News Archive

China’s Zoomlion abandons talks to buy U.S. crane maker Terex

HONG KONG/HELSINKI China’s Zoomlion Heavy Industry Science and Technology Co Ltd (000157.SZ) has abandoned its $3.4 billion bid for U.S. crane maker Terex Corp (TEX.N) after failing to agree terms, clearing the way for a smaller deal between Terex and Finland’s Konecranes (KCR1V.HE).

The decision comes after months of merger talks between the three companies and marks the latest setback to corporate China’s ambitions to acquire U.S. assets.

Zoomlion and Konecranes had both bid for Terex to help them better cope with cooling Chinese and weak European demand in the cranes business.

Konecranes and Terex had agreed on an all-share merger last August, but Zoomlion emerged as a rival bidder in January and sweetened its unsolicited offer to $3.4 billion in March.

The Finnish company this month scrapped plans for a full merger and instead agreed to buy just part of Terex — its cranes business for ports and factories — for 1.1 billion euros ($1.2 billion).

The agreement gave Terex the right to terminate the deal for a fee by the end of the month if its talks with Zoomlion were to proceed.

“No agreement can be reached on the crucial terms,” Zoomlion said in a statement on Friday, but declined to specify what the hurdles were.

Konecranes shares rose 4.9 percent in Helsinki while Zoomlion’s Hong Kong-listed shares (1157.HK) fell 3.2 percent by 0800 GMT.

“We’ve reached the result we wanted, and we are very pleased,” Konecranes Chief Executive Panu Routila told Reuters, adding that the companies would start integration plans after the summer.

Last week, Konecranes shares jumped as much as 18 percent when the modified deal was announced. The merger is expected to close early next year.

A successful acquisition would have put Zoomlion on a more equal footing with cross-town rival Sany Heavy Industry Co Ltd (600031.SS) which has a U.S. assembly plant.

“Without the positive effect due from Terex, Zoomlion will continue to develop slowly at its own pace,” said Jiao Yiding, an analyst at China Merchants Securities in Shenzhen.

Last month, Zoomlion posted a record quarterly loss as Chinese heavy equipment makers battle an historic glut of unsold equipment.

The collapse in talks comes after China’s Anbang Insurance Group Co said in April it had abandoned its $14 billion bid for Starwood Hotels Resorts Worldwide Inc (HOT.N), paving the way for Marriott International Inc (MAR.O) to buy the Sheraton and Westin hotels operator.

In January, the United States blocked a bid by Chinese-based investment fund GO Scale Capital for Philips’ (PHG.AS) lighting-components business on security grounds.

(Additional reporting by Donny Kwok in Hong Kong and Bengaluru newsroom; writing by Jussi Rosendahl; editing by Edwina Gibbs and Keith Weir)

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Adidas sells U.S. apparel firm Mitchell & Ness

FRANKFURT Adidas (ADSGn.DE) said it had agreed to sell U.S. sportswear seller Mitchell Ness, resulting in a one-time gain in a the low to medium double-digit million euro range.

The German group said in a statement on Friday it would re-invest the proceeds of the sale into its “Creating the New” strategy.

“Nostalgia headwear and apparel is not core to this strategy and the sale of Mitchell Ness will allow us to reduce complexity and pursue our target consumer more aggressively with our core brands,” Adidas said in a statement on Friday.

The buyer is a newly formed entity primarily owned by U.S. private equity firm Juggernaut Capital Partners.

(Reporting by Maria Sheahan; Editing by Caroline Copley)

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Japan expands Takata air bag recall by about 7 million vehicles

TOKYO Japan’s transport ministry said on Friday automakers will recall about an additional 7 million cars equipped with Takata Corp (7312.T) air bag inflators without a drying agent by March 2019, bringing the total recalled in the country to 19.6 million cars.

Japan’s latest announcement may further ramp up Takata’s potential recall costs if the air bag maker is found to be responsible for the defective inflators.

The company is in bailout talks with a number of potential investors including private equity firm KKR Co (KKR.N), people familiar with the matter told Reuters on Thursday.

The transport ministry said Takata and automakers had found the absence of desiccants could make ammonium nitrate used in the air bag inflators deteriorate when exposed to temperature changes over a long period of time.

Its decision comes after U.S. transport authorities earlier this month expanded its recall of air bag inflators made by the Japanese parts supplier, which will result in an additional 35 million to 40 million products withdrawn from the U.S. market.

The ministry said that the latest recall covers mainly passenger-side airbags, and will be conducted in phases. It would not comment on which automakers were affected, although it said that the number would likely increase from the 17 companies affected so far.

The ammonium nitrate-based propellant used in the inflators have a tendency to explode violently in hot, humid conditions, spraying metal shrapnel into vehicle compartments. The defect has been linked to 13 deaths and more than 100 injuries globally, mainly in the United States.

Honda Motor Co (7267.T), once Takata’s biggest buyer of airbags, earlier this month said it would recall 21 million more potentially faulty airbag inflators globally, while Toyota Motor Corp (7203.T) last week said it would recall almost 1.6 million additional U.S. vehicles installed with front passenger side Takata air bags.

(Reporting by Naomi Tajitsu; Writing by Ritsuko Ando; Editing by Ryan Woo)

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Valeant rejected joint takeover bid from Takeda, TPG in spring: source

Valeant Pharmaceuticals International Inc (VRX.TO) received a joint takeover offer from Japan’s Takeda Pharmaceutical Co Ltd (4502.T) and TPG Capital Management LP [TPG.UL] this spring that the Canadian drugmaker rejected, according to a source familiar with the matter.

The offer was made a few weeks before Joseph Papa took over as Valeant’s new chief executive in April last week, the source told Reuters.

The board wants to give Papa time to focus on running the company before thinking about a sale offer, the source said.

Takeda and private equity firm TPG were ready to offer a substantial premium to Valeant, whose stock had fallen about 65 percent this year up to the close of trade on April 22 as the drugmaker was not just seeking a new head but was also hit by an accounting scandal, the source added.

However, analysts from Mizuho Securities USA said that large shareholders and board members are so far ‘underwater’ on their positions and would not want to part with the stock even at a premium to current levels.

“It would require a hostile offer and protracted battle to dislodge the current board, which most activists may find unattractive,” Irina Koffler, an analyst from Mizuho, said in a note late Thursday.

The brokerage, which reiterated its ‘underperform’ rating on Valeant, also said the company’s assets do not warrant a premium bid at this time.

TPG and Valeant declined to comment. Takeda did not immediately respond to a request for comment.

There are currently no talks between the three companies following the bid’s rejection, according to the Wall Street Journal, which first reported the news late Thursday and also added that as part of the approach Takeda would take the business of Salix Pharmaceuticals and TPG would take much of the rest.

Valeant’s shares were up 6 percent at $28.55 on the New York Stock Exchange in extended trading on Thursday.

(Reporting by Michael Flaherty in New York; Ramkumar Iyer and Rishika Sadam in Bengaluru; Editing by Cynthia Osterman and Sunil Nair)

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Short sellers circle Alibaba amid SEC probe

NEW YORK Alibaba Group Holding Ltd (BABA.N), which disclosed it is under investigation for its accounting practices, has emerged as one of the short-selling community’s favorite targets in the relatively short time it has been in the public market.

Noted short-sellers Jim Chanos of Kynikos Associates and John Hempton of Bronte Capital have been raising red flags since last year about the Chinese e-commerce giant’s accounting practices.

Hempton told Reuters in an email on Thursday that Alibaba, which went public in September 2014, is “a real company” but “with questionable accounts.” He added: “The ability to value it from the accounts is, thus, tricky.”

Hempton said he believes shares will eventually “go down a lot – and get a takeover bid”. A takeover would require deep pockets without an extreme decline – the company is currently worth about $190 billion.

Questions about Alibaba’s growth rate and its relations with affiliated companies have dogged the firm for years. The latest investigation highlights how far Alibaba has to go to improve transparency, while a continuing acquisition spree creates uncertainty over its earnings.

Alibaba declined to comment beyond its statements on Wednesday that it was cooperating with the U.S. Securities and Exchange Commission, that the SEC had said a request for information did not indicate that it believed federal laws had been violated, and that the annual report delivered this week was “exactly” the type of information regulators requested.

Alibaba said the SEC investigation launched earlier this year focused on the accounting for logistics firm Cainiao Network, which is around 47 percent-owned by Alibaba, accounting practices applicable to related-party transactions in general, and operating data from its annual “Singles’ Day” sale, according to Alibaba’s annual report filed on Tuesday.

Shares of Alibaba recovered a bit on Thursday, closing up 3.65 percent at $78.35, after diving nearly 7 percent the day before. Some financial analysts downplayed the inquiry.

“While we would never be dismissive of an SEC inquiry, we believe that investigations are sometimes launched because the SEC is unfamiliar with various” business models, Deutsche Bank wrote.

Short interest in Alibaba shares doubled in the second half of 2015, shooting from fewer than 50 million shares in June to a peak of 98.1 million in early January 2016. That has dropped back to around 77.5 million shares, more than 10 percent of Alibaba’s free float, as of the last bi-monthly data from the New York Stock Exchange.

Senator Bob Casey, a Pennsylvania Democrat who raised concerns about Alibaba and Chinese IPOs in 2014, applauded the investigation. “China’s financial markets remain so opaque there are serious questions about whether investors are receiving basic protections,” he said in a statement. 

Chanos pitched Alibaba as a “short idea” at an investment conference in November.

“We are skeptical on BABA’s prospects as China e‐commerce is maturing, while BABA’s market share is already very high,” according to a Kynikos research report Chanos sent out at a conference last November which was seen by Reuters. “Free Cash Flow is being sapped by increasing acquisitions and equity investments into opaque entities,” he added.

The AdvisorShares Ranger Equity Bear ETF shorted Alibaba about six weeks ago, expecting the stock to fall below $60, said portfolio manager Brad Lamensdorf. He said he did not buy back any shares during Wednesday’s 7-percent stock drop, and is sticking with his conviction that the stock has further to fall.

“Its business is very convoluted, there’s a lot of stuff that has not been disclosed properly, and it trades at a ridiculous multiple,” Lamensdorf said.

All told, Paul Gillis, professor of accounting at Peking University, said the accounting for Cainiao off Alibaba’s balance sheet is important because Alibaba is trying to position itself as an “asset-light company.”   

Gillis said: “Their accounting is designed to support the argument that they don’t have a lot of capital invested in the business when, in fact, they actually do.”

Alibaba in its annual report said Cainiao is a logistics platform and “does not deliver packages itself.”

Still, Gillis said: “Something has gotten SEC focused on this. It does not appear to be a routine inquiry. It appears to be more serious than that.”

(Reporting By Jennifer Ablan, Noel Randewich, Sarah Lynch and Ross Kerber; Editing by Peter Henderson and Bernard Orr)

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Exclusive: Verizon turns to former Yahoo bankers for bid

NEW YORK/SAN FRANCISCO Verizon Communications Inc is working on its bid for Yahoo Inc’s core assets with an investment bank which was, as recently as last year, one of the U.S. internet company’s top advisers, people familiar with the matter said.

Verizon has added former Yahoo adviser Bank of America Corp to its roster of investment banks, as the U.S. telecommunications carrier seeks an edge over other bidders ahead of a June 6 second-round bid deadline in the auction for the core assets, the people said this week.

The sources asked not to be identified because details of the auction process are confidential. Verizon, Yahoo and Bank of America declined to comment.

Bank of America has intimate knowledge of Yahoo. The bank was listed as its lead adviser last year on a plan to spin off its 15 percent stake in China’s e-commerce company Alibaba Group Holding Ltd, whose value is equivalent to 84 percent of Yahoo’s $35 billion market capitalization.

That plan was abandoned in December on concerns that the spin-off could result in a tax bill that would have potentially exceeded $10 billion.

Bank of America can also help provide financing for Verizon’s offer. The three other investment banks working on the bid – Guggenheim Partners LLC, LionTree LLC and Allen Company – are boutiques with limited or no balance sheet for deal financing.

While Verizon is prepared to buy all the core assets, the New York-based company is primarily interested in Yahoo’s advertising technology tools, according to one of the sources.

It is also examining how the other assets up for sale, such as search, mail and messenger, could be combined with the corresponding businesses of AOL, which it acquired last year for $4.4 billion, the source said.

Given its synergies with AOL, analysts see Verizon as the most likely candidate to prevail in the auction for Yahoo’s web business, which has garnered interest from a host of private equity firms and other bidders such as a Warren Buffett-backed consortium led by Quicken Loans Inc founder Dan Gilbert.

While valuation estimates for Yahoo’s core assets vary, sources have suggested that first-round bids for the assets ranged from $4 billion to $8 billion.

Beyond AOL, Verizon has taken other steps to advance its advertising-backed internet business, including taking over Microsoft Corp’s advertising technology unit and buying a company called Millennial Media.

(Reporting by Greg Roumeliotis in New York and Liana B. Baker in San Francisco; Additional reporting by Malathi Nayak in New York; Editing by Richard Chang)

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Wall Street hits ‘pause’ after two-day surge

Wall Street treaded water on Thursday following two days of strong gains as advancing utilities offset declines in materials, banks and other cyclical industries.

Investors this week have grown more comfortable with expectations the Federal Reserve could raise interest rates as soon as June, with many taking the view that such a hike would reflect improvement in the country’s economy.

After gaining 2 percent over the previous two sessions, the SP 500 traded flat, with a 1.1 percent dip in the materials index .SPLRCM partly offset by a 1.06 percent rise in utilities .SPLRCU.

“People are taking their foot off the gas after making a bunch of money, and now they’re waiting for the next data point,” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York.

In line with other policymakers who have spoken in recent days, Fed Governor Jerome Powell said a rate hike may come “fairly soon” if data confirms the U.S. economy is continuing to grow and labor markets are still tightening.

Data showed that while orders for U.S. durable goods surged in April, business spending plans continued to show signs of weakness, suggesting the manufacturing rout was far from over.

Trading near 16.5 times expected earnings, the SP 500 appears fairly priced, said Michael Mussio, managing director with FBB Capital Partners. “We’re not expecting any significant increase in earnings for the SP 500 this year compared to last year,” he said.

The Dow Jones industrial average .DJI dipped 23.22 points, or 0.13 percent, to end at 17,828.29 points and the SP 500 .SPX edged down 0.44 points, or 0.02 percent, to 2,090.1.

The Nasdaq Composite .IXIC added 6.88 points, or 0.14 percent, to 4,901.77.

Muted volume suggested that some investors had already checked out ahead of an upcoming long weekend, with U.S. stock markets closed on Monday for the Memorial Day holiday.

Just 5.8 billion shares changed hands on U.S. exchanges, well below the 7.2 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Apple (AAPL.O) shares rose 0.79 percent, providing the largest boost to the SP 500, while Citigroup (C.N) fell 1.77 percent, weighing most on the index. Discount retailers Dollar General (DG.N) rose over 4 percent and Dollar Tree (DLTR.O) rallied nearly 13 percent, both hitting record highs after reporting better-than-expected quarterly profits.

Abercrombie Fitch (ANF.N) shares slumped 15.67 percent after the retailer posted its 13th straight quarter of sales declines.

Costco Wholesale (COST.O) rose 3.58 percent a day after posting quarterly earnings.

In extended trade, GameStop (GME.N) tumbled 7 percent after the videogame retailer reported a decline in quarterly revenue.

Advancing issues outnumbered declining ones on the NYSE by 1,552 to 1,449, while on the Nasdaq, 1,507 issues fell and 1,269 advanced.

The SP 500 posted 22 new 52-week highs and 1 new low; the Nasdaq recorded 55 new highs and 26 new lows.

(Additional reporting by Ankur Banerjee in Bengaluru; Editing by Dan Grebler and Nick Zieminski)

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Trump says he would exit global climate accord, slash U.S. oil regulation

BISMARCK, ND Donald Trump, the presumptive Republican presidential nominee, said on Thursday that he would pull the United States out of the U.N. global climate accord and slash environmental regulations on the energy industry if elected.

The comments deepen the contrast between the New York billionaire and his Democratic rivals for the White House, Hillary Clinton and Bernie Sanders, who both advocate a sharp turn toward renewable energy technology as a way to combat climate change.

“We’re going to cancel the Paris climate agreement,” Trump said at the Williston Basin Petroleum Conference in Bismark, the capital of North Dakota, the second largest U.S. oil-producing state. It was Trump’s first speech detailing the energy policies he would advance from the White House.

Trump said he would invite TransCanada to reapply to build the Keystone XL pipeline from Canada to the United States, reversing a decision by the administration of President Barack Obama to block the project over environmental concerns.

“I want it built, but I want a piece of the profits,” Trump said. “That’s how we’re going to make our country rich again.”

“President Obama has done everything he can to get in the way of American energy,” he said. “If crooked Hillary Clinton is in charge, things will get much worse, believe me.”

(Writing by Richard Valdmanis; Editing by Toni Reinhold and Leslie Adler)

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Wall St. pauses after two-day run

NEW YORK Wall Street treaded water on Thursday following two days of strong gains as advancing defensive sectors offset declines in materials, banks and other cyclical industries.

The Dow Jones industrial average .DJI fell 23.22 points, or 0.13 percent, to 17,828.29, the SP 500 .SPX lost 0.44 points, or 0.02 percent, to 2,090.1 and the Nasdaq Composite .IXIC added 6.88 points, or 0.14 percent, to 4,901.77.

(Reporting by Rodrigo Campos; Editing by Nick Zieminski)

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