News Archive

Boeing asks for delay in duty ruling on Bombardier jet petition

Bombardier Inc (BBDb.TO) may have to wait to find out if its CSeries commercial jets will be hit by punishing U.S. duties after Boeing (BA.N) requested the U.S. Department of Commerce to postpone its preliminary ruling on its petition until Sept. 25.

In April, Boeing had asked the Commerce Department to investigate alleged subsidies and unfair pricing for Bombardier’s CSeries airplane, accusing Bombardier of having sold 75 of the planes to Delta Air Lines Inc (DAL.N) last year at a price well below cost.

The allegations were denied by Bombardier.

The Commerce Department decided to launch an investigation into Boeing’s claims in May, a decision which was opposed by the Canadian government.

The U.S. Department of Commerce and Bombardier were not immediately available for comment, while Boeing declined to comment.

(Reporting by Kanishka Singh in Bengaluru; Edited by Martina D’Couto)

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Staples in $6.9 billion sale to private equity firm Sycamore

Sycamore Partners said on Wednesday it would acquire U.S. office supplies chain Staples Inc (SPLS.O) for $6.9 billion, a rare bet by a private equity firm this year in the U.S. retail sector, which has been roiled by the popularity of internet shopping.

Buyout firms largely have refrained from attempting leveraged buyouts of U.S. retailers in the past two years, amid a wave of bankruptcies in the sector that have included Sports Authority, Rue21, Gymboree and BCBG Max Azria LLC.

Sycamore’s deal for Staples, however, which Reuters was first to report would come this week, illustrates that some buyout firms are distinguishing between mall-based fashion retailers, which are vulnerable to changing consumer tastes, from retailers with a niche and rich cash flow, such as Staples.

The acquisition also shows that Sycamore, whose buyout fund is dedicated to retail deals, is willing to take on the risk of falling store sales at Staples because of the potential it sees in Staples’ delivery unit, which supplies businesses directly.

Sycamore said it would pay $10.25 per share in cash for Staples. The shares ended trading at $9.93 on Wednesday after Reuters reported the exact deal price. Staples said the deal was expected to close by December. Shira Goodman will remain as Staples CEO.

Sycamore will be organizing Staples along three lines: its stronger delivery business, its weaker retail business and its business in Canada, two sources familiar with the deal said. This structure will give Sycamore the option to shed Staples’ retail business in the future, one of the sources said.

Framingham, Massachusetts-based Staples, which made its name selling paper, pens and other supplies, has 1,255 stores in the United States and 304 in Canada. It previously tried to merge with rival retailer Office Depot Inc (ODP.O) but the deal was thwarted by a U.S. federal judge on antitrust grounds last year.

Staples has the largest share of office supply stores in the United States at 48 percent, according to Euromonitor, and generated $889 million of adjusted free cash flow in 2016.

Sycamore has a reputation amongst private equity peers for taking bets on retail investments others might eschew. Its previous investments include regional department store operator Belk Inc, discount general merchandise retailer Dollar Express and mall and web-based specialty retailer Hot Topic.

Barclays and Morgan Stanley Co. LLC are acting as financial advisors and Wilmer Hale LLP is acting as legal advisor to Staples. BofA Merrill Lynch and Deutsche Bank Securities Inc are acting as financial advisors and Kirkland Ellis LLP is acting as legal advisor to Sycamore Partners.

UBS Investment Bank, BofA Merrill Lynch, Deutsche Bank, Credit Suisse, Royal Bank of Canada, Jefferies, Wells Fargo Bank, National Association and Fifth Third Bank are providing debt financing for the deal.

(Reporting by Lauren Hirsch in New York; Editing by Andrew Hay and Bill Trott)

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Fed gives big U.S. banks a green light for buyback, dividend plans

WASHINGTON/NEW YORK The Federal Reserve has approved plans from the 34 largest U.S. banks to use extra capital for stock buybacks, dividends and other purposes beyond being a cushion against catastrophe.

On Wednesday, the Fed said those lenders, including household names like JPMorgan Chase Co and Bank of America Corp, had passed the second, tougher part of its annual stress test. The results showed that many have not only built up adequate capital buffers, but improved risk management procedures as well.

One bank, Capital One Financial Corp, must resubmit its scheme by year-end, though the Fed is still allowing it to go forward with its capital plan in the meantime.

Fed Governor Jerome Powell, who is acting as regulatory lead for the U.S. central bank, said the process “has motivated all of the largest banks to achieve healthy capital levels and most to substantially improve their capital planning processes.”

Altogether, banks that went through the tests will be able to pay out 100 percent of their projected net income over the next four quarters, compared with 65 percent after last year’s results, a senior Fed official said. It would be the first time since the 2008 financial crisis that banks return at least as much money to shareholders as they produce in annual profit.

The verdict marks a significant victory for the banking industry, which has worked for years to regain its stature. The green light could also serve as a watershed moment for Wall Street, which is eager to get a lighter regulatory touch from policymakers in Washington.

After the Fed’s announcement, banks began to release details on how they plan to use their extra capital. Apart from Capital One, bank stocks rose in after-hours trading.

Citigroup Inc won a particularly notable victory, gaining permission to return nearly $19 billion to shareholders, or about 125 percent of projected earnings over the next four quarters – a big bump from last year, and more than analysts had expected.

Capital One must resubmit plans because it did not appropriately account for risks in “one of its most material businesses,” the Fed said. Concerns centered around internal controls and whether senior management and the bank’s board of directors would be informed about problems in a timely and appropriate way, the Fed official said.

The Fed did not identify which business was ill-prepared. Capital One’s most significant business is credit card lending. It has also built up a presence in auto lending. Both areas have been flagged by bankers and analysts as showing signs of weakness lately.

Capital One has until year-end to deliver an improved submission. In the interim, the bank can go ahead with its plan to repurchase up to $1.85 billion worth of stock, but the Fed can still object if the problems are not fixed.

Capital One had already reduced its capital request after the first set of stress-test results was released last week.

American Express Co had also resubmitted a plan with reduced requests, which was approved.

Other big banks, including Wells Fargo Co, Goldman Sachs Group Inc and Morgan Stanley, also cleared the Fed’s bar, and most issued press releases detailing big increases in shareholder payouts.

In a twist, Bank of America’s planned dividend hike could lead Warren Buffett’s Berkshire Hathaway Inc to convert a large preferred stake into common stock, which would turn it into the bank’s largest shareholder.

This year was the first time all banks undergoing stress tests passed, although it was also the first time most were excluded from the “qualitative” component that Capital One failed. Only 13 of the 34 lenders were subject to that part, which bankers have criticized as being too opaque and subjective.

In response to those complaints, the Fed has now started to give banks more specific details on why they fail or where they need to improve, even if they sail through the tests.

To offer clarity to the public, the Fed also cited examples of where unnamed banks had stumbled in the past.

For instance, one lender failed the qualitative component in a prior year because senior management had told the board of directors and the Fed that a problem related to capital planning had been solved when it had not. Another management team had relied too heavily on experiences during the financial crisis, even though the bank’s business and risk profile had changed dramatically since then.

Although all the banks passed, some came close to missing a key financial hurdle known as the supplementary leverage ratio in the toughest part of the exam. That metric fell to as low as 3.1 percent at Goldman Sachs, just above the required minimum of 3 percent. JPMorgan, Morgan Stanley and State Street Corp also reported ratios below 4 percent.

The ratio’s requirements are not fully phased in, but the minimum is slated to move even higher over time. Wall Street has slammed the capital rule as overly burdensome, and it is being watched closely for change as part of the broader deregulation push in Washington.

(Reporting by Pete Schroeder in Washington and David Henry in New York; Writing by Lauren Tara LaCapra; editing by Leslie Adler and Phil Berlowitz)

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Apple’s iPhone turns 10, bumpy start forgotten

Apple Inc’s (AAPL.O) iPhone turns 10 this week, evoking memories of a rocky start for the device that ended up doing most to start the smartphone revolution and stirring interest in where it will go from here.

Apple has sold more than 1 billion iPhones since June 29, 2007, but the first iPhone, which launched without an App Store and was restricted to the ATT Inc network (T.N), was limited compared to today’s version.

After sluggish initial sales, Apple slashed the price to spur holiday sales that year.

“The business model for year one of the iPhone was a disaster,” Tony Fadell, one of the Apple developers of the device, told Reuters in an interview on Wednesday. “We pivoted and figured it out in year two.”

The very concept of the iPhone came as a surprise to some of Apple’s suppliers a decade ago, even though Apple, led by CEO Steve Jobs, had already expanded beyond computers with the iPod.

“We still have the voicemail from Steve Jobs when he called the CEO and founder here,” said David Bairstow at Skyhook, the company that supplied location technology to early iPhones. “He thought he was being pranked by someone in the office and it took him two days to call Steve Jobs back.”

The iPhone hit its stride in 2008 when Apple introduced the App Store, which allowed developers to make and distribute their mobile applications with Apple taking a cut of any revenue.

Ten years later, services revenue is a crucial area of growth for Apple, bringing in $24.3 billion in revenue last year.


Fans and investors are now looking forward to the 10th anniversary iPhone 8, expected this fall, asking whether it will deliver enough new features to spark a new generation to turn to Apple.

That new phone may have 3-D mapping sensors, support for “augmented reality” apps that would merge virtual and real worlds, and a new display with organic LEDs, which are light and flexible, according to analysts at Bernstein Research.

A decade after launching into a market largely occupied by BlackBerry and Microsoft devices, the iPhone now competes chiefly with phones running Google’s Android software, which is distributed to Samsung Electronics (005930.KS) and other manufacturers around the world.

Even though most of the world’s smartphones now run on Android, Apple still garners most of the profit in the industry with its generally higher-priced devices.

More than 2 billion people now have smartphones, according to data from eMarketer, and Fadell, who has worked for both Apple and Alphabet, sees that as the hallmark of success.

“Being able to democratize computing and communication across the entire world is absolutely astounding to me,” Fadell said. “It warms my heart because that’s something Steve tried to do with the Apple II and the Mac, which was the computer for the rest of us. It’s finally here, 30 years later.”

(Reporting by Stephen Nellis; Editing by Peter Henderson)

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Buffett’s Berkshire on verge of becoming BofA’s top shareholder

Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) may be on the verge of becoming Bank of America Corp’s (BAC.N) largest shareholder, after the bank raised its dividend in the wake of a positive assessment of its ability to handle market stresses.

Bank of America on Wednesday boosted its annual dividend 60 percent to 48 cents per share from 30 cents, beginning in the third quarter.

Buffett has said a boost of that size would likely prompt him to swap Berkshire’s preferred shares in the second-largest bank into common shares now worth about $16.7 billion.

Berkshire did not immediately respond to requests for comment.

An exchange would made Berkshire the largest shareholder of both Bank of America and Wells Fargo Co (WFC.N), the third-largest U.S. bank, and more than triple a $5 billion investment made fewer than six years ago.

It would also signal Buffett’s confidence in Brian Moynihan, Bank of America’s chief executive.

Moynihan has worked to restore investors’ confidence in his Charlotte, North Carolina-based bank after it spent more than $70 billion since the global financial crisis to resolve legal and regulatory matters, largely from its purchases of Countrywide Financial Corp and Merrill Lynch Co.

“Buffett has said he is very happy with what Moynihan’s doing, and it’s easy work for him to get more dividends,” said Bill Smead, whose $1.16 billion Smead Value fund includes shares of both companies. “For Bank of America, it would mean a further endorsement by the most spectacular large-cap stock picker of all time.”

Buffett is worth $76.1 billion, Forbes magazine says.

The dividend increase required approval by the Federal Reserve, which conducts annual “stress tests” of big banks’ ability to handle tough economic and market conditions.

On Wednesday, the Fed approved capital plans for Bank of America, which also announced a $12 billion stock buyback plan, and 33 other large U.S. banks.


Buffett had bought $5 billion of Bank of America preferred stock with a 6 percent dividend, or $300 million annually, in August 2011, when investors worried about the bank’s capital needs.

The purchase included warrants to acquire 700 million common shares at $7.14 each, less than one-third Wednesday’s closing price of $23.88.

In his Feb. 25 letter to Berkshire shareholders, Buffett said he “would anticipate” swapping the preferred stock into common stock if the annual dividend rose above 44 cents per share.

If Omaha, Nebraska-based Berkshire made the swap now, it would have a $11.7 billion paper profit and begin collecting $336 million of annual dividends, on top of roughly $1.7 billion of dividends already paid.

A swap would also let Berkshire enjoy gains if Bank of America’s stock price rose. In contrast, the value of the preferred shares will not change so long as Bank of America does not collapse. Berkshire’s warrants expire in September 2021.

Buffett’s bet was among more than $25 billion of high-yielding investments he made from 2008 to 2011 in such companies as General Electric Co (GE.N) and Goldman Sachs Group Inc (GS.N).

The investments shored up confidence in the companies and helped give Buffett a reputation as a lender of last resort when times were tough.

Bank of America’s largest shareholder is Vanguard Group, whose 652.4 million shares give it a 6.6 percent stake, Reuters data show.

(Reporting by Jonathan Stempel in New York; Editing by Sandra Maler and Dan Grebler)

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Canada’s top court rules Google must block some results worldwide

OTTAWA Canadian courts can force internet search leader Google to remove results worldwide, the country’s top court ruled on Wednesday, drawing criticism from civil liberties groups arguing such a move sets a precedent for censorship on the internet.

In its 7-2 decision, Canada’s Supreme Court found that a court in the country can grant an injunction preventing conduct anywhere in the world when it is necessary to ensure the injunction’s effectiveness.

“The internet has no borders – its natural habitat is global,” the Supreme Court wrote in its judgment. “The only way to ensure that the interlocutory injunction attained its objective was to have it apply where Google operates – globally.”

Google, a unit of Alphabet Inc (GOOGL.O), did not immediately reply to a request for comment.

The case stems from claims by Equustek Solutions Inc, a small technology company in British Columbia that manufactures network devices, that distributor Datalink Technologies Gateways relabeled one of its products and sold it as its own online and acquired trade secrets to design and manufacture a competing product.

In 2012, Equustek asked Google to remove Datalink search results until the case against the company was resolved. While Google removed over 300 specific web pages associated with Datalink, it did so only on the Canadian version of its search engine.

The Supreme Court of British Columbia subsequently ordered Google to stop displaying search results in any country for any part of Datalink’s websites.

In its appeal before the Supreme Court of Canada, Google had argued that the global reach of the order was unnecessary and that it raised concerns over freedom of expression.

The Supreme Court rejected Google’s argument that the right to freedom of expression should have prevented the order from being issued.

“This is not an order to remove speech that, on its face, engages freedom of expression values,” the court wrote in its ruling. “We have not, to date, accepted that freedom of expression requires the facilitation of the unlawful sale of goods.”

The global reach was necessary, according to the court, because if the removed search results were restricted to Canada alone, purchasers both in and out of Canada could easily continue to find and buy from Datalink.

OpenMedia, a Canadian group campaigning for open communications, opposed the ruling.

“There is great risk that governments and commercial entities will see this ruling as justifying censorship requests that could result in perfectly legal and legitimate content disappearing off the web because of a court order in the opposite corner of the globe,” said OpenMedia spokesman David Christopher.

Google cannot appeal the Supreme Court ruling. If the company has evidence that complying with the order would force it to violate other countries’ laws, including interfering with freedom of expression, it can apply to the British Columbia court to alter the order, the Supreme Court said, noting Google has not made such an application.

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FedEx says operations at TNT Express disrupted after virus attack

Package delivery company FedEx Corp (FDX.N) said on Wednesday operations of its TNT Express unit were disrupted after being hit by an information system virus attack.

TNT Express operations and communications systems were disrupted but no data breach was known to have occurred, FedEx said in a statement.

The Netherlands-based TNT Express said on Tuesday it was experiencing interference with some of its systems, following a global ransomware attack.

Operations of all other FedEx companies were unaffected, the company said.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Saumyadeb Chakrabarty)

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Meat processor cuts deal with ABC in ‘pink slime’ defamation case

Beef Products Inc has settled a closely watched defamation lawsuit against American Broadcasting Co and its reporter Jim Avila, the meat processor said on Wednesday.

BPI had claimed that ABC, a unit of Walt Disney Co (DIS.N), and Avila defamed the company by calling its ground-beef product “pink slime” and making errors and omissions in a 2012 report.

The terms of the settlement were not disclosed. BPI attorney Dan Webb told Reuters the settlement came together “quickly this week,” but declined to provide further details, citing a confidentiality agreement signed by both parties.

BPI’s signature product, commonly mixed into ground beef, is made from beef chunks, including trimmings, and exposed to bursts of ammonium hydroxide to kill E. coli and other contaminants.

“While this has not been an easy road to travel, it was necessary to begin rectifying the harm we suffered as a result of what we believed to be biased and baseless reporting in 2012,” South Dakota-based BPI said in a statement.

“Through this process, we have again established what we all know to be true about Lean Finely Textured Beef: it is beef, and is safe, wholesome, and nutritious.”

ABC stood by its reporting, which it has said deserved protection under the U.S. Constitution’s First Amendment which guarantees freedom of religion, speech and the press.

“Throughout this case, we have maintained that our reports accurately presented the facts and views of knowledgeable people about this product,” ABC said in a statement confirming the settlement.

“Although we have concluded that continued litigation of this case is not in the company’s interests, we remain committed to the vigorous pursuit of truth and the consumer’s right to know about the products they purchase.”

The trial began earlier this month in the tiny town of Elk Point, South Dakota, and had been expected to last eight weeks.

BPI had claimed up to $1.9 billion in damages, which could have been tripled to $5.7 billion under South Dakota’s Agricultural Food Products Disparagement Act.

During its reports, ABC used the term “pink slime” more than 350 times across six different media platforms including TV and online, Webb said during opening statements on June 5.

In the aftermath of ABC’s broadcasts, BPI closed three of its four processing plants and said its revenue dropped 80 percent to $130 million. The company had around 1,300 employees before the reports. Some 700 were let go shortly after, Erik Connolly, a BPI attorney, told Reuters on Wednesday.

“If inaccurate information is being put out there by a news organization, particularly one with a powerful reach, it can cause tremendous damage,” he said. “There are real consequences to that for real people.”

Attorneys for ABC countered in opening arguments that the term was commonly used before ABC’s reports and said that BPI’s business was already suffering.

(Reporting by Timothy Mclaughlin in Chicago; Additional reporting by Jonathan Stempel in New York; Editing by Noeleen Walder and Phil Berlowitz)

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Meal-kit company Blue Apron slashes IPO valuation expectations

Blue Apron Holdings Inc (APRN.N) slashed its valuation expectations for its initial public offering by a third on Wednesday, as’s (AMZN.O) $13.7 billion deal to buy Whole Foods Market Inc (WFM.O) weighed on prospects for the meal-kit industry.

The move came after potential IPO investors pushed back against the New York-based company’s valuation expectations, expressing concerns not just about the impact of Amazon’s Whole Foods deal, but also about Blue Apron’s costly marketing strategy and lack of profitability, people familiar with the matter said.

Blue Apron is the biggest U.S. meal kit company and the first set to go public. Smaller peers and their venture capital investors were hoping it would pave the way for them to also go public or be acquired at rich valuations.

Grocery delivery startups have attracted increasing investment year-over-year since 2013, totaling $1.4 billion in funding in 2016, according to CB Insights.

“Amazon’s deal for Whole Foods earlier this month added to concerns, but Blue Apron’s high marketing costs were a negative factor. Snap Inc’s (SNAP.N) IPO earlier this year has shown investors that growth at all costs is a mistake,” said Kathleen Smith, principal of Renaissance Capital LLC, a manager of IPO-focused exchange-traded funds.

Snap went public in March and surged in its first day of trading, but shares are now just above their IPO price after declining revenue growth raised questions about whether the Snapchat app owner would ever be profitable.

Blue Apron issued new IPO pricing guidance that implied a valuation of up to $2.08 billion, below its previous $3.2 billion estimate as well as a $2.2 billion valuation in its latest private fundraising round two years ago.

Like other meal-kit companies, Blue Apron has spent heavily on marketing to compete for customers who often switch from one service to another, or cancel their subscriptions altogether.

The company spent roughly 18 percent of its $795.4 million revenue in 2016 on marketing, posting a net loss of $54.9 million. It has also faced steep costs of building out delivery infrastructure for fresh food.

While meal kits have not been a focus for Amazon, it started investing in the sector earlier this year and has launched a partnership with Martha Stewart and Marley Spoon to deliver Stewart-designed meals in New York, San Francisco, Dallas and Philadelphia.

Amazon has not specified its plans for Whole Foods stores, but industry insiders believe they could serve as distribution points for fresh food delivery. Amazon’s significant investment in automation is also likely to give it a leg-up in managing costs.

“With Amazon as their potential main competitor, this may make that long-term profit target more difficult than before the (Whole Foods) merger,” said Eric Kim, co-founder and managing partner of venture capital firm Goodwater Capital.

Among the meal kit delivery companies that were hoping to follow Blue Apron was Sun Basket, which Reuters reported earlier this year had hired banks to prepare for an IPO.

Green Chef and Home Chef are two other meal kit companies reviewing options, including a sale or fundraise, Reuters has reported.

The challenge of balancing marketing and operational costs with affordable pricing has already claimed victims in the food delivery industry. Food delivery startup Maple announced it was shutting down earlier this year, while SpoonRocket made a similar announcement last year.

Shares in the broader consumer sector have shown signs of weakness in the past month. The SP index of consumer discretionary companies .SPLRCD rose 13 percent over the first five months of 2017, but is down about 2.5 percent since its peak on June 2.


Online sales represented only $12 billion, or 2.2 percent, of the U.S. restaurant market in 2016, but are expected to grow about 22.6 percent annually between 2017 and 2020, Blue Apron has said, citing a Euromonitor study it commissioned.

During an IPO road show that launched last week, the company sought to convince investors it was well positioned to benefit from consumers’ growing interest in cooking and where their food comes from.

Following the negative investor feedback, Blue Apron said on Wednesday it expected its IPO to be priced between $10 and $11 per share, compared to its previous $15 to $17 range.

That would cut Blue Apron’s valuation from about 2.4 times estimated 2017 revenue to 1.6 times, according to Goodwater Capital. While that would represent a discount to e-commerce companies who on average command 3.1 times 2017 revenue, it would still mark a premium to grocery players, which trade at roughly 0.7 times 2017 revenue, Goodwater said.

Bessemer Venture Partners, Stripes Group and Fidelity are among Blue Apron’s investors.

The IPO was scheduled to price later on Wednesday, and Blue Apron shares were expected to begin trading on the New York Stock Exchange on Thursday under the symbol APRN.

Goldman Sachs, Morgan Stanley, Citigroup and Barclays are among the underwriters to the IPO.

(Reporting by Lauren Hirsch and Angela Moon in New York; Additional reporting By Aparajita Saxena in Bengaluru; Editing by Saumyadeb Chakrabarty and Meredith Mazzilli)

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