Month: November 2006

Old fogies crawl over newspapers

13 Nov 2006

Hank Greenberg joins Jack Welch, Eli Broad and David Geffen. Only Sandy Weill is missing from the bunch. Do these former moguls see real value in the industry or are they just underemployed, overcapitalised and unable to operate a computer?

Arcelor Mittal forced to keep $5bn Dofasco

13 Nov 2006

The Canadian steelmaker was placed under the control of a Dutch foundation as part of Arcelor's defence against Mittal. The foundation is now refusing to allow Arcelor Mittal to sell Dofasco, as Mittal had planned. Still, that may ultimately suit Mittal well.

Why does AOL want Wall Street desktops?

13 Nov 2006

AOL's purchase of a small outfit called Relegence seems odd, since one caters to the masses and the other serves Wall Street's elite. But AOL fancies Relegence technology, which could someday enable millions of its users to track hot news and information about any topic.

Firing Ricke won’t solve DT’s problems

13 Nov 2006

The Deutsche Telekom boss lost the confidence of the German government and Blackstone having failed to raise growth and cut the workforce. But that wasn't all Ricke's fault. Without a change in German labour laws, his successor faces an equally daunting task.

Detroit honchos seek Bush’s vote

13 Nov 2006

Bush gave car execs a cold slap in the face in January. Now he appears more amenable after losing Congress. The president may grant some small gifts to the car makers on energy and China. But he won t tackle the most important issue healthcare.

Foreign banks threaten to roil China’s savings pool

13 Nov 2006

China s savings are needed to bail out the $1 trillion worth of bad loans in Chinese banks. If Chinese savers are given alternatives, this house of cards could fall. That may explain why China is trying to keep out foreign banks.

Marshall Wace to list E1bn Tops fund

13 Nov 2006

Permanent capital raisings by alternative asset managers have had a mixed record so far, but this would be the biggest yet. The deal has been structured to ensure the fund doesn t trade at a discount to net asset value. If it works, others are sure to follow.

Demand overwhelms supply in the junk bond market

13 Nov 2006

HCA s record issue has been trading well above par. Demand is strong because the high yield carry trade has been very profitable this year. But with credit quality declining this market could blow up when favourable conditions change.

Italy’s E13bn bank merger may not be applauded

13 Nov 2006

A Banche Popolari Unite and Banca Lombarda combination may have industrial logic, but it would have an archaic governance structure. The banks are right to consolidate. But the cooperative system means it would stay takeover proof, limiting the influence of market forces.

Virgin could get its brand on a combined ITV-NTL

12 Nov 2006

That would be a coup for Richard Branson, who owns the brand and is NTL s largest shareholder. His licence income would jump. Better still, the Virgin name would get even more exposure. The should increase its value.

Sainsburys’ investors bet on King

12 Nov 2006

The UK food retailer s shares are up 60% since Justin King took over two years ago. Sainsburys is now twice as expensive as rival Tesco. At these levels, talk of a possible private equity bid looks odd. But at least King hasn't yet given investors any reason to check out.

Ignoring options costs doesn’t make them go away

10 Nov 2006

A year after Cisco was required to account the expense of options grants, the tech group still stresses proforma numbers that ignore cost. It is no coincidence Cisco spends 70% of its free cash flow mopping up options grants.

High yield underwriters get sloppy

10 Nov 2006

Take the collapse of bottled water firm LeNature s. Wachovia tried to flog its debt shortly before the company evaporated. Wachovia is not the only secondtier bank thriving off the sale of seriously junky CCCrated debt. This may come back to haunt them.

Who’s overvalued – Toyota or the West?

10 Nov 2006

The combined market of the major European and US car industries now slightly surpasses that of Toyota's $221bn market cap. Yet factor in losses at GM and Ford, and the Japanese carmaker earns double the West s combined profits.

Some petrodollars are more acceptable than others

10 Nov 2006

When Russia buys a stake in Eads, Europe shrieks. When an Arab fund says it plans the same, hardly anyone bats an eyelid. True, Russia wanted board seats while Dubai is a financial investor. But money does come in different colours.

Fortress shouldn’t push the envelope on valuation

10 Nov 2006

Fortress Investment Group s upcoming IPO is the first big US private equity and hedge fund floatation. By some measures, it looks pricey. To support its valuation, Fortress must deliver rapid growth. Since it s only selling a 10% stake, it should leave some upside on the table.

Wallenbergs deny ganging up to save Scania

10 Nov 2006

The Swedish family s vehicles have just enough votes to block an unwanted merger. Coincidence? The Swedish regulator suspects not. If found guilty, the Wallenbergs could be forced to make a full bid. But that might not be such a bad outcome.

SEC Chairman Cox proves a sensible regulator

10 Nov 2006

There were fears the former Republican congressman would be a lackey for big business when he took charge. By rolling back a burdensome piece of SarbOx, and tightening existing hedge fund rules, Cox is wielding power wisely.

Bank of England walks a narrow line

10 Nov 2006

How much interest rate pain can highly geared UK consumers take? Rising insolvencies suggest many are already struggling. Yet inflation remains too high and further interest rate hikes may be on the cards. The Bank will be lucky to get through this unscathed.

Suez hand strengthened by utility frenzy

10 Nov 2006

Talks over sweetening the terms of the merger with GdF are delicate. Shareholders are demanding more than the government will cede. But recent utility activity, including Iberdrola's bid for Scottish Power, shows that Suez has other options. It has no reason to back down.

Wilbur Ross builds up his war chest

10 Nov 2006

The billionaire investor has received $685m from a Goldman Sachs fund to invest in bankrupt companies. Record levels of corporate debt issuance will doubtlessly create future opportunities. As usual, Wall Street will profit from its own mess.

Accountants’ self-serving ideas miss the point

9 Nov 2006

The chiefs of the big firms want constant disclosure of key business parameters. But that would only drive more companies to go private. The big problem with audits is conflict of interest. The best reform would be to get rid of them. Investors should get more involved.

NTL adds ITV to its shopping list

9 Nov 2006

Buying ITV would allow the UK cable group to pack a punch in content. That would fill a gap in its quadruple play strategy. But a deal looks complicated. NTL hasn't even finished integrating Virgin. And it's not clear that a deal would fix ITV's advertising woes.

Iberdrola approach sign of utility euphoria

9 Nov 2006

The European utility sector is feeling its M&A oats, and there are highpriced deals and rumoured offers everywhere. There was a similar frenzy four years ago, when many firms overpaid and learnt their lesson. But this time private equity is involved too.

Danske/Sampo deal creates Nordic banking champion

9 Nov 2006

The Danish bank's purchase of its Finnish rival for $5bn will result in a new bank of roughly the same scale as Nordea. There should be synergies. And Danske has already shown with its Irish foray that it can effectively branch out of the tricky Danish market. The Danish bank's E4bn purchase of its Finnish rival plugs the hole in its Nordic map. What s more, it will become nearly as big as Nordea. But Danske is paying a full price. It looks like Sampo has been able to use the rarity of available Finnish assets as a bargaining chip.

Severstal must be kicking itself over Arcelor

9 Nov 2006

The Russian steelmaker s shares have fallen 15% since the day its potential merger with Arcelor was announced. That deal failed. Arcelor s share price is up 28% since then. It looks the shareholders chose wisely and Severstal missed out on a good deal.

MasterCard submits to Wal-Mart

9 Nov 2006

Shoppers can finally use a credit card at WalMart s bulk discount retailer Sam s Club. But it has to be MasterCard and not Visa. WalMart has done this before. It kept MasterCard out as its IPO approached. Now it s putting the screws on Visa as it goes public.

Iberdrola interest in Scottish Power looks odd

9 Nov 2006

The E32bn Spanish energy company has just revealed a big strategic plan to invest E9bn, most of it in Spain. Synergies would be thin on the ground. But Iberdrola s low gearing and Spanish tax credits means it could probably afford it.

Could Vietnam become the next Asian Tiger?

9 Nov 2006

It s joined the WTO, has cheaper labour costs than China and 84m hardworking people. Vietnam is also among the most corrupt Asian countries. That could dampen growth and investment prospects.

CVS/Caremark shouldn’t spur copycats

9 Nov 2006

The $21bn merger has inspired talk of similar deals involving other drug middlemen. There s one problem. This looks like a replay of a disastrous wave of acquisitions the sector went through in the early 1990s.