News Archive

Einhorn’s GM plan poses conflict challenge for board

NEW YORK Hedge fund manager David Einhorn’s unusual plan to divide General Motors Co’s (GM.N) shares into two classes poses a potential corporate governance minefield for GM board members.

The shareholder proposal, quickly rejected by the company this week, is aimed at boosting a lagging stock price, but did not appear to catch fire with other existing or prospective shareholders, who see it as an odd mix of hybrid security schemes.

The plan would create one class of stock for investors keen to capture GM’s juicy dividend, and a second for those eager to bet on its growth potential.

Einhorn, who runs New York-based Greenlight Capital, has pledged to fight for it at the company’s annual meeting and plans to nominate a slate of directors ready to advance his idea.

One obstacle cited by legal and financial advisers is the probable conflict it presents for GM’s directors, who under Delaware law are required to be loyal to all shareholders. That could get tricky under Einhorn’s plan as directors would oversee two classes of stock that each have voting powers but competing ambitions for use of company capital.

For instance, directors would have to square voting to raise quarterly payouts, which would exclusively benefit the dividend stock holders, versus allocating more toward capital expenditures or stock repurchases, which would benefit the growth stock camp.

“It puts the board in an odd position,” said Charles Elson, a University of Delaware corporate governance professor who also sits on the board of restaurant chain Bob Evans Farms Inc (BOBE.O). “Do you plow money back into the business, or buy back the stock? You end up penalizing at least one of the stock holders. It gets messy.”

Dividend holders would get one-tenth of a vote under the Einhorn plan, while the so called “capital appreciation” owners would have a full share.

While all public company boards encounter tension when evaluating short- and long-term goals, “separating out dividend-paying shares makes those tensions explicit, pitting actually different stockholders against each other,” Delaware Law School professor Larry Hamermesh said.

Hamermesh added that such a structure could become more troublesome in terms of conflicts if the board’s stock holdings were concentrated more in one class of stock.


Investors – even some GM holders frustrated by its persistent underperformance since its shares returned to public markets in 2010 after a wrenching reorganization in bankruptcy – were not immediately lining up in support of Einhorn’s idea.

“I agree completely that the stock is undervalued, but I’m not sure that splitting it into two classes is going to drive it any higher,” said Scott Moore, co-portfolio manager of the Buffalo Dividend Focus fund, who owns shares of GM.

Moore said he doesn’t want to have to choose between dividend income and stock price appreciation. He wants both.

So far, GM shares have not seen a big response to the Einhorn proposal. The stock gained about 2.5 percent on Tuesday after it was made public but ended little changed on Wednesday.

Mark Freeman, chief investment officer of Westwood Holdings Group, who does not own GM, said he would not buy a dividend-focused share class that was not a preferred stock. Preferreds stand between common shares and debt in a company capital structure and offer a greater likelihood that investors will have a claim on assets in the event of a bankruptcy.

Einhorn’s plan has flavors of several existing hybrid equity security types, such as tracking stocks, perpetual preferred shares and master limited partnerships, but does not exactly replicate any of them.

To some degree, it harkens back to independent share trusts called “primes” and “scores,” equity derivative securities that were popular in the late 1980s and early 1990s.

As under the Einhorn plan, investors interested in the stability provided by dividends could own a company’s prime trusts, while those willing to take on more risk and bet on its growth could buy the scores.

The key difference, however, was that the trusts were established by shareholders, not the companies issuing the underlying stock. Companies themselves had no involvement at all, and their shares were not formally divided into two classes as Einhorn’s proposal provides.

The trusts phased out in the early 90s following a disadvantageous change in tax rules.

GM itself has had multiple share structures in the past.

In the mid-1980s, the automaker made two splashy diversification moves, acquiring Electronic Data Systems Corp, a pioneering computer services company founded by future presidential candidate H. Ross Perot, and later Hughes Aircraft, the defense and satellite company founded by billionaire Howard Hughes.

GM then set up tracking stocks for each of the units. GM Class E shares, for EDS, and GM Class H shares, for Hughes, gave holders a dividend based on the profits of each operation, but no ownership stake.

GM’s own history suggests there are ways around the potential conflict posed by dual share classes.

In a 2005 case in Delaware Chancery Court, the company acknowledged that the board had an internal policy toward handling different shareholders when GM had a tracking stock.

According to a copy of the case obtained by Reuters, “Recognizing that the interests of … shareholders may not always coincide, GM created a board committee called the Capital Stock Committee to determine the terms of any material transaction between GM and Hughes and ensure fairness to all shareholders.”

(Reporting by Michael Flaherty and David Randall; Additional reporting by Nick Carey in Detroit; Editing by Dan Burns and Nick Zieminski)

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U.S. economic growth revised higher, boosted by consumer spending

WASHINGTON U.S. economic growth slowed less than previously reported in the fourth quarter as robust consumer spending provided a boost that was partially offset by the largest gain in imports in two years.

Gross domestic product increased at a 2.1 percent annualized rate instead of the previously reported 1.9 percent pace, the Commerce Department said on Thursday in its third GDP estimate for the period.

The economy grew at a 3.5 percent rate in the third quarter. Despite the upward revision to the fourth quarter, the economy grew only 1.6 percent for all of 2016, its worst performance since 2011, after expanding 2.6 percent in 2015.

There are signs that economic activity slowed further in the first quarter, with the trade deficit widening in January and both consumer and construction spending weakening.

With the labor market near full employment, the data likely understate the health of the economy – GDP also tends to be weaker in the first quarter because of calculation issues the government has acknowledged and is trying to resolve.

“Some of this softness is due to seasonal adjustment issues that will reverse later in the year,” said Gus Faucher, deputy chief economist at PNC Financial in Pittsburgh. “Consumer spending will lead growth thanks to higher incomes from more jobs and rising wages.”

The Atlanta Federal Reserve is forecasting GDP rising at a rate of 1.0 percent in the first quarter.

Though the moderate growth pace has been sufficient to lower unemployment, it is a challenge to President Donald Trump’s goal of boosting annual growth to 4 percent by slashing taxes, increasing infrastructure spending and cutting regulations.

The Trump administration has offered few details on its economic policies, but both business and consumer confidence have surged following the businessman-turned-politician’s electoral victory last November.

After last week’s failed attempt by Republicans in the U.S. House of Representatives to repeal the Obama administration’s 2010 healthcare law, economists say Trump faces a tough road ahead implementing his pro-growth agenda.

“The primary question is whether the next few years will resemble the last several years with growth of around 2 percent or whether better days lie ahead,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

The dollar .DXY was slightly stronger against a basket of currencies, while prices for U.S. Treasuries fell. U.S. stocks were trading higher. Economists polled by Reuters had expected fourth-quarter GDP would be revised up to a 2.0 percent rate.


The government also reported that corporate profits after tax with inventory valuation and capital consumption adjustments increased at an annual rate of 2.3 percent in the fourth quarter after rising at a 6.7 percent pace in the previous three months.

Profits were held back by a $4.95 billion settlement between the U.S. subsidiary of Volkswagen AG (VOWG_p.DE) and the U.S. federal and state governments for violation of environmental regulations. As a result, the economy grew at only a 1.0 percent rate when measured from the income side, braking sharply from the 5.0 percent pace of growth in the third quarter.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised up to a 3.5 percent rate in the fourth quarter. It was previously reported to have risen at a 3.0 percent rate.

Consumer spending is being supported by a tightening labor market. A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 258,000 for the week ended March 25.

Claims have now been below 300,000, a threshold associated with a healthy labor market for 108 straight weeks. That is the longest stretch since 1970, when the labor market was smaller.

Domestic demand increased at a robust 3.4 percent rate in the fourth quarter, the fastest pace in two years.

Some of the increase in demand was satiated with imports, which increased at a 9.0 percent rate. That was the biggest rise since the fourth quarter of 2014 and was an upward revision from the 8.5 percent growth pace reported last month.

Exports fell more than previously estimated, leaving a trade deficit that subtracted 1.82 percentage point from GDP growth instead of the previously reported 1.70 percentage points.

Robust domestic demand and import growth meant stronger inventory investment than previously estimated. Businesses accumulated inventories at a rate of $49.6 billion in the last quarter, instead of the $46.2 billion reported last month.

Business investment was revised lower to reflect a more modest pace of spending on intellectual property, which increased at a 1.3 percent rate instead of the previously estimated 4.5 percent pace.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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Volkswagen settles 10 U.S. state diesel claims for $157 million

WASHINGTON Volkswagen AG said on Thursday it has agreed to pay $157.45 million to settle environmental claims from 10 U.S. states over its excess diesel emissions, as the world’s largest automaker looks to move past the scandal.

The settlement covers states including New York, Connecticut, Massachusetts, Pennsylvania and Washington, as well as some consumer claims. In 2016, the German automaker reached a $603 million agreement with 44 U.S. states, but that settlement did not cover claims in Thursday’s announcement.

The settlement also requires Volkswagen to offer at least three new electric vehicles in the 10 states by 2020, including two SUVs. VW agreed in December to offer the vehicles in California in the same time frame.

In total, VW has agreed to spend up to $25 billion in the United States to address claims from owners, environmental regulators, states and dealers and to make buy-back offers.

New York Attorney General Eric Schneiderman said the state’s $32.5 million share of the settlement is the state’s largest- ever air pollution fine and “makes clear that no company – however large or powerful – is above the law.”

Massachusetts Attorney General Maura Healey said the state’s $20 million share is the largest-ever state environmental civil penalty.

The settlement is significantly less than what the states had sought when they sued VW last year.

Washington state had said in 2016 it planned to impose $176 million in penalties related to state environmental claims, while other states said they sought penalties totaling hundreds of millions of dollars. States can use settlement funds for any purpose.

Volkswagen said the deal with 10 state attorneys general “avoids further prolonged and costly litigation as Volkswagen continues to work to earn back the trust of its customers, regulators and the public.”

Earlier this month, Volkswagen pleaded guilty in U.S. District Court in Detroit to fraud, obstruction of justice and falsifying statements as part of a $4.3 billion settlement reached with the U.S. Justice Department over the diesel scandal.

Under the plea agreement, VW agreed to sweeping reforms, new audits and oversight by an independent monitor for three years after admitting to installing secret software in 580,000 U.S. vehicles. The software enabled it to beat emissions tests over a six-year period and emit up to 40 times the legally allowable level of pollution.

The September 2015 disclosure that VW intentionally cheated on emissions tests led to the ouster of its chief executive, damaged the company’s reputation and prompted massive bills in what has become the costliest automotive industry scandal in history. VW still faces an ongoing criminal investigation in Germany.

(Reporting by David Shepardson; Editing by Dan Grebler)

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Exclusive: Bullying, bonuses and a red flag that BT missed in Italy

MILAN Three employees of BT Group’s Italian unit warned their Madrid-based supervisor in November 2015 about possible accounting problems at BT Italy, one of the three said, a year before the phone company revealed financial irregularities at the division.

The source’s disclosure, on condition of anonymity because Italian prosecutors are investigating the matter, raises questions about how promptly BT began investigating an accounting scam that has cost it 530 million pounds ($670 million) and hit its share price.

BT, one of Britain’s oldest companies, said last October it had discovered “inappropriate management behavior” and “historical accounting errors” at its Italy unit, taking a 145 million pounds write-down. In January, it said in a statement it had identified improper accounting at BT Italy and expanded the write-down to a total of around 530 million pounds.

BT Chief Executive Gavin Patterson told reporters at the time that BT could not have detected the problem sooner because Italian managers kept their London bosses in the dark. BT did not say how it believed managers were involved in this deception. Reuters was unable to verify BT’s allegation.

The source told Reuters that he and two BT Italy colleagues had met the head of European sales, Jacinto Cavestany, on the sidelines of a company gathering in Munich in November 2015. The three told the sales chief that they were worried something was wrong with the unit’s financial results, though they did not provide evidence, the source said.

They also complained to Cavestany of bullying by local management, especially then BT Italy Chief Executive Gianluca Cimini, and of pressure to meet tough bonus targets, the source said. The source added that the sales chief had replied that the three should help him to steer Cimini “in the right direction”.

BT said in response to questions by Reuters that it began an internal investigation after receiving allegations in late summer 2016 of “inappropriate behavior” at BT Italy – almost a year after the Munich meeting. It did not specify the allegations or say exactly when the probe began.

Contacted by Reuters, Cavestany referred questions to BT. The company said in an email that “Jacinto has no recollection of these issues being raised with him at the conference”.

Cimini, in an email to Reuters, denied allegations of bullying. In relation to alleged financial irregularities, he said he knew of no illegal behavior and that BT Italy’s accounts were verified by head office during his time as CEO.

BT declined to say exactly when it uncovered irregularities. “BT became aware of the financial irregularities after receiving allegations of inappropriate behavior in late summer 2016. This led to us carrying out an initial investigation of the alleged conduct as we announced in October,” it told Reuters.

As a listed firm, BT is obliged to make timely disclosure of price-sensitive information. BT’s shares fell 20 percent when it made its January disclosure on improper accounting at BT Italy.

BT has publicly disclosed that it uncovered a complex set of improper sales, leasing transactions and factoring. Factoring is a way in which firms sell future income to financiers for cash.

BT also said in response to Reuters’ questions that it had received complaints of what it called bullying at BT Italy earlier in 2016. It said senior company representatives had visited the Italian business and looked into the issue.

According to a person familiar with BT’s internal investigation, the probe – codenamed Project Crane – began as an inquiry into bullying and interviewed about 40 employees. It concluded that Italian management had been responsible for “bullying and inappropriate behavior”, according to a one-page summary of the findings reviewed by Reuters. It was not clear from the summary what the “inappropriate behavior” referred to.

During or as a result of Project Crane, BT uncovered financial irregularities, current and former employees of BT said. BT then hired auditor KPMG to look at the irregularities. Neither the Project Crane report nor KPMG report has been released.

In the United States, several BT shareholders have filed class-action lawsuits alleging the group misled investors and failed to promptly disclose the financial irregularities.

In a suit filed by Rosen Law Firm on Jan. 25, a shareholder claims BT had failed to disclose improper accounting that was either known to the company or “recklessly disregarded by them” for four years until their first disclosure in October 2016.

Rosen Law Firm spokesman Noel Chandonnet said the lawsuit would show that BT lacked effective internal controls.


The source involved in the Munich meeting, as well as four current employees not involved in that meeting, also laid out for the first time certain details of how they say the deception worked.

The five sources said a network of people in the Italy unit had exaggerated revenues from certain BT-installed phone lines, faked contract renewals and invoices and invented bogus supplier transactions in order to meet bonus targets and disguise the unit’s true financial performance. All of these practices had been going on since at least 2013, they added.

Two sources familiar with the KPMG report said it had found these same types of irregularities.

For example, BT Italy earned income from toll-free hotlines provided to corporate clients. This income varied according to how much traffic a hotline carried: the busier the line, the more money a client paid to BT Italy.

According to four of the sources, client-account managers exaggerated hotline traffic by misstating them in internal records. They did this in order to meet aggressive internal targets and collect their bonuses, they added.

Clients were unaware of the deception and only paid revenues due on the actual traffic recorded, they said.

BT Italy’s purchasing office also colluded to mask the true state of the business, making fake purchase orders to suppliers with no intention of receiving goods, four sources said. Reuters was unable to determine if any of the suppliers was aware of the scheme.

No cash changed hands, but BT Italy would suddenly cancel the order and ask the supplier to issue a credit note by way of a refund, these sources said. Some bogus credit notes were then sold to a factoring company for cash, said one of the sources, a current client-account manager at BT.

One current employee said multiple internal accounting systems, a legacy of BT acquisitions in Italy, enabled staff to inflate revenues by entering two duplicate invoices for the same client. The genuine invoices were entered into one system and mailed to clients; the duplicates went into another system, according to this source.

A source familiar with the prosecutors’ investigation said the accounts of the former and current employees matched the prosecutors’ findings on the practice of faking income.

BT annual reports show it examined Italy’s risk controls in 2013 and 2014. It said in its 2014 report that the unit had made significant progress to improve its control environment.


The deception took place in an atmosphere in which employees were criticized and shouted at by a few top managers in front of colleagues for failing to meet targets, all five BT Italy sources said.

They said the pressure to hit targets rose after Cimini became the unit’s chief executive in April 2013. He was formerly its chief financial officer.

For example, the current BT Italy client-account manager said his 2016-17 goals, set early last year, require him to more than double overall revenues from his clients.

In a staff meeting in Milan, one eyewitness source said, Cimini spoke about the need to meet targets and demonstrated how no employee was indispensable. He dipped a finger into a glass of water and remarked: “What happens if I put my finger inside and take it out? Absolutely nothing – the same if you left the company.”

Cimini denied this incident took place.

“The episodes of mobbing (bullying) that were reported (to Reuters) are absolute fantasy and falsehood, but evidently the sources can invent and speak of stuff they know nothing about when they think they are protected by anonymity,” he said.

BT suspended Cimini and some other managers late last year after its internal inquiry. It did not disclose the reason for their suspensions. The five BT sources offered no evidence that Cimini knew of the deception.

Cimini said in his emailed comments to Reuters that the most recent company survey on BT Italy’s internal environment showed it was one of the best workplaces in Europe. Reuters could not verify this. BT declined to comment on employee surveys across different lines of business.

(Additional reporting by Valentina Consiglio in ROME, Paul Sandle, Simon Jessop and Kirstin Ridley in LONDON and Agnieszka Flak in MILAN; Editing by Mark Bendeich and Alessandra Galloni)

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Unions threaten to scupper Linde-Praxair merger

FRANKFURT/MUNICH Linde (LING.DE) labor representatives threatened on Thursday to scupper the German industrial gases group’s planned $65 billion merger with U.S. rival Praxair (PX.N), urging their board members to vote against the deal and enlisting Berlin’s support.

The move contradicts Linde’s characterization of talks with workers as constructive, and is a reversal of previous approval from employee representatives for the framework all-share merger-of-equals deal in return for job guarantees.

The merger would entail significant job losses in European Union countries outside Germany to achieve the promised $1 billion of synergies and would destroy the essence of Linde’s brand, Linde’s European works council wrote in a letter to Linde staff seen by Reuters.

“The European Works Council members and the workforce will therefore vigorously oppose the planned merger with Praxair,” it said. “We call upon the employee representatives in the supervisory board to stand up for Linde’s independence and to vote against the merger with Praxair.”

Matthias Machnig, state secretary in the German economy ministry, said in a statement: “Such a planned merger needs the acceptance of the labor side. This clearly does not currently exist. The economic rationale of such a project has also not been convincingly put forward, in my opinion.”

The merger is designed to create an industry leader with a combined market value of $65 billion and revenue of $29 billion that would overtake France’s Air Liquide (AIRP.PA) and reunite a global Linde group split by the First World War a century ago.

It is the second attempt by the two companies to agree a deal. Previous talks ran aground last September over where to locate key activities and who would run the business, resulting in the departure of Linde’s two top executives.

Linde’s supervisory board, half of which is made up of labor representatives, voted unanimously in favor of the intention to merge in December, in exchange for job guarantees through 2021 for Linde’s 8,000 German workers.

The company employs several thousand more people elsewhere in Europe.

But on Thursday, labor representatives said they had only agreed to an “examination with an open outcome”.

“We are against it,” said trade union IG Metall. “We think nothing of the merger.”


Linde and Praxair are racing to finalize an agreement by Linde’s annual shareholder meeting on May 10, after agreeing the non-binding term sheet in December. It would then have to be approved by the boards of both companies.

“The probability that the deal will still go through is still greater than 50 percent in our view, but has clearly decreased,” wrote Equinet analyst Knud Hinkel, who has an “accumulate” recommendation on Linde stock.

“If the deal actually collapsed, the share would suffer in the short term. In the long term, Linde could be better off without the merger.”

Linde shares were up 0.4 percent at 1107 GMT (7:07 a.m. ET), broadly in line with the German blue-chip DAX .GDAXI.

The merger plan envisions a combined holding company being headquartered in Europe, but not Germany – probably Ireland, the Netherlands or Britain. These countries do not offer workers the same rights over strategy that Germany does.

“The negotiations with Praxair are proceeding as planned,” a Linde spokesman said on Thursday. He declined to comment on labor relations.

Linde Chief Executive Aldo Belloni said earlier this month he would not push through a deal against the will of workers, but was confident of winning them over.

Linde’s supervisory board will meet next Thursday, but will not yet vote on the matter.

If the eventual vote is tied, Chairman Wolfgang Reitzle, the driving force behind the merger, will have a casting vote.

“The works council feels it is being pushed into something,” said an adviser to the labor side, who asked not to be named because his advice is confidential. “If the capital side wants it, then Reitzle will have to use his casting vote, if they’re so convinced.”

(Additional reporting by Gernot Heller in Berlin and Arno Schuetze and Alexander Huebner in Frankfurt; Editing by Mark Potter)

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German lawmaker warns U.S. exchanges against Deutsche Boerse bids

LONDON U.S. stock exchanges should not attempt to buy Deutsche Boerse (DB1Gn.DE), the German exchange whose bid to merge with its London counterpart has just collapsed, a senior German politician said on Thursday.

“Deutsche Boerse is not only a private company but it also has state responsibilities,” Thomas Schaefer, finance minister for the German state of Hesse, told reporters.

“The stock exchange authorities of Germany have to guarantee that if there is a change of owner, it has to guarantee that business has to continue uninterrupted as normal and it doesn’t matter who makes an offer,” Schaefer said.

Asked what his response would be if a U.S. exchange like ICE (ICE.N) stepped in to bid for Deutsche Boerse, Schaefer replied: “I would rather recommend colleagues in America not to attempt to do this.”

Hesse regulates the financial center in Frankfurt where Deutsche Boerse is based, and also has a veto over any merger involving the exchange.

The European Commission on Wednesday vetoed a planned tie up between Deutsche Boerse and the London Stock Exchange Group (LSE.L), saying it would have reduced competition in fixed income markets.

In 2012, Brussels also vetoed a merger between Deutsche Boerse and NYSE Euronext, the U.S. exchange which ICE later acquired.

The collapse of the latest merger effort has triggered speculation of fresh attempts at consolidation among exchanges, with Singapore Exchanges (SGXL.SI) looking at tie-ups abroad, according to media reports on Thursday.


Schaefer was in London to visit financial institutions and regulators as Frankfurt hopes to benefit from banks in London having to beef up their continental bases to continue serving clients after Brexit.

“We believe Frankfurt will grow,” Schaefer said.

However, he expects that the Brexit “cake” will be divided among several financial centers in the EU.

Insurance market Lloyd’s of London [SOLYD.UL] said on Thursday it has chosen Brussels for its European Union subsidiary because of its strong regulatory framework.

Schaefer said he believed banks would make decisions in principle over the next three to six months on where to set up new entities and relocate.

He also met with the European Banking Authority (EBA), which will have to relocate its headquarters from London, and noted that the European Commission has proposed that it is merged with the European Occupational and Pensions Authority, which is based in Frankfurt.

(Editing by Alexander Smith)

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Westinghouse set to win UK reactor approval

LONDON Toshiba’s (6502.T) Westinghouse, which filed for bankruptcy on Wednesday, is on track to win approval for its AP1000 reactor design by the end of March, Britain’s nuclear regulator said.

The approval is necessary before the reactor can be used at NuGen’s Moorside new nuclear project in north west England, which could generate around 7 percent of Britain’s electricity.

Westinghouse’s bankruptcy filing has raised questions over whether it will be able to complete capital intensive projects, although it does not affect Westinghouse’s operations in Asia, Europe, the Middle East and Africa, according to a company statement.

“We are still expecting to close out the AP1000 GDA (Generic Design Assessment) by the end of the month, according to the long-standing timeline,” a spokeswoman for Britain’s Office for Nuclear Regulation (ONR) said in an email on Thursday.

All new nuclear plants in Britain need ONR approval through its GDA process, which typically takes around four years.

Westinghouse’s AP1000 approval however, has taken much longer since assessment first began in 2007. It was paused by the ONR at the end of December 2011 while it asked for some design modifications, but was resumed in 2014.

Britain needs to invest in new infrastructure to replace aging coal and nuclear plants set to close in the next decade, but has struggled to get large projects built, especially nuclear, due to the costs involved.

EDF’s (EDF.PA) 18 billion pound ($22.5 billion) Hinkley Point C nuclear project in southwest England got the final go-ahead in 2016 after several years of delay, but only after securing backing from the French government.

NuGen, a joint venture between Toshiba and French utility Engie (ENGIE.PA) has also come under doubt since Japan’s Toshiba said last month it planned to pull out of the construction work at the British plant after posting a $6.3 billion writedown on Westinghouse, which has been hit by billions of dollars in cost overruns at new nuclear plants.

A spokesman for NuGen said it could not comment on specific financial issues relating directly to Toshiba or Westinghouse and that it will continue “business as usual” to gain the necessary permits and licenses to build the project.

Britain’s GMB trade union has called on the government to offer reassurances that the project, which it says could provide thousands of jobs, will still go ahead.

“The UK Government is committed to new nuclear,” a spokeswoman for the Department for Business, Energy and Industrial Strategy said.

“The UK is one of the most attractive countries to invest in new nuclear and we engage regularly with the developers of proposed new nuclear projects,” she said.

(Additional reporting by Nina Chestney; editing by Alexander Smith)

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Saudi Aramco formally appoints banks to advise on share sale

LONDON Saudi Aramco IPO-ARMO.SE has formally appointed JPMorgan Chase Co (JPM.N), Morgan Stanley (MS.N) and HSBC (HSBA.L) as international financial advisers for its initial public offering, sources familiar with the matter told Reuters.

The trio join Moelis Co (MC.N) and Evercore (EVR.N), which have been appointed independent financial advisers, one source said of what is expected to be the world’s biggest share sale.

The Saudi authorities aim to sell up to 5 percent of Aramco, listing the shares in Riyadh and at least one foreign exchange to raise cash for investment in new industries in a bid to diversify away from oil exports in an era of cheap crude.

Aramco has appointed Saudi Arabia’s NCB Capital 1180.SE and Samba Capital 1090.SE as local advisers, the sources said.

Reuters previously reported that JPMorgan, Morgan Stanley, Moelis and Evercore had been asked to work on the global listing, while HSBC was a leading contender to join them. Samba Capital was earlier named as one of two local advisers.

One source said all the banks had now been “onboarded”, a term indicating they had been fully briefed on the IPO process, and had been tasked with work that includes helping ensure systems on the Saudi stock exchange, the Tadawul, can be integrated with a foreign exchange.

Saudi Aramco has yet to pick a foreign site to list.

When asked for comment, Saudi Aramco said it did not respond to rumor or speculation. Officials at NCB Capital were not immediately available and other banks have previously declined to comment on their role.

(Reporting by Ron Bousso in London,; David French in New York, Davide Barbuscia in Dubai, with additional reporting by Reem Shamseddine in Khobar, Saudi Arabia; Writing by Tom Arnold; Editing by Edmund Blair)

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BlackBerry, freed of handsets, looks to software for return to glory

TORONTO Although BlackBerry Ltd (BB.TO) has extricated itself from the smartphone handsets that weighed on its recent fortunes, the Canadian firm faces a tough slog to convince skeptics it can return to its glory days through an enlarged software business.

The company, which will report fourth-quarter and full-year results on Friday, says it has no major gaps in its software portfolio, thanks to the integration of a string of recent acquisitions.

It concedes, however, that more work is needed to get those offerings into the healthcare and automotive industries and other sectors that it hopes will power future growth.

“The bottom line is: BlackBerry is a completely different beast than it was a decade ago,” said Nicholas McQuire, a workplace IT analyst at CCS Insight, a consulting firm. “However, it still needs to educate enterprises, particularly prospects in markets outside its core regulated footprint on the ‘new BlackBerry’,” he said.

Investors are unsure how to value the company, waiting for guidance from Chief Executive Officer John Chen, who needs a late bump in sales to hit the 30 percent growth in software revenue BlackBerry targeted for its recently completed fiscal year.

BlackBerry’s enterprise-value-to-forward-revenue ratio is 3.14, according to Thomson Reuters data, lower than the roughly 4.5 ratio enjoyed by Oracle Corp (ORCL.N) and Microsoft Corp (MSFT.O), two of its closest peers now that Blackberry focuses on enterprise software.

The Waterloo, Ontario-based company is expected to barely break even in the fourth quarter and likely notch revenue of less than $1.4 billion in its fiscal year ended Feb. 28, 2017, according to Thomson Reuters I/B/E/S estimates. At its peak, the smartphone pioneer was raking in more than $5.5 billion a quarter.

Blackberry’s Toronto-listed shares were trading down 0.4 percent at C$9.40, while the benchmark Canadian share index .GSPTSE was up 0.3 percent.

BlackBerry declined to comment ahead of its earnings release.

The redesigned company has gone from selling its own phones with the servers and software that manage them for businesses and governments to securing an array of rival devices and the information that flows to and from them.


It is also targeting the burgeoning but fragmented market to connect sensors and other devices and has invested in other potentially high-growth areas including cyber security consulting and autonomous vehicles. “It has pivoted in the right direction with some new and promising areas ahead of it, but these are nascent markets which will take time to materializes in its bottom line,” McQuire said.

The company’s 2015 purchases of Good Technology and WatchDox helped it secure a leading position in the enterprise mobility market, and its QNX industrial operating system is key to its self-driving vehicle ambitions. However, there is tough competition in these and other areas of interest.

“We have a no-moat rating for BlackBerry,” said Ali Mogharabi, an analyst at Morningstar. “There’s still a lot of uncertainty on how well they are going to progress in autonomous driving and other growth markets.”

The company no longer has any responsibility for making or selling smartphones bearing its brand, after setting up late last year to take a cut on sales from the likes of Chinese smartphone maker TCL Communication, which will begin selling a BlackBerry-branded phone in April.

But given TCL is going to rely on the BlackBerry name to sell the KeyOne device, which it announced at a major technology conference last month, the separation may yet prove difficult.

Chen, who took over the helm of BlackBerry in late 2013, said in December the company would likely take another four or five quarters to halt the steady decline in its overall revenue, with software sales growth projected to slow to around 15 percent in the fiscal year that began in March.

“What would help is if these guys actually standardize the type of guidance and/or the detailed information they provide on their calls,” Morningstar’s Mogharabi said. “It’s pretty tough to get a clear picture of where they are in the turnaround mode and the potential upside or downside going forward.”

(Reporting by Alastair Sharp; Editing by Denny Thomas and Paul Simao)

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