Rentokil pension freeze shows way forward 20 Dec 2005 The services group is closing its generous pension plan to current workers. It won t be the last big UK company to make the move. Low investment returns and tougher regulation are killing off defined benefit pensions. Investors should be pleased with the trend.
FPL-Constellation deal could spark US utility M&A 20 Dec 2005 Government restrictions destroy pentup value. Their abolition releases it. That is the lesson from FPL s $11bn buyout of Constellation. The recent repeal of an old utility restriction may allow several other utilities and energy traders to unlock value by hooking up too.
Morgan Stanley’s Q4 gives Mack a break 20 Dec 2005 The first full quarter under chief executive John Mack was a good one. Slowing fixedincome trading was offset by gains elsewhere. This doesn t vindicate Mack s metoo banking strategy or his plans to keep Discover. But it does show the underlying franchise is intact.
Fazio’s exit gives Italian banks a boost 20 Dec 2005 Departed central bank governor Fazio was famous for the restraints he placed on bank mergers. Now he's gone, things may lighten up. Hopefully there will be more consolidation. The question is whether the new governor will be able to meddle like Fazio did.
Lloyds TSB’s £1bn Goldfish sale adds up 20 Dec 2005 The credit card brand never looked at home in the UK bank. Its assets fell despite the UK s lending boom. The disposal gives Lloyds muchneeded capital. And it has squeezed a good price from Morgan Stanley.
Skandia’s fall shows power of hedge funds in M&A 20 Dec 2005 The Swedish insurer has it lost its independence to Old Mutual and even failed to tease a higher price, despite hiring Goldman to defend it. The defence was probably doomed. Old Mutual had cleverly played to Skandia s hedge funds investors, who served it up on a plate.
Can a fundamental index beat the stock market? 20 Dec 2005 Conventional indices, like the S&P 500, too often reflect investor irrationality. The RAFI fundamental index aims to avoid getting caught up in bubbles. But its launch is unfortunately timed.
Unilever yet to convince on dual structure 19 Dec 2005 The AngloDutch consumer giant has decided against scrapping its dual listing, dashing hopes that the move would pave the way to a breakup. But Unilever still trades below the sum of its parts. Until its operating performance improves, doubts over its structure will persist.
Investors snap up US junk bonds 19 Dec 2005 The highyield market is experiencing a sort of preChristmas rush. December is shaping up as the busiest month of 2005 for new issues. Energy deals and a large coupon from Hertz's LBO issue are giving investors comforting places to stash their growing cash piles.
Fazio’s resignation must not be a false dawn 19 Dec 2005 The departure of Italy's central bank governor is a chance for the country to clean up its murky financial system. But it has had too many false dawns for one to be confident it really will grasp this opportunity.
BAA pays up for £1.3bn Budapest airport 19 Dec 2005 The UK airport operator outbid two rivals by paying 28 times Budapests ebitda or more than double BAA s own multiple. Budapest needs to deliver spectacular growth to make the numbers work.
Underbidding has limited merits as M&A tactic 18 Dec 2005 Macquarie bid for the LSE below its share price because the exchange s stock already trades with a speculative premium. But if a bidder really thinks a target is overvalued, it is usually wiser to be patient and wait for the company s share price to correct.
Wall Street girds for transit strike 17 Dec 2005 But there may not be as many empty chairs as one might expect from the first transit strike in 25 years. New York s subway and bus strike threat just so happens to come at the most crucial moment in the securities industry calendar bonus time.
Fazio reportedly investigated for insider trading 16 Dec 2005 Berlusconi, Italy's PM, has called a cabinet meeting to discuss the situation at the central bank. Fazio, its boss, looks isolated. Spain's BBVA may be able to reenter the E8.4bn battle for BNL as Fazio may no longer have the clout to push through Unipol's rival bid.
Deutsche tries to limit hit from fund closure 16 Dec 2005 The German bank's decision to freeze trading in its E6bn property fund has provoked investor protests and criticism from its regulator. Deutsche's promise of compensation will reduce the flak. But the PR damage probably can't be undone. There may be a financial hit too.
Earnings confusion reigns at US tech companies as accounting change nears 16 Dec 2005 From January, companies will have to expense the cost of stock options compensation. Microsoft already does so. However, consensus earnings estimates at many tech giants continue to ignore the cost of options.
Is value overvalued? 16 Dec 2005 Value stocks, such as utilities and tobacco, were out of favour and cheap during the bubble. They were subsequently boosted by the Fed s easy money policy. Today, value stocks are expensive and risky.
RAG set on buying E.on’s E3.4bn Degussa stake 16 Dec 2005 The unlisted German coal miner s core business is in decline. It needs to take over the chemicals group to achieve its objective of an IPO. But the purchase makes no sense industrially. It would create an unappealing and undercapitalised conglomerate.
US megacap stocks set to outperform 16 Dec 2005 During the late 1990s US largecaps became seriously overvalued. Now they trade at a discount to the market. Five years on, investors are still punishing these stocks. Yet they overlook the megacaps defensive qualities and relative value.
VNU rebel makes life tough for private equity bidders 16 Dec 2005 Private equity is circling the E7.5bn Dutch media group, drawn by its strong market position, turnaround potential and discredited bosses. But a rebel shareholder is doing its own shadow private equity exercise, so buyout houses don t snap VNU up on the cheap.
Altria share price gets ahead of itself 15 Dec 2005 The tobacco, beer and food conglomerate s shareholders are understandably excited by its latest victory in the courts. But they are now discounting the absence of any tobacco litigation, and have already priced in a breakup of the group.
Another US bank gets hit by the yield curve 15 Dec 2005 Commerce Bancorp is paying the price for rapidly growing its securities portfolio. The flattening yield curve is hitting profits. Its portfolio restructuring is not enough. The bank is likely to come under pressure next year, and may be forced to raise more capital.
Philips takes welcome step toward chip division disposal 15 Dec 2005 The Dutch electronics conglomerate is exploring options for its E5bn chip division. Spinning off or selling the highly cyclical division would unlock value. Philips has a substantial conglomerate discount built in.
US deficits show need and love of foreigners 15 Dec 2005 The $69bn trade deficit in October shows how much the US needs imports. Add in an expected record $120bn purchase of foreign shares in 2005. Americans don t seem to think that theirs is the land of investment opportunity. There's plenty of scope for the dollar to fall.
Hedge funds score over private equity with Drax IPO 15 Dec 2005 That's significantly more than the maximum £2.3bn private equity suitors were offering. The funds have achieved a £2.6bn enterprise value by floating the giant UK power plant.
NTL reshuffle is good news for Virgin Mobile deal 15 Dec 2005 Simon Duffy is stepping down as CEO of the underperforming and clumsy cable group, but will remain on the board. That provides continuity in NTL s bid talks with Virgin Mobile. And the associated rise in NTL s shares has improved the value of its offer.
Banks struggle to make money out of longevity 15 Dec 2005 People are living longer and it's causing a financial headache. CSFB is the latest firm to seek a way of laying off this risk. But it's not easy partly because there aren't many investors willing to bet on people living shorter lives.
Macquarie sets up as stalking horse for LSE 15 Dec 2005 The Australians cheeky £1.5bn bid won t get them into talks. It is really a hostile pitch straight to the exchange s shareholders. The offer throws down the gauntlet to other bidders. But even if none surfaces in the next three months, shareholders should sit tight.
Pilkington right to reject £2.1bn NSG offer 15 Dec 2005 The UK glassmaker objected to both the price and the preconditions attached. Fair enough. This is a deal that does not need to be done. It looks like the Japanese competitor needed Pilkington s cooperation to raise the money. The price was not high enough to justify that.
Goldman Sachs outperforms hedge funds 15 Dec 2005 Given the volatility and opacity of the investment bank s earnings, perhaps this is the correct comparison investors should make. The firm has managed to grow its book value better than the average hedge fund has performed for its limited partners.