In Case You Missed It: Business News Round-up

Contributed by Martin Mitchell of the Corporate Training Group.

The U.K. Chancellor of the Exchequer’s pre-budget report includes a 50% levy on bank bonuses of more than £25,000. Barack Obama plans to utilise the $200bn of unused Tarp funds to boost job creation. Japan announced a Y7,200bn stimulus package to help the country’s economic recovery. These are but a few highlights of important market events that we’ve gathered to help you start the week well informed.

Economic Backdrop

U.K. Chancellor of the Exchequer Alastair Darling presented his pre-budget report. The government is projecting borrowings of £178bn in the current 2009/10 year, then £176bn in 2010/11 and £140bn in 2011/12. Thereafter it will fall to reach around £82bn in 2014/15. The pre-budget report also included a one-off 50% levy on bank bonuses of more than £25,000 that will only apply until 5 April 2010.
Spain became the latest sovereign issuer to come under scrutiny as Standard & Poor’s revised its outlook from ‘stable’ to ‘negative’. Spain’s long-term outlook is currently AA+.
Barack Obama plans to utilise the $200bn of unused funds from the troubled asset relief programme (Tarp) by boosting resources for job creation.
The U.K. economy grew by 0.2% in the three months to November according to the National Institute for Economic and Social Research. This followed a contraction of 0.3% in the three months to October.
Japan announced a Y7,200bn ($80bn) stimulus package to help the country’s fragile economic recovery.
The German government looks set to pass an €8.5bn package of tax cuts to stimulate demand.

Mergers and Acquisitions

Apax Partners announced a £975m buy-out of Marken, a distributor to the pharmaceutical industry, in the biggest private equity deal in the U.K. for more than a year. Apax is underwriting the entire purchase price and is in talks with banks about raising debt to finance the transaction. Lazard and Rothschild advised Marken on the sale.
Waste management company Shanks Group received a £535m unsolicited takeover approach from Carlyle Group. Shanks reaction was to declare that an increased bid of £600m would deliver ‘appropriate value’ to its shareholders.
Volkswagen agreed a deal to buy 19.9% of Suzuki Motor shares. The deal is a prelude to a cross shareholding agreement that will see the two companies co-operate whilst respecting each other’s independence.
Bear Stearns headquarters building in Canary Wharf in London’s docklands was sold for £208m to a partnership owned and controlled by a private investor. Most of the building is let to JPMorgan on a 20 year lease. The transaction will yield just under 6%.

Financial Institutions

The 30 members of Goldman Sachs management committee will receive their entire 2009 bonus in stock that must be held for five years. Goldman will also give investors a non-binding advisory vote on its compensation principles and bonuses at its annual meeting.
The U.S. Treasury auctioned its 88.4m warrants in JPMorgan Chase that were granted alongside $25bn in Tarp funds. The Tarp money has already been repaid and the warrants generated $936m.
The Kuwait Investment Authority has sold its 5% stake in Citigroup for $4.1bn. The stake cost $3bn and was invested when Citigroup was desperately searching for capital in January 2008.
Citigroup is also reported to be racing against the clock to repay $20bn of U.S. government bail-out funds received under the troubled asset relief programme (TARP). If it is to repay the funds, it is thought Citi will have to launch a capital raising in the next ten days, after which it will have to wait until late January 2010 when it announces quarterly results

Credit

Greece was put on ‘credit watch negative’ by Standard and Poor’s due to its fiscal deficit. The current year deficit sits at around 12.7% of GDP, and government debt is 110% of GDP. Later in the week, Fitch actually cut Greece’s rating to BBB+.
A group of regional and international banks held a ‘kickstart’ meeting with Dubai World in relation to the company’s request to restructure $26bn of debt. The credit downgrades of Dubai World have also triggered an early repayment clause on $2bn of debt issued by state-owned Dubai Electricity and Water Authority’s securitisation programme. The debt was scheduled to be repaid in 2036.
In a further development in Dubai, quoted real estate company Emaar Properties decided not to go ahead with a merger with the property companies owned by Dubai Holdings (Dubai Properties, Sama Dubai and Tatweer). Dubai Holdings is the conglomerate owned by the emirate’s ruler, and the potential deal had been described as an effective private sector bail-out for a troubled public sector competitor.

Other

Warren Buffet’s Berkshire Hathaway is trading at 1.18 times book value – over the past 18 years, investors have paid an average of 1.7 times book.
Mexico has taken out put options to for its 230m barrels of oil exports in 2010, buying protection against oil prices falling below $57 per barrel. Barclays Capital, Deutsche Bank, Goldman Sachs and Morgan Stanley arranged the hedge.
HSBC carried out the first derivative trade in the Bangladesh taka. Two pairs of onshore foreign exchange options in the taka against the dollar were arranged for two clients – an exporter of ready made garments from Bangladesh called Viyellatex, and Coats Bangladesh, a U.K. based supplier of yarn and other raw materials. Each trade had a notional value of around $500,000.
The International Accounting Standards Board has started its search to replace Sir David Tweedie as chairman. Sir David is set to retire in June 2011.
Nomura is planning to launch the first bank-owned ‘dark pool’ that will reveal details of the executed trades. It plans to convert its existing NX crossing network into a ‘multi-lateral trading facility’ (MTF), a particular structure under the European Markets in Financial Instruments Directive that is required to disclose trades and prices at which those trades were struck.

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