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Sep 21, 2018

Comcast and Disney (Fox) Battle Again. This Time for British Broadcaster Sky I Business I DealBook I NYT

The fight will be settled by an auction this weekend. We work out the possibilities.
The fight for control of British broadcaster Sky is scheduled to start Friday evening.CreditCreditBen Stansall/Agence France-Presse — Getty Images
Edmund Lee
Control of a $30 billion company doesn’t often come down to an auction. But that is the fate of the British broadcaster Sky, one of Europe’s most valuable television businesses.
To determine control, a showdown between Comcast and 21st Century Fox (through the auspices of its soon-to-be owner, the Walt Disney Company) is scheduled to start Friday evening. Over the next day, Comcast and Fox will duel it out for Sky. The winner of the auction will be announced Saturday evening London time, pending no major changes to the process.
Rupert Murdoch had long sought to acquire the 61 percent of Sky that Fox (and, earlier, News Corporation) did not own. His most recent takeover effort began in late 2016.
Then in December, 21st Century Fox struck a $52.4 billion deal to sell the bulk of its assets to Disney, including its 39 percent stake in Sky.
But Sky was a key target in what became a complex bidding war between Comcast and Disney. Comcast made a higher takeover offer this spring in part to spoil Disney’s bid to acquire most of Fox. The situation effectively leaves Fox trying to acquire Sky on behalf of Disney, and it and Comcast both increased their offers.
Then in June, Comcast made an offer worth $65 billion for Fox’s businesses. The spoiler bid forced Disney to increase its offer by $19 billion, adding to Disney’s debt.
Disney prevailed but did not gain control of Sky, which Robert A. Iger, the head of Disney, had called “a real crown jewel.”
Fox has offered 14 pounds per share, or about $32.5 billion. Comcast has countered with £14.75 per share, or $34 billion. But neither offer was considered best and final, prompting Britain’s Takeover Panel to force both parties into an auction.
Sky shares have been trading above £15 — well above the roughly £10 at the start of the year — in anticipation of even higher bids.
The auction rules, published Thursday, describe three rounds of blind bidding. But several factors could complicate the process beyond simply sorting out who offered the higher price.
Here are some possible outcomes:
Round 1: Fox-Disney goes first since it currently has the lower offer. It could keep its bid at £14, which would be a calculated move to force Comcast into bidding against itself.
Round 2: Comcast’s turn. The bids are blind, so Comcast won’t know if Fox-Disney has raised its offer or not. If Comcast senses it would be bidding against itself, it might leave its offer at £14.75.
No Round 3. Comcast wins.
Round 1: Fox-Disney raises its bid above £14.
Round 2: Comcast raises its bid, and the two offers are not equal.
No Round 3. The higher offer wins.
Round 1: Fox-Disney raises its bid.
Round 2: Comcast’s bid matches Fox-Disney’s Round 1 offer.
Round 3: Both parties put in their best and final offer, and the higher offer wins.
Round 1: Fox-Disney bids.
Round 2: Comcast’s bid matches Fox-Disney’s Round 1 offer.
Round 3: Here is where a twist could add a complication. Either side can make its final-round offer contingent on both parties making a bid.
In other words, if Comcast makes its Round 3 offer contingent on Fox-Disney bidding and Fox-Disney doesn’t bid, Comcast’s offer is null. In that case, there’s no Round 3 and we’re back to Round 2 with the equal bids.
In that case, the matter would be handed over to Sky’s independent directors, who would evaluate each offer based on the likelihood of completing the deal. That means determining how many more shares either party has to buy to gain control.
Fox-Disney has a head start here since it already owns 39 percent. Based on its most recent stated offer, the company plans to amass 75 percent of the company, which means it needs to buy only 36 percent for control.
But Fox-Disney could lower that threshold to 51 percent at any time, meaning it would have to buy only 12 percent of outstanding shares. That would be appealing to Sky’s board. In this narrow outcome, Disney could effectively get control of Sky relatively cheaply.
For Comcast, it has to own 50 percent plus one share for control, giving it a higher threshold to meet.
In that case, Fox-Disney wins.
Edmund Lee covers the media industry as it grapples with changes from Silicon Valley. Before joining The Times he was the managing editor at Vox Media’s Recode. @edmundlee

EU FX: Dollar struggles near 2-1/2-mth lows, yen slips as risk aversion ebbs I CNBC

The dollar struggled near 2-1/2 month lows, while the yen also sagged on Friday on reduced safe haven demand amid a switch in investors' view that the Sino-U.S. trade conflict would not lead to an immediate global shock.
The dollar index against a basket of six major currencies stood little changed at 93.908 after touching 93.829 overnight, its lowest since July 9.
The index has fallen more than 1 percent this week, with investor flows being diverted from the greenback to other currencies including emerging market ones amid an ebb in U.S.-China trade war concerns.
"It appears that positions which were skewed towards risk aversion are being reversed across the board," said Makoto Noji, senior strategist at SMBC Nikko Securities in Tokyo.
"The trigger was Chinese Premier Li's comments on the yuan, which has led to hopes of a more moderate outcome to the U.S.-China trade row," he said.
Premier Li Keqiang pledged on Wednesday that Beijing will not engage in competitive currency devaluation, a day after his country and Washington plunged deeper into a trade war with more tit-for-tat tariffs.
The dollar had attracted strong demand thanks to trade-related tensions in recent months, as investors bet the greenback would gain at the expense of riskier currencies.
The better risk sentiment contrasted with a Reuters poll showing forecasters were unanimous in viewing the trade row between the world's two top economies as bad for growth.
The euro was a beneficiary of the shift in currency flows. The single currency was 0.05 percent higher at $1.1783 after climbing 0.9 percent the previous day, when it had scaled a three-month peak of $1.1785.
"The 'risk on' mood in light of optimism towards U.S.-China trade issues has cleared the path for the euro's rise," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
Amid a bounce in currencies such as the Turkish lira and South African rand, ravaged earlier in the month by trade friction and domestic factors, MSCI's emerging market currency index rose to a three-week peak on Thursday.
The Australian dollar, a proxy of China-related trades as well as gauge of risk sentiment, climbed to a three-week high of $0.7297.
The Aussie has jumped nearly 2 percent this week, having pulled back from a 2-1/2-year low of $0.7085 plumbed on Sept. 11 and headed for its biggest weekly advance in 14 months.
S&P Global Ratings revised its outlook on triple-A rated Australia to stable from negative on Friday, providing the Aussie with a further lift.
The dollar was up 0.25 percent at 112.745 yen, its strongest in two months.
"Higher U.S. yields, particularly the two-year yield's rise, has added further momentum to the dollar's gains versus the yen ahead of next week's Fed meeting," Yamamoto at Mizuho Securities said.
The two-year Treasury yield has climbed to a decade high this week on the back of receding risk aversion and expectations for a hawkish Federal Reserve meeting next week.
The Australian dollar, pound and euro also advanced significantly against the yen this week.
China's yuan was a shade higher at 6.8420 per dollar in onshore trade. It has gained about 0.35 percent on the week.
Expectations of a rise in bank lending rates and tightness in cash supplies caused a sudden spike in the Hong Kong dollar, pulling it off the lower end of its narrow trading band, where it had been stuck for six months.
The Hong Kong dollar rose to 7.8244 to the dollar, hitting its highest levels since late February. Since March, it had stayed near 7.85, the lower end of the Hong Kong Monetary Authority's managed trading band.
The pound hovered near a two-month peak of $1.3295 scaled overnight, when robust UK retail sales data added to confidence towards the currency already bullish on growing optimism that Britain and the European Union are making progress towards a Brexit deal.

Bonds & Fixed Income: US Treasury yields hold steady ahead of Fed rate decision I CNBC

Thomas Franck, Alexandra Gibbs

U.S. government debt yields held steady Friday after a notable uptick in long-term rates earlier in the week.
The yield on the benchmark 10-year Treasury note was a touch lower at 3.065 percent at 4:03 p.m. ET, while the yield on the 30-year Treasury bond was also slightly lower at 3.203 percent. Bond yields move inversely to prices.
The yield on the 10-year note climbed roughly 8 basis points over the week
While no members of the U.S. Federal Reserve are scheduled to deliver remarks Friday, investors are gearing up for next week's Federal Open Market Committee (FOMC) meeting.
Though central bankers are widely expected to hike the federal funds rate during the meeting, markets will be looking past this month's decision and toward the direction the Fed will chart ahead.
A quarter-point bump to the Fed's benchmark rate is already factored into investor forecasts. The hike will push the funds target to 2 percent to 2.25 percent, where it last was more than 10 years ago.
Members of the FOMC are grappling over how much more monetary tightening is necessary to keep the economy (and inflation) healthy. Up until now, most officials have been comfortable with the Fed's slow-and-steady rate hikes and unwind of its massive balance sheet.
"Traders would fear that the Fed might sound 'dovish' if it drops its 'accommodative' characterization of the policy stance," Thierry Wizman, global interest rates and currencies strategist at Macquarie Group, said in an emailed statement.
A flattening of the so-called yield curve has some economists nervous as spreads between short-term and long-term debt rates shrink to lows not seen since before the 2008 financial crisis.
An inverted U.S. yield curve — where short-term rates surpass long-term rates — has frequently heralded upcoming recession.
Macquarie's Wizman added that, despite fears of flatting, a stronger U.S. economy should keep the curve in check.
"Even if the FOMC does drop 'accommodative' next week," Wizman added, "it shouldn't have much importance for the path of the Feds Funds rate, which will be informed by U.S. data which is in a strong patch in the second half of the year."

Just last month, the spread between the 10-year yield and the two-year yield hit 19.75 basis points, its lowest level since August 2007. The spread between two-year yields and 10-year yields was last seen at 25.91 basis points.
Trade tensions between the U.S. and China continue to rattle investors after both inflicted fresh tariffs on one another earlier this week. China's commerce ministry said Thursday that it hoped the States would show sincerity in trade negotiations, Reuters reported.
The U.S. administration inflicted sanctions on the Chinese military on Thursday for purchasing missile systems and fighter jets from Russia, Reuters reported.
Despite the ongoing trade anxieties, U.S. stocks rallied to new highs this week with both the S&P 500 and the Dow Jones Industrial Average clinching records.
Until Thursday, the Dow had not hit a record level since January, when fears of burgeoning inflation sparked a resurgence in volatility and sent the major stock indexes into a correction.
Elsewhere, purchasing managers' index data was slightly worse-than-expected, with the flash composite PMI figure coming in at 54.2, against a Thomson Reuters analyst forecast of 54.4.
WATCH: Here's why the Dow doesn't really matter

Oil Price at Close Report: Oil pares gains after report OPEC, allies considering supply hike I CNBC

Tom DiChristopher

Oil prices pared gains on Friday, reversing a late morning rally, following a report that OPEC and its allies are considering a coordinated increase in crude production.
The 15-nation OPEC cartel and a group of producers led by Russia are discussing a potential increase of 500,000 barrels a day, Reuters reported, citing an unnamed source. The talks are occurring ahead of the producers' meeting in Algeria this weekend, where they are scheduled to discuss allocating a production increase announced in June.
Brent crude, the international benchmark for oil prices, rose as high as $80.12 on Friday, but fell sharply after the Reuters report. It was trading up 11 cents at $78.81 by 2:29 p.m. ET.
U.S. West Texas Intermediate crude ended Friday's session up 46 cents at $70.78, off a session high of $71.80.

The report also comes after President Donald Trump criticized OPEC on Twitter, saying the group is pushing oil prices higher while benefiting from U.S. military protection. Trump has tweeted at OPEC several times this year, demanding the producer group take action to tame oil prices, which are near a four-year high above $80 a barrel.
Prior to the Reuters report, analysts told CNBC it was highly unlikely that Sunday's meeting in Algiers would produce a major policy decision. However, they said top exporter Saudi Arabia faced the challenge of appeasing Trump, who wants OPEC to boost production, while maintaining cohesion among the producers, many of whom could be hurt by lower oil prices caused by a supply increase.
"The 500,000 barrels is sort of a clever way for the Saudis to placate Trump too," said John Kilduff, founding partner at energy hedge fund Again Capital. "It's not that big of a number. It shouldn't really sink prices materially, but it does throw the president a boon."
The Reuters report did not specify whether the producers were considering taking the action at this weekend's meeting, which is meant to monitor adherence with OPEC's deal with other producers to keep 1.8 million barrels a day off the market. That kind of major policy decision is usually made only during OPEC's "ordinary" or "extraordinary" meetings.
The so-called Vienna Alliance agreed earlier this year to restore about 1 million barrels a day to the market after producers cut output more than they intended, putting upward pressure on oil prices. The producers are preparing for the impact of U.S. sanctions on Iran, OPEC's third largest producer, which could cut supply by about 1 million barrels a day.
"The country out in the cold obviously is Iran because nobody's standing in league with them," said Kilduff. "Everyone's talking about getting more oil on the market to offset the Iranian losses."
Tanker tracking and industry data show Iranian exports of crude have already begun to decline well before the imposition of new U.S. sanctions on Tehran.
"Iranian crude exports are coming (down) earlier and bigger than expected, at a time seasonal demand is strong. With spare capacity also falling sharply, the market remains exposed to supply-induced price shocks," ANZ Bank analysts said in a note to clients.
Jason Gammel, analyst at U.S. bank Jefferies, said he expects Saudi Arabia to try to keep the oil market adequately supplied into 2019, "but at the cost of spare capacity", a key supply buffer to prevent oil price volatility.
"Spare capacity could fall below 1 percent of demand by year-end if Iranian exports fall below 1 million barrels per day, as now seems likely," Gammel said.
— Reuters contributed to this story.

Wall Street at Close Report: Dow rises 62 points to record, posts solid weekly gain I CNBC

Fred Imbert, Alexandra Gibbs

The Dow Jones Industrial Average and S&P 500 hit record highs on Friday and headed for solid weekly gains as concerns about global trade dissipated.
The 30-stock Dow rose 62 points as McDonald's and Boeing outperformed. The S&P 500, meanwhile, hovered around the flatline after rising as much as 0.4 percent. Both indexes hit fresh all-time highs earlier on the day. For the week, the Dow jumped 2.2 percent while the S&P 500 gained nearly 1 percent.
The the weekly gains pushed the Dow to its first record high since January on Thursday, the same day the S&P 500 posted its first all-time high dating back to late August as investor fears of a full-blown trade war taking place decreased.

"I've been a bit surprised at how robust the rally has been given the chatter on trade," said Michael Geraghty, equity strategist at Cornerstone Capital. He noted, however, equities are also benefiting from strong corporate profits. "The stock market is strong because the economy is strong and the economy is strong because corporate earnings are strong."
The Trump administration announced on Monday it would impose a 10 percent tariff on $200 billion worth of Chinese imports, which would rise to 25 percent by year-end. China retaliated Tuesday by announcing levies targeting over 5,000 American products worth $60 billion and to go into effect next week.
However, these levies were seen as less than feared by analysts and investors, thus helping push stocks back to record highs.
"A full-blown global trade war may yet erupt and derail the global economic expansion, but the odds of such an outcome appear to be diminishing," strategists at MRB Partners wrote in a note, adding this is "spurring a risk-on phase."
"Game theory suggests that even President Trump will want a deal with China, or at least has no incentive to take significant economic risks looking out to 2020," they said. "To this end, Trump has shown that he is willing to do deals, provided he can claim it as a 'win.'"
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 20, 2018.
Michael Nagle | Bloomberg | Getty Images
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 20, 2018.
Investors also braced for an S&P 500 sector reshuffling that will send Google-parent Alphabet, Netflix, Facebook and Twitter to the telecommunication services sector. That sector will also be renamed communication services starting Monday. Disney and CBS will also be added to the revamped space.
The moves will lead to a 21.4 percent loss in market cap for the consumer discretionary sector and a 19.5 percent drop in tech's market value, said Lindsey Bell, investment strategist at CFRA, in a note. Meanwhile, the new communication sector will represent 9.8 percent of the S&P 500, up from the current telecom's size of 2 percent.
"Ultimately, the new communication service sector will better reflect the rapidly changing way the world's population communicates. It will result in a more cyclical, lower yielding sector," Bell said.
Analysts are not expecting a large move when the new sector starts trading on Monday, but some media stocks could garner buying interest as some of the large FANG stocks join the space.
McDonald's shares rose 2 percent after the company hiked its quarterly dividend by 14.9 percent to $1.16 per share.
Micron shares dropped 3.5 percent after the chipmaker said PC processor shortages are hurting demand for memory chips, a key business for the company.
Five homebuilder stocks were downgraded by J.P. Morgan, including PulteGroup, sending the space lower. The SPDR S&P Hombuilders ETF (XHB) fell 0.1 percent while PulteGroup shares dropped 0.7 percent. The analysts noted the housing recovery will be "tepid."

Gerald Celente Video- Trends in the News: Economic 9/11: Gold, Guns and a Getaway Plan

Ted Butler: A constructive suggestion: GATA I THE GATA DISPATCH

Submitted by cpowell on 04:16PM ET Friday, September 21, 2018. Section: Daily Dispatches 12:20p ET Friday, September 21, 2018
Dear Friend of GATA and Gold:
Responding today to your secretary/treasurer's request a few days ago that he consider the possibility that the U.S. government is the real party in interest behind the rigging of the monetary metals markets and that the investment bank JPMorganChase is just the government's broker --
-- silver market analyst and rigging exposer Ted Butler acknowledges the possibility but explains why he still thinks the bank is the main culprit.
Butler's commentary is headlined "A Constructive Suggestion" and it's posted at GoldSeek's companion site, SilverSeek, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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