In Brief: CLO Edition
2018 Oct 22
Today's Top Story
China Posts Worst Economic Growth Figures Since the Financial Crisis
CNBC News (19 October, Tan, Lee) reports that China's economic growth slowed more than anticipated to the weakest pace in nearly a decade amid an ongoing trade fight with the United States. According to official data released early Friday, China confirmed that its economy grew 6.5 percent on a year-over-year basis from July through September. The Chinese economy has indeed faced increasing headwinds in 2018, not only in the form of escalating trade tensions but also a slumping stock market that has hurt confidence in the outlook. Those problems have spurred officials to step up stimulus and pledges of further support. However, the impact of those measures has yet to kick in. The third-quarter performance exposed new signs of weakness, including slowing retail sales, a scaleback of industrial production, rising corporate defaults, and lackluster big-ticket investments.
Lippo Raided in Bribery Probe
Indonesia's anti-corruption agency has raided 10 locations connected to Lippo Group, as part of a bribery probe, reports the Financial Times (18 October, Palma). The raids followed the arrests of nine suspects, including two Lippo Group consultants and an employee accused of attempting to pay city officials in return for property permits for a multibillion-dollar project. The project, the largest for Lippo Group to date, is meant to be a hub for the electronic and automotive industries.
Musk, Tesla Board Sued Over Recent Behavior
Law.com (18 October, McParland) reports that a Tesla shareholder this week sued CEO Elon Musk in the Delaware Court of Chancery over his recent pattern of "erratic behavior" and further charged the company's board of directors with "gross mismanagement" for not properly monitoring his statements on Twitter. The derivative suit is the first in Delaware to target Musk and company board members after Musk in August tweeted to his 22 million followers that he had "funding secured" to take the California-based automaker private at US$420 per share. Since then, Musk and Tesla have settled a lawsuit from the U.S. Securities and Exchange Commission stemming from the tweet. "The board consciously disregarded his actions and failed to do anything," lawyers from Faruqi & Faruqi and the Grabar Law Office alleged in their filing. "The board put their loyalties to Musk ahead of their fiduciary duties to the company and its shareholders."
Mergers and Acquisitions
Invesco to Buy OppenheimerFunds
Invesco is acquiring OppenheimerFunds, reports the Wall Street Journal (18 October, Baer). The emergence of exchange-traded funds (ETFs) and other low-cost options have pressured investment firms to lower fees and seek out new businesses. Invesco CEO Martin Flanagan has done his part in recent years to touch off a wave of consolidation in an industry criticized for having too many managers, acquiring businesses ranging from Guggenheim Partners's ETF arm to a robo-advisory firm.
Coca-Cola Shuffles C-Suite
Coca-Cola Co. President and CEO James Quincey has promoted Brian Smith to COO and President, effective 1 January, reports the Wall Street Journal (18 October, Maloney, Maidenberg). Smith, a 21-year company veteran, presently serves as president of the beverage giant's Europe, Middle East, and Africa unit. He will be tasked with overseeing global operations. Quincey, who has been at the reins since May 2017, said the move will enable him to devote more time and attention to "big-picture issues." Quincey had not named a No. 2 executive since taking over from Muhtar Kent, who remains Coke's chairman. Separately, Coca-Cola CFO Kathy Waller has announced she will retire in 2019 after spending more than three decades with the company. John Murphy, Coca-Cola's president for its Asia Pacific group, will succeed her, starting in March.
British Companies Sign Up for Workplace Counter Terrorism Training Program
More than 1,000 companies and organizations in Britain have signed up for a new counterterrorism training course, according to the U.K. National Counter Terrorism Security Office. The training scheme is a measure that could help prevent terror attacks, reports Xinhua (18 October). Called Action Counters Terrorism (ACT) Awareness e-Learning, the program was developed in a partnership between Counter Terrorism Policing and British retail giant Marks & Spencer. The training covers how to spot the signs of suspicious behavior and what to do if an attack occurs. The course takes one hour to complete.
Huawei Accused of Trying to Steal Semiconductor Technology
CNEX Labs, a Silicon Valley startup backed by Microsoft and Dell, and its co-founder Yiren "Ronnie" Huang alleged in Texas federal court this week that Huawei and its Futurewei unit have engaged in a plan to steal CNEX's technology. The allegations were made in a countersuit in response to a complaint Huawei itself had filed last year, accusing CNEX and Huang—its former employee—of stealing its trade secrets and demanding detailed information about CNEX's technology. The legal dispute is an unusual example of a Chinese company attempting to use the U.S. court system to access technology it claims had been stolen from it by an American firm. Huang, a Chinese-born U.S. citizen, is at the center of both the U.S. and Chinese companies' allegations against each other, underscoring the increasingly intertwined nature of the talent pool for developing cutting-edge technologies, reports the Wall Street Journal (19 October, O'Keefe).
Acacia Mining Threatens to Sue Tanzania
Acacia Mining has threatened to sue the government of Tanzania in international court, reports the Financial Times (19 October, Sheppard). Acacia Interim CEO Peter Geleta said there had been a "significant escalation" by the Tanzanian government in recent weeks, which has stopped the gold mine from exporting from the country for 20 months. Criminal charges have recently been brought against several current or former employees of the company, said Geleta. Acacia is waiting for its largest shareholder, Barrick Gold, to negotiate a settlement with the government, after Acacia was prevented from exporting 20 months ago over a failure to pay back taxes.
Japan Orders KYB to Fix Quake Shock Absorbers
The Japanese government has ordered KYB, which falsified quality data for earthquake "shock absorbers" used in hundreds of buildings, to fix any problems quickly, reports the Associated Press (19 October). KYB admitted that it and a subsidiary had been faking data on the equipment designed to absorb seismic movements since the early 2000s. KYB identified 70 central and local government offices that were among nearly 1,000 affected facilities. The admission is the latest in a slew of data manipulation cases at Japanese manufacturers.
Food and Beverage
StarKist to Plead Guilty to Price-Fixing
StarKist will plead guilty to a felony antitrust offense for fixing prices on canned tuna, and faces a fine of up to US$100 million, reports the Wall Street Journal (19 October, Kendall). The U.S. Department of Justice filed the charge, alleging that StarKist and others conspired to "fix, raise, and maintain the prices of packaged seafood" from 2011 until at least the end of 2013. StarKist is the second company to plead guilty. Bumble Bee Foods did so last year and was fined US$25 million. Executives at both companies have pleaded guilty in the investigation as well and are awaiting sentencing. Former Bumble Bee CEO Christopher Lischewski is fighting price-fixing charges and is awaiting trial.
Colgate Halts Venezuela Detergent Plant
Colgate-Palmolive has paused production at its detergent and dish soap plant in Venezuela due to a lack of cardboard boxes to ship products, reports Reuters (19 October, Romero). The cardboard provider, Ireland's Smurfit Kappa, halted production in Venezuela last month after government authorities took over its local unit. Multinationals in Venezuela have drastically scaled back operations as the government's currency controls have made obtaining raw materials difficult, and an economic collapse has curbed demand.