News Archive

ConAgra Foods stock seen rising 30 percent: Barron’s

NEW YORK ConAgra Foods’ stock (CAG.N) could climb up to 30 percent in the coming months as the U.S. packaged food company seeks to shed businesses, improve existing brands and achieve lower overheads, Barron’s said in its latest online edition.

After ConAgra sold its Spicetec Flavors Seasonings for about $340 million to Givaudan last week, Barron’s said analysts speculate it might consider sales of other brands including Lamb Weston, its commercial frozen potato business.

Without Lamb Weston, the Omaha-based company would remain the second biggest U.S. frozen entree producer and top maker of shelf-stable meals with $9 billion in annual revenue, the paper said.

Analysts expect ConAgra’s revenue to fall to $11.7 billion in fiscal 2016 following the sale of its private-label food business to Treehouse Foods for $2.7 billion. This compared with $15.83 billion the prior fiscal year.

ConAgra CEO Sean Connolly, who took over the post last April, might be preparing ConAgra for sale, Barron’s said. Connolly aims to cut $300 million in annual costs, which make up of $200 million in selling, general and administrative expenses and $100 million in ineffective trade promotions, the business weekly said.

ConAgra carries a hefty price tag. Its current market capitalization was nearly $19.8 billion on Friday when its shares closed down 0.4 percent at $45.29.

“But with Lamb Weston gone and his new strategy kicking in, the food giant might be a tasty target,” Barron’s said.

(Reporting by Richard Leong; Editing by Nick Zieminski)

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Bourbon maker Brown-Forman shares seen expensive

NEW YORK Shares of Brown-Forman (BFb.N), which makes Jack Daniel’s and other liquors, are seen as pricey as the world’s top bourbon seller faces slowing growth in an increasingly crowded field, Barron’s said in its latest online edition.

Brown-Forman’s stock had delivered annual gain of 12.5 percent in the past decade including dividend, outpacing the Standard Poor’s 500 index .SPX by 5 percent points, the financial weekly paper said.

The company’s flavored whiskeys for cocktails, and small-batch labels which are extremely profitable have boosted its growth. They also helped raise its shares’ forward earnings estimates’ at 27 times, compared with a 10-year average of 21 times.

A strong dollar has hurt the revenue of the Louisville, Kentucky-based company in the first nine months of the year, which fell 2 percent. After adjusting for currency moves, it rose 5 percent, Barron’s said.

“A lot of things have to go right in order for shares to outperform over the next year. Only one or two must go wrong for them to fall 10 percent or more,” it said.

Barron’s said it has become harder to catch the attention of consumers with new whiskey flavors.

Back in 2010, there were over 40 flavored whiskeys. Now there are some 450, the paper said.

“If revenue gains continue to slow, shares could lose some of their growth premium. Perhaps they carry a smidgen too much of a safety premium, too,” it said.

On Friday, Brown-Forman’s stock closed up 1.5 percent at $98.36.

(Reporting by Richard Leong; Editing by Sandra Maler)

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Data analysis from Paris raid on Google will take months, possibly years: prosecutor

PARIS Analysis of data seized by investigators in last week’s raid of Google’s (GOOGL.O) Paris headquarters could possibly take years, French financial prosecutor Eliane Houlette said on Sunday.

Dozens of French police raided Google’s offices on Tuesday, escalating an investigation over suspected tax evasion.

“We have collected a lot of computer data,” Houlette said in an interview with Europe 1 radio, TV channel iTele and newspaper Le Monde, adding that 96 people took part in the raid.

“We need to analyze (the data) … (it will take) months, I hope that it won’t be several years, but we are very limited in resources”.

Google, which said it is complying fully with French law, is under pressure across Europe from public opinion and governments angry at the way multinationals exploit their global presence to minimize tax liabilities.

(Writing by Maya Nikolaeva; Editing by David Goodman)

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Japan’s Abe to delay sales tax hike until 2019: government source

TOKYO Japanese Prime Minister Shinzo Abe plans to delay an increase in sales tax by two and a half years, a government official said on Sunday, as the economy sputters and Abe prepares for a national election.

Abe told Finance Minister Taro Aso and the secretary general of his ruling Liberal Democratic Party, Sadakazu Tanigaki, on Saturday of his plan to propose delaying the tax hike for a second time, until October 2019, said the official, who was briefed on the meeting.

The prime minister, who has promised to announce steps on Tuesday to spur economic growth and promote structural reform, is also expected to order an extra budget to fund stimulus measures, just two months into the fiscal year and on the heels of a supplementary budget to pay for recovery from recent earthquakes in southern Japan.

After chairing a summit of Group of Seven leaders on Friday, Abe said Japan would mobilize “all policy tools” – including the possibility of delaying the tax hike – to avoid what he called an economic crisis on the scale of the global financial crisis that followed the 2008 Lehman Brothers bankruptcy.

“There is a risk of the global economy falling into crisis if appropriate policy responses are not made,” Abe told a news conference after the summit. To play its part, Japan “must reignite powerfully the engine of Abenomics,” he said, referring to his easy-money policies aimed at getting Japan out of two decades of deflation and fitful growth.

Abe has long said he would proceed with a plan to raise the tax rate to 10 percent from 8 percent next April unless Japan faced a crisis on the magnitude of the Lehman shock.

He said the G7 “shares a strong sense of crisis” about the global outlook, with the most worrisome risk being a global contraction led by a slowdown in emerging economies like China.

Other G7 leaders, however, appeared to differ with Abe on the risk of a global crisis, fuelling comment that Abe was using the G7 to justify delaying the painful tax hike.

Abe will announce his intention to delay the tax hike by the end of the current session of parliament on Wednesday, after meeting with Komeito, the LDP’s junior coalition partner, the government official told Reuters.

Japan fell into recession after Abe raised the tax from 5 percent in April 2014 hoping to curb government debt, and consumption has still not recovered.

Despite massive monetary easing by the Bank of Japan and a series of government spending packages Japan’s growth is weakening. Core consumer prices and exports fell in April, and manufacturing shrank at the fastest pace since Abe took office in 2012.

A Reuters poll last week showed most companies expect no escape from deflation for the foreseeable future.

Despite the fresh fiscal stimulus, however, Abe told Aso and Tanigaki that will stick with his pledge to achieve a budget surplus, excluding debt-servicing costs and income from bond sales, by the fiscal year ending in March 2021.

(Reporting by Takaya Yamaguchi; Additional reporting by Izumi Nakagawa; Writing by William Mallard; Editing by Paul Simao)

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Lufthansa suspends Caracas flights as Venezuelan economy struggles

CARACAS German airline Deutsche Lufthansa AG (LHAG.DE) said on Saturday it will temporarily suspend flights to Venezuela as of next month due to economic difficulties in the South American nation and problems converting local currency into dollars.

International airlines have for years struggled to repatriate billions of dollars in revenue held in the local bolivar currency due to exchange controls, prompting many to limit service and require that passengers pay fares in dollars.

“We deeply regret that for these reasons, we will be forced to suspend our service between Caracas and Frankfurt as of June 18,” the company wrote in a statement, noting that demand for international flights to Caracas dropped in 2015 and the first quarter of 2016.

Lufthansa does not plan to shut its office in Caracas.

Following a two-year rout in oil prices, the South American OPEC nation is struggling with a deep recession and the world’s highest inflation rate, which has put foreign travel out of the reach of most of its citizens.

American Airlines in March said it was scrapping a recently-reinstated direct flight between Caracas and New York due to low demand.

(Reporting by Diego Ore; Writing by Brian Ellsworth; Editing by Paul Simao)

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How four words rewrote Bayer-Monsanto deal script

“There is nothing there.”

Monsanto Co President Brett Begemann uttered those words last week to a small group of investors and a Reuters reporter when asked how the world’s largest seed company he helps lead might fit with German drugs and crop chemicals group Bayer AG.

Those four words, said on the sidelines of a New York conference, set off a series of events leading to the disclosure of Bayer’s confidential, $62 billion bid for Monsanto, the largest all-cash corporate takeover offer on record.

Bayer had sent a confidential acquisition proposal to Monsanto on May 10. Media reports surfaced two days later that Bayer was considering a bid.

Initially, neither company would comment on whether any talks were taking place – a common practice for many corporations that prefer to negotiate deals in private and only tell Wall Street if they manage to come to terms.

But Begemann appeared to go a step further than simply declining to comment at the May 18 conference. Monsanto’s securities lawyer was concerned that his reply could be interpreted as a denial that any talks were going on, according to a person with knowledge of the situation.

The U.S. Securities and Exchange Commission has strict disclosure rules to protect investors from being misled by companies. To avoid triggering SEC scrutiny, according to the source, Monsanto issued a statement a few hours after Begemann’s comment to acknowledge that Bayer had approached the company about a possible takeover.

Bayer soon followed with its own statement. The negotiations have since been subject to intense investor scrutiny that has weighed on Bayer’s deliberations over how much it can pay, according to sources with knowledge of the talks.

The SEC declined to comment on whether it is looking into Begemann’s remark.

Monsanto and Bayer also declined to comment, and Monsanto did not make Begemann available for comment. His remark was characterized by sources close to Monsanto as an “honest mistake.”

Begemann came “close to a violation but probably not enough” for the SEC to bring a case, because his answer was open to interpretation, said Peter Henning, a law professor at Wayne State University in Michigan.

Begemann’s statement could be interpreted to mean that Monsanto and Bayer had not come to a definitive agreement, Henning added.


Bayer shares, which fell modestly after the initial media reports, dropped as much as 10 percent the day after the company confirmed the takeover approach, as investors fretted over the impact of such an acquisition on its strategy and balance sheet. Some of Bayer shareholders spoke out against doing a deal.

To address those investor concerns, Bayer on Monday unveiled the terms: it had offered $62 billion in cash for Monsanto, and it would finance 25 percent of the bid primarily through a rights offering that would dilute existing shareholders.

Before Monsanto publicly responded, Bayer embarked on a highly unusual investor charm offensive, launching a website and holding presentations. Chief Executive Werner Baumann also gave several media interviews.

“Because of the Monsanto President’s remark, Bayer’s CEO now has to fight a battle on two fronts, negotiating a deal with Monsanto while also trying to keep his shareholders onboard,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

“It can be an easier pitch to investors when they know they can no longer influence negotiations, and a deal is presented as fait accompli,” he said.

On Tuesday, Monsanto rejected Bayer’s offer but agreed to hold further talks with Bayer to see if they can agree on better terms. The two companies will now try to carry out negotiations privately, without making further statements until there is an outcome, according to the sources.


Though the negotiations continued after Begemann’s comments, some sources close to Bayer said the company felt more restricted on how much more money it can offer Monsanto, given the investor feedback it received. By Friday, Bayer shares ended down 11 percent from where they were before Monsanto disclosed the approach.

To be sure, overcoming such challenges is possible.

“Sophisticated investors understand that deal premiums need to be evaluated” against the stock price before news of negotiations break, said Steven Scheinfeld, global chair of the corporate department of law firm Fried, Frank, Harris, Shriver Jacobson LLP in New York.

Even transactions that have become public often get to the finish line, he added.

The fact that Monsanto’s shares were trading at around $110 – significantly below Bayer’s $122 offer price due to uncertainty about the deal – is in Bayer’s favor. Monsanto shares were at $97 before Bayer disclosed its offer.

Some Bayer shareholders have been positive about the deal. For example, Royal London Asset Management said that the German company’s bid for Monsanto made sense strategically, and that, as a shareholder, it would support a deal if it was priced at around $130-$135 per share.

(Reporting by Tom Polansek in Chicago and Greg Roumeliotis in New York; Additional reporting by PJ Huffstutter in Chicago, Sarah Lynch in Washington D.C. and Rod Nickel in New York; Editing by Edward Tobin and Tiffany Wu)

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Fed reaction to data barrage is focus for stocks

NEW YORK Data on inflation and employment, two of the economic indicators most important to a “data-dependent” U.S. Federal Reserve are expected next week.

While Fed policymakers will be looking at those numbers as they decide whether to raise key interest rates as soon as June, traders will read through them to try and get ahead of the Fed decision.

For most of the current bull market, stocks have sold off on expectations of tighter monetary policy. But they rose sharply over the past week as Fed-speak turned more hawkish.

The Fed has remained constant in using economic data to decide whether to raise the Fed funds rate. On Friday, Fed Chair Janet Yellen said that if current economic conditions hold, a rate hike over the next few months would be “appropriate.”

However, stocks have not yet priced in a rate hike in June or even July, according to analysts at Bank of America/Merrill Lynch.

“The vast majority of ‘hawkish’ industries (which have outperformed when rate hikes have been pulled forward by the market) are still cheap, while most ‘dovish’ industries (which have outperformed when rate hikes have been pushed out) are still expensive,” the bank’s analysts said in a Friday note.

They list consumer finance, banks and insurance among industries that appear cheap while beverages, real estate investment trusts and electric utilities still rank as expensive even though they benefit from policy the Fed seems to be walking away from.

Financials led the way on the SP 500 on Friday. If next week’s data continues to point to a hike from the Fed, banks will likely continue to outperform, as higher interest rates mean increased returns for lending, the core of their business.

Shares in the utilities sector .SPLRCU were the laggard of the week and could continue to be if investors see a hawkish slant at the Fed. With a dividend yield of 3.5 percent, the sector is mostly favored when rates are expected to remain lower for longer.

The Fed’s favorite inflation gauge, personal consumption expenditures, is due on Tuesday and is expected to show a 0.2 percent monthly increase for April. Non-farm payrolls data due on Friday is expected to show the U.S. economy created 164,000 jobs in May.

Besides the big inflation and jobs data, the Fed will get its own numbers out, with the Beige Book of anecdotal information of current economic conditions out Wednesday.

Though the probability of all data pointing in the same direction is small, a chance of an increase in the manufacturing work-week numbers in the payrolls report, a broad build-up of wage pressure in the Beige Book and a strong reading in the new orders component of the private-sector ISM manufacturing data out Wednesday are key to determining the Fed’s next move, according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Asset Management in Menomonee Falls, Wisconsin.

“Those three things could line up to make (a rate hike in)June a real possibility,” he said.

(Reporting by Rodrigo Campos; Editing by Leslie Adler)

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Sumner Redstone suggests he could oust Viacom board, CEO

Sumner Redstone made clear on Friday that he is considering ousting Viacom’s (VIAB.O) chief executive and the company’s board of directors in the fierce power struggle between Redstone’s family and company executives over control of the media empire.

A judge set an early June hearing on the possible removal of CEO Philippe Dauman from the trust that will control the media company when Redstone dies or is deemed incapacitated.

In a statement issued through a spokesman, Redstone, who turned 93 on Friday, said he would act in “the best interests of shareholders,” when weighing whether or not to oust Dauman and the company’s board.

Redstone, who holds 80 percent of the voting shares in Viacom (VIAB.O) and CBS Corp (CBS.N), last week removed Dauman and Viacom board member George Abrams from the seven-person trust that will control the shares after Redstone exits.

In the statement, Redstone said he will apply “the same deliberation and consideration” he used when he removed Dauman and George Abrams as trustees.

Redstone’s latest missive comes amid reports that Viacom’s board is preparing a lawsuit challenging any attempts to remove its members or the CEO.

Dauman, 62, has filed a legal challenge to stop his removal from the trust, arguing that Redstone was being manipulated by his daughter, Shari. She has called that allegation “absurd” and said her father made his own decisions.

Judge George Phelan scheduled to hear the case on June 7, after Dauman filed a petition to have the trial date expedited.

A spokesman for Dauman and the Viacom board was not immediately available to comment.

Viacom’s shares are up 13 percent since news broke last Friday that Redstone had removed Dauman and Abrams from the trust and the National Amusements Board, as some investors bet that a change in management could lead to a sale of the media company. Mario Gabelli, the second-largest owner of Viacom voting shares, has said Dauman has six months to turn the company around.

Also on Friday, Standard Poor’s revised downward its assessment of Viacom’s management and governance to “fair” from “satisfactory” because it believes the litigation and succession planning issues “reflect poorly” on Viacom’s corporate governance.

Viacom shares have fallen more than 50 percent in the past two years as its cable networks, including MTV and Nickelodeon, suffered from falling ratings as younger viewers migrate online and to mobile video. Viacom’s U.S. advertising revenue has declined for seven straight quarters. [nL3N17V4EG}

Dauman has tried to turn Viacom around by wooing advertisers with data to better target commercials. Under his leadership, Viacom renewed a multi-year distribution contract with satellite TV provider Dish Network Corp (DISH.O).

But it was Dauman’s plan to sell Viacom’s stake in Paramount Pictures, which investors cheered, that caused him troubles. Redstone, who won a long battle with media mogul Barry Diller to acquire the film studio in 1994, opposes the sale of the stake.

Frederic Salerno, Viacom’s lead independent director, on Wednesday asked for a meeting with Redstone to discuss the company’s strategy, including its planned sale of a stake of Paramount.

Redstone has not yet responded, a source familiar with the situation told Reuters on Friday.

(Reporting By Jessica Toonkel; Editing by Bernard Orr and Dan Grebler)

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N.J. Governor Christie signs Atlantic City rescue package into law

New Jersey Governor Chris Christie on Friday signed into law a package of legislation that provides distressed gambling hub Atlantic City with immediate cash help but also a potential state takeover if the city cannot fix its finances.

The bills will help reform the city’s “overblown municipal government” while protecting state and local taxpayers, Christie said in a statement while continuing to take shots at local officials.

“We all agree that Atlantic City’s government has not demonstrated the competence to properly manage the people’s money without state guidance and oversight,” he said.

The legislation “embraces my demand that Atlantic City immediately account for every dollar it receives and spends, and triggers a series of strict conditions and rigorous requirements the city must meet immediately,” Christie said.

Atlantic City Mayor Don Guardian did not immediately respond to a request for comment. Earlier on Friday, Guardian marked the opening of summer beach season for the seaside resort city.

The bills provide a $60 million, six-month bridge loan from the state to the city and establish $120 million of payments annually from casinos in lieu of property taxes, a move aimed at stabilizing the city’s volatile, eroded tax base.

In return, the city must prepare a balanced budget for fiscal 2017, which begins Jan. 1, and a five-year recovery plan. If it falls short, the state can move to take over operations and throw out collective bargaining agreements, among other powers.

The package could prove positive for the city’s credit rating, which is deep in junk territory at Caa3, because it provides much-needed financial relief and removes the immediate threat of default or bankruptcy, Moody’s Investors Service said after the governor announced his signature.

But a bond restructuring, which Guardian has said the city will likely pursue, would be considered a default if it includes bondholder impairment, Moody’s said.

The city has about $240 million of bond debt outstanding.

(Reporting by Hilary Russ; Editing by Chizu Nomiyama and Jonathan Oatis)

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