Manhattan-New York

In Case You Missed It: News Round-up

martin.jpgContributed by Martin Mitchell of the Corporate Training Group

Mergers and Acquisitions

  • India’s biggest mobile operator Bharti Airtel is talking to South African rival MTN about a cross shareholding deal that could lead to a full merger. Under the proposal MTN would acquire 25% of Bharti with a cash payment of $2.9bn as well as some new shares. Bharti would buy 36% of MTN’s existing shares for R86 plus 0.5 a Bharti share per share.

  • A deal to rescue the European arm of General Motors is nearing a conclusion. Canadian company Magna International looks the likely winner with a deal that also involves Russia’s Sberbank. Magna and Sberbank have offered €700m for 55% and also will provide €300m of emergency funding. Confirmation of the deal will unlock a €1.5bn bridging loan from the German government. General Motors is expected to file for Chapter 11 bankruptcy in the US on Monday.

  • City of London headhunter Whitehead Mann has held talks with US recruiter Korn/Ferry aimed at selling a majority stake in the business.

  • Social networking site Facebook has accepted a $200m investment from Digital Sky Technologies, a private Russian internet investment group, that values Facebook at around $10bn. Goldman Sachs facilitated the deal by introducing the two parties.

  • The London Metals Exchange (LME) has joined the consortium that already includes 11 banks and Icap, in the €830m bid for European clearer LCH.Clearnet. The banks are Deutsche Bank, JPMorgan, Royal Bank of Scotland, UBS, Barclays Capital, Morgan Stanley, Credit Suisse, Citigroup, Goldman Sachs, HSBC and Nomura.

Financial Institutions

  • For the third time in a month, Morgan Stanley was linked to a disciplinary action from the UK’s Financial Services Authority when a former trader was banned and fined £140,000. The FSA said the trader had engaged in ‘pre-hedging’ – where the dealer trades in the same direction as the client in advance of executing the client’s order. Arguably pre-hedging is simply a less severe way of describing front running. The FSA said this had happened on 7 occasions between July and October 2007.

  • Spain’s Santander has reached a settlement with the trustee seeking to recover money for the victims of Bernard Madoff. Santander has agreed to pay $235m to resolve claims against two of the bank’s hedge funds. The money is effectively a clawback of principal and profits withdrawn by the funds in the period leading up to Mr Madoff’s arrest.

  • Santander also announced that it will rebrand all of its UK operations under its own name. The UK operations currently continue to trade under the names of the entities acquired by Santander, such as Abbey National, Alliance & Leicester and Bradford & Bingley.

  • A survey by jobs website eFinancialCareers showed that nearly 30% of London finance professionals are so worried about their futures that they are planning to leave for more desirable destinations like Zurich, New York, Singapore, Geneva and Hong Kong. The sentiment is thought to stem from concerns about relative competitiveness, impending regulatory changes and changes in the tax system.

  • The sale of the Asian assets of UK government controlled Royal Bank of Scotland (RBS) is set to drag on for some months as two of the potential bidders have sought more information. After having been given a deadline of last weekend to table non-binding offers, HSBC and Standard Chartered instead sought more information. The third leading bidder, Australia’s ANZ, has made an offer alongside raising A$2.85bn of capital but RBS is thought to want to inject some competitive tension by keeping the other two potential bidders involved.

  • The former fund management arm of Lehman Brothers, Neuberger Berman has completed its buy-out from the Lehman estate. Staff now own 51% of the group, with the Lehman’s estate holding the remaining equity and $813m in preferred stock. Neuberger’s assets under management are approximately $155bn.

  • Bank of America (BofA) has now raised almost $26bn towards the $33.9bn that the US government has ordered it to raise following the completion of the ‘stress tests’. The latest capital raising involves several non-government owners of its preferred stock converting to $5.9bn worth of common stock. This follows a $13.5bn equity capital raising earlier this week and asset sales including the $4.5bn gain on the sale of a stake in China Construction Bank. BofA is still looking at selling several subsidiary companies including First Republic Bank and Columbia Management Group.

  • Credit Suisse is planning the sale and leaseback of its London property portfolio that includes its two buildings in Canary Wharf. The deal could raise £500m. Others banks are taking similar actions – for example, HSBC is in talks to sell three of its office buildings in London, Paris and New York for around $2bn.

Credit

  • The week saw the US Treasury auction $101bn of new notes – part of an expected $2000bn of new issuance this financial year to fund the US budget deficit.

  • Paris-based Danone announced plans to launch a €3bn rights issue to reduce its net debt and give it the flexibility to make bolt-on acquisitions. The offer is at €24.73 a share, about a third below the traded price, and shareholders are able to buy 4 new shares for every 17 held. The group currently has €11bn of net debt and wants to reduce its leverage from 3 times EBITDA to the agricultural food industry average of 1.5 times. JPMorgan and Calyon advised Danone.

  • Britain’s largest private company, Ineos, is attempting to win a stay of execution from its consortium of 230 banks ahead of a deadline this week. Ineos has around £6.6bn in net debt and covenants require its debt levels to be no higher than 5.25 times EBITDA and it is expecting to generate €1.1bn EBITDA this year.

  • UK cable company Virgin Media is taking steps to reduce its net debt of £5.9bn. It is offering $650m of new debt and has also auctioned off a package of 7 digital channels, with the highest bid of £160m from rival BSkyB.

  • Music group EMI has received £28m of additional funding from its owner, private equity firm Terra Firma. The move indicates that EMI failed to meet conditions required for its £2.6bn of loans from Citigroup in the six months to 31 March 2009.

  • Heineken has spent around £90m buying up the debt of struggling pub chain Globe Pub Company at discounts of around 50%. The result is that Heineken now has around 85.7% of Globe’s £200m of senior debt, 31.6% of its £57m of junior debt and 21.7% of its syndicated bank debt. The reason for the investment seems to be Heineken’s 30 year contract to manage and supply beer to Globe’s 425 pubs. Under the terms of the contract, if Globe hits financial difficulty, payments due to bondholders and lenders take priority over payments to Heineken, although Heineken is still obliged to continue supplying beer and managing the estate. Globe is already in financial difficulty because it has breached banking covenants and defaulted on a £257m loan this year.

  • German chipmaker Infineon has asked the German government to guarantee €500m in loans. Infineon is Europe’s second largest maker of ‘logic’ chips supplied to big customers, particularly carmakers. Infineon is racing to secure €900m in follow-on financing for loans and bonds falling due next summer.

Other

  • Australia’s securities regulator, the Australian Securities & Investment Commission, has lifted its eight month ban on short-selling financial stocks. However, it did state that the ban would be reintroduced immediately if market conditions warranted such a move.
  • Airline Virgin Atlantic said its pre-tax profits had almost doubled to £68.4m in the year to 31 March 2009 from £34.8m a year earlier, but it appears that UK GAAP rules assisted in the generation of the profit. Virgin Atlantic is a private company and is therefore not required to provide much detail to the market and is able to prepare its accounts using UK GAAP rather than IFRS. However it is 49% owned by Singapore Airlines. The Singapore Airlines accounts for the same period prepared under IFRS showed that Virgin Atlantic barely broke-even. The differences seem to relate to the way derivatives based hedging losses were accounted for – under UK GAAP they are just disclosed, whereas under IFRS they impact reported income.
  • German derivatives exchange Eurex is launching a set of agricultural futures contracts as it expands into commodity trading. The contracts will start in July and include cash-settled futures on hogs, piglets and potatoes.
  • The London Stock Exchange agreed to allow Plus Markets to freely trade shares on AIM. This followed a potential legal dispute with Plus Markets challenging the LSE’s requirements for AIM companies to have to elect to be traded elsewhere, and for all trades occurring elsewhere to be reported into the LSE. The LSE has confirmed it will obtain the information it requires and will no longer require companies to give consent to trade elsewhere.

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

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