TheChek News Flow

Negotiations have broken down because of valuation, but they could be revived

General Electric Co.’s GE -0.30% Baker Hughes recently held takeover talks with energy-services company Subsea 7 SA, SUBCY 1.24% according to people familiar with the matter.

Talks between the two companies recently broke down over price, the people said. It is possible that the companies could reignite talks, one of the people said.

As of Tuesday, U.K.-based Subsea 7 had a market value of $5.4 billion. The company is a construction-and-services contractor to the offshore energy industry. Year to date, its stock price is up nearly 30%.

Baker Hughes—officially known as Baker Hughes, a GE Company—was formed in July when General Electric Co closed a deal to combine its oil-and-gas business with Baker Hughes Inc. The company, which has a $40 billion market value, is 62.5% owned by GE and 37.5% owned by Baker Hughes shareholders.

Earlier this year, Subsea 7 made a bid for the struggling operations of EMAS Chiyoda Subsea Ltd., whose fleet of ships puts together offshore-drilling projects, under a proposal filed with a U.S. Bankruptcy Court.

The oilfield-services space has been consolidating as boards of directors have identified a need for greater scale to advance. The industry has been routed since 2014 as oil prices fell from over $100 a barrel to less than $30.

The industry shed tens of thousands of jobs during the slump and was forced to accept pricing cuts—sometimes more than 50%—from its customers. More than 200 oil-field-service companies went bankrupt.

Meanwhile, on Monday, The Wall Street Journal reported that offshore energy company Helix Energy Solutions Group Inc. is exploring a sale. Baker Hughes, prior to merging with GE’s oil-and-gas business, had agreed to merge with service company Halliburton Co. , but that deal later fell apart.

The Journal reported in August that Dover Corp. is exploring strategic options for most of its energy business, including a sale, merger or spinoff of the business, which makes industrial energy equipment.

Paper and forest products company Mondi has warned that full year profits will be below expectations, blaming cost pressures and adverse currency movements.

In a trading update on Wednesday, the FTSE 100 paper and packaging company said it expected a strong final quarter with higher average selling prices. But it warned that “continuing cost pressures and negative currency impacts are expected to result in an underlying performance for the year modestly below market expectations”.

The company which was spun out of mining conglomerate Anglo-American and is also listed on the Johannesburg stock exchange, said third quarter operating profit was 8 per cent higher at €245m, with higher sales of fibre packaging and containerboard, the base product for cardboard boxes.

However it said costs for wood, energy and chemical inputs were higher while recycling paper prices, which is the raw material for much new packaging production, were 15 per cent higher than the comparable period last year.

It was also hit by adverse currency movements, with weaker Russian rouble, Turkish lira and US dollar.

In addition it said maintenance shut downs in the third quarter had reduced operating profit by €30m, and estimated the full year impact would be around €90m.

US Market Closed again higher. WMT +4.5% after reaffirming its guidance for fiscal year 2018, announcing a $20 billion share repurchase program, and projecting a 40.0% increase in next year's online sales, AMZN -0.4%. Airlines outperformed with AAL& UAL raising their Q3 guidances. WTI +2.6% after Saudi Arabia's announcement that it will cut its monthly exports in November. Micron (MU) annonce a $1b offer of common stock. US After Hours, HDSN -14%, VOXX -12%, CUDA -7% following earnings/guidance, MU -4%. Asian Market, opened mixed again before turning positive, the Nikkei 225 is heading for its highest close since December 1996, thought the yen remained slightly weaker; the upward trend in equities being attributed to more solid economic and market conditions. Uncertainty around the upcoming Japan election and the ramifications of BOJ Gov Kuroda losing his position if PM Abe is not re-elected have started to circulate in the press. China MOF to offer $2B in 5 and 10-year sovereign bonds in Hong Kong, could be sold end of Oct. 1st doller bond since 2004. Sanrio (8136) -9% after cutting guidance, Kobe Steel (5406) -16% on falsified information

Nikkei +0.30% HAng Seng +0.08% CSI +0.38% Shanghai +0.22% Shenzen +0.05%

Eur$ 1.1816 CNH 6.5752 CNY 6.5807 JPY 112.36 GBP 1.3193 CHF 0.9752 RUB 58.036 WTI$ 51.13 +0.43%

S&P -0.03% EuroStoxx +0.42% FTSE +0.18% Dax +0.17% SMI +0.05% IBEX indicated +1.8%

Macro :

- Nobel Economist Thaler Says He’s Nervous About Stock Market

- Puigdemont Seeks to Suspend Independence Vote Result For Weeks

- May Won’t Say If She’d Back Brexit in Second U.K. Referendum

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