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Santander launches 4.7 billion euro Brazil buyout as Europe rebounds

MADRID/SAO PAULO (Reuters) – Banco Santander SA (SAN.MC) launched a 4.7 billion euro ($6.5 billion) buyout offer for the 25 percent it does not already own of its flagging Brazilian subsidiary, allowing the euro zone’s largest bank to focus future growth in Europe.

Santander, which for the past years has struggled with Europe’s worst economic crisis in decades and a disappointing Brazilian economy, offered minority shareholders of Banco Santander Brasil SA (SANB11.SA) new stock paying a 20 percent premium.

Shares of Santander Brasil soared more than 20 percent on the news, underscoring the potential success of the deal, investors said. The move, announced the same day the Madrid-based bank reported a rise in first-quarter profit, marks an exception to its strategy of recent years of floating foreign divisions whenever possible to bring in minority shareholders.

“It’s a take-it-or-leave-it offer to gain exposure to Santander’s recovery in Europe as we recognize that much heavy-lifting has to be done in Brazil,” said Mohamed Mourabet, who oversees $900 million for Victoire Asset Brazil in São Paulo.

The Brazil deal comes during a shift in Santander’s revenue mix, heavily reliant on Latin America in recent years as many European countries suffered economic downturns. The buyout would not change its approach to other listed divisions, adding a long-mooted public offering of its U.K. unit would still take place, in the “mid-term,” Chief Executive Javier Marin told investors at a conference call.

The buyout also reflects Santander’s confidence in its finances as its first quarter profits rose 8 percent ahead of Europe’s toughest banking stress tests yet, which the region hopes will help it draw a line under the financial crisis. The deal is also financially attractive for the parent company.

Santander is committed to Brazil in the long run even as slowing economic growth dampened earnings last year and pushed bad debts up, Marin added.

Shares of Santander Brasil have lost nearly half their value since they were listed at 23.5 reais ($10.5) in October 2009. They closed on Monday at 12.74 reais.

“The offer price seems reasonable given that it is well above what we consider to be Santander Brasil’s stand alone fair value,” said Saúl Martínez, a senior banking industry analyst with JPMorgan Securities in New York.

The deal gives management more room to execute a successful turnaround in Santander Brasil, enhancing cost efficiency, boosting returns and attracting more clients, Santander Brasil CEO Jesús Zabalza noted. The buyout is also financially attractive for the parent company.

“Market participants are indeed failing to assign a fair value to our businesses in Brazil,” said Zabalza on a conference call with investors.

The buyout may have very little impact on the bank’s capital levels, which have long been under scrutiny. Analysts and investors have highlighted the parent group lagged some European peers in terms of solvency levels.

The plan would help group profits grow 7 percent in 2015 and in 2016, equivalent to a boost of 560 million euros in 2016.


Shares of Santander, which have risen over 13 percent this year, were up 0.8 percent at 7.10 euros in Madrid.

Chairman Emilio Botin, a shrewd dealmaker who at 79 is still the lender’s main strategist, has driven it through global expansion. But the bank has faced its share of woes in recent years.

Losses on property loans in Spain, which led some peers into state bailouts following a real estate crash, have dragged on earnings.

In the first quarter, Europe provided just over half Santander’s net income, which rose to 1.3 billion euros. Profits in continental Europe rose 64 percent quarter on quarter and 53 percent on the year.

Its U.K. unit – where revenues in pounds rose 13 percent from the first quarter of 2013 on a sharp rise in margins and an improving economy – was now on par with Brazil in providing a fifth of total profits, it said.

In Brazil, Santander’s profit dropped 27 percent from a year ago, and rose 20.9 percent from the fourth quarter of 2013 taking into account currency fluctuations.

Santander said its core capital ratio was 10.6 percent under Basel III criteria at end-March, above minimum requirements. The bank expects to have core capital ratio of 9 percent by year-end under Basel III ‘fully-loaded’ criteria, which takes into account changes that need to be made by 2019.

Its net interest income at group level, or earnings on loans minus deposit costs, fell 3 percent in the first quarter from a year ago to 6.9 billion euros. This was above the 6.6 billion euros forecast by analysts in a Reuters poll.

Profits missed forecasts slightly. Non-performing loans in Spain and Brazil edged up slightly at the end of March compared to end December, even if at a group level the ratio dipped to 5.52 percent from 6.61 percent.

Santander said it had not booked the more than 1 billion euros in one-off gains from the sale of several units to help profits in the first quarter, adding it was setting these aside, though it did not detail for what.

($1 = 2.24 Brazilian reals)

(Additional reporting by Tomas Cobos and Julien Toyer and Steve Slater in London, Editing by Julien Toyer, Sophie Walker, John Stonestreet and Chizu Nomiyama)

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Rosneft says deal to buy trading from Morgan Stanley intact

MOSCOW (Reuters) – Russia’s top crude oil producer Rosneft (ROSN.MM) said on Tuesday it aimed to complete deal to buy the majority of global physical oil trading operations from Morgan Stanley in the second half of 2014, as expected.

Some industry watchers have expressed doubts the deal will go ahead due to Western sanctions on Russian officials, including Rosneft’s head Igor Sechin, over the Ukraine crisis.

Rosneft said in emailed comments that the deal with Morgan Stanley was going to plan.

“The implementation of the deal is going according to the agreed schedule between the companies, including in terms of filing the documentation to the regulatory bodies,” Rosneft said.

Morgan Stanley sold the majority of its global physical oil trading operations to Rosneft in December, becoming the latest Wall Street firm to dispose of a major part of its commodity business. The parties did not disclose the price.

Morgan Stanley planned to submit the sale for review by the U.S. Committee on Foreign Investment (CFIUS), an inter-agency executive branch panel that examines foreign investment for potential threats to national security, a source familiar with the matter said last December.

It was not clear whether the submission have been made.

The sale is subject to regulatory approvals in the United States, the European Union and certain other jurisdictions.

(Reporting by Vladimir Soldatkin, editing by Nigel Stephenson)

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U.S. Senate panel backs Fischer to be Fed’s No. 2

WASHINGTON (Reuters) – The Senate Banking Committee approved three nominees to the Federal Reserve’s board on Tuesday, including Stanley Fischer to be the U.S. central bank’s No. 2, in a big step toward replenishing the Fed’s governing body.

The panel also backed the nominations of former senior U.S. Treasury official Lael Brainard and current Fed Governor Jerome Powell, who was nominated for another term. All three nominees were approved on a unanimous voice vote.

The nominations are now cleared to go before the full Senate for final confirmation votes. A date for Senate consideration has not yet been set.

Former Fed officials say the Senate needs to act fast to confirm the nominees, given the heavy workload the board faces with only a few governors in place.

With Fed Governor Jeremy Stein leaving in late May to return to academia, the normally seven-person board would fall to three members for the first time in its more than 100-year history if the Senate does not move quickly.

“If the Fed goes down to three in June, it’s reprehensible,” said Northern Trust economist Carl Tannenbaum, who has worked for both the Fed board in Washington and at the Federal Reserve Bank of Chicago.

The Fed also has 12 regional branches, whose presidents rotate through five voting positions each year.

Fischer’s previous roles include the No. 2 spot at the International Monetary Fund, chief economist at the World Bank and vice chairman at Citigroup.

The 70-year-old, who was born in Zambia, is highly regarded in monetary policy circles for his extensive international experience, his academic career teaching economics at the Massachusetts Institute of Technology, and his successful stint at the top of Israel’s central bank.

The combination of veteran Fed policymaker Janet Yellen leading the central bank and Fischer as second in command comes with high expectations, though Fed watchers will have to wait and see just how well the two work together in their roles.

Brainard, 52, served until recently as a top financial diplomat at the U.S. Treasury and had previously worked at the White House under President Bill Clinton. Predicting her influence on the Fed is more difficult than it is for Fischer, given her lack of experience with monetary policy.

Among the biggest strengths she brings to the Fed is her international policy background, including experience gained as a U.S. diplomat working with European officials during the height of the euro zone crisis.

Brainard also worked as a consultant at McKinsey and taught at MIT.

Powell, 61, served at the Treasury under President George H.W. Bush and worked at private equity firm Carlyle Group. While his term at the central bank ended in January, Fed governors can serve until replaced or confirmed to a new term.

Even if Fischer, Brainard and Powell are confirmed, as analysts widely expect, two empty spots would remain on the board after Stein leaves. President Barack Obama is said to be considering someone with community banking expertise for one of those positions.

(Reporting by Michael Flaherty; Editing by Paul Simao)

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Sprint’s subscriber losses fall as fewer defect, tablet sales rise

(Reuters) – Sprint Corp, the No. 3 U.S. mobile provider on Tuesday reported fewer subscribers leaving than expected and strong tablet additions, as the company undergoes a massive network overhaul in a highly competitive market.

Sprint shares were up 7 percent, as the company cut costs to offset subscriber losses due to a network overhaul and competitor price cuts.

“Network is obviously a crucial foundation for being competitive,” Sprint’s chief executive, Dan Hesse told analysts in a post-earnings call.

“We are beginning to see churn improvements after a few months but it takes longer to see improvements in gross adds,” he said.

The company, 80 percent owned by Japan’s SoftBank Corp, said it lost 231,000 net postpaid subscribers in the first quarter, compared with Wall Street estimates of 244,000 losses. Yet excluding 516,000 tablet additions, handset additions were the worst in five years.

“Handsets have a higher lifetime value than tablets, so if they continue to lose handset subscriptions, it will have a higher value impact in the long term,” said Felix Wai, an analyst at New Street Research.

The company reported an increase in quarterly revenue in line with analysts’ expectations, due to a new billing plan that lowered wireless expenses.

In January, Sprint unveiled a new billing option called the “framily” plan that gives up to 10 family members or friends big service discounts if they sign up as a group, following aggressive discounts by Sprint’s smaller rival T-Mobile US that sparked a new wave of competition.

The plan requires each customer to pay for his own cellphone, whether with a one-time payment or on an installment plan, saving Sprint money on phone subsidies.

Sprint has attempted to convince U.S. regulators that consolidation in the industry would allow for greater competition against the two top players, Verizon Communications Inc and ATT Inc.

The company is eyeing T-mobile as an acquisition target.

“If you really want effective competition you have to level the playing field, you have to get players of same elk. That’s the benefit of consolidation, “Joe Euteneuer, Sprint’s chief financial officer told Reuters.

Its quarterly adjusted net income loss narrowed to $151 million, or 0.04 cents per share, in the first quarter, from $643 million, or 21 cents per share, in the year-ago quarter.

Revenue rose to $8.88 billion from $8.8 billion, matching the average analyst estimate according to Thomson Reuters


Wireless customer defections, known in the industry as churn, increased slightly from a year ago, as the company continues an overhaul of its 3G and voice network, which is expected to be completed by mid-year.

(Reporting by Marina Lopes; Editing by Sofina Mirza-Reid)

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Target names new CIO to oversee technology, security

(Reuters) – Target Corp (TGT.N), which is recovering from a massive data breach, on Tuesday named high-profile information technology consultant Bob DeRodes as chief information officer.

The discount retailer’s previous CIO resigned in March, several months after the data breach, which included the theft of about 40 million credit and debit card records and 70 million other records of customer details late last year.

DeRodes starts on May 5. Target, the third-largest U.S. retailer, said it was still looking for a chief information security officer and a chief compliance officer.

DeRodes has been a senior information technology advisor for the U.S. Department of Homeland Security, the U.S. Secretary of Defense, and the U.S. Department of Justice.

He sits on the board of NCR Corp (NCR.N) and was a director at privately held Veracode, which offers cloud-based application security. He worked at First Data Corp from 2008 to 2010 and at Home Depot Inc (HD.N) from 2002 to 2008.

Target also said that starting early next year, all of its store-branded credit and debit cards will be equipped MasterCard Inc Inc’s chip-and-PIN (personal identification number) technology.

(This version of the story has been filed to correct in 5th paragraph to show that DeRodes is no longer on Veracode board)

(Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn)

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Pfizer may have to pay more cash and top $105 billion to win AstraZeneca

LONDON (Reuters) – U.S. drugmaker Pfizer (PFE.N) will need to raise its bid for AstraZeneca (AZN.L) to around $105-110 billion and increase the proportion of cash in the offer to win its British rival, investors believe.

After showing his hand and pressuring his smaller competitor on Monday by disclosing two bid approaches, both of which were rebuffed, Pfizer CEO Ian Read has until May 26 to “put up or shut up” under UK takeover rules.

Importantly, after a jump in Pfizer shares, Read knows he has the backing of many of his own shareholders, while the threat of a counterbid does not appear imminent.

Read and his team will be using the time available to consider how they can sweeten an offer made in January worth 58.8 billion pounds ($98.8 billion), or 46.61 pounds a share, comprising 30 percent cash and 70 percent shares.

AstraZeneca said that offer fell “very significantly” short and it specifically flagged the small cash component, which would leave investors exposed to the risks faced by Pfizer in executing an ambitious mega-merger.

So far, the British group has refused to talk to Pfizer – but it has not ruled out discussions altogether and one person close to the company said the cash component of any fresh offer would be key in determining if there was engagement in future.

Cash is uppermost in the minds of AstraZeneca shareholders, too.

“For it to move forward from here, they (Pfizer) need to find a way of getting Astra management engaged and that feels like it needs a specific value being applied to the group, and it needs the cash element to be higher,” said Alastair Gunn of Jupiter Fund Management (JUP.L), which is a top-20 investor in AstraZeneca.

Analysts at Jefferies believe a deal could get done with Pfizer offering a 50/50 split between cash and shares at a price of at least 50 pounds a share.

Several investors contacted by Reuters confirmed they were looking for 50 pounds a share or more, with Neil Veitch of SVM Asset Management predicting an agreed deal somewhere between 52 and 53 pounds.

Because a key goal of the planned takeover is to get the tax advantages of re-domiciling the enlarged group in Britain, there is a limit to how much cash Pfizer can offer, since at least 20 percent of its shareholders are required to be UK-based.

“We estimate Pfizer will need to issue a minimum of around $55 billion in shares to comfortably meet this requirement,” Jefferies said.

Based on the original 30 percent cash element, Moody’s analyst Michael Levesque said Pfizer could fund the whole of the cash portion with offshore funds.

Pushing the cash element to 50 percent, however, would require taking on some incremental debt.


AstraZeneca CEO Pascal Soriot, whose efforts to revive the firm’s drug pipeline have proved a key draw for Pfizer, will now be canvassing the views of shareholders as a “priority”, with machinery in place for meetings with big and small investors, two people close to the company said.

Soriot and chairman Leif Johansson will also be weighing strategic alternatives for the drugmaker, including the potential spin-off of non-core therapy areas like infection and neuroscience, as well as possible acquisitions.

But “white knight” counterbidders ready to take on Pfizer are likely to be thin on the ground – not least because few other companies would enjoy the same cost and tax benefits from acquiring AstraZeneca as Pfizer.

Amgen (AMGN.O) is one player for whom an AstraZeneca deal might make sense, since the two companies are co-developing a number of drugs, but a person familiar with the U.S. biotech firm said on Tuesday it was not interested in entering the fray.

French drugmaker Sanofi (SASY.PA) is another company with the heft and MA experience to consider intervening, yet its CEO Chris Viehbacher said on Tuesday he planned to stick to smaller bolt-on acquisitions.

GlaxoSmithKline (GSK.L), the British company with arguably the greatest potential to extract synergies from buying AstraZeneca, has meanwhile said for several years it is not interested in large deals.

($1 = 0.5950 British Pounds)

(Additional reporting by Anjuli Davies; Editing by Mark Potter)

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U.S. home prices rise in February: S&P/Case-Shiller

NEW YORK (Reuters) – U.S. single-family home prices rose in February and slightly beat expectations, a closely watched survey said on Tuesday.

The SP/Case-Shiller composite index of 20 metropolitan areas rose 0.8 percent in February on a seasonally adjusted basis. A Reuters poll of economists had forecast a 0.7 percent rise.

“Despite continued price gains, most other housing statistics are weak,” said David Blitzer, chairman of the index committee at SP Dow Jones Indices, who cited new and existing home sales data.

“The recovery in housing starts, now less than one million units at annual rates, is faltering. Moreover, home prices nationally have not made it back to 2005.”

On a non-seasonally adjusted basis, prices were flat in February compared with January.

Prices in the 20 cities rose 12.9 percent year over year, just shy of expectations for 13 percent.

(Reporting by Ryan Vlastelica; Editing by Meredith Mazzilli)

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Barclays’ U.S. head McGee quits

LONDON (Reuters) – Barclays (BARC.L) said that Hugh ‘Skip’ McGee, one of the British bank’s highest earners, has quit as head of its U.S. business because he does not want to oversee the task of establishing a new company required under tougher U.S. rules.

Barclays has to establish an intermediate holding company by July 2016, which imposes more stringent rules on the U.S. operations of foreign banks. The bank said that, given the amount of time and focus on regulations, compliance and legal and operational issues for the next two years, McGee had decided to step down.

Joe Gold, currently head of client capital management, will become CEO of the Americas from May 1. Barclays said the role has been restructured and Gold will report to the co-CEOs of the corporate and investment bank, Tom King and Eric Bommensath.

McGee, 53, was awarded nearly 9 million pounds ($15 million) of shares last month under bonus plans from prior years, the highest payout among the bank’s executives. His full pay details are not disclosed.

Former Lehamn Brothers banker McGee joined Barclays when it bought the U.S. arm of Lehman when the investment bank collapsed in 2008. He became Barclays’ U.S. head in March 2013.

He said that, after 21 years at Lehman and Barclays, he is looking forward to his next challenge but did not specify what that would be.

The Texan has spent most of his career advising investment banking clients in the energy sector. ($1 = 0.5950 British Pounds)

(Reporting by Steve Slater; Editing by Matt Scuffham and David Goodman)

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Mercedes recalls 284,000 cars in US, Canada over tail lights

DETROIT (Reuters) – Mercedes is recalling about 284,000 of its C-Class sedans in the United States and Canada because an electrical issue could cause the tail lights to dim or fail, according to the company and documents filed with U.S. safety regulators.

Mercedes, a unit of Germany’s Daimler AG (DAIGn.DE), is recalling certain C300, C350 and C63 sedans from model years 2008 through 2011 as a poor electrical ground connection could cause the tail lights to dim or fail, raising the risk of a crash, according to documents filed with the U.S. National Highway Traffic Safety Administration.

Of the cars recalled 252,867 were sold in the United States, according to the NHTSA documents. A Daimler spokesman said the rest of the recalled cars were sold in Canada, and no other markets are affected.

The spokesman said Daimler is not aware of any accidents or injuries related to the issue.

In 2009, Mercedes received five field reports in which a loss of tail lamp was due to loss of electrical connection, but the cause was unknown at that time and designated for further study, according to the NHTSA documents.

Last year, NHTSA opened an investigation into the issue and Mercedes responded with information in October, according to the documents. NHTSA requested further information in March 2014, and in preparing to respond, Daimler decided to conduct the recall.

Dealers will replace the bulb holders if not previously updated and replace any corroded connectors, NHTSA said. Parts are not currently available. Owners will be sent an interim notification in June and a second letter will be sent when the parts are available, which is expected in August or September, NHTSA said.

(Reporting by Ben Klayman in Detroit and Ilona Wissenbach in Stuttgart; Editing by Bernadette Baum and Chizu Nomiyama)

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