GE’s Immelt sets powerful stage for his successor 30 Apr 2014 He’s not leaving any time soon. But the $13.5 bln Alstom asset purchase puts him on track to ensure industrial earnings account for 75 pct of the business in five years’ time. And though it will take precise execution, the deal even promises a return above GE’s cost of capital.
Market forces should be slam dunk for NBA fiasco 30 Apr 2014 Real-estate mogul Donald Sterling is under pressure to sell his Los Angeles Clippers after receiving a lifetime ban for making racist remarks. Fellow owners may be reluctant to put the matter to a ballot, for fear of setting a risky precedent. Capitalism will spare them.
Exelon is overpaying, even with the sandbagging 30 Apr 2014 Relative to similar deals, the U.S. utility is low-balling the projected savings from its $6.8 bln Pepco purchase. Modesty won’t fool regulators. They’ll demand a cut through lower electric bills. Even assuming more realistic synergies won’t justify a $1.1 bln premium.
Edward Hadas: Apple’s many magic tricks 30 Apr 2014 The tech giant’s millions of products appear with few employees, little R&D and almost no inventory. The huge profits from this industrial prestidigitation are sheltered by tax footwork and helpful accounting. Apple’s not alone in that, but it’s no way to build a vital industry.
U.S. GDP stumble makes more noise than news 30 Apr 2014 First-quarter growth of only 0.1 pct looks feeble, and it wasn’t just bad weather. Yet a dip was due after a strongish Q4 and full-year growth was 2.3 pct. Despite healthy consumer spending, weak investment and other data, continuing tepid recovery may be the real message.
Greek bank rebirth oiled by taxpayer largesse 30 Apr 2014 Athens’ decision to let its 95 pct stake in Eurobank get diluted means that the lenders who financed the country’s bailout are sitting on a 4 bln euro paper loss. But Greece’s bet - that rapid re-privatisation yields more upside than holding and hoping – may not be a foolish one.
Don’t trust the $20 trillion global GDP uplift 30 Apr 2014 Dollars go further in poorer countries than at home. The World Bank’s latest effort to quantify by how much adds 29 pct to global GDP. But the method, using theoretical exchange rates, is questionable. And the endeavour risks understating the problems of challenged economies.
Energizer split leaves biggest problem intact 30 Apr 2014 The struggling $7 bln batteries-to-tampons group plans to separate into household and personal care companies. That may improve focus, but it’s hard to see how it addresses Energizer’s main challenge: mustering more resources to take on industry gorilla Procter & Gamble.
GE in hard-to-beat 11.4 bln euro bid for Alstom 30 Apr 2014 The U.S. conglomerate’s offer for the French group’s power assets is at the upper end of a reasonable price range. Germany’s Siemens will find it hard to improve on a fair offer favoured by Alstom’s board - and it would probably bring less cash to the table.
BNP is latest pawn in U.S. too-big-to-jail saga 30 Apr 2014 Post-HSBC, U.S. regulators are keen to bin the idea that big banks can’t be found guilty on stability grounds. BNP’s breaches of foreign sanctions may not be worse than peers’. But at best it looks to be facing a big fine; at worst, a serious threat to its Stateside business.
Rest of world comes to Nomura’s aid again 30 Apr 2014 The Abenomics-inspired rally has fizzled, knocking the Japanese bank’s domestic business. But its investment banking arms in the United States and Europe are beginning to carry their weight. With healthy capital and a less hostile regulator, Nomura can continue to hold its own.
WH Group flop shows pitfalls of crowded IPOs 30 Apr 2014 The Chinese pork producer hired a record 29 banks but still failed to sell its $1.3 bln listing to investors. That undermines the received wisdom that more advisers mean less risk for issuers. For banks, it’s a reminder they can share embarrassment as well as league table credit.
China’s bank exam ticks just one of three boxes 30 Apr 2014 As in Europe and the United States, the country’s central bank makes its largest lenders sit an annual stress test. But regulators don’t publish individual results, or spell out the consequences of failure. That’s why the inspection won’t do much for investor confidence.
Twitter’s slow user growth is an ill canary 29 Apr 2014 Sure, first-quarter revenue doubled. But Twitter is finding it increasingly difficult to sign up new users or tempt existing ones to tweet more. That’s a bad combination for the microblogging service that’s losing money yet valued at 18 times projected 2014 sales.
Heirs to $40 bln TXU flop inherit same old risks 29 Apr 2014 The Texas utility now called Energy Future Holdings is finally going bankrupt. Its plan to emerge will still leave it with more debt than rivals and vulnerable to a fall in energy prices, just like after its record 2007 LBO. And that’s only after a fight with junior creditors.
Apple’s new debt is more iBond 1S than iBond 2 29 Apr 2014 The iPhone maker is venturing into bond markets for the second year, even though it has $151 bln of cash. Investors who snapped up last year’s $17 bln offering are nursing losses thanks to Apple’s good timing. The 2014-model debt issue’s main improvement is its smaller size.
U.S. bank watchdogs need more Washington love 29 Apr 2014 Regulators came out of the financial crisis shamed, but also with more power - and more work. Yet lawmakers are forcing more belt-tightening on them. Meanwhile, the Fed and the top swaps supervisor suffer from a dearth of leaders. Regulators need more resources, not fewer.
Barclays U.S. bankers are a Skip away from a jump 29 Apr 2014 The UK lender’s Wall Street chief has quit after finding regulatory box-ticking duller than dealmaking. Skip McGee’s exit will hurt morale, as the ex-Lehmanite was a foil to CEO Antony Jenkins’ aborted war on pay. The flipside is that Jenkins should now have more clout Stateside.
EU banking stress tests equipped to avoid ridicule 29 Apr 2014 The European Banking Authority’s macroeconomic assumptions for its 2014 exercise aren’t as harsh as they could have been. But the methodology will encompass sovereign risk, and harmonised balance sheets will add rigour. Unlike prior efforts, the test should avoid becoming a joke.
U.S. banks wasting Fed’s $2.7 trln of stimulus 29 Apr 2014 QE-generated excess reserves just sit there earning 0.25 pct while loans have increased less than nominal GDP. Only consumer debt and yield curve games have grown. No wonder America has little growth or inflation. If the Fed wants more lending, it should charge for reserves.
WH Group’s pulled pork IPO is least bad outcome 29 Apr 2014 The Chinese producer was so greedy even 29 banks couldn’t sell its $1.3 bln Hong Kong offering. Pushing ahead would have left private equity backers with a big stock overhang. A delay gives WH Group time to integrate its big U.S. deal, although it means carrying debt for longer.
Deutsche Bank is running to stand still 29 Apr 2014 The German lender’s equity increased by 1 bln euros in Q1. Fixed-income trading was not as bad as feared, and a 1.5 bln euro bond will further boost capital. But rising regulatory costs look sticky. The good news: a much-needed equity raise has now become an easier sell.
Santander puts Brazil unit out of listed misery 29 Apr 2014 The Spanish bank is buying back the minorities of Santander Brasil at a discount to the 2009 IPO price. The move makes financial sense. But it weakens the bank’s stated policy of listing major units. And Santander’s Brazilian unit still needs fixing.
ABB shocker raises questions about profit target 29 Apr 2014 The Swiss engineering company’s shares tanked 7 percent on news that its power systems unit faces bigger problems than thought. Persistent operational issues and increased restructuring efforts will make it hard for the group to meet its 2014 profit target.
Sweden shows monetary rigour not fatal for assets 29 Apr 2014 Economist Paul Krugman’s critique of overly tight central bank policy has lately been directed at Stockholm. Some investors level similar charges against the ECB. At least the Swedish experience shows that financial assets can withstand a period of negative inflation rates.
There’s something unhealthy about robust UK 29 Apr 2014 The first quarter’s 0.8 pct GDP gain looks nice, but is buoyed by foreign cash flowing into hot London property. New calculations will boost output and increase the savings rate, but the statistical shift won’t change one sobering fact: GDP is still not back to the 2008 level.
Pfizer tax arbitrage will hasten more deals 29 Apr 2014 The biggest charm of the U.S. drug giant’s $99 bln offer for the UK’s AstraZeneca lies in switching to a lower-tax domicile. The latest and largest such deal raises the odds Congress will tighten rules. Until then, Pfizer’s validation of the tactic will encourage copycats.
China’s big airlines stuck in economy 29 Apr 2014 Earnings have plunged as a weaker currency adds to pressure from high-speed rail, and cheap carriers like Spring Airlines. But budget valuations don’t reflect two things: the benefits of rapidly rising incomes, and a government happy to put the brake on competition.
China index: Economy is creeping and crawling 29 Apr 2014 Our index touched 90.7, slightly up from 89.5 a month earlier. But domestic activity still looks sluggish. Rail freight volumes are lower; truck sales are slower; steel production is stalling; and growth in air travel is unusually modest. Dwindling exports offer little support.
Sotheby’s case for poison pill tough to swallow 28 Apr 2014 The auction firm has blocked uppity investors like Dan Loeb from owning 10 pct or more of its stock. The hedge fund boss has sued for being singled out and portrayed as a takeover threat. Legal precedent supports the company, but may stifle activism that benefits shareholders.