News Archive

Katzenberg sued over ‘side deal’ to Comcast-DreamWorks merger

WILMINGTON, Del. Jeffrey Katzenberg, DreamWorks Animation SKG Inc’s (DWA.O) chief executive, has been hit with a proposed class action lawsuit over what a minority shareholder called an “extraordinarily valuable” side deal he struck as part of the $3.8 billion sale of the studio to Comcast Corp (CMCSA.O).

Comcast, the owner of NBCUniversal and the largest U.S. cable distributor, agreed in April to pay $41 in cash per DreamWorks share and Katzenberg agreed to vote his controlling stock for the deal, assuring investor approval. The deal for is expected to close by the end of this year.

Monday’s class action complaint by Ann Arbor City Employees Retirement System, a DreamWorks shareholder, claims Katzenberg breached his duty to minority shareholders by reaching a lucrative consulting deal for himself.

Once the deal closes, Katzenberg will become the chairman of DreamWorks New Media, which will oversee Awesomeness TV, an online studio for teen-oriented content, and a 3-D animation business.

While Katzenberg will only be paid $1 annually as a consultant, he will also collect 7 percent of the profits from DreamWorks New Media in perpetuity.

“Had Katzenberg not received the extraordinarily valuable side deal, Comcast would have been required to increase the merger price to secure Katzenberg’s support,” said the complaint. The lawsuit was filed in the Court of Chancery in Delaware, where DreamWorks Animation is incorporated.

A DreamWorks spokesman declined to comment.

The lawsuit said the profit-sharing deal violates the DreamWorks charter, which requires minority shareholders receive the same treatment in a merger as Katzenberg.

The lawsuit seeks damages from Katzenberg and a share of the profits from his side deal. DreamWorks Animation was spun off from DreamWorks Studios in 2004 with Katzenberg as CEO.

DreamWorks Studio was founded in 1994 by Katzenberg, Steven Spielberg and David Geffen.

Shares of Comcast were up 0.3 percent at $62.63 and shares of DreamWorks Animation were up 0.1 percent at $40.75 in midday trade on Nasdaq.

The merger would combine DreamWorks’ franchises such as “Shrek” and “Kung Fu Panda” with “Despicable Me” from Comcast’s Universal Pictures.

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U.S. first-quarter GDP revised up, Brexit risk to outlook

WASHINGTON U.S. economic growth slowed in the first quarter but not as sharply as previously estimated, and while there are signs of a pickup in the second quarter, analysts worry Britain’s vote to leave the European Union could hurt activity later this year.

Gross domestic product increased at a 1.1 percent annual rate, rather than the 0.8 percent pace reported last month, the Commerce Department said on Tuesday in its third GDP estimate. The economy grew at a rate of 1.4 percent in the fourth quarter.

There are indications the economy has regained momentum in the second quarter, with retail sales and home sales rising in April and May, although business spending remains weak and job growth has slowed. But uncertainty following last Thursday’s so-called “Brexit” referendum poses a risk to the growth outlook.

“The test comes in the next few months as the turbulence in financial markets may affect consumers’ behavior and also weigh on business investment,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania.

“If financial markets settle down, the effect of the British referendum on the U.S. economy will be very small.”

Brexit wiped off $3.01 trillion from global stock markets over two days. On Tuesday, global equities recouped some losses, with financial shares leading the rebound. U.S. stock indexes rallied, while prices for government debt fell. The dollar fell against a basket of currencies.

Economists estimate that Brexit could subtract an average of two-tenths of a percentage point from U.S. growth over the next six quarters, with most of the drag coming through weak business spending as uncertainty causes companies to either delay or scale back capital projects.

“Following the Brexit vote, we expect a stronger U.S. dollar and heightened financial market strains will weigh on domestic activity, but lower interest rates should provide some offset so that the net impact is a marginal negative,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics in New York.

Despite signs growth is gaining steam, economists say the Federal Reserve is unlikely to raise interest rates in the near-term, given the uncertainty over the implications of Brexit.

Fed Chair Janet Yellen told lawmakers last week that data pointed to “a noticeable step-up” in GDP growth in the second quarter. The Atlanta Federal Reserve is currently estimating second-quarter GDP rising at a 2.6 percent rate.

When measured from the income side, the economy grew at a 2.9 percent rate in the first quarter, the quickest pace since the third quarter of 2014.

That was up from the 2.2 percent pace reported last month and reflected upward revisions to corporate profits. After-tax profits increased at a 2.2 percent rate in the first quarter, rather than the previously reported 0.6 percent pace.


Economic growth in the first quarter was constrained by dollar strength and sluggish global demand. Output was also hampered by business efforts to reduce an inventory overhang, with a further drag coming from lower oil prices, which have unleashed deep spending cuts on capital goods such as equipment.

There are indications that the model used by the government to strip out seasonal patterns from data is not fully accomplishing its goal. The economy has underperformed in the first quarter in five of the last six years.

The government has acknowledged shortcomings with its seasonal adjustment model, and early this month said beginning in mid-2018, it planned to produce estimates of GDP and its major components that are not seasonally adjusted.

These will be released together with the seasonally adjusted GDP estimates.

First-quarter business spending on software, research and development was revised to show it rising at a 4.4 percent rate instead of falling at a 0.1 percent rate. Business spending on equipment fell at an 8.7 percent pace as opposed to the 9.0 percent rate reported last month.

Still, overall business spending sliced off 0.58 percentage point from first-quarter GDP. Business spending has contracted for two consecutive quarters.

Export growth was revised to show a 0.3 percent rate of increase instead of the previously reported 2.0 percent pace of decline. As a result, trade contributed 0.12 percentage point to GDP growth in the first quarter. It was previously reported to have cut 0.21 percentage point from GDP growth.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised down to a 1.5 percent rate, the slowest pace in two years. Consumer spending was previously reported to have increased at a 1.9 percent rate.

The downward revision reflected weak spending on services such as transportation and recreation. But April and May retail sales reports suggest consumer spending has rebounded.

Should financial markets continue to settle down after last week’s global equities rout, consumer spending could gain further ground, also aided by lofty savings and rising house prices, which are boosting household wealth.

A report from the Conference Board on Tuesday showed consumer confidence increased to an eight-month high in June. The survey was, however, conducted before last week’s Brexit referendum.

“Near-term market volatility may give households reason for pause, but consumer spending should remain a key support for the economy in the coming quarters,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.



U.S. home prices (Case-Shiller interactive)

Consumer confidence interactive

The U.S. consumer: Ipsos, Umich, Conference Board


(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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Taiwanese chip supplier says Apple conservative on orders: Nikkei

Taiwanese chip firm Advanced Semiconductor Engineering Inc said on Tuesday that its biggest customer, Apple Inc, was being more conservative in placing orders compared with last year, according to the Nikkei.

The business daily reported in May that component suppliers in Taiwan would receive fewer orders from Apple in the second half of 2016.

Apple usually launches its flagship iPhone in September.

Earlier this month, Goldman Sachs lowered its price target on Apple’s stock on worries about slowing growth in the smartphone industry.

At the time, the brokerage also lowered its fiscal 2016 forecast for iPhone shipments to 211 million units from 212 million units.

Cupertino, California-based Apple reported its first-ever quarterly decline in iPhone sales in April, leading to worries about demand for its next iPhone.

Up to Monday’s close, Apple’s shares had fallen 12.6 percent this year.

(Reporting by Narottam Medhora in Bengaluru; Editing by Maju Samuel)

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Takata boss says he’ll step down once ‘new regime’ is in place

TOKYO Takata Corp’s chief executive said he will resign after a “new management regime” is found, finally bowing to calls for change so that the auto parts supplier can move ahead in dealing with a multi-billion dollar airbag recall.

Takata, one of the world’s largest suppliers of auto safety equipment, has been searching for a financial backer to help it overhaul the business and carry ballooning costs.

The Japanese firm’s airbag woes first emerged in 2008 but its troubles have grown over the past three years as fatalities linked to its inflators rose and recalls mounted to the point where some analysts have questioned its future.

CEO Shigehisa Takada – a quiet, bookish presence in contrast to his gregarious, hands-on father who previously led the company – is the first member of the founding family to take public responsibility. He apologized for the scandal last year, but has also defended the company’s products.

“I am not clinging to this. My role is to make sure the company does not take a bad turn until there is a passing of the baton,” he told an annual shareholders meeting, where he came under fire for failing to deal more effectively with the crisis.

News of his planned exit sent Takata’s shares surging as much as 10 percent although they later pared gains to finish 2 percent higher.

At times barely audible when answering investor questions, Takada said details of the management changes would be determined by a third-party committee enlisted to oversee the company’s restructuring.

That committee, which has brought in investment bank Lazard, said last month said it would reform governance and resolve cost issues surrounding the recall.

As many as 30 potential investors have indicated initial interest in providing support for the company and a solution is expected by November, people with knowledge of the discussions have said.

Addressing shareholders, the shy and often awkward Takada often mumbled, apologizing for his inadequate responses.

Takada is the third-generation leader of the company, which began in 1933 as a textiles maker in central Japan, before expanding into seatbelts in the 1960s.

He became president in 2007 and has been at the helm of the company since the 2011 death of his father, Juichiro, who built up the group.

Battered by the crisis, Takata posted its third annual loss in four years in the past financial year and has seen its shares tumble some 90 percent since early 2014.

It is struggling to supply enough replacement inflators, as roughly 100 million have been classified as defective due to the possibility that they may explode violently after prolonged exposure to hot conditions.

Takata’s recall costs have so far been comparatively small as automakers have borne most of the burden, but it is widely expected to shoulder much more.

If Takata was found to be solely responsible for the fault, it could face a bill of more than $10 billion, based on a rough calculation that each replacement kit costs around $100. It also faces U.S. lawsuits.

(Reporting by Maki Shiraki; Writing by Naomi Tajitsu; Editing by Clara Ferreira-Marques and Edwina Gibbs)

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UK’s Osborne says taxes will rise, spending will be cut after Brexit

LONDON Finance minister George Osborne said on Tuesday that Britain would have to raise taxes and cut spending to deal with the economic challenge posed after Britons voted to leave the European Union.

“We are absolutely going to have to provide fiscal security to people, we are going to have to show the country and the world that the government can live within its means,” he told BBC radio.

Asked if that meant tax rises and spending cuts, he said: “Yes, absolutely.”

(Reporting by Michael Holden, editing by David Milliken)

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Uber, Lyft settle litigation involving top executives

SAN FRANCISCO Rival ride services Uber and Lyft have settled high stakes litigation involving two of their top executives, court filings show, in advance of a trial that could have aired sensitive details about both companies.

Lyft and its former chief operating officer Travis VanderZanden ended litigation in a California state court in which Lyft accused VanderZanden of breaking his confidentiality pledges when he went to work for Uber.

Uber also withdrew a subpoena on Monday in separate litigation over a data breach at Uber, which had targeted an Internet address assigned to Lyft’s chief technology officer (CTO), according to a court filing.

Last year Reuters reported that the U.S. Department of Justice was pursuing a criminal investigation of a May 2014 data breach at Uber [UBER.UL], including an examination of whether any employees at competitor Lyft were involved.

Lyft has said it found no evidence that any employee was involved in the breach. It is unclear what impact the civil settlements will have on that probe.

A Lyft spokesman confirmed the settlement with VanderZanden on Monday but declined to disclose the terms. An Uber representative could not immediately be reached for comment.

VanderZanden served as Lyft’s chief operating office until August 2014, when he expressed disagreement with the company’s leadership and approached two board members about taking over as chief executive, according to court filings.

Lyft accepted VanderZanden’s resignation instead, and he eventually became vice president of international growth at rival Uber.

Lyft sued him in November 2014. In a sworn affidavit submitted in court earlier this year, VanderZanden said Lyft sued him in bad faith.

According to VanderZanden’s filing, Lyft surmised he had told Uber that Lyft’s CTO, Chris Lambert, had discovered a method to “hack into Uber’s computer systems and gain access to Uber confidential information.”

Uber revealed last year that as many as 50,000 of its drivers’ names and their license numbers had been improperly downloaded, and filed a lawsuit in a San Francisco federal court in an attempt to unmask the hacker.

As part of its investigation, Uber determined that an Internet address potentially associated with the breach could be traced to Lambert. However, Lambert’s attorney told Reuters Lambert “had nothing to do” with the breach, which was launched from a different Internet address.

Trial in the VanderZanden case had been scheduled to begin in August.

(Reporting by Dan Levine; Editing by Mark Potter)

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U.S.-UK alliance seen outweighing Brexit trade concerns

WASHINGTON The United States looks unlikely to follow through on a threat to relegate Britain to second-class trade status once its ally leaves the European Union, as it weighs the potential costs of undermining the countries’ close diplomatic and military ties.

President Barack Obama had warned ahead of Thursday’s “Brexit” referendum that Britain would move to the back of the queue on U.S. trade priorities if it voted to leave the bloc, well behind a much-larger U.S.-European trade deal now under negotiation.

But in the face of a severe financial market reaction to the vote to leave the EU, U.S. officials are making more supportive statements about the strength of the U.S.-U.K. “special relationship” and stressing that they are still analyzing the impact of “Brexit” on the European trade talks.

Security and trade experts said Washington is wary of adding to Britain’s economic pain, which could hamper its ability to maintain its commitments to NATO and U.S.-led efforts to fight terrorism. A poorer Britain may not be able to afford its pledge to spend 2 percent of its GDP on defense at a time of increasing threats from Russia, nor a new fleet of nuclear submarines that form a key part of the West’s nuclear missile deterrent.

“The U.K. could become smaller and weaker. If that happens, then you wonder if they can sustain the defense spending and the effort to be globally oriented,” Nicholas Burns, a former U.S. ambassador to NATO, told reporters after an Atlantic Council event on Monday.

“That’s what we worry about with Britain leaving. Britain was the strongest American partner inside the EU.”

Some trade experts also said that a deal on the U.S.-European Trans-Atlantic Trade and Investment Partnership (TTIP) was unlikely for years now without Britain at the table, which could open an opportunity for a separate deal with the U.K.

“The ‘back of the queue’ statement will be forgotten by the next administration, if not sooner,” said Gary Hufbauer, a senior fellow at the Peterson Institute of International Economics. “In my view, TTIP is either dormant or dead in the wake of Brexit.”

It may be easier for Washington to negotiate a bilateral trade deal with Britain, a “like-minded” country that is more open to free trade than the 27 remaining EU members, said Miriam Sapiro, a former deputy U.S. Trade Representative.

“A U.S.-UK agreement could create leverage to get TTIP done more quickly, and it’s an easier agreement to do,” Sapiro said.


As U.S. Treasury Secretary Jack Lew and Secretary of State John Kerry sought to contain the damage from Brexit in public appearances on Monday, they both refrained from repeating Obama’s trade warning.

Lew told CNBC that a trade deal with the EU remains a priority because it has been under negotiation for several years, but he did not rule out the possibility of separate talks with Britain once Europe and the UK agree on separation terms.

“Any separate negotiation with the U.K. will have to take a course in part determined by what happens between the U.K. and EU,” Lew said. “So it is, I think, very much in the interest of all parties to maintain open trade relationships. The U.S. and the UK have a special, deep relationship that will continue.”

White House spokesman Eric Schultz added that the administration was “working through” how the “Brexit” vote would affect the TTIP talks.

“If we have to start negotiating separately with the United Kingdom, that’s going to start from a different vantage point, especially because we’ve had years of progress.”

Schultz said that U.S.-U.K. economic ties “remain strong and vibrant as they have been, and the special relationship had not suffered because of the vote.

The more conciliatory tone “is about stabilizing the economic situation,” said Heather Conley, European Program Director at the Center for Strategic and International Studies, a Washington think tank. She added that since markets were “already punishing” Britain for the vote, there was no need for the Obama administration to pile on.


Goldman Sachs’ top economists told clients that they expect Britain to enter a recession within the next year as investment plans shrink and credit tightens in the vote’s wake..

Both Standard and Poor’s and Fitch Ratings cut their credit ratings for Britain, anticipating damage to its economy from Brexit, while the shares of British homebuilders have tumbled as much as 40 percent in two days.

The British government is scheduled to make a final decision this year on replacing the four aging submarines that carry its Trident intercontinental nuclear ballistic missiles, a program that could cost as much as $167 billion.

British Defense Minister Michael Fallon told parliament on Monday that the government maintains its commitment to the BAE Systems program and hoped a vote on the decision would be held “shortly.”

In another twist, Britain’s submarine fleet is based at Faslane on Scotland’s west coast. Should Brexit prompt Scotland to make a second, successful bid for independence, Britain may be faced with having to spend billions to build a new submarine base.

Britain’s departure from the EU — which could take several years to negotiate — risks undermining Europe’s new defense strategy, days before NATO and EU governments sign a landmark pact to confront a range of threats from Russia to the Mediterranean, officials say.

NATO allies will be looking for reassurances on Britain’s commitments to the group at a summit in Warsaw in July.

“Things are going to be a lot harder,” said a senior Western defense official involved in EU-NATO cooperation. “NATO planned on linking itself up to a stronger European Union, not being the default option for a weakened, divided bloc.”

Another U.S. official played down any near-term security concerns saying: “I don’t think the sky is falling here.”

(Additional reporting by Jonathan Landay, Phil Stewart and Ayesha Rascoe in Washington and Warren Strobel and Robin Emmott in Brussels; editing by Stuart Grudgings.)

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Oil prices rise on looming Norway strike, but Brexit still weighs

LONDON Oil prices rose above $48 a barrel on Tuesday as investors took advantage of a two-day slide in crude following Britain’s vote to leave the European Union to lock in lower prices.

The vote result sent global stocks and currencies spiralling down, though oil price losses were relatively limited due to expectations of strong summer demand in Asia and the United States, as well as tightening supplies after a two-year rout.

A looming strike at several Norwegian oil and gas fields threatened to cut output in western Europe’s biggest producer, also helped support prices on Tuesday.

Brent crude futures were 2.3 percent, or $1.08, higher at $48.24 per barrel at 0836 GMT.

U.S. West Texas Intermediate (WTI) futures were also 2.3 percent higher, up $1.06 at $47.39 a barrel.

Sterling and London’s FTSE 100 stock market index also recovered sharply on hopes of a coordinated central bank response to financial market losses. [MKT/GLOB]

“Oil is recovering on some bargain hunting after the drop below $47 a barrel proved unsustainable and news of a possible strike in Norwegian oil and gas industry,” said Commerzbank analyst Carsten Fritsch.

He also said the turmoil in Europe was not expected to have a “meaningful impact on the physical global supply and demand balances”.

Oil fell more than 7 percent to seven-week lows in the previous two sessions on the back of the British vote to leave the EU, which reduced investor appetite for volatile commodities such as oil.

A strike in Norway, which could start this Saturday, would add to a number of production outages in oil producing countries including Nigeria and Libya in recent weeks.

Still, news a successful ceasefire in Nigeria had allowed repairs to oil pipelines that had restricted the country’s ability to export oil weighed on market, ANZ Bank said.

Oil production in Nigeria has risen to about 1.9 million barrels per day from 1.6 million (bpd) due to repairs and to the fact there has not been a major pipeline attack for more than a week, a state oil company spokesman said on Monday.

(Additional reporting by Henning Gloystein in Singapore; editing by David Clarke)

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World stocks, sterling try to shake off Brexit blues

HONG KONG Asian stocks rose for the first time in three days on Tuesday while sterling and other currencies advanced as investors scooped up beaten down assets after Britain’s vote to exit the European Union stunned financial markets.

European markets looked set to follow Asian stocks higher, according to financial bookmakers, and U.S. stock futures ESc1 rose 0.8 percent, suggesting a stronger opening on Wall Street after a brutal two-day slide. [.N]

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.1 percent but the tiny gain belied an impressive turnaround which saw the Japanese stocks .N225 rally more than 3 percent from the day’s lows, pulling other Asian markets higher. The Nikkei was up 0.6 percent by early afternoon.

But in a sign that investors remained extremely nervous, trading volumes were light and price action was choppy across markets.

“Short-covering in the currency market and U.S. futures market is limiting selling,” said Yutaka Miura, senior technical analyst at Mizuho Securities. “But overall sentiment remains fragile.”

“Friday’s Brexit jump scare has faded, but markets are still worried” about its possible effect on global demand, SLW brokerage trader João Paulo de Gracia Corrêa said.

Policymakers from Japan to China vowed to protect their economies and markets from the destabilizing impact of Brexit.

“It’s hard to avoid short-term volatility in China’s capital markets, but we won’t allow roller-coaster rides and drastic changes in the capital markets,” Premier Li Keqiang said at the World Economic Forum (WEF) in the city of Tianjin.

In currency markets, sterling GBP=D4 was changing hands at $1.3291, after falling to a three-decade low of $1.3122 on Monday, its weakest since 1985.

Against the yen, sterling rose 1 percent to 135.54 GBPJPY=R, not far from Friday’s 3-1/2 year low of 133.18. The euro stood at 82.93 pence EURGBP=R after scaling a two-year peak of 83.79 pence on Monday.

The euro edged down slightly to $1.1060 EUR=, not far above Friday’s three-month low of $1.0912 after the British vote.

“In the near term, risk aversion and market uncertainty makes the euro less attractive to investors,” Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, wrote in a note to clients.

“In the long run, Brexit also raises questions about the Eurozone’s viability because if major countries like Britain start dropping out the EU, nationalism could drive smaller Eurozone nations to exit out of the euro,” she said, adding that she expects the euro to “make another run” for the $1.0900 level.

Early signs of a cautious return in demand for riskier assets were evident in the high-yielding Aussie AUD=D3 and the New Zealand dollar NZD=, which helped put a floor under other emerging market currencies in Asia.

Anticipating yet another round of global policy easing by major central banks, government bond yields pushed deeper into negative territory. Yields on ten-year and 20-year Japanese debt plunged to fresh record lows.

Gold XAU=, one of the rare outliers in global financial markets in the last few days, came in for a bit of profit taking with the precious metal down 0.7 percent. Silver XAG= fell 0.3 percent.

Crude oil prices regained some of their overnight losses after tumbling nearly 3 percent on Monday. [O/R]

U.S. crude CLc1 added 1.7 percent to $47.11 a barrel after shedding 2.8 percent on Monday, while Brent LCOc1 rose 1.6 percent to $47.89 after skidding 2.6 percent and touching seven-week lows overnight.

(Additional reporting by Lisa Twaronite in TOKYO; Editing by Shri Navaratnam and Kim Coghill)

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