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Link to Article :{http://for.tn/1B3veJo}
The only executive to head two Fortune Global 500 companies at once, Carlos Ghosn, the CEO of both Renault and Nissan, has created a $143 billion behemoth with far-flung headquarters, multiple boards, interlocking share ownership, and complex alliances. Will anyone else ever be able to run it?Can a corporation literally become unmanageable? That’s a question that some are starting to raise about Renault-Nissan. Its CEO, Carlos Ghosn, who has done a brilliant job creating this auto giant, has consolidated his power by constructing what’s arguably the most complicated management structure anywhere outside the Vatican—one so convoluted that he may well be the only person in the world capable of running it. Who else oversees two Fortune Global 500 companies, never mind ones separated by a 12-hour flight and language barriers? He holds the chairman and CEO titles at both Nissan, with headquarters in Yokohama, Japan, and Renault in Boulogne-Billancourt, France. Says Michael Useem, a Wharton professor who has studied the companies: “For any other person, the two-CEO thing would be preposterous.”
Ghosn seems to be built for the job: He has the ability to connect with strangers instantly and to compartmentalize, no discernible private life outside his family, and a willingness to travel 300,000 miles a year (that’s 11 circumnavigations). The question is, Who will run this leviathan, which he calls the Renault-Nissan Alliance, after the 60-year-old retires, or if, God forbid, something happens to him? It is such a demanding, bone-crunching job that Ghosn himself has said that after he leaves no one person should replace him. In fact, on numerous occasions he has said to a close former colleague: “Who would want this job?”
For the time being, Ghosn wants it. Over the years he has built Renault-Nissan into the fourth-largest carmaker in the world, after Toyota, GM, and VW. Yes, the Alliance is doing reasonably well—Nissan’s sales were up about 12% in the U.S. in 2014 thanks to a garageful of new models rolling out. The stocks of both companies have done well over the past three years, with Nissan rising 50% and Renault more than doubling. But the CEO will have to do some fancy maneuvering if the company is to become one of the top three global automakers, a goal he set at Renault’s annual meeting last April. (Currently Renault-Nissan sells 8.5 million cars a year. Toyota, GM, and VW each move nearly 10 million a year.)
There are obstacles. Of late Ghosn (rhymes with “phone”) has witnessed an exodus of top executives from both automakers. A large part of his company’s growth strategy is to conquer the BRIC markets, but the economies in Brazil and China are starting to slow, and Russia appears headed for recession or worse. Then there’s Infiniti, which has been unable to gain traction in the luxury market and has missed its long-term sales targets—Ghosn a year ago even floated the idea that Nissan sell it. On top of all that, his $6 billion bet on the electric Nissan Leaf has yet to come even close to paying off.
Ghosn exudes confidence about his challenges. “We still have a long way to go,” he told a town hall meeting at Nissan’s Smyrna, Tenn., plant in November, “but I’m not worried because we know what to do—we just need to execute.” Will that be enough?
Well, we will find out the answer to that question because it looks like this Machiavelli of management isn’t going anywhere anytime soon. He’s been the head of Nissan for 15 years now and of Renault for eight. Six months ago Ghosn signed a four-year contract to remain chairman and CEO at Renault, and he has until March 2017 on his Nissan contract. Renault currently has a 43.4% (fully voting) stake in Nissan, and Nissan holds a 15% (nonvoting) stake in Renault, which effectively gives Renault control. No one on the board of either company seems to be pushing for a leadership change. Nissan’s board is mostly executives, and Renault’s board is largely controlled by the French government, which owns 15% of the automaker.
Ghosn’s real power, however, resides in a small, nondescript office building in Amsterdam, where he holds the title of Renault-Nissan Alliance chairman and CEO. It has its own board, composed of at least three Renault senior executives and at least three Nissan senior executives. The Amsterdam office is where most of the major strategic decisions are made. Dizzy yet?
It gets even more convoluted. Last summer the Alliance acquired the Russian automaker AvtoVaz, which makes that country’s top-selling Lada. Ghosn is now AvtoVaz’s chairman, so in effect he runs three auto companies, with three different official languages, responsible for 10% of all cars sold in the world and ringing in an expected $140 billion in 2014 sales. Take a deep breath: The Alliance also owns 3.1% of Daimler, and Daimler, which makes Mercedes, in turn owns 3.1% each of both Nissan and Renault. Daimler and the Alliance have been working on 12 major projects on three continents. The most recent: Renault is providing diesel engines for Mercedes, and the German carmaker is providing powertrains for Infiniti.
Anyone who would take on Ghosn’s job would have to be a glutton for punishment. Last January he explained to an audience at the Stanford Business School that his schedule was already filled for all of 2014. He has homes in France, Japan, and Brazil, and is divorced with four grown children. When asked, numerous executives who have worked for him over the years say they cannot think of anything he does outside of work besides following soccer. Executives who have worked for Ghosn talk about sacrificing their lives for their jobs.
Ghosn still works 15 to 16 hours a day, circling the globe in his Gulfstream (which can fly from Paris to Tokyo nonstop), running town hall meetings, taking factory tours, dropping in on dealers, and attending executive and board meetings. He spends one-third of his time in France, a third in Japan, and a third bouncing around the 68 other countries where the Alliance has plants. It’s hard to imagine having the stamina to handle all that jet lag, the different cuisines, and an endless stream of decisions to make. Ghosn says he lives “like a monk,” keeping to a strict schedule of eating, sleeping, and exercise.
Ghosn is most famous for his turnaround of a struggling Nissan in 1999. This Brazilian-born Lebanese who speaks four languages—French, English, Arabic, and Portuguese (although not Japanese)—did what everyone said couldn’t be done in Japan: He broke up Nissan’s cozy keiretsu, abandoned the seniority system, and restored the carmaker to profitability within two years. He worked relentlessly and became a master of efficiency. The auto press nicknamed him “le cost cutter.” Such was his hard-driving fame that a Japanese publisher created a seven-part comic book about his corporate heroics. The manga has sold more than 300,000 copies.
Jose Muñoz, the chairman of Nissan North America, says that Ghosn makes decisions only at the appropriate place and time: “There’s no ‘Okay, you can do this’ conversation by the water cooler.” Like a general who has drawn up a detailed military campaign, Ghosn follows some strict basic rules. When he’s in Japan, he’s making decisions for Nissan. When he’s in Paris, he’s making decisions for Renault. And when he’s in Russia, he’s making decisions for AvtoVaz. That, he says, helps keep his life simpler and makes each team feel as if it has his undivided attention.
While Ghosn has been flying around the world, the auto industry has been abuzz with speculation about the growing number of departures from Nissan and Renault. In 2014, Andy Palmer, Nissan’s chief planning officer, left to run Aston Martin. Johan de Nysschen, who headed up Infiniti, left to run Cadillac. That followed a defection by Carlos Tavares, the COO of Renault, who in 2013 told Bloomberg (before telling Ghosn) that he wanted to run his own company. He now runs PSA Peugeot Citroen. Tavares’s predecessor Patrick Pelata left, taking responsibility for an industrial espionage scandal at Renault that turned out to be a hoax. He now works at Salesforce.com.
The partings seemed amicable, for the most part. Ghosn can be a tough boss, but even his critics admit he’s fair. He’s not abusive and never takes down an employee in public. Sources close to the departed executives give various reasons for their leaving, from being tired of the grind to having lived overseas too long to being offered a great opportunity at another company. Even so, it’s hard to imagine that Ghosn’s entrenched position doesn’t have something to do with it. “Every time someone starts understanding how the Alliance works,” says a former executive, “something happens, and they leave.”
“It’s interesting,” says Ghosn, “that everyone’s talking about executives leaving Nissan and Renault, although I don’t think the turnover is higher than what I see at GM, Ford, and VW.” As an example, he points out that Infiniti recently lured Roland Krüger from BMW to replace de Nysschen. Krüger will have his work cut out for him at the underdog luxury brand, but he seems to have the energy for the job. Recently he became the first German to trek solo to the South Pole.
Whether or not that level of turnover is normal, the fact remains that neither Nissan nor Renault has a clear candidate to replace Ghosn. Most of today’s top-line executives are in their fifties and sixties, and with Ghosn having at least four more years at the helm, the next leader is likely to be someone younger, says one former employee. The CEO says that each board has an envelope with the names of two or three candidates, though there are no obvious front-runners, at least to the outside world. “I’m not planning to go anywhere soon,” says Ghosn. “But this image of someone hanging onto his chair and eliminating all this potential is just a joke.”
The succession question is no joke for shareholders. “Ghosn will have to tell the world who’s going to take over,” says Ian Fletcher, a principal analyst at IHS Automotive in London. “He has to make his heir clear to shareholders and to the industry. If he doesn’t, he’s going to raise worries.”
If Renault-Nissan cannot find another globetrotting polymath like Carlos Ghosn, the remaining options leave much to be desired. In one scenario Renault-Nissan would be run by two CEOs, but we know how well dual-leadership models have worked out. (Citigroup or SAP, anyone?) Nissan and Renault could split up, but it’s hard to imagine two small companies surviving in an industry where scale counts. The third and likeliest scenario, say analysts, is that Nissan and Renault merge and have a single CEO. Even that wouldn’t be easy. One former employee who worked on a task force to analyze a merger of the two carmakers said that the cultures are so different, and the interlocking share structures of the Alliance so complex, that it would probably keep top management distracted from the core business for a year or two while they sorted out a corporate marriage.
Many in the industry consider Nissan a good but not a great car company, and Ghosn would like to see it move from good to great. How is he going to do that? Ghosn says his strategy is “mobility for all.” Asked what he means, he replies, “You have to be present in every market in the world and in every segment in every market.” If that sounds fanciful, the Alliance at least is making progress. It produces 110 different models in 170 different markets. Taking advantage of a sophisticated and flexible platform-sharing system, the company has a host of new models lined up, including new Nissan Maxima sedans and Murano SUVs. Renault debuted its new Espace minivan at the Paris auto show in October. This will be followed with replacements for the Megane compact car, Scenic compact minivan, and Laguna midsize sedan.
Some industry consultants wonder how the Alliance will pull off its “mobility for all” strategy, especially since the company has a reputation for being somewhat volatile—the opposite of a Toyota that just marches forward. The Alliance, for example, does a lot of things right—the new Nissan Rogue crossover is hot, on track to see a respectable 200,000 units this year. Renault’s low-cost Dacia brand is booming in Europe. But when Nissan revived the Datsun nameplate in India to compete with the $3,700 Tata Nano, the international car safety organization NCAP awarded the car zero stars for safety and recommended its withdrawal. The NCAP said the body shell is so weak that even if the company were to install airbags, it wouldn’t improve the survival chances of the occupants. A Nissan spokesperson says, “The Datson Go meets all local safety regulations, and we will continue to sell it in India.”
To make it to the ranks of the top three automakers, Ghosn is depending upon do-or-die stretch goals. He’s pushing Nissan to achieve what he calls his Power 88 Plan, meaning the company aims to achieve 8% global market share and 8% operating margins by the end of fiscal year 2017, which ends in March. Ghosn knows it will be hard to achieve his goal. The company is currently at what you might call Power 66—6% market share and margins—which means it has less than three years to increase its market share and profits by 33%. It is one thing to set aggressive stretch goals; it is quite another to make sure they’re achievable. Wharton’s Useem says that a CEO has to make sure that even the most extreme stretch goals are achievable. “If not, good executives can become frustrated and leave.”
There’s no question that the Alliance, on one level at least, has helped achieve efficiencies of scale and offers the best hope of Ghosn’s meeting his operating margin goals. That’s because the cross-shareholding structure gives Renault and Nissan an interest in seeing each other do well. In an age when most auto alliances have failed—Chrysler/Daimler and GM/Fiat come to mind—Ghosn has succeeded because he has given both Nissan and Renault the autonomy to act within certain bounds. Ghosn once compared the Renault–Nissan partnership to a marriage: “A couple does not assume a converged, single identity when they get married. Instead, they retain their own individuality and join to build a life together.” Says one former Nissan executive: “There’s none of the usual ‘I’m a winner and you’re a loser’ syndrome you see in traditional mergers.”
Ghosn uses logic and sometimes a little coercion to persuade the managements of Renault and Nissan to share designs and parts. If it’s mutually beneficial, it happens. (The downside is that if a collaboration envisions a winner and a loser, it probably won’t happen, even if there would be a net gain for the Alliance.) During the past year the Alliance has pushed to achieve even more efficiencies: Functions such as HR, supply chain, R&D, and purchasing are now being run out of Amsterdam. The company claims that such synergies helped the Alliance shave $3.6 billion in costs in 2013.
While he’s shaving costs, Ghosn must also figure out how to stay a leader in self-driving cars (see related story), rejuvenate Infiniti, and make electric cars go mainstream. No one has been as gung ho about electric vehicles (EVs) as Ghosn. In 2010 he launched the Leaf, a five-passenger electric sedan that got rave reviews from the car press. It was not the first electric car on the market, but it was the most ambitious. Nissan has invested $6 billion in the project. Around the time he launched the Leaf, Ghosn boasted that Nissan and its sister company Renault, which offered a similar EV under the Zoe nameplate, would sell 500,000 of the vehicles by 2013.
It hasn’t quite worked out that way. By many measures, the Leaf is a success. It is the world’s bestselling EV. This year American consumers will snap up about 30,000 of the cars, making it the bestselling plug-in vehicle in the U.S., ahead of the Tesla S and the Chevy Volt. The car, which has a range of 86 miles and a sticker price of $29,010 (before a $7,500 federal tax credit) has proved popular with drivers who have short, regular commutes.
Even so, the Leaf has fallen far short of Ghosn’s target, having sold only 152,000 units since its launch—a far cry from the 500,000 he predicted for 2013. To put Ghosn’s goal into perspective, so far global sales of all plug-in vehicles worldwide, according to the Plug-In Hybrid & Electric Vehicle Research Center at UC–Davis, amount to just more than 500,000 units.
What went wrong? The age-old problem with EVs: range anxiety. Ghosn argues that the problem is a lack of charging stations. The country has only about 10,000 installed, compared with more than 115,000 gas stations. That ratio doesn’t sound too bad, especially for a new technology, until you remember that it takes three to four hours to charge an EV compared with about five minutes to fill up a traditional car.
Ghosn says that sometime in the not-so-distant future, electric cars will have a 300-mile range. Also, he believes that super-fast chargers, which will be able to fill an electric car in about 12 minutes, will become widely available soon. “We already have prototypes that can do that,” says Ghosn.
As for Nissan’s luxury division, Infiniti, the brand has been growing, but not at a pace that satisfies Ghosn. A few years ago Ghosn said that Infiniti would be selling 500,000 cars a year by 2017. This year it will sell only 120,000. That goal was recently moved back to 2020. The division is profitable but seems stuck in the second tier of luxury brands. Its cars simply can’t compete with high-end luxury makers such as Mercedes, BMW, and Audi. Muñoz, who is currently in charge of Infiniti, says, “Typically, Infiniti buyers aren’t cross-shopping BMWs or Mercedes, but are Chevy and Ford owners looking to trade up.” Infiniti, needing a reason besides horsepower and a lower price to lure well-heeled customers behind the wheel, has been stressing the self-driving capabilities of its cars. That can’t hurt, but the brand will need more than that. Bringing Krüger from BMW to run the division will help instill some of that Bavarian motoring DNA. The marque has also hired a new advertising agency to stress that Infinitis are about excitement. We’ll see. Perhaps the most hopeful sign is that Ghosn, in 2013, shifted Infiniti’s headquarters from Japan to Hong Kong to move its employees out of the shadow of Nissan and its bureaucracy.
Ghosn is betting that electric cars, autonomous vehicles, and a sharp eye on costs will help drive the Renault-Nissan Alliance toward a bright future. Given his impressive track record and his willingness to experiment with new technology, he may well succeed in bringing the Alliance into the ranks of the world’s top three automakers. Yet even if he does, there still remains the question of who, if anyone, can run this Rube Goldberg organization when he steps down. If Ghosn in the next few years can’t figure out how to make the Alliance more manageable, or clone himself, in all likelihood it will have to undergo a long, costly restructuring. That’s not the kind of legacy any CEO would want to leave behind.
China’s Two Biggest Trainmakers Soar After Agreeing to Merge (1)
2014-12-31 02:32:37.607 GMT
(Updates with Shanghai share movement in fourth
paragraph.)
By Jonathan Browning and Clement Tan
(Bloomberg) -- China’s two biggest trainmakers surged after
saying they plan to combine in a $12.3 billion share swap, a
move intended to boost exports of the country’s high-speed rail
technology.
CSR Corp. will acquire smaller competitor China CNR Corp.
by issuing 1.1 new shares to CNR investors for each share they
own, the two companies said in a joint statement today. CNR
climbed 43 percent in Hong Kong trading, the biggest jump on
record, while CSR soared 31 percent at 10:18 a.m. Both companies
are state-owned.
The companies, which had $37 billion of combined sales in
the 12 months through September, are merging as competitors such
as Germany’s Siemens AG and France’s Alstom SA face constrained
public spending in developed markets. China is competing
aggressively for overseas projects, with Premier Li Keqiang
touting the nation’s rail technology on his foreign trips.
Shares of CNR and CSR, which have been halted from trading
since Oct. 27, climbed by the limit in Shanghai today.
Infrastructure builder China Railway Group Ltd. jumped 47
percent in Hong Kong during their suspension, while China
Railway Construction Corp. advanced 33 percent.
The offer values CNR at 6.19 yuan per Shanghai-traded
share, or HK$8.05 for its Hong Kong-listed stock, according to
today’s filing. The two companies earned a combined $1.84
billion in net income in the latest 12-month period, according
to data compiled by Bloomberg.
Global Competitor
The Chinese companies aren’t the only ones in the industry
seeking economies of scale: Earlier this year Siemens, Europe’s
largest engineering company, unsuccessfully tried to combine its
train operations with Alstom’s transport business as part of an
asset swap to buy the French company’s energy assets. Alstom
instead sold energy assets to General Electric Co., and will
receive the U.S. company’s rail-signaling unit in exchange.
The two Chinese companies recently embarked on a drive for
high-profile overseas projects. CSR won a 1.7 billion yuan ($274
million) contract to provide locomotives and cars for a railway
renovation project in Argentina, according to a Dec. 16
statement on the website of China’s State-owned Assets
Supervision and Administration Commission.
In October, CNR won a $567 million contract to supply
trains for Boston’s subway system, the first rail-related deal
for a Chinese company in the U.S.
CNR investors who object to the deal have the option of
receiving HK$7.21 in cash for each Hong Kong-traded share they
hold.
For Related News and Information:
China Merging Trainmakers Adds Pressure on Siemans, Alstom
China’s Two Biggest Trainmakers Seek Approval of Plan to Combine
China Said to Plan Merger of Biggest Trainmakers CNR, CSR
Top Stories: TOP <GO>
To contact the reporters on this story:
Jonathan Browning in Hong Kong at +852-2977-4706 or
jbrowning9@bloomberg.net;
Clement Tan in Hong Kong at +852-2977-2031 or
ctan297@bloomberg.net
To contact the editors responsible for this story:
Philip Lagerkranser at +852-2977-6626 or
lagerkranser@bloomberg.net
Ben Scent
2014-12-31 02:32:37.607 GMT
(Updates with Shanghai share movement in fourth
paragraph.)
By Jonathan Browning and Clement Tan
(Bloomberg) -- China’s two biggest trainmakers surged after
saying they plan to combine in a $12.3 billion share swap, a
move intended to boost exports of the country’s high-speed rail
technology.
CSR Corp. will acquire smaller competitor China CNR Corp.
by issuing 1.1 new shares to CNR investors for each share they
own, the two companies said in a joint statement today. CNR
climbed 43 percent in Hong Kong trading, the biggest jump on
record, while CSR soared 31 percent at 10:18 a.m. Both companies
are state-owned.
The companies, which had $37 billion of combined sales in
the 12 months through September, are merging as competitors such
as Germany’s Siemens AG and France’s Alstom SA face constrained
public spending in developed markets. China is competing
aggressively for overseas projects, with Premier Li Keqiang
touting the nation’s rail technology on his foreign trips.
Shares of CNR and CSR, which have been halted from trading
since Oct. 27, climbed by the limit in Shanghai today.
Infrastructure builder China Railway Group Ltd. jumped 47
percent in Hong Kong during their suspension, while China
Railway Construction Corp. advanced 33 percent.
The offer values CNR at 6.19 yuan per Shanghai-traded
share, or HK$8.05 for its Hong Kong-listed stock, according to
today’s filing. The two companies earned a combined $1.84
billion in net income in the latest 12-month period, according
to data compiled by Bloomberg.
Global Competitor
The Chinese companies aren’t the only ones in the industry
seeking economies of scale: Earlier this year Siemens, Europe’s
largest engineering company, unsuccessfully tried to combine its
train operations with Alstom’s transport business as part of an
asset swap to buy the French company’s energy assets. Alstom
instead sold energy assets to General Electric Co., and will
receive the U.S. company’s rail-signaling unit in exchange.
The two Chinese companies recently embarked on a drive for
high-profile overseas projects. CSR won a 1.7 billion yuan ($274
million) contract to provide locomotives and cars for a railway
renovation project in Argentina, according to a Dec. 16
statement on the website of China’s State-owned Assets
Supervision and Administration Commission.
In October, CNR won a $567 million contract to supply
trains for Boston’s subway system, the first rail-related deal
for a Chinese company in the U.S.
CNR investors who object to the deal have the option of
receiving HK$7.21 in cash for each Hong Kong-traded share they
hold.
For Related News and Information:
China Merging Trainmakers Adds Pressure on Siemans, Alstom
China’s Two Biggest Trainmakers Seek Approval of Plan to Combine
China Said to Plan Merger of Biggest Trainmakers CNR, CSR
Top Stories: TOP <GO>
To contact the reporters on this story:
Jonathan Browning in Hong Kong at +852-2977-4706 or
jbrowning9@bloomberg.net;
Clement Tan in Hong Kong at +852-2977-2031 or
ctan297@bloomberg.net
To contact the editors responsible for this story:
Philip Lagerkranser at +852-2977-6626 or
lagerkranser@bloomberg.net
Ben Scent
Dec 31 (Reuters) - Fugro NV
* Secures amendment of credit agreements
* Reached agreement with its lenders on a temporary adjustment of two financial covenants and on related definitions
* This provides company with additional headroom under these covenants
* Agreement signals continued support of Fugro's lenders for co and its initiatives to restore margins, delever balance sheet and improve return on capital employed.
* Agreed temporary amendments to net leverage and fixed charge covenants contained in its EUR 775 million revolving credit facilities
Fosun to acquire Meadowbrook Insurance Group for approximately USD 433m ( +21.3% Premium )
Fosun International Limited (HKEx stock code: 00656, together with its subsidiaries, "Fosun") and Meadowbrook Insurance Group, Inc. (NYSE: MIG) ("Meadowbrook"), today announced that they have entered into a definitive agreement under which Fosun will acquire Meadowbrook for USD 8.65 per share in cash, representing an aggregate transaction value of approximately USD 433m.
The transaction follows a thorough review of strategic alternatives by the Meadowbrook board of directors and represents a 24% premium over Meadowbrook's closing price on December 29, 2014 and a premium of 39% to Meadowbrook's three-month average closing price for the period ending December 29, 2014. The transaction also represents a multiple of approximately 1.04x Meadowbrook's tangible book value per share as of September 30, 2014.
Fosun is a leading investment group headquartered in Shanghai, China with over USD 50bn in total assets and operations around the world. The acquisition of Meadowbrook will enable Fosun to establish a significant presence in the U.S. P&C market. Currently, Fosun has more than one third of its total assets invested in insurance businesses around the world, including investments in Yong'an P&C Insurance, Pramerica Fosun Life Insurance and Peak Reinsurance, as well as Fidelidade Group, Portugal's largest insurance company. Fosun's most recent investment in the insurance sector was an acquisition of a 20% equity interest in Ironshore Inc. in August 2014.
Guo Guangchang, Chairman of Fosun, said, "This transaction allows Fosun to establish a presence in the important U.S. P&C market, consistent with our strategy of expanding our core insurance business. Meadowbrook has a talented employee base, comprehensive offering of high-quality specialty insurance products, robust distribution network and a strong commitment to meeting the evolving needs of its policyholders. The transaction represents another milestone for Fosun and will enable Fosun to further strengthen its insurance-oriented comprehensive financial capabilities."
Robert S. Cubbin, President and Chief Executive Officer of Meadowbrook, said, "Combining with Fosun further strengthens our capital base as we continue to focus on supporting the needs of our customers, partners and policyholders, improving our underwriting performance and driving profitability."
Mr. Cubbin continued, "This transaction is the culmination of a thorough strategic review process to maximize shareholder value. We believe this is a positive outcome for our shareholders, who will receive significant value; our employees, who will benefit from enhanced opportunities as part of a larger, global organization; and our customers, partners and policyholders, who will benefit from an even stronger specialty risk, insurance and service provider."
The transaction has been unanimously approved by all of the directors of the Meadowbrook board of directors present at the meeting and has been unanimously approved by the Fosun board of directors. Following the closing of the transaction, which is expected in the second half of 2015, Meadowbrook will continue to maintain its headquarters in Southfield, Michigan and will operate under the Meadowbrook brand name. The transaction is subject to the approval of Meadowbrook's shareholders as well as regulatory approvals and the satisfaction of other specified closing conditions.
KPMG, Towers Watson Delaware and PricewaterhouseCoopers are acting as advisors of finance, actuary and tax, respectively, to Fosun. DLA Piper LLP is acting as legal advisor to Fosun. Willis Capital Markets & Advisory is acting as exclusive financial advisor and Sidley Austin LLP is acting as legal counsel to Meadowbrook in connection with the transaction.
US Market closed on a weaker note but in weak volume (525mil shares), cyclical sectors were responsible for the bulk of the weakness as three of six growth-sensitive groups settled in-line with or behind the broader market while the utilities sector (-2.1%) was the only laggard on the countercyclical side (narrow its 2014 gain to 26.6%). Energy finished also lower (-0.6%) following early weakness on crude on a volatile session...Oil service stock Civeo (CVEO) -52.6% after cutting its guidance for next year...VIX @ 15.92 +5.71%...After Hours MIG +14.3% to be acquired by Fosun for $8.65/share +21.3% Premium...JPST +20.6% to be bought by HNH for $10 in cash and share (+34% Premium)...Trading conditions are particularly light in the final session of 2014. In Japan, Nikkei225 was already closed for holidays after registering its 3rd consecutive year of gains, while Korea was also closed and Australia was out early. A press report out of Japan speculated the govt issuance of JGBs in FY15 would fall to ¥37T, below ¥41.3T budgeted for this year and below ¥40T for the first time in 6 years. Shanghai Composite was an outperformer in the early going and only added to its gains in the afternoon session with a near 2% rally retesting the 3,200 level. China HSBC final manufacturing PMI for December confirmed the first contraction in 7 months but also fared a 0.1pt better than expected...HSBC economist Qu remarked that price contraction deepened, and coupled with weaker economic activity, stronger disinflationary pressures warrant further monetary easing in the coming months. Separately, a Chinese press report reiterated 2015 GDP target could be formally set at 7% and 2016 below 7%. In the property space, a research note out of China Academy of Social Sciences (CASS) forecasted 2015 property price decline of another 5%...CSR, CNR to merge : CSR 1766 HK +32.3%, CNR 6199 HK +45.2% ...Nikkei Close...Hang Seng +0.44%...Shanghai +2.06%
RUB $56.02 RUB €69.41 WTI $53.60 Brent $57.18
EUR$ 1.2152 S&P +0.17%
YTD Perf in local Curr:
DOW +8.48% SPX +12.55% Nasdaq +14.39% Nikkei +7.12% Hang Seng +1.28% Shanghai +53% EuroStoxx +0.87% CAC -1.17% DAX +2.65% IBEX +3.66% FTSE MIB +0.23% AEX +4.93% SMI +9.51% FTSE -2.99% Bovespa -2.91%
Macro :
- HSBC China Dec. Manufacturing PMI 49.6; Est. 49.5
- S&P Takes Various Rating Actions on Russian Corporates
- Greece State Financing Covered Until Around March 20, FD Says
Keep an eye on :
- AC FP : ITaly chain UNA gets offers from Potential Buyers, Starwood offered €200m, offers also made by NHH & AC
- STS IM : Italy’s FSI Fund Could Have Role in Ansaldo Deals: Corriere
- POP SM : Banco Popular to Convert Mandatory Convertibles at EU4.31/Shr
- BP/ LN : BP Said to Examine Its Own Foreign-Exchange Trading: WSJ
- BPTY LN : Bwin.Party Sees 2014 Rev. EU608m-EU612m
- BRISA PL : Brisa Plans to Invest About EU55m in Highway Network in 2015
- CBK GY : Commerzbank CEO Excludes Negative Rates for Private Clients: BZ
- EDP PL : EDP Agrees to Sell 50% Stake in EDP Asia Unit
- EZJ LN : EasyJet to Cancel 138 Flights To, From France On Dec. 31, Jan. 1
- FLO FP : Groupe Flo Plans Asset Sales, CEO Tells Le Figaro
- FUR NA : Fugro Secures Credit Agreements’ Amendment; Sees More ‘Headroom’
- KPN NA : KPN Sues Samsung in U.S. After Patent Licensing Talks Fail
- MRL SM : Merlin Properties Raises EU940m Loan Backed by Its Assets
- SAP GY : SAP BEO Endorses Single EU Digital Market, Boersen Zeitung Says
- SPM IM : Saipem Received Notice South Stream Project Still Suspended
- TRN IM : Terna May Buy Ferrovie Dello Stato’s Electricity Network
Asian Mid-session Update: China HSBC final Manufacturing PMI confirms first contraction in 7 months
***Economic Data***
- (CN) CHINA DEC FINAL HSBC MANUFACTURING PMI: 49.6 V 49.5E (first contraction in 7 months)
- (AU) AUSTRALIA NOV PRIVATE SECTOR CREDIT M/M: 0.5% V 0.5%E; Y/Y: 5.9% (5-year high) V 5.9%E
- (KR) SOUTH KOREA DEC CPI M/M: 0.0% (first non-negative print in 4 months) V 0.0%E; Y/Y: 0.8% (lowest since Oct 2013) V 0.9%E; CPI CORE Y/Y: 1.6% V 1.6%E
- (SG) SINGAPORE NOV BANK LOANS AND ADVANCES: 7.5% V 9.0% PRIOR
- (SG) SINGAPORE NOV M1 Y/Y: 4.6% V 4.0% PRIOR; M2 Y/Y: 2.5% V 2.0% PRIOR
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 closed, S&P/ASX -0.1%, Kospi closed, Shanghai Composite +0.7%, Hang Seng +0.2%, Mar S&P500 +0.1% at 2,078
***Commodities/Fixed Income***
- Feb gold +0.1% at $1,201, Feb crude oil -0.6% at $53.80/brl, Mar Copper flat at $2.85/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 1.5 tonnes to 712.3 tonnes; Lowest level since Sept 2008
- (US) API PETROLEUM INVENTORIES: CRUDE: +0.76M (smallest build in 4 weeks) v -0.5Me, GASOLINE: +1.7M v +1.5Me, DISTILLATE: +0.31M v +1.5Me
***Market Focal Points/Key Themes/FX***
- Trading conditions are particularly light in the final session of 2014. In Japan, Nikkei225 was already closed for holidays after registering its 3rd consecutive year of gains, while Korea was also closed and Australia was out early. A press report out of Japan speculated the govt issuance of JGBs in FY15 would fall to ¥37T, below ¥41.3T budgeted for this year and below ¥40T for the first time in 6 years. In Korea, central bank Gov Lee pledged to keep monetary policy accommodative in 2015, even as Fin Min Choi forecasted next year's economic performance to improve due to lower oil price and govt policies. Australia put out its November private sector lending, showing a 5-year high rate of increase y/y at 5.9%. Housing credit growth was particularly impressive, rising another 0.6% on the month, while personal and business credit components both rose 0.2%.
- Shanghai Composite was an outperformer in the early going and only added to its gains in the afternoon session with a near 2% rally retesting the 3,200 level. China HSBC final manufacturing PMI for December confirmed the first contraction in 7 months but also fared a 0.1pt better than expected, supporting the mainland index while also boosting AUD/USD to session high above 0.82. HSBC economist Qu remarked that price contraction deepened, and coupled with weaker economic activity, stronger disinflationary pressures warrant further monetary easing in the coming months. Separately, a Chinese press report reiterated 2015 GDP target could be formally set at 7% and 2016 below 7%. In the property space, a research note out of China Academy of Social Sciences (CASS) forecasted 2015 property price decline of another 5%.
***Equities***
US markets:
- NRX: Announces Positive Results for QT Study of Pyridorin; +118.3% afterhours
- MIG: Fosun to Acquire Meadowbrook Insurance Group for $433M; +18.5% afterhours
- HNH: Submits proposal to acquire JPS Industries (ticker: JPST) For $10.00/shr in cash; +1.4% afterhours
Notable movers by sector:
- Industrials: CSR 1766.HK +29.3%, CNR 6199.HK +42.8% (CSR, CNR to merge; resume trading)
After Hours Summary: MDXG +6.0% following earnings/guidance
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings: MDXG +6.0%
Companies trading higher in after hours in reaction to news: NRX +82.8% (announced positive results from a thorough QT/QTc cardiac safety study on Pyridorin), JPST +20.6% (Handy & Harman (HNH) submited proposal to acquire the company for $10.00 per share in cash), MIG +14.3% (to be acquired by Fosun International for $8.65 per share in cash), MDXG +6.0% (co issued comments on recent FDA draft guidance on minimal manipulation of HCT/Ps; co also said it expects to exceed Q4 and FY14 rev guidance), AQXP +3.9% (announced initiation of dosing in a Phase 2 clinical trial of AQX-1125 for the treatment of atopic dermatitis), USAT +1.3% (co and and Coca-Cola Refreshments have resolved their outstanding billing dispute; USA Technologies to continue as authorized supplier to the Coca-Cola system)
After Hours Losers:
Companies trading lower in after hours in reaction to news: ONVO -3.0% (filed for Controlled Equity Offering Sales Agreement with Cantor Fitzgerald for sale of up to $33 mln of common stock), GSAT -2.5% (filed for ~12.37 mln share common stock offering by selling shareholders),
Closing Market Summary: Stocks Retreat Amid Light Volume
The stock market ended the Tuesday session on a broadly lower note. The Nasdaq Composite (-0.6%) was the weakest performer among the major averages while the S&P 500 (-0.5%) ended a bit ahead of the tech-heavy index.
Equities began the day in negative territory and remained below their flat lines until the close. However, participation was very limited with just 525 million shares changing hands at the NYSE floor. The light activity was also reflected by narrow trading ranges with the S&P 500 bounded between 2,080 and 2,084 for most of the session.
Overall, cyclical sectors were responsible for the bulk of the weakness as three of six growth-sensitive groups settled in-line with or behind the broader market while the utilities sector (-2.1%) was the only laggard on the countercyclical side.
The utilities sector spent the entire session at the bottom of the leaderboard to narrow its 2014 gain to 26.6%. Despite today's retreat, the rate-sensitive group remains on track to finish the year ahead of the other nine sectors while health care, which has spiked 24.5% in 2014, is all but sure to finish the year in the second place.
Similar to utilities, the energy sector (-0.6%) slumped out of the gate amid early weakness in crude oil, which endured a volatile session. The energy component faced selling pressure overnight, but was able to climb into the green this morning, ending higher by 0.8% at $54.10/bbl. Today's uptick in the price of crude could not prevent oil services provider Civeo (CVEO 3.92, -4.35) from slashing its guidance for next year, which caused the stock to plunge 52.6%.
Elsewhere, other influential sectors like industrials (-0.5%) and technology (-0.7%) kept the market under pressure while consumer discretionary (-0.4%), financials (-0.1%), and health care (-0.4%) displayed relative strength.
For the most part, the health care sector withstood weakness in the biotech group that pressured the iShares Nasdaq Biotechnology ETF (IBB 304.62, -3.39) lower by 1.1%. This in turn contributed to the underperformance of the Nasdaq Composite.
Treasuries notched their highs shortly after the opening bell before retreating throughout the day. The 10-yr yield slipped one basis point to 2.19%.
Economic data was limited to Consumer Confidence and Case-Shiller 20-City Index:
* The Conference Board's Consumer Confidence Index increased to 92.6 in December from an upwardly revised 91.0 (from 88.7) while the consensus expected an increase to 94.4
* Over the last month, gasoline prices dropped to their lowest point in more than five years, equity markets have reached historic highs, and the employment situation improved notably, but the December reading came in below the 94.1 that was recorded in October
* The Case-Shiller 20-city Home Price Index for October rose 4.5% against a 4.4% increase expected by the Briefing.com consensus
* The prior month's reading was revised down to 4.8% from 4.9%
Tomorrow, weekly MBA Mortgage Index will be released at 7:00 ET while Initial Claims will be reported at 8:30 ET (consensus 290K). The Chicago PMI report for December (consensus 60.0) will cross the wires at 9:45 ET while the Pending Home Sales report for November (expected 0.8%) will be released at 10:00 ET.
* Nasdaq Composite +14.4% YTD * S&P 500 +12.6% YTD * Dow Jones Industrial Average +8.5% YTD * Russell 2000 +4.1% YTD