TheChek News Flow

Macro :

- G-7 Minus U.S. Affirms Paris Climate Pledge in Draft Statement

- Atlanta Fed’s GDP Nowcast Model Sees U.S. 2Q GDP at 3.7%

- Short Sellers Resist Covering as S&P 500 Retakes Record in Week

- Govt sources say US debt ceiling could be hit this summer, sooner than markets may be expecting - CNBC

- Mattis Says Trump ‘Wide Open’ on Paris Climate Accord

Keep an eye on :

- ABE SM : Atlantia signs EUR 16.3bn financing deal with pool of banks for Atlantia bid

- AIR FP : Airbus Helicopters Breaks Ground on 1st Assembly Line in China

- AMS SM : Amadeus Drops as Much as 7.8% After IAG Sets Booking Fees, Sabre, Travelport Follow Amadeus Lower on IAG Booking Charge

- AAPL US : Apple Said to Plan Dedicated Chip to Power AI on Devices

- BMW GY : BMW’s Stalled Stock Ready to Accelerate, German car maker’s heavy R&D spending should pay dividends down the line, as autonomous driving and electric cars gain popularity - Barron's

- BMW GY : BMW Plans Car-Data Link for Service Providers: Automobilwoche

- CA FP : Fnac CEO Bompard to Meet Carrefour Appointments Committee: JDD

- CPR PL : Cimpor Says Shareholders to Vote to Take Company Private

- BN FP : PepsiCo Said in Bid to Acquire Owner of Vita Coco: Reuters

- DIS US : Disney Cuts ‘Pirates’ Weekend Forecast to Mid-$70m From $80m, Disney Says ‘Pirates’ Has $62.2m in 3-Day Weekend Sales

- FNAC FP : Fnac CEO Bompard to Meet Carrefour Appointments Committee: JDD

- FNTN GY : Freenet Not Limited to German-Speaking Regions, CFO Tells BZ

- GLEN LN : Deutsche Boerse Adds Glencore to STOXX 50, Deletes Syngenta

- IAG LN : British Airways Cancels All Heathrow, Gatwick Flights Today

- JNJ US : J&J Ordered to Pay $2.1 Million Over Woman’s Vaginal-Mesh Claims

- LGEN LN : Legal & General Said to Eye GBP15b Steel Pensions Buyout: Times

- NOVN VX : Novartis’s Zykadia Gets Expanded FDA Approval for Lung Cancer

- NVDA US : SoftBank Said to Consider Raising Stake in Nvidia

- DPS US : KKR Said to Consider Bidding for Pepper Group, AFR Says

- PFV GY : Pfeiffer Vacuum Interested in ‘Larger’ Acquisitions: EamS

- PRS SM : Prisa Decides to Reject Offers for Santillana

- SAN FP : Sanofi Won’t Renew One of Two Regeneron Pacts: Bernstein

- SPM IM : Saipem Board Approves Tax Disputes Settlement

- SIE GY : Three IG Metall Reps to Leave Siemens Supervisory Board: Spiegel

- SIKA VX : Sika’s Haelg Says Jenisch Departure Won’t Change Strategy: SamW

- SITESL MM : Slim Said Preparing to Sell Minority Stake in Telesites: Reuters

- SYNN VX : Deutsche Boerse Adds Glencore to STOXX 50, Deletes Syngenta

- VALE US : Vale CEO’s Strategy Could Include M&A, New Cost-Cutting: BofAML

Trump Takes Aim at White House Leaks

Tweets are first time president has weighed in on reports over Kushner, Russia

Back on American soil from his first foreign trip, President Trump on Sunday released a flurry of Twitter posts dismissing White House leaks as “fake news,” though he has previously called for an investigation into leaks.

His remarks were the first time he had weighed in since reports surfaced that his top adviser and son-in-law, Jared Kushner, had considered setting up a secret communications line with Russia during the presidential transition to discuss the country’s military operations in Syria and other issues.

“It is my opinion that many of the leaks coming out of the White House are fabricated lies made up by the #FakeNews media,” Mr. Trump said on Twitter. “Whenever you see the words ‘sources say’ in the fake news media, and they don’t mention names….it is very possible that those sources don’t exist but are made up by fake news writers. #FakeNews is the enemy!”

Mr. Trump’s remarks were part of a broader pushback against the reports about Mr. Kushner from other members of his administration and some Republican members of Congress.

Meanwhile, the president is discussing major changes in the White House, including having lawyers vet his tweets and shaking up his top staff, as he grapples with the fallout from probes into his campaign’s dealings with Russia, according to several senior administration officials and outside advisers.

Russia has denied interfering in the U.S. election.

The president’s demand for scrutiny into the leaks, while calling them “fake news,” has been a staple of what have been conflicting responses by the White House to a damaging series of news reports about his campaign’s ties to Russia. The Trump administration has denied any collusion with Russia.

In an interview with NBC’s “Meet the Press,” Homeland Security Secretary John Kelly said, “I don’t see any big issue here relative to Jared” in reference to reports that Mr. Kushner discussed setting up secret communications with Russia.

Mr. Kelly was also asked about British Prime Minister Theresa May’s complaints that the U.S. was the source of intelligence leaks after the suicide bombing in Manchester that left 22 people dead and injured dozens more.

“It’s borderline, if not over the line of treason” to leak highly classified information from foreign intelligence, Mr. Kelly said. “I think it’s darn close to treason.”

Former Director of National Intelligence James Clapper told NBC News regarding the allegations over Mr. Kushner: “I will tell you that my dashboard warning light was clearly on, and I think that was the case with all of us in the intelligence community—very concerned about the nature of these approaches to the Russians.”

U.S. Sen. Bob Corker (R., Tenn.), chairman of the Senate Foreign Relations Committee, said in an interview Sunday that he had heard from a Kushner “associate” in the wake of the disclosures who told him, “Look, please know that he’s glad to answer any and all questions” and that “there’s nothing there that he’s wishing to hide.”

Mr. Corker defended Mr. Kushner as having been “transparent” and said it would be wrong to “prejudge” his dealings in the Trump orbit. “Let’s see what, if anything, occurred,” Mr. Corker said.

Some Democrats, including Rep. Adam Schiff (D., Calif.), the ranking Democrat on the House Intelligence Committee, are calling for a review of Mr. Kushner’s security clearance. “You have to ask, who are they hiding the conversations from?” he said in an interview with ABC News on Sunday.

But both Sen. Dick Durbin (D., Ill.) and Sen. Lindsey Graham (R., S.C.) expressed skepticism about the Kushner disclosure.

A Washington Post article last week said that Russian ambassador to the U.S. Sergey Kislyak reported to Moscow that Mr. Kushner wanted to make use of Russian diplomatic facilities to open back-channel communications.

Jamie Gorelick, a lawyer for Mr. Kushner, previously said in a statement about Mr. Kushner’s meetings with Russians: “Mr. Kushner previously volunteered to share with Congress what he knows about these meetings. He will do the same if he is contacted in connection with any other inquiry.”

Asked by Fox News if Mr. Kushner should lose his security clearance, Mr. Durbin said, “Of course not. This a rumor at this point.” He added that he was confident that the newly appointed special counsel, former FBI Director Robert Mueller, would get to the bottom of what happened.

Mr. Graham, appearing on CNN’s “State of the Union,” said, “I don’t trust this story as far as I can throw it.”

“I think it makes no sense the Russian ambassador would report back to Moscow on a channel that he most likely knows we’re monitoring,” Mr. Graham said. “The whole story line is suspicious.”

Former House Speaker Newt Gingrich, one of Mr. Trump’s most outspoken surrogates outside of the White House, said the president’s trip to the Middle East and Europe and his domestic agenda should take center stage.

“They were disciplined. They were strategic,” Mr. Gingrich said of the trip on Fox News. “I hope they’ll come home focused on jobs, health, infrastructure…and shove to one side of all of this garbage.”

Health-Care Groups Weigh Involvement in GOP Overhaul Push

Lobbies are split on whether to shape a new measure or try to kill it

U.S. Says it Has Shifted Strategy in Fight Against ISIS

Defense Secretary Jim Mattis says new goal is to kill militants in Syria and Iraq rather than force them to flee

The U.S. has switched to “annihilation tactics” against Islamic State in Iraq and Syria, surrounding fighters instead of moving them from one spot to another, the defense secretary said Sunday.

“Our strategy right now is to accelerate the campaign against ISIS. It is a threat to all civilized nations. And the bottom line is we are going to move in an accelerated and reinforced manner, throw them on their back foot,” Jim Mattis said on CBS News ’s “Face the Nation.”

Iraqi forces have launched an offensive to reclaim the last districts of Mosul still under Islamic State control, considered the most difficult stage of this battle against the militants now in its eighth month.

Army, police and elite counterterrorism units began the assault on the edges of western Mosul’s Old City before dawn on Saturday, backed by U.S.-led coalition airstrikes and artillery. Explosions from the strikes were heard starting from about 3 a.m. and continued into the afternoon.

“Our main mission is to liberate people before land,” Brig. Gen. Yahya Rasool, a spokesman for Iraq’s military, said on Saturday.

Mosul was the largest city Islamic State controlled in Iraq and the Old City is home to the ancient Grand Nouri Mosque. The mosque was where Islamic State leader Abu Bakr al-Baghdadi made his only publicly recorded appearance, announcing the creation of a caliphate, or religious empire, in July 2014.

With the entire city encircled by Iraqi forces, U.S. and Iraqi commanders are expecting militants to put up fierce resistance in the last remaining patch of the city they occupy.

“Our intention is that the foreign fighters do not survive the fight to return home to North Africa, to Europe, to America, to Asia, to Africa,” Mr. Mattis said Sunday. “We’re not going to allow them to do so. We’re going to stop them there.”

Iraq’s military said recently that Islamic State controls less than 10% of western Mosul and has fortified it with booby traps in buildings and explosives along the Old City’s narrow roads.

Iraqi troops will have to conduct the final battles on foot, foregoing armored vehicles that are too large for the streets and alleys in the area, which is still packed with some 200,000 civilians.

The United Nations is also bracing for the fight, which it expects will send most of those 200,000 people still living in the Old City fleeing for already overcrowded camps. On Friday, the U.N. said those remaining behind Islamic State lines lack clean water, medicine and food, and have been herded by the militants into explosive-laden houses to be used as human shields.

Islamic State snipers have deliberately targeted children, said Stephen O’Brien, the top U.N. humanitarian affairs official.

“International law is unambiguous,” Mr. O’Brien said. “The protection of civilian lives is a legal and moral duty that stands above all other objectives.”

Islamic State’s use of human shields and the pace of U.S. airstrikes have had devastating consequences in the fight for western Mosul.

On Thursday, the Pentagon said a U.S. military investigation concluded that 101 civilians were killed by a March 17 U.S. airstrike on a house that triggered secondary blasts of explosives placed by militants. The collapse of the building, where the civilians were sheltering, also left 36 people still missing.

Iraq’s military said Friday that it has been dropping leaflets on the Old City, instructing residents there to flee toward security forces who are prepared to transport them to safe locations and camps in anticipation of the tough fight. U.S. commanders say the fight for Mosul has seen the most intense urban combat since World War II.

It is more than 30 years since Tokyo began inflating a property and stock market bubble, as fears grow that Beijing faces a similar fate

There are few things studied as closely by the Chinese Communist party as how to avoid the fate of its Soviet counterpart. In an internal meeting after he assumed power in 2012, President Xi Jinping said no one in the Soviet Union had been “man enough” to stand up to Mikhail Gorbachev and glasnost.

But for Mr Xi another historical event from the same era may warrant more immediate attention. It is just over 30 years since Japan began inflating a property and stock market bubble whose implosion ravaged public confidence, cowed corporations and scarred an economy for decades. China’s priority today is to avoid that fate.

It is not a new concern for Beijing. In 2010, as China’s overall indebtedness was approaching 200 per cent of gross domestic product, Mr Xi, then the country’s vice-president, asked scholars at the Central Party School to research the subject, according to two Chinese academics familiar with his request. A subsequent paper outlined some of the lessons of the Japanese bubble, including the need for Beijing to raise awareness of financial risks, safeguard “economic sovereignty” and not give in to pressure to change its currency policy.

Seven years on, China’s total debt is 250 per cent of GDP and climbing, officials are trying to rein in sky-high real estate prices and the government is still grappling with the aftermath of a stock market bubble that burst in 2015. Mr Xi last month warned the country’s leaders of the need to “safeguard financial security”.

But how great is the risk of China turning Japanese? Does China, the world’s second-biggest economy in 2017, run the risk of repeating the fate of what was the world’s second-biggest economy in 1989 — Japanese-style “lost decades?”. If Japan’s fate were to befall its giant neighbour, the consequences would be devastating for the global economy. China provides 40 per cent of its annual growth. China also buys just over 20 per cent of US exports, the same percentage as Japan in the mid-1980s.

Goldman Sachs’ Naohiko Baba and other analysts suggest that there are lessons for Beijing to learn from Japan’s bubble experience, when laid out against spookily similar reference points ranging from corporate debt levels to average white-collar commuting times in China. Yet others, including Andy Rothman, an investment strategist at Matthews Asia, insist that there are far more differences than similarities. He says the only real value of the comparisons “is to calm people down”.

A short answer — and one often favoured by both foreign investors with billions of dollars at stake and the Chinese state with 1.4bn people — is that there is more to be gained from taking the bubble risk seriously than from assuming that this time it is different. China has already hit various milestones that recall Japan in its late 1980s pomp. Some, such as the non-financial corporate debt-to-GDP ratio reaching similar levels of about 155 per cent, are technical. Others are more frivolous: Yasuda Kasai, the Japanese insurance company, paying $40m for Van Gogh’s “Sunflowers” in 1987; and Chinese billionaire Liu Yiqian’s 2015 purchase of a Modigliani painting for $170m.

Similar patterns

To many observers, comparisons of bubble-like economic behaviour have always seemed within easy reach. Both countries have shown themselves capable of spasms of asset inflation with similarly boom-and-bust shaped price charts. And both have paid handsomely for overseas assets — Mitsubishi Estate paid $900m for 51 per cent of New York’s Rockefeller Center in 1989 and CC Land shelled out a record £1.15bn for London’s Cheesegrater building earlier this year, just one of the deals that has featured in record overseas spending by Chinese groups.

Japan 1980s v China now

1. Most prominent overseas corporate purchase

Japan Sony paid $3.4bn for Columbia Pictures in 1989

China ChemChina’s pending purchase of Syngenta for $43bn

Analysts are particularly intrigued by the similarities between “zaitech”, the financial engineering techniques used to boost non-operating profits that fuelled Japanese non-financial corporations’ speculative financial investment, and the Chinese equivalents that include wealth management products and trusts.

And if the mark of a real bubble is that it spills into unusual assets, look no further than the spring crop price of Old Banzhang — generally regarded as the finest of Pu’er teas. It has soared almost 90 per cent over the past year to Rmb15,000 ($2,174) a kilo, making it four times more expensive, by weight, than silver. In 1987, a similar cocktail of ostentation and speculative money propelled the membership fee of Japan’s Koganei Country Club golf course to $3.5m.

The comparisons have felt more compelling as the warnings of a China bubble — or a concoction of inter-related bubbles — have intensified over the past four years. “China has halved its growth rate and doubled its debt over the past eight years,” says Fraser Howie, an expert on the country’s financial system. “It’s not a great correlation.”

Different approaches

Yet there are some very specific points where the comparisons fail. Economic historians date the start of Japan’s bubble economy to September 1985 and the Plaza Accord agreement in New York that gave a green light to the depreciation of the dollar, paving the way for the market to take control. The yen strengthened from ¥240 against the dollar to ¥120 three years later. China, in contrast, carefully manages its currency and regularly cracks down on speculative behaviour. As it demonstrated in July 2015 when it controversially stepped in to arrest declines on the stock market, the Chinese state has a formidable arsenal of weaponry. That is unlikely to change.

2. Land buying overseas

Left, a view of the Rockefeller Centre in New York. Right, the New York Waldorf Astoria © Getty Images; AP

Japan Mitsubishi Estate bought Rockefeller Center in October 1989 for $900m

China Anbang’s purchase of New York’s Waldorf Astoria for almost $2bn in 2014

Another striking difference is the respective capacity to rebound from a big crash in property prices. When that hit Japan in the early 1990s, it was catastrophic because it lacked the engines to grow its way out of trouble, but China may have them. In terms of top-down economic planning, says CLSA equity strategist Christopher Wood, China is also attempting something that Japan never consciously did — the move from an export-driven model to a consumption-driven model.

A third distinction between China’s present and Japan’s past is the unique nature of the Chinese party-state. Two-thirds of corporate debt is owed by state-owned enterprises to state-owned banks. As Macquarie analysts Larry Hu and Jerry Peng noted last year: “China’s debt is overwhelmingly owed by one government entity to another. Normal credit analysis fails in this context, given the government’s capability in reshuffling debt within the system.”

But its expansion has also been much faster. In Japan it took a quarter of a century for private sector debt to almost double from 125 per cent of economic output in 1970 to more than 220 per cent in 1995, according to figures compiled by Steve Keen, professor at Kingston University in the UK. China’s private sector debt burden soared from 115 per cent of GDP to more than 210 per cent in just the past nine years.

“China cannot escape all the laws of economics but it is unique in many respects,” says Eswar Prasad, a China finance expert at Cornell University.

Sleepless nights in Beijing

3. Eye-catching overseas art purchase

Left, Portrait of Dr Gachet by Vincent Van Gogh, right, Nu Couche by Amadeo Modigliani © Alamy; Getty Images

Japan “Portrait of Dr Gachet” by Vincent van Gogh bought by Daishowa Paper’s Ryoei Saito for $82.5m in May 1990

China Liu Yiqian’s 2015 purchase of Amedeo Modigliani’s painting “Nu Couché” for $170m

What makes Chinese officials nervous, however, is when asset classes from ginseng to copper start to look frothy. The same is true of investors drawn to the market by sustained Chinese growth, who are constantly looking out for similar red flags — particularly because Japan’s late-1980s boom of property and stock speculation so clearly marked the end of the country’s high-growth era. Japan’s bubble did not just end badly, says Martin Schulz, senior economist at the Fujitsu Research Institute, it left scars that are still visible a quarter of a century later and show up in the form of a budget deficit maintained to “keep the economy together”.

The clean-up of Japan’s post-bubble financial crisis — painfully delayed until the mid-2000s because of a stubborn reluctance to trigger corporate failures and mass lay-offs — represents a masterclass for China in what not to do should it face a similar crisis in its banking system.

Hiromichi Shirakawa, Credit Suisse’s chief Japan economist, argues that the authorities’ reaction in the aftermath of any China bubble is ultimately more important than whether one is inflating. That is where China has the most to learn from Japan. “The biggest post-bubble challenge is to restore confidence in the banks. If you don’t kick a few out, it doesn’t work,” he says.

At a psychological level, the Japanese experience of watching the stock market triple in value between 1985 and 1989 corresponds with its modern Chinese counterpart: the ascent of assets has knotted itself around a deepening sense of national ascendancy.

4. Number of outbound tourists (as % of population)

Left, Japanese tourists take pictures in Fontvieille, France. Right, a Chinese tourist in Athens © Getty Images

Japan 7.85 per cent, 9.66m tourists in 1989

China 8.56 per cent, 122m tourists in 2016

“A bubble is a euphoric ending to a long period of prosperity,” says Peter Tasker, a fund manager and author on Japanese economic history. “It starts with sensible optimism and morphs into a sense that there are no limits . . . every class of investor wants to participate. People become euphoric about their country. And Japan was a total bubble — with stocks and real estate inflating at the same time. The euphoria was social and political as well as economic and financial.”

Mr Shirakawa argues that in both China and Japan the sense of confidence comes from having overcome a threat that initially appeared devastating — in Japan’s case the “oil shock” of rising prices in the early 1980s, and in China’s the fallout from the 2008 global financial crisis.

“But there are differences too. In Japan, the Plaza Accord [and a strong yen] allowed the Bank of Japan to maintain an easy policy for a long time. The banks were under pressure and they took significant risk. In China, the confidence comes from thinking ‘we have attracted huge money flows from outside the country and this will continue forever’,” says Mr Shirakawa.

Despite that, Beijing is well aware that financial risk, as one government adviser puts it, “is the one thing that can sink the ship”.

5. Economy — What the experts say

Left, dealers working on the floor of the Tokyo stock exchange in 1992. Right, an investor watches the market on his smartphone in Huaibei © AP; Getty Images

Japan ‘Japan was a total bubble — with stocks and real estate inflating at the same time. The euphoria was social and political as well as economic and financial’ — Peter Tasker

China ‘China has halved its growth rate and doubled its debt over the past eight years. It’s not a great correlation’ — Fraser Howie, author on China

It is also worried about disturbing demographic trends that, as in Japan, could depress Chinese savings and growth. Both countries have passed from a phase of demographic bonus to demographic burden as the working-age population aged 15 to 54 has begun to decline. For Japan, that crossover was in 1990. In China, it happened in 2012, marking the end of its “demographic dividend”.

“The Chinese are looking at demographics because they know now what Japan was not aware of at the time — nobody was. We learnt from Japan how quickly growth can stop when demography changes,” says Mr Schulz.

In Japan and China equity valuations both peaked at about the same time as their demographic bonus. This may suggest, says Mr Baba at Goldman, “that in the run-up to the peak of the bubble, the equity market has a tendency to excessively extrapolate the good times of the bonus period in later years”.

To the extent that some see compelling similarities between the inflation of the Japanese bubble and China’s present situation, the focus has shifted to whether China is close to the same turning points faced by Japan at the start of the 1990s. Moody’s last week downgraded China’s sovereign rating to A1, the same level as Japan, citing a large and growing debt burden. But the rating agency also upgraded its outlook for the Chinese economy and predicted that its growth potential would slow to 5 per cent by 2022, a far better outcome than the sudden crash and years of stagnation experienced by Japan.

6. Per capita GDP

A Nissan assmbly line in Ageo in May 1998. Right, a factory producing energy saving lightbulbs in Suining, Sichuan province © Getty Images

Japan $23,472 in 1989

China $8,069, 2015

SOURCES: World Bank; Japan National Tourism Organisation; China’s tourism bureau

In both countries, bubble-like behaviour has produced profound changes in the lives of millions of people. As the Japanese property and stock bubble neared its peak, the price of living in the cities skeetered out of the reach of ordinary “salarymen”. By 1989, a modest, 75 sq metre apartment a 90-minute commute from central Tokyo cost 8.5 times the average white-collar salary. Three decades later China is witnessing an even more dramatic dynamic at play in its capital. The average cost of a 100 sq metre apartment in Beijing is Rmb5m — or more than 50 times the average annual income of local residents.

This comparison is especially important, say analysts, because of the respective government approaches to the problem. On becoming governor of the BoJ in 1989 — two weeks before the all-time peak of the Nikkei 225 Stock Average at 38,915 points — Yasushi Mieno condemned rising property prices and long commutes and in doing so triggered, many now believe, the subsequent market collapse.

At some level, China appears to have taken the Mieno experience to heart, and cautiously speaks in terms of “containing” increases rather than deflating a bubble that has transformed tens of millions of urban residents into dollar millionaires. But it is a finely balanced thing. Beijing’s awareness of that fragility is clear, as Mr Xi recently warned that “houses are for living in, not speculating on”.

Dutch court due to rule on Monday on hedge fund’s request for special shareholder meeting

Investors are braced for what could be a pivotal week in the battle over the future of paintmaker Akzo Nobel, which is resisting a €26.9bn takeover attempt by its US rival PPG Industries.

The Dutch owner of the Dulux brand has rejected three unsolicited buyout offers from PPG since March, arguing they undervalued its business, would lead to substantial job cuts and face a lengthy review by competition authorities. 

But Akzo Nobel’s steadfast position has sparked a chorus of investor dissent, with a number of shareholders, led by the hedge fund Elliott Advisors, publicly urging it to the negotiating table.

This has set up the possibility of a hostile takeover bid by PPG, in what has become a bitter transatlantic tussle over one of Europe’s oldest industrial concerns. 

A combination of the two companies would create a leader in the $130bn global paints and coatings market, at a time of blockbuster corporate mergers and acquisitions sweeping through the wider chemicals industry.

On Monday, a Dutch business court is set to rule on a case brought by Elliott against Akzo’s management. The activist investor, which has a stake above 3 per cent and is known for its aggressive campaigns to influence corporate boardrooms, is seeking to overturn Akzo’s rejection of its request for a special shareholder meeting to remove chairman Antony Burgmans, who is seen as an obstacle to talks with PPG.

Elliott also wants the appointment of a new supervisory director to oversee the setting up of the requested extraordinary general meeting, at which shareholders would vote on Mr Burgman’s position. Several other shareholders are either backing Elliott’s petition to the court or variants of it. 

PPG’s board is then scheduled to meet on Tuesday and could decide whether to walk away from its courtship of Akzo, or launch a hostile takeover bid with a direct offer to Akzo’s shareholders. 

Under Dutch takeover rules, PPG must submit formal bidding papers along with evidence of financing by Thursday June 1 to the financial markets regulator AFM for review. Otherwise it faces a six-month “cooling off” period during which it cannot make further takeover attempts for Akzo. The US group has requested an extension of the deadline to June 14 at the earliest. 

Michael McGarry, chief executive of PPG, told the FT that shareholders representing more than a quarter of Akzo Nobel’s stock were in favour of the proposed takeover, including all its top-20 shareholders. 

“We’ve always said our preferred pathway is a friendly, consensual deal negotiated privately,” he said. “It’s clear to us this is no longer about value.”

To shore up the support of its shareholders, Akzo Nobel has unveiled €1.6bn in dividend payments and a standalone plan that involves the separation of its speciality chemicals division, which would leave a company focused on paints and coatings. 

The episode has triggered a political backlash in the Netherlands, where the government is considering a new law to give publicly listed companies greater protection against foreign takeovers. 

Akzo Nobel and Elliott declined to comment.

From cinemas to gold mines, foreign companies expand into challenging Greek market

An open-air cinema with a natural backdrop of twinkling city lights and the inky Aegean Sea is the latest attraction for shoppers at One Salonica, a mall in the Greek port of Thessaloniki.

The new screen is the eighth that Cineplexx, an Austrian investor, has opened at the mall in a low-income neighbourhood since the company came to Greece two years ago. Christof Papousek, chief financial officer and a partner in Cineplexx, says the investment has worked out well.

“We’re profitable there, we feel in a very comfortable position and we’re ready to expand in the Greek market,” he says.

Such confidence might seem barely conceivable. Greece has been gripped by economic crisis for years: indeed Cineplexx arrived in mid-2015 just as the country was falling off Europe’s investment map. Capital controls had been imposed, the leftwing Syriza government was locked in a dispute with international creditors and Greeks were bracing for an involuntary exit from the euro.

But companies that are willing to embrace risk say that after years of shrinking investment and deep wage cuts, Greece offers opportunities rarely found in central and south-east European markets.

Despite falling back into recession in the first quarter, the economy is projected to expand this year by 1.8 per cent, and 2.4 per cent in 2018. And the International Monetary Fund and other Greek creditors are drawing closer to a deal over the country’s €86bn bailout programme, following parliament’s approval of additional pension and tax reforms.

Prinzhorn Holding, an Austrian recycling and packaging group, also arrived in 2015, buying Viotyk, a Greek family-owned packaging company as part of a regional expansion that included Romania and Turkey. “We saw the opportunity in Greece and we liked it. It’s a challenging market but by potential I give it a chance of higher growth than any other market [we work in],” says Cord Prinzhorn, chief executive.

Viotyk this month completed an investment in a packaging unit to triple output at its plant near Athens. It will cater for local subsidiaries of multinationals as well as Greek companies that began to focus on exports when domestic consumption slumped in the crisis.

“As soon as people export they think of packaging,” Mr Prinzhorn says. “We see healthy demand . . . Our core market is food and beverages and Greece will continue to export olive oil, sesame seeds, honey and wine.”

Both companies have thick skins. Cineplexx is present in several western Balkan countries including Albania, Macedonia and Kosovo, and so has plenty of experience of a volatile business environment and frequent political upheavals. Family-owned Prinzhorn takes decisions “with a 20-30 year horizon in mind”, Mr Prinzhorn says.

The largest recent investment by a multinational company is by Philip Morris International, which is spending €300m to transform Papastratos, its Greek subsidiary, from a traditional cigarette manufacturer into a producer of “smokeless” tobacco sticks that are heated in a handheld electronic device.

Christos Harpantidis, chief executive of Papastratos, says the project will create 400 jobs at its plant in Aspropyrgos, a town near Athens with an unemployment rate of more than 30 per cent.

The new product uses a higher percentage of strongly flavoured Oriental tobacco, produced in Greece, than traditional cigarettes, which is one reason PMI chose Papastratos for the venture. The company has a three-year deal to buy tobacco from 30,000 local growers.

Greece remains a risky proposition. Critical issues such as debt relief, Greece’s inclusion in the European Central Bank’s quantitative easing programme and the date of a return to the international capital markets have still to be settled with the EU and the IMF.

And even the most bullish companies struggle with numerous other obstacles in Greece — which dropped another three places to 61st in the World Bank’s 2016 “ease of doing business” report.

Getting a permit is one issue. Mr Harpantidis recounts a difficult experience of chasing the official permits needed to upgrade the Papastratos plant.

Another investor complaint is the slow enforcement of contracts through the Greek courts. Capital controls, though loosened, constrain business activity.

One recent high-profile case involves Eldorado Gold, a Canadian company developing a €1bn gold mine in northern Greece. The Syriza government revoked several permits issued to Eldorado, stalling progress for more than a year. Syriza officials also backed a vocal anti-mining campaign by local hard-left politicians.

The mining project is back on track following a policy reversal by Alexis Tsipras, the prime minister. Yet George Burns, Eldorado’s chief executive, says permits are still being approved “more slowly than we’d like.”

Mr Tsipras’s speeches stress that foreign investment will be critical to economic recovery. Privatisations have been part of recovery plans: a German-Russian consortium agreed to pay €230m for a majority stake in Thessaloniki’s port, while Fraport of Germany paid €1.2bn for a 40-year concession to run Thessaloniki airport and another 13 regional airports.

With Papastratos’s new plant set to begin operating in January, Mr Harpantidis is realistic about Greece’s problems but confident his company can still carve out a substantial regional market.

“The situation [in Greece] isn’t good. There are issues with bureaucracy, excessive taxation and the banking system. That’s the reality,” he says. “But the country has potential and comparative advantages we are building upon.”

The airline must show that it deserves its privileged position

People can be remarkably tolerant of long travel delays when they are clearly unavoidable, clearly communicated and accompanied by practical efforts to limit the inconvenience and help those affected make alternative plans. None of these mitigating features was in evidence at Heathrow or Gatwick on Saturday, when a computer system crash forced British Airways to cancel all its flights out of London on one of the busiest weekends of the year.

Instead, thousands of passengers were left stranded without information, many of them unable to retrieve their luggage or even leave the terminal. BA staff were conspicuous by their absence. When the airline’s chief executive, Alex Cruz, eventually donned a yellow high-vis jacket to issue an apology posted on Twitter, his message amounted to: “We’re really sorry, but please don’t come to the airport, and please, please don’t try to call customer services.” On Sunday, he offered further apologies, acknowledging many families had endured a “horrible experience”, but Heathrow remained crowded and chaotic, with about a third of BA flights still cancelled.

On the scant information available so far, there appears to be no good excuse for the crippling IT failure. Mr Cruz said there was no evidence of a cyber attack and that the root cause seemed to be a power supply issue — the same reason given by Delta, the US airline, when IT problems forced it to ground planes around the world last summer.

This is an entirely inadequate explanation. Whatever back-up systems BA had in place, they are woefully deficient if they cannot withstand a power cut. No chief executive today can afford to underestimate the threat posed by either cyber attack or more mundane IT glitches. Equally inexcusable, though, was BA’s failure to look after families left in limbo. Those executives responsible for such errors should be held to account. Mr Cruz must be ruthless with subordinates who dropped the ball, but his own management of the crisis should be equally scrutinised.

The GMB trade union was swift to blame the disruption on BA’s decision to outsource some of its IT functions. Given their natural bias, this claim needs substantiation. But BA has been more aggressive than other legacy airlines in cutting costs to compete with low-cost carriers and new challengers on its long-haul routes. It has irked customers by trimming frills, from the flowers in first-class toilets to economy-class leg room. This incident will prompt questions as to whether it is also scrimping on essentials.

If so, it will be entirely self-defeating. BA has two big advantages over its rivals. One is its brand. There is an enduring perception that the former flag carrier offers higher standards, better customer service and is intrinsically more trustworthy than the low-cost upstarts. This perception will not survive many more such debacles.

BA’s other huge asset, though, is its dominant position at Heathrow, a hub for the most lucrative long-haul routes used by business travellers, where it holds more than 50 per cent of take-off and landing slots. This is partly due to astute dealmaking: BA gained new slots as a result of its parent IAG’s takeovers of BMI and Aer Lingus. But it is largely a legacy of its days as a flag carrier: BA has “grandfathered” rights to its existing slots and can keep them so long as it uses them. Although slot trading is allowed, the severe capacity constraints at Heathrow mean that very few new slots are made available.

Under the current regulatory regime, this makes BA’s advantage a formidable one. It is increasingly questionable whether the airline deserves its privileged position.