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KKR interested in becoming financial sponsor to Takata: Nikkei

TOKYO KKR Co (KKR.N) and other investors are in separate talks with a committee overseeing a restructuring of Japan’s Takata Corp (7312.T) about a financial investment to bail out the embattled auto parts maker, people familiar with the matter said on Thursday.

Japan’s Nikkei newspaper reported earlier on Thursday that KKR has proposed taking about a 60 percent stake in Takata and has submitted a restructuring plan to the external steering committee tasked with the restructuring.

Takata and KKR spokeswomen declined to comment on the report, which drove up shares in the company by its daily limit to trade 21 percent higher.

The U.S. fund approached the committee, once source told Reuters.

Takata’s external committee said on Wednesday it had hired investment bank Lazard Ltd to lead restructuring efforts as the auto parts supplier potentially faces billions of dollars in costs stemming from a global recall of its inflators.

The Nikkei said the selection of a financial sponsor would require discussion with Takata’s automaker clients and stakeholders.

The company’s founding family owns nearly 60 percent of the firm, which was started by Takezo Takada in 1933 as a maker of parachutes and other textiles, and is now run by his grandson.

Reuters in April reported that Takata planned to draw up a shortlist of financial backers by August, and that it hoped to reach an agreement on its restructuring by mid-September.

Earlier this month, the U.S. Transportation Department and Takata confirmed that 17 automakers would recall another 35 million to 40 million air bag inflators by 2019 – on top of 28.8 million recalled previously. Globally, more than 50 million inflators have been recalled so far.

KKR currently invests in Japanese companies, including in Panasonic Healthcare and Pioneer DJ Corporation.

(Additional reporting by Naomi Tajitsu; Editing by Stephen Coates and Muralikumar Anantharaman)

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Oil prices top $50, Asian shares struggle as China sags

TOKYO Brent crude oil rose above $50 a barrel for the first time in nearly seven months on Thursday but Asian shares struggled to gain traction, with worries about U.S. interest rates and China’s slowing economy keeping investors on the sidelines.

While energy stocks outperformed, a slump in mainland China stocks to 2-1/2 month lows dampened any broader interest in riskier assets in Asia, offsetting overnight gains on Wall Street.

“The market environment is not bad overall. Oil prices are rising, which would benefit oil producing countries. But Asia may be hurt by concerns about the Chinese economy,” said Shuji Shirota, associate director at HSBC in Tokyo.

“The market’s focus is returning to the Fed, given rising expectations that they could hike rates much earlier than expected. That is weighing on many emerging markets as well,” he said.

European shares are expected to fall slightly, with financial spreadbetters seeing Britain’s FTSE 100 and Germany’s DAX to open down 0.2 percent.

Japan’s Nikkei rose just 0.1 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2 percent, struggling to extend its rebound from Tuesday’s 12-week low. It had gained 1.2 percent on Wednesday.

Shanghai shares fell more than 1 percent at one point, with sentiment frail after a series of disappointing economic data earlier this month and fears that policymakers may be taking a more cautious stance on further stimulus as debt levels grow.

Share prices rallied globally overnight, led by European banks, which benefit from a decision by euro zone finance ministers to unlock new funds for Greece and to give it a firm offer of debt relief.

On Wall Street, U.S. SP 500 Index rose around 0.7 percent to 2,091, its highest in almost a month and near its six-month intraday high of 2,111.

Energy stocks outperformed on the back of a continued recovery in oil prices, which hit seven-month highs after the U.S. government reported a larger-than-expected drop in crude inventories. [O/R]

Global benchmark Brent futures rose 34 cents or about 0.6 percent to as high as $50.14 per barrel, the highest level since early November. U.S. West Texas Intermediate (WTI) hit $49.93, a seven-month high.

“Geopolitical issues in West Africa and the Middle East, supply outages, increased demand and maybe a touch of a weaker dollar have all helped push prices higher,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

“I don’t think the rally will last because prices will reach a level that will bring U.S. shale oil output back into the market,” he added.

The rally in U.S. and European shares came even as investors readied themselves for monetary tightening by the U.S. Federal Reserve as early as next month.

The yield on two-year U.S. notes rose to a 10-week high of 0.938 percent on Wednesday as investors priced in the likelihood of the Fed raising its federal funds target rate to 0.50-0.75 percent from the current 0.25-0.50 percent in coming months.

It last stood at 0.903 percent, almost a quarter percentage point above this month’s low of 0.686 percent.

Market players are awaiting comments by Fed Chair Janet Yellen at a Harvard University event on Friday, though many also say her speech scheduled for June 6 – after new U.S. payrolls data comes out – would be even more crucial.

Recent comments by Fed policymakers have put a possible rate hike this summer firmly on the table for discussion, but U.S. interest rate futures 0#FF: are still pricing in only about one-third chance of a rate hike in June and about a 60 percent likelihood by July.

The prospects of higher U.S. interest rates undermined the attraction of gold, which fell to a seven-week low of $1,217.90 per ounce though it came back up a tad in Asia to trade at $1,228.

In the currencies, sterling rose to $1.4706, near its four-month peak of $1.4770 hit earlier this month, as several bookmakers widened the odds on a British “Brexit” from the European Union after opinion polls showing the “in” camp leading. [GBP/]

The dollar was generally supported by U.S. rate hike expectations, while the euro stood at $.1151, having hit a 10-week low of $1.1129 overnight.

But it saw a 0.5 percent loss against the yen to 109.64 yen in an erratic move.

(Additional reporting by Keith Wallis in Singapore; Editing by Kim Coghill and Sam Holmes)

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SEC probes Alibaba accounting methods, shares dive

U.S. regulators are investigating Alibaba Group Holding Ltd’s (BABA.N) accounting practices to determine whether they violated federal laws, the Chinese e-commerce giant said, sending its shares tumbling nearly 7 percent on Wednesday.

Alibaba said the Securities and Exchange Commission launched the investigation earlier this year. Questions about its 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, as it also fights sales of fake items, while a continuing acquisition spree creates uncertainty over its earnings.

It was not immediately clear what prompted the SEC investigation. Alibaba said that it was cooperating with the authorities, and that the SEC advised it the investigation should not be seen as an indication the company had violated federal securities laws.

The SEC 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.

Some merchants in China have questioned whether results from the Nov. 11 Singles’ Day promotion, which have exceeded the combined sales of the Black Friday and Cyber Monday shopping events in the United States, are as high as reported by Alibaba. Last year it reported about $14 billion in transactions on Singles’ Day, when shoppers are encouraged to treat themselves to special deals.

Cainiao, started jointly in 2013 by Alibaba, Yintai Holdings, Fosun Group, Forchn Holdings and five major delivery companies, has in the past been unconsolidated in Alibaba’s financial statements, raising questions among some investors and analysts.

Alibaba said its latest annual report disclosed for the first time Cainiao’s revenue, net loss, assets and liabilities. Alibaba spokesman Robert Christie said those figures are “exactly the kind of robust and transparent information that will address the underlying issues in SEC’s inquiry”.

There are no other undisclosed SEC inquiries, Christie said.


Through Cainiao, Alibaba is trying to take a lead role in developing China’s fragmented package delivery industry, as e-commerce spreads beyond urban hubs and requires a more robust logistics network.

In partnership with delivery businesses, Cainiao crunches reams of data on everything from order trends to delivery routes and weather patterns to increase efficiency.

Last March, Cainiao completed its first funding round, raising around 10 billion yuan ($1.53 billion). Investors included Singapore’s Temasek Holdings [TEM.UL] and GIC Pte Ltd [GIC.UL], Malaysia’s Khazanah Nasional Bhd [KHAZA.UL], and China’s Primavera Capital.

Noted short-seller Jim Chanos of Kynikos Associates, who has been betting on a huge decline in Alibaba shares, last year called Alibaba’s delivery and warehousing infrastructure “a risk”, according to a report he sent out at a conference last November which was seen by Reuters.

Alibaba “appears to control Cainiao via 48 percent stake and consolidates the results via equity method”, Kynikos said. “Cainiao’s business is capitally intensive. It is unclear how much of this capital will be spent by Alibaba versus the delivery partners.”

Hedge-fund manager John Hempton of Bronte Capital, who has been shorting shares in Alibaba, said the company’s accounting for acquisitions was, “The next shoe to drop”.

Up to Tuesday’s close, Alibaba’s stock had fallen 12.3 pct in the last 12 months. On Wednesday it fell 6.8 percent to $75.59.

(Additional reporting by Jane Lanhee Lee and Peter Henderson in SAN FRANCISCO, Jennifer Ablan in NEW YORK, Narottam Medhora in BENGALURU and Donny Kwok in HONG KONG; Editing by Anil D’Silva and David Gregorio)

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Japan Seven & i shareholders approve new president, but predecessor lingers

TOKYO Shareholders of Japan’s biggest retail conglomerate Seven i Holdings (3382.T) approved on Thursday the appointment of its new president, Ryuichi Isaka, a choice backed by U.S. activist investor Daniel Loeb but opposed by Isaka’s long-reigning predecessor.

Isaka, 58, who successfully led the group’s Seven-Eleven Japan convenience store chain, was officially named president, ending the 24-year reign of charismatic former CEO Toshifumi Suzuki who is stepping down after a failed bid to oust Isaka.

But in a sign Isaka may not have a free hand in implementing a radical overhaul of the $90 billion retail conglomerate, the company said Suzuki, widely respected in Japan’s retail industry, will stay on as an honorary adviser.

Many of the company’s managers and employees still revere Suzuki, a pioneer of Japan’s now-ubiquitous convenience stores. Isaka’s decision to keep Suzuki on is seen as an olive branch that could help mend a divided board and management.

Loeb has said the company should focus on growing its profitable convenience store chain and overhaul its weak Ito-Yokado supermarkets. Investors have also urged it to sell off or restructure its luxury clothing store Barneys Japan, Seibu department stores and mail-order business Nissen.

Suzuki confirmed at Thursday’s shareholder meeting that he would stay on as an adviser, and thanked shareholders for their support since his early days when the company’s annual sales were a mere 4 billion yen ($36.5 million). He also defended the retail group’s performance.

“Today the group’s sales total over 10 trillion yen,” he said. “Now, there is some concern about Yokado and Seibu. But Yokado has shown improvement, albeit gradual, since the start of the year. Seibu is also trying with new products.”

Isaka shook hands with Suzuki at the shareholders’ meeting, and tried to play down the conflict, saying he aimed to carry on his predecessor’s management philosophies.

Suzuki resigned as CEO in April after the board refused to rubber-stamp his proposal for Isaka to step down, a proposal criticized by some investors as an attempt to elevate one of his sons to a more senior position.

The board’s rejection of Suzuki’s proposal, was widely seen as a sign of improving corporate governance in Japan, where corporate boards rarely challenge CEOs.

But worries that Isaka will face strong resistance from within, as well as fears Japanese retailers would struggle with weak consumer sentiment for a while longer, have dragged Seven i’s shares down 15 percent so far this year.

(Reporting by Ritsuko Shimizu; Writing by Ritsuko Ando; Editing by Muralikumar Anantharaman)

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Boeing reduces size of tech workforce amid competitiveness drive

NEW YORK Boeing Co (BA.N) said on Wednesday it was reducing the size of its tech support unit as part of an ongoing drive to lower costs.

The company declined to comment on how many Information Technology workers are being laid off, after the Seattle Times reported on Tuesday that hundreds of IT jobs were being cut.

The reductions are across the company, and reflect tech-support work being reduced, “not work that is being shifted or outsourced,” Boeing spokeswoman Lauren McFarland said.

The cost cuts come as the Chicago-based aerospace and defense company battles for sales with European rival Airbus (AIR.PA).

“There is an enterprise-wide effort to increase our competitiveness in today’s global aerospace marketplace,” she said. “As a result, Boeing is engaging in non-labor and labor reductions to help enable the business to meet and exceed customer requirements.”

The job reductions will take place in mid-July, after 60-day notices were sent to workers last week, McFarland said.

The layoffs are involuntary and include managers and non-managers, she said. The reductions are separate from the voluntary job reductions Boeing is making in its commercial airplanes unit, she added.

Boeing’s engineers union said none of the IT layoffs would affect its members. Boeing has eliminated 71 IT jobs held by its members since March 2012, said Bill Dugovich, spokesman for the Society of Professional Engineering Employees in Aerospace.

(Reporting by Alwyn Scott; Editing by Andrew Hay)

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HP Inc profit beats Street amid weak market for PCs, printers

HP Inc (HPQ.N), which houses the former Hewlett-Packard Co’s legacy hardware business, reported a better-than-expected quarterly profit as aggressive cost cutting helped counter weak demand for personal computers and printers.

The company’s shares reversed course to trade up more than 2 percent at $12.45 after the bell on Wednesday.

“I believe the general sentiment from HP Inc investors is that it could have been much worse given how poorly the PC market has been expected to be and the poor PC sales numbers put forth by peers,” Bill Kreher, tech analyst at Edward Jones, said.

Total costs and expenses fell by 10.3 percent to $10.75 billion in the second quarter ended April 30, from a year earlier.

The company remains on track to cut costs by more than $1 billion in 2016, Chief Executive Dion Weisler said on a conference call.

HP Inc said in February it was accelerating its restructuring program and still expects about 3,000 people to exit by the end of the financial year 2016, instead of over three years, as announced initially in September.

Revenue in the personal systems business, the company’s biggest, fell 9.9 percent in the second quarter, while revenue declined 15.8 percent in the printing division.

HP Inc forecast an adjusted profit of 37-40 cents per share for the third quarter, largely below the average analyst estimate of 40 cents.

The company lowered the top end of its 2016 adjusted profit forecast to $1.65 per share from $1.69, leaving the low end unchanged at $1.59.

HP’s earnings from continuing operations fell to $660 million, or 38 cents per share, in the second quarter, from $733 million, or 40 cents per share, a year earlier.

The company’s revenue fell about 11 percent to $11.59 billion.

Excluding items, the company earned 41 cents per share.

Analysts on average had expected earnings of 38 cents per share and revenue of $11.72 billion, according to Thomson Reuters I/B/E/S.

This is HP Inc’s second quarterly results since Hewlett-Packard Co formally split in November.

The other company, Hewlett Packard Enterprise Co (HPE.N), announced on Tuesday that it would be spinning off and merging its struggling IT services business with Computer Sciences Corp (CSC.N).

(Reporting by Alan John Koshy in Bengaluru; Editing by Maju Samuel)

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Exxon shareholders pass measure that may put climate expert on board

DALLAS/SAN RAMON, Calif. Voters at Exxon Mobil Corp’s (XOM.N) annual meeting on Wednesday approved a measure to let minority shareholders nominate outsiders for seats on the board, meaning a climate activist could eventually become a director at the world’s largest publicly traded oil company.

The so-called proxy access measure was the first Exxon shareholder proposal since 2006 to be approved, and it was the only one of 11 proposals related to climate change to pass at meetings held on Wednesday by Exxon and fellow U.S. major Chevron Corp (CVX.N).

This year’s meetings were arguably the tensest ever, coming on the heels of the Paris accord to curb fossil fuel emissions and as New York’s attorney general investigates allegations from environmentalists that Exxon misled the public about climate change risks.

Exxon has denied this and complained of being unfairly targeted.

More than 60 percent of Exxon shareholders backed proxy access, which was narrowly defeated last year. Exxon’s board had opposed the proposal, saying it risked increasing the influence of “special interest groups.”

New York City Comptroller Scott Stringer, who sponsored the proxy access proposal, urged the board to enact it.

“If this company is to properly address fundamental long-term risks like climate change, its board of directors must be diverse, independent, and accountable,” he said in a joint statement signed with the California Public Employees’ Retirement System.

Stringer later called Exxon shareholders’ approval of the measure a “watershed moment.”

Exxon Chief Executive Officer Rex Tillerson said the board would weigh the matter in July. Proxy access proposals were approved last year at more than a dozen oil companies, including Chevron.

The raft of proposals up for vote at Exxon and Chevron more than doubled from last year.

Still, while some gained traction from previous years, nearly all the measures failed, including ones that would have forced the companies to detail how they will plan for the future after 195 governments agreed in December to limit the rise in global temperatures to 2 degrees Celsius (3.6 degrees Fahrenheit), or to stop investing in new oil and gas deposits by paying out more dividends to shareholders.


Chevron CEO John Watson said he was not opposed to the Paris accord, but is against efforts to put a price on carbon emissions.

“Carbon pricing means raising prices on everything,” he told reporters after the meeting. “What are you prepared to live without?”

While BP Plc (BP.L), Statoil ASA (STL.OL) and other European oil companies have begun releasing myriad data points on how their businesses will respond to climate change, Chevron and Exxon have lagged them, critics say.

Two dozen protesters holding signs that said “keep the oil in the ground” lined the entrance to Chevron’s corporate headquarters in San Ramon, California.

In Dallas, a group of protesters, estimated at around 70 by one organizer, representing groups like and the Sierra Club, gathered in front of a church across the street from the meeting.

“Exxon’s feeling the heat from all sides,” said Anna Kalinsky, the granddaughter of a former Exxon climate scientist, citing investigations into the company from several state prosecutors.

They held signs reading “keep it in the ground” and “Exxon lied, the planet fried.”

Deborah Nixon, an organizer with the local Dallas Sierra Club, said some members who held Exxon shares and would be attending the meeting.

In a legal filing this week to shoot down a subpoena from the U.S. Virgin Islands demanding documents on the company’s deliberations about climate change, Exxon’s lawyers said that since 2006 the company has been saying that “the risk to society and ecosystems from rising greenhouse gas emissions could prove to be significant.”

The lawyers also called inquiries by state prosecutors a “fishing expedition” that were stifling free speech and trying to create public policy instead of enforce laws.

(Reporting by Luc Cohen in Dallas and Rory Carroll in San Ramon, Calif.; Editing by Terry Wade and Matthew Lewis)

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Bayer could get ECB financing for Monsanto bid, rules show

FRANKFURT Bayer (BAYGn.DE) could receive financing from the European Central Bank that would help to fund a takeover of Monsanto (MON.N), according to the terms of the ECB’s bond-buying program.

U.S.-based Monsanto, the world’s largest seed company, turned down Bayer’s $62 billion bid on Tuesday, but said it was open to further negotiations.

The ECB can buy bonds issued by companies that are based in the euro area, have an investment-grade rating and are not banks, provided that they are denominated in euros and meet certain technical requirements.

The purpose for which the bonds are issued is not among the criteria set by the ECB, which will start buying corporate bonds on the market and directly from issuers next month.

This means that, in theory, the ECB could buy debt issued by Bayer, which said on Monday it would finance its cash bid for Monsanto with a combination of debt and equity.

“It will be interesting to observe how much of such a deal would be absorbed by the central bank,” credit analysts at UniCredit wrote in a note.

The ECB is buying 80 billion euros ($90 billion) worth of assets every month in an effort to revive economic growth in the euro zone by lowering borrowing costs.

Central bank sources told Reuters that it would not be the ECB’s first choice if the money it spent ended up financing acquisitions.

But even this would have a silver lining if consolidation made an industry or sector more efficient and if it gave fresh impetus to the stock market, the source added.

And if issuers ended up exchanging the euros raised through bond sales for dollars, that would also help the euro zone by weakening the euro against the greenback, the sources said.

Bayer has investment-grade ratings from SP, Moody’s and Fitch, but all three agencies said they were reviewing their ratings for possible downgrades following the offer for Monsanto.

Moody’s said the Monsanto acquisition might lead to a multi-notch downgrade of Bayer but it did not anticipate that the deal would cause the group to lose its investment-grade status.

(Reporting by Francesco Canepa; Editing by Ruth Pitchford)

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