In Brief: CLO Edition
2018 Feb 20
Today's Top Story
U.K. Promises Not to Torch EU Regulation Post-Brexit
Brexit Secretary David Davis will reassure the European Union that the United Kingdom will not try to undercut the bloc by tearing up regulations after the split, making the case for mutual trust between regulators on each side. In a speech in Vienna on 20 February, Davis will say "mutual recognition" of regulatory standards should continue after the divorce. Cars manufactured and approved for sale on one side of the channel should still be approved for sale on the other, according to excerpts released by his office. Davis's words are the clearest statement yet of how closely the United Kingdom wants to remain aligned with the European Union after Brexit, in a bid to maintain the best possible access to Europe's single market for U.K. companies, reports the Wall Street Journal (19 February, Ross-Thomas).
Mergers and Acquisitions
Stronger European Earnings Augur More M&A
European companies are reporting higher revenues and profits as the continent benefits from the fastest pace of economic growth in a decade, reports the Wall Street Journal (19 February, Trentmann), prompting corporate executives to increasingly mull deal making. As of Friday, JPMorgan Chase & Co. reports, over 50 percent of the 294 companies in the Stoxx Europe 600 index that have posted quarterly results topped analysts' earnings expectations. Earnings per share have increased 16 percent year-over-year, with companies in the energy, materials, and consumer-discretionary sectors seeing particularly strong gains. "More and more companies are beating expectations," commented JPMorgan analyst Emmanuel Cau. "The quality of earnings is good, both the top-line and margins are driving growth." The strong corporate performances come after years of anemic economic growth during which many European firms repaired their balance sheets by slashing costs and shedding underperforming assets.
Qualcomm Set to Sweeten Bid for NXP
MarketWatch (20 February, Friar) reports that Qualcomm is poised to sweeten its offer for NXP Semiconductors to US$44 billion, as it angles to win shareholder support for the acquisition. The California-based chip maker initially offered US$110 a share, valuing NXP at US$39 billion. Qualcomm is now expected to lift its bid to around US$127.50 a share as soon as this week.
Michael Josef Lappe Named New GC of Deutsche Börse AG
Michael Josef Lappe is the new general counsel at Deutsche Börse AG as of 1 March 2018. Lappe is currently working as a lawyer in the consulting and transaction business, and as senior counsel has various mandates with international legal consulting firms, reports Mondo Visione (19 February). Lappe will be replacing Dr. Roger Müller, who is leaving Deutsche Börse Group by mutual agreement at the end of February 2018. This departure allows Müller to fulfill his wish to change direction to new technologies and services.
Gender Diversity on Boards in India Improves
The law that requires companies to have at least one woman director on their boards has helped improve gender diversity in India's corporate boardrooms, states the Economic Times (19 February, Bhattacharyya). However, much ground still needs to be covered, say experts, especially as almost 25 percent of the female appointees on boards are family members of the owners. As of 26 January, Prime Database reports that out of 1,723 companies listed on the National Stock Exchange of India (NSE), 1,667 of those firms had met the mandate of one woman director in the boardroom. Out of those, 425 companies have women from either a "promoter group" or family. NSE data showed that 285 companies had more than one female board member, while 56 companies did not even have one woman director.
Germany Seeks to Attract Banks by Making it Easier to Fire Executives
Germany's likely next government is ready to give global banks what they want: less job protection for highly paid executives. In an attempt to increase Frankfurt's allure for international banks, the coalition treaty agreed by Angela Merkel's conservatives and the Social Democrats contains an outline for the first loosening of employment protection laws in the country in 15 years. The plan, which would make it easier for banks to fire highly paid staff in a manner more familiar in the "Anglo-Saxon" financial centers of London or New York, is a bold signal of Germany's intention to lure post-Brexit business from the U.K., reports the Financial Times (20 February, Storbeck). However, the proposal has worried some, like the pro-union SPD, which is already lukewarm about going back into government with Merkel, and it has given the group further reason to be unhappy as they consider whether to back the coalition deal in a party-wide vote next month.
Singapore Plans 'Netflix Tax' as NDP Push for One in Canada
Another Canadian trade partner is extending its sales tax to Netflix and other foreign digital-content providers, a move Canada's New Democratic Party (NDP) says Ottawa should quickly follow. In a budget released on 19 February, the government of Singapore announced that it would be extending its goods and services tax to foreign-based music and video-streaming services as of 2020. Singapore and Canada are among the 11 countries that agreed earlier this year to the reworked Trans-Pacific Partnership trade deal. Currently, Canadians pay GST on digital content from Canadian-based companies—such as Bell's CraveTV streaming service—but sales tax is not collected by foreign-based companies, such as Apple, Google, and Netflix, reports the Toronto Globe and Mail (19 February, Curry). In a recent speech, NDP Leader Jagmeet Singh said it was not fair that "web giants" such as Netflix are not required to follow the same tax rules as Canadian companies.
Rusal to Name First Woman CEO
United Co. Rusal is set to name CFO Alexandra Bouriko as its new CEO, reports Bloomberg (19 February, Federinova), the first time a woman will lead one of Russia's biggest commodity companies. Billionaire Oleg Deripaska is stepping down as CEO of Rusal and president of En+ Group PLC as part of a broader reshuffle, according to Bloomberg sources. Bouriko joins a very small group of high-level female executives in the metal and mining industry. Bouriko has served as Rusal's finance chief since October 2013, before which she was deputy CEO at En+. Prior to that, Bouriko spent 16 years with KPMG in Russia and Canada, including as a partner.
Food and Beverage
GPA Shakes Up Management
GPA, one of Brazil's largest food retailers, recently announced a shake-up of its management team, replacing its CEO and the head of a subsidiary just moments before releasing full-year results. In a statement, GPA announced Peter Paul Estermann as its new chief executive officer effective in April, replacing Ronaldo Iabrudi who had served in the post since 2014 and will now become vice chairman of the company's board. In a related move, Flavio Dias will become the CEO of appliance and electronics subsidiary Via Varejo SA, replacing Estermann, who had been serving in that post. The company posted fourth-quarter results on 19 February that hit analysts' estimates, though some of the company's more traditional grocery formats continue to drag on margins, reports Reuters (19 February, Slattery, Bautzer).
KFC Closes Most of its U.K. Stores Due to Logistics Mishap
KFC said it has been forced to close hundreds of its British stores because of a shortage of chicken. The problem arose a few days ago, after the chain switched its delivery contract to DHL, forcing the majority of its 900 outlets in Britain to shut, reports Reuters (19 February, Holden). DHL blamed the delivery delays on "operational issues."
India to Tighten Approvals for Firms Borrowing from Overseas
India's central bank is reviewing its process for allowing companies to raise money overseas due to concern that any increase in rupee volatility may hurt borrowers' ability to repay debt, a person familiar with the matter said. The Reserve Bank of India is spending more time scrutinizing companies' hedging practices, vetting borrowers more closely to prepare for any financial-market fallout from an increase in U.S. interest rates, the person said. The person said the new process is resulting in slower approvals in recent weeks for offshore debt sales, reports Bloomberg (20 February, Joshi, Patil, Antony). "RBI's prime concern is to avoid any defaults by companies offshore," said Raj Kothari, head of trading at Jay Capital Ltd. in London. "Such scrutiny will further improve the trust of international investors in Indian issuers."
Albertsons Swoops for Rite Aid
Albertsons plans to acquire the parts of Rite Aid that are not being sold to Walgreens Boots Alliance, the Wall Street Journal (20 February, Haddon) reports, as retailers of all stripes scramble to respond to a rapidly changing consumer shopping landscape. Including debt, the drugstore chain and Albertsons have a combined value of nearly US$24 billion. The transaction would create a company with combined revenue of US$83 billion. For Rite Aid, which ranks as the nation's third-biggest drugstore chain, the deal represents one more way to gain heft after the federal government blocked its full sale to Walgreens, which now plans to acquire around 2,000 of Rite Aid's stores.
2018 ACC Mid-Year Meeting
April 22-24, Denver, CO
ACC In-house Counsel Certification Program
April 30-May 3, Dubai, UAE
ACC Global General Counsel Summit
June 4-6, Amsterdam, Netherlands