This weeks news includes; EU and Canada finalise free trade deal, Co-op bank goes up for sale, Blackberry’s market shares falls to 0% and Peugeot in talks to acquire Vauxhall.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Click on the links for full stories.
Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- CNBC asks “Should investors place their cash and confidence in Europe?”
- Sky News explores claims that UK firms ‘chronically understaffed’ in face of cyber threat.
- Business Insider looks at 2 reasons you might not want to buy Snapchat when it IPOs.
1. EU AND CANADA FINALISE CETA FREE TRADE DEAL
The European Parliament has approved a landmark free trade deal with Canada. EU lawmakers backed the Comprehensive Economic and Trade Agreement (Ceta) by 408-254 votes despite crowds of protesters contesting the deal outside. It means parts of the deal, such as tariff reduction, will come into force eight years after negotiations began.
But other, more controversial aspects of the deal, such as the investor court system, will require ratification by EU member states which could take years. There were chaotic scenes outside the parliament building in Strasbourg as protesters blocked access ahead of the vote – only to be dragged off by riot police.
The vote was comfortably, though not overwhelmingly, passed, with 33 members of parliament abstaining. Canadian Prime Minister Justin Trudeau will address the parliament on Thursday.
Ceta will see the removal of 99% of non-farm duties between the EU’s market of 500 million people and Canada’s 35 million – trade worth €63.5bn ($67bn; £54bn) in 2015. That will boost growth and jobs on both sides of the Atlantic, supporters say.
But the deal has been extremely divisive, says the BBC’s Europe reporter Gavin Lee – it’s triggered many demonstrations across Europe, with critics arguing it will erode labour laws, environmental standards and allow multinational companies to dictate public policy. (BBC News)
2. TATA STEEL JOBS SAVED
Thousands of steelworkers have agreed to a rescue deal with Tata, the company that owns the Port Talbot steel plant.
A ballot has been open to 10,000 members of staff for the last two weeks, with sources telling Sky News that it has caused friction between the unions and employees. Around a quarter of those who voted at each union said no to the proposals.
The deal agreed on Wednesday will safeguard thousands of jobs and will guarantee £1bn worth of investment over the next ten years. Workers at TATA Steel will hear the results of a ballot on company reform.
It comes at a price to peoples’ pensions though it should help avoid the British Steel Pension Scheme (BSPS) from having to be taken over by the Pension Protection Fund (PPF) lifeboat scheme.
The final salary scheme will now close and a defined contribution scheme will be set up in its place. Voting figures from Community union members showed 72% in favour and 28% against the changes, with a 76% to 24% split among Unite members and a 74% to 26% divide at the GMB. (Sky News)
3. ENERGY M&A ACTIVITY REACHES ALL TIME HIGH
Energy and power M&A activity is at an all-time high at the start of 2017, with nearly $66bn (£53bn) of deals announced this year. Deal activity is 36 per cent higher in the sector compared with the same period last year and the best start to a calendar year since records began in the 1980s, according to Thomson Reuters.
The largest transaction of 2017 was by US-based pipeline firm Oneok, which purchased the final 22 per cent of the pipeline partnership it doesn’t already own for $9.3bn. Other sizable deals included Bopco’s $6.6bn sale to Exxon Mobil and Royal Dutch Shell’s $3.8bn sale of North Sea assets to Chrysaor.
The Shell sale is one part of the FTSE 100 firm’s wider $30bn divestment programme of non-core assets. Activity in the sector over the last 12 months increased a slightly steadier pace. But with total deals worth $629bn there was increase of 17 per cent compared with the same period a year ago. The analysis revealed energy and power was one of only two sectors where M&A activity had grown over the last year – the other being media and entertainment.
The largest single deal since February 2016 was Sunoco’s purchase of Energy Transfer Partners for $51bn. (City A.M)
4. CREDIT SUISSE
Credit Suisse Group AG signaled it is weighing alternatives to a public offering of its Swiss unit after its $5.3 billion settlement over toxic mortgage securities hurt capital buffers less than estimated. Investors cheered the change in tune.
The settlement was a “game-changer for us,” Chief Executive Officer Tidjane Thiam said in an interview with Bloomberg Television. “What it does is that it leaves us in a more comfortable position to look today at our capital planning.”
The bank, which on Tuesday posted a fourth-quarter loss of 2.35 billion francs ($2.34 billion), said it would cut as many as 6,500 jobs this year, stepping up cost reductions to boost profitability. Savings are ahead of schedule and an improved market sentiment for banks that boosted trading in the fourth quarter has continued this year, Thiam said in the interview. That may mean Credit Suisse no longer needs to sell part of the Swiss unit, according analysts and investors.
Herro had questioned the need for the IPO after the U.S. settlement, which ended an investigation into the role of the bank’s mortgage securities business in the 2008 financial crisis. The bank posted a fourth-quarter loss of 2.35 billion francs after setting aside 2.17 billion francs to top up legal provisions.
The Swiss universal bank delivered the biggest contribution to pretax profit in the fourth quarter, with 382 million francs. The CEO had previously described the plan to raise 2 billion francs to 4 billion francs through a sale of 20 percent to 30 percent of the Swiss business as a cornerstone of his turnaround strategy. On Tuesday, he repeatedly referred to it as a “backstop.”
The IPO remains “a very good option, it’s on the table, we’ve been working on it,” Thiam said in the interview. “But again, as you would expect — that’s what we’re paid for — we look at other options as well, continuously, and always have.” (Bloomberg)
5. ACTURIAL FIRM XAFINITY LAUNCHES LARGEST UK IPO OF 2017
The £190m float of a mid-tier actuarial and consulting firm will help it break the stranglehold of the largest three market players. Xafinity announced plans last week for a London listing and intends to make an official admission to the exchange on Thursday.
Paul Cuff, the company’s co-chief executive, told City A.M. he hopes the IPO will take the firm to the next level, allowing it to challenge the “big three” actuarial firms: Willis Tower Watson, Aon Hewitt and Mercer.
“The IPO is the logical next step in our strategy, enhancing our public profile and status with existing and potential clients and providing access to the capital markets to aid future growth if required,” he said.
However, he added that Xafinity did not have any specific deals in the pipeline for acquisitive growth.
Instead, he highlighted the large proportion of repeat revenues the firm is booking – over 90 per cent of sales, depending on the exact definition of a “repeat sale” – and the highly cash generative nature of the business. The listing provides an exit for private equity firm CBPE Capital, which has previously invested in firms such as Cote restaurants and Park Resorts, with net proceeds of £125.1m. The net proceeds from the float are expected to raise £46m. Together with current cash reserves, Xafinity intends to cut borrowing from £86m to £33m. (City A.M)
6. KRAFT HEINZ ABANDONS £115 BILLION UNILEVER TAKEOVER
Kraft Heinz has said it has dropped its plan to buy Anglo-Dutch rival Unilever. Marmite-maker Unilever rejected the US food giant’s bid on Friday, saying it saw “no merit, either financial or strategic” in Kraft’s offer, worth about $143bn (£115bn).
The deal would have been one of the biggest in corporate history, combining dozens of household names. Unilever owns Ben & Jerry’s ice cream, Dove soap, and Hellmann’s mayonnaise, while Kraft’s range includes Philadelphia cheese and Heinz baked beans.
Kraft Heinz is jointly controlled by the billionaire investor Warren Buffett and the Brazilian private equity group 3G. The latter has a deserved reputation for taking a scythe to costs – irrespective of how that might impact jobs and factories. Unilever, on the other hand, has a reputation for doing the right thing in terms of corporate social responsibility and the environment – even if that eats into the bottom line.
The bosses of both consumer giants spoke over the weekend and it was clear that if Kraft really wanted Unilever it would have to launch a hostile takeover bid which could have ended up being very expensive. Shares in both companies rose sharply on Friday, as investors welcomed the news. A merger often aims to combine sales while cutting costs, flattering profits. The combined group may have had more power to raise prices through a bigger share of the branded food market. Unilever clashed with UK supermarket Tesco in October over its attempts to raise prices to compensate for the steep drop in the value of the pound.
The consumer goods giant has over a dozen sites across the UK, including three major plants in Liverpool, Norwich and Gloucester. If the deal had proceeded, it would be the second biggest ever, behind Vodafone’s $183bn takeover of Germany’s Mannesmann in 2000, according to Dealogic. (BBC News)
7. CO-OP BANK LOOKS FOR A BUYER
The Co-op Bank says it is putting itself up for sale and is inviting offers to buy all of its shares. The bank, 20% owned by the Co-operative Group, almost collapsed in 2013, and was bailed out by US hedge funds.
The bank has four million customers and is well known for its ethical standpoint, which it says makes it “a strong franchise with significant potential” when it comes to a sale. It has not been able to strengthen its finances because of low interest rates.
From among potential buyers, the TSB has told the BBC that although it is focused on completing the separation of their IT systems from Lloyds, it would be interested if the price was right.
The Co-operative Bank merged with the Britannia building society in 2009. The deal was later held responsible for the near collapse of the bank. In 2013, the bank revealed a £1.5bn black hole in its accounts, which led to its rescue. Bank chairman Paul Flowers also stepped down over concerns about expenses in 2013, before pleading guilty to drug possession the following year.
And in January 2016 the Bank of England banned two former Co-operative Bank executives – former chief executive Barry Tootell and former managing director Keith Alderson – from holding senior banking positions. In the autumn of 2015 the Co-op Bank said it would remain loss-making until the end of 2017. (BBC News)
8. BLACKBERRY MARKET SHARE FALLS TO 0%
It’s the end of an era: BlackBerry’s share of the global smartphone market is now 0.0%.
In the fourth quarter of 2016, more than 432 million smartphones were sold, according to a report published on Wednesday by the research firm Gartner. Of those, just 207,900 were BlackBerry devices running its own operating system. That gives the Canadian smartphone company a share of the overall phone market of less than a single percentage point. To be precise, it’s 0.0481%.
In contrast, a whopping 352.7 million smartphones running Google’s Android operating system were sold in Q4 2016, making up 81.7% of the market, according to Gartner. In second place is Apple’s iOS, which sold 77 million units in the quarter, with 17.9% of the overall market share.
BlackBerry also sells handsets that run Android, like the DTEK60 and the Priv, which aren’t included in that 207,900 figure. But Gartner’s data confirms what we suspected: BlackBerry’s once unassailable independent phone ecosystem is dead in the water.
Meanwhile, Google dominates the numbers game because it gives Android to phone makers for free, making it the operating system of choice for low-cost handsets in countries like India and China. Apple, on the other hand, keeps its iOS in-house and its prices high — limiting its reach but maximizing its profits.
In the pre-smartphone era, a BlackBerry was the phone of choice for professionals, even earning the nickname “Crackberry” because of its addictive nature. With the BlackBerrys’ full keyboards and email and messaging functionality, nothing else came close. But the company was blindsided by the launch of the iPhone, and Apple stole its crown. The BlackBerry brand quickly lost its luster, and sales have been in slow decline ever since.
In September, BlackBerry announced it would no longer make its own phones, instead of relying on third-party partners for any future BlackBerry-branded devices. It released its first Android phone in October 2015. (Business Insider)
Rolls-Royce to launch crewless ships by 2020
Rolls-Royce is planning to release the first of its fleet of crewless ships by 2020. The engineering giant is working with government-backed groups across northern Europe on the autonomous vessels. The company estimates that the move could cut sea transport costs by as much as 20%. Rolls-Royce vice president of innovation Oskar Levander said tugboats and ferries will be developed first, ahead of cargo vessels which will sail across international waters.
Major shipping firms are expected to adopt the technology in the hope it will boost profits. However, unions have expressed concerns about the possible impact on sea-faring workers. Autonomous ships also present challenges for insurers who have to consider the new types of risks that they will face. Some analysts believe that with no crew to protect from piracy, autonomous ships will reduce demand for guards – an industry that has been booming in recent years.
International shipping expert Jonathan Moss, from law firm DWF, said: “The maritime industry as a whole may suffer in terms of employment levels. Rolls-Royce maintains that crewless ships will be both safer than existing vessels and that they will lead to the creation of more jobs on land. (Sky News)
Rolls-Royce post £4.6 billion loss
A bribery settlement and the fall in the pound have pushed engineering giant Rolls-Royce to a record loss. The jet engine maker reported a loss before tax of £4.6bn for 2016. However, once one-off costs have been stripped out, the company’s underlying profit was better than many experts had predicted.
Rolls-Royce agreed to pay £671m to settle corruption cases with UK and US authorities and it has written off £4.4bn from currency related contracts. Like many international businesses, Rolls-Royce usually “hedges” its bets to protect itself from fluctuating currency markets. Most international aerospace contracts are priced in dollars, but, as a UK company, much of Rolls-Royce’s costs are in pounds.
It takes out long-term currency trades. These were designed to protect the firm against what seemed the most likely risk- the fall in the dollar – and many of them were put in place before the EU referendum was even announced.
Since the Brexit vote, the pound has fallen sharply against the US dollar, which has led to the accounting loss. Underlying profits, which ignore these factors, fell to £813m, down from £1.4bn the previous year, although the fall was much less than many analysts had forecast. (BBC News)
10. PEUGEOT OWNER IN TALKS TO ACQUIRE VAUXHALL
PSA Group, the maker of Peugeot and Citroen cars, is exploring an acquisition of General Motors Co.’s European business to cement a top position in Europe in a deal that could hasten consolidation of the region’s crowded automotive landscape.
GM and the French carmaker are in talks on numerous strategic initiatives, including the possible sale of Opel to PSA, the companies said after Bloomberg reported the talks earlier Tuesday, adding there was no assurance an agreement will be reached.
The U.S. manufacturer is seeking a multi-billion dollar amount for Opel, which also operates U.K. sister brand Vauxhall, because of the outlook for the improved operations, according to a person familiar with the matter. Analysts at Macquarie estimated that Opel has an enterprise value of about 2.6 billion euros ($2.8 billion).
A combination would create a manufacturer with about 16 percent of the European car market, pushing past Renault SA to become the region’s second-biggest auto group after Volkswagen AG. A deal would also be the second run at linking the two mass-market carmakers. GM, which has controlled Opel for nearly 90 years, sold a 7 percent stake in its French counterpart in 2013 after savings from a purchasing and development cooperation fell short of expectations.
PSA shares rose 4.3 percent to 18.70 euros, valuing the French company at 16.2 billion euros. GM jumped 5 percent at 11:44 a.m. in New York trading. European rivals Renault and Fiat Chrysler Automobiles NV climbed 4.1 percent and Renault advanced 3.1 percent as the deal could serve as a catalyst for squeezing excess capacity from the European car market.
While an agreement could be reached in the coming weeks, negotiations are complex and could still fall apart. (Bloomberg)