News Archive


Peltz’s activist fund Trian to end quarterly redemptions: sources


Trian Fund Management LP, the activist hedge fund run by billionaire investor Nelson Peltz, is ending quarterly redemptions by its new investors, according to people familiar with the matter, in order to lock in money for longer periods.

The change comes as activist hedge funds increasingly seek more stable sources of funding that allow them to keep the pressure on companies, without fretting about the short-term demands of the funds’ investors.

Trian is closing its quarterly subscription for investors after Dec.1, the people said. Investors who come in after that date will instead have the option to lock up their money in one of Trian’s existing one-, three- or five-year vehicles, the people added.

Trian began to discuss limiting its quarterly subscribers earlier this year, and may decide to reinstate the option in the future to select investors, one of the sources added. The source added that quarterly subscribers who signed up on or before Dec. 1 can still redeem on a quarterly basis.

The sources asked not to be identified because the matter is not public. Trian declined to comment.

Trian is one of several activist funds moving to longer-duration investment capital, which can also allow the funds to go beyond their standard playbook of pushing for stock buybacks and divestitures, focusing instead on improving the business operations of their targets.

“You are definitely seeing more of a private equity mentality here, and activists realize if they are going to run a successful, long-term operation they have no choice but to lock in longer-term capital,” said Tyson McCabe, a senior director for Nasdaq’s Advisory Services division, which tracks investments by activists.

ValueAct Capital said in its third-quarter letter earlier this month that it would launch a new offering for investors that would lock up their money for five years. The five-year tranche would also allow ValueAct to draw down capital over a period of three years rather than receive it up front.

“In line with that of a typical private equity fund structure, we believe this structure provides additional flexibility to our capital base by having ‘dry powder’ to draw upon a market pull back and/or around a company specific event,” ValueAct said in the letter.

Activist investor Jana Partners started offering a three-year lockup vehicle in 2010. Pershing Square and European activist Cevian Capital also offer long-term lock-up vehicles for investors. The longer the lock-up period, the lower the fees for investors.

The longer-term offerings show how activists are developing a preference for the types of illiquid investment funds seen more in the private equity industry. Hedge funds have traditionally allowed investors, which include pensions, university endowments and large financial institutions, to cash out every quarter.

Private equity firms, by contrast, typically ask investors to commit to allocate a sum of money that will be locked up for as many as 10 years. Rather than asking for the money up front, the firm calls on the investor to supply chunks of the commitment when needed – any unused money remaining in a fund when it matures goes back to the investors.

Activist funds are also adopting this draw-down feature.

Even so, not all activists will be able to convince investors to commit to long-term arrangements, as they will depend on their performance record. Investors, aware that activists are suffering from lower returns and stiffer headwinds, may be wary of being locked in for longer.

(Reporting by Michael Flaherty in New York; Editing by Leslie Adler and Ryan Woo)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/fX04aesV61o/story01.htm

Asia stocks mixed amid geopolitical tension, oil eases from highs


TOKYO Asian stocks were mixed in early trading on Wednesday as investors assessed the geopolitical risk surrounding Turkey’s downing of a Russian fighter jet, while crude oil prices eased from two-week highs.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS nudged up 0.2 percent. Australian shares dipped 0.1 percent while Japan’s Nikkei .N225 shed 0.4 percent. South Korea’s Kospi .KS11 was virtually unchanged.

Turkey shot down a Russian craft near the Syrian border on Tuesday, saying the jet had violated its air space, in one of the most serious publicly acknowledged clashes between a NATO member country and Russia for half a century.

“The conclusion would be Russia would not want to take this too much further at a time when its economy is seeing some green shoots after the past two years of sanctions,” said Evan Lucas, market strategist at IG in Melbourne, adding that Turkey is Russia’s second-biggest energy customer.

The incident briefly sparked oil supply fears and sent crude prices surging overnight to 2-week highs.

U.S. crude CLc1 was down 0.4 percent at $42.71 a barrel after jumping nearly 3 percent on Tuesday.

The overnight jump in crude favored commodity currencies such as the Australian dollar. The Aussie was steady at $0.7258 AUD=D4 after hitting a 1-month high of $0.7276.

The Canadian dollar fetched C$1.3308 CAD=D4 to the greenback after pulling away from a 2-month low of C$1.3436 struck earlier this week.

The U.S. dollar was lower, hurt in part as the latest flare up in geopolitical tensions generated demand for safe haven Treasuries and drove their yields lower.

The dollar index .DXY fell to 99.564, retreating from an 8-month peak of 100.000 set on Monday.

Against the yen, the greenback dipped to a 1-1/2 week low of 122.31 JPY= and has since edged back to 122.46.

The euro was little changed at $1.0648 EUR=.

(Editing by Ryan Woo)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Tn1DV-zjprU/story01.htm

Wall Street ends higher, driven by energy amid global tension


U.S. shares closed higher on Tuesday as energy stocks rose along with oil prices after Turkey shot down a Russian warplane near the Syrian border.

The three major U.S. indexes recovered from a morning selloff that was triggered by the overseas news despite some strong U.S. economic data.

Oil prices were up more than 2 percent after a spike in Middle East tensions.

“You came in this morning and everybody was talking about this potential escalation of violence between Turkey and Russia,” said Andrew Frankel, co-president of Stuart Frankel Co in New York. He added that investors settled down after it appeared that Russia’s response would not be as confrontational as they initially feared.

Relatively light trading appeared to exaggerate swings in the market, according to Frankel, as many market participants were away ahead of the U.S. Thanksgiving holiday. Markets will be closed all day Thursday and close early Friday.

The Dow Jones industrial average .DJI rose 19.51 points, or 0.11 percent, to 17,812.19, the SP 500 .SPX gained 2.55 points, or 0.12 percent, to 2,089.14 and the Nasdaq Composite .IXIC added 0.33 points, or 0.01 percent, to 5,102.81.

Investors steered clear of many of Nasdaq’s higher-valuation stocks like Netflix (NFLX.O) and instead took safety in cheaper stocks due to geopolitical concerns, according to J.J. Feldman, portfolio manager at Los Angeles-based Miracle Mile Advisors.

“When you get that kind of thing people say they’re going to get out of the high-flyer expensive P/E stocks and into the flight-to-quality value stocks that have been beaten down,” he said.

Travel-related stocks fell after the U.S. State Department issued a global travel alert for Americans. The Dow Jones Airlines index .DJUSAR ended down 2.7 percent, led by a 5-percent decline in Allegiant Travel (ALGT.O). United Continental (UAL.N), Delta Air Lines (DAL.N) and Spirit Airlines (SAVE.O) all fell around 3 percent.

Six of the 10 major SP sectors rose and energy .SPNY led with a 2.4-percent increase, followed by a 0.8 percent increase in materials .SPLRCM.

Hewlett-Packard (HPQ.N) shares fell 3.4 percent in extended trading after the close when it reported a revenue decline for the fifth straight quarter, its last before it split into two companies.

The U.S. economy grew at a 2.1 percent pace in the third-quarter, compared with an earlier estimate of 1.5 percent, data showed, but consumer sentiment in November was the weakest since September 2014 ahead of the crucial holiday shopping season.

Advancing issues outnumbered declining ones on the NYSE by 1,893 to 1,162, for a 1.63-to-1 ratio on the upside; on the Nasdaq, 1,659 issues rose and 1,121 fell for a 1.48-to-1 ratio favoring advancers.

The SP 500 posted 9 new 52-week highs and 8 new lows; the Nasdaq recorded 63 new highs and 74 new lows.

About 6.9 billion shares changed hands on U.S. exchanges below the 7.2 billion average for the last 20 sessions, according to Reuters data.

(Additional reporting by Abhiram Nandakumar in Bengaluru; Editing by Ted Kerr and Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/K3cmDdr4c-0/story01.htm

Exclusive: Peltz’s activist fund Trian to end quarterly redemptions


Trian Fund Management LP, the activist hedge fund run by billionaire investor Nelson Peltz, is ending quarterly redemptions by its investors, according to people familiar with the matter, in order to lock in money for longer periods.

The change comes as activist hedge funds increasingly seek more stable sources of funding that allow them to keep the pressure on companies for longer stretches of time.

Starting Dec. 1, Trian is closing its quarterly class of shares for investors, the people said. Investors will instead have the option to lock up their money in one of Trian’s existing one-, three- or five-year vehicles, the people added.

Trian began to discuss limiting its quarterly subscribers earlier this year, and may decide to reinstate the option in the future to select investors, one of the sources added.

The sources asked not to be identified because the matter is not public. Trian declined to comment.

Trian is one of several activist funds moving to longer-duration investment capital, which can also allow the funds to go beyond their standard playbook of pushing for stock buybacks and divestitures, focusing instead on improving the business operations of their targets.

“You are definitely seeing more of a private equity mentality here, and activists realize if they are going to run a successful, long-term operation they have no choice but to lock in longer-term capital,” said Tyson McCabe, a senior director for Nasdaq’s Advisory Services division, which tracks investments by activists.

ValueAct Capital said in its third-quarter letter earlier this month that it would launch a new offering for investors that would lock up their money for five years. The five-year tranche would also allow ValueAct to draw down capital over a period of three years rather than receive it up front.

“In line with that of a typical private equity fund structure, we believe this structure provides additional flexibility to our capital base by having ‘dry powder’ to draw upon a market pull back and/or around a company specific event,” ValueAct said in the letter.

Activist investor Jana Partners started offering a three-year lockup fund in 2010. Pershing Square and European activist Cevian Capital also offer long-term lock-up vehicles for investors. The longer the lock-up period, the lower the fees for investors.

The longer-term offerings show how activists are developing a preference for the types of illiquid investment funds seen more in the private equity industry. Hedge funds have traditionally allowed investors, which include pensions, university endowments and large financial institutions, to cash out every quarter.

Private equity firms, by contrast, typically ask investors to commit to allocate a sum of money that will be locked up for as many as 10 years. Rather than asking for the money up front, the firm calls on the investor to supply chunks of the commitment when needed – any unused money remaining in a fund when it matures goes back to the investors.

Activist funds are also adopting this draw-down feature.

Even so, not all activists will be able to convince investors to commit to long-term arrangements, as they will depend on their performance record. Investors, aware that activists are suffering from lower returns and stiffer headwinds, may be wary of being locked in for longer.

(Reporting by Michael Flaherty in New York; Editing by Leslie Adler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/fX04aesV61o/story01.htm

HP Inc profit forecast misses Street on weak PC, printer sales


HP Inc, which houses former Hewlett-Packard Co’s legacy printer and PC business, forecast adjusted profit for the first quarter below market expectations as it struggles with weak sales of PCs and printers.

However, Hewlett Packard Enterprise Co, which is headed by Meg Whitman and holds the corporate hardware and services businesses, maintained its adjusted profit forecast for the year.

HP Inc’s shares were down 7.1 percent in extended trading on Tuesday, while HPE’s shares were up 2.3 percent.

“Looking ahead, we expect the PC market to remain challenged for more quarters to come,” HP Inc’s Chief Executive Dion Weisler said on a conference call with analyst.

PC sales have been falling sharply worldwide and the recent launch of Windows 10 has so far failed to reboot the industry.

Revenue in HP’s personal computer and printer businesses fell about 14 percent in the fourth quarter ended Oct. 31, pushing Hewlett-Packard Co’s overall revenue down for the fifth straight quarter.

The results are the last for Hewlett-Packard Co, the tech pioneer that split into two separate companies this month, before HP Inc and Hewlett Packard Enterprise Co start to report separately.

The 76-year-old company has struggled in recent years to keep up with newer technologies and trends, such as the shift by consumers to smartphones and tablets and by businesses to the Internet to store and manage large amounts of data.

HP Inc forecast adjusted profit of 33-38 cents per share for the quarter ending January, missing analysts’ average estimate of 42 cents, according to Thomson Reuters I/B/E/S.

The company also cut its 2016 adjusted profit forecast to $1.59-$1.69 per share from $1.67-$1.77 per share.

Hewlett-Packard Co’s revenue from enterprise services division fell 9 percent, while revenue from its enterprise group rose 2 percent.

Overall, revenue at Hewlett-Packard Co fell 9.5 percent to $25.71 billion.

Net income fell to $1.32 billion from $1.33 billion a year earlier. But on a per share basis, profit rose to 73 cents per share from 70 cents, based on fewer shares outstanding.

Up to Tuesday’s close of $13.69, HPE shares had fallen 7 percent since their market debut on Nov. 2.

In contrast, HP Inc’s shares, which closed at $14.64, had risen about 20 percent.

(Reporting by Abhirup Roy and Anya George Tharakan in Bengaluru; Editing by Anil D’Silva)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/j1GAmQitnkE/story01.htm

U.S. consumers and stores face off over depth of holiday discounts


NEW YORK/CHICAGO Target Corp’s 10 percent discount on a $30.49 pair of embroidered curtains was not nearly enough to entice Valerie Jenkins, shopping in Chicago the weekend before Thanksgiving.

She expects the 60-70 percent off she got during the last holidays. “There were some very good deals this time last year,” she said.

Jenkins represents a problem for retailers going into what traditionally has been the peak shopping day of the holiday season, Black Friday. Big retailers are keeping discounts for the weekend following Thanksgiving at around the same level as last year, according to data supplied to Reuters by Market Track.

But polls by Reuters/Ipsos and some others show shoppers, who got even bigger discounts closer to Christmas last year, are cautious with their spending and willing to wait for deals.

The Reuters/Ipsos survey found more people planned to cut holiday spending than increase in every category surveyed: clothing, jewelry, electronics, food and toys, and that 46 percent felt they could wait longer in the season to buy because of faster shipping.

Black Friday shopping will help set the tone for the rest of the holiday season, signaling to retailers whether they need to drop prices or change promotions. While Black Friday is not always a strong forecaster of holiday spending, last year reports of poor Black Friday spending were followed by deeper discounting and a rush of buying in the week before Christmas.

J.C. Penney Co Inc offered an average 58 percent off in Black Friday ads this year, down from 59 percent last year, according to Market Track, which looks at circulars from top retailers. Kohl’s Corp is offering 54 percent off, up from 51 percent in 2014, and discounts from Staples Inc and Office Depot are both a touch less than last year, at 45 percent and 50 percent, respectively.

Appliances, entertainment items, infant products and hardware showed narrowing discounts, Market Track reported, while promotions for apparel, toys and electronics were getting bigger.

Kurt Jetta, head of retail industry researcher TABS Group, found the discounts underwhelming.

“The fact that retail has been so weak coming in to the season would suggest they may need to ramp up efforts to make up for this later,” Jetta said. Consumers were cautious going into the holidays, with sales at Macy’s, Nordstrom Inc and Best Buy missing expectations in recent quarterly results. Target’s online sales fell due to a drop in demand for electronics.

LOOKING FOR DISCOUNTS

The Reuters/Ipsos survey of 4,639 adults from Nov. 12-23 found 28 percent of consumers expected discounts of 50 percent or more on most items, 36 percent hoped to see promotions of at least 33 percent while 49 percent expect a minimum discount of 20 percent on most products.

A survey for Boston Consulting Group found 70 percent of consumers would spend the same or less as last year, describing the consumer outlook as “tepid.”

Still, spending intentions are difficult to gauge and Gallup reported Americans plan to spend $830 on gifts this season, up from $720 a year ago at this time.

The National Retail Federation expects holiday sales to rise 3.7 percent, slower than last year’s 4.1 percent growth rate, due to stagnant wages and sluggish job creation.

Many retailers including Macy’s came into the season with high winter clothing inventory after warm weather in September and October, which also will increase discounting pressure.

“Consumers have been trained to know that they can wait, and they will wait and that will force the retailers to continue to be promotional,” said Joel Bines, managing director at AlixPartners.

(Story corrects company name to Market Track from MarketTrak in paragraphs 3, 7, 8)

(Additional reporting by Nathan Layne in Chicago and Sruthi Ramakrishnan in Bengaluru; Editing by Leslie Adler and Alan Crosby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/JUA6mWCYSKw/story01.htm

Exclusive: Shire prepares to make new bid for Baxalta


ZURICH/LONDON Drugmaker Shire (SHP.L) is preparing to make a new takeover offer for U.S. biotech firm Baxalta (BXLT.N) that if successful will create one of the world’s leading specialists in rare diseases, a source with direct knowledge of the situation said on Tuesday. The London-listed group has asked its advisers to renew its bid effort, the source said, almost four months after Baxalta rejected an unsolicited $30 billion offer that it said significantly undervalued the company.

Shire’s bid preparations come three weeks after it announced its $5.9 billion purchase of U.S. rare disease specialist Dyax Corp (DYAX.O).

Shire is working with Morgan Stanley (MS.N), Evercore (EVR.N) and Deutsche Bank (DBKGn.DE) on the offer which could be structured in cash and shares, the source said, cautioning that no deal was certain and negotiations could still fall through. A spokesman at Shire declined to comment while Baxalta had no immediate comment. Morgan Stanley, Evercore and Deutsche Bank declined to comment.

Baxalta, which has a market capitalisation of $22.7 billion, would help complement Shire’s growing portfolio of high-priced treatments for rare or “orphan” diseases.

Baxalta’s shares rose to an intra-day high of $37.50, up more than 10 percent, after the Reuters report, before trimming gains to $35.67 at 2105 GMT(1605 ET). On Aug. 3 Shire valued each Baxalta share at $45.23.

If it goes ahead, the deal will create a rare diseases company with product sales of around $20 billion by 2020 and double-digit percent annual sales growth.

Shire Chief Executive Flemming Ornskov has relentlessly pursued a merger with Baxalta for the past six months, the source said. 

“He’s never given up,” the source said, adding that Shire is keen to buy Baxalta to deliver on its goal of doubling its revenue in the next few years.On Nov. 2 Ornskov said the acquisition of Dyax had not compromised Shire’s ability to pursue a bid for Baxalta.

“Even with this transaction, we will continue to have the financial firepower to pursue other value-added strategic acquisitions, including Baxalta,” he said at the time.

Baxalta, advised by Goldman Sachs, said Shire’s bid did not reflect its potential as a newly listed company which expects its shares to rise as it becomes better known. The biotech firm was spun off by Baxter International (BAX.N) in July.

Baxalta develops biotech treatments for rare blood conditions, cancers and immune system disorders. It employs 16,000 people and had proforma revenue of $6 billion in 2014.

The transaction, however, faces several hurdles mainly due to Baxalta’s state-of-the-art takeover defences, with a “poison pill” that effectively stops unwanted suitors buying more than 10 percent of the company and a hard-to-replace board.

(Additional reporting by Carl O’Donnell in New York and Paul Sandle in London; editing by Susan Thomas)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/SJjqNc5sCBY/story01.htm

Roy Harvey to head Alcoa’s commodities business post split


Aluminum producer Alcoa Inc (AA.N) said it named Roy Harvey chief executive of its traditional aluminum smelting and refining operations, which would be separated from its faster growing plane and car parts business.

Harvey, 41, is currently the president of Alcoa’s global primary products business, where he manages the operations of aluminum smelters, alumina refineries and bauxite mines.

Alcoa said in September it would split into two, as shareholders sought higher returns amid a commodity slump.

A global glut of aluminum has led to depressed prices, battering Alcoa’s stock, which has nearly halved in one year.

Alcoa had previously said its current CEO Klaus Kleinfeld would helm its plane and car parts business, which is yet to be named.

The company also said on Tuesday Chief Financial Officer William Oplinger would continue in the same role at its smelting and refining business, which will retain the Alcoa name following the split.

Ken Giacobbe, who is currently the finance chief of Alcoa’s engineered products and solutions business, will be the CFO of its plane and car parts business.

The separation of the two businesses is expected to be completed in the second half of next year.

(Story corrects paragraph 2 to show that Harvey is currently, not formerly, the president of primary products business; Also clarifies in the headline he will head the commodities, not smelting, business)

(Reporting by Arunima Banerjee in Bengaluru; Editing by Anil D’Silva)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/mj71D3UyoEQ/story01.htm

Nine Fed banks called for discount rate hike: minutes


WASHINGTON The number of regional Federal Reserve banks pushing for a hike in what commercial banks are charged for emergency loans rose to nine in October, a sign the U.S. central bank may be close to tightening monetary policy, minutes from its discount rate meeting showed on Tuesday.

Eight Fed banks had voted to raise the discount rate at the prior meeting in September, a jump from five in July and August.

Ahead of the central bank’s Oct. 27-28 policy meeting, directors of the Boston Fed joined their counterparts in St. Louis, Atlanta, San Francisco, Cleveland, Dallas, Philadelphia, Kansas City and Richmond in asking the Fed’s board to increase the discount rate to 1 percent from 0.75 percent, according to the minutes.

The nine regional banks that requested a hike want to normalize the spread between the discount rate governing Fed lending to banks and the overnight federal funds rate, which is the central bank’s primary economic lever.

U.S. interest rate futures on Tuesday suggested that traders saw a 74 percent chance of the central bank raising its benchmark interest rate next month for the first time in almost a decade, according to CME Group’s FedWatch.

The Fed board opted to hold the discount rate steady last month, a decision that was backed by two other regional Fed banks. The Minneapolis Fed again voted to cut the rate to 0.5 percent.

Minutes from the October meeting showed that some directors reported reduced labor slack, with recruiting difficulties and signs of wage pressures in some sectors and parts of the country.

Those that wanted to raise the discount rate saw it as “as appropriate in light of the improvements in labor market conditions this year and their expectations for inflation to rise gradually toward the Federal Reserve’s 2 percent objective,” the minutes said.

Some directors favored an increase as they thought an earlier start to policy normalization “could allow for a more gradual pace of adjustment,” the minutes added.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Jqxt62KbUf4/story01.htm