Economic Calendar

Monday, March 19, 2012

Apple’s Cook to Discuss Plans for $97.6 Billion Cash Hoard

By Adam Satariano - Mar 19, 2012 6:27 AM GMT+0700

Apple Inc. (AAPL) will outline plans on a conference call tomorrow for its $97.6 billion in cash and investments, signaling that investors may get the dividend they’ve been seeking from the world’s most valuable company.

Chief Executive Officer Tim Cook and Chief Financial Officer Peter Oppenheimer will host the call, scheduled for 9 a.m. New York time, Cupertino, California-based Apple said in a statement today. The company didn’t elaborate on its plans, and said it won’t discuss topics besides cash.

March 16 (Bloomberg) -- Apple Inc. began selling its new iPad today, drawing the customary lines of cheering, die-hard fans to Apple stores around the world. Bloomberg's Jon Erlichman reports on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Apple’s cash pile has swelled amid surging demand for its products, such as the iPhone and iPad. Shareholders have urged Apple to return some of the balance to investors in the form a dividend, and have been awaiting an announcement after Cook said this year the company has “more than we need to run a company” and that the board is considering its options.

“This is something that large shareholders have been asking for,” said Shaw Wu, an analyst at Sterne Agee & Leach Inc. “When you look at the cash generation capability of Apple, it’s just tremendous.”

Apple may introduce a dividend of $2 a share, according to data compiled by Bloomberg. That estimate is based in part on the dividends paid by other large technology makers, including Microsoft Corp. and International Business Machines Corp. Apple and Google Inc. (GOOG), owner of the most-popular search engine, are the only technology companies with market values higher than $100 billion that don’t pay a dividend.

Dividend Predictions

A dividend would be an added boon to investors who have already seen the company’s stock rise 45 percent this year to $585.57 as of March 16. Apple co-founder Steve Jobs, who died in October, long resisted calls to return some of the money to investors.

Apple generated $16 billion in cash in the first quarter of fiscal 2012, which ended in December. Wu predicts that Apple will generate about $75 billion in cash this year. Besides Wu, analysts at Morgan Stanley, JPMorgan Chase & Co. (JPM) and Mizuho Securities USA Inc. also have predicted that Apple will institute a dividend.

The growing amount of money on Apple’s balance sheet has followed the introduction of the iPhone, the best-selling smartphone, and the iPad, the leading tablet computer. The company last week debuted a third-generation iPad, which comes with a high-definition screen and faster processor.

Apple this year surpassed Exxon Mobil Corp. (XOM) to be the world’s most valuable company. The iPhone maker’s market value is $545.97 billion, compared to $407.4 billion for Exxon Mobil.

To contact the reporter on this story: Adam Satariano in San Francisco at

To contact the editor responsible for this story: Tom Giles at


Oil Trades Near One-Week High in New York as Saudi Output Climbs

By Ben Sharples - Mar 19, 2012 6:01 AM GMT+0700

Oil traded near the highest price in a week in New York as investors bet that the second-highest Saudi Arabian crude output since at least 1980 signals fuel demand is increasing.

Futures were little changed after climbing the most in more than three weeks on March 16. Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, pumped 9.87 million barrels a day in January, according to data submitted by the government to the Joint Organization Data Initiative. Reports this week may show the economy strengthening in the U.S., the world’s biggest crude consumer.

Oil for April delivery was at $107.36 a barrel, up 30 cents, in electronic trading on the New York Mercantile Exchange at 9:54 a.m. Sydney time. The contract, which expires tomorrow, climbed 1.9 percent to $107.06 a barrel on March 16, the highest close since March 9. The more active May future rose 31 cents to $107.89 a barrel today. Prices have advanced 8.6 percent this year.

Brent oil for May settlement was at $125.95 a barrel, up 14 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $18.06 to New York futures for the same month.

Saudi Arabia’s output in January rose 0.6 percent from December and compares with 10.05 million barrels a day in November. The November figure was the largest in at least 31 years, according to the U.S. Energy Department.

Saudi exports climbed 2 percent in January to 7.5 million barrels a day, the JODI data show. Shipments by Iran, OPEC’s second biggest producer, increased to 2.3 million barrels a day, the highest since December 2008.

Home purchases in the U.S. probably rose in February to the highest level in almost two years in another sign of stabilization in the real-estate market, according to Bloomberg News surveys of economists before reports this week.

To contact the reporter on this story: Ben Sharples in Melbourne at

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at


Japan Stock Futures Little Changed on Yen; Australia Shares Rise

By Kana Nishizawa and Toshiro Hasegawa - Mar 19, 2012 6:35 AM GMT+0700

Japanese stock futures were little changed as the yen rebounded, damping the earnings outlook for exporters. Declines may be limited ahead of U.S. data that’s forecast to show the housing market is improving. Australian stocks rose after oil prices increased.

American depositary receipts of Honda Motor Co. (7267), Japan’s second-largest carmaker by market value, fell 0.4 percent from the closing share price in Tokyo. ADRs Komatsu Ltd., Japan’s biggest construction machinery maker, dropped 0.4 percent after China’s February home prices posted the worst performance in a year. BHP Billiton Ltd., the No. 1 Australian oil producer, gained 0.9 percent in Sydney.

Futures on Japan’s Nikkei 225 Stock Average (NKY) expiring in June closed at 10,035 in Chicago on March 16, compared with 10,060 in Osaka, Japan. They were bid in the pre-market at 10,060 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index rose 0.3 percent today. New Zealand’s NZX 50 Index slipped 0.1 percent in Wellington.

“Investors are likely to take profits today with a lack of news to move the yen,” said Hideyuki Ishiguro, assistant manager of investment strategy at Okasan Securities Co. in Tokyo. “But with a positive housing report expected from the U.S. and hopes for some easing from Japan’s central bank,” declined could be limited, he said.

Futures on the Standard & Poor’s 500 Index (SPXL1) were little changed today. The Dow Jones Industrial Average snapped a seven- day gain on March 16 after an increase in oil and consumer prices sparked inflation concerns as the U.S. economy improves.

U.S. Housing

Home purchases in the U.S. probably climbed in February to the highest level in almost two years, another sign of stabilization in the real-estate market, economists forecast reports this week will show.

Combined sales of new and previously owned properties rose to 4.93 million at an annual rate, the strongest since May 2010, from 4.89 million in January, according to the median forecasts in a Bloomberg News survey. Home construction also improved as warmer weather bolstered prospects for the industry, another report may show.

The MSCI Asia Pacific Index (MXAP) rose 12 percent this year through March 16, compared with a 12 percent gain by the S&P 500 and an 11 percent advance by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 15 times estimated earnings on average, compared with 13.5 times for the S&P 500 and 11.4 times for the Stoxx 600.

The yen strengthened to 83.31 per dollar today, compared with 83.94 reached on March 16. A stronger yen decreases the value of Japanese exporters’ profits overseas when repatriated.

Oil traded near the highest price in a week in New York as investors bet that the second-highest Saudi Arabian crude output since at least 1980 signals fuel demand is increasing.

Crude for April delivery was at $107.36 a barrel, up 30 cents, in electronic trading on the New York Mercantile Exchange at 9:54 a.m. Sydney time. The contract, which expires tomorrow, climbed 1.9 percent to $107.06 a barrel on March 16, the highest close since March 9.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at

To contact the editor responsible for this story: Nick Gentle at


Germany’s $270 Billion Renewables Shift Biggest Since War

By Stefan Nicola - Mar 19, 2012 7:00 AM GMT+0700

Not since the allies leveled Germany in World War II has Europe’s biggest economy undertaken a reconstruction of its energy market on this scale.

Chancellor Angela Merkel is planning to build offshore wind farms that will cover an area six times the size of New York City and erect power lines that could stretch from London to Baghdad. The program will cost 200 billion euros ($268 billion), a third of annual gross domestic product, according to the DIW economic institute in Berlin.

Angela Merkel, Germany's chancellor. Photographer: Alessia Pierdomenico/Bloomberg

Vestas Wind Systems A/S. is the largest maker of wind turbines. Photographer: Ken James/Bloomberg

Germany aims to replace 17 nuclear reactors supplying a fifth of its electricity with renewables such as solar and wind. Merkel to succeed must experiment with untested systems and policies and overcome technical hurdles threatening the project, said Stephan Reimelt, chief executive officer of General Electric Co. (GE)’s energy unit in the country.

“Germany is like a big energy laboratory,” Reimelt said in an interview. “The country has a political and societal consensus to drop nuclear power but lacks a clear technological solution.”

Already, the program is expanding markets for Suntech Power Holdings Co. (STP), the world’s biggest solar panel maker, and Vestas Wind Systems A/S (VWS)., the largest maker of wind turbines. It’s hurting utilities from RWE AG (RWE) to EON AG (EOAN), which have stepped up cost cutting to curb losses from closing nuclear stations early.

Bloomberg Conference

Technology officers from Lockheed Martin Corp. (LMT), IBM Corp. (IBM) and BP Plc (BP/) will discuss innovations that are spurring renewable energy businesses on a panel at the Bloomberg New Energy Finance conference in New York today.

“The German energy transformation is as challenging as the first moon landing,” said Peter Terium, who in July takes over as chief executive officer of RWE, Germany’s second-largest utility. “It’s a huge challenge we’ll be able to master only if everyone works together.”

Germany is among the first nations to grapple with a global need to upgrade power stations. By 2035, at least $10 trillion of investment is needed to add 5,900 gigawatts of generation worldwide, more than five times the capacity of all U.S. utilities, the International Energy Agency estimates. Half of that will come from renewable. A gigawatt is about enough to supply 800,000 homes in the U.S. and a bit less than the capacity of a nuclear reactor.


“If Germany succeeds, it could be a role model for economies all over the world,” said Claudia Kemfert, DIW’s senior energy expert. “If it fails, it will be a disaster for Germany’s politicians, society and economy.”

Germany’s efforts in the industry are sending shocks through European power markets. When it’s windy and sunny, turbines and solar cells flood the grid with electricity, undermining the economics of natural-gas fired generators, since clean energy has supply priority over fossil fuels.

Utilities running gas generating plants in Germany lost 10.11 euros a megawatt-hour on March 16 at 5 p.m. local time, based on so-called clean-spark spreads for the next month that take account of gas, power and emissions prices. That compared with a profit of 20.95 euros in October 2009, according to data compiled by Bloomberg. U.K. generators earned 2.22 pounds ($3.52), down from a profit of 7.02 pounds in October.

Statkraft SF, a Norwegian power generator, said last month it’s shutting a gas-fired plant in the German city of Emden near the Dutch border because prices are so low. A biomass plant at the same site will keep working, the Oslo-based utility said.

‘Negative Margin’

“The picture for last year, the year before and the next two to three years is so negative that we see a negative margin going forward,” Asbjoern Grundt, a Statkraft executive vice president for markets operations, said in reference to his utility’s gas plants.

Norbert Roettgen, the 46-year-old lawyer who is Merkel’s environment minister and protégé, is managing the transition and aims for the nation to generate at least 35 percent of its power from renewables by 2020, up from 20 percent last year.

Roettgen seeks 25,000 megawatts of power generated by wind farms in the North Sea and Baltic Sea by 2030, about the same as 25 nuclear power stations. About 200 megawatts of offshore wind plants are working now.

Scale of Shift

That will require 5,000 turbines, each standing taller than Big Ben and taking up 247 acres of sea each, on average. Combined, their footprint would cover 1,931 square miles (5,000 square kilometers), compared with the 305 square miles comprising New York’s five boroughs.

In January, German Economy Minister Philipp Roesler estimated grid operators would have to add or upgrade 4,500 kilometers (2,800 miles) of high-voltage power lines to connect the turbines with the national electric grid. Operators also must modernize their systems to integrate fluctuating supplies from renewable with the steady output that comes from coal and nuclear stations.

“The energy transformation is the biggest modernization and infrastructure project in the coming decade,” Roettgen said in a televised speech on March 11. “Whether other countries follow our model will depend on whether we succeed.”

Others are making similar pledges, and Germany’s only ranks fifth in Europe in terms of ambition. Sweden, Austria, Spain, Slovenia, each of which have richer hydro-electric resources, are promising a bigger share than Germany for renewable by 2020. The U.S. has no federal mandate on renewable. Japan, also phasing out nuclear power, will announce policies to accomplish the goal in the next few months.


“The energy transformation is open-heart surgery,” Hannelore Kraft, state prime minister of North Rhine-Westphalia, said Dec. 20 in Essen. “We need a master plan and careful monitoring so this operation can succeed.”

After lobbying against clean-energy subsidies for years, utilities are gearing up to make money from the industry. EON, the country’s biggest operator of nuclear power stations, plans to invest 7 billion euros in renewable energy projects in the next five years. That includes 1 billion euros on the Amrumbank West wind farm in the German North Sea, a project that Siemens AG (SIE) will supply with 80 of its turbines.

“We don’t do this because we think it’s nice, but because we believe we can be successful,” Johannes Teyssen, EON’s chief executive officer, said Dec. 20 in Essen. The German energy experiment, Teyssen said, is “a task that will occupy an entire generation.”

Hurdles to Clear

Roettgen faces difficulty on a number of fronts in achieving his targets:

-- Delays in connecting offshore wind turbines to the grid are threatening the government’s aim to have 10 gigawatts installed by 2020, according to RWE an EON, which say slow permitting and the short supply of cables and transformer stations are to blame.

-- German solar manufactures including Solarworld AG (SWV), Q- Cells SE (QCE) and Conergy AG (CGYK) are struggling to finance their operations after competition from Chinese companies led by Suntech depressed margins and panel prices. Solon SE (SOO1) and Solar Millennium AG (S2M) are in bankruptcy proceedings.

-- Output from solar panels and wind turbines is highly unpredictable, which strains the stability of the power grid and has forced utilities to pay renewable generators to shut off supplies on some days. Last month, the Czech government complained it was close to a blackout because wind farms in northern Germany overloaded the grid.

Mixed Messages

Merkel herself is raising questions about how quickly companies should push into the new business, slashing subsidies for solar energy. A record 7.5 gigawatts of solar capacity was installed last year, more than double the government’s target for this year. Her government plans to cut rates for solar power by as much as 29 percent from April 1 and make further reductions each month beginning in May.

“We’re very concerned by the government’s recent steps on solar energy,” said Eicke Weber, the head of the Fraunhofer Institute for Solar Energy Systems, a Freiburg-based institute researching renewable energy technologies. “They look like an about-face.”

Germany’s advantage is it was the first major economy to provide incentives for clean energy, offering a feed-in tariff guaranteeing above-market prices for solar power starting in 2004. That made it the world’s biggest market for solar panels when it comes to total capacity and an innovator in other technologies from wind to building materials.

Germany’s Edge

Already, Germany has built the world’s biggest renewable generation complex, with 53.8 gigawatts of wind and solar generators at the end of last year. Italy last year added a record 9 gigawatts of solar panels, overtaking Germany for the first time. The U.K. plans 18 gigawatts of offshore wind capacity by 2020, up from 1,500 megawatts now.

Some of Germany’s biggest companies are entering the renewables business and backing the innovations needed to make expand the scale of the industry.

Robert Bosch GmbH (RBOS), the world’s biggest car parts supplier based in Stuttgart, has invested about 1.5 billion euros into its solar energy business by purchasing companies and building new plants. Hochtief AG (HOT), Germany’s biggest builder, has commissioned four heavy-duty ships to erect wind farms at sea including the 200 million euro “Innovation.”

Volkswagen AG (VOW)’s Audi luxury car division plans to build a plant that uses water and carbon dioxide to convert electricity into natural gas, backed by 5 million euros of investment from EON in a pilot plant based on a similar technology.

“This energy transformation is about innovation,” Roesler, the German economy minister, said in Stuttgart in January. “If we do it right, there will be many chances for economic growth.”

To contact the reporter on this story: Stefan Nicola in Berlin at

To contact the editor responsible for this story: Reed Landberg at


James Murdoch Board Seats Dwindle as BSkyB Role Under Scr

By Amy Thomson and Edmund Lee - Mar 19, 2012 7:01 AM GMT+0700

A year ago, James Murdoch was promoted to News Corp. (NWSA)’s deputy chief operating officer, moving ever closer to succeeding his father as head of the media company. Now he’s struggling to keep his career alive.

Auction house Sotheby’s said March 16 that Murdoch will leave its board, following demands he resign over his role in a U.K. phone-hacking scandal. It was the third influential position he gave up in as many months, resigning from the board of GlaxoSmithKline Plc (GSK) in January and as executive chairman of News Corp.’s U.K. publishing unit News International last month.

James Murdoch, son of News Corp. Chief Executive Officer Rupert Murdoch, is the chairman of BSkyB and previously oversaw News Corp.’s U.K. publishing unit. Photographer: Peter Foley/Bloomberg

Feb. 17 (Bloomberg) -- Michael Wolff, author of the Rupert Murdoch biography "The Man Who Owns the News," talks about News Corp. Deputy Operating Officer James Murdoch's move to step down from the position of executive chairman of the company's News International unit.¶ He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." Adam Johnson also speaks. (Source: Bloomberg)

News Corp., based in New York, said the moves will allow Murdoch, 39, to focus on his main job. Tim Bale, a professor of politics at the University of Sussex, said Murdoch’s role in the scandal may force him to step down as chairman of pay-TV company British Sky Broadcasting Group Plc (BSY), a position that is crucial to his position overseeing the international television operations of News Corp.

“It will be very difficult for him to stick around,” Bale said in an interview. “His personal brand has been trashed so comprehensively and continues to be trashed with each new revelation.”

Murdoch’s future at BSkyB hinges on a report that U.K. lawmakers are preparing on the phone-hacking scandal following testimony he gave that has been contradicted by former subordinates. The committee began its inquiry in July after Murdoch said lawmakers had been misled about the extent of phone hacking during a previous probe in 2009. It has questioned him twice for the new report, once alongside his father Rupert, News Corp.’s 81-year-old chief executive officer.

Tarnished Reputation

U.K. media regulator Ofcom will take parliament’s report into consideration when evaluating whether James is “fit and proper” to hold a broadcast license on behalf of BSkyB.

Murdoch’s prospects for remaining chairman of BSkyB, in which News Corp. owns 39 percent, are also diminished because the scandal tarnished his reputation as a manager, saidJeffrey Sonnenfeld, senior associate dean of the Yale University School of Management.

“He’s certainly not bringing better management competence or insight or a reputation where his character is beyond question,” Sonnenfeld said in an interview. “A lot of things under his watch at best are a failure of management oversight, even if he’s not directly complicit in any of the scandal.”

A News Corp. spokeswoman, Julie Henderson, declined to comment on the Sotheby’s departure, which takes effect May 8. Robert Fraser, a spokesman for London-based BSkyB, in which News Corp. owns a 39 percent stake, also declined to comment.

‘More Questions’

On March 14, Murdoch told U.K. lawmakers he should have dug deeper to uncover the phone hacking at the company’s U.K. unit, which saw News Corp. journalists hack into the phones of celebrities and a murdered schoolgirl.

“I could have asked more questions, requested more documents and taken a more challenging and skeptical view of what I was told,” Murdoch said.

Murdoch told lawmakers in November that News of the World editor Colin Myler failed to tell him in 2008 that phone hacking at the now-defunct tabloid was common. Myler and the newspaper’s lawyer Tom Crone have repeatedly insisted that they discussed evidence with Murdoch.

The phone-hacking scandal prompted News Corp. to close the News of the World in July and drop its 7.8 billion-pound ($12.4 billion) bid for full control of BSkyB, the U.K.’s biggest pay- TV company.

‘Little Advantage’

James’s decision to leave the boards of Sotheby’s (BID) and Glaxo may already signal a diminishment of his perceived management value, Edward Wasserman, Knight Professor of Journalism Ethics at Washington and Lee University, said in an interview.

“It’s tempting to say that in both cases, the boards saw little advantage to whatever wisdom or adornment James brought to being on the boards of these companies,” he said.

Murdoch was a Sotheby’s director for two years. Sotheby’s, based in New York, said it benefited from Murdoch’s “broad- based marketing and brand management experience, his guidance regarding the company’s strategic initiatives in Asia and his insight into digital media.”

Murdoch is leaving to “focus on his core responsibilities at News Corp.,” Sotheby’s said. Glaxo Chairman Christopher Gent said in January that “James has taken this decision to focus on his current duties as non-executive chairman of BSkyB, and following his decision to re-locate to the U.S.”

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

James was appointed CEO of BSkyB in 2003 amid accusations of nepotism. He was promoted in 2007 to run News Corp.’s television, newspaper and digital operations in Europe, Asia and the Middle East, while becoming non-executive chairman of BSkyB.

Report Delayed

The U.K. lawmakers are behind schedule with their report, as they debate how critical they can be ofMurdoch, two people with knowledge of the panel’s discussions said in February. There is no question of Murdoch escaping criticism completely, the people said at the time. They said panel members are unimpressed by his statements that he was ignorant about what was going on at the News International unit.

News Corp. shareholders in October lodged a protest vote against Rupert Murdoch and his sons, following an annual meeting at which investors called for governance changes and an end to voting practices that cement the family’s control. James received the highest percentage of votes against his election to the board, at 35 percent.

In November, one third of BSkyB’s independent shareholders voted against James Murdoch’s re-election as chairman.

Professor Bale says the public criticism of Murdoch’s role in the scandal is increasingly becoming a problem for BSkyB itself.

“For the board as a whole and the company as a whole it’s very difficult when someone is under such pressure,” Bale said. “It’s a story he can’t control and there’s more to come. What’s out there already is really bad.”

To contact the reporters on this story: Amy Thomson in London at; Edmund Lee in New York at

To contact the editor responsible for this story: Kenneth Wong at


UPS Is Said to Agree to Purchase TNT Express for $6.8 Billion

By Aaron Kirchfeld, Jacqueline Simmons and Alex Webb - Mar 19, 2012 6:38 AM GMT+0700

United Parcel Service Inc. (UPS) reached an agreement to buy TNT Express NV (TNTE), Europe’s second-largest express delivery company, after sweetening its bid to about 5.16 billion euros ($6.8 billion), two people with knowledge of the talks said.

The price will be about 9.50 euros a share and an announcement will come as soon as today, said one of the people, who declined to comment because they weren’t authorized to speak publicly.

United Parcel Service Inc. reached an agreement to buy TNT Express NV after raising its bid for Europe’s second-largest express delivery service, according to two people with knowledge of the talks. Photographer: Tim Boyle/Bloomberg

TNT Express NV employees process incoming and outgoing freight at Liege Airport in Grace-Hollogne, Belgium. Photographer: Jock Fistick/Bloomberg

For Atlanta-based UPS, acquiring TNT will mean achieving roughly equal footing in Europe with Deutsche Post AG (DPW)’s DHL, the region’s biggest delivery operator. For TNT, the deal secures a higher value on the money-losing Dutch company than the 9 euros a share that directors turned down last month.

“They can declare a victory and sign on the dotted line and go home,” said Kevin Sterling, a BB&T Capital Markets analyst in Richmond, Virginia. “If they didn’t do this deal, everyone else would take market share from them in Europe and they would continue to weaken over time.”

TNT closed at 9.35 euros in Amsterdam on March 16, giving the Hoofddorp, Netherlands-based company a market value of 5.08 billion euros, according to data compiled by Bloomberg. UPS, already No. 1 in the world in package deliveries, traded at $78.41 in New York for a $75.2 billion market value.

Company spokesmen declined to comment yesterday.

Deal Valuation

At 9.50 euros a share, the deal would value TNT at 13 times its last four quarters’ earnings before interest, taxes, depreciation and amortization, compared with a median of 10 times trailing Ebitda in nine other similar deals, according to data compiled by Bloomberg.

“That price is a bit ahead of what the shares are trading at currently, so they seem to be getting a bit of a premium,” said Dieter Furniere, a Brussels-based KBC Securities analyst who has a hold rating on TNT.

A mix of cash and debt will be UPS’s likeliest choice for financing, Sterling said yesterday in a telephone interview.

UPS “could practically write a check” because it had about $4.2 billion in cash and short-term investments as of Dec. 31, said Sterling, who recommends buying the stock. “The rating agencies might put them on watch, depending on how much leverage they use, but this is a deal that UPS can easily afford.”

Overlapping operations, particularly in Europe, may produce savings and benefits for UPS worth more than 400 million euros, according to Andre Mulder, an analyst at Kepler Capital Markets in Amsterdam, who recommends buying TNT shares.

European Market Share

UPS controlled 7.7 percent of the European express-parcels market in 2010, compared with TNT’s 9.6 percent, according to Transport Intelligence. Combined, they would be about as large as DHL, which had a 17.6 percent share.

Buying TNT will be the UPS’s biggest purchase since the company was founded in 1907 as a bicycle-messenger service. The deal tops the 2005 acquisition of Overnite Corp. (OVNT) for about $1.25 billion in cash, which gave UPS the ability to make U.S. land shipments of parcels too large to be lifted by a driver.

International packages generate the most revenue for UPS, at $19.30 each in 2011, compared with $9.30 per domestic parcel. The $12.2 billion in sales for that business last year was 23 percent of UPS’s $53.1 billion total, which the company doesn’t disclose on a regional or country-by-country basis.

The final stages of talks played out as investors and unions looked on after TNT said Feb. 17 it rejected a “highly conditional” UPS offer while saying the sides were still meeting. UPS said March 16 that negotiations had been extended.

Unhappy Directors

TNT directors were unhappy with terms attached to the initial offer that may have required divestitures to win regulatory approval, possibly leading to job cuts, a person familiar with the matter said last month.

The company’s four main unions wrote Chief Executive Officer Marie-Christine Lombard and Supervisory Board Chairman Antony Burgmans on March 6 to express opposition to “forced” job reductions. TNT employed about 77,500 people as of Dec. 31.

TNT was spun off in May from the Dutch postal operator, which is now named PostNL and retains a 29.9 percent stake, according to data compiled by Bloomberg. TNT, whose name derives from the postwar Australian company Thomas Nationwide Transport, sold its Indian domestic road business in December and has been hurt by costs from revamping unprofitable Brazilian operations.

Focus on Europe

After posting a 2011 operating loss of 105 million euros on Feb. 21, TNT said it would refocus operations on Europe, where its operating profit was 356 million euros last year. Operating losses were 360 million euros in the Americas and 76 million euros in the Asia-Pacific region.

A bid by UPS or FedEx Corp. (FDX) had been fodder for industry speculation for years as the U.S. companies studied expansion in Europe.

That talk gained momentum following the spinoff of TNT as an express operator, and some analysts and investors had predicted a possible late bid by FedEx after UPS’s interest was announced, a scenario that never came to pass.

In an industry in which UPS, FedEx and DHL already operate on a global scale, TNT was a “once-in-a-lifetime chance” for one of the biggest competitors to grow by gobbling up a substantial rival, Katrina Dudley, a portfolio manager at Mutual Series, a Franklin Templeton Investments unit, said last month. Mutual Series owns TNT shares.

UPS has completed the acquisition of Brussels-based Kiala to bolster operations in Belgium, France, the Netherlands, Spain and Luxembourg, after several smaller purchases in recent years, said David Campbell, a Thompson Davis & Co. analyst in Richmond, Virginia, who recommends buying UPS and FedEx.

To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at; Jacqueline Simmons in Paris at; Alex Webb in Frankfurt at

To contact the editors responsible for this story: Ed Dufner at; Chad Thomas at; Frank Connelly at


Monti to Meet Labor Unions Amid Warning of Continued Euro Crisis

By Patrick Donahue - Mar 19, 2012 6:01 AM GMT+0700

Italy’s Prime Minister Mario Monti will press ahead with efforts to revise labor laws this week, amid fresh warnings that the three-year-old European debt crisis is far from over.

Monti will lead talks with unions and employers in a final round of negotiations beginning tomorrow. Decision makers meanwhile warned against complacency after delivery of the final element of Greece’s 130 billion-euro ($171 billion) bailout package and the completion of the world’s largest sovereign-debt restructuring last week.

Mario Monti, Italy's prime minister. Photographer: Alessia Pierdomenico/Bloomberg

March 16 (Bloomberg) -- David Blanchflower, a professor at Dartmouth College and a Bloomberg Television contributing editor, talks about the global labor market, wages and central bank policy. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

“Optimism should not give us a sense of comfort or lull us into a false sense of security,” International Monetary Fund Managing Director Christine Lagarde said in a speech at the China Development Forum in Beijing yesterday. “We cannot go back to business as usual,” she said, urging vigilance on oil prices, debt levels, and the risk of slowing growth in emerging markets.

An easing of the crisis offered breathing room for Monti to seek an Italian labor-market overhaul and for euro-area ministers aiming to bolster euro bailout funding before a meeting at the end of the month. Still, urgency was underscored by an IMF warning that the Greek bailout held “exceptional risks” that could prompt a “disorderly” exit from the monetary union unless additional help is prepared.

‘Sovereign Default’

“The materialization of these risks would most likely require additional debt relief by the official sector and, short of that, lead to a sovereign default,” IMF staff wrote in a report released March 16. “In the absence of continued official support and access to” refinancing by the European Central Bank, “a disorderly euro exit would be unavoidable,” it said.

With billions of euros committed to hold Greece afloat and investors looking to see whether contagion could spread to Spain or Italy, the fragility of rescue efforts were reflected in bond yields last week. Spain’s 10-year yield climbed 20 basis points to 5.20 percent, the second weekly gain, while the yield on similar maturity Italian debt rose three basis points to 4.86 percent.

Investors have been encouraged by the Italian prime minister’s efforts to rein in the country’s debt since his government of non-politicians replaced Silvio Berlusconi’s administration last year.

Monti’s labor overhaul will include a revision of firing rules and an expansion of jobless benefits. The rules, which will distinguish between workers removed without just cause and those fired for disciplinary or economic reasons, are among the most contentious. Under article 18 of the Italian labor code, employers have to compensate and rehire and worker ruled to have been fired without just cause by a labor court.

Month’s End

Monti met with Confindustria head Emma Marcegaglia, Labor Minister Elsa Fornero, CGIL union leader Susanna Camusso, CISL union chief Raffaele Bonanni and UIL union head Luigi Angeletti on March 17, a spokesman for Confindustria said. The Italian leader has said he wants to pass labor legislation by the end of the month.

“We’ll get an agreement within about a week, although there may be some small changes to the present proposal before it’s all done,” Erik Nielsen, chief global economist at UniCredit SpA (UCG) in London, wrote in a note to clients.

Even as focus shifted beyond Greece to other parts of the euro area, the IMF’s continuing concern about the Greek package illustrated the difficulty of implementing changes that officials in Brussels and Athens had been negotiating for months. Greece remains “accident prone,” the Washington-based institution’s staff said in the report.

Greek Election

The IMF reduced its contribution to the second Greek bailout because the operation poses what staff called “unprecedented financial risks” to its finances. One of the risks identified was the Greek election, to be held in April or May.

Lagarde has pushed European governments to boost their bailout fund in an effort to protect Spain and Italy from contagion. Euro finance ministers may decide to increase the region’s crisis fund to a total capacity of 692 billion euros when they meet on March 30, a euro-area official said March 16.

The ministers, who will meet in Copenhagen, are weighing what to do with the temporary European Financial Stability Facility and its permanent successor, the European Stability Mechanism. The 692 billion-euro figure represents the most attainable compromise between 500 billion euros, if policy makers change nothing, to a maximum of 940 billion euros, the official said.

On March 16, Chancellor Angela Merkel left the door open to boosting the euro-area backstop, saying a decision on reinforcing the firewall will be made before IMF meetings next month. Ministers have discussed “combination possibilities” for the EFSF and the ESM ahead of their meeting.

“What’s clear is that we need to settle on a position with a view to the IMF’s spring meeting because the topic will surely come up and because there have been offers by the international community,” Merkel said. “You can count on us setting the course by the end of March.”

To contact the reporter on this story: Patrick Donahue in Berlin at

To contact the editor responsible for this story: James Hertling at


Merkel Free to Focus on Elections After Germans Choose President

By Tony Czuczka and Patrick Donahue - Mar 19, 2012 6:01 AM GMT+0700

German Chancellor Angela Merkel has been freed to focus on issues likely to shape her chances of a third term after changing sides to ensure the election of Joachim Gauck as the country’s 11th postwar president.

Merkel can concentrate on three forthcoming state elections and euro area crisis-fighting. With her Free Democrat coalition allies backing Gauck, a candidate she initially opposed, it also enables her to dodge a conflict within government which might have dented her record-high approval ratings.

Germany's Chancellor Angela Merkel. Photographer: Michele Tantussi/Bloomberg

German President Joachim Gauck, who had been a pro-democracy activist in East Germany. Photographer: Johannes Eisele/AFP/Getty Images

“She’s like Teflon,” Carsten Brzeski, an economist at ING Groep in Brussels, said in an interview. “Everything that could have been blamed on her hasn’t affected her at all.” Merkel “has shown that she can sit things out.”

Yesterday’s decision means that Europe’s biggest economy is headed for the first time by both a chancellor and president who grew up behind the Iron Curtain. A special federal assembly of national and state politicians convened in Berlin elected Gauck with 991 of the 1,232 ballots cast.

The election of Gauck, 72, a former pastor and East German anti-communist activist, was the second vote for the mainly ceremonial post in less than two years. Gauck was the main opposition candidate in 2010, when he lost to Christian Wulff, Merkel’s pick. Wulff quit on Feb. 17 to face a criminal probe that may lead to corruption charges. He denies any wrongdoing.

Nazi Hunter

His main opponent this time was Beate Klarsfeld, 73. The German-born, Paris-based Nazi hunter was nominated by the anti- capitalist Left party. With Merkel’s coalition and two opposition parties backing Gauck, his election was assured.

Gauck, the son of a sailor who was sent to a Soviet Gulag for more than three years in the 1950s, grew up in the Baltic Sea port city of Rostock and became a leading figure in East Germany’s anti-communist opposition in 1989. He later gained a reputation as Germany’s leading “Stasi hunter” for his work in overseeing the opening of millions of files kept by informants of the communist-era Ministry of State Security.

“Out of the joy of liberation came the joy and obligation to take on duties,” Gauck said after the vote.

After expressing reservations about the opposition’s support for Gauck, Merkel backed down last month when the Free Democrats, her junior coalition ally, supported him. By retreating and moving on, she tamped down a domestic distraction as European leaders were struggling to craft a second bailout for Greece.

Euro Bailouts

An Emnid poll on March 11 showed national support for her bloc at 36 percent, the best level since 2008. Her FDP ally, which has seen voter support collapse amid leadership changes and a split over its stance on euro bailouts, had 3 percent backing, against almost 15 percent in 2009. The main opposition Social Democrats had 28 percent support and the Greens 14 percent.

“She checked it off the list in a hurry,” Manfred Guellner, head of the Berlin-based Forsa polling firm, said of the Gauck spat. “It didn’t harm the high approval she enjoys. When Merkel is alone on the stage saving the euro, that’s when she scores points.”

Next stop for Merkel is Saarland, where voters cast ballots on March 25 in the first of three German state elections this yea, followed by the northern state of Schleswig-Holstein on May 6. North Rhine-Westphalia, Germany’s most populous region with almost a quarter of the country’s 82 million people, will also vote the same day. It’s a bellwether for the respective parties’ national fortunes ahead of a federal election due next year. While not yet scheduled, that vote will probably also take place in May.

Dead Heat

Merkel’s position is a turnaround from last year, when her national coalition was defeated or lost votes in all seven state elections as Germany’s involvement in the crisis stemming from Greece made it the biggest contributor to euro-region bailouts.

Polls now show the CDU and Social Democrats in a dead heat in Saarland, suggesting the CDU and SPD will govern the region bordering France and Luxembourg in a “grand coalition,” mirroring Merkel’s first-term government.

That’s a constellation Germans like because they favor cooperation among the two biggest parties rather than conflict, making another grand coalition a possible outcome of the next national election in 18 months, Forsa’s Guellner said.

With the Free Democrats decimated, Merkel sought agreement with the opposition to find a presidential candidate, who is elected by the assembly meeting at the Reichstag building in Berlin.

The chancellor’s majority in the assembly narrowed to as little as two seats from 21 seats in 2010, when Wulff defeated Gauck, according to election website

To contact the reporters on this story: Tony Czuczka in Berlin at; Patrick Donahue in Berlin at

To contact the editor responsible for this story: James Hertling at