News Archive

America Movil threatens to abandon KPN takeover bid

Fri Aug 30, 2013 4:53pm EDT

BRUSSELS/MEXICO CITY (Reuters) – America Movil threatened to abandon its bid for Dutch telecom KPN on Friday, saying it has no plans to raise the 7.2 billion euro ($9.5 billion) offer, after a foundation representing KPN told the Mexican firm to improve its proposal or face a veto.

The foundation, an independent group of former Dutch companies’ executives tasked with protecting KPN stakeholders, bought almost 50 percent of KPN’s voting stock late on Thursday, moving to block the deal.

America Movil, owned by Mexican billionaire Carlos Slim, responded testily to the foundation’s move. Asked whether America Movil could increase its bid for KPN, Slim’s chief spokesman, Arturo Elias, told Reuters: “No way.”

“We’re surprised by the opposition, since current management has stopped investing, modernizing the company, and has lost a lot of clients and market share,” Elias said.

Elias also said the company was unwilling to agree to curbs on its managerial involvement in KPN’s operations and will have to analyze whether to maintain its nearly 30 percent stake in the company if the takeover offer does not succeed.

The KPN foundation, which was set up when the former state monopoly was being privatized, said it had upped its voting stock to protect the interests of shareholders, employees, customers, trade unions and “Dutch society more generally,” because America Movil, Latin America’s biggest phone company, had not consulted with KPN before making its offer.

“The soccer rules in Mexico and the Netherlands are the same, but taking over a large company is not soccer. We may have different rules for this here than in Mexico,” said Jacques Schraven, a former president of Dutch Shell, who heads the foundation.

He told a news conference on Friday that the group wanted America Movil to make a “fair” bid for KPN and to make binding arrangements with stakeholders such as KPN employees before officially launching its bid.

Slim’s America Movil denied its bid – at 2.40 euros a share – would put the company’s interests at risk.

“We believe we can help make (KPN) into a better company, one that grows, creates jobs, is more competitive and ultimately is strong enough to remain a major player at home and abroad,” America Movil said in a statement on Friday.

America Movil shares initially rose after the market opening as investors, concerned the deal could threaten the firm’s credit ratings, were cheered by the new hurdles to the acquisition, analysts said. But the stock later pared gains to trade at 12.85 pesos ($0.96) per share amid worries that there could be still room for more talks.

On Wednesday, America Movil met KPN’s labour unions, saying they would stick to the company’s existing strategy.

The foundation said it had been in touch with America Movil this week and called for the company to open negotiations with KPN’s board and the Dutch government.

KPN shares fell 3.41 percent to close at 2.210 euros.

On average, Slim’s telecoms giant paid about 3.24 euros a share for its Dutch stake, including stock bought as part of a rights issue by KPN earlier this year.

America Movil offered to buy the rest of the Dutch telecoms firm earlier this month and has since said that its financing for the bid was in place and expected it to proceed in September.


“It’s clear the foundation is trying to keep KPN Dutch-owned by using this poison pill, which, in effect, has the same impact of golden shares, which are illegal,” said Imari Love, an analyst with Morningstar.

Jorge Negrete, head of telecoms think-tank Mediatelecom in Mexico City, said: “This isn’t about business. This seems to me to be clearly about protecting the European market.”

The foundation said that in theory it could block the bid for up to two years, but that Dutch law called for any such measure to be proportional with the threat.

But, Slim’s spokesman and son-in-law Elias said the company has no plans to use European courts to press their case for the KPN takeover.

Foundations such as KPN’s have been used to try and gain an advantage in high-profile corporate battles, including luxury goods maker LVMH’s failed hostile takeover bid for Gucci in 1999 as well as efforts by hedge funds to replace the board and break up chip equipment maker ASM International in 2008.

A number of analysts believe America Movil offered to buy the rest of KPN to squeeze more money from Slim’s great rival in Latin America, Spanish company Telefonica, which wants to buy KPN’s German unit, E-Plus.

If so, the move paid off. Telefonica earlier this week raised its offer by 6 percent to 8.55 billion euros and it won America Movil’s support for the deal.

The E-Plus sale will provide cash that will improve KPN’s balance sheet, and, though it leaves the company without direct exposure to Europe’s biggest mobile market, it makes America Movil’s 2.40 euros-per-share offer less attractive, analysts said.

In a research note written before the KPN foundation’s announcement, analysts at Sanford Bernstein said: “We think that KPN could be worth as much as 3 euros per share.”

($1 = 13.3520 Mexican pesos)

(Additional reporting by Sara Webb and Anthony Deutsch in Amsterdam and Alexandra Alper in Mexico City; Editing by G Crosse, Leslie Gevirtz and Tim Dobbyn)

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Ansaldo Breda says ready for legal action over rail deal

Fri Aug 30, 2013 2:10pm EDT

MILAN (Reuters) – Train manufacturer Ansaldo Breda, a unit of Italian defence company Finmeccanica (SIFI.MI), said it was ready to take legal action against Dutch railways group Nederlandse Spoorwegen (NS) for cancelling a 300 million euro contract.

Ansaldo Breda won the contract to provide trains for a high-speed line between Brussels and Amsterdam but the decision was suspended in June. Ansaldo Breda said it was officially notified of the cancellation on Friday.

“Ansaldo Breda believes the decision is unacceptable, and will take all necessary legal steps to protect its interests,” the company said in a statement.

(Reporting by Jennifer Clark; editing by Tom Pfeiffer)

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Trial date of November 25 set for U.S. challenge to AMR-US Airways merger

Fri Aug 30, 2013 6:03pm EDT

WASHINGTON (Reuters) – American Airlines and US Airways voiced a fresh sense of optimism on Friday after a U.S. judge granted their request for a speedy trial to determine whether the two carriers are allowed to form the world’s largest airline.

U.S. District Judge Colleen Kollar-Kotelly said a trial pitting the airlines against the U.S. Justice Department and several states would begin on Monday, November 25.

The trial date is close to what the airlines wanted and months earlier than the Justice Department had hoped, meaning the government will need to work faster than it thought if it hopes to succeed in blocking the $11 billion merger.

Both airline stocks got a boost from the news. US Airways Group Inc (LCC.N) shares closed up 1.3 percent at $16.16 in New York Stock Exchange trading, against a lower market. Shares of AMR Corp (AAMRQ.PK), American’s parent, were up 4.4 percent at $3.54 in thin over-the-counter trading.

“We are confident in our case and eager to get to court,” the airlines said in a joint statement. “We are pleased to have a trial date that will enable us to resolve this litigation in a reasonable time frame.”

Justice Department spokesman Peter Carr said in a statement: “We appreciate the court’s careful consideration of the scheduling issues and will be ready to present our case.”

The Justice Department sued on August 13 to block the deal, saying it would lead to higher prices for customers, while the companies said it would make them more competitive and strengthen the market.

Barring a settlement, which both sides said they are open to, lawyers will spend the next three months in intense preparation that will involve most of the U.S. commercial airline industry.

Executives of American Airlines and US Airways will be asked to sit for pre-trial depositions, lawyers said during a court hearing on Friday. Rivals including Delta Air Lines Inc (DAL.N) and Southwest Airlines Co (LUV.N) will be asked to turn over documents related to how the industry sets fares and fees.

The Justice Department proposes depositions of as many as 50 people in all, while the airlines said they want to depose 10 people. Lawyers said they could exchange millions of documents.

Kollar-Kotelly will appoint a special master to help the discovery process move along faster. She set a status conference for October 1.

The judge will try the case without a jury. It was expected to last 10 to 12 business days, lawyers for the two sides said. The Justice Department plans to call about 15 witnesses and the airlines plan to call approximately six.


The U.S. Justice Department had asked for a March trial. The airlines had pushed for November because holding a deal together for months puts a strain on the parties. During the merger review and challenge process, the companies said they are essentially in limbo, unable to merge but unable to make independent long-range plans.

“March 3, I think, is too far off. It needs to be a tighter, expedited schedule,” Kollar-Kotelly said in court.

The trial date sets up “an aggressive schedule to be sure,” said Diana Moss, vice president of the American Antitrust Institute, which has been critical of the deal. But, she wrote in an email, “given the depth and strength of the DOJ’s case, the government should be ready.”

In its complaint, the Justice Department focused on Ronald Reagan National Airport, just outside Washington, D.C., where the two companies control a combined 69 percent of takeoff and landing slots. It also listed more than 1,000 city pairs where the two airlines dominate the market.


The two airlines and the Justice Department indicated in a joint court filing on Wednesday they were open to settling the matter. The government said it was, too, but added that it had not been given an offer from US Airways and American that “addresses the anticompetitive harms posed by the merger.”

In response, a US Airways spokesman said in a statement in part: “The concessions we were willing to offer were designed to address competitive concerns that DOJ had raised during the investigation. We continue to believe there ought to be a realistic possibility of settlement.”

The companies have said that the deal is critical for American Airlines, whose parent, AMR Corp, has been operating under Chapter 11 bankruptcy protection since late 2011.

A U.S. bankruptcy judge on Thursday hinted he would approve AMR’s bankruptcy exit plan despite the government’s challenge to its main component – AMR’s planned merger with US Airways. Judge Sean Lane said he found “arguments in favor of confirmation to be fairly persuasive.

Comments from the antitrust and bankruptcy case judges were positive for the airlines’ shares because they suggested a speedy trial process and bankruptcy-court approval incorporating the merger, said George Hamlin, president of Hamlin Transportation Consulting, in Fairfax, Virginia.

It was surprising that the Justice Department wanted a lengthy period before trial, because its suit implied it had a slam-dunk case, Hamlin said. “They had the element of surprise. The airlines weren’t expecting this. Why wouldn’t you want to do it sooner rather than later?”

The case at the U.S. District Court for the District of Columbia is No. 1:13-cv-12346.

(Additional reporting by Alwyn Scott and Nick Brown; Editing by Howard Goller, Steve Orlofsky and Tim Dobbyn)

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GE plans to exit U.S. retail lending

Fri Aug 30, 2013 1:25pm EDT

(Reuters) – General Electric Co (GE.N) plans to spin off the U.S. consumer lending operations of its finance arm GE Capital, as the conglomerate moves to focus on its core industrial operations, a person familiar with the matter said.

GE Capital nearly sank the whole company during the 2007-2009 financial crisis, and the company has been trying to shrink the division’s portfolio ever since.

An initial public offering of the consumer lending division, which issues store credit cards for 55 million Americans, could come early next year, but its size has not yet been determined, according to the Wall Street Journal. (

“A spin-off of GE’s consumer business would be a significant positive for the company, as it would expedite its shift to industrial earnings solidly outgrowing GE Capital,” said William Blair Co analyst Nicholas Heymann, in a note.

GE declined to comment.

A sale might help GE Capital escape some of the most burdensome new regulations after it was named a systemically important financial institution by the U.S. financial risk council in July.

The council reviews the status of these institutions – which are so large their demise could threaten the safety of the entire financial system – annually, taking into account “any material changes” to the business.

The consumer division earned $3.24 billion last year and had assets of $139 billion. GE Capital’s total assets at the end of 2012 were $539 billion.

Chief Executive Jeffrey Immelt at a conference in May said the company aimed to trim GE Capital’s assets to $300 billion to $350 billion by the end of 2014 through “staged exits” of some non-core assets.

Bankers from JPMorgan Chase Co (JPM.N) and Goldman Sachs Group Inc (GS.N) are working on a possible public offering, while alternatives include smaller spin-offs or asset sales, the Wall Street Journal said. Goldman Sachs and JPMorgan declined to comment.

William Blair analysts said the consumer division could potentially be valued at $35 billion, or about $3 to $4 per GE share.

(Reporting by Patricia Kranz and Jessica Toonkel in New York, Douwe Miedema in Washington, and Sakthi Prasad in Bangalore; Editing by Steve Orlofsky and Tim Dobbyn)

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Weak spending, inflation data point to soft U.S. economy

Fri Aug 30, 2013 1:05pm EDT

WASHINGTON (Reuters) – U.S. consumer spending barely rose and inflation was tame in July, offering a cautionary note on the economy as the Federal Reserve weighs cutting back its massive bond-buying program.

Spending, which accounts for more than two-thirds of U.S. economic activity, could struggle to regain momentum as other data on Friday showed consumer sentiment fell this month.

The reports added to a number of signs that have suggested a loss of steam in the economy early in the third quarter after a fairly sturdy performance in the April-June period even in the face of higher taxes and lower government spending.

“There has been a lot of optimism about the economy accelerating in the second half of the year as the fiscal drag waned. The latest data suggests that’s not happening,” said Michelle Girard, chief economist at RBS in Stamford, Connecticut.

The Commerce Department said consumer spending ticked up 0.1 percent, restrained by weak outlays on utilities and automobiles. Adjusted for inflation, spending was flat.

It is not likely to rebound anytime soon. A separate report showed the Thomson Reuters/University of Michigan’s consumer sentiment index slipped to 82.1 in August from 85.1 in July.

The drop reflected concerns about higher borrowing costs. Long-term interest rates have risen more than a percentage point over the last three months in anticipation of the Fed scaling back its support for the economy.

“Less confident individuals don’t become more active shoppers,” said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania. “That does not bode well for growth.”

U.S. financial markets were little moved by the data as investors kept a wary eye on developments in Syria. Stocks were trading lower, while U.S. Treasury debt prices were up. The dollar touched a four-week high against a basket of currencies.

With demand tepid, inflation pressures were subdued last month. A price index for consumer spending edged up 0.1 percent, slowing from a 0.4 percent rise in June.

Over the past 12 months, prices have risen only 1.4 percent. While that is the biggest increase since February, it is well below the Fed’s 2 percent target.

Excluding food and energy, the price index for consumer spending nudged up 0.1 percent after advancing 0.2 percent in June. For the fourth month running, core prices were up just 1.2 percent from a year ago.


The lackluster spending and soft inflation data would argue against the U.S. central bank trimming the $85 billion in bond purchases it is making each month to keep interest rates low.

Many economists, however, believe the Fed will decide to begin tapering its buying, or quantitative easing, at its September 17-18 policy meeting.

“This does nothing to alter our view of tapering,” said Eric Green, chief economist at TD Securities in New York. “Fear of unquantifiable financial risks within a QE regime that offers diminishing returns is driving the policy agenda, not strong growth and inflation.”

The economy grew at a 2.5 percent annual pace in the second quarter, quickening from a 1.1 percent rate in the first three months of the year.

Economists said it was now unlikely that consumer spending this quarter would even match the second quarter’s 1.8 percent growth pace. Wall Street banks such as Goldman Sachs, Barclays and RBS lowered their third-quarter GDP growth estimates by as much as half a percentage point to as low as a 1.5 percent rate.

Consumer spending continues to be constrained by sluggish wage growth. Income ticked up 0.1 percent in July after rising 0.3 percent in June.

Both private and government salaries fell last month. Furloughs at federal agencies as part of Washington’s belt-tightening reduced salaries by $7.7 billion last month.

With spending matching income growth, the saving rate – the percentage of disposable income households are socking away – held at 4.4 percent.

(Reporting by Lucia Mutikani, additional reporting by Steven C Johnson in New York; Editing by Andrea Ricci)

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Bombardier’s CSeries aircraft receives flight test permit

Fri Aug 30, 2013 12:10pm EDT

TORONTO (Reuters) – Bombardier Inc (BBDb.TO) said on Friday its CSeries aircraft had received a flight test permit from Transport Canada, paving the way for the delayed maiden flight of the narrow-body jet.

Montreal-based Bombardier, which has already delayed the new aircraft’s maiden flight three times, did not provide a specific date for the voyage, saying merely that the flight will occur in the coming weeks.

However, a source familiar with the situation said the first flight is likely to occur before September 17, when the company is planning to host an event in Mirabel, Quebec, to celebrate the maiden voyage.

The source, who was not authorized to discuss the matter with the media, said the exact date of the first flight has not yet been finalized, as the aircraft still has to undergo high-speed taxi tests, landing gear tests and other checks before it takes to the air.

The single-aisle CSeries, with up to 160 seats, is the first all-new narrow-body jetliner in decades and will challenge top-selling Boeing Co (BA.N) 737 and Airbus (EAD.PA) A320 aircraft.

“Following receipt of Transport Canada’s flight test permit, we are very close to the CSeries airliner’s first flight,” said Mike Arcamone, the president of Bombardier’s commercial aircraft segment, in a statement. “Pending optimal weather, the CSeries aircraft will soon take to the skies.”

Shares of Bombardier were up 7 Canadian cents at C$4.80 in trading on the Toronto Stock Exchange on Friday.

(Reporting by Euan Rocha; Editing by Gerald E. McCormick and Phil Berlowitz)

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U.S. consumer sentiment slips in August

Fri Aug 30, 2013 10:01am EDT

NEW YORK (Reuters) – U.S. consumer sentiment retreated in August from last month’s six-year high, though Americans were slightly more upbeat in their outlook than earlier in the month, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment slipped to 82.1 in August from 85.1 in July.

The final result did manage to top an initial mid-month reading of 80.0 and beat economists’ expectations for a final read of 80.5.

“Most of the late August gain was due to more favorable income expectations, with consumers expecting the largest income gains in nearly five years, although the median expected increase was just 0.9 percent, less than the expected rate of inflation,” survey director Richard Curtin said in a statement.

However, households with incomes below $75,000 grew more pessimistic about the future, and all households expected higher interest rates over the next year and slightly slower growth.

That helped drive the gauge of consumer expectations down to 73.7 from 76.5. The survey’s barometer of current economic conditions slipped to 95.2 from 98.6 in July.

Long-term interest rates have risen by more than a full percentage point over the last three months on the view that the Federal Reserve will start scaling back as soon as next month its hefty support for the economy.

That has pushed up mortgage rates. Economists fear consumer sentiment could weaken if higher interest rates start to slow momentum in a housing revival that has been one of the brightest spots in the overall U.S. recovery

The one-year inflation expectation fell to 3 percent from 3.1 percent while the five-to-10-year inflation outlook edged up to 2.9 percent from 2.8 percent.

(Reporting By Steven C. Johnson; Editing by Chizu Nomiyama)

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Judge in AMR/US Airways merger wants trial sooner than March

Fri Aug 30, 2013 9:45am EDT

WASHINGTON (Reuters) – A federal judge said on Friday that a trial in the U.S. government effort to block an American Airlines AAMRQA.UL merger with U.S. Airways (LCC.N) should take place before March, the date sought by the Justice Department.

U.S. District Judge Colleen Kollar-Kotelly said in open court: “March 3, I think, is too far off. It needs to be a tighter, expedited schedule.”

(Reporting by David Ingram; Writing by Howard Goller; Editing by Kevin Drawbaugh)

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Wall St. opens flat after data; Syria worries linger

Fri Aug 30, 2013 9:35am EDT

NEW YORK (Reuters) – U.S. stocks opened little changed on Friday as the likelihood of an impending Western military strike on Syria appeared to lessen and personal income data for July came in soft.

The Dow Jones industrial average .DJI was up 1.49 points, or 0.01 percent, at 14,842.44. The Standard Poor’s 500 Index .SPX was up 1.69 points, or 0.10 percent, at 1,639.86. The Nasdaq Composite Index .IXIC was up 0.37 points, or 0.01 percent, at 3,620.67.

(Reporting by Angela Moon; Editing by Chris Reese)

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