President Donald Trump on Monday said he has concerns that a merger between United Technologies and Raytheon would harm competition and make it more difficult for the U.S. government to negotiate defense contracts.
"I'm a little concerned about United Technologies and Raytheon," Trump said in an exclusive interview with CNBC. Aerospace companies have "all merged in so it's hard to negotiate" with them, he added, suggesting the defense industry could be heading in the same direction.
Asked whether he would have problems with the merger, Trump replied, "Only if they have the same products. That would be the thing that bothers me most."
United Technologies and Raytheon announced on Sunday that they had struck deal to combine, which would bring together a booming aerospace business with a giant government defense contractor. That tie-up could rattle suppliers, customers and competitors. The new company, with an estimated $74 billion in sales, would become the second-largest aerospace-and-defense company in the U.S. after Boeing.
Executives from the two companies dismissed Trump's concerns about a possible reduction in competition, saying they have very little overlap that would generally spark concern among anti-trust regulators.
"We are complementary, not competitive," Raytheon CEO Tom Kennedy told CNBC in an interview. "I don't know the last time we competed against United Technologies."
Greg Hayes, United Technologies' CEO and chairman who is slated to be CEO of the new company, once the merger closes, said he looked forward "to talking to the president later today," about potential job growth under the deal.
Still, the president repeatedly expressed concerns about dwindling competition in aerospace.
"When I hear United and I hear Raytheon, when I hear they're merging, does that make it less competitive? It's already not competitive," Trump said.
"I just want to see competition. They're two great companies, I love them both. But I want to see that we don't hurt our competition."
The proposed deal would create a giant, one-stop shop with products that range from Tomahawk missiles and radar systems to jet engines that power passenger planes and the seats that fill them.
Raytheon and United Technologies have a combined market value of close to $166 billion. The stock price of each has gained more than 21% this year, far outpacing the broader market, as they've reaped the benefits of strong defense spending and record orders for passenger planes around the world. Still, they have lagged some of their competitors.
United Technologies is in the process of spinning out its Carrier air conditioning unit and its Otis elevator business. The company expects those transactions and the newly announced deal with Raytheon to close by early 2020.
Everything is falling apart for Renault-Nissan, more tariff threats, more Brexit fallout, more alleged corruption in the Trump administration, and bad reviews for Elon Musk as a boss. All this and more in The Morning Shift for Friday, June 10, 2019.
1st Gear: Renault-Nissan Tensions Get Even Tenser
As you may be aware, Nissan’s former chairman and CEO Carlos Ghosn is currently awaiting trial in Tokyo for a slew of corruption-related charges. One of the major issues brought to light by Ghosn’s arrest has been how Nissan’s corporate structure enabled his alleged malfeasance. At the very least, it’s clear there are, ahem, problems with Nissan’s corporate structure that allowed one person to wield so much power.
Which brings us to this weekend, when Renault, which had previously been supportive of Nissan’s internal reform efforts, notified the Japanese automaker that they will not, in fact, be voting for the governance reforms on the table, both Bloomberg and Reuters reported. This is a very big problem for Nissan, because such a move requires two-thirds of shareholders to vote in favor, and Renault owns 43 percent of Nissan. Without Renault’s support, the measure cannot pass.
What is Renault’s problem? They don’t think they have enough influence in the new governance structure, of course. From Reuters:
A Renault source said Senard’s letter was motivated by concern about Renault’s under-representation on the new Nissan board committees being introduced following the arrest of Ghosn, who is now awaiting trial and denies the financial misconduct charges against him.
“It’s not a final abstention, and Renault’s position can still change,” the source said. “As things stand, Renault has not been assured of appropriate committee representation as Nissan’s main shareholder.”
Renault had yet to receive specific details on the proposed composition of each of the committees, another source with knowledge of the issue told Reuters.
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This is a lot of boring corporate governance stuff that will, if I had to guess, get sorted in the coming days and weeks. But the bigger picture here is Nissan was at the very least neutral and at the very worst did not support Renault’s proposed merger with FCA. Both Renault and FCA officially blamed the French government, which owns 15 percent of Renault, for the merger falling apart, but Nissan didn’t exactly help.
Bloomberg summarized the rift as such:
Nissan has long complained that the partnership with Renault is unbalanced, and that the French government’s outsize role at Renault, with board representation and extra voting rights, gives the state undue influence over the Japanese carmaker. Nissan owns a 15% stake in Renault, but with no voting rights, and has been seeking more power in the partnership rather than the “closer ties” sought openly by the French state and pursued first by Ghosn and later by Senard.
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In short, even though their fates are all largely intertwined, nobody in this alliance thinks they have enough influence over anyone else.
2nd Gear: Trump Threatens Mexico With Tariffs Shortly After Cancelling Tariffs
President Donald Trump said on Monday the United States had signed another portion of an immigration and security deal with Mexico that would need to be ratified by Mexican lawmakers.
He did not provide details but threatened tariffs if Mexico’s Congress did not approve the plan.
As we wrote regarding fuel efficiency standards, big businesses care not so much about what regulations are, but that they are consistent. Especially in the context of multinational automakers with manufacturing plans extending years into the future, predictability is paramount. Whatever you think of Trump’s tariff threats and massive swings in federal regulatory standards, it is not predictable, and that’s bad for automakers.
3rd Gear: UK Car Production Is Tanking Thanks to Brexit
Earlier in the year, several automakers, including Mini, Rolls Royce, Vauxhall, and Land Rover, announced plans to temporarily shut down plants in Britain in anticipation of trade disruptions due to the country leaving the E.U. by March. That “British Exit,” if you will, got pushed back to October, but the plant closures were already in motion. Which resulted in this:
Car production in April fell 24% on the month, the biggest drop since records began in 1995, and the broader category of “transport equipment” showed its largest drop since 1974.
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Is that bad?
4th Gear: DOT Secretary Awarding Projects to Help Husband’s Re-Election
The U.S. Department of Transportation head, Elaine Chao, is married to Senate majority leader Mitch McConnell. As it happens, Chao has created a “special path” for DOT projects in McConnell’s state of Kentucky to get funding, according to a POLITICO investigation:
The Transportation Department under Secretary Elaine Chao designated a special liaison to help with grant applications and other priorities from her husband Mitch McConnell’s state of Kentucky, paving the way for grants totaling at least $78 million for favored projects as McConnell prepared to campaign for reelection.
Chao’s aide Todd Inman, who stated in an email to McConnell’s Senate office that Chao had personally asked him to serve as an intermediary, helped advise the senator and local Kentucky officials on grants with special significance for McConnell — including a highway-improvement project in a McConnell political stronghold that had been twice rejected for previous grant applications.
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This comes a week after the New York Times investigation detailed how Chao has used her cabinet position to elevate the standing of her family’s shipping company, which has donated millions of dollars to her husband’s campaign.
Surely there is someone else more qualified to run the country’s Department of Transportation who isn’t married to the Senate majority leader or the heiress to a massive shipping company, which is of course regulated by said Department of Transportation. Perhaps the better question: is there anyone less qualified?
5th Gear: Job Ratings Websites Are Souring on Tesla Too
Would I rely on a website like Glassdoor when considering a new employer? Probably not; its ratings are entirely anonymous and the site takes no measures to ensure the reviewer actually worked for—or indeed has any familiarity with—that company.
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That being said, this Reuters article is still funny, because they found a new angle rather than the usual bearish market analysts or automotive safety experts to pile on Tesla:
At jobs site Glassdoor, Tesla’s overall company rating fell to 3.2 out of 5.0 stars based on reviews written in the first quarter from a high of 3.6 in 2017, according to historical data compiled by Glassdoor at Reuters’ request. The average rating of the nearly 1 million employers reviewed on the site is 3.4.
Like I said, I wouldn’t take any of this too seriously, at least out of the context of what we already know about working for Tesla, which is that it’s a highly volatile but potentially fulfilling work environment with a healthy dose of hero worship and cult-like atmosphere baked in.
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Although, about that hero worship:
In the first quarter, Elon Musk’s CEO approval rating dropped to 52% from 90% in 2017.
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Yikes.
Reverse: Trail of Doughnuts
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Neutral: What’s the Renault-Nissan Endgame?
Does the latest news alter how you see this quarrel unfolding?
Investing.com - Stocks in focus in premarket trade Monday:
• United Technologies (NYSE:) stock and Raytheon (NYSE:) stock gained 2.4% and 8.7%, respectively, by 7:55 AM ET (11:55 GMT) after the two companies that would create an aerospace and defense giant worth about $121 billion.
• Tableau Software (NYSE:) stock skyrocketed 33.6% after in a deal valued at $15.7 billion. Salesforce stock (NYSE:) fell 4.9%.
• Tilray (NASDAQ:) stock jumped 17.8% after the company signed a letter of intent with its largest stockholder Privateer Holdings to extend the lock-up on 75 million of the company’s shares representing 77% of total stock outstanding.
• Shutterfly (NASDAQ:) stock traded up 6.2% on reports that in a deal that would value the digital imaging company at about $2 billion.
• Fiat Chrysler (NYSE:) stock rose 1.9% on a report that the company had with Renault (PA:). Sources cited by Reuters said the deal would most likely involve a reduction in the French automaker’s stake in Nissan (T:) in an attempt to secure the Japanese company’s approval.
• Insys Therapeutics (NASDAQ:) stock plunged 61.8% after the company filed for Chapter 11 bankruptcy.
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The latter is publicly traded and this deal will involve shares of Tableau Class A and Class B common stock getting exchanged for 1.103 shares of Salesforce common stock, the company said, and so the $15.7 billion figure is the enterprise value of the transaction, based on the average price of Salesforce’s shares as of June 7, 2019.
This is a huge jump on Tableau’s last market cap: it was valued at $10.79 billion at close of trading Friday, according to figures on Google Finance. (Also: trading has halted on its stock in light of this news.)
The two boards have already approved the deal, Salesforce notes. The two companies’ management teams will be hosting a conference call at 8am Eastern and I’ll listen in to that as well to get more details.
This is a huge deal for Salesforce as it continues to diversify beyond CRM software and into deeper layers of analytics.
The company reportedly worked hard to — but ultimately missed out on — buying LinkedIn (which Microsoft picked up instead), and while there isn’t a whole lot in common between LinkedIn and Tableau, this deal is also about extending engagement with the customers that Salesforce already has.
This also looks like a move designed to help bulk up against Google’s move to buy Looker, announced last week, although I’d argue that analytics is a big enough area that all major tech companies that are courting enterprises are getting their ducks in a row in terms of squaring up to stronger strategies (and products) in this area. It’s unclear whether (and if) the two deals were made in response to each other.
“We are bringing together the world’s #1 CRM with the #1 analytics platform. Tableau helps people see and understand data, and Salesforce helps people engage and understand customers. It’s truly the best of both worlds for our customers–bringing together two critical platforms that every customer needs to understand their world,” said Marc Benioff, Chairman and co-CEO, Salesforce, in a statement. “I’m thrilled to welcome Adam and his team to Salesforce.”
Tableau has about 86,000 business customers including Charles Schwab, Verizon (which owns TC), Schneider Electric, Southwest and Netflix. Salesforce said it will operate independently and under its own brand post-acquisition. It will also remain headquartered in Seattle, WA, headed by CEO Adam Selipsky along with others on the current leadership team.
That’s not to say, though, that the two will not be working together: on the contrary, Salesforce is already talking up the possibilities of expanding what the company is already doing with its Einstein platform (launched back in 2016, Einstein is the home of all of Salesforce’s AI-based initiatives); and with “Customer 360”, which is the company’s product and take on omnichannel sales and marketing. The latter is an obvious and complementary product home, given that one huge aspect of Tableau’s service is to provide “big picture” insights.
“Joining forces with Salesforce will enhance our ability to help people everywhere see and understand data,” said Selipsky. “As part of the world’s #1 CRM company, Tableau’s intuitive and powerful analytics will enable millions more people to discover actionable insights across their entire organizations. I’m delighted that our companies share very similar cultures and a relentless focus on customer success. I look forward to working together in support of our customers and communities.”
“Salesforce’s incredible success has always been based on anticipating the needs of our customers and providing them the solutions they need to grow their businesses,” said Keith Block, co-CEO, Salesforce. “Data is the foundation of every digital transformation, and the addition of Tableau will accelerate our ability to deliver customer success by enabling a truly unified and powerful view across all of a customer’s data.”
President Donald Trump on Friday called off tariffs on goods from Mexico that would have gone into effect this week.
"I am pleased to inform you that The United States of America has reached a signed agreement with Mexico," Trump tweeted Friday. "The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended."
The tariffs, which would have started at 5% and could have eventually climbed as high as 25%, were opposed by many members of the president's own party and businesses that move goods back and forth across the border.
The reversal is good news for US stock indexes. The Dow, S&P 500 and Nasdaq are coming off their best weeks of the year, boosted by investor optimism that the Federal Reserve could be on the verge of cutting interest rates.
2. United Technologies and Raytheon:United Technologies(UTX) and Raytheon(RTN) have agreed to merge, creating an aerospace and defense powerhouse.
The companies currently have a market value of $166 billion. The deal, announced Sunday, is one of the biggest corporate mergers of 2019.
It won't include United Technologies' elevator and air conditioning units, which the company will spin off in 2020.
Shares of Raytheon(RTN) are tracking 2.8% higher in premarket trading, while stock of United Technologies(UTX) could leap 5%.
In other deal news: UK travel business Thomas Cook said Monday that it's looking at selling its tour operator business to China's Fosun. Thomas Cook shares in London rose more than 10% on the disclosure.
3. UK GDP: GDP in the United Kingdom fell by 0.4% in April as Brexit uncertainty continued to take a toll.
The Office for National Statistics pointed to a steep drop in car production due to planned shutdowns put in place around the original Brexit deadline.
It also cited broader manufacturing weakness. Stockpiling faded as the date of Britain's departure from the European Union was pushed back again.
4. Coming this week: Monday — US job openings; Chinese trade data; UK GDP Tuesday — Uber(UBER) CEO Dara Khosrowshahi at the Economic Club of Washington; Dave & Busters(PLAY) earnings; Tesla(TSLA) shareholder meeting; E3 gaming conference begins Wednesday — US and Chinese inflation data; US oil inventories; Lululemon(LULU) earnings Thursday — German inflation data; Tesco(TSCDF) and Broadcom(AVGO) earnings; OPEC report; European Union industrial production Friday — US and Chinese retail sales; University of Michigan consumer sentiment
(Reuters) - Strong Chinese export data and the U.S.-Mexico deal to avoid new import tariffs bolstered the mood on European stock markets on Monday, while car company shares also got a lift from signs of moves to revive Fiat-Chrysler and Renault's merger.
The pan-regional index rose 0.4% by 0805 GMT, with trading volumes thinned out by the Whit Monday holiday in Germany, Switzerland, Austria and most Nordic countries.
The auto sector gained 0.5% on signs that Fiat Chrysler Automobiles NV and Renault SA (PA:) were looking for ways to resuscitate their collapsed merger plan and secure the approval of Nissan Motor Co.
Fiat Chrysler and Renault's shares were both up about 2% after sources close to the companies told Reuters they were back in discussions on ways to revive the deal.
"We believe it is too early to talk about negotiations being re-opened," Equita analyst Emanuele Gallazzi wrote in a note.
"Today's news together with the hypotheses discussed in various press sources relating to alternative scenarios for FCA, including GM, Hyundai and Geely, keep high the speculative appeal of the stock."
President Donald Trump on Friday retreated on last month's shock threat of a 5% import tariff on all Mexican goods in exchange for moves on immigration, providing relief to investors worried that a second major U.S. trade dispute would drive the global economy into recession.
"Markets are blowing small celebratory bubbles this morning," Deutsche Bank (DE:) analysts said in a note.
Trade tensions between the U.S. and China still lingered, with Group of 20 finance leaders saying that trade and geopolitical tensions have raised risks to improving global growth while stopping short of calling for a resolution of the conflict.
Adding to gains was some residual buying after weak U.S. nonfarm payrolls data on Friday that spurred hopes of the Federal Reserve cutting interest rates.
Concerns over the pace of growth in the world's major economies drove a nearly 6% fall in European stock markets in May, their worst month in more than two years, but have been countered since by hopes of new stimulus from central banks to head off the threat.
Among other stocks, BAE Systems (LON:) gained 1% on hopes of further deal making in the aerospace and defense space after United Technologies Corp (NYSE:) agreed on Sunday to combine its aerospace business with U.S. contractor Raytheon (NYSE:) Co, in what would be the sector's biggest ever merger.
Thomas Cook's shares jumped 15% after a report that Hong Kong's Fosun Tourism was in talks to buy its tour operating business as the British group faces breakup after issuing three profit warnings in the past year.
Ferguson Plc fell 4% after the British plumbing products distributor's third quarter revenue missed analysts' estimates.
Disclaimer:Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
