In Brief: CLO Edition
2018 Apr 21
Today's Top Story
Australia Vows Crackdown on Corporate Misconduct
An Australian inquiry into financial sector misconduct claimed its first scalp on 20 April as the CEO of the country's largest wealth manager stepped down over revelations of board-level deception and misappropriation of funds. The departure of AMP Ltd.'s Craig Meller came as the government vowed to double prison terms for financial crimes, dramatically increase penalties, and ramp up the investigative powers of the corporate regulator following shocking admissions of misconduct to the Royal Commission inquiry, reports Reuters (19 April, Kaye, Duran). Faced with daily revelations of wrongdoing at the highest levels of corporate Australia, the government is now under mounting pressure to extend the inquiry beyond its February 2019 deadline, meaning it would run concurrently with the next federal election.
Wells Fargo Will Be Fined US$1 Billion, Sources Say
CNNMoney (19 April, Borak, Bronner-Wiener) reports that the U.S. Consumer Financial Protection Bureau and the U.S. Office of the Comptroller of the Currency are close to fining Wells Fargo US$1 billion for forcing customers into car insurance and charging mortgage borrowers unfair fees. The penalty will be announced as early as today by the two federal regulators, sources say. The penalty would rank as the harshest action taken by the Trump administration against a Wall Street bank to date.
Mergers and Acquisitions
Weir Group to Buy Esco
London-listed engineering company Weir Group has agreed to buy U.S.-based manufacturing company ESCO for US$1.05 billion, reports MarketWatch (19 April, Martuscelli). The deal has already received approval from the board of directors and the required majority of ESCO shareholders.
IMF Chief Urges Greater Scrutiny of Big Tech Companies
The head of the International Monetary Fund (IMF) has called for policymakers to step up scrutiny of the market power of technology companies such as Amazon and Google, warning that they threaten innovation and productivity gains. The call from Christine Lagarde, the IMF's managing director, came at an opening press conference for the spring meetings in Washington of the IMF and the World Bank at which fears of a trade war between the United States and China, and its potential effect on the global economy, have dominated discussions. France's former finance and trade minister said she was concerned about the growing market power of the big tech companies, reports the Financial Times (19 April, Donnan). Addressing those concerns and the impact of new technologies on the global economy, she said, was vital. There is mounting pressure on companies such as Amazon and Facebook regarding their hold over consumers and their data, as well as their ability to shrug off competition from new startups because of their sheer size.
Kenya Market Regulator Plans Waivers to Spur Listings
Kenya's Capital Markets Authority (CMA) is proposing exemptions for companies that were not fully tax compliant in the past with the goal of increasing listings on the Nairobi Securities Exchange. The proposed waivers will be included in the 2018-19 budget and are intended to help small- and medium-sized enterprises feeling sensitive about giving their tax history to "come to the table," CMA Chief Executive Officer Paul Muthaura said. He said the move will benefit all by raising capital for companies, boosting the number of listed firms, and widening the tax net, reports Bloomberg (19 April, Changole).
Shire Rejects Takeda Bid as Allergan Drops Pursuit
Reuters (19 April, Roumeliotis, Martin, Hirschler) reports that Shire has rejected a US$63 billion acquisition offer by Takeda Pharmaceutical. Meanwhile, Allergan has reversed course on pursuing a rival offer. The drama underscores the surge in dealmaking this year in the pharmaceutical sector, as large players look for promising assets to improve their pipelines. Takeda acquiring Shire would be by far the biggest acquisition of a drug company this year. On Thursday, Allergan CEO Brent Saunders decided to drop his pursuit of Shire after receiving pushback from shareholders, who were reportedly worried about the company overstretching its resources.
Hong Kong Targets Tech IPOs With New Listing Rules
Hong Kong's stock exchange will publish final rules next week that will allow "innovative" companies ranging from biotechnology businesses to technology giants to list on the venue. Hong Kong Exchanges and Clearing will unveil its new listing regime on 25 April, following weeks of consultation with market participants, including banks, lawyers, and investors, the stock exchange confirmed. The new rules are expected to enable biotech firms that have yet to generate a revenue to list on the exchange for the first time. The rules are also set to permit companies deemed "innovative" to list with dual-class share structures, which give founders of companies greater voting rights over ordinary shareholders, reports the Financial Times (20 April, Dunkley).
Self-Inflicted Wounds in U.S.-China Tech Battle
China has intensified the tit-for-tat trade battle with the U.S., with antitrust regulators warning that they have "hard to resolve" concerns about Qualcomm Inc.'s planned US$44 billion purchase of NXP Semiconductors, potentially creating a stumbling block for the deal. The move follows a decision by the U.S. Commerce Department to ban sales of American components to Chinese telecommunications company ZTE Corp., as well as threats from the White House to impose tariffs on US$150 billion worth of Chinese goods to punish what it says are efforts to steal U.S. technology, reports the Wall Street Journal (20 April, Kubota, Strumpf). The escalating tensions have placed new constraints on tech companies' strategic plans and have threatened their access to giant markets.
U.S. Manufacturers Seek Relief from Tariffs
President Trump's tariffs on imported aluminum and steel are disrupting business for hundreds of U.S. firms that purchase those metals, reports the Allentown Morning Call (19 April, Wiseman, Rugaber). Hundreds of companies are asking the U.S. Commerce Department to exempt them from the 25 percent steel tariff and the 10 percent aluminum tariff. A group of small- and medium-size manufacturers recently gathered in the nation's capital to announce a coalition to fight the steel tariff. The White House imposed the tariffs in March, arguing that reliance on imported metals posed a threat to U.S. security. However, it granted temporary exemptions, which expire at the end of April, to several key U.S. allies. Steel- and aluminum-consuming companies can also appeal to the Commerce Department for exemptions, as long as they can prove they cannot obtain the metals they need from U.S. producers.
Food and Beverage
EU Bans 20 Brazilian Meat Plants
Europe's decision to ban meat imports from several Brazilian suppliers affects 30 to 35 percent of the country's exports to the bloc and will force companies to find new markets while officials work to reverse the measure, Brazil's Agriculture Minister said. On 19 April, the European Union suspended imports of Brazilian meat products, mostly poultry, in a move that affected 20 plants in the South American nation that had been authorized to export to the EU, according to a European Commission statement. Minister Blairo Maggi said the Brazilian government would request that a trade mission be allowed in Europe to negotiate a reversal of the measure, reports Reuters (20 April, Mano, Koester).
Walmart Commits to Zero Food Waste in Canada by 2025
Over the past few years, a manual has been slowly making its way into the hands of Walmart store workers, helping employees decide whether fruits and vegetables are still good for sale and when they should be "culled." The idea is to reduce the amount of perfectly good produce being thrown out and is part of a suite of changes the giant retailer has unveiled in a massive effort to cut food waste in its 411 stores across Canada—efforts that have already resulted in a 23 percent reduction in waste since 2015, reports the Toronto Globe and Mail (20 April, Hui). At a time when the need for corporate social responsibility is increasingly viewed as a given—especially for a polarizing brand such as Walmart—the company has focused much of its philanthropic efforts on sustainability and waste. This week, the company announced CA$19 million in funding through the Walmart Foundation for charities and research institutions to address systemic issues contributing to food waste. The retailer is also on track to become the largest Canadian grocer to reach "zero food waste," although its commitment to reach the target by 2025 puts it behind the Metro chain, which aims to do so by 2020.
Corporate Social Responsibility
Netherlands Leads Morningstar List of Countries With Strong ESG Companies
Dutch companies are the world's sustainability leaders, according to a recent report from Morningstar. In an analysis of 46 country indexes and their constituents on environmental, social, and governance factors, Morningstar found the Netherlands index took the top spot with a score of 60.54, helped by high-scoring companies like ASML Holding, ING Group, Philips, and Ahold Delhaize. Scores are calculated on a scale of 0-100. The next highest scoring country based on sustainability criteria was Denmark at 60.47, followed by Finland at 60.2, reports Pension & Investments (19 April, Kilroy).
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