Category Archives: Companies

Italian Confectioner Ferrero Buys Nestle USA

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Photo courtesy of Avelinak

After considering several buyers for its US chocolate business, food giant Nestle picked the Italian luxury chocolate brand, Ferrero in a deal worth about $2.5 billion. Last week it was reported that Ferrero had outbid its rival Hershey for the prize.

The deal makes Ferrero the third largest chocolate company in the US, after Mars, Inc. and Hershey. Before the buyout, Ferrero was the fifth largest confectioner, but only controlled 3% of the market. The Hershey group had 31.5% of the industry and Mars with 27.1%.

Ferrero also makes Ferrero Rocher pralines and Kinder chocolate eggs. It was founded in 1946, in the small Italian town of Alba, in Piedmont, by the grandfather of the present CEO, Giovanni Ferrero.

In 2011, after the death of his brother, Giovanni became the sole CEO of the company. Until that point the business grew solely through internal growth. After that the company started growing through acquisitions of other companies.

TSX Worried About Pot Companies with US Business Exposure

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A ripe & healthy cannabis plant. Photo courtesy of Cannabis Training University.

The struggle over the legalization of marijuana in the United States has created a bit of uncertainty in the Toronto Stock Exchange’s relationship to US companies that produce the mind-stimulating drug.

Aphria Inc, an Ontario-based producer of marijuana says it met with representatives of the TSX a week ago to talk about the company’s exposure to US markets and the risk that exposure subjects the company to.

Vic Neufeld, CEO of Aphria, said that the company re-committed to working with the TSX as it carefully studies the developments in the United States as they happen. Earlier in October the TSX warned companies that the US federal laws take precedence over the state laws, and, at least right now, federal US law holds marijuana to be an illegal substance. The potential for economic trouble exists for companies like Aphria which have investments in Florida and Arizona, where marijuana is legal for medicinal only and recreational use, respectively.

The TSX said that companies on their exchange that do not comply with US federal law are not in compliance with their requirements to be listed on their exchange.

Neufeld said that he would like to see his company remain on the TSX, and right now has no plans to move Aphria to the more pot-friendly Canadian Securities Exchange. However, if an agreement with the TSX can’t be reached Neufeld said there are other options, such as creating a spin-off for its US business which can be listed separately on the CSX.

The Hartford Acquires Aetna’s Group Life and Disability Business.

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The Hartford Financial Services Group, Inc, announced that it will buy the US Group life and disability business from the health insurance company Aetna, Inc for $1.45 billion in cash. Hartford hopes to expand its insurance division and ignite its digital technology strategy.

Hartford shares lost over 5%, falling to $53.63 after they said is would halt their existing buyback in order to pay for part of the deal with Aetna. They added that they will not be repurchasing stock next year as well.

The company said it will use $273 million from its 2017 equity buyback program to fund the deal, and will also use dividends from its holding company resources and insurance units to cover the cost of Aetna’s subsids.

“Hartford is financing the deal by dividends and clearly mentioned that it will not authorize an equity repurchase plan for 2018, driving the shares down,” said John Heagerty, Atlantic Equities analyst.

The deal will insure that Harford is the second-biggest group life and disability insurance provider in the US. They will have over 20 million customers, and the deal will also strengthen the firm’s dealings with mid-sized companies.

Aetna’s divisions will also provide Hartford with access to Aetna’s digital assets. These tools will allow Hartford to more efficiently process worker’s comp and disability claims. Aetna’s assets include an integrated absence management platform.

Companies that Pay the Least Taxes

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There are plans to cut taxes for American corporations, slashing the present 35 percent theoretical rate companies are supposed to be. But there is a long road between “should pay” and “do pay.” The following is a list of the more relevant “effective US tax rate” paid by 11 companies that pay the least corporate taxes.

1. Baxter International is a health care company which pays an effective rate of only 2%.
2. Prologis is a REITs company (financial sector) which pays an effective tax rate of 2.3%
3. Pioneer Natural Resources is an energy company with an effective tax rate of 2.3%.
4. Digital Reality Trust- a REITs which pays 2.4% effective corporate tax.
5. Electronic Arts is a technology company paying 2.9% effective tax.
6. Becton, Dickinson is a health care company which pays an effective tax rate of 3.3%
7. Host Hotels and Resorts is a REITs with an effective tax rate of 3.3%.
8. Extra Space Storage pays 3.7% effective tax rate, and is in the REITs sector
9. Micron Technology is a technology company paying 3.7% effective tax rate.
10. Markit is in the industrial sector paying 4.4% effective tax.
11. XL Group is in the financial sector and pays a 4.8% effective tax rate.

ABB Purchasing GE Industrial Solutions for $2.6 Billion

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After about four years of restructuring, ABB Ltd., under the leadership of CEO Ulrich Spiesshofer, inked a deal with the industrial solutions division of General Electric Co. valued at $2.6 billion. The deal will fortify Swiss-based ABB’s US business, its largest market.

The company expects that the deal will generate about $200 million per year in savings. Spiesshofer is ready to spark a growth spurt after four years of regrouping and positioning to bring the company forward. This deal should help to expand ABB’s ability to offer urgent power, transformers and related services to its clients, which include large institutions such as hospitals, refineries and data centers.

Beginning around seven years ago the Zurich-based company has poured about $11 billion in capital investment into it operations in the United States. This new deal with GE will further enhance the company’s influence in North America.

On GE’s side, money from the deal with ABB will be used to fund its own restructuring plan. The industrial solutions division has about 13,000 employees.