Business this week

Kraft Foods and Heinz agreed to merge, creating the world’s fifth-biggest food company. The $50 billion transaction has been orchestrated by Warren Buffett’s Berkshire Hathaway and 3G Capital, a Brazilian investment firm with a voracious appetite for deals in the food and consumer-goods industries. Berkshire and 3G already own Heinz, which they bought in 2013. See article.

Ringing in the changes

Hutchison Whampoa, Li Ka-shing’s holding company in Hong Kong, agreed to buy O2, a British mobile-phone network owned by Telefónica of Spain, in a deal valued at £10.3 billion ($15.3 billion). Hutchison wants to combine O2 with Three, its existing wireless network in Britain, which would give it around 40% of the British market. With BT in the process of buying EE, the number of big operators in that market is shrinking, a potential concern for regulators. See article.

In one of the biggest acquisitions by a Chinese state firm in recent years, China National Chemical Corporation bought a stake in Pirelli, an Italian tyre company which supplies the rubber for Formula One cars, with a view to taking full control. The agreement is worth €7 billion ($7.7 billion) and allows Pirelli to keep its headquarters in Milan. See article.

An activist hedge fund stepped up its fight with Vivendi to return €9 billion ($10 billion) to shareholders. The French media conglomerate has sold off bits of its empire over the years, leaving it with a sizeable cash pile. But P. Schoenfeld Asset Management wants it to go further and divest all or part of Universal Music Group, a subsidiary of Vivendi.

Euro trash

Hennes & Mauritz, a fashion retailer based in Sweden, reported another healthy quarterly profit, of SKr3.6 billion ($449m). But it warned that the strong dollar “will affect our sourcing costs going forward”.

More evidence emerged that the recovery in the euro zone may at last be gathering pace. A closely watched index of private-sector activity in the currency bloc compiled by Markit, a data-research firm, rose to its highest level in almost four years. The weaker euro has been a boon to exporters, especially in Germany, but job creation and the growth of new orders was strong throughout much of the euro zone in the survey.

Britain’s annual inflation rate fell to zero in February. In contrast to other countries that are doing their utmost to battle a precipitous drop in consumer prices, mostly the result of falling oil prices, George Osborne, Britain’s chancellor of the exchequer, was remarkably relaxed, pointing to the benefits to households from “good” low inflation, compared with “bad” deflation.

American regulators rejected the “living wills” of subsidiaries owned by three foreign banks. HSBC and Royal Bank of Scotland, two British banks, and BNP Paribas, a French one, were told to resubmit their plans about how they would unwind if faced with bankruptcy, after they were found to contain “shortcomings”, including “unrealistic” assumptions about customer behaviour. The three join 11 other banks who were told to rewrite their living wills in August last year.

Schlumberger, the world’s biggest oilfield-services company, agreed to plead guilty and pay $233m in a deal with America’s Justice Department for violating sanctions by providing drilling equipment to Sudan and Iran between 2004 and 2010. The penalty comes at a bad time for the firm, which has had to retrench as the global oil glut reduces the demand for its services.

Google appointed Ruth Porat as its next chief financial officer, a position she currently holds at Morgan Stanley. Ms Porat, one of the most powerful women on Wall Street, is widely credited with improving the bank’s performance through cost-cutting. Investors will hope she can do the same at Google, which has seen R&D spending soar over recent years.

Supercell, the Finnish mobile-gaming firm that brought “Boom Beach” to the world, said that sales tripled to €1.6 billion ($1.7 billion) last year, and profit doubled to €515m. Supercell has developed only three games (the other two are “Clash of Clans and “Hay Day”) that are free to play but which entice users to pay for additional features. They regularly top the charts for downloaded apps on Apple and Android devices.

In the aviation nation…

Amazon complained to a Senate committee about the slow process for approving tests on commercial drone flights in America, describing it as “inadequate”, especially compared with other countries. It said a waiver it had been granted was already obsolete, as it applies to a drone it is no longer testing.