By John Miller
ZURICH (Reuters) - Power grids maker ABB is buying General Electric's Industrial Solutions business for $2.6 billion in a bet it can improve the division's lackluster margins over the next five years, the Swiss engineering company said on Monday.
Zurich-based ABB sees potential for annual cost benefits of $200 million with the deal, which includes an agreement for long-term use of GE's brand and a strategic partnership. In 2016, the GE business had sales of $2.7 billion.
The GE products include circuit breakers, switchgear, components for lighting control and power supply equipment for facilities including data centers. ABB's portfolio includes similar products.
ABB is seeking to better penetrate the North American market and gain access to GE's larger installed base of electrical installations worldwide.
ABB said the business had been "an unloved child" and pledged to upgrade aging products with its own technology to help arrest a declining U.S. market share.
ABB is suspending its $3 billion share buyback program as part of the deal, which will bolster its position as the second-biggest supplier of electrical components behind France's Schneider Electric (PA:SCHN).
ABB is also wagering on being able to cut costs and boost profitability at the Georgia-based GE unit.
"The key rationale of the integration is, first we will make this business better. And then afterwards, we will make this business bigger and better," said ABB Chief Executive Ulrich Spiesshofer.
ABB expects integration costs of $400 million.
The GE unit's operating earnings before interest, taxes and amortization (EBITA) are just 6 percent of sales, less than half the 15 percent operating margin at ABB's comparable Electrification Products division.
Spiesshofer said he agreed to the transaction only after striking a supply partnership where ABB and GE will increase buying and selling from each another.
"Without that, the economics wouldn't have worked," he told reporters on a call. "With the supply partnership, the economics at the price of 0.9 times revenue is working."
GE has been under pressure from activist investor Nelson Peltz's Trian Fund Management to sell assets and focus on higher-margin businesses.
Some analysts said the price was surprisingly high given the GE business's low profitability.
"GE Industrial Solutions isn't in top shape, so ABB has its work cut out for it," said Zuercher Kantonalbank analyst Richard Frei.
ABB said it would finance the deal -- likely its last for some time -- with cash and did not need to raise equity capital. Its shares were little changed in early trading.
GE had resumed negotiations to sell the business to ABB after moderating its price expectations, people familiar with the matter told Reuters in August.
Credit Suisse (SIX:CSGN) and Dyal Co acted as financial advisers to ABB, and Davis Polk & Wardwell provided legal counsel.
By John Geddie
LONDON (Reuters) - The single currency and European stocks slipped on Monday after the bloc's most powerful leader German Chancellor Angela Merkel won a fourth term but faced a fractured parliament as support for the far-right surged.
Investors were unnerved by the prospect of months of coalition talks which could distract from negotiations with Britain over its divorce from the European Union and efforts to integrate the bloc's remaining members.
Political uncertainty also weakened the New Zealand dollar as the ruling National Party won the largest number votes in a weekend election but failed to secure a ruling majority, with a protracted period of coalition building now a possibility.
"Merkel's most pressing task now is not to knit Europe closer together. It's to form a coalition which will prove to be extremely difficult and time-consuming," said Oliver Rakau, chief German economist at Oxford Economics.
The euro slid 0.3 percent to $1.1918, putting more distance between a 2-1/2-year high of $1.2092 reached on Sept. 8, when a European Central Bank policy meeting left currency bulls optimistic the ECB would begin tapering its big stimulus program.
Euro zone stock markets were down 0.3 percent, although falls were more pronounced in Asia where equity markets were hit by concerns over the economic health of the world's second biggest economy China.
MSCI's broadest index of Asia-Pacific shares outside Japan was last down 0.8 percent.
Hong Kong's Hang Seng was down 1.3 percent and Shanghai slipped 0.4 percent after a number of Chinese cities rolled out new measures to cool housing prices.
Investor sentiment was also undermined by concerns that China's beefed-up environmental protection could reduce demand, and consequently economic growth.
In European debt markets, the focus was firmly on the German election where the anti-immigration Alternative for Germany (AfD) stunned the establishment by becoming the first far-right party to enter parliament in more than half a century.
All parties have ruled out a coalition with the AfD and Merkel's only straightforward path to a majority in parliament is a three-way tie-up with the liberal Free Democrats (FDP) and the Greens - an arrangement untested at national level.
Investors bought German government bonds on the result - seen as one of the safest stores of cash in the euro zone - and sold lower-rated debt in the likes of Portugal, Spain and Italy.
Overall the market moves were fairly modest, however, and some analysts said investors may have used the result as an excuse to sell the euro which was moving lower before the vote.
"The euro...was already losing support from the European Central Bank's monetary policy theme and appeared to be on its way lower," said Daisuke Karakama, chief market economist at Mizuho Bank in Tokyo.
In New Zealand, the kiwi, the world 11th most-traded currency, was down 0.7 percent at $0.7288 and set for its biggest daily drop in around a month.
It was at a 1-1/2-month high of $0.7435 as recently as Sept. 20, when speculation for a comfortable ruling party win had boosted the currency.
"While there are a few different scenarios and some potentially testy issues to negotiate, ultimately the political landscape appears as though it will remain relatively centralist and we are reasonably agnostic on what it all means," wrote economists at ANZ.
The British pound edged up 0.3 percent to $1.3541, bouncing back from a slide on Friday when ratings agency Moody's downgraded its credit rating.
The dollar was up 0.2 percent against a basket of six major currencies at 92.397.
The greenback added 0.3 percent at 112.27 yen , reversing losses suffered on Friday when the exchange of insults between U.S. President Donald Trump and North Korea heated up, sapping broader risk appetite.
Oil prices consolidated after surging on Friday, when OPEC and other oil producers said they were clearing a glut that has weighed on crude prices and may wait until January before deciding whether to extend their output curbs beyond the first quarter of 2018.
Brent crude futures was down 0.2 percent at $56.73 a barrel, not far from a 6-1/2-month high of $56.91 set on Friday.
U.S. crude lost 0.5 percent to $50.52 a barrel.
By Julien Ponthus
LONDON (Reuters) - European shares edged higher in cautious trade on Monday after German Chancellor Angela Merkel secured a fourth term but saw her party weakened by a surge in support for the far-right.
At 1027 GMT (5.27 am ET) both the pan-European STOXX 600 (STOXX) and euro zone blue chips (STOXX50E) were 0.1 percent higher - a more moderate reaction than the currency market where the euro took a hit.
European bourses were mixed, with France's CAC 40 (FCHI) down 0.1 percent, Germany's DAX (GDAXI) up 0.3 percent and Milan (FTMIB) flat.
Financials were the biggest drag on European stocks while healthcare, energy and industrials helped offset those losses.
"We had a small negative surprise", Lionel Melin, a senior cross asset strategist for Lyxor, said.
Some traders said they were worried the vote might lead to a new coalition government less keen on pushing euro zone integration.
French train maker Alstom (PA:ALSO) rose 1.5 percent to its highest level since March 2013 after confirming on Friday it was in talks with German engineering group Siemens on a possible tie-up.
Switzerland's ABB (S:ABBN) rose 0.6 percent on its announcement it was buying General Electric's Industrial solutions unit in a deal worth $2.6 billion.
Shares in ABB have risen around 12 percent so far this year, in line with the broader European industrials index.
Unilever (L:ULVR), which announced it would buy cosmetics firm Carver Korea for 2.27 billion euros ($2.71 billion), added 0.7 percent.
Unicredit (MI:CRDI) slipped 0.1 percent after its deputy chairman said on Friday that the speculation about his bank wanting to take over Commerzbank (DE:CBKG) was nonsense. The German bank lost 1.2 percent.
Swedish construction firm NCC (ST:NCCb) was the worst performer on the STOXX, falling 7.2 percent, after it said it expected third-quarter operating earnings to come in far below market forecasts.
Politics continued to play spoilsport in Spain where Madrid's IBEX (IBEX) lagged its peers, off 0.7 percent.
The mounting political crisis over Catalonia's campaign for independence, which dragged stocks sharply lower last week, intensified over the weekend. Caixabank (MC:CABK) took the most points off the index, retreating 2.3 percent.
BEIJING (Reuters) - Citigroup Inc (N:C) expects to boost its revenue growth in China by tapping into opportunities presented by Beijing's Belt & Road initiative, the bank's China chief said.
The New York-based lender is one of a handful of global banks promoting its cross-border capabilities to capitalize on President Xi Jinping's Belt and Road initiative.
The initiative, unveiled in 2013, aims to bolster China’s global leadership ambitions by building infrastructure and trade links between Asia, Africa, Europe and beyond.
"We're seeing more and more multinational customers benefiting from Belt and Road, mostly through supplying into the Belt and Road projects, particularly companies in the industrial sector," Christine Lam, Citigroup's chief executive for China, told Reuters in an interview on Thursday.
Lam was speaking on the sidelines of a conference hosted by Citigroup in Beijing this week.
Rivals HSBC Holdings (L:HSBA), Standard Chartered (L:STAN), and Credit Suisse (S:CSGN) also have promoted their cross-border capital markets and cash management services to leverage Belt and Road opportunities.
China is one of eight Asian markets that produce $1 billion or more in revenue for Citigroup. The bank's local unit reported about $770 million in revenue last year, representing a decline of 10.5 percent, following the sale of its stake in Guangfa Bank. Profits increased about 1 percent to $163 million.
Citigroup has banking relationships with more than 80 percent of Fortune 500 companies in China, Lam said, and provides services in 58 markets in so-called Belt and Road countries.
The bank expects to book more revenue from providing services for Belt and Road related activities, including mergers and acquisitions, cash management, trade finance and hedging, Lam said.
Most Belt and Road opportunities are financed by government-owned policy and commercial lenders, with China Construction Bank Corp (SS:601939) (HK:0939) and Bank of China (SS:601988) (HK:3988) raising billion-dollar funds for future investment.
Lam said that Citigroup is also looking to increase service to Chinese state-owned enterprises and other multinationals investing overseas, and has established nine China desks in locations around the world, including Dubai, Nairobi and Kazakhstan.
Separately, Lam said that Citigroup has already benefited from ongoing discussions between Washington and Beijing over expanding access to China's financial markets.
In February, Citigroup became the first U.S.-based bank to secure a license to act as a bond settlement agent in China's interbank bond market, allowing its local unit to compete alongside Deutsche Bank AG (DE:DBKGn) and BNP Paribas SA (PA:BNPP) in the country's $9 trillion bond market.
MILAN (Reuters) - European shares steadied on Friday amid fresh tensions over North Korea but remained near recent highs ahead of this weekend's general election in Germany, where conservative Chancellor Angela Merkel is expected to win a fourth term.
L'Oreal was one of the few bright spots on market talk about possible ownership changes at the cosmetics giant.
L'Oreal (PA:OREP) rose as much as 6.7 percent after billionaire Liliane Bettencourt, whose family founded the firm and still owns the largest stake in it, died.
Traders said her death could fuel talk that Nestle (S:NESN) could consider selling its stake in L'Oreal, which in turn may look at selling its holding in Sanofi (PA:SASY). Both Sanofi and Nestle rose around 1 percent.
The pan-European STOXX 600 (STOXX) index fell 0.1 percent by 0805 GMT. Miners (SXPP) were the biggest sectoral faller, down 1.4 percent, as escalating tensions on the Korean peninsula and China's rating downgrade hit metal prices.
North Korea said on Friday it might test a hydrogen bomb over the Pacific Ocean after U.S. President Donald Trump vowed to destroy the reclusive country.
Among top fallers on the STOXX were London-listed miners BHP Billiton (L:BHP), Anglo American (L:AAL) and Glencore (L:GLEN), which dragged UK's FTSE (FTSE) down 0.2 percent.
Germany's blue chip DAX index (GDAXI) was little changed, close to a two-month high on the last trading day before the general election in Europe's biggest economy.
The DAX has outperformed euro zone peers over the past four years to hit a record high in June and there are expectations that a victory of Merkel could further support the country's equities, regardless of the makeup of her coalition.
Yet some investors believe that German stocks, especially industrials like carmakers, are too highly priced and could be severely hit by a possible correction in key export market China on the back of a growing pile of debt.
"The risks in a lot of the German companies are being under appreciated," Luiz Sauerbronn, who helps manage $30 billion at global investment advisory firm Brandes Investment Partners.
Sauerbronn however said he was more optimistic about prospects for European equities as a whole given their attractive relative valuations versus the U.S. and sees opportunities in British grocers or European oil companies.
Among German blue chips, utilities RWE (DE:RWEG) and E.ON (DE:EONGn), which are seen sensitive to possible policy changes in their country following the vote, rose 0.7 and 0.6 percent.
Among other top movers on Friday was British engineer Smiths Group Plc (L:SMIN). Its shares fell 3.9 percent after full-year revenue growth fell short of analyst expectations even though its pretax profit rose 17 percent helped by growth in its security scanners business.
By Tanya Agrawal
(Reuters) - U.S. stock index futures were little changed on Thursday, a day after the Federal Reserve signaled that it could raise interest rates for the third time this year despite low inflation and disclosed plans to shrink its balance sheet.
* The Fed, as expected, said it would begin to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities - acquired in the years after the 2008 financial crisis - from October.
* While the central bank left rates unchanged, it cited low unemployment, growth in business investment and an economic expansion that has been moderate but durable this year to build its case for another rate hike in 2017.
* Interest rate futures are now pricing in about a 70 percent chance of a December hike, according to CME's FedWatch tool, up from above 50 percent prior to the Fed meeting.
* Fed Chair Janet Yellen said the fall in inflation this year remained a mystery, adding that the central bank was ready to change the interest rate outlook if needed.
* Benchmark U.S. Treasury yields jumped to their highest levels in six weeks on Wednesday, while the dollar index (DXY) hit a two-week high.
* The S&P and the Dow ended slightly higher on Wednesday, adding to their string of closing records, while the tech-heavy Nasdaq ended slightly lower weighed down by Apple (O:AAPL).
* U.S. stocks have continued to climb this year, with the S&P up about 12 percent so far, helped by strong corporate profits and optimism that U.S. President Donald Trump will cut business taxes.
* Economic data at 8:30 a.m. ET (1230 GMT) is expected to show that the number of Americans filing for unemployment benefits have increased by 6,000 to 263,250 for the week.
* Oil prices were slightly lower but held most of their recent gains before a meeting of oil producers that could extend production limits aimed at clearing a glut that has depressed the market for more than three years.
* Shares of Calgon Carbon (N:CCC) soared 59.1 percent in premarket trading after Japanese chemical manufacturer Kuraray (T:3405) agreed to buy the carbon materials firm for $1.107 billion.
* U.S.-listed shares of Deutsche Bank (N:DB) were down 2.4 percent after Morgan Stanley (NYSE:MS) cut the stock's price target.
Futures snapshot at 6:56 a.m. ET:
* S&P 500 e-minis were down 0.5 points, or 0.02 percent, with 112 contracts changing hands.
* Nasdaq 100 e-minis were down 2.75 points, or 0.05 percent, in volume of 27 contracts.
* Dow e-minis <1YMc2> were down 10 points, or 0.04 percent, with 4 contracts changing hands.
Daimler (OTCPK:DDAIF) plans to invest $1B in a plant in Alabama as it prepares the facility for production of electric SUVs in the future.
The new SUV is expected to be sold under the Mercedes-Benz EQ subbrand.
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By Shinichi Saoshiro
TOKYO (Reuters) - Asian stocks were mostly steady on Wednesday after Wall Street again rose to record highs, although movements were limited as a wait-and-see mood prevailed before the Federal Reserve reveals its monetary policy stance later in the day.
Spreadbetters expected Britain's FTSE (FTSE) to start unchanged and Germany's DAX (GDAXI) and France's CAC (FCHI) to each open down about 0.1 percent.
The caution in financial markets ahead of the Fed has kept some investors from making sharper adjustments to their positions despite potentially higher tensions over the Korean peninsula following hawkish statements from U.S. President Donald Trump overnight.
The Fed is due to announce its decision at 1800 GMT on Wednesday and is widely expected to keep rates unchanged after a two-day meeting but could begin paring its bond holdings, with reductions likely to start in coming months.
The financial markets will also sift through the "dot plot" representing Fed policymakers' rate projections for any hints of a rate hike in December.
MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was up 0.05 percent.
Japan's Nikkei (N225) was effectively flat. Shanghai (SSEC) added 0.3 percent while Hong Kong's Hang Seng (HSI) added 0.2 percent.
The three major U.S. stock indexes edged higher on Tuesday, logging record closes, with financial stocks providing the biggest boost. (N)
"A benign outcome for equities would be the Fed going somewhere in between being too passive on reducing its bond holdings and too aggressive in hiking interest rates," said Soichiro Monji, chief strategist at Daiwa SB Investments in Tokyo.
"There may be some speculation towards the Fed sounding slightly dovish, but over the last few weeks hawkish rhetoric has come into vogue globally as demonstrated by the Bank of Canada and Bank of England," he said.
The Canadian central bank hiked interest rates this month and left the door open for more tightening, while a BoE policymaker hinted last week that it might need to raise rates in the coming months.
Expectations for the Fed to raise interest rates in December have risen since.
According to CME FedWatch, markets are pricing in a more than 50 percent chance of a Fed hike in December, up from around 31 percent as recently as Sept. 8.
The dollar hovered close to an eight-week high against the yen, buoyed with U.S. Treasury yields having risen to one-month highs before the Fed's policy announcement.
The greenback was little changed at 111.460 yen after touching 111.880 overnight, its highest since late July.
Currency markets had a muted reaction to Trump's latest comments on North Korea.
Trump said in a speech to the U.N. General Assembly on Tuesday that the United States will be forced to "totally destroy" North Korea unless Pyongyang backs down from its nuclear challenge.
South Korea's KOSPI (KS11) was down 0.05 percent and the won was up 0.2 percent at 1,128.6 to the dollar.
"Trump's comments were actually very strong and the won would have moved more if it were not for the overall cautious mood before the Fed's decision," said Kim Doo-un, a foreign exchange analyst at Hana Financial Investment Seoul.
For now, broader risk sentiment was yet to be swayed by Trump's comments.
"The market doesn't seem to have any strong risk-off sentiment, even after Trump's comments," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
The euro edged up to touch $1.2019 , its highest since Sept. 11.
The dollar index (DXY) against a basket of six major currencies was little changed at 91.747.
The Mexican peso pulled back slightly after dropping in response to a strong earthquake that struck central Mexico. The currency stood at 17.8165 pesos per dollar after touching 17.8500 overnight, its weakest in two weeks.
The 10-year Treasury note yield (US10YT=RR) stood close to 2.246 percent, the one-month peak set the previous day.
In commodities, oil prices rose after Iraq's oil minister said OPEC and other crude producers were considering extending or even deepening a supply cut to curb a global glut, while a report showed a smaller-than-expected increase in U.S. inventories. [O/R]
Brent crude futures (LCOc1) were up 0.3 percent at $55.30 a barrel and U.S. crude (CLc1) rose 0.6 percent to $49.76 a barrel.
Taiwan stocks were lower after the close on Wednesday, as losses in the , Glass and Other Electronic sectors led shares lower.
At the close in Taiwan, the Taiwan Weighted lost 0.54%.
The best performers of the session on the Taiwan Weighted were Abocom Systems Inc (TW:2444), which rose 9.90% or 3.00 points to trade at 33.30 at the close. Meanwhile, VIA Technologies Inc (TW:2388) added 9.85% or 1.00 points to end at 11.15 and Logah Technology Corp (TW:3593) was up 9.84% or 1.50 points to 16.75 in late trade.
The worst performers of the session were Genius Electronic Optical Co Ltd (TW:3406), which fell 8.34% or 35.50 points to trade at 390.00 at the close. Grand Pacific Petrochemical Corp (TW:1312) declined 7.32% or 1.90 points to end at 24.05 and Calin Technology Co Ltd (TW:4976) was down 6.31% or 2.95 points to 43.80.
Falling stocks outnumbered advancing ones on the Taiwan Stock Exchange by 547 to 237 and 89 ended unchanged.
Shares in Abocom Systems Inc (TW:2444) rose to 5-year highs; up 9.90% or 3.00 to 33.30. Shares in Logah Technology Corp (TW:3593) rose to 52-week highs; rising 9.84% or 1.50 to 16.75.
Crude oil for November delivery was up 0.80% or 0.40 to $50.30 a barrel. Elsewhere in commodities trading, Brent oil for delivery in November rose 0.44% or 0.24 to hit $55.38 a barrel, while the December Gold Futures contract rose 0.47% or 6.11 to trade at $1316.71 a troy ounce.
USD/TWD was down 0.02% to 30.123, while TWD/CNY fell 0.18% to 0.2181.
The US Dollar Index Futures was down 0.09% at 91.54.
Australia stocks were lower after the close on Wednesday, as losses in the Telecoms Services, Energy and Resources sectors led shares lower.
At the close in Sydney, the S&P/ASX 200 lost 0.12%.
The best performers of the session on the S&P/ASX 200 were Seven Group Holdings Ltd (AX:SVW), which rose 9.66% or 1.080 points to trade at 12.260 at the close. Meanwhile, Brambles Ltd (AX:BXB) added 4.67% or 0.420 points to end at 9.420 and Cleanaway Waste Management Ltd (AX:CWY) was up 2.91% or 0.040 points to 1.415 in late trade.
The worst performers of the session were TPG Telecom Ltd (AX:TPM), which fell 6.56% or 0.360 points to trade at 5.130 at the close. Asaleo Care (AX:AHY) declined 4.32% or 0.070 points to end at 1.550 and Nanosonics Ltd (AX:NAN) was down 3.72% or 0.100 points to 2.590.
Falling stocks outnumbered advancing ones on the Sydney Stock Exchange by 589 to 554 and 371 ended unchanged.
Shares in TPG Telecom Ltd (AX:TPM) fell to 3-years lows; losing 6.56% or 0.360 to 5.130.
The S&P/ASX 200 VIX, which measures the implied volatility of S&P/ASX 200 options, was down 2.26% to 11.930 a new 1-month low.
Gold Futures for December delivery was up 0.51% or 6.63 to $1317.23 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in November rose 0.68% or 0.34 to hit $50.24 a barrel, while the November Brent oil contract rose 0.42% or 0.23 to trade at $55.37 a barrel.
AUD/USD was up 0.12% to 0.8020, while AUD/JPY unchanged 0.00% to 89.38.
The US Dollar Index Futures was down 0.12% at 91.51.