Chemical manufacturer Solutia Inc. is buying Southwall Technologies Inc., a developer of films and glass products for the automotive and architectural industries, for $113 million.
Town & Country-based Solutia is buying Southwall for $113 million in cash, or $13.60 per share of Southwall’s common stock, the companies announced Friday. Solutia’s tender offer is expected to be completed in the fourth quarter this year. Southwall is based in Palo Alto, Calif.
The nation’s economy is managing to grow modestly, reports Monday showed, despite high U.S. unemployment and growing alarm about Europe’s debt crisis.
Manufacturing expanded in September more than in August, though the pace of growth remains weak, according to a survey by the Institute for Supply Management. The ISM said its manufacturing index rose for the first time in three months.
And construction spending rose modestly in August, the government said. The gain was due mostly to a pickup in state and local government projects.
In addition, U.S. auto sales rose in September, largely because consumers bought more pickups and SUVs, U.S. automakers said.
Collectively, the reports suggested that the U.S. economy may be able to avoid another recession yet will continue to struggle.
Economists said the manufacturing and construction reports are consistent with an annual growth rate of about 2 percent to 2.5 percent for the July-September quarter.
That would be an improvement from growth of about 0.9 percent in the first six months of the year. But it wouldn’t be enough to reduce the unemployment rate, which is 9.1 percent.
The reports are “mildly encouraging,” said Paul Ashworth, chief U.S. economist at Capital Economics. “But even if the U.S. avoids a recession, economic growth is going to remain lackluster.”
Manufacturing executives said their volume of new orders shrank for the third straight month. That doesn’t bode well for future production.
Stocks initially declined, partly because Greece said earlier Monday that it would miss deficit-reduction targets it had agreed to as part of its bailout agreement. That raised worries that Greece could default on its debts, harming Europe’s economy.
The ISM’s manufacturing index rose to 51.6, up from 50.6 in August. A reading above 50 indicates expansion. The increase follows two months of declines.
Measures of production and exports grew, while a gauge of new orders was unchanged. Factories also added workers, the report said. The ISM is a trade group of purchasing executives.
The manufacturing sector has been a key driver of the economy’s growth since the recession officially ended in June 2009 low fee payday loans. The index topped 60 for four straight months earlier this year. It rose above 50 a month after the recession ended and has topped that level ever since.
But manufacturing accounts for only about 11 percent of the economy and can do only so much to support the recovery. And manufacturing has slowed in the past several months as consumer spending has weakened in response to high unemployment and stagnant wages. High gas and food prices are also forcing shoppers to cut back in other areas.
Respondents to the survey expressed “concern over the sluggish economy, political and policy uncertainty in Washington, and forecasts of ongoing high unemployment,” said Bradley Holcomb, chair of the ISM’s survey committee.
The report follows other indicators that show the economy is sputtering though still growing. Companies ordered more machinery, computers and other equipment in August, a government report last week showed.
Twelve of the 18 manufacturing industries tracked by the ISM reported growth in September. They include food and beverages; clothing; autos and other transportation equipment; and chemicals. Furniture, paper products, and electrical equipment were among those that contracted.
Construction spending rose 1.4 percent in August, the Commerce Department said. The increase followed a 1.4 percent drop in July, which had been the biggest setback in six months.
Analysts noted that much of the increase stemmed from a jump in spending on government projects, such as roads and schools. But with many states and cities short of cash, gains of that size aren’t expected to continue.
And private construction is still not healthy.
“The pickup in the pace of spending was … not a sign of revival in private demand,” said John Ryding, an economist at RDQ Economics, in a note to clients.
Building activity reached a seasonally adjusted annual rate of $799.1 billion. That’s 4.8 percent above an 11-year low hit in March. But it’s barely more than half the $1.5 trillion pace considered healthy.
The world is not an easy place in which to invest these days. To make any headway, investors must exhibit the patient determination of an explorer such as Marco Polo.
“There are really no bright spots, but you can find values,” asserted Daniel O’Keefe, lead portfolio manager of Artisan Global Value Investor Fund (ARTGX). “The greatest times to invest are during periods of greatest uncertainty, which, while not psychologically comfortable, is the way it works low interest rate personal loans.”
The current global environment should not alter anyone’s long-term investing strategy, O’Keefe said. Given current stock valuations and the cleaner balance sheets of most companies, over a reasonable period of time you are going to do well investing globally, he predicted.
“We own shares of two European banks
As the world commemorates the 10th anniversary of the World Trade Center attacks, Sunday is doubly significant for Japan. It marks six months since the massive earthquake and tsunami on March 11, a date now seared in the national consciousness.
Up and down the hard-hit northeast coast, families and communities came together to remember victims. Monks chanted. Survivors prayed. Mothers hung colorful paper cranes for their lost children.
At precisely 2:46 p.m., they stopped and observed a minute of silence. March 11 changed everything for them and their country.
The magnitude-9.0 earthquake produced the sort of devastation Japan hadn’t seen since World War II. The tsunami that followed engulfed the northeast and wiped out entire towns. The waves inundated the Fukushima Dai-ichi nuclear power plant, triggering the worst nuclear accident since Chernobyl.
Some 20,000 people are dead or missing. More than 800,000 homes were completely or partially destroyed. The disaster crippled businesses, roads and infrastructure. The Japanese Red Cross Society estimates that 400,000 people were displaced.
Half a year later, there are physical signs of progress.
Much of the debris has been cleared away or at least organized into big piles. In the port city of Kesennuma, many of the boats carried inland by the tsunami have been removed. Most evacuees have moved out of high school gyms and into temporary shelters or apartments.
The supply chain problems that led to critical parts shortages for Japan’s auto and electronics makers are nearly resolved. Industrial production has almost recovered to pre-quake levels.
But beyond the surface is anxiety and frustration among survivors facing an uncertain future. They are growing increasingly impatient with a government they describe as too slow and without direction.
Masayuki Komatsu, a fisherman in Kesennuma, wants to restart his abalone farming business.
But he worries about radiation in the sea from the still-leaking Fukushima plant and isn’t sure if his products will be safe enough to sell. He said officials are not providing adequate radiation information for local fisherman.
“I wonder if the government considers our horrible circumstances and the radiation concerns of people in my business,” said Komatsu, who also lost his home.
Another resident, 80-year-old Takashi Sugawara, lost his sister in the tsunami and now lives in temporary housing. He wants to rebuild his home but is stuck in limbo for the time being.
“My family is not very wealthy, and I only wish that the country would decide what to do about the area as soon as possible,” Sugawara said.
He might be waiting for a while. The Nikkei financial newspaper reported this week that many municipalities in the hardest-hit prefecture of Miyagi, Iwate and Fukushima have yet to draft reconstruction plans.
Of the 31 cities, towns and villages severely damaged by the disaster, just four have finalized their plans, the Nikkei said. The scale of the disaster, the national government’s slow response and quarrels among residents have delayed the rebuilding process.
The Red Cross also expressed frustration over the layers of bureaucracy that delayed distribution of assistance to victims.
“The speed and scope of implementing the response during the emergency phase was not as swift and comprehensive as (the Red Cross) wished, partly due to the structure of disaster management in Japan, partly because of insufficient preparedness,” it said in a six-month report.
Criticism of the government’s handling of the disaster and nuclear crisis led former Prime Minister Naoto Kan to resign. Former Finance Minister Yoshihiko Noda took over nine days ago, becoming Japan’s sixth new prime minister in five years.
He spent much of Saturday visiting Miyage and Iwate prefectures, promising more funding to speed up recovery efforts and trying to shore up confidence in his administration.
But the trip was overshadowed later in the day by his first big political embarrassment. Noda’s new trade minister Yoshio Hachiro resigned, caving into intense pressure after calling the area around the nuclear plant “a town of death,” a comment seen as insensitive to nuclear evacuees.
Public support for the new government started out strong, with an approval rating of 62.8 percent in a Kyodo News poll released last Saturday. Hachiro’s resignation will likely translate into a drop and new doubts about Noda’s ability to lead.
On Sunday, he apologized for hurting the feelings of Fukushima residents.
“I continue to believe that without a revival in Fukushima, there will be no revival of Japan,” Noda said.
Regardless of politics, what’s clear is that the road ahead will be long.
“Given the enormous scale of the destruction and the massive area affected, this will be a long and complex recovery and reconstruction operation,” Tadateru Konoe, the Red Cross president, said in a statement. “It will take at least five years to rebuild, but healing the mental scars could take much longer.”
After more than a year, Peabody Energy’s dogged pursuit of a major Australian coal company now appears to have succeeded.
Spurning earlier offers from St. Louis-based Peabody, the board of directors at Macarthur Coal Ltd. announced this morning that it would recommend that shareholders accept a sweetened $5.2 billion bid from Peabody and its partner ArcelorMittal, the world’s largest steelmaker.
The deal gives Peabody Energy Corp. and its minority partner control of the world’s biggest maker of pulverized coal used by steelmakers. It also expands Peabody’s coal output in Australia, the world’s largest coal-exporting nation.
“This is a major step forward in our acquisition process,” Peabody Chairman and Chief Executive Officer Gregory H. Boyce said in a press release. “We are pleased to have Macarthur, Peabody and ArcelorMittal moving forward together to urge shareholders to accept this attractive premium.”
Peabody, the biggest U.S. coal miner, and ArcelorMittal raised their bid to 16 Australian dollars a share from 15.50 Australian dollars, which now values the company at 4.8 billion Australian dollars, or $5.2 billion. The offer is 44 percent more than the stock’s close before the initial bid July 11.
The market for coking coal is increasingly lucrative. Credit Suisse Group AG in July raised its price forecasts for coking coal by an average 15 percent for 2014 to 2018, citing “unrelenting” demand. Prices rose 47 percent to a record $330 a ton for three-month contracts starting April 1 and have traded close to records.
The chase began on March 30, 2010, when the St. Louis-based coal company offered to buy the Australian company for $3 billion. Eventually, Peabody offered as much as $3.8 billion before it was turned away after a two-month pursuit.
However, Peabody was not to be deterred. Last month, the St. Louis-based company teamed up with ArcelorMittal, which owns 16 percent of Macarthur. The two companies, through a jointly owned venture, offered 15.50 Australian dollars for each Macarthur share.
When the board rejected that offer three weeks ago, the two companies threatened to take the offer directly to shareholders.
WHITE KNIGHT?
After receiving the Peabody-ArcelorMittal bid, Macarthur began talks with other possible suitors in the hopes of finding a white knight.
Macarthur’s board said it accepted the 16 Australian dollar offer in the absence of any competing bids that were superior.
“In the period since the initial offer, a number of parties have conducted due diligence,” the company said in the statement. “Although it remains possible that a superior proposal might be made, none have emerged to date, and there can be no assurances that any will emerge.”
Anglo American Plc is exploring a bid for Macarthur, according to two people with knowledge of the matter. Teck Resources Ltd. and Yanzhou Coal Mining Co. may also be interested, the Australian Financial Review said in its Street Talk column last month, without citing anyone.
However, Macarthur’s shares rose to as much as 15.94 Australian dollars this morning, indicating investors don’t yet expect any counterbid.
Peabody and ArcelorMittal have the right to match any competing offer, and Macarthur faces a breakup fee of 48.3 million Australian dollars under the terms of the agreement.
The bid is being made through PEAMCoal Pty, a venture 60 percent owned by Peabody and 40 percent owned by Luxembourg-based ArcelorMittal.
The Peabody group’s bid for Macarthur will be the second-largest coal takeover this year, second only to Alpha Natural Resources Inc.’s $7.1 billion purchase of Massey Energy Co. in June. This year has yielded about 50 coal transactions globally, with a combined value of more than $20 billion.
Brown Shoe Co. is unloading the men’s basketball brand AND 1 from its portfolio about six months after the company procured it as part of the acquisition of American Sporting Goods.
The Clayton-based footwear company said today that it was selling the brand for $55 in cash to Galaxy International, a newly-formed brand management company. Brown Shoe said it would use the proceeds from the sale to pay down debt.
In February, Brown Shoe completed its $145 million acquisition of American Sporting Goods, which also includes the brands Avia and Ryka. The acquisition of the athletic shoe company was part of Brown Shoe’s strategy to increase its offerings in the active and healthy living category.
“AND 1 is a great brand with a strong heritage, however, it did not cleanly align with our strategy to focus on the key consumer platforms of healthy living, contemporary fashion and family,” Diane Sullivan, the company’s chief executive, said in a statement.
When Sullivan took over the reigns of the company as chief executive in May, she said one of her top priorities would be evaluating Brown Shoe’s portfolio of brands and divesting from those that don’t fit into its strategic focus in key categories fast cash. She said she will continue to review brands in the second half of this year.
The company also reported its earnings today for the second quarter. It had a net loss of $4.6 million, or 11 cents a share, compared to a profit of $5.3 million, or 12 cents a share, in the same period last year. The company blamed the drop in part on a more rapid-than-expected decline in toning footwear and to some continuing costs associated with the implementation of a new information technology system.
Net sales in the quarter rose 7.2 percent to $628 million, up from $586 million. The company attributed much of the gain to the increased sales from the American Sporting acquisition.
UPDATED: at 3:49 p.m. with more details.
ST. CHARLES
CALGARY
Last week marked the end of John Haugh’s two-year tenure as president and “chief marketing and merchandising bear” at Build-A-Bear Workshop.
He resigned from his position.
There has been a bit of a revolving door at the No. 2 spot at Build-A-Bear in recent years. Haugh was the Overland-based company’s third president in three years.
The company hasn’t said much about Haugh’s resignation. It noted the fact with two simple sentences in a recent Securities and Exchange Commission filing.
In an email, Jill Saunders, a company spokeswoman, said that Haugh voluntarily resigned his position. It appears he taken a new job since she added that the company would prefer to let Haugh and his new employer announce his new position.
Sean McGowan, an analyst with Needham & Co., said he thinks Haugh left of his own accord.
“I feel strongly that it’s NOT a sign that things are going badly,” he wrote in an email. “Obviously he thought he had a better opportunity somewhere…I think he has changed jobs quite a bit in recent years.”
Haugh joined Build-A-Bear in March 2009. He was previously president of It’s Sugar, a candy and confectionary retailer. He has also held executive positions with Mars Retail Group, Payless ShoeSource and Universal Studios no credit check payday loans.
When he came on board at Build-A-Bear, he replaced Scott Seay, who had been fired in 2008. The company did not disclose a reason for it at the time other than to say the decision was not related to the company’s performance or business operations.
The company’s president before that — Barry Erdos — resigned in January 2007.
But despite the comings and goings of presidents at Build-A-Bear, the leadership at the very top has remained stable. Maxine Clark, the company’s founder, has been the “chief executive bear” throughout the retailer’s history.
Build-A-Bear has begun an external search for president and has temporarily assigned Haugh’s responsibilities to its senior management team.
The turnover comes at a time when the company is working to try to reverse same-store sales declines. In the first quarter, total revenue dipped 6.1 percent. It will report its second quarter earnings later this week.
If the proposed merger of pharmacy benefit titans Express Scripts and Medco goes forward, George Paz will find himself at the helm of one of the nation’s largest companies. He joined St. Louis-based Express Scripts in 1998 after working as a partner at Coopers and Lybrand, an accounting firm, from 1988 to 1993, and also from 1996 to 1998. He worked as executive vice president and chief financial officer for Life Partners Group from 1993 to 1995.
Paz took a few minutes Friday to talk about the blockbuster deal, his company’s lust for acquisitions and his management style. What follows is an edited transcript of that interview.
How would you characterize your management style or philosophy?
I believe that you can run companies in one of two ways: you can either collaborate and get the management team to work together for common goals, or you can dictate. I don’t believe in dictating.
How does that translate into Express Scripts’ mission, personality, or ethic?
I have 14,000 employees and 10 senior leaders. By getting everyone’s consensus views, it lets us build up many diverse inputs and work toward common goals.
What would be examples of a couple of big, pivotal decisions you’ve made at the company?
Our acquisitions. For acquisitions to truly work, it’s a lot of effort and a lot of work to integrate the businesses. To take on something large, you need not just the CEO’s buy-in, but the whole company’s buy-in. Another big decision was our focus on consumerology, behavioral science and helping us understand what drives people’s behavior in managing their health and how we can achieve cost savings.
Were these merger decisions risky? Were these hard decisions to make?
Business textbooks tell you that most acquisitions fail. For us, the acquisition has never been a reaction, but instead a purposeful event in which we see a strategic gain and opportunity.
Is there much debate involving these big decisions?
There’s debate around how to get there, and the strategy to get things done. We don’t do things unless we have 100 percent buy-in by senior staff. We keep debating until all debate is quenched, until we’ve resolved every issue.
How did the Medco acquisition come about?
I’ve known David (Snow, the chief executive of Medco) since 2003. We’ve talked numerous times over the years about the value of putting our two organizations together. We saw a golden opportunity.
Was there internal debate over the Medco decision?
That was unanimous.
How do you relax or spend your time away from work?
I love business. I love St. Louis. I love health care, I love the challenge of driving waste out of health care while producing better outcomes. I like to read, to study, to understand. I also like to play golf, but it’s something I don’t get to play that often.
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