Good Monday morning. We’re expecting Broadcom to begin a fight as soon as this morning to replace Qualcomm’s entire board, which would officially make its $105 billion takeover bid for the chip maker a hostile one. We’re also looking at what’s next for the health care industry after CVS proposed buying Aetna for $69 billion.
CVS Health wants to become a one-stop shop where consumers can find health insurance, community-based clinics that dispense medicine, and data and advice on their prescriptions. Or, in the words of CVS chief Larry Merlo, “We think of it as creating a new front door to health care in America.”
Many analysts and investors expect more consolidation in the wake of the deal. Other insurers who tried to sell themselves in recent years, like Humana and Cigna, could try again. Walgreens and Walmart could look to duplicate the CVS feat. And perhaps Express Scripts, the country’s only remaining independent manager of pharmacy benefits, will try to sell itself, though its C.E.O. has said the company hasn’t been actively looking.
Then there is the question of Amazon and what it plans to do in the health care sector.
But one person who worked on the Aetna deal told Michael J. de la Merced that it wasn’t clear that others would rush to copy the transaction:
How the deal came together: Though many have speculated that Amazon was the primary factor, Michael was told that CVS and Aetna, in a business partnership for seven years, had been converging anyway when it came to their views on the health care industry. They began formal merger talks within the past two months.
The antitrust angle: Remember that this is a so-called vertical merger, combining two companies in adjacent but noncompeting industries. It’s the same kind of transaction as AT&T’s $85.4 billion bid for Time Warner, which the Justice Department has sued to block.
• Charley Grant writes: “CVS Health has taken bold action to win back investors. The potential benefits outweigh the serious risks.” (Heard on the Street)
• Robert Cyran writes, “With more than $20 billion of debt on its books, and another $49 billion lined up for the deal, CVS may find fending off Amazon puts its own financial health at risk.” (Breakingviews)
Today’s DealBook briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Amie Tsang in London.
After persuading every Republican senator but Bob Corker of Tennessee to vote in favor of the legislation, the Senate majority leader, Mitch McConnell, and his team must now reconcile their plan with the House version. (Don’t forget: Congress needs to pass a stopgap funding measure for the government by late Friday or risk a shutdown.)
The flurry of last-minute changes, which Democrats loudly criticized, led Goldman Sachs economists to slightly raise their estimates of how much economic growth the bill would create.
But there are many issues to be sorted out, including the tax rate, whether to make the individual tax cuts permanent, how many tax brackets to have and when the new corporate tax rate should kick in.
An unexpected twist: The Senate bill unexpectedly kept the alternative minimum tax for individuals and corporations. That means that companies could lose access to a research and development tax break that is used often by manufacturers, tech concerns and drug makers, according to the WSJ.
He said it: “What the Senate did, in their befuddled mess, is drove me out of business and then bragged about the fact that they got some tax reform passed,” Robert Murray, the C.E.O. of the coal miner Murray Energy, to the WSJ.
How companies plan to spend their tax-cut money
“Simplifying the tax code will reduce compliance costs and make it possible for job creators to reinvest more of their own money in their enterprises,” Mitch McConnell wrote in a WSJ op-ed.
But it’s not always that simple. Executives at CalPortland, which mines limestone to make cement, told the NYT that the company probably wouldn’t use the extra cash to immediately hire new workers.
Maybe the media giant came back to the negotiating table because it feared that Comcast was advancing in talks to buy prime 21st Century Fox assets like the Fox movie studio, cable channels like FX and stakes in the British broadcaster Sky and the Indian broadcaster Star.
The next milestone: The Murdoch family is expected to make its decision by the end of the month, Michael was told on Saturday. If the sale moves forward, it would be an extraordinary breakup of an empire that the Murdochs spent decades putting together.
The wild card: Would either a Comcast bid or a Disney bid for Fox assets run afoul of antitrust regulators? Remember that the Justice Department has cited the effects of Comcast’s takeover for NBCUniversal as a major reason for suing to block the Time Warner deal.
Its value surged to $11,800 at one point this morning, helped in part by the Venezuelan government announcing its interest in starting its own digital currency, to be known as the “petro.”
The latest signs of the Bitcoin frenzy
• Nowhere has the public frenzy over Bitcoin been more feverish than in South Korea, prompting the prime minister to express his concern. (NYT)
• Is it time to think about Fedcoin? Central banks are increasingly looking at whether they should create digital currencies. (WSJ)
• Wall Street is about to join the fun after the C.F.T.C. gave a green light to plans to introduce Bitcoin futures. The futures will be settled by cash so traders won’t be getting their hands dirty buying the stuff directly. (Barrons)
There’s just one issue: No one’s using it, the WSJ reports.
Take a look at how the S.&P. 500 and the Dow Jones industrial average moved after Michael Flynn pleaded guilty and disclosed that he was cooperating with Mr. Mueller:
Wall Street’s so-called fear gauge — the Chicago Board Options Exchange Volatility Index, or the VIX, which measures expectations of how wildly the stock market will swing in the next month — jumped at almost the same time. The spike was the index’s biggest one-day jump since August.
The two stock indexes and the VIX calmed down by day’s end, perhaps because of the Senate tax overhaul’s progress to passage. But expect any future bombshell revelations from Mr. Mueller to again hit investors in the gut.
The man who has helped shape President Xi Jinping’s policies has told the World Internet Conference — whose audience this past weekend included Tim Cook of Apple and Sundar Pichai of Google — that China had a right to regulate its own internet.
But that Communist Party official, Wang Huning, added, “China stands ready to develop new rules and systems of internet governance to serve all parties and counteract current imbalances.”
Despite the ongoing concerns about China’s close policing of its online space, Mr. Cook and Chuck Robbins of Cisco touted their commitment to the country.
Extra credit: The WSJ reported on how two of China’s top internet companies, Alibaba and Tencent, help the country spy on its citizens. And China showed off its interest in artificial intelligence, according to the NYT.
• After firing Matt Lauer, NBC maintained that its executives were unaware of his purported sexual misconduct until they heard a detailed complaint that week. (NYT)
• Visa fired one of its top executives, Jim McCarthy, who handled partnerships, saying his behavior had violated company policy. The memo did not specify why he was dismissed. (Recode)
• Vice Media fired three employees for behavior that included verbal and sexual harassment. One was Jason Mojica, the head of the documentary films unit. (NYT)
• The hard-edge style of a Hollywood lawyer, Marty Singer, has collided with a sudden cultural shift toward empowering people who speak out against about abuse. (LAT)
The key, Paul Polman of Unilever told the FT, was that the 3G-backed Kraft Heinz (where he sits on the board) was making an ill-advised hostile takeover bid.
From Scheherazade Daneshkhu and Lionel Barber:
• Thomas Barkin, a senior executive at McKinsey, has been chosen to lead the Federal Reserve Bank of Richmond, Va., according to a person familiar with the decision. (Bloomberg)
• Blue Apron’s new chief executive may be well-paced to patch some of the company’s problems, but perhaps no one can fix what looks like an ailing business model. (Bloomberg Gadfly)
• Splitting the job of a chief executive can work, but only if the two bosses are self-effacing, so it makes it hard to imagine co-chief executives running Goldman Sachs. (FT)
• Oracle is bringing a public charter school onto its campus, where employees will be able to mentor students. (NYT)
• Units of HNA Group are stepping up their fund-raising in the local bond market even as borrowing costs soar, adding to the worrisome debt burden of the Chinese conglomerate. (Bloomberg)
• Swiss banks have begun reporting to the Swiss Money Laundering Reporting Office suspicious account activity among some of their Saudi Arabian clients, according to people close to the situation. (FT)
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