ARAB TIMES, THURSDAY, FEBRUARY 18, 2016
BUSINESS
35
China’s Fosun scraps deal to buy Israeli insurer
Fosun International Ltd has dropped a plan
to buy a controlling stake in Israeli insurer
Phoenix Holdings because conditions for
the 1.8 billion shekels ($462 million)deal
were not met, Fosun and seller Delek Group
said on Wednesday.
It is the first major setback for the Chinese
conglomerate since its chairman, Guo
Guangchang, briefly went missing late last
year.
Fosun agreed to buy a 52.31 percent
stake in Phoenix from Delek Group in June
last year.
But the Chinese company was unable to
“consummate” the deal to the satisfaction,
or waiver, of the closing conditions of the
agreement, Fosun said in a statement to the
Hong Kong Stock Exchange on Wednesday.
Neither party will be obligated to pay termination fees, Fosun said.
Guo, one of China’s most successful private businessmen, was called in to assist
authorities in an investigation in December,
sparking concern that he was caught in the
government’s anti-corruption campaign.
After Guo went missing, the Tel Aviv
BAE picks Mahindra for gun assembly plant
Stock Exchange suspended trading in
Phoenix and its parent company Delek.
Representatives from Fosun also flew to
Israel in December to discuss the deal.
Energy conglomerate Delek said in a separate statement it was examining other options for
the sale of its stake in Phoenix with other potential investors and would issue a new statement if
there was a significant development.
Fosun shares were down 1.0 percent at
HK$10.42 on Wednesday, in line with the
fall in the benchmark Hang Seng Index.
(RTRS)
BAE Systems said on Wednesday it had
chosen Indian conglomerate Mahindra
Group to build a plant for the assembly
of its M777 Ultra Lightweight Howitzer
artillery guns that it wants to sell to
India.
India and the United States, where BAE
manufactures the weapons, are in
advanced-stage talks for the sale of 145
M777s in a deal expected to be worth
more than $700 million.
New Delhi is trying to replenish its
range of artillery weapons after years of
delays in ordering new equipment for
depleted supplies.
Prime Minister Narendra Modi has
vowed to upgrade the country’s military
hardware, but wants deals with foreign
companies to include the setting up of
factories and plants in India to boost
local industry, and the transfer of technology.
Under the proposal, Mahindra will run
an assembly, integration and testing facility for the 145 Howitzers, BAE said in a
statement. (RTRS)
Airbus and Boeing win billion-dollar deals
Orders come despite caution among buyers
SINGAPORE,
Feb
17,
(AFP): Airbus and Boeing
announced
billion-dollar
deals at Asia’s largest airshow
in
Singapore
Wednesday, underscoring
the region’s role as a driver
of industry growth despite
greater caution among plane
buyers.
Europe’s Airbus said it had won an
$1.85 billion deal for the purchase of
six A350-900s by Philippine Airlines
(PAL), the flag carrier of one of
Asia’s fastest-growing economies.
US-based Boeing meanwhile said it
had won a commitment from China’s
Okay Airways to buy 12 aircraft for
$1.3 billion despite a weakening
Chinese economy.
“The Chinese people are very good
at saving,” Okay Airways chairman
Wang Shusheng told reporters. “It
doesn’t matter if the economy has
worsened, they will still travel.”
Tony Tyler, director-general of the
International
Air
Transport
Association, said ahead of the
Singapore show that airlines in the
region may try to push back their
orders due to softer profits.
Airline savings from low fuel costs
are being eroded by hedging losses
and a strong dollar, Tyler said, noting
that the greenback climbed 20 percent
over the past 18 months.
With Asia-Pacific accounting for 40
percent of global air cargo, regional
carriers have been badly hit by the
global economic slowdown, worsening the impact of competition from
Gulf carriers, the IATA chief added.
“We want to sell as many aircraft in
Asia as much as possible but we also
want to settle in Asia and have industrial facilities, research and engineering centres,” Marwan Lahoud, chairman of the French aerospace industries association GIFAS, told AFP in
an interview on Tuesday.
“We want to amplify what we have
started already -- selling, designing
and manufacturing in Asia,” said
Lahoud, who is also a member of the
group executive committee of the
Airbus Group.
Industry players say travel demand
in Asia is still there, boosted by the
region’s growing middle class, but
that the mega deals of previous years
are gone.
In a statement issued this year,
Airbus said it won 421 orders from 17
airlines and lessors in Asia in 2015,
representing 39 percent of the company’s net order intake for the year.
Boeing this week forecast that the
world will need 38,050 planes in the
next 20 years, with 38 percent of the
deliveries to Asia, 21 percent to North
America and 19 percent to Europe.
Management cites delays with Saudi project
Airbus Group to keep border security business
FRANKFURT/SINGAPORE, Feb 17,
(RTRS): Airbus Group has excluded
its border security business from the
planned sale of its defence electronics unit, whose sale may now go
ahead within weeks, defence and
space workers at the European company were told on Wednesday.
The company had planned to sell
defence electronics and border security activities in one package, but
missed its goal of reaching a deal by
early 2016 because of delays with a
border project in Saudi Arabia,
according to a letter to staff.
“For this reason, Airbus Defence
and Space has decided to remove the
Border Security business from the
joint package and to retain it within
Airbus Defence and Space,” Bernhard
Gerwert, the unit’s chief executive,
said in the letter, seen by Reuters.
“This means that the sales process
for Defence Electronics shall continue
as planned and can be finalised shortly,” he said.
The defence electronics arm has
been valued at up to 1.3 billion euros
($1.5 billion) and taking out border
security will not lead to a lower price,
a person familiar with the matter said.
“The border security ops are losing
a high double-digit million euro
amount each year and their enter-
prise value is zero at best,” the person
said.
The Frankfurter Allgemeine Zeitung
newspaper, which first reported the
letter’s contents, said Airbus Group
hoped to be able to take advantage of
new opportunities for border security
presented by Europe’s refugee crisis,
citing an unnamed manager.
“The move is not linked to a new
boom in border security but has only
been done to facilitate the sales process”, an Airbus Group spokesman
said.
“The clear focus of the border security entity staying within Airbus is on
executing existing projects not on
exploring new opportunities.”
Europe’s largest aerospace group
is currently selling several businesses
to focus its defence division on warplanes, missiles, launchers and satellites. The group had originally planned
to pick a buyer for the defence electronics unit by the end of last year as
part of its plan to dispose of assets
with combined annual revenues of
around 2 billion euros ($2.2 billion).
Airbus Group short-listed Carlyle
and KKR for the defence electronics
unit, after they put up significantly
higher offers than rivals, three people
familiar with the matter told Reuters in
December.
In other Singapore deals, a US leasing firm ordered 20 aircraft from
Japan’s Mitsubishi Aircraft Corp in a
transaction potentially worth more
than $900 million.
PAL also said it separately signed a
$600-million order with Rolls-Royce
for Trent XWB engines to power its
six A350s.
Office “found no basis to sustain or
uphold the protest” from Boeing and
partner Lockheed Martin for a contract potentially worth some $80 billion, the agency said.
“In denying Boeing’s protest, GAO
concluded that the technical evaluation, and the evaluation of costs, was
reasonable, consistent with the terms
of the solicitation, and in accordance
with procurement laws and regulations,” the GAO said.
Boeing and Lockheed had filed the
protest in November after the Air
Force picked Northrop for a contract
to engineer and build the new long-
range strike bomber.
Boeing had argued that the Air
Force’s method for evaluating costs of
the bomber was “fundamentally
flawed” and did not adequately recognize initiatives by the aerospace giant
to save money on the contract.
The contract covers engineering and
options for the first 21 aircraft. The
Air Force has estimated the initial
engineering and manufacturing phase
as having a value of $21.4 billion, with
some 100 aircraft costing $511 million
per plane, GAO said.
Boeing said it was reviewing the
GAO decision.
“We continue to believe that our
offering represents the best solution
for the Air Force and the nation, and
that the government’s selection process was fundamentally and irreparably flawed,” Boeing said.
“We will carefully review the
GAO’s decision and decide upon our
next steps with regard to the protest in
the coming days.”
The
Chicago-based
Boeing’s
defense business has been hit by a lack
of orders for its F/A-18 and F-15
fighter jets, whose production is
scheduled to end in 2017 and 2020,
respectively.
Also:
NEW YORK: US officials rejected a
Boeing-led challenge to the Air
Force’s award of a major contract to
rival Northrop Grumman to supply
next-generation bombers.
The Government Accountability
More ECB policy loosening adds to appeal
Co to train 200 staff
Central Europe, a new safe
haven amid ‘market jitters’
Nissan to ‘build’
cars in Myanmar
BUDAPEST, Feb 17, (RTRS):
Central Europe’s fast-growing
economies have become an island
of stability for investors in turbulent global markets this year, and
more European Central Bank policy loosening could add to the
region’s appeal.
The economies of the European
Union’s eastern wing grew at rates
of 3 percent or even faster in 2015
on strong exports and rising
domestic demand, drawing in
investors despite fears of a Chinese
slowdown and falling oil prices.
Those investors have also had to
deal with local, home-grown risks.
Policies brought in by Poland’s
eurosceptic new government have
worried banks, weighed on the
zloty and angered the European
Union. Millions of workers have
headed west, in a drain of brains
and skilled labour.
But inflows of EU development
funds have boosted investment,
while low oil prices have cut
import costs. Labour costs remain
relatively cheap, making these former communist countries attractive to big car makers and other
foreign firms.
Hungary’s forint and Romania’s
leu have been the best-performing
emerging currencies globally this
year versus the dollar. And they
could appreciate more if the ECB
pumps up its stimulus and rate
hike fears in the United States
recede.
“It’s been visible in the past one
and a half months that amid the
waves of risk-aversion, the CEE
region has been a kind of safe
haven,” said Gergely ForianSzabo, fund manager at Pioneer
Investments in Budapest.
Forian-Szabo said the region’s
assets could be especially attractive to those euro zone investors
who want to diversify their portfolio from some euro zone peripheries like Spain or Italy and are too
scared to buy risky Russian or
Turkish assets.
Bonds
While 10-year Italian or Spanish
bonds carry yields of around 1.601.74 percent, Hungary’s 10-year
yield trades at 3.37 percent while
Poland’s corresponding bond at 3
percent and Romania’s 10-year
bond at 3.28 percent -- a nice
upside in a world where negative
rates are becoming common.
Even in Poland, where the new
government’s bank tax, stronger
controls on public institutions and
other policies helped trigger a ratings downgrade, yields have
declined in the past weeks.
Central Europe’s main economies are in better shape now than
the euro zone’s weaker members
after their recovery from the 2008
crisis.
Growth is solid, budget deficits
are under control, and Hungary
and the Czech Republic posted
record high trade surpluses last
year. The Czech economy grew at
its fastest pace since 2007 last year
at 4.3 percent, Poland grew 3.6
percent, Romania 3.7, while
Hungary at 2.9 percent.
“Despite external headwinds,
Central Europe continues to perform well, powered by healthy
domestic demand,” JP Morgan
said in a note. “Sentiment remains
upbeat, job growth is solid, and
headline inflation is low.”
Policy
With inflation low and the ECB
expected to ease policy further,
many Central European central
banks are also mulling loosening.
They may have to act to counter an
appreciation of their currencies if
that starts hurting the economy
and drives inflation even lower.
The Czech National Bank could
be the first in the region to take
rates into negative territory. It has
been intervening to keep the crown
on the weak side of 27 to the euro.
Serbia unexpectedly trimmed
rates to 4.25 percent last week,
while rate cut expectations are lingering in Poland.
Hungary’s central bank has
already signalled it might implement further loosening “primarily
using its unconventional toolkit.”
Hungary’s debt is expected to be
raised to investment grade from
“junk” this year.
Some of this expected monetary
easing has been priced into markets, but global risks could affect
the region negatively.
“The largest risk for the group
(of main CEE currencies) relates
to tail events specific to Europe -ie Brexit, quite significant for
open economies such as Czech,
also Hungary,” said Roxana Hulea
at Societe Generale.
On the home front, the outflow
of workers is unlikely to be
reversed any time soon, while
wage demands at home are growing. Hungarian railway workers
and bus drivers are planning
strikes.
Eniko Szijj-Wieland, owner of
Hungarian firm Optimum Trend,
has been hiring skilled workers
such as welders and electricians
for jobs in southern Germany in
the past two years.
“Skilled workers mostly say
they don’t earn enough here, even
if they work in several shifts, to be
able to get by,” she said, adding
that an electrician earns a net
150,000 forints ($536.98) a month
in Hungary, while in Germany he
can get 2,100 euros.
USAF Boeing C-17 Globemaster III military transport aircraft on static display at the Singapore Airshow at the Changi
exhibition centre in Singapore on Feb 17. Asia’s largest aerospace and defence event is taking place from Feb 16 to 21.
(AFP)
Moscow wants to borrow $3 bln in 2016
Russia chances to tap foreign markets higher
MOSCOW, Feb 17, (RTRS): Russia’s
Finance Ministry said on Wednesday it
may be easier for it to borrow this year on
Western markets than to raise debt in the
Chinese yuan, indicating that forming
financial alliances with Beijing have
proven more difficult than anticipated.
Moscow said last year it was hoping to
issue no less than $1 billion worth of the
so-called OFZ bonds, which are the main
treasury bonds used to finance government borrowing on the domestic market,
in yuan in 2016.
Negotiations, however, have been difficult and on Wednesday Storchak said
that there are still unresolved issues that
need to be agreed with Chinese regulators.
“It’s a long story,” Storchak said,
answering a question from journalists on
how probable it is for Russia to issue its
OFZ bonds in yuan this year.
“The chances that we will enter tradi-
tional markets are higher ... than the
Chinese.”
Russia has not tapped foreign markets
with a sovereign issuance since 2013,
with Western sanctions imposed in 2014
limiting access to financial markets for
some of the country’s largest companies
and also making borrowing prohibitively
expensive and difficult for the state.
Slump
Sanctions and a slump in oil prices,
Russia’s main export, have slashed state
revenues, threatening to leave a gaping
hole in the federal budget and forcing the
government to seek financing.
Storchak downplayed the need to raise
foreign debt, saying that Russia still has
“safety cushions” to ensure the budget
deficit does not spiral out of control.
“We are not in a hurry anywhere,”
Storchak said. “We want a high quality
entrance onto the market, and not an
entrance at any price.”
Russia is sitting on nearly $50 billion
saved in a sovereign fund, but some analysts have warned the fund may be
depleted already this year or in 2017.
Russia’s budget for this year calls for
borrowing of up to $3 billion abroad.
Russia has also tried to woo Chinese
investors onto its domestic OFZ market.
Talks on establishing a common depository and clearing center that would made
it logistically possible have been going
on for months.
On Wednesday, Sergei Moiseev, head
of financial stability at the central bank,
said that “much depends on the will of
the Chinese leadership.”
Eddie Astanin, chairman of Russia’s
National Settlement Depository said that
in April Russia and China will discuss a
“despoitory bridge” that would help both
sides with investing into each others’
treasury bond.
YANGON, Feb 17, (AFP): Japanese auto
giant Nissan will start assembling cars in
Myanmar for the first time this year, the
company said Wednesday, as it expands
its presence in one of Asia’s final economic frontiers.
Foreign companies have piled into the
Southeast Asian nation since reforms began
in 2011, eager to tap into a 51.5 millionstrong pool of potential customers.
Nissan said production will start in a
factory run with a Malaysian partner, Tan
Chong Motor Group, before eventually
moving to a new facility in Bago, 80
kilometres (50 miles) northeast of the
commercial hub Yangon.
The Japanese company announced its
plan to build the largest automobile manufacturing site in Myanmar three years
ago.
Two hundred employees will receive
training in Malaysia for a Myanmar
assembly line that aims to turn out 10,000
units, according to a Nissan statement.
It was not immediately clear if all the
vehicles would be destined for the
domestic market or whether some were
intended for export.
“Nissan is pleased to have the opportunity to be part of new motoring growth in
Myanmar,” said company vice-president
Toru Hasegawa.
Huge import taxes and international
sanctions aimed at the previous regime
meant vehicles were too expensive for most
people, but recent changes have seen a
sharp increase in demand for four wheels.
Evidence of the former pariah state’s
exploding car market lies on its oncesleepy streets, which are now choked
with cars.
Nissan began selling cars in Myanmar
in 2013, two years after a stream of
political and economic reforms saw
Western sanctions lifted, opening the
impoverished country up to trade and
foreign investment following nearly five
decades of military rule.
Investors are hoping that Myanmar’s
economy keeps growing under a new government set to be formed by Aung San Suu
Kyi’s pro-democracy party next month.
The carmaker’s Myanmar expansion
comes after the company reported weakening demand last week in Thailand and
Indonesia -- its two major Southeast
Asian manufacturing hubs.
‘Bad bank’ deal could be
option for several nations
FRANCFORT, Feb 17, (AFP): A statebacked “bad bank” that would take over
non-performing loans from a country’s
banks, as has been agreed for Italy, could
also be an option for other countries, the
head of Europe’s new banking resolution
authority said on Wednesday.
“Italy has come up with a constrution
for a bad bank that uses a market solution
without state aid,” the head of the Single
Resolution Board, Elke Koenig, told the
business daily Handelsblatt in an interview.
“But Italy isn’t alone with this problem. In other countries, too, a large
amount of non-performing loans has also
amassed,” Koenig said.
The solution reached in Italy “could
also be suitable for many other countries,” she added, pointing out that
“Germany has also had good experience”
with such a solution.
Last month, the European Union and
Italy reached agreement on creating a
guarantee vehicle to help Italian banks
sell bad loans.
Rome had spent more than a year
thrashing out a solution with Brussels,
having to ensure that any deal would
not contravene EU rules on state aid.
With its debt-laden economy struggling to recover from a deep recession,
Italy was keen to reach a solution to aid a
banking system forced to set aside capital
to cover bad loan losses, limiting lending
to households and firms.
Visitors walk through the expo ‘E-world’ at the fair grounds in Essen, western
Germany on Feb 17. 650 exhibitors from 22 countries present their solutions
and products around Energy trade. The fair is running until Feb 18. (AFP)