Jobs in Japan outweigh recession-that-wasn’t 8 Dec 2015 Revised data show Japan avoided six straight months of economic shrinkage after all. Bravo. But GDP figures are always volatile and technical recessions count for little in low-growth countries. For Japanese policymakers, the priority is ensuring a healthy labour market and boosting inflation.
Valeant poised to cause much collateral damage 7 Dec 2015 The acquisitive drugmaker’s travails have vaporized fortunes, damaged reputations and dusted the sector with political radioactivity. Indirect effects could be even larger. Valeant will take its toll on so-called platform companies, “adjusted” accounting and hedge funds broadly.
Latam pro-business leaders face welfare conundrum 7 Dec 2015 Venezuela’s victorious opposition and Argentina’s President-elect Mauricio Macri need to stem unsustainable social spending that helped tank their countries’ economies. The puzzle is how to fix it without sparking unrest or wrecking their credibility. Brazilians will be watching.
"Zero and 100" model might just work for BlueCrest 7 Dec 2015 The $8 bln hedge fund is closing to outsiders. Michael Platt’s firm will need to do more with far less capital to offset the loss of hefty “2 and 20” external fees. A Breakingviews analysis shows higher leverage is the key. Platt may be OK taking extra risk others wouldn’t.
Late cycle M&A runs afoul of U.S. trustbusters 7 Dec 2015 Enforcers stopped GE’s sale of its ovens business to Electrolux, put the lid on a canned tuna union and may yet erase Office Depot’s sale to Staples. Some health insurance mergers may be at risk, too. In a record year for acquisitions, it’s becoming hard to find clean ones.
New type of dealmaker gives Keurig $14 bln respite 7 Dec 2015 The single-serve coffee group is selling to the family-backed JAB. The 78 pct premium is surely a welcome exit for investors in the struggling company. The novelty, though, is JAB’s caffeine-themed consolidation play, reminiscent of Brazilian 3G’s effort with Heinz and Kraft.
Far-right poll success jeopardises French reforms 7 Dec 2015 Marine Le Pen’s National Front won more votes than mainstream rivals in the first round of regional elections. Anti-euro and anti-immigration, the party espouses protectionism and state intervention. Its rise may force the ruling Socialists to rethink economic reform plans.
Container shipping deal stacks up in multiple ways 7 Dec 2015 French giant CMA CGM is buying Singapore’s ailing Neptune Orient Lines for $2.4 billion plus debt. Offering majority owner Temasek and public shareholders close to book value – a 49 percent premium – looks generous. But the unlisted buyer can chart a course to value creation.
Electrolux’s GE failure leaves only faint stains 7 Dec 2015 The Swedish group will be deprived of extra growth after a U.S. acquisition was scotched by trustbusters, who felt that owning GE’s appliance unit would give Electrolux overmighty pricing power. The $1 bln fall in Electrolux’s value suggests investors never held such hopes.
Dixon: Turkey’s economy threatened on many fronts 7 Dec 2015 A row with Russia, a resurgence of violence within its borders and the prospect of the Fed raising rates have coincided with President Erdogan’s increasing politicisation of the economy and bad governance. This could prove a toxic cocktail given the private sector’s high debt.
Ambani towers pact sets up Indian telco comeback 7 Dec 2015 Anil Ambani’s Reliance Communications could halve its $6 bln net debt with the sale of its telecom towers. A string of recent deals - and closer ties with his richer older brother - mean the tycoon is almost ready to do battle in the next round of India’s costly mobile war.
China index: Time to clear the air 7 Dec 2015 While President Xi Jinping visited Paris for climate talks, Beijing was choking on a toxic haze. Yet our index shows the Chinese capital’s infamous smog is lifting as the economy slows. Environmental policy can only become more ambitious: dirty industrials face tougher times.
Jobs and wages mean rate hikes are go! 4 Dec 2015 Barring market meltdown at home or abroad, American job creation in November looks strong enough to allow Janet Yellen’s Fed to lift interest rates this month after seven years near zero. The shift in stance is overdue, but unexciting growth will keep the central bank wary.
OPEC indecision could engulf big oil majors 4 Dec 2015 Instead of cutting output, the oil cartel has cleared the way for its members to keep flooding the market with more crude. For investors in oil companies this means a year of deeper spending cuts. Lower earnings are almost guaranteed to follow.
Venezuela’s populist revolution runs out of gas 4 Dec 2015 The Andean nation has the world’s biggest oil reserves but can’t get basic goods like milk and medicine into stores. Voters will punish the inept heirs of leftist caudillo Hugo Chavez in Sunday’s legislative elections, but no quick turnaround is coming. Default is a risk in 2016.
Rail deal’s logic loses steam under legal scrutiny 4 Dec 2015 Norfolk Southern rejected a $28 bln bid from Canadian Pacific, which could probably afford up to $33 bln. Regulatory approval is a bigger issue, though. The bar is high for railroad mergers, and this one likely falls short. It may be one deal that shouldn’t have left the station.
BTG Pactual woes echo its history in reverse 4 Dec 2015 The scandal-tainted Brazilian investment bank is in talks to sell its latest acquisition, BSI. The Swiss private bank joins the list of assets on the block to shore up cash after ex-CEO André Esteves’ arrest. It’s reminiscent of how he wrested control of Pactual from UBS in 2009.
Avon colors new activist-buyout battle lines 4 Dec 2015 The makeup company is under fire from a pushy investor and may call on private equity firm Cerberus to help. Motorola and NCR similarly just sold minority stakes to Silver Lake and Blackstone. This growing white-knight role suggests the targets aren’t the only ones with troubles.
Europe’s least bad option: ditch Schengen 4 Dec 2015 The 26-country free border zone is struggling to cope with refugees and security risks. Abolishing Schengen would be expensive and wouldn’t solve migration problems. Yet it might dampen the populism in continental Europe and the UK that threatens Europe’s economic integration.
Anglo American dividend cut just the beginning 4 Dec 2015 Confidence in the mining giant is at rock bottom. Cost savings are paling beside the slide in commodities prices. Anglo American can save the equivalent of one-eighth of its market cap by scrapping the dividend. Shuttering production, and firesales, may now be necessary evils.
Caixabank finds neat way to conserve capital 4 Dec 2015 The Spanish lender owns minority stakes in overseas banks that consume capital and add volatility to earnings. It is selling two of them to its parent for 2.7 bln euros, mostly in its own shares. It’s an elegant workaround. But Caixabank’s tough home market is the bigger problem.
Hong Kong’s IPO prowess is weaker than it looks 4 Dec 2015 Despite China’s boom and bust, the bourse has hosted $30 bln of floats this year - more than any other exchange. That should ease angst about HK’s future as a capital market. But quality is a problem – post-IPO performance is patchy and “cornerstone” backers play too big a role.
Global taxi app alliance will test faith in Uber 4 Dec 2015 Car-hailing firms in India, China, Southeast Asia and the United States will link their apps. It’s not clear how many people will use it or how revenue will be shared. The anti-Uber coalition’s main impact may be on the Silicon Valley darling’s ability to keep raising funds.
China’s music dream is out of tune with reality 4 Dec 2015 State planners are good at building bridges and roads. Appealing to consumers is harder. Their latest goal is to expand China’s music business to $47 bln by 2020 – almost three times the current size of the U.S. market. It just shows how out of touch bureaucrats are.
Yahoo sale would carry a warning from print 3 Dec 2015 The internet company may be putting itself on the block. Private equity is interested – and perhaps in L.A. Times parent Tribune, too. Both are plagued by a long-term decline in advertising revenue. LBO shops fell victim to that disease with newspapers a decade ago.
Congress punts gas tax hike in favor of bank raid 3 Dec 2015 A $305 bln transport spending plan may soon be law. Rather than raise the absurdly low U.S. fuel levy, though, lawmakers are plugging a $70 bln shortfall by swiping the Fed’s rainy-day funds and dividends it pays lenders. Creative, perhaps – but it’s no long-term solution.
Mario Draghi is central banking’s tragic hero 3 Dec 2015 Despite new easing measures, the ECB chief’s fight to revive inflation looks doomed. Forces beyond his control, such as oil prices, are too strong. Markets are moving against him. Draghi is admirably determined, but will probably be remembered for trying rather than succeeding.
Diageo drinks to Silicon Valley-style disruption 3 Dec 2015 As AB InBev brews mega-beer, the $74 bln distiller of Johnnie Walker and Smirnoff wants for potent takeover targets. Instead of waiting for big brands like Jack Daniel’s and Bacardi, Diageo is seeding booze entrepreneurs who are building new ones. Doing so quietly is the twist.
Saudi has chance to teach hedge funds a lesson 3 Dec 2015 The largest OPEC producer has long complained that the biggest risk to a stable oil market is hedge funds who bet on falling prices. A deal to cut production in Vienna on Dec. 4, while a drop in the bucket for Saudi, could push up oil prices and leave speculators with big losses.
Mediobanca gets Barclays to pay for its own pivot 3 Dec 2015 The UK bank is paying its peer 237 mln euros to take its Italian branches. Barclays gets rid of an unprofitable, non-core deadweight. Mediobanca gets a leg up in the arms race for asset management fees in Italy. Just as well, given Italian retail banking is under the gun.