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In Case You Missed It: Business News Round-up

Martin Mitchel of CTGContributed by Martin Mitchell of the Corporate Training Group.

India reported unexpectedly strong third quarter GDP growth. Kraft published its formal offer for Cadbury. U.S. cable company Comcast is entering into a joint venture with NBC Universal. These are but a few highlights of important market events that we’ve gathered to help you start the week well informed.

Economic Backdrop

  • India reported unexpectedly strong third quarter GDP growth of 7.9%.
  • The U.S. monthly employment report showed that only 11,000 jobs were lost last month, far less than the expected job losses of 125,000. The unemployment rate fell from 10.2% to 10%.
  • According to the latest ‘beige book’ survey from the12 regional Federal Reserve banks, economic conditions in the U.S. have generally improved ‘modestly’ since their last report on October 21st.

Mergers and Acquisitions

  • Kraft published its formal offer for Cadbury. The U.S. food conglomerate did not improve the terms of its indicative bid. It is offering cash and stock worth 713p per Cadbury share. Cadbury shares are currently trading at 795p, anticipated counter offers or an improved offer from Kraft.
  • Kraft has entered into exclusivity deals with nine banks to finance its bid for Cadbury. Known as ‘bankmail’, the agreement prevents the banks from financing any competing bid. The agreement is costing Kraft more than $70m in commitment fees as well as interest of at least 2 percentage points above benchmark rates.
  • U.S. cable company Comcast is entering into a joint venture with NBC Universal, the entertainment unit previously owned by General Electric. The JV will consist of $7.25bn of content assets from Comcast, plus $30bn of NBC Universal assets. GE will retain 49% of the JV and will also receive $6.5bn of cash from Comcast plus $9.1bn cash from the JV.
  • A consortium of private equity investors is close to making a bid for about half of AIG‘s International Lease Finance Corporation (ILFC). ILFC’s current chief executive is working with Onex, Greenbriar and Canada Pension Plan with Credit Suisse arranging a debt facility of more than $2bn.
  • China’s Wuhan Iron and Steel Company (Wisco) has agreed to pay $400m for a 22.5% stake in Brazilian iron ore miner MMX.

Financial Institutions

  • The FT managed to get hold of a list of thirty global financial institutions that the Financial Stability Board believes pose a systemic risk and require cross-border supervision. The list includes 24 banks – 5 U.S. banks (Goldman Sachs, JPMorgan Chase, Morgan Stanley, Bank of America Merrill Lynch and Citigroup), 4 from the U.K. (HSBC, Barclays, RBS and Standard Chartered), 4 from Japan (Mizuho, Sumitomo Mitsui, Nomura and Mitsubishi UFJ) plus UBS, Credit Suisse, SocGen, BNP Paribas, Santander, BBVA, UniCredit, Banca Intesa, Deutsche Bank and ING. It also includes 6 insurance groups (Axa, Aegon, Allianz, Aviva, Zurich and Swiss Re).
  • Barclays completed the $15.2bn sale of Barclays Global Investors to Blackrock. Blackrock is now the world’s biggest asset manager with more than $3,000bn in assets. Barclays has taken a 19.9% stake in Blackrock as part of the deal and will book £6.2bn gain on the transaction. Barclays’ core tier one ratio will rise from 8.8% to 9.2%.
  • The chief executive of BNP Paribas raised the estimate of the synergies that will be realised from its acquisition of Fortis Bank’s Belgian activities from €500m per annum to €900m. The synergies are expected to be realised by 2012 and mainly consist of cost cuts.
  • In an unusual deal Apax Partners has agreed that China’s sovereign wealth fund, China Investment Corp (CIC) can invest as much as €800m in its Apax Europe VII fund that raised €11.2bn two years ago. Apax is offering existing investors to transfer their unfunded commitments to CIC. The
    deal is conditional upon CIC receiving at least €350m of commitments.
  • Private equity group Candover has agreed with investors to terminate the €3bn fund it raised last year. The fund had been suspended since April because Candover’s listed arm was unable to meet its €1bn commitment.

Credit

  • The UAE central bank announced an emergency liquidity scheme that will provide fresh liquidity where required to UAE banks and foreign branches of foreign groups. The decision is aimed at easing fears about the UAE’s banking system after Dubai’s flagship holding company Dubai World requested a standstill on its companies’ $22bn of debts until 30 May 2010.
  • Standard & Poor’s, the rating agency, responded to Dubai World’s announcement by downgrading five of the Dubai state-backed companies to junk status, including the Jebel Ali Free Zone and DP World.
  • Prominent Kuwaiti conglomerate National Industries Group, is suing Carlyle Group in a local court. The conglomerate invested $50m in Carlyle Capital Corp, a fund that was marketed as safe because it invested in mortgage-backed bonds. However, the fund collapsed due to high leverage and the investors lost all of their money. Rather than compensate, Carlyle have offered NIG the ability to invest $100m in any Carlyle funds without the customary management and performance fees, but NIG have not accepted the offer.

Other

  • The IPO of Italian online fashion retailer Yoox was priced at the top end of its range. In the first technology IPO since the downturn, Yoox was priced at 26 times 2010 expected earnings valuing the company at €260m. Goldman Sachs and Mediobanca are the global sale co-ordinators.
  • Meanwhile, in Germany Hochtief blamed the Dubai debt problems for its decision to pull the plug on a planned €1bn IPO of its Hochtief Concessions business. The order book was only 60% filled with investors blaming the over-ambitious valuation. The investment banking consortium was led by Citigroup, Deutsche Bank, Goldman Sachs and Barclays Capital.
  • The whistleblower central to the U.S. government’s crackdown on undeclared Swiss bank accounts is seeking a ‘reward’ under rules introduced by the IRS to encourage whistleblowing. The regulations state an entitlement to receive a minimum of 15% and maximum of 30% of the money raised as the result of their information.

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

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