Ackman’s Valeant defense nervy but unpersuasive 30 Oct 2015 The hedge fund founder says the drug firm is a victim of bad PR, naive investors and jealous rivals. He even likened his stake to Warren Buffett’s savvy investment in lenders cheated by a 1960s salad-oil scandal. The reality is Valeant is flawed in ways a “pep talk” won’t fix.
Exxon pumps up position in world of cheap oil 30 Oct 2015 The $340 bln energy giant is standing firm despite $50-a-barrel crude, avoiding the kind of writedowns and job cuts that tarnished results at Shell and Chevron. An iron-clad balance sheet and strong cash flow leave Exxon primed to acquire assets as weaker producers falter.
American bank laggards band together for safety 30 Oct 2015 KeyCorp is paying $4.1 bln for First Niagara, creating the 13th-largest U.S. institution. Key is healthier than its quarry but doesn’t meet its cost of capital. The combination is expected to bring cost cuts of $400 mln and more efficiency – and may be tasty prey for big rivals.
Review: Fed founders wouldn’t recognize their baby 30 Oct 2015 In “America’s Bank,” Roger Lowenstein shows how the Federal Reserve was created to act as lender of last resort and little more. Since then, there’s been mission creep with many ill consequences. A century after its foundation, the central bank needs to address its failings.
AB InBev enters SAB mega-deal on a solid footing 30 Oct 2015 The Budweiser brewer has upped guidance on revenue. Costs are also rising because AB InBev is selling more fancy beers. Ahead of its $105 billion deal with SABMiller, the world’s largest brewer must spend on new products and markets as well as buying rivals in order to secure growth.
Too soon for BNP to ramp up its investment bank 30 Oct 2015 France’s biggest lender by assets grew third-quarter revenue 8.5 pct on gains in trading, the U.S. and emerging markets. But a plan to grab investment banking market share is risky given its low capital ratio. And a skimpy equity allocation flatters the division’s returns.
LNG moves from blessing to curse for BG/Shell 30 Oct 2015 BG Group posted a big drop in third-quarter liquefied natural gas EBITDA. Earlier this year LNG, which provides a fifth of BG earnings, looked a definite plus for Shell as it completes a $70 bln takeover. Now it looks like yet another headache for the Anglo-Dutch major.
Airbus success hides growing flagship problem 30 Oct 2015 Europe’s aerospace group is getting many things right, as a 12 pct third-quarter growth in operating profit shows. But demand for its ageing long-distance A380 model has peaked. The flagship jet is overdue a $2 bln or so upgrade. Airbus can afford it, but is losing crucial time.
Spain’s big banks hit by volatile emerging markets 30 Oct 2015 BBVA’s core capital fell in the third quarter while Santander’s barely grew, in part due to falling currencies in their foreign operations. Despite robust profits, capital looks light at both banks. Worryingly, book value per share also fell. Diversification has its drawbacks.
RBS capital strength not quite what it seems 30 Oct 2015 After offloading a stake in its U.S. arm, the British bank will have a huge 16 pct solvency ratio. But RBS still faces costs to exit UK state ownership, and hefty charges for past conduct issues. Investors trying to locate when dividends will resume still require a telescope.
China’s two-child policy delivers wrong baby boom 30 Oct 2015 Diaper and dairy stocks jumped on news all couples will be allowed to have two children. Though the birth rate may inch up it won’t have much impact on China’s ageing population and shrinking workforce. Beijing will find it harder to rally urban mothers than to restrict them.
BOJ opts to remain conventionally unconventional 30 Oct 2015 Japan’s central bank decided not to add to its already huge bond-buying scheme. The bet is that prices will keep rising once the impact of cheaper oil fades. But with its 2 pct inflation target still distant, a nasty slowdown could yet force the BOJ to take more extreme measures.
Brookfield’s Aussie deal faces surprise blockade 30 Oct 2015 The Canadian group’s $6.3 bln offer for Australian port and rail group Asciano has been upset by smaller local rival Qube and partners snatching a 20 pct stake. Brookfield cannot sweeten its way out of trouble. Still, some mix of asset sales and co-investments might just work.
Pfizer may overdose on quick and complex deals 29 Oct 2015 The drug giant is in talks to buy Allergan and seems likely to split the merged firm. It is moving briskly to take advantage of low share prices and tax benefits that could vanish with a new Congress. Speed can prompt missteps, though, as the pharma giant knows only too well.
PayPal foots bill for doubts about financial tech 29 Oct 2015 The electronic-payments firm just missed quarterly revenue estimates, sending its stock down as much as 5 pct. Investor reaction seems unjustified and reflects fear and misunderstanding about the industry. A fintech powwow’s record crowds, though, suggest PayPal may find friends.
TPG reaches for some vintage Goldman fairy dust 29 Oct 2015 The buyout shop hired the bank’s former president, Jon Winkelried, to be co-CEO. That suggests no one internal was better suited than a man who rode off mid-financial crisis for a cowboy’s life. The Goldman imprimatur may help with, say, an IPO but it doesn’t always stick.
Fantasy sports embrace fantasy of self-regulation 29 Oct 2015 The embattled $4 bln U.S. industry is hastily assembling a governing authority as DraftKings and FanDuel find themselves in the crosshairs. It’s a belated and transparent attempt to ward off outside oversight. Self-policing organizations, however, often have more bark than bite.
Energy subsidies will test Saudi’s pain threshold 29 Oct 2015 The kingdom is considering how to claw back the $107 bln it foregoes each year by subsidising the price of domestic energy. Without that support, companies would be uncompetitive and subjects angry. But the impact of low oil prices makes giveaways an unaffordable luxury.
Petrobras should be considered too big to fail 29 Oct 2015 The scandal-plagued Brazilian oil giant is hobbled by rising debt with bond yields pricing in a high degree of distress. A default does not look imminent, however, and the government has means and motive to keep the group afloat. Petrobras is probably a good fixed-income bet.
Traders aren’t buying the idea of a euro rout 29 Oct 2015 Hints of monetary easing in the euro zone and the chance of a December tightening in the United States have pushed the currency down against the dollar. But market disconnects suggest traders are wary of betting against the euro too aggressively. Their caution is justified.
Conoco shows flexibility in oil’s awful year 29 Oct 2015 The $66 bln crude producer cut capital-spending plans yet again as it reported a $1.1 bln loss in the third quarter. Low oil prices have yet to hit output, though. And CEO Ryan Lance is cutting other costs, too. Investors can take comfort from all that, but should still watch their dividends.
Testing simplifier Theranos complicates governance 29 Oct 2015 The Silicon Valley blood-analysis firm, ostensibly worth $9 bln or more, trimmed its director ranks, formerly packed with wise men from the U.S. government and military. But now it has sprouted three boards. That contrasts with the clarity Theranos seeks for hematology.
Deutsche Bank looks like tortoise to Barclays hare 29 Oct 2015 The German lender is cutting 35,000 staff and 20 pct of risk assets in John Cryan’s big revamp. Its UK peer did better in Q3 capital markets advisory, a business both seek to grow. With Barclays hit by UK ring-fencing, Deutsche’s investment bank could cope better long term.
Shell throws kitchen sink at low oil 29 Oct 2015 The Anglo-Dutch major’s quarterly results were scarred by a net charge of $7.9 billion. It’s painful, and the comparison with rival Total unflattering. Shell was able to cover dividends with cashflow in the last year, but the balancing act is only going to get more difficult.
Pfizer may pay dearly for Allergan tax-lite charms 29 Oct 2015 The U.S. drugs group is eyeing a $330 bln tie-up with its Ireland-based rival, reports suggest. Allergan, with an enviably low tax rate, can hold out for a good price. But if Pfizer stumps up for a premium of more than 25 percent, it will risk paying away the benefits of a deal.
Europe’s stricken airlines cursed with good luck 29 Oct 2015 Lufthansa and Air France-KLM reported boosts from lower oil prices and strong summer demand. The uplift is probably temporary. But try telling that to restive pilots who may push back even harder on essential cost cuts. There’s little respite for the carriers’ horrible returns.
BT has to make better case to avoid $65 bln split 29 Oct 2015 UK regulators are mulling whether the British telecoms group should be broken up. BT reiterated its dislike of the idea as it reported flat earnings growth. United, it says the UK has a good chance of better telecoms infrastructure at the best price. Its argument is unconvincing.
Samsung shows investors it can be generous too 29 Oct 2015 The South Korean group plans to buy back stock worth $10 bln and pay out up to half of its free cash flow in dividends. That will shrink its cash pile and may help the Lee family reorganise their empire. It’s a small but welcome sign that restructuring can benefit shareholders.
Hong Kong shareholders strike fresh blow at GOME 29 Oct 2015 Investors prodded the Chinese electrical-goods retailer into paying a fifth less for a chain of sister stores. That’s a significant improvement, even if the $1.2 bln deal still hands too much power to jailed founder Huang Guangyu. The city’s institutions are having a good run.
No simple cures for Gilead and Apple valuations 28 Oct 2015 Like the iPhone maker, the biotech is the best in its industry and churns out hefty profit. Yet its stock trades at a big discount to the market. Investor impatience for astonishing new products - and fears that neither company will find them - borders on the irrational.