TheChek News Flow

Greg Heckman launches management revamp and portfolio review at agribusiness

The new chief executive of Bunge has moved to put his stamp on the international agribusiness, announcing the exit of three senior managers and bringing in external advisers to review a portion of its portfolio.

Greg Heckman was appointed in April after serving three months as interim chief and six months as a director brought on by activist shareholders Continental Grain company and DE Shaw. He formerly ran Gavilon, a US grain trading house.

On Wednesday, Bunge announced the appointment of Mr Heckman’s former Gavilon colleague John Neppl as chief financial officer. Mr Neppl most recently served as the chief finance officer of Green Plains, a corn ethanol refiner that, like Gavilon, is headquartered in Omaha, Nebraska.

Bunge also revamped management of its flagship agribusiness unit, which buys, processes, ships and sells bulk grains and oilseeds around the world. Previously managed from regions such as South America and North America, it will now be centrally led by three executives: Raul Padilla, president of global operations; Christos Dimopoulos, president of global supply chains; and Brian Zachman, president of global risk management.

Three senior executives, including chief financial officer Thomas Boehlert, will leave the company, Bunge said.

The New York-listed company’s shares have lagged behind the US stock market in recent years, a result of operational mis-steps and slack grain markets. Under pressure from the activists, Bunge created a strategic review committee that includes Mr Heckman to explore options, such as a sale.

Mr Heckman placed options in three categories: active projects, projects in a late stage “where we’ve made a decision about what we’re going to do”, and more complex projects where there “may be a bigger strategic question”, he told analysts while reporting earnings. He said that internal and external personnel were working on active projects, and “those are the ones you’ll hear about first”.

Bunge reported a first-quarter profit because of higher soyabean crushing margins compared with a loss a year before, earning $45m, or 26 cents, a share. Losses last year reflected a $120m charge on derivative contracts used to lock in margins. Shares rose 6.6 per cent to $53.27 early on Wednesday, the biggest one-day percentage gain since January 2018.

The wholesale grain and oilseed industry has been operating in a risky environment. China’s retaliatory tariffs on US soyabeans have redirected trade of the oilseed in which Bunge is the world’s leading processor. The rapid spread of African swine fever in China could lead to the loss of up to 200m pigs, analysts have estimated, depressing demand for soya-based feed in the world’s biggest consumer.

Mr Heckman listed ASF among “a number of unprecedented factors in the market” causing “the largest decline of animal protein supplies in recent memory”. He said the situation should benefit Bunge in the long term but would not estimate the timing or magnitude of the impact.

His comments were more measured than rival oilseeds processor Archer Daniels Midland, which last month provided a positive outlook for soya crushing margins later this year as meat producers ramped up efforts to supply China. For the full year, Bunge said its agribusiness division was likely to deliver lower results compared with 2018.

US soyabean prices this week dropped to a decade low after the White House threatened to increase tariffs on Chinese goods amid tense trade negotiations, suggesting that China’s tariffs could continue.

Bunge said that soyabean processing margins for the year would depend partly on resolution of US-China trade talks. “Even if you knew the timing, you’d need to know the content of what the outcome is going to be,” Mr Heckman said.

Subprime lender’s assessment that a deal lacks prudence looks to be correct

Corporates spend millions on rebranding exercises. Any merger between companies named Non-Standard Finance and Provident Financial would require one of these. So far, however, the two sides have not agreed on much since NSF made a hostile bid in late February. On Wednesday, Provident explained why a deal with NSF lacks prudence. Frankly, that looks correct.

At first sight, combining these two UK lenders to folks with racy credit ratings looks like a rescue for NSF investors. These include prominent fund manager Neil Woodford, who is also a shareholder in Provident.

While revenues have tripled since 2016, NSF has not registered any profits after tax. That matters: retained earnings after dividends go into shareholders’ equity. Losses do the opposite. Provident has — apart from 2017 — made profits for years. It is also more than six times larger.

Partly due to its subprime loans, Provident must hold substantial common equity tier one capital (CET1) against its assets, nearly 30 per cent. But it also can accept deposits, which represents cheaper funding. All that looks pretty to NSF, which has had to raise money through equity offerings or expensive borrowing. It is not a bank, so watchdogs require no minimum amount of capital. Should it acquire Provident, that would change. NSF/Provident would need more money to cover a capital shortfall.

How much is moot. Subtracting intangibles and a dividend payment from the NSF shareholder equity puts the notional core tier one equity ratio at 16 per cent of assets. However, NSF has promised to sell a subsidiary, Loans at Home, to satisfy any competition concerns. Remove that equity and the ratio drops to less than 6 per cent. Provident has five times that proportion of CET1. On its pessimistic view, including any acquisition costs, the new group could need £130m. NSF argues that its all-share offer would raise a lot of equity, offsetting any capital shortfall. Its shareholders would face dilution, however.

They might prefer that to waiting for a turnround. The Provident side is right to brand the deal a loser.

Case points to potential path for countering growing threat of bacteria resistant to antibiotics

Researchers said they treated a 15-year-old patient’s antibiotic-resistant infection with the help of genetically engineered viruses. The effort points to a potential path for countering the growing threat of bacteria resistant to antibiotics.

The researchers, in the U.S. and the United Kingdom, saved the patient with the help of bacteria-destroying viruses known as bacteriophages that occur naturally and are the most populous organisms on the planet. Using genetic engineering, the researchers tweaked some of the phages to specifically fight the patient’s infection.

The effort, published Wednesday in the journal Nature Medicine, marked the first reported use of genetically engineered phages to treat a patient, researchers said. The success suggests promise for using engineered phages more broadly against antibiotic-resistant bacteria.

“We have to be cautiously optimistic about clinically individual cases,” said Helen Spencer, a pediatric respiratory consultant at Great Ormond Street Hospital for Children in London who treated the patient. “But I think in terms of globally what we’re facing in terms of antibiotic resistance, this could be a really important therapy.”

Antibiotic resistance is a growing threat across the globe, as overuse of antibiotics in hospitals and in farm animals has made some bacteria resistant and increasingly dangerous, said Helen Boucher, an infectious-disease specialist at Tufts Medical Center in Boston. About 23,000 people die from drug-resistant infections in the U.S. each year, according to the Centers for Disease Control and Prevention, and drug-resistant infections could kill as many as 10 million people a year by 2050.

Clinicians first started experimenting with phage therapy to treat bacterial infections as early as 1919, though it fell out of practice in the West after the widespread introduction of antibiotics. The therapy has remained in use in some countries in Eastern Europe and the former Soviet Union.

Now researchers in Western countries are once again exploring phage therapy as bacteria become increasingly resistant to classic antibiotics and new antibiotics are slow to enter the market. Academic institutions, biotech companies and clinical trials with a focus on bacteriophages are popping up across the U.S., and a handful of patients have been successfully treated with the experimental therapy.

Natural Born Killers

Here’s how the viruses called bacteriophages attack and kill bacteria such as E. coli and P. aeruginosa that can cause deadly infections.

The 15-year old patient, who had cystic fibrosis, had been taking antibiotics for eight years to fight off two persistent strains of bacteria. After a lung transplant for her cystic fibrosis, however, the infection spread and stopped responding to the antibiotics. As a result, the girl’s liver lost function; she stopped eating and drinking and had visible lesions on her skin.

Looking for new options to treat the patient, Dr. Spencer turned to phage therapy. She partnered with a team at the University of Pittsburgh that had amassed a library of over 15,000 different phages from across the world in order to find one that would attack the patient’s infections.

The team focused their search on 1,800 phages both that matched the type of bacteria of the patient’s infections and whose genetic makeup was known. They found three phages—from Pittsburgh, Providence, R.I., and Durban, South Africa—but only one of the matching phages would actually eliminate the infection.

That is because, while some phages reproduce within their bacterial hosts and then bust them open, others replicate with the bacteria without harming it, according to Robert Schooley, a professor of medicine in the division of infectious diseases at the University of California, San Diego and a senior author on the case.

The researchers used genetic engineering to remove a gene that prevents the phages from killing the bacteria, turning them into bacteria destroyers, said Graham Hatfull, a professor of biological sciences at the University of Pittsburgh and a senior author on the paper.

Dr. Spencer then administered the three-phage cocktail to the patient—both intravenously and directly applied to her skin—in addition to a few antibiotics.

The patient healed gradually over six months. The patient is still actively receiving both antibiotic and phage treatment to stave off the infection while otherwise living a relatively normal life, according to Dr. Spencer.

Researchers say the case is one of the first instances of using phages to combat mycobacteria, a type of bacteria that includes strains responsible for tuberculosis and leprosy. As a result, the case suggests a potential new way for treating drug-resistant tuberculosis.

The role that phages seem to play in tackling the patient’s infection is unclear. It is uncertain whether the phages themselves are destroying the bacteria or if the phages are making the bacteria susceptible to the patient’s antibiotics, Dr. Spencer said.

Several clinical trials using phages are planned, though because phages are so specific in choosing their targets, researchers are unsure if they can be general enough to work on a large scale. Phages also cause bacteria to rapidly develop resistance and could potentially run into similar problems as antibiotics.

Potential workarounds, researchers say, are genetically engineering the viruses, giving patients multiple phages or using them in combination with antibiotics.

Private-wealth clients bought debt in 2015 that would convert into stock at a discount to the eventual IPO price. The discount now stands at 40%

Wealthy clients of Goldman Sachs Group Inc. GS -0.49% will emerge with deeply discounted stakes in Uber Technologies Inc. when it goes public this week, placing them among the biggest winners in a deal full of them.

In 2015, Uber raised $1.6 billion from Goldman’s private-wealth clients by selling them debt that would convert into stock at a discount to the eventual IPO price. The discount grew the longer Uber stayed private and now stands at 40%, including accrued interest, according to investor documents and people familiar with the matter.

That will translate into a 3.4% stake in Uber, worth $2.7 billion at the middle of the expected IPO price range—a $1 billion paper profit in 4½ years.

Uber will mint plenty of millionaires when it debuts on Friday. Employees, early Silicon Valley backers and mega-investor SoftBank are all poised for big gains on their stakes in the money-losing company. Goldman itself has a small stake that will be worth about $500 million at the IPO, courtesy of its investment bankers’ unusual side hustle as venture capitalists.

That investment is distinct from the convertible bonds, which Goldman bought on behalf of private-bank clients. Goldman’s partners have tens of millions of dollars invested alongside them. The fund’s name, DRT Investors, is rumored internally to stand for “Don’t Ride Taxis,” a plug for Uber’s business model.

Goldman earned a $65 million fee for placing the bonds, which were marketed as a sort of apology to clients following a canceled offering of private Facebook Inc. shares in 2012, according to people familiar with the matter. In that deal, Goldman’s overseas clients and partners got pre-IPO shares of the social network but those in the U.S. were cut out.

The Uber bonds initially earned interest of 2.5%, rising to 12.5% this year and giving their holders extra rights if the company dragged its heels on an IPO past next year, according to investor documents.

Goldman can’t sell its Uber shares for six months and both the firm and the individual investors are barred from entering into hedges or any other transactions to lock in their gains in the meantime, according to people familiar with the terms.

A hedge between two large investors in rival ride-sharing app Lyft Inc. is thought to have contributed to Lyft’s share-price slide following its March debut. Uber re-examined its own agreements with investors as it prepared to go public, The Wall Street Journal has reported.

Goldman’s multiple roles could put the bank in a tricky spot, especially if demand for the shares is soft or early trading is bumpy.

Along with lead underwriter Morgan Stanley , it is responsible for helping to set the price at which Uber shares will list, balancing the company’s need to raise cash with a desire to have the shares trade up. (Morgan Stanley also manages a client fund that owns Uber shares.)

The gains will come at a good time for Goldman, which is looking to raise more client money for alternative investing funds across real estate, private equity and credit.