GE To Exit Bulk of GE Capital GE, Alinda Seek Buyer
Transcription
GE To Exit Bulk of GE Capital GE, Alinda Seek Buyer
Market Snapshot* DJIA 18057.65 +98.92 4995.98 +21.41 S&P 500 2102.06 +10.88 10-Year 1.9537% 1/32 Nasdaq Friday, April 10, 2015 30-Year 2.5831% 8/32 Euro $1.06075 -0.0044 $51.64 +0.85 Nymex Crude Source: SIX Telekurs, ICAP plc Stocks U.S. stocks rose Friday, on track for their second weekly gain in a row, as General Electric Co.'s plans to exit most of its lending operations buoyed the Dow industrials and S&P 500. General Electric's shares surged 8.6% on Friday, leading the Dow and S&P higher. GE has resolved to part ways with the bulk of finance business GE Capital, and will sell or spin that part off over the next two years. Treasurys U.S. Treasury bonds perked up Friday but posted the biggest weekly selloff in more than a month. The mixed results suggest investors continue to grapple with the prospect of a major shift in U.S. monetary policy and low bond yields permeating in developed countries. Forex The dollar pushed higher against the euro and the British pound on Friday as investors continued to bet on the U.S. economy's recovery, and for an interest rate increase in the second half of 2015. The euro tumbled 0.6%, to $1.0592, its lowest level since March 18, the day the Federal Reserve's policy-making group met. The pound fell 0.3%, to $1.4650, approaching its lowest level in almost five years. Commodities Oil prices rose for the fourth straight week on expectations that production will soon plateau and amid uncertainty about Iranian nuclear negotiations. Light, sweet crude for May delivery settled up 85 cents, or 1.7%, to $51.64 a barrel Friday on the New York Mercantile Exchange. Prices rose 5.1% in the week. *preliminary values subject to adjustments Tomorrow’s Headlines GE To Exit Bulk of GE Capital In the conglomerate’s most significant strategic move in years, General Electric has resolved to part ways with the bulk of GE Capital, the giant finance business that long accounted for around half the company’s profits but whose risks have rattled investors and weighed on its stock. GE said it would hang on to its aircraft leasing operations, as well as financing for the energy and health-care industries—smaller lending lines that support its core industrial operations. But the bulk of the $500 billion behemoth would be sold or spun off over the next two years, as the company concluded the benefits aren’t worth bearing the regulatory burdens and investor discontent. To punctuate its intentions, the company agreed to sell $26.5 billion worth of office buildings and commercial real estate debt to Blackstone Group LP, Wells Fargo & Co. and other buyers. That follows plans to spin off its privatelabel credit cards and retail-finance businesses as a separate company called Synchrony Financial. The timing of exits from other large lending businesses wasn’t clear and could be drawn out. GE, Alinda Seek Buyer for Gas Utility GE Energy Financial Services and Alinda Capital Partners LLC are seeking a buyer for natural-gas utility SourceGas LLC, according to people familiar with the matter. The company could fetch more than $1.5 billion in a sale, including debt, some of the people said. Potential buyers of SourceGas include large utilities and infrastructure-focused private-equity funds. SourceGas and its subsidiaries operate more than 18,000 miles of distribution, gathering and transmission pipelines as well as storage facilities in Colorado, Arkansas, Nebraska and Wyoming, according to its website. The Golden, Colo.-based company has more than 415,000 customers. General Electric Co. and Alinda formed SourceGas after buying the U.S. natural gas retail distribution assets of Kinder Morgan Inc. in 2007 for $710 million. The next year, SourceGas made its first acquisition, buying Arkansas Western Gas Co. from Southwestern Energy Co. for $224 million. GE explored the sale of its stake in SourceGas two years ago but opted not to move forward at the time, according to people familiar with the earlier process. continued on page 2 Monday’s Calendar N/A G24 Committee of the Whole N/A World Strategic Forum commences Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com page 1 Friday, April 10, 2015 4 p.m. ET Tomorrow’s Headlines continued Import Prices Fall 0.3% In March Prices of imported goods fell broadly last month, raising the likelihood that inflation will remain subdued in coming months amid a limping global economy. Since 2013, the CFPB has been looking into PayPal Credit, a lending service formerly known as Bill Me Later. In Thursday’s filing, eBay said the probe includes “online credit products, advertising, loan origination, customer acquisition, servicing, debt collection and complaints handling practices.” PayPal said it may face fines, payments to customers or be required to make changes to the lending unit’s operations. Import prices fell 0.3% in March from February, the eighth decline in nine months, the Labor Department said Friday. Prices have fallen 10.5% over the past year, largely reflecting last year’s slide in oil prices that has since stabilized. A CFPB spokeswoman declined to comment, but said no lawsuit had been filed as yet. A PayPal spokeswoman declined to comment. Last month’s drop came entirely outside of oil, reflecting lower prices for everything from capital goods such as computers to industrial supplies to automobiles. Nonpetroleum import prices fell 0.4% last month and are down 2.7% over the past year—the biggest 12-month drop since fall 2009. Excel Trust Agrees to Be Purchased by Blackstone Even as oil stabilizes, prices in the U.S. are coming under pressure from stimulus efforts by global central banks that have weakened foreign currencies against the U.S. dollar. A stronger dollar makes foreign goods cheaper in the global market. The purchase price of $15.85 a share is a 15% premium on Excel’s closing price Thursday. The total transaction, including debt, is valued at about $2 billion. Ford To Take Controlling Stake in Russian Venture Ford Motor Co. on Friday said it would take a controlling interest in its Russian joint venture with Sollers OJSC, providing additional funding to the venture and opening the door for further integration at a time when the Russian auto market is suffering. The Dearborn, Mich., auto maker’s move contrasts the strategy of General Motors Co., which last month said it was closing its plant in Russia and stopping sales of most of its products in that market, a shift aimed at helping it meet its European profit targets. Russian car sales fell 43% in March, the latest in a series of monthly declines dating back to early 2014. Once seen as one of the world’s most promising emerging markets, Russia’s car market has collapsed amid wider economic problems, political turmoil and a weak ruble. Dismal market conditions are hitting mass-market auto makers like Ford and GM hard, and dragging down wider European operations. Ford, however, has said it is committed to Russia, given what it believes to be strong longerterm prospects for auto sales. PayPal Says It May Face Regulator Lawsuit EBay Inc.’s PayPal payments unit may be sued by a U.S. regulator over allegedly excessive finance charges for a same-day lending service. In a Securities and Exchange Commission filing Thursday, PayPal said the Consumer Financial Protection Bureau indicated it may file a lawsuit against the division as soon as this quarter. Excel Trust Inc. agreed to be purchased by Blackstone Property Partners LP for about $1 billion in cash. San Diego-based Excel is an REIT that mostly targets community shopping centers. Chief Executive Gary Sabin said the board decided to sell because, “We did not believe the market accurately reflected the value of the assets,” given the strong demand for retail real estate. Under the terms, Excel will pay an additional commonstock dividend in July, but not afterward. Investors Advised To Vote Against Barrick Gold Chairman Pay North America’s biggest proxy-advisory firm has told investors at Barrick Gold Corp. to vote against chairman John Thornton’s $13 million 2014 pay package, adding to growing investor disquiet over governance practices at the world’s largest gold miner. Institutional Shareholder Services said that the former Goldman Sachs president’s 36% pay rise was unwarranted given Barrick’s share price underperformed its peers. Last year, Barrick’s share price lost over a third of its value. In recent years, Barrick has been dogged by investors” concerns that the company was paying Mr. Thornton too much. Mr. Thornton was paid $5 million in cash and was given $7 million to buy Barrick shares for the year ended Dec. 31, 2014, according to the company’s annual management circular. A further $913,547 was awarded to Mr. Thornton in pension and other benefits. “At a time when shareholder returns have significantly lagged peer companies, that total compensation for Thornton .. has nevertheless increased significantly in the most recent year is seen to be problematic at a minimum and seemingly unwarranted,” ISS said in a report viewed by the Wall Street Journal. Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com continued on page 3 page 2 Friday, April 10, 2015 4 p.m. ET Tomorrow’s Headlines sonal data within the country’s borders, a person familiar with the matter said Friday. continued As North America’s biggest proxy-advisory firm, Institutional Shareholder Services, is considered by many the most influential with institutional investors that rely on these services for voting recommendations. Iran Prepared to Extend Nuclear Deal Talks A representative of Rostelecom told a meeting with the communications ministry and data centers that Google has begun placing some of its servers at Rostelecom’s data centers, said a person who was at the meeting, confirming a report by the RBC news website. Another person who works in the industry also said Google has begun moving some of its servers to Russia. GM Shuffles Finance Team Iran will extend talks for a final nuclear deal with world powers beyond a June 30 deadline if the extension is required to satisfy red lines drawn this week by supreme leader Ayatollah Ali Khamenei, a senior Iranian official said. “Iran will work hard to reach an agreement within the specified time of three months or even sooner, but if the deal doesn’t meet the criteria the Leader has introduced for a good deal, we would extend the time,” said Deputy Foreign Minister Abbas Araqchi, a member of the Iranian negotiating team, in televised comments reported Friday by the Mehr News Agency. The comments underlined the wide gaps that still exist between Iran and the group of six world powers who reached a framework deal last week that would limit Iranian nuclear activities and mandate international inspections. EU, Ukraine, Russia Gas Supply Talks Cancelled Gas-supply talks scheduled for next week between energy ministers from Europe, Russia and Ukraine have been cancelled due to still unanswered technical questions, the European Commission said on Friday. The commission, the European Union’s executive arm, said in a statement that “as not all technical questions at expert level have yet been answered, trilateral expert talks need to continue next week in Brussels with a view to properly prepare the next trilateral meeting at political level.” Commission vice-president Maros Sefcovic added he expects the talks to take place before the end of April. The talks, which were supposed to take place in Berlin on Tuesday, are aimed at keeping natural gas from Russia flowing to Ukraine and on to Europe at least through the end of next winter. Gazprom, the Russian state-owned energy giant, in February threatened to cut supplies to Ukraine, claiming the war-torn country hasn’t paid for shipments. Google Moves Some Servers to Russian Data Centers Russian state-controlled telecommunications company Rostelecom said Google Inc. has moved some servers to Russian data centers to comply with a controversial law that mandates that Internet companies store Russians’ per- General Motors Co. Chief Executive Mary Barra is shuffling her finance team, appointing a 35-year-old executive as treasurer while the company is intensifying plans to invest in plants, technology and a revamp of its international presence. Dhivya Suryadevara will take over as treasurer July 1. She will replace Niharika Taskar Ramdev, 45, who was named chief financial officer of the auto maker’s international operations. Ms. Suryadevara will direct GM’s global treasury operations, including capital planning, capital market activities and world-wide banking. She will also participate in business development, risk management and investor relations. Ms. Taskar Ramdev will lead the finance team for GM International, GM’s operating segment which generates $14 billion in revenue and comprises nearly 100 markets outside of China, including India, Africa and the Middle East. Ms. Suryadevara was a part of the team that handled the reduction of GM’s pension plans in 2012 and 2013. GM cut more than $30 billion from its obligations, in part by offering some retired salary workers to convert their monthly annuity to a lump-sum payout. Boeing Receives Order From Panama’s Copa Airlines Boeing Co. has received a $6.6 billion order from Panama’s Copa Holdings S.A., the largest deal ever between a Panamanian and U.S-based company. The order is for 61 737 MAX 8 and MAX 9 airplanes, which Copa Airlines will use to replace some of its existing airplanes. The news came Friday at a signing ceremony during the Summit of the Americas attended by President Barack Obama and Panamanian President Juan Carlos Varela Rodriguez. Stanley Motta, chairman of Copa, said that the order is “an important step in strengthening Copa’s leadership in the region” and will help Panama’s economic growth. Copa will be the first airline in the region to fly the 737 MAX 9 on South American routes. In recent years, Copa has turned its Panama hub into a profitable fortress linking cities in North, South and Central America. Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com page 3 Friday, April 10, 2015 4 p.m. ET Copyright Dow Jones & Co., Inc. The Week Ahead Tomorrow's News Today is made available as a complimentary service to Dow Jones News Service paying subscribers. No further redistribution is permitted without written permission from Dow Jones. Tomorrow’s News Today is intended to provide factual information, but its accuracy cannot be guaranteed. Dow Jones is not a registered investment adviser, and under no circumstances shall any of the information provided be construed as a buy or sell recommendation or investment advice of any kind. Retail Sales, Inflation Seen Rising Want to send a co-branded daily version to your valued clients? Dow Jones offers subscribing firms the opportunity to co-brand Tomorrow's News Today for redistribution to their clients. If your firm is interested in co-branding, please contact us at service@dowjones.com or 1.800.223.2274. Tuesday’s March retail report may be the one with the biggest market-moving potential. That’s because sales fell in the previous three months, raising worries about the consumer sector. Economists surveyed by the Wall Street Journal say top-line sales finally increased in March, to the tune of 1.1%. Automakers have already reported a gain in auto sales last month. The median forecast of economists calls for nonauto sales to be up 0.6%, which would more than offset the 0.1% drop in February. If store sales disappoint again, expect more Fed-watchers to forecast the first interest-rate increase to happen in September rather than in June. Two price reports are on tap next week. The producer price index, out Tuesday, and the consumer price index, out Friday, should show that a pickup in energy prices pushed up headline inflation. The PPI is forecast to rise 0.2% in March and the CPI is expect to be up 0.3%. Excluding food and energy, the core PPI is forecast to be up 0.1% and the core CPI up 0.2%. Factory Data Seen Strong Factory reports will cover March and April. The Federal Reserve will report on total U.S. industrial production on Wednesday. The median forecast expects a 0.5% decrease in output. That reflects an expected drop in utility output which surged 7.3% in frigid February. Two regional Fed banks will release factory surveys covering April. The New York Fed and the Philadelphia Fed will release their surveys on Wednesday and Thursday, respectively. Should You Invest In Bitcoin? Is your stomach strong enough to take a flier on bitcoin? The value of the virtual currency can fluctuate wildly—even in a single day. From July 2010 to February 2014, its price was 26 times more volatile than the S&P 500, according to Matt Elbeck, a marketing professor at Troy University in Alabama, who co-wrote a recent study about bitcoin with a colleague, Chung Baek. In addition, nearly a half-billion dollars worth of bitcoin disappeared last year from Mt. Gox, once the dominant exchange for bitcoin trading. And regulators are paying increasing attention to digital currencies, adding another element of uncertainty. For many investors, those kinds of risks are reason enough to stay far away. Yet bitcoin could have some virtues for certain investors. “It doesn’t trade with stocks or bonds or gold or any other asset that typically appears in a mass-affluent portfolio,” says Nicholas Colas, chief market strategist at New York-based brokerage firm ConvergEx Group. There also is growth potential, given that digital currencies are in their infancy. Investment firms show growing interest in the currency and in the technology behind it, which could point to more widespread use. This year, the value of bitcoin has fallen about 23%, through Thursday, according to a CoinDesk index. Still, a single bitcoin is worth $243.26, up from less than $5 three years ago, according to the index. Dedicating a small sliver of your portfolio to bitcoin may make sense for a younger, affluent investor who won’t get spooked by sharp swings in value. continued on page 5 Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com page 4 Friday, April 10, 2015 4 p.m. ET The Week Ahead Most Fed officials expect to begin raising interest rates this year as the economy improves, though the precise timing of the first increase remains uncertain. continued Mr. Elbeck says such a stake should represent less than 0.5% of your investments. And investors who will need to tap the money in the near term—or whose finances would be compromised if the investment became more or less worthless—should stay far away, says Mark La Spisa, president of Vermillion Financial Advisors in South Barrington, Ill. Banker: Fed Should Wait Til 2016 For Hikes The Federal Reserve should wait until the second half of 2016 before beginning to increase its benchmark shortterm interest rate, which has been pegged near zero since December 2008, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota reiterated Friday. “Under my current outlook, I continue to believe that it would be a mistake to raise the target range for the fed funds rate in 2015,” Mr. Kocherlakota said in remarks prepared for delivery in Bloomington, Minn. Mr. Kocherlakota’s speech was largely identical to remarks he made Tuesday in Bismarck, N.D. Federal Reserve Bank of Richmond President Jeffrey Lacker said earlier Friday that he sees a strong case for the Fed to begin raising rates this summer. “I expect that, unless incoming economic reports diverge substantially from projections, the case for raising rates will remain strong at the June meeting,” Mr. Lacker said. But after a recent run of weak economic data, “it’d be reasonable to think that the timing of the Fed’s first rate hike might be a little further off in time,” Federal Reserve Bank of New York President William Dudley said on Wednesday. A June rate increase “could still be in play,” he said, but “now the bar is a little higher.” Mr. Kocherlakota, on the other hand, has argued that the Fed should hold off on raising rates for now. On Friday, he said the Fed can be “both late and slow” because it will take years for the central bank to achieve its goals of maximum employment and stable prices. The initial rate increase should be delayed until the second half of 2016, he said, and the benchmark federal funds rate should rise to roughly 2% by the end of 2017. In March, the median of policy makers’ projection for the fed funds rate at the end of 2017 was 3.125%. Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com page 5