Concerns about state of global economy have increased: UK's Osborne

GNN London - Stagnation in the euro zone, recession in Japan and geopolitical crises have increased concerns about the state of the global economy, British finance minister George Osborne said on Friday.

Osborne said economic performance in the euro zone was a cause of "real worry and concern", particularly in Britain whose main export markets are in the bloc.

"There is definitely more concern around about the state of the global economy than there was a few months ago, you see that not just when you talk about Europe," he told an audience of business leaders in London.

"Japan has gone into recession and there are all the geopolitical risks out there."

Earlier this week, British Prime Minister David Cameron said "red warning lights" were flashing over the state of the global economy. Britain's opposition Labour party said he was "making excuses" for a slowdown in Britain's growth rate ahead of national elections in May.

Speaking at the same event as Osborne, Italian Economy Minister Pier Carlo Padoan said he was confident that monetary policy was being used to do "whatever it can" in the euro area to support the recovery and move the inflation rate towards its target.

Padoan said progressive integration within the European Union had been a key driver of growth and jobs over the last decade and plans for a capital markets union would help continue this.

The EU's new financial services chief has said he wants to create an integrated market for raising money through bonds, shares and other financial instruments over the next five years and will set out his plans by the middle of next year.

Channelling more money into small companies is seen as crucial for Europe's efforts to boost its fragile economy because small and medium-sized enterprises provide two out of every three private-sector jobs in the EU.

"What we need to do is to take decisive action towards further integration of capital markets which are an essential instrument for growth," Padoan said.

Osborne said there had been "a marked improvement" in financial and credit conditions in Britain but more needed to be done, particularly for small and medium-sized businesses. Europe as a whole was still too dependent on bank credit as source of finance for businesses, he said.

"There is a real opportunity," he said of plans for capital market union. "Let's not turn this into a bureaucratic exercise or an empire-building exercise in the European Union, let's turn it into a growth-promoting exercise to support the expansion of businesses."

(GNN, Reuters, Aip)(Editing by Stephen Addison)

Aviva in $8.8 billion deal to buy Friends Life after pensions shake-up

GNN London - British insurer Aviva (AV.L) said on Friday it had agreed terms on a possible deal to buy rival Friends Life (FLG.L) for 5.6 billion pounds ($8.8 billion) as British pension reforms put pressure on insurance companies to find new business.

Pension providers are rushing to reinvent themselves after the government in March unexpectedly removed obligations for people to buy an annuity, or income for life, at retirement, sharply cutting annuity sales.

Aviva's all-share offer of 0.74 shares for every Friends Life share implies a 15 percent premium to the closing price on Friday. The board of Friends has indicated it will recommend the offer, which equates to 399 pence per Friends share, the companies said in a statement.

The deal would strengthen Aviva's balance sheet and reduce its leverage, as well as boosting its assets under management, it said.

Brokerage Panmure Gordon & Co downgraded Aviva following the announcement.

"Whilst there will be some cost synergies and it could accelerate Aviva's dividend paying capability it is also at odds with management's previous comments about Aviva being too UK-centric," Panmure analyst Barrie Cornes wrote in a research note.

The brokerage cut its target price to 505 pence per share from 585p previously and downgraded its recommendation to "Hold" from "Buy".

Mark Wilson, former boss at Asian rival AIA (1299.HK), joined Aviva as chief executive two years ago and has pushed a restructuring agenda across the group, selling off businesses, cutting costs and improving profitability.

Created in 2008 by entrepreneur Clive Cowdery as Resolution, Friends Life was known for buying up closed books of business from other insurers and using its scale to make cost savings in managing them as they gradually expire, or "run off", rather than writing new business itself.

Friends Life has a stronger presence in the growing "bulk annuity" market, in which insurers take on the risk of part or all of a company's pension scheme.

"The transaction would...more than double Aviva’s corporate pension assets under administration and create new opportunities," the statement said.

Friends Life posted a 7 percent drop in operating profit in the first half, while Aviva saw a 4 percent rise.

The two companies combined would have a stock market valuation at Friday's London market close of around 20.5 billion pounds.

Under the terms of the offer, Friends Life shareholders would own around 26 percent of the combined group. They would also receive an amount in cash equal to any Friends Life final dividend for the 2014 financial year.

Friends Life shares are down 2 percent this year, while Aviva has gained 20 percent.

(GNN, Reuters, Aip)(Additional reporting by Kate Holton; editing by Jason Neely)

Related articles

• Insurance companies Aviva and Friends Life set to merge (itv.com)
• Aviva Agrees To Possible $8.8 Billion Deal To Buy Friends Life (businessinsider.com)
• Aviva agrees to possible 5.6 bln stg deal to buy Friends Life (dailymail.co.uk)
• Aviva Agrees £5bn Deal To Buy Friends Life (news.sky.com)

Lockheed sees buyer for hybrid cargo airship in 2015

GNN - Lockheed Martin Corp (LMT.N) expects to reach an agreement next year with a launch customer for a giant new hybrid airship that would revolutionize the way oil and mining companies haul equipment to the Arctic and other remote areas without roads.

The initial version of the airship, filled mostly with helium, would carry 20 tons of cargo, but could easily be scaled to roughly the size of a football field with 500 tons of capacity, Robert Boyd, an engineer with Lockheed's Skunk Works R&D house, told Reuters in a rare media visit to the sprawling facility some 60 miles from Los Angeles.

Boyd, who started working on airships in 1991, said he was optimistic about finding an initial customer for the manned prototype airship, also known as P-791, next year, nearly a decade after the airship's first flight in 2006.

"We're months away, not days, not years," Boyd told Reuters. "By 2015, we'll be out there on the development track ... By 2018, we should see these in operation."

Lockheed is the Pentagon's No. 1 supplier, but it is targeting a commercial market for the slow-moving airships that have four hovercraft-like landing pads and can set down on nearly any flat surface, including sand, snow and even water.

"It's not the most sexy of airplanes, but it does its job," Boyd said.

Initial buyers would likely include small airlines or other firms that ship cargo to remote areas for oil, gas or mining companies, he said. He said the aircraft were also very safe because they are filled with helium, which does not burn.

He said climate change might boost demand with warmer conditions cutting the time that ice roads could be used.

The airships could help countries like Indonesia develop remote territories that lack ports, and could prove useful in providing relief supplies during natural disasters.

U.S. military officials had also expressed interest, he said, but would likely contract for cargo transportation services rather than buying the airships themselves.

Eventually, Lockheed could sell hundreds of the smaller airships and thousands of the larger ones, Boyd said.

He said the airships would likely cost tens of millions of dollars, making their cost comparable to what operators now pay to truck cargo via seasonal ice roads, but about five to 10 times cheaper than much cheaper than transport via helicopters.

(GNN, Reuters, Aip)(Reporting by Andrea Shalal; editing by Gunna Dickson)

Exclusive: With Baker Hughes, Halliburton cements leading North Dakota role

GNN - Halliburton Co's $35 billion takeover of Baker Hughes Inc will create an oilfield services powerhouse in North Dakota with more than half the cementing market and a leading position in fracking, according to data seen by Reuters.

The deal, announced on Monday, will help Halliburton better compete with global leader Schlumberger NV, as well as smaller peers Calfrac Well Services Ltd, Trican Well Service Ltd and other oilfield services companies in North Dakota, the second-largest oil producer in the United States.

The North Dakota market share projections for the combined company will be of keen interest to competitors and regulators. The deal faces stiff antitrust hurdles and likely will receive close scrutiny from regulators in the United States and European Union. Halliburton has said it would be willing to shed units that generate revenue of $7.5 billion to ensure the deal closes.

Even though oil production in the state's Bakken shale formation has grown exponentially in the past five years, more than 35,000 new wells are expected to come online in the state by 2030, highlighting the ongoing need for the services these companies provide.

"We will rule unconventionals now," one Halliburton manager in North Dakota told Reuters, speaking on the condition of anonymity.

In the Williston Basin, the oil-rich geologic formation holding much of North Dakota's Bakken and Three Forks shales, the combined company will control 53 percent of the market to line a new well with cement to prevent leaks, according to the data. The step is required by regulators and a key process to safeguard drinking water supplies.

The combined company will also control roughly 36 percent of the Williston Basin market for hydraulic fracturing - the process commonly known as 'fracking' where water and sand are blasted into a well at high pressure to extract oil. And roughly 35 percent of the market for directional drilling, the process to drill wells horizontally, will be held by the combined company, according to the data.

The Williston Basin market prowess in cementing and directional drilling would eclipse the united company's global share of those markets. Fracking market share in the basin would nearly match the new Halliburton, globally.

UNIFORM PRICING

Halliburton is very interested in Baker Hughes' artificial lift division, which makes products that help old wells boost their productivity, as well as its production chemicals unit, according to footnotes accompanying the data.

In a statement to Reuters, Halliburton said it is too early to discuss the status of the combined company. "It is important to remember that until the close of the transaction, Halliburton and Baker Hughes remain separate companies," Halliburton spokeswoman Emily Mir said.

It was not immediately clear what Schlumberger's market share is for various products and services in North Dakota, but the Halliburton-Baker Hughes tie-up gives the combined company clear dominance in most oilfield services performed in the state.

Schlumberger did not respond to a request for comment.

The deal could lead to higher prices for some oil producers. Baker Hughes historically has priced its services below Halliburton, and the deal will allow Halliburton to make pricing more uniform. Continental Resources Inc, for instance, uses a plethora of oilfield service companies for various well completion processes, often choosing the lowest bidder.

The deal also gives Halliburton access to Baker Hughes' extensive North Dakota real estate holdings, including a training center it built earlier this year. Halliburton currently trains employees at centers in Oklahoma and Colorado.

(GNN, Reuters, Aip)(Editing by Terry Wade and Muralikumar Anantharaman)