Unformatted text preview: For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or . WEDNESDAY, AUGUST 28, 2019 ~ VOL. CCLXXIV NO. 50 * * * * * * DJIA 25777.90 g 120.93 0.5% NASDAQ 7826.95 g 0.3% STOXX 600 373.62 À 0.63% 10-YR. TREAS. À 16/32 , yield 1.493% HHHH $4.00 WSJ.com OIL $54.93 À $1.29 GOLD $1,541.00 À $14.70 EURO $1.1091 YEN 105.75 Altria, Philip Morris Talk Merger What’s
News ⼀一格⼩小站yigeplus.top 为你呈现 Falling demand spurs
the Marlboro makers
to consider reuniting
in an all-stock deal Business & Finance BY JENNIFER MALONEY
AND CARA LOMBARDO hilip Morris and Altria
are in advanced talks to
merge, a potential blockbuster deal that would reunite
two tobacco giants struggling
with shrinking demand. A1 P Marlboro makers Philip
Morris International Inc. and
Altria Group Inc. are in advanced talks to merge, a potential blockbuster deal that
would reunite two tobacco gi- Purdue and its owners are
in talks with state and local
governments to resolve more
than 2,000 opioid cases in a
deal valued at between $10
billion and $12 billion. A1 ants struggling with shrinking
The two businesses—which
were split apart in 2008—hold
the same portfolio of cigarettes, including industry
leader Marlboro, one of the
world’s best known brands.
The products are sold by Altria in the U.S. and Philip Morris elsewhere. A combination
would create a company with
a market value of roughly
Both companies have been
struggling with declining ciga- rette consumption and new
electronic cigarettes such as
those made by Juul Labs Inc.,
which are stealing away some
smokers. Altria invested $12.8
billion to take a large stake in
Juul last year.
The talks were partly
sparked by U.S. authorization
this year of a cigarette alternative that Altria and Philip
Morris will jointly start selling
in September, according to
people familiar with the matter, and the realization that it
could be easier to sell as one and Altria sported a market
value of roughly $88 billion.
The two sides are discussing an all-stock deal with no
premium based on where the
two companies’ shares have
been trading recently, people
familiar with the matter said.
Philip Morris would control
about 59% of the combined
company under the terms currently being discussed, some
Please turn to page A6 company rather than through
an existing distribution deal.
The discussions are also
motivated by the risks—and
opportunities—that Juul presents for both companies as the
startup expands outside the
U.S., the people said.
Philip Morris is the bigger
of the two companies in terms
of revenue and market value.
Based on share prices before
the companies disclosed their
talks early Tuesday, Philip
Morris had a market capitalization of about $121 billion Heard on the Street: How to
explain a remerger............... B14 Deprived of a Trial, Women Allegedly Abused by Epstein Speak Out in Court Anthony Levandowski, a
pioneer of self-driving car
technology and ex-Google engineer, was charged with 33
counts of trade-secret theft. B1
The Fed rejected political
considerations in its policy
making after ex-official Dudley
called for it to consider the
economic risks of Trump’s reelection when setting rates. A2 Peloton released documents for its planned IPO,
disclosing surging revenue
and steep losses. B2
Costco opened its first
store in China. The crush of
shoppers forced the Shanghai
site to shut its doors early. B3 World-Wide MAKING THEMSELVES HEARD: Women wait to make impact statements in federal court in Manhattan on Tuesday during a hearing on the dismissal of the criminal case
against Jeffrey Epstein, who was found to have killed himself in jail. Over a dozen women told the court they had been sexually abused by Epstein and his associates. A3 SAT Drops
Plan to Use
BY DOUGLAS BELKIN The Trump administration is preparing to initiate direct talks with Iranbacked Houthi forces in
Yemen in an effort to end
the four-year war there. A5 OxyContin maker Purdue
Pharma LP and its owners, the
Sackler family, are in talks with
state and local governments to
resolve more than 2,000 opioid
cases in a deal valued at between $10 billion and $12 billion, according to people familiar with the matter.
The discussions, part of a
mediation to end the mounting
litigation that seeks to blame
Purdue for fueling the opioid
crisis, have been ongoing for more than a year and remain
in flux, the people said.
The latest proposal, which
came out of settlement talks
last week in Cleveland, would
put Purdue into bankruptcy
and have it emerge as a public
benefit trust corporation, with
proceeds going toward the
governments bringing the lawsuits, the people said.
The Sackler family, which
has owned the company since
its founding in the 1950s,
would cede ownership as part
of the bankruptcy reorganization. Erdogan Asks Putin to Rein In Syria Deutsche Bank has copies
of tax returns sought under
a congressional subpoena
for financial information of
Trump and his family, the
bank told a federal court. A4 The administration plans
to use $271 million of DHS
funds, including some that
had been designated for
storm relief, for detentions
at the U.S.-Mexico border. A3
More than a dozen
women told a federal court
that they had been sexually abused and emotionally manipulated by Epstein and his associates. A3
Brazil’s Bolsonaro, irked
by French leader Macron,
threatened to refuse $20
million in G-7 aid to help
fight fires in the Amazon. A6
Adults of a wide range
of ages should be screened
for hepatitis C, according to
a draft recommendation
from an expert panel. A3
Business News B3,5,7
Heard on Street. B14
Life & Arts......... A9-11
Markets.................... B13 Opinion.............. A13-15
Property Report... B6
U.S. News............. A2-4
World News........ A5-7 > s 2019 Dow Jones & Company, Inc.
All Rights Reserved Turkish President Recep Tayyip Erdogan, in a photo provided by
his office, met with President Vladimir Putin, left, near Moscow
to seek Russia’s help to defuse the conflict in Syria’s last rebel
stronghold. Turkey fears a flood of refugees from the fighting. A5 New Type of North Korean Defector Heads to YouTube
i i i Unlike prior generation, they discuss dating, snack food, makeup
BY NA-YOUNG KIM
AND DASL YOON
SEOUL—Fleeing North Korea 11 years ago, Heo Jun
sought a better life, studied
hard and won a prized admission to South Korea’s most
But his aspirations have
swung to a profession where a
fancy degree isn’t required:
YouTube star. To stand out, Mr. Heo shoots
videos challenging strangers to
hug a “commie, spy or traitor.”
He’s shown people tasting
North Korean food, defectors
trying dating apps and filmed
his own exasperated reaction
watching a music video by BTS,
the mega-popular South Korean boy band. His subscribers
recently surged past 100,000.
“We defectors have an advantage in attracting atten- The company and plaintiffs’
lawyers face a Friday deadline
to give an update on the talks
to U.S. District Judge Dan Polster in Cleveland, who is overseeing the bulk of the opioid
lawsuits and has been a strong
proponent of settling the cases.
State attorneys general, whose
separate lawsuits aren’t in
front of Judge Polster, also are
involved in the discussions.
NBC News earlier reported
the outlines of the deal.
The settlement talks are
coming up against an October
trial date in cases filed by two Ohio counties that will take
place in Judge Polster’s courtroom. Purdue in March settled
a case in an Oklahoma state
court for $270 million rather
than take the claims to trial.
Purdue, based in Stamford,
Conn., faces sprawling litigation accusing it of helping start
America’s opioid-addiction crisis through misleading and deceptive marketing of the painkiller OxyContin. Some Sackler
family members have been individually named in lawsuits,
and documents in one suit
Please turn to page A2 Democrats’ Idea:
Not Just Income TURKISH PRESIDENCY/AGENCE FRANCE-PRESSE/GETTY IMAGES no Iran’s president rejected the possibility of
meeting with Trump as
long as the U.S. maintains
sanctions on his country. A5
Iraq, under U.S. pressure,
is trying to cut its dependence on Iranian energy. A5 The College Board is abandoning its plan to assign an
adversity score to every student who takes the SAT college admissions test, after facing criticism from educators
Instead, it will try to capture a student’s social and
economic background in a
points. The new tactic is called
Landscape and, while it includes much of the same information, it doesn’t combine the
metrics into a single score.
The original tool, called the
“environmental context dashboard,” combined about 15 socioeconomic metrics from a
student’s high school and
neighborhood to create something college admission officers
called an “adversity score.”
Considering a student’s
race and class in college admissions decisions is a contentious issue. Many colleges, including Harvard University,
say ensuring a diverse student
body is part of a school’s educational mission. A lawsuit accusing Harvard of discriminating against Asian-American
applicants by holding them to
a higher standard is awaiting a
final ruling from a judge. Lawsuits charging unfair admission practices have also been
filed against the University of
North Carolina at Chapel Hill
and the University of California system.
“We listened to thoughtful
criticism and made Landscape
Please turn to page A2 BY SARA RANDAZZO
AND JARED S. HOPKINS n- The College Board is
abandoning its plan to assign an adversity score to
every student who takes the
SAT college-admissions test,
after facing criticism from
educators and parents. A1 Purdue Offers Up to $12 Billion
To Settle Government Opioid Suits tion,” says Mr. Heo, 27, who
says he earns several thousand
dollars a month from advertising revenue—enough to suspend his studies at Seoul National University.
The lures of online fame
have lassoed even North Korean defectors. Born in one of
the world’s most informationrepressed regimes, Mr. Heo
and other escapees are satuPlease turn to page A7 Options seek to capture some of the
trillions in assets belonging to the richest
BY RICHARD RUBIN generate. The personal income tax indirectly touches
wealth, but only when assets
are sold and become income.
At the end of 2017, U.S.
households had $3.8 trillion
in unrealized gains in stocks
and investment funds, plus
more in real estate, private
businesses and artwork, according to the Economic Innovation Group, a nonprofit
focused on bringing investment to low-income areas.
Most of the value of estates
over $100 million consists of
unrealized gains, said a 2013
Federal Reserve study. Much
has never been touched by
individual income taxes and
may never be.
Democrats are eager to
tap that mountain of wealth
to finance priorities such as
Please turn to page A8 The income tax is the
Swiss Army Knife of the U.S.
tax system, an all-purpose
policy tool for raising revenue, rewarding and punishing activities and redistributing money between rich
The system could change
fundamentally if Democrats
win the White House and
Congress. The party’s presidential candidates, legislators and advisers share a
conviction that today’s income tax is inadequate for an
economy where a growing
share of rewards flows to a
sliver of households.
For the richest Americans,
Democrats want to shift toward taxing their wealth, instead of just their salaries
and the income their assets DAVID PAUL MORRIS/BLOOMBERG NEWS U.S. stocks fell and bond
yields slipped as investors
hedged bets on the state of
U.S.-China relations. The
Dow retreated 0.5%. B13 co Fo
on Drivers have reported
hundreds of incidents involving problems with automatic braking to U.S. regulators in recent years. B1 JANE ROSENBERG/REUTERS Papa John’s hired Arby’s
President Lynch as its CEO, the
chain’s second change at the
top in less than two years. B1 ly
. BP is selling all of its assets in Alaska to Hilcorp Energy for $5.6 billion, exiting
the state after six decades. B3 Ex-Google Official
Anthony Levandowski, a
pioneer of self-driving car
technology who was at the
center of a legal fight between
Google’s parent company and
Uber, was charged with 33
counts of trade-secret theft. B1 For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or . A2 | Wednesday, August 28, 2019 * ***** U.S. NEWS THE WALL STREET JOURNAL. Fed Spurns Call to Weigh Political Factors
BY NICK TIMIRAOS
The Federal Reserve said it
rejected political considerations in its policy making after
one of its former top officials
called for the central bank to
consider the economic risks of
President Trump’s re-election
when setting interest rates.
Former New York Fed President William Dudley, in an article published Tuesday by
Bloomberg Opinion, urged the
central bank to reconsider its
apolitical approach because,
by cutting interest rates, it is
enabling Mr. Trump to escalate trade wars that are harming the economy.
His suggestions, which
stunned economists and other
Fed officials, would mark a significant departure from the
central bank’s practice of ignoring partisan politics when
Fed officials quickly dismissed the recommendations
in the column. “The Federal
Reserve’s policy decisions are
guided solely by its congressional mandate to maintain
price stability and maximum
employment. Political considerations play absolutely no
role,” said Michelle Smith, a
Given Mr. Trump’s trade
disputes are hurting the economic outlook, “the central
bank’s efforts to cushion the
blow might not be merely ineffectual. They might actually
make things worse,” said Mr.
Dudley, who as New York Fed president served as vice chairman of the rate-setting Federal Open Market Committee
from 2009 until mid-2018.
Mr. Dudley said the Fed
should let political factors guide
its thinking about the economy’s long-term interest. “After
all, Trump’s re-election arguably
presents a threat to the U.S. and
global economy, to the Fed’s independence and its ability to
achieve its employment and inflation objectives,” he wrote.
The White House declined
to comment. Separately, Mr.
Trump continued his attack on
the central bank Tuesday by
blaming the Fed for recent
weakness in manufacturing.
“Our Fed has been calling it
wrong for too long,” he said
on Twitter. Fed officials cut interest
rates last month for the first
time in a decade, citing risks
that included slower global
growth, trade policy uncertainty and muted inflation.
Fed Chairman Jerome Powell has indicated in public and
in private that the central bank
must avoid political considerations when making policy decisions. He has tried to avoid
providing the kind of fuel that
might add to the political fire
menacing the central bank.
Instead, Mr. Powell has said
that Fed officials must focus
exclusively on how best to
meet their congressional mandate if they are to defend the
institution’s independence to
set policy without political interference. Mr. Trump’s attacks on the
Fed have made Mr. Powell’s
apolitical stance untenable,
wrote Mr. Dudley, who before
joining the New York Fed was
chief economist at Goldman
Sachs. He declined to comment for this article.
Mr. Dudley is a registered
Democrat, according to public
records, and he donated to
Democratic candidates before
his service at the central bank.
His argument suggests that
there are times when the central bank should not attempt
to meet its mandate in the
short run in order to achieve
it in the long run, and that
this is one of those times.
Several economic analysts
and former Fed officials said
Tuesday that they were
stunned by Mr. Dudley’s argument. While some of them
agreed that Mr. Trump’s policies are harming the economy
and that his attacks on the Fed
are undermining economic
policy making, they said it
would be treacherous for the
Fed to interfere in the democratic process by exercising its
own judgment over that of
Taking electoral politics
into account when setting interest rates is “categorically
beyond the pale of legitimate
technocratic central banking
regardless of the risks posed
by a given political outcome,”
said Krishna Guha, vice chairman of Evercore ISI and a former adviser at the New York
Fed to Mr. Dudley. U.S. WATCH
PUERTO RICO legislative nor judicial limits on
abortion can be measured by
specified weeks of development
of a fetus; instead, ‘viability’ is
the sole test for a State’s authority to prohibit abortions
where there is no maternal
—Jennifer Calfas Tropical Storm
Heads for Island Home-Price Growth
Continues to Slow
Home-price growth continued
to decelerate in June, the latest
sign that lower mortgage rates Purdue
Settle Suits ly
GIANFRANCO GAGLIONE/ASSOCIATED PRESS A man in San Juan, Puerto Rico, prepared for Tropical Storm Dorian. President Trump declared an emergency Tuesday night.
are providing little boost to a
housing market that has been
slowing for the past year.
Average national home prices
grew 3.1% in the year ended in
June, according to the S&P CoreLogic Case-Shiller National Home
Price Index, down from a 3.3%
annual pace the prior month.
Price growth has now been
slowing for the longest period
since the 2008 housing crash.
Mortgage rates have fallen
roughly a percentage point since November but thus far that has
done little to reverse the slowdown in both prices and sales.
The Federal Housing Finance
Agency House Price Index similarly showed that home-price
growth has decelerated for the
past 15 months.
Home prices rose just under
5% in the second quarter compared with a year earlier, down
from nearly 7% appreciation during the period in 2018.
—Laura Kusisto A federal judge temporarily
blocked parts of a Missouri law
that would have prohibited abortions after eight weeks of pregnancy, putting on hold one of
the most restrictive limitations
on abortion in the nation.
The law, which provided exemptions for medical emergen- Johnson & Johnson
Stock Rises, Other
Drug Shares Drop just one year. Judge Balkman
wrote in his opinion that the
state didn’t present sufficient
evidence that justified additional time and resources.
Larry Biegelsen, an analyst
at Wells Fargo & Co., wrote in
a note to clients that the verdict is a “net positive” for the
New Brunswick, N.J., company
because it was far less than
the $17.5 billion sought by the
Oklahoma attorney general.
Several analysts expect the
$572 million to be reduced on
appeal. The analysts said Johnson & Johnson’s overall outlook
remains promising, even with other opioid lawsuits unresolved.
Its revenue last year totaled
$81.6 billion. Shares of Johnson
& Johnson closed up 1.4% at
$129.64 on Tuesday.
Johnson & Johnson said it
disagreed with the decision and
promised an appeal, a process
that could last years.
Other companies facing
lawsuits nevertheless received
a cold reaction Tuesday from
investors. Teva Pharmaceutical
Industries Ltd. closed down
9.6%, Endo International PLC
fell about 13% and Mallinckrodt
PLC shares fell about 16%.
—Jared S. Hopkins more than a decade, The Wall
Street Journal has reported.
Purdue has sold more than
$35 billion of OxyContin, the
company’s signature product,
since its introduction in 1996.
The current proposal was
subject to change as the talks
moved forward, said people familiar with the matter.
The proposal also includes
the donation of products to
treat addiction, such as buprenorphine, and nalmefene,
an opioid-overdose antidote
the company is developing. Purd...
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