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Trump helps make cross border M&A great again


Cross-border M&A had its strongest start since 2007, driving first-quarter global volumes up 7 percent, as optimism over U.S. President Donald Trump's economic agenda buoyed the stock market and the dollar, making foreign acquisitions cheaper than some U.S. targets. Many U.S. CEOs are feeling richer and more confident thanks to a rally in their companies' stock. Yet potential U.S. acquisition targets often feel they are worth a lot too, while uncertainty over Trump's tax policies makes planning a merger more difficult for the companies involved. To be sure, U.S. M&A was still up 3 percent in the first quarter. Some acquirers brushed off the political uncertainty, and often got around disagreements over the cash value of a company by using their stock as currency to pay for deals. Nonetheless, a few acquirers chose to cast their net overseas. The biggest deal since the start of the year was U.S. healthcare and consumer conglomerate Johnson & Johnson's (JNJ. N) $30 billion agreement in January to acquire Swiss biotechnology firm Actelion Ltd (ATLN. S). Other major cross-border deals were attempted unsuccessfully. Anglo-Dutch consumer goods giant Unilever Plc (ULVR. L) snubbed a $143 billion acquisition offer from U.S. food conglomerate Kraft Heinz Co (KHC. O), while Dutch paint maker Akzo Nobel NV (AKZO. AS) rejected a sweetened $24 billion bid from U.S. coatings manufacturer PPG Industries Inc (PPG. N). Some cross-border M&A even headed in the other direction. British consumer products company Reckitt Benckiser Group Plc (RB. L), for example, agreed in February to acquire baby milk manufacture Mead Johnson Nutrition Company (MJN. N) for $17.9 billion.

"We saw an increase in outbound deals from the United States into Europe, as the outlook on the European economy has improved. Transactions for European targets are also less impacted by uncertainty around potential U.S. tax reform," said Gary Posternack, global head of mergers & acquisitions at Barclays Plc (BARC. L). Preliminary Thomson Reuters data show that global M&A totaled $726.5 million in the first quarter, up 7 percent year-on-year. Cross-border M&A totaled $323.1 billion year-to-date, the highest level since 2007, accounting for 45 percent of total M&A activity so far this year. Acquisitions by U.S. companies abroad reached $114.1 billion so far in 2017, a triple-digit percentage increase compared with a year ago, surpassing the year-to-date record set in 2007 of $97.1 billion. Europe inbound cross-border M&A reached $127.1 billion, topping the year-to-date record of $104.5 billion set last year. In the United States, the biggest questions CEOs faced when considering M&A were around mulled policy reforms that would affect deductibility of interest expense, corporate tax rates, overseas cash repatriation, and the potential cross-border adjustment tax.

"There are a number of people who are saying I want to wait until this fleshes out a bit, until questions around tax or certain healthcare policies get reformed over time, it’s harder to do a deal," said Robin Rankin, co-head of global M&A at Credit Suisse Group AG (CSGN. S). Nevertheless, most M&A advisers appear optimistic. About 44 percent of dealmakers expected M&A to increase in 2017, an uptick from just 13 percent a year ago, according to a survey published this week by financial communications firm Brunswick Group. PRICE CONCERNS

Unions threaten to scupper Linde-Praxair merger FRANKFURT/MUNICH Linde labor representatives will vote against the German industrial gases group's planned $65 billion merger with U.S. rival Praxair , the head of the German works council told Reuters on Thursday, in a move that could scupper the deal.

Saudi Aramco formally appoints banks to advise on share sale LONDON Saudi Aramco has formally appointed JPMorgan Chase & Co , Morgan Stanley and HSBC as international financial advisers for its initial public offering, sources familiar with the matter told Reuters.

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U.S. business seeks action, not trade war, in Xi Trump summit


Although worried about the prospect of a trade war, American businesses operating in China nonetheless want President Donald Trump to wring some concessions on market access from China's leader Xi Jingping when the two meet this week. Trump warned in a tweet last week the meetings at his Mar-a-Lago resort on Thursday and Friday will be "very difficult" and "American companies must be prepared to look at other alternatives." Trump has said he wants U.S. companies to stop investing in China and instead create jobs at home. He has also accused China of manipulating its currency to boost exports. Critics within U.S. industry have accused China of unfair government subsidies to its companies, and of flooding the U.S. market with cheap products from steel to solar panels, while restricting foreign investment over vast swathes of the world's second-biggest economy. But they also worry Trump's policies on China are not entirely clear, with his trade team still not in place, and may be subject to a 'grand bargain' involving other issues such as North Korea. Trump is set to enter the meeting without several key advisors, including his pick for trade negotiator, Robert Lighthizer who has yet to be confirmed by Congress. His nominee as ambassador to China, Iowa Governor Terry Branstad, has also yet to be confirmed, while several posts in the U.S. State Department that formulate Asia policy remain unfilled."With this in mind, it is hard to imagine that there will be much in the way of concrete accomplishments at this summit, or even that there has been any significant interagency discussion on strategy leading up to it," said Randal Phillips, Mintz Group's Beijing-based managing partner for Asia and the former chief CIA representative in China.'ACTIONS, NOT WORDS' Some of the largest U.S. companies have contributed to the billions of dollars of foreign direct investment that have poured into China over the past two decades, creating hundreds of thousands of jobs. They include tech companies like Apple, which makes much of its iPhone in China, automakers such as General Motors and Ford, heavy machinery firms like Caterpillar, retailers like Starbucks and makers of shaving foam and detergent, like Procter & Gamble.

U.S. steel producers want Trump to press Xi on Chinese steel prices, according to a source who has been in discussions with the administration in advance of the summit. U.S. automakers complain about a disparity in tariffs: The United States has a 2.5 percent tariff on auto imports, China's is 25 percent. But the stakes are perhaps highest for American technology firms, who worry that China's new cyber-security law, which takes effect in June, sets potentially discriminatory standards for multinationals. The Information Technology & Innovation Foundation (ITIF), a think-tank whose board includes representatives from Apple, IBM Google and other tech heavyweights, has urged the Trump administration to pressure China to "stop rigging markets". It warned that possible retaliation from Beijing was not a reason for inaction. Trump has staked out various positions on China as president in his tweets, phone calls and statements.

In a phone call with Xi after taking office, Trump gave ground on one of Beijing's most sensitive issues – the status of Taiwan - after earlier suggesting he might not stick to Washington's long-held "one China" policy. Trump signed two executive orders on trade on Friday, one to improve import tariff collection and another to study the causes of the U.S. trade deficit. Trump said at the White House signing ceremony he and Xi were "going to get down to some serious business" and vowed that "the theft of American prosperity" by foreign countries would end. Chinese Vice Foreign Minister Zheng Zeguang said on Friday the U.S.-China trade imbalance was mostly the result of differences in the two countries' economic structures and noted China had a trade deficit in services. China tops the list of countries who have trade surpluses with the United States, with a $347 billion surplus last year. TRADE WARS

Some in the U.S. business community worry about tit-for-tat retaliation in trade disputes with China. Jacob Parker, vice president of China operations at the U.S.-China Business Council, said the two presidents need to take "positive actions that would lead to a more durable relationship, not retaliatory actions that would lead to a trade war". The list of commercial issues between the two countries was so long, it would be impossible to make a major dent in them with one meeting, he said. China is the largest export market for U.S. soybean producers, accounting for 62 percent of U.S. soy exports in 2016 with a value of over $14 billion, leading some experts to suggest the sector could be particularly vulnerable to retaliation. Steve Censky, chief executive of the American Soybean Association, told Reuters he hopes Trump will take a "prudent" approach to the trade relationship and address any issues in a "workman-like manner", recognizing that both countries have a lot to lose if the relationship suffers. William Zarit, chairman of the American Chamber of Commerce in China met senior Trump administration officials in February, and said "it was clear they were very familiar with the issues facing American companies in China, perhaps more so than previous administrations". But several corporate lobbyists, representing a range of companies expressed concern Trump's lack of attention to detail could prove counterproductive when it comes to the intricacies of the massive trade and investment relationship."It's not yet clear whether ... this is a White House that wants to fundamentally reset the terms of the relationship or tinker at the edges and declare a public relations win," said a China expert at a Washington business lobby who asked not to be named.