EU freezes aviation carbon tax

Updated 13 November 2012
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EU freezes aviation carbon tax

BRUSSELS: The European Union will freeze for a year its rule that all airlines must pay for their carbon emissions for flights into and out of EU airports, the EU executive said, following threats of international retaliation.
Flights within the European Union will still have to pay for their carbon emissions. The year-long exemption will apply to flights linking EU airports to countries outside of the bloc.
Climate Commissioner Connie Hedegaard said she had agreed “to stop the clock” to create a positive atmosphere for international talks on an alternative global plan to tackle airline emissions.
“But let me be very clear: if this exercise does not deliver — and I hope it does — then needless to say we are back to where we are today with the EU ETS. Automatically.”
The United States, China and India have put intense pressure on the European Union. Debate in the US Congress is set to resume this week on legislation to counter the EU rules.
US politicians welcomed Monday’s news, but wanted more.
“While I am pleased the EU has temporarily suspended its efforts to unilaterally impose a tax on our airlines flying over US and international airspace, the EU’s announcement does not rule out future efforts to tax foreign carriers,” said Senator John Thune, who has led the push for the blocking law in the US Senate.
EU member states still have to formally endorse the Commission’s proposed freeze. Hedegaard said she had informed representatives of all 27 member states of the Commission’s plan but could not specify how long the EU approval process might take.
Representing Europe’s biggest economy, German Environment Minister Peter Altmaier said the Commission decision was justified.
“It made clear that the EU is holding on to its view, but at the same time it is also in the position to stick to its international commitments and actions,” he said.
Some airline associations welcomed Monday’s announcement, but said the moratorium meant EU carriers operating flights within the bloc could be at a competitive disadvantage.
Environment campaigners said the European Union was giving up too much, too soon.
But they said opponents could no longer blame the European Union for any lack of progress at the UN’s International Civil Aviation Organization (ICAO), which is seeking an alternative global deal.
“The Commission, with today’s decision, has moved further than necessary given the little progress made so far at ICAO level,” Bill Hemmings, program manager at campaign group T&E, said. “There is no excuse for inaction left.”
DECADE OF DITHERING
The European Union agreed on its law after more than a decade of talks at the ICAO failed to find a way to curb aviation emissions. It always said it would modify its legislation if the ICAO could deliver an alternative.
Hedegaard said the ICAO had made good progress at a meeting in Montreal on Friday.
Efforts have intensified since the start of this year, when the EU’s requirement for all airlines to buy carbon emissions began to take effect.
The law is being phased in slowly, which means the first bills would only be sent out in April next year after the calculation of this year’s emissions. Any airline that does not submit carbon allowances by then would face stiff fines.
The proposed year-long waiver — meaning no carbon payments before April 2014 for international flights — gives the ICAO until its general assembly late next year to reach a global deal.
The Association of European Airlines (AEA) said the ICAO was the right body and that now the onus was on it.
“In their opposition to EU ETS, countries such as the USA, Russia, China and India have repeatedly stated that the issue should be dealt with in ICAO. Now they have the chance to show that they mean it,” Athar Husain Khan, acting secretary general of the AEA, said.
The cost of the EU’s aviation law is minimal, at 1-2 euros per passenger per flight, given the weakness of the EU Emissions Trading Scheme, on which the carbon price has sunk under a glut of surplus permits following the region’s economic slowdown.
The cost to aviation is expected to rise, though, and on Monday, the Commission also published draft legislation to temporarily withdraw some of the surplus allowances.
International opponents of including aviation in the EU scheme say it is a question of principle. They argue the European Union is imposing an extraterritorial tax, although the Commission says its market-based mechanism is not a tax.


Market unsure over Shire's backing of $64 billion Takeda bid

Updated 25 April 2018
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Market unsure over Shire's backing of $64 billion Takeda bid

  • Takeda shares fell 7 percent on news of possible deal.
  • Combined company would have its primary listing in Tokyo and also offer American Depository Receipts

Rare disease specialist Shire has announced it was willing to recommend a sweetened $64 billion offer from Japan’s Takeda Pharmaceutical Co. to shareholders, in what would be the biggest acquisition of a drug company this year.
But shares in Takeda extended recent losses, tumbling 7 percent as investors fretted over its ability to buy a company twice its size, raising doubts about whether Shire shareholders will accept a bid that is 56 percent in new Takeda shares.
The stock slide — 18 percent since the news of a possible bid broke — makes the cash-and-share deal less appealing to Shire shareholders, some of whom may be reluctant or unable to hold Takeda shares.
“While this offer represents a solid improvement over Takeda’s third bid (38 percent cash), we still wonder if it is enough to satisfy Shire shareholders,” said Jefferies analyst David Steinberg.
Shire shares slipped 0.8 percent to 39 pounds by 0850 GMT, well below Takeda’s 49 pounds offer, signalling skepticism about the deal as Takeda’s falling stock price erodes the bid’s $64 billion headline value.
Without a deal, Shire shares could fall back to mid-March levels of 30-32 pounds, pressuring management to find other ways to realize value. Prior to Takeda’s approach, Shire was already considering divestments and a split in its operations.
It is now four weeks since Takeda first revealed it was considering a bid and the absence of firm interest from rivals means investors see only a low chance of an interloper emerging.
The latest development, first reported by Reuters, comes after London-listed Shire rejected four previous offers from Takeda.
The fifth offer is worth 49.01 pounds per share, comprised of 27.26 pounds per share in new Takeda shares and 21.75 pounds per share in cash. That represents a 4.3 percent premium to Takeda’s fourth proposal on April 20 and an 11.4 percent premium to its first approach on March 29.
Shire, a member of Britain’s benchmark FTSE 100 stock index, said its board agreed to extend a Wednesday regulatory deadline to May 8 so Takeda can conduct more due diligence and firm up its bid. Shire added the deadline may be extended further if needed.
Any deal is subject to the resolution of several issues, including completion of due diligence by Shire on Takeda, the Dublin-based company said.
A deal would significantly boost Takeda’s position in gastrointestinal disorders, neuroscience, and rare diseases, including a blockbuster haemophilia franchise.
If successful, it would be the largest overseas acquisition by a Japanese company and propel Takeda, led by Frenchman Christophe Weber, into the top ranks of global drugmakers.
Weber, who became Takeda’s first non-Japanese CEO in 2015, has said publicly it was looking for acquisitions to reduce its exposure to a mature Japanese pharmaceutical market.

FINANCIAL STRETCH
The combined company would have its primary listing in Tokyo and also offer American Depository Receipts — a move that would give Shire investors an opportunity to cash out more easily.
But the transaction would be a huge financial stretch, and Takeda investors have been skeptical about the merits of a Shire deal, given the size of the potential purchase and concerns that a large share issue will be needed to fund it.
Moody’s said the deal would pile up debt and hit Takeda’s credit ratings. “This huge acquisition bodes a spike in leverage that could result in a multi-notch downgrade,” said analyst Yukiko Asanuma.
Ambitious cost cutting is also seen as necessary to make the deal pay, and the uncertainties facing an enlarged group would spell a big change in the investment case for holding Takeda.
“Takeda’s shares have been valued for their stability and relatively high dividend,” said Daiwa Securities analyst Kazuaki Hashiguchi, adding this made them attractive even to investors without specialist knowledge of the drug sector.
Takeda, now worth $33 billion by market value, had 466.5 billion yen ($4.3 billion) in cash and short-term investments as of the end of December. It said yesterday it intended to maintain its dividend policy and investment-grade credit rating following the deal.
Dealmaking has surged in the drug industry this year as large players look to improve their pipelines. A Takeda-Shire transaction would be by far the biggest.
Shire has long been seen as a likely takeover target.
Botox-maker Allergan Plc said last week it was considering making a rival offer, only to scrap it hours later due to pushback from shareholders. Shire was also nearly bought by US drugmaker AbbVie Inc. in 2014, until US tax rule changes caused the deal to fall apart.
Shire traces its roots back to 1986, when it began as a seller of calcium supplements to treat osteoporosis, operating from an office above a shop in Hampshire, southern England. Since then, it has grown rapidly through acquisitions to generate revenues of about $15.2 billion last year.
But it has been under pressure in the past 12 months due to greater competition from generic drugs and debt from its $32 billion acquisition of Baxalta in 2016, a widely criticized deal.
It announced last week a sale of its oncology business to unlisted French drugmaker Servier for $2.4 billion.