tv Nightly Business Report PBS March 25, 2015 7:00pm-7:31pm PDT
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this is "nightly business report" with tyler m sue herera. stock plunge. concerns over economic growth and investors heading for the kpis. the nasdaq hit like it hasn't been in nearly a year. acquired taste. heinz and kraft gets together to form one of the biggest world food companies. more to come? the supreme court takes up the latest challenge to the epa's power plant rules. the big business ramifications being weighed. all that and more tonight on "nightly business report" for wednesday, march 25th. good evening and welcome. an ugly day on wall street got even uglier at the close. stocks were pummellm pummelled with the nasdaq taking the biggest hit.
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between kraft and heinz, not even that could stem the bleeding. more on that in a moment. up 93 points to 17,718. nasdaq suffered its biggest percentage drop in 11 months falling more than 2% or 118 points to 4,876. and the s&p 500 dropped 30. investors were concerned about economic growth after a surprise decline in durable goods. orders for long-lasting products like appliances and computers fell almost 1.5% in february and that's the third decline in four months. while a key measure of business investment fell for the sixth straight month. the results prompted several economists to lower their forecast for first quarter economic growth. now to that blockbuster deal sue just mentioned involving two giants in the american food industry. kraft and heinz both makers of products that are likely sitting on your kitchen shelves like jell-o maxwell house and of
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course, heinz kechtchup, revenue of $8 billion and sales of a billion each a year. it would rank as the fifth largest food company in the world behind nestle mondelez pepsi and unilever this according to euro monitor international. shares of kraft? guess what. they shot higher. up 35%. heinz owned by the private equity firm 3g and warren buffett's berkshire hathaway will control 51% of the combined company with kraft shareholders owning the rest. both 3g and buffet say they'll invest ano $10 billion in the company and as sara eisen reports, the deal could have a big impact on the global food business. >> reporter: kraft singles and mack and cheese? meet heinz beans and ketchup. owned by brazilian private equity giant 3g and warren buffett. third biggest world company in
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the world and americas. heinz in pittsburgh and kraft chicago. heinz ceo bernard oh hess will be ceo of the kraft company and kraft's ceo chairman of the board. >> we believe this transaction will allow us to make the changes that we need to make to become a stronger business much faster than we would be able to do on our own. like most teams make it's the right move at the right time. >> reporter: now is a tricky time for food companies as they try to keep up with fast-changing taste. consumers migrate to healthier and natural choices. but warren buffett will be a top shareholder of the new company told us he's got a long history with kraft and its brands and he plans to stay in it for the long haul. >> i first went into general foods on behalf of berkshire hathaway in the early 1980s. i think maybe we were larger shareholder of general foods and these brands of kraft, a lot of
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them come out of general's food. so these are brands that i like 30 plus years ago and like them today and think i like them 30 years from now. >> reporter: the first order of business cutting costs. management says they're at least $1.5 billion worth of synergies. opportunities in the area to cut cost everything from marketing to manufacturing. another great opportunity international. heinz gets 61% of its sales abroad while kraft is mostly focused on north america. for "nig henry buickma owns shares of kraft and talking to us more about the deal and other companies he thinks could potentially pair up. he's president and codirector of giasuta investment advisors. thank you for being here. >> thank you very much for having me. >> what do you think about this deal? do you see the synergies in this combination, the two companies do?synergies are
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somewhat modest. they promise $4.15 billion of waves by 2017 but i think that the synergies could be much higher. if we go back and look at the heinz deal it was a little over a billion dollars of expense saves. so yes i think that those are very achievable what they've laid out so far. >> you had a nice day today didn't you, henry? >> yes. in a sloppy market glad to own kraft. >> okay. let's talk about what you think they have to do jointly to get their businesses growing. that's been sort of the challenge for these packaged foods companies, as food tastes change. >> well that's exactly the long-term question that, you know 3g brings a excellent play book. you know the zero based budgeting on how to cut costs, but the enigma is how do you
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create long-term growth in an environment where consumers want more fresh, more natural, organic and are willing to trade down to private label. they don't feel that there is value within the brands and so the way that long-term this needs to be addressed is really through product innovation and then the traditional tool set of marketing, you know, effective displays. you know working with retailers. but innovation is going to be key because that's also the way that you can generate price over time. it's very hard to increase prices on well known staple products but a new product, you know that meets some of the consumers' emerging trends around dietary and natural and organic. those products will have pricing power. >> so who might be next? i mean a number of the stocks in this particular sector rally.
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some of them sharply today on the idea there might be more combinations out there. >> well looking at the space, companies that come to mind based on both opportunities as well as their size. campbell's soup, you know there is family control there that would have to be negotiated with as part of any transaction. hershey is another interesting one. monde mondelez is interesting and a little bit smaller than the three companies that just mentioned are smucker's, mccormick which is a spice company, and then if we branch just a little bit outside of food we can also look at deals as large as for companies like pepsi or even coca-cola where companies that are thinking about the space of what i'll
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call sheriff throat they could be beer companies that are looking to add a company like pepsi or coke to the portfolio. >> when you say a beer company, i can't think of many that would be large enough to playing off your metaphor there, swallow either pepsi or coat. which one are you talking about? >> ab and bev could consummate a transaction of that size. so that would be the one that would most come to mind in terms of an acquirer or potentially a merger of equals. >> all right henry. we have to leave it there. thank you for joining us. henry buickmoe with giasuto advisors. a challenge to the environmental protection agency's rules to curb power plant emission argument is focused on one thing, costs. hampton pearson has more from the supreme court. >> reporter: the latest
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challenge to the epa's regulatory authority involves power plant rules slated to take effect next month that for the first time would limit mercury, arsenic, and acid gas emissions. now 20 states key players in the utility industry and the chamber of commerce have gone to the supreme court challenging the rule making process. claiming the agency refused to consider costs before imposing mercury regulations on coal and oil fired electric power plants. but the business community, the case is much bigger than the epa. >> it really is a very fundamental question of whether regulators should pay more attention to the cost of their regulation. i mean if you look at the question that the supreme court asks it really all comes down to that. >> reporter: obama administration solicitor general donald verrilli said the epa did its own cost analysis after it set health guidelines. the epa estimates the costs at
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$9.6 billion per year for the utility industry but produces 37 billion to 90 billion in benefits and prevents up to 11,000 deaths a year. environmentalists argue it's n how the epa approached auto pollution law making. >> throughout the clean air act, congress said the initial decision about whether to regulate pollution should be a decision about public health and then what congress said throughout the clean air act and in this provision that when you then set standards, you take into account costs. >> reporter: the epa rule at the heart of this case has already gone into effect. but any decision by the high court could in the future mandate cost-benefit analysis as part of regulation review that would be a game changer. for "nightly business report," i'm hampton pearson in washington. and just yesterday, by the way, the supreme court issued a decision that could affect securities lawsuits. the high court said investors could not sue companies for making misleading statements of
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opinion in an sec filing that later turned out to be false. but investors can sue if documents filed with the sec express an opinion but omit important facts. the case stems from stock offering statements filed by om omnicare. the supreme court decision was unanimous. the security and exchange commission took an important step to making it easier for small and mid-sized businesses to raise cash in the public market. the commissioners approved rule changes that allow companies to raise up to $50 million a year from the general public without certain regulatory hurdles. that's way up from the $5 million cap. this rule approval was part of the jobs act the president signed into law nearly three years ago. and american express' investor say, ken chenault said he has a strategy to overcome recent setbacks. dow component fell 1.5% day.
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it's been a struggle. mary thompson with more. what's the big takeaway from this three and a half hour conference call? >> reporter: there was one key takeaway. ken chenault said the firm's primary goal is to get back to an earnings growth of 12% to 15% by 2017 after losing a costco co-branded business. plans to use a familiar strategy to grow new and existing businesses costs, and capital management or buybacks. losing that costco business meant the company lost 10% of its profits. it's a big blow to american express. >> did they give any reason or as to why they lost at business? >> chenault made a couple of interesting comments during the presentation. he said first of all, that costco wanted amex with higher cost and the retailer wanted a credit utility for kplients. amex is focused on retaining
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those clients. wouldn't say how. good results from this in canada but interestingly, the company's ceo said if we don't continue to retain them, we're going to hav to go through restructuring. that's code for job cuts. >> another setback was the loss of a recent anti-trust suit. what if anything did they say about that? >> chenault say they're going to appeal the lawsuit. the remedies have been filed, once the judge rules on the remedies the company will request a stay of the ruling during the appeals process, so they're asking basically that can't request customers use less than american express does. >> he's had a very long run at american express. he's had a very supportive shareholder in warren buffett. >> not at all but i think a lot of people are watching this closely because the company lost a little bit of its mojo and he pointed out today, a very competitive environment. there's a lot of new technology
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but you kept going back to the fact they have a very strong core brand, strong platform lots of information to share with retailers which would help them. >> all right, mary. thank you. >> as always. all right. still ahead, big changes are coming to facebook. as that company continues to extend its reach far beyond the like button. facebook has already changed how we share parts of our lives and sometimes too many parts of them. today at its annual developers'
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conference, the social networker said it plans to change the way we communicate. shares of facebook fell with the rest of the markets today down 2.5% for fb. julia boorstin with more from the developers' conference in san francisco. >> reporter: facebook ceo mark zuckerberg telling me this year's gathering of 2500 developers is how the company is expanding beyond its core social network. to a rich portfolio of communication tools. >> over the last few years, facebook has really evolved in our approach to how we connect the world. facebook used to be this single blue app. it did a lot of different things. now facebook is a family. >> reporter: facebook announcing it's turning messenger into a platform. 40 developers are already on board to build on top of the app. enabling 600 million users to share richer content like gifs, videos and photos and allowing
quote
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businesses to communicate through messenger too. >> think about how yufl it would be if you could just message and get information instantly about whatever you need, make a reservation, buy something online. today, we're introducing a way for you to communicate with businesses right through messenger. >> reporter: today, facebook expanding adg tools, could be the go-to destination for marketers to buy mobile and video ads not just for facebook apps but the universe putting more direct competition with twitter as wel google. the company giving a window into the ways people communicate in the future. >> soon we start supporting videos and news feed. people watch more than 3 billion videos a day already in news feeds and it's some of the most engaging content in our system. we're going to bring spirkl videos and put on your headset like you're really there. >> reporter: zuckerberg has high
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hopes for oculus' technology. it could be more than just video gapes but for all the ways people communicate. for "nightly business report," i'm julia boorstin. now to another silicon valley firm. google. according to visitor logs recorded by "the wall street journal" to the white h 130 times, one a week on average during the current administration. even as the government was wrapping up its anti-trust investigation. in comparison executives from comcast of cnbc visited 20 times. eamon javers has been looking into the visits and he has more from washington. so eamon, put it in perspective. how many companies have meetings at the white house? >> well, suhe, the short answer is all of them. any company of significant size has meetings with the white house. the white house has any number of ceo panels on a regular basis and reach out to small businesses but 230 meetings is
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a lot of meetings and it really giveles you the impression that google and its staffers have sort of become part of the furniture over at the white house. whether that has helped them in the ftc case is going to be a big question here. >> do we know eamon, what the content of many of these meetings were? were they there expressly the lobby in the matter of these investigations? >> well what the white house said is no and it would have been improper for them to talk about an ongoing ftc investigation with google at the white house. what i think we're likely to find out is that google is there on a regular basis on a whole host of different issues almost everything crosses google's threshold these days including intelligence matters, but also things like girls who code and other programs that google is involved with at the white house. i think you're going to see that these meetings were on a wide range of topics not necessarily this ftc case but it's going to raise the question of why the obama folks are so close to the
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google folks. why are they seeing them so often on all these different topics? part of the answer to that i think is you have this young tech savvy obama administration coming in after the 2008 campaign that are pushing forward on the internet and sort of culturely sim pat co-with the guys at google. from top to bottom there's a closeness with the white house and folks at google. >> the president said he'll crack down on lobbying. this would suggest that hasn't happened. >> what the pres wk on eliminating a lot of people doing the revolving door in washington. they were th working for companies, coming back working for government. in the end though the white house was forced to issue a number of waivers to their own policy on that and a a number of people who were lobbyists to participate in government again even though say said at the outset they didn't want to do that in this administration and part of what
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you're seeing here is the plain fact that any white house is going to have to deal with the most powerful companies in the country including google. and that's what's happened here. the question though is d they have outside support in the white house and did that have any bearing on the ftc resolution? >> eamon, thank you very much. eamon javers in washington for us. and comcast now says it expects the regulatory review of its proposed merger with time warner to conclude in the middle of this year. the comment was made by an executive in a blog post. the $45 billion deal is looked at by the justice department and the federal communications commission. comcast owns cnbc which produces nbr. apollo education group sees a big dip in college enrollment and that is where we begin tonight's focus. the for-profit education reported a smaller than expected loss last quarter but offered up a disappointing sales projection for the rest of the year. shrinking student numbers are a big part of the story.
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after its university of phoenix, which i had in my bracket, saw a drop in enrollment. shares plunged more than 28% to $20.04. tough day for shares of land's inn. saw the earnings fall in holiday quarter as results hurt by product recall and negative currency impact. stock more than 2.5% to $34.74. paychecks meanwhile saw sales rise in its february quarter helped by an increase in revenue and human resources business. the payroll services company's earnings in line with the street's estimates. still, the stock was off on this down day by 4% to $49.20. an update now on lumber liquidators. the consumer product safety commission said they were investigating certain chinese made products sold by the wood flooring company. it will test to see if those floors contain harmful levels of form meld hide, a knowncarcinogen.
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up to $31.86. u.s. steel will temporarily idle a plant in illinois as it consolidates north american roll steel operations. this comes as there's been a weak demand from the energy sector and the move results in more than 2,000 layoffs. shares were up a few cents to $24.81. mccormick announcing a buyback and a dividend after t close. the spice maker declare add 40 cent quarterly dividend and authorizes a $4.6 million program. little change. before the close rose 1% to $75.99. and coming up a build-up of cargo out of those west coast ports also may be a high-tech solution to help break through
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and here's a look at what to watch for tomorrow. initial jobless claims will gi insight into the health of the labor market. a judge decides radioshack's bank in court and a run-up of chair janet yellin speech on friday. james folad. that's what to watch. one of the highest paid television personalities in britain and the world in the host of one of the bbc's most profitable franchises has been sacked. jeromy clarkson already suspended for allegedly punching a producer on his popular show "top gear" was told today that his contract with the bbc won't be renewed and what a contract it was. in all he pulled down about $21 million last year. clarkson who was apparently
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miffed when the producer couldn't produce a state dinner for him at a yorkshire hotel. helped turn top gear into a cash cow for the bbc. in fact it's one of the most watched television shows in the world in all. "top gear" $1.5 billion franchise. estimated 350 million people in about 170 countries it's viewed by. it's been a month since the temporary deal to end the slowdown at the west coast ports. as jane wells reports from the port of los port is getting creative to cut through all congestion. >> reporter: after months of congestion unclogging the nation's largest container port is taking longer than expected. just ask ryan mulinaro. >> a little more velocity but we still have a long way to go. >> reporter: weeks after a tentative deal was reached between shipping operators and dock workers on the west coast,
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there is still a back-up in los angeles and long beach. here's a view of that port complex one month ago from the marine traffic app. there were 30 offshore then. today, the number is down to about 20. still much higher than normal. so right here right now they've got to get this stuff moving. all kinds of experiments they're trying including an app from vc start-up that works like uber but instead calling up a car, it's a truck and instead of passengers it picks up containers. >> over 200 trucks out here right now. >> reporter: it's founded by parker and kessler. who trucks usually arrive at the port they come for a specific container which can be buried beneath the pile but with cargomatic program, they are with willing truckers who take the first container off a pile no matter where it's going. truck driver markus browder said he gets him out of the port in half the time. >> it's real quick and you're
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out of here. >> it increases the number of containers that you can leave the port by a factor of 6. >> reporter: retailers are starting to notice. >> william sonoma michael's, a newest one is perry ellis. >> reporter: right now, it's a very small experiment in one corner. mulanro is impressed. >> it brings everyone together streamlines the process. >> reporter: streamlining is exactly what the port needs right now. for "nightly business report," jane wells san pedro, california. that's it for tonight. >>
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