CHINA DEC FOREIGN RESERVES: $3.011T V $3.052T PRIOR (UPDATE) (6th consecutive decline) Components:
- Sept FX reserves (SDR-denominated): 2.24T v 2.25T m/m
- Gold reserves: $67.878 v $69.8B m/m (59.24M v 59.2M troy oz prior)
London property downturn sees Berkeley target Birmingham
High-end builder’s new division to take part in ‘large-scale regeneration’
Luxury London housebuilder Berkeley Group is looking to the English provinces as a source of future growth as the market for high-end properties in the capital undergoes a downturn.
It has opened a new division in Birmingham — its first venture outside London and the south-east in more than a decade — as the Brexit vote and tougher property taxes cool prices of luxury London homes.
In a market that has been driven higher by international investors, average prices for prime properties in the capital have dropped an average 12.5 per cent since the 2014 peak according to Savills, the estate agent. Gloomy sentiment has pushed Berkeley Group’s share price down by a fifth in the past year, causing it to drop out of the FTSE 100 index in 2016.
The new division is a departure from the group’s strategy since 2005 of focusing purely on London and the south-east, although historically it has built homes in cities across the country including Birmingham.
“Birmingham is on the rise, with a can-do council that seems keen to encourage development,” said Rob Perrins, chief executive of Berkeley. “We want to bring a distinctive approach to the local market.”
He said the new division would develop homes including family housing, affordable homes, luxury homes and student accommodation, using “our expertise in large-scale regeneration”.
It will be headed by Angus Michie, chairman of the group’s St Edward business — a joint venture with the Prudential insurance company that focuses on high-end luxury homes, including a flagship development on the Strand in central London.
Anthony Codling, analyst at Jefferies, said: “There is a view from some investors that having all your eggs in the London and the south-east basket is a double-edged sword, and it’s swinging one way at the moment. It can potentially be viewed as a negative.
“[In the West Midlands] they have identified areas that fit their current product mix and where the demographics are similar to areas they know and understand.”
A person close to the company said the Birmingham move did not represent a reduction of its business in London and the south-east, where all of its land bank is currently located.
Berkeley’s move comes as an oversupply of new-build apartments in the capital is looming, according to documents from researchers at Molior London seen by the Financial Times.
Their research shows that the number of construction starts of new homes in inner London have been higher than those sold since 2012, resulting in an estimate of more than 10,000 unsold units by the end of 2016.
Berkeley said in December that its sales reservations had dropped by a fifth since the UK voted to leave the EU in June. It also amended a planned five-year dividend policy in favour of an enhanced share buyback programme to return more value to shareholders. It said most of its recent land purchases had been in outer London and the home counties, rather than the faltering inner London market.
The group’s strategies are closely followed in the market, thanks to the reputation of its chairman and former chief executive, Tony Pidgley, who successfully weathered storms including the 2008 financial crisis.
The group has also said it will focus on modular construction, sometimes known as prefabrication, and last year launched a house design that can be largely built off-site and then completed on site within 14 weeks.
Berkeley previously operated in Birmingham after buying the Manchester-based housebuilder Crosby Homes. Its projects there included the residential elements of Brindley Place and the Mailbox, two city-centre regeneration schemes, but it sold the Crosby business in 2005.
Euronav looking for takeover candidates - De Tijd
Euronav [EBR:EURN] is looking for takeover candidates, reported Belgian daily De Tijd citing CFO Hugo De Stoop. The shipping company, specialised in oil tankers, got a loan of EUR 390m which the newspaper describes as a 'war chest'. For the loan, 11 tankers were given as collateral. The company has already cashed in EUR 95m from a sale and lease back of four super tankers.
According to the report, the cheap loans are meant to be used to hunt for takeovers, now that interest is low and there is overcapacity in the shipping sector. The report also referred to an earlier report in which CEO Paddy Rogers confirmed Euronav was looking for takeovers.
BAT/Reynolds talks hit a bump over ‘heat vs burn’ technology - report
Merger talks between Reynolds [NYSE:RAI] and British American Tobacco [LON:BATS] have hit a bump over the valuation of Reynolds’ technology which heats tobacco rather than burning it, The Sunday Telegraph reported.
BAT, already a 42% shareholder in Reynolds, is eager to get its hands on Reynold’s purportedly safer and more advanced technology to enable it to compete better against its competitor Philip Morris, the report said, quoting Owen Bennett, an analyst with Jefferies.
Boosting its standing among its rivals would offer BAT a significant incentive to increase its bid, Bennett said. Reynolds turned down a USD 56.50-per-share offer from BAT last October but is expected to agree a deal priced at approximately USD 60 per share, with a bigger cash component, according to Jefferies.
A BAT insider said the USD 1.6bn-plus cash flow generated by Reynolds was more important than access to the company’s technology, the item reported. The same source said no deadline has been set for the merger to be agreed.
According to people with close links to the talks, the two sides are also still discussing the exact mix of stock and cash which will make up the GBP 38bn (USD 47bn) deal, the report said.
Weekly Performance
Dow +0.73% S&P +1.23% Nasdaq +1.64% Russell +0.30% Mexico +0.94% (-1,41% in $) Brazil +2.39% (+3,42% in $) EuroStoxx+0.93% FTSE+1.26% (+0.78% in $) CAC +0.98% Dax +1.03% Ibex +1.75% MIB +2.36% SMI +2.02% Nikkei +0.27% Hang Seng +3.27% CSI +1.61% Shanghai +1.88%
After a slow start to the New Year, the stock market closed the week on an up-note, with NASDAQ and S&P posting new highs; the DJIA was flirting with the 20,000 barrier again. Investor sentiment over the past week saw a stark change from how the year closed 2016. The markets saw some unwinding of the post-election reflation trade mid-week as buying bonds became popular again, pressuring Treasury yields and the greenback. Big retailers like Macy's and Kohl's revealed holiday season results fell short of expectations, but large-cap tech stocks found renewed favor, with FANG stocks leading the NASDAQ to fresh highs. For the week, the Dow gained 1%, the S&P climbed 1.7% and the Nasdaq rose 2.6%.
Macro :
- Fed’s Kashkari Optimistic New Congress May Reexamine Bank Rules
- Citadel’s Griffin Says Corp. U.S. More Leveraged Than Ever
- Fed’s Evans: Downside Risks Remain Amid Weak Global Growth
- Summers: Trump’s Deregulation Plan Sets Stage for Next Crisis
Keep an eye on :
- ABG SM : Abengoa Said to Be in Final Talks to Sell Brazil Ethanol Unit
- AZA IM : Etihad Airways Says Meeting on Alitalia’s Business Plan Monday
- AVP US : Avon Products Rises to Highs; Call Volume 20.7x the 20-Day Avg
- ARAMCO IPO : Aramco Said to Have Discussed Reducing Tax Rate for IPO: FT
- BATS LN : BAT/Reynolds talks hit a bump over ‘heat vs burn’ technology - The Sunday Telegraph
- BT/A LN : Virgin Chooses BT Group for Wireless Network Order: Telegraph
- CSGN VX : Credit Suisse Said to Seek Buyers of Shell Assets: Inversor
- CSGN VX : Credit Suisse Saw External Asset Management Outflows in 4Q: FuW
- DAI GY : Nvidia and Mercedes-Benz to bring an AI car to market within a year - Recode.net - http://tcrn.ch/2iRx7Fd
- BN FP : WhiteWave Extends Long Stop Date on Danone Deal by 90 Days
- RLD SW : Edmond de Rothschild Asset Mgmt to Exit U.K. Market: Telegraph
- EURN BB : Euronav looking for takeover candidates - De Tijd
- FCA IM : Fiat Chrysler Recalls Est.86,403 Older-Model SUVs for Airbags
- GFC FP : Gecina Appoints Meka Brunel as CEO, Replacing Philippe Depoux
- GBX US : Greenbrier Jumps 18% as Year EPS View Beats, Peers Gain
- KU2 GY : China’s Midea Settles Takeover of Kuka on Jan. 6
- LHA GY : Lufthansa Confirms 2016 View, Sees ‘Clearly Negative’ Pricing
- MC FP : TAG Heuer CEO Sees Return to Growth for Swiss Watchmaking: SamS
- NOVN VX : Ionis Sees ’16 Pro Forma Net Op Income in Low-to-Mid $20m Range
- ORA FP : France’s Arcep May Allocate 2.6 GHz, 3.5 GHz Bands in 2nd Half
- ROG VX : Illumina Call Volume Jumps as Stock Rallies Before Conference
- SAN FP : Sanofi Has Capacity to Make Acquisitions: CEO Tells Figaro
- SIE GY : Siemens, Marubeni Set to Win Thai Power Plant Order: Nikkei
- UHR VX : TAG Heuer CEO Sees Return to Growth for Swiss Watchmaking: SamS
- TII CN : Terra Firma Said to Revive Sale of Wind Farm After Brexit Delay
- TOM2 NA : Automakers, suppliers team up to share costs of self-driving cars - http://reut.rs/2iRp8rN
- TUI1 GY : Germany’s TUI Considers Sale of Travelopia to Kuoni: City A.M.
- TRI FP : Trigano in exclusive talks to acquire Adria
- UBSG VX : UBS CEO Says He Welcomes Basel Committee Decision Delay: NZZ
- VIV FP : Ubisoft Says Assassin’s Creed Movie Is Doing ’Well’ Abroad
- VOD LN : Vodafone considers merging Indian unit with Jio, Idea; Telenor India and Tata DoCoMo seek buyers - Sunday Telegraph
- VOW3 GY : Volkswagen Recalls 2009-2010 VW, Audi Models on Brake Failures
- VOW3 GY : Audi 2016 Global Sales Up 3.8% at 1.87 Mln Cars: Welt
Apple’s Fortunes Are Hard to Read
Apple’s highly focused business model means even conservative forecasts can miss the mark
Apple is famously conservative with its projections, but the company’s unique business model makes it easier for a small miss to have a major impact.
Take the most recent fiscal year, which ended in September: According to a proxy filing on Friday, Apple’s board of directors had projected a 4% decline in annual revenue early in the year. But sales ended up falling by 8%, with operating income missing the board’s targets. Apple’s top executives, including CEO Tim Cook, got less pay as a result.
What that means going forward is a fair question for investors. Apple’s internal estimate for the current fiscal year remains unknown, though its published forecast for the December quarter that will be reported later this month could hardly be considered aggressive. The company projected revenue growth of just 1.5% at the midpoint. It is worth noting that Apple has exceeded the midpoint of its quarterly revenue forecast 87% of the time in the past four years since it made changes to its guidance practices.
But the miss last year is still instructive on how quickly things can go south for a huge company that depends on just a few big drivers. The iPhone logged its first-ever annual sales decline in fiscal 2016. And China sales—which now account for nearly one-quarter of Apple’s revenue—slid in the last half of fiscal 2016 after more than a year of high double-digit growth thanks to brutal competition in the smartphone market there.
Forecasting, of course, is never an exact science. But Apple is a company that likes to do a few things very well. That can mean trouble when just a few of them don’t go so well.
Parkinson’s Therapy Gets Fresh Look From Device Makers
Medtronic faces new competition in offering deep brain stimulation systems that moderate Parkinson’s symptons
Deep brain stimulation, an established therapy that modifies the brain’s circuitry to treat symptoms of Parkinson’s disease and other movement disorders, is attracting fresh attention from medical-device makers who believe it is underused.
St. Jude Medical Inc. recently introduced a new DBS system in the U.S., and Boston Scientific Corp. is planning its own entry late next year. Both already sell the implantable devices for DBS in Europe.
The shake-up in the U.S. reflects the promise that St. Jude—which recently combined with Abbott Laboratories—and Boston Scientific see in a market that for years has been served by just one company: Medtronic PLC.
Although DBS accounts for just $500 million of Medtronic’s roughly $30 billion in annual revenue, it is one of the company’s fastest-growing areas, expanding around 9% a year, according to a company presentation at a medical meeting in late 2015. The price of a Medtronic DBS system ranges from about $18,000 to $35,000.
“The last two decades, Medtronic has done the yeoman’s work of creating and legitimizing DBS,” said Brett Wall, head of the company’s brain business. ”It’s about time someone else got in this market.”
Parkinson’s, an incurable, degenerative neurological disease, affects around one million people in the U.S. DBS, which involves embedding a wire in the brain and a pacemaker-like unit in the chest, has been shown to significantly increase control over symptoms in those with advanced Parkinson’s.
But not all patients stand to benefit from DBS. Some can control their symptoms using medication alone, while others have complications, such as dementia, that rule out surgery.
Even so, all three medical-device companies believe only a fraction of eligible patients are undergoing the surgical procedure. Maulik Nanavaty, head of neuromodulation at Boston Scientific, estimates that about 13% of Parkinson’s patients who could benefit from DBS have used it. Medtronic puts that figure at around 25%.
One reason for the modest use in the U.S., according to Allen Burton, medical director of neuromodulation at St. Jude, is a lack of familiarity. Many Parkinson’s patients are treated by primary-care doctors or community neurologists who lack connections with the roughly 100 specialist centers across the country that offer DBS.
The cost of DBS implantation can reach $100,000, but insurers typically reimburse most or all of the bill, according to the National Parkinson Foundation. As much of a deterrent to use is the time commitment required. The procedure involves a two-day hospital stay, plus numerous consultations before and after treatment. There is also the travel time to the specialist centers.
St. Jude is working with community neurologists to raise the profile of DBS and is considering advertising the procedure directly to patients. The device makers are also betting that improving the precision of DBS will make it more marketable.
With traditional DBS implants, the current radiates out from the end of the wire. Now Boston Scientific and St. Jude have developed devices that can “steer” the electrical impulse in a particular direction, with the aim of reducing side effects such as mood changes or speech difficulties. Medtronic plans to launch its own steerable device in the next two to three years, Mr. Wall said.
It also is working on a way to vary the strength of the electrical signal depending on the brain’s own activity, though that technology is at least five years away from launch.
Another approach: advocating use of DBS at an earlier stage. DBS is typically used in patients with advanced Parkinson’s, but the Food and Drug Administration earlier this year said Medtronic could market one of its devices when the disease had been diagnosed for as little as four years. That decision followed a large study by Medtronic showing that earlier-stage patients did better on medication plus DBS, compared with medication alone.
Even with such advances, medical-device makers could come up against a more fundamental problem: fear of surgery, particularly on the brain. “Many people would avoid brain surgery if they have other options,” said Jeff Bronstein, a neurologist at University of California, Los Angeles. “The risks are relatively small, but if you happen to be in the 1% to 2% that has a stroke, that’s a big deal.”
Concern about surgery risks means DBS is viewed “almost as a last resort,” according to Patrick Hickey, an assistant professor of neurology at Duke University School of Medicine who has received grant funding from Medtronic. But he said it was gradually “becoming part of the treatment program” as doctors became more familiar with it.
Some believe DBS has more potential still. Among them are researchers at Vanderbilt University, who believe it could go beyond controlling the symptoms of Parkinson’s to delaying the progression of the disease itself.
David Charles, a professor of neurology at Vanderbilt who has done consulting work for Medtronic, said the research team was in the process of raising funds to run a large clinical test of that hypothesis, after a small study showed early-stage Parkinson’s patients on standard therapy were two to five times more likely to worsen in two years than those using DBS.
“DBS plus medicine seems to be not just a little better, but potentially is far superior to standard therapy,” Dr. Charles said. “That still needs to be proven.”
Saudi Aramco gets ready for ‘no ordinary IPO’ - http://on.ft.com/2i7lk6U
Largest oil producer must resolve issues on shape, tax and listing location
A year ago Mohammed bin Salman, Saudi Arabia’s deputy crown prince and the power behind the throne, electrified the global energy industry by revealing plans to float the world’s largest oil producer.
The ambitious proposal for an initial public offering in state-owned Saudi Aramco is the centrepiece of the hard-charging 31-year-old’s vision to overhaul an economy seen as too heavily dependent on natural resources.
One year on from Prince Mohammed’s statement of intent, many key issues are still to be resolved: notably those pertaining to the precise shape of Saudi Aramco as a public company, its tax rate and dividend policy, and where it will take a stock market listing.
But Saudi officials and advisers who are scrambling to secure work on the flotation say one thing is clear: this is no ordinary IPO.
“This listing is different to every other in terms of scale, the nature of the offering, the uncertainties around it, the timeline, the process,” says one person who has discussed the IPO planning with Saudi officials. “Nothing about it is comparable.”
Saudi officials are seeking to transform Saudi Aramco into the world’s most valuable publicly traded company, which they say is worth about $2tn.
Those close to the planning say the sale of a 5 per cent stake should happen next year, although the number of shares sold could increase, and the IPO timing could slip.
Saudi Aramco declined to comment. Saudi government officials were unavailable to comment.
Advisers are fully aware the IPO plans are being driven by Prince Mohammed, the son of King Salman bin Abdul Aziz al-Saud.
They say a successful flotation is essential to the deputy crown prince’s radical efforts to wean the kingdom off oil through his Vision 2030 programme, which aims to diversify the Saudi economy and create jobs.
The slump in oil prices since 2014 unleashed a sharp economic slowdown in Saudi that has prompted criticism of the ruling royal family by the country’s citizens, and Prince Mohammed wants to use the IPO proceeds for investments in non-oil industries — from technology and manufacturing to tourism.
“The state can no longer afford to allow see-sawing [oil] prices to disrupt its ability to govern,” says Jim Krane, a Middle East energy expert.
What’s in the IPO and what’s out
Saudi Aramco is heavily entwined with the Saudi state. Although its core operations are focused on producing and refining oil, the company conducts an array of other activities on behalf of the government.
These functions have included operating hospitals, running education programmes and building sports stadiums.
But to achieve the highest possible valuation in the IPO, there is a drive under way to streamline the company that would be taken public, so that it resembles one of the large international oil groups rather than a sprawling conglomerate.
The so-called integrated western majors have an upstream division responsible for exploration and production, and a downstream unit that refines crude.
“A lot of housekeeping and spring cleaning needs to be done before any listing can happen,” says a second person familiar with Saudi Aramco’s IPO planning. “Aramco needs to present itself as a company that is focused. Anything that is not for a strategic purpose will need to be removed.”
Staff at Saudi Aramco have spent months untangling the company’s finances from those of the government, and separating its core oil operations from projects that reflect its broader role in Saudi society.
Saudi Aramco aims to exclude as many of these non-oil projects as possible from the company that floats, by establishing joint ventures and other arrangements to take responsibility for such activities.
The company is working with the government to create a project management entity that can handle development of critical infrastructure, says one person with knowledge of the matter.
Who’s in charge, tax and the dividend
Under the IPO plans, the Saudi government will remain Saudi Aramco’s controlling shareholder, having the final say over production levels and management of the kingdom’s oil reserves.
Saudi Aramco executives are keen to resolve issues around payments it makes to the state in the form of taxes and royalties, because this will heavily influence its dividend policy, and therefore the company’s IPO valuation.
Historically, Saudi Aramco’s profits have been taxed at 85 per cent, and it pays a 20 per cent royalty on its oil production to the state, say two people close to the company.
The company has discussed the case for reducing its tax rate to about 50 per cent, although this has not been finalised, and requires government approval.
Timing should be everything
Getting a flotation away in 2018 is no easy task for Khalid Al Falih, the Saudi energy minister and chairman of Saudi Aramco.
Saudi Aramco pushed last year to overhaul its accounts so that its financial reporting in 2017 could be used in its IPO regulatory filings, say several people close to the company.
But the government will need to set out a new tax regime for Saudi Aramco before it can produce its 2017 figures in this manner, and generate pro-forma accounts for the previous two years.
Meanwhile a third-party audit of the kingdom’s oil reserves — estimated at 260bn barrels by Saudi Aramco last year — has been conducted, say two people familiar with the work.
Releasing audited accounts and reserves would be an unprecedented exercise in transparency by the company. Saudi Aramco has never issued a set of financial statements, and the country’s reserves data has been questioned by experts because the figures have barely fluctuated since the 1980s.
Where will Saudi Aramco find a home?
Another big outstanding question is the location of Saudi Aramco’s stock market listing. People close to the company say a primary listing is most likely overseas, with a secondary one in Riyadh.
While New York is being considered for the primary listing, US legislation that allows families of victims of the 9/11 attacks to sue Saudi has complicated matters. London is seen as prestigious, and Asian exchanges, including Hong Kong and Tokyo, are also being discussed.
The listing, disclosure and corporate governance rules associated with these overseas exchanges could have a significant influence on which one Saudi Aramco selects.
For example, companies on the London Stock Exchange are required to have a free float of not less than 25 per cent of their shares, although the authorities can permit a listing that does not meet this threshold in certain instances.
“In order to be able to list Aramco . . . and get the sort of valuation that the Saudis are hoping for, Aramco will need to open its books and increase transparency, including with independently audited reserves, to an extent it has not previously,” says Jason Bordoff at Colombia University’s Centre on Global Energy Policy.
Hedge fund launches heading for eight-year low
Fund closures are also set to be the highest since 2008
New hedge fund launches last year look set to be the lowest since 2008 if the rate at which new funds were launched in the first three quarters held steady to the end of 2016. Fund closures are also set be the highest in eight years.
There were 576 new launches in the first nine months, lower than 2008’s 659 launches, according to data from Hedge Fund Research. Meanwhile, 782 funds were liquidated, making it the highest level of closures since 1,471 funds were shut down in 2008.
Despite the slowdown, alumni of some of the biggest names in the hedge fund industry are midway through launching new funds: Ben Melkman, a former Brevan Howard partner who led the firm’s Argentina-focused fund, is starting a hedge fund in New York called Light Sky Macro and Marcello Sallusti, the former deputy investment chief at Egerton Capital, has launched Engadine Partners, a European equity fund that bets on stocks rising and falling.
There are also new funds in the works from former managers at BlueCrest Capital, the hedge fund-turned-family office run by Mike Platt, and from Brazilian bank BTG Pactual’s hedge fund unit. David Russekoff, a former chief investment officer at Perry Capital, is also starting a hedge fund: Smith Cove Capital Management.
For an entrepreneurial industry built on the reputation of individual traders and their recent track records, a steady flow of new launches and, conversely, closures, is normal. But a lack of ready funding, an increase in regulation that has driven up costs, and a sceptical investor base means it is becoming harder to start a fund.
At the same time, investors are seeking more liquid alternatives to traditional hedge funds, or strategies with longer lock-ups, such as private equity and real estate.
It is driving a trend towards fewer hedge fund start-ups. Those that do launch, are led by managers with established records.
Foreign takeovers of UK companies fall after Brexit vote
Sharp devaluation of pound was not enough to encourage foreign buyers in second half
The sharp devaluation of the British pound in the aftermath of the Brexit vote in late June failed to boost foreign takeovers of British companies, as political instability trumped the appetite for bargains.
A new study shows that despite a few large foreign acquisitions of UK groups, such as the takeover of chip designer Arm by Japanese tech conglomerate SoftBank for £24bn, overseas buyers steered away from British assets.
During the second half of 2016, the number of UK companies taken over by foreign buyers fell by 30 per cent compared with the same period in 2015, according to accounting firm Moore Stephens, as concerns about the British economy outweighed the benefits of a collapse in sterling.
After Britain voted to leave the EU, the UK currency slid from about $1.50 against the dollar to less than $1.20, fuelling speculation that British household names such as Vodafone and ITV could soon become foreign takeover targets.
However, a foreign takeover frenzy did not materialise. Moore Stephens’ research also showed that the total number of acquisitions of UK companies completed in 2016 fell 16 per cent to 1,002, down from 1,187 in 2015.
Debbie Clarke, head of M&A at Moore Stephens, said the drop in the value of the British pound had “only partly” made up for uncertainty surrounding the UK’s departure from the EU.
“There has been no rush of ‘carpetbaggers’,” she said.
“Foreign buyers still have understandable concerns over the speed of growth of the UK economy and they worry that further currency volatility would impact the future value of any dividends they repatriate. We are glad that the ‘Cassandras’ have been proven wrong for now,” she added.
That said, by different measures, the number of foreign takeovers of British businesses actually grew in the second half of last year. According to data by Dealogic, such deals increased from 428 in the first half to 446 in the second half. However, Dealogic’s definition of a takeover included any transfer of ownership starting at 1 per cent, compared with Moore Stephens’ 50 per cent or more threshold.
For many companies looking to do a deal, the US remains a preferred destination. The US economy is on track for a substantial boost to growth, according to economists and dealmakers, following the Trump administration’s promises to lower taxes and increase infrastructure spending.
“In developed economies, the US remains the preferred place to invest as the American economy is expected to grow substantially in the next year,” said Scott Barshay, a senior dealmaker at law firm Paul Weiss.
Mr Barshay added that the pound’s devaluation in the aftermath of the UK’s Leave vote was never going to be a driver for dealmaking.
“Companies won’t just do a deal in a country overseas because the currency valuation there has fallen,” Mr Barshay said. “There needs to be a strategic rationale. The currency arbitrage can make the transaction more attractive but it will never be the driver of the deal.”