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Bayer wins U.S. nod for Monsanto deal to create agriculture giant

FRANKFURT/WASHINGTON (Reuters) – Bayer (BAYGn.DE) won U.S. approval for its planned takeover of Monsanto (MON.N) after agreeing to sell about $9 billion in assets, clearing a major hurdle for the $62.5 billion deal that will create by far the largest seeds and pesticides maker.

FILE PHOTO: The corporate logo of Bayer is seen at the headquarters building in Caracas, Venezuela March 1, 2016. REUTERS/Marco Bello/File Photo

Makan Delrahim, who heads the U.S. Justice Department’s (DoJ) Antitrust Division, said the asset sales agreed to by Bayer were the “largest ever divestiture ever required by the United States.”

A Bayer spokesman said the planned sale of businesses with 2.2 billion euros ($2.54 billion) in sales to BASF already agreed to address antitrust concerns, mainly in Europe, were not materially different from the DoJ’s demands.

“Receipt of the DOJ’s approval brings us close to our goal of creating a leading company in agriculture,” Bayer CEO Werner Baumann said in a statement.

After months of delays in a drawn-out review process the ruling brings Bayer close to creating an agricultural supplies giant with sales of about 20 billion euros, based on 2017 figures, when taking into account the divestments.

At current foreign exchange rates, that compares to about 12.4 billion euros at DowDuPont’s (DWDP.N) Corteva Agriscience unit, 11 billion euros at ChemChina’s Syngenta and 7.9 billion at BASF, including businesses to be acquired.

Bayer’s move to combine its crop chemicals business, the world’s second-largest after Syngenta AG SYNN.S, with Monsanto’s industry-leading seeds business, is the latest in a series of major agrochemicals tie-ups. U.S. chemicals giants Dow Chemical DOW.N and DuPont merged in September 2017 and are now in the process of splitting into three units. In other consolidation in the sector, China’s state-owned ChemChina purchased Syngenta and two huge Canadian fertilizer producers merged to form a new company, now called Nutrien (NTR.TO). Bayer committed to selling its entire cotton, canola, soybean and vegetable seeds businesses and digital farming business, as well its Liberty herbicide, which competes with Monsanto’s Roundup.

Under agreements with European and other antitrust enforcers, Bayer agreed to sell assets with revenues of 2.2 billion euros ($2.6 billion), to rival BASF (BASFn.DE) for 7.6 billion euros.

Bayer said in a statement it expected Bayer and Monsanto to begin the integration process as soon as the sales to BASF are complete, which it said are expected to take two months to complete.

If Bayer does not close the deal by June 14, Monsanto could withdraw from the takeover agreement and seek a higher price.

It has already secured the go-ahead from key jurisdictions, including the European Union, Brazil and Russia. Apart from the United States, it still needs clearance in Canada and Mexico.

In a separate statement, Bayer said on Tuesday said the European Commission had approved BASF as a suitable buyer of the businesses to be divested.

Bayer last week said synergies from folding Monsanto into its organization would be about $300 million below its previous target because it will have to sell more businesses than initially expected.

($1 = 0.8668 euros)

Additional reporting by Patricia Weiss; Editing by Mark Potter, Dan Grebler and David Evans

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Fiat Chrysler investors want electric road map in CEO’s swan song

MILAN/LONDON (Reuters) – Fiat Chrysler (FCA) (FCHA.MI) boss Sergio Marchionne is expected to outline new plans for electric and hybrid cars in a strategy presentation on Friday, aiming to ensure the world’s seventh-largest carmaker remains in the race in the absence of a merger.

FILE PHOTO: FCA CEO Sergio Marchionne addresses the media during a celebration of the production launch of the all-new 2017 Chrysler Pacifica minivan at the FCA Windsor Assembly plant in Windsor, Ontario, May 6, 2016. REUTERS/Rebecca Cook/File Photo

The 65-year-old will present FCA’s strategy to 2022, his final contribution to the company he turned around and multiplied in value through 14 years of canny dealmaking.

After failing to secure a tie-up he said was necessary to manage the costs of producing cleaner vehicles, Marchionne needs to show the group can keep churning out profits on its own, even as emissions rules tighten, SUV competition intensifies and worries around his succession abound.

Marchionne had long refused to jump on the electrification bandwagon, saying he would only do so if selling battery-powered cars could be done at a profit. He even urged customers not to buy FCA’s Fiat 500e, its only battery-powered model, because he was losing money on each sold.

But Tesla’s (TSLA.O) success and the need to comply with tougher emissions rules have forced Marchionne to commit to what he calls “most painful” spending.

“FCA is way behind rivals in terms of hybrid and electric vehicles and they need to hit the accelerator to convince investors they can close that gap,” said Andrea Pastorelli, a fund manager at 8a+ Investimenti.

Germany’s Volkswagen (VOWG_p.DE), Daimler (DAIGn.DE), BMW (BMWG.DE) and U.S. rivals GM (GM.N) and Ford (F.N) have committed to spending billions of euros each in coming years to try produce profitable cars powered by cleaner fuels.

FCA needs to present a clear roadmap, just like Volvo Cars, which ditched diesel from its best-selling XC60 SUV, launched a new electric brand and pledged to shift all brands to hybrid by 2019, a banking source close to FCA said, noting: “The tech divide determines winners and losers in the industry”.

Marchionne has already said half of the wider FCA fleet will incorporate some elements of electrification by 2022, while luxury marque Maserati will spearhead FCA’s electrification drive by making all new models due after 2019 electric.

  • Factbox: Fiat Chrysler’s track record and challenges ahead

But its plans remain vaguer and less advanced than most big rivals and some investors wonder about the capital required to make vehicles compliant, and what share of spending can go to electrification given FCA’s numerous demands.

To view a graphic onFiat Chrysler shares with Marchionne behind the wheel, click:


While Marchionne, described by Bernstein analyst Max Warburton as “God’s personal gift to auto sector investors”, has an impressive track record of creating shareholder value through spin-offs, he has been less successful at delivering a string of ambitious turnaround plans.

Profitability in Europe is only gradually recovering, FCA has yet to make any significant inroads in China and Alfa Romeo – which along with Jeep and Maserati was the focus of the last strategy launched in 2014 – has yet to turn a profit.

The market ridiculed Marchionne’s forecast for eight new Alfa Romeos and 400,000 annual sales by 2018. Only two models have hit the road so far as focus shifted to fixing FCA’s finances.

But investors take reassurance from what Marchionne achieved in North America, which now makes three-fourths of profits.

FCA retooled some U.S. plants to boost output of lucrative SUVs and trucks, while ending production of unprofitable sedans.

The move got FCA close to erasing the margin gap with its larger U.S. rivals and set it on course to erase debt this year.

Marchionne has set in motion a similar shift in Europe, where Italian plants are being revamped to produce Alfas, Jeeps and Maseratis, while output of some Fiats is being shifted to lower-cost locations elsewhere or discontinued.

This should boost profitability and prevent layoffs that would have been difficult to justify in Italy particularly with populist political parties in the driving seat.

Marchionne multiplied Fiat’s value 11 times since he took charge in June 2004, including by spinning off tractor firm CNH Industrial (CNHI.MI) and supercar brand Ferrari (RACE.MI).

The pending spin-off of parts maker Magneti Marelli will further up the figure, raising expectations of more deals to come.

Marchionne has ruled out separating the Jeep brand, saying he had to worry “about the stump that’s left behind”. He also poured cold water on the idea of a Maserati or Alfa spin-off, saying the two needed to become self-sustainable first.

But the doubling in FCA’s stock in the last 12 months suggests many still bet on Marchionne doing a final major rejig before he hands over to an internal successor next year.

“Partnerships, a merger, spin-offs and other value accretive deals make up more than 40 percent of the FCA investment case,” said Michele Pedroni, a fund manager at Decalia Asset Management.

FCA declined comment on Friday’s presentation.

Additional reporting by Joe White in Detroit; Editing by David Holmes

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Petropavlovsk challengers call for end to rancour

Roderic Lyne, Robert Jenkins and Pavel Maslovskiy have put themselves forward as directors in a requisition backed by two anonymous shareholders, CABS Platform Ltd and Slevin Ltd, which hold a combined 9.1% of Petropavlovsk. 

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Exclusive: Mexico central bank ready for election, could support peso-Diaz de Leon

MEXICO CITY (Reuters) – Mexico’s central bank is prepared for different scenarios resulting from the country’s July 1 presidential vote, central bank chief Alejandro Diaz de Leon said late on Monday, adding that policymakers could act to support the peso if liquidity dries up.

FILE PHOTO: Mexico’s central Bank Governor Alejandro Diaz de Leon Carrillo speaks during an interview with Reuters on the sidelines of the Mexican Banking Association’s annual convention in Acapulco, Mexico March 9, 2018. REUTERS/Henry Romero

Diaz de Leon said in an interview with Reuters that it was not the central bank’s place to comment on candidates’ economic policies, but added that policymakers are “attentive and prepared for different scenarios.”

Leftist Andres Manuel Lopez Obrador, whose campaign has focused on promises to tackle poverty and corruption, holds a wide lead in recent polls over second placed Ricardo Anaya, from a right-left coalition, and the trailing ruling party’s candidate Jose Antonio Meade.

Lopez Obrador has said he will respect the central bank’s independence and that he will not jack up government debt to pay for social spending, relying instead on fighting waste from corruption. His rivals contend he could implement policies that put Mexico’s economic stability at risk.

“I would not like to talk about a particular scenario, there may be many scenarios,” Diaz de Leon said when asked how the bank could react to expansionary fiscal policies.

He said the central bank would keep working toward its main goal of “low and stable” inflation, whoever wins in July.

“We will be very clear in our approach to our goal,” he said. “We will try to be very constructive but very clear and very prudent in how to use instruments and, in particular, monetary policy in order to reach our target.”

Mexico’s peso has lost more than 8 percent against the dollar since mid-April, a move that Diaz de Leon said was mostly due to the broad rally in the greenback that has hit other emerging market currencies as well.

But he said the peso faced further risks from uncertainty about the election and Mexico’s talks with the United States and Canada to preserve and update the North American Free Trade Agreement.

A Reuters poll last week showed analysts were divided on whether the central bank could raise interest rates or step up intervention if the peso keeps weakening.

Diaz de Leon said the country’s foreign exchange commission, which sets intervention policies and is made up of central bank and finance ministry officials, would consider taking action if there were signs of “very thin” liquidity in markets.

“So far this year, the market has been liquid, it has been deep and that helps us to have the peace of mind that the price may go up or down, but it is reflecting market conditions,” he said. “To the extent that there may be episodes in which liquidity is compromised and the market is very thin, at that moment the foreign exchange commission may review that situation,” he said.

After the election of U.S. President Donald Trump hammered the peso, the central bank launched a $20-billion hedge program to help stabilize the currency. But, so far, the bank has only auctioned $5.5 billion of the peso derivatives. 

Diaz de Leon said the central bank needs a “prudent” monetary policy even with a drop in inflation this year due to the risks of a deeper peso slump.

Inflation has fallen from a 16-1/2 year high close to 6.8 percent at the end of last year to below a 4.8 percent rate forecast by the central bank for the second quarter.

“There is uncertainty about what can happen and it has been important to have a prudent, cautious monetary stance that contributes, in the first place, to inflation returning to its three percent target – and it is doing that – and, secondly, that there is an orderly adjustment in the markets,” he said.

On May 17, Mexico’s central bank held its benchmark interest rate steady at a nine-year high of 7.50 percent for the second meeting in a row. It signaled that signs the peso was driving up inflation could justify more hikes.

The market is divided over the central bank’s next move. Nine economists surveyed last week by Banamex expect a hike in June, two more see a hike in the months after the election, while 10 others think the bank is done raising borrowing costs and will begin to cut later this year or in the first half of 2019.

Reporting by Michael O’Boyle and Ana Isabel Martinez; Editing by Frank Jack Daniel and Nick Zieminski

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Exclusive: Mexico’s Diaz de Leon says peso risks require prudent policy

MEXICO CITY (Reuters) – Mexico’s central bank needs to stick to a prudent monetary policy for now, even with a recent drop in inflation, due to the risks of a deeper peso slump, Central Bank Governor Alejandro Diaz de Leon said late Monday.

FILE PHOTO: Mexico’s central Bank Governor Alejandro Diaz de Leon Carrillo speaks during an interview with Reuters on the sidelines of the Mexican Banking Association’s annual convention in Acapulco, Mexico March 9, 2018. REUTERS/Henry Romero

Diaz de Leon told Reuters the peso faced risks from broad dollar strength, as well as uncertainty over Mexico’s trade talks with the United States and the outcome of the July 1 presidential vote in Latin America’s second biggest economy.

“There is uncertainty about what can happen and it has been important to have a prudent, cautious monetary stance that contributes, in the first place, to inflation returning to its three percent target – and it is doing that – and, secondly, that there is an orderly adjustment in the markets,” he said.

Diaz de Leon said policymakers would consider taking action to support the peso if there were signs that liquidity “was compromised,” but he said so far this year the peso’s losses had occurred in “deep” markets.

Reporting by Michael O’Boyle and Ana Isabel Martinez; Editing by Nick Zieminski

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U.S. to continue trade actions against China: White House

WASHINGTON (Reuters) – The United States said on Tuesday that it will continue pursuing action on trade with China, days after Washington and Beijing announced a tentative solution to their dispute and suggested that tensions had cooled.

FILE PHOTO: Containers are seen at the Yangshan Deep Water Port in Shanghai, China April 24, 2018. REUTERS/Aly Song/File Photo

By June 15, Washington will release a list of some $50 billion worth of Chinese goods that will be subject to a 25 percent tariff, the White House said in a statement. The United States will also continue to pursue litigation against China at the World Trade Organization.

  • China surprised at White House trade statement -ministry

In addition, by the end of June, the United States will announce investment restrictions and “enhanced export controls” for Chinese individuals and entities “related to the acquisition of industrially significant technology,” it said.

In mid-May, China agreed to increase purchases of U.S. agriculture and energy products, and last week, the U.S. Commerce Department told lawmakers it had reached a deal to put Chinese telecommunications firm ZTE Corp (0763.HK) (000063.SZ) back in business.

While the announcements eased worries about the possibility of a trade war between world’s two largest economies, U.S. President Donald Trump also said last week that any deal between Washington and Beijing would need “a different structure,” fueling uncertainty over the talks.

Trump has threatened to impose tariffs on up to $150 billion of Chinese goods to combat what he has labeled unfair trade practices on the part of Beijing. Meanwhile, China has warned of equal retaliation, including duties on some of its most significant U.S. imports, like aircraft, soybeans and vehicles.

Reporting by Makini Brice; Editing by Doina Chiacu and Andrea Ricci

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U.S. consumer confidence rebounds, house prices increase

WASHINGTON (Reuters) – Consumer confidence rebounded in May, but households were a bit pessimistic about their short-term income prospects even as they expected strong job growth to persist, which could restrain consumer spending.

FILE PHOTO: A shopper makes a purchase at the J.C. Penney department store in North Riverside, Illinois, U.S., November 17, 2017. REUTERS/Kamil Krzaczynski/File Photo

The Conference Board said on Tuesday its consumer confidence index rose 2.4 points to a reading of 128.0 this month from a downwardly revised 125.6 in April. The index was previously reported at 128.7 in April.

“If consumers don’t step up their spending … then the growth outlook this year may disappoint on the weak side,” said Chris Rupkey chief economist at MUFG in New York.

U.S. financial markets were little moved by the data amid a deepening political crisis in Italy. The dollar rose to a 10-month high against the euro, while U.S. Treasury yields fell. Stocks on Wall Street dropped, with the SP 500 and Dow Jones Industrial Average touching near three-week lows.

The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, increased to 26.6 in May, the best reading since May 2001, from 22.7 in April.

That measure, which closely correlates to the unemployment rate in the Labor Department’s employment report, suggests that labor market slack continues to shrink.

But consumers were less upbeat about their short-term income prospects. The share of consumers expecting an improvement in their income fell to 21.3 percent this month from 21.8 percent in April. The proportion expecting a decrease rose to 8.2 percent in May from 7.9 percent in the prior month.


The weak income readings are despite massive tax cuts which the Trump administration claimed would boost paychecks for American workers. The $1.5 trillion tax cut package came into effect in January.

Consumers also showed a reluctance to commit to purchases of big-ticket items this month, with intentions to buy automobiles, houses and appliances declining. Consumer spending braked sharply in the first quarter and there are signs that it picked up early in the April-June period.

A separate report on Tuesday showed the SP CoreLogic Case-Shiller composite index of home prices in 20 metropolitan areas increased 0.5 percent in March after rising 0.8 percent in February. House prices gained 6.8 percent in the 12 months to March after rising by the same margin in February.

The solid gains are at odds with recent data which had suggested a cooling in house prices. The Federal Housing Finance Agency reported last week that house prices edged up 0.1 percent in March from February.

The regulator’s index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae or Freddie Mac.

“While the weakness in the FHFA house price data raised some concerns that the trend in house price appreciation had started to shift lower, so far, the Case-Shiller data do not support that view,” said Daniel Silver, an economist at JPMorgan in New York.

The house price inflation is being fueled by an acute shortage of homes available for sale, which is hurting the housing market.

Reporting By Lucia Mutikani; Editing by Andrea Ricci

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Wall Street tumbles on concerns over Italy’s political turmoil

(Reuters) – U.S. stock indexes slumped on Tuesday led by bank stocks, as a deepening political crisis in Italy triggered a rush to safe-haven assets.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S. May 22, 2018. REUTERS/Brendan Mcdermid

The blue-chip index fell below its 50-day moving average, a key technical level that represents short-term momentum, for the first time since May 9, while the SP 500 is only a few points away from breaching that level.

Dow Jones Industrial Average fell 428.83 points, or 1.73 percent, to 24,324.26, the SP 500 lost 37.3 points, or 1.37 percent, to 2,684.03 and the Nasdaq Composite dropped 61.40 points, or 0.83 percent, to 7,372.45.

Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur

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Starbucks shuts 8,000 stores for anti-bias training

(Reuters) – Starbucks Corp (SBUX.O) appealed to customers for forgiveness in a row over racial profiling on Tuesday, saying its behavior toward two black American customers last month had been reprehensible as it closed 8,000 stores for anti-bias training.

The company has settled privately with the two men after the incident in a Philadelphia store on April 12 and will try to draw a line under the row with a day of workshops in traditionally slow afternoon hours which Wall Street analysts say will only cost it $5-$7 million in lost business.

Starbucks executive chairman Howard Schultz, the architect of its move into a cafe format in the late 1980s, said in an open letter that the decision to call police and their subsequent arrests “were reprehensible and did not represent the company’s mission and enduring values”.

“We determined that insufficient support and training, a company policy that defined customers as paying patrons—versus anyone who enters a store—and bias led to the decision to call the police,” he said.

Analysts say Starbucks can ill afford the bad publicity at a time of growing competition in a coffee industry which has seen a number of rivals bought out or merged.

British sandwich and coffee shop chain Pret A Manger was sold for $2 billion on Tuesday in the latest move by Germany’s billionaire Reimann family to challenge Nestle (NESN.S) in the coffee sector.

A woman walks through Center City clutching a hot Starbucks beverage, before more than 8,000 stores nationwide will close this afternoon for anti-bias training, in Philadelphia, Pennsylvania U.S., May 29, 2018. REUTERS/Mark Makela

Starbucks signed a $7 billion licensing deal with Nestle earlier this month that banks on the power of its brand in the United States to strengthen the Swiss company’s leading position globally.

Starbucks is closing 8,000 company-owned U.S. stores at around 2 pm local time on Tuesday as a first step in training 175,000 employees on racial tolerance. Some 6,000 licensed Starbucks cafes will remain open in locations such as grocery stores and airports, and those employees will be trained at a later time.

The arrests sparked protests and accusations of racial profiling at the coffee chain known for its liberal stances on social issues such as same-sex marriage.

Black leaders who are advising Starbucks Corp (SBUX.O) on the training hope it will reinvigorate decades-old efforts to ensure minorities get equal treatment in restaurants and stores, setting an example for other corporations.

“The incident has prompted us to reflect more deeply on all forms of bias, the role of our stores in communities and our responsibility to ensure that nothing like this happens again at Starbucks,” Schultz said.

Reporting by Aishwarya Venugopal in Bengaluru; editing by Patrick Graham

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