Icahn changes tack, seeks $16B Dell stock buyback

NEW YORK — Activist investor Carl Icahn on Tuesday proposed a $16 billion share buyback in his latest effort to thwart Dell Inc. founder Michael Dell's effort to take the struggling computer maker private.

Icahn, now the company's second-largest shareholder after buying 72 million shares from fellow activist investor Southeastern Asset Management Inc., wants the company to buy back up to 1.1 billion Dell shares at $14 apiece to boost shareholders' return on their investment. The price of the buyback would represent about two-thirds of Dell's current market value of about $23.5 billion.

Dell and other personal computer makers have seen their sales crumble because of the growing popularity of smartphones and tablets. In May, Dell posted a 79 percent decline in earnings for the most recent quarter. Michael Dell believes he can turn the company around by taking it private and diversifying into niches, such as business software, data storage and consulting. He and the investment firm Silver Lake Partners are bidding to take the company private for $24.4 billion, or $13.65 per share.

But Icahn and Southeastern say that offer short-changes shareholders and originally proposed that the Round Rock, Texas, company instead give shareholders a special dividend of $12 in cash or stock per share. That would have allowed shareholders to get cash and stay invested in the company.

Dell's board rejected that proposal and has asked shareholders to approve the offer from Michael Dell and Silver Lake in a July 18 vote. In a letter to shareholders on Tuesday, Icahn wrote that he's concluded that Dell's board will never accept his dividend proposal over Michael Dell's offer, and thus is pushing for the buyback to boost shareholder value.

Dell shares rose 7 cents Tuesday to finish at $13.48, a sign that investors aren't taking Icahn very seriously and still expect the buyout deal to go through.

Icahn is now the company's biggest independent shareholder with about 152.5 million shares or an 8.7 percent stake, second only to Michael Dell's 273 million shares, or 15.6 percent stake. Southeastern now holds about 74 million shares, or a 4.2 percent stake.

A special committee of Dell's board said Tuesday that Icahn's latest proposal lacks adequate financing or a commitment from anyone to participate. The proposal "would likely force shareholders to continue to own shares in the highly leveraged company that would result," it added.

Icahn contends that the proposed share buyback would be paid for with $5.2 billion in debt, $7.5 billion in Dell cash and $2.9 billion from the sale of Dell receivables. He said he would make available $2 billion if needed, and said that a major investment bank, which was not named, has agreed to put up $1.6 billion.

Icahn said he and Southeastern would not tender their shares into the $14 per share offer. Other shareholders would be able to sell at least 72 percent of their positions.

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Dolce and Gabbana convicted of tax evasion

MILAN — A Milan court has convicted the designers Domenico Dolce and Stefano Gabbana of tax evasion.

The pair were found guilty Wednesday of failing to declare euros 1 billion ($1.3 billion) in income to authorities. The court sentenced them both to one year and eight months in jail.

Prosecutors argued that the pair had evaded taxes on income of 416 million euros each and 200 million euros through a Luxembourg-based company. The statute of limitations ran out on a charge of misrepresenting income.

The designers have denied the charges.

Two years ago, a judge threw out a tax evasion and fraud case against the pair, whose label Dolce&Gabbana is a Milan fashion mainstay. Italy's high court later ruled the designers could be prosecuted for tax evasion, though not for fraud.

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Men's Wearhouse ousts founder, pitchman Zimmer

NEW YORK — Apparently, Men's Wearhouse Inc. doesn't like the way its founder looks anymore.

In terse release issued Wednesday, Men's Wearhouse said it has fired the face of the company and its executive chairman, George Zimmer, who appeared in many of its TV commercials with the slogan "You're going to like the way you look. I guarantee it."

The timing was even odd —the announcement happened the morning the company's annual shareholder meeting had been set to take place. The company delayed the meeting but didn't give a new date.

Men's Wearhouse gave no reason for the abrupt firing of Zimmer, who built Men's Wearhouse from one small Texas store using a cigar box as a cash register to one of the North America's largest specialty men's clothiers with 1,143 locations. The company generated revenue of $2.48 billion in its latest fiscal year ended Feb. 2.

The company said the purpose of postponing the annual meeting is to re-nominate the existing board of directors without Zimmer. It said the board expects to discuss with Zimmer the extent, if any, and terms of "his ongoing relationship" with the company.

The news shocked analysts and corporate governance experts, who tried to speculate what happened.

"This is very rare to fire a founder. Founders are generally entrenched in the company," said Eleanor Bloxham, CEO of The Value Alliance, a board advisory firm.

Zimmer, who handed over his CEO title to Douglas Ewert in 2011, was the company's personable, down-to-earth face, his slogan almost a cultural touchstone.

As of late morning, the company's website still prominently spotlighted Zimmer, calling him "The Man Behind The Brand" and linking to YouTube videos of "the man in action."

The abrupt departure comes a week after Men's Wearhouse reported that its fiscal first-quarter profit increased 23 percent, helped by stronger margins and an earlier prom season.

In 1971, fresh out of college, Zimmer made his first foray into the clothing industry, working in Hong Kong for six months as a salesman for his father's coat manufacturing business, according to the company website.

In 1973, he and his college roommate opened the first Men's Wearhouse store, which sold $10 slacks and $25 polyester sport coats, in Houston. His personal car was a van with the company logo on the side and clothing racks in the back.

The company launched its first TV commercial in the 1970s when commercials for clothing were rare. Zimmer starred in his first TV commercial in 1986, with the line "I guarantee it."

Men's Wearhouse kept expanding, focusing on large markets where business was sluggish to take advantage of lower real estate costs. It also expanded beyond sports coats and trousers to casual sportswear in the 1980s and then went into the tuxedo rental business in 2000.

Zimmer owned 1.8 million shares of Men's Wearhouse as of the company's May 9 proxy filing, a 3.5 percent stake in the company.

Shares of Men's Wearhouse fell more than 2 percent, or 80 cents, to $36.67 in morning trading. The stock has traded between $25.97 and $38.59 in the past 52 weeks, and ended Tuesday up about 20 percent since the start of the year.

The company, based in Fremont, Calif., also runs the Moores and K&G retail chains. It also sells uniform and work wear in the U.S. and U.K.

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Stocks drift lower as investors wait for the Fed

NEW YORK  — Stocks are drifting lower on Wall Street as investors hold back ahead of a policy announcement from the Federal Reserve.

The Dow Jones industrial average was down 10 points, or 0.1 percent, at 15,307 at midday Eastern Daylight Time Wednesday.

The Standard & Poor's 500 index was down two points, or 0.2 percent, at 1,649. Telecommunications stocks fell the most in index, 0.9 percent.

The Nasdaq composite index edged down four points, or 0.1 percent, to 3,478.

The Fed is winding up a two-day policy meeting. Traders hope the bank will clarify when it plans to slow down its bond-buying program.

Men's Wearhouse fell 84 cents, or 2.2 percent, to $36.63 after the company's board dismissed its founder and executive chairman, George Zimmer.

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Bluebird Bio shares rocket higher in trading debut

NEW YORK — Shares of gene therapy developer Bluebird Bio Inc. are surging in their trading debut.

Its shares climbed $9.15, or 53.8 percent, to $26.15 in morning trading Wednesday after trading as high as $27 earlier in the session.

The company's initial public offering of 5.94 million shares had been priced Tuesday at $17 per share, above its initial expectations of $14 to $16 per share.

That raised $101 million before underwriting costs and other expenses.

Bluebird is developing gene therapies for severe genetic and very rare diseases.

The underwriters of the IPO have the option to buy another 891,000 shares of the Cambridge, Mass., company over the next month.

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Grains futures mostly rise, livestock prices up

CHICAGO — Grains futures rose or were flat Tuesday in early trading on the Chicago Board of Trade.

Wheat for July delivery rose 9.5 cents to $6.97 a bushel; July corn rose 5.75 cents to $6.79 a bushel; July oats were flat at $3.9775 a bushel; while July soybeans rose 0.25 cent to $15.11 a bushel.

Beef prices fell, while pork prices rose on the Chicago Mercantile Exchange.

August live cattle rose 0.35 cent to $1.1937 a pound; August feeder cattle rose 0.15 cent to $1.4395 a pound; July lean hogs added 1.90 cent to $1.0060 a pound.

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Obama warns EU over high youth unemployment

BERLIN — President Barack Obama raised the prospect Wednesday that Europe might need to adjust its economic policies to tackle high youth unemployment and make sure that some countries don't "lose a generation."

Obama warned during his visit to Berlin that, while he has confidence the euro area's leaders will resolve their debt crisis, austerity and structural reforms must not cause policymakers to lose sight of the main goal — improving people's lives.

Unemployment in the group of 17 European Union countries that use the euro, which is stuck in recession, has shot up to a record 12.2 percent. Youth unemployment in southern Europe's crisis-hit economies like Spain and Greece is now well above 50 percent.

Obama spoke at a news conference alongside German Chancellor Angela Merkel, who has championed Europe's focus on budget cuts and structural reforms to tackle the crisis. Some analysts say, however, that the insistence on belt-tightening has worsened the eurozone's recession and that stimulating growth is now needed to overcome the crisis and create new jobs.

"We have to make sure that in pursuit of our longer-term policies, whether it's fiscal consolidation or reforms of our overly rigid labor markets or pension reforms, that we don't lose sight of our main goal, which is to make lives of people better," Obama said.

"And if for example we start seeing youth unemployment go too high, then at some point we've got to modulate our approach to ensure that we don't just lose a generation who may never recover in terms of their careers," he added.

Meanwhile, the unemployment rate among those aged 15-24 in the eurozone is 24.4 percent. That compares to 16.1 percent in the U.S, where the age range is 16-24.

Germany itself, Europe's biggest economy, enjoys low unemployment and has avoided recession.

Merkel insisted that her government is committed to help its European partners in the crisis-hit nations.

"Germany on the long run can only do well when Europe does well too," Merkel said. "If we were conducting policies that would harm other countries, we would harm ourselves."

Obama acknowledged that there is no patent solution to fix economic problems, saying the U.S. also has to press ahead with reforms such as improving workers' training, upgrading infrastructure and fostering more investment in research and development.

"I don't think there's a perfect recipe. All of us have to make sure that our budgets aren't out of control, all of us have to undergo structural reforms to adapt to a new and highly competitive economy," he said.

The high unemployment rate is among the most visible fallout of Europe's economic woes, increasingly threatening to undermine young people's faith in their governments and the European Union.

Obama said during a speech later Wednesday: "we want to work with you to make sure that every person can enjoy the dignity that comes from work — whether they live in Chicago or Cleveland, in Belfast or Berlin, in Athens or Madrid, everybody deserves opportunity."

"We have to have economies that are working for all people, not just those at the very top," he added.

The President of the EU Commission, the bloc's executive arm, acknowledged in Brussels "we have a social emergency in parts of Europe."

Jose Manuel Barroso vowed to use next week's summit of the EU's 27 leaders to push for "concrete measures to fight youth unemployment" and improve corporate lending conditions, especially in southern Europe's crisis-hit economies, to help boost investment and job creation.

The EU, which also includes 10 nations that don't use the euro currency, has already earmarked some funds for programs tackling youth unemployment. Germany and France, the bloc's biggest economies, have launched a drive to tackle it, although many details still remain unclear. Merkel will host a meeting on the issue next month of some EU leaders and the bloc's 27 labor ministers.

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Follow Juergen Baetz on Twitter at http://www.twitter.com/jbaetz

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Banks fall short in helping struggling homeowners

WASHINGTON — A new report says homeowners trying to avoid foreclosure must wait too long for their loan modification applications to be reviewed by some of the nation's top mortgage servicers. Such delays can plunge borrowers deeper in debt.

Joseph A. Smith, the independent monitor of last year's national mortgage settlement, said Wednesday that while the banks are doing a better job complying with new mortgage servicing rules, more needs to be done.

The settlement between 49 states, federal government agencies and lenders JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Ally Financial set new rules for how banks handle troubled home loans.

The settlement helped close a difficult chapter of the financial crisis when home values sank and millions edged toward foreclosure. Many firms had processed foreclosures without verifying documents.

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Va. newspaper removes 'Democrat' from name

WARRENTON, Va. — A newspaper in Virginia is removing the word "Democrat" from its name because of the nation's increasingly divisive politics.

In an editorial (http://bit.ly/102C4gg) published Wednesday, The Fauquier Times-Democrat announced it would now be known as the Fauquier Times. The editorial said having the word "Democrat" in the newspaper's name in such partisan political times "is no longer a very astute business decision."

The newspaper is located in Warrenton, about 45 miles outside of Washington. It's published twice a week, on Wednesdays and Fridays.

The newspaper traces its roots back nearly 200 years to the Palladium of Liberty, which began publishing in 1817. In 1905, the newspaper became the Fauquier Democrat. In 1989, it changed its name to the Fauquier Times-Democrat to more closely identify with the Times Community News, the family-owned chain that owned the paper.

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'Nightline' anchor Moran heading to London for ABC

NEW YORK — ABC News "Nightline" anchor Terry Moran is getting a new posting as the network's London-based chief foreign correspondent.

Moran will head overseas late this summer, ABC said Wednesday. Moran was ABC's chief White House correspondent from 1999 to 2005 and has done many overseas and domestic stories for "Nightline," most recently from Syria.

It's a revived position at ABC News. The late Peter Jennings spent several years as a London-based correspondent before becoming the network's chief news anchor.

Dan Abrams will replace Moran alongside Cynthia McFadden and Bill Weir as "Nightline" anchors.

Abrams will also be a chief legal affairs anchor for ABC News and expand his role on "Good Morning America," ABC News President Ben Sherwood said.

Abrams is a former general manager and show host at MSNBC and a legal correspondent for NBC's "Nightly News."

Abrams will be stepping back from daily operations at Abrams Media, a network of websites he founded that includes Mediaite, to devote more time to ABC News, Sherwood said.

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ABC is owned by The Walt Disney Co.

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