Mistimed writedowns lesser of mining M&A evils 18 Oct 2017 Rio Tinto has been accused by the SEC of hiding the plunging value of a coal mine it bought in 2011. The charges are serious, but at least accounting procedures are fairly clear. If only there were rules that could prevent mining bosses getting carried away during M&A upswings.
Heads or tails, Mark Carney loses 17 Oct 2017 British inflation has hit 3 percent, the highest level since 2012. No wonder the Bank of England chief is hinting policy rates may soon rise. Carney’s problem is that he will be criticised for hurting a slow-growing economy if he hikes and accused of inconsistency if he delays.
Pearson’s improved report card could be erased 17 Oct 2017 The education publisher issued a slightly more optimistic forecast for operating profit and said its U.S. textbook business is unlikely to repeat its catastrophic 2016. But Pearson has misread its key market before. The shift to digital publishing still looks painful.
FirstRand makes punt on post-Brexit housing market 16 Oct 2017 The South African bank has offered 1.1 billion pounds for Britain’s Aldermore. Shares in the mortgage lender had slipped amid concerns about the slowing property market. At 8 times expected 2018 earnings, FirstRand could be getting a bargain – provided bad loans don’t shoot up.
UK energy cap is bad economics and poor politics 12 Oct 2017 Prime Minister Theresa May wants to limit the most commonly used gas and electricity tariffs until 2020. Other EU countries show government meddling does consumers more harm than good. As a response to the Labour Party’s threat of nationalisation, it’s too little, too late.
Sky investors choose between profit and principles 12 Oct 2017 Chairman James Murdoch faces a backlash over concerns about his independence as Twenty-First Century Fox, which he runs, tries to buy the UK pay-TV group. Shareholders have legitimate corporate-governance grievances. But financially they’d be better off with Murdoch’s money.
Helping Santander helps UK bank competition 11 Oct 2017 Smaller lenders are angry that a state-aid funding pot set up by RBS to improve competition could help Santander, one of Europe’s largest banks. But it may be best for borrowers. Sharing funds between minnows would have done less to permanently reduce big lenders’ dominance.
Smith & Nephew could use surgical activism 11 Oct 2017 U.S. hedge fund Elliott is building a stake in the artificial knee and hip maker. Talk that the company could be taken over has surfaced more often than actual bids. Agitating for bigger profit margins and a breakup may be more rewarding than hopes for a bigger deal.
Time for Barclays to sever its U.S. cards arm 10 Oct 2017 CEO Jes Staley has a conundrum: the UK bank’s market value is so depressed investors are essentially getting the U.S. credit card business for free, according to Breakingviews calculations. Spinning off the unit would make Barclays less complex and help it to a richer valuation.
HSBC’s next challenge is how to grow responsibly 9 Oct 2017 The global bank wants insider John Flint to replace CEO Stuart Gulliver, according to the Sunday Times. If approved, he will take over a slimmed-down lender trading at 1.2 times book value. Investors now want growth – but Flint and Chairman Mark Tucker should heed past mistakes.
SeaWorld a slimy meal for ex-Blackstone predator 5 Oct 2017 Merlin Entertainments is mulling a bid to buy the theme parks of the operator famous for its killer whales. Both were once owned by the buyout group. A $1.6 bln sale could create value, but SeaWorld’s complex ownership and the tough business outlook make a breakup tricky.
More for China than London in Russian hydro IPO 5 Oct 2017 Oleg Deripaska’s En+, which controls aluminium outfit Rusal, aims to raise $1.5 bln in an LSE and Moscow listing. It touts a green model, but public investors will have little say. The cornerstone backer, a partner of the PRC group that just bought into Rosneft, may do better.
Tesco is spinning its wheels to get nowhere fast 4 Oct 2017 CEO Dave Lewis has boosted margins at Britain’s biggest supermarket, shrunk the pension deficit and cut debt. The first dividend in three years confirms the rebound. Yet the threat from inflation, weak consumer demand and online rivals have left Tesco shares stuck in a rut.
Telco banks may be consigned to fringes of finance 4 Oct 2017 Orange and Altice plan to offer banking services to capitalise on a boom in digital finance. It’s a novel solution to slowing telecom revenue growth, and similar ventures were a hit in Africa. But mobile operators are entering a crowded field, with no obvious advantage.
Fidelity apes hedge funds to play active defence 3 Oct 2017 The asset manager’s UK offshoot will charge clients more when funds beat their benchmarks and less when they underperform. The risk is that fees become more opaque. Yet a variation on alternative managers’ “2-and-20” model may help it resist the onslaught from cheap trackers.
WPP handed lucky exit from Japanese jam 3 Oct 2017 The British ad group, which owns 25 pct of Asatsu-DK, reckons Bain’s $1.3 bln offer for the Asian company is stingy. But WPP is already a winner. CEO Martin Sorrell will either profit from the private equity group’s margin-boosting clout or get the best terms in a decade to exit.
Monarch suffers very British failure 2 Oct 2017 The airline’s past reliance on tourism to Egypt and Tunisia, now danger areas, started the rot. But the Brexit-induced slump in sterling worsened things, and a laissez-faire resistance to government intervention – unlike the German help handed to Air Berlin – finished the job.
Central bankers’ superpowers are looking spent 2 Oct 2017 Between taming inflation, fighting the financial crisis and averting a breakup of the euro, monetary policymakers acquired an aura of omnipotence. Their responsibilities are growing and their mandates have turned into a fetish. A painful collision with reality is overdue.
Catalonia crisis is painful distraction for Spain 2 Oct 2017 Despite violent police intervention, the region’s vote to leave Spain is unlikely to trigger a breakup of the country. Yet the political unrest has damaged an already weak government and could strain public finances. Spain’s recovering economy needs a bigger political discount.
Political fiddles skirt UK housing market problem 2 Oct 2017 The Conservative government is putting up more cash to help homebuyers, while the Labour Party proposes rent controls. Both policies risk hurting those they are supposed to help. Lasting reform means pushing down house prices; no politicians seem ready to pay the political price.