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Two suitors for Thyssenkrupp elevator division sign fair owner pledge

DUESSELDORF, Germany (Reuters) – The two consortia bidding for Thyssenkrupp’s (TKAG.DE) 16 billion euro ($17.3 billion) elevator division have signed a fair owner agreement, a key demand by labor union IG Metall to protect jobs, the union and a company spokesman said on Saturday.

The move leaves wide open the race for the asset, potentially Europe’s biggest private equity transaction since 2007.

Two consortia are battling it out: Blackstone (BX.N), Carlyle (CG.O) and the Canada Pension Plan Investment Board on one side and Advent and Cinven, supported by the Abu Dhabi Investment Authority and Germany’s RAG foundation, on the other.

Thyssenkrupp’s management board will make a decision about the sale in the coming week, and then inform the supervisory board, the union said.

The supervisory board is scheduled to meet on Feb. 27.

The agreement between labor and the two consortia includes the preservation of collective bargaining agreements and safeguarding the company pension scheme, according to the union.

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Mexico billionaire Slim's construction company plans $1.4 billion offering

MEXICO CITY (Reuters) – Mexican infrastructure company Promotora del Desarrollo de America Latina, which is controlled by billionaire Carlos Slim, said on Friday that it plans a public offering of real estate investment trust units worth almost $1.4 billion this year.

Promotora Ideal (IDEALB1.MX), as the company is known, said in a filing to the Mexican stock exchange that the 25.8 billion Mexican pesos ($1.365 billion) offering would be via a Fibra E, a Mexican real estate investment trust.

If successful, the listing would be the first of its type in a long time. In recent years, experts said, local companies have mostly raised funds via bonds and certificates of capital development (CKDs).

Promotora Ideal manages highway, water treatment, electric energy generation and social infrastructure projects across Mexico. Like other companies controlled by Slim, it is listed on the Mexican stock exchange.

The Fibra E structure was launched in 2015 in an attempt to attract investments in infrastructure and energy projects following a far-reaching reform under former President Enrique Pena Nieto that opened these sectors to private investors.

Credit Suisse has been tapped for the placements, documents published by the local stock exchange showed.

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Axel Springer proposes dividend cut to 1.16 euros per share

FRANKFURT (Reuters) – Axel Springer (SPRGn.DE) is proposing to cut its dividend for 2019 to 1.16 euros a share, down from 2.10 euros a share in 2018, documents which accompany Springer’s proposed delisting showed on Friday.

A spokesman for Axel Springer said the lower dividend would free up cash which can be invested into growth instead.

Last month the German media company, which publishes Germany’s Bild newspaper, said it planned to delist from the Frankfurt Stock Exchange as part of a 63 euros per share takeover by U.S. private equity investor KKR.

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Spotlight turns to Goldman Sachs after Morgan Stanley deal

NEW YORK (Reuters) – For months, the watercooler chatter around big Wall Street banks focused on whether Goldman Sachs Group Inc (GS.N) would finally pursue a major deal. Instead, Goldman’s top rival beat it to the punch.

On Thursday, Morgan Stanley (MS.N) said it plans to acquire E*Trade Financial Corp (ETFC.O) for $13 billion, cementing its position as a hub where individuals manage their finances. If successful, it will be the biggest acquisition by a big Wall Street bank since the 2007-2009 financial crisis.

It also underlines Goldman’s position as an outlier as the only big U.S. bank to not do any transformative deals during or since that time. Unlike Morgan Stanley, JPMorgan Chase & Co (JPM.N) or Bank of America Corp (BAC.N), which all executed major transactions during or after the crisis, Goldman looks much the same, analysts say.

Instead of opening its own wallet to expand, Goldman is trying to grow a fledgling retail bank, create a treasury-services business, and expand in asset management, corporate lending and trading — largely all from the ground up.

Asked about the matter in January, Goldman Sachs Chief Executive David Solomon dismissed the idea.

“We’re not out there looking to buy a big bank,” Solomon told Bloomberg TV.

A Goldman Sachs spokesman declined to comment on whether Morgan Stanley’s deal affects its own strategy.

Goldman was among a litany of financial firms that were rumored as suitors of E*Trade over the past year or so, as the retail trading firm looked for an acquirer. Analysts who follow Goldman and sources inside the bank have told Reuters it would not be a good deal for a variety of reasons, including technology, culture and price.

Morgan Stanley’s stock fell 4.5% on Thursday after announcing the deal. Goldman was down 2%.

With Goldman’s stock value weak and with it doing less business with average investors, the E*Trade deal would have been too expensive, said David Hendler of Viola Risk Advisors.

“Morgan Stanley is better positioned to acquire E*Trade because of its higher stock valuation and more significant cross-over into its network of brokers and workplace assets than Goldman Sachs,” said Hendler.

Goldman’s share price as of Thursday’s close was 1.1 times its stated tangible book value as of the fourth quarter compared with 1.3 times tangible book value for Morgan Stanley.

Goldman entered the retail space a long time after Morgan Stanley or other U.S. rivals.

It purchased $16 billion worth of deposits from a General Electric Co (GE.N) subsidiary in 2015, and has since bought a few relatively small companies to expand its presence in retail and wealth management: a personal-finance startup called Clarity Money, a retirement platform called Honest Dollar and an investment-advisory firm called United Capital.

But none of those deals gave Goldman a big pool of retail deposits or other kinds of businesses that could offset a sharp decline in trading revenue.

Michael McTamney, an analyst of big banks and brokers for credit rating service DBRS Morningstar, said Morgan Stanley’s move deal puts more pressure on Goldman.

“Goldman Sachs has, historically, been a build-up-themselves organization as opposed to making acquisitions,” McTamney said. Now there will be more questions from investors about whether acquisitions are needed, he said.

DEALMAKER IN CHIEF

Associates say that Solomon is staking his legacy on turning Goldman into a global, full-service financial services firm that can compete with rivals. His predecessor, Lloyd Blankfein, has expressed regret about not acquiring during the crisis for the same kind of growth

A longtime dealmaker, Solomon became CEO in 2018 and was instrumental in a turnaround plan that preceded his elevation. At Goldman’s first-ever investor day in late January, his management team set ambitious targets to grow the bank’s consumer division over the next five years.

Goldman may be able to do that without an acquisition, but a deal would help, said Dick Bove, a senior research analyst at Odeon Capital.

“If they acquire a bank, which will bring in low-cost deposits, I think that would be a big plus,” he said.

“Goldman, clearly under Blankfein, missed the boat.”

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'Massive passive' funds squeeze stock pickers

NEW YORK (Reuters) – A $4.5 billion buyout of Legg Mason Inc (LM.N) by rival Franklin Resources Inc (BEN.N) announced on Tuesday is the latest example of how a decade-long shift into low-cost, index-tracking products is pushing stock-picking funds to join forces to remain competitive.

Mergers and acquisitions within the U.S. asset management industry have increased since 2014, according to data from Refinitiv. Nearly 200 deals took place last year, the most since at least 2000.

Past deals between stock pickers include Federated Investors’ 2018 purchase of a majority stake in Hermes Fund Managers, leading to the combined firm Federated Hermes Inc (FHI.N), and Henderson Global Investors’ 2017 acquisition of Janus Capital to form Janus Henderson Group PLC (JHG.N).

(Graphic: U.S. fund managers up for sale png link: here).

The comparatively low costs of exchange-traded funds have forced actively managed funds to slash their fees, pushing active firms to merge in order to preserve their profits, said Larry Tabb, founder of capital markets research firm Tabb Group.

“It forces what used to be storied asset management firms to start acquiring or be acquired,” he said. “The larger funds need to become even bigger.”

(Graphic: Active managers eclipsed by passive giants png link: here).

The largest passive managers now eclipse active funds in assets under management, which has helped to spur consolidation.

In 2019, passive U.S. equity funds overtook active funds in net assets under management, according to Morningstar Direct. As of Dec. 31, passive U.S. equity funds managed $4.78 trillion in net assets while active funds managed $4.58 trillion.

(Graphic: The rise of passive funds png link: here)

BlackRock Inc (BLK.N) alone has more than $7 trillion in total assets under management, while Vanguard Group has more than $5 trillion. A combined Franklin Resources and Legg Mason would manage about $1.5 trillion in assets.

At the same time, since the bull market for U.S. equities started in 2009, passive large-cap funds have largely outperformed their active counterparts, according to Morningstar Direct.

(Graphic: Active management, smaller returns png link: here)

Last year’s performance followed that trend. Passive U.S. large-cap blend equity funds – in which neither growth nor value stocks dominate – posted a 30.1% return in 2019, whereas active U.S. large-cap blend equity funds returned 27.8%. The benchmark S&P 500 .SPX index rose 28.9% last year.

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Bunge bids for two Brazil soy plants, building lead over Cargill

SAO PAULO (Reuters) – Bunge Ltd has offered to buy two soy processing plants in Brazil from local crusher Imcopa, the U.S. grains trader said on Tuesday, reinforcing its position as the country’s biggest oilseeds processor.

Two sources familiar with the transaction told Reuters that Bunge agreed to pay about 50 million reais ($12 million) for the plants while assuming debt of around 1 billion reais related to the assets, located in the state of Paraná.

In an emailed statement, Bunge confirmed making a bid for the assets, adding that it was awaiting a court decision to continue with the process. It declined to give more details.

Bunge was the only company to submit a bid in the auction, according to one of the sources.

Imcopa, now restructuring debt in bankruptcy court, did not immediately respond to a request for comment.

Bunge is already Brazil’s top oilseeds processor, and the move will help it expand a lead over rival Cargill, which has two thirds as many crushing and refining facilities, according to data from national oilseeds group Abiove.

According to Abiove data from 2018, Cargill owned eight active oilseed crushing units in Brazil and Bunge owned 12.

“Bunge not only intends to acquire the two industrial plants … (it also) intends to hire a significant number of the current employees,” according a filing Bunge made to the bankruptcy court dated Nov. 26.

On Imcopa’s website, the company touts capacity to crush 1.5 million tonnes of soybeans per year, producing up to 240,000 tonnes of soy protein concentrate.

The minimum asking price of each of the plants was 25 million reais in an auction scheduled for Feb. 17, according to bankruptcy court documents. The debt attached to the plants was 1.043 billion reais in December 2018, public records show.

Last year, Imcopa ended a leasing contract with Brazilian brewer Grupo Petrópolis for use of the two crushing plants, alleging a breach of contract, and put the assets up for sale.

The leasing agreement was set to expire in 2024. Petrópolis declined to comment on Bunge’s bid to assume control of the two Imcopa plants.

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Bunge agrees to buy two Brazil soy plants, assume debt – sources

SAO PAULO (Reuters) – Bunge Ltd has agreed to buy two soy processing plants in Brazil and assume debt from local crusher Imcopa, two people familiar with the matter said on Tuesday.

Bunge agreed to pay about 50 million reais ($12 million) for the plants and assume debt of around 1 billion reais related to the two plants in the state of Paraná, according to the sources, who requested anonymity because the deal is not yet public.

Bunge, already the biggest soy processor in Brazil, and Imcopa, now restructuring debt in bankruptcy court, did not immediately respond to requests for comment.

On Imcopa’s website, the company touts capacity to crush 1.5 million tonnes of soybeans per year, producing up to 240,000 tonnes of soy protein concentrate.

The minimum asking price of each of the plants was 25 million reais in an auction scheduled for Feb. 17, according to bankruptcy court documents. The debt attached to the plants was 1.043 billion reais in December 2018, public records show.

Bunge was the only company to submit a bid in the auction, according to one of the sources.

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Union sets out demands as $17 billion Thyssenkrupp elevator sale nears endgame

DUESSELDORF/FRANKFURT (Reuters) – Any new owner of Thyssenkrupp’s (TKAG.DE) prized elevator unit not only has to provide guarantees against job cuts and plant closures, but also commit to staff involvement and investment plans, Germany’s largest union told Reuters.

“We want to conclude the negotiations as fast as possible and then sign an agreement with the chosen buyer,” IG Metall’s Knut Giesler, chief staff negotiator in Thyssenkrupp’s efforts to sell its elevator division, said on Tuesday.

Thyssenkrupp on Monday narrowed the field of bidders for the world’s fourth-largest lift maker and was focusing on selling a majority or all of the unit to either Blackstone (BX.N), Carlyle (CG.O) and the Canada Pension Plan Investment Board, or Advent and Cinven [CINV.UL].

“There are two, three things that still need to be ironed out. That’s the task of the next one and a half weeks,” said Giesler, who serves as deputy chairman of the supervisory board of Thyssenkrupp Elevator Technology.

Labour representatives control half of Thyssenkrupp’s supervisory board – which is expected to meet on Feb. 27 – and their consent will be key to any transaction.

The sale of Thyssenkrupp Elevator Technology, potentially Europe’s largest private equity deal in 13 years, will be key for the future of the German conglomerate, which has been hit by profit warnings and delayed restructuring steps.

The unit employs roughly 53,000 people, most of them outside Germany, and is valued at about 16 billion euros ($17 billion), based on most recent private equity bids.

Giesler said as well as securing jobs, sites and “co-determination” arrangements at supervisory board level, any new owner must also ensure that debt repayments – likely to result from any private equity deal – will not overly burden the division.

He said the future of Thyssenkrupp Elevator would have to be secured through investments, adding this involved a “decent” triple-digit million euro sum per year as well as an agreed level of research and development spending.

“For us it’s not decisive how much is being paid,” Giesler said. “We want to secure staff,” he added, also expressing his preference for Thyssenkrupp to keep a minority stake in the business.

Sources close to the process have said Thyssenkrupp is likely to keep a stake of between 20% and 30% in the division, which competes with United Technologies Corp’s (UTX.N) Otis, Switzerland’s Schindler (SCHP.S) and Finland’s Kone (KNEBV.HE).

Analysts at Exane BNP Paribas said a stock market listing, which remains an option, or a partial sale were likely to be the preferred options of Thyssenkrupp, “as the group cannot afford to lose access to the reliable source of (cash flow) from Elevators at this stage”.

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Union sets out demands as Thyssenkrupp elevator sale nears endgame

DUESSELDORF/FRANKFURT (Reuters) – Any new owner of Thyssenkrupp’s (TKAG.DE) prized elevator unit not only has to provide guarantees for jobs and sites but also commit to co-determination structures and investments to keep the business future-proof, Germany’s largest union told Reuters.

“We want to conclude the negotiations as fast as possible and then sign an agreement with the chosen buyer,” IG Metall’s Knut Giesler, who leads talks on behalf of employees in Thyssenkrupp’s efforts to sell its elevator division, said on Tuesday.

Thyssenkrupp on Monday narrowed the field of bidders for the world’s fourth-largest lift maker and was now focusing on selling a majority or all of its elevator unit to either Blackstone (BX.N), Carlyle (CG.O) and the Canada Pension Plan Investment Board or Advent and Cinven [CINV.UL].

“There are two, three things that still need to be ironed out. That’s the task of the next one-and-a-half weeks,” said Giesler, who also serves as deputy chairman of the supervisory board of Thyssenkrupp Elevator Technology.

The sale of Thyssenkrupp Elevator — potentially Europe’s largest private equity deal in 13 years — will be key for the future of the German conglomerate, which has been hit by profit warnings and delayed restructuring steps.

Giesler said as well as securing jobs and sites, any new owner must also make sure that debt repayment — which is part of any private equity deal — will not overly burden the division.

He said the future of Thyssenkrupp Elevator would have to be secured through investments, adding this involved a “decent” triple digit million euro sum a year.

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