At Last! An M&A Slowdown (Maybe) — CEO Daily, Monday, 30th October

October 30, 2017, 12:14 PM UTC

Good morning.

Merger activity is expected to slow in the coming year—at least compared to the overheated pace of the last two years. That’s a key finding of EY’s twice-yearly Capital Confidence Barometer, based on a survey of U.S. executives, which is coming out later this morning. (CEO Daily was offered an early peek). Only 42% of surveyed executives said they planned to pursue a deal, down from highs over 70% in recent years.

The M&A cooling would follow the recent announcement of a blockbuster bid by CVS to acquire insurer Aetna. The stock market was down on that deal Friday, with shares of both companies falling. Analysts said that may have more to do with news last week that Amazon has won regulatory approval to wholesale pharmaceuticals in 12 states. Competing with Amazon has become every company’s worst nightmare.

And former GE CEO Jeff Immelt told The Wall Street Journal that he didn’t know his company was sometimes sending a second plane to shadow his globetrotting travels. Apparently, the GE board didn’t know either.

More news below.

Alan Murray

Top News


Special Counsel Robert Mueller is reportedly set to announce the first indictments in his investigation of alleged collusion between Russia and the Trump campaign last year. Various reports said charges were filed by the grand jury in Washington D.C. on Friday. It’s not clear yet who the charges name or what they allege. Speculation necessarily revolves around former National Security Adviser Michael Flynn and former campaign manager Paul Manafort, due to documented connections with various Russian officials and businessmen. The President amped up criticism of the probe over the weekend, also drawing attention to the lack of progress in subjecting Hillary Clinton to the same degree of legal pressures. Fortune

Markets Breathe Out as Catalonia Stays Quiet

Spain’s financial markets leaped in relief on reopening Monday, on evidence that the imposition of direct rule from Madrid will not, in the short term at least, lead to violence. The central government formally dismissed the regional one in Barcelona over the weekend, along with the head of Catalonia’s police, and also called fresh elections on December 21 for the region. State prosecutors have just filed charges of rebellion, sedition, and abuse of public funds against dismissed Catalan leader Carles Puigdemont and other members of his government. Puigdemont, who formally declared Catalonia’s independence on Friday, has made no public appearance yet Monday.   Bloomberg

Akzo Tries to Gobble Its Way up the Food Chain

Akzo Nobel decided that the best way to avoid getting swallowed by PPG was to make itself too big to be digested. It’s in talks with Philadelphia-based Axalta (formerly DuPont Performance Chemicals) on a disingenuously-styled “merger of equals” (Akzo is three times the size of its target). Akzo’s stock fell 1.4% as the market priced in fears management would overpay in order to secure its own future. Fortune

Saudi Comments Lift Oil Prices to New High

Crude oil prices rose by more than a dollar over the weekend after Saudi Crown Prince Mohammed bin Salman confirmed the kingdom’s willingness to extend the OPEC-led agreement on output restraint beyond its scheduled end-date of March 2018. It has already been extended once, and King Salman’s cordial visit to Moscow earlier this month suggests that Russia, whose support will make or break a deal, could also be kept on board. It will be a tough sell though: the market is already rebalancing, and Vladimir Putin will have less need for market stability after he’s re-elected in March. FT, metered access

Around the Water Cooler

Sexual Harassment Allegations Snowball

The genie is out of the bottle. Across all walks of life and most countries with any degree of freedom of expression, allegations of sexual harassment are snowballing so fast that it is impossible to keep up with developments. Among the notable exposures at the weekend: actor Kevin Spacey, who allegedly made indecent advances to a 14 year-old boy; Hamilton Fish, publisher of the left-wing beacon The New Republic; and (to nobody’s great surprise) a large swathe of the British parliament. Prime Minister Theresa May gets regular “ins and outs” briefings regarding the conduct of her lawmakers from party whips, and her reported answer may be on the minds of many others: “Why can’t they just do their job?”  Fortune

Kobe Doesn’t Want to Talk About Profits or Dividends

Kobe Steel scrapped its profit forecast and suspended its dividend in connection with the growing scandal over uncertified products. Kobe’s embarrassment has been slightly mitigated recently by similar admissions from Nissan. Separately, Reuters reported that the company is seeking an emergency 50 billion yen ($440 million) loan from its banks. An offer of help from larger rival Nippon Steel & Sumitomo Metal Corp raised speculation about a rescue bid in the works. Reuters

Puerto Rico Admits Whitefish Deal Isn’t Healthy

Puerto Rico’s power company said it will scrap a controversial $300 million contrast with Montana-based Whitefish Energy Holdings once it finishes work on recovery efforts in the wake of Hurricane Maria. Federal lawmakers are investigating the contract, which was awarded without a competitive bidding process. Around 70% of the island is still without power. CNBC

Pitched Into Darkness at Hulu

The march of the cord-cutters went into retreat, however briefly, at the weekend, as Hulu’s live-stream of the World Series crashed halfway through Game 4. It’s a black eye for Hulu’s new $40 a month TV service, one of a raft of offerings from internet-based distributors that has been causing carnage among cable providers’ financial reports in third quarter. Fortune

Summaries by Geoffrey Smith;


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