Month: May 2007

Wachovia’s $6.8bn broker deal creates value

31 May 2007

Buying AG Edwards makes it the secondlargest broker by number of advisers, after Merrill Lynch. But size is only one attribute. The deal s return vaults the cost of capital. And the capitalized synergies are higher than the premium and worth some $1.50 a share.

E.on changes tack with E7bn buyback

31 May 2007

The Germany utility is buying back E7bn of shares and splashing out on internal investment. That appears to leave little leeway for deals. That looks a double dose of good news for its investors. E.on s taste for acquisitions left its shares at a steep discount to peers.

CBS shows up faster-growth sister Viacom

31 May 2007

Since their forced separation by Sumner Redstone, CBS has made four times more money for investors than Viacom. Now it also seems to be competing with its former parent. This further confirms Redstone s muddled strategy in breaking them apart.

Why has Frere invested E2.2bn in Iberdrola?

31 May 2007

The Belgian financier targets companies where he can push for big changes. On that basis, the Spanish utility fits the bill. With the Spanish utility sector in flux the chances of a deal materialising, possibly with Suez, look high. Just not in the short term.

Yahoo resignation signals deeper problems

31 May 2007

The abrupt departure of Yahoo's chief technology officer reveals the failure of the firm's strategy to play catchup with Google. With two top positions vacant, Yahoo is reeling and morale is slumping. The rudderless firm needs new leadership.

New Mid-East oil exchange is a long-shot

31 May 2007

The Nymexbacked Dubai Mercantile Exchange promises to modernise the region s opaque and inefficient petroleum markets. If it works it will be easier to trade the bulk of the world s oil. But it won t succeed unless it can sign up the region s major producers.

Loss of French partner a blow for CVC’s Altadis bid

31 May 2007

Club deals are tricky for buyout firms. Squabbles over control are inevitable. That seems to be why PAI left CVC to bid for Altadis alone. CVC will now pick up even more of the equity, making this an unusually concentrated bet. But it could still do with a local partner.

Why does Goldman breed do-gooders?

31 May 2007

Robert Zoellick is the latest executive to bounce from the investment bank to public service, as the head of the World Bank. It sounds corny, but the firm s credo that wealth creation is good, ostentation appalling and philanthropy expected explains the trend.

China’s bubble policy beats India’s

30 May 2007

While India celebrates its stock market hitting $1tr in capitalisation, China is trying to rein in its own frothy bourse. China s approach is unconventional, but it may end up being much better for the health of its citizens finances.

Is Gazprom getting too big?

30 May 2007

The Russian gas monopoly is taking on evermore ambitious projects, raising questions about its ability to handle the risk. But even if these projects take longer to develop, Russia may not care much. After all, it is playing a longterm game.

Alitalia auction disintegrates

30 May 2007

The Italian government s rules proved too much for TPG. That leaves just two bidders: Italy s Air One and Russia s Aeroflot. The Italians look a shooin. Auctions are generally a good thing for sellers. But an auction gone wrong is just plain embarrassing.

Should private equity set the standard for pay?

30 May 2007

Margaret Ewing, former finance director at BAA, thinks that pay limits for bosses at public companies block innovation. Greed is certainly a powerful motivator. But it can be counterproductive. Public captains of industry should value the prestige as well.

Gaddafi now a safe pair of hands

30 May 2007

BP is coming back to Libya, with the Brotherly Leader s blessing. He s changed a lot since he nationalised the BP concession in 1971. But so has the energy world. An erratic but friendly autocrat provides useful diversification from Putin and Chavez.

eSpeed’s BGC deal unlikely to pacify its shareholders

30 May 2007

US electronic broker eSpeed is buying BGC, a fellow Cantor Fitzgerald unit, for $1.3bn a 7% discount to BGC s fair value, Cantor says. But the deal isn t as favourable as it looks. If eSpeed is valued on peer multiples, it is buying BGC for a hefty 17 times 2007 profits.

UK government finally starts British Energy sale

30 May 2007

Ten months, two faulty nuclear reactors and one energy white paper later, the UK is finally selling a 25% stake in the nuclear energy group. The delay may have cost about £500m, yet the government has still doubled its money. But how will it invest its £2.2bn proceeds?

ABN levels the playing field

30 May 2007

That should help the tattered reputation of the supervisory board. And it might help investors get the best deal. Groenink, the Dutch bank s boss, favoured a merger with Barclays. But the supervisory board will now take more control of the situation.

Biomet shareholders should hold out for more

30 May 2007

Blackstone won the auction for the orthopaedic firm with a $10.9bn bid. While fair at the time, that now looks cheap. The sector rallied, and Biomet is fixing its problems. It will probably trade back in line with competitors eroding the takeover premium.

Novel risks lurk in US municipal CDOs

29 May 2007

Investors allergic to taxes and credit risk like municipal debt. Wall Street s now adding some octane to this $2.3tr market. It s offering leveraged returns on debt backed by pools of munis. But these deals are inflexible and riskier than they look.

Vodafone growth hinges on emerging markets

29 May 2007

The UK mobile operator s European revenues are flat and fierce competition continues to drive down margins. Investors have little to cheer. Fortunately for Vodafone, it s the opposite tale in emerging markets. Integrating its £11bn Indian acquisition will be key.

Archstone-Smith an unlikely EOP sequel

29 May 2007

Tishman Speyer has offered $22bn for the apartment REIT. That s below its net asset value, and the market is expecting more. Shareholders might be having visions of Equity Office, when Blackstone's third offer was 15% more than its first. They shouldn t bet on it.

Is Goldman Master of the Universe no more?

29 May 2007

The investment bank s flirting with a $100bn market cap. But it trades at a big discount to new rivals like Fortress and Greenhill. Blame bullmarket rarity value, or opaque trading desks. Either way, it s the hotshot new kids that seem to rule the Wall Street roost now.

Eads should put its house in order

29 May 2007

The company s top managers sold shares in March 2006, just before the disclosure of big problems with the A380. The AMF is investigating, but its record of successful prosecutions is poor. Whatever the outcome, Eads needs a moral shakeup. The company s top managers reportedly knew about big problems with the A380 when they sold shares in 2006. The French regulator is investigating, but has had trouble getting convictions. Even if the bosses get off, an ethics lesson is called for.

BMW bid for Volvo would be a tough sell

29 May 2007

Current owner Ford s already borrowed against its Swedish unit, and would have to use at least half any sale proceeds to pay down its debts. True, BMW could overcome that by offering a juicy premium. But doing so would only drag down the German car maker s margins.

Consortium’s E71bn ABN bid is not a knockout

29 May 2007

The RBSled group has put its cards on the table. What s new? A little more cash, and the assumption of the potential LaSalle liability. But the bid still faces big road roadblocks, including full regulatory approval and shareholder votes from ABN and the three bidding banks. But the bid still faces big road blocks, including full regulatory approval and shareholder votes from ABN and the three bidding banks.

Russian market is cheap – rightly so

29 May 2007

Credit Suisse says that Russian market is a buy, because it s 22% cheaper than the emerging market average. And oil prices could stay high. But that s economics, not politics. Russia violates property rights and is increasingly hostile to the West. Investors should be wary.

European telecom companies swap assets

28 May 2007

France Telecom intends to sell its Dutch mobile division to Deutsche Telekom, and buy a Spanish internet company from it. The deal has the flavour of a medieval carve up. But it makes sense, as the two former monopolies have different strategies.

GdF needs breathing space

28 May 2007

If the merger with Suez doesn t go through, the former French gas monopoly will have to start looking for other options. A merger with electricity counterpart EdF will not pass EU muster. The first step to a new strategy is privatisation, with or without Suez.

Poor countries can’t afford rich world takeover

28 May 2007

It might not sound that way. Emerging countries seem to be everywhere LionOre, OMX, stakes in Deutsche Bank and Eads. Poor countries have $500bn a year to spend. That is enough to make a lot of deals, but it s a mere 1% of richworld equity markets.

UBS exit may not herald Julius Baer takeover

25 May 2007

The private bank looks more vulnerable now its biggest investor is selling. And it s got plenty of likely suitors. Deutsche Bank for one. But that doesn t mean Baer will fall anytime soon. It looks expensive, even at current prices. And UBS won t want to do a rival any favours.

Nasdaq’s $3.7bn OMX buy may presage LSE move

25 May 2007

It s hard to make the cashandshares deal stack up on its own. The returns on the Nordic exchangeandtechnology group look meagre. But Nasdaq has another concern its 30% stake in LSE. OMX might provide a Scandinavian appetiser to the big London meal.