Market Rally, Zuck’s No-Show, GSK’s Novartis Deal: CEO Daily for March 27, 2018
Markets around the world continued their rebound overnight and are poised to rise in the U.S. today on hopes that the trade war with China will instead turn out to be a minor skirmish. Yesterday, the Dow rose 669 points, one of the biggest point rises in history, after getting clobbered last week.
Treasury Secretary Steven Mnuchin said Sunday that he’s “cautiously hopeful” that the world’s two biggest economies will reach an agreement to avoid tariffs. And Chinese Premier Li Keqiang said he believes the two countries “both have the intelligence to resolve the issue,” according to an official statement issued late Monday.
“Trade talks going on with numerous countries that, for many years, have not treated the United States fairly. In the end, all will be happy!” President Trump tweeted.
Trade wars can’t be won. But they can be avoided. And if Trump’s brinksmanship forces some useful concessions from China, the market’s March rollercoaster swings may turn out to have been worth the ride.
Meanwhile, reports continue to swirl that North Korean leader Kim Jong-un traveled to Beijing by train for rare meetings there. Neither country is commenting on the trip, but it could be another manifestation of the Trump administration’s disruptive approach to global diplomacy.
More news below.
Facebook CEO Mark Zuckerberg was summoned by U.K. parliamentarians to explain the company's role in the Cambridge Analytica scandal, but he won't show. Instead, Facebook is sending "one of his deputies," the company has announced. That means either CTO Mike Schroepfer or product chief Chris Cox, either of whom Facebook said will be "well placed" to answer questions. This suggests Zuckerberg may try to pull the same move in the U.S., as he said he would only appear before Congress if he is the best-placed executive to comment on the scandal. Bloomberg
GSK's Novartis Move
GlaxoSmithKline may not be buying Pfizer's consumer health care business, but it is buying out Novartis's share of the GSK-Novartis consumer healthcare joint venture. The deal is worth $13 billion and it should remove uncertainty on GSK's side—the terms of the JV allow Novartis to demand GSK buy it out anytime over the next 17 years. Both companies' stock rose on the news. Fortune
Carlyle and Akzo Nobel
The private equity outfit Carlyle Group and Singaporean sovereign wealth partner GIC are to spend $12.5 billion on Akzo Nobel's specialty chemicals unit. They beat rival bidders by promising to keep the business in one piece and providing assurances on employee salaries. Akzo Nobel says its shareholders will get the bulk of the proceeds, and the deal will allow it to focus on paints and coatings. Bloomberg
Foxconn Buys Belkin
A unit of the Chinese gadget-manufacturing giant Foxconn has announced plans to buy routers-and-peripherals company Belkin, in a cash deal worth $866 million. Foxconn has recently been stepping out of the contractor shadows by buying brands such as Sharp and now, through the latest purchase, Belkin, Linksys and Wemo. The U.S. Committee on Foreign Investment will probably still need to give its approval to the takeover. Fortune
Around the Water Cooler
Wall Street bonuses last year almost reached their pre-crisis highs, with the average bonus in the year rising 17% to $184,220—the record average, $191,360, was reached in 2006. The total pool of bonuses for 2017 was also up 17%, reaching $31.4 billion. Back before the financial crisis, the total pool was around $33 billion. According to recruiters, the bonus boom is partly due to companies hiring younger people and paying them more in cash than stock. Financial Times
The Wall Street Journal has a feature on Latvia's ABLV Bank, which U.S. authorities say has been a money-laundering conduit for Russian, Azerbaijani and Ukrainian clients. The bank had to close after Treasury charges last month sparked a run—all very unusual considering that Latvia is a NATO member. The U.S. sees the alleged corruption as a national security issue. WSJ
MBS and Softbank
Saudi Crown Prince Mohammed bin Salman and Softbank CEO Masayoshi Son are in New York, looking for investment opportunities together. The Saudi press agency tweeted a photo of the pair yesterday. Saudi Arabia is a big backer of Softbank's $100 billion, tech-focused Vision Fund, and Softbank plans to be a big investor in Saudi Arabia. CNBC
Hong Kong IPO Record
Most Kwai Chung, the publisher of a satirical magazine called 100Most, has made Hong Kong history by launching an IPO that's oversubscribed 6,000 times over. The previous record belonged to nightclub operator Magnum Entertainment, whose 2014 IPO was oversubscribed 3,559 times. However, Most Kwai Chung's offering may be extremely popular, but it's also relatively small—it's only aiming to raise just over $10 million. South China Morning Post