News Archive

S&P 500, Dow end up after late rebound; Apple, Pfizer lift

NEW YORK (Reuters) – The SP 500 ended higher on Monday after a volatile session, as gains in Apple (AAPL.O) and Pfizer (PFE.N) helped offset another round of selling in some high-growth tech shares.

The Dow also managed to end the session with a modest gain, while the Nasdaq closed slightly lower after rebounding from a fall of over 1 percent. Leading the Nasdaq down was (AMZN.O), which extended Friday’s sharp drop a day after its earnings report.

A flurry of merger and acquisition activity in the pharmaceutical sector increased speculation of further deal-making. Shares of Pfizer gained 4.2 percent to $32.04 after the U.S. drugmaker was said to be working on its next move in a potential bid to take over Britain’s AstraZeneca Plc (AZN.L).

“What we saw earlier was you had more rotation out of the high-beta momentum names, and a lot of those tech players rotated into Apple, which just had positive earnings,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

“This whole MA aspect of the pharmaceutical healthcare industry has people positively biased for the time being,” he said, and “people who had to sell the momentum names are at least finished for the time being.”

The Dow Jones industrial average .DJI rose 87.28 points or 0.53 percent, to end at 16,448.74. The SP 500 .SPX gained 6.03 points or 0.32 percent, to 1,869.43. The Nasdaq Composite .IXIC dropped 1.161 points or 0.03 percent, to 4,074.401.

Apple’s stock jumped 3.9 percent to $594.09. The stock has gained 13.2 percent since the close on Wednesday, when Apple reported results after the bell. ended down 2.4 percent at $296.58. High-growth stocks have been battered in recent weeks as investors have pulled out of the tech and biotech space.

Bank of America shares tumbled 6.3 percent to $14.95 after the company said it will suspend a planned increase in its quarterly dividend as well as its latest stock-buyback program because it miscalculated a measure of the capital on its books.

Chinese Internet stocks also fell after China’s government ordered the removal of four U.S. television shows from video websites. The U.S.-listed shares of Baidu (BIDU.O) slid 7.4 percent to $150.93.

In other MA activity, Forest Laboratories Inc (FRX.N) said it would buy Furiex Pharmaceuticals Inc (FURX.O) for up to $1.46 billion. Furiex Pharmaceuticals shares surged 28.6 percent to $103.05 while Forest Laboratories shares shed 0.4 percent to $89.50.

Agenus (AGEN.O) shares jumped 19.5 percent to $3.06 after the biotechnology company said it signed a deal with Merck Co Inc (MRK.N) to discover and develop antibody-based treatments against cancer.

After the bell, shares of in-flight wireless Internet services provider Gogo (GOGO.O) dropped 19.2 percent to $14.85 after ATT (T.N) said it plans to launch an in-flight connectivity service. ID:WNBB047WB

During the session, about 7.4 billion shares changed hands on U.S. exchanges, above the 6.5 billion average so far this month, according to data from BATS Global Markets.

(Editing by Bernadette Baum and Jan Paschal)

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Pfizer move to join tax-driven deal-making raises red flags in U.S

(Reuters) – A wave of tax-driven overseas deal-making by U.S. companies gained momentum with drugmaker Pfizer Inc’s (PFE.N) announcement on Monday that it had made takeover bids for UK rival AstraZeneca Plc (AZN.L), fueling political concerns about tax “reflagging” strategies.

Pfizer said it wants to buy AstraZeneca and merge the two companies into a UK holding company with a UK tax domicile, while maintaining its operational headquarters in New York. It would likely be the largest deal ever done that included such a so-called tax “inversion.”

If a deal goes through – which is far from certain given AstraZeneca has so far rejected Pfizer’s overtures – it would likely mean a loss of corporate tax revenue for the United States, and a lower effective tax rate for the combined entity than the two companies pay now.

For 2013, Pfizer disclosed an effective rate of 27.5 percent and global cash income tax paid of $2.87 billion, including income taxes paid to the U.S. government and other state and foreign tax authorities, based on company filings.

The Pfizer proposal triggered concern in Washington. “This further demonstrates the urgency for tax reform,” said a spokeswoman for Democratic Senator Ron Wyden, chairman of the tax-writing U.S. Senate Finance Committee.

“Now is the time to undertake comprehensive reform to ensure our country stays competitive on a global stage and continues to be the best place for corporate investment,” the spokeswoman said.

Governments worldwide are increasingly wary of corporate tax avoidance. The Obama administration earlier this year included a proposal in its 2015 budget to clamp down on deals like the one Pfizer is pursuing. The administration’s proposal is unlikely to go anywhere though with Congress deadlocked on tax issues.

The U.S. Internal Revenue Service on Friday issued a separate notice limiting shareholders’ tax-free treatment in inversion transactions.


Since the 2008 global financial crisis, about two dozen U.S. companies have shifted their legal tax residences to lower-tax countries via corporate deals, versus about the same number over the previous 25 years, a Reuters review of transactions showed.

Ireland, the Netherlands, Switzerland, Canada and Britain lately have been the most common destinations of U.S. companies seeking new tax domiciles, replacing preferred havens of years past such as Bermuda and the Cayman Islands.

Buying AstraZeneca would allow Pfizer to escape the comparatively high 35-percent U.S. corporate income tax rate.

The United States has one of the highest such tax rates in the world, though most multinational companies pay less than that due to plentiful loopholes.

Pfizer spokeswoman Joan Campion said the UK holding company structure being contemplated “provides for a more efficient tax structure that doesn’t subject AstraZeneca’s non-U.S. profits to U.S. tax.” Campion declined further comment.

Inversions allow U.S. corporations to escape that high rate by moving to a lower-tax country, via an acquisition, a merger or the creation of a new holding company. They can also reduce overall U.S. profits in a process known as “earnings stripping” that involves loading up the legacy U.S. business with tax-deductible debt, said academics and private tax watchdog groups.

The AstraZeneca transaction would also give Pfizer a way to spend some of an estimated $69 billion it is holding abroad under a law that lets U.S. companies shelter overseas earnings from U.S. taxes by keeping them out of the United States.


Another large inversion deal is New York advertising firm Omnicom Group Inc’s (OMC.N) proposed $35-billion merger with Paris rival Publicis Groupe SA PUBP.PA). This transaction is encountering approval delays among European tax authorities.

Omnicom and Publicis announced in mid-2013 they planned to merge into a new corporate holding company to be based in the Netherlands, with operating units staying in New York and Paris.

The merger was described then as tax-free to shareholders of both companies, with each side getting about 50 percent of the shares in the new Dutch holding company. The deal was then expected to close in late 2013 or early 2014.

Last week, Omnicom said Dutch and UK tax authorities had not yet approved the deal, which Omnicom had previously said would save $80 million a year in taxes. A plan to make the company tax resident in the UK while being domiciled in the Netherlands had become a particular stumbling block.

Omnicom-Publicis is more like a merger of equals than it is an inversion, but “the practical impact of this transaction is that the company is achieving a corporate inversion,” said Bret Wells, a professor at the University of Houston Law Center who has studied corporate inversions for years.

Though the Obama budget proposal is unlikely to become law anytime soon, it does indicate that the U.S. government is trying to grapple with the question of inversions.

“It’s been a decade since the first inversion legislation was enacted and Obama is now trying to tighten the rules,” said Steven Rosenthal, a tax expert and senior fellow at the Urban Institute, a policy think tank in Washington, D.C.

“There’s a lot of concern about losing U.S. companies to these reflagging operations,” he said.


The IRS’s move last week “further evidences the government’s narrow reading of the inversion rules and dovetails with the Obama administration’s 2015 budget proposal to narrow the scope of permitted inversions,” said international law firm Cadwalader, Wickersham Taft LLP in an emailed update to clients on tax-related merger and acquisition developments.

“More companies are currently considering inversions by merger, including mergers involving two or more foreign jurisdictions,” said Linda Swartz, chair of Cadwalader’s tax group. “Companies have become more comfortable with the prospect of inverting as the number of announced deals has steadily increased this year.”

The Organization for Economic Co-operation and Development, a Paris-based club of major industrial economies, is studying tax base erosion and the related issue of profit shifting by multinational corporations among units in different countries.

The United States was among members of the G20 nations that endorsed the OECD project. “Profits should be taxed where economic activities deriving the profits are performed and where value is created,” said a declaration of the G20 leaders in September after a summit meeting in St. Petersburg, Russia.

The IRS has addressed inversions, which are generally thought to have first emerged in 1982, by trying to define what is and is not a foreign business, and by trying to curb opportunities for earnings stripping, but with little success.

A flurry of deals from 1997 through 2002 saw several major U.S. companies reflag in Bermuda and the Cayman Islands. Congress cracked down with a stricter law in 2004 and the flow of deals dried up for a few years.

The latest wave of deals got under way in 2008 after the financial crisis abated. The wave has continued amid inconclusive IRS efforts to define how much presence a corporation must have in the United States and abroad to be treated as a foreign company for U.S. tax purposes.

(Additional reporting by Tom Bergin and Ben Hirschler in London; Nicola Leske, Olivia Oran, Nadia Damouni, Leila Abboud and Ransdell Pierson in New York; Editing by Martin Howell)

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Frontier Airlines rolls out carry-on bag fees, cuts base fares

(Reuters) – Bargain hunters could find themselves paying more to fly after Frontier Airlines, a low-cost carrier, on Monday said it would start charging extra for carry-on bags.

The Denver-based carrier said it simplified its price structure and cut its lowest economy fares by 12 percent. But customers taking advantage of the lower fares will now pay $20 to $50 more for a carry-on bag to store in the overhead bin, depending on whether the traveler books online or pays at the gate. Customers can carry on one personal item at no charge.

Prior to Monday’s announcement, Frontier charged a carry-on fee for consumers who purchased on third-party websites.

Those who buy an economy fare will also have to pay additional fees for seats near the front of the plane and with more leg room. Those charges start at $3.

The new fees are “very consumer unfriendly no matter how they try to spin it,” said Brian Kelly, founder of, a website that focuses on frequent-flier issues. “Booking Frontier is likely going to cost you more.”

Frontier travelers who buy the fully refundable and higher-cost Classic Plus fares are allowed one free carry-on and one free checked bag and also incur no seat fees.

Frontier, which flies to more than 75 cities in the United States, Costa Rica, the Dominican Republic, Jamaica, and Mexico, said in a statement that the “unbundled” economy airfare will allow customers to save by paying only for services they want.

In making the changes, Frontier is taking a page from Spirit Airlines (SAVE.O), the Miramar, Florida-based carrier known for low base fares and extra charges for many other options.

Denver-based Frontier was purchased from Republic Airways Holdings (RJET.O) last year by private equity firm Indigo Partners LLC, whose co-founder William Franke is a former Spirit Airlines chairman. Last week, Frontier said Barry Biffle, a former executive vice president of Spirit, had been named its president.

“Spirit is known as an airline that will nickel-and-dime you and they’re proud of it,” Kelly said. “Frontier is not.”

(Reporting by Karen Jacobs in Atlanta; Editing by Diane Craft)

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Toyota move to Texas is latest blow to Southern California

NEW YORK/DETROIT (Reuters) – Toyota Motor Corp. (7203.T) said it will move its U.S. sales headquarters from southern California to suburban Dallas, delivering the latest blow to California in a fight for jobs with arch-rival Texas, whose Governor Rick Perry has been actively poaching businesses from the Golden State.

The relocation from Torrance, a Los Angeles-area city of about 150,000, will bring much of the Japanese automaker’s U.S. operations under one roof in Plano, Texas, including sales, service, marketing, advertising and quality. Also moving to Texas will be some manufacturing staff now based in Erlanger, Kentucky, and corporate operations staff based in New York City.

Toyota is the largest employer in Torrance, accounting for more than 5 percent of all jobs in the city with 3,837 workers in 2013, according to the city’s annual financial report. About 2,000 people from Toyota Motor Sales in Torrance will be affected by the move, and about 4,000 U.S. employees in all, the company said.

Toyota’s move, which will take place in stages between this summer and the end of 2016, is the latest by a major employer to defect to the Lone Star State from California. Toyota has been in California since 1957, when it set up shop at a former Rambler dealership in Hollywood.

In February, Occidental Petroleum Corp. (OXY.N) said it would move from Los Angeles to Houston. In 2009, power company Calpine Corp (CPN.N) abandoned San Jose for Houston and in 2006 engineering company Fluor Corp. (FLR.N) relocated to the Dallas area from Orange County.


It’s “sad news,” Torrance mayor Frank Scotto said at a press conference Monday. “Toyota has been an integral part of the city.” He said his son-in-law works for Toyota, so he faces the prospect of having to travel to Texas to see his daughter and grandchildren.

Toyota’s decision also means all three of the major Japanese carmakers will have exited the state where they first got their footholds in the United States. Nissan Motor Co (7201.T) in 2006 moved most of its operations from Gardena, California, to Franklin, Tennessee, outside Nashville. Last year, Honda Motor Co (7267.T) decided to move a number of executives from Torrance to Columbus, Ohio.

Perry has made luring businesses from other states a priority, making personal recruiting trips to sell what the Republican touts as a superior business climate, particularly lower taxes. California and New York State, both with Democratic governors, have been particular targets for the effort.

On a poaching trip to New York last week, Perry challenged New York Governor Andrew Cuomo to a debate over which of the two states has a better business climate. There are about 50 people working in Toyota’s Manhattan office, and not all will be required to move.

Toyota’s chief executive for North America, Jim Lentz, said Perry had no role in Toyota’s decision to move.

Perry “is an interesting guy,” Lentz said in an interview. “I’ve never met him. I talked to him on the phone today for the first time. This was never about Governor Perry courting us.”


The company never gave California a chance to make a counter-offer, Lentz said, adding that it weighed as many as 100 possible sites over the past year.

“California didn’t work out for a number of reasons, especially the distance from our U.S. manufacturing operations,”

he said. It would have been “disingenuous” to seek an alternative proposal from California.

When it came time to decide on the site from the four finalists, Plano “was clearly No. 1,” Lentz said, but not because of the incentives it offered the company.

“Our decision was not based on the dollar amount we received,” but rather on a friendly overall business climate and certain advantages for Toyota employees, from affordable housing and shorter commutes to the absence in Texas of a personal income tax.

Those supposed quality of life advantages don’t ensure success in a big corporate relocation, however.

Larry Dominique, a former Nissan executive, recalled how Nissan lost about two-thirds of its California employees in the move to suburban Nashville.

While some employees liked the lack of income tax in Tennessee, which was akin to “getting a 20-percent raise,” Dominique said many others couldn’t be persuaded to go. That included a sizeable number who were not their family’s primary earners.

Culture change is another challenge likely to be on Toyota’s horizon, said Dominique, who now heads an automotive research and consulting firm in Santa Barbara.

“You lose centuries of institutional knowledge,” he said. “In some departments, like in planning or branding, you have to retrain people on who you are.”


Some employees will begin to move this summer, though most won’t until construction of a new headquarters in Texas is completed in late 2016 or early 2017, the company said.

Toyota has a truck assembly plant in San Antonio, Texas, as well as manufacturing and assembly plants in eight other states, including Kentucky, Indiana and Mississippi.

Meanwhile, the departure from Torrance will leave more than a gap in employment.

According to the city’s Comprehensive Annual Financial Report, the company was also Torrance’s third-highest property taxpayer, with a taxable assessed value of $473 million or over 2 percent of the city’s total taxable assessed value last year. Toyota also paid the city $203,037 in water revenue.

Torrance had a $271.5 million budget in 2013 and about $121.5 million in long-term debt. In December 2012, credit rating agency Moody’s downgraded Torrance to Aa2 from Aa1, citing a moderately weakened general fund compared to pre-recession levels, increasing pension payments and public safety costs.

The departure could also hurt efforts by Los Angeles to regain its footing in the job market. The region’s unemployment rate stood at 8.1 percent in February, well above the national rate of 6.7 percent.

(Additional reporting by Tim Reid in Torrance. Writing by Dan Burns, editing by John Pickering)

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BofA suspends buyback, div increase after capital error

(Reuters) – Bank of America Corp said on Monday that regulators had suspended its plan to buy back more shares and raise its dividend after the bank realized it had miscalculated a measure of the capital on its books.

The second-largest U.S. bank said fixing the mistake reduced a capital level by $4 billion, or about three-quarters of the extra money that the Federal Reserve had approved its returning to shareholders over the next year.

News of the gaffe sent the bank’s shares down 6.3 percent on Monday to close at $14.95, in the biggest one-day decline in the stock since November 2012. (BREAKINGVIEWS-BofA reclaims banking dunce cap with $4 billion flub.

The announcement illustrates how difficult it is to determine appropriate capital levels for the biggest banks, particularly under hypothetical stress situations that regulators consider. Bank of America now has to submit its request to return more capital to shareholders for a third time, and the Fed itself previously erred in projecting the bank’s minimum capital ratios under a stressed scenario.

The previously approved increase in the bank’s dividend would have been the first since the financial crisis, and raising it has been a focus of top executives. Banks historically paid out relatively high dividends, spurring retirees and other investors seeing income to buy their shares.

Banks failed to cut their dividends even as their earnings shrank during the financial crisis, burning up valuable capital and leaving them more vulnerable as the housing market deteriorated. In response, lawmakers have given regulators much more control over banks’ plans to return funds to shareholders.

The Fed said Bank of America has 30 days to submit a new plan that corrects the errors and ensures no further reporting problems if it would like to return more money to shareholders over the next four quarters. (

The bank said its new plan will likely be more modest than its prior request. In March, the bank received approval to buy back $4 billion of shares and increase its dividend payout by more than $1.5 billion a year, or 5 cents per share per quarter from 1 cent.

Analysts said the bank would likely increase its dividend as previously planned, while not asking to buy back any shares.

The accounting error stemmed from Merrill Lynch Co debt, which Bank of America assumed after it bought the investment bank and brokerage during the financial crisis.

The acquisition, which Bank of America agreed to in September 2008, boosted earnings in areas like investment banking and wealth management by billions of dollars, but it has also given management some real headaches. Bank of America agreed to pay $2.4 billion in 2012 to settle allegations that it had misled investors about Merrill’s health at the time of the purchase. Additionally, the New York Attorney General’s office intends to take action against the bank as a result of an investigation of Merrill’s mortgage bond practices.


The bank already had to scale back its requests to return capital in 2014. The Fed said Bank of America’s original request would have left it with too little capital to withstand a hypothetical economic crisis, and it asked the bank to tweak its request. (

Other banks have also stumbled during their efforts to win approval to pay more capital to shareholders. Citigroup Inc’s plan was rejected after the Fed took issue with the bank’s ability to assess risks and capital needs. Goldman Sachs Group Inc also had to adjust its initial proposed payout to shareholders to win approval from the Fed.

The problems Bank of America announced on Monday related to how it calculated the value of structured notes that investment bank and brokerage Merrill Lynch had issued. Changes in the value of the notes have an impact on the bank’s earnings and capital levels under generally accepted accounting rules.

But regulators pay less attention to capital levels under GAAP, and focus instead on a measure known as “regulatory capital,” which strips out changes in the value of the notes. In making that adjustment, the bank failed to account for the fact that some of the notes had matured or were redeemed.

Factoring in those redemptions and maturities cut the bank’s capital ratios by 0.30 percentage points to 9.0 percent from 9.3 percent by one measure. The bank estimates that it will need to maintain a 8.5 percent minimum capital requirement under this measure by 2019.

Bank of America found the errors over the past week as it prepared a quarterly filing with the U.S. Securities and Exchange Commission, a person familiar with the matter said. It notified the Fed and worked through the weekend so it could announce the adjustments on Monday, the source said.

The reduction in regulatory capital and capital ratios will not affect the company’s historical consolidated financial statements or shareholders’ equity, the bank said.

The Charlotte, North Carolina-based bank’s shares have whipsawed since the start of the year, rising 16 percent from the start of January before giving those gains and more since late March. Overall the bank’s shares are down about 3.7 percent since the start of the year compared to a 2.4 decrease in the KBW bank index in the same period.

(Reporting by Peter Rudegeair in New York and Tanya Agrawal in Bangalore; Editing by Ted Kerr, Jeffrey Benkoe and Tom Brown)

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Buffett: Next Berkshire CEO should be only one to get options

NEW YORK (Reuters) – The next chief executive of Berkshire Hathaway should be the only one at the company to get options, Warren Buffett, the current head of the sprawling conglomerate, said on Monday.

In an interview with Fortune, Buffett said he had written a memo to the Berkshire (BRKa.N) board to suggest the next CEO should be “the only one who would receive options because he would be the only one who is responsible for the overall success of the operation.”

Buffett, an investing icon and the world’s third-richest man, came under fire last week when he said that he disagreed with a controversial equity compensation package for Coca-Cola (KO.N) management but nonetheless abstained from voting.

He told CNBC last week that he “didn’t want to express any disapproval of management but we did disapprove of the plan.”

He’s since drawn broad criticism for not voting against the measure, which passed.

Buffett in the past has spoken out about stock options for executives as expensive and ineffective.

In 1995, for example, Buffett wrote: “Who, after all, refuses a free lottery ticket?” and called such arrangements “wasteful to the company.”

Still, Buffett said on Monday that executive compensation is not out of whack with pay rates in the rest of the country.

“If you run a multibillion-dollar company the difference between a 10 and an eight is huge in terms of value,” he said.

“Still, almost on a voluntary basis, I think it should be somewhat restrained in some cases.”

He offered no more details on who the next Berkshire Hathaway CEO could be, a source of widespread speculation as investors wonder how much longer the octogenarian can continue in his current role.

Buffett, 83 and Charlie Munger, 90, the chairman and vice-chairman, respectively, of Berkshire Hathaway, have each drawn a salary of $100,000 each for more than 25 years.

In a securities filing this year, the company noted that “Mr. Buffett has advised the (Governance) Committee that he would not expect or desire such compensation to increase in the future.”

Buffett’s fortune is estimated at $65 billion by Forbes magazine.

(Reporting by Luciana Lopez; Additional reporting by Jonathan Stempel; Editing by Andrew Hay and Sandra Maler)

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Comcast in deal with Charter as it seeks approval for TWC

(Reuters) – Comcast Corp on Monday agreed to a three-way deal with Charter Communications Inc as part of Comcast’s efforts to win regulatory approvals for its proposed $45 billion purchase of Time Warner Cable Inc.

The transaction would make Charter, which lost out to Comcast in a bid to acquire Time Warner Cable, the second-largest cable provider in the United States.

The agreement would leave Comcast with less than 30 percent of the U.S. residential cable or satellite TV market, a factor seen as a key step to pleasing regulators. Charter would have about 6 percent of the pay-TV market, with an eventual shot to climb to 9 percent.

Under the deal, Charter would pay Comcast $7.3 billion for 1.4 million subscribers. Comcast would divest another 2.5 million subscribers into a new publicly traded company that would be two-thirds owned by Comcast shareholders and one-third owned by Charter.

In addition, Comcast and Charter would trade about 1.6 million subscribers in different parts of the country.

“For Charter, this deal is a transformative event and sets them up over time to consolidate the balance of the rest of the cable industry,” Pivotal Research Group analyst Jeff Wlodarczak told Reuters, adding that the deal was good for both parties.

Comcast is awaiting approval by the U.S. Justice Department and the U.S. Federal Communications Commission to take over Time Warner Cable, something that likely will take many months and could impact the future of cable and broadband.

Charter’s shares were up almost 8 percent at $139.90 in mid-morning trading while Comcast shares were up 1.4 percent at


Under the deal for the new company, Charter would manage the as-yet-to-be named company and Charter CEO Tom Rutledge would become its chairman.

The company would have an estimated enterprise value of $14.3 billion and an equity value of $5.8 billion, Charter and Comcast said in an investor presentation. (

A person familiar with the deal said there was a standstill agreement with Charter stipulating that it cannot gain full control of the new company for four years. Comcast will have no ownership.

The entire deal with Charter is contingent on Comcast closing the Time Warner Cable acquisition.


If the agreement with Comcast goes through, Charter would leapfrog Cox Communications Inc and become the second-biggest U.S. pay TV company, with 5.7 million customers.

The deal also marks an acceleration of John Malone’s effective return to cable through his investment vehicle Liberty Media Corp, which owns about 27 percent of Charter.

Liberty Media got involved in working with Comcast but Charter did the nuts and bolts of the deal, the person familiar with the matter said.

In addition to the divestments, which will deliver about $19.5 billion in value to Comcast shareholders.

Under the agreement to swap about 1.6 million customers, Charter will acquire systems in Ohio, Kentucky, Wisconsin, Indiana and Alabama, while Comcast will get parts of the Los Angeles, New York state, western Massachusetts, North Carolina South Carolina, and parts of the Texas and Georgia markets.

The new company will get the Detroit and Minneapolis-St. Paul markets.

Time Warner Cable had 11.2 million residential video subscribers as of March 31, while Comcast had 22.6 million.

Charter, which also reported better-than-expected first-quarter revenue, said it expected to fund the purchase of 1.4 million customers through debt.

Time Warner Cable shares were up 1 percent at $141.01.

(Additional reporting by Abhirup Roy and Sruthi Ramakrishnan in Bangalore; Editing by Saumyadeb Chakrabarty and Leslie Adler)

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U.S. senators ask federal agency to act on recalled GM cars

WASHINGTON (Reuters) – Two Democratic U.S. senators on Monday called on the Department of Transportation to urge owners of 2.6 million recalled General Motors cars to stop driving them until they are repaired, which could take months as dealerships wait for replacement ignition switches.

Senators Edward Markey of Massachusetts and Richard Blumenthal of Connecticut, who serve on the Senate Commerce Committee investigating GM regarding its safety problem, wrote Transportation Secretary Anthony Foxx urging him to act.

“GM has indicated that it could take until October, 2014, before it can complete all the needed repairs,” the senators wrote. “Every day that unrepaired vehicles remain on the road increases the risk of more injuries, deaths and damage.”

The recalled autos can stall unexpectedly because of faulty ignition switches. At least 13 deaths have been linked to the problem, which also makes power steering and power brakes malfunction and stops airbags from deploying during crashes.

Transportation Department officials were not immediately available for comment on the senators’ request.

On April 17, a federal judge refused to order GM to tell customers to stop driving cars that have been recalled because of the defective switches.

The owners of a recalled 2006 Chevrolet Cobalt had sought an emergency order directing GM to issue “park it now” notices.

The Detroit automaker, which has known about the troubled ignition switches for more than a decade before ordering recalls earlier this year, maintains the cars are safe to operate as long as there are no added keys or fobs hanging from the ignition switch key. However, the company also acknowledges increased risk of ignition switch malfunctions when traveling on rough roads.

Senate and House of Representatives committees are probing why it took GM so long to order the recalls and who within GM management made the decisions.

(Reporting by Richard Cowan; Editing by Dan Grebler)

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France meets Alstom bidders with pledge to protect jobs

PARIS (Reuters) – France said it would defend jobs and its national interest as it met suitors eyeing a breakup of engineering group Alstom on Monday and suggested it preferred Germany’s Siemens over U.S. giant General Electric.

President Francois Hollande held talks with GE boss Jeff Immelt on Monday morning and was due to sit down later in the afternoon with Siemens CEO Joe Kaeser to discuss the fate of Alstom, the maker of the country’s prestigious TGV high-speed trains and turbines for power plants.

“We won’t let Alstom sell this national champion behind the back of its shareholders, its employees and the French government,” Economy Minister Arnaud Montebourg wrote on his official Twitter account before the meetings started, accusing Alstom’s CEO Patrick Kron of “a breach of national ethics”.

Alstom, which is suffering from big debts and falling demand, was bailed out by the French government in 2004 but now needs help again. Smaller than its rivals, it was hit the hardest by a slump in orders for power equipment since the 2008 economic downturn depressed electricity prices.

Monday’s meetings follow a weekend of drama when Alstom’s German rival Siemens proposed a swap of power and rail assets to counter a potential Alstom-GE energy tie-up. Montebourg said the Siemens plan would create “two European and global champions.”

Berlin weighed in on Monday morning, saying an Alstom-Siemens deal could offer “great opportunities” for Franco-German cooperation.

Siemens also re-confirmed its interest in an Alstom deal.

After GE CEO Immelt emerged from talks at the presidential palace late on Monday morning the company issued a statement saying: “The dialogue was open, friendly and productive.”

It added: “It was important to hear in person President Hollande’s perspective and to discuss our plans… We understand and value his perspective, and we are committed to work together.”

Hollande and Montebourg have said their concerns are related to jobs, the nation’s energy independence, and the location of activities both in power and rail. A source familiar with the discussions said GE had offered some solutions to these concerns but that there was still a lot of work to do.

Montebourg said before the meeting with GE that France would oppose any deal it considered unsuitable. But the minister – who has threatened in the past to nationalize assets belonging to steelmaker ArcelorMittal – stopped short of suggesting the state would do the same for Alstom.

“It’s too early to raise that question,” he said.

Hollande is due to meet Siemens’ Kaeser in the evening, at 1600 GMT, then at 1715 GMT hold talks with Martin Bouygues, the billionaire chairman of family conglomerate Bouygues that is Alstom’s largest shareholder with a 29.4 percent stake.

Immelt arrived in Paris during the weekend, aiming to hammer out a $13 billion deal to buy Alstom’s power turbines business. News of talks between the two surfaced last week and sources with knowledge of them say they have been going on for months and are very advanced.

However Siemens may also be working on refining its proposal, a second source with knowledge of the talks said.

“It is clear that Siemens wants to remain in the race. They could come back with a more binding offer or with another, more detailed letter addressing some of the issues pointed out in the press, such as antitrust and jobs.”


Analysts see sense in an Alstom-GE tie-up. GE is relatively weak in turbines for nuclear and coal power generation, where Alstom is strong, and the French group’s established base of power installations generated 70 percent of its global revenue in the last year. A deal would also enable GE to expand into offshore wind power and grid technology.

Such a beefed-up GE would be a tough competitor for Siemens – hence its counter-attack, say industry sources.

Citi analysts estimate that combined with Alstom, Siemens could have 50 percent of the world’s installed power capacity, well ahead of GE, which currently has around 25-28 percent.

Germany’s Siemens, like Alstom, makes high-speed trains and other rolling stock as well as power station turbines, and according to sources familiar with its plan is proposing an asset swap that would make Alstom a more significant rail transport player while enhancing its own turbines and power grid equipment business, Its proposal also offers Alstom some cash, and puts an enterprise value of around 10 to 11 billion euros ($14-$15 billion) on Alstom’s power arm.

However, industry sources and analysts say that a deal with Siemens – an option floated a decade ago but rejected by both Alstom’s CEO Kron and then-president Nicolas Sarkozy – could bring more overlap and antitrust issues than a deal with GE.

Alstom’s unions warned a Siemens tie-up implied big layoffs at both companies due to heavy overlap. Alstom employs 18,000 people in France, about 20 percent of its total workforce, against GE’s 10,000 French workers and Siemens’ 7,000.

“Why not a Franco-French solution? Can’t the French state intervene directly by partly taking over the stake Bouygues holds?” Alstom’s moderate CFE-CGC union said in a statement.

Labour Minister Francois Rebsamen, asked if nationalization remained an option, told France Inter radio: “I think nothing is out of the question at the moment.”

GE has declined to comment apart from Monday’s brief statement. So has Bouygues, only saying it supports Alstom’s strategy. Siemens said on Sunday it had written to Alstom about strategic opportunities and in Monday’s statement said that after the meeting with Hollande it would “convene as soon as possible to decide whether to make an offer for Alstom and what this will consist of.”

Siemens has hired Societe Generale and BNP Paribas to help it on a possible deal swap with Alstom, according to sources with knowledge of the situation who declined to be named because the talks are private.

Rothschild and Bank of America Merrill Lynch are advising Alstom on the deal while GE is working with Lazard and Credit Suisse, the sources said. BNP and Societe Generale declined to comment; the other banks were not immediately available for comment.

Alstom’s shares are suspended from trading until Wednesday while it considers its options. Alstom shares, which had slumped earlier this month to a near nine-year low, jumped at the end of last week to reach their highest in five months.

($1 = 0.7227 Euros)

(Additional reporting by Elizabeth Pineau, Nicolas Vinocur and Matthieu Protard in Paris, Arno Schuetze in Frankfurt and Sophie Sassard and Anjuli Davies in London; Editing by Sophie Walker)

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