attempting to merge with Time Warner, and the federal government has a lawsuit in place currently to block that merger. Comcast is in the process of a bidding war with Disney over the assets of 21st Century Fox as well.

In fact, some within the financial news media suggested that Verizon may have backed off from making a formal proposal to CBS because of the federal government response to the AT&T deal with Time Warner.

The news broke about three hours ago today that Verizon has had contact with CBS and that there is some renewed interest in a potentially deal. That makes sense given the steps that CBS has taken with the lawsuit here against National Amusements. They may not want to take the Viacom deal if they have a better deal with Verizon.

The rather limited cable presence of CBS (Showtime and a couple of smaller channels) would be enhanced by a partnership with Verizon. The network shows on CBS are tremendous ratings drivers, which along with the NFL and other sports content, makes CBS a desirable commodity for Verizon as they seek to keep up with their competitors in the marketplace.

The Verizon potential involvement could be the “wrench” that gets thrown in the CBS – Viacom negotiations that causes a rift that cannot be repaired. The decision of the court will loom over this merger and will be pivotal to which direction it takes in the months ahead.

In the meantime, if the AT&T lawsuit with the government gets resolved that will determine the strategic direction that Comcast will take in the bidding war with Disney over Fox and will provide guidance to Verizon as they determine their commitment to acquire CBS. It is similar to a giant game of dominoes, except that billions of dollars are at stake as well as the careers of many seasoned industry executives, and the fate of consumer choice hangs in the balance.

Follow Up: All Cash Or All Stock – The Battle Between Disney & Comcast For 21st Century Fox Assets

In a follow up to an earlier full-length piece on this same subject, the bidding war between two media titans: Comcast and Disney have intensified with the assets of 21st Century FOX clearly in the crosshairs.

The business news media outlets were all buzzing on Tuesday morning with the news that Comcast is looking to attempt a move in mergers & acquisitions known as “crashing the gate”. This maneuver involves putting together, through a variety of ways, a huge amount of cash to put a premium level bid on the table which will change the valuation of the assets involved (in this case FOX assets) to sway those involved to go with that bid over a competitive bid.

The Disney bid which has been known to the public for a while now involves an all stock proposal for the FOX assets. The shareholders of FOX would get Disney stock shares at a level commensurate with their level of involvement in FOX stock ownership. There is a formula for all stock bids of this type which I will not go into further detail, plenty of other writers have covered that component of this deal and have done amazing work in that area.

My focus is two-fold: the bids for this deal as it relates to other media acquisitions and the impact on the media industry which also relates back to the consumers. This method of “crashing the gate” that Comcast is now seeking to employ in this merger is somewhat risky. In past M&A activity it has either worked very well, or failed in spectacular fashion.

The contrasting strategy by Disney, the all stock bid, is a more traditional approach; it is an “old school” method which has a more reliable historical track record. The bid by Disney is seen as a very important acquisition in terms of content ownership in an increasingly competitive landscape.

It should be noted that Fox prefers the Disney bid because the all stock approach would be more favorable for their shareholders. The Comcast bid being all cash would create a scenario where Fox shareholders would have to pay taxes on that in the short term, which is not a desirable position for a corporation to have to pass along a tax increase to shareholders.

The backdrop to this is the impending launch of the Disney streaming app service where the company spent an immense amount of money developing the app which will be a subscription based streaming service. Disney needs the consumers to enroll in their subscription- based app in massive numbers to “break even” on the outlay of dollars they sunk into the project.

The best way to ensure the enrollment of that scale and magnitude is to have a very broad based and extensive content collection. Disney plans to pull their content off of Netflix, with whom they had a partnership to exclusively stream Disney content prior to their own app being developed. The potential acquisition of the 21st Century Fox assets would provide a huge assortment of content for Disney to feature on their new streaming service.

Comcast is trying to also stay in prime position in the race for control of content in the new landscape of the television medium today. The efforts by Comcast to pull together a reported bid of $60 billion for the FOX assets is proof of their strategic importance to the media and cable TV giant.

However, according to Reuters and other outlets, the Comcast “crash the gate” strategy has one caveat that many find curious. Comcast will only pursue the full process of acquiring the FOX assets with an all cash bid if the banking and government entities involved in the AT&T bid for Time Warner allow that merger to take place.

Some found it strange that Comcast would make this request and would be that interested in the outcome of another merger within the industry. I thought about it and realized that Comcast is adding this caveat to the proposal because they want some legal precedent for a large scale merger of this type before they go “all in” on investing time and resources into taking it through the process.

The legal team for Comcast can use the decision in the AT&T / Time Warner merger to alleviate hurdles and a protracted legal suit with government ant-trust regulators if they have a precedent to utilize in their defense. The AT&T proposed merger with Time Warner has been tied up in courts for several months with significant costs to AT&T. Comcast does not want to fall victim to the same fate.

The case for Disney could be made because of the benefits of the all stock transaction but anti-trust oversight will be certainly a factor in either transaction whether it is Comcast or Disney with the winning bid.

However, in order to relieve some of that anti-trust scrutiny, Fox announced that they will take Fox News, Fox Business, and their cable sports division comprised of channels known as FS1 and FS2 ; and they will form a separate company that will be not part of this deal with either Disney or Comcast. The new company will be a spin-off of Fox and will have shares divided up among current Fox stockholders.

In my view, I was concerned about the cable news and cable sports divisions of the company being owned by either Disney (which owns ABC and ESPN) or Comcast (which owns NBC and NBC Sports). The major sports and news divisions would be run by one single entity if that spin-off company was not created. The impact on the viewer would have been significant and created concerns about the control of news and the cost of those cable subscriptions for both news and sports programming.

It remains to be seen what Comcast would plan to do with the content it could potentially wrestle control of from Disney that would represent the assets of the former 21st Century Fox properties. Comcast does not have a streaming app, but it could bolster the VOD (video on demand) offerings for their customers with such an acquisition.

The other industry rumor is that Comcast would seek to create a platform of channels that it could package out at lower rates to their subscribers as well as put together some sort of streaming package of channels like Hulu and YouTube have released recently.

Conversely, this brings about another potential issue with the Comcast bid, that it would benefit only the subscribers to Comcast cable services and not to the rest of the public. The same could be stated for Disney with their streaming app, but the argument could be made that everyone has the opportunity to join the app, but not everyone has the ability to become Comcast customers.

The precursor to the Disney app is the ESPN+ streaming app which just launched about a month ago. I was “grandfathered” into the ESPN+ membership because I held a subscription to MLS Live to watch all the soccer games from my days of covering the New York Red Bulls and the league.

The ESPN+ app is $4.99 per month and it is a tremendous value for a sports fan in my opinion. The amount of content on the app is robust and truly impressive. The ability to live stream games, watch archived games from earlier in a season, and the access to exclusive new programming is worth the cost. The average and the die hard sports fan would have several options and the addition of NHL hockey (which ESPN does not broadcast) streaming on the service is outstanding, especially with the Stanley Cup Playoff games currently ongoing.

A report from CNN later on Tuesday refuted some earlier reports saying that the Fox news and financial news assets would be spun off separately, but the sports division (FS1 and FS2) would go to the winning bid along with the other 21st Century Fox assets. That would be of interest to Disney to gain Fox Sports portfolio to bolster the ESPN+ app service even further.

The launch of the ESPN+ app was a smart business decision by Disney because if their streaming service is going to be on par or better than the ESPN+ service, then that could be a game changer for the industry, no pun intended.

The groundwork has been laid for a bidding war and it will be interesting to see what Disney will do and how they could counter this maneuver from Comcast. The viewers have a lot at stake as the cost that you pay for content could be impacted significantly but what transpires in the next several months.