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tv   Bloomberg Business Week  Bloomberg  May 28, 2016 12:00pm-12:31pm EDT

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♪ david: coming up on "bloomberg best," the stories that shaped the week in business around the world. could the chemistry be right for the heart center merger? >> you rarely see such a family rejection. david: does deutsche bank deserve more credit for its comeback efforts? it has been in decline the past couple of corners. david: has greece turned the corner in its debt debacle? high-profile leaders said share high-level insights in the week's best interviews. >> the regulars want this to be a level playing field. we can expect turbulence in
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the financial markets. david: it is all straight ahead on "bloomberg best." ♪ david: hello and welcome, i am david gura. this is "bloomberg best," the weekly review of the most important analysis of business news and interviews from around the world. two giant chemical companies took over the headlines. shery: bayer is proposing a blockbuster deal that would create the largest supply of farm chemicals and genetically modified seed. bayer wants to buy monsanto for $62 billion in cash. that represents a 20% premium. it would be the biggest takeover ever by a german company. francine: if monsanto actually
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reject the offer, are you ready or do you have a capacity to increase the offer? werner: we are totally convinced about the effectiveness of our offer. it is a 37% premium over and above the effective share price as of may 9. that is a strong testament as to the value proposition of monsanto shareholders. it is also my with the attempted transactions have seen in the past. we are fully convinced that it is a highly effective offer for monsanto's board. francine: is it your best offer? or just your first? werner: the best and sean's offer. we are waiting for the offer from the shareholders of monsanto. mark: 100 six dollars is the monsanto share price. that tells us investors are not convinced? >> they are not. there is a lot of concern that investors will come back and say they are not convinced. david: the current offer of $122
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a share is inadequate. addressnot adequately and provide reassurance for some of the potential financing and regulatory risks related to this. francine: do we intimate they are prepared to pay a price? rarely seen such a friendly reduction from the target company. on the one hand, it says it undervalues risk, but it says it respects bayer and sees that rationale for the deal. so it is very obviously invited to them with a higher price. bayer has to ask itself if we are going to stretch the balance sheet, do we want to raise more equity, sell assets? i think, if i had to guess, bayer does not table the first offer first, there is room to bump. scarlet: the dow up more than such points, u.s. stocks close saying near the best level of the session, joining a rally we
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saw in european markets. if you break the s&p 500 into 24 interest groups, everyone climbed. the worst performer was energy. that's still gained one half of 1%. alix: it feels like a risk-on day. we had the home cells that were killer, but oliver pointed out before got to air it started overnight. it is hard to find a specific catalyst. oliver: definitely helps when you open the day with european indexes across the board, on the other side of the pond, trading at standard deviations two times as high as they normally close. does not help. and you had some company-specific news. a good day from apple again. nice to see that back in the mix. overall, great day for biggest day in three months. >> and new home sales -- killer. really amazing new home sales. it will be paid back down the road data helps with risk on momentum. matt: greece's creditors have reached an agreement that will allow the release of 10.3 billion euros of aid.
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they have also committed to taking steps to believe the nation's 321 billion euro debt. after meeting off european finance ministers, they european monetary fund softened its stance. what will be the political impact of this? ian: there were three main headlines really last night. there was the deal on the payout of 10.3 billion euros degrees. there was also an agreement to look at debt relief in the future. details are still to come. we have to work that out. and also, the imf gave a commitment it would continue to participate in the greek rescue. that is important for germany , particularly going into the federal elections next year. so the political impact will be some respect for alexis tsipras, the prime minister of greece. some certainty for angle amerco going into those elections. -- in germany, some certainty for angela merkel going into those elections. more than anything, from sense
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of calm, sense of debt relief has been pushed until 2018. guy: i looking for details and struggling to find them. this feels all too reminiscent of where we have been before. ian: it does. it is particularly reminiscent of all we have seen the greek saga the last five or six years or so. in principle agreement to keep everybody happy, but in the end, nobody is happy and it all blows up again? so yes. there are options on debt relief after 2018, that is when the bailout program finishes. but there are no concrete measures. guy: brent crude back above $50 a barrel for the first time in more than six months. a drop in u.s. stockpiles spurring the latest rise. along with domestic options in oil-producing nations -- canada, nigeria, etc. reason it the exact is above $50 a barrel and why it could go higher. tracy: the catalyst the stockpile data from the u.s. showing a much higher than expected cut in stockpiles, something like 4 million
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barrels. as well as you point out we have production outages in venezuela, nigeria in turmoil, and lingering effects from wildfires in canada. all of those one-offs seemed to be combining to give oil a bit of a spur at the moment. you have to wonder how much further that rally can go ahead of the opec meeting next week. bloomberg is reporting today in the pre-opec meeting, there was no discussion from opec officials of a production cut. at least from the gulf side, we are seeing a continuation of the strategy of maintaining market share. david: now we want to go to japan, where world leaders tangled over how to push the global economy toward growth. there was some language in the communique saying we need to get growth going, but they did not go as far as prime minister abe wanted to go. is he satisfied with this result? yvonne: he says no.
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he continued to talk about their lehman crisis even after the fact that the g7 didn't buy it. he could not get that language into the communique. instead we heard leaders declare in this document that they have strengthened their resilience of the economies to avoid falling into a crisis. try to fixthe g7 this coordination, but trying to get that recipe on boosting growth, that remains tangled over geopolitical tensions. david: they did not get the language of crisis in, but in the 11th hour, they added the uk's referendum about leaving the european union. what happened with that? yvonne: that is right, and david cameron really got the last my effort to get that added in. they added a line that says brexit is a serious risk to the global economy. it was a good weekend for the prime minister. he was able to get support from the g7 when it came to china's
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steel overcapacity issues. the g7 saying they will tackle this excess, which has been fueled by government subsidies and support. not singling out china, but the references seemed to point to it. jonathan: as the data drops in the united states, gdp annualized quarter on quarter, the previous 0.5 rises to 0.8. the survey was looking for something firmer. but an upward provision nonetheless. carl: this is important news which lowers the hurdle for what is required for the next couple of quarters to hit the fed's full-year growth target of 2.2%. now we need to average 2.7% for the remaining quarters of the year. that makes it a little easier to hit that mark and on the margin, helps them stay on track for major activity, but i doubt at the june meeting. david: what will janet yellen and the fed be looking at in june? is it consumer spending?
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karl: three indicators. jobs, jobs, and jobs. david: still ahead on "bloomberg best," investors involved in turkey, puerto rico, and saudi arabia. up next, some of their weeks most important company stories, including a report of a new suitor for yahoo! ♪
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♪ david: this is "bloomberg best," i am david gura. let's continue our global to her of the week's top is news stories. deutsche bank has been ensuring investors it is in the midst of a turnaround. tuesday, that journey took an unexpected turn. david: moody's downgraded deutsche bank, and it has ceo john krantz speaking his mind this morning. mr. cryan came out fairly
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emphatically. matt: john cryan saying he thought it was ridiculous for moody's to downgrade their debt just two steps above junk because, in his words, they have enough capital to pay their debt four times over. >> does mr. cryan have a point? the bank has never had as much capital. they could easily repay their debt many times over. is that a valid argument? peter: the rating action was about the increased headwinds the bank is facing in terms of operating environment, and its results have been in -- its operating results have been in decline for the past couple of quarters. so that is what drove our rating change. mark: what is the biggest challenge, then, for deutsche bank in achieving this big turnaround? peter: the turnaround has many elements in it. it has been a very disciplined execution by the new management team. what they are trying to do is change the balance of the earnings mix of the bank. they are trying to strengthen the balance sheet.
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they are trying to revitalize the technology platform. they are trying to do all of these things, and all of these things, if they were achieved, we think would actually be credit positive. but they are challenging to achieve them all. shery: yahoo! having its award space since early january, falling 5%. telecom giant at&t is set to be -- is a said to be interested in buying the company's internet business. why did at&t come back into the game? we had heard earlier it was dropping its bid. alex: we don't know if we were fed misinformation or at&t has sort of changed its mind about yahoo! are both atizon the port where there is only so much they can do, at least u.s.-wise, from m&a standpoints. they cannot by another wireless network. regulators will not allow them
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to pay they cannot by another cable network -- regulators will not allow them to. so the digital aspects like yahoo!, it is probably somewhat appealing. you can make a small bet and develop something down the road that is appealing to your wireless customers. francine: let's go to vietnam, where boeing has won an order for 100 points from viet jet, the country's only private airline. it is worth $3 billion. viet jet is an airbus customer. it has multibillion offers. what incentives were offered for you to switch? dinesh: it's not a switch. it's looking at the value of the new airplanes caused the max 200, which is 370 max. this was launched by ryanair, and clearly that airplane has 197 seats. they saw the economic stuff that airplanes, and they realized this is the best economic any
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airplane can have in the world. ,ith that particular importance and they are kind of a low carrier in vietnam right now, they have ambition to go into other parts of asia. they want to do a major order, so that is why they order 100 airplanes. shery: toyota is investing in uber to explore a ridesharing partnership. mirai areancial and joining together to make a specific investment in the company. it will include toyota leasing special fleet vehicles to uber. >> the auto industry is being assaulted by all kinds of technological change. maybe the least of those is this concept of ridesharing, but it has really taken off. it has changed the way rental cars operate, the way taxis operate. it is a big part of the global fleet. it may change the way people drive or choose one to own a car or not to.
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nobody wants to get left out. toyota has a lot of money. it is easy for them to make an investment. get a toe in the water and see what is there for them to learn. guy: the unicredit ceo has agreed to step down after only six years at the helm of the bank after losing the support of investors and share price capital as well. do they have to raise money? jonathan: they certainly need more capital. one of the issues it faces is when you are trading at four times global growth, it is diluted. there was a lot of things they can do, spin off assets, relieve some of the capital pressure. unicredit is second to only santander as the lowest capital big bank across the eurozone. it has 40 billion of our provisioned performing land. it is the biggest. emily: hp enterprise shares are surging in extended trading. this is half of the old hewlett-packard still run by
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ceo meg whitman and focuses on servers and storage for corporate customers. the company announced it is spinning off the corporate business and merging with computer sciences corp.. is this expected? anand: no, but it makes sense. to focus -- have one part of the energy focus on hardware, predominantly networking, storage, and servers, and then finding a way to exit the services business to a company that focuses on exactly that portion of the business. it is a good strategy. into acuses the company smaller piece of the pie. the risk here is that you have an extremely small pie you are focusing on, one that is on hardware, predominately selling to corporate i.t. systems. will that be the long-term revenue growth area for hpe? be seen.ins to
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but in the near term, the deal makes sense. shery: microsoft is making as many as 1,850 job cuts while taking a $950 million impairment and restructuring charge. give us a sense of where these cuts are coming from, and what this tells us about the strategy. cory: one of the things it tells us is that the $9.5 billion acquisition of nokia, one of the last eight deals, was a disaster. $7 million last year, another $1 billion down now. it shows that decision at the time, which was controversial, was a mistake. a very expensive one. it shows you the company is focused on the things they do differently and focused on the things they do well, and focusing very much on software on the cloud, where they have franchises, both on the operating side and microsoft office. thinking about the cloud, thinking about bringing micro
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users to the office 365 platform and the microsoft azure platform, which they think will be the future of this business. shares in alibaba close more than 6% lower in new york after the company revealed the sec is looking into its accounting practices. the information was disclosed in its annual report filing. alibaba is being investigated -- for what? rosalind: the sec is looking into consolidation policies. it asked alibaba about more commission on its delivery network and also operating data for a single day. single day is a shopping extravaganza. once a year. it was in november last year. it brought in something like $40 billion. oppenheimer and co-size of the single issue could the -- the single day issue that could be related to issues with alibaba's -- growth of gmv
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merchandising volume. there was this total transaction. it is possible government moved sometime that turned out to be fake. it is possible 20% or 30% of transactions could be inflated as sellers buy their own products to boost their own sales ranking,ssentially. not think it is too much of an issue, if things alibaba is trying to become more transparent. alibaba is cooperating. and sec says just because it requests information does not mean anything is wrong. ♪
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♪ david: you are watching "bloomberg best," i am david gura. earnings season is winding down, but there were still a number of major companies reporting. a roundup begins with a u.s. builder many see as a bellwether for the luxury housing market. scarlet: toll brothers ceo doug
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yearly has been frustrated by the decline in his stock price. today, the stock is having its best day since 2013 after earnings beat estimates. betsy with the numbers on the luxury builders show. the numbers don't lie. first, we discuss stocks. even with the bounceback toll , brothers is down 12% in 2016. in the past year, it trailed the broader market and its peers. today's results lessened some investor concerns, saying the luxury market remains a strong and conjunction labor costs are easing. again or are bouncing back from the housing crisis. revenue increased 31%. analysts estimate toll's revenue may regain in the full year. california is a key market for toll. it represents 12% of its revenue the last quarter. it provided instant skill in the
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state to the northeast corridor, historically the center of told's business, but the land has fewer opportunities and rings fourth overall. beyond theversified single-family home. it now makes up two thirds of all offshore closings versus 91% in the year 2000. the strategy is paying off today with stocks gaining 8%. angie: sony is enjoying another positive session, the stock rising the most in a month -- 5.4% higher. that follows an overnight jump on wall street as investors shrug off weak profit outlook and take the long term view. why are investors ignoring this dreadful profit forecast? yvonne: it seems like the earthquake impact forecast for sony is a hiccup. that is the view of analysts out there. if you look at the restructuring sony has undergone with its tv
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and handset business, a lot of them say, hey, they are already over the hump. the company showing more resilience than we know. but keep in mind it was a pretty , ugly annual forecast, it basically ruins the hopes sony was going to have its most profitable year in nearly two decades. net income expected to fall 46% to $727 million. that is nearly two thirds what analysts were expecting, and operating profit was also a miss. if you look at the quake impact and do the math, it seems like this could cost sony $1 billion when it comes to damages, repairs, as well as sales lost from the time they had to shut down their facilities. forecast earnings growth will slow this year even as profits jump. europe's largest discount airlines expected to rise 40% after a 33% surge in march. airlines cut ticket
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prices to entice people to fly where he after recent terror attacks. how weak is pricing going to be as we go through 2017? >> the primary key driver of the next 12 months will be lower oil. we just reported $1.2 billion in profit when we were $90 a barrel. oil prices are falling. theme is weaker pricing. we are seeing the first half of the year, up to september, prices drop 7%. that is a combination of three things. own strong plastic across europe opening new bases, , new markets. you have the impact of competitors, responding with the benefit of lower oil prices. and then the terrorist activities. the events in brussels, paris, egyptair incident this weekend.
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and then you have the repeated air traffic control strikes in mainly the french, which is causing a lot of cancellation of high-yielding passages we cannot replace. >> shares of best buy plunging after a forecast that trailed analysts estimates. also the departure of the cfo effective after the june meeting. >> the cfo, why do markets care so much? >> she came in after the current ceo joins in 2012 and give the turnaround a lot of credibility. she came out and said we would cut $1 billion in cost pay they back it up and did that. that is the best part of this turnaround. sold off foreign divisions. now it is a matter of sales again. alix: in terms of growth, it was a store within a store concept , like the samsung store in a best buy that was going to be one of their growth drivers going forward. where are they in the actual growth turnaround plans? >> it has been tough, because
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they have done a lot of stuff to make the store better. stores,e the samsung the apple store within the stores. but the product cycle has gone against him for about two years now. not since spencer reported for your results the u.k. ceo , also unveiled a new plan to boost clothing and home business by reducing price provisions and refreshing styles more often. i was drawn to one of the lines about the need to focus on older returns. what does that mean for shareholders in the context of what you have done previously, buybacks and the light? >> what we announces we are continuing the program of shareholder returns. we announced last year we are moving to an ongoing program of returns. that is continuing with the announcement of special dividends at 75 million pounds for the first half of the year. we are a strong regenerative business. we will invest in growth, as we said, but our growth is likely
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to be 40 million pounds next year, which will generate surface capital, and we are committed to sharing that with shareholders. >> shares at hp are climbing this morning after reporting 11% decline in second-quarter revenue. the company, which focuses on the consumer market, which was spun off from hewlett-packard enterprises in november. declining sales, but they did be estimates which is why the stock , may be up. >> there was a hint in the restructuring going on since 2001, but we are reaching an end. they actually started the new company with restructuring programs. it is crazy restructuring, so they are giving non-gap numbers, they beat that gap number with a non-gap number with a gap number. they are 11% year-over-year. they have always been tied to printing and pcs. pcs are a disaster right now, but the printing is unfolding right now. this is a bad sign, because that has been the bread and butter fowl


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