Rollercoaster year puts business to the test

Last year saw “Brexit” and Trump change the landscape, while agribusiness consolidated and Europe’s banks fell in rankings.

When Nikesh Arora, the expected heir to one of Japan’s most successful technology groups, abruptly resigned in June after less than two years at SoftBank, founder Masayoshi Son blamed his own greed.

The 59-year-old said he was not ready to hand over the company he founded to the former Google executive as promised, saying he had to “work on a few more crazy ideas.”

Investors did not need to wait long to find out what the chief executive was up to next. A month later, and just weeks after the United Kingdom voted to leave the European Union (EU), SoftBank agreed to take over British chip designer Arm Holdings for $32 billion. Differences in opinion over the acquisition, it appears, was what helped kill the Son-Arora bromance, in addition to a clash over succession plans.

SoftBank’s crazy spending spree did not end there. After the summer had passed, Mr. Son was off to Riyadh to meet Prince Mohammed bin Salman, Saudi Arabia’s deputy crown prince, to launch a $100-billion technology fund.

In December, Mr. Son boasted to reporters in New York that he had made a $50-billion pledge to invest in US start-ups, in a meeting with president- elect Donald Trump. The move spurred speculation that Mr. Son would revive talks for a merger between SoftBank-owned Sprint and rival T-Mobile USA.

Analysts say Mr. Son will need to follow through on his pledge to restore the company’s balance sheet.

Werner Baumann had been chief executive of Bayer for just two weeks when he launched a takeover bid for US seedmaker Monsanto in May.

Formerly Bayer’s finance director and a lifer at the company, Mr. Baumann saw an opportunity via the deal to transform the aspirinto-crop chemicals conglomerate into the market leader of the agribusiness industry, while making Bayer too large for any rival to easily swallow.

Following four months of backand-forth with Monsanto’s board and shareholders, the 54-yearold succeeded in clinching a $66-billion takeover agreement in September after raising Bayer’s initial offer by only about 5%.

The deal, one of the largest in 2016, was aided by three factors. Monsanto, which unlike Bayer is fully exposed to the agriculture sector, had been weakened by a downturn in commodity prices.

Second, Monsanto’s chairman and chief executive Hugh Grant had spent much of the previous five years trying to buy Swiss crop chemicals group Syngenta. Those failed attempts put Syngenta in play for other prospective suitors. By February, ChemChina, a Chinese state-owned enterprise, had agreed a friendly $44-billion takeover.

Third, Monsanto’s main US rivals, Dow Chemical and DuPont, had agreed to a $ 130- billion merger in December 2015 that would see their respective agribusiness units spun off into a stand-alone company after the deal completes. The situation left Monsanto with limited options to escape Bayer’s clutches.

Now, the trio of deals may lead to over 60% of the agribusiness industry being controlled by three companies — Bayer, ChemChina and the Dow Chemical and DuPont unit. However, that is only if the transactions are approved by regulator.

Nissan shrugged off uncertainty unleashed by the “Brexit” vote to make the most significant investment decision by a company since the EU referendum by pledging to build new car models in the UK.

The Japanese car maker said its decision to assemble two models including the Qashqai at its northeast of England factory “follows the UK government’s commitment to ensure that the Sunderland plant remains competitive.”

The details of the assurances offered by the government to Nissan remain unclear, and ministers have faced repeated questions by MPs about whether the commitments are backed by any taxpayer money.

For the government, securing the Nissan investment was crucial, as other car makers including Toyota and General Motors’ Vauxhall unit also have investment decisions to make.

Nissan chief executive Carlos Ghosn said he could not delay the investment decision around the new Qashqai sport utility vehicle until after the UK’s exit, adding that any changes in trading conditions would have to be compensated by the British government.

With Nissan and Renault sharing some manufacturing through their alliance, the Japanese car maker would have been able to move production of the Qashqai to Spain.

Losing the Qashqai — which accounts for half the vehicles made in Sunderland — could have rendered the factory uncompetitive.

Europe’s investment banks have been losing share ever since the 2008 crisis, but 2016 was the year when they ceded all top five places in the global investment banking ranking to their US rivals.

Industry monitor Coalition reported in September that JPMorgan, Citi, Goldman Sachs, Bank of America and Morgan Stanley were leading the rankings for global investment bank fees, having edged out Deutsche Bank.

Deutsche attributed its investment banking decline to a strategic revamp that has drained it of resources.

Indeed, similar strategic choices have inflicted similar wounds on the once mighty Credit Suisse, Barclays, UBS and Royal Bank of Scotland, which are now much smaller.

But US banks argue that the loss of share for Deutsche and other Europeans is not just because they have cut back on investment banking, but also because they lost focus and the faith of clients. Their argument is that European banks have spent the past few years distracted by capital worries, which US banks dealt with much earlier.

But this suggests European banks may be on course for a rebound in 2017. Most are nearing the end of their strategic turnarounds, leaving them more time for their day jobs.

A rare combination of rising prices, falling costs and management discipline helped the mining sector stage a remarkable comeback.

Burdened with debt and under fierce attack from hedge funds, mining stocks tumbled at the start of the year as concerns about slowing growth in China shook markets.

Since then, the sector has enjoyed a change in fortunes, triggered by a sharp surge in commodity prices and a growing realization that 2017 could be a year of bumper payouts for shareholders.

From a 12-year low in January, the FTSE All- Share Mining index has almost doubled in value and will end the year as one of the best performing sectors in Europe. Anglo American and Glencore are up 280% and nearly 200% respectively year to date.

Usually when commodity prices are rising, miners crank up investment and dealmaking activity. 2016 has been different. Alarmed by the downturn, top mining executives have not sunk billions of dollars into new projects.

Instead, they have continued to trim capital expenditure, cut costs and put profits above chasing market share.

This has allowed the benefits of higher commodity prices to flow straight to the bottom line.

Glencore, the miner and commodity trader that axed payments in 2015, has already announced plans for a dividend of at least $1 billion next year.

Anglo American is expected to reinstate its dividend in 2017, while Rio Tinto could have enough surplus capital to launch a $ 2- billion share buyback, if commodity prices hold.

France’s EDF received the goahead in September from the UK government to build an £18-billion nuclear power station in Southwest England.

Hinkley Point C in Somerset — due to supply about 7% of the UK’s electricity demand — is a crucial part of securing the country’s energy needs as Britain phases out coal-based power.

For EDF, the deal is a chance to show that its European Pressurized Reactor technology can be built on time and to budget.

Other projects involving the EPR design have suffered big cost overruns and significant delays.

For the Chinese, which are financing one-third of Hinkley, it is a chance to get a foothold in the European nuclear industry.

Some in EDF warned that the balance sheet of the French utility was too stretched and that any construction delays at Hinkley could destroy the company. The chief financial officer of EDF resigned over these concerns.

In the UK, critics questioned the guaranteed electricity price for Hinkley’s electricity that was agreed with the British government. There were security concerns by British Prime Minister Theresa May about Chinese involvement in such a project.

But she approved Hinkley, albeit under revised terms. EDF was barred from selling its stake during construction, and the UK said it would take a “golden share” in future nuclear plants.

Few businesses have made as many big pivots as Uber in 2016. At the beginning of the year, the ride-hailing company was pouring money into its lossmaking China business as quickly as it could, while chief executive Travis Kalanick spent one in five days there.

That headlong rush into developing markets drove Uber to losses of $1.3 billion in the first half.

That is believed to be a record for a private company in Silicon Valley, but Uber’s investors did not blink.

Saudi Arabia’s sovereign wealth fund invested $3.5 billion in June, and then a few weeks later, Uber raised a line of credit of more than $1 billion. Both of these valued the group at more than $60 billion.

A pivot point arrived at the beginning of August, when Uber cut its losses in China, selling its business to rival Didi Chuxing in exchange for taking a stake in the Chinese company and receiving a $1-billion investment from Didi. The deal also saw the rivals take seats on each other’s boards.

Uber focused on a different area in the second half: expanding its research into self-driving vehicles. The company made its largest ever acquisition in August, buying Otto, a start- up working on technology for selfdriving trucks. In September, Uber started carrying passengers in its pilot self-driving taxi fleet in Pittsburgh, and then expanded these tests to San Francisco.

These new efforts are part of the reason Uber’s deep losses have continued. The company lost $800 million in the third quarter, and had net revenues of $1.7 billion.

A bright start to the year for Samsung Electronics went up in smoke after it took the unprecedented decision to axe its Galaxy Note7 line following safety issues that saw the smartphone banned from aircraft.

By September, Samsung had moved to replace 2.5 million Note7s, amid reports that the handset was overheating and catching fire. It laid the blame on a battery supplier and was initially praised for acting quickly.

That confidence collapsed however, as the replacement models also started to catch fire, eventually triggering a full recall and the decision to kill the model.

Analysts estimated that the cost of the recall could be $2.3 billion, while Samsung would lose out on sales of up to $17 billion. Samsung said its operating profit would decline 3.5 trillion won ($3 billion) over the next six months, taking the total cost of the safety debacle to more than $5 billion.

The end of the year proved frantic as it paid $ 8 billion for automotive technology company Harman Industries and came under pressure from activist shareholders to return almost half of its $60-billion cash pile to investors and reform its structure.

Social networks such as Facebook and Twitter came under scrutiny.

The US election crystallized one old fear, that they let people live in filter bubbles, and created a new one, that fake news was spreading faster than real news.

Facebook was in the line of fire. Stories claiming the Pope endorsed Donald Trump and that Hillary Clinton’s associates were involved in a pizza-parlor pedophile ring went viral. Facebook responded by saying it was working on ways to flag the fakes in the news feed.

Twitter was adopted by Mr. Trump as his trumpet, bypassing the questioning media. The platform was also criticized for allowing hate speech from the “alt right.”

Twitter’s stock came under pressure because of user growth problems that have dogged it for years and the once gigantic Yahoo signing a deal to be sold to Verizon for just $4.8 billion.

But while Twitter failed to find a buyer, after talks with Google and Salesforce, and Verizon pushed for an even lower price after Yahoo revealed a large data breach, LinkedIn was quids in with a $26-billion sale to Microsoft.

Sir Philip Green said he made “an honest mistake” when he sold BHS, a department store chain that employed 11,000 people, to a consortium led by a former bankrupt.

MPs sifting through the wreckage pronounced him “the unacceptable face of capitalism.”

The demise of BHS in April was Britain’s biggest high street failure since Woolworths toppled over in 2008. It dented the retirement incomes of thousands of former workers, shouldering an official rescue fund with what it says could be a £300-million bill.

Dominic Chappell had never run a retailer, or any company approaching the size of BHS, when he bought the chain for £1 last year. He has acknowledged receiving £4.1 million in salary, bonuses, fees and loans during his 13-month spell at BHS.

But the brunt of resentment has fallen on Sir Philip. He is facing a campaign by MPs to strip him of his knighthood and the prospect of legal action by the watchdog.