Google Buys Songza, a Playlist App for Any 0ccasion

By BEN SISARIO July 1, 2014

In a sign of growing consolidation in the digital music business, Google announced on Tuesday that it had bought Songza, a three-year-old app that competes with Pandora and others in making customized playlists of recommended songs.

The price was not announced. But a person briefed on the deal, who was not authorized to speak about its terms, said that Google paid more than $39 million for Songza. Representatives of Google and Songza declined to comment on that figure.

Acquiring Songza could help Google improve its ability to offer musical "curation" — the buzzword of the moment in digital music, meaning the ability to generate playlists of songs that are tailored to each user. In the case of Songza, its specialty is a concierge service that matches playlists to particular times of day, or to activities, like working, studying or entertaining at home. A deal with the Weather Channel allows Songza to further tailor its music recommendations to a listener's current weather conditions.

"We can't think of a more inspiring company to join in our quest to provide the perfect soundtrack for everything you do," Songza said in a statement on its website on Tuesday afternoon.

The Songza deal is much smaller than Apple's recent $3 billion deal for Beats, which along with its line of popular headphones operates a fledgling subscription service whose chief selling point is playlists curated by music experts. Most of that purchase price was attributable to Beats's lucrative headphones business.

Google said in an announcement that it was not "planning any immediate changes to Songza," but may begin to incorporate the service into the company's existing services, like Google Play Music or even YouTube. Google Play Music includes an iTunes-like download store as well as a subscription streaming service, All Access, that competes with Spotify. Barely a year after being introduced, All Access is already available in 28 countries, but music executives complain that its appeal has been limited.

Songza, which offers its playlists free along with advertising, could give Google a readymade free music service along with expertise in creating playlists.

Introduced in fall 2011, Songza emerged from the ashes of a music download service called Amie Street, whose founders met at Brown University. Songza grew quickly, reporting 5.5 million regular users at the end of last year. Pandora, which has dominated the market for free streaming music, has more than 75 million regular users. Counting investments made in Amie Street, Songza has raised a total of $12 million from investors including Amazon, the William Morris Endeavor talent agency and the music managers Troy Carter and Scooter Braun.

Apple's purchase of Beats has triggered speculation of many further deals among streaming music services, many of which are run by small startups with limited budgets. Spotify, the sector's leader, has 10 million paying subscribers around the world and may be considering an initial public offering of stock.

Last week, Lew Dickey, the chief executive of Cumulus Media, a chain of more than 400 radio stations that owns a 15 percent stake in the streaming service Rdio, predicted in an interview with The Associated Press that "there will be handful of survivors" among such streaming companies.

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T-Mobile Made Millions With Bogus Charges, F.T.C. Says

By THE ASSOCIATED PRESS July 1, 2014

WASHINGTON — The Federal Trade Commission is alleging that T-Mobile USA, Inc., made "hundreds of millions" of dollars off its customers through bogus charges.

In a complaint filed Tuesday, the F.T.C. says the mobile phone provider billed consumers for subscriptions to "premium" texts such as $10-per-month horoscopes that were never authorized by the account holder. The agency alleges that T-Mobile collected as much as 40 percent of the charges, even after being made aware that the subscriptions were scams.

Edith Ramirez, chairwoman of the F.TC., said in a statement that the agency's goal is to ensure T-Mobile repays its customers. She said there were, "clear warning signs the charges it was imposing were fraudulent."

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DealBook: American Homes Acquires Rival in Buy-to-Rent Business

Mia Curcio/NYSE EuronextAmerican Homes 4 Rent, which went public last year, is positioning itself for consolidation in the industry.

In what could be the start of a wave of consolidation in the business of buying single-family homes to rent them out, American Homes 4 Rent, one of the largest institutional investors in foreclosed homes, said on Tuesday that it was buying a smaller competitor.

American Homes, which owns about 25,000 homes in two dozen states, said it had completed the acquisition of Beazer Pre-Owned Rental Homes, a real estate investment trust backed by the builder Beazer Homes. The REIT, which owns about 1,300 houses, was acquired by a company that was newly formed by American Homes for 8.2 million shares of American Homes and $5 million in cash. American Homes also assumed about $112.8 million on a credit line to the Beazer REIT.

The combination of stock and debt put the value of the transaction at about $263 million.

In a May conference call with Wall Street analysts, David P. Singelyn, the chief executive of American Homes, said he anticipated consolidation in the buy-to-rent industry and that American Homes had positioned itself as "one of the players in the consolidation of this sector."

The move toward consolidation in the business of buying homes to rent them out comes after institutional investors have spent more than $50 billion since 2011 to acquire 386,000 single-family homes across the country, according to RealtyTrac, a property research company. Institutional firms began buying homes at foreclosure auctions and from banks in the wake of the worst housing crisis in the United States in decades, which sent home prices plunging as much as 40 percent in some markets.

Industry participants say the rapid buying of foreclosed homes by institutional investors like American Homes and the Blackstone Group has ended and that they expect other early institutional buyers to sell homes to lock in profits as the business consolidates.

The Waypoint Real Estate Group, one of the first companies to raise money from private investors to buy foreclosed homes, is quietly shopping as many as 2,000 houses in California that it acquired over the last few years in several private investment funds, said three people who had been briefed on the matter but were not authorized to discuss it.

With the Beazer acquisition, American Homes, which is based in Agoura Hills, Calif., will now have almost 27,000 homes. The company is the second-largest institutional buyer of single-family homes behind Blackstone, which has bought more than 45,000 homes.

Beazer formed its single-family home REIT in 2012, a year after it began buying and renting foreclosed homes. The company started by raising more than $100 million from an investor group led by an affiliate of the private equity firm K.K.R.

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Bits Blog: Twitter Names Ex-Goldman Banker Anthony Noto as Chief Financial 0fficer

Brian Ach/Getty Images for TechCrunchAnthony J. Noto, a former Army Ranger and pro-football executive, proved himself a keen observer and trusted banker of web pioneers.

In another shake-up of its executive ranks, Twitter has appointed Anthony J. Noto as its chief financial officer, according to a filing with the Securities and Exchange Commission.

Mr. Noto replaces Mike Gupta, who had been Twitter's chief financial officer since December 2012. Mr. Gupta will become senior vice president for strategic investments, the filing said, overseeing a new division.

It is Twitter's second major change of senior executives in a matter of weeks. Ali Rowghani, formerly Twitter's chief operating officer, stepped down last month to act as a strategic adviser to Twitter. Chloe Sladden, a former vice president of Twitter's media division, also left the company last month.

Mr. Noto is a familiar face at the eight-year-old company. As a top technology banker at Goldman Sachs, Mr. Noto led Twitter through its initial public offering process in 2013, forging strong relationships with executives such as Dick Costolo, Twitter's chief executive. Mr. Noto announced his departure from Goldman Sachs in March, and planned to take a position at Coatue Management as a senior managing director working with tech start-ups.

The shifting in the ranks come at a crucial time for Twitter, which has seen widespread criticism from investors and analysts for problems with attracting new users to the service. The company's stock has lost nearly half its value since its record close of $73.31 on Dec. 26.

Thus far, Wall Street seems to have reacted positively to the major changes at the top of Twitter's organization; Shares of Twitter have steadily risen since Mr. Rowghani's departure last month, and were trading up more than 4 percent at $42.89 on the news Tuesday morning.

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DealBook: Short-Selling of Banco Espírito Santo Briefly Banned

LONDON – Securities regulators in Portugal and Britain have temporarily banned short-selling in Banco Espírito Santo after the Portuguese lender's stock fell more than 16 percent on Monday on fears about its corporate parent.

Late Monday, the Comissão do Mercado de Valores Mobiliários of Portugal suspended short-selling in Banco Espírito Santo and in the Espírito Santo Financial Group, which owns about a quarter of the bank's stock. The Financial Conduct Authority of Britain followed suit on Tuesday.

The restrictions on short sales — bets that a stock price will fall — are expected to expire just before midnight on Tuesday.

On Monday, shares of Banco Espírito Santo fell more than 16 percent, to 60 euro cents, or 82 cents, equaling an 11-month low.

Shares were trading down 4 percent, at 58 euro cents, in Lisbon on Tuesday morning.

An audit in May by the Bank of Portugal found that Espírito Santo International, the parent company of Banco Espírito Santo, was in "serious financial condition."

The parent company disclosed that the audit had identified "material irregularities" in its financial statements, including "omissions in the accounting of liabilities," overvaluation of certain assets and inadequate record keeping.

Ricardo Espírito Santo Silva Salgado, the bank's chief executive, is expected to step down in July and, pending shareholder approval, will be succeeded by the bank's chief financial officer, Amílcar Morais Pires.

Mr. Salgado is a member of the Espírito Santo family, a dynasty of Portuguese bankers that has controlled the bank for generations. Mr. Salgado and other members of the Espírito Santo family will leave the bank's board in July, ceding direct management control of the bank.

Members of the family, including Mr. Salgado, are expected to join a new advisory board for the bank, separate from its board of directors.

The disclosure of the audit's findings at the end of May has pressured the bank's stock, which had already slipped after it announced a €1 billion rights offering in mid-May.

At that time, the bank also reported a first-quarter loss of €89.2 million, driven by increased provisions for bad loans.

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DealBook: Mergers Hit a 7-Year High, Propelled by a Series of Blockbuster Deals

The New York Times

Deal makers have been thinking big this year.

Buoyed by some of the biggest deals in recent memory, 2014 has so far been the kind of year that bankers and lawyers have been awaiting for some time.

"People are willing to make bigger bets on transactions than they were two years ago," said Stephen Arcano, a partner at the law firm Skadden, Arps, Slate, Meagher & Flom.

And it appears that the factors that have been driving the waves of consolidation will keep propelling mergers for the rest of the year.

At first glance, many of the statistics that define merger activity for the first half of the year are eye-popping: Deals worth nearly $1.77 trillion were announced in the first six months of 2014, according to Thomson Reuters, up nearly 73 percent from the period a year earlier. Much of that was spurred by a smattering of blockbuster transactions, like AT&T's $48.5 billion bid for DirecTV; Comcast's $45 billion offer for Time Warner Cable; and Facebook's $19 billion deal for WhatsApp. Over all, 18,217 deals have been announced, down 0.4 percent from last year and the lowest level of announced transactions since 2005.

In the high end of the market, however, business is booming. Forty-six deals worth more than $5 billion have been announced so far this year, 130 percent more than last year. The difference is even starker on a dollar basis: these announced megadeals were worth $740.7 billion, up nearly 231 percent.

The New York Times

Many of the factors underpinning the growth have been little changed since the end of the financial crisis. Companies are sitting on enormous amounts of cash. And borrowing has rarely been cheaper, with the Federal Reserve keeping interest rates low.

But much of the work done to bolster stock growth, such as cost cuts and stock buybacks and special dividends, has already been completed. Accomplishing more requires more drastic action.

That has prompted companies to buy growth through acquisitions. Management teams have been dusting off corporate playbooks for potential deals. And as companies have pursued industry-changing mergers, their peers have been forced to weigh the cost of inaction — and many have chosen to act.

"What's different now is that you have catalysts in industries that are causing managements and boards to act because their industry structures are changing," said Michael Carr, Goldman Sachs's head of Americas mergers and acquisitions. "And in some ways, the stakes of not acting have gone up."

The New York Times

Investors have been largely rewarding companies for taking action, with stocks of acquirers climbing — they normally fall as shareholders worry about the potential for overpaying for deals. That sort of positive reaction inspires others weighing takeover bids to jump in, confident that shareholders will be on their side.

"We went back and looked to the share price reaction of acquirers. It's higher in 2014 than we've seen in at least the last 20 years," said Patrick Ramsey, a co-head of Bank of America Merrill Lynch's Americas mergers business. "That's a huge source of confidence and validation not just for the people doing the deals, but for their peers and others."

Another sign of emboldened deal makers: a rise in hostile and unsolicited takeover bids. About $145.1 billion worth of such transactions has been announced this year, reaching levels unseen in seven years. The surge in activity has been led by the likes of Valeant Pharmaceuticals' $53 billion bid for the Botox maker Allergan and the drug maker AbbVie's $46 billion offer for its Irish counterpart Shire.

Once seen as distasteful, such unsolicited bids are now just a standard part of the M.&A. tool kit, advisers say.

"What was once maybe viewed as a vice has become much more acceptable," Mr. Arcano said.

AbbVie's pursuit of Shire also highlights how taxes are becoming an increasingly important driver for deals, particularly within sectors like the health care industry. The deal would be structured as a so-called inversion, in which the American buyer would essentially be allowed to reincorporate in country like Ireland or the Netherlands with a significantly lower tax rate.

Pfizer's thwarted $119 billion bid for AstraZeneca of Britain and Medtronic's $43 billion deal for the Irish lab equipment maker Covidien were also done as inversions, meant in part to cut the buyers' taxes. Buyers protest that the tax rationale is not the only reason to pursue such a deal — the transactions must make sense strategically in the first place — but analysts calculated that Pfizer could have saved some $200 million for each percentage point of taxes that it cut in the deal.

"Everyone is talking about it, from M.&A. professionals to people on Capitol Hill," Mr. Arcano said.

The emergence of hostile deals and the prospect that some of America's biggest corporate names are weighing a change of address to cut their taxes has prompted an outcry among some in Congress. Some lawmakers have proposed a moratorium on inversions. Fearing that the move may eventually be outlawed, companies are plowing ahead in search of foreign targets that fit the inversion mold.

Strikingly, however, one of the most deal-focused sets of buyers has been largely sitting out this year's boom. Private equity firms' announced transactions — worth $117.1 billion — accounted for just 7 percent of all mergers, down nearly half from the same time a year ago.

While such companies focus on buying up targets, these firms find themselves increasingly unable to compete with corporate rivals that can take advantage of bigger cost savings to justify higher prices.

"The proportion of M.&A. with respect to financial sponsors has dropped simply because the size and scope of M.&A. among corporate buyers is so high," Mr. Carr of Goldman said.

Despite the torrid pace of the first half of the year, deal makers say that the second half is likely to keep them busy. Sprint, for example, is widely expected to announce a merger with T-Mobile. And more health care and tech deals are in the works, advisers say.

"At times," Mr. Arcano said, "it feels like we're drinking out of a fire hose."

A version of this article appears in print on 07/01/2014, on page B8 of the NewYork edition with the headline: Mergers Hit a 7-Year High, Propelled by a Series of Blockbuster Deals.
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DealBook: BNP Paribas Admits Guilt and Agrees to Pay $8.9 Billion Fine to U.S.

Brendan McDermid/ReutersBNP's general counsel, Georges Dirani, in a Manhattan court on Monday. Related Links

Updated, 9:07 p.m. | After months of heated negotiations, state and federal authorities on Monday announced a criminal case against BNP Paribas, taking aim at France's biggest bank for transferring billions of dollars on behalf of Sudan and other countries blacklisted by the United States.

BNP agreed to plead guilty to criminal charges and pay an $8.9 billion penalty, a record sum for a bank accused of doing business with countries that face United States sanctions. State and federal authorities portrayed BNP, the seventh bank to settle a criminal sanctions violation case but the first to plead guilty, as the worst offender.

Like other banks, BNP hid the names of Sudanese and Iranian clients when sending transactions through its New York operations and the broader American financial system. But the wrongdoing was more pervasive at BNP, the authorities found, stretching from at least 2002 into 2012, by which time the investigation was already in full swing.

"This conspiracy was known and condoned at the highest levels of BNP," Edward Starishevsky, an assistant district attorney in Manhattan, said in court on Monday when the bank pleaded guilty to one count of falsifying business records and one count of conspiracy.

The rebuke — from the Justice Department's criminal division in Washington, the United States attorney's office and district attorney's office in Manhattan, as well as the Federal Reserve, Treasury Department and New York's financial regulator, Benjamin M. Lawsky — provides a template for prosecuting other financial misdeeds. In the coming months, the focus will shift to a number of big banks suspected of manipulating foreign currencies.

In the BNP case, the authorities sought to send a message that no bank is immune from criminal charges, despite lingering concerns that financial institutions have grown so large and interconnected that they are "too big to jail." The decision to require BNP's parent company to plead guilty, coming six weeks after Credit Suisse pleaded guilty to helping American clients evade taxes, reflects a broader policy shift after decades of civil settlements and so-called deferred prosecution agreements.

"This outcome should send a strong message to any institution — any institution anywhere in the world — that does business in the United States: that illegal conduct will simply not be tolerated," United States Attorney General Eric H. Holder Jr. said at a news conference on Monday.

Preet Bharara, the United States attorney in Manhattan who accused BNP of "perpetrating what was truly a tour de fraud," has argued that no bank is too big to charge.

Still, criminal pleas could prompt regulators to revoke the license of a bank, the Wall Street equivalent of the death penalty. To prevent that outcome, prosecutors and regulators coordinated their actions months in advance.

Unlike Credit Suisse, which paid fines but faced few practical implications from pleading guilty, BNP was required to temporarily forfeit a core business operation in New York.

Mr. Lawsky announced on Monday that he would suspend its ability to process payments in dollar denominations, a function known as dollar clearing, which is essential to doing business with international clients. The deal with BNP will prevent certain units within the bank's headquarters in Paris, as well as its offices in Geneva, Rome, Milan and Singapore, from clearing dollar transactions for one year beginning in January 2015.

Mr. Lawsky also required the bank to part ways with 13 employees, including one of its chief operating officers. "It is important to remember that banks do not commit misconduct — bankers do," he said in a statement.

Still, not one BNP employee was criminally charged. And prosecutors have yet to demonstrate that their newfound enforcement muscle applies equally to American banks.

"Though we appreciate the magnitude of the BNP guilty plea, we believe this does not signify the end of 'too big to jail,' " Public Citizen, a nonprofit watchdog group, said in a statement.

In its own statement, BNP emphasized that it had "designed new robust compliance" measures to prevent a repeat of the wrongdoing. "We deeply regret the past misconduct that led to this settlement," said the bank's chief executive, Jean-Laurent Bonnafé.

BNP had initially hoped to fend off a guilty plea. It had proposed creating an entirely new subsidiary to plead guilty, according to people briefed on the matter.

When prosecutors rebuffed that idea, the bank enlisted help in the highest rungs of French government. President François Hollande made unusually direct and personal appeals to President Obama, while French financial officials questioned Mr. Lawsky about the dollar-clearing suspension.

Ultimately, Mr. Lawsky focused the suspension on the specific units that processed transactions at the heart of the case, a move that will most likely generate a logistical headache for the bank and undercut its revenue as it has to outsource the business to another bank. The bank's oil and gas units in Paris and elsewhere, for example, are subject to the suspension.

Some units tried to cover up the transactions, the authorities said. In the bank's Geneva office, "there was policy to strip, amend and omit" information identifying Sudanese clients.

Alex Wong/Getty ImagesFrom left, Attorney General Eric H. Holder Jr., the United States attorney Preet Bharara, F.B.I. Director James Comey and Deputy Attorney General James Cole.

At the time, Sudan was operating a genocidal regime. And as Mr. Holder noted, citing the words of a BNP compliance manager, the country "hosted Osama bin Laden."

Some BNP employees sounded the alarms. But at a September 2005 meeting, one of the bank's chief operating officers "dismissed the concerns of the compliance officials," Mr. Lawsky said, and requested that no minutes of the meeting be taken.

The bank's compliance staff in New York also failed to thwart the wrongdoing, the authorities said. When another bank settled a sanctions violations case, BNP's head of ethics for North America wrote in an email to a colleague, "The dirty little secret isn't so secret anymore, oui?"

William Alden contributed reporting.

A version of this article appears in print on 07/01/2014, on page B1 of the NewYork edition with the headline: BNP Admits Guilt and Agrees to Pay $8.9 Billion Fine to U.S..
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