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Judge sides with Red Cross in trademark dispute case

A decision by Johnson & Johnson, the giant health-care conglomerate, to sue the American Red Cross last year for commercializing the Red Cross symbol may be turning into a bit of a disaster for the company.

This week the company lost the second round in its trademark dispute against the disaster relief agency when U.S. District Judge Jed Rakoff in Manhattan threw out most of the case.

In a decision late Wednesday, Rakoff said the congressional charter for the Red Cross gave it the right to use the symbol - a Greek red cross on a white background - even for business purposes.

The company and the Red Cross had amicably shared use of the symbol for more than a century through an agreement signed in 1895. But the Red Cross angered Johnson & Johnson beginning in 2004 by licensing the symbol to other companies for use on commercial items sold in stores as part of the organization’s fundraising.

In August, the company took the dispute to court. But in his second ruling dismissing part of the case - the first one was in November - Rakoff said that charitable reasons for Red Cross’ business ventures make them all the more reasonable.

New York Times Mortgage rates edge down again

Rates on 30-year mortgages edged down this week to their lowest point in a month, a spot of welcome news to would-be home buyers.

Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 6.01 percent for the week. That was down from last week’s 6.05 percent and was the lowest since mid-April, when rates averaged 5.88 percent.

Other rates also fell. Five-year adjustable-rate mortgages fell to 5.57 percent, from 5.67 percent last week. One-year ARMs fell to 5.18 percent, from 5.29 percent.

However, rates on 15-year fixed-rate mortgages held steady at 5.6 percent.

Associated Press Bernanke says banks must prepare better

Commercial banks and other financial institutions need to beef up their ability to detect and protect themselves against risks like the credit and mortgage debacles, Federal Reserve Chairman Ben Bernanke said Thursday.

The three crises - housing, credit and financial - have exposed weaknesses in financial firms’ risk-management practices. Banks and other financial players have racked up multibillion-dollar losses when investments in complex mortgage-backed securities soured with the collapse of the housing market. Credit problems in housing quickly spread to other areas, intensifying the turmoil.

Banks need to better identify and measure risk, value their assets and liabilities, and prepare for liquidity disruptions, when access to cash or the ability to smoothly buy and sell can be impaired, Bernanke said in a speech to a Federal Reserve banking conference in Chicago.

Regulators also need to bolster their oversight, Bernanke said.

“It is clear that supervisors must redouble their efforts to help organizations improve their risk-management practices,” he said. “We have focused on the institutions in most need of improvement, but we will continue to remind the stronger institutions of the need to remain vigilant, particularly in light of the ongoing fragility of market conditions.”

Associated Press Drinkers like light (on the wallet) beer

Cash-strapped drinkers are starting to trade down to economy beers, the chief executive of Miller Brewing Co. said Thursday.

The Milwaukee brewer saw some shift between higher-priced, premium beers and economy beers such as Miller High Life and Milwaukee’s Best starting in January, Tom Long said.

“We think it’s primarily driven by decline of disposable income and pocket money that American consumers are feeling right now,” he said.

Long said the volume of beers sold remains stable, but the company expects to sell more lower-priced beers this year if gas prices continue to rise.

Associated Press

CHICAGO: For more than a year, food makers and other consumer products companies have passed on much of the burden of rising commodity costs to consumers.

Companies like H.J. Heinz and Hormel Foods proved again with earnings forecasts and announcements Friday that this was still the case early this year, fueling a rally in food stocks.

But that relief could prove short-lived, as 2008 could be the year consumers say “enough!” and start shunning branded products for less expensive private-label alternatives, industry experts warn.

The next round of price increases “will actually start to impact consumer behavior in a profound way,” Ken Harris, a principal at consulting firm Cannondale Associates, said.

That could hit profits at the companies that already have exhausted most measures to cut costs and become more efficient over the past several years in the wake of soaring prices for wheat, cocoa, milk and energy, just to name a few.

“When you say input costs are going up 6 percent and you are only getting 4 percent net pricing, where do you make up the rest?” asked Gregg Warren, an analyst at Morningstar.

Rising commodity costs and economically stressed consumers are expected to be the key topics when consumer products company executives meet with analysts at the Consumer Analyst Group of New York conference in Florida that begins Tuesday.

For the past several years, many of the big food and consumer products companies have tried to mitigate rising commodity costs by cutting jobs, closing plants and taking other steps to become more efficient.

They also passed some of those costs to consumers in the form of price increases, generally finding little resistance as shoppers continued to eat brand-name foods and use brand-name soap, while cutting back in other areas.

But the pricing power is not unlimited by any means, Cannondales Harris said. While the current round of price increases that went in place a few weeks ago might not cause a major change, the next will, he said.

Concerns about higher costs and weaker pricing power had led to a sharp downturn in stocks that would normally perform well as defensive plays with a U.S. economy that might be on the brink of a recession.

Even after a rally Friday morning, the Standard Poors packaged foods index is down 5 percent this year. The SP household and personal care index is down 8 percent.

“We think investors remain rightfully focused on U.S. economic weakness and the potential effects around the globe,” Bear Stearns said in a research note about the Florida conference.

Consumers have already started trading down in juice and milk, said Brian Morgan, a senior research analyst at Euromonitor International. He also said he expected to see moves down in other staples like bread.

“People will begin to shift away from kind of the newer, higher end things, to higher-volume value brands,” Morgan said.

Food price increases are adding to the financial pressure on American consumers who are also facing higher costs for gas, rising mortgage payments and falling home values.

The food component of the U.S. consumer price index rose 4.9 percent in 2007, according to U.S. Labor Department data. That was part of the largest overall CPI increase since 1990.

On store shelves, Sara Lee has announced three separate price increases for bread over the past year, Hershey announced a 13 percent increase in the price of about a third of its U.S. candy products at the end of January, and General Mills reduced the size of its cereal boxes last year, effectively raising the price per ounce.

The increases are not just limited to food. Procter Gamble, the worlds largest household and personal care products maker, has taken to summarizing a litany of price increases during its quarterly earnings conference call. The most recent included a 6 percent increase on Iams dog food and an 8 percent increase on Zest and Safeguard soap bars.

What is driving these prices up? How about a 127 percent rise in wheat prices in the past year, as shown by the futures price at the Chicago Board of Trade. Cocoa has been at a 24-year high and is up 45 percent on the ICE futures exchange. Crude oil is up 65 percent at the New York Mercantile Exchange.

For the most part, American consumers have swallowed rising food prices and instead cut back on other items.

“Theyve cut back as much as they can on a wide range of goods, such as purchases of clothing, how much they drive, or eating out,” Richard Curtin, director for the Reuters/University of Michigan Surveys of Consumer said.

NEW YORK: General Electric said Friday that it may sell or spin off its century-old appliances unit in a bid to lower its exposure to the slumping U.S. housingmarket.

The blue-chip conglomerate said it planned to seek “strategic options” for the unit that may include a partnership, spin-off, orsale.

GEs appliances arm, which makes dishwashers and refrigerators, is a relatively small business for the second-largest U.S. company by marketcapitalization.

Last year it generated about 4 percent of GEs $173 billion in revenue. But, along with lightbulbs, it is one of the businesses with which consumers most closelyidentify.

A sale of the unit, which makes refrigerators, microwaves and washer-dryers, among other items, could fetch at least $5 billion, according to people with knowledge of thediscussions.

GE and its investment bank, Goldman Sachs, have been laying the groundwork for an auction over the past fewweeks.

The appliance unit, which helped make GE an American icon, may end up in foreignhands.

Wall Street bankers are rushing to lay claim to potential bidders, and the expected suitors include Haier of China, which bid on Maytag two years ago; LG Electronics and Samsung, both of South Korea; Bosch of Germany; Electrolux of Sweden, which makes the Kenmore line of appliances by Sears; and Controladora Mabe, a GE partner based inMexico.

The sale would mark the end of a brand of household products that made General Electric a fixture in American homes over the pastcentury.

Jeffrey Immelt, GEs embattled chief executive, has been trying to refashion General Electric in the face of widespread calls to break up one of largest companies in America. That mission has taken on greater urgency with the credit squeeze and the slumping economy, which have affected many of GEsbusinesses.

February 18, 2008 — Yankees captain Derek Jeter is leading the charge to bring the 24 Hour Fitness chain to New York.

Tapping the shortstop as its pitchman, 24 Hour Fitness plans to open three Jeter-styled gyms starting in June.

Jeter will do more than lend his name to the building. He will be an equity partner and is also involved in designing the clubs.

The deal is separate from the agreement the fitness chain signed last year with the Yankees team to open three baseball-themed clubs in the city.

As part of that deal, 24 Hour Fitness will have a presence at the Yankees’ new ballpark in 2009 and create a new fitness center at the team’s spring training facility in Tampa, Fla.

“We are really excited about our relationship with the Yankees because of their spring training facility and new ballpark,” said Carl Liebert III, chief executive of 24 Hour Fitness. “But this is a relationship with Derek and putting the Jeter brand alongside 24 Hour Fitness.”

Just don’t expect Jeter to decorate his clubs with Yankees memorabilia and pinstripes. The sports star, who will appear in the advertising and make promotional appearances, said he wants to broaden the appeal beyond baseball fans.

“I play baseball and that’s my career, but a workout facility is for everyone,” Jeter said in an interview. “I wanted to steer clear a little bit of the baseball element and make it more of a lifestyle club.”

Jeter, who said he’s been involved in design details down to the tile, is aiming for a “New York flavor,” which he describes as “sophisticated,” “classy” and “hip.”

The premiere club on Madison Park will occupy 28,000 square feet and boast amenities including a pro shop with fitness apparel, a Starbucks and XM Satellite Radio. There are plans for two more locations in the Citibank building on Lexington and in SoHo.

The cost of a membership will be priced somewhere in the “mid-tier,” according Liebert, suggesting it will competitive with chains such as New York Sports Club.

24 Hour Fitness has partnered with star athletes in the past - Andre Agassi, Shaquille O’Neal and Lance Armstrong - to open signature clubs.

holly.sanders@nypos t.com

It’s deadline day for shareholders of Take-Two Interactive Software, the video game company undergoing a hostile takeover bid from its much bigger rival Electronic Arts. Today is the day those shareholders must decide whether they’ll tender their shares to this unsolicited suitor, and accept the $2 billion offer, or whether they’ll hold out for more money or outright independence.

While $2 billion sounds like a pretty good deal, the whole matter was complicated in recent weeks by the release of Take-Two’s controversial blockbuster game Grand Theft Auto IV, which set a record by pulling in $500 million in its first week.

And that has some people wondering if the company might be worth more than $2 billion. If EA can get at least 51 percent of the shareholder votes, it can choose to buy the stock and pursue the acquisition, provided it clears the required legal hurdles.

Take-Two had said it wouldn’t talk to any suitors until after the April 29 launch of Grand Theft Auto IV and said EA’s offer in particular undervalued the company. Observers had speculated that GTA IV’s success may serve to harden Take-Two’s position. EA tried to deter that thinking this week by saying the game’s success was already factored into its bid, which amounts to $25.74 per share.

“As (EA chief executive John) Riccitiello said this week, they made a spectacular game that sold really well, but that was all built into our offer,” said EA spokesman Jeff Brown, echoing comments made by Riccitiello during an earnings conference call this week.

Analysts agreed the success of GTA IV does little to deter EA’s courtship of Take-Two. “I don’t think GTA’s performance changes anything,” said Michael Pachter, an analyst with Wedbush Morgan Securities. “I don’t think there is a person that understands the industry that was surprised by the GTA numbers.”

It might, however, allow Take-Two to extract a higher purchase price, Pachter said. EA has previously warned that the price and likelihood of the deal may go down the longer Take-Two waits to act.

Take-Two stock finished Thursday at $27.33 per share, $1.59 more than EA’s offer price, which Pachter said may indicate there are a significant number of arbitrage traders looking to get a higher bid from EA.

Analyst Colin Sebastian said that he believes the chances of an acquisition are high and that a merger represents a good opportunity for both sets of shareholders. EA investors get a deal that will expand the company’s earnings potential while Take-Two shareholders can unlock the value of their shares, he said.

Sebastian said Take-Two would also benefit from EA’s more established distribution and publishing organization.

“I think it’s more than likely the deal gets hammered out,” Sebastian said. “Maybe it happens at a slightly higher price, but it’s good for shareholders.”

EA could simply extend its tender offer deadline, which it did last month, if it’s still encountering delays in getting the deal done. The company has provided information to the Federal Trade Commission and the German Federal Cartel Office to answer antitrust concerns, though it’s unclear if the company will need more time to satisfy regulators in both countries.

Pachter said he’s more optimistic that the two sides will come to an agreement soon, citing a recent Wall Street Journal story in which Sam Houser, president of Rock Star Games, the Take-Two unit that created GTA IV, said he was open to being acquired by EA. He believes Houser, whose contract with Take-Two expires next year, can inject himself into the company’s decision-making process with the hope of getting rewarded by a thankful EA.

“Houser’s enlightened enough to make this deal happen, and EA’s enlightened enough to pay him,” Pachter said.

E-mail Ryan Kim at rkim@sfhronicle.com.