Month: October 2017

Ken Chenault a mediocre but tough act to follow

18 Oct 2017

The Amex boss is to leave after 17 years in charge. He survived a credit bust, an activist and losing the firm’s biggest client, Costco. But total return under his tenure lagged rivals. That may seem an easy target for new CEO Squeri to beat. But fintech will be his bugbear.

Greenhill loss heightens turnaround challenge

18 Oct 2017

The M&A boutique fell into the red last quarter and revenue plummeted as it completed fewer deals, even as most bulge-bracket rivals prospered. CEO Scott Bok is betting on a bumper recapitalization to boost shareholder returns, but that can’t mask the firm’s fundamental weakness.

Tootsie Roll bet could leave return cavity

18 Oct 2017

Hedge fund Spruce Point reckons the secretive confectionary firm may be worth half its $2 bln value. The short seller may have a point. But Tootsie Roll’s future rests on the health of octogenarian CEO and major shareholder Ellen Gordon. Betting against candy in general is safer.

Sexual harassment forces way into the board room

18 Oct 2017

Harvey Weinstein’s movie studio is in tatters. Mighty Amazon is wrestling with the fallout from alleged misbehavior of a top executive. They're not alone. The mistreatment of women has swiftly moved from an HR issue to a serious business risk deserving of attention from the top.

U.S. tax outlook opens M&A pricing divide

18 Oct 2017

Republicans want to cut the corporate rate to 20 pct, but the timing is as uncertain as the outcome. Theoretically, profit – and thereby valuations – could get a 23 pct boost from lower taxes. Sellers want that priced in, but buyers won’t. All-stock deals could be one answer.

Danone’s chair-CEO blend leaves sour taste

18 Oct 2017

Boss Emmanuel Faber is taking on both roles three years after the yoghurt maker split them. Yet shareholders are increasingly unhappy with such poor corporate governance at French companies. And with an activist to contend with, the board’s decision looks complacent.

Spanish toll-road bid steamrollers Benettons

18 Oct 2017

ACS has made a 17 billion euro offer for infrastructure operator Abertis, using the balance sheet of its German unit Hochtief. The price is better than a rival bid from Atlantia, controlled by Italy’s Benetton family. It owes more to cheap debt than economic sense.

TPG’s car-insurance deal comes with a warranty

18 Oct 2017

The buyout group and Uber investor is selling car insurer Warranty to Assurant for $2.5 bln, taking a 23 pct stake and some cash. It looks to have doubled its money. Taking shares as payment isn’t a full exit for TPG, but it leaves both parties assured of respectable returns.

Global watchdogs may curb U.S. deregulatory push

18 Oct 2017

The U.S. Treasury will decide whether to recommend scrapping the post-crisis bank resolution regime, as some Republicans urge. But foreign regulators threaten to impose new limits on American firms if it's ditched. That reduces the chances of a major rollback of financial rules.

Chancellor: 1929 is more apt anniversary than 1987

18 Oct 2017

Today's high stock prices, dollops of leverage and robust profit margins more closely resemble market conditions preceding the Great Crash than the minor blip that took place 30 years ago. Fold in risk parity, ETFs and other trading strategies, and a repeat could be coming.

Revamped Reckitt has yet to clean up its act

18 Oct 2017

A restructuring is eclipsing the Dettol-to-Durex maker’s poor third quarter results. Parking brands that are more exposed to competition in a separate unit is smart but makes the company costlier to run. Nor does that address the sales problems caused by shifting consumer habits.

Private equity margarine bet needs activist backup

18 Oct 2017

Buyout firms may pay up to 7 billion euros for Unilever’s spreads unit. The new owners will need to stem falling sales as shoppers shun artificial produce. Acquiring other brands from food companies under pressure from uppity shareholders could be one way of boosting returns.

Mistimed writedowns lesser of mining M&A evils

18 Oct 2017

Rio Tinto has been accused by the SEC of hiding the plunging value of a coal mine it bought in 2011. The charges are serious, but at least accounting procedures are fairly clear. If only there were rules that could prevent mining bosses getting carried away during M&A upswings.

Qudian IPO feeds debt-hungry Chinese millennials

18 Oct 2017

The online lender backed by e-commerce giant Alibaba’s financial arm has priced its U.S. listing above expectations, says Reuters. It boasts fast growth, low defaults and - shockingly for tech - profitability. As young Chinese shoppers rack up debt, Qudian will keep earning.

Indonesia’s slowdown belies Jakarta’s reform spin

18 Oct 2017

Eight interest-rate cuts by Indonesia’s central bank since January 2016 are getting little traction with investors or consumers. As growth slows, the urgency is rising for President Joko Widodo to accelerate infrastructure projects, attack corruption and create well paid jobs.

Viewsroom: President Xi Jinping’s moment

17 Oct 2017

The Chinese Communist Party’s 19th National Congress kicks off this week. Delegates at the week-long confab will select new leaders, including for key financial and economic posts. But the spotlight will be on Xi and whether he can consolidate his power and extend his reign.

Soros punches new $18 bln hole in societal ills

17 Oct 2017

The hedge funder who took on the Bank of England has given most of his fortune to his charity, making it the second-largest in the U.S. behind the Bill and Melinda Gates Foundation. Conservatives may moan, but his causes of human rights, democracy and fairness need support.

China’s iQiyi is like Netflix with extra challenges

17 Oct 2017

The Chinese video-streaming service is eyeing a debut on U.S. markets next year and already inviting comparisons to its American partner. Both are burning cash on new content to lure fans. Fickle consumers and limited appeal abroad stand in the way of a $10 bln-plus valuation.

Morgan Stanley staff have the most to cheer about

17 Oct 2017

Rival Goldman Sachs pays its people more on average, but James Gorman’s firm has boosted comp and benefits by 9 pct this year, almost double the raise of its rival. JPMorgan bankers face a pay cut. Asset-management employees, though, can afford to pop some champagne corks.

Investors choke on generic-drug deal complexity

17 Oct 2017

The merger of Amneal with Impax, worth some $9 bln in combined enterprise value, brings scale, savings and a bigger business for a respected CEO. But the larger firm is private, its owners are selling down, and there’s a wacky tax element. No wonder Impax owners aren’t loving it.

Heads or tails, Mark Carney loses

17 Oct 2017

British inflation has hit 3 percent, the highest level since 2012. No wonder the Bank of England chief is hinting policy rates may soon rise. Carney’s problem is that he will be criticised for hurting a slow-growing economy if he hikes and accused of inconsistency if he delays.

Goldman pips Morgan Stanley on style not substance

17 Oct 2017

Lloyd Blankfein’s firm bested its Wall Street rival on quarterly earnings, thanks mostly to lumpy gains on equity investments and strong M&A fees. Longer term, the broader diversification and stable trading business James Gorman has crafted is becoming more attractive.

Credit Suisse breakup faces trading conundrum

17 Oct 2017

An activist investor wants to split the Swiss bank into three parts. On paper, the private banking and asset management units alone justify its $41 bln market value. But the ailing investment bank – including an estimated $250 bln of derivatives – would struggle to stand alone.

Vivendi can live with Italy’s “golden power” move

17 Oct 2017

Premier Paolo Gentiloni wants Telecom Italia to install state-backed directors and a special appointee to handle security matters. It’s a headache for top shareholder Vivendi. But government sentinels are preferable to being forced to spin off assets or accept state investment.

Pearson’s improved report card could be erased

17 Oct 2017

The education publisher issued a slightly more optimistic forecast for operating profit and said its U.S. textbook business is unlikely to repeat its catastrophic 2016. But Pearson has misread its key market before. The shift to digital publishing still looks painful.

Danone has to work to milk turnaround tale

17 Oct 2017

Strong third-quarter sales lifted the French yogurt maker’s shares to record highs. Rebounding Chinese demand will help make the most of a strong portfolio of brands. But cost cuts and making a success of its WhiteWave acquisition are key ingredients for an even richer valuation.

Breakdown: Narendra Modi’s not-so-bright spot

17 Oct 2017

The premier has called India’s sharp economic slowdown temporary but must be worried about a prolonged slump as state elections approach. Investors are more sanguine. Breakingviews explains how things went wrong, what is at stake, and why India might wait out the pain.

Guest view: Chinese oil can fuel North Korea talks

16 Oct 2017

Nothing will concentrate the minds of North Korean leaders more than a Chinese oil embargo, argues William Rhodes, a former Citigroup executive and co-chair of the G30’s steering committee on bank culture and governance.

Netflix valuation outstrips burgeoning opportunity

16 Oct 2017

The $86 bln video-streaming service hit an all-time high after Comcast and AT&T warned of a fall in subscribers. Pay-TV customers cutting the cord should mean more viewers for Netflix. But even that and a recent fee hike don’t justify the firm trading at a sky-high multiple.

Allergan’s latest drug wheeze has bad side-effects

16 Oct 2017

The firm’s stock fell 5 pct after a judge invalidated a key medication’s intellectual property and said using a Native American tribe to protect the patents was a “ploy.” Allergan’s plan was too clever by half. With President Trump on the warpath, it does the industry no favors.