Manhattan-New York

In Case You Missed It: Business News Round-up

Contributed by Martin Mitchell of the Corporate Training Group.Martin Mitchel of CTG

The U.K. revised initial figures for the third quarter from a gross domestic product fall of 0.4% to a fall of 0.3%. Cadbury may receive an offer from Hershey. China issued its first 50 year government bond. These are but a few highlights of important market events that we’ve gathered to help you start the week well informed.

Economic Backdrop

Mergers and Acquisitions

  • Speculation is rife that Cadbury is about to receive a ‘white knight’ offer from Hershey, possibly in conjunction with Italy’s Ferrero. The charitable trust that controls Hershey has informed the Pennsylvania’s Attorney General that it is considering its options in relation to the UK confectioner. Cadbury is already facing a hostile offer from Kraft, and there is a possibility that Nestle may also make an offer.

Financial Institutions

  • Sir David Walker published his proposals for corporate governance of U.K. financial services companies. The proposals include the requirements to disclose bands of numbers of employees receiving bonuses of greater than £1m, and a requirement to vet new non-executive directors.
  • Lloyds Banking Group’s fundraising plans were approved by more than 99% of their shareholders. The plans will see capital increase by £22.5bn through the combination of a rights issue and a debt swap, allowing the group to break free from the U.K. government’s asset protection scheme.
  • Royal Bank of Scotland signed the formal agreement to enter the U.K. government’s asset protection scheme, paving the way for £240bn of toxic assets to be insured.
  • The Bank of England revealed that it had acted as ‘lender of the last resort’ and lent money to both Royal Bank of Scotland and HBOS at the peak of the financial crisis. The loans peaked at a massive £61.6bn (£36.6bn to RBS and £25.4bn to HBOS) and have since been repaid.
  • German bank WestLB has secured a €4bn bailout from the German government. Berlin will inject an initial €3bn, and then a further €1bn later if required.
  • German bank Commerzbank is being sued by a further 21 investment bankers for €16.7m of unpaid bonuses. The bank is already facing a claim from more than 80 bankers relating to €33m of unpaid bonuses.
  • Spain’s BBVA is set to exercise an option to acquire a further 5% in China Citic Bank for €1.1bn. BBVA’s stake will rise to 15%, comfortably below the 20% limit for investments by single foreign groups in Chinese banks.
  • The Middle East’s largest private equity house Abraaj Capital has raised its capital by almost a third as it prepares for a new round of investments. Abraaj’s parent entity has raised $375m from existing shareholders in a rights issue.

Credit

  • China issued its first 50 year government bond, selling Rmb20bn (£1.8bn) of notes due in 2059. The auction priced the bonds to yield 4.3%.
  • Dubai’s flagship holding company Dubai World requested a standstill on its companies’ $22bn of debts until the 30th of May 2010. The group includes Nakheel, the property company behind the ‘palm’ development, as well as DP World, the owner of U.K.-based P&O Ferries. Nakheel is due to pay back $4bn on an Islamic bond issue on 14th of December. The news came as a shock as it arrived only 2 hours after Dubai raised $5bn from two Abu Dhabi banks and on the eve of the Eid holidays.
  • Investors’ wishes to hold safe investments at the year end are driving up the price of U.S. Treasury bills and two year notes. Yields for some bills maturing next January have fallen to zero and even turned negative and six month bills’ yields have fallen as low as just 13 basis points.

Other

  • The London Stock Exchange suffered a three-hour trading outage due to ‘connectivity problems’ and its shares fell almost 9% due to worries that Dubai’s problems could result in its largest shareholder, the Dubai Borse, being forced to offload its stake.
  • Four people were jailed for up to 30 months in Hong Kong for market manipulation. The four traded shares among themselves to ‘produce a false picture of the depth and liquidity’ of Asia Standard Hotel, boosting its market value by HK$4bn.
  • Vodafone followed a succession of companies including Barclays, Whitbread and Fujitsu by announcing plans to close its final salary pension scheme. The scheme covers around 4,000 staff and had a £60m shortfall as of the 31st of March. The plan is to close the scheme in April 2010, after a consultation process.
  • Nomura was fined £1.75m by the FSA for mismarking its equity derivatives trading book. The problem stemmed from a trader in Hong Kong and led to a total downward adjustment of £16.3m. Nomura brought the problem to the attention of the regulator, and was given a 30% discount on the fine for its co-operation.
  • The Bombay Stock Exchange announced plans to list its shares. Asia’s oldest exchange is investing heavily in improving its technology and currently lists around 5,000 companies.
  • Sands China raised less than expected in its Hong Kong IPO. The operator of three Las Vegas Sands casinos in Macao raised HK$19.4bn ( U.S.$2.5bn), less then the HK$26.3bn that had been hoped for and priced at the bottom end of the range. The IPO was arranged by Goldman Sachs, Citibank and CLSA.
  • Volkswagen U.K.’s defined contribution pension scheme has decided to give half of its £70m default fund to an absolute return manager. The cash will be invested in Standard Life’s Global Absolute Return Strategies fund.

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

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