Congressional Talks on Syria Thwart Early Market Surge

The stock market rose modestly on Tuesday as renewed fears about an American military attack on Syria dampened an early rally.

Stocks surged in the opening minutes of trading as investors felt that a military strike on Syria was not imminent after President Obama announced over the weekend that he would seek Congressional approval before taking action. That move is expected to delay any attack until at least next week, when Congress returns from its summer recess.

But the early rally faded after the House speaker, John A. Boehner said he would support Mr. Obama’s call for military action. Mr. Boehner said the United States needed to respond to the Syria’s suspected use of chemical weapons. Representative Eric Cantor, the House majority leader, also voiced support.

The Dow Jones industrial average closed up 23.65 points, or 0.16 percent, to 14,833.96. The index had climbed as much as 123 points in early trading.

The Dow was also held back by Microsoft and Verizon, which both slumped after announcing deals.

The Standard & Poor’s 500-stock index gained 6.80 points, or 0.42 percent, to 1,639.77. The Nasdaq composite index rose 22.74 points, or 0.63 percent, to 3,612.61.

The stock market also got an early boost from a report showing that manufacturing expanded last month at the fastest pace since June 2011. The report was better than economists had expected, according to estimates compiled by FactSet.

In corporate news, CBS shares rose $2.40, or 4.7 percent, to $53.50, after the broadcaster and Time Warner Cable reached an agreement that ended a blackout of CBS and CBS-owned channels. Time Warner Cable shares rose $1.90, or 1.8 percent, $109.25.

Other corporate news was disappointing. Microsoft stock fell $1.52, or 4.6 percent, to $31.88, after the software company said it would acquire Nokia’s smartphone business and a portfolio of patents and services for about $7.2 billion.

Verizon fell $1.37, or 2.9 percent, to $46.01, after the company agreed to pay $130 billion for Vodafone’s 45 percent stake in Verizon Wireless.

After a tough August, stocks may struggle to rally in September because of a string of events that could shake investors, said Randy Frederick, managing director of active trading and derivatives at the Schwab Center for Financial Research.

The S.& P. 500 logged its worst performance last month since May 2012 as investors became increasingly concerned about when the Federal Reserve would cut its economic stimulus. The Fed’s next meeting, which starts Sept. 17, is when many on Wall Street think it will begin winding down its bond-buying program.

Lawmakers in Washington may also throw investors a curve ball. To keep the government running, Congress needs to pass a short-term spending bill before the fiscal year starts Oct. 1. Then there is the government’s $16.7 trillion borrowing limit. Treasury Secretary Jacob J. Lew has warned that unless the debt ceiling is raised soon, the government would lose the ability to pay its bills by the middle of October.

September has often been a losing month for the stock market. Since 1945, the S.& P. 500 has slumped nearly six out of every 10 Septembers, with an average loss of 0.6 percent.

In government bond trading, the price of the 10-year Treasury note fell 20/32, to 96 28/32, while its yield rose to 2.86 percent, from 2.79 percent late Friday.

DealBook: Two Market Operators, BATS and Direct Edge, Said to Be in Talks to Merge

DealBook: Fearing Loss of Capital, SAC Talks of Layoffs

Unable to Reach Deal, Europe Plans New Talks on Bank Rescues

“We ran out of time,” Michael Noonan, the Irish finance minister, told reporters as he left the meeting here. “There are still core issues outstanding, so we’ll need a full meeting next week, and there’s no guarantee it will reach conclusion.”

Diplomats said the next attempt to reach a deal was scheduled for Wednesday — a day before the leaders of the European Union’s 27 member states gather for a summit Brussels, their last scheduled meeting before the summer. The leaders had been expected to endorse the finance ministers’ decision.

The failure to reach a deal could further unsettle investors who were already jittery about the lingering recession in the euro zone, turbulence on global markets, renewed political instability in Greece, and hints that Cypriot leaders were balking at their bailout agreement. 

The marathon effort, involving 18 hours of talks beginning Friday morning, was aimed at breaking the so-called doom loop, in which struggling governments take their states deeper into debt to save their banking systems, only to face sky-high sovereign borrowing costs.

The rules would specify the order in which investors and creditors have to absorb losses so taxpayers do not have to bear the burden.

A deal could also help prevent a recurrence of the chaos that ensued during a bailout for Cyprus in March, when governments and international lenders argued over how to impose losses on investors in the country’s troubled banks.

The tools would become important building blocks in the future for a possible banking union, which includes a single supervisor under the European Central Bank overseeing about 150 of the bloc’s largest lenders. It is supposed to go into force in the middle of next year.

A day earlier, as part of the effort to address the banking issue, the 17 ministers from the euro area agreed to allow a rescue fund, the European Stability Mechanism, or E.S.M., to pump money directly into failing banks during the second half of next year.

But on the second day of talks, as ministers from the 10 remaining non-euro countries in the European Union joined the meeting, there was a deadlock over how to stop disorderly bank bailouts from turning into national fiascos.

One of the most sensitive issues was a divide between countries using the euro, and those remaining outside the single currency, was where losses should fall when banks fail, said Mr. Noonan. “Those countries which aren’t in the euro need greater flexibility because they haven’t access” to the shared rescue fund.

France and Germany, which are both members of the euro group of countries, were also divided on that issue. France sought more leeway to access the shared European mechanism while Germany resisted, said diplomats who spoke on condition of anonymity.

The German stance, which was shared by the Dutch, underlined how some northern European countries want to ensure that bank bailouts remain a national responsibility as much as possible, and how they remain determined to resist creating a lender of last resort that could expose them to losses incurred by other parts of the bloc.

For much of the day, ministers were divided over how, and whether, to allow countries discretion to protect certain classes of creditors.

The worry among some countries like Britain was that automatic losses for some creditors could set off fears of losses at other institutions, which could start bank runs. But countries like Spain wanted to ensure that bank investors do not flee to more prosperous countries like Germany, where mechanisms for resolving bank problems might be better capitalized and could be used to shield creditors from losses.

A proposal put forward by the Irish delegation during the negotiations would have given countries the flexibility to choose where losses would fall, as long as 8 percent of a failing bank’s total liabilities were wiped out first.

But that proposal failed to gain sufficient traction. Sweden protested that the figure was too high. The Dutch and the Germans said the Irish figure was too low, and they complained it still could induce risky behavior if bankers were overly confident of relying on mechanisms like national bailout funds to come to their rescue.

U.S. and Europe to Start Ambitious but Delicate Trade Talks

Mr. Obama said that the first round of talks would begin next month in Washington between the United States and the 27-nation Europe Union. “The U.S.-E.U. relationship is the largest in the world — it makes up almost half of global G.D.P.,” Mr. Obama said, referring to gross domestic product. “This potentially groundbreaking partnership would deepen those ties.”

But President François Hollande of France expressed disbelief at comments José Manuel Barroso, the European Commission president, made over the weekend. In an interview, Mr. Barroso had criticized as “reactionary” France’s insistence on protecting its film and television industries as a condition of supporting the trade negotiations.

“I do not want to believe that the president of the European Commission could have made the statements about France, or even about the artists, that were made,” Mr. Hollande said, according to the Web sites of several French news organizations.

Mr. Hollande did not appear in a media tent here at the Lough Erne Resort when Mr. Obama and Mr. Barroso — with Herman Van Rompuy, president of the European Council, and David Cameron, the British prime minister — announced the timing of the trade negotiations. French reporters said Mr. Hollande was busy preparing for his meeting with President Vladimir V. Putin of Russia.

Aside from trade, the two-day Group of 8 meeting was likely to be dominated by the civil war in Syria. Other financial issues on the agenda were measures to clamp down on tax evasion and the legal ruses multinational companies use to limit their tax liabilities.

Mr. Cameron, the host of the meeting, was by far the most effusive of the leaders who spoke about their trade ambitions. “We’re talking about what could be the biggest bilateral trade deal in history, a deal that would have a greater impact than all the other trade deals on the table put together,” he said.

A trade pact between the United States and the European Union has long been an ambition of policy makers. According to the European Commission, the executive arm of the bloc, such a deal would allow European companies to sell an additional 187 billion euros, $250 billion, worth of goods and services a year to the United States.

The angry French response highlighted the delicacy of the negotiations, which will aim to reduce trans-Atlantic tariffs and streamline regulations to stimulate economic growth in the United States and Europe.

Last Friday, after a campaign by French artists and politicians, European Union trade ministers agreed to accede to France’s demands to protect the audiovisual sector.

In his interview after the agreement, Mr. Barroso said France’s Socialist government was advocating an “anti-globalization agenda” that was “completely reactionary.”

Mr. Barroso’s comments were described as “scandalous and dangerous” in a statement on Monday from the French Socialist Party.

In addressing reporters on Monday, Mr. Barroso took no questions and did not comment on the French reaction.

Speaking in Brussels, Olivier Bailly, a spokesman for the European Commission, said that Mr. Barroso’s comments had referred not to the French government but to those who had “made personal attacks” against him before the negotiations. Mr. Bailly did not identify them.

In response to the French objections, some Europeans worry that the United States will seek to exclude financial services from the talks, reducing their scope significantly.

Mr. Obama acknowledged those concerns. “There are going to be sensitivities on both sides,” he said. “There are going to be politics on both sides. But if we can look beyond the narrow concerns to stay focused on the big picture — the economic and strategic importance of this partnership — I’m hopeful we can achieve the kind of high-standard, comprehensive agreement that the global trading system is looking to us to develop.”

This article has been revised to reflect the following correction:

Correction: June 17, 2013

Because of an editing error, an earlier version of this article stated incorrectly the timing of an interview with José Manuel Barroso. The interview was on Friday before trade ministers agreed to accede to France’s demands to protect the audiovisual sector, not after the agreement.

Europe and China Trade Talks End Bitterly

The European Union accuses Chinese firms of selling solar panels below cost in Europe, a practice known as dumping, and has already proposed antidumping tariffs of nearly 50 percent on Chinese solar panel shipments. That is one of the largest categories of Chinese exports to Europe and worth about $27 billion a year.

But Germany’s economy minister said that his country had informed the European Commission, which is the executive branch of the European Union, that it opposed proceeding with the solar panel tariffs. If a majority of the European Union’s 27-member states oppose tariffs during the current consultation period, then the commission could be forced to abandon the tariffs. But that could risk undermining the commission’s long-term ability to negotiate trade deals on behalf of the bloc.

Zhong Shao, China’s vice minister of commerce and chief international trade representative, denounced the European Commission for not reaching a deal at the talks, which were held in Brussels.

The commission’s plan to impose tariffs on Chinese solar panels starting on June 6, together with the commission’s preparations to begin a similar trade case against Chinese exports of wireless communications gear, “would seriously hurt the Chinese industries and workers concerned and seriously sour the climate on bilateral trade and economic engagement,” he said in a statement.

He added, “Such practices of trade protectionism are not acceptable to China,” and asked that the European Union delay the tariffs.

European officials have said repeatedly that they face statutory deadlines for actions in trade cases and have little or no discretion to delay action.

The commission has been discussing the tariffs with member governments; Germany, with large exports to China that could be vulnerable to retaliation by Beijing in any broader trade conflict, has been particularly vocal in calling for a negotiated deal.

Karel De Gucht, the European Union’s trade commissioner, issued an unusually blunt complaint late Monday that China was bypassing the European Union’s leaders by going to member governments. Mr. De Gucht “also made it very clear to the vice minister that he was aware of the pressure being exerted by China on a number of E.U. member states,” said John Clancy, Mr. De Gucht’s spokesman.

Mr. Clancy added, “It is the role of the European Commission to remain independent, to resist any external pressure and to see the ‘big picture’ for the benefit of Europe, its companies and workers based upon the evidence alone.”

The United States has already imposed antidumping and antisubsidy tariffs totaling about 30 percent on Chinese solar panels. The Obama administration has recently decided to seek its own negotiated settlement with China to replace the tariffs. Such a settlement could take the form of setting high minimum prices for Chinese exports to the United States, a ceiling on the volume of exports, or both.

While Washington, Brussels and Beijing are all saying now they want a negotiated settlement, Chinese solar companies and their many local government patrons are divided on what a settlement should look like.

James Kanter contributed reporting from Brussels.

Settlement Talks Begin in Duck-Boat Accident Trial

Testimony stopped in order to hold a settlement discussion on the second day of the civil trial related to the double fatality on a duck-boat tour two years ago.

DealBook: Studying the Dark Art of Leaking Deal Talks

Psst.

That’s how you might imagine a “leak” of a big merger or acquisition would start. A well-placed phone call. An off-handed comment over lunch. A confidential document accidentally left on an airplane.

It seems as if news of most big deals is invariably leaked ahead of the official announcement. Of the biggest deals of the year so far — the buyout of Dell, Warren Buffett’s acquisition of Heinz, American Airlines-US Airways, Liberty Global-Virgin Media — none made it to the finish line without the news media finding out about it first, sometimes with weeks of advance notice, some with just hours to go.

An intriguing academic study casts new light on the dark arts of the leak — or what used to be affectionately known in London as “the Friday night drop.” (It’s a bit of lore, but deal leaks used to be delivered by envelope on Friday night on Fleet Street to the gossipy Sunday broadsheets where the news could be placed as a trial balloon ahead of the markets’ reopening on Monday.)

According to the study, conducted by the Cass Business School in London — and commissioned by Intralinks, a provider of electronic data rooms for deal makers — sellers are often perversely rewarded by leaks in the marketplace: buyers of companies involved in deals that leaked before the announcement paid a premium averaging 18 percentage points more than in deals that did not leak.

Sean Gallup/Getty ImagesA Dell stand at the CeBIT technology convention in March in Germany. Word of a Dell buyout leaked to the news media before it could be finished.

The study examined 4,000 deals between 2004 and 2012. On average, the study suggests, despite anecdotal evidence to the contrary, that leaks have actually been reduced in recent years. According to the study, 11 percent of all deals were leaked between 2008 and 2009. Between 2010 and 2012, it fell to 7 percent.

Remarkably, there is a huge divergence based on region. During the period examined, 19 percent of all deals in Britain were leaked, while only 7 percent of deals in the United States were leaked; 10 percent of deals were leaked in Asia.

To the casual observer, those numbers may seem to understate the situation, especially because it is usually the big, complex transactions with brand names that receive the headlines.

In Britain, the Financial Services Authority published a report in 2010 suggesting that word of a whopping 30 percent of all deals was leaked before they were officially announced. At the time, the agency said, “Strategic leaks, designed to be advantageous to a party to a transaction, are particularly damaging to market confidence and do not serve shareholders’ or investors’ wider interests.” It went on to push for “a much stricter culture that firmly and actively discourages leaks.”

The Cass study also reflected a distinct downside to deal-leaking: a deal’s chances of completion drop significantly. Leaked deals were 9 percent less likely to close than those kept under wraps and took, on average, a week longer to complete, perhaps given the added commotion and complexity created by the leak. (The study did not look at what happened to deals that were leaked but never reached the point of being announced.)

So how did the study explain the reduction of leaks in recent years?

The authors attributed it to “a stricter regulatory environment with more active enforcement and, perhaps most significantly, the subdued deal-making environment and fewer buyers in the market, which has encouraged firms to play it safe and not complicate a deal by leaking.”

How true. With so few deals these days, everyone involved in a transaction — management, boards, bankers, lawyers, accountants, public relations professionals, consultants and other fixers — are reluctant to leak and risk their fees, many of which are typically contingent on a deal’s completion.

Still, of course, the art of leaking news of a deal has long been part of the mergers and acquisition machine.

Bryan Burrough, the author of “Barbarians at the Gate,” described how Henry Kravis reacted in 1986 when news that he was planning to bid for RJR Nabisco leaked, and he made a phone call to a banker he was convinced was responsible.

“I can’t believe you did this to me,” Mr. Kravis reportedly told Jeff Beck of Drexel Burnham Lambert.

“I didn’t do it! I didn’t do it! You’ve got to believe me! It was Wasserstein! It had to be Wasserstein!” Beck shot back, referring to Bruce Wasserstein. Years before Mr. Wasserstein died, he insisted to me that he wasn’t behind that leak, but he did say that leaking was part of every deal maker’s arsenal in the 1980s. I can confirm that Mr. Wasserstein never leaked to me.

Of course, the topic of this column hits a little too close to home. I will share a bit more, but not too much. A magician, as they say, never reveals his secrets.

First, leaks become exponentially more likely as more people are added to a transaction, whether it be people inside the acquirer or target, or perhaps, as additional advisers are included in the process. If a big deal needs financing — as in debt from banks — the risk of leaks jumps. Every bank contacted then knows about the deal, as does the bank’s law firm. And it is not just one or two bankers and lawyers who were first contacted — it’s often dozens of them. Every banker or lawyer who brings on a new client must clear the new assignment with a “conflicts committee.” That committee can have half a dozen or more people on it — and those people may have to check with others at the firm who are working on competitive projects. This is true not just of banks and law firms but of consulting firms, accounting firms and public relations firms.

The private equity world poses its own problem. Those firms often have large investment committees and also employ armies of outside consultants and law firms that typically do much of the heavy lifting when it comes to going through the books and records of prospective targets.

By the time deal talks begin in earnest, it is almost impossible that fewer than 100 people know about it; more likely it’s many more. If there is a “bake-off” — a competition among advisers for the assignment — the number is even higher. And if there is an auction, well, forget about it.

The Cass study suggests all sorts of motivations for deal leaks. “Leaks from the seller are seen primarily as a way to improve the target’s bargaining power,” for example. The authors added that “leaks from a buyer are seen as a tool to scupper a deal which has not progressed as originally hoped.” The authors also said that third parties, not involved in a deal but aware of it, are “seen as a source of leaks designed to sabotage a deal.” Yet, the authors also said that “some M.&A. practitioners also feel that leaks can be used to help drive a deal through when one side is delaying.”

Those explanations make sense. Over the years, I’ve heard it all: a chief executive who wanted to get a deal done despite opposition from his board and was convinced that if the market knew, investors would cheer and bolster his position; a board member who wanted to block a deal but didn’t have the votes and was convinced that if the market knew there would be an outcry; a banker who lost the business to a rival firm and wanted to make his competitor appear to be a leaker.

But the one problem with the Cass study is this: It assumes the leaks are rational and based on a considered strategy. As a reporter who has covered the world of deal-making for more than a decade, I can attest that most “leaks” are actually not that organized. More often than not, they start out as accidents — a tip from a competitor about a transaction they heard about that then gets passed on.

The rate of deal leaks may be down. But if the economy begins chugging along — and a merger boom, a good gauge of market sentiment, returns — keep your eyes peeled. The “Friday night drop” might stage a comeback.

DealBook: Billabong in Talks Over $300 Million Takeover

Matt Dunbar/Association of Surfing Professionals, via Associated PressBillabong sponsors surfing competitions around the world.

Billabong International is trying to avoid a total wipeout.

The Australian surfwear company, whose shares have fallen around 65 percent since it rejected a $824 million takeover offer from the private equity firm TPG Capital last year, said on Tuesday that it was in talks to sell itself for $300 million.

Billabong said the discussions were with a group led by Paul Naude, the former head of its American operations, and the buyout firm Sycamore Partners Management, and would last for 10 days.

The consortium has offered to buy the struggling retailer for 60 Australian cents a share (about 63 American cents), an 18 percent discount on Billabong’s closing share price on April 2 before the stock was suspended.

Billabong has fallen on difficult times because of changing consumer tastes and the financial crisis. It has closed stores and sold assets as part of an effort to restructure the company.

On Capitol Hill, Fiscal Talks Now Turn to U.S. Borrowing Limit

According to the Treasury Department, the government is about $66 billion below its $16.4 trillion debt ceiling, a legal borrowing limit that is set and periodically raised by Congress. When the country hits the ceiling — sometime toward the end of December, analysts estimate — it would start a countdown clock that would end with Washington running out of money to pay its bills.

That event might hobble the government, ruin the country’s credit and send markets into an outright panic, analysts predict. But despite — or because of — the debt ceiling’s potential to disrupt the economy, members of Congress are refusing to raise it as a matter of course, instead using it as a potent political football to extract concessions from the other side.

“I will not raise the debt ceiling ever again until we get significant entitlement reforms, because if we don’t reform entitlements, we’re going to become Greece,” Senator Lindsey Graham, Republican of South Carolina, said on CNN this week. If President Obama “doesn’t lead, there’s going to be one hell of a fight over raising the debt ceiling.”

The White House has pushed back by warning Republicans away from the ceiling in strong terms. “We cannot play this game, because while it might be satisfying to those with highly partisan and ideological agendas, it’s not satisfying to the American people and is punishing to the American economy,” said Jay Carney, the White House spokesman, this week. “We cannot do it.”

Some Democrats have in recent weeks urged the White House to mount a legal challenge to the ceiling itself. The White House has ruled out such measures. But in its initial proposal to avert the worst of the year-end tax increases and spending cuts, the so-called fiscal cliff, the Obama administration asked Congress to grant it more authority over the ceiling.

The White House’s plan — based on a proposal initially made by Senator Mitch McConnell of Kentucky, the Republican leader — would allow it to request an increase to the debt limit. Congress could pass a resolution blocking the increase, though such a resolution could be killed with a presidential veto.

Republicans immediately rejected the proposal. But it stems from the Obama administration’s deep frustration with Capitol Hill’s use of the ceiling as a source of political leverage, both last year and this year.

Mr. Boehner and Mr. Obama tried and failed to strike a long-term debt package before raising the debt ceiling, but not before scaring the markets and leading to the first-ever downgrade of the country’s credit rating.

This time, the ceiling is complicating the renewed negotiations on a long-term debt deal. Republicans are considering a plan to preserve the tax cuts on income up to $250,000 that Mr. Obama has requested, and then in the new year refuse to raise the debt ceiling unless the Obama administration concedes to cost reductions for Social Security, Medicaid and Medicare and possibly other programs.

When the country hits the ceiling, the Treasury would stop issuing new debt and start a series of “extraordinary measures,” technical maneuvers to leave it with enough money to pay all its obligations. But such extraordinary measures would buy the government only about six to 10 weeks, analysts estimate.

Eventually, its spending obligations would overwhelm incoming receipts, and the government would not be able to pay its bills. That would leave the Treasury in the position of choosing whether to pay bondholders or soldiers, the elderly or states.

Last summer, “Treasury considered asset sales; imposing across-the-board payment reductions; various ways of attempting to prioritize payments; and various ways of delaying payments,” a department report said. “Treasury reached the same conclusion that other administrations had reached about these options — none of them could reasonably protect the full faith and credit of the U.S., the American economy, or individual citizens from very serious harm.”

Knowing exactly when the Treasury would reach that point is an exercise in guesswork. The Bipartisan Policy Center estimates the date would fall sometime in February.

If Congress failed to address any of the year-end spending cuts or tax increases, the government’s revenue would rise and spending obligations would fall. But analysts say they do not think that would delay the need to raise the debt ceiling for more than a few days.

“I’ve been here in 40 years this coming January, and I have never seen this many consequential spending and tax problems descend at the same time,” said Steve Bell, senior director of economic policy at the Bipartisan Policy Center, and a former Republican Hill staff member.

“There might be a variation of a day or two or four,” he guessed. But by sometime in March, Congress would have needed to raise the ceiling or the country might have entered another financial crisis — or even another recession.

On Capitol Hill, Fiscal Talks Now Turn to U.S. Borrowing Limit

Sorry, I could not read the content fromt this page.Sorry, I could not read the content fromt this page.

Settlement Talks Begin in Duck-Boat Accident Trial

Testimony stopped in order to hold a settlement discussion on the second day of the civil trial related to the double fatality on a duck-boat tour two years ago.

DealBook: As Labor Talks Collapse, Hostess Turns Out Lights

What might be the last Twinkie in America — at least for a while — rolled off a factory line Friday morning. It was just like the millions that had come before it, golden, cream-filled empty calories, a monument to classic American junk food.

But it is likely to be the last under the current management. After not one but two bankruptcies, Hostess Brands, the beleaguered purveyor of Twinkies, Ho Hos, Sno Balls and Wonder bread, announced plans to wind down operations and sell off its brands.

Since filing for Chapter 11 bankruptcy protection in January, Hostess has been trying to renegotiate its labor contracts in a bid to cut costs. But the talks fell apart, and last week one union went on strike.

The so-called liquidation will probably spell the end of Hostess, an 82-year-old company that has endured wars, countless diet fads and even an earlier Chapter 11 filing. Although the company could theoretically negotiate a last-minute deal with the union, Hostess is moving to shut factories and lay off a large majority of its 18,500 employees.

But Twinkies and the other well-known brands could eventually find new life under a different owner. As part of the process, Hostess is looking to auction off its assets, and suitors could find value in the portfolio.

“The potential loss of iconic brands is difficult,” said the company’s chief executive, Gregory F. Rayburn. “But it’s overshadowed by the 18,500 families that are out of work.”

The company’s current problems stem, in part, from the legacy of its past.

An amalgam of brands and businesses, the company has evolved over the years through acquisitions. In the 1960s and 1970s, the company, then called Interstate, bought more than a dozen regional bakeries scattered across the country. A couple of decades later, it paid $330 million for the Continental Baking Company, picking up a portfolio of brands like Wonder and Hostess.

As the national appetite for junk food waned, the company fell on hard times, struggling against rising labor and commodity costs. In 2004, it filed for bankruptcy for the first time.

Five years later, the company emerged from Chapter 11 as Hostess Brands, so named after its most prominent division. With America’s new health-conscious attitude, it sought to reshape the business to changing times, introducing new products like 100-calorie Twinkie Bites.

But the new private equity backers loaded the company with debt, making it difficult to invest in new equipment. Earlier this year, Hostess had more than $860 million of debt.

The labor costs, too, proved insurmountable, a situation that has been complicated by years of deal-making. The bulk of the work force belongs to 12 unions, including the International Brotherhood of Teamsters and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.

The combination of debt and labor costs has hurt profits. The company posted revenue of $2.5 billion in the fiscal year 2011, the last available data. But it reported a net loss of $341 million.

With profits eroding, the company filed for Chapter 11 in January. It originally hoped to reorganize its finances, seeking lower labor costs, including an immediate 8 percent pay cut.

The negotiations have been contentious.

The Teamsters, which has 6,700 members at Hostess, said it played an instrumental role in ousting Hostess’s previous chief executive, Brian J. Driscoll, this year after the board tripled his compensation to $2.55 million. The union also hired a financial consultant, Harry J. Wilson, who had worked on the General Motors restructuring.

While highly critical of management missteps, the Teamsters agreed in September to major concessions, including cuts in wages and company contributions to health care. As part of the deal, the union was to receive a 25 percent share of the company’s stock and a $100 million claim in bankruptcy.

“The objective was to preserve jobs,” said Ken Hall, the Teamsters’ general secretary-treasurer. “When you have a company that’s in the financial situation that Hostess is, it’s just not possible to maintain everything you have.”

But Hostess reached an impasse with the bakery union. Frank Hurt, the union’s president, seemed to lose patience with Hostess’s management, upset that it was in bankruptcy for the second time despite $100 million in labor concessions. He saw little promise that management would turn things around.

“Our members decided they were not going to take any more abuse from a company they have given so much to for so many years,” said Mr. Hurt. “They decided that they were not going to agree to another round of outrageous wage and benefit cuts and give up their pension only to see yet another management team fail and Wall Street vulture capitalists and ‘restructuring specialists’ walk away with untold millions of dollars.”

About a month ago, Mr. Rayburn said, the bakers union stopped returning the company’s phone calls altogether. For its part, the bakery union said the company had taken an overly aggressive approach. David Durkee, the union’s secretary-treasurer, said Hostess had given an ultimatum. “They said, ‘If you do not ratify this, we are going to liquidate based on your vote.’ ”

With the company standing firm, the bakery union struck last week, affecting nearly two-thirds of the company’s factories across the country. The Teamsters drivers honored the picket line, further shutting down the operations. The company gave union members until 5 p.m. on Thursday to return to work.

Mr. Rayburn said the financial strain of the strike was too much for the company, which had already reached the limits of its bankruptcy financing. Over the last week, Hostess lost tens of millions of dollars as many customers’ orders went unfilled. And its lenders would not open their wallets one more time.

By Thursday morning, Hostess’s executives were ensconced in the company’s headquarters in Irving, Tex., still hoping that enough employees would return to work to resume production. A small number of workers had already crossed the picket lines that had sprung up at most of the baker’s factories, but more than 10 plants remained well below their necessary capacity.

Mr. Rayburn’s deadline of 5 p.m. passed without either side backing down. Soon after, executives asked the company’s legal advisers to finish the court motions that would begin the liquidation. Papers had been drawn up well before that afternoon.

Around 7 p.m., Mr. Rayburn had his final discussions with the company’s board and his senior managers and made the call to begin winding down.

“We were trying to focus on where people were having success, but I had to make a call,” Mr. Rayburn said.

Germany Holds Talks on National Energy Strategy

Until now, each state has drawn up and worked from its own plan for the expansion of renewable resources in its territory, often in conflict with one another. On the federal side, there is no single leader for the project to increase reliance on renewable energy to at least 35 percent by 2020. Instead, responsibilities are divided between the ministries of the environment and the economy, with the education minister responsible for financing research on renewable energy and storage technology.

The opposition Social Democratic Party has pounced on the weakness in the Merkel government’s signature project ahead of national elections next year, while widespread public support for the plan faces strains from a nearly 50 percent jump in a consumer tax for the transformation next year.

“Germany’s energy transformation is threatened with collapse due to the inability of the government” to draw up a master plan, Hubertus Heil, a leading Social Democrat, said before Friday’s meeting.

Germans’ relationship to nuclear energy is deeply emotional, rooted in the antinuclear protest culture of the 1970s and memories of radioactive mushrooms and wild game in Bavarian forests that resulted from the 1986 meltdown in Chernobyl.

It would be a severe blow to Ms. Merkel and her Christian Democrats if the project, passed last year by her center-right government in the wake of the Fukushima nuclear disaster in Japan, were to fail. On Friday, she pledged to work with the states through a national dialogue on how best to move forward.

“Germans can be assured that we feel committed to the goal of energy transformation,” Ms. Merkel said after the meeting. “I felt a spirit that we all want, and perhaps can, achieve this.”

Torsten Albig, a Social Democrat who is governor of Schleswig-Holstein, also praised the discussions as “a considerable step forward” toward reaching a master plan by March.

His northern coastal state, along with Lower Saxony, has been criticized for expanding offshore wind energy at such a rapid pace that turbines have had to be switched off on exceptionally windy days, because they produce more energy than the grid can handle.

Ultimately, Ms. Merkel would like to see the energy generated by wind farms in the north transmitted to the power-hungry industrial south. A plan to expand Germany’s grid with that aim, which would require about 500 miles of new power lines and other major upgrades, is to go before Parliament next month.

Settlement Talks Begin in Duck-Boat Accident Trial

Testimony stopped in order to hold a settlement discussion on the second day of the civil trial related to the double fatality on a duck-boat tour two years ago.

Settlement Talks Begin in Duck-Boat Accident Trial

Testimony stopped in order to hold a settlement discussion on the second day of the civil trial related to the double fatality on a duck-boat tour two years ago.

EADS and BAE Systems Merger Talks Hit Rough Patch

PARIS — Britain, France and Germany failed on Friday to reach an agreement on the proposed $45 billion merger of the European aerospace groups EADS and BAE Systems, people close to the negotiations said.

But the three governments are expected to continue talking in the coming days, with an eye to resolving how to preserve their interests in the companies, as well as the balance of jobs and industrial expertise in their respective countries, if the merger plan proceeds.

A German government spokesman declined to comment late Friday on German media reports that the negotiations were on the verge of collapse. But British and French officials, speaking on condition of anonymity, dismissed the reports as speculation.

The companies said the talks had stalled but denied that the merger plan was dead. “In no way have we been told that the deal is off,” EADS, the European Aeronautic Defense and Space Company, said in a statement.

Talks among the three countries intensified this week ahead of a Wednesday deadline imposed by British market regulators for the two companies to announce a final agreement or seek an extension to continue negotiations. But the governments remain divided over the best way to balance state interests in the merged company, either through direct ownership of shares or through the granting of special voting rights to the governments, said the people close to the negotiations, who spoke on condition of anonymity because the talks were continuing.

France is standing firm on its insistence that it retain a direct stake in the merged group of no more than 9 percent, reflecting the value of its existing 15 percent stake in EADS, these people said.

Germany, which holds no shares in EADS, has proposed acquiring a 9 percent stake to balance the French holding. Currently, German interests in EADS are represented by the automaker Daimler and a consortium of private and public banks.

Britain, which owns no shares in BAE but can veto any merger, has accepted that the French cannot be forced to sell their stake. But London is worried that a German investment would put too much of the company in government hands and limit its ability to secure contracts in the United States, the world’s largest military equipment market.

“The critical issue is what the government ownership will be,” a person with direct knowledge of the talks said. “The only reason not to do a deal would be around government ownership.”

The deal proposed by EADS and BAE offers Britain, France and Germany each a so-called golden share, with a veto over hostile takeovers or deals involving sensitive national security assets.

But Thomas O. Enders, chief executive of EADS, and his counterpart at BAE, Ian King, have stressed that ownership of ordinary shares would not grant the governments any additional influence in the management of a merged company.

Melissa Eddy contributed reporting from Berlin, and Mark Scott from London.

This article has been revised to reflect the following correction:

Correction: October 5, 2012

Because of an editing error, an earlier version of this article misstated the position of the EADS and BAE chiefs on the prospective effect of share ownership by governments in a merged company. They said ownership of ordinary shares would not grant any additional influence; they were not referring to so-called golden shares with a veto over some deals.

Crédit Agricole Starts Talks to Sell Its Greek Unit

PARIS — Crédit Agricole, the big French bank, said Monday it had begun exclusive talks to sell its Greek unit, Emporiki, to Alpha Bank for a symbolic one euro.

Crédit Agricole, which has the largest exposure of any European lender to the troubled Greek financial sector, is trying to reduce the possible damage if Greece were to leave the euro. Alpha Bank is one of Greece’s largest banks.

Already, many of the loans Greek banks made during the days of easy credit have soured after years of financial crisis and austerity-induced recession. An exit, which would probably be accompanied by a sharp devaluation of the new Greek currency against the euro, would further reduce the value of those loans when translated into euros.

Crédit Agricole's gamble on Greece has been a spectacularly bad one. The bank in 2006 paid €2.2 billion, or $2.8 billion, for its stake in Emporiki, which is based in Athens, but its losses from the unit are now approaching €6 billion.

Representatives of the International Monetary Fund, the European Central Bank and the European Commission were in Athens on Monday to discuss a new austerity package as Finance Minister Yannis Stournaras presents the 2013 budget plan to Parliament. The proposal is expected to include new measures, including tax increases and spending cuts, to reduce the 2013-2014 budget by €13.5 billion.

As part of its deal with Alpha Bank, Crédit Agricole said it would inject another €550 million into Emporiki, on top of the €2.3 billion it injected in July.

The Hellenic Financial Stability Fund, the Greek banking support agency, had made it a condition of any sale of Emporiki that the bank be recapitalized.

The French bank will also buy €150 million of convertible bonds to be issued by Alpha Bank. All told, the French bank’s funding to Emporiki would fall by €700 million.

Aurélie Marboeuf, a Credit Agricole spokeswoman, said the bank would book a loss of around €2.8 billion before taxes when the sale closes, possibly as early as the third quarter of this year.

These measures will help it reach its solvency targets for the end of 2013, she said.

Alpha Bank said in a statement that the deal would result in a €3 billion recapitalization of the combined Alpha-Emporiki and would contribute toward Alpha Bank’s own recapitalization, and that the combined group would have about 19 percent of Greek deposits and 25 percent of lending.

Alpha said it expected “substantial” synergies from the deal, including €150 million in annual cost savings from economies of scale.

Société Générale, another French lender, said in late August that it was in advanced talks to sell its 99.1 percent stake in Geniki Bank, a large Greek bank, to Piraeus Bank, also a Greek bank.

Field Fisher and Osborne Clarke in Talks Over Potential �200 Million Merger

Field Fisher Waterhouse and Osborne Clarke are in early-stage talks about a potential combination that could create a merged firm with revenues of nearly £200 million, Legal Week can reveal.

News of the discussions comes weeks after Field Fisher's merger talks with LG were called off in June.

If the union goes ahead, the tie-up would create a U.K. top 20 firm with combined revenues of around £195 million, based on the two outfits' 2011-12 results.

The firms also posted similar profits per equity partner figures last year, with Osborne Clarke coming in at £406,000, while Field Fisher partners took home an average of £410,000 following a drop of nearly 20 percent.

Separately, it has emerged that Field Fisher managing partner Matthew Lohn has been signed off sick from the firm since the talks with LG ended, with technology and outsourcing head Michael Chissick filling in on an interim basis.

Lohn was elected as managing partner in October following a contested vote that also saw Chissick put himself forward.

It is understood that Mark Abell, the chairman of the firm's European franchising network and a senior partner within the firm, is also playing a leading role in the Osborne Clarke talks.

In a statement, Field Fisher said: "It is well known that merger is on Field Fisher Waterhouse's agenda as potentially one way of achieving our ambitious growth plans and strategic objectives. This means that like many in the mid-market we have been speaking to a number of firms to explore the benefits that such a merger would bring.

"We will not be commenting on individual talks unless they reach an appropriate stage."

Separately, Field Fisher chief operating officer Charlie Keeling, who was appointed to the role in November, is leaving the firm to join Clyde & Co. You must be signed in to comment on an article