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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 demand. 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 $200 billion. 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 Adversity Scores 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 CONTENTS Business News B3,5,7 Crossword.............. A12 Equities....................... B9 Heard on Street. B14 Life & Arts......... A9-11 Markets.................... B13 Opinion.............. A13-15 Property Report... B6 Sports........................ A12 Technology............... B4 U.S. News............. A2-4 Weather................... A12 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 prestigious university. 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: Tax Wealth, 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 and parents. Instead, it will try to capture a student’s social and economic background in a broad array of data 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 expanding health-insurance 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 and poor. 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 m rp m e er rs ci on al a us l, e 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 Faces Charges 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 setting policy. 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 Fed spokeswoman. 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 elected officials. 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 health issue.” —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 Looks to 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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