In Brief: CLO Edition
2018 Sep 18
Today's Top Story
EU Investigates German Carmakers Over Emissions
The European Commission said it has launched a formal investigation into whether German carmakers BMW, Daimler, and VW Group had agreed to avoid competition in developing and introducing systems to reduce harmful emissions from petrol and diesel cars. "These technologies aim at making passenger cars less damaging to the environment," said European Competition Commissioner Margrethe Vestager. "If proven, this collusion may have denied consumers the opportunity to buy less polluting cars, despite the technology being available to the manufacturers." The Commission said it had alerted the companies of the probe and added that there was no legal deadline for bringing such an investigation to a close, reports Reuters (18 September, Blenkinsop).
Mergers and Acquisitions
Merger of Cigna and Express Scripts Approved by Justice Department
On 17 September, the Justice Department approved the proposed merger between Cigna, one of the nation's largest health insurers, and Express Scripts, a major pharmacy benefit manager. Major U.S. health insurers, including Aetna and Cigna, had previously tried to combine with other insurers, but were blocked over concerns about the possible impact on consumers. Federal officials emphasized that they did not believe this merger would hurt competition in the pharmacy business, reports the New York Times (17 September, Abelson). Both companies say the merger will benefit consumers by allowing Cigna and Express Scripts to better manage their customers' health by sharing information about both their medical and drug expenses. The Justice Department is also reviewing a deal between Aetna, another giant insurer, and drugstore chain CVS Health.
Allianz's Australian Unit Rapped for Governance Inaction
A year-long Australian inquiry, called a Royal Commission, is investigating misconduct in the insurance industry after finding widespread wrongdoing in the consumer credit, rural, lending, small business banking, and pension sectors. On 19 September, the inquiry discovered the local insurance unit of Germany's Allianz SE commissioned an independent review of its culture, but handed the report back because it did not like the findings. Lori Callahan, Allianz Australia chief risk officer, told the inquiry the company had commissioned accounting firm Deloitte in June to undertake an independent review of its compliance systems in response to an order by the regulator. Under questioning, Callahan said she later asked Deloitte to retract the report because "it didn't fulfill what I wanted to know." The inquiry heard that a draft document given to Callahan criticized the culture of the insurer and its compliance systems. The inquiry also heard that Allianz unsuccessfully tried to alter the conclusions of a second risk report completed by Ernst & Young, reports Reuters (18 September, Duran).
Viet Dinh to Become CLO of the New Fox
Viet Dinh, who has served on 21st Century Fox's board for 15 years, is stepping down in order to be named chief legal and policy officer for the new Fox, the company said. Dinh, who was most recently a partner at the law firm of Kirkland and Ellis, will take on many of the roles previously held by 21st Century Fox General Counsel Gerson Zweifach, who will depart when the sale of assets to Disney is completed. Dinh will report to Lachlan Murdoch, who will be the chairman and chief executive of the new company, reports the Wall Street Journal (17 September, Flint).
Clariant Taps Sabic Executive as CEO
Switzerland's Clariant has appointed a manager from its new Saudi Arabian anchor shareholder Sabic as its chief executive. Ernesto Occhiello, an executive vice president at Sabic, will replace Hariolf Kottmann, who will become Clariant's chairman. Clariant also said it would form jointly with Sabic a "high performance materials" business division, which will include products for the electronics, healthcare, aerospace, and automotive industries, reports the Financial Times (18 September, Atkins).
Labor and Employment
IBM Sued for Age Discrimination
IndustryWeek (17 September) reports that attorney Shannon Liss-Riordan has filed a class-action lawsuit on behalf of three former IBM employees who say the technology giant discriminated against them based on their age when they were fired. Liss-Riordan, a partner at the law firm of Lichten & Liss-Riordan in Boston, has represented workers against Amazon, Google, and Uber and has positioned her firm as the premier champion for employees left behind by major tech firms. The suit draws heavily on a ProPublica report published earlier in the year that said IBM has fired more than 20,000 employees older than 40 in the past six years. The Equal Employment Opportunity Commission, meanwhile, has reportedly consolidated complaints against IBM into a single, targeted investigation.
Swiss Watchdog Casts Light on Credit Suisse for Anti-Corruption Failings
Switzerland's financial watchdog FINMA dealt a blow to Credit Suisse's reputation on 17 September, stating that the company failed to combat money laundering in suspected corruption cases linked to soccer's ruling body FIFA and Venezuelan and Brazilian state oil companies. FINMA will designate an independent auditor to oversee the bank's anti-money laundering processes, but did not order it to return any profits that it might have illegally reaped, reports Reuters (17 September, Miller). The enforcement action against Credit Suisse emerged from FINMA's investigation into several Swiss financial institutions starting in 2015.
U.S. Announces New Tariffs on Chinese Imports
President Trump announced he will impose new tariffs on nearly US$200 billion worth of Chinese goods, reports the Wall Street Journal (18 September, Schlesinger, Salama). Trump also said additional tariffs were possible in the future. The move has heightened trade tensions between the world's two biggest economies. The 10 percent tax on Chinese imports is set to go into effect on 24 September and will increase to 25 percent at the end of the year. The tariffs will affect thousands of goods, ranging from seafood to luggage.
Airbus Prepares for a New Generation of Leaders
Airbus is facing a shift in leadership as it struggles to catch up with delays on its production lines and an investigation into bribery and corruption. In January, the company found a replacement for John Leahy, the man whose marketing campaigns had helped put the company on level footing with its U.S. rival Boeing, reports the Financial Times (17 September, Pfeifer, Keohane). Leahy's replacement was Eric Schulz, from the British aero-engine maker Rolls-Royce. However, he abruptly resigned last week. Company veteran Christian Scherer took over with immediate effect. Meanwhile, CEO Tom Edners will step down in April after six years. A separate search is under way to find a replacement for Harald Wilhelm, the company's long-serving finance director, who also leaves next year. Fabrice Brégier, the chief operating officer, left the group in February, and Charles Champion, chief engineer and a key figure in the development of the company's new aircraft, has retired. The number of departures has accelerated the anticipated generational change taking place at the company, according to people close to the matter.
Wall Street Salaries Hit Their Highest Level in a Decade
The average Wall Street salary rose 13 percent last year to its highest level since 2008, reports Bloomberg (17 September, Ballentine). Including bonuses, annual pay in New York City's securities industry increased to US$422,500 on average in 2017, according to New York State Comptroller Thomas P. DiNapoli in a report released Monday. Salaries gained as pretax profits climbed 42 percent to US$24.5 billion. In the first six months of this year, the earnings tallied US$13.7 billion, an 11 percent increase year over year. DiNapoli wrote in an official statement: "The momentum from last year's dramatic rise in profits has carried into 2018 and the industry is on track for another good year absent a setback later in the year." The research further found that bonuses are likely to increase for the third straight year in 2018. The average payout increased 17 percent in 2017 to US$184,200.
Natura Talks to Avon About a Takeover
Avon Products Inc., which has faced years of decline, has been approached Brazil's Natura Cosmeticos about a takeover, according to people familiar with the matter. The companies are not in serious talks and other firms have also approached Avon, reports the Wall Street Journal (17 September, Mattioli, Terlep, Cimilluca). Avon had US$5.7 billion in sales last year and US$1.9 billion of debt, so a purchase of the company would be a substantial deal. Natura, which also sells cosmetics via a direct sales force, recently said in a statement that "there are no negotiations in progress concerning a possible acquisition of Avon."
Relocation Plan Rejected by Major Unilever Shareholder
BBC News (17 September) reports that Aviva Investors, one of Unilever's biggest shareholders, said it will vote against the company's plan to move its headquarters to the Netherlands amid growing investor concern regarding the plan. Unilever, which makes Dove soap and other popular household products, is relocating to simplify its corporate structure. However, it must have 75 percent of shareholder votes to push the plan through. Unilever, which currently has headquarters in both London and Rotterdam, announced late in this year's first quarter plans to have just one headquarters located in the Dutch city. Under U.K. rules, it would no longer be eligible for inclusion in the U.K.'s FTSE 100 share index after the proposed change. Shareholders fear this would cause a rush for the exits to sell the stock, leading to losses.