Year: 2005

Anglo American needs bolder strategy

30 Oct 2005

Last week s review did not go far enough. The UKlisted miner needs to sell more noncore units and improve its operational performance. That could add 30% to Anglo s market value. True, it might make the group more vulnerable to a bid, but that would be no bad thing.

Breakups aren’t broken

29 Oct 2005

Cendant, Primedia, Viacom, Sara Lee and others have seen their breakup plans flop. But that shouldn t give comfort to bosses at GE, Citi, Time Warner and elsewhere. The flops are more indicative of companyspecific issues.

New wave of US bank M&A starts on wrong foot

29 Oct 2005

Sovereign s $3.6bn takeover of New York s Independence destroyed value and ran roughshod over shareholders. A flat yield curve will tempt other banks to do deals. But they shouldn t take their cue from Sovereign and overpay.

Jumbo buyout funds offer poor prospects for investors

29 Oct 2005

Buyout funds are getting larger despite the fact that there is an inverse relationship between fund size and investment returns. With interest rates rising and investor appetite for junk bonds waning, Blackstone s record new fund signals the turning for the LBO market.

France takes aggressive gamble on EDF price range

28 Oct 2005

The E8bn privatisation is structurally unappealing and dogged by political risk. But the price range is hardly cautious. At the midpoint, the utility is being offered at no discount to European peers.

Eutelsat pulls IPO despite price cut

28 Oct 2005

The satellite group s private equity owners weren t just put off by weak markets. Investors have no appetite for Frenchlisted tech stocks. This IPO flop may not be a harbinger of others to come.

Governance is key in splitting up Parmalat

28 Oct 2005

It makes sense to split the dairy group s operating activities from the lawsuits it has filed against its banks. But there are conflicts because these banks are also big shareholders. These need to be managed.

Deutsche delivers sparkling trading result in Q3

28 Oct 2005

The bank s consistently excellent proprietary trading results belie fears about its exposure to this potentially volatile earnings stream. Deutsche should hit its 25% pretax ROE target this year. The risk is that it has curbed longterm investment in the franchise to get there.

Short-sellers take unfair rap

28 Oct 2005

Lawsuits against shortsellers and research firms threaten to chill independent voices who serve the markets well. In the latest case, Overstock.com s charges against a research firm that issued negative reports sound like sour grapes.

Supreme Court nominee withdrawal weakens Bush

27 Oct 2005

Bush is a wounded president with no clear successor. And he faces reaching lame duck status earlier than secondterm presidents usually do. Add in all the other turmoil at the White House, and this does not bode well for the next big item on the domestic agenda tax reform.

Blackberries may go black

27 Oct 2005

The US Supreme Court dropped a bomb on the investment banking fraternity with its refusal to hear Research in Motion s copyright appeal. But not to worry. Before thumbs stop tapping on Wall Street it s likely a settlement will be reached, though RIM investors may not like it.

Shell shouldn’t build a warchest

27 Oct 2005

The oil giant has recovered its poise after the Watts affair. But investors worry it may address its reserves problem by doing a huge deal. The company is stoking these worries by building a huge warchest. If it wants to win trust, it should hand back more cash to investors.

Smith & Nephew shares look cheap

27 Oct 2005

The UK orthopaedic group s shares have sunk to a twoyear low over concern that implant prices will stagnate. This is overblown. The market should see 15% sales growth for years, as an older and obese population needs more joints replaced.

Hedge funds need conclusion to trading probe

27 Oct 2005

Regulators have spent over a year examining whether hedge funds wrongly used information provided in the premarketing of convertibles. The market needs guidance on this issue. Regulators need to pursue these investigations faster.

France Telecom bitten by internet switch

27 Oct 2005

The telecoms operator blames internet technology for a drop in sales. It is offering cheap deals to retain its customers. At least group ebitda is holding up for now. But with competition growing elsewhere, it may be squeezed in future.

Italy should open its bond markets

27 Oct 2005

Icap, the UK broker, is moving closer to establishing a market for Italian sovereign debt to rival local exchange MTS. After the Antonveneta debacle, Italy has a second chance to show it will treat foreign entrants into its financial services markets fairly.

Wal-Mart worries workers linger too long

27 Oct 2005

The retailer could cut healthcare costs by raising its employee turnover rate. This would boost the bottom line. But unless it is careful, WalMart could end up sapping staff morale and escalating its public relations woes.

Germany may sell iconic Autobahn

26 Oct 2005

The finance minister designate says the government may sell off the motorways. It's easy to see why, given possible proceeds of over E80bn. But buyers should keep an eye on repair bills. Many routes are in need of an upgrade.

Prudential’s new strategy is a tough sell

26 Oct 2005

The UK insurer s new CEO Mark Tucker plans to use its Egg banking unit to sell insurance. He also wants to move beyond life and pensions. But bancassurance is a tough nut to crack. And greater focus would be preferable to diversification.

Anglo takes first step on road to value

26 Oct 2005

The UKlisted miner is rethinking the future of assets that currently deliver a quarter of its profits. The shift is overdue, but welcome. If Anglo American can actually live up to its potential, the initial positive share price reaction doesn t go far enough.

Eutelsat float hurt by triple blow

26 Oct 2005

The satellite operator timed its flotation poorly. It has been hurt by falling equity markets and falling confidence in IPOs. BSkyB s acquisition of a broadband operator has also raised doubts over satellite. That has allowed investors to press for a better deal.

Daimler’s solid Q3 clouded by tough US outlook

26 Oct 2005

Operating profits at the giant carmaker rose 38%, beating forecasts. Troubled Mercedes is on the road to recovery. But incoming CEO Zetsche faces a tough US market and deteriorating prospects for Chrysler.

RWE right to consider E15bn water spin-off

25 Oct 2005

A float would easily attract outside investors, and would give greater transparency to the value of the German utility s water assets. That would be a welcome strategic shift for RWE. But unless it can convince otherwise, it should return the proceeds to shareholders.

Merger arbitrageurs take a beating

25 Oct 2005

As several large deals fall through in the US, mergerdriven hedge funds are becoming the weak link of the industry. The fourthquarter losses threaten to push many hedge funds into negative territory during a nearrecord year for M&A.

Wal-Mart calls for a higher US minimum wage

25 Oct 2005

The retailer says higher wages would boost spending by its main lowermiddle class customer base. In fact, it is keen to raise labour costs for its competitors. But the higher minimum wage will backfire for WalMart, too.

VNU buyout would be a big stretch

25 Oct 2005

A group of four private equity groups has reportedly been circling the beleaguered Dutch publisher since March. But they may be too late. An LBO might have been feasible when the share price was at E21. But at E27, it looks all but impossible.

Can private equity make Compass taste good?

25 Oct 2005

It s not surprising private equity is reportedly eyeing up the UK contract caterer. Its shares just hit at a fiveyear low. But limited potential for gearing and underlying wobbles would make this a tricky one for buyout firms to swallow.

Marconi makes best of bad hand

25 Oct 2005

The UK telecoms equipment maker has sold off most of its business for £1.2bn, leaving its pension fund and a small IT services group. Marconi has fetched a good price. And it can still recover more value from selling the fund or its remaining business.

Marconi pension deal a wake-up call to UK plc

25 Oct 2005

The regulator made the UK telecoms group plug its FRS17 hole and put money into escrow. Otherwise it would have blocked the Ericsson deal. The implications for other UK companies with large pension deficits are stark.

Stock market too keen on Bernanke

25 Oct 2005

His proposed appointment was greeted by a 1.7% rally. Investors like the idea of the Bernanke put . Bernanke may not care about asset prices, but he thinks inflation is dangerous. If his measure of inflation rises, he could prove tough.