Not all leveraged recaps are evil 7 Mar 2007 Paying giant debtfinanced dividends is a timehonoured way for struggling managers at public companies to repel buyout shops advances. But not all of these transactions destroy value. A new doityourself LBO by Dean Foods shows how they can benefit shareholders.
AHL slump highlights problem with managed futures 7 Mar 2007 There s been a bloodbath among funds such as Man Group s AHL. But you expect that kind of volatility among funds that simply follow trends. The real worry is that these trades have become oldfashioned and overcrowded so you get a lot less upside despite your bumpy ride.
The price of fear on Wall Street: $40bn 7 Mar 2007 That s the combined value wiped off the top five US brokerage firms recently. That s more than subprime mortgage woes warrant. In fact, financial markets would have to take a much broader pummelling for shareholders fears to come true.
Nick Leeson: bubble bellwether? 7 Mar 2007 So Nick Leeson is doing a bit of daytrading in his spare time. What people do in their spare bedrooms is their own business. But the bane of Barings now claims that other people want him to manage their money. Napoleon Bonaparte must be smiling.
Thompson exit makes Resolution sale more likely 7 Mar 2007 It was always hard to see how the insurance investor's CEO would rub along with founder and chairman, Clive Cowdery. But why the split? Egos may have played a part. But it may also be that Cowdery, who has a large stake, was keener to sell the group than his chief executive.
Will another Clear Channel bid emerge? 7 Mar 2007 Providence may want to revive its bid for the $26bn radio giant. But investors must vote against the existing offer to find out. That s because a $500m breakup fee makes a deal less attractive. It would automatically skim 4 percentage points off its returns.
Hedge funds launch Grand Theft company coup 7 Mar 2007 Steve Cohen and Paul Tudor Jones may seize control of TakeTwo, the videogame producer, without buying out minority shareholders. Given TakeTwo's problems, investors may welcome this. But it highlights a weakness in US shareholder protections that could be exploited.
E.on can live with Endesa poison pill 7 Mar 2007 The German utility is no longer making its bid conditional on scrapping Endesa s 10% voting restrictions. This makes strategic sense. It doesn t want Acciona and Enel, which now hold a combined 43% stake, to take de facto control. Neither does Endesa.
Have you been LinkedIn? 6 Mar 2007 Some 9m professionals already have been. The online networking service aims to be a MySpace for Suits. But most busy execs ignore emails inviting them to join. So far the online club lacks the exclusivity professionals crave.
Is Greenspan’s recession already in progress? 6 Mar 2007 The former Fed Chairman said there is a one third chance of recession, perhaps by yearend. Yet Tuesday s figures show further weakening from a poor fourth quarter. With inflation stymieing rate cuts, are we already in recession?
Miners still sitting pretty 6 Mar 2007 Commodity prices have been weak for months, but they remain high enough to keep the big producers extremely profitable. Take Xstrata. The $11bn of debt it took on in 2006 would cripple the company at 2004 metal prices. But now it is gushing cash.
Investors make wrong call on RWE boss 6 Mar 2007 Harry Roels contract wasn t renewed after he failed to deliver the kind of expansion strategy rival German utility E.on is pursuing. Had investors bothered to check, they might have notice that RWE has outperformed E.on by a mile since Roels took over.
Microsoft image-polishing campaign falls short 6 Mar 2007 By lambasting Google, the software firm is strengthening ties to the search giant s enemies and trying to improve its own battered image. But its escalating war with European regulators over antitrust issues badly dents Microsoft s campaign to be seen as the good guy.
Citi launches $11bn bid for Nikko 6 Mar 2007 Bidding for a scandalhit Japanese brokerage may seem bold especially given the US bank's own past difficulties in Japan. But Citi knows Nikko well. And with Nikko in distress, Citi may be able to rebuild in Japan without dipping too deeply into its pockets.
Palm offers cautionary tale to tech titans 6 Mar 2007 The handset maker was a hot consumer tech company worth $92bn. Now its most attractive attributes are its cash and tax losses. Palm s shift from darling to alsoran illustrates the challenge of retaining a competitive advantage in consumer electronics.
Macquarie makes friends in America 5 Mar 2007 The Australian investment bank is acquiring Republican presidential frontrunner Rudy Giuliani s advisory firm. Given the political sensitivities of infrastructural investing it may pay off to have made the former New York mayor an even richer man.
Buyout shops can dodge bond meltdown temporarily 5 Mar 2007 The sharp widening in highyield bond spreads last week caught some buyout financiers off guard. Univision, in particular, had to pay more. But LBOs aren t dependent on bonds any more. Buyout shops raise most of their debt in the loan market. It too will slide, but more slowly.
Hedge funds win either way in Countrywide deal 5 Mar 2007 The funds that locked buyout firm 3i out of the UK estate agent are supporting Apollo s bid because they're being offered an equity stake. Stub equity is rarely popular with investors. But Apollo securing a recommended bid puts 3i back in the frame. Either way, hedge funds win.
Open skies agreement not terribly open 5 Mar 2007 In theory, a pact to ease restrictions on transatlantic travel between the EU and US could make sense for both sides. But the US refuses to give up restrictions on foreign ownership of its airlines. It s hard to see why the EU should roll over.
Estonia’s free-market nirvana is fragile 5 Mar 2007 Its flat tax and free market policies have given it one of the world s highest productivity growth rates. But public spending is too high. And its large trade deficit leaves it vulnerable to an investment downturn. The government should head off problems by cutting spending.
Cablevision’s owners face a quandary 5 Mar 2007 On the one hand, everyone knows Time Warner or Comcast could theoretically pay $40 or more for the $19bn media group. But the company s governance means, in practice, that investors may be denied the opportunity to sell at a 36% premium like this.
US bad debts aren’t HSBC’s only worry 5 Mar 2007 The news on US mortgagerelated provisions wasn't as bad as feared and 2006 earnings were better than expected. The dividend is rising too. But the results also point to cost pressures. In particular, HSBC may have been too swift to declare victory in investment banking.
Wanted urgently: safe havens 5 Mar 2007 Investors unnerved by stock market falls might want to fly to safety. But that's not easy in a financially unbalanced world. Bonds are at risk from inflation, the dollar could drop sharply any time, and credit quality is set to fall. Inflationlinked debt, anyone?
All shareholders lose out from PT bid collapse 4 Mar 2007 Sonaecom investors aren t the only losers from the failures of its bid. The loss of the deal s synergies means PT investors will suffer too. The winners of the deal may be Portugal s consumers, who avoid having this valuecreating but monopolistic deal foisted upon them. Sonaecom investors aren t the only losers from the failure of its bid. The loss of the deal s synergies means PT investors will suffer too.
Enel’s Spanish adventure is fraught with risks 2 Mar 2007 The worst scenario is that Madrid is merely using Enel to fend off a rival German bid for local utility Endesa. The best outcome might be a friendly Enel/Endesa merger. But jobsharing at the top could lead to Eadsstyle paralysis hardly ideal.
Siemens should sell E7.5bn VDO unit 2 Mar 2007 After all, making electronics for cars isn't a core business. And boss Klaus Kleinfeld is meant to be restructuring the German conglomerate. So why doesn't he just get on and have an auction? Corporate politics seem to be getting in the way worse luck.
Subprime mortgage index bets are a crapshoot 2 Mar 2007 Deutsche Bank s $250m windfall from shorting a mortgage benchmark made reaping a profit look easy. And subprime prospects remain grim. But the index doesn t reflect reality. It s pushed around by onesided trades. That will make it hard to cash out of winning positions.
Fear is biggest threat to markets 2 Mar 2007 Investors do have a few new reasons to derisk their portfolios: a weakening US mortgage market and a slightly more expensive carry trade. But this week s tumble springs mainly from a loss of confidence. That need not be dangerous, as long as doubt does not turn into distress.
Can Warren Buffett attract the right stuff? 2 Mar 2007 As the billionaire investor looks for his successor as Berkshire Hathaway s chief investment officer that may sound like an absurd question. But squaring the talent search with his views on the grotesque fees of the Wall Streethedge fund complex is not such a simple task.
Credit market sidesteps market tremor – for now 2 Mar 2007 Spreads have widened in the last few days as fear set into markets. But the higher yields have also attracted buyers. Banks have responded by taking a longerterm view. The stabilising mechanism seems to be keeping panic at bay.