Seven West Media takeover considered by New Corp
News Corp [NASDAQ: NWS] has received several pitches from bankers to acquire Seven West Media [ASX: SWM], the Australian Financial Review reported. According to the report, undisclosed sources said that the banks' approaches were unsolicited and they were not representing News, but the company seriously considered the proposals. News has decided against a deal for the time being due to concerns related to Seven’s debt burden, the paper said.
The paper noted that News is eager to pursue free-to-air television assets due to their potential to add to its publishing, digital, and subscription TV assets.
The report noted that Seven’s debt levels are believed to have deterred News, but the item cited undisclosed sources as saying that it could reconsider its position should Seven continue to reduce its debt and cut costs.
News and Seven would not comment, the paper said.
Seven has a market capitalisation of AUD 1.09bn (USD 822m).
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European groups at risk of US sanctions over Iran
Trump’s national security adviser wants to make sure Tehran ‘never gets nuclear weapons’
European companies risk being hit by US sanctions if they defy Donald Trump’s calls for commercial links with Iran to be severed, the White House national security adviser warned on Sunday.
John Bolton said he expected Europe ultimately to go along with the US after the president’s decision to re-impose sanctions on Iran following his withdrawal from the 2015 nuclear deal.
But asked on CNN whether EU companies could be hit by the US as a consequence of doing business in the Islamic republic, Mr Bolton said: “The answer is it’s possible”, adding that it depended on the conduct of their governments.
“The president said in his statement on Tuesday that countries that continue to deal with Iran could face US sanctions,” he said separately on ABC. Europeans were going to face effective US sanctions “because much of what they would like to sell to Iran involves US technology, for which the licences will not be available.”
Mr Trump’s decision on the nuclear accord last week has broadened a rift with America’s EU allies, coming on top of a festering trade dispute. It has triggered angry responses from top EU politicians who have vowed to keep the agreement alive and protect the interests of their companies.
Bruno Le Maire, the French finance minister, told Europe-1 radio last week that Europe should not accept the status of “vassals” to the US. Angela Merkel, the German chancellor, said Mr Trump’s decision to pull out of the deal made the situation in the Middle East even more difficult.
In a call with Iranian president Hassan Rouhani, UK prime minister Theresa May reiterated the UK’s position that it and its European partners remained firmly committed to ensuring the deal was upheld, and welcomed Mr Rouhani’s commitment to abide by its terms,
While they publicly denounce the US decision, European governments are planning to appeal for exemptions for key companies operating in Iran. Sanctions experts stressed that for all the focus on the EU response, the bigger question was how major Asian powers react to the US sanctions given the volume of trade between them and Iran. In particular, the vacuum left by major western multinationals will open up opportunities for Chinese investors and businesses less concerned about the reach of US sanctions.
European executives have acknowledged in private that it would be hard for any multinational company with businesses and financial ties to the US to remain active in Iran given the scope of US sanctions.
Mr Bolton asked in his ABC interview: “Why would any business, why would the shareholders of any business want to do business with the world’s central banker of international terrorism?”
But he also attempted to play down the scale of the transatlantic rift. “I think we’ll work with all of the Europeans,” he said. “We all share the common objective of making sure Iran never gets nuclear weapons.”
Tensions with Tehran have increased in the region in the wake of Mr Trump’s decision to pull the US out of the Iran accord, with direct hostilities taking place between Iran and Israel.
Israeli military facilities were targeted by rocket fire from within Syria by Iran’s elite Quds Force, according to Israeli officials. Israel hit back by targeting almost all of Iran’s military sites in Syria, claiming to have hit dozens of targets in at least seven locations.
Analysts in both countries warned that the subsequent pause in hostilities was unlikely to last long. The Israeli army sounded the all clear in the occupied Golan Heights, which was hit by 20 Iranian-fired rockets last week. The rockets missed their targets — Israeli military posts — but Ali Akbar Velayati, a senior adviser to Iran’s supreme leader, said at the weekend the exchanges had shown that Israel was “totally vulnerable”.
Weekly Performance
Dow +2,34% S&P +2,41% Nasdaq +2,68% Russell Mexico -0,56% Brazil +2,53% Nikkei +1,27% Hang Seng +3,99% CSI +2,60% Shanghai +2,34% Shenzen +2,02% EuroStoxx +0,42% FTSE +2,96% CAC +0,47% Dax +1,42% Ibex +1,66% MIB -0,72% SMI +1,71%
US stock indices moved out to the best levels since March this week, after inflation readings remained relatively benign, keeping a lid on Treasury yields and lingering inflationary concerns. Regardless, WTI crude finished the week with a $70 handle for the first time since 2015 after Trump made good on his campaign promise to pull out of the Iran nuclear deal. The Greenback continued to melt up causing consternation for several emerging market currencies and resulted in various central bank interventions. The BOE met and, as expected, ratcheted back expectations for further hikes this year. Brexit, NAFTA, and China trade negotiations wore on with little concrete progress to speak of. North American trading partners met in D.C. and remained hopeful that some kind of agreement can be reached by next week's self-imposed deadline, with some speculation that negotiators might shift toward a ‘skinny’ NAFTA deal as a starting point. For the week the S&P500 rose 2.4%, the DJIA added 2.3%, and the Nasdaq gained 2.7%. In corporate news this week, Walmart confirmed an agreement to acquire 77% of India’s Flipkart for $16B in order to accelerate its move into commerce in South Asia. Nestle and Starbucks announced a $7.2B partnership to market, sell, and distribute Starbucks’ coffee brands, excluding the ready-to-drink products. AthenaHealth received an unsolicited $160/share cash offer from holder Elliott Management, who see promise for the company in the healthcare IT industry. Nvidia posted a beat on revenue and earnings in its quarterly report, but warned investors that their cryptocurrency-related chip sales will be reduced substantially this quarter. Disney earnings also exceeded top and bottom line estimates thanks to a slew of blockbusters that drove 21% rev growth in its studio division. Wendy's and Papa John’s lost ground following disappointing results once again.
Macro :
- Trump Said to Propose 20% Tariff on Imported Cars: WSJ
- Trump Presents Drug-Pricing Proposal: TOPLive Key Takeaways
- Drug-Pricing Overhang May Remain Into 2019, Credit Suisse Says
- North Korea Sets Date for Shutting Down Its Nuclear Test Site
- Germany Expects Difficult Energy Talks with Russia, Ukraine
Keep an eye on :
- AENA SM : London Luton Airport Staff Vote Strike, Warns Holiday Disruption
- AIR FP : SpaceX Likely to Build 30 to 40 Rocket Cores Over 5 Years: Musk
- AF FP : Air France-KLM to Stay Merged, Board Member Says: Nieuwsweekend
- BAYN GY : Bayer/Monsanto Syngergies Cut by Divestments, Dietsch Tells BZ
- BP/ LN ; BP CEO: U.S. Sanctions on Iran Could Cut Oil Supply by 1m B/D
- CVG US : Convergys Is Said in Talks With Several Potential Buyers: WSJ
- DIS US : Disney: ‘Avengers: Infinity War’ Globally Collects $1.61 Bln
- IGY GY : Innogy: Still Open Questions on Job Security in RWE-EON Deal
- LHA GY : Brussels Airlines Says There Is No Plan to Cut 200 Jobs
- LUX IM : Luxottica Exits Italy Industry Lobby Ahead of Merger: Repubblica
- MTC LN : Mothercare Is Said Planning to Announce Measures Next Week: Sky
- UG FP : PSA’s Opel Suspends Voluntary Redundancies: Reuters
- QTA CN : Quaterra could be targeted as copper prices rise, COO says (MicroCap)
- SAN SM : Santander Is Said to Be Planning U.K. Digital Bank: Telegraph
- SGO FP : Haelg Sees Saint-Gobain Selling Sika Stake After 2 Years: SamW
- SIE FP : Siemens Says No Plans to Sell Shares in Digital Factory Unit
- SIK SW : Haelg Sees Saint-Gobain Selling Sika Stake After 2 Years: SamW
- TELIA SS : Sweden Should Sell Stakes in SBAB and Telia, Moderates Tell TT
- TEVA IT : Perrigo Won’t Launch Generic of Teva’s ProAir in 4Q --> TEVA +1,6% PRGO -2,6%
- FP FP : Total Signs Agreement to Develop Natural-Gas Resources in Oman
- FP FP : Zanganeh: Total Hasn’t Commented on Leaving Iran Project: IRNA
- VIV FP : Bollore Now Owns More Than 24% of Vivendi: Reuters
- VOD LN : Moody’s Weighs Vodafone Downgrade
- WPP LN : *EX-AOL CEO ARMSTRONG IS SAID CONSIDERED FOR WPP CEO: FT
From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: 05/12/18 14:55:59
Subject: WSJ : Trump Targets Foreign Auto Makers for Not Building Enough in U.S.Trump Targets Foreign Auto Makers for Not Building Enough in U.S.In meeting with industry officials, president proposes 20% tariff and tougher emission rules on vehicle importsPresident Donald Trump proposed to executives from the world’s biggest auto makers Friday imposing a 20% tariff on vehicles brought into the U.S. and also subjecting imports to tougher emissions standards than domestic vehicles, according to people familiar with the session.During a tense meeting at the White House that was billed as a discussion of U.S. auto-emissions standards, Mr. Trump brought up the issue of trade and targeted European auto makers for not building more vehicles in the U.S., according to the people briefed on the meeting. He then proposed a 20% tariff on imported cars, which he also suggested would be subject to Obama-era emissions regulations, the people said.The president’s comments added to the list of Washington policy changes the auto makers are now processing. The administration is considering new emissions standards that could clash with those in California and is in the midst of negotiating a rewrite of North American Free Trade Agreement rules that govern which cars and auto parts can be traded within the bloc without incurring duties.A spokeswoman for U.S. trade representative Robert Lighthizer referred questions about the matter to the White House, which didn’t respond to a request for comment.Industry officials were guarded in their reaction. “We thank President Trump for inviting us to the White House to discuss the automotive sector. He is passionate about our industry and we appreciate his interest and shared commitment to American jobs and the economy,” said John Bozzella and Mitch Bainwol, the heads of the Association of Global Automakers and the Alliance of Automobile Manufacturers, respectively, in a joint statement.Mr. Trump has rattled car executives dating back to his presidential campaign, questioning their commitments to U.S. jobs and threatening stiff border taxes on Mexican imports. Auto makers have responded by highlighting U.S. commitments and, in some cases, changed foreign investment plans. Mr. Trump has touted industry announcements, even some that were long-planned and not necessarily responses to his criticisms.Mr. Trump has repeatedly singled out autos—a major part of U.S. trade—in warnings about potentially imposing tariffs. This year he said cars from the European Union could face tariffs if the EU retaliates against U.S. duties on steel and aluminum imports. Trade experts say it would be difficult to enact extra tariffs on car imports without violating World Trade Organization rules.Under WTO agreements, cars imported to the U.S. are subject to 2.5% tariffs, with trucks subject to 25% tariffs, unless the U.S. has a free-trade agreement with the country exporting the vehicles.During the Friday meeting, which was closed to reporters except for opening statements, administration officials said they would work with California on the emissions issue as the administration moves to ease Obama-era federal rules. The companies welcomed that message, as they are hoping to avoid a dual system that included a national standard and a California standard.The state has an Environmental Protection Agency waiver allowing it to set its own standards. Many other states follow California’s lead, a coalition that makes up a sizable portion of the U.S. car market.Mr. Trump began the meeting by threatening litigation against California, but in an about-face, later in the meeting said EPA Administrator Scott Pruitt and Transportation Secretary Elaine Chao would be tasked with striking a deal with California.One person with knowledge of the meeting said the Big Three Detroit auto makers stayed behind at the end of the session after the foreign auto makers left. It was unclear what was discussed.At the beginning of the meeting, the president urged the companies to build more cars in the U.S., saying they should “build them here and ship them overseas.” He singled out Sergio Marchionne, the chairman and CEO of Fiat Chrysler Automobiles NV, for praise and lauded the company’s plans to move a facility to Michigan from Mexico.“That’s what we like,” Mr. Trump said. “Right now, he’s my favorite man in the room.”He also credited the law overhauling the U.S. tax code that he signed last year for increasing auto manufacturing in the U.S.On the emissions issue, auto makers say the current standards for their vehicles are too rigorous and don’t reflect consumer demand for fuel-thirsty trucks and sport-utility vehicles that now eclipse 60% of U.S. sales. But they have voiced concern that the rollback being pushed by the White House is so extensive that it will cause more problems than it seeks to solve.“The administration will soon issue a range of proposals for future fuel economy and greenhouse gas regulations, and we look forward to reviewing their notice of rulemaking and providing comments along with other stakeholders,” Messrs. Bainwol and Bozzella said in their statement. “We also appreciate the president’s openness to a discussion with California on an expedited basis.”Separately, Mr. Trump during the opening again assailed Nafta, and the subsequent discussions with car executives were expected to provide an opportunity for vehicle manufacturers to sound out the president on proposed changes to the agreement’s auto rules.The U.S. now wants vehicles and significant components that move across the Nafta region to have at least 75% North American content to avoid duties when crossing borders, down from a previous proposal of 85%. The current trade pact sets the so-called rules-of-origin threshold at 62.5%. The Trump administration also has dropped a previous suggestion that vehicles be made up of 50% U.S. content to pass through borders duty free.Detroit’s auto makers and other vehicle manufacturers have moved significant amounts of production to Mexico, and had grown concerned that drastic changes to Nafta would upset their business plans and potentially force higher prices on consumers.According to Mr. Bozzella’s group, international auto makers built more than 5.1 million cars and trucks in the U.S. in 2017, just under half of all light-duty vehicle production nationwide.
Chinese Firm Weighs Takeover of Portuguese Utility, Likely Drawing U.S. Eyes
China Three Gorges plans $10.8 billion tender offer for 77% of EDP it doesn’t already own, but faces potential regulatory hurdles
China Three Gorges Corp. late Friday said it plans to launch a €9.07 billion ($10.8 billion) offer to acquire the almost 77% it doesn’t already own of Portugal’s main energy utility, a bold move to expand further into Europe’s power sector that will likely attract heavy scrutiny from the U.S. and other governments in the West.
By consolidating its ownership of Energias de Portugal SA, EDPFY 12.01% or EDP, China Three Gorges, or CTG, would gain full control of Portugal’s largest electricity producer, distributor and supplier. But it also would offer the Chinese state-owned energy company a bigger platform to gain exposure to EDP’s power operations in several other countries in Europe, including Spain, France, Italy and the U.K. In the Americas, the Lisbon-based company is present in Brazil, Mexico and in the U.S., where it operates wind farms across much of that country.
As one of the world’s largest sources of greenhouse gases, China has aggressively pushed the construction of solar panels, wind farms and other alternative energy sources, while adopting policies designed to drive the purchase of electric vehicles in a bid to reduce pollution. CTG’s interest in acquiring EDP underscores that effort.
Last year, EDP generated operating profit of about €1.1 billion, of which about 40% originated from wind and other types of alternative energy.
CTG was formed in 1993 to oversee the construction and operation of the Three Gorges Dam, the world’s largest hydropower plant, on the Yangtze River. It first acquired a minority stake in EDP in 2011 and even then saw the investment as a way to open doors to the European utility’s hydroelectric plants in Brazil and its two million customers there.
CTG said it is offering €3.26 in cash for each EDP share it doesn’t own, or a 5% premium to EDP’s share price Friday, for a total of almost $11 billion. At that price, the deal would represent one of the biggest foreign acquisitions by a Chinese company since the $43 billion takeover last year of Swiss agro-giant Syngenta AG by China National Chemical Corp.
The premium relative to share price is relatively low. That said, winning the minimum support of shareholders holding shares representing 50% plus of the votes is helped by CTG’s being able to count its shares toward hitting that threshold to carry out the bid. The premium is a more attractive 17.9% over the adjusted six-month volume weighted average share price of EDP.
Still the biggest challenge CTG could face in completing the deal may come from regulators in the U.S. and the European Union, which need to approve the proposal and are more closely scrutinizing acquisitions by foreigners of assets in sectors such as energy infrastructure, defense, technology and telecommunications to guard against security breaches.
The Committee on Foreign Investment in the U.S., a multiagency panel tasked with screening foreign investments on national-security grounds, is required to rule on the proposed deal since EDP operates wind farms in that country. The U.S. government has blocked a number of Asian-led deals on CFIUS’s recommendation, most recently in March when President Donald Trump rejected an attempt by then Singapore-based Broadcom Ltd. to acquire rival chip maker Qualcomm Inc. for $117 billion.
A simmering trade war between China and the U.S. could also complicate matters for CTG in winning regulatory approval in the U.S.
Other required approvals include the Portuguese government and either Portugal’s antitrust regulator or the European Commission, the EU’s executive body.
CTG has tried to ease any concerns that the Portuguese may have about losing control of the country’s main utility. “We are…committed to preserving EDP’s Portuguese identity, with headquarters in Lisbon…as well as [maintaining] the highest standards of corporate governance,” Lu Chun, CTG’s chairman said in a statement.
Chinese ownership of major energy infrastructure isn’t new in Europe. China Investment Corp. owns a stake in the U.K. gas-distribution business of National Grid PLC and China General Nuclear Power Corp. is helping to finance construction of the nuclear power station at Hinkley Point in southwest England.
Still, the European Commission has signaled that it will look more closely at the purchase of energy infrastructure in Europe among other assets by foreign, state-owned companies.
“It is a political responsibility to know what is going on in own backyard so that we can protect our collective security if needed,” European Commission President Jean-Claude Juncker said in September.
A Late-Cycle Contrarian Play: Buy British
The major stock benchmarks—European, American, and others—haven’t exactly hit it out of the park this year. In fact, they’ve been whiffing a lot thanks in part to investor fears that it’s late in the recovery, with the nine-year-old U.S. expansion ranking as the second longest in U.S. history.
Investors with such worries ought to consider a broad bet on United Kingdom stocks, say Bank of America Merrill Lynch strategists. The U.K.’s FTSE 100 works as a “later-cycle trade given its heavy weight in commodities and defensives,” writes the BofA ML team. They say they’re closing out their bet on European health-care stocks and dividend payers and switching into U.K. equities. (Read more about an options play on rising European stocks.)
Commodities producers tend to outperform when an expansion gets on in years, and the FTSE has plenty of them. Oil and gas companies such as BP (ticker: BP.UK) make up 16% of the index, while basic-resources plays such as miner BHP Billiton (BLT.UK) account for 8%. As for playing defense, 21% of the equity index’s weighting goes to food and beverage companies, telecoms, health care, and utilities—typically resilient sectors.
The BofA ML strategists’ bet on Britain is contrarian, and they like it that way. “We think the current entry point is attractive from a sentiment perspective,” write James Barty, Ronan Carr, and Jack Iacovou. U.K. equity funds have seen huge outflows over the past two years, and BofA ML’s March survey of fund managers showed allocations to British stocks at an all-time low, the strategists point out. April’s edition showed an improvement, and that could indicate attitudes are “turning the corner,” they say.
The outflows followed the U.K.’s June 2016 vote in favor of Brexit, or leaving the European Union. The departure, due to officially take place in March, has led Allianz strategists to caution that the U.K. is “set to endure a significant period of economic uncertainty and weakness.” Many strategists, if not most, have issued similar warnings.
But BofA ML emphasizes that the FTSE is one of the only major stock benchmarks offering a dividend yield above 4%. They also stress that a weakened pound should continue to help the index.
The weakened pound has been providing a boost because the index’s multinational companies generate about 70% of their revenue in foreign currencies, getting a lift when sales are switched into sterling. The pound recently changed hands at $1.36, down 9% against the dollar from its pre-Brexit-vote level around $1.50. “Further dollar gains, as our FX strategists forecast, should underpin additional earnings momentum and outperformance,” BofA ML says.
The FTSE 100 is up 4% over the past 12 months, lagging the S&P 500’s gain of 12%, but topping the Stoxx Europe 600’s drop of 1%. The British blue-chip barometer trades at 14 times forward-year estimated earnings, below the S&P’s multiple of 17 and the Stoxx 600’s price/earnings ratio of 15.
The most popular U.S.-listed exchange-traded fund for U.K. stocks is the iShares MSCI United Kingdom (EWU). The MSCI U.K. index is “very similar” to the FTSE 100, say BofA ML strategists. Competing ETFs include the First Trust United Kingdom AlphaDEX fund (FKU) and the iShares Currency Hedged MSCI United Kingdom (HEWU).
It’s late innings for the global expansion, not game over. “Clearly we are later cycle, but that does not mean we are at the end of the cycle, and the difference is crucial for investors,” they say.
Barrons weekend summary: positive features on KR, ANET
* Cover story: The growing wave of share buybacks is a good reason for investors to be in stocks at this time; Buybacks offer investors an effective yield of about 3%, which when combined with the 1.9% current dividend yield, provides nearly 5%—which holds up well against alternatives.
* Feature: 1) Positive on KR: Despite AMZN’s move into the grocery sector, Kroger has gained market share in recent years, and remains a top-three player in almost all its market; Consumers tend to prefer a supermarket to other formats, such as grocery delivery; 2) More oil-price increases could be on the horizon as additional Trump administration sanctions on Iran curtail its ability to supply markets, while problems in Venezuela could mean further cuts in production there; 3) Positive on T, XOM, PG, KMB, KO, ED, CAH, LEG, CVX, TGT, FRT, PEP: These 12 stocks have dividend yields of at least 3.3%, well above the S&P 500 average of about 2%, and because many have been beaten down, some could be attractive value plays; 3) Story looks at hedge fund manager Whitney Tilson’s Kase Learning, an educational company that teaches people who to be better investors; 4) Positive on ANET: Company is entering CSCO’s dominant franchise: switches that connect computers on corporate networks, and its success or failure could determine whether its pricey shares continue to rise.
* Tech Trader: Positive on ANET, Innovium: The startups are set to disrupt the dominance of CSCO and AVGO in networking equipment and the chips that power them; As more corporations connect to cloud-computing data centers, they will look to move past decades-old technologies, benefiting Arista and Innovium.
* Trader: Volatility is dormant, not dead, says Andrew Slimmon of Morgan Stanley Investment Management, and there is a good chance the S&P 500 will finish roughly flat after seeing large gains; Amid the growth of computer-generated trading, investors are almost guaranteed to see a short-term response to a “death cross” when one finally occurs; Cautious on SEAS: With 12 parks in the U.S., the company has a “fundamentally attractive set of assets,” but has yet to get past bad publicity related to allegations of poor treatment of whales.
* Profile: Jason Brady is manager of the Thornburg Limited Term Income fund, which is structured as a laddered portfolio, holds bonds to maturity, and reinvests them back into the portfolio (top 10 sectors: corporate bonds, asset-backed securities, Treasuries, collateralized mortgage obligations, cash and equivalents, commercial MBS, government agency, municipal bonds, mortgage pass through, foreign treasuries).
* Interview: Chuck Clough and Vince Lorusso of the Clough Global Long/Short fund, “an old fashioned fundamental research asset manager with a global perspective,” make the case for shorting tech and buying India.
* Follow-Up: California’s rule that developers must install solar panels on new residential buildings won’t do much for manufacturers, many of which are overseas, but will boost the installation and development industry.
* European Trader: Investors worried about the performance of major European and American stock benchmarks should consider a broad bet on U.K. stocks, say Bank of America Merrill Lynch strategists ( Positive on BP, BBL, FKU, HEWU).
* Emerging Markets: Investors in China will soon be able move past tech giants BABA, Tencent Holdings, and BIDU as half-a-dozen multibillion-dollar IPOs from the country’s tech sector launch this year—but rewards won’t come without risk.
* Commodities: Lumber prices have risen by more than 300% this year to reach their highest level on record amid tight supplies, but analysts say the trend isn’t likely to last, and a 50% drop could be on the horizon.
* Streetwise: Recent revelations about corporate payments to Donald Trump’s personal attorney, Steven Cohen, underscore that current campaign-finance disclosure laws aren’t enough to ensure good behavior.