Regulator approves Cap One: HSBC deal

Fri Mar 9, 2012 6:32pm EST
(Reuters) – Bank regulators approved Capital One Financials acquisition of HSBC’s $30 billion U.S. credit card business, the Office of the Comptroller of the Currency announced on Friday.

McLean, Virginia-based Capital One has been expanding through acquisitions recently and received approval from the Federal Reserve last month to acquire ING Groep NV’s U.S. online banking unit in a $8.9 billion deal.

Capital One in August announced its plan to acquire HSBC’s U.S. credit card portfolio in a $2.6 billion deal.

Consumer groups have been critical of Capital One’s growth plans arguing that it has a spotty record in how it treats low-income customers and that the acquisitions will create another “too big to fail” bank.

Capital One has defended its record and highlighted the benefits the acquisitions will bring to new and existing customers.

Both the Fed and the OCC, which regulates national banks, extended initial comment periods on the deals in response to consumer advocates’ requests to solicit more feedback.

Capital One shares ended the day up 0.8 percent to $49.82.

(Reporting By Dave Clarke; Editing by Tim Dobbyn)

full story

Wall Street workforce up in 2011, despite layoff fears: report

Thu Mar 8, 2012 7:46pm EST
(Reuters) – Wall Street companies hired an extra 4,900 workers from January 2011 to January 2012, the New York Department of Labor said on Thursday in revised data that countered expectations of job losses in the securities industry.

The gain was one of the most surprising findings in the annual revisions to New York City’s unemployment data, according to James Brown, a market analyst with the Department of Labor.

Officials had feared Wall St. would lose jobs after profit-hit banks and brokerages announced thousands of layoffs.

The data did not indicate whether those layoffs never happened or whether banks simply hired more staff than they fired.

In January, Wall Street hired 600 workers, bringing its total workforce to 171,300 employees, according to the Labor Department.

This sector galvanizes the economies of New York City and New York state as it drives a host of other service companies to hire workers, from accounting firms to restaurants.

Nor was that the only unexpected finding. The benchmark revisions also increased the 2011 annual average employment in the city’s private sector by 43,800 positions, a 1.4 percent increase.

“It’s a significantly stronger upward revision; all indications are that we are doing a lot better than we thought,” said Labor Department Market Analyst James Brown by telephone.

Still, he noted the city’s pre-recession unemployment rate hovered around 4 percent to 4.5 percent — about half the latest rate — which suggests the recovery is far from complete.

The overall financial sector, which includes banks and insurance, hired 7,800 people from January 2011 to January 2012, bringing its payroll to a total of 440,600.

“New York City added private sector jobs at a rate almost 60 percent greater than the country as a whole in 2011, and over the last two years, New York City created more jobs than the next 10 largest cities combined,” Mayor Michael Bloomberg said in a statement.

New York state’s economy also performed better than first reported, according to the benchmark revisions. “As of December 2011, the state had recouped 76 percent of the private sector jobs lost in the 2008-2009 recession,” the Labor Department said in a statement.

Still, the state’s unemployment rate rose a tenth of a percentage point to 8.3 percent in January from a year earlier. New York City’s jobless rate rose fourth-tenths of a percentage point to 9.3 percent over the same time.

(Reporting By Joan Gralla; Editing by Andrew Hay)

full story

Mega-deals possible, but not a priority: Nasdaq

By John McCrank
NEW YORK | Wed Mar 7, 2012 5:28pm EST
(Reuters) – Nasdaq OMX Group (NDAQ.O) said on Wednesday that while it does not believe mega-deals among global exchanges are dead, it is likely to keep its focus on small and mid-sized acquisitions.

In the past year, a number of large exchange takeovers have been stopped by regulators, including an $11 billion bid by Nasdaq, along with IntercontinentalExchange Inc (ICE.N), for NYSE Euronext (NYX.N).

“We don’t believe that mega-consolidation is dead,” Lee Shavel, chief financial officer of Nasdaq, said at the Citi 2012 Financial Services Conference.

But due to the regulatory environment, along with uncertainty from an economic and from a markets perspective, Nasdaq, which runs U.S. and Nordic markets, will not likely pursue any large deals in the near-term, he said.

“It’s something that we monitor, we look at, but our primary focus and the most likely M&A activity that you’ll see from us are going to be for small and mid-sized bolt-on acquisitions that we know we can integrate into the business and generate good returns from,” he said.

A number of firms have recently submitted bids for the London Metals Exchange, the world’s biggest marketplace for industrial metals, which analysts and industry sources have valued at 500 million to 1.5 billion pounds ($800 million-$2.4 billion).

The bidders include CME Group Inc, along with ICE, Hong Kong Exchanges and Clearing Ltd, and NYSE Euronext, sources have said.

Shavel did not comment on LME specifically.

(Reporting By John McCrank; Editing by Bernard Orr)

full story

Japan watchdog files criminal complaint against Olympus

By Noriyuki Hirata
TOKYO | Tue Mar 6, 2012 8:49pm EST
(Reuters) – Japan’s securities watchdog became the latest authority to file a criminal complaint against Olympus Corp (7733.T), some former executives and outside advisers over the company’s $1.7 billion accounting fraud.

The Securities Exchange and Surveillance Commission (SESC) said on Tuesday it had requested criminal charges be filed by public prosecutors against individuals involved in dubious mergers and acquisitions used to hide losses in one of Japan’s biggest corporate scandals.

The complaint against Olympus is for filing false financial statements for the financial years ending March 2007 and March 2008. Last December, the company filed five years worth of corrected earnings statements to account for the scandal.

Former prosecutor, now lawyer, Shin Ushijima said the fact that the SESC had filed the complaint probably meant that prosecutors had already agreed to prosecute.

“Most likely the company will accept the charge, because the company’s main purpose is to recover as quick as possible, so they want to avoid any unnecessary conflict,” he said.

Kyodo news reported last month that the SESC and Tokyo prosecutors had apparently determined they could make a case against the company.

The SESC named former Chairman Tsuyoshi Kikukawa, former executive Vice President Hisashi Mori and former auditor Hideo Yamada in the complaint, plus former bankers for the company Akio Nakagawa and Nobumasa Yokoo.

It will also recommend the Financial Services Agency, a government agency overseeing banking, securities and insurance, fine the company more than 100 million yen ($1.2 million) for false accounting, the Nikkei newspaper reported.

Tokyo prosecutors and the metropolitan police arrested these executives and bankers last month following their own investigations for hiding huge investment losses through complex takeover deals. They may be rearrested as soon as Wednesday to face further questioning about the scandal, the Nikkei said.

Under the criminal charges, Olympus executives could face up to 10 years in prison, or a fine of up to 10 million yen, lawyers have said. The company could face a fine of up to 700 million yen, Kyodo has reported.

Olympus itself is suing for mismanagement five of its eight internal directors, including the current president, Shuichi Takayama.

The latest charges would not affect the company’s current listing status, the Tokyo Stock Exchange said. In January, the exchange said Olympus could keep its listing but that it would be placed on a “security on alert” list of firms seen needing to urgently improve their internal management.

The maker of cameras and medical equipment has proposed a new board of directors as it tries to recover from the scandal, subject to approval at a shareholders’ meeting next month.

The losses were exposed in October by Michael Woodford, who was sacked as chief executive by the Olympus board after querying the M&A deals.

Since then, Olympus has admitted it used improper accounting to conceal massive investment losses under a scheme that began in the 1990s. The firm is under investigation by law enforcement agencies in Japan, Britain and the United States.

The restated accounts showed that net assets at the end of December had dwindled to 44 billion yen ($540 million) from a restated 225 billion yen in March 2007.

Last week, Olympus proposed a new board of directors for shareholder approval at a meeting on April 14. However, the line up fell short of demands from major foreign shareholders for fresh outside talent in key positions.

Olympus’ share price fell as much as 83 percent after Woodford was sacked. It was trading on Wednesday at 1,295 yen per share, down 48 percent since the Briton lost his job.

“We take the commission’s decision seriously and will continue our efforts to strengthen our corporate governance system,” Olympus said in a statement referring to the SESC’s complaints. ($1 = 81.41 yen)

(Additional reporting by James Topham and Chris Gallagher; Editing by Edwina Gibbs and Neil Fullick)

full story

GM to pay 320 million euros for Peugeot stake

(Reuters) – General Motors Co (GM.N) will pay 320 million euros ($423 million) for its 7 percent stake in French automaker Peugeot SA (PEUP.PA) as part of an alliance designed to save the companies at least $2 billion.

GM and Peugeot (PSA) will develop at least four vehicles together by 2016, GM said in a regulatory filing with the U.S. Securities and Exchange Commission on Monday. The term of the pact is 10 years.

The companies said last week that they would form an alliance to pool purchasing, research and development, and to build vehicles on shared platforms to lower costs.

The alliance can end early if one of GM’s competitors buys 10 percent or more of Peugeot stock, either directly or indirectly, GM said in the filing.

The deal can end if the Peugeot family’s stake falls below 15 percent and a competitor comes to own 5 percent or more of PSA. The alliance can also end if another automaker buys 3 percent of PSA through a deal with PSA or the Peugeot family.

GM and Peugeot will continue to separately market and sell their vehicles.

GM is banking on the deal to help it reverse 12 years of losses in Europe, mainly on its Opel brand. Peugeot, which relies heavily on the European market, hopes to increase sales in other markets.

(Reporting By Deepa Seetharaman)

full story

Tepco seeks $6.38 billion loan: report

Wed Feb 15, 2012 1:53pm EST
(Reuters) – Tokyo Electric Power Co (9501.T) and a government-run nuclear compensation fund have requested the utility’s lenders to provide 500 billion yen ($6.38 billion) in new financing in two stages as part of a loan package worth 1.07 trillion yen.

Last week, Tepco and the fund supporting it asked lenders for about 1 trillion yen in additional financing.

Tepco and the Nuclear Damage Liability Facilitation Fund want 200 billion yen this July and 300 billion yen in December 2013.

They have asked the Development Bank of Japan DBJPN.UL to supply 150 billion yen in July and at the end of 2013.

The total sum is 50 billion yen-plus for Sumitomo Mitsui Banking Corp (8316.T), and about 28 billion yen for Mizuho Corporate Bank (8411.T).

Bank of Tokyo-Mitsubishi UFJ (8306.T) has been hit up for more than 20 billion yen.

Major life insurers — including Nippon Life Insurance Co and Dai-ichi Life Insurance Co (8750.T) — as well as Sumitomo Mitsui Trust Holdings Inc (8309.T) and other trust banks, have been asked to cough up around 100 billion yen combined.

The lending package also includes 170 billion yen in refinancing and a 400 billion yen credit line that Tepco can tap from April 2015. ($1 = 78.3350 Japanese yen) (Reporting by Shounak Dasgupta in Bangalore)

full story

Chesapeake targets new asset, debt sales

Mon Feb 13, 2012 12:35pm EST
(Reuters) – Chesapeake Energy Corp (CHK.N) said it will sell $10 billion to $12 billion in assets as decade-low natural gas prices force the company to raise cash to cover a shortfall.

The second-largest U.S. natural gas producer has a strategy to increase output from more profitable wells that produce crude oil and natural gas that is rich in liquid content.

Despite those efforts, the Oklahoma City, Oklahoma, company faces a funding gap in the billions for next year and it needed to cobble together a series of deals to raise cash.

Chesapeake said it expects the sales or joint ventures for its West Texas Permian Basin assets and Mississippi Lime acreage in northern Oklahoma to yield $6 billion to $8 billion this year. The company expects those deals to close by the end of the third quarter.

It also plans to raise $2 billion by selling a “volumetric production payment,” in which it receives funds for oil and gas it has not yet produced, from its Granite Wash assets in the Texas Panhandle and from another the sale of preferred shares centered on acreage in two counties in Oklahoma.

For example, Chesapeake is selling four field pipeline networks in west Texas as well as natural gas production and reserves in the Barnett and Woodford shales along with 37,800 acres in Texas Wolfbone field on the border with New Mexico, according to a prospectus on the deals.

Investors initially welcomed the announcement. Shares of Chesapeake rose more than 5 percent in early trading, before falling back somewhat.

Chesapeake may find it difficult to get the prices it wants for the assets because of low prices for natural gas, which are hovering near $2.50 per million British thermal units, Brean Murray, Carret & Coone analyst Raymond Deacon said.

The low natural gas prices are also putting pressure on the company’s cash flow.

Analysts have said anticipated cash flows of about $5 billion in 2012 are likely to fall far short of Chesapeake’s spending needs of around $12 billion.

Chesapeake shares had slumped nearly 40 percent since their peak in August through last week, hurt by the weak gas prices. The company has promised to trim its debt to $9.5 billion by the end of the year from nearly $14.5 billion at the end of the third quarter.

Last week, Chesapeake said it had cut its gas output by 500 million cubic feet per day and was considering pulling production down by double that amount, a move that could help reduce spending.

Included in the expected deals are sales or joint ventures for the company’s West Texas Permian Basin assets and Mississippi Lime acreage in northern Oklahoma, which will yield $6 billion to $8 billion.

Chesapeake’s plans to raise funds with a volumetric production payment from its Granite Wash assets in the Texas Panhandle and from another sale of preferred shares centered on acreage in two counties in Oklahoma raised some concerns.

Volumetric production payments are viewed as debt by some analysts and ratings agencies, and preferred shares are sometimes viewed as expensive debt because the company is obligated to pay a dividend.

“In short, we believe today’s announced plans correspond to adding $3 billion in debt – $1 billion of on-balance sheet debt (senior notes) along with $2 billion of off-balance sheet liabilities (VPP and LLC structures), Bernstein Research analyst Bob Brackett said in a note to clients.

We believe many things need to go right for the company to achieve the proposed $10 billion-$12 billion in asset monetizations, and note the company is largely selling liquid assets to pay for its current cash-flow shortfalls, the analyst said.

The Permian Basin in Texas, which Chesapeake may sell, is experiencing a rebirth of sorts as operators use hydraulic fracturing and horizontal drilling to pry oil and natural gas liquids from rocks.

The company expects the sale of some “midstream” pipeline and storage assets, service company operations and other investments to bring in another $2 billion.

It will also issue $1 billion in bonds with a maturity in 2019 to help cover short-term debt obligations and for general corporate purposes.

Chesapeake shares were up almost 2 percent at $22.54 in midday trading on the New York Stock Exchange after rising as high as $23.32 earlier in the session.

(Reporting by Matt Daily in New York and Swetha Gopinath in Bangalore; Editing by Maureen Bavdek, Lisa Von Ahn and Gunna Dickson)

full story

Deal talk: Roche, Glencore spark hope of European M&A revival

By Victoria Howley
LONDON | Fri Feb 10, 2012 7:17am EST
(Reuters) – Bankers are dusting off pitches for long-expected deals as a flurry of company bids worth over $50 billion in the last few weeks sparks hope that Europe’s depressed M&A market is on the verge of a fragile resurgence.

Dealmakers point to Roche’s (ROG.VX) $5.7 billion hostile offer for Illumina (ILMN.O), ABB’s (ABBN.VX) $3.9 billion bid for Thomas Betts (TNB.N) and Glencore’s (GLEN.L) mammoth $41 billion approach for Xstrata (XTA.L) as potential green shoots.

“We are seeing classic early indicators of a recovery in M&A – industry leaders taking action, hostile activity and cash deals,” said Gregg Lemkau, head of European and Asian M&A at Goldman Sachs (GS.N).

“Strategic conversations with companies have picked up. If we can build on this momentum, it should give others more confidence to transact,” Lemkau said.

Even including Glencore, the European, Middle Eastern and African mergers and acquisitions market is worth just $77 billion so far this year, according to Thomson Reuters data, about a third of its value in the full first quarter of 2011.

M&A is a lucrative business for investment banks because it does not require capital behind it and fees are often shared between fewer banks than capital markets mandates like initial public offerings.

Glencore’s two advisers, Citigroup and Morgan Stanley, are set to share $50 million to $70 million in fees in the event of a successful deal, based on estimates from Thomson Reuters and Freeman Consulting.

The recent awakening of debt markets and a mini-rally in equities could inject life into a sluggish market that endured its slowest January for nine years, provided debt-laden Greece does not get in the way.

“Investor appetite towards risk is better, but most people are still wary about what is happening around Greece,” said Giuseppe Monarchi, co-head of M&A for Europe, the Middle East and Africa at Credit Suisse.

“A default would be a major setback for the market.”

Greece this week pushed through more wage and budget cuts, but euro-zone ministers demanded further steps and parliamentary approval before providing aid to keep the country afloat.

Long-awaited industry consolidation and companies that have excess cash to put to work are most likely to feature in deals that could emerge in the next few years if the M&A market really starts to build towards its next peak.

Glencore Xstrata, which would have a combined market capitalization of over $80 billion if its deal goes through, is almost certain to look at rival miner Anglo American (AAL.L) in the intermediate term, dealmakers said.

Xstrata tried to buy Anglo in 2009, preceded a few years earlier by an attempt from Brazil’s Vale (VALE5.SA) (VALE.N).

Bankers in the consumer sector have started to talk about a combination of AB InBev (ABI.BR), the world’s largest brewer, and global peer SABMiller (SAB.L) as a case of “when, not if.”

In a global brewing industry marked by huge consolidation over the last decade, bankers are praying for one final $80 billion plus deal between the two giants.

In the pharmaceutical sector, an acquisition of perennial target Shire could result in a deal worth tens of billions of dollars, and in telecoms western European markets like Spain and Germany are ripe for consolidation.

One banker that advises telecom companies described a merger between Telefonica’s (TEF.MC) 02 and KPN’s (KPN.AS) e-plus in Germany as one of the sectors “old chestnuts.” KPN said last month there were currently no talks about this.

HEALTHY DEBT MARKETS

The European Central Bank’s longer-term refinancing operation (LTRO) has improved European banks’ liquidity and ability to lend, setting up loan and bond markets as more accommodating for M&A.

“I am more encouraged than I was at the end of 2011, I thought it would be a bleak first quarter, but it’s not turned out that way,” a senior loan banker said.

Loan bankers are waiting for syndication of ABB’s $4 billion bridge facility for the purchase of U.S.-based Thomas & Betts because it is expected to set a new benchmark.

“There has been little to test it so far, but in the corporate loan market there’s a feeling that banks are willing to do deals, classic corporate M&A deals with big bond bridges,” the senior loan banker said.

The European high-yield bond market has shown signs of life in the last few weeks, an important source of funding for private equity dealmaking.

“There is no doubt that the European high-yield market has had a strong open to 2012, and fund inflows continue to be strong because just on a process of elimination, investors cannot get yields of 7-10 percent anywhere else,” said a high-yield banker.

(Additional reporting by Tessa Walsh, and Natalie Harrison; Editing by Erica Billingham)

full story

UnitedHealth nudges up 2012 view on XLHealth deal

Thu Feb 9, 2012 7:55am EST
(Reuters) – UnitedHealth Group Inc (UNH.N) nudged up its 2012 profit view on Thursday after closing its acquisition of privately held Medicare specialist XLHealth Corp.

The largest U.S. health insurer by market value now sees 2012 earnings in a range of $4.60 to $4.80 per share, up from $4.55 to $4.75. Analysts were anticipating $4.79, according to Thomson Reuters I/B/E/S.

Shares of UnitedHealth fell last month after the company backed its forecast that was below Wall Street’s target.

The XLHealth acquisition is expected to add about $2 billion in revenue, and with its 117,000 members, will bring UnitedHealth’s Medicare Advantage membership up to 2.5 million.

(Reporting By Lewis Krauskopf; Editing by Maureen Bavdek)

full story

Japan firms talk on system chip tie in reform drive: sources

By Reiji Murai and Maki Shiraki
TOKYO | Wed Feb 8, 2012 3:54am EST
(Reuters) – Renesas Electronics and two other big Japanese chip makers are in talks to combine their struggling system chip operations in a government-backed deal, sources said, as pressure mounts for drastic reforms to confront stiff global competition.

Fujitsu Ltd, Panasonic Corp and Japan’s government-backed Innovation Network Corp, an investment fund, would also be part of the deal, which could outsource production to privately held chip maker GlobalFoundries, sources familiar with the matter said.

Japan’s once high-flying chip sector has been forced into a series of mergers and restructuring drives over the past decade to keep up with aggressive competitors in the United States, South Korea and Taiwan, led by Intel Corp and Samsung Electronics.

Under the latest plan, the new company will develop system chips, which serve as the brains of electronic gadgets and automobiles, but outsource production.

The move would revamp a money-losing division for Renesas, a market leader in system chips by sales ahead of Intel and Broadcom Corp, and allow Panasonic and Fujitsu to focus on more profitable businesses.

“This is just one of many options under consideration,” one of the sources said, adding that other areas of the chip sector were also under discussion and there could be further twists and turns as talks proceed.

As part of the deal, the sources said California-based GlobalFoundries could also buy cash-strapped Elpida Memory’s chip production plant in Hiroshima, while the Nikkei business daily said Elpida, which has been battered by a strong yen and tumbling memory chip prices, would move its DRAM chip production to Taiwan.

The news sparked a surge in chipmaker shares, with Renesas jumping as much as 14 percent to a three-month high of 576 yen and Elpida climbing to an intraday high of 374 yen, up nearly 10 percent. Fujitsu rose 5 percent to 399 yen.

“The first observation is that it looks good for every company — Elpida, Fujitsu, Panasonic and Renesas,” said Yasuo Sakuma, portfolio manager at Bayview Asset Management.

But he remained skeptical.

“It’s like the bad parts of a banana, apple and orange getting put together in a mixer to make juice. If you drink that it may taste good the first time. But the juice will go bad in a couple of days.”

BAD JUICE?

Renesas, Fujitsu and Panasonic said separately that no decisions had been taken regarding their chip businesses, while Elpida said the report on the sale of the Hiroshima plant was incorrect, but gave no details.

The Nikkei said the three companies were expected to hammer out a basic agreement by the end of March and would aim to set up a new company by the end of this year. But one of the sources suggested the time frame was too ambitious, especially given that various options were under review.

Haruo Sato, senior analyst at Tokai-Tokyo Securities, saw potential snags to an agreement.

“The top management of the three companies would have to reach agreements on tough issues such as allocation of resources, including job cuts. I think it will be extremely hard for them to reach a compromise,” he said.

The Japanese government is wary of allowing technology know-how to disappear overseas and used its Innovation Network fund in a similar move last year, announcing plans to merge the small to medium sized liquid crystal display (LCD) panel operations of three firms into a new company.

Japanese chipmakers have been hit hard over the past year by a sluggish economy and a strong yen, with many falling into the red on an operating basis.

Renesas, itself the product of successive mergers of the chip divisions of Hitachi, Mitsubishi Electric and NEC Corp, reported an operating loss of 33.2 billion yen ($430 million) for the nine months to December 31.

Elpida, set up to take over the struggling DRAM operations of several Japanese chipmakers a decade ago and now scrambling to meet debt repayment deadlines in late March and early April, last week posted a wider-than-expected 43.8 billion yen operating loss for the October-December quarter.

Speculation has swirled that Elpida was seeking a rescue deal with U.S. DRAM maker Micron Technology and its Taiwanese technology partner, Nanya Technology, although Elpida President Yukio Sakamoto has played down the need for an immediate equity tie-up.

Japanese chip industry leader Toshiba which has largely remained above the merger fray in recent years, cut its full-year operating profit forecast by one-third to 200 billion yen after posting a 72 percent drop in third-quarter profit.

($1 = 76.95 yen)

(Additional reporting by Nobuhiro Kubo, Miki Kayaoka, Dominic Lau, Emi Emoto and Chikafumi Hodo in Tokyo; Writing by Edmund Klamann, Editing by Richard Pullin)

full story