Last week, Iranian President Hassan Rouhani said that countries behind the fall in global oil prices would regret their decision and warned that Saudi Arabia and Kuwait would suffer alongside Iran from the price drop. [ID:nL6N0US176] "There is something that caused a delay in our foreign minister's planned visit to Saudi Arabia and that is the fall in the oil price," Iran's top diplomat for the Middle East, Hossein Amir-Abdollahian, told state-run al-Alam television.The two sides have been talking about the visit for about 18 months, and a date had been tentatively set for last October. Amir-Abdollahian added that the oil issue had adversely affected efforts to improve strained relations with Riyadh. "Oil-producing countries in the region expect Saudi Arabia and others to make an effort to prevent harm to our economies from the long-term effects of the fall in oil prices," he said. "We have conveyed this to Saudi officials via diplomatic channels and made it clear to them that they must correct their policy." Regional powers Iran and Saudi Arabia find each other on opposite sides of many conflicts raging across the Middle East, including the civil wars in Syria and Iraq as well as the sectarian conflict in Iraq. (Reporting by Mehrdad Balali; editing by Susan Thomas) ======================= Cheaper oil tames U.S. producer inflation; jobless claims up Thu, Jan 15 12:39 PM EST image By Lucia Mutikani WASHINGTON (Reuters) - U.S. producer prices in December recorded their biggest fall in more than three years on tumbling energy costs while underlying inflation pressures were tame, a cautionary note for the Federal Reserve as it ponders its next step on monetary policy. The Labor Department said on Thursday its producer price index for final demand declined 0.3 percent, the biggest drop since October 2011, after falling 0.2 percent in November. "That makes the Fed's job more difficult," said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh. "We expect inflation to slow ... the Fed needs to be more cautious about raising interest rates." In the 12 months through December, prices at the factory gate increased 1.1 percent, the smallest gain since November 2013, after rising 1.4 percent in November. A broader measure of underlying producer inflation pressures that excludes food, energy and trade services edged up 0.1 percent after being flat in November. Fed officials have largely viewed the energy-driven weakness in inflation as transitory. But with retail sales and average hourly earnings, another key inflation measure, falling in December, that could give pause to some policymakers. The U.S. central bank has kept its short-term interest rate near zero since December 2008. A Reuters survey published on Thursday showed nearly two-thirds of the 82 economists polled expected the first interest rate hike by June. While interest rate futures have pushed bets into the second half of this year, they continue to point to the first increase occurring in October. Inflation is running below the Fed's 2 percent target. Consumer inflation data on Friday is expected to show price pressures remaining muted in December. SEASONAL QUIRKS In a second report, the Labor Department said initial claims for state unemployment benefits rose by 19,000 to a seasonally adjusted 316,000 for the week ended Jan. 10. Economists, who had forecast claims falling to 291,000 last week, said the data had been distorted by difficulties adjusting it for seasonal fluctuations. Seasonal quirks also have been blamed for the weak retail sales and wage growth in December. "Seasonal adjustments become particularly difficult around year-end. We expect claims to resume their downward trend in the coming weeks and reflect broader improvement in labor markets," said Jesse Hurwitz, an economist at Barclays in New York. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, remained below 300,000, a level associated with a strengthening labor market, for an 18th straight week. Other reports showed mixed fortunes for manufacturing in New York state and the mid-Atlantic region in January. Economists said this was broadly in line with some cooling in factory activity in response to slowing global demand and a strong dollar. Prices for U.S. Treasury debt rose on the data, with the yield on the benchmark 10-year bond falling to a 20-month low. The dollar rallied to an 11-year high against the euro after the Swiss National Bank abandoned a three-year-old cap against the single currency. U.S. stocks fell in choppy trade. Wholesale energy prices dropped a record 6.6 percent in December, declining for a sixth straight month, reflecting falling crude oil prices against the backdrop of weakening global demand and more shale production in the United States. A strong dollar, as the domestic economy outperforms its global peers, is also helping to curb inflation. International Monetary Fund Managing Director Christine Lagarde said on Thursday weak oil prices were unlikely to boost the global economy. Concerns about global growth have also undercut copper prices. On Thursday, copper rose on a mix of bargain-hunting, short-covering and hedging by consumers, a day after its biggest slide in more than three years, but more losses were expected. (Reporting by Lucia Mutikani; Editing by Paul Simao) ==========================
In the multi-part deal, shareholders in the tycoon’s existing holding company, Cheung Kong, will receive one new share in Cayman Islands incorporated CKH Holdings for each share they already own.
CKH Holdings will then issue new shares to absorb the 50 percent of its listed subsidiary Hutchison Whampoa that it does not already own and also to acquire the Husky stake. The two transactions will happen simultaneously and are inter-conditional.
Li’s family trust will sell 61.4 million shares in Husky to CKH. The shares were worth C$1.56 billion ($1.32 billion) at the close of trading on Jan. 8. The family will get 1.376 newly issued shares in CKH for every one Husky share acquired.
As part of the deal, the Li family’s stake in Husky will fall from 35.6 percent to 29.3 percent.
The newly enlarged CKH will put all of the property assets into a unit called CK Property which it will spin off. Shareholders will get one share in CK Property for each they own in CKH.
The Li family trust will own around 30 percent of both companies. Its current stake in Cheung Kong is 43.4 percent.
Shares in Husky Energy have lost 24 percent of their value in the past six months.
On the morning of Jan. 12, shares in Cheung Kong rose 14 percent, while shares in Hutchison Whampoa were up 12 percent.
---Cheap oil could be vital to Li Ka-shing keeping control of his empire. Asia’s richest man is selling a 6 percent stake in Husky Energy to his holding company as part of a broader shake-up. The move is vital to maintaining Li’s grip on his telecom, retail and property businesses. The recent fall in the oil price makes it harder for shareholders to object.
In an attempt to shrink a persistent stock market discount, Li is merging his main holding company, Cheung Kong, with its 50 percent owned subsidiary Hutchison Whampoa into a new company called CKH Holdings. The combined group will leverage up and spin off its property assets.
A straightforward swap would have reduced the Li family’s stake in the enlarged holding company to around 29 percent, from 43 percent today, according to Breakingviews calculations. Dropping below 30 percent would limit the family’s ability to control the business and prevent it from adding to its stake without making an offer to independent shareholders.
That’s where the Husky deal comes in. Li is exchanging a $1.3 billion equity stake in the Canadian energy group directly owned by his family for shares in the enlarged holding company. The extra equity lifts the family’s stake in CKH Holdings – and in the subsequent property spinoff – above the 30 percent threshold.
A few months ago, shareholders in Cheung Kong and Hutchison Whampoa might have baulked at accepting shares in Husky, which were then trading at a five-year high. But the collapse in the oil price since has knocked about a quarter off the value of Husky shares. The result is that Li has to part with a bigger stake in the Canadian group. However, it makes the trade look more attractive for independent investors who must approve the broader restructuring.
Investors added $5.4 billion to the value of Cheung Kong by midday on Jan. 12, shrinking the discount to the holding company’s book value to 13 percent, from 24 percent before the deal. It confirms that there is value to in restructuring Li’s empire. If the Husky swap helps him keep control, it will rank as one of the tycoon’s slickest trades.
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