2024-07-22 19:28

Bankers push for fees on deals that regulators thwart Top banks seek up to 25% of breakup fees Fairness opinion fees rise to 20-25% of success fees NEW YORK, July 22 (Reuters) - Investment bankers are changing how they ask to be paid in a bid to preserve and boost fee revenue they generate from advising companies on mergers and acquisitions, as more big deals face challenges by regulators. Many of these fees are awarded only if a transaction is completed. Bankers have been pushing to get paid even when a deal is thwarted by regulators, and are charging more for services paid irrespective of whether a transaction closes, interviews with more than a dozen dealmakers showed. The banks' tactics include taking a larger slice of the breakup fee paid by the acquirer to the target for failing to close a deal, and charging more for "fairness opinions" they provide to companies on whether they should sell themselves. At stake is the dealmaking revenue of the top investment banks in North America and Europe. While banks that are listed on the stock market do not break down the source of their fees in their investment banking revenue disclosures, the dealmakers said that fees paid even when transactions fail have helped boost profits this year amid a flat market for mergers and acquisitions and a rise in the challenges to deals. U.S. antitrust regulators filed 50 enforcement actions against mergers in the 12 months to the end of September 2022, representing the highest level of enforcement activity in over 20 years, according to the most recent data published by the Federal Trade Commission and U.S. Department of Justice. In Europe, the European Commission issued two prohibition decisions in 2022 and one in 2023 against deals, compared with none in 2021 and 2020. "The European Commission is more likely than ever to block a merger," White & Case lawyers wrote in a note to clients earlier this year. Political opposition amid rising economic protectionism is also a growing risk and has led, for example, to U.S. officials casting doubt on whether Japan's Nippon Steel (5401.T) , opens new tab can complete its $14.9 billion acquisition of U.S. Steel (X.N) , opens new tab amid U.S. labor union opposition. Top investment banks, including Goldman Sachs (GS.N) , opens new tab, JPMorgan Chase (JPM.N) , opens new tab and Morgan Stanley (MS.N) , opens new tab, are pushing to be paid as much as 25% of the breakup fee on some transactions, depending on the transaction's size, according to the dealmakers who were interviewed. That is up from a historic average of receiving about 15% of the breakup fee, they added. Goldman Sachs, JPMorgan, and Morgan Stanley declined to comment. Investment banks have also been making roughly 20-25% of their advisory fees to companies selling themselves subject to delivering fairness opinions, which are paid even if a deal does not close. Referred to in the industry as "announcement" fees, these are up from an average of 5% to 6% of the total advisory fees during the previous decade, according to several dealmakers and regulatory filings. SPIRIT AIRLINES, WORLDPAY In the case of JetBlue's (JBLU.O) , opens new tab failed $3.8 billion takeover bid for Spirit Airlines , Spirit's advisers Barclays and Morgan Stanley negotiated a cut of roughly 25% of the termination fee that JetBlue paid to Spirit when regulators shot down the deal earlier this year, according to people familiar with the matter. On deals of a similar size, banks were paid less than 20% of the breakup fee a few years earlier, the sources added. Barclays and Morgan Stanley declined to comment on the matter. In another example involving private equity firm GTCR's $18.5 billion deal to buy a majority stake in the merchant services business of payment processing company Fidelity National Information Services (FIS.N) , opens new tab, Worldpay's lead advisers JPMorgan and Goldman Sachs took a cut of about 25% of the total fees as an announcement fee, the sources said. On deals of a similar size, banks were paid about 5% to 6% of the advisory fees as an announcement fee a few years earlier, the sources added. JPMorgan declined to comment and Goldman Sachs did not respond to requests for comment on the matter. "The increased scrutiny of transactions by antitrust regulators and uncertainty over how the antitrust laws will be applied has led to significant changes in the way that M&A agreements are negotiated," said Logan Breed, global co-head of the antitrust, competition and economic regulation practice at law firm Hogan Lovells. Sign up here. https://www.reuters.com/business/finance/with-no-big-deal-safe-investment-bankers-move-safeguard-fees-2024-07-22/

2024-07-22 17:53

NEW YORK, July 22 (Reuters) - L Catterton, the private equity firm backed by luxury goods giant LVMH (LVMH.PA) , opens new tab, has approached Mattel (MAT.O) , opens new tab, the toy maker behind Barbie and Hot Wheels, with an acquisition offer, people familiar with the matter said on Monday. The move could prompt other potential suitors to consider bids for Mattel, including rival Hasbro (HAS.O) , opens new tab, which has become aware of L Catterton's approach and is discussing whether it should also submit an offer, one of the sources said. Hasbro and Mattel have held unsuccessful merger talks over the years. The sources cautioned that there is no certainty L Catterton's approach will push Mattel into exploring a sale and asked not to be identified because the matter is confidential. A Mattel spokesperson said the company does not comment on speculation. "We are very confident in Mattel's strategy and our ability to create long-term shareholder value as a standalone company," the spokesperson said. Hasbro declined to comment, while L Catterton did not respond to a request for comment. Mattel shares jumped 20% to $19.49 following the Reuters report of the approach, giving the toy maker a market value of $6.5 billion. Hasbro shares rose 4% to $61.25. Mattel has been turning to media partnerships to offset tepid demand for its toys. Despite the commercial success and acclaim of the Barbie movie released last year, its shares had lost 23% of their value in the last 12 months, as investors fretted about Mattel's profitability and handling of unprofitable toy franchises. The El Segundo, California-based company posted a smaller-than-expected loss for the first quarter in April, helped by its tight leash on costs while it grapples with weak sales. Activist investor Barington Capital in February called on Mattel to pursue changes, including exploring options for its Fisher-Price and American Girl brands and separating the roles of CEO and chairman. L Catterton, which has $34 billion in assets under management, has made more than 250 investments in consumer brands since its launch in 1989, according to its website. In 2016, the firm partnered with LVMH and the family office of LVMH CEO Bernard Arnault, and sold a stake to them. Hasbro has also taken steps to reduce expenses. The Play-Doh maker reported a smaller-than-expected drop in first-quarter sales in April and handily beat profit estimates, helped by leaner inventories and steady digital gaming revenue. Last year, Hasbro agreed to sell its eOne film and TV studio to Lions Gate Entertainment (LGFa.N) , opens new tab for about $500 million as part of its push to focus on more profitable brands. Hasbro's shares have performed better than Mattel's, down 9% in the last 12 months. Mattel and Hasbro reached a partnership agreement last year to create co-branded toys and games from some of their most popular brands, including Barbie-branded Monopoly games and Transformers-branded UNO games. Analysts have said a merger between the two companies could unlock a lot of value but also face major antitrust obstacles. Sign up here. https://www.reuters.com/markets/deals/buyout-firm-l-catterton-approaches-mattel-with-acquisition-offer-sources-say-2024-07-22/

2024-07-22 17:05

Ryanair warns ticket prices falling as travel boom fades Boeing gets order boost for 777X from Korean Air UK PM stresses importance of fighter jets amid defence review FARNBOROUGH, England, July 22 (Reuters) - A plunge in Ryanair's (RYA.I) , opens new tab quarterly profits cast a shadow over the opening of the Farnborough Airshow on Monday, where aviation leaders were already fretting about supply chain snags, aircraft delays and floundering plans to cut emissions. Boeing (BA.N) , opens new tab announced a bumper order from Korean Air (003490.KS) , opens new tab for 20 777X jets and 20 787s, worth $7 billion according to estimated delivery prices from Cirium Ascend, in a boost for the U.S. planemaker's long-delayed 777X programme. But many delegates at the July 22-26 gathering of aviation leaders were not expecting the traditional deluge of deals as Airbus (AIR.PA) , opens new tab struggles to reach output goals and Boeing adopts a low-key posture amid its safety crisis, which was triggered by a panel flying off a 737 MAX jet in January. Aviation was hit hard by the pandemic which saw air travel collapse only to bounce back sharply. That left many firms scrambling to resolve labour and parts shortages. The situation has been exacerbated by a spiralling crisis at Boeing, which has had to slow production of its best-selling 737 MAX plane following the panel blowout. Delays in delivering planes have hampered airlines' efforts to capitalise on the post-pandemic surge in travel and inflated costs, and signs are growing that they are struggling to pass those costs on to consumers as demand starts to normalise. Ryanair, Europe's biggest budget airline, reported on Monday an almost halving in quarterly profit, with fares plunging 15% and management warning of more pressure to come on prices. CEO Michael O'Leary added there had been some improvement on deliveries from Boeing, but that there were still delays and he was getting a little concerned about deliveries due next year. Separately, flydubai said its fleet expansion plans had been hit by delays in Boeing deliveries, while the boss of Air India said it was having to rob parts from some of its other aircraft to keep planes flying amid industry supply chain snags. "The big question for the airlines here at Farnborough is what has happened to the halo effect of demand after the pandemic - has that recovery stalled?" said veteran aviation journalist Mark Pilling, who was due to host a panel of CEOs. Pegasus Airlines (PGSUS.IS) , opens new tab CEO Guliz Ozturk told reporters that customers were going "back to basics" seeking lower fares. "We have started seeing the normalisation of demand. What does it mean? I mean, the demand is there, but now the travellers are looking for, as before the pandemic, for the most affordable, the lowest, the best price for their travel." Hot on the heels of Ryanair's warning, Air Canada (AC.TO) , opens new tab cut its full-year core profit forecast, blaming over-capacity in some markets and weaker pricing power on international routes. Its shares fell nearly 4% in early trading. Airline stocks were among the biggest fallers in Europe (.STOXX) , opens new tab, with Ryanair down 16% at 1600 GMT, easyJet (EZJ.L) , opens new tab down 7.5%, TUI (TUI1n.DE) , opens new tab off 4.6% and BA-owner IAG (ICAG.L) , opens new tab 3.5% lower. However, Boeing's vice president of commercial marketing, Darren Hulst, said there was no sign of a weakening in demand for planes and suggested the warnings from airlines were just a sign of a "little bit more reality in the marketplace". FIXING SUPPLY CHAINS With dealmaking expected to be limited, the focus at the air show is likely to fall on how manufacturers are tackling supply chain blockages. Asked about flydubai's complaints, Hulst conceded that Boeing had "disappointed our customers ... over and over again, in many cases," but that the work the company was doing this year was focused on ensuring that wouldn't happen again. Airbus CEO Guillaume Faury also said on Sunday that the European planemaker was making progress ramping up production of its top passenger jets. Some deals will get over the line, delegates said. Japan Airlines (9201.T) , opens new tab said it had ordered 10 Boeing 787-9s and agreed options for 10 more, while Vietnamese budget carrier VietJet (VJC.HM) , opens new tab firmed up a deal for 20 Airbus A330neos. Industry sources said Virgin Atlantic was close to placing a top-up order for Airbus A330neos and Saudi low-cost carrier Flynas was poised to order up to 30 of the same widebody aircraft. The companies declined to comment. Turkish Airlines (THYAO.IS) , opens new tab, however, said engine talks were still holding up a potential big order with Boeing. This week’s air show will be peppered with sustainability panels and workshops as aerospace giants and airlines seek to emphasise their commitment to reducing carbon emissions, even as they plan to massively expand global air travel. On the defence side, the focus will be on Ukraine, possible delays to America's future F-22 fighter replacement, code-named NGAD, and a defence review by Britain's new Labour government. At the show, British Prime Minister Keir Starmer stressed the importance of the UK's fighter jet capability, but stopped short of guaranteeing its next generation combat air programme with Japan and Italy would not be affected by the review. Sign up here. https://www.reuters.com/business/aerospace-defense/sliding-airline-profits-plane-delays-cast-shadows-air-show-2024-07-22/

2024-07-22 15:24

Canadian dollar falls 0.2% against the greenback Touches its weakest since June 14 at 1.3774 Price of U.S. oil decreases 0.4% Bond yields trade mixed across flatter curve TORONTO, July 22 (Reuters) - The Canadian dollar weakened to a five-week low against its U.S. counterpart on Monday as speculators raised their bearish bets on the currency ahead of a potential interest rate cut this week by the Bank of Canada. The loonie was trading 0.2% lower at 1.3760 to the U.S. dollar, or 72.67 U.S. cents, after touching its weakest intraday level since June 14 at 1.3774. "The CAD's focus this week falls squarely on Wednesday's BoC policy decision where a 25 bps (basis points) cut is more or less fully priced in at this point," Shaun Osborne, chief currency strategist at Scotiabank, said in a note. The Canadian central bank is widely expected to cut its benchmark interest rate by 25 basis points to 4.50% on Wednesday, its second cut in as many months, after recent data showed inflation easing and a decline in retail sales. Investors see a 94% chance of a rate cut this week, while they are expecting 62 basis points of easing in total by the end of the year, swaps market data shows. Non-commercial accounts had increased their net short positions in the Canadian dollar to 132,473 contracts as of July 16 from 111,212 in the prior week, data on Friday from the U.S. Commodity Futures Trading Commission showed. In June, speculative net shorts in the currency reached an all-time high of 147,931 contracts. The price of oil, one of Canada's major exports, fell to a five-week low as a surprise move by China to lower a key short-term policy rate did little to boost sentiment. U.S. crude oil futures were down 0.4% at $79.85 a barrel. Canadian bond yields were mixed across a flatter curve. The 10-year was down 2 basis points at 3.377%. Sign up here. https://www.reuters.com/markets/currencies/canadian-dollar-hits-5-week-low-ahead-expected-rate-cut-2024-07-22/

2024-07-22 14:01

July 22 (Reuters) - Vista Outdoor (VSTO.N) , opens new tab said on Monday Czechoslovak Group had raised the base purchase price for its ammunition business, Kinetic Group, by $50 million to $2.15 billion. Vista had rejected investment firm MNC Capital's final buyout offer of $3.2 billion, or $42 per share, for the entire company earlier this month, saying the bid undervalued Revelyst — its performance gear business. MNC said on Monday it would make a tender offer to Vista's shareholders at $42 per share, if the company approved and would not reduce its final bid. Vista, responding to MNC, said it does not support the proposal and reiterated that it "firmly believes" the transaction with CSG is superior. It also clarified that MNC is not subject to any restrictions from Vista that would require its consent to an unsolicited tender offer by MNC. Vista had decided to split its performance gear and ammunition units into two separate companies in 2022. CSG's latest bid comes after its proposed transaction faced opposition from proxy advisory group Institutional Shareholder Services and shareholder Gates Capital Management. ISS had said MNC's offer was a "better alternative". This is the fourth time that CSG has raised its bid for Kinetic Group, which houses brands such as Federal Ammunition, since its initial offer of $1.91 billion made in October. The Prague-based defense firm also raised the cash consideration payable to Vista's shareholders by $3 per share. On closing of the deal, Vista stockholders would receive $24 per share in cash and one share of Revelyst common stock. Vista adjourned its virtual special shareholder meeting to July 30 from July 23 and said it expects the deal with CSG to close in early August. The company also reported preliminary first-quarter results for both units and reiterated its fiscal 2025 sales forecast in the range of $2.67 billion to $2.78 billion. Sign up here. https://www.reuters.com/markets/deals/csg-increases-purchase-price-vista-outdoors-unit-215-billion-2024-07-22/

2024-07-22 13:19

BUENOS AIRES, July 22 (Reuters) - Brazil's economy will continue growing at a steady pace over the medium term thanks to a continuous rise in public spending that is set to keep fiscal deficits uncomfortably high, a Reuters poll showed. This would add to an already large budget gap that last month triggered a confidence crisis and a sell-off in Brazilian assets. Tensions subsided after President Luiz Inacio Lula da Silva signalled more fiscal restraint. However, analysts remain cautious about the direction of public finances. So far, the impact of the market rout on the real economy has been contained to a small increase in inflation expectations due to a weaker currency. Gross domestic product (GDP) is set to expand 2.0% both in 2024 and next year, according to median estimates from 45 economists polled over July 8-18. That compares to forecasts of 1.8% and 2.0%, respectively, in an April survey. "Despite the pause in the central bank's easing cycle, a hot labor market and fiscal stimulus measures will help keep GDP growth close to 2.0%," said Marcela Kawauti, chief economist at Lifetime Investimentos. "On the other hand, strong demand should maintain consumer prices under pressure, which, in addition to the effect of the depreciation of the local currency, will probably keep annual inflation around 4.0%." Consensus views for inflation in the poll rose to 4.0% in 2024 and 3.6% in 2025 from 3.9% and 3.5% in April's poll. It is expected to average 4.3% this quarter before slowing next year. Asked what was more likely for inflation in the rest of 2024, a slim majority of six of 11 respondents said it could run higher than projected. The other five said lower. A rate of 4.0% would be a full percentage point above the mid-value of the central bank's target for 2024, of 3.0% +/- 1.5 percentage points. A pickup in inflation expectations this year pushed the bank to suspend a series of interest rate cuts in June. The move, defended by Banco Central do Brasil's orthodox governor Roberto Campos Neto, prompted a strong public rebuke from Lula, taking an old spat to a level that further spooked investors during the recent market turmoil. The latest median growth estimates in the poll were below the government's projections of 2.5% for this year and 2.6% in 2025, including positive contributions of aid programs for different sectors. A budget freeze announced last week was not enough to dispel analyst worries. "We expect a very gradual fiscal correction but anticipate fiscal deficits will remain large," said Elijah Oliveros-Rosen, chief economist - EM at S&P Global Ratings. "A lack of visibility on government efforts to contain non-discretionary spending leads us to believe the general government primary result will remain slightly negative over 2024-2027, at an average of -0.7% of GDP." In a report, Citi analysts said the freeze meant a reduction in the expected 2024 deficit to -0.5% from -0.7%, still "insufficient to deliver the year-end primary fiscal result within the target band (-0.25% of GDP to 0.25% of GDP)." (Other stories from the Reuters global economic poll) Sign up here. https://www.reuters.com/world/americas/brazils-economy-seen-growing-steadily-fiscal-deficit-stay-high-2024-07-22/