December 5, 2023

DealBook: Energy Transfer Raises Southern Union Bid to $5.1 Billion

Panhandle Energy, a division of Southern Union, operates a liquid natural gas terminal in Lake Charles, La.Panhandle Energy, via Associated PressPanhandle Energy, a division of Southern Union, operates a liquid natural gas terminal in Lake Charles, La.

5:23 p.m. | Updated

Energy Transfer Equity raised its bid for the the pipeline operator Southern Union Company to $5.1 billion in cash and stock on Tuesday, topping a rival $4.9 billion bid from the Williams Companies.

Still, the battle may not be done. Shares of Southern Union rose 4.2 percent to $42.07 on Tuesday, indicating that investors expect an even higher bid. The new Energy Transfer offer is meant to address several concerns about its original bid for Southern Union, including the first offer’s complicated structure and two lucrative consulting and noncompete agreements offered to Southern Union’s two top executives.

Under the new terms of the deal, Energy Transfer will offer $40 a choice of either cash or stock. Up to 60 percent of the deal consideration is payable in cash. About 14 percent of Southern Union’s shareholders have signed onto the new offer and have chosen to take stock, potentially letting more investors choose cash.

Moreover, the two Southern Union executives who were offered the rich consulting contracts, George L. Lindemann, the chief executive, and Eric D. Herschmann, the president, have agreed to forgo them.

Energy Transfer executives acknowledged on Tuesday that Williams’ $39-a-share all-cash offer, announced only days after their initial bid, had forced them to counter with a new proposal that was simpler and higher-valued. Energy Transfer initially sought to block Southern Union from holding talks with Williams, a major energy company seeking to bolster its gas pipeline business.

Energy Transfer even decided to offer new partnership units, something it was reluctant to do.

“We’ve been more aggressive here than we have been than probably in my whole career,” Kelcy Warren, Energy Transfer’s chairman, said in a conference call with analysts Tuesday morning.

Mr. Warren argued that combining his company with Southern Union would yield a stronger pipeline operator with significant reach throughout the southern United States. Offering stock alongside cash would allow Southern Union shareholders to benefit if the combined company performs well.

“I don’t think this is a $40 offer,” he said on the call. “I think this is substantially more than $40.”

A Williams spokesman declined to comment.

Shares of Energy Transfer rose slightly on Tuesday, to $44.99, while shares of Williams dipped a little, to $30.68.

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Record U.S. Exports Shrink April Trade Deficit

The Department of Commerce report said that exports of goods were $126.4 billion and services $49.1 billion, while total imports were $219.2 billion, resulting in a trade deficit of $43.7 billion, the lowest since December. The deficit in March was revised down to $46.8 billion from $48.2 billion, the department said.

The gap had been forecast by some economists to widen to $48.8 billion.

In recent months, a weaker dollar has made goods from the United States less expensive overseas, while exports have also climbed in price as demand rose in developing countries.

The department said the March-to-April increase in exports of goods reflected greater sales of industrial supplies and materials, capital goods and consumer goods. The decline in imports was caused, in part, by a decrease in automotive parts, vehicles and industrial supplies and materials, the department said.

The data was the first to reflect the impact of the supply chain disruptions from the natural disasters in Japan, as well as the impact of commodity prices in April, when the average price per barrel of crude oil was $103.18. That was the highest since September 2008, when it was $107.30.

The United States imported 8.41 million barrels of crude per day on average in April, the lowest amount since last October.

Imports from Japan dropped by $3 billion, shrinking the American trade deficit with that country to $3.5 billion in April from $6 billion the month before.

The data also showed that the United States trade deficit with China continued to widen, to $21.6 billion in April from $18 billion in March, but still below January’s $23 billion. The trade deficit with China was $273 billion in 2010.

Meanwhile, the Labor Department said Thursday that the number of Americans who filed initial claims for unemployment edged higher in the week ending June 3, to 427,000, up by 1,000. Economists usually interpret any level above 400,000 to mean a lack of job growth.

Economists say that domestic demand in the United States is still weak. And while the rise in exports of goods was helping to offset that weakness, exports compose only about 9.6 percent of the country’s gross domestic product.

Thursday’s report was the first to reflect trade statistics for the second quarter, and economists gave a range of effects from the data on their estimates for gross domestic product.

Gregory Daco, the United States economist for IHS Global Insight, said the trade numbers helped raise the company’s estimate for real gross domestic product growth to slightly above 2 percent.

“Over all, this report was a good one for the U.S. economy,” he said.

Kevin Logan, the chief United States economist for HSBC, said forecasts should take into account that the deficit declined mostly because of a drop in oil imports of $3.7 billion, while the non-oil trade balance actually worsened.

“Normally, an improvement in the trade balance leads to an increase in estimates of G.D.P. growth in the quarter,” he said in a research note. “But if the trade balance is improving because of an across-the-board drop in demand for oil products, there should be little impact on G.D.P. growth.”

Economists from Capital Economics said that they expected little contribution to second-quarter growth.

“Pretty much all of the sharp fall in the trade deficit in April will eventually be reversed as the temporary effects caused by disruptions from Japan’s earthquake fade,” the economists said in a research note.

“Nonetheless, a modest positive contribution to second-quarter G.D.P. growth may at least offset part of the slowdown in other parts of the economy.”

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BP Partner Agrees to $1.1 Billion Settlement Related to Gulf Spill

LONDON — BP said Friday that Moex Offshore, one of its partners in the oil well that leaked into the Gulf of Mexico last year, has agreed to pay $1.1 billion as part of a settlement for any claims related to the oil spill.

Moex, which had a 10 percent stake in the well, is the first company aside from BP to make a payment towards covering the costs of the disastrous oil spill, BP said in a statement. The agreed payment is about half of a total $2.1 billion BP had sought from Moex in monthly invoices for reimbursement of costs, including interest, according to Mitsui of Japan, which owns Moex.

The settlement covers all claims related to the well accident and would immediately go to the $20 billion trust that was set up to compensate fishermen and other local residents and businesses that were affected by the oil spill, BP said.

“Moex is the first company to join BP in helping to meet our shared responsibilities in the gulf,” the BP chief executive, Robert W. Dudley, said. “This settlement is an important step forward for BP and the gulf communities.”

BP set aside $40 billion to cover costs and liabilities linked to the oil spill, the worst ever in the United States. The London-based firm has already raised $25 billion by selling assets and is seeking to sell some more oil and gas fields in Britain and two refineries in the United States. So far BP has paid almost $6 billion in claims.

Mr. Dudley called “on the other parties involved in the Macondo well to follow the lead.”

The April 20, 2010, explosion of the rig killed 11 workers and resulted in a spill that poured nearly five million barrels of oil into the Gulf of Mexico. Since the accident companies involved in the well — BP; Transocean, which operated the rig; and Halliburton, which was responsible for cement work at the well — have engaged in recriminations and lawsuits, with each accusing the others of negligence. BP has filed claims worth tens of billions of dollars against Transocean and other partners in the United States.

BP said it was in talks with its other partners on the well to also “contribute appropriately,” It was also seeking payments from Anadarko, which owned a quarter of the project, BP said.

Moex agreed to the settlement to “reduce the risk and uncertainty for its shareholders,” Mitsui said in a statement. “Doing so will also make it possible for Mitsui to focus on the future growth of its business.”

The settlement is not an admission of liability by Moex or BP, BP said. BP also agreed to indemnify Moex for claims for compensation arising from the accident, excluding civil, criminal or administrative fines and penalties.

Like BP, Moex also recognized the findings by a presidential commission in its investigation into the causes of the oil spill. The commission found that the accident was the result of mistakes by a number of parties and different causes.

Moex also acknowledged a study by the U.S. Coast Guard released in April, which concluded that poor maintenance, inadequate training and a lax safety culture at Transocean contributed to the lethal explosion. Transocean rejected the report’s findings.

Moex is a subsidiary of Mitsui, a Tokyo-based commodity trading and financing company.

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Toyota Profit Slips 77 Percent

TOKYO — Toyota Motor posted a 77 percent fall in quarterly net profit, to 25.4 billion yen, or $314 million, on Wednesday and gave no annual forecasts, as expected, as it struggled to measure the scope of the disruption to production after the March 11 earthquake.

The world’s biggest automaker is facing another tough year, with a severe shortage of parts hammering production just as it was putting its recall problems behind it.

Toyota’s president, Akio Toyoda, said Wednesday the automaker should see a pickup in output beginning in June to 70 percent of volume planned before the quake. It is now operating at less than half capacity. Last month, it forecast a return to full production by November or December.

On Tuesday, Toyota denied a report in The Nikkei newspaper that normal production would come two to three months earlier than planned.

The massive hit to production will almost certainly mean Toyota will fall behind General Motors and possibly Volkswagen to rank third in global vehicle sales this year.

With inventory tight and supply short for popular models like the Prius hybrid, Toyota is losing consumers to rivals like Hyundai Motor, which has been nipping at its heels for the past several years.

Toyota said Wednesday that its operating profit for the January-to-March period — its financial fourth quarter — fell 52 percent, to 46.1 billion yen, or $570 million, compared with an average estimate of 94.6 billion yen from 17 analysts who revised their numbers after the quake, according to Thomson Reuters I/B/E/S.

For Toyota’s current business year, which ends next March, analysts forecast an average operating profit of 307.5 billion yen, down 34 percent from 468 billion yen last year. Uncertainties over the broken supply chain have yielded a wide range, from a loss of 25 billion yen to a profit of 846 billion yen.

Analysts say the disruption is a temporary one caused by the shortage of supply, not demand, and that Japanese automakers should reverse the trend next business year.

Toyota’s shares have led a fall in Japanese auto stocks since the disaster, losing 11 percent, compared with 9.9 percent at Honda and 5.8 percent at Nissan as of the Tuesday close.

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DealBook: Glencore Prices Shares, Valuing It at $60 Billion

Glencore, the global commodities trader and miner, set the price range for its highly anticipated initial public offering on Wednesday at 480 pence to 580 pence a share, which at the midpoint values the company at about £36.5 billion, or roughly $60 billion.

The company aims to raise about $10 billion in its share issue in London and Hong Kong, with $7.9 billion coming from a primary sale. The rest of the shares will be sold by the company’s management.

Glencore is the world’s largest trader of commodities, dealing in metals like gold and copper, as well as energy resources like coal and oil. It also produces many of the commodities at its own mines, and holds about a one-third stake in the global miner Xstrata.

The company said that 31 percent of the offer, or $3.1 billion in shares, had already been subscribed to by cornerstone investors, who are locked in for six months after the offer.

More details are expected to be released on the investors with the publication of the London prospectus on Wednesday. The group is expected to include major sovereign wealth and hedge funds.

“We are pleased by the strong investor interest shown,” Ivan Glasenberg, Glencore’s chief executive, said in the company statement, adding that it was “one of the largest cornerstone investor participations ever achieved for an I.P.O.”

A prospectus will be issued May 13 in Hong Kong, the company said, where the issue is also open to retail investors. Shares are expected to start trading on about May 24 in London and May 25 in Hong Kong. If they are sold at the high end of the range cited on Wednesday, they would value the company at up to $65.8 billion.

The Hong Kong retail offer amounts to 31.25 million shares, or 2.5 percent of the total offer. Normally, when companies go public in Hong Kong, they are obliged to offer 10 percent of their shares through public subscription on the exchange, and up to 50 percent if the issue is oversubscribed — but Glencore has been granted a waiver.

Glencore reported $3.8 billion in profit last year, 41 percent higher than 2009. It notched revenue of $145 billion, up 36 percent from 2009. The company also reaffirmed its outlook for this year.

“Despite recent events in Japan and the Middle East, the directors remain confident that economic activity and commodity demand remain robust and that Glencore remains well positioned,” the company said, adding that it would still pay an interim dividend of $350 million in August.

Citigroup, Credit Suisse and Morgan Stanley are serving as joint global coordinators and joint bookrunners for the issue.

Glencore may opt for a 10 percent overallotment, it said, meaning that if demand is large enough, the company will issue additional shares worth about $1 billion.

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