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tv   Nightly Business Report  PBS  October 25, 2016 1:00am-1:31am PDT

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♪ this is "nightly business report" with tyler mathisen and sue herera. eyebrows raised. at&t proposes to buy time warner for $86 billion. but will the proposal end in wedded bliss? why washington may stand in the way. deal frenzy. from media to aerospace to discount brokerages. why a flurry of mega deals is happening now. in the fast lane. the automaker, american automaker, that did something no other domestic car maker has done in more than three decades. those stories and more tonight on "nightly business report" for monday, october 24th. good evening, everyone. neither one of these two are strangers to big deals. at&t and time warner themselves, the products of audacious deal-making now plan to hook up
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in an $86 billion merger. it's one of the biggest of all-time. the deal would put together the nation's second-largest wireless carrier, a corporate descendent of the great ma bell with one of the most prominent media companies of them all. time warner. which traces its roots literally invented the news magazine and introduced the first talking picture. we told you friday the deal was close and this weekend it became official. the combination creates a massive media and distribution company. the ceos predictably think it's the next big thing. an irresistible force, combining content, innovation, speed and mobility. >> the world of distribution and content is converging, and we need to move fast, and if we want to do something truly unique, begin to cure rate content differently, begin to format content differently for these mobile environments, this is all about mobility.
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>> we realize that if we had ourselves together that we could create more innovations for consumers so they could have more choices of package. they're going to end up with more competition, therefore lower prices. >> but both stocks fell in trading today as invest, realize that closing the deal won't be easy, and, in fact, faces an uphill climb, especially in washington. speaking of which, politicians from both sides of the aisle are raising questions about the proposed deal. this weekend, donald trump vowed to block it. >> as an example of the power structure i'm fighting, aet is buying time warner, and thus, cnn, a deal we will not approve, in my administration, because it's too much concentration of power in the hands of too few. >> he wasn't the only one. when asked on "meet the press," tim kaine said he has some questions.
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>> generally, pro competition and less concentration, i think, is generally helpful, especially in the media. but this is just announced, and i haven't had a chance to dig into the details. but those are the kinds of questions we need to be asking. >> and senator bernie sanders said simply, "washington needs to kill it." eamon javers is in washington with more on the challenges this deal faces. we heard about from mr. trump and mr. kaine. have we heard from hillary clinton? >> yes. hillary clinton true to form, has been a little bit more cautious about where she stands on this deal. her campaign did release a sort of generic statement, saying that the deal has to be examined. but she hasn't come out and said one way or the other whether she favors this deal. and given the polls and the presidential race right now, a lot of people are thinking this might land on the desk of an incoming clinton foundation early next year. it will be up to the clinton folks what they want to do with
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it, if she wins this election. so a lot of eyes now focused on her, if that bernie sanders comment and that donald trump comment sort of box her in politically and force her to come out one way or the other on this deal. so far, she hasn't planted her flag yet. >> it's interesting, eamon. usually when antitrust cases come into play, it's too airlines merging to become one really big airline. this isn't that. what's the next step then in the washington process? >> well, in terms of process, we're going to see a filing in the s.e.c. this week, and we'll expect to learn a little bit more about the deal and where it goes from here. we're also going to see filings with department of justice and in november, hearings on capitol hill as the senate antitrust subcommittee holds hearings designed to provide a public platform here for the -- both the companies that are trying to do this deal and their critics to air their grievances about the deal and whether they think it will take out too much competition. the companies have been saying, look, this is a vertical merger. it's not a merger of competitors
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like we have seen in other deals. therefore, it should escape much regulatory scrutiny as a result of that. i'm not so sure that's the case. the populus mood out there in the country that's been driving this entire election cycle we have been covering doesn't make it a natural fit for a massive $86 billion merger here in washington. >> indeed. eamon, thank you very much. eamon javers in washington. and another big deal. this one in the global aerospace sector. we'll bring together two of the biggest suppliers to plane-makers. rockwell collins will acquire b/e aerospace for about $6.5 billion, making this the biggest deal in rockwell's history. rockwell collins' ceo said the combination gives it a new path for growth and will let it develop supplies for a so-called smart airplane. >> we are currently providing broadband systems to communicate with the ground, on board secure fire walls, cyber security, networks on the aircraft, and in the future, all of the cabin
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systems are going to be nodes on that network. and that's the thesis here, we'll be able to bring that net working technology to the products that b/e brings to our portfolio. >> shares went in different directions. b/e aerospace took off, rockwell collins fell 2.5%. and yet another deal. td ameritrade will buy rival scott trade financial services for about $4 billion. that acquisition combines the two largest online brokerages and comes at a time when the industry is facing pressure from lower trading volumes and sluggish revenue growth. and td ameritrade's ceo says his company has a strategy to gain the trust of younger investors. >> we're also investing in even more cutting-edge technologies, whether it be using amazon echo, for example, to be able to talk to td amir ameritrade. we'll be well-positioned. >> shares of td ameritrade fell 4% today's session.
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>> general worth financial, which provides mortgage and long-term care insurance agreed to sell itself to a chinese investment firm. the deal valued at $2.5 billion, and comes as gen-worth copies with rising costs. analysts say the low premium to fried's closing prices reflects the gloomy business outlook. yet another chinese conglomerate is going to buy a 25% stake in hotel operator hilton worldwide. h & a group will pay $6.5 billion for its portion of the company, which it's sbig from private equity firm blackstone. that comes as hilton plans to celebrity into three entities later this year and the latest move into american real estate assets by a chinese firm. shares of hilton rose just a fraction. and so from media and telecom to aerospace to discount brokerages and more, companies across many different industries are buying, selling and merging.
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in recent weeks alone, nearly $240 billion in deals. and here to discuss why is one of america's most respected deal-makers, chairman of the global m & a practice at the law firm, jones day. welcome. why are these deals happening now? >> well, why not? one of the things -- one of the things when you went through the list, you're going to look for a sort of common thread. certainly not an industry common thread. there has been a little bit of a backup in m & a in august and september, a little bit. but still plenty of big deals being done. one of the things is the market got a little bit lumpy. everybody has their own theory as to why that is. the election, discussion of what the feds are going to do. uncertainty. but, you know, what today proves or this weekend proves is still a very strong market. particularly driven by low-cost to capital, and frankly a, tepid
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growth rate that makes you think you need to buy in order to grow. >> you're saying perhaps the market has a little more clarity on the political side of things. but the higher interest rate scenario. the fed is probably only going to raise interest rates once this year. and not by very much. how big a factor is that in the move to merge now? >> it's -- there's never one single factor. it's probably a factor. but if you're looking at something very large, and there's maybe a 30 basis point swing in rates, you know, now rather than later is probably a good idea. nothing is driven by a single factor. it's wrong when, you know, you've got to search out the headlines. but it's a combination of things. i do think the election and the uncertainty about exactly what all of us are going to -- result from that, that had a negative effect, just like it did on the stock market. and now that it looks more certain, less of an effect. >> yes, i was going to say,
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implicit in that is what i sense is your view that it isn't as uncertain as it once was. let's talk a little bit quickly about that idea of not being able to create sort of organic growth, but having to go and acquire it. is that what's happening here? >> well, when you -- when you're organic growth rate is in the 150 to 200 basis point rate, that doesn't support a very high stock price. so one of the things that is common among all of these deals from this weekend is their strategic. sure, people criticize big deals that it's just empire building. i don't think so. when you think about each of these deals, it had a very strategic purpose behind it. so it isn't about getting better. it's about getting bigger. it's about getting better. and sinner jazzing and getting a greater earnings growth than you can in revenue. >> what kind of a year do you think it's going to end up to be? obviously, the time warner/at&t deal is huge, certainly, but is
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it going to be a -- an up year compared to last year, do you think? >> well, it's hard for -- last year was over $4 trillion. that's probably not going to be seen again for some time. but it's going to be just as good as 2014 that we all thought was a very good year. so, you know, year over year comparisons are a little bit negative but that's because they're being compared to an astonishing year. i still think, as long as money is cheap, there's going to be plenty of deals. >> very quickly, if you might, sir. do you see on the face of it any antitrust issues with at&t/time warner. >> it is a different deal. not horizontal as was said earlier. but we're in a political environment. it will be looked at. the analogous deal, comcast took a year to get done. and as a pace of merger and acquisition activity picks up, who might be next, especially in the fast consolidating media and communications industry? julia boorstin takes a look. >> the end of traditional tv is
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getting closer, and media companies are scrambling to position themselves for the world where customers get exactly what they want on their mobile devices. we could see other distributors, such as verizon and charter, follow at&t's lead. >> to the extent that our strategy succeeds, i think other companies will try to look like us. and if our strategy doesn't succeed, other companies won't bother, right? so i think it's a function of how well we do together. and for the strategy off. >> tech companies, apple, google or amazon could be buyers as they all put together more video offerings. and for content creators, this deal creates more pressure to consolidate for negotiating power with distributors. >> if you go across the large cap media sways, cbs and viacom with voting control in discussions about a merger, i think this probably slightly increases the odds of that happening. >> fox, which made a failed bid to buy time warner a few years ago, could be looking at other deals.
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and smaller media assets, such as am cnet works, discovery communications, scripps networks and msg networks, channels at risk of being excluded, could be snapped up. but analysts warn that prices would need to come down first. >> i'm not sure that there's many silicon valley companies who want to pay a multiple on the affiliate model that basically they think they're destroying. they might want some content, but that's different than buying television networks. so if the buyers emerge, i'm sure we'll have some willing sellers. >> when it comes to streaming giant, netflix, its $55 billion valuation means not many could buy it. but as the likes of apple were to step up, it would be another game-changer for the fast-moving media space. for "nightly business report," i'm julia boorstin in los angeles. all the deal news spurred some optimism on wall street today and helped prop up the broader market. the gains were capped by a
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rising dollar and falling oil prices. the dow jones industrial average rose 77 to 18,223. had been up 130 points at one point. nasdaq gained 52. s&p 500 up 10. a federal reserve official said today very low interest rates will likely be the norm for the next two or three years. st. louis president james bullard reiterated his view that only one more interest rate hike is necessary before holding steady. bullard said he thinks the path of rate rises shuck should be so slow as to be imperceptible. the dow component visa reported a sharp rise in profits as customers spent more using its network. the world's largest payments operator was helped by its acquisition of visa europe. u.s. accounted for 41%, europe 25%. visa earned 78 cents a share, 5 cents above estimates. revenues climbed 19% from a year
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ago to $4.2 billion. that was also above expectations. the stock, volatile in after-hours trading and as aditi roy explains, that may have something to do with the company's outlook. >> visa beat expectations on the top and bottom lines, its forward-looking guidance for the coming fiscal year came in weak. the company projecting net revenue growth for year 2017 at 16 to 18%. that's lower than street expectations of 20%. its projected eps growth for the coming fiscal year in the mid teens. that number also missing expectations with the street looking for 19% growth. the report coming on the heels of the company's announcement last week that ceo charles scharf will be stepping down and board member and former amx president, al kelly, will be taking over. the latest earnings also reflecting the company's acquisition of visa europe earlier this summer. for "nightly business report," i'm aditi roy, san francisco. still ahead, blurring the lines. big tech is circling telecom.
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the telecom is fighting back. and these powerful industries may never be the same. with its proposed bid for time warner, it is clear that the boundaries between technology, telecom and media are not as defined as they once were. deidra bosa explains. >> with at&t's bid for time warner, a new wave of media change may have just begun. and the line between media, telecom and tech is becoming blurred. >> i think the reality is, as we shift to an on-demand world, without commercials, move to a mobile-first environment, the media industry -- the legacy media industry, meaning the
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cable network product that kind of has been the basis for all of the media stocks, is very challenging. >> and the big shift is a big advantage for tech companies. just last week, youtube ceo telling the audience at the "vanity fair" summit, youtube sees itself as a platform. >> the question is whether you define tv as the content or the platform. right? back to your original question. and i think the content is going over time morph more to an online type of platform, similar to youtube. where content is available, you know, on demand, global, and interactive. and so when we think about youtube, we think about being a platform for the next generation of media companies, and traditional media companies, too. >> and that makes traditional media companies nervous. it's not just youtube and google but amazon with its own original content and distribution channels, apple tv and facebook's push into video. big tech is starting to look a
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lot like media. it's also encroaching on telecom's bread and butter distribution business from financing their own cable to satisfy bandwidth needs to offering ultra high speed internet as google fiber already does in nine cities. with tech, telecom and media now playing in the same sand box, they may start competing for the same assets. the at&t time warner deal reportedly came together quickly as apple and others were circling. in a consolidating media landscape, the tech giants will continue to play a major role. for "nightly business report," i'm dierdre bosa, san francisco. >> kimberly-clark cuts its outlook after a disappointing quarter and that's where we begin tonight's market focus. the consumer products company missed analysts' estimates for profits and revenue, citing currency headwinds and compete active environment. the maker of kleenex tissues and huggy's diapers lowered its earnings forecast for the year.
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shares finished down 5% to 113.91. t-mobile posted higher than expected profrlt thanks in part to an increase in customers. the wireless carrier is optimistic that momentum will continue, saying it expects to add more kmeshz this year than it previously forecast. the shares popped almost 10% to $51.19. restaurant brands topped profit expectations as the owner of burger king benefited from higher sales in some foreign markets. but the company's same-store sales fell due to sluggish demand. shares off nearly 5% to $44.67. vf corp posted worse than expected revenue as weak demand in the apparel retailer's denim division hurt results. wrangler did report a higher profit but the company cut its guidance. vf did raise its quarterly dividend on this day, nearly 14% to 42 currents a share.
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shares down to $53.07 microsoft said the deep drop following britain's vote to leave prompted the company to raise prices for its software and cloud services in that country. starting january 1st, business customers can expect to see a price hike of 13% for enterprise software and an increase of 22% for enterprise cloud services. shares were up 2% on the day at $61 even. shares of the restaurant chain, sonic, took a hit after hours following a down beat earnings outlook for the year. the company also said profit and revenue were hurt in its latest quarter, because of, quote, slowing consumer trends. shares initially fell 10%, following the after the bell news, but finished the regular session up more than 1% to $26.49. a lot of money has been pouring into passive investments like mutual funds and etfs. it's a trend we have been reporting on.
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but etfs or exchange traded funds are multiplying like crazy. and as mike santoli reports, not all of them are created equal. exchange-traded funds are a bit like the smartphone apps of the investing world. remarkably cheap and useful, new ones pop up every day and there are far too many. because they offer sufficient exposure at low costs, one of the hottest growth areas. some 1,700 etfs controlling assets. still the market is dominated by a handful of very broad funds. the ten largest, including state street's s&p 500 trust, and the van guard total market command more than a quarter of all etf assets. this is driven fund companies to push a variety of gimmicky etfs to appeal to niche interests. among, one for the drone economy and others for most every agricultural commodity. the success rate is pretty low.
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more than half of all listed funds have less than $100 million in assets, a common threshold for determining a fund's viability. and one website that tracks the death watch now lists more than 400 funds vulnerable to closure. one promising area within etfs is known as smart beta or pursuing automative stock selection strategy to outperform the market. this could be cheap stocks or momentum stocks or those with some other trades. these are crowding out traditional higher cost mutual funds run by human portfolio managers. all this innovation in downward pressure on costs ultimately can work to the benefit of small investors to construct a low fee, tax efficient portfolio. but as with the surplus of phone apps, it's important to avoid the frivolous or costly ones. for "nightly business report," i'm mike santoli at the new york stock exchange. >> coming up, auto reliability. the american automaker that just broke a 35-year losing streak for domestic brands.
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see if you can guess which one. here's a look at what to watch. tomorrow seven do you components report earnings, apple, 3m, caterpillar and merck. the future of digital payments the focus of the money 2020 event. and a read on home prices with the release of the s&p case-shiller home pricin sde in and that's what to watch tuesday. the white house today confirmed that health care premiums will go up sharply next year for insurance sold through healthcare.gov. before subsidies, premiums for a mid-level plan will increase on
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average 25%. the administration says that the subsidies will help offset that price increase, but it comes as a number of insurers have pulled back from offering plans in the federal market. open enrollment starts november 1st. today brought a surprise in the rankings of car brand reliability. the latest report on that shows a japanese brand stumbling while a domestic brand has jumped to near the top of the list. in fact, for the first time ever, consumer reports puts a domestic brand among the three most reliable auto brands in the u.s. phil lebeau reports. >> reporter: they're not the flashiest models for sale, but buicks are turning heads, especially after the latest report on auto reliability by "consumer reports" which ranks buick as the third most reliable brand behind lexus and toyota. >> if you look at the top three, it's toyota and lexus, no surprise there. conservative companies that have a real good reputation of
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putting out reliable vehicles. but above any of the other japanese automakers, above honda, above subaru, we see buick. that is a big deal. >>. >> reporter: while buicks are getting better, hondas are not as reliable. in fact, the latest version of the civic, one of the most popular cars in america, dropped in the survey due to problems with the powertrain and infotainment system. honda says it respects the survey results and is working to enhance the usability and functionality of its vehicles. meanwhile, issues with the falcon wing doors in the new tesla model x are one reason "consumer reports" ranks it as the least reliable luxury mid size suv. but the brands with the poorest rankings are ram, fiat and chrysler. >> they continue to stumble. the platforms they have for fiat have not proven reliable. >> fiat chrysler says the company's own internal
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measurements continue to show positive growth toward vehicle quality. this survey is based on "consumer reports" subscribers critiquing the cars, trucks and suvs they own. their most common complaint, the infotainment systems in these cars are not always working as they should be. phil lebeau, "nightly business report," chicago. and that will do it for "nightly business report" for tonight. i'm sue herera. thanks for watching. >> and thanks from me, as well. i'm tyler mathisen. have a great evening, everybody. and we'll see you here tomorrow night.
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