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BW Businessworld

Deal, Finally

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After years of stalemate and months of deadlock, the World Trade Organisation approved the first-ever multilateral trade agreement, which is projected to boost global trade by $1 trillion and add as much as 21 million jobs to the world economy. The agreement means WTO will introduce new standards for customs checks and border procedures. The US trade representative Michael Froman said the agreement would mean a significant reduction in costs and transaction time in customs procedures and would unlock new opportunities for all countries. “We have put our negotiations back on track,” said WTO director general Roberto Azevedo.
 
Extra Cover
British insurer Aviva agreed on terms for a $8.8-billion takeover of rival Friends Life, responding to pressures brought on by pension industry reform. Pension providers are rushing to revise their product ranges after the government in March surprisingly removed obligations for people to buy an annuity, or income for life, at retirement, hurting sales. Aviva said the merger creates a market leader with 16 million life insurance customers. It is expected to generate £600 million in excess cash flow a year and £225 million in annual cost savings till 2017.
 
Shedding Weight
Procter & Gamble (P&G) is working with Goldman Sachs to explore the sale of its Wella hair care business that could be worth around $7 billion, sources familiar with the matter said, as the world’s largest consumer products company streamlines its business. P&G is looking at options for the unit, which includes a professional and a trade business. That may result in selling the whole or parts, the sources said, cautioning that no final decision had been taken. Cincinnati-based P&G earlier said it would shed 100 to 80 slow-growing product lines in order to focus on brands such as Tide laundry detergents and Pampers diapers that generate most of its profit and revenue. In November, it also announced the sale of its Duracell battery unit to Warren Buffett’s Berkshire Hathaway.
 
Cold Comfort
Russia’s economic crisis deepened as the government acknowledged it is heading for recession and a former central banker spoke of “some panic” in the financial system as oil prices plunged. President Vladimir Putin said Russia is scrapping a proposed $45-billion pipeline to Europe even as the government predicted the economy would contract next year. Russia may enter its first recession since 2009 in the first quarter, according to deputy economy minister Alexei Vedev.
more pain: Euro zone manufacturing growth stalled in November and new orders fell at the fastest pace in 19 months despite heavy price cutting, painting a bleak picture for the coming months, according to a survey, Markit. Also, worryingly for policymakers at the European Central Bank struggling to bolster growth and drive up dangerously low inflation, factory activity declined in the bloc’s three biggest economies of Germany, France and Italy. “The situation in euro area manufacturing is worse than previously thought... There is a risk that a renewed rot is spreading across the region from the core,” said Chris Williamson, chief economist.
 
The Name’s Bond
Amazon.com sold its biggest bond offering even as the online retailer began pouring money into drones, television programming and smartphones. The maker of the Kindle e-book reader issued notes worth $6 billion in five parts. The sale was its first since it offered $3 billion in bonds in November 2012. Jeff Bezos, the company’s CEO, has emphasised big spending and is counting on sales growth over earning a profit as the Seattle-based company reported its biggest quarterly net loss in October since 2003.
 
Downgraded
Ratings agency Standard & Poor’s (S&P) cut its credit rating on Standard Chartered for the first time in 20 years, citing the “tough period” the Asia-focused bank was going through and its weaker credit-worthiness. S&P cut its long-term issuer credit rating on Standard Chartered to ‘A’ from ‘A+’, with a negative outlook — a move that could make it more expensive for the bank to borrow money. It was S&P’s first downgrade since it assigned Standard Chartered a rating in 1994. It said the bank “is going through a tough period” after years of solid growth and strong financial performance. “We lowered the ratings because we consider the group’s credit-worthiness to have weakened when compared with its peers,” said S&P.
 
Data Breach
The massive cyber attack on Sony Pictures Entertainment reads like a blockbuster screenplay. Hackers targeted a large amount of confidential data, from coming products to executive pay, and disabled the company’s internal systems. The hacking group brought down the Hollywood studio’s corporate email, and leaked five films and a slew of sensitive personnel data, including a spreadsheet allegedly containing salaries of some 6,000 employees and top executives. The company denounced the hackers’ “brazen attack” and is working with law enforcement authorities to determine how the hackers got access to its systems. The investigators made the connection to North Korea as they reviewed evidence left by the hackers.
 
In Denial
Takata rejected a US regulator’s demand to expand regional air bag recalls to the entire country, sticking to its piecemeal approach in dealing with a potentially deadly flaw in millions of cars. The US National Highway Traffic Safety Administration (NHTSA) is reviewing Takata’s response and deciding its next steps, deputy administrator David Friedman said. Hitoshi Sano, Takata’s head of investor relations, said the company won’t issue a recall as 8 million cars had already been called back from across states and territories in the US.
 
Tinsel Dreams
Chinese conglomerate Dalian Wanda Group, one of the biggest theatre operators in the US, is in talks to buy a stake in the US film studio Lions Gate Entertainment. Discussions between Lions Gate and Wanda are “at an early stage and may not lead to a deal”, said Wanda’s chairman Wang Jianlin. Wang’s comments are the latest sign of the company’s interest in making further inroads into the US film industry. It comes days after Wanda Cinema Line, a movie theatre company controlled by Wang, received approval for a share offering in China in which it hopes to raise up to 2 billion yuan. 
 
(This story was published in BW | Businessworld Issue Dated 29-12-2014)