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A round up of some of the week’s most significant corporate events and news stories.
Boeing lands Emirates deal at Dubai fair to leave Airbus in its slipstream
Airbus and Boeing use air shows like boxers use prize fights. This week the world’s two big aircraft makers slugged it out in Dubai, home to the Middle East’s biggest aerospace trade fair, writes Peggy Hollinger.
© FT montage / Bloomberg
The first round should have gone to Airbus, which was widely expected on the first day of the show to clinch a deal with Emirates Airline for 36 A380 superjumbos that would finally lay to rest speculation over the future of the world’s largest passenger aircraft.
Tim Clark, Emirates president, said his government shareholder needed a guarantee from Airbus that it would still produce the A380 into the 2030s. Yet Tom Enders, Airbus chief executive, had already given that promise in a statement approved by the carrier on the eve of the expected announcement. Fabrice Brégier, chief operating officer, reiterated that vow yesterday morning.
But it seems that Emirates — as the world’s largest operator of the A380 — is playing hard ball, using its leverage as the biggest operator of the aircraft to demand further concessions on price and delivery schedules.
Part of the problem seems to be that Emirates may not need the new aircraft as urgently as Airbus needs the order. Traffic in the Gulf has slowed after terror attacks in Europe.
Airbus, meanwhile, faces a delivery gap between about 2019 and 2021 that it needs to fill if it is to keep production running smoothly for the period demanded by Emirates.
It was hard for Airbus to escape the shadow of that unfulfilled deal. Yet it should have been triumphant. After all, it announced a commitment for a record 430 single-aisle aircraft worth a list price of close to $50bn on the penultimate day of the show.
In total, Airbus secured firm orders and commitments for more than 500 aircraft against Boeing’s 269. It should have been Airbus’s show. But, for those with ringside seats, it was Boeing’s footwork that drew the applause at the end.
Altice turns away from debt-fuelled strategy
Altice, the crisis-hit cable and telecoms company, moved to arrest the alarming decline in its share price by pledging to halt its acquisition spree and get to grips with its €50bn debt position, writes Nic Fildes.
© FT montage / AFT / Reuters
The Dutch-listed company has lost half of its value since a poorly received trading statement two weeks ago raised concerns about its business model. The debt-fuelled strategy has come under pressure as a result of a poor performance at SFR, its French telecoms network.
Patrick Drahi, the billionaire founder of the company, made an unscheduled appearance at the Morgan Stanley European Technology, Media & Telecom Conference in Barcelona this week in an attempt to ease fears over the company’s position.
He admitted that Altice had “mismanaged” the pay-television business in France and that its content strategy of spending billions of euros on rights to sports, including Uefa Champions League football, had not worked.
But Mr Drahi was adamant that the situation could be turned round. “I am 150 per cent confident the [key performance indicators] will improve in the coming weeks,” he said.
Dennis Okhuijsen, chief financial officer, added that Altice would now focus its efforts on deleveraging the business.
“We are very focused on no M&A and to go back to the basics,” he said, raising the prospect of non-core asset sales, including its mobile masts.
The strategic U-turn from buying businesses triggered a slight recovery in the shares as some investors backed the chastened company’s management.
Yet those gains were erased with the stock falling again by as much as 11 per cent yesterday.
The shift in strategy came just days after a management reshuffle, which saw Michel Combes, the telecoms veteran who had previously led Alcatel-
Lucent, resign as Altice chief executive. His departure followed the exit of Michel Paulin as director-general of SFR in September.
Dexter Goei, who runs Altice USA, was reinstated to the role of group chief executive.
General Electric cuts dividend in attempt to stabilise cash position
General Electric’s financial position has been deteriorating sharply this year, in part because of the poor performance of its division selling equipment to the power industry. On Monday, chief executive John Flannery set out his plan for turning the company round.
That strategy started with a 50 per cent cut in the dividend — only the second such reduction since 1938 — in a bid to stabilise the company’s cash position. Smaller divisions with assets of about $20bn, including two of GE’s oldest business lines in locomotives and lighting, will be sold, leaving the group focused on just three industries: power, aircraft engines and other components, and medical equipment.
Mr Flannery also promised to make GE more profitable, saying he was committed to “restoring the oxygen of earnings and cash generation to the company.” He did not give a number for a planned reduction in the workforce, which was 295,000 worldwide at the end of last year, but some jobs have already been cut in areas including central corporate functions and software sales.
Investors were disappointed by the dividend cut, and by a warning that earnings for 2018 were likely to be only about half the level that the company had previously suggested was possible.
Some analysts said they had wanted more radical change, possibly including a spin-off for the healthcare division.
As GE’s shares plunged, it for a while ceded its position as the largest US manufacturer by market capitalisation to Boeing. By Friday it had regained that spot by a whisker, but the shares were still down about 10 per cent on the week. The bad news was capped by Moody’s, the rating agency, downgrading GE from A1 to A2 on Thursday, citing the “severe deterioration” in its power equipment division.
Cerberus move on Deutsche Bank ignites Commerzbank merger talk
Cerberus, the US private equity group, this week revealed that it had built up a 3 per cent stake in Deutsche Bank, making it the fourth-largest shareholder in the lender and sparking speculation of a merger between Germany’s two largest banks, writes Olaf Storbeck.
The move by Cerberus, whose Deutsche stake is worth just under €1bn, boosts the private equity group’s exposure to Germany’s financial sector as it already holds a 5 per cent stake in Deutsche’s domestic rival Commerzbank.
Cerberus said in a statement that it believes “there are attractive long-term opportunities in [German] retail and corporate banking”, because of the country’s “robust economy, high savings rate, and a number of other factors”.
Last year, Deutsche and Commerzbank briefly discussed the idea of a tie-up but the talks came to nothing. “Cerberus is positioning itself very cleverly for future consolidation, as they would be on both sides of a merger between Deutsche and Commerzbank,” a Frankfurt based financial insider said.
A merger between Germany’s two biggest listed banks would create a national champion with a joint market share of 10 per cent in German retail banking, according to Morgan Stanley.
However, bankers in Frankfurt stress that any potential tie-up between Deutsche and Commerzbank would only make sense once Deutsche has finished its restructuring, which according to chief executive John Cryan’s timetable will be in 2021.
“At the moment, a merger [between Deutsche and Commerzbank] it is
completely out of the question,” a senior manager of one of the two lenders said.