Rona of Canada Rejects $1.8 Billion Offer from Lowe’s

After Rona rejected a $1.8 billion takeover offer, American rival Lowe’s has said it will continued to pursue a deal.

Lowe’s is the latest American retailers looking for growth in Canada, which boasts a comparatively healthy economy and housing market.

“Bottom line, we believe that our proposal is good for Rona and the communities it serves in Quebec as well as across Canada, and it is also good for consumers,” Robert A. Niblock, the chairman, president and chief executive of Lowe’s said in a statement.

But the province of Quebec, where Rona is headquartered, swiftly said that it will attempt to prevent any takeover. Raymond Bachand, Quebec’s finance minister, said that a Lowe’s deal “does not appear to be in the interest of Quebec or Canada.” He said that the province is considering several options including the creation of a fund “to defend the interests of Quebec.”

In a statement, Rona said that it was approached by Lowe’s on July 8 w ith a “non binding” offer to pay 14.50 cents for all of its shares. Rona said that it formally rejected the offer last Thursday.

Two days later, Lowe’s indicated that it would move forward with its hostile bid. Lowe’s said that it has support of about 15 percent of Rona’s shareholders.

Michelle Laberge, a spokeswoman for Rona, did not directly explain why the company waited for several weeks to announce that it was a takeover target except to say that its board immediately formed a special committee and hired outside advisers to evaluate the bid.

Lowe’s only entered the Canadian market in 2007 and has about 16, big box stores. Rona, by contrast, has about 1,500 retail outlets of various sizes, including franchises and affiliated stores. It operates about 840 stores under its own name.

But Lowe’s arrival has added to the squeeze Rona was feeling from the Canadian subsidiary of Home Depot which operates about 180 stores. Many analysts have said that there is not enough room in the Canadian market for three large players. Home Hardware, a cooperative owned by 1,080 retailers, has also been expanding the number of its large stores that also offer a full range of building supplies.

At Rona’s annual meeting in May, Jean Gaulin, its chairman, firmly rejected any notion that the company would be sold.

“Rona is not up for sale,” he said. “Not part of it, not all of it, not bits and pieces of it. It’s not for sale.”

Rona is a major corporation in Quebec and the province’s investment and pension fund, Caisse de dépôt et placement du Québec, owned about 12 percent of its shares as of last month.

The Caisse issued a carefully worded statement neither supporting nor rejecting the bid. The fund, which operates at arm’s length from the government, said however that it will consider several factors including the impact of a takeover on workers and franchise holders as well as the long term impact of any deal. Any takeover would will also require approval under federal foreign investment laws.

The company’s profile nationally is particularly high at the moment because of Rona’s sponsorship of the Canadian Olympic team and its extensive sponsorship of broadcasts of the London games. Its Olympic campaign strongly emphasis the company’s Canadian ownership and commitment to Canadian suppliers.

Lowe’s promised to keep Rona’s headquarters in Boucherville, Quebec and to also focus on Canadian suppliers.

American retailers have been trying to tap into the economic strength of their rivals to the north.

Target is currently preparing its move into Canada after acquiring the leases of 189 Zellers discount department stores from the Hudson’s Bay Company. Zellers struggled significantly following the entry of Wal-Mart into the Canadian market. Hudson’s Bay said this week that the remaining 64 Zellers stores will close by next spring leaving about 6,400 people without jobs.

At the other end of the retail spectrum, several Canadian news outlets have reported that Nordstrom has acquired the leases of four Sears Canada stores for its first move into Canada. While Nordstrom has not confirmed those reports, Sears has announced that it is leaving those locations.

24 Hour Fitness Health-Club Chain Is Said to Be on the Block

The health-club chain 24 Hour Fitness is for sale, people briefed on the matter said on Tuesday.
 
Forstmann Little, the private equity firm that owns 24 Hour Fitness, has hired Goldman Sachs to run the auction process, these people said. Goldman will soon begin soliciting interest from potential buyers, a group that includes other fitness chains and private-equity firms. 

24 Hour Fitness is expected to fetch about $2 billion in a sale, said these people, who requested anonymity because they were not authorized to discuss the deal publicly.

With about 425 locations, 24 Hour Fitness is the nation’s largest privately owned chain of fitness centers. A representative of the company did not immediately respond to a request for comment.
 

Forstmann Little’s eventual sale of 24 Hour Fitness was expected. Once one of the world’s largest private equity funds, Forstmann Little began winding down its operations several years ago afte r ill-timed telecommunications investments. Theodore J. Forstmann, the billionaire financier who led the firm, died last November at the age of 71.
 
24 Hour Fitness is one of the two major investments remaining in Forstmann Little’s portfolio. The other is IMG, the sports, fashion and media company. Forstmann Little is also expected to pursue a sale of IMG sometime next year.
 
The Forstmann Little fund formally expired on June 30, 2012, meaning that it was contractually required to sell its assets and return all money to its investors by then. But the firm’s investors – called limited partners in private equity parlance – had allowed that deadline to lapse and granted the fund extra time to sell 24 Hour Fitness and IMG. 
 
After Mr. Fortsmann’s death, Forstman Little named the hedge fund manager Julian H. Robertson as its chairman. He, along with Mark J. MacDougall, a lawyer at Akin, Gump, Strauss, Hauer & Feld, have been overseein g the sale of the firm’s remaining assets.

 
Health-club chains have been attractive acquisition targets for private equity firms because their membership fees generate predictable cash flows that they can use to pay off the debt taken on to pay for the company. The New York-based chain Equinox, for example, was owned by North Castle Partners and J.W. Childs before it was sold to the real estate developer Related Companies.
 
Other potential buyers of 24 Hour Fitness include LA Fitness, a chain of health clubs partially owned by the private equity firm Madison Dearborn; and Lifetime Fitness, a publicly traded company.

Forstmann Little acquired 24 Hour Fitness in 2005 for $1.6 billion. The company’s financial results suffered during the recession, but have since improved. In recent years the company has expanded internationally, opening several outposts in Asia.

San Ramon, Calif.-based 24 Hour Fitness was started in 1983 by Mark S. M astrov, a former natural-foods salesman, with a single club. Today, the company sponsors the U.S. Olympic team and at the London Games has several athletes on its “Team 24″ squad, including the beach volleyball star Kerri Walsh and water polo captain Tony Azevedo.
 

Morning Take-Out

TOP STORIES

Suggestions for an Apple Shopping ListSuggestions for an Apple Shopping List  |  Question: What would you do if you had $117 billion? That’s the challenge facing Tim Cook, Apple’s chief, whose company’s cash hoard keeps growing – by about $1 billion a week.

He could hold onto it. He could increase Apple’s dividend, which he instituted this year for the first time. Or he could spend it, Andrew Ross Sorkin writes in the DealBook column.

Just last week, Mr. Cook acquired AuthenTec, a mobile security company, for $356 million in cash – a price equal to pocket lint for a company with the war chest the size of Apple’s. The real question is whether Mr. Cook would ever spend Apple’s money on an “elephant† – Wall Street parlance for a huge deal.

Apple denizens often say that the company is not interested in deal making. It has, after all, invented some of today’s most successful consumer products. But that view misunderstands Apple’s history: some of its most important innovations were not invented within Apple; they were purchased from other companies.
DealBook ‘

Tiger Management Helps Next Generation of FundsTiger Management Helps Next Generation of Funds  |  When a top hedge fund manager donated money to start a student-run portfolio at the University of Virginia in 1994, Richard Gerson was one of the few undergraduates to earn a spot managing the six-figure portfolio.

It was the first connection of many that paved his way to the upper echelons of the hedge fund industry.

Mr. Gerson parlayed his college experience into an internship at Tiger Management, the vaunted hedge fund firm run by Julian Robertson. He then helped John Griffin, a top deputy of Mr. Robertson and the sponsor of the investment club, start Blue Ridge Capital.

Now, Mr. Gerson, 37, is building a new firm. Mr. Gerson and his business partner, Navroz D. Udwadia, have raised $1.2 billion for Falcon Edge Capital, according to people with knowledge of the matter. At a time when investors are reluctant to hand over money to unproven managers, Falcon Edge is the hedge fund equivalent of a high first-round draft pick.
DealBook ‘

DEAL NOTES

Levinsohn Confirms That He’s Leaving Yahoo  |  Ross Levinsohn, the executive who served as Yahoo’s interim chief, confirmed on Monday that he was leaving the Internet company after being passed over to fill the spot permanently.
DealBook ‘

Borrowing Costs Ease for Spain and Italy  |  The two countries benefited from pledges of support by European leaders and the United States Treasury secretary, Timothy F. Geithner, The New York Times reports.
NEW YORK TIMES

Mergers & Acquisitions ‘

Alibaba Is Said to Be Close to Raising $8 Billion  |  Some American Internet companies may be unpopular with investors these days, but a Chinese one is finding plenty of takers.
DealBook ‘

Oracle to Buy Xsigo  |  Oracle is extending its recent embrace of the cloud, agreeing on Monday to acquire privately held Xsigo Systems, a maker of network virtualization software.
DealBook ‘

Chicago Bridge & Iron to Buy Shaw Group for $3 Billion  |  The Texas-based engineering company has agreed to buy a rival, the Shaw Group, in a cash-and-stock deal worth $3 billion.
DealBook ‘

Roper Industries to Buy Sunquest Information Systems for $1.4 Billion  |  Roper Industries, an industrial manufacturer, has agreed to purchase Sunquest Information Systems, a maker of diagnostic and laboratory software for $1.42 billion in cash.
Dea lBook ‘

Cnooc Said to Seek $5 Billion to Finance Nexen Deal  |  Cnooc is looking to foreign banks for $5 billion of financing to help pay for its $15 billion acquisition of Nexen, two unidentified people familiar with the matter told Bloomberg News.
BLOOMBERG NEWS

Another Lawmaker Challenges Cnooc’s Nexen Deal  |  Representative Edward Markey asked for conditions on Cnooc’s bid for the Canadian firm Nexen, following a similar challenge by Senator Charles Schumer, Reuters reports.
REUTERS

ING Said to Be in Talks to Break Up Asian Unit  |  Bloomberg News reports that the Dutch financial services firm ING “may break up its Asian life insurance operations and is holding talks with buyers interested in the business in different countries, two people with knowledge of the process said.”
BLOOMBERG NEWS

Rio Tinto Maintains Control of Ivanhoe  |  The English-Australian mining firm Rio Tinto said it paid about $935 million for 133.6 million shares of Ivanhoe Mines, allowing it to maintain its 51 percent ownership stake, Reuters reports.
REUTERS

Korea Development Bank Abandons Talks for HSBC Unit  |  The Korea Development Bank said it failed to reach an agreement with HSBC over a sale of the European bank’s South Korean retail banking operations, Reuters reports.
REUTERS

INVESTMENT BANKING ‘

UBS Profit Falls on Facebook Loss  |  The Swiss bank reported a 58 percent decline in its net profit, as the firm was hit by a $356 million loss connected to the botched Facebook initial public offering.
DealBook ‘

Deutsche Bank Earnings Plunge as Euro Crisis Lingers  |  Germany’s largest lender said the turmoil made clients reluctant to trade in financial markets, resulting in a 46 percent decline in net income.
DealBook ‘

BBVA of Spain Reports a Drop in Profit  |  BBVA, the big Spanish lender, said its profit in the second quarter fell 58 percent as it set aside provisions for soured real estate assets, Bloomberg News reports.
BLOOMBERG NEWS

2 Japanese Banks Report Contrasting Results  |  While the Mitsubishi UFJ Financial Group said its quarterly profit fell 64 percent from a year earlier, the Mizuho Financial Group said its profit nearly doubled during the period, The Wall Street Journal reports.
WALL STREET JOURNAL

An Uncertain Path to Success on Wall Street  |  At a gathering of financial industry workers over the weekend, the prevailing mood among those just starting out in the business was one of confusion, New York magazine writes.
NEW YORK

New Chief to Take Reins at Swiss National Bank  |  Fritz Zurbruegg, a former civil servant, is stepping up this week to fill a spot that has been vacant since Philipp Hildebrand resigned in January, The Wall Street Journal reports.
WALL STREET JOURNAL

Derivatives Exchange to Overhaul Trading in Energy Contracts  |  IntercontinentalExchange is making the changes ahead of regulations intended to bring more transparency to the trading of derivatives, The Wall Street Journal reports.
WALL STREET JOURNAL

A Case Emerges for Mortgage Forgiveness  |  The Financial Times reports: “Provisional estimates by the regulator of Fannie Mae and Freddie Mac suggest they could save public money by forgiving certain mortgage debts, according to people familiar wit h the figures.”
FINANCIAL TIMES

PRIVATE EQUITY ‘

Private Equity Assets Reach a Record  |  The private equity industry as a whole oversaw about $3 trillion in assets as of the end of 2011, according to the data collector Preqin.
WALL STREET JOURNAL

Go Daddy Chief to Step Down, as a K.K.R. Executive Steps In  |  When the Go Daddy Group announced on Monday that its chief executive was stepping down, the Web hosting company didn’t have far to go to find an interim replacement. It plucked an executive from Kohlberg Kravis Roberts, one of its owners.
DealBook ‘

Private Equity F irm Hires a Former G.E. Official  |  John Krenicki, who ran a big energy unit at General Electric, is joining the private equity firm Clayton, Dubilier & Rice in January as a senior operating partner, The Wall Street Journal reports.
WALL STREET JOURNAL

Brazil Billionaire Plans to Take Transport Firm Private  |  Eike Batista, a Brazilian mining magnate, said on Monday he intends to spend about $300 million to buy all the shares of the transportation company LLX Logistica, The Wall Street Journal reports.
WALL STREET JOURNAL

Global Infrastructure Partners Unveils $7.5 Billion Fund  |  The investment firm Global Infrastructure Partners raised $7.5 billion for a fund to invest in infr astructure, the largest such fund to date, Reuters reports.
REUTERS

HEDGE FUNDS ‘

Banks Get Tough With Hedge Fund Clients  |  Reuters, citing unidentified “industry sources,” reports that big banks that cater to hedge funds are “sifting through their client lists, in some cases demanding higher fees on trading or a greater share of a fund’s business, and sometimes telling funds to look elsewhere.”
REUTERS

Activist Investor Steps Onto a Bigger Stage  |  Daniel S. Loeb, who runs the hedge fund Third Point, successfully pushed for a management change at Yahoo, a victory that raises his profile and marks a “new phase” in his career, The Wall Street Journ al writes.
WALL STREET JOURNAL

Hedge Funds Miss a Stock Market Rally  |  The stock market has climbed since the start of June, but hedge funds have largely remained on the sidelines, The Financial Times reports.
FINANCIAL TIMES

Venture Capitalist to Start a Hedge Fund  |  Rob Chandra, of Bessemer Venture Partners, is reducing his role at the venture capital firm as he prepares to start a $250 million hedge fund known as Avid Park, Reuters reports, citing an unidentified investor in the new fund.
REUTERS

I.P.O./OFFERINGS ‘

Manchester United Sets Price Range for I.P.O. at $ 16 to $20 a Share  |  Manchester United is moving forward with its initial public offering, disclosing on Monday that it is seeking $16 to $20 a share in its return to the public stock markets.
DealBook ‘

Facebook Faces Fresh Doubts About Advertising  |  On Monday, a Long Island start-up said it had discovered that Web robots, rather than actual human users, were far more likely to click its ads on Facebook, raising questions about the effectiveness of advertising on the social network, the Bits blog reports.
NEW YORK TIMES BITS

Restaurant Operator Sets Price Range for I.P.O.  |  CKE, which operates the Carl’s Jr and Hardees chains, and is backed by Apollo Management, plans to sell 13 .3 million shares at a price of between $14 and $16 each, Reuters reports.
REUTERS

Annie’s to Price Secondary Offering  |  Annie’s plans to sell 3.2 million shares, after the pasta maker went public in March.
INTERNATIONAL FINANCING REVIEW

VENTURE CAPITAL ‘

Venture Capital Firm With a Politically Charged Name  |  Bain Capital Ventures, the venture capital arm of Bain Capital, has recently been trying to gain more recognition for its efforts, contacting journalists “just to talk,” The Verge reports.
VERGE

Twitter Introduces a Stock Ticker Symbol Feature  |  A new feature allows Twitter users to search for tweets that mention particular stocks, AllThingsD reports. A similar feature is already offered by Stock Twits, a project of the entrepreneur Howard Lindzon.
ALLTHINGSD

Twitter Silences a Critic of NBC  |  GigaOm writes: “The episode raises questions about free speech and corporate control of social media platforms.”
GIGAOM  |  DEADSPIN

LEGAL/REGULATORY ‘

Medical Debt Collector Agrees to $2.5 Million Settlement  |  Without admitting wrongdoing, Accretive Health agreed to settle accusations that it violated a federal law re quiring hospitals to provide emergency care even if patents can’t afford it, The New York Times reports.
NEW YORK TIMES

Day Trading Firm Runs Afoul of Regulators  |  A firm called Swift Trade has reached a settlement with the Financial Industry Regulatory Authority over an alleged failure to prevent a “pattern of manipulative trading activity,” The Wall Street Journal reports, citing a copy of the settlement.
WALL STREET JOURNAL

The Evolving Contours of Insider Trading  |  Two recent cases filed by the Securities and Exchange Commission show how malleable the term “insider trading” can be, Peter J. Henning writes in the White Collar Watch column.
DealBook ‘

R.B.S. Said to Be in Talks Over Libor Settlement  |  The Wall Street Journal reports that the Royal Bank of Scotland is “negotiating a settlement with authorities investigating attempted interest-rate rigging at RBS and other banks, and a deal, including fines, could be announced in the next few months, according to people familiar with the matter.”
WALL STREET JOURNAL

Inside the Fed, Calls for Pre-Emptive Stimulus  |  The argument that the Federal Reserve should sometimes buttress the economy against large, potential risks dates to the era of Alan Greenspan, The New York Times reports.
NEW YORK TIMES

Agency Finds Its Chief Wasn’t Too Close to Corzine  |  An internal analysis by lawyers at the Commodity Futures Trading Commission found that the agency’s chairman, Gary Gensler, did not have a close relationship with Jon S. Corzine, the former head of the failed brokerage firm MF Global. Bloomberg News reports: “They didn’t attend each other’s weddings, Corzine didn’t go to the bat mitzvahs of Gensler’s daughters and they haven’t socialized together in 14 years.”
BLOOMBERG NEWS

Chinese Solar Company Reveals Soured Deal  |  Suntech Power Holdings, a big manufacturer of solar panels, disclosed a potential fraud by an affiliated company that could stretch its finances to the breaking point, The New York Times reports.
NEW YORK TIMES

Lehman Brothers Raises $4.7 Billion for Payment  |  In the second quarter, Lehman Brothers Holdings raised money through derivatives, real estate sales and the settlement of a lawsuit, as it prepares to pay creditors, Bloomberg News reports.
BLOOMBERG NEWS

Aer Lingus Rejects Ryanair’s Takeover Offer

LONDON — The board Irish airline Aer Lingus is trying to thwart the latest advances of Ryanair.

On Tuesday, Aer Lingus’ chairman, Colm Barrington, urged shareholders to reject Ryanair’s 694 million euros ($852 million) takeover bid. In a letter to investors, Mr. Barrington said the offer undervalued the Irish carrier and that competition authorities could block a tie-up between the two airlines.

Last month, Ryanair offered to buy the 71 percent stake in Aer Lingus that it did not already own for 1.30 euros-a-share, a 38 percent premium to the share price. But the bid was less than half the 1.48 billion euros that Ryanair first bid for the stake in 2006. The European Commission has previously ruled against Ryanair’s efforts to takeover its domestic rival.

“Your board has received legal advice that the European Commission is likely once more to prohibit the Ryanair offer as the number of routes into and out of Ireland that Ryanair would monopolize has s harply increased.” Mr. Barrington wrote to shareholders.

Aer Lingus’ chairman also said that Ryanair may be willing to give up slots at London’s Heathrow airport to win approval for the deal. Any loss of access to one of the world’s busiest airports would jeopardize future growth, he added.

On Tuesday, Aer Lingus said its pretax profit fell 73 percent, 11.4 million euros, during the three months through June 30, compared to the same period last year.

When it launched the bid for its local rival last month, Ryanair said the airline industry had changed significantly since its most recent failed bid in 2008. The low-cost carrier said European officials would take these changes into consideration when making an antitrust ruling.

Ryanair has pledged to keep the two airlines operating separately in one group, but regulators have consistently vetoed a merged group that would control more than 70 percent of the Irish air travel market. British competition authorities also are investigating whether Ryanair’s substantial minority stake in Aer Lingus has given it undue influence over the airline’s business and strategy.

In early afternoon trading in London, Aer Lingus’ share price had risen 1.4 percent.

Rothschild, Goodbody and UBS are advising Aer Lingus, while Morgan Stanley and Davy are advising Ryanair.

Celebrating Those Who Help Small Businesses

By AMI KASSAR

I recently came across a photo on Facebook from the Pay It Forward movement. It was of a dry cleaner with a sign on the door that read, “If You Are Unemployed and Have a Job Interview, Bring Us Your Suit and We Will Clean It for Free.” The photo struck an emotional chord in me. I believe it’s this very spirit that could help us work our way out of our economic mess. Americans helping Americans is what we need to succeed.

But when it comes to the world of small-business lending, I don’t see this spirit very often. Sometimes at Multifunding, we have to work with lending shops where there are dozens of employees in a room working to lend money to small businesses at annual percentages of 60 to 80 percent. The shops are backed by venture capitalists. Hedge funds lend them money, and they’re having a field day in the current economy. They say they are providing a service by making it easier for businesses to get financing, and t hey are — but at a big price.

Other times, we hear stories of small-business owners who are the victims of unscrupulous loan brokers. They have paid $2,500 for a business plan they didn’t need, or they have paid for credit repair services even though their credit scores were above 700. Sometimes, that $2,500 is the last money they have.

The stories get tougher. Occasionally the workout groups at banks call us to try to help clients they no longer want find a new (and more expensive) lender. Many times these small-business owners take 18 percent interest loans in the hope that they will provide one last chance; often, the alternative is to just shut down the family business. The decisions are tough — and very personal.

Two days ago a woman called from rural Alabama because she was trying to open a retail store. She had $8,000 she wanted to put down on the business and was hoping to borrow $100,000. Her plan was to buy a buil ding for $65,000 and use the other $35,000 for working capital and to stock up on inventory. I sent her back to the drawing board and told her to find a place to rent, and then maybe think about buying a building once her store was up and running. I could tell she was shattered. I had about seven seconds to absorb her reaction before the phone rang with the next challenge.

The other day, however, was special. We hosted an event for Valley Green Bank in Philadelphia, which we gave an “A” for small-business lending on our Banking Grades scorecard – a grade that qualified Valley Green for one of our 2012 Small Business Bank Awards.

More than 2,500 banks have received an A grade on bankinggrades.com. The grade means the banks used at least 25 percent of their domestic deposits to make small-business loans. We picked Valley Green for our first awards ceremony because it is the A bank that is closest to our office and it is the largest bank in Philadelphia County t o receive an A.

Several of the bank’s customers came to the ceremony and shared stories of the businesses they started with Valley Green’s help. The food co-op from up the street brought plums from local farmers. The new Hispanic radio station in Philadelphia was present. We had a high-end car parts wholesaler and a woman who had quit her job to provide business and operations support to her husband, an inventor. Everyone there had received a loan from the bank.

These weren’t the businesses with $20 million in revenue that the big banks like to call small businesses. These were true small businesses and entrepreneurs who have been fighting the fight since the Great Recession and have been able to do so, in part, because they were fortunate enough to find a lender who was willing to offer them reasonable rates. There was a true sense of community in the room as they shared horror stories, laughs, business cards and cake (see photo).

Americans helping Americ ans. I will hold onto this memory as we try to survive our endlessly depressing political season.

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

UBS Profit Hit After Loss on Facebook IPO

LONDON – UBS on Tuesday reported a 58 percent decline in its net profit during the second quarter as a fall in investment banking income weighed on the Swiss bank.

The drop in profits comes as the chief executive of UBS, Sergio P. Ermotti, is paring back the firm’s investment banking unit to focus on its wealth-management division.

Ongoing market volatility connected to the European debt crisis has hit trading activity across the financial services sector.

Like many of its rival, UBS’s investment banking unit continued to face difficult market conditions, and was also hit by a 349 million Swiss franc, or $356 million, loss connected to the botched Facebook initial public offering.

The bank said the lack of a solution to the European debt crisis and the Continent’s ongoing banking problems could harm the firm’s future profits.

“Failure to make progress on these key issues, accentuated by the reduction in market activity levels typically seen in the third quarter, would make further improvements in prevailing market conditions unlikely,” UBS said in a news release.

Net income at the Swiss bank fell to 425 million francs during the three months through June 30, compared with 1.02 billion francs in the same period a year earlier. Operating income fell 10.6 percent, to 6.4 billion francs.

Lower trading revenues and the loss incurred from the Facebook initial public offering hurt UBS’s investment banking unit. In total, the division reported a pretax loss of 130 million francs in the second quarter. UBS does not provide net income figures for its separate business units.

Technical errors at Nasdaq exchange earlier this year caused a delay in the start of trading of Facebook shares and later flooded the market with the social networking company’s stock. The problems caused UBS to receive more shares than its clients had ordered, according to a company statement.

”We will take appropriate le gal action against Nasdaq to address its gross mishandling of the offering and its substantial failures to perform its duties,” the bank said.

Despite the declining activity in its investment banking unit, UBS said its wealth-management businesses had received 13.2 billion francs of new money during the second quarter of the year.

UBS continues to reduce its exposure to risky assets after a string of recent scandals, including a $2.3 billion trading loss prosecutors say was caused by Kweku M. Adoboli, a former trader at the bank.

The Swiss financial giant said it had cut its risk-weighted assets by 45 billion francs in the second quarter. The bank now plans to reduce the total figure to 270 billion francs by 2013, more than the previous 290 billion-franc target.

UBS said its core Tier 1 capital ratio, a measure of a firm’s ability to weather financial shocks, had risen to 8.8 percent, and would reach 9 percent by the end of the year.

The firm also cut more than 700 jobs during the three months through June 30, as part of the bank’s plan to achieve 2 billion francs’ worth of annual savings by 2013.

UBS is also subject to several investigations into the manipulation of the London interbank offered rate, or Libor. The British bank Barclays agreed a $450 million settlement last month with American and British authorities after some of its traders and senior executives were found to have altered the rate for financial gain.

In a conference call with reporters, Tom Naratil, the bank’s chief financial officer, declined to comment on whether UBS had made specific provisions to cover potential fines connected to the manipulation of the rate.

Deutsche Bank Blames Euro Crisis For Earnings Plunge

FRANKFURT—Deutsche Bank, Germany’s largest lender, on Tuesday blamed the euro zone debt crisis for a plunge in earnings in the second quarter, saying that the turmoil made clients reluctant to trade in financial markets.

Net income fell 46 percent to 661 million euros, or $811 million, compared to the second quarter of 2011, the bank said. Deutsche Bank reported approximate earnings for the quarter last week, but gave more detail Tuesday.

Jürgen Fitschen and Anshu Jain, who have been sharing the job of chief executive since replacing Josef Ackermann in May, attributed the sag in profit and revenue to ‘‘a volatile environment.”

‘‘The European sovereign debt crisis continues to weigh on investor confidence and client activity across the bank,” they said in a statement.

The investment banking division previously headed by Mr. Jain, which had been the most profitable unit until recently, suffered a 63 percent decline in pretax profit, to 35 7 million euros, the bank said.

Pretax profit at Deutsche Bank’s retail banking operations, including its network of branches in Germany, fell 13 percent to 398 million euros. The German economy, which has been less affected by the debt crisis, has helped make retail banking a more reliable source of profit than investment banking.

The bank reiterated that a decline in the euro compared to the dollar led to an increase in operating expenses that also hurt profit. Bank revenue fell 6 percent to 8 billion euros.

The earnings report is the first under Mr. Jain and Mr. Fitschen, who in May replaced Mr. Ackermann after a decade as head of the bank.

Alibaba Is Said to Be Close to Raising $8 Billion

Some American Internet companies may be unpopular with investors these days, but a Chinese one is finding plenty of takers.

The Alibaba Group, a Chinese e-commerce giant, is close to completing a more than $8 billion round of financing that will value it at as much as $43 billion in equity, according to two people briefed on the matter. Alibaba plans to use the bulk of that new money to buy back a 20 percent stake in itself from Yahoo for $7.1 billion. Yahoo owns 40 percent of Alibaba.

One Yahoo executive who signed off on that deal with Alibaba, Ross Levinsohn, announced on Monday that he was leaving the Internet company. The departure of Mr. Levinsohn, who served as Yahoo’s interim chief executive for three months, was expected after the company’s board hired Marissa Mayer from Google as its new leader.

With its financing nearly in place, Alibaba is prepared not only to solidify its position as the most valuable privately held Internet company but also to take a big step toward separating itself from Yahoo, which has struggled to revive its brand and stock price.

Alibaba’s financing round includes a $1.5 billion sale of convertible preferred shares, based on a $43 billion equity valuation for the company, and the sale of $2.6 billion in common shares, at a roughly $35 billion valuation, the people briefed on the matter said. They requested anonymity because the discussions are private. Alibaba is also close to borrowing $4 billion.

The agreement with Yahoo stipulated that Yahoo could receive more than $7.1 billion if its Chinese partner raised money at a significantly higher valuation than it is expected to. Yet because the sale of preferred shares and common shares are subject to certain discounts, Alibaba is still expected to pay close to the original amount.

Still, that price represents a big return on Yahoo’s investment.

Yahoo invested $1 billion in Alibaba about seven years ago, gaining a 40 pe rcent stake in what was then seen as a promising Chinese start-up company.

Now the Alibaba 40 percent stake makes up more than half of Yahoo’s $20 billion market value. Under the agreement hashed out in May, Yahoo will sell back another 10 percent of Alibaba shares when the Chinese company goes public and divest itself of the rest at later date.

Shares of Yahoo fell nearly 1 percent on Monday to close at $15.98 per share.

The two companies have butted heads a number of times in recent years. Alibaba’s decision in 2010 to spin off its Alipay online payment business prompted protests from Yahoo that it had not been properly consulted. The dispute was not settled until last summer.

Alibaba has long sought to buy back Yahoo’s interest in itself, though attempts to reach an agreement fell apart many times. Irritated that Yahoo was considering selling a minority stake in itself to investor groups last year, Alibaba threatened to wage a hostile takeover atte mpt to try to forestall such a possibility. The American company eventually abandoned the idea.

Alibaba is raising billions of dollars from a patchwork of international backers. Nearly a dozen investors, including hedge funds, sovereign wealth funds, mutual funds and private equity firms, will buy the preferred shares, these people said. The China Investment Corporation, that country’s sovereign wealth fund, will participate in the purchase of the common shares. The China Development Bank, is expected to provide a substantial portion of the loan to Alibaba.

Joseph C. Tsai, Alibaba’s chief financial officer, who has led the company’s fund-raising efforts, tried to limit the financing round to a small group of investors to restrict access to Alibaba’s financial information, one of the people briefed on the financing matter said.

The rapid rise of Alibaba, a collection of Chinese consumer and business-to-business e-commerce sites, illustrates how quickly momen tum can shift on the global Web. Seven years ago, the company was eager for a capital infusion amid intensifying competition from domestic and international rivals like eBay, which owned an online auction site named Eachnet. In 2004, the year before Yahoo’s investment, Alibaba recorded just $68 million in revenue.

Since then, Alibaba’s sales have swelled.

In the first half of this year, Alibaba recorded a little more than $1.8 billion in revenue, more than 60 percent more than in the year-earlier period, people with knowledge of the matter said.

In contrast, Yahoo has fallen nearly as swiftly. In early 2008, Yahoo spurned a takeover offer from Microsoft – a bid that valued it at roughly $45 billion. Since then, Yahoo’s slumping advertising sales have slumped and it has lost market share to companies like Google and Facebook. Its shares, since its Alibaba investment, have lost more than half their value.

In an effort to appease investors, Yahoo has sai d the proceeds of Alibaba’s purchase will be returned to shareholders, possibly through a share buyback program.

Alibaba is expected to complete the repurchase of the 20 percent stake in the beginning of the fourth quarter.

Suggestions for an Apple Shopping List

Question: What would you do if you had $117 billion?

That’s the challenge facing Tim Cook, Apple’s chief, whose company’s cash hoard keeps growing – by about $1 billion a week.

He could hold onto it. He could increase Apple’s dividend, which he instituted this year for the first time.

Or he could spend it.

Just last week, Mr. Cook acquired AuthenTec, a mobile security company, for $356 million in cash – a price equal to pocket lint for a company with the war chest the size of Apple’s.

The real question is whether Mr. Cook would ever spend Apple’s money on an “elephant” – Wall Street parlance for a huge deal.

Apple denizens often say that the company is not interested in deal making. It has, after all, invented some of today’s most successful consumer products. But that view misunderstands Apple’s history: some of its most important innovations were not invented within Apple; they were purchased from other companies.

For example , the touch-sensitive gesture technology that made the iPhone and iPad possible was invented and patented by FingerWorks, which Apple acquired in 2005. Siri? Apple bought it in 2010. Even Apple’s urrent Macintosh current operating system was an acquisition of sorts. It is built on the back of NeXT, acquired from Steve Jobs (they got him to return as part of the deal, too) in 1996. (Pixar, Mr. Jobs’s other big success, was an acquisition as well. He bought the company from George Lucas as part of a spinoff from Lucasfilm in 1986.)

A year before Mr. Jobs died, he strongly hinted that Apple would consider a big deal. “We strongly believe that one or more very strategic opportunities may come along, that we are in a unique position to take advantage of because of our strong cash position,” Mr. Jobs said in a call with analysts in 2010.

Having all that money can be daunting, so to help Mr. Cook, here is a potential shopping list – some must-buys and some pie-in-th e-sky targets – that he may want to consider:

NUANCE This is the one no-brainer on the list. Nuance, based in Burlington, Mass., provides much of the speech recognition technology behind Apple’s Siri and dictation functions. Right now, Apple has merely licensed it and integrated it into both its mobile devices like iPhones and iPads as well as its new Macintosh operating system. Most users think it is Apple technology, but those services wouldn’t work without Nuance.

It should go without saying, but the importance of speech recognition is only going to increase in the future. Nuance has more patents for it and has developed the technology further than just about any firm in the world. At some point, Nuance will be able to hold Apple for ransom. Google and Microsoft are steadily building their own speech recognition technologies and they are catching up quickly. Nuance’s market value is $6.3 billion. Even if Apple paid twice as much, it would be a worthwhile inves tment.

TWITTER AND PATH Consider this a one-two punch. Apple should buy the social media companies Twitter and Path. Twitter is well known. The 140-character Twitterverse now has more than 140 million active monthly users. It is one of the few, if only, independent social media properties that could allow Apple to build its own social media platform to truly compete against the likes of Facebook and Google.

Twitter’s price tag is just north of $10 billion, and as my colleagues Evelyn M. Rusli and Nick Bilton reported in The New York Times last week, the idea has certainly crossed the minds of Apple executives.

Path is less familiar, but it would be an integral ingredient for Apple’s push into social media. Path is a fast-growing social media company that works on mobile devices only. It has cracked the code on making the mobile experience of sharing with friends enjoyable. Path would probably cost $250 million to $1 billion. If Apple were to stir together T witter, Path and its own Photo Stream service – and leveraged all the data it has collected about its users over the years (while mindful of privacy issues) – the company would have quite a product that would keep consumers hooked.

RESEARCH IN MOTION Yes, this one may be a head-scratcher, considering that the iPhone seems to have eaten RIM’s BlackBerry for breakfast – and lunch. But with a marke value of $3.7 billion it is a relative bargain and could be had for four weeks’ worth of Apple’s spare cash).

Such a deal would instantly put Apple into the enterprise market, giving it access to corporate and government customers that require RIM’s highly secure servers. Apple could build access into RIM’s network directly into future iPhones and maybe even create an iPhone with BlackBerry’s famous keyboard, which for many of us would create the ultimate smartphone.

RIM’s relationships with corporate and government customers could be leveraged to sell other product s like computers and iPads. RIM also owns QNX, a software that is being used in its next-generation BlackBerry devices. More important for Apple, QNX is used as an in-dashboard operating system, and it is already in 20 million cars, like Chryslers and Porches.

Finally, there are RIM’s patents, said to be worth $1 billion to $4 billion alone, a virtual treasure trove for a company that is locked in brutal patent wars with rivals. Google paid $12.5 billion for Motorola Mobility last year, in part, to secure the company’s patent portfolio.

SQUARE Everyone is talking about the mobile wallet. Square, started by the Twitter co-founder Jack Dorsey, has created a unique new electronic payment system though iPhones and iPads. The next time you go to a coffee shop, there is a chance you can pay with your iPhone simply by saying your name when you get to the cash register.

Square’s value has crept up to more than $3 billion, which is high for a company that is still l osing money. But if Apple could integrate Square into iTunes – which has over 400 million active credit cards on file from around the world – it could become a sensation overnight, pushing out rivals like VeriFone and PayPal.

SPRINT Yes, the phone company. This might seem the most out-there idea. But it solves many of Apple’s biggest problems.

Such a deal would give Apple its own wireless network, which it could upgrade to become the ultimate high-speed wireless carrier in the country. It could eventually use the network to bypass the cable operators to deliver content directly to the home on multiple devices, including the product that everyone speculates is on its way: a TV device.

With a stock market value of $13.5 billion, Sprint can be purchased for a song. Apple could easily spend four times more than that – say, $50 billion – to build out the Sprint network and turn it into a showcase for the next generation mobile technology. Apple could still offer its devices on other carriers, but its premium product would exist on its own network.

Think about it: Apple service, Apple Stores and simple Apple pricing. That would revolutionize the business. And such an investment would force the other carriers to step up their game, which would only help Apple. Most compelling is the possibility of Apple owning the last mile into everyone’s home (wirelessly) and be able to offer televised content. (I had considered Netflix as a suitable acquisition target, but if Apple had its own telephone company, it could negotiate directly with content providers on a level playing field with cable and satellite operators.)

The total cost for this grocery list, takeover premiums and additional investments included, is about $97 billion, give or take a couple billion. (Let’s put aside the thorny issue of how Apple can use its cash, much of which is abroad, without being taxed). That would leave Mr. Cook with almost $15 billion in th e bank for walking-around money.

Tiger Management Helps Next-Generation Funds

When a top hedge fund manager donated money to start a student-run portfolio at the University of Virginia in 1994, Richard Gerson was one of the few undergraduates to earn a spot managing the six-figure portfolio.

It was the first connection of many that paved his way to the upper echelons of the hedge fund industry.

Mr. Gerson parlayed his college experience into an internship at Tiger Management, the vaunted hedge fund firm run by Julian Robertson. He then helped John Griffin, a top deputy of Mr. Robertson and the sponsor of the investment club, start Blue Ridge Capital.

Now, Mr. Gerson, 37, is building a new firm.

Mr. Gerson and his business partner, Navroz D. Udwadia, have raised $1.2 billion for Falcon Edge Capital, according to people with knowledge of the matter. At a time when investors are reluctant to hand over money to unproven managers, Falcon Edge is the hedge fund equivalent of a high first-round draft pick.

Mr. Gerson is capita lizing on his background.

In a relatively young industry where stars can quickly fade, Tiger Management – and its myriad affiliates like Falcon Edge – is the closest thing to a hedge fund dynasty. After a brief career in finance, Mr. Robertson started Tiger in 1980 with seed money from friends and family. He regularly racked up double-digit returns by taking big positions in companies with good long-term growth prospects and aggressively betting against those stocks poised to fall.

Mr. Robertson trained his young prot̩g̩s Рthe so-called Tiger cubs Рin the same tradition, creating the next generation of hedge funds stars. After leaving Tiger in 1993, Lee Ainslie started Maverick Capital, which currently manages roughly $10 billion. Stephen F. Mandel Jr. began Lone Pine Capital in 1997. Two years later, Andreas Halvorsen opened Viking Global.

“We really gravitated to young people, and that was a great deal of our success,” said Mr. Robertson, 80, who often hired people in their 20s. “I was just an old goat with all these young geniuses around.”

As the first wave of Tiger cubs age, they are breeding new funds, too.

Blue Ridge Capital, where Mr. Gerson honed his skills, has been a particularly good incubator for talent. While Blue Ridge has subscribed to the long-term strategy of Tiger, the founder, Mr. Griffin, has infused the firm with his own philosophy. As a proponent of behavioral finance, he trained analysts like Mr. Gerson to identify how ego and emotion can affect the market and stock performance.

The fund, which is named for the mountain range that run through several Eastern states, has returned an average of 20 percent a year since 1996, compared with 8.9 percent for the Standard & Poor’s 500 index. Despite strong demand, Blue Ridge has refused new investments for most of the last decade.

The blend of success and exclusivity has created a halo effect for its graduates. Christopher R. Hansen, the founder of the $2 billion Valiant Capital, was an early investor in Facebook. David Greenspan, another Blue Ridge Capital alumnus, is expected to raise more than $1 billion this year for his new firm, Slate Path Capital.

In building Falcon Edge, Mr. Gerson is tapping the wealth of relationships that he has cultivated over the last 18 years as part the Tiger family. He chats regularly with the billionaire commodities investor Thomas Kaplan, who has one of the largest private collections of Rembrandts. Nearly a decade ago, Mr. Gerson met the real estate magnate Sam Zell. The meeting was made possible through Mr. Gerson’s brother, Mark, the co-founder of the Gerson Lehrman Group, a firm that connects industry specialists with investors.

Mr. Zell said he was so charmed by the young investor that he asked Mr. Gerson to join him for a trip to Egypt to meet with government officials and investors. Since then, Mr. Zell and Mr. Gerson have traveled extensively throughout the Middle East and Asia, including Iraq, Dubai, Cairo and Beijing.

“I don’t think I’ve ever met anyone better at networking than Rick,” said Mr. Zell.

Mr. Gerson, who is known for his intense manner and boyish grin, is a force of personality.

While working on the student-run portfolio in 1994, he contacted Mr. Griffin, then the president at Tiger Management, for a job. Mr. Griffin was not planning on hiring any interns. But he relented after Mr. Gerson e-mailed him incessantly.

Mr. Griffin was impressed. When he branched out on his own the next year, he offered Mr. Gerson a job. In those early days of Blue Ridge Capital, Mr. Gerson picked stocks and helped shape investment decisions from his college dorm room.

At Blue Ridge, Mr. Gerson has developed a reputation as a rapid-talking, high-energy investor who can be equally blunt. While friends say that Mr. Gerson lacks the usual filter, it is usually interpreted as honesty rather than rudeness.

“He can get away with being very direct,” said Mr. Hansen, a former colleague and the founder of Valiant. “Other people may not be able to pull it off because people would think they have an agenda, but Rick is so good at admitting his mistakes.”

A spokesman for Blue Ridge declined to comment.

Mr. Gerson did have to repent for a misstep in China. In 2006, Mr. Gerson oversaw a Blue Ridge private equity portfolio there with a local partner, raising $1.45 billion. But one of the fund’s first investments, ITAT, became ensnared in a major accounting fraud, bruising Blue Ridge and other blue-chip investors, like Morgan Stanley and Merrill Lynch.

Soon after, Mr. Griffin unwound the fund and returned the money to investors, according to people with knowledge of the matter. But he was upfront about his mistakes. Mr. Gerson conceded to friends and colleagues that private investments in China were more difficult than anticipated and that t he team had overestimated its knowledge of the market.

Tiger ties do not always guarantee success. Chris Shumway, a top deputy of Mr. Robertson, shut down Shumway Capital in 2011 after investors revolted over some management changes.

The offspring of those Tiger cubs have faced their share of troubles, too. JAT Capital, started by an alum of Shumway Capital, is down nearly 20 percent in 2012, after stellar returns for years.

Since many of the managers are steeped in the same principles, some traders joke they often suffer from “group think.” The cubs tend to hold similar positions in certain companies, like Apple or MasterCard. These stocks are sometimes referred to as “101 Park” names, a nod to the building that housed Tiger Management and several affiliates.

Mr. Gerson is hoping to build something different, even as he borrows from the blueprints of Mr. Griffin and Mr. Robertson, according to several people with knowledge of the firm. Falcon Edge will own publicly traded stocks, but it will also make investments in private companies that are not listed on exchanges.

The firm plans to invest overseas, too. Mr. Udwadia, Mr. Gerson’s partner, is an emerging-markets specialist from the well-known hedge fund Eton Park Capital Management. Mr. Gerson wants to focus on the Middle East, where he has spent years establishing ties.

But Mr. Gerson will be based in Manhattan.

Falcon Edge is just one floor below Blue Ridge Capital at 660 Madison Avenue.