October 18, 2011

BHP, others eyeing partnership with Ferrous - sources


* Ferrous aims for annual 62 mln tonnes by 2016By Clara Ferreira-MarquesLONDON, Oct 18 (Reuters) - BHP Billiton , the world’s biggest miner, is one of several parties in talks over a strategic partnership with fast-growing Brazilian iron ore miner Ferrous Resources, sources familiar with the deal said.Options being considered by BHP include a joint venture or an equity stake in Ferrous, which is seeking cash and expertise to develop huge deposits in Brazil’s “iron quadrangle”, the sources said on Tuesday.The sources said Chinese buyers have also expressed an interest in Ferrous, worth around $3.5-$4.0 billion, according to the expected valuation from shelved 2010 float plans and the implied value from shares sold in 2008.Ferrous, which aims to become one of the world’s top five iron ore miners, wants funding to develop its assets but has twice pulled IPO plans, most recently last year when it cited difficult market conditions.It has since hired Deutsche Bank assess its options, help find a strategic partner and secure funding.An all-out acquisition of Ferrous is less likely than a partnership that would bring BHP in as a strategic investor, the sources said.A sale remains an option, given most Ferrous shareholders are financial investors, including hedge fund Harbinger Capital Partners and private equity firm TPG.In the run-up to the planned float last year, Harbinger was reported to have considered a sale of its stake. However, most funds bought in around 2007 and 2008, making it hard to recover their investment at current levels.”The shareholders at Ferrous … know that today, if they were to sell, no one is going to pay them the full value,” one of the sources said. “There is a lot of flexibility on what type of deal the company would consider.”BHP, along with other miners, has been using the drop in valuations — currently close to 2008 levels — to search for opportunities in key commodities. Miners seeking funding to develop substantial assets are seen as prime targets.Ferrous’s size has put off smaller players, given any buyer or strategic investor will have to stump up an initial payment and then considerable investment as the project grows, making it an $8-$10 billion investment, the sources said. That would be a modest target for cash-rich BHP.BHP and Ferrous declined to comment.PILBARA MARK TWO?Analysts said they could see logic in BHP, the world’s no.3 iron miner, looking to diversify production from Australian region Pilbara through a deal with Ferrous, which has assets in Brazil’s key iron ore producing region, Minas Gerais.”I can see BHP seeing merit in having some production out of Brazil,” said Peter Chilton, an analyst at Constellation Capital Management.A takeover of Ferrous would be unlikely to arouse competition issues, as the company is producing modest quantities and aiming to produce more than 60 million tonnes by 2016, which would still leave BHP behind the top two global producers, Vale and Rio Tinto .”The infrastructure situation with Ferrous, although it is not currently in place, it does give a fair amount of flexibility,” another one of the sources said.”In terms of being able to create an export hub, you certainly have the resource there, and you certainly have the potential to create some (heavy duty) infrastructure and get some serious tonnage to market.”Analysts at Liberum said this week a purchase could offer synergies with Samarco, BHP’s venture with iron ore giant Vale, but also an improved product offering.”With declining grades in the Pilbara, BHP could elevate its product offering with high grade Brazilian concentrate or pellets,” the analysts said.”The key sticking point is still likely to be price with a number of key shareholders buying in at punchy valuations before the 2008 downturn — Ferrous’s reported valuation expectation is $3 billion.”Ferrous started production in this year, with initial output expected to reach 2.5 million tons by end of 2011.

October 18, 2011   81 notes

EU mergers and takeovers (Oct 18)


APPROVALS AND WITHDRAWALS:N— Mitsubishi Corp to acquire a stake in Czech auto car body maker Sungwoo Hitech from South Korea’s Sungwoo Hitech Co Ltd (approved Oct. 17)— Private equity firm CVC Capital Partners to acquire a stake in international health club operator Virgin Active (approved Oct. 14)— A joint venture led by Gores Group LLC to acquire clothing retailer Mexx from Liz Claiborne Inc (approved Oct. 17)NEW LISTINGS:— Dutch conglomerate Philips Electronics NV to acquire lighting product company Indal (notified Oct. 17/deadline Nov. 23)EXTENSIONS AND OTHER CHANGES:— German sugar company Suedzucker to acquire a 25 percent stake in British commodities trading company ED&F Man (notified Sept. 19/deadline extended to Nov. 9 from Oct. 24 after Suedzucker offered commitments)FIRST-STAGE REVIEWS BY DEADLINEOCT 20— Dutch bank AEGON’s Spanish unit to acquire a 50 percent stake in Spanish life insurer Cajaburgos Vida, part of Banca Civica (notified Sept. 15/deadline Oct. 20/simplified)OCT 26— German property operator ECE and German retailer Metro to set up a joint venture (notified Sept. 21/deadline Oct. 26)— U.S.-based Seagate Technology to acquire Samsung Electronic’s hard disk drive business (notified April 19/deadline extended for the second time to Oct. 26 from Oct. 10)— U.S. equipment maker Caterpillar to acquire German maker of gas and diesel engine maker MWM Holding GmbH (notified March 14/deadline extended to Oct. 26 from Sept 16 after Commission opens in-depth investigation and despite commitments offered)OCT 28— U.S. company Dow Chemical and Japanese trading house Mitsui to set up a Brazilian joint venture (notified Sept. 23/deadline Oct. 28/simplified)— German conglomerate Siemens to acquire Dutch engineering company NEM Holding (notified Sept. 23/deadline Oct. 28)OCT 31— Vitol Investment Holdings, a unit of oil trader Vital , and U.S. energy company ArcLight to acquire joint control of Luxembourg-based Petro Lux (notified Sept. 26/deadline Oct. 31/simplified)NOV 3— Belgian building materials group Etex to acquire German peer Lafarge’s gypsum assets in Europe and South America (notified Sept. 27/deadline Nov. 3)— U.S. healthcare company Johnson & Johnson to acquire Swiss medical devices maker Synthes Inc (notified Sept. 27/deadline Nov. 3)— Private equity group TPG Capital LP to acquire a stake in Danish online brokerage Saxo Bank from Portugal’s Banco Espirito Santo (notified Sept. 27/deadline Nov. 3/simplified)NOV 7— Danish dairy coperative Arla Foods to acquire German dairy cooperative Allgauland (notified Sept. 15/deadline extended to Nov. 7 from Oct. 20 after Arla offered commitements)NOV 8— German fruit producer Agrana and Austrian equipment maker RWA to combined their subsidiaries into a joint venture (notified Sept. 30/deadline Nov. 8)NOV 10— U.S. cleaning and pest-control services company Ecolab to acquire water treatment services company Nalco Holding (notified Oct. 4/deadline Nov. 10)NOV 14— German industrial services company Buchen Industrieservice to acquire German technical services company ThyssenKrupp Xervon (notified Oct. 6/deadline Nov. 14/simplified)NOV 15— German natural gas supplier Verbundnetz Gas Aktiengesellschaft to sell a 25.1 percent stake in VNG Austria to CE Gas Marketing & Trading (notified Oct. 7/deadline Nov. 15/simplified)NOV 17— U.S. agribusiness company Cargill to acquire KoroFrance, the holding company of Dutch animal feed maker Provimi from private equity firm Permira (notified Oct. 11/deadline Nov. 17)— French company Caisse des Depots et Consignations to acquire 50 percent of a Paris real estate from a subsidiary of French insurer Axa (notified Oct. 11/deadline Nov. 17/simplified)— French power and transport engineering group Alstom and Bouygues subsidiaries Bouygues Immobilier and Exprim SAS to form a joint venture (notified Oct. 11/deadline Nov. 17/simplified)NOV 30— U.S. technology company Western Digital Corp to acquire Hitachi’s hard disk drive business (notified April 20/deadline extended for the fourth time to Nov. 30 from Nov. 9 after Western Digital offered remedies)— U.S. conglomerate General Electric, Russian energy producer and importer Inter Rao Ues and Russian engine maker United Engine Corporation to set up a joint venture (notified Sept. 30/deadline Nov 9/simplified)DEC 13— Deutsche Boerse and NYSE Euronext to merge (notified June 29/deadline extended to Dec. 13 from Aug. 4 after Commission opens in-depth probe)GUIDE TO EU MERGER PROCESSDEADLINES:The European Commission has 25 working days after a deal is filed for a first-stage review. It may extend that by 10 working days to 35 working days, to consider either a company’s proposed remedies or an EU member state’s request to handle the case.Most mergers win approval but occasionally the Commission opens a detailed second-stage investigation for up to 90 additional working days, which it may extend to 105 working days.SIMPLIFIED:Under the simplified procedure, the Commission announces the clearance of uncontroversial first-stage mergers without giving any reason for its decision. Cases may be reclassified as non-simplified — that is, ordinary first-stage reviews — until they are approved.

October 18, 2011   23 notes

UPDATE 1-Greek unemployment rises to 16.5 pct in July


* Number of unemployed at 820,276, up 35 pct y/y* Youth unemployment at 42 percent, twice its 2008 levelATHENS, Oct 18 (Reuters) - Greece’s jobless rate rose to 16.5 percent in July, its second-highest level on record, driven by EU/IMF-imposed austerity measures which have plunged the economy into its fourth consecutive year of recession.Data from national statistics agency ELSTAT on Tuesday showed unemployment rose from 16.0 percent in June as job cuts in the wider economy outweighed a rise in seasonal tourism.The reading — exceeded only by the 16.6 percent rate recorded in May — was sharply higher than in the same period last year, when it stood at 12 percent. The number of the unemployed grew by more than a third to about 820,000. Greek unemployment figures are not adjusted for seasonal factors.”The pace of decline in employment in basic sectors of the economy, such as construction, retail and wholesale trade, could not be mitigated from seasonal hiring in tourism,” said Nikos Magginas, an economist with the National Bank of Greece.Magginas said he expected the jobless rate to exceed 17.5 percent by the end of the year.The young continued to be the hardest hit, with the jobless rate in the 15-24 category soaring to 42 percent, twice its level three years ago.The Greek economy is seen shrinking for a fourth consecutive year, at an annual pace of 5.5 percent. The European Union and International Monetary Fund do not expect a recovery before 2013.The average jobless rate in the 17 countries sharing the euro held steady at a seasonally adjusted 10.0 percent in July.

October 14, 2011

UPDATE 2-Unilever buys Russian cosmetics group Kalina


* Expected to complete by the end of 2011By David Jones and Neil MaidmentLONDON, Oct 14 (Reuters) - Consumer goods giant Unilever agreed to buy 82 percent of Russian cosmetics group Concern Kalina for 500 million euros ($685 million) on Friday as part of its strategy to expand into fast-growing emerging markets.The Anglo-Dutch group is looking to offset sluggish European and U.S. markets by investing in growth markets such as Russia and aims to see three-quarters of its turnover from emerging markets by 2020 from around 54 percent currentlyConcern Kalina is Russia’s largest local personal care company with leading positions in skin and hair care, and sells its products primarily in Russia, Ukraine and Kazakhstan. It expects a 2011 turnover of around 303 million euros.The deal will give Unilever, the world’s No 3 food and consumer goods group, Russian brands such as Pure Line, Black Pearl and Silky Hands to add to its own personal care brands such as Dove, Sunsilk, Timotei and Clear.Personal care is Unilever’s fastest-growing category and accounted for more than 30 percent of the group’s 44.3 billion euro turnover in 2010 with strong positions in emerging markets in India, Brazil and China.”This will transform Unilever’s personal care business in Russia… It will also strengthen and re-balance Unilever’s portfolio and competitive position in Russia, an emerging market with considerable potential and one of our priority countries,” Chief Executive Paul Polman said in a statement.Subject to obtaining regulatory approval, the deal is expected to complete by the end of 2011, Unilever said.Shares in Unilever, which have risen 7 percent in the last month, were 2 percent higher at 2,099 pence by 0836 GMT, while Kalina shares jumped 40 percent to 3,077.2 roubles.

October 12, 2011   13 notes

UPDATE 1-EU reform plans target greener, fairer farm subsidies


By Charlie DunmoreBRUSSELS, Oct 12 (Reuters) - The EU’s executive proposed on Wednesday making farm subsidies fairer and more environmentally-friendly, in a bid to win support for keeping EU agricultural spending at about 55 billion euro-a-year ($75 billion-a-year) up to 2020.Critics of the bloc’s common agricultural policy (CAP) had urged the European Commission to take advantage of high global food prices and cut the huge subsidies it pays to farmers in a reform of the policy from 2014.But against a backdrop of increasing market volatility, resource scarcity and climate change, the Commission rejected calls for subsidy cuts and instead proposed refocusing spending on the increasing threats facing farmers.”The risks to European farming come not just from extreme weather events, climate change, but also from market instability and sharp falls in prices or producer incomes,” said EU farm chief Dacian Ciolos, presenting the proposals in Brussels.The Commission’s stance is supported by pro-farming countries such as France, whose President Nicolas Sarkozy has pledged to defend the CAP with an eye to securing rural votes in next year’s presidential elections.But the plans will face opposition from other countries such as Britain and Sweden, who want to see a sharp cut in EU farm spending to fund new growth-enhancing measures such as research and innovation.The CAP reform plans must now be jointly approved by EU governments and lawmakers in the European Parliament — a process which is expected to take up to two years to complete.The Commission’s desire to keep overall farm spending at more or less its current level until 2020 was confirmed in proposals for the EU’s next long-term budget for 2014-20, announced in July.NEW ELEMENTSThe reform plans begin the process of addressing current imbalances in direct subsidies which sees farmers in Italy and Greece receive about 400 euros ($545) per hectare, compared to less than a hundred euros on average in Latvia.In a speech to EU lawmakers on Wednesday, Ciolos said he wanted farmers in all countries to receive at least 90 percent of the average level of direct payments — currently about 270 euros per hectare — but gave no deadline for achieving the goal.To help free up funds for the redistribution, Ciolos said large individual farms would see their subsidies capped at 300,000 euros a year from 2014.”The Commission proposes the progressive reduction of basic subsidies above 150,000 euros, and capping them at 300,000 euros,” he said.In future, 30 percent of direct subsidies will be conditional on meeting new environmental criteria, such as forcing arable farmers to grow at least three different crops, and leaving seven percent of farmland ecological fallow.Those plans drew accusations of “greenwash” by environmentalists, but EU farmers said the requirements would damage their competitiveness.”It does not make sense to require every single farm to stop producing on a certain percentage of their land (ecological set-aside) when world food demand is set to rise by 70 percent by 2050,” EU farm union Copa-Cogeca said in a statement.The plans also included a proposal to limit payment of EU subsidies to “active farmers” only, and Ciolos said he doubted whether airports and golf courses needed the EU farm subsidies they currently receive.The 27-nation bloc should retain its existing market management tools after the reform — including public intervention and private storage aid — to cope with market volatility and future food crises, Ciolos said.EU sources with knowledge of the plans said the Commission had agreed to propose ending the bloc’s system of national sugar production limits and minimum prices from 2015 — not in 2016 as had been suggested in earlier drafts of the reform plans.The move is designed to avoid a repeat of the current shortage of sugar on the EU market, and will also allow an increase in EU sugar exports, which are currently capped under world trade rules due to the bloc’s sugar quota system. ($1 = 0.733 Euros)