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In Case You Missed It: Business News Round-up

Contributed by Martin Mitchell of the Corporate Training Group   

In case you were too busy to have kept up with all the news, contributor Martin Mitchell has gathered some important market events from last week to help you start this week well informed:  

Mergers and Acquisitions

  • The adviser rankings for M&A activity in the first half of 2009 from Dealogic saw the following top ten (based on the value of deals advised on): (1) Goldman Sachs $363.2bn; (2)  JPMorgan $321.3bn; (3) Morgan Stanley $319bn; (4)  Citigroup $244bn; (5)Bank of America Merrill Lynch $198.9bn; (6) Deutsche Bank $193.6bn; (7) Lazard $182.7bn; (8) UBS $161.5bn; (9) Credit Suisse $131.0bn; (10) Barclays Capital $108.7bn
  • Preliminary talks commenced on a nil premium, all share ‘merger of equals’ between two mining giants. Swiss-based Xstrata proposed the link up with London-listed Anglo American. The market capitalisations of the two are similar, with Xstrata at £20bn and Anglo American at £21.4bn. However, Anglo American management labelled the offer ‘totally unacceptable’ arguing that its assets were superior to those of Xstrata. Anglo American is being advised by UBS and Goldman Sachs, Xstrata by JPMorgan Cazenove and Deutsche Bank.
  • German airline Lufthansa reached an out of court settlement over the future ownership of BMI British Midland. Lufthansa will pay a total of £223m for the 50% plus one share that was previously owned by BMI Chairman Sir Michael Bishop. Sir Michael and Lufthansa have been in negotiations for some months since BMI has been making losses and Sir Michael had a contractual right to sell his stake to Lufthansa for £298m. Lufthansa will now own 80 per cent of BMI and will offer to buy the remaining 20% from SAS Scandinavian Airlines.
  • UK real estate company Brixton has received a bid from rival Segro that values Brixton at around £107m. Segro (formerly known as Slough Estates) is being advised by UBS and JPMorgan Cazenove, Brixton is being advised by Citi and Nomura.
  • US retailer Office Depot is raising $350m by selling preference shares to private equity firm BC Partners. The preference shares will pay a 105 dividend and could convert into a 20% stake at a price of $5 per share. Office Depot shares are currently trading at $3.92. 
  • State-owned Sinopec, one of China’s biggest oil companies is taking over Addax Petroleum in a C48.3bn (£4.4bn) all cash deal. Addax is Swiss-based and has oil production interests in Africa and Iraqi Kurdistan. 
  • General Motors has invited a select number of investors to submit improved offers for its European operations. In an attempt to put pressure on preferred bidder Magna, GM has asked Beijing Automotive Industry Corporation, the Chinese carmaker and Belgium-based RHJ International to make improved bids. 
  • Private equity companies are circling Almatis, the German aluminium business that is owned by Dubai International Capital as it negotiates a $1.1bn debt restructuring. Blackstone and Advent International are amongst those interested in providing fresh funds as part of the restructuring.
  • Emaar Properties, the Middle East’s largest property company and the company building the world’s tallest tower in Dubai, is in talks to merge with three other property companies – Dubai Properties, Sama Dubai and Tatweer. The three are all part of the Dubai ruler’s Dubai Holding Group and Emaar is a listed company that is 32% owned by the government. 

Financial Institutions

  • UK government controlled Royal Bank of Scotland (RBS) unveiled a £9.6m pay packet for its chief executive Stephen Hester. The package is made up of a basic of £1.2m in salary, plus projected non-cash awards of a £2m annual bonus and £6.4m worth of long-term stock awards.
  • In an effort to stop poaching by rivals, Merrill Lynch, UBS and Citigroup are substantially increasing the basic pay of valued investment banking staff. The market rate for managing directors has jumped from around $250,000 to closer to $400,000. 
  • A gathering of the Swiss Private Bankers’ Association showed that the Swiss private banks are edging closer to accepting that they will have to raise tax compliance issues with clients and, if necessary, encourage them to declare previously hidden assets.
  • The attorney acting for Bernard Madoff is requesting leniency in the form of a 12-year prison term for the man guilty of a $65bn Ponzi scheme. Mr Madoff faces up to 150 years, but his attorney argues that setting aside the ‘emotion and hysteria’ a 12 year term would be appropriate given that the remaining life expectancy on Mr Madoff is only 12.6 years. Mr Madoff is due to be sentenced next week.
  • The dispute continued between Dubai investment bank Shuaa Capital and the Dubai Banking Group as the Banking Group commenced legal proceedings. The dispute surrounds a convertible bond with a face value of Dh1.5bn that is held by Dubai government-controlled Dubai Banking Group. Shuaa’s view is that the bond has a mandatory conversion provision to convert into Shuaa shares at Dh6 each. The Dubai banking Group maintains that it can instead demand repayment of the principal and interest. Shuaa shares are currently trading at around Dh1.7.
  • Private equity firm Kohlberg Kravis Roberts (KKR) has abandoned its plans for a NYSE listing. Instead it has opted for a merger with its Amsterdam-listed fund, KKR Private Equity Investor to gain a listing on Euronext instead.
  • UBS announced a SFr3.8bn (£2.1bn) equity placing that will lift its tier one capital by 1% to 13%. The placing was at a 7% discount to the bank’s market price.
  • AIG agreed a $25bn debt for equity swap with the Federal Reserve. The deal will see the Fed receive $16bn in preferred equity in AIG’s Asian arm American International Assurance (AIA) and $9bn in preferred shares in American Life Assurance Company (Alico). The agreement is expected to pave the way for listings of both the entities. The deal will cut the debt to the Fed to just $15bn. AIG has also received $40bn from the US government’s troubled asset relief program (Tarp).
  • Shinsei and Aozora Bank, two medium sized Japanese banks are in merger talks that could create the country’s sixth largest banking group.
  • Japan’s financial regulator, the Financial Services Agency has banned Citigroup from selling retail financial products for a month. The regulator’s actions come as a result of failures to take sufficient action regarding suspicious transactions, including suspicions of money laundering.

Credit

  • Sports broadcaster Setanta is announced the appointment of Deloitte as administrators to its UK operations after failing to find the cash to retain its rights to a significant number of UK Premier League soccer games. Administration is likely to see shareholders that include Doughty Hanson, Balderton Capital and Goldman Sachs lose their investments.
  • Walt Disney-controlled broadcaster ESPN stepped in and purchased the rights to broadcast 46 games in the coming season and 23 in each of the following three seasons for a total of £250m.
  • Publisher of the ‘yellow pages’, UK-listed Yell warned that it may need to have the terms of its borrowing eased if it is to cope with ‘increasingly uncertain trading conditions’. Yell needs to refinance £3bn of bank borrowing between now and 2011 and is faced with declining advertising revenues alongside a pension deficit. Additionally, house broker Merrill Lynch has withdrawn its stock recommendation that was ‘neutral’.
  • German car company Porsche that is struggling under €9bn of debt looks likely to have a €1.75bn state loan turned down, although it is still in discussions with state-owned bank KfW. Porsche is also in talks with the Qatar Investment Authority regarding an investment of €2.5bn for a 25% stake.
  • The European Central Bank (ECB) lent €442.2bn to more than 1,100 banks in one year loans at its current benchmark rate of 1%. The auction was the latest attempt by the ECB to unlock the credit markets and revive the region’s economies.

Other

  • The Financial Times’ financial training special report showed that despite the downturn, the global trend towards the Chartered Financial Analyst (CFA) qualification continued its upwards path. June 2009 saw 128,600 candidates – an increase of 14% on June 2008 – with an 18% rise to 8,098 candidates in London and registrations in France up 24%, Germany up 21% and the Middle East up 19%. Whilst the US only saw a 4% increase, the Asia Pacific provided 80,200 candidates and a staggering 25% increase year on year.
  • Astaire Securities, the nominated adviser on the London Stock Exchange’s AIM market has been fined £225,000 and publicly censured by the exchange. The punishment surrounds failures to properly assess a company (Worthington Nicholls) that was admitted by Astaire’s predecessor firm Corporate Synergy to AIM in the summer of 2006. 
  • A study the UK’s public sector showed that the UK’s National Health Service is the world’s third biggest employer. The top five by number of employees are: (1) People’s Liberation Army of China 2.26m;  (2) Wal-Mart 2.10m; (3) NHS  1.56m; (4) Indian railways 1.41m; (5) Indian army 1.13m
  • UK-based mobile phone operator Vodafone has decided to move its global headquarters from the provincial market town of Newbury in Berkshire to central London. A total of 200 including the senior management team will relocate to Paddington in London. 
  • Two years after its creation, Thomson Reuters has decided to rationalise its dual listing structure and remove its London listing in favour of its listing in Toronto.
  • A new share trading venue aimed at retail investors was launched in the Netherlands called Tom Trading. Standing for ‘the order machine’, Tom will seek out the best prices across European markets in the same way as many ‘smart order routing’ systems run by banks. 
  • The latest World Wealth Report from Merrill Lynch and Capgemini shows the global population of ‘ultra high net worth individuals’ (with at least $30m to invest) fell by almost 25% in 2008. High net worth individuals with at least $1m excluding their main home fell by around 19.5%.
  • Japan is moving a step closer to using rights issues as a method of raising funds. To date, there have been no rights issues in Japan, reflecting the preference for companies to tap the broader market with share sales and private placements and a peculiar rule of the Tokyo Stock Exchange. The rule only allows listed companies to conduct rights issues by doubling the shares in issue, rather than any smaller proportion. The Tokyo exchange is discussing introducing more flexibility in its approach.
  • British Airways, Cable & Wireless, Marks and Spencer and SAB Miller are among the companies urging changes in the combined code of good corporate governance. The changes revolve around replacing the underlying principle of ‘comply or explain’ with ‘apply or explain’. This change would remove a presumption of compliance with the rules and undue criticism of any departure from the code.
  • The UK financial services regulator (the FSA) is planning to ban the payment of commissions by product providers to independent financial advisers (IFAs). In a drive to remove ‘commission bias’ from the system, instead of the advisers receiving commission investors will be told upfront how much advice will cost and be able to choose whether to pay a fee, or have the money deducted from their investment. The change is to be introduced in 3 years and is expected to result in thousands of IFAs leaving the industry.

 

 Note : The details contained in this article have been drawn from a daily review of the Financial Times

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