Month: June 2006

Why private equity prefers Amsterdam to New York

14 Jun 2006

KKR and Apollo listed their private equity funds on the Dutch stock exchange. Its appeal loose regulation and lax corporate governance. This is just the kind of regulatory arbitrage that's prompting US stock exchanges to go shopping abroad. They can't afford to sit around.

Enel’s Suez demands aren’t realistic

13 Jun 2006

The Italian utility is now looking for a political deal that will allow it to share Suez s Belgian subsidiary. But this makes no sense. Enel s Conti has weakened his position by appearing to back down on his threat to go hostile. His credibility is now on the line.

Ebay turns screw on newspapers

13 Jun 2006

These ads will extend Ebay s auction reach, hurting newspaper classified revenues. The online auctioneer plans an ad system aimed at thousands of affiliated websites.

Sarkozy pulls rug from under Suez/GdF deal

13 Jun 2006

The French interior minister has spoken out against the merger of Suez and Gaz de France, making it that much harder for it to go ahead. But his proposed alternative that the two groups should buy stakes in each other is crackers and will destroy massive shareholder value.

Window closes on listed buyout funds –for now

13 Jun 2006

Blackstone and Carlyle have reportedly postponed plans to launch listed buyout funds. In the current market conditions, it's not surprising. KKR already mopped up most of the demand. But these funds offer too many advantages for the firms to stay away for long.

Merck plays hard-ball in German drugs fight

13 Jun 2006

By building a 21% stake in Schering just before Bayer s offer closes, it has acquired the power to determine the outcome of the bid. What use will it make of this? The obvious thing would be to demand to carve up Schering with Bayer as a price for letting the bid proceed.

BBVA pays keenly to bulk up in the US

13 Jun 2006

At least BBVA will be able to wring some synergies. And it cuts its exposure to Mexico at a time when emerging markets are out of fashion. The Spanish bank is paying 3.3 times book for the biggest of its Texan deals. That s more than other European banks have paid in the US.

Veolia’s mooted bid for Vinci lacks logic

13 Jun 2006

Both the French water and construction firms used to be a part of Generale des Eaux, now Vivendi. It s hard to see why, or how, Veolia would want to resurrect the old order. There is precious little overlap, and financing might be tricky.

Goldman shows staying power in 2Q

13 Jun 2006

The investment bank earned $2.3bn in the second quarter. That s only just shy of its recordbreaking results last time around. But it had to pull some tricks out of its hat to stay even. A longerterm slowdown for investment banks looks inevitable.

Naked shorts come out of the closet

12 Jun 2006

This murky practice is now being blamed for Vonage s disastrous initial public offering. That may not be fair. Nevertheless, regulators are right to take a dim view of naked shorting.

Verasun IPO fuelled by ethanol exuberance

12 Jun 2006

A crop of ethanol producers is fetching premium IPO valuations. But their growth is predicated on unsustainable ethanol prices. As Alan Greenspan noted this week, the economics of the business aren t there. Investors may be in for some nasty surprises.

Is Browne right to expect lower oil prices?

12 Jun 2006

The BP chief doesn t think peak oil production is at hand. So he anticipates an oil price of $40 per barrel. Or even $25 in the long term. But is he right? Possibly, as far as supply and demand are concerned. But politics and inflation could get in the way. The BP chief sees a mediumterm oil price of $40 per barrel. And a possible fall to $25 in the long term. True, the current high price is stimulating supply and constraining demand. But politics will have the last word.

KKR shouldn’t get greedy with German crane IPO

12 Jun 2006

It has knocked the group into shape and demand for Demag Cranes' whizzo port technology is strong. It's offering shares in Demag Cranes at E26E31 each. That isn t a steal, but KKR should be able to hoist it at the low end of the range.

Lehman’s bond sales disappoint

12 Jun 2006

The investment bank tried to steal the limelight from Goldman by reporting a day before the Wall Street titan. But by drawing attention to the whopping 30% drop in its bond underwriting business, this PR move may have backfired.

US trade still disastrously weak

12 Jun 2006

From one angle, it looks like the trade deficit trend is getting better. It has decline from 6.6% to 6.2% of US GDP in five months. But the reversal is largely technical, and likely to prove temporary. A big dollar fall still looks hard to avoid.

If Gazprom wants Centrica, the UK should let it

11 Jun 2006

Some UK politicians don t like the idea of the Kremlincontrolled firm buying the old British gas monopoly. Such distaste is understandable. But their concerns don t match up with what it would actually mean if Gazprom did bid.

Tribune local breakup would add value

9 Jun 2006

McClatchy s piecemeal sale of Knight Ridder showed newspapers are more highly prized in private hands than the public markets. Apply the same logic to Tribune, and its newspaper assets could be worth at least 10% more than investors give them credit for.

Merck’s stakebuilding in Schering looks odd

9 Jun 2006

In March, the German drug maker abandoned its hostile bid for competitor Schering after Bayer emerged as a white knight. In April, Merck said it wouldn t be a longterm shareholder. Yet it has now doubled its stake in Schering to more than 10%. What's it up to?

Pfizer should think twice about $15bn OTC sale

9 Jun 2006

The drugs group lost more than $4bn of value in a week when bids for the consumer arm came in much higher than expected. This may reflect concerns it will get hit with a big tax bill and then let the proceeds gather moss in its flabby balance sheet.

Growth or inflation? Investors should fear both

9 Jun 2006

There was a growth panic on Thursday. Equity buyers worried that higher interest rates might deter highly geared consumers. But other worries inflation, dollar and geopolitical could retrun. Such fluctuating concerns are reasonable in an unbalanced world. The mood of the markets swings between fears of higher inflation and slower growth with each new piece of data. That's understandable. But the real risk is that both come at the same time. A dose of stagflation would really hurt.

Bond bubble inflates as Gulf stocks collapse

9 Jun 2006

Arab equities have fallen by more than 50% in recent months. But petrodollars continue to flood the region with liquidity. The explosive growth of Islamic or Sukuk bonds could spell trouble ahead.

Gold remains vulnerable to further decline

9 Jun 2006

The precious metal has corrected in the past month. But the costs of holding gold continue to rise. Moreover, as a hedge against a falling dollar, gold looks overpriced.

Morrisons CEO hire should plug boardroom leaks

8 Jun 2006

Marc Bolland s appointment had been widely telegraphed. That s symptomatic of the leaks that have destabilised the UK retailer. Finding a CEO and ending the infighting between Ken Morrison, the chairman, and his deputy should fix the leaking tap.

Varley makes expensive hire to perk-up Barclays

8 Jun 2006

The bank s CEO is paying £12m to lure Citigroup s Frits Seegers as head of retail and commercial. He has also sacrificed jobs of two allies. But Varley is getting more for his money than hope of fixing consumer banking. Seegers has deal experience and help balance Barclays board.

Vonage underwriters face lawsuits

8 Jun 2006

Citigroup, Deutsche Bank and UBS deserve little sympathy now that shareholders are suing after the internet telecom group s shares tanked. Not only was Vonage controversial before its IPO. The stock was priced too high and the float was badly handled.

Cable & Wireless caves in to broadband rivals

8 Jun 2006

The UK telecoms operator has admitted it's no match for retail rivals such as Carphone Warehouse and is retreating to the wholesale market. This will allow C&W to exploit its lead in unbundling. And it gives UK boss John Pluthero a chance to justify his huge pay.

Resolution’s Abbey purchase whets its appetite for deals

7 Jun 2006

With targets getting more expensive, and Resolution s chairman Clive Cowdrey on the prowl, that may reflect an acquisition discount. Investors are warming to the closed book specialist s purchase of Abbey life businesses. But they are still leaving a margin for error.

Sergey Brin goes to Washington

7 Jun 2006

The Google cofounder added his weight to the raging debate over whether telcos can charge tech firms for heavy use of the web. The billionaire s rare and impromptu visit to Capitol Hill illustrates just how much is at stake for Google in this fight.

France Telecom to offload yellow pages

7 Jun 2006

The French telecoms operator is following in Telefonica s footsteps in its decision to sell its 54% stake in Pages Jaunes. Like Telefonica s TPI, Pages Jaunes is underleveraged, noncore and likely to attract plenty of interest. But it s also not cheap.

French Suez shambles revives Enel bid hopes

7 Jun 2006

The French government is in disarray over the privatisation of GdF, and there s now a real chance the merger with Suez will fall apart. That might make Suez shareholders more amenable to a bid from Enel, which has not gone away. But Enel must be careful not to overpay.