Exclusive: SPX closes in on $4.2 billion Gardner Denver deal - source

NEW YORK (Reuters) - Industrial machinery maker SPX Corp is closing in on a roughly $4.2 billion deal to buy rival Gardner Denver Inc, as it makes progress in securing financing, a source familiar with the matter said on Tuesday. A deal could value Wayne, Pennsylvania-based Gardner Denver at about $85 per share, the source said. Gardner Denver's shares closed at $73.68 on Tuesday. SPX has a market value of $3.23 billion, compared to $3.62 billion for Gardner Denver. SPX's financial advisor Credit Suisse Group AG has been joined by Bank of America Corp and JPMorgan Chase & Co in efforts to raise debt for the deal, the source said on condition of anonymity because the talks are confidential. A deal could value Wayne, Pennsylvania-based Gardner Denver at about nine times estimated 2012 earnings before earnings, tax, depreciation and amortization (EBITDA), the source said, cautioning details had yet to be finalized. A deal announcement could come as early as this week though no final agreement has yet been reached and negotiations could still fall apart, the source added. Depending on the availability of financing, SPX shareholders may be called on to vote on a capital increase to finance the share portion of the bid, the source said. A Gardner Denver spokesman declined to comment while SPX did not immediately respond to a request for comment. Credit Suisse, JPMorgan and Bank of America declined to comment. A deal with Charlotte, North Carolina-based SPX would represent a huge premium to the $55 per share level that Gardner Denver's shares traded at before Reuters reported news of a potential sale on October 25. Gardner Denver passed on private equity firms Advent International, KKR & Co LP, and a consortium of TPG Capital LP and Onex Corp, which made all-cash offers in the mid-to-high $70s per share range, people familiar with the matter told Reuters last week. The SPX offer was substantially higher, the people said. Some analysts looking at the financial fundamentals of a potential deal have suggested that an offer of up to $90 per share would not be unreasonable. "Comparing this to a sample of 47 large deals since 2009, we come to the conclusion that implied (valuation) multiples do not look egregious -- the average multiples paid since 2009 has been 2.1 times trailing sales and 12.9 times trailing EBITDA," Morgan Stanley analysts wrote in a note on December 16. SPX Chief Executive Chris Kearney has worked over the past few years to focus the company on its flow control business, making equipment used in processing liquids ranging from petroleum to dairy products. Gardner Denver makes compressors, pumps and vacuum products for industrial uses. Its decision to explore a sale followed months of pressure from activist investor ValueAct Capital LLC, which acquired a roughly 5 percent stake. The shareholder campaign followed the sudden resignation of Chief Executive Barry Pennypacker in July and his interim replacement by Chief Financial Officer Michael Larsen, who last month was appointed as permanent CEO. Gardner Denver has grappled with lower demand for petroleum and industrial pumps, which pressured its engineered products group. That group reported a 20 percent drop in revenue in the third quarter.

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Shares, euro rise on hopes of U.S. "cliff" deal, BOJ easing

SINGAPORE (Reuters) - Asian shares rose and the euro hit multi-month highs on Wednesday as signs of progress in resolving the U.S. "fiscal cliff" budget crisis and expectations of more aggressive monetary stimulus from the Bank of Japan lifted riskier assets. The gains in Asia came after Wall Street's S&P 500 <.spx> rose more than 1 percent, completing its best two-day run in a month, on growing confidence a deal can be reached in Washington to avoid a raft of painful spending cuts and tax rises due to take effect from January if there is no budget agreement. <.n> "What is important, and what is driving the market higher, is that the two parties are now in constructive discussions over specific tax levels and spending programs, and working towards a common middle ground," said Cameron Peacock, a strategist at IG Markets in Melbourne. Industrial commodities such as oil and copper consolidated earlier gains, while gold recovered some lost ground but remained not far above its lowest in nearly four months as progress in the U.S. budget talks limited its safe-haven appeal. JAPAN SHARES KEEP RISING Tokyo's Nikkei share average <.n225> rose 1.3 percent, topping 10,000 points for the first time since April, as the Bank of Japan (BOJ) was starting a two-day policy meeting. <.t> The BOJ will ease monetary policy and consider adopting a 2 percent inflation target in January, double its current price goal, sources say, after pressure from the incoming prime minister, Shinzo Abe, for stronger efforts to beat deflation. "The market is already in overbought territory, but investors are increasingly being alarmed that there is a risk of not having Japanese stocks in their portfolios," said Hiroichi Nishi, general manager at SMBC Nikko Securities. Australian shares <.axjo> rose to a 17-month high, led by miners and banks. MSCI's broadest index of Asia Pacific shares outside Japan <.miapj0000pus> gained 0.3 percent, while S&P 500 futures were flat. The euro rose as far as $1.3250 on electronic trading platform EBS, its highest since the beginning of May, and against the yen it fetched 111.58, having risen as far as 111.69, its highest since late August 2011. "Unless U.S. fiscal cliff talks take an unexpected turn for the worse, we believe that EUR/USD will meet our 1.3300 year-end target," analysts at BNP Paribas wrote in a note. Oil held steady, with Brent crude rising a few cents to around $108.88 a barrel and U.S. crude barely changed just below $88. "There is more upside potential for Brent because of a revival in the overall economic outlook," said Yusuke Seta, a commodities sales manager at Newedge Japan. Copper was also flat just above $8,020 a metric ton (1.1023 tons). Copper rallied almost 8 percent from mid-November to hit a two-month high a week ago, but has since lost some ground. Gold rose 0.3 percent to around $1,675 an ounce, after falling to $1,661.01 on Tuesday, its lowest since August.

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Republicans put squeeze on Obama in "fiscal cliff" talks

WASHINGTON (Reuters) - Frustrated by their inability to wring more "fiscal cliff" concessions out of President Barack Obama, Republicans in the U.S. House of Representatives announced Tuesday night that they expect to pass their own tax bill as a backup plan to avert the tax hikes and automatic budget cuts set to occur in January. No one expects the bill, which would extend low tax rates except on income of $1 million and above, to pass the Democratic-controlled Senate. President Barack Obama's latest position puts the threshold for income tax hikes at $400,000. While the move, called "Plan B" by Republicans, may not prompt Obama to give further ground in his negotiations with House Speaker John Boehner, it could allow Republicans to argue they did what they could to stop tax hikes and the full impact of the "fiscal cliff," which the Congressional Budget Office and economists have said could trigger another recession. "Why not put on the floor something that's what most Americans think the president is talking about, which is protecting from tax increases everybody but truly millionaires and billionaires?," said Republican Representative Pat Tiberi of Ohio. When it dies in the Senate, he said, "that's not our problem. We can't be held responsible for what the Senate does." Polls have consistently suggested that the public is likely to blame Republicans for failure to reach a deal ahead of the December 31 deadline for action. After important concessions in recent days from both Obama and Boehner, Republicans expressed frustration that the president had not moved further. The White House seemed unconcerned by the Republican tactic, and stressed Obama's willingness to compromise further. "The president has demonstrated an obvious willingness to compromise and move more than halfway toward the Republicans," White House spokesman Jay Carney told reporters, adding that Obama is making a "good faith" effort to reach a compromise. Still, the mood on Capitol Hill was guardedly optimistic. Global stocks advanced to their highest levels since September. Investors shifted funds to stocks and the euro and pulled away from safe-harbor assets such as bonds, gold and the U.S. dollar. "They've still got a long way to go, but you can't help but say that the odds are better today than they were on Friday that we'll get some sort of agreement," said Oklahoma Republican Representative Tom Cole. Hopes of an accord rose Monday night after Obama made a concession with his offer to limit tax increases to incomes exceeding $400,000 per household. That is a higher threshold than the $250,000 that the president had sought earlier. Boehner, the top Republican in Congress, had earlier conceded on Obama's insistence that tax rates rise on the wealthiest Americans, but the two have been unable to agree on what income levels should be included in that category. Analysts said Obama and Boehner may strike a compromise at $500,000 or close to that, though time was running short. One House Republican aide, asked about prospects for "Plan B" on the House floor, said: "It wouldn't be surprising ... if a lot of conservatives balk at something like that." The House's second ranking Republican, Eric Cantor, said he was confident his party members in the House would back the bill. 'WE CAN DO BETTER' Even as he presented the measure, Boehner said he would continue to negotiate with Obama on a broader agreement. "Plan B is Plan B for a reason. It's a less-than-ideal outcome. I've always believed we can do better," Boehner said. The expiration of low tax rates enacted under former President George W. Bush is a key component of the "fiscal cliff" that lawmakers are trying to prevent from taking hold next month, along with deep automatic government spending cuts. Often challenged by the conservative wing of his caucus, Boehner held Republican lawmakers together in support of his efforts to forge a deal with Obama. The speaker emerged largely unscathed from a potentially tough meeting with his fellow House Republicans on Tuesday morning. Representative Darrell Issa, a key committee chairman, said his fellow House Republicans "were supportive of the speaker. ... I saw no one there get up and say, 'I can't support the speaker.'" With opinion polls showing broad support in the United States for raising taxes on the wealthiest Americans and Obama still buoyed by his re-election last month, the Republicans' traditional opposition to tax hikes has waned somewhat. The Obama-Boehner talks have largely overcome stark ideological differences and are focused increasingly on narrower disagreements over numbers. COST-OF-LIVING INCREASES Obama also may face unrest from within his party. Liberal Democrats were likely to oppose a key compromise he has offered to permit shrinking cost-of-living increases for all but the most vulnerable beneficiaries of the Social Security retirement program. His proposal calls for using a different formula, known as "chained Consumer Price Index," to determine the regular cost-of-living increases, essentially reducing benefits. "I am committed to standing against any benefit cuts to programs Americans rely on, and tying Social Security benefits to chained CPI is a benefit cut," Democratic Representative Keith Ellison said in a statement. Obama also moved closer to Boehner on the proportion of a 10-year deficit reduction package that should come from increased revenue, as opposed to cuts in government spending. Obama is now willing to accept a revenue figure of $1.2 trillion, down from his previous $1.4 trillion proposal. Boehner's latest proposal calls for $1 trillion in new tax revenue from higher tax rates and the curbing of some tax deductions taken by high-income Americans. Missing from Obama's latest offer was any extension of the so-called "payroll tax holiday" that ends on January 1, bringing an immediate tax increase on wage earners. Possible plans to produce cuts in spending for Medicare and Medicaid, the government health insurance programs for seniors and low-income Americans respectively, remained to be discussed. Boehner and Obama have made headway on the politically explosive question of the president's ability to avoid constant battles over raising the nation's debt ceiling, which controls the level of borrowing by the government. Boehner is ready to give Obama a year of relative immunity from conservative strife over the debt ceiling, while Obama is pushing for two years.

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Ford says recalls have not hurt auto sales

DETROIT (Reuters) - Ford Motor Co is not experiencing a hit to its auto sales as a result of a recent spate of safety recalls, Chief Operating Officer Mark Fields said. "I think overall our sales are doing well," Fields told reporters on Tuesday, adding that consumers have a good perception of the quality of Ford products. "But we also understand that's a very precious thing and we're working very hard every day to deliver that quality commitment to our costumers," said Fields. Last week, Ford issued the fourth recall on its 2013 Escape crossover since July. The most recent recall was for increased risk of an engine fire due to a software glitch in the cooling system of the Escape as well as the midsize Fusion sedan. On December 10, the same day as the Escape and Fusion recall, the U.S. Environmental Protection Agency said it would investigate claims by Consumer Reports magazine that Ford's hybrid models of the Fusion and C-Max crossover fell well short of the official fuel economy rating of 47 miles per gallon. Fields spoke with reporters after an event in Detroit where Fields and Detroit Mayor Dave Bing announced a $10 million program Ford is to fund to create a community center, youth recreation and summer camp and support for education and summer job programs. Ford's 2103 Escape launched in July. Fields defended Ford's response to the safety recalls. "I think on the Escape launch, we've had a few issues," said Fields. "Our approach to any of our issues were very proactive - we go out and fix it for our customers." Fields said December sales were going well, but he declined to offer an estimate of this month's sales. Ford sales in November rose 6.4 percent from the previous November. Ford's 2012 sales through November were up 5 percent at 2.03 million new vehicles, for a 15.5 percent share of the U.S. auto market, down from 16.8 percent market share at the same time in 2011, when sales for Japanese rivals Toyota Motor Corp and Honda Motor Co were limited due to the earthquake and tsunami in March 2011.

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China's CNOOC lauds Canadian approval of Nexen buy

BEIJING (AP) -- China's state-owned CNOOC said on Saturday that it is delighted that the Canadian Ministry of Industry has approved its $15.1 billion proposed takeover of Canadian oil and gas producer Nexen. Once finalized, it will be China's largest overseas energy acquisition, coming at a time when other Chinese companies such as telecommunications giant Huawei are encountering difficulties in expanding in North America, Europe and Australia. Wang Yilin, chairman of China National Offshore Oil Co., said the approval is recognition of the acquisition's long-term economic benefits for Calgary, Alberta and Canada. Nexen is headquartered in Calgary in Canada's Alberta province and is to remain there after CNOOC's takeover as its head office for north and central American operations. "I express my appreciation for Canada's welcome of our investment," Wang said in a statement Saturday. CNOOC Chief Executive Officer Li Fanrong said the takeover will bring opportunities for Nexen employees, partners and CNOOC. "We are delighted that the Ministry of Industry has concluded that this transaction represents a 'net benefit' to Canada," he said. China's Ministry of Commerce could not be reached for comment Saturday. Despite the approval, the Canadian government said it will reject any future takeovers in the oil sands sector by foreign state-owned companies unless there are exceptional circumstances. "To be blunt, Canadians have not spent years reducing ownership of sectors of the economy by our own governments only to see them bought and controlled by foreign governments instead," Canadian Prime Minister Stephen Harper said. In 2005, U.S. lawmakers blocked a CNOOC $18.5 billion bid to buy the oil company Unocal over national security concerns.

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CNOOC pledge small step for China transparency, skeptics abound

SINGAPORE/HONG KONG (Reuters) - CNOOC's promise of transparency, pledged to win approval from Canada for its $15.1 billion purchase of Nexen Inc, looks like a positive step on the face of it but is unlikely to represent a sea change in Chinese business practices. To be sure, the details of commitment are not clear. The state-controlled energy firm has promised the Canadian government an annual compliance report on all its commitments that are part of its takeover of Nexen Inc, China's biggest ever takeover. These include listing shares on Toronto stock exchange, which comes with certain disclosure requirements. But when capital is king, cash-rich Chinese state-owned enterprises have the balance of power in any acquisition talks, leaving doubts about the real potency of transparency pledges. "On the transparency side, I believe there will be efforts from foreign governments to get more information, but it's still a question of how far China is willing to give," said Robert Lewis, a partner at Zhong Lun law firm in Beijing. "Twenty years ago it was all about foreign capital coming into China and that foreign capital having the leverage in negotiations. Now it's the other way round, so China will not have to give as much on the transparency side as some might suspect". The international community has demanded greater transparency from China on a number of fronts for years, wary of its intentions as the country grew to become the second-biggest economy in the world and symbolic of a shift in global power to emerging nations. On the latest front, U.S. securities regulators are in an intense stand-off with their Chinese counterparts over access to Chinese audit documents. Separately, a U.S. congressional advisory panel described Chinese investment in the United States as a "potential Trojan horse." China's state-secrets laws, massive bureaucracy and cronyism make it difficult to get key, verifiable information from Chinese companies. FINANCIAL CLOUT But the same Chinese companies yield considerable global clout. Chinese companies launched $51.3 billion of overseas acquisitions this year, second only to Japan, Thomson Reuters data shows, making the country one of the world's most active buyers of corporate stakes and businesses abroad. Much of that acquisition power is led by China's government-run companies, and its energy sector, which has both the cash and the need to build up oil-and-gas supplies to fuel the $5.8 trillion economy. The government owns all large financial institutions, which lends according to state priorities and directives and which favour large state enterprises -- one reason why the Washington think tank, the Heritage Foundation, ranks China 138th out of 179 in global economic freedom. Even Chinese companies that aren't classed as state-owned enterprises, such as telecom giants Huawei and ZTE, face accusations they could covertly gather information for Beijing. In October, a U.S. congressional report urged American companies to stop doing business with the two companies saying the Chinese government could take advantage of their equipment for espionage purposes. Canada and Australia have also indicated they will ban Huawei from taking part in communication network projects due to cyber security concerns. The Nexen deal, and a separate though less contentious $5.3 billion offer by Malaysia's Petronas for Canada's Progress Energy, provided capital infusions to two Canadian companies, not to mention payouts to shareholders at a time of economic uncertainty. Such considerations may trump the fear of a state-owned bogeyman coming to town. "No government in the world is going to say 'we don't want your money'," said Andrew Lumsden, a partner at Corrs Chambers Westgarth in Sydney. "There will be a bit of huffing and puffing but it's probably business as usual". GROUND RULES Last week, the U.S. Securities and Exchange Commission (SEC) charged the Chinese affiliates of five of the world's biggest audit firms with violating U.S. securities law. The United States and China could still reach a settlement, but the action shows the U.S. securities watchdog and their Chinese counterparts could not find agreement on the exact topic under discussion with CNOOC-Nexen: transparency of information. Canada though is following in the steps of other countries that have attracted money from state-backed Chinese companies, such as Australia and Norway, in putting place a working set of ground rules. "There's become an almost standard set of behavioral undertakings that firms accept in Australia from these kind of companies and reading between the lines it looks like the Canadians are doing similar," said Lumsden at Corrs Chambers Westgarth. "The companies put in place a series of undertakings such as ensuring they have local management and comply with local environmental laws", he said. Rupert Li, a partner at King & Wood Mallesons in Hong Kong, said all Chinese companies should study Nexen's transparency clause, particularly those that plan to venture abroad. "If you want to be part of the global business community, people should have more visibility into your management, your finance, and who actually drives your strategy," Li said, adding the extent of a board's independence was also important. "The question is whether the Chinese companies can actually dispel the notion that they are just part of the mandate from the Chinese government as opposed to being a true profit seeking entity," he added.

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Huawei duplicará personal en Europa

HELSINKI (Reuters) - El proveedor de equipos de telecomunicaciones chino Huawei Technologies planea duplicar su plantilla de empleados en Europa durante los próximos años e instalará un centro de investigación en Finlandia destinado a desarrollar nuevos teléfonos avanzados. Los planes de expansión para Europa se dieron a conocer dos meses después de que legisladores estadounidenses señalaron que los equipos de Huawei podrían ser usados para espionaje de China. La firma enfrenta también prohibiciones en Australia para el desarrollo de ciertos equipos de redes debido a preocupaciones de seguridad que no fueron especificadas. "Europa ha demostrado ser un ambiente de negocios tranquilo y abierto para Huawei", dijo el portavoz de la empresa Roland Sladek. Huawei dijo que planea emplear a más de 14.000 trabajadores dentro de Europa en cinco años, con lo que duplicaría su actual fuerza laboral de unos 7.000 empleados. También planea gastar 70 millones de euros (91 millones de dólares) para un nuevo centro de investigación y desarrollo en Finlandia que se enfocará en el desarrollo de teléfonos avanzados. La firma dijo que quiere lanzar nuevos teléfonos avanzados incluyendo dispositivos con plataforma Windows Phone 8. Los dispositivos móviles representaron el año pasado un 22 por ciento del negocio de Huawei. (1 dólar =0,7735 euros)

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