In Today’s World, Major Companies Barter To Achieve Objectives
· Executive Pay Comes In Form Of Barter
Incoming American International Group president and CEO Robert Benmosche’s salary will be paid in cash ($3 million) and barter ($4 million in fully vested AIG stock). The stock will provide him with a significant equity stake, aligning his interests with those of AIG. (The package was “approved in principal” by Kenneth Feinberg, the Treasury Department’s special master for executive compensation for institutions that received U.S. government bailouts.
· Barter, A Tool Used For Biggest International Deals
India plans to turn its armed forces into a modern fighting machine to boost border security and fight terrorism. They will be spending between $50- and $55-billion over the next five years. When making big-ticket purchases from the top defense companies around the world barter enters the picture. The foreign companies will be required to “offset” their sales by making a 30% (of every sale) purchase from an Indian company (domestic supplier) or a similarly sized investment within India.
· Patent Settlement Embraces Barter
Align Technology, the provider of the Invisalign teeth straightening treatment, is providing (via barter) a 10% stake in its company to Danaher as part of a patent settlement with one of Danaher’s subsidiaries.
· Media Giant Barters For Stake In TV Site
Walt Disney negotiated a barter deal with longtime media rivals (News Corp and NBC Universal, the creators of Hulu) to take an equity stake in Hulu.com, the fast-growing web site where users can watch movies and TV episodes for free. In exchange, Disney provides content — episodes of ABC shows to Hulu.
· Bankruptcy-Restructuring Sees Debt-For-Equity Barter Deal
Bally Total Fitness Holding Corporation is finalizing its bankruptcy-restructuring plan, which calls for lenders to take control of the health club operator (300 health clubs). The debt-for-equity barter deal will cut the company’s debt by $600 million. Lenders, under a pre-bankruptcy term loan, will receive 94% of the equity of the reorganized company.
· Bank Cements Win-Win Barter Deal With Clients
Spanish bank Banco Santander SA, has quietly offered to reimburse its private-banking clients their original investments in compensation for losses arising from Bernard Madoff’s Ponzi scheme. The bank’s effort is a barter type deal that will see the bank providing their original investments in the form of preferred stock in Banco Santander SA.
The preferred shares will be issued by Santander and pay a 2% rate of annual interest. In return, its clients will agree both to not sue and to keep all of their current business and deposits at the bank.
· Energy Trader Looks To Barter For Equity
Energy trader Andrew Hall is in discussion with Citigroup to barter a substantial chunk of Mr. Hall’s compensation for 2010, into equity (Citigroup stock) from cash. Hall is the head of Citigroup’s energy-trading unit Phibro LLC and made roughly $100 million in compensation in both 2008 and 2009.
· Hollywood’s Movie Stars Know The Value Of Barter Option
Top Hollywood movie stars often choose to pass on upfront fees for starring in a movie. Rather they’ll choose to accept the barter option (which in essence is betting on themselves), thus passing on the guarantee fee in exchange for a sizable back-end deal, which will include an ownership stake (often 25% to 33%) in the film.