Case Blog

I spent the past week in London. While it was colder than normal, I missed the February blizzard that blanketed the northeast U.S. on Wednesday. Over the past several years, Mary Claire and I have managed to be in New York City for each of the major February snowstorms. This time she got to enjoy the winter wonderland without me.  It was hard to gauge on this trip if the Labour Party was bouncing back in time for the spring election or if the Tories had peaked too early, and no one I spoke with seemed ready to make a prediction.

Speaking of predictions, The Field General lost to the clever Sean Payton and the Drew Brees lead Saints. Congratulations to all those long-suffering Saints’ fans and the city of New Orleans. I trust that Peyton Manning and the Colts will get at least one more shot at another Super Bowl before Manning ends his stellar career.

While in London my meals were distinctively French. We had lunch with Dominic Hobson and the management team of Global Custodian at L’Oranger on St. James’s Street. This classic restaurant never disappoints. One evening we had dinner with John Lee and his senior team from The Trade at The Bleeding Heart Restaurant in Bleeding Heart Square, just off Hatton Garden. The ambience, service and cuisine were, as always, superb.  Both groups continue to build upon the strong momentum they established in the fourth quarter.  Finally, I got to try a new restaurant, for me, The Orrery Restaurant on MaryleBone High Street.  Orrery is located with Conran’s and is a superb restaurant, again French, with enough room between tables for one to truly enjoy a special meal with colleagues or friends.

On the M&A front in London, the announcement by Pearson (PSON/PSO ADR) in January that they were exploring options for their majority-controlled public company Interactive Data Corporation (IDC) brought out a long list of potential bidders. IDC is a global provider of financial market data & analytics for financial institutions and traders and is listed on the New York Stock Exchange. The company was formed in 2000 when Pearson merged FT Interactive Data Corporation with Data Broadcasting Corporation and gained the majority position. It is clear that with the amount of interest this auction has attracted, with bids due shortly, the winner will need to pay at least $3B for this trophy. The list of suitors according to the Wall Street Journal (WSJ, 2/3/10) and the Financial Times (FT, 2/10/10) includes many of the major private equity funds: Apax, Apollo, Bain, Blackstone, Carlyle, Hellman Friedman, KKR, Permira, and Providence. McGraw-Hill and Thomson-Reuters were listed as the two interested strategic acquirers. The FT also reported that Bloomberg, which recently purchased Business Week but does not have a history of large acquisitions, was not intending to bid.

Within the past two weeks it was also announced that the Financial Times had purchased Medley Global Advisors as FT continues to look for subscription-based data products to lessen their dependency on advertising. This relatively small acquisition is along the lines of Money-Media, another subscription-based business FT purchased two years ago.

It is clear that as global financial markets continue to recover the companies that have both the financial data and analytical tools that provide transparency will see significant EBITDA multiples offered when they come to market in an auction environment.

We will be announcing, shortly, the appointment of a managing director for Strategic Insight, who as part of the Global SI team will manage our expansion in the UK and the rest of Europe from our new London office.

The recent news in New York has been positive for the institutional financial services sector. Two weeks ago Bank of America (BAC) surprised most analysts by announcing that they had worked out an agreement to pay back the $45B of TARP funds they needed to carry them through the Great Recession. Greg Curl, one of the internal candidates to take over from Ken Lewis as CEO, negotiated the arrangements with the government. Shortly after the announcement Bank of America sold new shares, which gave them the capital base they needed to pay back the Treasury. It is becoming clear that the government will get their desired return on the TARP funds, as they predicted. The Merrill Lynch acquisition by Bank of America is starting to look better each quarter as trading profits improve dramatically. Citigroup (C) and Wells Fargo (WFC) remain the two money center banks that have not yet repaid the TARP funds, but they are inching closer to an agreement each week.

I flew to London on Wednesday to spend time with our two U.K. subsidiaries, Global Custodian and The Trade. I found the overall mood to be positive and The City looking very festive for the holiday season. I was greeted, though, by headlines in the Financial Times that Chancellor Darling was imposing a new 50% tax on bankers’ bonuses to be paid by the institutions. Prime Minister Gordon Brown was able to quickly get the support of the French President Sarkozy, while the Germans demurred. It seems like we will have to live for a while with the idea of taxing an industry in recovery from the worst downturn since the Great Depression.

Finally, on the media side of the equation, Springer Science & Business Media was sold, not to a strategic buyer like Informa, who had been evaluating a deal, but to EQT, a Swedish private equity firm controlled by the Wallenberg family and GIC, Singapore’s sovereign wealth fund. (Telegraph, 12/11/09) The sale was driven by Candover’s and Cinven’s need to exit this investment, with loans coming due next year. Derk Haank, a former colleague at Reed Elsevier and a very able publisher, will continue as CEO. This deal is another sign that the private equity media market is starting to emerge from a very slow ‘09, with leverage returning to the market.

This Thursday when we sit down to Thanksgiving dinner with our family and friends the majority of us will be thankful for surviving the Great Recession and seeing a very challenging year for the global economy come to an end. While we are cautious in our outlook for 2010, we know that the first and second quarters will show significant growth over ‘09, when we were still in free fall.  Earlier this week, Treasury Secretary Tim Geithner appeared on Capitol Hill before a Joint Economic Committee hearing and discussed winding down the TARP program. In a “sometimes contentious” hearing he made the point that the economy is in much better shape than when the Obama administration took office in January. (NY Times 11/20/09)  In spite of Representative Kevin Brady, a Texas Republican, calling on him to resign because the economy “was such a mess,” Geithner held his ground that there has been significant improvement.

As we move into 2010, I would like to see President Obama and his administration focus on job creation. With the unemployment rate over 10 percent and forecast by most economists to remain there for all of next year, we will not see sustainable growth until we move toward a significantly lower unemployment rate. This will require a more open and trusting relationship with the business community and a more realistic approach to tax policy at a time when the economy remains under pressure. As we move toward the mid-term elections next November, job creation and unemployment will be the key issues.

We are starting to see signs of the private equity market coming to life in the media and business information sectors. During the first week of November, IMS Health (RX), the leader in providing “market intelligence to the pharmaceutical and healthcare industries,” announced that its board had entered into a definitive agreement to be acquired by TPG and the CPP Investment Board. (IMS Press Room 11/5/2009) Goldman Sachs (GS) will provide the debt financing to take IMS private.  The total value of the transaction will be $5.2B and represents a significant premium for the public shareholders.

IMS was founded in 1954 and was acquired in 1981 by Dun & Bradstreet (DNB). It was later spun out of D&B as a separate NYSE company. Several years ago, VNU, later renamed Nielsen, announced plans to take over IMS and reunite A.C. Nielsen and IMS, which had both been spun out of D&B, but the shareholders revolted over the poor performance.  Management was forced out and eventually VNU was taken private by five large private equity players and now operates privately as Nielsen.  This transaction when completed will represent the largest leveraged buyout of ‘09. (WSJ 11/06/09)

I will close with some wine tips to accompany your Turkey Dinner!

Blankiet
This small winery is an inspired producer of outstanding wines. The 2006 Rive Droite is a Saint-Emilion styled, limited production (only several hundred cases) wine that will complement your meal and not overwhelm it. www.blankiet.com

Kistler
I just received my fall shipment of Kistler Chardonnay and Pinot Noir. The ‘07 Pinot Noir Sonoma Coast (RP 91-93) would be an excellent choice for Thanksgiving dinner. www.kistlervineyards.com

Merryvale
A more value-oriented selection would be Merryvale’s ‘07 Pinot Noir, Carneros. This is one of my longtime favorites to visit in Napa. www.merryvale.com

Miguel Mendoza Malbec, Reserva
This 2006 Malbec is for those of you looking for something different that also provides great value. This wine retails for under $20 and can be found at Sherry-Lehmann online or at their Park Avenue retail store.  www.sherry-lehmann.com

Mary Claire and I are headed to Boston to have dinner with our family and our car will be filled with the wines listed above. Happy Thanksgiving!

As we celebrate Labor Day in the Bay Area, it is clear that summer is coming to an end. I returned to Blackhawk from a week in London, where Gordon Brown and the Labour Party continue to surprise me by still surviving. It looks like Brown will make it until he must call for an election in the spring.

We are evaluating several acquisitions for further expansion in London. In addition, organic growth through global expansion is also a priority. Information needs around pensions are still significant, as plans continue to recover from last year’s stock market debacle. Under Nevin Adams’ editorial leadership we will launch the well-respected Plan Sponsor brand in the United Kingdom and continental Europe. I sense that New York and London will remain the primary global money centers and we need to have a significant presence in each market. Commercial real estate offers similar opportunities to New York and we plan to consolidate our presence in a new headquarters in The City.

Many of London’s private equity players and their bank sponsors are working on restructuring plans. I was interested to see that the Royal Bank of Scotland and Apax have reached an agreement to split Incisive Media. RBS will take a controlling interest in the UK assets of Incisive, while Apax will still control the U.S. based ALM, which was under a separate financial structure with very different covenant requirements. The media industry will continue to be deleveraged throughout the fall, particularly in the newspaper sector.

Mary Claire and I will enjoy several last rounds of summer golf this weekend, and then she will return to New York while I head to Hong Kong, Beijing and Shanghai. In Hong Kong we will attend SWIFT’s Sibos 2009. It is a large conference and exhibition and for many it is one of the financial services industry’s major events. Last year in Vienna it drew over 8,000 attendees. We will be introducing Asset International’s growing portfolio of products and services, including our most recent acquisition, Strategic Insight. Charlie Ruffel and Dominic Hobson will host the event during this 20th anniversary year for Global Custodian.  The Trade’s editorial team (we acquired The Trade in June) under John Lee’s leadership will be producing the show dailies, which they have done for close to 10 years.  We will be looking for opportunities to further expand our footprint in this fast-growing region, which appears to be recovering at a faster pace than the west.

Fall has also given us the return of the football season in the U.S. The biggest upset of this inaugural weekend of college football was the #20 Brigham Young Cougars beating the #3 Oklahoma Sooners, who with their Heisman Trophy winner Sam Bradford had their eye on a national championship before last evening. Max Hall, the talented quarterback of BYU, clearly established the Cougars as a contender for a major BCS bowl game, in spite of playing in the Mountain West conference, one that is not insured of BCS Bowl representation.

In my last posting, I wrote about what the B2B industry will look like as it emerges in ’10 and ’11 from the deep recession (B2B Media Business on the Recovery: A Sneak Preview). While I am certain that we are now in a recovery cycle, economists, pundits and others are still debating where we are with regard to the recession ending and the recovery beginning.

When the history of this recession is written after all the data points are recorded, I believe that the 2nd quarter of ’09 is where we will officially mark the start of the recovery. As we close July it is difficult to see the recovery beginning because the summer months are traditionally slow months for the economy. This is particularly true for the media business. However, I am confident that September-December will confirm that we have started to see a fading recession in our rearview mirror and accelerating growth before us. It will be ’10 and ’11 before we know how strong and sustained the growth cycle will be, but it will certainly provide for a more robust deal market, as private equity firms and strategic investors begin again to redefine their portfolios.

Understanding the impact of this recession may be difficult at this point, but one benchmark that I will use to gauge the depth of the recession is Microsoft’s (MSFT) earnings announcement last week, where for the first time since they went public in the mid ’80s a year-over-year decline in revenues was recorded.

As we enter August, the Yankees and the Red Sox, the greatest rivalry in sports, are fully engaged, with the Yankees holding a slim 2 1/2 game lead over the Red Sox, in spite of having lost all eight head-to-head games this season. On Saturday I went to the new Yankee Stadium for the first time. I was delighted to see that the design of the field and the fabled facade give a sense of still being in the old stadium, while the comfortable seats and new amenities and restaurants remind you that this is a new experience. Sitting six rows behind home plate offered a wonderful vantage point, in spite of the Yankees losing to the last-place Oakland A’s after having won eight straight after the All Star break.

Finally, every golfer over 50 I met this week was feeling Tom Watson’s disappointment at having come so close, at age 59, to winning one more British Open, only to see his hopes evaporate on the 18th hole and then lose in a playoff to Stewart Cink, who is in his mid-30’s and realized his first major victory.  If you are looking for an interesting golf book to read, I would recommend “Are You Kidding Me?: The Story of Rocco Mediate’s Extraordinary Battle with Tiger Woods at the US Open” by Rocco Mediate & John Feinstein  Publisher: Little, Brown & Company.

Back in mid-February, I wrote in Transparency: “The current financial crisis, which has resulted in the worst recession since World War II, will come to an end when confidence is restored in our global financial institutions. Treasury Secretary Tim Geithner learned very quickly last week that the markets want more than a blueprint, they want a specific plan that will lead to the balance sheets of our largest money center banks being healthy and the subprime toxic assets isolated.”  Part of the specific plan that emerged was the “stress test” for 19 large banks around the country. At this point it not clear to me whether Secretary Geithner or Larry Summers or someone else within the Obama administration came up the idea of a stress test to determine if the banks’ balance sheets were strong enough to weather a continuing and deepening recession, but I am willing to give credit to the Obama team for finally demonstrating to everyone that the worst is behind us.

The back and forth between the Treasury Department and several of the banks, for example Wells Fargo (WFC), reminded me of the process that those of us on the deal side often experience in finding a common ground for valuation of a company prior to an acquisition or investment. In other words, I think it was a healthy process and in the end all of the banks worked within the guidelines and are now going forward raising additional capital where necessary.   It is clear that of the largest bank holding companies, JPMorgan Chase (JPM) and Goldman Sachs (GS) are very strong and will be able to pay back the government before the end of this year.  Bank of America (BAC) and Citigroup (C) still have some work in front of them, but they are clearly in stronger shape than some analysts would have had us believe, which was reflected in the significant share increase they both realized this past week. In the case of Bank of America, it would appear that the Merrill Lynch acquisition, while problematic, should play out in a positive way over the next several years.

With confidence restored in our major banks, I trust that we will start to see more signs of recovery in June and into the third quarter. We will also start to see more signs of consolidation within several sectors, including media, as the strongest companies look to take advantage of the current low valuations to improve their market share.  Will Microsoft (MSFT) make one last run at Yahoo (YHOO) to improve its fortunes in search?

As we enter mid-May the second round of the NBA playoffs are starting to give us a hint of what the finals, in early June, will look like. Can any team in the east stop LeBron James and the Cavaliers? The defending champion Celtics without Kevin Garnett do not look like they have the bench to pull it off, particularly after a long struggle in the first round with the Chicago Bulls.  In the west, it is clear that the Lakers, once again, will be the team that someone will have to beat to make a trip to the finals. Could we end up with that made-for-TV finals of LeBron vs. Kobe?

While taking some R&R last week, Mary Claire and I had the pleasure of dining at Spago on Maui. While trying to decide on a red wine to accompany a Kobe style flank steak, I noticed a Syrah from a small winery out of Washington state, DeLILLE Cellars. A friend and colleague from earlier in our careers, John Koenigs, had dropped me a note recently about DeLILLE’s Syrahs. While I was familiar with them, I had not had the pleasure of trying their Doyenne Syrah. We went with the ‘05 Doyenne Syrah (RP 91) and found it to be an excellent full-bodied wine with hints of cassis, blackberries, pepper and espresso.  It is 97% Syrah and 3% Viognier.  DeLILLE’s current ‘06 release is available through their website for $49. www.delillecellars.com

Before we turn to opportunities, I need to do a mea culpa on my pick of Louisville to go all the way after they trounced Arizona. They unexpectedly ran into the Motown favorite, Tom Izzo’s Michigan State Spartans. Detroit needed some magic and the team from 90 miles away in Lansing answered the call. The idea of Louisville playing in an all-Big East final faded away and we found Michigan State facing North Carolina in the final. The Spartan dream ended quickly at the hands of Ty Lawson and Tyler Hansbrough.  Coach Roy Williams took President Obama’s call after the game, congratulating Williams and his team and also thanking him for vindicating Obama’s pick of UNC to win the tournament. I will defer to the nation’s #1 fan when next year’s brackets are released.

Turning to the Masters this past Sunday, we saw a “final within a final.” With Tiger Woods and Phil Mickelson trailing the leaders by a significant margin when the third round ended on Saturday, they were paired together for the final round on Sunday. With the crowds and the cameras following them on Sunday they found magic, with Mickelson tying a course record 30 on the front 9 and Tiger gradually bringing the leaders within reach. This was the first Act of a very enjoyable play. On the back 9 in Act II, we realized that Tiger and Phil were going to fall short, as the magic faded and they gave back several strokes and Kenny Perry had the Green Jacket within reach. Then the unthinkable happened: a very consistent golfer trying to sit on a lead bogeyed both 17 and 18 to find himself in a three-way tie. The final Act was a sudden-death play-off between Perry, Angel Cabrera and Chad Campbell. Cabrera had stayed close all day, and when Perry left the door open Cabrera was not going to be denied. He walked off with the Green Jacket and his second major championship, having won the US Open in ‘07 at Oakmont.

The media market has significant opportunities in ‘09, but they are not all obvious and they are very different than they have been in the recent past. Across the various sectors there are companies that were overleveraged, and in this advertising tsunami they do not have the cash flow to meet their debt obligations. Many of them have excellent brands and are well positioned within their sector for a rebound as the economy improves. They will need to be recapitalized, though, in order to survive. With strategic investors on the sidelines waiting for the storm to pass, the opportunity will fall, once again, to the private equity investors who have dry powder and recognize the upside potential. It will also fall to some of the lenders, who will find themselves trading their debt for equity.  This opportunity may even exist for some of the overleveraged newspaper properties that have strong brands, community support and a digital strategy for the future.

Yesterday Goldman Sachs (GS) made two important announcements. First they are going to raise capital in the public markets to be the first major financial institution to repay the TARP funds to the government. I trust that many more will follow over the next several quarters. I sense that this demonstrates that we have touched bottom and we are at the beginning of a recovery, although on any given day it does not feel that way. The financial stocks rallied on this news. Goldman Sachs also announced that they are in the process of closing a $5.5B fund to buy private equity investments at a discount in the secondary market. The GS Vintage Fund V (WSJ 4/13/09) will be the largest secondary fund raised to date. Many pension funds and endowments that need liquidity are now open to selling their positions in this asset class at a discount. Again, for the savvy investor, this is a time of opportunity.

Finally, if you go to www.assetinternational.com and click on AI’s 5000 you will find the opening pages of, “Harvard Has a Cold,” by Kristopher McDaniel. He chronicles why Harvard, earlier this year, tried to sell some of its private equity holdings in the secondary market. This is the type of in-depth, quality reporting and analysis that you will find in this digital publication when it launches in early June.

On Thursday March 12th in the Wall Street Journal, Peter Lattman wrote,  “The LBO is dead. Long live the EBO” (WSJ, “Lacking Leverage, Firms Embrace EBOs”).  In the article he quoted Scott Nuttall, a partner at KKR speaking at a private equity conference, “Opportunities abound right now. You don’t need to use leverage to buy companies when they’re trading at a 50% discount to their historic average multiples.”

The appeal of the EBO for the seller is there is not the risk of a transaction failing to close because of the credit markets. In the same article, an October deal by Advent was cited. Advent paid all cash for a card-processing business, later renamed Monext. This was a $260M transaction. “We were able to provide certainty, which is a scarce commodity these days,” according to  Advent’s Stephen Hoffmeister.

In the media space we will see more EBOs than LBOs this year — if deals are going to get done. The EBO does carry some risk for the private equity firm, though. In order for these deals to be successful in the long run, there needs to be realistic price expectations  on the part of the sellers and their advisers.

Earlier this week, Bill Cohan’s new book, “House of Cards: A Tale of Hubris and Wretched Excess on Wall Street,” was published by Doubleday.  The initial reviews have all been outstanding. Bill has clearly made the transition from investment banker to established author. This story of Bear Stearns’ demise, together with his first book, “The Last Tycoons,” has established him as a force to be reckoned with on Wall Street.

Later this afternoon, “Selection Sunday” will provide answers for the March Madness field of 65. There are always disappointments for the schools on the bubble, but on Monday morning the NIT selection extends their season.

Several readers have asked for some new wine recommendations to carry them from winter to spring. Here are several new ones from northern California that provide both value and very good quality.

Steel Plow Syrah
Landmark Vineyards consistently produces quality wines that represent real value. Most of their releases are priced between $20 and $40. One of my recent favorites is their ‘06 Steel Plow Syrah, which can be purchased on their website for $30.  I have had it several times recently in restaurants and find it to have depth. It is perfect when paired with a short rib on a winter evening.  The Wine Spectator recently rated it a 94 (WS 94). www.landmarkwine.com

Anagram
I was recently introduced to Rich Moran by my friend and former publishing colleague Stewart Alsop. Rich is a partner at the venerable venture capital firm Venrock. Rich and his wife Carol collaborate on producing limited (600 cases per year) Bordeaux-style blends, named Anagram. Their vineyard is located in Knights Valley. I ordered a mixed case of their ‘04, ‘05 and ‘06 releases. When we returned late on Friday night to New York City from Blackhawk, we opened the ‘04 Anagram with our favorite pizzas from Una Pizza Napoletana (www.unapizza.com). I was impressed with the balance, the wonderful nose and the nuances of this release. I could not find a review from either the Wine Advocate or the Wine Spectator, but I rated it an 89-90. At an average price of $40 this represents excellent value. Please let Rich or Carol know when you order that you have read this blog entry. Small wineries need viral, word-of-mouth marketing. It is nice to see someone from our industry have as many varied interests, all of which Rich does successfully. While Stewart introduced us, Rich and I must thank Tom Peterson of El Dorado Ventures for pointing out to us that we shared a passion for wine.
www.moranmanor.com

Lucia Chardonnay, Lucia Pinot Noir
This is another brand from Pisoni Vineyards. The current releases include the ‘07 Lucia Chardonnay, $40 and the ‘07 Lucia Pinot Noir, $40.  It also includes the Gary’s Vineyard release for $50. I am just ordering this weekend, but since their introduction several years ago, all of the Lucia releases have represented excellent quality and value. www.luciavineyards.com

This past Monday morning as I was preparing for my evening flight to London and reflecting on the exciting Super Bowl win by the Steelers on Sunday evening, I received an email notifying me that my Virgin Atlantic flight from JFK to London had been cancelled because of snow. London had just been hit by its worst snowstorm since the early ’90s.  I turned on CNN and after a short time I heard London’s mayor, Boris Johnson, explain why snow plows were not justified when you did a cost-benefit analysis. Once every twenty years, you shut down for a day or two. The city ground to a halt. My trip was delayed for a day and London came back to life by the time I arrived on Wednesday morning.

I decided that I needed to read a football book on the flight over that reflected in some ways the tradition that the Steelers and the Rooneys have built.  I chose “WAR As They Knew It: Woody Hayes, Bo Schembechler, and America in a Time of Unrest” by Michael Rosenberg, which I had purchased as a Christmas gift on Amazon but realized that my list did not have anyone on it for whom it seemed appropriate. It went on to the bookshelf, while I waited for a long, round-trip flight.

The “ten year war” between Ohio State and “that school up north” began when Woody’s former protégé and former assistant, Bo Schembechler, became the head coach at Michigan. In their first meeting in November of ‘69, a game I still remember, the Buckeyes went into Ann Arbor with a 22-game winning streak on the line and lost to the Wolverines, 24-12. In ‘73 both teams entered that year’s match-up undefeated with a trip to the Rose Bowl in the balance. (In those days, only one school from the Big Ten could represent the conference in a bowl game and that bowl game was the Rose Bowl.) They fought to a 10-10 tie. The 10 athletic directors from the Big Ten voted and Ohio State was selected to go to the Rose Bowl.  This decision did not sit well with Michigan fans. After 10 years of war, Bo’s record vs. Woody was 5-4-1.

As we were landing back at JFK on Friday evening and I finished the book, I thought back to the IDG vs. Ziff-Davis battles in the ’90s, which I wrote about in Rivals this past June, and decided that Asset International is going to need a strong competitor to keep us focused as we look to grow the business on a global basis. We are having a sales meeting in several weeks and this clearly will be one of the breakout topics!

London is where we publish Global Custodian. Charlie Ruffel launched this brand 20 years ago in New York. As Asset International grew and he launched events and other publications, including Plan Sponsor, the leading resource for pension and retirement issues, Charlie turned to a former classmate from Cambridge, Dominic Hobson, to take over the editorial responsibilities for Global Custodian. Under Dominic’s leadership it has continued to distinguish itself as the leading information source covering the international securities services business. It has become the relied upon source for investment professionals around the world. And its annual surveys have established benchmarks for the entire industry.  This coming June we will celebrate this 20th anniversary milestone with the industry in London , and toast GC, Charlie and Dominic.

Before I end this column, there’s one more competition heating up I want bring to your attention. Just when I thought there might not be many deals to write about in the first quarter, along comes a potential battle between Mel Karmazin’s Sirius XM radio and the tenacious Charlie Ergen, who controls EchoStar.  Karmazin has been battle tested and scarred from losing his war with Sumner Redstone over the leadership of Viacom, but Sirius XM has significant debt that is maturing shortly. In an interesting strategy that may well reflect the times, Ergen has been buying up a substantial part of the bonds that are coming due.  In spite of the low level of new car sales (this is where most satellite radio subscriptions are sold) and the negative impact on subscriber growth, with the merger completed and costs being cut, this 19 million strong subscriber-based business is going to be attractive to Ergen, if he can take it over prior to bankruptcy or even in the bankruptcy process. Can John Malone, who now controls DirecTV through Liberty, sit on the sidelines and watch this battle unfold? Will Rupert Murdoch view this as an opportunity to re-enter the U.S. satellite business, after having traded Malone DirecTV in exchange for his News Corp position?  In the current market, we may see more media deals that involve over-leveraged assets from another time, with the bond holders controlling their fate.

The holiday season provided a nice interlude from the train wreck of a global economy that the fourth quarter of ‘08 unveiled. We spent the Christmas week in New York and then traveled to the Bay Area for the New Year. Unfortunately, we enter the New Year with all our problems still in place. As I write this Bernie Madoff is still out on bail, but each day as the magnitude of his scam and hubris comes into focus, he appears closer to having his bail revoked. For many who have lost their fortunes, he has become the new Ponzi or Scrooge.

It seems appropriate in the current economic climate to write about a value wine: Clos De Los Siete is an Argentinian-based project of the famed French oenologist Michel Rolland. The vineyard where this wine is made sits at the foothills of the Andes. To quote Robert Parker, “There may be no finer red wine value in Argentina than this superb blend  of 48% Malbec, 28% Merlot, 12% Syrah, and 12% Cabernet Sauvignon.”  Parker’s scores ‘06/92 & ‘07/91. You can find these wines at retail for $17-$20, which represents real value.

Mary Claire and I are always interested in finding the perfect pizza to go with an outstanding wine, like the Malbec blend mentioned above. We may have found that perfect pizza for those of you who live in New York City. In the East Village at 349 East 12th Street, just off 1st Avenue, you will find Una Pizza Napoletana, www.unapizza.com. The proprietor, Anthony Mangieri, set out several years ago to make authentic Neapolitan pizza. His oven is wood-fired and all of his ingredients, with the exception of his naturally leavened dough, are imported from Italy. He personally makes each pizza (there are only 4 options, my personal favorite is the Bianca) and is open from Thursday through Sunday from 5:00 p.m. until he sells out of his fresh dough. You can take out your pizza or eat in the small restaurant, but you need to show up and place your order in person, not by phone.  The restaurant offers a pleasant environment, a throwback to another era, and you can have an Italian beer or a glass of wine while you wait for your order.

This is also the time to turn our attention to sports, as the college football bowl season wraps up and the NFL playoffs are gaining momentum. The Florida Gators used their playbook to first expose Alabama’s weak hold on #1 in the SEC Championship Game. Nick Saban’s undefeated team could not compete with the Gators, which had suffered one loss to Ole Miss during the regular season. Coach Urban Meyer and quarterback Tim Tebow then used their playbook to play the high scoring #1 Oklahoma Sooners and defeat them 24-14 to win the mythical National Championship.  An undefeated Utah team turned to their playbook and Alabama suffered their 2nd defeat.  USC and Texas won their bowl games in fine form, but their claims on #1 were not heard.  My guess is that Tebow, after winning the Heisman last year and two national championships, will make himself available for the NFL draft and will be a first-round pick.

The 2nd round of the NFL playoffs begin today and each team will have a playbook that reflects some minor adjustments, but they will play the basic game that carried them this far.

My alma mater, Boston College, concluded a startling week on the basketball court. Last weekend they traveled to Chapel Hill to play the #1 undefeated North Carolina Tar Heals and beat a team that many pundits thought could go undefeated. They then traveled home to play Harvard and less than 72 hours after their surprising victory suffered an 82-70 upset by Harvard.  Coach Skinner of BC was quoted: “I told them it’s a short trip from the main house to the big house to the out house.”

President-elect Obama and his team are trying to put together their playbook to deal with a global economy that appears to be in a nosedive. I am encouraged that they are looking at many tools and a broad approach to try to jump-start an economy in free fall. The unemployment rate of 7.2% announced last week could easily climb above 10% by the end of the first quarter if the various stimulus plans fall short. I do believe that the current effective interest rate of 0% is starting to have some positive impact, but it will take an aggressive fiscal policy combined with a responsive monetary policy to pull us out of this deflationary spiral.

We are putting our own playbook together for Asset International, the global financial information provider that we acquired with Austin Ventures at the end of the year. We sense that global markets will demand more transparency as a response to the current financial crisis and look to position ourselves in New York and London as a trusted partner. We will be announcing a new digital and event product line launch, The 5000, later in the first quarter and are working with the AV team on several other acquisition opportunities. As we move forward, my blog will be posted here on  www.caseinteractivemedia.com and on a new AI site that is being developed.

Let’s hope that President-elect Obama’s playbook leads us back to the playoffs and if we are fortunate to a #1 ranking!