Business Watch -- WSJ

GLENCORE

Genesee & Wyoming In Coal-Haulage Deal

SYDNEY -- Glencore PLC has agreed to sell its coal-haulage business in Australia's New South Wales state to U.S. railroad operator Genesee & Wyoming Inc. for 1.14 billion Australian dollars (US$874 million), the latest deal by the company aimed at reducing its debt load.

Glencore last year had promised to sell operations to cut borrowings after a mounting debt pile and sagging commodities prices sent its shares tumbling. The company has since agreed to carve off parts of its operation including a 40% stake in its agricultural business, which it sold to Canada's largest pension fund, Canada Pension Plan Investment Board, for US$2.5 billion in cash.

"The sale of the GRail business forms another significant part of Glencore's debt-reduction program," the Swiss commodities trader and mining company said in a statement Thursday.

Glencore said that after the deal is completed Genesee & Wyoming, based in Darien, Conn., would manage much of Glencore's coal-transport in Australia's Hunter Valley region under a 20-year contract.

GRail, also known as Glencore Rail, currently hauls about 40 million metric tons of its parent company's coal output from mines in the Hunter Valley to the Port of Newcastle, the world's biggest coal-export hub, each year.

"We established GRail in 2010 and have steadily grown it to become the third largest coal haulage business in the country," said Peter Freyberg, head of Glencore's global coal assets. "It has played a very important role in reducing costs and improving the overall efficiency of Australia's largest coal chain in the Hunter Valley."

The deal will need approval by Australia's foreign-investment regulator, the company said.

Genesee & Wyoming already has operations in Australia, including running more than 3,000 miles of track in South Australia state and the Northern Territory, according to its website.

--Rhiannon Hoyle

ALKERMES

Stock Soars on News Of Depression Drug

Alkermes PLC said its depression drug helped patients not responding to standard treatments, news that added more than $3 billion to the company's market value in after-hours trading.

The company said that in a late-stage trial, its ALKS 5461 treatment significantly improved depression scores in patients who had an inadequate response to standard therapies. The most commonly reported adverse events associated with the treatment were nausea, dizziness and fatigue.

Alkermes said it plans to request a meeting with the U.S. Food and Drug Administration to discuss the filing strategy for the treatment, which has a fast-track designation.

Shares of Alkermes rose 47% to $64.10 in after-hours trading. At that price, the company has a market cap of $9.7 billion, up from its valuation of $6.59 billion at the end of the regular session Thursday.

--Josh Beckerman

S. KIDMAN

Australian Faction Tries to Block Sale

CANBERRA, Australia -- Nationalist lawmakers have teamed up with local ranchers to try to counter a bid involving Chinese buyers for the S. Kidman & Co. cattle empire, in what would be one of Australia's biggest agribusiness deals.

Independent and small-party lawmakers courted by Prime Minister Malcolm Turnbull to backstop his one-seat majority, threw their influence Thursday behind a potential "all-Australian" offer for the Kidman ranches, which cover an area larger than Ireland.

The bid by the BBHO syndicate, yet to be formalized, is expected to value the ranches at 385 Australian dollars (US$297 million) and would pit some of Australia's wealthiest ranchers against mining billionaire Gina Rinehart and China-based partners Shanghai CRED Real Estate Stock Co. They have offered A$365 million for Kidman.

The cattle empire includes the world's largest cattle ranch: Anna Creek Station, located beside a strategic missile range.

Surging Chinese investment in housing and trophy agriculture assets is triggering a backlash in major economies from Europe to the U.S., as well as Australia. The government has repeatedly stated the country's openness to foreign, and specifically Chinese, investment, but Mr. Turnbull has faced pressure from within his conservative coalition and from fringe lawmakers to oppose any foreign farm takeovers.

The government blocked last year an offer from Shanghai Pengxin Group Co. of China to buy Kidman outright, arguing that the deal covered too much land and overlapped the Woomera missile test range. And in May, Treasurer Scott Morrison, who has veto power over deals, ruled that an offer from China-based Dakang Australia Holdings and Australian Rural Capital Ltd. was against the national interest.

In August, Canberra blocked two rival bidders, from Hong Kong and mainland China, from taking a controlling stake in Ausgrid, the country's largest electricity network. The state government of New South Wales said Thursday that it had agreed to lease the Ausgrid network to two Australian pension funds for A$16 billion.

"Despite my name I'm not xenophobic," said Sen. Nick Xenophon, whose NXT Party controls a crucial Parliament voting bloc. "But in this case we must consider a credible, local alternative bid that is commercially competitive with the one that's been put up by Gina Rinehart and her Chinese partners."

The Kidman empire, founded in 1899, has leases covering 40,000 square miles, more than 1% of the continent, across South Australia, Western Australia, Northern Territory and Queensland. The family-owned empire is one of Australia's biggest beef producers, with an average herd size of 185,000 cattle and exports to the U.S., Japan and Southeast Asia.

The holding went on sale almost 18 months ago.

Independent lawmaker Bob Katter, a political maverick and vocal critic of foreign farm investment, opposes the bid involving Shanghai CRED, even though Australian Ms. Rinehart would have two-thirds control.

"Australians should own their land," Mr. Katter said, standing alongside BBHO syndicate leader and Northern Territory rancher Sterling Buntine. The rival Rinehart bid "involves no development for Australia except baubles and tomahawks and blankets," Mr. Katter added. "That's what's on offer to us."

Mr. Buntine said BBHO syndicate members were holding talks with bankers on Friday and expected to launch a counteroffer by the weekend, dependent on successful talks. Other members of the group include South Australian cattle king Tom Brinkworth, who in 2013 claimed the record for the world's largest cattle drive.

"We are fair dinkum about this," he said, using an Australian term meaning they are earnest. "We intend to fight for these places. It is our intention to take this great Australian company and legacy and grow it into a global brand."

Ms. Rinehart's Hancock Prospecting Pty. Ltd. said this month that a deal with Kidman had been reached under which her company would control 67% of the cattle-ranch empire and Shanghai CRED the remaining 33%. Shanghai CRED was part of the Dakang consortium that earlier failed in its bid to buy Kidman.

--Rob Taylor

MERGER

Walgreens, Rite Aid Push Out Deadline

Walgreens Boots Alliance Inc. and Rite Aid Corp. pushed out the deadline to close their $9.4 billion merger to next year amid delays in selling stores the two sides have to divest to get the deal past federal regulators.

The companies now expect to close the deal in early 2017, as the previous timetable of completing the transaction by the end of this year is no longer feasible. The companies expect to agree to sell between 500 and 1,000 stores by the end of 2016, though any transactions will also require approval from the Federal Trade Commission.

The delay is the latest adjustment to a deal that was announced almost one year ago after Walgreens said in September it would have to divest more stores than it previously expected. And it comes at a time when federal authorities have scuttled several other transactions, including the merger of Staples Inc. and Office Depot Inc. and Electrolux AB's acquisition of General Electric Co.'s appliance business.

The protracted process has raised doubts as to whether the deal will reach the finish line. Rite-Aid shares have persistently traded well below the $9 a share offered by Walgreens and dipped below $7 earlier this week. However, both sides have continued to express confidence that they will eventually get the green light to merge.

But the affirmation that the deal is on track was cheered in markets. In morning trading Thursday, Rite-Aid shares rose 7.9% to $7.18 and Walgreens shares rose 3.8% to $80.07.

Meanwhile, Walgreens continues to push its plan to win more pharmacy customers, improve margins in its U.S. stores and cut costs throughout its enterprise. Thursday, Walgreens posted an increase in fourth-quarter profit as revenue edged higher.

In its largest division, the U.S. retail pharmacy business, Walgreens posted a 3.2% increase in sales at existing stores, with a stronger pharmacy sales offsetting a small decline in the front-end of the stores, where the company sells food and other everyday items. The company filled 3.9% more prescriptions versus a year ago as it continues to get more volume from Medicare patients.

Walgreens is hoping to win more patients to its pharmacies with a string of new agreements with health-care companies that encourage patients to use Walgreens pharmacies. Those include a recent partnership with Prime Therapeutics, a pharmacy-benefits manager owned by Blue Cross and Blue Shield health plans, that makes Walgreens a preferred pharmacy where patients pay less to fill prescriptions. It also replaced CVS Health as in-network pharmacy for Tricare, a health-care program for military personnel and their families.

By getting more patients into its drugstores to fill prescriptions, Walgreens hopes they will also shop more too. "These close partnerships are central to our strategy to increasing volumes to our pharmacies and driving footfall to our stores," Walgreens Chief Executive Stefano Pessina said.

That strategy is different than the one employed by Walgreen's main drugstore rival, CVS Health Inc., which owns a large pharmacy benefits management business in Caremark.

"This is the beauty of being independent," Mr. Pessina said. "We can work with everybody and we can offer our services to everybody and we are not seen as particularly skewed to this or that player in the market."

For the quarter, Walgreens reported a profit of $1.03 billion on flat revenue of $28.64 billion.

--Paul Ziobro and Austen Hufford

(END) Dow Jones Newswires

October 21, 2016 02:48 ET (06:48 GMT)

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