TheChek News Flow

The Sunni Saudis and the Gulf kings possess immense wealth, the only religion that Trump really respects, and they want to destroy Shia Iran, Syria, the Hezbollah and the Houthis – which is a simple ‘anti-terrorist’ story for the Americans

Even for those used to the insanity of Arab leadership – not to mention those Westerners who have still to grasp that the US President is himself completely off his rocker – the Arab-Muslim (Sunni) summit in Saudi Arabia is almost beyond comprehension. From Pakistan and Jordan and Turkey and Egypt and Morocco and 42 other minareted capitals, they are to come so that the effete and ambitious Saudis can lead their Islamic crusade against “terrorism” and Shiism. The fact that most of the Middle East’s “terrorism” – Isis and al-Qaeda, aka the Nusrah Front – have their fountainhead in the very nation to which Trump is travelling, must and will be ignored. Never before in Middle Eastern history has such a “kumidia alakhta” – quite literally “comedy of errors” in Arabic – been staged.

On top of all this, they have to listen to Trump’s ravings on peace and Islamic “extremism”, surely the most preposterous speech to be uttered by a US president since he is going to have to pretend that Iran is extremist – when it is Saudi Arabia’s Wahhabi Isis clones who are destroying Islam’s reputation throughout the world. All this while he is fostering war.

For Saudi Deputy Crown Prince Mohammad bin Salman (henceforth MbS) wants to lead his Sunni tribes – plus Iraq if possible, which is why Shia Prime Minister Abadi has been invited from Baghdad – against the serpent of “terrorist” Shia Iran, the dark (Shia) “terrorist” Alawite regime of Bashar al-Assad, the “terrorist” Shia Lebanese Hezbollah and the aggressive “terrorist” Shia Houthis of Yemen. As for the Gulf states’ own Shia minorities and other recalcitrants, well, off with their heads.

After all, that’s what the Saudis did to the prominent Saudi Shia leader Sheikh Nimr al-Nimr last year: they cut his head from his body, Isis-style, in a classic bit of Wahhabi decapitation, along with 47 other “terrorists”. And any powerful Shias in neighbouring Gulf countries will be cut down, too – which is what happened to Bahrain’s Shia majority when the Saudi army moved in to occupy the island in 2011 at the “request” of its Sunni ruler.

And you can see why America’s disgraceful President, a man who truly falls into the regional pantheon of raving loonies – he surely ranks among the Gaddafis and Ahmadinejads of the Middle East – goes along with this. The fact that Isis – Trump’s mortal enemy and the strategic adversary of his defence chiefs – is a creature of the same Salafist cult as Saudi Arabia, is neither here nor there. The Sunni Saudis and the Gulf kings and princes possess immense wealth, the only religion that Trump really respects, and they want to destroy Shia Iran and Syria and the Hezbollah and the Houthis – which is a simple “anti-terrorist” story for the Americans – and this means that Trump can give MbS and his chums $100bn (£77bn) of US missiles, planes, ships and ammo for the war-to-come. America will be happy. And Israel will be happy.

I guess Crown Prince Jared Kushner thinks he can handle this end of the Arab-Nato alliance, though the Israelis themselves will be perfectly happy to watch the Sunnis and Shia fight each other, just as they did during the 1980-88 Iran-Iraq war when the US supported Sunni Saddam – albeit that his army was mostly Shia – and the Israelis furnished US missiles to the Shia Iranians. Already, the Israelis have distinguished themselves by bombing the Syrian army, the Hezbollah and the Iranians in the Syrian war – while leaving Isis untouched and giving medical assistance to al-Qaeda (Nusrah) on Golan.

Much has been made (rightly) of MbS’s threat to ensure that the battle is “in Iran and not in Saudi Arabia”. But, typically, few bothered to listen to Iran’s ferocious reply to the Saudi threat. It came promptly from the Iranian defence minister, Hossein Dehghan. “We warn them [the Saudis] against doing anything ignorant,” he said, “but if they do something ignorant, we will leave nowhere untouched apart from Mecca and Medina.” In other words, it’s time to start building air raid shelters in Riyadh, Jeddah, Dhahran, Aramco headquarters and all those other locations dear to American hearts.

Indeed, it’s difficult not to recall an almost identical Sunni hubris – almost four decades ago – to that of MbS today. The latter boasts of his country’s wealth and his intention to diversify, enrich and broaden its economic base. In 1980, Saddam was determined to do the same. He used Iraq’s oil wealth to cover the country in super-highways, modern technology, state-of-the-art healthcare and hospitals and modern communications. Then he kicked off his “lightning war” with Iran. It impoverished his oil-rich nation, humiliated him in the eyes of his fellow Arabs – who had to cough up the cash for his disastrous eight-year adventure – led to Saddam’s invasion of Kuwait, sanctions and the ultimate Anglo-US invasion of 2003 and, for Saddam, the hangman’s noose.

Yet this leaves out the Syrian dimension. Sharmine Narwani, a former senior associate of St Antony’s College – and an antidote for all those sickened by the mountebank think-tank “experts” of Washington – pointed out this week that US support for Kurdish forces fighting under the dishonest label of “Syrian Democratic Forces” are, by advancing on Raqqa, helping to cut Syria off from Iraq. And that Kurdish forces are now reported as “retaking” Christian or Muslim Arab towns in the Nineveh province of Iraq, which were never Kurdish in the first place. Kurds now regard Qamishleh, and Hassakeh province in Syria as part of “Kurdistan”, although they represent a minority in many of these areas. Thus US support for these Kurdish groups – to the fury of Sultan Erdogan and the few Turkish generals still loyal to him – is helping to both divide Syria and divide Iraq.

This cannot and will not last. Not just because the Kurds are born to be betrayed – and will be betrayed by the Americans even if the present maniac-in-charge is impeached, just as they were betrayed to Saddam in the days of Kissinger – but because Turkey’s importance (with or without its own demented leader) will always outweigh Kurdish claims to statehood. Both are Sunnis, and therefore “safe” allies until one of them – inevitably the Kurds – must be abandoned.

Meanwhile, you can forget justice, civil rights, sickness and death. Cholera has quite a grip on Yemen now, courtesy of the criminal bombing attacks of the Saudis – ably assisted by their American allies long before Trump took over – and scarcely any of the Muslim leaders whom Trump meets in Riyadh do not have torturers at work back home to ensure that some of their citizens wish they had never been born. It will be a relief for the fruitcake president to leave Israel for the Vatican, albeit given only a brief visitation to – and short shrift by – a real peacemaker.

That only leaves one nation out of the loop of this glorious charivari: Russia. But be sure Vladimir Putin comprehends all too well what is going on in Riyadh. He will watch the Arab Nato fall apart. His foreign minister Lavrov understands Syria and Iran better than the feckless Tillerson. And his security officers are deep inside Syria. Besides, if he needs any more intelligence information, he has only to ask Trump.

Aerospace and defence giant Airbus has appointed a panel of independent consultants following the launch of a bribery investigation at its jet business by the UK’s Serious Fraud Office.

Airbus said it had set up an three-member “Independence Compliance Review Panel” that will be given “all access to all levels of the company and will report to the Airbus CEO and Board on how to further improve Airbus’ compliance processes, policies, organisation and culture”.

The news comes after French authorities joined the SFO in investigating allegations of fraud, bribery and corruption in March. The SFO launched a probe into Airbus’ use of third party consultants to win international aircraft orders last year.

Chief executive Tom Enders said:

A year ago we self-disclosed to the authorities misstatements and omissions that we had found. We have been cooperating fully with the investigations that ensued and further improving our compliance system is obviously our number one priority now.

The panel is made up of former German finance minister, Theo Waigel, David Gold, one of the UK’s most senior laywers, and Noëlle Lenoir, a former French minister and specialist in competition law.

“We have chosen to elect highly experienced independent experts to challenge and guide us,” added Mr Enders.

Asian equity markets are mostly higher, tracking 2nd day of gains on Wall st on Friday as investors bought the Trump political controversy dip. Energy sector is performing particularly well, with Crude Oil prices rising above $51/brl - a 1-month high - on chatter of OPEC supply cut extension. In FX, renewed risk-on flows translated into JPY weakness, as USD/JPY rose some 60pips from opening lows. Commodity currencies AUD and NZD are rangebound despite the jump in iron ore prices. GBP underperformed following UK press report citing Brexit min Davis threatening pullout out from Brexit negotiation if EU imposes a penalty as part of the deal. Separately, UK's Survation poll for the upcoming elections saw PM May and Conservatives' lead slip to single digits, shrinking in half. Over the weekend, US Pres Trump kicked off his Middle East trip with first stop in Saudi Arabia, where he signalled US is signing some $110B of military contracts as part of memorandum of intent to support Saudi defense. Saudi Oil Min Al-Falih also said OPEC and non-OPEC producers are on course to back an agreement extending the oil supply deal by a further nine months. Also of note in the region, Iranian Pres Rouhani defeated hard-line candidate Raisi by a wide margin in re-election for 2nd term. Japan trade surplus was smaller than expected on bigger than anticipated rise in imports than exports, though both were in positive territory for 5th and 4th month respectively. Shipments to Asia and China were up mid-teens again, while export growth to US and Europe grew low single digits.

Nikkei +0.33% Hang Seng +0.95% CSI -0.06% Shanghai -0.45%

Eur$ 1.1197 CNH 6.8795 CNY 6.8898 JPY 111.52 GBP 1.2999 CHF 0.9751 RUB 56.64 WTI$ 51.12 +0.87%

S&P +0.12% EuroStoxx+0.25% Dax +0.26% FTSE +0.42% SMI +0.39%

*CAIRN ENERGY RAISED TO OUTPERFORM VS NEUTRAL AT MACQUARIE

All-stock merger of US and Swiss chemicals groups to make it formidable player

Huntsman Corporation and Switzerland’s Clariant have unveiled a multibillion dollar all-stock cross-border merger, allowing the two speciality chemicals companies to form a formidable industry challenger. 

Clariant investors will control about 52 per cent of the combined group, while Huntsman shareholders will own the remainder, the companies said in a joint statement on Monday.

Peter Huntsman, chief executive and a son of the company’s founder and chairman Jon Huntsman Sr, will lead the new company, while Clariant’s head Hariolf Kottmann becomes its chairman.

The business will be called HuntsmanClariant, with a combined enterprise value of approximately $20bn, according to the statement.

“This is the perfect deal at the right time. Clariant and Huntsman are joining forces to gain much broader global reach, create more sustained innovation power and achieve new growth opportunities,” said Mr Kottmann.

It is the latest high-profile transaction across the diversified chemicals sector, where companies are striking ever more aggressive deals to find new ways to slash costs and gain greater scale of their segments.

Mr Huntsman Sr, a Mormon, founded the company, which was focused on styrofoam packing, with his brother in 1970 after leaving a junior role in the Nixon White House. Soon after, he famously managed to snag McDonald’s as a client, which was looking for a container to hold its newly-launched Big Mac hamburgers.

The success of the business spawned a family dynasty in Utah, where another one of Mr Huntsman’s sons, Jon, became the state’s governor and a presidential candidate in 2012.

Today the business employs 15,000 people across a number of speciality chemical segments, including polyurethanes and advanced materials. It listed in 2005 and has a market value of $6.4bn and a net debt of just under $4bn.

Clariant was formed in 1995, having been spun off from the larger chemicals group Sandoz. It employs just over 17,000 people and has a market value of €6.7bn and net debt of about €1.5bn. The company has been the subject of endless deal speculation in recent years, with larger rivals such as Germany’s Evonik having considered takeover approaches.

Huntsman, Clariant Near Deal to Merge

All-stock deal would create chemicals company with market value of about $14 billion

Huntsman Corp. HUN 3.37% and Switzerland’s Clariant AG CLZNY 0.94% are near an agreement to merge in an all-stock deal that would create a chemicals giant worth about $14 billion as companies in the industry seek ways to cut costs and boost revenue.

No deal has been signed, Huntsman said, but terms being discussed call for Clariant shareholders to own about 52% of the new entity, and Huntsman investors to own the rest—based on their current values. Huntsman Chief Executive Peter Huntsman is to hold that title at the new company with Clariant CEO Hariolf Kottmann taking the chairman role. The new group, with board representation evenly split, is to be called HuntsmanClariant.

The deal, which was announced Monday, would create a trans-Atlantic company valued at about $20 billion including debt, offering a wide array of chemicals such as polyurethanes, pigments, automotive fluids, additives and resins that are used across industries ranging from aerospace to agriculture to household-cleaning.

Together Huntsman, which is based in Woodlands, Texas, and its Swiss-based rival would operate in well over 100 countries and employ about 32,000. Combined they would generate annual revenue of more than $13 billion.

The expected tie-up comes amid a period of consolidation in the chemicals industry as companies seek to cut costs by eliminating overlapping operations and products, and seek new sources of revenue by tapping new markets and customers. The deals are also meant to help the companies combine resources to bolster the research and development for new products.

“Combining our companies should give us more stable and steady earnings, increased margins and new growth opportunities,” Mr. Huntsman said in an interview. “For either side to get to a $20 billion enterprise value would take many many years of organic growth.” He added that the deal will “double our reach without stressing the balance sheet.”

Another benefit of the Huntsman-Clariant tie-up, Huntsman said, is a broader, more balanced geographic footprint. The so-called annual synergies from putting the companies together could reach $400 million.

U.S. paint and coatings maker PPG Industries Inc. is in a battle to acquire Dutch rival Akzo Nobel NV for $27 billion in cash and stock. Its advances have been repeatedly rebuffed, and the next week or so is expected to be crucial in determining whether the deal happens. Meanwhile Praxair Inc. and Germany’s Linde AG are trying to complete their merger to create the biggest industrial-gas player with a market value of more than $66 billion.

The lack of major revenue growth last year by Huntsman and Clariant demonstrated the challenging environment that the chemicals industry faces. Huntsman reported a 6% revenue decline to $9.66 billion in 2016, hurt in part by soft demand and difficulty raising prices for some products. The company’s additives and other performance-enhancing chemical products posted the biggest revenue decline both for the year and in the fourth quarter when competitive market conditions and lower average selling prices weighed on results.

Clariant fared better, posting revenue of 5.85 billion Swiss francs ($5.96 billion) last year, up 2% from the prior year. The company attributed that revenue gain to relatively strong growth in Asia, the Middle East and Africa, which helped to offset a weaker performance in North America, Europe and Latin America. The company said demand for higher-margin specialty industrial and consumer chemicals used in products such as laundry detergent and aircraft de-icing fluid was particularly strong.

Both companies’ shares have nevertheless performed well, helping set the stage for the merger, which came together in a matter of a few weeks after years of on-and-off discussions, a person familiar with the matter said. Each company had a market value of roughly $7 billion as of Friday.

The planned merger brings together two of the most recognized names in the chemicals industry. And both have incorporated deal making as a key part of their strategies to expand. Huntsman’s roots date back to 1970, when Jon Huntsman Sr. founded Huntsman Container Corporation. Since then, the company has made a series of acquisitions and joint ventures in Europe, India and China as part of its global expansion plans.

Clariant was formed in 1995, a spinoff from the chemical company Sandoz, whose history dates back to Basel in 1886. Clariant has also been an active acquirer, targeting acquisitions in the U.S. and Europe to broaden its portfolio of specialty chemicals.

Arconic Board Vote to Test Power of Activist Investors

The company’s bitter fight with hedge fund Elliott Management comes to a head this week

The future of Arconic Inc. ARNC 2.45% is up for grabs this week in a tightly fought shareholder vote that will test the growing power of activist investors.

At a shareholder meeting in Purchase, N.Y., Thursday, Arconic shareholders will vote to fill five seats on the company’s 13-member board. They will choose among candidates offered by the company itself and Elliott Management Corp., an activist hedge fund that wants to overhaul the $12 billion maker of parts for airplanes and automobiles.

A board shake-up could have a profound effect on Arconic, formerly part of aluminum giant Alcoa Inc., as the new board will select the company’s new chief executive and determine the company’s trajectory for years to come. It also could have broader implications for activist investors, who have become ever more aggressive in their pursuit of higher returns.

Elliott already has locked up around 20% of the vote. The hedge fund, Arconic’s largest shareholder with an 11.6% stake, has public backing from First Pacific Advisors LLC and Orbis Investment Management Ltd.

It has also won key endorsements from influential proxy-advisory firms. Institutional Shareholder Services Inc. suggested investors vote for two of Elliott’s nominees, while Glass Lewis & Co. backed all four Elliott nominees.

Arconic, meanwhile, has the support of at least one top-15 shareholder, according to people familiar with the matter. And asset manager Douglas C. Lane & Associates has urged its clients to back Arconic’s slate, even though one of its portfolio managers had been critical of the board and former Arconic CEO Klaus Kleinfeld, according to a letter to clients reviewed by The Wall Street Journal. The firm’s clients hold 0.5% in aggregate.

Elliott launched its Arconic campaign in January, just months after the company’s split from Alcoa and a year after it installed three of Elliott’s handpicked nominees on the board.

The hedge fund immediately called for the ouster of Mr. Kleinfeld, citing the company’s lackluster stock performance and missed profit forecasts.

In April, Mr. Kleinfeld resigned from Arconic after sending a vaguely threatening letter to Elliott founder Paul Singer. Yet Elliott pressed ahead with its bid for four board seats, arguing that Arconic’s current directors can’t be trusted to depart from Mr. Kleinfeld’s strategy.

Arconic says it has changed more than nine directors over the past 16 months, including Elliott’s three picks in 2016, and argues that the hedge fund’s attempts to nominate four more directors would give too much sway to a single shareholder.

The company has told shareholders an Elliott win would embolden activists to go too far, criticizing Elliott’s personal attacks on Mr. Kleinfeld.

An Elliott victory, even a partial one, could signal few companies are safe, said Chris Young, a Credit Suisse Group AG banker who advises companies in fights with activists.

“It’s not just let’s fix the basket cases, now it’s let’s make the company the best it can be, even after all the self-help steps,” Mr. Young said. “Now we are on the margins of a new event horizon. Almost any company can be marginally improved.”

Thursday’s vote offers a rare chance to gauge the sentiment of big institutional investors, who collectively control enough shares in most big publicly traded U.S. companies to sway the outcome of board fights.

Though activists in recent years have targeted ever larger companies, it is rare for such campaigns to go all the way to a vote.

DuPont Co.’s 2015 scuffle with Nelson Peltz’s Trian Fund Management LP was the last major board fight to make it to a vote. The chemical company’s shareholders narrowly rejected Mr. Peltz and Trian’s other nominees, which was seen as an endorsement of DuPont’s strategy for the business. Later that year, Ellen Kullman stepped down as CEO after performance slipped, and the company reached a deal to merge with Dow Chemical Co.

The Arconic vote likely will hinge on Vanguard Group, BlackRock Inc. and State Street Global Advisors, index funds that collectively hold some 20% of the company’s stock. Many institutional investors have approached activist fights with trepidation, willing to entertain change but wary of giving hedge funds with shorter time horizons too much power.

Arconic has insisted that its strategy of working closely with customers to win long-term contracts will lead to greater long-term gains. Elliott, for its part, wants to shake up how the company is run, hoping that will lead to more efficient spending and improve stock gains.

Elliott and Arconic each have spent millions of dollars wooing shareholders. Elliott mailed shareholders a video player to watch its pitch. Arconic says in a filing it expects to spend about $17.5 million on the fight.