Transcripts For BLOOMBERG Street Smart With Trish Regan And

Paribas, and considering slavering slapping charges. Plus, professional boxer, Floyd Mayweather junior, currently undefeated World Champion repairing for a fight this weekend. Also throwing his hat in the ring with Oprah Winfrey to compete to buy the l. A. Clippers. Do we want to buy the clippers . Yes, we do. There he interested in buying the clippers. We will keep them right where they are at. We will have all of that ahead. Getting to the market right here. Gocks were watching as we into the close. Julie hyman keeping an eye on them. Avon shares declining sharply. Million. Will pay 130 5 million for a justice criminal Department Investigation and noncriminal investigation, similar investigation. The company reporting a wider firstquarter loss as sales fell in all of the regions. We have been watching a lot of pharmaceutical deals recently. A Company Called Merrimack Pharmaceuticals reported in a study that patients treated with the experimental cramp cancer longereated lived than those who receive standard chemotherapy. No approved drugs. If it were to get approved, that would be a big heal. Shares are surging. The other deal talking about is in telecom. At t has approached directv for talks. Hares are at a record of course there has been a lot of merger talk in the industry. This reportedly also approached directv. Our big story,to a megamerger in the Telecom Industry could be in the works. Softbank planning to move forward with a bid for tmobile. The company met with them this month to make that arrangement for the tmobile offer and could be a pretty big win or sprint. The acquisition target added more subscribers in the First Quarter than at t and verizon combined, adding 1. 3 million new monthly subscribers. Joining me to discuss, jeff mccracken, Bloomberg News managing editor and tina moby. Also, emily chang. I know you just sat down with the tmobile ceo. What did he have to say about potentially running the tmobile merger . Kudos to the team for breaking the story and also breaking the scoop john leger is a leading cavender asked canada to run up potential merger. I love interviewing john because he never minces words. Always provocative. Any other ceo might not have done the interview at all after we broke the story but he came out swinging, not just on television. Run theing candidate to combined company. I . Tweeted back at me, am . Consolidation is one path forward or this company. I will not comment on any individual talks that may or may not go on. With the approach we have and the options we have, consolidation is one good option. Our shareholders and owners would consider any opportunity. I am not privy to any of what you learned there. The individual speculation about me, you know my own opinion of myself. It will be easy for me to comment on that. He thinks pretty highly of himself. When i asked him a couple months back, what if dan has he become ceo . He said that would be like reading cory johnson in charge and noberg west one would ever do that, right . What do you think about the potential for this to go through . One of the more unusual situations in that 30 billion dollar megamergers are not usually this will telegraphed. Meetings with big regulators. He got pushed back regulators weeks ago. Or julyframe is june when you would get a deal announced. Really not trying to hide the deal from anybody. Isnt he going to change the pricing by being so public about it . His view is he wants the regulators to know he is coming, and he wants them to know here is the proposal i will make him and be prepared and be ready, and i dare you to block me. Thats quite a character. Do you think regulators would be ok with this . I think it will be a tough sell for regulators. More important theme is what this means for pay tv and wireless and skate. I think it is all about the race to offer consumer integrated bundle services. You can make the case that a combined tmobile and sprint will be a much more level competitive Playing Field with verizon and at t. Thatwould agree consolidation is the main driving theme right now. I know you spoke to him about whatands for the company, he would do differently if he was running sprint. Tell us what he said . Twitter he has bashed all of these guys. At t and verizon and even sprint. Up. Ays sprint is frucked him what sets him apart . What he would do differently if he was running sprint. Take a listen. Is nothing more than another way of touching individual customers, listening to them. The difference with me is i listen to them and then i walk in and use that as the strategic input for how i run my company. It is not mckinsey, bain but individual customers on twitter telling me what to do, creating the next phase. I would do that in any of these big companies. Wrinkly, i just do not know if the companies are ready to change. Frankly. Like even that sprint is ready for it, who knows what regulators will say. The argument has been they need for competitors, four players for there to be real competition. Tmobile says if you combine the underdogs, you have three real competitors rather than a doowop list and underdogs. Talking about another deal in the making. Rumors at t is approaching directv. What with that gain for them . We reported weeks ago that dished and directv have had merger talks. I think it is inevitable in the next 12 months you will see dish and directv. You will see a merger between one of those three. Broadly speaking telecom and Satellite Companies are coming into the same Playing Field. What will that mean for the consumer . For the consumer am i think such a merger is questionable in the sense that you have more choices that is better than less. More importantly, for investors, a very important aspect, we upgraded directv today rummel hold to abide. A buy. A hold to we believe it makes the potential margin merger to be more plausible. I would think there would be other candidates out there that audiosay being the sole provider as directv is, granted it is doing exceedingly well, we think the future is wireless broadband. Reading all of that together. All of that together. You said we will probably see more rumblings. Is this something specific to the media sector or merger and Acquisitions Development . It is really like the dam is broke. Merck looking to do deals and pfizer and astrazeneca. Confidence out there . Behalf of ceos willing to make the acquisitions. Cash has been on the Balance Sheet for a long time. Investors have been rewarding deals for a long time. Seems like at the board level theyre willing to go forward. The changing lets double size of my company type deals. A big deal. Sticking with me. Tank you for being here. Terrific interview. Thank you for sharing the highlights. Coming up next, the pepsi ceo speaks to bloomberg tv about hedging her bets when it comes to inhome soda makers in standing her ground with activist investors. We will go inside pepsi next. Plus, is chinas economy about to eclipse the u. S. . We will hear the heart of the debate that may redefine relations between washington and beijing next. Pepsico fighting a multi front battle. Dealing with nelson peltz who wants to see pepsico spinoff the struggling Beverage Business. Betty liu spoke with the pepsico chairman and ceo about dealing with activist investors, and she joins us now. Still on set with me is jeff mccracken. T does he say about how she say about bringing back the carbonated soft drinks could affect the business . Both pepsico and pepsico cocacola dealing with a deflated soft drink market. There is no secret to the trend. There is diy Home Improvement am a cars and now diy colas. That seems to be the next trend. Shes wanting to see if this markets in the market will really grow, and if it is a misuse open to looking at technologies being developed, including the one game developed by soda stream. They are the target of a lot of acquisition talks. The things she said to me on that which i will play for you in a moment, pushed the soda stream stocks up to an intraday high. Let me first play for you what she said. Inhome soft drink manufacturers could be something that is a significant force into the future. When that is going to happen, we do not know. I think our goal is to make sure when this category becomes of factor in the marketplace, we are playing with all of the machinery manufacturers. It is an open system and we can supply great tasting products for all of the people so consumers can get pepsico products whatever machine thereby. Clearly investors in soda stream are very sensitive to any kind of talk that might open the company up to acquisitions. Starbucks might be interested in taking a 10 take stake can soda stream. That hass a Company Really been under a lot of challenges. Nelson peltz wanting to spinoff the snack business, carbonated average business not doing as well. People around the globe looking into other kinds of beverages. It is she going to do here . Nelson has a pretty good track record. Heinz tot correctly on dr pepper and kraft and other Consumer Products as mrs. He has been right a lot more than he has been wrong. When it comes to Consumer Products and beverages he has made a lot of good investments. What is the advantage . He thinks they are very bloated. He thinks the headquarters is bigger than it needs to be. He thinks youre the number two Beverage Company and Snack Company that on their own will be just fine and can start to do acquisitions. He would like to see an old craft business be coupled up with the snacks business of pepsi once they are broken in to two. You do have synergies, given that pepsi is on shelves all over the world and can then put snacks on the same shelves in the same Grocery Stores and that is a bit of a synergy that benefits that it would not have if it was separated. That is right. All of the arguments nelson peltz has put forward as to why the company should be split up into two are the reasons why andrew newly says it should not. Beveragea softening markets. We need the snack food market and innovation being put in place and other segments. We need that to help offset some of the slowing growth you are seeing in other areas. Some of the stuff you are seeing about leveraging, you do not see it out front as much. More behindthescenes. She can bring both of her businesses to various distributors. Happens when you are looking at the bottling system for instance. I want to play another part of what she said. I asked her about nelson peltz and so there are for postals and what do you think about them . Anytime a shareholder gives us any sort of feedback, we take it very seriously. At the end of the day, we are all shareholders of the company, too. If anyone has an idea on how to create more value, we are the first people to take that to heart. I own 20 of my salary and pepsico stock. Jeffs point, what nelson peltz has said is it is a cash cow for the Beverage Business and should be a standalone company. He said beverages would do much better on its own and much more focused on the carbonated soft drinks market and be able to innovate more. That is his argument. Here at pepsico, they disagree. Like thank you. Thank you. Jeff mccracken, thank you. I have a feeling i will continue to see you more. Inc. You. Next up am a new report says china may change its path. The data may tell you another story. The Justice Department said to be preparing the first criminal charges against the global bank since the financial crisis. Will we see a Lehman Brothers style followup as some have predicted. That is next. Time for todays global outlook. China could surpass the u. S. Of the Worlds Largest economy this year. That is an attention grabbing headline. Comes from a new world bank study. The trouble is, Michael Mckee says it is ridiculous. Everyone talks about 2027 as the key year they take over as the Worlds Largest economy. Measure itis how you and whether it means anything. Gdp obviously is the sum of all the goods and services, the value sold in a year. Something else called purchasing power header parity. This is what it cost to live in a country given the differences for what you buy in what you pay for it for exchange rates. The world bank compared ppp to gdp. They recalculated the numbers it, sayingnd updated it could happen this year. The problem is, that is nonsense at this point. No one believes the chinese Economic Data are any good, not even the chinese leadership. A cousin that, hard to use the numbers. Were good, they do not use them for a couple of reasons. Things that come from overseas. Also, in the case of china, not fully convertible. You are guessing at what the value might be and what you buy internally may vary from what you buy in the United States and variety and quality. You are really left with gdp. By the traditional measure, chinese economy only half of hours. I the traditional measure, twice the size. Can we anticipate 2027 is still the year . You look at the growth rate in china, and whether you trusted or not, still probably better than what we are growing at. Growth rates very. It is true, they will pass this. 20 of the world population. No reason to believe they would not pass it. Only a question of when, not really if. Looking at a different measure, and that is national wealth. Not just what we produce in a year but what we have accumulated. The chinese have all of the people but not very much national wealth. You do not care really about what the countrys gdp is, you care about what youre part of it is. What are you getting out of it . By that measure, the chinese are still well behind us. Kind of like who cares if the economy is growing fast or if it eventually is bigger . If the standard of living cannot rival ours, you would still rather live in the United States. That is what the chinese are focusing on. They said we do not agree with the methodology and will not publish it in this country and do not think it is an official statistic because they are focused on trying to raise the Living Standards of the individual people. They have fast defenses. Another report of the inequality level is greater. Yes, clearly. Issues theylot of will have to deal with. The United States will remain an important economy whether we are second or first. Thank you. Coming up next, big banks in the crosshairs of federal prosecutors weigh criminal charges. Critics warning of a Lehman Brothers style fallout. Do criminal charges main more fallout . More on that story coming up. Welcome back. I am trish regan. Prosecutors setting their sights on big rings. Paribasuisse and pnb could be looking at litigation. On big banks. Joining me now to discuss whether the concerns are legitimate, richard farley, hardware at Paul Hastings and carrie geithner. Great to have you here. Is there a chance it will get willbad that prosecutors put people in jail . They may put people in jail, we do not know. I know nothing about the merits it the case other than what i read in the paper. What we are seeing, particularly as a result of the bank of america case against individuals, ken lewis and joe prosecutedworked because they cooperated with the government by acquiring Merrill Lynch and then accused of not disclosing how terrible things were to the shareholders, and these individuals were banned from Public Companies for yearandahalf and find the 7 million. Fined. If you have an environment where if i cooperate with the government and do what they tell me to do to save the Financial System and i am going to get prosecuted for what i think was a minor offense, i think that is a toxic environment that will reduce the ability for private bailouts going forward. Eliminating the ability of a change of law and public bailout. Who will be there to pick up the pieces . Also a question, do prosecutors want to push it that far . Arthur anderson. A lot of fallout. Posing ds of people losing their jobs. We do not know what will happen if they do indict one of the banks. If they do, what is the fallout from that . That is where you see a lot of controversy and debate over whether or not it should be the way forward for how prosecutors are treating the cases. We have some idea. I think we know prosecutors are working with the regulatory authorities so that any unintended consequences are avoided. There is always a wild card, which is a person who have not necessarily thought of, a regulator in north dakota who can decide to do something with a consequence no one thought of before hand. I think the regulators are pretty as possible and thoughtful in terms of what they are intending to do. Being thoughtful and very intentional when they go after foreign banks here . Are talking about a swiss bank and french bank, no american bank. That is very true. Another issue is these particular cases do not have anything to do with the financial crisis is what people were clamoring for to see a case against banks, major ceos and those angst. So this is a way forward and possibly a test case. However, it may not be the kind of case people are really clamoring for from the fallout of the financial crisis. Backing up for a moment. You have done a lot of reporting on this. Iscribed actually what transpiring. Credit suisse that has been a target for prosecutors going back to 2011 him and the concern is they are allowing people to evade taxes. We have that issue, and of course we have a Senate Hearing about this, which has probably put more pressure on prosecutors to bring action and brought more attention to this case than there was previously. Then we have issues with sanctions. Several banks have settled over similar sanction issues. Will be really interesting