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Xerox Prepares Hostile Buyout Bid for HP; Westpac CEO Steps Down Over Money-Laundering Scandal; At Least 21 Dead in a 6.4-Magnitude Earthquake in Albania. Aired 3-4p ET
Aired November 26, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:14]
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: An hour to the closing bell and well, we were records last night, so we're up across
the board, but there's been a bit of a wobble there this morning. Not sure what that was about, but small gains, but they are enough to ensure all
three indices are at a record.
Those are the markets, and these are the reasons why. The biggest listing of the year, Alibaba's move is a political event as much as an economic one
in Hong Kong.
Xerox won't go quietly. It's going hostile in its bid to take over HP.
And a tug of war. Ford tells Tesla, we will meet you in the parking lot.
We are live in the world's financial capital, New York City. What a spectacular winter's day it is today. It is Tuesday. It is November the
26th. I am Richard Quest, and yes, I mean business.
Good evening. Tonight, one of China's technological crown jewels comes home figuratively. Alibaba's shares jumped nearly seven percent with its
Hong Kong debut. This is a secondary listing worth around $13 billion dollars. It's the largest of the 2019 IPOs and the second largest in Hong
Kong in nearly a decade.
It's been viewed as a vote of confidence in the city after six months of clashes between the government and pro-democracy protests. It's a hedge
for Beijing against any potential U.S. crackdown on Chinese companies.
All the while this was the scene outside the exchange, riot police standing guard facing down protesters. A stark reminder of the struggle that
continues to grip Hong Kong. Sherisse Pham is in Hong Kong.
(BEGIN VIDEOTAPE)
SHERISSE PHAM, CNN BUSINESS REPORTER: Ali Baba debuting with a bang here in Hong Kong.
(BEGIN VIDEO CLIP)
CROWD: Three, two, one, yes.
(END VIDEO CLIP)
PHAM: Shares popping on the open, ending the day up six and six tenths of a percent. Alibaba, of course already trades in New York. The company had
a blockbuster debut there in 2014, raising $25 billion in what remains the world's largest IPO.
But Alibaba's first choice was Hong Kong. It didn't work out because of a disagreement over Alibaba's shareholding structure. CEO Daniel Zhang
calling today's listing a homecoming.
(BEGIN VIDEO CLIP)
DANIEL ZHANG, CEO, ALIBABA (through translator): We have done what we said five years ago that if it was allowed, Hong Kong, we would come back.
(END VIDEO CLIP)
PHAM: This is a big win for Beijing, a symbolic homecoming for one of China's most famous tech companies. Listing in Hong Kong now makes it
easier for investors in China and elsewhere in Asia to buy into Alibaba.
The strong debut, also a win for Hong Kong. This city has been rocked by months of protests and political unrest. The high profile listing from
Alibaba, a real boost of confidence in Hong Kong and its financial markets.
Alibaba could raise up to $12.9 billion in the secondary listing that would make it the world's largest public debut so far this year. Sherisse Pham,
CNN, Hong Kong.
(END VIDEOTAPE)
QUEST: Jamie is with me. Jamie Metzl, Senior Fellow at the Atlantic Council. His latest book, "Hacking Darwin" explores the U.S.-China rivalry
over science and technology. Good to see you, sir.
JAMIE METZL, SENIOR FELLOW, ATLANTIC COUNCIL: Nice to see you, too.
QUEST: And so why did -- why did they decide to go back to Hong Kong? They have a listing in New York, their primary listing is here. That seems
to work well. What was the necessity for having Hong Kong?
METZL: There are a couple things. First, they're worried about what may happen in the United States. There are people in the United States, high
levels in the U.S. government who are talking about restrictions on Chinese companies listing on U.S. exchanges. So this was an insurance policy
against that. It brings them closer to home, where they're in their home market and their home government. The government in Beijing can have a
little more protective influence.
Secondly, they wanted to give a vote of confidence, not just for Hong Kong, but for the Beijing government in the context of what's -- of the tumult
that we're seeing in Hong Kong.
QUEST: Okay, but how -- I mean, dual listings are nothing new. Most international companies have one at home and one in New York or vice versa?
Why is this one any different? If it is, between -- the relationship between the two listings?
METZL: Well, there's two. So originally, when Alibaba listed in New York, there was a question. They wanted to have two different levels of shares
and that wasn't allowed in Hong Kong and that was why they went to New York originally.
[15:05:00]
METZL: Now they want to have it again so that they can be closer to their home market and they can be within the protective grasp of Beijing because
there's a lot of uncertainty with what's going to happen in the U.S. regulated markets, particularly in the context of the U.S.-China trade
rivalry.
QUEST: So let's talk about that U.S.-China -- the latest developments. The President today making some obscure comments about Hong Kong and his
relationship with President Xi. But saying that a deal was close by.
METZL: Yes, we've heard that over and over and over, maybe it is; maybe it isn't. But certainly, one thing is clear, the relationship the United
States and China is rocky. It is going to remain rocky and there's going to be ups and downs. And that's going to create a lot, it is already
creating uncertainty for both the U.S. and Chinese companies.
QUEST: But they did the Phase 1 deal. Supposedly, they came out and told us all about it. What's taking so long? I mean, they made a big show of
announcing something when the last time they had the talks in Washington.
METZL: Right.
QUEST: The Phase 1. Why haven't they actually now inked that?
METZL: There's a few different reasons. One is because there isn't an agreement on the core deal, and because it is politically sensitive on both
sides. If Xi Jinping is seen as making too great of a compromise to Trump, that's going to be a problem for him.
And Trump at the end of the day, if he just gets some additional Chinese purchases of agricultural products, that's going to be a loss for him.
So -- and then there is this thing that the United States is pushing for structural reforms and China doesn't want to do it.
QUEST: Finally, back to Alibaba. In China, Alibaba is B2C.
METZL: Right.
QUEST: For the rest of the world, even though it's a very well-known name, It's B2B. It's taking international products and selling them into China.
Do you envisage at any stage, Alibaba would B2C i.e. take on Amazon and the rest of the world?
METZL: One hundred percent yes. Probably not --
QUEST: Yes?
METZL: Yes, absolutely. I mean, that's what this is about. They have a $44 billion war chest. This is an incredibly big and innovative company.
They are dominating the ecosystem of China.
And so their plan is to go big and that's why this is such a significant day. These resources are big, but Alibaba's aspirations are monumental and
the United States needs to wake up that these Chinese competitors aren't just copycats anymore. These are potential world beaters.
QUEST: Good to see you sir.
METZL: Nice to see you.
QUEST: Thank you as always. Staying with Chinese companies, Huawei is also playing defense against the United States, which got the company off
from Google's operating system and apps.
An exclusive interview with CNN, Huawei's founder says the company can become the world's largest smartphone maker. Even without Google software.
He spoke to CNN's Kristie Lu Stout.
(BEGIN VIDEOTAPE)
KRISTIE LU STOUT, CNN INTERNATIONAL CORRESPONDENT: I just returned from Shenzhen where I had a long and wide ranging exclusive interview with the
founder and CEO of Huawei, Ren Zhengfei and he is a straight talker.
We had a very frank discussion about his daughter and Huawei CFO, Meng Wanzhou. We discussed Hong Kong and the ongoing tension between the U.S.
and China, but of course we talked about Huawei's bottom line.
Yes, its business appears to be strong. Huawei is signing up new carriers for its network equipment side business and its smartphone business is
growing, but it is only growing in China. The reason, Huawei is on the U.S. trade blacklist forcing Huawei to bring new phones to market without
Google or other critical apps.
So I asked Ren Zhengfei about his Google backup plan?
(BEGIN VIDEOCLIP)
LU STOUT: Are you working on a backup plan because Google is not going to get a license to work with you?
REN ZHENGFEI, CEO AND FOUNDER, HUAWEI (through translator): Yes. And at a very large scale.
LU STOUT: Have you heard definitively, Google did not get a license to work with you? Has Google been denied?
ZHENGFEI (through translator): No.
LU STOUT: Right now, Huawei is the number two smartphone vendor in the world. Can Huawei be number one without Google?
ZHENGFEI (through translator): I don't think that will be a problem. But it just takes time.
LU STOUT: It takes time. How would you be able to crack into the overseas market without Google?
ZHENGFEI (through translator): When I say it takes time, what I am referring to as the overseas market, because we will return to the overseas
market next year, and the year after that. We have full capability and determination.
(END VIDEO CLIP)
LU STOUT: That is a very bold statement. And this is what we know about Huawei's backup plan. It has been developing its own operating system.
It's called Harmony. Huawei also has its own app store. But it only has 45,000 apps compared to 2.8 million apps available in the Google Play
Store.
Ren Zhengfei did concede that the U.S. is still the most powerful country in the world when it comes to innovation. And no one including China can
overtake the U.S. -- in his words -- for decades to come.
But if Huawei is blacklisted from working with American companies, it has to create an alternative and he says, if those alternatives become mature,
it will be less likely to switch back. Kristie Lu Stout, CNN, Hong Kong.
(END VIDEOTAPE)
QUEST: Now, to the markets in New York which we've got an hour left to trade or so. The animal spirit does seem to be alive and well.
Optimism after the top U.S. and Chinese trade negotiators had a phone call early on Tuesday morning in Beijing time.
According to the Chinese, core concerns were addressed as Jamie Metzl was saying, and one of those was how to resolve those issues.
[15:10:08]
QUEST: And look at the way the markets are -- all three are at a record. The Dow is over 28,000. The markets have been resilient during the
impeachment firestorm in Washington.
Now the public hearings haven't changed the minds of Americans. The latest CNN poll shows support for impeachment remains the same. Half of Americans
supporting Donald Trump's removal, 43 percent are still against it.
On the other hand, his approval rating on the economy is up to 55 percent. That's more than what it was at the beginning of the year, slightly below
the highest from April. David Gergen is with me. He advised four Presidents and is CNN's senior political analyst.
When you look at these numbers on these statistics, the poll, it is interesting he is doing well on the economy, he always has. But everything
else stays exactly where it was, including his overall popularity.
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, that's right, Richard. The popularity on the economy, too, especially it as moved up among
Independents, and that is shoring up the President in the face of this onslaught over impeachment.
The impeachment hearings themselves did not move the needle much either way, and both sides have reason to say fine, but both sides also have a
reason to say, but that's actually a disappointment. They say that privately.
The Democrats had really hoped to use these impeachment hearings as a way to mobilize the public behind the impeachment.
Whereas the Republicans thought this was a terrible chance that the Democrats were taking. It was going to be a backlash, and it would really
help them win in November of this coming year.
So both sides are disappointed they didn't do that, the status quo.
QUEST: Is it your feeling that the Democrats will go ahead with Articles of Impeachment?
GERGEN: Absolutely. There may be a few falling off. But in this poll, 80 percent of Republicans say they favor ending this right here. They're
against impeachment. Eighty percent of Republicans are against impeachment. Eighty percent of Democrats are for impeachment.
That's about as much of a draw as you can get in politics. There is one of the things worth pointing out there, Richard, and that is, these numbers
have changed in the past. The number of people who want to impeach Donald Trump is now almost double the number who wanted to impeach Bill Clinton at
this stage in the process. And similarly, the approval for going after Nixon wasn't as high as it is now.
So the Democrats start off with that advantage, but can they keep it? Can they keep building? In this partisan environment, where so many people are
now rooted in partisan parties? It's going to be hard for either side to change the numbers very much.
QUEST: Michael Bloomberg is in the race.
GERGEN: Yes.
QUEST: From your long experience of this, does he stand a chance?
GERGEN: I think there are several roads to success, but they're all low probabilities. And that's the view, I think within the Bloomberg camp.
I personally think that he -- he has the makings of a very good President. I thought he was an extremely good mayor of New York. But he is running
for the nomination of the Democratic Party where being a billionaire these days is not looked upon it with a great favor and applause.
QUEST: But isn't the argument -- we've just got a second or two more -- isn't the argument a valid one? That shifting the Democrats too far to the
left will alienate Middle America and, you know, you need those votes in the middle to get elected?
GERGEN: Yes.
QUEST: And Elizabeth Warren's policies cannot get her elected.
GERGEN: Well, I think it's hard -- a hard shot for her. It's very, very uphill, and I do think -- I think in the meantime, what Bloomberg coming to
the race may do is to stop the drift to the left and pull the party a little bit more back to the center where it has -- does have a much better
chance of winning a national election.
QUEST: One final thought. When we look at the --
GERGEN: Sure.
QUEST: When we look -- back to impeachment -- I'm fascinated to know, you were there of course during those days in the Nixon White House.
GERGEN: Yes.
QUEST: What do you remember? What happened in the Senate that turned senators' views so that it became likely he would lose in any trial? What
was that key turning point that we have not seen from Republicans in the Senate with Donald Trump?
GERGEN: A critical, critical turning point when the bottom really fell out was when the President was ordered by the Supreme Court to turn over the
taping system and the tapes that he had of his conversations in the Oval Office.
[15:15:00]
GERGEN: As soon as that got out to the prosecutors, they saw that Nixon had ordered the cover up from day one, and then he had directed it and run
a lot of this right there. And as soon as that happened, everybody knew it was over.
I will tell you, Al Haig was in Chief of Staff of the White House. He called his top lieutenants in and I was one of this group that went in, and
he -- when he told us those, everybody blanched and everybody knew we're done.
QUEST: David Gergen. There's plenty more to talk about that if this impeachment goes on to the other side. Thank you for joining us. Thank
you.
GERGEN: Thank you, Richard.
QUEST: Thank you. Now, IKEA wants to go climate positive. Right now, it's sacrificing profit to do it. We'll hear from the CFO who says IKEA
thinks in generations, not in the quarters.
And it's a literal tug of war. Ford and Tesla locked in a battle for the strongest pickup truck. This is QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Rapid and transformational change -- that's what the United Nations says is necessary to stop the Earth's temperature from reaching
catastrophic levels if indeed we can.
A new report predicts that the planet will heat up by 3.2 degrees in the year 2100, twice the target the country set in the Paris Climate Accord.
That's actually the crisis. It will take coordination from individuals, governments and businesses.
IKEA says it is investing heavily in changes to its business model and to be more environmentally friendly.
The latest earnings from the company show the investments are cutting into profits. But none the wise. Jim Bittermann spoke to the CFO of IKEA's
parent company who says, that's a price they are prepared to pay.
(BEGIN VIDEOTAPE)
JUVENCIO MAEZTU, CHIEF FINANCIAL OFFICER, INGKA GROUP: We feel actually quite proud that we are most performing and transforming.
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: That idea of transforming -- last year, you launched in a major sort of retake on how
you do your business, right?
MAEZTU: We are changing a lot of things and then we are basically working in three areas to make IKEA more affordable for the many people, to keep
IKEA more convenient for the many people, and thirdly to working our sustainability agenda because we have decided to become climate positive.
BITTERMANN: The idea of being available to people, more available, this is the reason this store exists. The city center stores are -- that's part of
that concept.
MAEZTU: It's not going from brick and mortar to online. It's about the combination of everything.
[15:20:10]
MAEZTU: So we are expanding IKEA in these cities by having smaller IKEAS inside the cities and to make it more convenient. But also, we are
offering a wide range of services.
BITTERMANN: Online business can be tricky.
MAEZTU: Sometimes, there is a customer wants to have the convenience of online. But you know the beauty of IKEA as well is about touch and feel.
It is about dreams. And it is about inspiration. That's why their role of whether it is outside the city or like this one inside the city will keep
playing a super important role.
BITTERMANN: You're showing all the advantages of being a private company as opposed to a public company but you don't have to justify your spending
on sustainability at all.
MAEZTU: We have decided to become climate positive by 2030 and we are doing this by three things. One is that the way that IKEA produce our
design, building circularity in the way they produce their design.
Then the second dimension is about the way they products are used by the customer. And the third dimension, an important one, we are investing
massively in sustainability.
For example, we have invested 2.5 billion Euros in renewable energy -- in wind and solar. We have 1.6 million solar panels both outside and on the
roof of our buildings. But also we own today and operate 524 wind turbines and, you know, what is a good thing? That we get a good return out of
this, so it's good business to be a good to business.
BITTERMANN: It is also a profitable story for IKEA.
MAEZTU: It is. We had a long chain company, and then we don't think in quarters but in generations.
BITTERMANN: How do you answer the critics? Some of the critics who say you encourage crazy wild spending by consumers? I just was struck by the
Christmas advertising.
[VIDEO CLIP PLAYS]
MAEZTU: I love IKEA advertisement because they are genuine and they are talking to do, not to kill your soul, not to your brain. And many of them
are connecting the brand but also what is important for you.
BITTERMANN: That's the future of unbridled growth and also is the company ever going to go public?
MAEZTU: Ingvar Kamprad, the founder, he wanted to give eternity to IKEA. He said that IKEA should be eternal and should be owned by the many.
So our structure allow us to think in the innovation in the long term so this is not an option today.
(END VIDEOTAPE)
QUEST: Now, airlines have been forced to confront their carbon footprint in the rise of flight shaming, airBaltic calls its fleet one of the most
environmentally friendly in Europe. It is aiming to fly only the Airbus A220s, the old Bombardier C-Series, which gives off lower levels of
emissions.
The Chief Executive of airBaltic is Martin Gauss, he joins me in the C- suite. Good to see you, sir. You're flying the A220. You're going to get rid of the 73s. The environment and the airline industry continues, the
airline continues to be attacked. You're not -- I mean, all of them.
MARTIN GAUSS, CEO, AIRBALTIC: Yes, especially in Europe and we have to do something. We are emitting 2.8 percent of the global CO2 and all airlines
are taking their force together to reduce that as much as we can.
We have new engine technology like on our Airbus A220s which reduce it by 20 percent, but we have years to come to reduce the footprint even more,
but we are doing it together and all new technologies coming in to help of course with big steps, not only percentiles.
QUEST: Right, so Qantas has made the commitment. IAG has made the commitment for neutrality by 2050. When are you going to make the
commitment?
GAUSS: I would say before that because with the Airbus A220, we have invested in an aircraft which is at the moment the most efficient aircraft
in its category.
So we are taking delivery only of that aircraft. So in the future, we should be there ahead of them.
QUEST: Why is the industry -- the airline industry -- the whipping boy? Why has it become the scapegoat for pretty much all environmental issues?
GAUSS: I think because it's easy to focus on a big aircraft, which is burning a lot of fuel, but then also traveling with a lot of passengers in
it.
I think that that is the reason -- it's not fair. But we will address it because there's a lot of effort now with new technology coming in to reduce
the footprint.
QUEST: What's wrong with your engines on the 220? Swiss had problems -- Swiss grounded the 220 fleet. You didn't need to ground your fleet.
What's wrong with them?
GAUSS: There was an issue in Swiss and all engines had to be inspected, which they have been inspected and they're flying and we're very happy with
it. We fly the aircraft now for more than three years, and it is doing a very good job in our fleet.
[15:25:13]
QUEST: You are in many ways, the little airline that can. You sort of fly under the radar against, you know, everybody knows airBaltic and your green
tails flying around the continent. But what -- how are you going to protect yourself against the big boys and girls that could attack your
market?
GAUSS: So we're coming from Latvia. Latvia is small, but the airBaltic is not so small if you look at it, and how do we protect ourselves? We are
very successful in the Baltics expanding. We are focusing on the Baltics and there, we have our market share of nearly 40 percent. So we are doing
our job in and from the Baltics in ensuring connectivity.
QUEST: Isn't the danger that you suddenly get big airlines-itis is suddenly decide you want to run longer routes, have premium beds, champagne
and lounges and then go bankrupt.
GAUSS: No airBaltic has decided to go for a single fleet first of all, Airbus A220s and 300s only. We have a maximum of 80 aircraft which we will
operate in the future, 50 for the Baltic.
So we have a plan. We are not going for flatbeds or going for wide body aircrafts.
QUEST: Are you sure?
GAUSS: We are sure because with the A220, we want to focus on simplicity and build that airline from the Baltics and connect the Baltics.
QUEST: Monarch went. Air Berlin went. Thomas Cook went. The view is that there's many more or there are more to go out of business. I'm not
suggesting for a moment, you'll be one of them. But you too are expecting others to fail.
GAUSS: We saw in our neighboring countries that the airlines failed, but we stepped in and we increased our market share and our presence in the
neighboring countries, so we are growing. We are successfully growing, and we continue to do that because there's still a lot of room in the Baltics
to grow.
QUEST: Finally, where do you see the airline in five years? I mean, you want to grow it. But you need to grow it by more than a route here and a
route there. I mean, some wide bodied planes and nice long routes to Asia.
GAUSS: We don't see wide body planes. We see a maximum --
QUEST: New York?
GAUSS: No, we also don't see New York.
QUEST: No?
GAUSS: We focus on the A220. We have 80 aircraft by then. We have done in five years from now an IPO and the airline is continuous its successful
growth.
QUEST: Good to see you, sir.
GAUSS: Good to see you.
QUEST: Thank you very much indeed.
GAUSS: Thank you.
QUEST: Thank you. QUEST MEANS BUSINESS, more to come. Two executives are out at Westpac, the Australian bank. The authorities said, they broke the
law, tens of millions of times. After the headlines.
(COMMERCIAL BREAK)
[15:30:00]
QUEST: Hello, I'm Richard Quest, a lot more QUEST MEANS BUSINESS as we continue. Xerox is getting hostile in its quest to take over HP. And a
top bank CEO in Australia is stepping down after allegations that the bank violated money laundering regulations.
Not just once, not just twice, but millions of times. This is CNN, and on this network, the facts always come first. Rescue crews in Albania are
sifting through rubble to find survivors after the most powerful earthquake in decades struck near the capital, Tirana. At least, 21 people have been
killed and many have also been pulled alive from damaged buildings. Some families are spending the night in a soccer stadium as nearly a 100 after-
shocks of record in the region.
The U.K.'s main opposition party is pushing back against accusations of anti-Semitism in the run-up to the general election. It's a race and faith
entirely on Tuesday. The Labor leader Jeremy Corbyn said in his words, abuse of racism in any form is not acceptable. It follows criticism from
Britain's chief rabbi over Corbyn's handling of anti-Semitism allegations.
The former White House counsel Don McGahn is appealing against a federal judge's ruling that he must testify in the house impeachment inquiry. In a
stinging rebuke at the Trump administration, a federal judge on Monday rejected White House claims of absolute immunity writing, presidents are
not kings. McGahn and the Justice Department want the ruling to be put on hold while the appeals process plays out.
Thirteen French troops have been killed in a crash involving two helicopters in Mali. They're part of a combat operation against Jihadist.
President Macron has expressed deep sadness and offered condolences to the victims' families.
Xerox is going hostile after HP rejected its takeover offer. HP had said that the previous bid significantly undervalues the company, however, Xerox
came back in a letter and said, and I quote, "your refusal to engage in mutual due diligence with Xerox defies logic. While you may not appreciate
our aggressive tactics, we will not apologize for them." Clare Sebastian is with us, why?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: It's gotten very nasty. They gave HP an ultimatum that if they didn't respond to the offer by Monday
night this week, that they would go hostile, they would go to shareholders. HP had rejected the offer again on Sunday night, and this is really
degenerated into a bit of a slinging match for want of a better words -- HP accused Xerox of getting aggressive.
They said they're not dependent on the Xerox's combination, they've started to slate Xerox's finances in that letter to the company, and Xerox has now
done what they promised to do, and said, you know, we're going to go directly to shareholders. So, that means --
QUEST: But why? Why is Xerox doing it?
SEBASTIAN: Well, they clearly are intent on merging with HP. The company has said there's going to be $2 billion in costs energies. I mean, both of
these companies are clearly -- have one key thing in common, is that they are bastions of essentially a dying section of tech, which is printing.
Printing is no longer essential in the age of smartphones.
They -- both companies have other strings to their bones as well. HP has PCs for example, but they clearly -- Xerox clearly sees that there will be
safety in numbers going forward. And HP actually doesn't disagree. They said we are, you know, willing to look at a combination as they call it.
But perhaps they want to be the acquirer, they are three times the size.
QUEST: So, why do they get on? I mean, this is about -- so HP has refused --
SEBASTIAN: Yes --
QUEST: Xerox due diligence.
SEBASTIAN: Right --
QUEST: Why don't they request due diligence and get on and look at the reversing it?
SEBASTIAN: Why?
QUEST: And if they did do that --
SEBASTIAN: Right --
QUEST: Would Xerox complain that they were being acquired?
SEBASTIAN: The thing about -- there's a couple of issues, HP has a new CEO. He's only being on the job 26 days, he took over on November 1st,
that perhaps he doesn't want to be unseated this soon into his role. Xerox's CEO may want to be in charge of the combined company, clearly, that
is part of it here.
[15:35:00]
But you know, this is the other wild card, perhaps not the best way through. But the other factor in all of this is Carl Icahn who owns 10
percent of Xerox and about 4 percent of HP. He may be a factor that could still push these companies together, but it's certainly going to be a more
complicated path going forward, Richard, it remains to be seen whether Xerox will do this through a tender offer, you know, solicit purchases from
existing shareholders or whether they'll launch a proxy fight.
QUEST: On the -- remind our viewers the difference between the two just to support --
SEBASTIAN: So with a tender offer, they buy up shares possibly at a premium from existing shareholders. They then acquire enough control of
the company to force the issue with management and with the proxy fight. They tried to unseat the current management and do it that way. Carl Icahn
has a history of that, he did it with Xerox.
QUEST: The issue though is, how much support there is besides icon, amongst HP's shareholders?
SEBASTIAN: They say that in their letter. They say -- in the Xerox letter to HP, they say we have already received inquiries from several HP
shareholders and encourage by their interest in that offer. HP stock has actually gone up a little bit since this was first announced.
QUEST: So, there's a --
SEBASTIAN: It's not this for a flat, down a bit today --
QUEST: Yes --
SEBASTIAN: But it's up -- it's up a little bit since this first came to light in the beginning of November. So --
QUEST: You've got to admit, Clare, this is the most interesting business story around at the moment.
SEBASTIAN: It's -- that is interesting as we've seen a printed story recently, Richard, it's got pretty juicy. I think, you know, there are
analysts out there who think this certainly makes sense. That it would bring cost synergies, and there are those who think -- one I think
described it as a collision of two garbage trucks.
QUEST: Reach out, it's nearly Christmas, thank you, Clare Sebastian. Now, another extraordinary business story around today. Two executives are out
at the Australian bank Westpac. It's one of the country's biggest lenders. The company is accused of violating money laundering and terror-financing
regulations. The authorities say many of the transactions in question indicate child exploitation, and that it broke the law 23 million times.
The CEO and the Chairman will both be leaving. Ross Greenwood is the finance editor of Nine Network in Australia. Always good to see you, Ross,
thank you. You join us from Canberra. This is an extraordinary, another one because this is banks behaving badly, they should have known better.
ROSS GREENWOOD, FINANCE EDITOR, NINE NETWORK: Oh, they should have known better. And this was all about systems, Richard. What occurred basically
is that most people have transferred money internationally -- know about the swift system. Now, with that swift system, an individual transaction
is tracked, and as a result, it can be sent off to anti-money laundering agencies such as AUSTRAC.
Now, the truth is in Westpac's case, about five years ago, they created a new system where they batch these transactions to save money. And as a
result of that, they blow inside of the regulator AUSTRAC, and that meant that these 23 million occasions when suspicious transactions didn't go to
the anti-money laundering agency, simply meant that these transactions, the worst of which went to the Philippines, which aided and abetted pedophiles
and people --
GREENWOOD: Right --
GREENWOOD: Who exported children, are really now the revelations that are coming out in public.
QUEST: Now, but Ross, if this would be bad enough, but there are other financial companies in Australia, other Australian financial companies that
are in trouble with regulatory crackdowns. For instance, Commonwealth Bank of Australia charged dead clients for advice, that's an achievement, also
hit by money laundering fines.
AMP has faced claims it overcharged its customers. Banks are never popular, but they seem to be extremely unpopular in Australia.
GREENWOOD: There's just been simply a wave after wave after wave of scandals that have hit the Australian banking industry. To the point at
which a royal commission was called, if you like a judicial inquiry to try and get to the bottom of these scandals. Now, the truth is that Westpac,
the latest bank in these revelations probably came into it cleaner than anybody else.
Despite that, it still allowed $1.5 billion to recompense its customers that had ripped off over the previous couple of years. So, that's the best
of the banks in Australia. Now, the truth is also, you mentioned the Commonwealth Bank there, the Commonwealth Bank itself was involved in an
anti-money laundering scandal going back 18 months.
In its case, it had 53,000 transactions, though not one reported to AUSTRAC. It was fined in this country --
QUEST: Right --
GREENWOOD: Seven hundred million dollars in the Westpac case, however, remember, it's 23 million --
QUEST: All right --
GREENWOOD: Transgressions of that. And that's the reason why this will be a big test for the courts and for the bank as well.
QUEST: Ross, it's good to talk to you, before we let you go, just give me a very quick sum. The strengths at the moment of the Australian economy,
which I know of course is enjoying -- you know, has enjoyed so many quarters of growth that we've lost track. But slow down from China takes
its toll.
[15:40:00]
GREENWOOD: There's no doubt, Richard, 28 years of continuous economic growth which is for the western nations, something of a world record. But
the truth is, it is slowing, you can feel it, the rails of residential market have actually slowed down in the Australia. The retail sector is
very slow.
They're still not forecasting in a recession on the horizon. But certainly, things are here --
QUEST: Right --
GREENWOOD: I can tell you, putting pressure on government are much slower than what they have been for many years.
QUEST: Ross, now it is Winter in the north, and it is Summer for you in the southern hemisphere. The timing is just about right that we can talk
to you in the early morning your time. Good to see you, sir, thank you.
Now, as we continue in a region gripped by anti-government demonstrations of a pocket and financial issues. One Prime Minister is confident his
country's economic future. The Prime Minister of Egypt, next.
(COMMERCIAL BREAK)
QUEST: Egypt is entering a new economic phase, and the Prime Minister Mostafa Madbouly is telling us he's very confident of the path forward.
The country has been undergoing painful economic reforms of austerity. All part of a $12 billion loan from the IMF which was completed earlier this
month. The Prime Minister sat down with Eleni Giokos.
(BEGIN VIDEO CLIP)
MOSTAFA MADBOULY, PRIME MINISTER, EGYPT: We are very confident now, and this is what we are receiving from all the signals and from our indicators
that we are moving on the right track. And the most important thing which make us confident, that we already passed the all -- the painful decisions.
So, we have reached now, what we can call it the self-finance of the fuel, almost we're reaching for the electricity and power.
So, already the painful -- you know, the painful period has passed now. And the most important thing now that we are concentrating in the coming
couple of years on how to make the Egyptian citizens feel the positive impact of the economic reform.
(BEGIN VIDEO CLIP)
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT: What could derail these plans for you? And I'm going to take it from a regional perspective. You
know, when I see what's happening in the likes of Lebanon, when I see what's happening in other African countries, where you see social unrest,
and it's usually spurred by unemployed youth that do not feel the effects of the economic prosperity story.
[15:45:00]
Where people are paying a lot more for food, and they just cannot survive on the money that they're earning. We saw that happening in Egypt, you
know, many years ago, you've been able to recover. But is that a point of worry for you? Does that keep you up at night?
MADBOULY: We are living here in a very turbulent region.
GIOKOS: Yes --
MADBOULY: And of course, everybody, every day we are looking at -- in the morning, we see the demonstrations here, unrest here. And of course, the
message that the people on those countries are not satisfied with, is of course, the performance of the country in terms of securing for them basic
needs. But I believe now here in Egypt, the situation is becoming far better than those countries.
Because already we have managed to -- as I was telling you just in the last question. Within the last three years to overcome all of this bottlenecks,
and we even started to -- I think, and this has been very clearly reflected by the people that the goods are there, the quality of living is becoming
much better for them.
Of course, still, the way is long and we recognize this as a government and always we confess with this, and we always acknowledge this. And we are
saying that nothing is perfect, and we are not doing that excellent work. We know very well, there's a lot of efforts needed to improve our
situation.
GIOKOS: Does it worry you at all? Do you -- do you have to keep a very close watch and to make sure that you are meeting the needs of the people
who you don't see, you know, unrests spreading as --
MADBOULY: Definitely, we are -- keep watching what's happening. We are very cautious about all the kind of things of -- definitely, we always put
the social fact into our consideration.
GIOKOS: Do investors ask you though, you know, what is, you know, the --
MADBOULY: Of course, let me tell you something. We are -- now, I think we are confident that we are trying to make a lot of massive reform initiative
that make Egypt more and more attractive to investors. And this is the messages that we are receiving from investors that they are more and more
becoming confident in Egypt.
(END VIDEO CLIP)
QUEST: In a moment, Ford versus Ferrari is so passe. Now it's Ford versus Tesla, and the two are fighting it out. It is a true tug of war.
(COMMERCIAL BREAK)
[15:50:00]
QUEST: Tug of war between Ford and Tesla. It all started with the Tesla cyber truck when they challenged -- well, didn't challenge, they
demonstrated -- look there it goes. The new Tesla truck pulling uphill the Ford F-150 handily seeming to beat it up.
Up we go, and it seems as if Tesla pulled a first with Elon Musk tweeting out the video. But in this tug of war, Ford pulled back, saying, the match
was unfair. It said it wasn't the same type of vehicles and calling for a redo. Tesla has pulled it again. Elon Musk says bring it on.
But Ford has a wider range, and Ford has vehicles already into production. Meanwhile, Tesla knows that it has the public's imagination. So much going
on, all right. I'm exhausted and I didn't even do anything. Peter Valdes- Dapena is with us. Good to see you, sir.
What do you make of it? I mean, was Tesla cheating when they pulled that F- 150? It was not apples and apples?
PETER VALDES-DAPENA, CNN BUSINESS SENIOR AUTO WRITER: That's what they say -- apparently, people are saying look, it was not apples to apples.
Apparently, that looks like a rear-wheel drive truck, certainly, a fair test some people say might have been a Ford super-duty like a 250 or a 350
fighting against that Tesla truck. So, really it wasn't, and of course, this was set up by Tesla, so you've got to figure they're not going to want
to give Ford the advantage.
QUEST: Right, and there was nothing in the back of that truck.
VALDES-DAPENA: And there's nothing in the bed, and weight gives a big advantage, the heavier vehicle obviously was going to tend to win in that
contest, obviously, the Tesla truck with its battery pack --
QUEST: Right, I heard somebody say -- some experts say, this wasn't -- this wasn't a battle of power and trucks --
VALDES-DAPENA: Right --
QUEST: It was a battle of friction.
VALDES-DAPENA: It's a battle of friction and a battle of grip on the roads. That's why the -- one of the reasons the heavier truck is going to
have better traction. Tires would also matter a lot in a battle like this.
QUEST: But you've got to hand it to Tesla --
VALDES-DAPENA: Indeed --
QUEST: They did not spend a penny marketing this thing, and we're all talking about it and have done for hours and days.
VALDES-DAPENA: The days and days, we've been talking about this thing. Thing number one, they did put on an event in L.A. that I was at where they
had performers and things like that outside. So, they did spend some money, but not that much. The main thing is just how crazy the truck
looks. We're still talking about this days later, partly because that truck looks insane.
QUEST: What's wrong with it?
VALDES-DAPENA: Well, look at it, it looks like a door stop. It's a triangle, all angles is in sharp edges which Tesla says it's because it's
made out of extra hard, thick steel that you can't bend into nice curvy shape. So that's why it has to be that kind of shape.
QUEST: Right, but is there any evidence that it's not practical? Is there any evidence? I mean, you know --
VALDES-DAPENA: Boy --
QUEST: I mean, 30 years ago, the cars of today were thought of as science fiction.
VALDES-DAPENA: Right, and then look at that. Now, one thing I can say from looking at that -- and you might remember the original Honda Ridgeline
had a bad somewhat like that.
QUEST: Yes --
VALDES-DAPENA: One problem I see from looking at that is -- let's say you have something in that truck bed, it's going to be hard on a regular truck
--look at the F-150, you just reach over the side and grab whatever is in the bed. On that truck, you're going to have a hard time accessing the bed
anywhere, but in the back from the tailgate.
QUEST: Two hundred thousand people have put a 100 bucks down to say, they'd like to -- tough one.
VALDES-DAPENA: Yes, well, on this -- remember when Tesla was doing some other cars, they've asked for a $1,000 deposit, this time they're asking
for a$100, we've getting 200,000 people. How many of those 200,000 people -- legitimate question, are really going to end up? Big difference between
spending $100 refundable deposit and 40, 50, 60,000 on a truck.
QUEST: Of course, but it shows that Tesla still captures the imagination.
VALDES-DAPENA: Indeed.
QUEST: I mean, you know, I've said on this program -- look, I'm not an automobile expert, only owned one. But I got a grudging respect for Elon
Musk --
VALDES-DAPENA: Yes --
QUEST: Even for all his weirdness.
VALDES-DAPENA: Sure, I mean, I can't -- I mean, many times I've said when Elon Musk and Tesla were having trouble with production on the model 3, you
said eventually, they're going to come around and they did. They did come around, they started getting their production problems under control.
So, I'm really hesitant to say, this is crazy --
QUEST: No --
VALDES-DAPENA: It's never going to work.
QUEST: Is it your view -- let's look at the Tesla existing production. The Model 3, the X and all the other ones.
VALDES-DAPENA: Yes --
QUEST: How -- are they now producing smoothly?
VALDES-DAPENA: They seem to be producing smoothly at this point with cars coming out of the factory. There are still questions about quality, but
consumer reports for example did recently return a recommended status to some of their cars.
QUEST: Good to see you, sir, thank you.
VALDES-DAPENA: Thank you very much.
[15:55:00]
QUEST: Off we go to the markets. Last few minutes of trade on Wall Street, and we are record -- three records. Not huge, let's face it for
the Dow, we're just up 74 points, a quarter of 1 percent. But we are well over 28,000 for the Dow Jones Industrials. The animal spirits are alive
and well, and the M&A activity that's taken place has boosted and given optimism.
Add on to that, the Chinese trade negotiations, and they had a phone call, the negotiators, and core concerns were addressed. Look at this, you have
got Merck at the top of the tree, that's going to be on something individual to itself. Disney up 1.75 percent, very simple reason, but that
of course, the streaming service is doing well.
Walgreen's down at the bottom, it is down 1.7 percent, all the usual ones in the middle. Those that are affected by China. Those are the markets,
we'll have our profitable moment after the break. Records.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment I alluded to when I was talking earlier to Clare Sebastian. I do love a good hostile takeover. They don't happen
very often these days. Back in the '80s, in the days of the leveraged buy- out, everybody was doing hostile takeovers of one sort or another.
Those days have to some extent gone. Now Xerox is back in the game. With its hostile bid or will be hostile for HP. It's a fascinating example
because as we said earlier, it's a car crash potentially of two dinosaurs. Both companies making printers of one sort or another. HP has computers as
well.
But the overall architecture, too old has-beens trying to prop each other up into the future. Now, what will be interesting is if HP comes back,
Pacman-like and tries to swallow up Xerox in return. And let's always remember, in all of this, the investors of the companies will make their
final decisions, but at the moment for those of us on the outside, it's nice to see a good, old-fashioned hostile takeover in the markets.
And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it is profitable.
(BELL RINGING)
The bell is ringing, we have records!
END
