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Mondelez abandons pursuit of U.S. chocolate maker Hershey

Mondelez International Inc (MDLZ.O), the maker of Oreo cookies and Cadbury chocolates, said it was no longer pursuing the acquisition of Hershey Co (HSY.N), two months after the U.S. chocolate company turned down its $23 billion cash-and-stock bid.

The abandoned deal, which would have created the world’s largest confectioner, underscores the grip that a charitable trust has on the maker of Hershey’s Kisses and Reese’s Peanut Butter Cups. The trust which controls Hershey was set up by the company’s founder over a century ago to fund and run a school for underprivileged children.

Hershey rejected a $107 per share acquisition offer from Mondelez at the end of June. An unrelated row between the trust and the Pennsylvania Attorney General’s office ensued over the trust’s governance, which resulted in a reform agreement being announced at the end of July.

The agreement calls for the trust’s board to be expanded from 10 members to 13, and for five members to resign in order for 10-year terms to be enforced. One trustee resigned last month, leaving a total of nine openings.

Mondelez’s Chief Executive Officer Irene Rosenfeld approached Hershey Chief Executive John Bilbrey again last week, and indicated that Mondelez would be willing to offer up to $115 per share for Hershey, according to a source familiar with the discussions who asked not to be identified because they were confidential.

Hershey responded that the trust would not be able to consider an offer until it is reconstituted next year, the source said. Even then, Hershey would not be willing to enter into deal negotiations for an offer of less than $125 per share, the source added.

Hershey did not respond to a request for comment. Its shares fell 11.4 percent in after hours trading in New York on Monday to $99.00.

“Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement,” Rosenfeld said in a statement.

The Hershey trust holds 81 percent of the company’s voting stock, and so a sale is not possible without its approval. About two-thirds of its $12 billion in assets are in Hershey stock.

Mondelez’s offer was half in cash and half in stock, sources have said. This means new board members of the trust, which must approve any sale of Hershey, could use such a transaction to substantially reduce its exposure in Hershey by partially cashing out on its stake.

“While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions,” Rosenfeld said on Monday.


Even if the trust does decide to explore a sale of Hershey, it can still be overruled. In 2002, the trust put Hershey up for sale, citing a need to diversify its holdings.

At the last minute, it pulled the plug on a sale to chewing gum maker Wm. Wrigley Jr. Co for $12.5 billion, after the attorney general’s office successfully petitioned a court to block the offer amid local community protests.

Pennsylvania’s attorney general Kathleen Kane stepped down earlier this month after she was convicted of leaking secret criminal files to discredit a political adversary, and then lying about it. She was succeeded by her deputy Bruce Castor, and the post is up for election in November.

Pennsylvania state senator John Rafferty, the Republican candidate for attorney general, has said he does not think diversification for a charitable trust is always necessary, and has expressed “serious reservations” about a potential sale to Mondelez.

Democrat candidate Josh Shapiro has said he will “vigorously protect Hershey’s continued success in Pennsylvania” and protect it from “multi-national corporations and Wall Street investors willing to destroy Pennsylvania jobs for their own profit.”

Hershey’s growth has slowed in the last two years as competitors such as Mars Inc expand their offerings, and premium players such as Chocoladefabriken Lindt Spruengli AG (LISN.S) entered the U.S. market.

Mondelez, which has more of a global footprint than Hershey, is the second-largest confectionary company in the world, while Hershey ranks number five.

Their merger would put them in the top place at 18 percent of the market, according to market research firm Euromonitor International Ltd. The combined company would leapfrog Mars, which has 13.3 percent of the global market.

Last year, William Ackman revealed his activist hedge fund Pershing Square had built a stake worth about $5.5 billion in Mondelez, in what was seen as an attempt to push the company to boost earnings or sell itself.

Ackman had joined fellow activist Nelson Peltz as an investor in Mondelez. In a letter to his investors earlier this month, Ackman wrote that Mondelez shares are currently undervalued, and that the issuance of Mondelez stock to fund the acquisition of Hershey would likely be costly for Mondelez shareholders.

(Reporting by Greg Roumeliotis in New York; Additional reporting by Svea Herbst-Bayliss in Boston and Gayathree Ganesan and Sruthi Shankar in Bengaluru; Editing by Kirti Pandey, Tom Brown and Bernard Orr)

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In twist, Caesars wins brief extension on lawsuit shield

In a case full of twists, Caesars Entertainment Corp (CZR.O) late on Monday won a two-week extension on a shield from lawsuits worth billions of dollars just days after a different U.S. court allowed those cases to proceed.

Investors are suing Caesars for reneging on its guaranty of bonds issued by its operating unit, Caesars Entertainment Operating Co Inc, or CEOC, which is bankrupt. Those lawsuits will now be stayed until Sept. 16, according to a filing in U.S. District Court in Chicago.

An appeal hearing is scheduled for Tuesday in Chicago, just hours before U.S. District Judge Jed Rakoff in Manhattan was scheduled to hear oral arguments from several bondholders.

Shares of the Nevada-based gaming company closed down about 16 percent at $6.35 on Nasdaq on concerns of an imminent ruling on the New York lawsuits, which the company has warned could plunge it into bankruptcy alongside its operating unit.

CEOC had argued that a halt to lawsuits against its non-bankrupt parent was critical to protecting a multibillion-dollar contribution to its reorganization plan.

The operating unit filed for bankruptcy in January 2015 with $18 billion in debt.

Until now, Caesars’ operating unit was able to use a bankruptcy court shield to protect its parent from some $11 billion in bondholder lawsuits filed in New York and Delaware.

That shield was scheduled to expire on Aug. 29 after U.S. Bankruptcy Judge Benjamin Goldgar in Chicago refused last week to grant a third stay on the lawsuits.

The bankruptcy has embroiled some of the largest funds on Wall Street, pitting Caesars’ controlling investors, Apollo Global Management (APO.N) and TPG Capital Management [TPG.UL], against bondholders, led by hedge fund Appaloosa Management.

Appaloosa has accused Caesars of stripping its operating unit of its best assets prior to the 2015 bankruptcy filing, allegations that were backed by an independent examiner’s report in March.

Caesars has denied the allegations.

(Reporting by Tracy Rucinski in Chicago and Tom Hals in Wilmington, Delaware; Editing by Meredith Mazzilli and Jonathan Oatis)

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Sycamore Partners confirms bid for bankrupt Aeropostale

SAN FRANCISCO Sycamore Partners on Monday confirmed it submitted a bid for Aeropostale Inc after a judge issued an opinion rejecting the teen-focused retailer’s attempt to block an offer and blame its bankruptcy on the private equity firm.

Aeropostale owes $151 million to two Sycamore affiliates, Aero Investors LLC and MGF Sourcing Holdings Ltd, and had sought to preempt a credit bid by them.

Credit bidding allows creditors to offer what they are owed rather than cash to acquire companies.

A representative for Sycamore said the firm made an offer for Aeropostale at the retailer’s auction on Monday but declined to say if the offer was a credit bid.

Reuters on Friday reported the firm and liquidators, companies that wind down business, would make offers for the retailer.

Aeropostale in court papers last month argued for a court order denying Aero, a lender, and MGF, a supplier, an opportunity to credit bid their claims.

Aeropostale charged the affiliates had caused liquidity and inventory troubles in an effort to strain the company’s finances and drive it into bankruptcy.

Aeropostale filed for Chapter 11 bankruptcy in May.

(Reporting by Jim Christie; Editing by Bernard Orr)

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Boeing keeps jetliner prices steady amid slowing sales

SEATTLE Boeing Co (BA.N) said on Monday it will refrain from increasing jetliner prices for the first time since 2009 as the industry grapples with a slowdown in new plane sales.

“Boeing will continue to quote July 2015 base prices in 2016,” company spokesman Doug Alder said in an email to Reuters.

Airlines typically negotiate steep discounts from the list prices that Boeing and rival plane maker Airbus (AIR.PA) quote publicly, leaving the list prices as largely symbolic.

Boeing has held prices steady during sales slow-downs in the past. It did not increase prices in 2001 or 2009, Alder noted.‎ Boeing and Airbus sales fell precipitously those years following the Sept. 11, 2001, attacks and the financial crisis.

This year, Boeing has booked new orders for 335 planes though Aug. 23, much fewer than the 418 jetliners in the first seven months of 2015, according to company data.

Boeing list prices range from $80.6 million for the small 737-700 to $400 million for the large 777-9X.

Airbus sales have slowed to a net 323 through July this year. That compares with 1,080 in all of 2015. Airbus prices range from about $88.6 million for an A319 up to $428 million for the double-decker A380.

Both major plane makers have struggled to sell their big twin-aisle planes this year as low fuel prices have kept older planes flying longer.

Boeing has said it feels particular pricing pressure from Airbus, but that it will not cut prices simply to win market share.

Boeing said earlier this month that it may need to cut production of its twin-aisle 777 and skip a planned production rate increase on the 787 as a result unless sales improve. Boeing also is slowing production of its 747-8 jumbo jet.

Airbus said in July that it would cut A380 production starting in 2018, citing weak demand for its largest plane.

(Reporting by Alwyn Scott; Editing by David Gregorio)

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EU to hand Apple Irish tax bill of $1.1 billion, source says

DUBLIN The European Commission will rule against Ireland’s tax dealings with Apple (AAPL.O) on Tuesday, two source familiar with the decision told Reuters, one of whom said Dublin would be told to recoup over 1 billion euros in back taxes.

The Commission declined to comment on Monday.

The European Commission accused Ireland in 2014 of dodging international tax rules by letting Apple shelter profits worth tens of billions of dollars from tax collectors in return for maintaining jobs. Apple and Ireland rejected the accusation; both have said they will appeal any adverse ruling.

The source said the Commission will recommend a figure in back taxes that it expects to be collected, but it will be up to Irish authorities to calculate exactly what is owed.

A bill in excess of 1 billion euros ($1.12 billion) would be far more than the 30 million euros each the European Commission previously ordered Dutch authorities to recover from U.S. coffee chain Starbucks (SBUX.O) and Luxembourg from Fiat Chrysler (FCHA.MI) for their tax deals.

Both companies and countries have appealed those decisions.

When it opened the Apple investigation in 2014, the Commission told the Irish government that tax rulings it agreed in 1991 and 2007 with the iPhone maker amounted to state aid and might have broken EU laws.

The Commission said the rulings were “reverse engineered” to ensure that Apple had a minimal Irish bill and that minutes of meetings between Apple representatives and Irish tax officials showed the company’s tax treatment had been “motivated by employment considerations.”

Apple employs 5,500 workers, or about a quarter of its European-based staff in the Irish city of Cork, where it is the largest private sector employer. It has said it paid Ireland’s 12.5 percent rate on all the income that it generates in the country.

Ireland’s low corporate tax rate has been a cornerstone of economic policy for 20 years, drawing investors from major multinational companies whose staff account for almost one in 10 workers in Ireland.

Some opposition Irish lawmakers have urged Dublin to collect whatever tax the Commission orders it to. But the main opposition party Fianna Fail, whose support the minority administration relies on to pass laws, said it would support an appeal based on the reassurances it had been given by the government to date.

The U.S. Treasury Department published a white paper last week that said the EU executive’s tax investigations departed from international taxation norms and would have an outsized impact on U.S. companies. The Commission said it treated all companies equally.

($1 = 0.8938 euros)

(Additional reporting by Robin Emmott in Brussels; editing by Ralph Boulton, Larry King)

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Truck carrying Takata air bag inflators explodes in U.S., killing one

A truck that was transporting Takata Corp (7312.T) air bag inflators and propellants at the center of a global recall exploded in Texas last week, killing one woman and injuring four other people, the auto parts supplier said on Monday.

The truck, operated by a subcontractor, was traveling to a Takata warehouse in Eagle Pass, Texas, early on Aug. 22 when an accident occurred, causing an explosion that incinerated a nearby home, local media reports said.

The truck “was involved in an accident,” Takata said in a statement on Monday. “According to preliminary reports, the accident caused a fire, which led to an explosion.”

Texas state officials did not immediately return calls for comment early on Monday.

A Takata spokesman in Tokyo said earlier on Monday the blast killed one woman and that the truck was carrying air bag inflators and propellants containing ammonium nitrate, a volatile chemical compound. These bags have in the past exploded and been linked to the deaths of at least 14 people, triggering the biggest recall in the global auto industry.

The force of the explosion damaged about 10 nearby homes, breaking windows and dislodging doors from their hinges, local media reports said, with rubble and truck parts found almost a mile away from the site of the blast.

Takata has a warehouse in Eagle Pass, which is near the Mexico-U.S. border, that stocks inflators manufactured in Monclova in Mexico. That plant has been confirmed as one of the sources of the company’s defective air bags.

Local media reports said the driver of the truck was a 20-year-old man who, along with a passenger, were able to escape from the truck before it exploded. However, a 69-year-old woman was killed when the blast occurred in front of her home, the reports said.

A two-day search was conducted to find the woman, but the search was called off after she was identified by dental records, local media reported.

More than 100 million vehicles worldwide have been slated for recall to replace Takata inflators, which in addition to the deaths, are linked to more than 150 injuries, mostly in the United States and involving Honda Motor Co Ltd (7267.T) cars.

Prolonged exposure of the defective Takata inflators to hot conditions has been found to cause air bags to explode with excessive force, spraying shrapnel into passenger compartments.

(Reporting by Naomi Tajitsu in Tokyo and Bernie Woodall in Detroit; Editing by Christopher Cushing and Bernadette Baum)

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Wall Street rises as hawkish Fed boosts financial stocks

Wall Street rose on Monday morning, helped by financial stocks that gained a day after Federal Reserve Chair Janet Yellen said the case for an interest rate hike had strengthened.

Yellen, addressing a gathering of global central bankers on Friday, said the central bank was close to meeting its goals of maximum employment and stable prices, while describing consumer spending as “solid”.

Yellen gave little indication of when the Fed would move but Vice Chairman Stanley Fischer suggested that a move as soon as next month could be possible.

“It’s a delicate yet deliberate delivery of reality,” said Andre Bakhos, managing director at Janlyn Capital. “Rates are going to move higher, based on the economic evidence, but the “when” of the move is up in the air.”

Financial stocks, which stand to gain the most in a higher interest rate environment, rose as traders raised bets on a hike in the coming months.

The SP 500 financial index .SPSY rose 0.6 percent, with Wells Fargo (WFC.N) and JPMorgan (JPM.N) rising about 0.8 percent.

The index was trading at its highest level since Dec. 30, shortly after the Fed raised rates for the first time in nearly a decade.

The chances of a rate hike in September jumped to 30 percent from 21 percent, while the measure rose to 45.1 percent from 41.4 percent for December, according to CME Group’s FedWatch tool.

A report from the U.S. Commerce Department showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose for the fourth straight month in July.

Still, in the 12 months through July the core personal consumption expenditure, the Fed’s preferred inflation measure, increased 1.6 percent, below its 2 percent target.

At 9:39 a.m. ET (1339 GMT), the Dow Jones Industrial Average .DJI was up 74.82 points, or 0.41 percent, at 18,470.22.

The SP 500 .SPX was up 8.05 points, or 0.37 percent, at 2,177.09.

The Nasdaq Composite .IXIC was up 11.51 points, or 0.22 percent, at 5,230.42.

The dollar index .DXY rose 0.25 percent, trading at more than a two-week high, while oil prices slipped more than 1 percent.

Microsoft (MSFT.O) rose 0.8 percent and gave the biggest boost to the SP 500 and the Nasdaq after UBS raised its price target.

Mylan (MYL.O) shares rose 1 percent after the drugmaker announced a generic version of its allergy treatment EpiPen.

Herbalife (HLF.N) rose 4 percent after Carl Icahn bought 2.3 million shares in the nutritional supplements maker after denying reports of attempts to sell his stake.

Advancing issues outnumbered decliners on the NYSE by 1,763 to 859. On the Nasdaq, 1,327 issues rose and 903 fell.

The SP 500 index showed eight new 52-week highs and one new low, while the Nasdaq recorded 44 new highs and three new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Don Sebastian)

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European Commission says ‘ball still rolling’ on trade deal with U.S. after German comments

BRUSSELS The European Union’s executive said on Monday it had a unanimous mandate from the bloc’s 28 members to finalise negotiations on a free trade deal with the United States, a day after Germany’s economy minister said the talks had “de facto failed”.

Sigmar Gabriel of Germany, the EU’s biggest economy, said on Sunday that negotiations over the Transatlantic Trade and Investment Partnership (TTIP) had failed because Europe rejected some U.S. demands.

Asked to comment on Gabriel’s remarks, a European Commission spokesman said “the ball is still rolling” on TTIP.

“Although trade talks take time, the ball is rolling right now and the Commission is making steady progress in the ongoing TTIP negotiations,” Margaritis Schinas told a news conference.

“Talks are now indeed entering crucial stage as we have proposals for almost all chapters on the table and a good sense of the outline of the future agreement.”

In Berlin, Germany’s leading industry associations were critical of Gabriel’s remarks and urged the German government to show greater commitment to free trade deals.

The head of industry association BDI, Ulrich Grillo, said it was “astonishing” that Gabriel, who is also vice chancellor and head of the co-governing Social Democrats, had declared the TTIP talks a failure when negotiations were still going on.

Top officials of other industry associations such as VDMA and the Auto Industry Association VDA also spoke out against Gabriel’s comments which highlight growing divisions within Chancellor Angela Merkel’s ruling coalition ahead of next year’s elections.

Three years of negotiations failed to resolve multiple differences, including over food and environmental safety, with critics saying the pact would hand too much power to big multinationals at the expense of consumers and workers.

Backers of a sweeping U.S.-EU free trade deal see it bringing economic gains on both sides of the Atlantic. EU trade ministers will discuss the issue when they next meet in Bratislava on Sept.22.

Schinas said the Commission was still ready to finalise the deal by the end of the year but not at the expense of “Europe’s safety, health, social and data protection standards, or our cultural diversity”.

Commenting separately on Gabriel’s remarks, Lithuania’s Foreign Minister Linas Linkevicius said he believed arriving at a deal would benefit both the EU and the United States.

“It would be better for all sides to agree,” he said. “Of course, not at an expense of our interests. We have to defend our interests, but we also have to negotiate and conclude this agreement. It would be a big boost for economies, jobs, trade.”

Britain’s June vote to leave the EU has further clouded the picture, though Schinas insisted Brussels was still negotiating on behalf of all 28 members of the bloc, including London.

But the prospect of a Brexit has triggered fresh doubt that TTIP could be completed in the final months of U.S. President Barack Obama’s term, as well as over Britain’s exact status in any deal as London ponders its future ties with the EU.

(Reporting by Gabriela Baczynska,; Additional reporting by Michael Nienaber in Berlin and by Nerijus Adomaitis)

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Oil falls towards $49 on high output, strong dollar

LONDON Oil fell towards $49 a barrel on Monday, pressured by high output from Middle East OPEC members and as a stronger U.S. dollar weighed on commodities.

Iraq, which has exported more crude from its southern ports in August, will continue ramping up output, its oil minister said on Saturday. Top exporter Saudi Arabia has kept output at around record levels this month.

Brent crude LCOc1 was 85 cents lower at $49.07 a barrel at 1323 GMT. The global benchmark is down more than 7 percent from its 2016 peak of $52.86 reached on June 9. U.S. crude CLc1 was also down 85 cents, at $46.79.

“A much stronger U.S. dollar is causing selling pressure today,” said Carsten Fritsch of Commerzbank. “Speculative financial investors in particular are likely to use this as an opportunity to take profits.”

The U.S. currency rose to a three-week high against the yen on Monday after the Federal Reserve bolstered expectations that it would increase interest rates soon. [USD/]

A rise in the dollar makes dollar-priced commodities such as crude more expensive for holders of other currencies, and tends to put downward pressure on oil prices.

The comments about high oil output have dampened expectations that OPEC and outside producers such as Russia will agree steps next month to support prices such as a production freeze, following the collapse of a similar effort in April.

“The market is increasingly likely to discount the outcome of the event, given, even in the instance of a freeze being agreed, compliance will be an issue,” Barclays said in a report.

Members of the Organization of the Petroleum Exporting Countries are due to meet informally in Algeria on Sept. 26-28 on the sidelines of the International Energy Forum. Russia is also expected to attend the IEF.

Oil prices are less than half their level of mid-2014 because of a persistent supply glut. The chief executive of U.S. oil company ConocoPhillips, Ryan Lance, said at an industry conference in Stavanger, Norway, he believed oversupply would extend into 2017.

(Additional reporting by Henning Gloystein and Karolin Schaps; Editing by Dale Hudson and Louise Heavens)

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