(BN) AB InBev’s Deal Thirst Can Be Satisfied With Pepsi: Real M&A


AB InBev’s Deal Thirst Can Be Satisfied With Pepsi: Real M&A
2014-10-12 22:00:01.1 GMT


(For a Real M&A column news alert: SALT REALMNA <GO>.)

By Brooke Sutherland
Oct. 13 (Bloomberg) -- If Anheuser-Busch InBev NV can’t
grab the beer of its choice, it could settle for a Pepsi.
With almost $90 billion in deals over the last 10 years,
including the 2008 acquisition of the maker of Budweiser, no
other beverage company spends like AB InBev does. Most of the
speculation on the $170 billion beer behemoth’s next move has
focused on the industry’s No. 2 brewer, SABMiller Plc. A company
of AB InBev’s size and ambitions has other options though,
including PepsiCo Inc.
AB InBev and its advisers have long studied whether a
merger with the $142 billion soda and snacks company makes
strategic and financial sense, said people familiar with the
matter. However, no talks are happening now, no deal is
imminent, and the scenario is among many it has looked at, one
of the people added, asking not to be identified because the
information is private. AB InBev should think beyond the beer
market, said Albert Fried & Co. That could put Monster Beverage
Corp. or Keurig Green Mountain Inc., even further away from the
brewer’s core, on its radar. Either way, AB InBev probably won’t
walk away empty-handed.
The culture of AB InBev is “really based on doing large
deals, making big steps forward,” Richard Withagen, an
Amsterdam-based analyst at Kepler Cheuvreux, said in a phone
interview. “It’s all speculation what the next step will be.
That there will be a next step seems pretty sure, given that I
don’t think this company wants to only manage the business and
not expand it any further.”

Too ‘Boring’

Representatives for Leuven, Belgium-based AB InBev,
Purchase, New York-based PepsiCo and London-based SABMiller
declined to comment. Representatives for Corona, California-
based Monster Beverage and Waterbury, Vermont-based Keurig
didn’t respond to requests for comment.
A takeover of SABMiller would be “boring,” said Sachin
Shah, a special-situations and merger-arbitrage strategist at
Albert Fried. Regulators would likely force divestitures, and
the cost savings from a combination wouldn’t necessarily
translate to increased value for shareholders, he said.
“Why am I going to pay a higher multiple for more of a
business that you’re already in that’s not necessarily
growing?” Shah said by phone. “Anheuser-Busch should become a
drinks business, rather than just alcohol and beer.”
AB InBev and PepsiCo do know each other well, one of the
people familiar with the matter said, citing the companies’
bottling arrangement in Latin America. PepsiCo’s soda and snacks
businesses both hold appeal amid slowing profits in the beer
space, the people said. Any deal between the two would have to
be friendly.

Cost Benefits

One driver for a takeover would be the potential cost and
revenue benefits of selling beer and soft drinks through the
same distribution system. AB InBev and its Brazilian backers
including 3G Capital billionaire Jorge Paulo Lemann could also
improve profitability at PepsiCo like they did after purchasing
Anheuser-Busch. Lemann and his two longtime business partners
are holders of AB InBev and serve on its board.
“From a strategic perspective, it doesn’t strike me as
too, too crazy,” Ali Dibadj, a New York-based analyst at
Sanford C. Bernstein & Co., said by phone. “If you look at the
strengths of ABI, they’re very clearly around cost-cutting and
distribution, particularly in a difficult volume environment
like beer. I think those could be translated pretty directly to
the Pepsi business in the North American marketplace.”

Snacks Sale

Should AB InBev decide it doesn’t want PepsiCo’s snack
business, it could sell it to one of the many buyers who would
be interested in the maker of Lays potato chips and Quaker
oatmeal, Dibadj said. The brewer hasn’t shied away in the past
from complex deals that involved divestitures.
A takeover of PepsiCo may have a better chance of adding to
AB InBev’s earnings than a purchase of SABMiller, said Withagen
at Kepler Cheuvreux. SABMiller has a higher valuation than
PepsiCo and less room for margin improvement.
“If you look at their history, those Brazilians have
always liked self-help stories,” Ian Shackleton, a London-based
analyst at Nomura Holdings Inc., said in a phone interview.
“SABMiller does not tick that box.”
One option that might is Coca-Cola Co., he said. There are
potentially more “levers to pull in terms of cost-cutting”
than at PepsiCo, which has already been trimming expenses amid
pressure from activist investor Nelson Peltz, according to the
analyst.

Deal Scenario

Shackleton said the more likely scenario would be that 3G
Capital buys Coca-Cola in conjunction with billionaire Warren
Buffett, the soft-drink maker’s largest shareholder and 3G
Capital’s partner on the more than $20 billion buyout of H.J.
Heinz Co. last year. Then 3G Capital could sell the U.S.
distribution business to AB InBev.
“When you look at the Coke distribution system, arguably
this is probably the best distribution system of any fast-moving
consumer goods company in the world,” the analyst said.
“You’re in every country in the world apart from North Korea
and Cuba. Couldn’t you actually use that system to distribute
other stuff? Beer is a very obvious starting point.”
Buffett said in June there was no chance of a buyout of
Coca-Cola after David Winters, an investor in the $195 billion
soft-drink maker, suggested he might be plotting one.
A deal for either Coca-Cola or PepsiCo would be a big bet
on a soda industry that has growth challenges of its own. Buying
a smaller player instead such as Dr Pepper Snapple Group Inc.,
with a market value of $13 billion, would represent less of an
all-in wager, said Shah of Albert Fried.

Monster, Keurig

The brewer could look at the faster-growing markets for
energy drinks and single-serve coffee. Coca-Cola announced
investments in both Monster, a $16 billion company, and $23
billion Keurig this year. “Why couldn’t Anheuser-Busch do the
same thing?” Shah said.
A deal for either could be structured as some sort of joint
venture with Coca-Cola, he suggested. Representatives for
Atlanta-based Coca-Cola and Plano, Texas-based Dr Pepper
declined to comment.
Coca-Cola’s recent agreement to buy 17 percent of Monster
will shift distribution away from AB InBev in the U.S. and
Canada. The companies split the job now. Coca-Cola also has an
option to boost its stake to 25 percent.
The biggest hurdle to targets outside of the brewery world
may be that AB InBev is simply more comfortable sticking with
beer.
“The opportunity is still large enough in brewing to
continue consolidation there,” Philip Gorham, an analyst at
Morningstar Inc., said by phone. “It’s with other brewers that
they’ll get the most cost savings, that they’ll be able to more
closely integrate operations, distribution.”

Beer Options

While a Heineken NV takeover would add another strong brand
to AB InBev’s beer line-up, it seems unlikely the company’s
founding family would be willing to sell after it rejected an
offer from SABMiller and said it wants to keep the brewer
independent, Gorham said.
Diageo Plc’s Guinness brand provides another possibility
that would move AB InBev into the African beer market, where it
currently has little presence. That deal may be too small to
have a meaningful impact on AB InBev’s profit, though, and
Diageo would also likely demand a hefty premium for that
business, should it be willing to sell it at all. The $70
billion company generates about 20 percent of its revenue from
beer.

SABMiller

That leaves SABMiller. Andrew Holland of Societe Generale
SA says it is “by far the most attractive target” for AB InBev
given its size, position in Africa and the potential cost
savings of a deal. Gorham of Morningstar says a deal may cost
too much and not be in the best interests of shareholders.
The difference of opinion adds weight to the argument for
at least considering some of the other big-deal options AB InBev
has.
“The bottom line is you’re always going to see these guys
be extremely entrepreneurial,” Shackleton of Nomura said. “Do
they have a case book on Pepsi? I’m sure. Do they have one on
Coke? Absolutely. Do they have one on SABMiller? Yeah, of course
they do. At the right price, with the right opportunity,
everything is of interest.”

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--With assistance from Matthew Boyle in London, Jeffrey
McCracken in New York and Duane D. Stanford in Atlanta.

To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman

WSJ : Rolls-Royce Needs Strategy Shift to Soar

Rolls-Royce Needs Strategy Shift to Soar

After nearly a decade of solid growth, turbulence has thrown Rolls-Royce Holdings RR.LN -1.33% off course.

Shares in the U.K. engineering company have lost about a quarter of their value this year, thanks mostly to lower growth prospects in its defense and marine divisions. The stock bounced slightly last week when the company announced a new order for aircraft engines from Norway. But investors shouldn’t breathe easy. For that, the company needs to deliver on chief John Rishton ’s promise of improving operating profit margins closer to about 15%, in line with competitors, from 12%.

Rolls-Royce stock trades at about 13.7 times forward earnings, roughly in line with rivals United Technologies and General Electric. GE -2.06% But their operating margins are higher. That suggests investors are banking on an improvement in profitability at Rolls-Royce that is yet to materialize.

One factor in the company’s fight to boost margins could be its 2011 decision to rely less on civil aviation for growth. Rolls-Royce retreated from the market for narrow-body jetliner engines to go full throttle into industrial diesel engines and marine engineering. But it has struggled to gain meaningful market share in those areas. Meanwhile, single-aisle planes now comprise about 75% of all commercial aircraft, according to Investec.

In trading its narrow-body business for the marine industry, Rolls-Royce may have crimped margins. Civil aerospace generated an operating margin of 12.7% in 2013, compared with 11.4% for marine.

The shift also means Rolls-Royce’s civil-aircraft business, which generates the bulk of profits, has become less diversified. Two-thirds of engine deliveries last year were tied to one product, the Trent 700, for one airplane, the A330, and to one company, Airbus, notes Edison Group. Rolls-Royce has become more dependent on a smaller pool of customers, leaving it more exposed to large contract wins or losses.

Granted, Rolls-Royce has a healthy order backlog in widebody engines and remains adept at selling aftermarket services packages. But it needs a credible plan to gain scale, either in the marine sector or by returning to narrow-body aircraft. Otherwise, Rolls-Royce could just keep drifting lower.

WSJ : Canadian Pacific Approached CSX About Merger Deal

Canadian Pacific Approached CSX About Merger Deal
CSX Rebuffed Approach, Which Came in Past Week

Canadian Pacific Railway Ltd. CP.T -4.69% has approached CSX Corp. CSX -2.57% about a combination that would unite two of North America’s largest railroad operators, according to people briefed on the matter.

The overture, made in the past week, was rebuffed, the people said, and it is unclear whether the Canadian company has shelved the effort.

A deal between the two companies would give rise to an industry giant with a combined current market value of some $62 billion and, potentially, an increased ability to take advantage of the North American energy boom.

WSJ : OPEC Members’ Rift Deepens Amid Falling Oil PricesOPEC Members’ Rift Deepe

OPEC Members’ Rift Deepens Amid Falling Oil PricesOPEC Members’ Rift Deepens as Oil Falls
Rival Producers Moving in Sharply Different DirectionsRival Producers Moving in Sharply Different Directions

A rift between OPEC members deepened over the weekend, as rival producers in the cartel moved in sharply different directions amid recently falling oil prices.

Venezuela, which has been one of the most outspoken proponents of a production cut by the Organization of the Petroleum Exporting Countries, called over the weekend for an emergency meeting of the group of some of the world’s biggest oil producers to respond to falling prices. But Kuwait said Sunday OPEC was unlikely to move to rein in output.

Saudi Arabia, meanwhile, appeared to deepen its recent move to defend its own market share at the expense of other members by aggressively courting customers in Europe. Over the weekend, traders said Saudi Arabia was now asking for stronger commitments from some of its buyers in Europe, a move that would lock in those customers, including any new ones it would gain with recent price reductions.

The moves and countermoves are the latest in a time of particular discord in the group. The organization was founded to leverage members’ collective output to help influence global prices. In recent periods of low prices, Saudi Arabia—the group’s biggest producer and de facto leader—has managed to cobble together some level of consensus among members to throttle back on output to bolster prices.

But even modest cooperation between many members has broken down, and Saudi Arabia, in particular, has moved to act on its own. While it cut output earlier this summer, other members didn’t go along. Since then, it has dropped its prices, undercutting other members.

Each member has a different tolerance for lower prices. Kuwait, the United Arab Emirates and Saudi generally don’t need prices quite as high as other members—including Iran and Venezuela—to keep their budgets in the black.

Late Friday, Venezuelan Foreign Minister Rafael Ramirez, who represents Caracas in the group, called for an urgent meeting to tackle falling prices. The group’s next, regular meeting is set for late next month.

But on Sunday, Kuwait’s oil minister said there has been no invitation for such a meeting, suggesting the group would need to stomach lower prices. Kuwait’s oil minister said there was a natural floor to how low prices could fall—at about $76 to $77 per barrel—near what he said was the average production costs per barrel in Russia and the U.S.

“I don’t think there is a chance today that [OPEC] countries would reduce their production,” Ali al-Omair was quoted as saying by the official Kuwait News Agency, or KUNA. A cut in OPEC production “may not necessarily boost prices” because of high output by other producers, he said.

Last week, OPEC’s average basket of crude fell to its lowest level since December 2010, while the Brent international benchmark fell near a four-year low at one point before bouncing back to close Friday at $90.21 a barrel.

Amid the price pressure, Saudi Arabia, which can stomach lower prices than many of its OPEC colleagues, has cut its Asian prices. Traders now say Saudi Arabia is taking the unusual step of asking European buyers to commit to maximum shipments, after cutting European prices, too.

This month, state-owned Saudi Aramco stunned the rest of the OPEC by slashing its November prices to defend its market share in Asia’s growing market. At the same time, Saudi Arabia said it increased its output in September.

After cutting its November prices in Europe, Saudi Aramco is also asking refiners to commit to full, fixed deliveries in talks to renew contracts for next year, the traders say. They say the Saudi oil company had previously offered a formula allowing flexibility of more or less 10% of contracted volumes, the most commonly-used in the industry.

“They are threatening buyers” to discontinue sales if they don’t agree with the fixed deliveries, another trader said.

FT : Fiat and Chrysler’s New York listing seals radical conversion

Fiat and Chrysler’s New York listing seals radical conversion

When shares in the combined Fiat and Chrysler begin trading on Monday, it will seal the conversion of the quintessential Italian small-car company into a US-focused manufacturer powered by 4x4s and pick-up trucks.
The carmakers formally completed their merger at the weekend, but the New York listing is only the start of the challenge for Fiat Chrysler Automobiles, as it seeks to meet the ambitious five-year targets set by chief executive Sergio Marchionne in May.

FCA wants to increase global shipments by more than 50 per cent to 7m vehicles by 2018 and ring up annual sales of €132bn versus a forecast €93bn for 2014, while achieving an operating margin of around 7 per cent compared with 2013’s 4.1 per cent.
To support those aims, FCA will launch a product offensive as part of the €48bn plan, unleashing 30 new models, including new Alfa Romeos and a Maserati sport utility vehicle, as it seeks to expand in India and China – virtually from scratch.
All this at a time of uncertain global demand for cars, with the US thought to be nearing its peak, Europe stalling and Brazil – where Fiat is the market leader – firmly in reverse.
“The targets themselves are obviously extremely challenging in what’s a worsening growth market in terms of global auto demand,” says Stuart Pearson, analyst at Exane BNP Paribas.
As if the targets were not challenging enough, Fiat is carrying €9.7bn in net industrial debt and is second only to PSA Peugeot Citroën in terms of total adjusted debt to operating earnings, according to Morningstar Equity Research.
The company has ruled out a rights issue to fix its balance sheet and Mr Marchionne says the growth plan does not require additional capital, though FCA plans to sell €800m of treasury shares into the US listing. The board will discuss the capital structure later this month in a meeting at its new London headquarters.
But Mr Marchionne – who is credited with reviving both carmakers from near-death experiences – has a habit of setting outlandish targets, aiming to stretch the organisation rather than guide financial markets. The latest five-year plan follows similar projections in 2006 and 2010, neither of which were met.
Analysts said the real challenge was pushing Maserati, Jeep and Alfa into relatively untapped emerging markets from Fiat’s Italian manufacturing base. It is a particularly risky strategy for Alfa, as it seeks to compete with locally produced BMWs.
Stefano Aversa, co-president at AlixPartners, a consultancy, said: “You add the logistics costs, the working capital for all the cars on the ocean . . . It is increasingly difficult to successfully implement an export model the more you move from luxury Ferrari and Maserati to premium Jeep, and Alfa to the volume brands – Fiat and Chrysler.”
The US is also central to FCA’s strategy. The irony is that Chrysler, which was on its knees when it was rescued by Fiat after massive losses in 2008 and 2009, now contributes the bulk of profits in the wider group – thanks to the striking success of its Jeep SUVs and Ram pick-up trucks in their home US market.
SUVs, pick-up trucks and luxury vehicles account for 14 per cent of worldwide car industry sales but 70 per cent of profits, according to General Motors, Chrysler’s biggest competitor in the US market.
However, the most audacious aspect of the company’s plans for North America is its effort to revive its moribund Chrysler marque, which has suffered from years of poor quality and fierce competition in its mid-market sedan segment. The company’s business plan calls for North American sales for the brand to rise from 350,000 in 2013 to 800,000 by 2018.

(ZH) Draghi The Dictator: "Working With The Germans Is Impossible"

Draghi The Dictator: "Working With The Germans Is Impossible"

The war of words between Europe's unelected monetary-policy dictator Mario Draghi and Germany's "but it's us that pays for all this" Bundesbank has been gaining momentum since Jens Weidmann penned his Op-Ed slamming Draghi's OMT 'whatever it takes' as "too close to state financing" in 2012. A week ago, Weidmann stepped up the rhetoric by claiming ECB policy is "hostage to politics" and has lost its indepdendence - warning Draghi's dictatorial policies were leading Europe down a "dangerous path." But now, as pressure grows from the Spanish (record unemployment, record bad debt, record low yields), Italian (record unemployment, record debt-to-GDP, record low yields) and French (record unemployment, treaty-busting-deficits, record low yields) for Draghi to monetize more assets, he has struck back in Focus magazine, blasting Weidmann is "impossible" to work with because the Germans "say no to everything." Dis-union...


Weidmann (2012): "When the central banks of the euro zone purchase the sovereign bonds of individual countries, these bonds end up on the Eurosystem's balance sheet. Ultimately the taxpayers of all other countries have to take responsibility for this. In democracies, it's the parliaments that should decide on such a far-reaching collectivization of risks, and not the central banks. Europe is proud of its democratic principles; they characterize European identity. That's something else that we should bear in mind."

Weidmann (2012): "The central bank is responsible for monetary stability, while national and European politicians decide on the composition of the monetary union. It wasn't the central banks that decided which countries are allowed to join the monetary union, but rather the governments."

Weidmann (2012): "I don't take my cue from the German government's position. That's part of being independent."

Weidmann (2012): "I want to work to make sure the euro stays as strong as the deutsche mark was."

Weidmann (2014): "There is a risk of monetary policy, especially in the euro area, being held hostage by politics,"

Weidmann (2014): "These concerns are particularly acute whenever the central bank buys specifically the most risky sovereign bonds... with government and corporate borrowing costs already super low, such a policy would have limited effect. Tying fiscal policies together through ECB bond purchases is a dangerous path."

And now Draghi responds... (via Focus Magazine)

The conflict between ECB President Mario Draghiand Bundesbank President Jens Weidmann over the course of the European Central Bank is more severe than expected, and has become “almost impossible,”
The Italian ECB chief characterizes the Bundesbank president after statements from witnesses internally on a regular basis with the three German words "No to all".
According to insiders, therefore Draghi is no longer even trying to win the Germans for its programs.
Since July there was a direct contact between the two presidents of the ECB and the Bundesbank outside of the two Council meetings in early September and early October.
* *

In other words, the Germans won;t let me do what I want - so I'm going to ignore them... this leaves the Germans with few options - none of them 'good' for a European Union.

FT : German companies look overseas as home opportunities fade

German companies look overseas as home opportunities fade
By Chris Bryant in Frankfurt and Stefan Wagstyl in BerlinAuthor alerts

An employee holds a control panel as escalators are assembled at the ThyssenKrupp AG factory in Hamburg, Germany, on Tuesday, Dec. 10, 2013. ThyssenKrupp AG, Germany's biggest steelmaker, is seeking to focus on its elevator, auto-parts and marine services business after selling a plant in Alabama. Photographer: Krisztian Bocsi/Bloomberg©Bloomberg
BASF, the world’s largest chemical maker by sales, is in the middle of a big upgrade of its main production site near the river Rhine in Ludwigshafen.
But chief executive Kurt Bock says Germany’s relative share of BASF’s total investment is set to decline, in part because of comparatively lower growth expectations in Europe, but also as investment conditions are more attractive elsewhere.

This outflow of investment is causing angst among the German establishment about the country’s longer term prospects, at a time when Berlin confronts the prospect of a new recession amid a wider eurozone slowdown.
BASF is considering investing more than €1bn in a new US facility that would help the company benefit more from the shale revolution that has led to far lower gas prices in the US than in Germany.
“North America is now much more profitable than Germany. If you had told me five or 10 years ago that would happen, I would have told you: never ever,” he said. “That tells you quite a bit: in Europe we are under intense pressure to improve our productivity."
Chancellor Angela Merkel last week added her voice to calls for improvements to the German investment climate, as export and factory data in August fell to their lowest level since 2009. But, so far, her coalition government is sticking to its pledge to balance the budget in 2015, thereby ruling out any big boost in public spending.
Instead, it will focus on measures to encourage private investment. That could be a challenge as companies are struggling to find reasons to invest at home. The combined private and public investment level is languishing below the levels needed for replacement. “Germany is eating its capital,” has become a common refrain in Berlin.
The share of gross fixed capital formation in gross domestic product is just 17 per cent, well below the 21 per cent average for industrialised countries. This stores up long-term problems for Germany: an ageing domestic population must raise its productivity or face a fall in living standards as retiring baby boomers cause the workforce to shrink.
EBM-Papst, a family-owned maker of industrial fans, began a €50m expansion of its main plant in Mulfingen earlier this year. But Rainer Hundsdörfer, chief executive, is frustrated by the poor state of the main road along which the company's trucks must trundle to a nearby production site. The road has not been repaired for years.

“Companies aren’t responsible for fixing public infrastructure, that’s what we pay taxes for . . . and if [the state does not] act, then Germany will become unattractive as an investment location and companies will invest elsewhere,” he says.
As a proportion of GDP, corporate investment in machinery and equipment has declined since 2011 and remains below the pre-crisis peak. Hopes of a recovery this year have been dashed by the geopolitical upheaval and several policy shifts at home that have worried business. These include the introduction of a minimum wage and pension increases for older mothers and long-service workers.
German utilities, which traditionally are big investors, have been squeezed by competition from subsidised renewable energy and have reacted by cutting capital expenditures.
RWE, Germany’s second biggest utility by market capitalisation, expects to cut capital spending from €4.5bn last year to around €2bn annually by 2016, or what it terms “maintenance level”. Eon, Germany’s biggest utility by market capitalisation, is also slashing investment at home and focusing overseas, for example in Brazil and Turkey.
“All this has put new burdens on Germany business both right now and for the future,” Ferdinand Fitcher, of the DIW economic institute, said on Thursday.
With profits high and borrowing costs at a near-record low, German companies have embarked on a spree of transatlantic technology acquisitions, following a period when German dealmaking was relatively muted.
Siemens agreed to pay $7.6bn for Dresser-Rand to build a stronger footprint in equipment for the US oil and gas industry. SAP said it would spend $8.3bn on Concur, the US travel expense software group. ZF Friedrichshafen agreed to acquire auto parts supplier TRW for $11.7bn and Infineon, the German semiconductor group, plans to buy International Rectifier for $3bn.
There are lots of things the government should support – it’s not just the roads, but also the data networks . . . Perhaps we have a lull [in the economy] now but with innovation and creativity we can get past it.
- Rainer Hundsdörfer, chief executive, EBM-Papst
German companies have also invested in new production capacity overseas to tap better growth prospects in the US and China. Announcing a $1bn expansion of its sports-utility vehicle plant in South Carolina in March, Norbert Reithofer, BMW chief executive, revealed it would surpass Dingolfing, northeast of Munich, to become the company’s largest plant.
But while German FDI has risen in the past decade, it amounts to below 2 per cent of GDP and cannot alone explain the domestic reluctance to invest. Domestic bank deposits owned by German companies almost doubled in the decade to January 2014 to €418bn, according to European Central Bank data. Companies have sat on their cash for want of opportunities and due to the grim outlook for growth in Europe.
“My impression is that German companies are carrying out investments to modernise their plants but they are not doing big domestic capacity expansions,” said Ralph Wiechers, chief economist at the VDMA engineering association. “Without significant growth why would you expand? There is a wait-and-see mentality.”
Mr Hundsdörfer at EBM Papst doesn't believe in "spending money that you don’t have". But he says there are times when both companies and the state must invest.
“There are lots of things the government should support – it’s not just the roads, but also the data networks . . . and education is also an important area . . . Perhaps we have a lull [in the economy] now but with innovation and creativity we can get past it.”

FT : Big European groups expect boost from weak euro

Big European groups expect boost from weak euro

LONDON, ENGLAND - NOVEMBER 26: In this photo illustration Euro notes are displayed in a pyramid, on November 26, 2010 in London, England. Concerns over the Euro zone debts have caused shares to retreat today by 1.3 percent, as speculation continues over other countries seeking financial help. According to reports, a 85 billion euro (112.7 billion USD) rescue package from the EU and International Monetary Fund (IMF) will be announced for Ireland on Sunday. (Photo illustration by Dan Kitwood/Getty Images)©Getty
The biggest European companies are expected to report a boost from the weak euro as third-quarter results season kicks off.
Nearly half of all revenues made by large European listed companies – some 47 per cent – come from outside the region. For many of Europe’s multinationals, who make much of their sales in US dollars, the single currency’s fall of about 8.5 per cent against the dollar since early May will help offset tepid growth in the eurozone itself.

“A weaker euro boosts economic growth, staves off deflation fears and supports corporate profits,” said Nick Nelson, a strategist at UBS in London.
When the regional economy began to pick up from the worst of the crisis, companies faced a headwind from a strong euro. Now, the weaker euro was “central to the whole investment case”, he said.
“Euro strength didn’t make sense,” said the head of one large Spanish construction company, which makes the bulk of its earnings in North America and the UK.
Any good news in this quarter’s earnings seasons would be welcomed by investors, given weak macroeconomic data across most of the region and signs that even the eurozone’s largest economy, Germany, may be sliding into recession.
Analysts have so far downgraded their earnings forecasts for European equities for 42 months in a row, only nine months less than Japan in the early 1990s.
Analysts strike positive note amid gloom

Amid increasing gloom over the eurozone’s economic prospects, expectations for companies’ third-quarter results announcements, due over the next few weeks, are surprisingly chirpy.
Continue reading
The euro has depreciated by about 5 per cent on a trade-weighted basis since early May, when the European Central Bank first signalled its intention to adopt negative deposit rates, and many analysts forecast a more sustained decline. Barclays expects the currency to drop to $1.10 against the dollar by the end of the year, while Deutsche Bank forecasts it could fall below parity with the greenback by 2017.
Dennis Jose, a strategist at Barclays, said a 1 per cent year-on-year decline in the euro dollar rate had been consistent in the past with a 0.5 per cent increase in sales growth and a 1.2 per cent increase in average corporate earnings growth.
Given long-term contracts and currency hedges, it will take time for the change in the exchange rate to be fully reflected in profits, but the effects will start to appear from the third quarter onwards.
Given the euro’s fall has been sharpest against the dollar, companies with significant US or dollar-denominated sales such as Airbus or BASF would eventually be among the biggest beneficiaries – while low-cost airlines that buy fuel in dollars but have no dollar revenues could be among the worst affected.

>>> Texas healthcare worker who cared for Thomas Eric Duncan tests positive for

Texas healthcare worker who cared for Thomas Eric Duncan tests positive for Ebola in preliminary examination - press 
- A healthcare worker that was involved in treating the Dallas area man who contracted and died of Ebola has tested positive for the virus in a preliminary test. The worker was showing early stage symptoms on Friday night (10/10) and was immediately isolated.
- If the case is confirmed, it would be the first transmission of Ebola in the US. Further test results are expected Sunday afternoon.
- Texas health officials say that the 48 people who were being closely monitored after contact with the first Ebola patient are showing no symptoms.