Month: August 2004

Sanofi beaten down too much by Plavix fear

20 Aug 2004

Sanofi has started paying out E16bn to Aventis shareholders as the two drugs companies merge. Reinvesting it in the combined group is a good idea. Investors get a free option on Sanofi defending the patent on blockbuster drug Plavix.

How will WPP deploy its cash flow?

20 Aug 2004

Martin Sorrell still seems pretty keen on acquiring Grey, especially if he can snap up the US group at a good price. But if not, the issue of share buybacks will come to the fore. Especially since WPP is confident in ever expanding margins. But if not, the issue of share buybacks will come to the fore, especially since WPP is confident of expanding margins further.

Fight over Parmalat’s lost billions gets messy

20 Aug 2004

The administrator has fired off lawsuits at banks and auditors. Someone may get stung, if Parmalat s bond prices are any guide. Enrico Bondi s charge sheet references some familiar trades. Breakingviews recaps its analysis of them.

Gazprom threat does Russia no favours

19 Aug 2004

PostYukos, the government needs a PR coup. And what better than lifting restrictions on foreign ownership of Gazprom stock? Instead, an MP's demand to investigate schemes that allow foreigners to own stock indirectly has spooked investors.

Top Goldman prop trader teams up with TPG

19 Aug 2004

Rather than go it alone, Dinakar Singh is launching a hedge fund in partnership with the giant US private equity group. It marks a further convergence between hedge funds and private equity. Synergies look limited now. Singh clearly thinks that will change.

VW needs skill to defuse pay row

19 Aug 2004

The German carmaker can t afford to give in to unions' pay demand when it is trying to push through badly needed costs cuts. Daimler and Siemens have already convinced staff to work longer hours. VW, in a weaker negotiating position, will need skill to do the same.

Swisscom and Telekom Austria call off merger

19 Aug 2004

A terse statement from the Swiss suggests both companies see advantages to a deal but can t currently agree terms. But there doesn t seem to have been much daylight between each side on price. Politics may have got in the way.

Marconi’s boss munches his golden carrots

19 Aug 2004

Chief executive Mike Parton has sold 80% of his performancerelated shares available for sale at the first practical opportunity. He seems to lack confidence in the share price holding up. But at least he has an incentive to keep it there plenty more carrots to come.

Underwriting cartel emerges unscathed from Google

19 Aug 2004

The search engine hoped to rewrite Wall Street's rules on IPOs. But Google's auction was so shambolic that it won't attract many copycats. Avoiding a traditional float ended up saving about $50m in fees at a probable cost of a few billion in market cap. Avoiding a traditional float ended up saving about $70m in fees at a probable cost of a few billion in market cap.

FSA ends Collins Stewart probe – unhelpfully

18 Aug 2004

The regulator has found nothing in allegations of impropriety made by an exemployee that justify publicly reprimanding the UK stockbroker. But it has drawn attention to the possibility it may have issued a private warning. It didn t need to do that.

Swisscom’s Austria talks encouraged by taxman

18 Aug 2004

The operational synergies from combining the Swiss and Austrian telecoms incumbents could be fairly thin on the ground. But a deal would create a tax shield for the Swiss group and allow it to pay more dividends. There is a good chance one will fly.

Seat’s investors take to the hills

18 Aug 2004

When private equity firms bought the majority of the Italian yellow pages group, investors cheered the benefits of extra leverage. But debt has its drawbacks. The market now fears that widening spreads and rising interest rates could hit the group instead.

Nestle says it will still hit its 5%-6% sales growth target for 2004. But the market remains to be convinced.

18 Aug 2004

Sales growth came in below its own forecasts. Meanwhile, bad weather and rising raw materials costs have hit the bottom line.

BHP Billiton plans to return $2bn in cash

18 Aug 2004

The world's premier mining group is generating so much cash that it can afford a buyback and keep firepower for possible deals. BHP probably isn't hellbent on a new acquisition spree. But its interest in deals has gone up a notch.

Barclays does a transatlantic deal at last

18 Aug 2004

But this ain t no transformational deal. The UK bank is paying $300m for a lossmaking US credit card outfit. Still, the acquisition could be the foundation of a new source of growth for Barclays.

Parmalat sues auditors for $10bn in damages

18 Aug 2004

Whatever the merits of the allegations against Grant Thornton and Deloitte, the lawsuit will send shockwaves though the audit profession. Accountancy firms are far more thinly capitalised than another of Parmalat s legal targets its banks.

Vodafone on front foot in Japan

17 Aug 2004

The mobile operator s poaching of Shiro Tsuda from rival NTT DoCoMo looks like something of a coup. Vodafone s struggling Japanese unit is its largest by revenues. Righting it would significantly lift the group s valuation.

UK summer housing lull could be temporary

17 Aug 2004

Economists will grasp a survey showing flat price trends as the beginning of the end of the long housing boom. But current interest rates are not enough to keep buyers away. We are probably witnessing a pause for breath before the upswing continues.

Allianz boss sets good example on pay

17 Aug 2004

Michael Diekmann has revealed a fixed salary of E900,000. That seems small, but he could earn a lot more in bonuses. Other German companies should follow suit. This would encourage greater transparency and avoid onerous legislation. Michael Diekmann, the boss of Germany's largest insurer, has disclosed his salary. But Allianz has not revealed his bonus and options. Allianz should disclose the total sum and other German companies should follow suit. This would avoid onerous legislation.

Investment banks still hiring despite slowdown

17 Aug 2004

After a pickup in hiring in the first half, most firms expect to end the year with more people than in January. Given the way the markets have dipped in the last quarter, maybe they've jumped the gun.

Rentokil not going anywhere fast

17 Aug 2004

Tension appears to be building, as former chairman Clive Thompson is rumoured to be mulling a bid for the UK services group. But the company is unattractive bait for a takeover.

China’s low-wage economy is coming to an end

17 Aug 2004

Factory wage inflation is rampant. That should have been expected. China is now too rich to get away with subsistence pay. But very low costs have propelled growth up to now. The next stage will be more challenging. The government has some hard work to do.

Google slashes IPO price

16 Aug 2004

The 26% cut at the midpoint of the range and insiders scaling back their own sales is a blow to the hifaluting internet search group. But it is also a sign that rationality is prevailing. Google's new valuation is still high but no longer crazy.

Chavez win soothes troubled oil markets

16 Aug 2004

Investors should welcome the Venezuelan president s referendum victory. Chavez craves higher oil production more than anything but power. And he is now in a good position to deliver.

Google Playboy interview misses big issue

16 Aug 2004

The article doesn't once mention Playboy's biggest business. This is despite the fact that it also represents one of Google's biggest businesses.

Hedge funds struggle again in July

16 Aug 2004

And as performance has suffered, so the flow of new money into hedge funds has slowed. But it's too soon to write the obituary of the hedge fund boom. Investors have few alternative places to stick their money.

US keeps on trading towards disaster

16 Aug 2004

The country cannot kick the import habit. Expensive oil makes a bad situation worse. But the problem is more basic import substitution is not working. The only solutions are a much lower dollar or a big recession. Or both.

Allianz investors unmoved by Dresdner recovery

16 Aug 2004

The German insurer s shares are down 25% this year even though its banking unit has returned to profit. Why the cool response? One reason may be that Dresdner s recovery is weedy. Another is that the rest of Allianz is only doing all right.

Swatch buckles under tax evasion allegations

13 Aug 2004

The Swiss watch group's shares initially fell more than 10% on news it was charged with tax evasion. Allegations of a coverup make this case more dramatic than a plain vanilla tax evasion charge. But how bad can it be?

Good news on defaults likely to be fleeting

13 Aug 2004

The default rate on junk debt has fallen from 11% to 2% as the foolish lending of the late 1990s has been flushed out of the system. But the era of favourable economics is already ending. A new generation of reckless loans should start to get into trouble soon.