March 22, 2023

Voestalpine Announces Investment in United States

LONDON — Voestalpine, the Austrian steel and components maker, said Wednesday it would invest in a so-called direct reduction plant somewhere in the United States — an apparent move to take advantage of low U.S. energy prices, which are substantially below those in Europe.

Direct reduction uses natural gas to turn iron ore into iron concentrate for use in mini-mills. In this way it substitutes for pig iron or scrap metal, according to Michelle Applebaum of Steel Market Intelligence in Highland Park Illinois.

Natural gas prices in the United States are one-third to one-half those of Europe, and electric power prices in the United States are also much lower. The iron briquettes or sponge iron produced by the direct reduction plant could be exported to Europe or used at the company’s steel making sites, voestalpine said.

“In my mind, voestalpine’s press release reinforces the view that the European steel industry faces difficult growth prospects in its traditional market,” Jeff Largey, an analyst at Macquarie Securities in London, wrote in an e-mail.

“In order to grow, European steel makers will need to look outside Europe and in the case of voestalpine, look” to increase the size of their steel processing and engineering business, Mr. Largey wrote.

He added that voestalpine’s move was similar to a recent decision by another European steel maker, Thyssen Krupp, to focus more on its engineering divisions.

Voestalpine said that European financial crisis has “left its marks” on the company but that it was “using this difficult phase to refashion the group.”

For the six months through September the company reported a 22 percent decline in profit, to €270 million or $356 billion, on €5.9 billion in sales.

The company said it planned to rapidly increase the size of its special steel, metal engineering and metal forming divisions, which produce more stable revenue streams than basic steel making.

The company also said it planned it plans to triple the amount of revenue it makes outside of Europe to €9 billion by 2020. It intends to increase activities in China, Southeast Asia, South America, and “niche segments” in the United States and Canada.

“In Europe, it is more a matter of securing our current position over the long term,” Wolfgang Eder, chairman of the management board and chief executive, said in a statement.

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DealBook: Santander’s Mexican Arm Said to Price Its I.P.O. at $12.18

A branch of Banco Santander in Mexico City in 2010.Susana Gonzalez/Bloomberg NewsA branch of Banco Santander in Mexico City in 2010.

The Mexican arm of Banco Santander priced the American portion of its initial public offering at $12.18 on Tuesday, within its expected price range, according to a person briefed on the matter who declined to be identified.

The unit, Grupo Financiero Santander México, sold additional shares on the Mexican Stock Exchange at 31.25 pesos each, at the middle of that offering’s expected range. The lender hoped to raise up to $4.2 billion through the dual listing, one of the biggest stock sales ever by a Mexican company.

When it begins trading on the New York Stock Exchange on Wednesday under the ticker symbol BSMX, Santander México will become the only Mexican lender listed on the Big Board. The offering was largely seen as a way to tap into Mexico’s growth prospects as investors hunt for ways to gain greater exposure to international markets.

The offering for the unit was also seen as a test for investors on a number of fronts. Its size, trailing only Facebook’s $18 billion stock sale for the year, was seen as potentially daunting at a time when the I.P.O. market has stagnated. The number of initial offerings priced this year has slid nearly 50 percent from 2011, according to data from Renaissance Capital.

And Santander México will still be closely tied to its parent, one of Spain’s biggest banks and a closely watched proxy of that country’s financial health. Banco Santander is expected to control about 75 percent of the company, raising the prospect that it may flood the market with additional shares if it needs to raise more capital.

Neither its size nor its Spanish parent appeared to be a major hurdle for investors. Santander México’s offering was about two times oversubscribed, according to Scott Sweet, the senior managing partner of IPO Boutique.

“Originally, I was concerned about the size,” Mr. Sweet said. “But as the road show took place, the conversion rates on orders was excellent.”

Investors appeared to be enticed by Santander México’s financial performance, which has outstripped that of the parent company. Its profit for the first half of the year rose 14.4 percent, to 556 million euros, as it benefited from improvements in the Mexican economy.

“There are very few quality banks that hit the I.P.O. front, whether they be in the U.S. or abroad,” Mr. Sweet said.

Profit at its parent, Santander, slid 51 percent in the first half from the year-ago period, to 1.7 billion euros, as it continued to grapple with Spain’s depressed economy.

Underwriters for Santander México sold about 20 percent of the bank’s shares in Mexico; the rest were sold internationally.

Santander has already taken its Brazilian arm public, raising about $7.5 billion, and said that it planned to hold I.P.O.’s for all of its biggest foreign subsidiaries within the next five years.

The Mexican stock sale is expected to bolster Santander’s capital ratios by about half of a percentage point.

The offering was led by Santander, UBS, Deutsche Bank and Bank of America Merrill Lynch.

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Europe’s Growth May Be Weaker Than Expected

But Mr. Trichet told a special session of the European Parliament’s economic committee, called to discuss the debt crisis in Europe, that inflation could remain above the bank’s target level of 2 percent “over the months ahead” and predicted that growth would continue at a “modest pace.”

The central bank plans to release a new forecast in early September.

Other senior officials on Monday underscored concern about weaker growth prospects for the euro zone, which is still reeling from a series of debt crises that began in Greece.

Olli Rehn, the European commissioner for economic and monetary affairs, addressing the same committee, said that “short-term growth prospects have somewhat worsened compared to our spring forecast.”

Mr. Rehn emphasized the dangers posed by continuing bouts of volatility, saying that “financial markets and the real economy move now more in synchrony.” That made Mr. Rehn “seriously concerned about continued financial turbulence spilling over to and potentially harming the recovery of the real economy.”

Mr. Rehn also appeared to reject suggestions from Christine Lagarde, the managing director of the International Monetary Fund, that the euro zone’s bailout fund should be used to provide a big injection of capital to European banks.

“E.U. banks are significantly better capitalized now than they were one year ago,” Mr. Rehn said. He noted that in recent months European banks had “increased their capital by some 50 billion euros,” or $72.5 billion.

“Those banks whose capital positions were found to be too weak by the stress tests were required to take appropriate action within six to nine months,” he continued. “Private sector solutions — rights issues, sale of assets, mergers, etc. — are preferred. However, public sector intervention is required, if such private sector solutions were unavailable. This process is now moving forward.”

The most immediate concern for officials remains Greece, which is awaiting another bailout worked out by European leaders in July. But that plan has become mired in concern about how the Greek government will pay back the huge sums of money that have been promised.

On Monday, European officials sought to ease the logjam over the bailout, with Finland appearing to show greater flexibility over demands that Greece provide collateral in exchange for further aid to its economy. “We are not there to cause problems, we are there to solve problems,” the Finnish foreign trade minister, Alexander Stubb, told reporters at a news conference in Helsinki. “Never underestimate the pragmatism of a country like Finland or the inventiveness of an institution like the E.U.”

At the same news conference, Werner Hoyer, the deputy foreign minister of Germany, said, “Finland doesn’t have the reputation as a troublemaker, so I’m very optimistic.”

Failing to resolve the dispute over collateral — which could come in the form of Greek property or government assets — could derail aid to Greece and throw Europe back into crisis as the central bank seeks to defend other vulnerable countries, like Spain and Italy, in the bond markets and to contain their borrowing costs.

Jean-Claude Juncker, the prime minister of Luxembourg and president of the Eurogroup, a forum of euro zone finance ministers, told the parliamentary committee in Brussels that there should soon be a proposal to resolve the “collateral guarantee difficulty.” Mr. Juncker said governments were “working on a proposal which I hope all euro zone member states will be happy with.”

The dispute over how to guarantee money lent to Greece is not the only uncertainty hanging over the bailout package. Greece wants banks and other investors to swap at least 90 percent of their existing holdings for new bonds that would be worth less but carry guarantees. To make sure that target is met, the Greek government wants to extend the swap by four years to include bonds maturing as late as 2024.

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DealBook: Breaking Up Morgan Stanley

Morgan StanleyMark Lennihan/Associated Press

Analyst Brad Hintz has a solution for Morgan Stanley’s flailing stock price: Send the company to the chop shop.

In a report titled “Is The Firm Worth More Dead or Alive,” Mr. Hintz of Sanford C. Bernstein Company, concludes that breaking up the company could unlock its value.

“Investors have grown impatient with the performance of Morgan Stanley,” he wrote in a report released this morning. “To be sure our analysis is not an endorsement of Morgan Stanley dismantling its institutional trading operation, but makes an illustrative point that the market is overly discounting the firm’s inherent value.”

Shares of Morgan Stanley, which was badly bruised during the financial crisis, have taken a beating. The stock is currently trading below $23 a share, down from more than $30 earlier this year.

The firm’s chief executive, James P. Gorman, has made a number of fixes to the business. But the stock continues to languish as investors fret about the growth prospects of Morgan Stanley and the broader financial services sector.

So Mr. Hintz decided to break up the company and see what the parts were worth.

The company, he wrote, could liquidate its capital markets operation and pay a big one-time dividend of $8.66 to shareholders. The big three remaining businesses, its merger and advisery franchise, asset management and wealth management would be worth $31.47 a share, almost 30 percent higher than where the stock is currently trading.

In short, he thinks the stock may offer a good value at the current level.

“While the firm undoubtedly has its share of challenges, we believe current valuations offer an attractive entry point for long-term, value oriented investors,” he wrote.

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S.&P. Cuts Its Outlook for Italy

The revision, which raises the risk of a downgrade of Italy’s sovereign rating, may heighten fears that contagion from the debt problems in Greece, Ireland and Portugal could be spreading to the euro zone’s third-largest economy.

“In our view Italy’s current growth prospects are weak, and the political commitment for productivity-enhancing reforms appears to be faltering,” the S.P. said in a statement on Saturday. “Potential political gridlock could contribute to fiscal slippage. As a result, we believe Italy’s prospects for reducing its general government debt have diminished.”

Standard Poor’s affirmed its “A+” long-term and “A-1+” short-term sovereign credit ratings on Italy, which is slowly recovering from its worst downturn since World War II and has one of the world’s largest public debts.

In recent years, the ratings agency has often taken a bleaker view of the state of Italy’s economy, compared to its counterparts Moody’s and Fitch.

Moody’s currently has an “Aa2” rating for Italy, while Fitch rates it at “AA-”, which means S.P. has Italy two notches below Moody’s and one below Fitch.

Italy has weathered the financial crisis better than some of its peers but its growth has lagged behind the euro zone’s average for over a decade.

Italy hardly grew in the first quarter, with gross domestic product edging up 0.1 percent, compared with rises of 1.5 percent in Germany and 1 percent in France. Crisis-hit Greece grew 0.8 percent.

The Italian Treasury criticized the move by S.P., saying data on its economic growth and public accounts had “constantly been better than expected.”

However, Italy last month cut its growth forecasts for 2011, 2012 and 2013 and raised its projections for the public debt. It kept the deficit outlook unchanged.

The economy is now expected to expand by 1.1 percent this year, down from a previous forecast of 1.3 percent. In 2012, G.D.P. growth is seen at 1.3 percent, compared with 2.0 percent previously.

Public debt is expected to reach 120 percent of G.D.P. this year, before falling slightly to 119.4 percent in 2012.

In a statement after the S.P. outlook revision, the Treasury said several major international organizations like the International Monetary Fund and the European Commission had given “very different” assessments on Italy from that of S.P.

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