Morgan Stanley to acquire E-Trade in $13bn deal

BY Fraser Tennant

In a combination which creates an industry leader in wealth management, global financial services firm Morgan Stanley is to acquire online brokerage industry company E-Trade in a deal valued at $13bn.

A pioneer in the digital brokerage and banking space for nearly 40 years, E-Trade’s consumer-facing technology platforms and digital banking services, including direct integration with brokerage accounts, checking and high-yield savings accounts, is expected to complement and significantly accelerate Morgan Stanley’s digital banking efforts. 

“Since we created the digital brokerage category nearly 40 years ago, E-Trade has consistently disrupted the status quo and delivered cutting-edge tools and services to investors, traders and stock plan administrators,” said Mike Pizzi, chief executive of E-Trade. “By joining Morgan Stanley, we will be able to take our combined offering to the next level and deliver an even more comprehensive suite of wealth management capabilities.”

For Morgan Stanley, the acquisition marks the continuation of a decade-long effort to rebalance its portfolio of businesses, so that a greater percentage of its revenues and income are derived from balance sheet light and more durable sources of revenues.

“E-Trade represents an extraordinary growth opportunity for our wealth management business and a leap forward in our wealth management strategy,” said James Gorman, chairman and chief executive of Morgan Stanley. “The combination adds an iconic brand in the direct-to-consumer channel to our leading adviser-driven model, while also creating a premier workplace wealth provider for corporations and their employees.

“E-Trade’s products, innovation in technology and established brand will help position Morgan Stanley as a top player across all three channels: financial advisory, self-directed and workplace,” continued Mr Gorman. “In addition, this continues the decade-long transition of our firm to a more balance sheet light business mix, emphasising more durable sources of revenue.”

Morgan Stanley’s acquisition of E-Trade is subject to customary closing conditions, including regulatory approvals and approval by E-Trade shareholders, and is expected to close in the fourth quarter of 2020.

Mr Gorman concluded: “We look forward to welcoming the infusion of management and technology talent that E-Trade will bring to Morgan Stanley.”

News: Morgan Stanley to buy E-Trade Financial in $13bn deal

Sustainable debt market to top $400bn in 2020, claims new report

BY Fraser Tennant

Driven by an expansion of the pool of financing options for investors, 2020 is likely to see the sustainable debt market surpass $400bn, according to a new report by S&P Global Ratings.

In ‘Led By Green Bonds, The Sustainable Debt Market Looks To Surge Ahead’ S&P notes that issuance in sustainable debt has doubled in 2019, with the primary driver being green bonds, which is expected to remain the main type of sustainable debt instrument in 2020.

"We also expect the sustainable debt market to continue to diversify and innovate, as investors look for alternative ways to contribute to sustainability objectives," said Noemie De La Gorce, ratings credit analyst at  S&P Global Ratings. “Furthermore, the market shows few signs of abating. Strong market fundamentals along with persisting positive credit conditions in the private sector are likely to support further green issuance growth in the next year.”

The report’s key takeaways include: (i) green-labelled issuance is expected to reach close to $300bn in 2020, partly reflecting the surge in absolute global fixed-income issuance and private financing; (ii) other sustainability-labelled debt instruments have emerged, including social bonds, sustainability bonds and sustainability-linked loans, which increased to about 35 percent of the total sustainable debt market in 2019; (iii) the unique and unprecedented regulatory and political push for green and sustainable finance in Europe will help to consolidate the region’s leadership in green-labelled issuance; and (iv) the majority of green-labelled proceeds will remain allocated to the energy transition, which absorbed 80 percent of proceeds in 2019.

Looking ahead, the S&P report suggests that issuance in the labelled green bond market could grow close to $300bn in 2020, after achieving a record $238bn in 2019. "While it still represents a minor part of global issuance, this share is increasing – to about 3.5 percent from less than 1 percent five years ago,” added Ms De La Gorce. “We expect this growth to be a long-term phenomenon, with sovereign and regulatory interventions, particularly in Europe, acting as a catalyst for private issuance.”

That said, the report sounds a note of caution, stating that growth levels are insufficient to bridge the existing financing gap between available sustainable debt and the investments needed to transition to a low-carbon and climate-resilient economy, which the UN. estimates will be at least $60 trillion by 2050.

Report: Led By Green Bonds, The Sustainable Debt Market Looks To Surge Ahead

McClatchy files for Chapter 11 bankruptcy

BY Richard Summerfield

McClatchy, the major US newspaper chain which owns 30 publications across the country, has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of New York.

The company has obtained new $50m debtor-in-possession (DIP) financing from Encina Business Credit, which will allow it and its newsrooms to continue to operate as normal throughout the Chapter 11 process. McClatchy, which plans to emerge from the Chapter 11 process in the coming months, is the second largest publisher of local newspapers in US, behind Gannett.

In a court filing, McClatchy listed the Pension Benefit Guaranty Corporation (PBGC) as its largest unsecured creditor, with a claim of $530m.

“McClatchy’s Plan provides a resolution to legacy debt and pension obligations while maximising outcomes for customers and other stakeholders,” said Craig Forman, president and chief executive of McClatchy. “When local media suffers in the face of industry challenges, communities suffer: polarisation grows, civic connections fray and borrowing costs rise for local governments. We are moving with speed and focus to benefit all our stakeholders and our communities.”

“McClatchy remains a strong operating company with an enduring commitment to independent journalism that spans five generations of my family,” said Kevin McClatchy, chairman of McClatchy. “This restructuring is a necessary and positive step forward for the business, and the entire Board of Directors has made great efforts to ensure the company is able to operate as usual throughout this process. We are privileged to serve the 30 communities across the country that together make McClatchy and are ever grateful to all of our stakeholders – subscribers, readers, advertisers, vendors, investors, and employees – who have enabled our legacy to date. We look forward to the continued success of such an outstanding group of colleagues long into the future.”

The company reported a net loss of $364m in the first nine months of 2019, up from a loss of $52m in the year-earlier period. Revenue in the first three quarters of 2019 fell by 11 percent, or nearly $68m, with a decline in revenue from both advertisers and readers.

News: Newspaper chain McClatchy files Chapter 11 bankruptcy after pension woes, print declines

Digitalisation dangers

BY Richard Summerfield

A new report suggests that attacks on smart supply chains, medical equipment and the exploitation of real-time operating systems (RTOS) will be the key issues facing companies this year.

‘Cybersecurity Trends for 2020’, the seventh annual report by testing, inspection and certification services provider TÜV Rheinland, is a collaboration between cyber security experts globally, and examines cyber security challenges companies will face in 2020.

Technological developments and changing consumer trends are changing the paradigm for many companies. For example, as the number of smart devices in private households increase, so too do the opportunities for cyber criminals to attack. And as the report notes: “Uncontrolled access to personal data undermines confidence in the digital society. The logistics industry and private vehicles are increasingly being targeted by hackers.”

“From our point of view, it is particularly serious that cybercrime is increasingly affecting our personal security and the stability of society as a whole,” explains Petr Láhner, business executive vice president for the business stream industry service and cyber security at TÜV Rheinland. “One of the reasons for this is that digital systems are finding their way into more and more areas of our daily lives. Digitalisation offers many advantages - but it is important that these systems and thus the people are safe from attacks.”

The report identifies seven top cyber security trends which companies must aware of in 2020 – (i) companies having uncontrolled access to personal data carries the risk of destabilising the digital society; (ii) smart consumer devices are spreading faster than they can be secured, (iii) the trend toward owning a medical device increases the risk of an internet health crisis; (iv) vehicles and transport infrastructure are new targets for cyber attacks; (v) hackers target smart supply chains; (vi) threats to shipping are no longer just a theoretical threat but a reality; and (vii) vulnerabilities in real-time operating systems could herald the end of the patch age.

Report: Cybersecurity Trends for 2020

FNF to acquire F&G in $2.7bn insurance deal

BY Fraser Tennant

In a transaction valued at $2.7bn, the US’s largest provider of commercial and residential mortgage and diversified services, Fidelity National Finance (FNF) Inc, is to acquire FGL Holdings (F&G), a leading provider of fixed indexed annuities and life insurance.

Under the terms of the merger agreement, holders of F&G's ordinary shares (other than FNF and its subsidiaries) may elect to receive either $12.50 per share in cash or 0.2558 of a share of FNF common stock for each ordinary share of F&G they own. Upon closing of the transaction, F&G shareholders will own approximately 7 percent of the outstanding shares of FNF common stock.

The acquisition of F&G offers FNF entry to an industry that it expects will perform well in economic environments which are challenging for title insurance. “We are excited to announce our plans to acquire F&G Holdings and look forward to welcoming F&G employees and policyholders to the FNF family,” said William P. Foley, II, chairman of FNF. “The board and management diligently reviewed FNF's capital allocation strategy and determined that expanding into the annuity market through the acquisition of F&G Holdings would offer compelling benefit to our shareholders.”

Following the close of the transaction, which has been approved by a special committee of F&G directors, a special committee of FNF directors and the FNF board of directors, F&G will operate as a subsidiary of FNF. “We are pleased to join forces with FNF, a world-class company we know well and respect,” said Chris Blunt, president and chief executive of F&G. “This agreement, which offers immediate value to F&G shareholders and compelling benefits to our stakeholders, will provide a meaningful platform for our business as we continue to build the F&G of the future.”

The transaction is expected to close in the second or third quarter of 2020, subject to the satisfaction of customary closing conditions, including the receipt of regulatory clearances and approval by F&G shareholders.

Mr Blunt concluded: “We are excited to enter into the next phase of growth with FNF and are confident that by combining our complementary businesses, we will be better positioned to carry out our mission of helping customers turn their aspirations into reality.”

News: U.S. insurer Fidelity National to buy FGL Holdings in $2.7 billion deal