Friday, January 20, 2017

Kraft Heinz, Warren Buffet and the Packaged Food Business

From Fortune:
In Madison, they still struggle to accept that it’s really happening. On a not-yet-specified day before the end of March, a Kraft Heinz employee will turn off the lights in the sprawling Oscar Mayer plant, and for the first time in 98 years, no one will be coming back to work.

The facility was once the city’s largest employer, with over 4,000 workers transforming hogs, 900 an hour, into Oscar Mayer hot dogs, bacon, sliced ham, and more. Employment was down to about 1,000 when Kraft Heinz announced in 2015 that it would close the plant, and recently the workers had dwindled to about 400; the products still being made include an item called liver cheese, which few consumers under age 80 are clamoring for. No one knows what happens after March.

— - - —
Because the 50-acre site will need environmental remediation, its “value” is estimated at negative $10 million to negative $20 million. The city is scrambling to drum up interest in the site but was caught flat-footed; planners never imagined that Oscar Mayer would leave. Redeveloping so many acres won’t be easy. Madison Mayor Paul Soglin told a local publication, “It’s possible that given its size, it will take a decade or more to develop.”

So what happened? Why is a plant that provided good jobs to 1,000 people just 15 months ago being shut down? (Other than the liver cheese.) The answer explains a lot more than the fate of a Midwestern processed-meat factory. It also illustrates Kraft Heinz’s iconoclastic strategy under the hard-driving management of 3G Capital, the private equity firm overseen by Brazil’s richest man, 77-year-old Jorge Paulo Lemann. The answer even hints at the future of the U.S. food industry—and perhaps has global implications—because all evidence suggests that 3G is just getting started in an effort to transform this whole vast sector. But evidence also suggests that the 3G playbook, which has worked spectacularly well over the past 30 years, may not prove so effective this time.

You can be forgiven if you’re not up to speed on the intertwined corporate marriages and divorces in the world of Big Food. Kraft Heinz came into being 18 months ago when Heinz bought Kraft Foods Group, a mostly U.S. grocery manufacturer that in 2012 had separated itself from a collection of mostly non-U.S. snack businesses now known as Mondelez Interna­tional, an independent, publicly traded company that could reenter this saga before long. Heinz had been bought and taken private in 2013 by 3G Capital, with considerable financing from Warren Buffett. When it then bought Kraft and merged it with Heinz in 2015, 3G took the combined business public as Kraft Heinz. Buffett’s Berkshire Hathaway owns about 27% of the stock; 3G, about 24%.

Got that? While Buffett is the largest shareholder by a slight margin and has three seats on the board of directors, including one for himself, he’s happy to let 3G run the show. Back before they bought Kraft, he said, “I’m not embarrassed to admit that Heinz is run far better under [3G] than would be the case if I were in charge.”

The 3G management model that Buffett so admires is worth a close look because it’s on track to eat the food industry. At its heart is meritocracy, broadly defined. Every employee must justify his existence every day. That’s great news for the very best performers; they are promoted with speed that’s unheard-of in lumbering old food companies. Kraft Heinz CEO Ber­nardo Hees, for example, first became a CEO in 2005 at a company called All America Latina Logistica, owned by a 3G predecessor. He was then made CEO of Burger King, a 3G holding since 2010. He moved up to be CEO of Heinz in 2013 and now of Kraft Heinz. He’s only 46.
Underperformers get fired with the same alacrity. Budgeted costs also are evaluated unsparingly every year, or more often, and are eliminated if they’re no longer judged worth incurring. After all, Hees (pronounced “Hess”) and other top executives are 3G partners. Their own money is tied up in each venture, and they can’t afford to be sentimental about it.

Which brings us back to the Oscar Mayer plant in Madison. The truth is, that plant should have been closed long ago, and everybody knew it. “The Madison plant was a terrible plant,” says John Ruff, a retired Kraft executive who spent much of his career in food-processing plants worldwide. “It had good people, but it was an old plant that had been added to over the years. It was never meant to be run as it was being run. Closing it was probably the right thing
to do.” So why hadn’t Kraft closed it long before 3G came along? The reason is a classic problem for big, old businesses: People loved that plant. It was a treasured part of the company’s history. But not to 3G. “[Kraft] had trouble making tough choices,” says Credit Suisse analyst Robert Moskow. “3G has forced them to make tough choices, like closing the Oscar Mayer facility. It was very emotional.” Ruff agrees: “3G got rid of a lot of remaining emotional ties.”

Now project that philosophy across a $26 billion company. Step 1 in the 3G management model is a wholesale replacement of the top team and a blitzkrieg of cost cutting. At Heinz, 3G cashiered 11 of the top 12 executives in one day (as this publication chronicled in a 2013 story headlined “Squeezing Heinz”). When Heinz bought Kraft, 10 top executives were quickly dismissed. Of Kraft Heinz’s top 10 leaders today, eight are Brazilians from 3G who know the playbook. “If you don’t speak Portuguese, you’re at a bit of a disadvantage,” says a former Heinz director.

As with every 3G takeover, cost-cutting measures were imposed immediately after the takeover of Kraft. Office refrigerators long stocked with free Kraft products (cheese, Jell-O) were wheeled out within days of the merger’s closing. Corporate aircraft were ditched, and everyone from the CEO down was made to fly coach. And today employees on the road are sometimes required to double up in hotel rooms. More important than the actual savings is the message. “We think and act like owners of our business, treating every dollar as if it were our own,” the company tells prospective employees....MUCH MORE

Uber Will Pay $20 Million To Settle FTC Lawsuit Claiming it Misled Drivers about Pay

From TechCrunch:
Uber settled a lawsuit filed by the Federal Trade Commission today for $20 million. The lawsuit alleged that the ride-hailing app recruited drivers by misleading them about the amount of money they could earn through the app and the auto financing deals they could get through Uber’s Vehicle Solutions Program.

The lawsuit claims that Uber made “false, misleading, or unsubstantiated claims regarding driver earnings and its Vehicle Solutions Program.” The FTC says that, although Uber advertised that drivers could earn between $16 and $29 per hour depending on the city in which they drove, only a fraction of drivers actually earned the advertised amount.,c_fill,g_face/v1484867337/fastconews/zywzosqvabnocxwttkpo.jpg
In Boston, Minneapolis and Philadelphia, fewer than 10 percent of drivers earned the advertised amount, according to the FTC. In several other cities, the rate was a bit higher — fewer than 30 percent of drivers earned the advertised rate in Dallas, Phoenix and Seattle.

Uber also promoted the Vehicle Solutions Program as a low-cost way for drivers to buy a vehicle, saying drivers would get the “best financing options available” and have “unlimited miles.” The FTC suit claims this wasn’t the case at all — in fact, Uber had “no basis” for these statements. The rates offered by Uber were often higher than those commercially available, the FTC says.

By settling the lawsuit, Uber did not admit to the allegations. An Uber spokesperson told TechCrunch, “We’re pleased to have reached an agreement with the FTC. We’ve made many improvements to the driver experience over the last year and will continue to focus on ensuring that Uber is the best option for anyone looking to earn money on their own schedule.”...MORE
 Here's the Federal Trade Commission press release:
Uber Agrees to Pay $20 Million to Settle FTC Charges That it Recruited Prospective Drivers with Exaggerated Earnings Claims

Thursday, January 19, 2017

"Snapchat Advertisers Can Now Target the App's Users Based on Offline Sales Data"

From AdWeek:
Snapchat advertisers are about to find out if offline data can drive better campaigns on the app. After forging measurement partnerships and data partnerships with companies like Moat, Nielsen and Millward Brown over the past year, Snap Inc. has now signed a deal with Oracle Data Cloud (formerly Datalogix) to arm marketers with more intelligence.

The partnership entails Oracle's data from offline purchases—like stats from a loyalty card program—that will be used to target consumers with relevant Snapchat ads based on products that they've purchased. Using hashed email addresses and anonymous files of mobile IDs, Snapchat matches up the data with Oracle's audiences of past purchase behavior.

Honda, STX Entertainment, Kia and The Honest Company are testing the new ad-targeting tool. STX Entertainment, for example, is zeroing in on sales from movie theater tickets.

"STX Entertainment continues to be impressed by how aggressive Snapchat has been in looking to solve our business challenges," said Amy Elkins, svp of media and marketing innovation at STX Entertainment in a statement. "Onboarding ODC moviegoer data eliminates marketing waste by allowing us to reach an audience that we know visits movie theaters."

Meanwhile, Snapchat's bigger push is to prove that its advertising creates revenue....MORE
See also: 

And from the "with-great-power-comes-great-corruption dept" (techdirt):

An Artificial Intelligence Model Has Been Created That Performs at Human Levels on Standard Intelligence Test

Northwestern University via R&D Magazine:
A Northwestern University team developed a new computational model that performs at human levels on a standard intelligence test. This work is an important step toward making artificial intelligence systems that see and understand the world as humans do.

"The model performs in the 75th percentile for American adults, making it better than average," said Northwestern Engineering's Ken Forbus. "The problems that are hard for people are also hard for the model, providing additional evidence that its operation is capturing some important properties of human cognition."

The new computational model is built on CogSketch, an artificial intelligence platform previously developed in Forbus' laboratory. The platform has the ability to solve visual problems and understand sketches in order to give immediate, interactive feedback. CogSketch also incorporates a computational model of analogy, based on Northwestern psychology professor Dedre Gentner's structure-mapping theory. (Gentner received the 2016 David E. Rumelhart Prize for her work on this theory.)

Forbus, Walter P. Murphy Professor of Electrical Engineering and Computer Science at Northwestern's McCormick School of Engineering, developed the model with Andrew Lovett, a former Northwestern postdoctoral researcher in psychology. Their research was published online this month in the journal Psychological Review.

The ability to solve complex visual problems is one of the hallmarks of human intelligence. Developing artificial intelligence systems that have this ability not only provides new evidence for the importance of symbolic representations and analogy in visual reasoning, but it could potentially shrink the gap between computer and human cognition....MORE
And in other news:
AI software is figuring out how to best humans at designing new AI software
at TechCrunch.

As noted in the intro to 2013's "Researcher Dreams Up Machines That Learn Without Humans":
Uh oh.

"Obama: 'My instinct is everybody hates media right now…that has to be an opportunity'"

Interesting on a few different levels.

From NiemanLab:
President Obama appeared on the latest episode of the new podcast Pod Save America, in what was billed as his last interview as president of the United States before Donald Trump’s inauguration on Friday. (Pod Save America is the new project from the Keepin’ It 1600 guys, former Obama staffers who broke from their podcast home at The Ringer and started the new media company Crooked Media partly in response to Trump’s election.) 

In his final days in office, Obama has in a variety of contexts highlighted his views on the problematic ways news is distributed and consumed today — from calling out what he sees as the way social media bubbles have degraded our democracy to warning of the dangers of “fake news” stories.

“For too many of us, it’s become safer to retreat into our own bubbles, whether in our neighborhoods or on college campuses, or places of worship, or especially our social media feeds, surrounded by people who look like us and share the same political outlook and never challenge our assumptions,” he said in his farewell speech in Chicago on January 10. “The rise of naked partisanship, and increasing economic and regional stratification, the splintering of our media into a channel for every taste — all this makes this great sorting seem natural, even inevitable.”

Indeed, according to a Pew study released Wednesday, Clinton and Trump supporters relied on predominantly different news sources — but for 54 percent of voters surveyed, it was television, not online news sources, that served as their primary source of election news. (Fox News was the main campaign news source among 40 percent of Trump voters; sources were more varied among Clinton voters.)

Asked on Pod Save America what advice he would have given to his 2009 self just before taking office, Obama suggested that he should’ve devoted more effort to finding “new ways of communicating with the American people”:
I would tell him that you have to spend more time thinking about new ways of communicating with the American people. You can’t be so intimidated by the way things have always been done in the White House, because the communications landscape has been shifting…
As Lincoln said, with public opinion, there’s nothing you can’t do, and without it, there’s nothing much you can do. We were going to get clobbered in 2010, probably no matter what we did, just because on my watch people were really hurting. I’d think about how I got here and spend that same effort and energy touching people directly, instead of standing behind a podium and giving a bunch of grim lectures…that’s where the impression arose that Obama is really Spock-like....

"New Patents Hint That Amazon and Google Each Have Plans to Compete with Uber" (AMZN; GOOG)

From MIT's Technology Review, Jan. 18:

The tech giants both want a slice of the ride-hailer’s automated taxi and trucking vision, and they have their own ideas to prove it.
Uber appears to be leading the charge to develop autonomous taxis and delivery vehicles. But a pair of patents show that tech giants like Amazon and Google have no intention of being left behind.

Both patents were only recently published, but both were originally filed in 2015. That means that although Uber has been making headlines for many of its innovations over the past 12 months, other companies haven’t necessarily been slouching.

While Google is already trialing a small ride-sharing service in San Francisco, one of the new patents describes how it plans to pair self-driving vehicles with ride-hailing apps. The problem it tries to overcome: how to negotiate a pickup location if an autonomous car can’t safely or accurately navigate to the passenger like a human driver could.

Alphabet’s autonomous car division, Waymo, is now targeting commercial applications of its technology by working with automakers, which means it no longer plans to build its own vehicles. But the company does plan to start trials of robotic Chrysler Pacifica taxis this year.

In doing so, it will be squaring up directly with Uber, which is testing autonomous taxis in Pittsburgh (along with a brief experiment in San Francisco that got shut down). Waymo may even make use of the technology described in the Google patent to help the test along....MORE
Let's Get Ready To Rumble: Amazon Vs. Uber In the Delivery Wars
Uber Say Uber Good, Amazon Bad
Amazon Goes All Uber In Boston (with a twist) AMZN 

"El Chapo" Guzman Being Sexually Harrased In Prison-Report

The people who put this blog together literally risk their lives with each word they publish.
We try to link at least once per month.
From Borderland Beat:

Reports of El Chapo claiming he is being sexually harassed
Ok folks….at first I thought this story must have been created from poor translating, but when several mainstream media sites posting the same story, and giving source credit to one of El Chapo’s attorney’s, I thought I would post it, if nothing else perhaps for a good laugh.

Joaquin Guzman Loera aka “El Chapo”, imprisoned leader of the Sinaloa cartel, has been complaining of his treatment and accommodations since “go”, and now his list of complaints supposedly includes, “sexual harassment”.

His attorney, Sylvia Delgado reports, that her client says he is being harassed by a prison guard who “squeezes” him and touches him in a manner that makes him feel “uncomfortable” and “embarrassed”....MORE

Sometimes Snark Is Funny, Sometimes It Just Exposes Laziness and/or Ignorance

This morning Matt Yglesias tweeted:
On May 27, 2013 the World Socialist Web Site had this to say about the current Secretary of Commerce:

Senators forgive Penny Pritzker’s $80 million “mistake”
On the eve of her confirmation hearing, President Obama’s nominee for commerce secretary, Penny Pritzker, admitted that she had underreported her 2012 income to the tune of $80 million, blaming a clerical error. Pritzker is worth an estimated $1.85 billion and would become the wealthiest US cabinet member in history.... MORE
Published by the International Committee of the Fourth International (ICFI)
The good news is, despite misplacing the $80 mil. Secretary Pritzker's share of PSP Capital Partners and Pritzker Realty Group is now worth an estimated $2.4-2.5 billion.

The 2013 story was originally reported by Bloomberg but the outrage at the WSWS was funnier, although BBG was briefly in contention with this quote from Ms. Pritzker's assistant and spokeswoman:
...“It is a substantial amount and we moved to correct the mistake as soon as it was discovered,”...
Yes, yes $80 million is substantial. 

Corn vs. Beans: Strong Incentive to Plant Soybeans

Last Chg
Corn 363-4-1-4
Soybeans 1067-4-7-4
Wheat 425-6-5-2

From Agrimoney:

Bull markets in grains need feeding, they say.
That is, escalating futures need a daily dose of price-supportive news to keep them on an upward path.
And the apparent lack of much fresh on Argentina's weather woes, the catalyst to the rally over the past week in prices of soybeans and of soymeal (of which the country is the world's top exporter), allowed a touch of profit-taking in early deals on Thursday....
China, US considerations
Still, what the apparent, if temporary, ceasefire by Argentina's weather Gods does allow is a focus on some of the other factors in the soybean market.
Such as, for instance, the potential dent to demand of prices which set a six-month high in Chicago in the last session, up 6.3% in a week, for spot March futures.
China, the top soybean importer, "thus far, is showing no interest in chasing the rally," said Richard Feltes at Chicago broker RJ O'Brien, if adding that this dearth of interest "may change after crushers return from Chinese new year".
And then there is the enhanced potential for huge US spring sowings of soybeans being encouraged by the elevated prices.
The ratio of November soybean futures: December corn futures, at 2.63, is well into territory incentivising plantings of the oilseed over the grain.
This "historically high" ratio is "providing a strong incentive for US farmers to increase 2017 US soy acreage, with private sector analysts looking for a 5m-7m acre gain" in the country's soybean area....

"The Dow hasn't seen a month-long range this narrow since at least 1957"

From CNBC:

If it seems like the stock market's crawl to nowhere over the past month has been particularly strange, that's because it has been. It turns out the gap between the Dow's high and low prices over the past month is a tiny 1.4 percent — the narrowest gap in data going back to 1957.

It was just over a month ago, on Dec. 13, when we saw the Dow Jones industrial average cross 19,900 for the first time. Since then, we've seen an intraday high of 19999.63 and a low of 19719.67. The gap between those two levels is only 1.4 percent. The Dow's entire past month has stayed within that extremely tight range.
To put this in perspective: We usually see a 6 to 7 percent average range in a typical month. In fact, the typical trading day in the past 60 years has seen a 1.5 percent move just on that day alone....MORE

Dollar Up On Yellen's Wednesday Comments, Dribbles Down On Ennui, Angst, Weltschmerz

It's quiet out there...

From Marc to Market:

Comments late yesterday by the Fed's Yellen after headline CPI rose above 2% for the first time in a couple of years, and the largest rise in industrial output since November 2014, spurred a rise in US yields and the dollar.  The US 10-year note yield rose 10 bp to 2.43%.  It was the biggest rise in a month.  The dollar snapped a seven-day drop against the yen with an exclamation point--a 1.8% jump, its best in a two months.   

While the US 10-year yield is unchanged, the dollar is consolidating its gains against the yen in a relatively narrow range of about half a big figure below JPY115.00.  It has seen its gains pared more against the euro and sterling, where most of Yellen-inspired gains have been unwound.  Sterling found support near $1.2250 and was bid up to $1.2335 by early in the European sessions.  The euro recovered have a cent from $1.0620.  

Some observers saw in Yellen's comments stronger confidence in the economy.  Bloomberg's calculation of the odds of a March hike increased to a little more than 34% from a little less than 30%.  The CME calculation was unchanged at a little below 20%.  The March Fed funds futures contract slipped half a basis point yesterday (to 68.5 bp from 68 bp). It is now near 69.5 bp.  

The focus now shifts to the ECB.  Of course, after adjusting policy last month, the ECB is highly unlikely to take new initiatives today.  The most important new development since the December ECB meeting is the rise in inflation. Headline CPI stood at 1.1% at the end of last year, nearly double the 0.6% pace seen in November.  The rise in German CPI to 1.7% can only increase the criticism of the German representatives of the ECB's stance.  

We look for Draghi to push back.  Like several other national central bank presidents, Draghi is likely to caution against exaggerating the increase in inflation, and see it as mostly reflecting the recovery in energy prices.  The core rate is at 0.9% having bottomed at 0.6%.  The ECB will have to wait until new staff forecasts are available in March to understand better if the trajectory of inflation has changed.  

Last month, Draghi acknowledged that deflation forces were almost vanquished.  He can extend this analysis a little, but it may not yet be time to change the balance of the outlook quite yet.  Still, there may be scope for another type of concession to the more hawkish contingent: the reference that rates will remain low or lower can be modified to suggest less risk of a lower rates.  

Draghi, like Yellen, will also likely recognize the high degree of uncertainty.  In addition to the uncertainty around the policies and priorities of the new US Administration, Draghi also has to navigate through several elections, including Germany, France, and Netherlands.   There is also some risk of elections in Greece and Italy too.  

US data, including housing starts, permits, initial jobless claims, and January Philly Fed, will be overshadowed by the ECB press conference a quarter hour later.   Yellen speaks late in the US, which will be early in the Asia's Friday session but after yesterday's comments, her views are a known quantity....MORE 
Here's Mental Floss on the difference between the three mental/emotional states.

Wednesday, January 18, 2017

If the Aliens Prove to Be Unfriendly, BAE Systems' Lasers Will Turn Earth's Atmosphere Into Deflector Shields

There is no reason to think alien intelligence would be favorably disposed toward humankind.
For example, as noted, with the incisive commentary readers have come to expect from this blog, the beginning of the introduction to "If we find ET, don’t talk to it, says the man who wants to find ET" speaks volumes:
Well duh...
Today's headline story is from IEEE Spectrum, January 17:

Laser Weapons Will Turn Earth's Atmosphere into Lenses, Deflector Shields
The Earth's atmosphere is a constant annoyance for anyone trying to do anything useful with light. Even if you discount things like clouds, smog, and smoke, there are layers and pockets of air of varying temperatures that routinely make things go all wobbly. This is why most halfway decent telescopes are built on the tops of mountains, and all the best telescopes are out in space.

Things get even more difficult when you're trying to push a lot of light through the atmosphere with the goal of having it all end up exactly where you want it, as is the case with a directed energy weapon. Adaptive optics have been able to help somewhat, but wouldn't it be better if the atmosphere could actually do something useful? You know, for once?

BAE Systems has been working on a way to use lasers to actively reshape the atmosphere to turn it into a variety of optical tools. The Laser Developed Atmospheric Lens system (LDAL) uses powerful laser pulses to make air itself into lenses, mirrors, and even protective deflector shields....MORE

Twenty Years Of Top 10 Stock Markets

From Bloomberg: 

History Shows Best Equity Gains Come From Emerging Markets

HT it was out there: Alpha Ideas.

Shhh...Theranos Quietly Shut Down Its Last Blood Testing Lab Without Saying Anything

From The Wall Street Journal via Fox News:

Second Theranos lab failed major inspection
Theranos Inc. failed a second major U.S. regulatory inspection of its laboratory facilities, people familiar with the situation said, a setback the Silicon Valley blood-testing firm hasn’t disclosed to investors or patients.

The failed regulatory inspection—at its one active lab at the time—has put the company at risk of a new round of sanctions, these people said.

The inspection, which took place in late September, came just days before Theranos said it was exiting the medical-testing business altogether, the people said. On Oct. 5, the closely held company said it would pivot to developing lab equipment to sell to other firms and restructure “around the model best aligned with our core values and mission,” according to a statement at the time.

The Centers for Medicare and Medicaid Services concluded its review of the second of Theranos’s two labs, in Scottsdale, Ariz., on Sept. 29 and found deficiencies there, the people familiar with the matter said....MORE
And at TechCrunch, the headline story:
Theranos closes its last remaining blood-testing lab after it reportedly failed an inspection

Possibly The Funniest (Profitable) Stock Recommendation of All Time

Originally posted Dec. 30, 2015 as:
Possibly the Funniest (profitable) Thing We Saw In 2015: FT Alphaville's Founder/Editor Channels Mr. Subliminal 
Now updated with this:
 -from Bloomberg's Tracy Alloway (formerly FT Alphavillein)
Original post:

For our younger readers, here is Mr. Subliminal on Donald Trump cheating on his wife Ivana in 1990:


And here's FT Alphaville's editor, Paul Murphy,

Hard-bitten journalist

on former FT Alphaville owner Pearson and its stock, Dec. 1, the day the Financial Times was handed over to Nikkei, while appearing to be having a normal conversation with Alphavillein Bryce Elder:

(So here’s our advice on the stock at 832p….)
Run )
...Today, though, the message is dovish. So we’re all choosing to forget about 2016.
Scarper )
Get out )
Bin it )
( You don’t think another profit warning is coming? Oh course another profit warning is coming! )
( And I can tell you it’s a screaming sell. )
( I can tell you what happens next…)
( Having focused the business down and down and down so that it’s pure corporatised education…)
( And with corporatised education, er, falling slightly out of fashion…)
( The next effort will be to slash costs — slashing with a blunt knife. A panic. )
( My guess is 15 per cent of the workforce will go. )
( Across the board. )
(except not in the boardroom, of course )
(It’s a lucky escape for us, cos the 15 per cent cut would have hit us as well. 100 journo jobs would have gone. )
Is that enough on banks? Actually, Goldman too. Just because.
(If you look back to the late 90s, the FT had all the bits to construct Bloomgerg. )
( Had a world class consumer offering in the form of the paper )
(But it also had a newswire, and an online markets business — Market Watch.)
Should we move on to other matters?
(It had data, in the form of IDC)
(Had Extel. Had what became factiva.)
(Had a huge EM news business.)
Okay …………. I think I have to do a quick bit of de-RAW here.
Coincidentally, we were chasing the same story from a slightly different angle.
The rumour that reached us was that National Grid was working on a bid of around $45 a share for ITC …
(People here complained of a lack of investment from Pearson. Investment??? They were sucking the life-blood out of the thing. )
… However, that would all appear to be very, very premature..
… However, that would all appear to be very, very premature..
What we can say with some confidence is that National Grid’s in the ITC auction process, which kicked off a week ago …
But NG only appointed a new CEO at the start of the month, and is in transition between the old guy and the new guy for the rest of the year.
And NG’s balance sheet doesn’t make ~$7bn-ish deals look very easy.
So. If National Grid’s involved …
… It’s much more likely to be in there to look at the numbers of a rival, rather than to launch an offer.
(Sure, there was one short period, during the dot comedy, that the FT was allowed to expand. It was a disaster, timing wise. But Pearson made up all the associated losses with one disposal — Market Watch. That covered everything.)
Also, note, there’s no shortage of potential bidders. It’s a crowded process.
(Anyway, ive said enough. We’re under new ownership now. )
Sell Pearson )
Also likely to be in there are Berkshire Energy, Iberdrola’s Avangrid, Hydro One, NextEra Energy, American Electric Power ….


The stock is currently trading at 739p, down 11.17% so far this month, after trading under 700 a couple weeks ago.... 

Updated stock price, January 18, 2017:
583.50 GBX down 224.50 (27.78%) on the day.
And FT Alphaville's latest commentary on Pearson.

Tight Oil Led by the Permian Tops a 2017 Oil Industry Revival: Wood Mackenzie

From Oil & Gas 360: 
Optimism returns: WoodMac calls for $450 billion in upstream O&G project FIDs in 2017
According to Wood Mackenzie’s global upstream outlook for 2017, confidence will start to return to the oil and gas sector in 2017, with exploration and production spend set to rise by 3% to US$450 billion.

The investment level is still 40% below the heady days of 2014, the group points out.
At the forefront of the revival will be U.S. tight oil. Costs will continue to fall in 2017, though only marginally.

U.S. tight oil, and the Permian basin in particular, will lead the way, distinguished by low breakevens, scale and flexibility. U.S. Lower 48 spend is set to grow by 23%, to U.S. $61 billion, with upside if oil prices rise strongly and U.S. Independents are emboldened by a Trump presidency.
“Nowhere is the mantra ‘doing more with less’ more evident than onshore U.S. There has been a dramatic increase in efficiency in the sector, exemplified by the drillers, who are managing to complete wells up to 30% quicker,” Dickson said.

Wood Mackenzie says as the tight oil sector heats up, the spectre of cost inflation looms in 2017. But any increase in costs may well be offset by further efficiency gains in earlier-life plays. For example, there’s still potential for a further improvement in drilling speed of 20% to 30% in some early-life tight oil plays. 

A much leaner industry: CapEx per barrel in 2017 shrinks to $7 from 2014’s $17
Wood Mackenzie predicts the number of FIDs will rise to more than 20 in 2017, compared with nine in 2016. This is still well short of the 2010-2014 average of 40 a year. But these are generally smaller, more efficient projects, and capex per barrel of oil equivalent (boe) averages just US$7 per barrel, down from US$17 per barrel for the 2014 projects, the consultancy said.

“Companies will get more bang for their buck as development incremental internal rates of return (IRR) will jump from 9% to 16%, comparing 2014 to 2017,” said WoodMac E&P analyst Malcolm Dickson. “This is in part a result of a shift in capital allocation away from complex mega projects towards smaller, incremental projects in the Canadian oil sands and deep water.”...MORE
CHART BELOW: FIDs per year: 2007-2017 (Greater than 50 mmboe)