Business

NEW YORK — Israeli pharmaceutical giant Teva said Monday that it was buying the generic drug business of Allergan for $40.5 billion, consolidating its position as a world leader in generics.

Teva will pay $33.75 billion in cash and offer $6.75 billion of its stock to Allergan, the company indicated, in a major move that will further shake up a drugs industry that has seen a rash of consolidation.

However, Teva said that it was withdrawing its offer of $40.1 billion for rival Mylan, a US-listed company that moved to the Netherlands a year ago for fiscal reasons.

Mylan had dismissed Teva’s bid in April and on Thursday Mylan’s independent foundation said it would exercise a call option, allowing it buy shares to control half the company to fend off the hostile takeover.

The Allergan transaction was unanimously approved by the boards of directors of both firms, Teva said, and is expected to be finalised in the first quarter of 2016.

Allergan, a US company headquartered in Ireland for tax purposes, is famed for the anti-aging Botox treatment but also makes antibiotics.

Addressing the mega deal for Allergan’s generics business, Teva CEO Erez Vigodman said in a statement: “This acquisition comes at a time when Teva is stronger than ever, in both our generics and speciality businesses.” 

“This transaction is another step forward on our roadmap to reinforce our already strong position,” he added.  

Generic drug companies are under pressure to do deals because there are fewer big-money drugs shifting to generic status compared with a few years ago, when cholesterol medication Lipitor and other blockbusters came off patent, experts say.

The sector also views cost-cutting as a key tool for raising profits as the industry faces rising competition from suppliers in India, a trend which exerts downward pressure on drug prices.

“This transaction will accelerate Allergan’s evolution into a branded Growth Pharma leader, enable a sharpened focus on expanding and enhancing our global branded pharmaceutical business and strengthen our financial position to build on our proven track-record of value creation led by effective capital deployment,” said Allergan CEO Brent Saunders. 

BRUSSELS/FRANKFURT — The International Monetary Fund (IMF) warned on Monday that the eurozone’s prospects were modest and that more money printing than planned may be needed.

Contrasting the IMF’s relative gloom, however, German think tank Ifo reported improving confidence in the 19-country bloc’s largest economy.

The IMF, saying medium-term growth would be subdued, urged  the European Central Bank (ECB) to keep its money presses rolling, perhaps beyond the target late next year.

“The important thing is that the ECB intends to stay the course until September 2016 and that, we think, will be necessary,” said Mahmood Pradhan, deputy director of the IMF’s European department, referring to quantitative easing (QE).

Letting the 1 trillion euro  ($1.1 trillion) plus scheme to buy chiefly government bonds run longer could be better still, he suggested. 

“It may need to go beyond that,” he said.

Worries about the global economy, prompted by a slowdown in China where shares slid more than 8 per cent on Monday, are weighing on many countries in Europe.

Manufacturing confidence in the Netherlands, with huge exposure to international trade though several of Europe’s largest ports, slipped back in July, reflecting pessimism among companies over the prospects for the coming three months.

Finnish consumer and industry confidence also weakened in July compared to the previous month.

But the data was mixed, with the positive Ifo report on German business confidence after two monthly drops and the ECB reporting a boom in lending for home buyers, which could  bolster the bloc’s economy.

Struggle

The ECB also said its M3 measure of money circulating in the eurozone, which is often an early indicator of future economic activity, grew by 5 per cent in June, in line with the previous month.

But lending to companies fell by 0.2 per cent in June. This was a slower pace of decline for the 11th month in a row, but still suggested most of the ECB’s largest is going to consumers not companies.

In its report on the eurozone, the IMF said the bloc was getting stronger thanks to lower oil prices, a weaker euro and central bank action, but that medium-term prospects were for an average potential growth of just 1 per cent.

The IMF said euro area gross domestic product should accelerate to 1.7 per cent next year from 1.5 per cent in 2015, with inflation of 1.1 per cent from zero.

Pradhan warned, however, that “a chronic lack of demand, impaired corporate and bank balance sheets, and weak productivity continue to hold back employment and investment”.

Potential growth, at an average of only 1 per cent over the medium term, was well below what is needed to reduce unemployment to acceptable levels in many countries, it said, adding that the euro area was vulnerable.

Reforms were also needed to improve labour markets and productivity. 

“In the euro area, the important area is structural reforms. This is where the euro area, when compared to countries in the Organisation for Economic Cooperation and Development, for example, is lagging behind,” Pradhan said.

NEW YORK — Major US airlines are facing a boon thanks to lower fuel prices and enjoying record profits, but doubts remain as to whether the industry can reach long-term profitable levels.

American Airlines, United Airlines, Delta Air Lines and Southwest Airlines — the four top US carriers — have seen their profits spike by some 30 per cent in the second quarter.

American Airlines and United even recorded their largest quarterly profits ever, $1.7 billion and $1.2 billion, respectively.

But behind the surge in earnings is an array of challenges that analysts say may be difficult to balance: a strong dollar, excess capacity on international routes and a war of budget pricing causing a downward trend on the market indicator of revenue per passenger per kilometre.

"Low oil prices translate into higher profits for big airlines," said analyst William Bias from 247WallSt.com.

Crude prices have fallen by more than 50 per cent compared to a year ago.

Delta, for example, was able to drop its fuel bill by 40 per cent.

The savings have delighted the markets, excited by the prospect of rising dividends and new share buyback programmes.

Analysts now project that American Airlines, United and Delta will appreciate by around a third after having long been shunned by investors.

"2015 and 2016 will likely be peak years for the US airline industry, and changes in either the relatively favourable economic conditions or low fuel prices could pressure the company's earnings at some point in the future," Standard & Poor's financial services company said in a note.

Investigations and profits 

The industry has gained, but not everyone has been pleased. 

The US Justice Department is investigating some airlines over anti-competitive behaviour after ticket prices appeared to stay high despite a drop in fuel prices.

Seat prices were up two per cent last year despite plummeting crude cost, Department of Transportation statistics show.

Large carriers have also increased capacity despite some analysts calling for a reduction in flights so they can raise rates.

Market firm Trefis says top airlines have no choice: they have to increase domestic flights to defend their market share from smaller aggressive competition such as JetBlue, Alaska Airlines and Spirit Airlines.

Profitability also is relative.

Profit indicator PRASM (passenger revenue per available seat mile) dropped 6.5 per cent in June, according to Airlines for America, the US airlines lobby.

PRASM fell 5.5 per cent domestically and 9.5 per cent on international routes. Delta and United have already warned their PRASM numbers would fall as well.

"International pricing remains under pressure as a consequence of lower international fuel surcharges along weak demand," said Deutsche Bank Research, adding that weak currencies relative to the dollar and oversupply in overseas markets are also to blame.

JAKARTA — Container ships dot the horizon off the coast of Jakarta, as cranes and labourers work on an ambitious, economy-boosting project to expand the port network in the world’s largest archipelago nation.

New Priok will be Indonesia’s biggest port once completed, and is one of 24 ports planned to overhaul maritime connections in Southeast Asia’s top economy, which comprises more than 17,000 islands.

President Joko Widodo is leading efforts to improve dilapidated maritime infrastructure in a country where ships face lengthy delays before berthing and goods can get stuck for days as they run a gauntlet of government agency checks.

“This is no longer a wish, but a necessity,” Widodo recently said of improving ports after Indonesian growth hit a six-year low of 4.7 per cent in the first quarter, a blow for a leader who won power on a pledge to revive the economy.

The port plan is part of a broader scheme to improve infrastructure, from potholed roads to creaking train lines, as the country seeks to lure foreign investors and pull out of a long slowdown driven by falling prices of its key commodity exports.

Action is urgently needed — Indonesia’s infrastructure is so woeful that it is cheaper to transport goods from China to the country’s most populous island of Java than to bring them from the Indonesian part of Borneo, which is far closer, according to the World Bank.

Formidable challenges

Improving ports is particularly critical for a nation that straddles the Indian and Pacific oceans and is home to important shipping routes. 

As well as attracting new investment, the scheme could reduce the price of consumer goods through lower transport costs and help develop more remote parts of the archipelago.

Widodo, a former furniture exporter who knows well the problems of the country’s ports, is taking a personal interest in the project but it faces formidable challenges.

There are growing doubts his administration, which has been criticised over its failure to kick start major infrastructure projects, will be able to push through the plans due to a lack of organisation and a dysfunctional bureaucracy.

On a recent visit to Tanjung Priok port in Jakarta, which handles much of Indonesia’s international trade, Widodo’s frustration at slow progress was clear when he delivered an angry tirade over the failure to substantially cut the time it takes goods to move through the facility.

The target date to complete all the ports is 2019. But even if the target is met, which seems doubtful given many infrastructure projects in Indonesia suffer delays, experts say this alone will not solve the problem of red tape and graft that slows down processing of goods.

“Building hardware is a critical element in the wider scheme of things,” said Jayendu Krishna, a Singapore-based analyst with industry consultancy firm Drewry Maritime Services.

“An equally important element for success will be tackling bureaucracy and corruption, otherwise it might turn out to be much ado about nothing,” he added.

Nevertheless, industry players sense renewed momentum under the new president.

“I am very optimistic, we’ve got very strong support from the top,” Richard Lino, president director of state-owned port operator Pelindo II, which is developing the New Priok port, told AFP. “There is no reason not to be successful.”

Playing catch-up

The Jakarta project is one of five planned deep-sea ports, which can receive large cargo ships and will be dotted across the archipelago from western Sumatra Island to underdeveloped eastern Papua.

Tanjung Priok, currently Indonesia’s biggest port, handles 6.5 million containers a year.

To its east, the first stage of New Priok is taking shape, with labourers working on a container terminal, a wide stretch of concrete jutting out into the sea.

Construction of the new port, which consists of two phases, began in 2013 but people involved in the project say it has sped up in recent months.

Trial operations are due to begin on the first stage later this year but the entire project is not expected to be completed for some years.

The new port, which will share services with Tanjung Priok and whose first phase alone is expected to cost around $4.5 billion, will have capacity to handle 12.5 million containers of international freight a year.

Work has already started this year on ports in Kuala Tanjung on Sumatra and in Makassar on central Sulawesi Island.

Despite the optimism, Indonesia faces a long road to catch up with other Asian countries, such as more affluent Malaysia, which has more modern port facilities.

“We are still behind our neighbours, that is for sure,” said Pelindo II’s Lino. “It is a very big challenge.”

AMMAN — The Amman Chamber of Commerce (ACC) on Saturday welcomed the recent decision taken by the Council of Ministers to activate the real estate sector since it has the potential for growth.

The Council of Minister’s decision came after negotiations between the private sector and the government to activate the real estate sector as it faced regression since the beginning of 2015, ACC President Issa Murad said.

He added that the decision will rekindle the real estate and housing activity in the Kingdom, fix the noticeable recession in the sector, and solve the difficulties facing investors besides attracting more investments.

Murad valued the decision as it  will exempt companies from fines and enable them to generate liquidity noting that the government’s support began with the tourism sector and then moved on to the real estate sector.

He affirmed that the decisions were in accordance with Jordan’s economic reform process and Royal directives to improve living conditions.

AMMAN — Three shareholders, out of 357 investors, decided this month to overhaul First National Vegetable Oil Industries Company (FNVO). 

During an extraordinary general assembly meeting, the shareholders who own a 69.9 per cent stake in the company authorised the board of directors to restructure FNVO administratively and legally and to prepare a future plan to restart operations and address losses .

They also asked the board to present recommendations and proposals for financial restructuring, in order to provide a basis for a settlement with the Capital
Bank of Jordan.

An earlier disclosure to the Jordan Securities Commission, besides the general assembly's minutes of the meeting, showed FNVO's  financial position as of December 31, 2013, the latest year when the accounts were audited.    

Jordan Audit House listed 11 qualified opinions on the financial statements, detailing irregularities in the computation and presentation of receivables, property and equipment, inventory, losses, customs and taxes, loans, and lawsuits.

"We did not detect any effort by the management in following up on the  receivables which have been static for a long time," the auditor wrote in the report, noting that no legal action was initiated on many of them and that no impairment provision was taken this year (2014). 

Without any direct substantiation of  receivable balances, "it seems that JD0.8 million cannot be recovered and, subsequently, the losses will be higher and the shareholders' equity will be lower".

The auditor pointed to miscalculation of depreciation and underlined the absence of data control records for all property, equipment and machinery as an important negative element.

Jordan Audit House listed several assets that were sold, based on a board of directors decision, noting that the company did not provide details about the sales and did not submit any assurances to the contrary.

"Selling assets impounded by executive court decisions can be considered as damages to the company, shareholders and creditors," the auditor said. 

It went even further to accuse FNVO of presenting deceiving financial statements and concealing fundamental information related to two plots of lands that were expropriated and transferred to the ownership of Capital Bank of Jordan.

In the report, the auditor also mentioned misconduct because the company kept raw oil in tanks for a long time, did not process it within the right time and did not indicate its purchase and expiry dates.

It said an impairment provision for the total volume of raw material would increase losses and lower inventory.

Jordan Audit House remarked that because of  management changes at FNVO, it was unable to obtain a suitable letter of undertaking regarding the financial statements.

According to the auditor, the company faces mandatory liquidation as its accumulated losses reached JD3.7 million, or 82 per cent of the company's capital.

With a number of necessary modifications, such as provisions related to receivables and inventory among others, accumulated losses should become JD4.5 million.

The auditor concluded that the company cannot be considered as an ongoing concern noting that it was not informed about the negotiations with any of the banks on  financing matters, or about the executive work plan to address the losses.

Stressing the management's incapability, the auditor mentioned that the board of directors lacked interest and seriousness in revitalising the company. 

The report also includes considerable technical data related to customs and taxes besides detailed correspondence that show several inconsistencies, disputes and conflicts.

ATHENS – Greece's parliament on Thursday passed legislation on a second batch of reforms needed to help unlock a huge international bailout for the country's stricken economy.

The bill passed by a resounding 230 votes out of the 298 members of parliament present, after a marathon debate stretching into the early hours that nonetheless exposed deep divisions in the governing Syriza Party.

The legislation covers changes to the civil justice system, a bank deposit protection scheme and measures to shore up the liquidity of Greece's banks — reforms that had to pass if Athens was to move forward in bailout negotiations with its creditors.

While the new law will come as a relief to Prime Minister Alexis Tsipras — who is negotiating a new bailout worth up to 86 billion euros ($93 billion) over three years — it saw him suffer a major rebellion amongst MPs in his leftist Syriza Party for the second time in a week.

Thursday's vote was seen as a key test of Tsipras' authority after he was forced to reshuffle his Cabinet following a mutiny by nearly a fifth of his MPs in a separate vote on the first tranche of tough economic reforms demanded by Athens' creditors.

While the prime minister trimmed the rebellion from 39 'no' votes and abstentions last week to 36 on Thursday, in both cases he was forced to rely on opposition parties to get the legislation passed.

Government spokeswoman Olga Gerovassili admitted the government was facing a "political problem" and said "planned procedures" would be implemented to address it. 

"The divide in the parliamentary majority is clear," she told reporters after the vote.

'Pain doesn't stop here'

While Tsipras is riding high in the opinion polls personally, analysts believe the deep divisions within Syriza are likely to force the government to call early elections after being voted into power at the beginning of the year. 

The tough reform package sparked five hours of fiery debate on Wednesday night, with weary lawmakers clashing on everything from Marxism to submarines as dawn neared, and the speaker of parliament comparing the bailout deal to "a coup".

In a passionate speech to the chamber, Tsipras insisted the deal was the result of a "difficult compromise" with Greece's paymasters — the European Union, European Central Bank and International Monetary Fund — necessary to prevent Greece from tumbling out of the eurozone.

The youthful premier, who blazed to power in January promising to end austerity, warned that Greece had to adapt to "the new realities" of the bailout agreement.

"The painful path does not stop here, unfortunately," he said. 

"We have been forced to make a difficult compromise under urgent conditions. We were at the limits of our economy and our banking system, and at the limits of Europe — where conservative forces, obsessed with austerity, dominate," he added.

Some 6,000 anti-austerity demonstrators had protested near parliament ahead of Wednesday night's debate, lobbing a handful of petrol bombs in the direction of the police, who had thrown up a ring of steel around the building after riots during last week's vote on austerity measures.

Katerina and George Sergidou Kokkinavis, two Syriza members in their thirties taking part in the protest, said they had come because "the government is no longer listening to the people".

'We will not be cowards'

Ahead of the vote, Vassiliki Georgiadis, a political science professor at Athens' Panteion University, said it would be "difficult" for Tsipras' Syriza-led coalition to remain in power if he is forced to rely on opposition MPs to get laws passed.

She said the split within Syriza was between hard-left MPs — "some of whom have spoken of a Greek exit from the eurozone as the only solution" — and those more sympathetic to Tsipras' arguments.

Tsipras was forced to reshuffle his Cabinet last week, having sacked three ministers for voting against the first bailout bill.

Government spokeswoman Gerovassili previously said the administration had "no intention" of calling early polls, and Tsipras told parliament on Thursday that he would keep fighting for Greece's best interests, adding he would not "voluntarily abandon" the job.

"The left's presence in government is a bastion for the defence of the interests of the people," he said.

"We will not be cowards. We will fight the battles we face with determination."

Gerovassili said negotiations with Greece's creditors would resume immediately after Thursday's vote.

The EU's Economic Affairs Commissioner Pierre Moscovici said they were aiming to finalise the deal by mid-August. 

Both sides are under huge pressure to finalise the terms of the rescue before August 20, when Greece owes the ECB a loan repayment of 3.2 billion euros it cannot afford.

VIENNA – Iran outlined plans on Thursday for the rebuilding of its core industries and trade links in the wake of a nuclear agreement with world powers, saying it was targeting oil and gas projects worth $185 billion by 2020.

Iran's Minister of Industry, Mines and Trade Mohammad Reza Nematzadeh said the Islamic republic would focus on its oil and gas, metals and car industries with an eye to exporting to Europe after sanctions have been lifted.

"We are looking for a two-way trade as well as cooperation in development, design and engineering," Nematzadeh told a conference in Vienna.

"We are no longer interested in a unidirectional importation of goods and machinery from Europe," he said.

The United Nations Security Council on Monday endorsed a deal to end years of economic sanctions on Iran in return for curbs on its nuclear programme.

Sanctions are unlikely to be removed until next year, diplomats say, as the deal requires approval by the US Congress. Nuclear inspectors must also confirm that Iran is complying with the terms of the deal.

But many European companies have already signalled interest in reestablishing business in Iran.

Iran's deputy oil minister for commerce and international affairs, Hossein Zamaninia, said Tehran had identified nearly 50 oil and gas projects worth $185 billion that it hoped to sign by 2020.

In preparation for negotiations with possible foreign partners, Zamaninia said Iran had defined a new model contract which it calls its integrated petroleum contract (IPC).

"This model contract addresses some of the deficiencies of the old buyback contract and it further aligns the short- and long-term interests of parties involved," he said.

He said Iran would introduce the oil and gas projects it has identified and the new contract in international markets later this year.

Deputy Economy Minister Mohammad Khazaei said Iran had already completed negotiations with some European companies wanting to invest in the country.

"We are recently witnessing the return of European investors to the country. Some of these negotiations have concluded, and we have approved and granted them the foreign investment licences and protections," Khazaei told the conference.

"Even in the past couple of weeks we have approved more than $2 billion of projects in Iran by European companies," he said, without naming the firms or providing further details.

Nematzadeh said Iran aimed to join the World Trade Organisation once political obstacles were removed and would be interested in preferred trade deals with Europe and central Asian countries.

BRUSSELS – The EU ordered France's electricity giant EDF to repay the French state 1.37 billion euros ($1.5 billion) in back taxes on Wednesday, in a case dating from 1997.

"The European Commission has decided that Electricite de France (EDF), the main electricity provider in France, has been granted tax breaks incompatible with EU rules on state aid," the European Union's executive body said in a statement.

The case has wormed its way through the EU court and regulatory system since 2003 and the decision by the EU sent EDF's shares plunging by 2.8 per cent in afternoon trading on the Paris stock exchange.

EDF is now an international player in providing electricity, relying on France's 58 nuclear reactors, as well as developing new plants, notably the controversial Hinkley Point project in Britain.

"The commission's investigation confirmed that EDF received an individual, unjustified tax exemption which gave it an advantage to the detriment of its competitors, in breach of EU state aid rules," EU Competition Commissioner Margrethe Vestager said in a statement. 

At heart of the ruling is a 1997 decision by French tax authorities to exempt EDF from a decade's worth of corporation tax on investments in France's high-voltage transmission network.

The commission said this tax break, nominally available to any company, was unjustified as no private company would have made the same, highly unprofitable investment.

"It is, therefore, state aid that has strengthened EDF's position to the detriment of its competitors, without furthering any objective of common interest," the commission said.

French Economy Minister Emmanuel Macron told reporters in Paris that the EU's decision would in no way "fragilise" the finances of EDF.

In 1997, EDF was a fully-fledged unit of the French state, with no meaningful competitor on the French market.

Today EDF is a publically traded company that competes for electricity markets worldwide, but remains 85 per cent owned by the French state. 

SAN FRANCISCO – Apple's latest quarterly profit leapt as people around the world snapped up big-screen iPhones but its shares slipped as analysts had expected even more.

The US tech giants reported Tuesday that its profit jumped 38 per cent to $10.7 billion on surging iPhone sales, compared to $7.7 billion in the same period last year.

Nevertheless, Apple shares fell sharply in after hours trading, at one point down around 8 per cent as traders noticed lower than expected sales forecasts.

"We had an amazing quarter," chief executive Tim Cook insisted, noting that iPhone revenue in the quarter that ended on June 27 was up 59 per cent from the same period a year earlier.

Analysts had expected Apple to sell even more iPhones and were looking for a brighter forecast than was given for the current quarter.

Apple shares dropped more than 6 per cent to $122.41 in after-market trades that followed release of the earnings figures.

Sales of iPhones have been powering Apple profits, and any hint of a plateau spooks investors.

Apple sold 47.5 million iPhones in the quarter, with sales up 85 per cent in Greater China where the company's overall revenue more that doubled to $13 billion, accord to chief financial officer Luca Maestri.

iPhone shines in China 

Big gains in China came despite stock market woes there.

"We remain extremely bullish on China and we are continuing to invest," Cook said, remaining confident that China is poised to be Apple's biggest market at some point in the future.

"We would be foolish to change our plans. I think China is a fantastic geography with an incredible, unprecedented level of opportunity."

He brushed aside any worry about iPhone sales growth, expressing confidents it has “lots of legs” that it will be running with for many years to come given market factors such customer satisfaction rates and the booming overall global smartphone market.

"It is an incredible market," Cook said.

"I think everyone is going to own a smartphone, and we can compete for a fair number of them."