With McDonald’s and Chipotle’s fortunes literally diverging (and their earnings announcements occurring within hours of each other last week) cue the quarterly cries that McDonald’s mistakenly divested the burrito dynamo.


World crude prices have stopped falling precipitously – for now. Plenty seem to be betting that prices can rise quickly from $85 a barrel, if a ‘floor’ is not far below. Lex isn’t so sure – and in this live note will look at the winners and losers of a longer oil slump. Join us at 12pm London for the discussion. 

Lex discussed on Wednesday the upcoming 600Mhz spectrum auction the FCC will launch in 2015. Not only is the estimated dollar value of the spectrum proceeds massive ($45bn vs. the $19bn for the 700Mhz auction in 2008) but many observers believe it is the most complex auction ever envisioned.

The US government doesn’t happen to own the spectrum being sold- it is the possession of local TV stations across the United States. It’s formally being referred to as an “incentive” auction because the FCC has to cajole thus far reluctant TV stations to put their spectrum holdings up for sale. And so the incentive auction is two auctions run in parallel. On one side is a “reverse” auction that determines the price at which spectrum is tendered. On the other side is a “forward” auction where buyers such as mobile operators Verizon and T-Mobile bid for spectrum. 

This probably isn’t the week to be announcing transformative M&A — as infrastructure software provider NetScout has discovered the hard way. It announced a rare Reverse Morris Trust transaction on Monday where it would combine with the communications unit of the conglomerate Danaher, a key rival. In an RMT deal, one company will spin off a division and simultaneously merge it with a smaller company. The rub is that it remains tax-free to both companies and shareholders as long as the shareholders of the spinning conglomerate own a majority of the new company’s shares.

Here’s how NetScout shares have reacted since Monday. 

After Bank of America settled litigation expenses with the Department of Justice over mortgage-related disputes for a record $16.7bn in August, investors were told that the worst was over. The focus would solely be on the future. Such promise was rewarded.

BofA shares rallied 10 per cent in the aftermath of the settlement up until the end of last month. That was double most of its rivals. JP Morgan stock was up 5 per cent, while Citigroup’s grew 4 per cent. There was confidence that the Charlotte-based bank was truly back on track.

But on Wednesday it emerged that its crisis-era mortgage troubles were not over yet. The $500m in reserves for legacy-related mortgage matters is small compared to the $70bn it has already agreed to pay over legal settlements. Still, it’s sizeable and leaves a cloud of uncertainty over the future of the bank. 

Railroads, the industry that arguably contributed the most to United States prosperity in the 19th century, aren’t that glamorous anymore. However this week the industry is back in the news in a big way. CSX, one of seven big “Class I” railroads with operations in the US, is the potential acquisition target of Canadian Pacific, a top-tier rival. Both have equity values exceeding $30bn. A combination would create an unprecedented transcontinental railroad. CSX’s tracks are in the eastern United States, while CP’s lines are in the west and upper Midwest.

Commercial railroads are privately held in the US. ( The passenger service, Amtrak, is however owned by the government.) The industry is textbook example of a “natural” monopoly, with no more than two operators in any given region. Capital costs are high so it makes sense to organise the industry around a few titans with the scale to afford necessary investments. 

Liquidity is tightening in the Chinese property sector. The cash calls have been trickling out, with three rights issues announced in the past few weeks (although Agile’s was shelved at the end of last week.)

So Country Garden’s issue – first out of the blocks and closed last Wednesday – should have been a good guide to sentiment towards the sector. But details of the take up, released on Monday, were perplexing. 

Now, we’d hate to think that Luxottica, the Italian eyewear group, is making up its management structure on the hoof. But consider the following.

At the start of September it announced a co-chief executive set-up. That’s never a wholly promising move, but here is the explanation: 

Some breakups happen because the relationship was a bad idea to begin with. So what about eBay, HP and Symantec? All of them are planning breakups that undo major deals made years ago. There was a time when these deals were nothing more than a sparkle in a chief executive’s eye – which translates, of course, into grandiose powerpoint slides.

Here’s a look back at the rationales that once seemed so exciting, and our assessment of whether these relationships really were a bad idea to begin with. 

There are a lot of good reasons for Blackstone to separate its M&A business. This slide from its most recent investor deck presents one. M&A boutiques (what it calls “advisory firms” and includes Lazard, Greenhill, Evercore, and Moelis) trade at twice the multiple of Blackstone.