FT : Grassley warns on ChemChina-Syngenta deal


Grassley warns on ChemChina-Syngenta deal
A $44bn Chinese bid for Swiss seeds and chemicals group Syngenta has come under fire from an influential US lawmaker for what he says are concerns it raises about the impact on US food and national security.
In a radio interview broadcast on Wednesday, Chuck Grassley, the Iowa Republican who chairs the Senate Judiciary Committee, said he was concerned that state-owned ChemChina’s bid for Syngenta would give Beijing ownership of a vital part of the US’s agricultural infrastructure.

“Because the food and agriculture sectors are part of the nation’s critical infrastructure this merger raises questions about the potential national security implications,” the veteran senator told an Iowa radio station.
While Syngenta is Swiss-owned, its biotech division is based in the US and is a big player in the US and international markets for genetically-modified seeds, a technology that Beijing has long coveted as it faces the challenge of guaranteeing its own food security.
The two companies announced the deal in February and said they would be submitting it for approval by the Committee on Foreign Investment in the US, a government panel that reviews purchases of US assets by foreign investors for potential national security implications.
CFIUS has never rejected a deal on the grounds of food security and lawyers say the ChemChina-Syngenta deal does not raise any obvious national security concerns, although it will be subjected to an obligatory 75-day review because ChemChina is state-owned.
But the deal, which would be the largest overseas acquisition by a Chinese company, comes amid growing Chinese inbound investment into the US and greater political and regulatory scrutiny that comes with it.
US reviews of investments made by China increase
This Friday, Feb. 5, 2016, shows the building that houses the Chicago Stock Exchange in Chicago. The Chicago Stock Exchange, which was founded more than a century ago, is being bought by an investor group led by a Chinese company. The deal is expected to close in the second half of the year, but first needs approval from the U.S. Securities and Exchange Commission. (AP Photo/M. Spencer Green)
Deals examined on grounds of national security amid rise in M&A by the country
Mr Grassley is among a growing number of senior US officials who have raised concerns about the deal. Earlier this month, Tom Vilsack, the US agriculture secretary, said he had reservations about the transaction and its impact on US competitors trying to crack the Chinese market.
Mr Grassley said he was concerned about the increasing consolidation in the seed industry and what that meant for Iowa farmers. But a ChemChina acquisition of Syngenta would also give China even more control over the global market for GM corn, soyabean and other seeds than it already enjoys, he said.
Because it is the largest US export market for many crops, the decisions Chinese authorities make on approving certain lines of GM seeds have huge commercial implications with many farmers in the US and elsewhere refusing to plant any seeds not approved for sale in China.

My concerns of concentration and national security are compounded by the fact the Chinese government, if the ChemChina-Syngenta deal is approved, would be both a regulator in regard to biotech product approval and also at the same time owner of an entity that needs biotech approval,” he said.
In a separate interview with the Wall Street Journal published on Wednesday, Mr Grassley said he would be seeking a formal role for the US agriculture department on CFIUS when it came time to consider the acquisition of Syngenta. The department does not normally take part in such reviews.

WSJ : Starboard to Start Proxy Fight to Remove Yahoo’s Board

Starboard to Start Proxy Fight to Remove Yahoo’s Board

Hedge fund says in letter that board and management have failed to live up to promises

Hedge fund Starboard Value LP is seeking to remove the entire board of Yahoo Inc., setting the stage for a battle over the future of the faded Web giant.

The activist investor plans to announce Thursday morning that it will nominate nine directors to Yahoo’s board, according to a letter reviewed by The Wall Street Journal, making good on a threat made this year that it would seek to shake up the board if it felt the directors weren’t making changes fast enough.

Starboard’s letter says the board and management have continually failed to live up to their own promises, and shouldn’t be trusted with the decision on whether or not Yahoo should remain an independent company.

A Yahoo spokeswoman declined to comment on the Starboard proposal.

Starboard’s move adds pressure to Yahoo and Chief Executive Marissa Mayer as they attempt to turn around or sell the beleaguered company. Yahoo’s board has already launched a sales process for its core business, while Ms. Mayer is seeking to reignite its results through costs cuts and improved focus on key areas including search and content.

Should Starboard prevail, in a vote likely to be held a few months from now, it could increase the odds of a sale and a dismantling of the company, which owns valuable stakes in China’s Alibaba Group Holding Ltd. and Yahoo Japan.
Starboard has warned that “turning around this business is extremely difficult” and, while it wants the board to remain open-minded, it believes there are several “interested and credible buyers” for the core business.

The company’s bankers have been contacting potential suitors—including Verizon Communications Inc., IAC/InterActiveCorp. and Time Inc., as well as private-equity firms TPG and KKR & Co.—but the process is in the early stages. The activist’s letter says it is launching its fight, in part, because of concerns about the process and the board’s reluctance to give Starboard a voice.

Under pressure from Starboard and other investors, the Sunnyvale, Calif., company earlier reversed a plan to spin off its stake in Alibaba. This month, it added two new board members with deal-making experience.

Yahoo, a pioneering Internet business, has struggled to reinvent itself in the age of smartphones and social networks. A half-dozen leaders tried and failed to revive growth at the company before Ms. Mayer’s arrival in 2012.
Ms. Mayer has struggled to show progress of a turnaround in more than three years as chief executive. Her forays into mobile software, online video and search have yielded no meaningful growth in users or revenue, and marketers continue to shift spending to Internet rivals Google Inc. and Facebook Inc.
The company is projected to generate $2.83 billion in digital ad revenue in 2016, a drop of 13.9% from last year, estimates online ad researcher eMarketer Inc. That would be the single-biggest annual drop in sales for Yahoo in the six years since eMarketer began tracking it.

A crisis of morale has gripped the company in recent months, as dozens of executives who had been instrumental to Ms. Mayer’s turnaround plan have left for jobs elsewhere.

Starboard, which says it has a 1.7% stake, has already called for the removal of Ms. Mayer.

The activist, along with other investors including Canyon Capital Advisors LLC and SpringOwl Asset Management Inc., have in recent months argued the turnaround has fallen flat.

The sides engaged in discussions in recent weeks aimed at avoiding a proxy fight, including a meeting that was held the same morning Yahoo added the new directors, people familiar with the matter said. The nominations caught Starboard by surprise, the people said. Changing a majority of the board would have been unprecedented in a negotiated settlement.

Among Starboard’s nominees are investment banker and deal maker Tor Braham, technology executives Dale Fuller and Richard Hill, media executive Eddy Hartenstein and Starboard’s own CEO Jeffrey Smith, according to the letter.

Yahoo has been here before. In 2012, Dan Loeb’s Third Point LLC waged a fight for board seats and leadership change. Mr. Loeb and two allies eventually took two seats and then helped hired Ms. Mayer.

Seeking to overturn the entire board is rare for activists, though Starboard managed a complete sweep of 12 directors at Darden Restaurants Inc. in 2014. Yahoo has a far larger market capitalization and Starboard has a much smaller stake, percentage wise, than it had in that fight.

Both sides will now canvas shareholders for support in the coming months, heading to a showdown at the annual meeting, typically held in June.

>>> Banca Carige receives non-binding offer from Apollo

Banca Carige receives non-binding offer from Apollo

Banca Carige, the listed Italian lender, has received a non-binding offer from private equity firm Apollo for a significant stake in the bank, Italian language daily La Repubblica reported.

The report cited unspecified rumours as saying that the offer was received a month-and-a-half ago but has been put on hold until a new board of directors is elected for Carige at its shareholders' meeting on 31 March.

The report said that under the terms of the offer, Apollo would subscribe to a EUR 525m capital increase reserved for the fund. The report said that a further EUR 100m capital increase would be launched in tandem for Carige's existing shareholders.

The report said that as a result, Apollo would have a strategic stake in Carige while the holding of the Malacalza family, presently Carige's largest shareholder, would fall.

The report said that Apollo is also offering to acquire a EUR 3bn non-performing loan portfolio for EUR 600m. The report said that it was unclear whether the NPL offer was separate or connected to the bid for a stake in Carige.

La Repubblica

>>> US After Hours: KBH +8.6%, PVH +3.8%, REED -12% following earnings

AH Summary: KBH +8.6%, PVH +3.8%, REED -12% following earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: KBH +8.6%, PVH +3.8%, SIGM +3.6%, CXRX +1%

Companies trading higher in after hours in reaction to news: TEX +9.1% (To move forward with negotiations with Zoomlion Heavy Industry Science and Technology Co - received a revised non-binding proposal $31/share cash)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: REED -11.8%, SPWH -6.2%

Companies trading lower in after hours in reaction to news: VTAE -2.1% (to offer and sell shares of its common stock in an underwritten public offering; size not disclosed)

>>> Mediaset and Vivendi to engage in share swap to cement content platform deal

Mediaset and Vivendi to engage in share swap to cement content platform deal 

Mediaset [BIT:MS], the Italian media group, and Vivendi [EPA:VIV] its French counterpart, are to engage in a share swap to cement a pan-European TV content deal, Italian language daily Il Sole 24 Ore reported. The unsourced report said that the share swap would lead to Mediaset holding 3% of Vivendi while Vivendi would hold the same stake in Mediaset.

The report noted that as Vivendi has a market capitalisation of EUR 26bn and Mediaset only only EUR 4.5bn, Vivendi would be compensated by taking a stake in Mediaset Premium, Mediaset's pay-TV division.

The report noted, however, that Mediaset has no intention of giving up control of Mediaset Premium because it is considered strategic to the group's operations.

The report added that Mediaset is receiving legal advice from Chiomenti and Vivendi from Carnelutti.

Il Sole 24 Ore

>>> Asian Update

Asian Market Update: Decline in commodities back in focus


***Economic Data***
- (NZ) NEW ZEALAND FEB TRADE BALANCE (NZD): 339M V 90ME; 2nd month of surplus

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.1%, S&P/ASX -1.1%, Kospi -0.3%, Shanghai Composite -0.9%, Hang Seng -1.1%, Jun S&P500 -0.2% at 2,024

***Commodities/Fixed Income***
- Apr gold -0.5% at $1,218/oz, May crude oil -0.2% at $39.73/brl, May copper +0.1% at $2.24/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 10,230 tonnes from 10,274 tonnes; first decline since Feb 12th
- WTI crude trades below $40 heading into NYMEX close, down 4%
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5150 V 6.4936 PRIOR; weakest setting since Mar 16th
- (CN) PBOC to inject CNY60B in 7-day reverse repos
- (CN) SWIFT: CNY use in international transactions 1.76% of total in Feb v 2.45% prior
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs,¥240B in 10-25yr JGBs and ¥160B in JGBs with maturity over 25-yr
- (NZ) New Zealand sells NZ$100M Apr 2033 bond

***Market Focal Points/FX***
- Asian equity markets are largely in the red, tracking more pronounced declines in US indices even as volatility of the pre-holiday week remains depressed. Commodity markets returned to the forefront of investors concerns as oil fell back below $40/brl after large builds in DOE and API weekly inventory data, though the general spillover from falling commodity prices is part of a broader narrative in Asia. Specifically, Japan's Mitsui is lower after formally cutting FY profit guidance on the close overnight due to impairment related to energy market price falls. Mitsubishi Corp was also on the hot seat with Nikkei report speculating commodity decline related impairments could send it to its first net loss in years. Company denied those rumors but did concede that it is preparing to formally downgrade its profit projections. Similarly in Australia, ANZ bank was down sharply after announcing it is raising its impairment provision by at least A$100M due to "pockets of weakness due to commodity prices in resources and related industries," highlighting the long-feared risks of a spillover from sour loans in the resources sector into the financial system. Among the FX majors, USD/JPY shrugged risk-off sentiment with a 50pip rise to 112.80, in line with the firmer USD setting vs CNY. AUD/USD was down over 40pips to test below $0.75 level, while NZD/USD initially rallied to 0.6720 on strong trade data before sliding to 0.6690.

- Among notable speakers, China Premier Li delivered the keynote address at the Boao forum with largely boilerplate rhetoric. Li saw latest employment data as steady and also promised to help workers who lost their jobs due to overcapacity in steel/coal find new work. Li acknowledged that China is facing unavoidable challenges in the process of upgrading economy, but also noted there have been positive changes this year. On exchange rate, Li pledged to keep Yuan levels stable and not devalue to boost exports, assuring the audience of his confidence in maintaining the 6.5% GDP target for the next 5 years.

- In Japan, BOJ Gov Kuroda also largely reiterated his prior expectations that negative rates will spread to real economy, adding he expects to face less opposition to negative rates at the next policy meeting. Note that the most recent decision split was already reduced to 7-2 from initial 5-4, and the latest Opinion Summary from that Mar 15th decision published today saw some agreement that wage growth has been weak, trend CPI of 1.0-1.5% is shaky, and negative rates have produced some intended effects with limited portfolio rebalancing. Board members agreed that more exemptions to negative rates could heighten market volatility. Earlier, a Nikkei report also indicated that there is a new focus within the BOJ to keep down interest rates - especially the short end - rather than expand money supply with more JGB purchases.

- New Zealand trade balance was the only economic datapoint in the session, posting its 2nd straight month of surplus on hotter than expected exports. Decline in shipments to US of -3.6% was much lower than -9.5% of the prior month, and the exports of dairy were a more healthy 9% vs 3.7% prior.

***Equities***
US equities / ADRs:
- SPLS and ODP: US judge reproaches FTC for questionable legal tactics in Staples-ODP merger case - press; SPLS +5.5%, ODP +11.7% afterhours
- KBH: Reports Q1 $0.14 v $0.11e, R$678M v $633Me; +7.0% afterhours
- PVH: Reports Q4 $1.52 v $1.45e, R$2.11B v $2.07Be; +5.4% afterhours
- LCI: Cuts FY16 guidance to R$555-565M v $578Me (guided $585-595M prior); -0.8% afterhours
- SPWH: Reports Q4 $0.27 v $0.25e, R$213M v $205Me; -9.4% afterhours

Notable movers by sector:
- Consumer discretionary: Shimamura 8227.JP +7.0% (guidance speculation); Panasonic Corporation 6752.JP -0.2% (to withdraw long term sales target)
- Financials: China Life Insurance 2628.HK -3.0% (FY15 result); Macau Legend Development 1680.HK -3.6% (FY15 result); ANZ Bank ANZ.AU -5.7% (credit update); Mitsui & Co 8031.JP -7.1% (guidance)
- Industrials: Qinhuangdao Port 3369.HK -14.5% (FY15 result); BBMG Corp 601992.CN +5.9% (FY15 result)
- Technology: TCL Communication Technology 2618.HK -5.8% (FY15 result)
- Materials: Anhui Conch Cement 600585.CN -1.0% (FY15 result); Mitsubishi Corp 8058.JP -2.5% (guidance speculation)
- Energy: PetroChina Co 857.HK -4.1% (FY15 result); GCL-Poly Energy Holdings 3800.HK -3.0% (FY15 result); Beach Energy BPT.AU -7.9% (headcount cut following merger)
- Telecom: Coolpad Group 2369.HK -1.5% (FY15 result)

>>> US Close Dow-0.45% S&P -0.64% Nasdaq-1.10% Russell-1.97%

Closing Market Summary: Averages End Down as Oil Stumbles 

The stock market spent the Wednesday session under selling pressure as a tumble in crude oil fueled a retreat in the broader market. Meanwhile, hawkish commentary from St. Louis Fed President Bullard (FOMC voting member), the underperformance of the heavyweight financial sector (-0.8%), and some below-consensus earnings results led the averages to their worst levels of the day. The Nasdaq Composite (-1.1%) ended the Wednesday affair behind both the S&P 500 (-0.6%) and the Dow Jones Industrial Average (-0.5%).

Before the opening bell, crude oil abandoned the $41.00/bbl price level after the API weekly inventory report showed a larger-than-expected build. Later, the energy component and the major averages carved out fresh session lows following the release of the Department of Energy's more influential stockpile data. The report showed that crude oil levels increased by 9.35 million barrels (consensus 3.09 million barrel) over the last week. By the end of its pit session, oil had surrendered 4.3% ($39.79/bbl).

Separately, hawkish commentary from St. Louis Fed President Bullard added to uncertainty in the broader market. President Bullard argued that rising inflation expectations would call for more rate hikes and that an April hike is not off the table. President Bullard's hawkish note raised speculation that there may be growing dissent on the FOMC with regards to the direction of the fed funds rate.

Heavily-weighted technology (-0.6%), consumer discretionary (-0.6%), health care (-0.6%), and financials (-0.8%) all joined energy (-2.1%) on the bottom of the leaderboard. Conversely, countercyclical utilities (+0.7%) and consumer staples (UNCH) ended above their flat lines.

Commodity-sensitive energy (-2.1%) displayed broad weakness as independent oil and gas names, refiners, and pipeline companies all showed steep losses. The broader sector has tumbled 2.9% thus far this week, but remains higher by 8.5% in the month of March. On a month-to-date basis WTI crude remains up 17.4%.

In the heavyweight technology space (-0.6%), data storage names displayed relative weakness as Western Digital (WDC 48.72, -2.62) and Seagate Technology (STX 34.80, -2.24) plummeted 5.1% and 6.1%, respectively. Additionally, the high-beta chipmakers underperformed, evidenced by the 1.3% decline in the PHLX Semiconductor Index.

The health care space (-0.6%) fell as biotechnology retraced yesterday's rebound effort. The iShares Nasdaq Biotechnology ETF (IBB 254.26, -8.68) surrendered all of its gain from yesterday and trimmed its week-to-date gain to 1.5%. Separately, health care provider and Dow component UnitedHealth (UNH 129.79, +1.77) ended at the top of the price-weighted index.

Meanwhile, Nike (NKE62.44, -2.46) had the worst showing in the Dow. The consumer discretionary name (-0.6%) fell after reporting disappointing top-line results for the third quarter. Elsewhere in the group, media name Time Warner (TWX 70.69, 2.13) plunged 2.9%.

The Treasury complex ended its day broadly higher as the group gained amid the downturn in equities. The yield on the 10-yr note ended its day lower by five basis points at 1.88%.

Today's participation was once again on the lighter side, with fewer than 839 million shares changing hands on the NYSE floor.

Today's economic data was limited to the weekly MBA Mortgage Index and the February New Homes Sales Report: 

  • The weekly MBA Mortgage Index showed a seasonally adjusted downtick of 3.3%, compared to last week's 3.3% decline.
  • New home sales, which are counted when a contract is signed, were at a seasonally adjusted annual rate of 512,000 in February, up 2.0% from an upwardly revised level of 502,000 (from 494,000) for January. The February number was nearly spot-on with the consensus estimate of 511,000.
    • As expected, sales in the West saw a huge reversal from the weakness in January, surging 38.5% to a seasonally adjusted annual rate of 151,000. January sales, which fell 32.7%, were reportedly impeded by abnormally wet weather.
    • Notwithstanding the big uptick in the West, total new home sales growth was still only modest due to a 4.1% decline in sales in the South, which is the biggest region for new home sales, accounting for 55% of new home sales in February. On a year-over-year basis, new home sales in the South are down 14.3%.
    • The Northeast saw the biggest drop in February, with sales declining 24.2%, and was followed by the Midwest, which saw sales slump 17.9% from January. Those downturns are apt to be blamed on inclement winter weather conditions. The March report will reveal if that in fact was the case.
    • The median sales price of new houses sold in February was $301,400, up 6.2% from January and up 2.6% from the same period a year ago.
    • At the current sales pace, there is a 5.6-month supply of new homes for sale, which is unchanged from January.

Tomorrow's economic data will include weekly initial claims (consensus 268k) and Durable Goods Orders for February (consensus -2.9%), which will both cross the wires at 8:30 ET.