Yahoo plans 'reverse spinoff,' instead of Alibaba sale

Yahoo said Thursday it would seek a "reverse spinoff" that would separate the Internet company's core operations from its holdings in China's online giant Alibaba. 

PHOTO: REUTERS

DEC 9, 20159:23 PM

[WASHINGTON] Yahoo said Thursday it would seek a "reverse spinoff" that would separate the Internet company's core operations from its holdings in China's online giant Alibaba.

The Internet pioneer said the move would create two separately publicly traded companies including one with the Yahoo core which has been struggling.

Yahoo said it was suspending its previous plan to create a new entity that would hold its multibillion-dollar stake in Alibaba.

That deal was envisioned to be tax-free but US officials said they could not guarantee this in advance.

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The new plan would transfer Yahoo's assets and liabilities other than the Alibaba stake to a newly formed company, the stock of which would be distributed to Yahoo shareholders.

It was not immediately clear what the deal would mean for the core Yahoo operations. Analysts believe that Yahoo would need to vastly scale back some operations or sell the company.

The company has been seeking to revive its fortunes under chief executive Marissa Mayer but the core operations are seen as having little or no value.

Yahoo's market value based on its share price is more than US$32 billion, but most of that is based on the value of its Alibaba holdings. The core business includes the company's Internet search component and a range of online advertising and digital media operations.

Last month, a hedge fund with a stake in Yahoo called on the company to sell its core business as a way to unlock more value for shareholders.

Yahoo said the new plan would be beneficial for its shareholders.

"In addition to our efforts to increase value and diminish uncertainty for investors, the ultimate separation of our Alibaba stake will be important to our continued business transformation," said Mayer.

"In 2016, we will tighten our focus and prioritize investments to drive profitability and long-term growth. A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo's business." Some reports suggested that telecom group Verizon or others could be interested in buying some of Yahoo's assets.

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IBM broadens push in China, India to predict pollution patterns

International Business Machines, which has been developing artificial intelligence to help fight Beijing's toxic air pollution, plans to work with other municipalities in China and India on similar projects to manage air quality. 

PHOTO: AFP

DEC 9, 20154:14 PM

[BEIJING] International Business Machines, which has been developing artificial intelligence to help fight Beijing's toxic air pollution, plans to work with other municipalities in China and India on similar projects to manage air quality.

IBM Research, a division of the company, will help an advisory body known as the Delhi Dialogue Commission to understand the link between traffic patterns and smog in the Indian capital so that decisions related to improving air quality can be backed with modeling, the Armonk, New York-based company said on Wednesday.

The announcement comes as smog continues to enshroud Beijing this week, prompting city officials to issue a red alert for the first time since a four-tier warning system was put in place in 2013. Air quality in the Chinese capital is expected to remain at hazardous levels until at least Thursday morning, according to the US embassy in Beijing.

The undertaking is an offshoot of a similar initiative started last year to address air pollution through a partnership with Beijing's municipal government. In collaboration with Beijing, IBM has been testing a computer system capable of learning to predict pollution patterns 72 hours in advance, along with pollution trends as many as 10 days into the future.

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IBM Research will also assist the city of Johannesburg and South Africa's Council of Scientific and Industrial Research in modeling air pollution trends and quantifying the effectiveness of the city's actions to tackle the issue, according to the statement.

Computer Modelling The company is also working with local authorities in China's northern cities of Baoding, Zhangjiakou, and in the Xinjiang region.

IBM's model is able to estimate where pollution is coming from, where it will go and then analyze possible government responses, said Dong Jin, associate director of IBM's China research unit. The systems apply IBM's cognitive computing, which is capable of taking unstructured data, understand it, learn from mistakes and offer improvements, said Dong.

The company uses data drawn from air monitoring stations, meteorological and environmental satellites, emissions, land use, traffic patterns, social media and the macro-economy, said Zhang Meng, chief meteorologist at the research unit.

IBM is also using similar technologies to help forecast the availability of renewable energy in the UK, the US, Japan and China, according to the statement.

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Walk-out over pay at China-owned US auto plant

DEC 9, 20159:48 AM

[DETROIT] More than 3,000 members of the powerful UAW auto union walked off the job at a Chinese-owned supplier plant in the United States on Tuesday.

Workers at the Nexteer Automotive plant in Saginaw, Michigan, downed tools with the start of the morning shifts, the United Auto Workers said.

The dispute centres on pay and benefits.

Workers had voted overwhelmingly to reject a contract offer from Nexteer, which was purchased from General Motors by Chinese firm Pacific Century Motors.

Nexteer Automotive is a three-billion dollar company that builds steering systems for manufacturers including GM, FiatChrysler, Ford, Toyota and PSA Peugeot Citroen - as well as automakers in India, China, and South America.

A drawn-out strike could force some of its major auto clients to curtail production.

AFP

North Face founder dies in kayak accident in Chile

      

Douglas Tompkins, the American co-founder of the outdoor label The North Face, died in a kayak accident in Chile's southern Patagonia region, a doctor who tried to save him said. 

PHOTO: AFP

DEC 9, 201511:11 AM

[SANTIAGO] Douglas Tompkins, the American co-founder of the outdoor label The North Face, died in a kayak accident in Chile's southern Patagonia region, a doctor who tried to save him said.

The 72-year-old succumbed to "severe hypothermia" after capsizing on Lake Carrera and slipping into its near-freezing waters, Carlos Salazar, the emergency room doctor, told Biobio Radio.

Mr Tompkins was kayaking with four other Americans and a Mexican on the lake when violent winds sprang up in the afternoon, generating waves that tossed them all into the water.

A Chilean navy ship rescued the group and Mr Tompkins was taken by private helicopter to the hospital in the town of Coyhaique where, despite doctors' efforts, he died.

Mr Tompkins founded the American outdoor clothing and camping label The North Face in 1964 with a partner.

Four years later he helped his first wife, Susie Tompkins Buell, establish the clothing brand Esprit and grow it into a big business before their divorce in 1989.

After selling his stakes in The North Face and Esprit for a fortune, Tompkins retired to Chile in 1990 and became a noted conservationist and philanthropist.

He worked to create a string of natural parks, and donated 8,000 square kilometres (3,000 square miles) to Chile and Argentina to help preserve a forest region on their border.

According to the last interview he gave, published in November by a magazine called Paula, he attracted criticism from some Chilean politicians who accused him of leading an ecological sect and of trying to control key Patagonian waterways.

"Lately I've been paying more attention to my biological clock. I tell myself to hurry up, that I have to do everything before death catches me," he told the magazine.

AFP

TIME names Merkel as its 'person' of 2015

TIME magazine Wednesday named German Chancellor Angela Merkel as its "Person of the Year 2015," hailing her leadership during Europe's debt, refugee and migrant crises, as well as Russia's intervention in Ukraine. 

PHOTO: REUTERS

DEC 9, 201510:15 PM

[NEW YORK] TIME magazine Wednesday named German Chancellor Angela Merkel as its "Person of the Year 2015," hailing her leadership during Europe's debt, refugee and migrant crises, as well as Russia's intervention in Ukraine.

"For asking more of her country than most politicians would dare, for standing firm against tyranny as well as expedience and for providing steadfast moral leadership in a world where it is in short supply, Angela Merkel is TIME's Person of the Year," wrote editor Nancy Gibbs.

TIME named Abu Bakr al-Baghdadi, leader of the Islamic State extremist group, Republican presidential candidate Donald Trump, America's Black Lives Matter activists campaigning against inequality against African Americans and Iranian President Hassan Rouhani as its runners up.

The magazine said the German chancellor had "stepped in" every time a serious crisis had threatened European statecraft this year.

"The prospect of Greek bankruptcy threatened the very existence of the euro zone. The migrant and refugee crisis challenged the principle of open borders. And finally, the carnage in Paris revived the reflex to slam doors, build walls and trust no one," Gibbs wrote.

"Each time Merkel stepped in. Germany would bail Greece out, on her strict terms. It would welcome refugees as casualties of radical Islamist savagery, not carriers of it.

"And it would deploy troops abroad in the fight against ISIS... You can agree with her or not, but she is not taking the easy road. Leaders are tested only when people don't want to follow."

A pastor's daughter who grew up behind the Iron Curtain, the 61-year-old Merkel made an unprecedented journey to become chancellor, in power for 10 years, and the world's most powerful woman.

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China suspends new applications for RQDII investment scheme: sources

China's central bank has suspended new applications for the Renminbi Qualified Domestic Institutional Investor (RQDII) investment scheme, sources told Reuters on Wednesday. 

PHOTO: REUTERS

DEC 9, 20154:57 PM

[HONG KONG] China's central bank has suspended new applications for the Renminbi Qualified Domestic Institutional Investor (RQDII) investment scheme, sources told Reuters on Wednesday.

"Many Chinese institutions have made use of the RQDII channel to buy yuan bonds and certificate of deposits in the past two months," said a source at a Chinese fund house, adding the scheme had now been suspended.

China rolled out the RQDII scheme at the end of last year to allow domestic investors to buy assets in the offshore market.

REUTERS

    
 

Bank of England FPC shows differences over bank risk buffers

Bank of England policymakers differed last month on how soon they might increase the amount of capital banks must hold against economic downturns, the central bank said on Wednesday. 

PHOTO: REUTERS

DEC 9, 20155:41 PM

[LONDON] Bank of England policymakers differed last month on how soon they might increase the amount of capital banks must hold against economic downturns, the central bank said on Wednesday.

Last week the central bank said British banks had nearly completed the job of building up their capital defences, and stopped short of any immediate action to curb lending to consumers or small-scale property investors.

But a record of the Nov 25 and Nov 30 meetings of the BoE's Financial Policy Committee at which the decision was made showed some disagreement among members, though they ultimately reached a consensus not to raise the so-called counter-cyclical capital buffer (CCB).

In future, however, the decision might come to a vote, Bank of England Governor Mark Carney said. "The discrete nature of the decision on the (buffer) might not always lend itself to a consensus-based process," the record said.

The central bank also discussed the possibility of the US Federal Reserve raising rates in December, and concluded that the market impact would be hard to predict.

To date public divisions between the 10 voting members of the FPC have been rarely visible - something which has drawn concern from the parliament committee which monitors the BoE.

This time, however, the record of the meeting showed that some differences over how soon to raise the CCB, which aims to make banks hold more capital as they start to lend more freely, and reduce capital requirements in a downturn.

Opponents of a rise said overall credit growth in Britain remained below pre-crisis rates and there were signs that companies were becoming more risk averse.

The FPC also noted that global guidelines suggested the buffer should remain at zero.

Others, though, saw a case for a move "soon". "The ability to support the economy in the future through cuts in the CCB, as risks crystallised, required a meaningful buffer of additional capital which could then be released," the record said.

The record also showed some disagreement over the overall amount of capital banks should hold.

BoE Governor Mark Carney was keen last week to dispel banks'fears that the BoE was going further than international rules required, and acknowledged that excess capital requirements could hurt growth.

The BoE is now tweaking the requirements individual banks must meet with a view to imposing the add-on CCB buffer step-by-step from March.

British lenders that play a key role in the global financial system - such as Barclays and HSBC have to hold extra capital to reflect this.

Wednesday's record showed that the BoE intends to consult in January on whether the ring-fenced units of banks also need to hold a 'systemic risk buffer' of extra capital.

The FPC also decided that banks and building societies with less than 175 billion of total assets would be subject to a systemic risk buffer of zero percent. For larger lenders, this buffer would be capped at 2.5 per cent of capital.

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Banks will struggle with profitability in 2020, survey shows

DEC 9, 20157:18 PM

[NEW YORK] Global investment banks face five years of cost-cutting as tighter regulations limit profits and trading revenue fails to bounce back, according to a survey of analysts covering the industry.

The firms on average will earn a 9 per cent return on equity in 2020, still short of their cost of equity, according to the survey of 147 analysts and portfolio managers conducted by Institutional Investor and Broadridge Financial Solutions Inc, which handles trade processing and investor communications for banks and other companies. 61 per cent of the respondents expect regulatory pressure to increase over the next five years and 9 per cent predict a decline.

While fixed-income trading revenue will halt a multiyear decline, it will increase only 0.2 per cent per year through 2020, according to the survey. Several banks have acknowledged doubts about how quickly that business will bounce back after revenue fell by more than half since 2009. Firms from Morgan Stanley to Deutsche Bank AG have announced job cuts and capital reductions in recent months.

"The trading businesses remain the problem child, and every week you end up with more evidence of that," Brad Hintz, a former equity research analyst who helped design the survey, said in a phone interview. "You have the strategy of the banks of last man standing: 'We're in better shape than everyone else, we'll wait everyone else out.' Well, it's already been a long time."

MERGER OUTLOOK

The analysts were more bullish on mergers and acquisitions, which may set a record this year. The survey estimated revenue from that business will climb 4.9 per cent a year through 2020.

US firms are expected to produce the best profitability, averaging a 10 per cent return on equity in 2020, according to the survey. The expectation is 9.1 per cent for European firms and 7.7 per cent in Asia.

Returns that continue to fall short of investor demands will drive firms to undertake new efforts to cut costs, the survey found. A potential strategy, once dismissed as too cumbersome, is setting up firms known as utilities to handle processing and reporting duties for a number of banks, eliminating duplicate expenses.

"We're definitely seeing a real change in appetite in terms of industry utilities," Vijay Mayadas, senior vice president of corporate strategy at Broadridge, said in an interview.

"Given the pressures a lot of the industry is facing, the conclusion of those conversations is much more along the lines of, 'Well, the reward is probably worth the risk."'

TECH INVESTMENTS

Analysts in the survey rated adoption of new technology for back-office activities as a potential source of the biggest cost savings, and 54 per cent said banks haven't invested enough in tech to improve efficiency. Deutsche Bank co-CEO John Cryan echoed those sentiments as he described changes to his firm's support and controls units at an investor conference Tuesday.

"Throwing people at the solution is never the answer, and sadly, unfortunately, it means taking people out of the equation and replacing them with computers," Mr Cryan said. "But it's the only way we'll be able successfully to control the cost of the business that we write."

The online survey of research analysts and portfolio managers at sell-side and buy-side firms was conducted from June to September.

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