In Brief: CLO Edition
2018 Oct 15
Today's Top Story
BOE to Advise Financial Institutions to Prepare for Climate Change
The Bank of England's (BoE) Prudential Regulation Authority (PRA) will advise all banks and insurers to place a senior executive in charge of managing climate-change risks and report to the board, or face consequences. A recent BoE survey showed that only 10 percent of banks were taking a long enough view of climate-related risks. The survey also found that banks, on average, were found to have a four-year planning horizon. Although some banks have said they will reconsider their lending to high carbon-intensity projects, the BoE wants them to better analyze the risks, such as what impact a flood plain might have on their mortgage portfolio. Some countries, like France, have required companies to disclose how they are addressing climate change, but the move by the PRA is considered a global first by a financial regulator, reports the Financial Times (14 October, Binham, Hook). "This is the clearest set of guidelines we have yet seen from any central bank or regulator for what banks and insurance should be doing to proactively manage climate risks," said Ben Caldecott, director of the Oxford Sustainable Finance Programme.
Deciem Founder Ousted on Judge's Order
Ontario Superior Court Judge Michael Penny has dismissed Brandon Truaxe as co-CEO of Canadian skincare brand Deciem. On 11 October, Estée Lauder, a minority investor in Deciem, asked the court to replace Truaxe, the founder of the brand, with Deciem's co-CEO Nicola Kilner on an interim basis. Estée Lauder also requested the removal of Truaxe from Deciem's board of directors, preventing him from hiring or firing employees and issuing statements on the company's social media accounts. The move comes after months of erratic online behavior by Truaxe. He took over the company's social media accounts in January and began posting personal and sometimes concerning messages, often accompanied by rambling captions, confusing fans of the brand, reports BBC News (12 October).
Mergers and Acquisitions
Harris and L3 Agree to Merge
Reuters (14 October, Renshaw, Brumpton) reports that military communication equipment providers Harris Corp. and L3 Technologies have agreed to an all-stock merger to create a defense contractor with a market value of US$34 billion. Rising defense spending under President Trump and the GOP-majority Congress is prompting contractors to consider combinations to give them more scale to bid on larger projects. The combined entity, dubbed L3 Harris Technologies, will have approximately 48,000 employees and customers in more than 100 countries. The merger is on track to close mid-year 2019. The new company's board of directors will have a dozen members, comprised of six directors from each company.
Noodles & Company Names New GC
Melissa M. Heidman has been promoted to executive vice president, general counsel (GC), and secretary at Noodles & Company. She had served as associate GC since August 2011, according to a release published by Nasdaq (12 October).
Thailand Seeks to Bolster Copyright Act
Thailand is seeking to overhaul its 1994 Copyright Act. The proposed law would require internet service providers to put technical measures in place to detect infringing content and set policies that would block users who post any stolen material. The current act protects content five decades after the date of creation, but the proposed law would authorize copyrights for the life of the owner plus 50 years, reports Bloomberg BNA (14 October, Hoang). Thailand's Commerce Ministry said it expects a cabinet vote this month on the measure, which would go to the National Legislative Assembly and then to the king for his signature. The move is part of Thailand's endeavor to join the World Intellectual Property Organization's Copyright Treaty so that its citizens' copyrights will be protected internationally. Still, not everyone supports the changes. Phil Robertson, the deputy director of Human Rights Watch's Asia division, warned that people would abuse the new law to remove any content they do not like from the internet.
Apple Criticizes Australia's Proposed Anti-Encryption Law
Australia's Access and Assistance Bill would require tech companies to help federal authorities gain access to encrypted communications, which the government has said are being used by terrorist groups and criminals to avoid detection. However, in a seven-page submission to federal Parliament, Apple said the bill is "dangerously ambigious" and could undermine the privacy and security of smartphone users, reports the Sydney Morning Herald (14 October, Morgan). The bill would make Apple's encrypted messaging service iMessage susceptible to breaches by authorities, as would third-party messaging services and locked iPhones. Other tech firms operating in Australia have made a submission against the bill as well, including Optus, Telstra, and Mozilla. Meanwhile, companies such as Facebook and Google have teamed up with civil and digital rights groups to oppose the bill.
Residents of San Francisco to Vote on Taxing Businesses to Help Needy
Proposition C, a measure on San Francisco's 6 November ballot, would tax hundreds of San Francisco's richest companies to help thousands of homeless and mentally ill residents. Last year, San Francisco spent US$380 million of its US$10 billion budget on services related to homelessness. The measure is expected to raise US$300 million a year, nearly doubling what the city already spends. Still, new Mayor London Breed is siding with the city's Chamber of Commerce in urging a no vote. He said the measure lacked collaboration, may attract homeless people from neighboring counties, and could cost middle-class jobs in retail and service. A similar effort failed earlier this year in Seattle, reports the Associated Press (14 October, Har). Many cities along the West Coast are wrestling with homelessness, driven in part by a growing number of well-paying tech jobs that price lower-income residents out of tight housing markets.
Food and Beverage
Food Companies Booting Their Dated Brands
Many food makers are beginning to modify their portfolios to scrap slow- or no-growth units as consumers increasingly prefer fruits, vegetables, grains, and meats free of preservatives and sweeteners. For example, J.M. Smucker Co. said in July that it was selling its U.S. baking unit, including Pillsbury, to focus on innovation in segments such as coffee and peanut butter, which can be marketed as healthful. "A lot of consumers see big, giant companies as providers of highly processed and preserved foods," said Pinar Hosafci, a food industry analyst for market researcher Euromonitor International Plc in London. "Divestitures have to do with the fact that Big Food really wants to change their image." Meanwhile, General Mills, which also uses the Pillsbury brand for frozen biscuits and cookie dough, has said it wants to divest 5 percent of its portfolio to pursue growth elsewhere, including in cereals and yogurt with less sugar. Chocolate maker Hershey has sold its potato chips product and purchased a brand called Smart Puffs, which advertises itself as a gluten, preservative, and trans fat-free snack, reports Bloomberg (15 October, Singh, Porter, Patton).
Sears Files for Bankruptcy
Sears Holdings has filed for Chapter 11 bankruptcy protection, reports the New York Times (15 October, Corkery). The department-store retailer is hoping to use the filing in federal court in New York to slash its debts and stay in business at least through the holidays. As part of the reorganization plan, Sears has negotiated a US$300 million loan to help keep its shelves stocked and employees paid.
Probe Opened Into Alleged Chinese Mattress Dumping
The Wall Street Journal (12 October, Maidenberg) reports that the U.S. Department of Commerce has initiated an investigation into whether mattresses imported from China are being sold in the United States below fair market value. Serta Simmons Bedding, Tempur Sealy International, and other U.S. mattress manufacturers filed a joint petition in October with U.S. trade officials claiming that Chinese exporters have gained market share by undercutting prices of domestic producers and urging them to implement duties on an array of mattress products. A preliminary determination on the matter is expected on or before 2 November. Approximately 4.6 million mattresses were imported from China last year versus 1.8 million in 2016. The value of mattress imports from China exceeded US$436.5 million in 2017.
Walmart Nears Deal to Settle Suit Over Lack of Seating for Cashiers
Walmart could pay US$65 million in a nearly decade-old class action lawsuit over its inadequate seating for cashiers, Fortune (14 October, Hinchliffe) reports. Approximately 100,000 current and former California Walmart cashiers are eligible to receive part of the payout. The plaintiffs say the retailer violated a 2001 California wage order that employees be given "suitable seats when the nature of the work reasonably permits." Walmart has long argued that the nature of their cashiers' work does not permit them to sit down. The two sides in the case have just filed a proposed settlement. Terms call for Walmart to launch a pilot program providing stools to cashiers who request them and for there to be no retaliatiation against workers who opt to sit down. The lawsuit is similar to one CVS lost over the same issue two years ago.