One cheer for Coke, two for Tata 25 May 2007 Coke s $4.1bn purchase of Glaceau Vitaminwater may look like a shocker. But it can make the deal work for shareholders. It will take a few years, even with super growth. The Tatas, meantime, walk off with $1.2bn on a $677m investment after a year.
How to hedge your bets with art 24 May 2007 Conspicuous consumption has made modern art a hot property. Last week a Rothko changed hands for a record $73m. Investors have lost a packet on fine art before. But maybe there are some ways the new wave of art buyers can improve their odds.
Xinhua IPO debacle looks bad for underwriters 24 May 2007 UBS and JPMorgan floated the Chinese media firm two months ago. Its stock has plummeted 50% since. Investors relied on the firms to vet Xinhua s prospects and governance. Yet several unflattering facts about its CFO weren t disclosed.
China isn’t the only market facing a bust 24 May 2007 World liquidity is too high. The former Fed boss is largely responsible. Greenspan s warning that its stock market faces a dramatic contraction applies to many other markets.
UK nuclear power is economic 24 May 2007 Nuclear energy brings economic benefits, such as diversity of energy supply and low CO2 emissions. Contrary to popular perception, it makes financial sense too. No wonder European utilities are queuing up to invest in the sector.
Wall Street edges toward a hiring freeze 24 May 2007 It s not just rumour. Goldman Sachs executives are calling for a recruitment pause that goes beyond a seasonal slowdown. With markets buoyant this may seem odd. But given estimates for a decline in earnings from next year, it s sensible.
Dell’s deal with Wal-Mart looks like bad idea 24 May 2007 The PC giant s business model is broken. Selling computers at the world s largest retailer might sound like a great way to boost sales. But Dell is entering a highlycompetitive, low margin market where its had a bad experience. That s a recipe for burning capital.
Sarko tries to tackle executive greed 24 May 2007 The new French president has put his campaign promise to limit golden parachutes on his priority list. He should tread carefully. Too tight rules could hurt business. But Sarko s credibility requires some curbs on excess. Transparency is a good place to start.
China might construct a guanxi portfolio 24 May 2007 Influence rather than shortterm profits seem to have guided its $3bn investment in Blackstone. If similar thinking guides the rest of the $200bn earmarked for investing outside the bond market, the shopping list could surprise Wall St.
How BA could play the Iberia LBO 24 May 2007 The UK flag carrier could get some cash up front for its 10% stake in the Spanish carrier, plus an even bigger slice of the company. It could also push for even deeper commercial ties. Best of all, BA won t have the hassle of actually having to run Iberia.
Hanson shows the benefits of breaking up 24 May 2007 The sale of the building materials group to Heidelberg makes it possible to calculate the value created by the Hanson demerger 11 years ago. Lord Hanson decided to split the group in four after conglomerates became unfashionable. The returns have been impressive.
Goldman’s new trading platform sets off arms race 24 May 2007 Wall Street firms are scrambling to establish proprietary exchanges for companies that want to avoid publicmarket scrutiny. Goldman is the first off the mark. But if too many bespoke platforms launch, it could splinter liquidity. It may make more sense to team up.
How a GUS break-up doubled investors’ money 23 May 2007 The UK conglomerate s fiveyear split into Burberry, Experian and Home Retail has delivered an impressive 110% return for investors. There may be more to come, too. Freed from the sarcophagus, all three businesses now look like tempting takeover targets.
Mining fever burns bright in Canada 23 May 2007 Norilsk s latest $6.3bn bid for nickel producer LionOre is 49% higher than Xstrata s first offer. An auction for Alcan also looks likely. But with metal prices high and funding cheap especially for the Russians it s easy to justify paying up.
Costamagna shows value in a full Rolodex 23 May 2007 The banker s contacts gave him the lone mandate to advise Capitalia on its E22bn takeover, while the big investment banks got the scraps. He s likely to have earned a fortune for a few days work. But that doesn t mean it s so easy for others to follow suit.
Google’s stake in co-founder’s bride justifiable 23 May 2007 Google's $3.9m investment in an online genetics firm owned by Sergey Brin's spouse raises questions of selfdealing and lax governance. But the move actually fits with Google's strategy to profit from the nexus of genetics and technology, making it just defensible.
Rome checks out of Alitalia 23 May 2007 Italy s decision to sell its entire 50% stake should be great news for the airline. Alitalia s woes are rooted in political meddling. But if Rome is really serious about reform, it should go the whole hog and loosen other conditions too.
Should managers in buyouts take haircuts? 23 May 2007 To get deals done, a few have had to. In the $3.1bn buyout of OSI Restaurants, managers got 3% less than public shareholders. This is a relatively new phenomenon, and it makes sense. But it won t be long before greedy execs game this trick, too.
Lloyds TSB settles for less in share registrar sale 22 May 2007 The UK bank got about 10% less than the asking price for this mature business. But the £550m price tag was still a juicy 17 times earnings. There may be some limit to the price private equity will pay for dull assets. But Advent still outbid trade buyers.
China’s strategy may outsmart Paulson 22 May 2007 Tariffs on steel exports will disarm critics in Congress. They will also make China more competitive in steel products. Meanwhile its stake in Blackstone, while questionable on investment grounds, buys Beijing more influence in Washington.
Foxtons buyout not as risky as it looks 22 May 2007 BC Partners paid 12 times last year s ebitda for London estate agent Foxtons, which is a big premium to similar businesses. But Foxtons is currently growing very fast. So long as the market doesn t actually tank, BC should be able to hit its 20% return target.
Is power Wall Street’s new subprime? 22 May 2007 Bear Stearns pricey acquisition of Williams power assets is the latest in a string of purchases by investment banks in the power markets. Banks got burned when they piled late into subprime. With the power industry overheating, are banks set to get zapped again?
Draghi beats Fazio in keeping Italy’s banks Italian 22 May 2007 The Bank of Italy boss has outdone his predecessor in deterring foreigners. The CapitaliaUnicredit deal has kept another stray at home. And he s done it without breaking the rules. By giving free market forces free rein, he s encouraged Italy s banks to huddle together.
Do MGM shareholders face a jackpot or a bust? 22 May 2007 If structured properly, a $9bn swap of the casino operator s two hot properties for stock held by Kerkorian could be a winner. But MGM s board must keep the process clean to ensure that. As it stands, a deal with the billionaire is fraught with conflicts.
Glaxo drug anxiety need not lead to withdrawal 22 May 2007 The UK pharmaceuticals shares have taken a battering after a study linked its blockbuster diabetes drugs to higher risk of heart attacks. The author is credible, but his technique is disputed. For now, it looks like Glaxo will only suffer mild damage.
EMI auction could be short-lived 22 May 2007 In theory, Warner Music could easily outbid Terra Firma s recommended offer at 265p a share. It may yet do so. But Warner could instead just cut a deal to buy the recorded music division off Terra Firma.
What comes after $70 oil? Maybe inflation 22 May 2007 Nigerian disruption and Opec complacency have pushed up the price of Brent to the highest level in almost a year. There could easily be more to come. The return of rising oil prices shows how hard it is to keep asset price inflation away from consumers.
Permira not buying Valentino for its haute couture 21 May 2007 The real appeal of the Italian fashion house is its 51% Hugo Boss stake. Buying Valentino would give Permira control for almost no premium. Boss is the more interesting private equity target. There may be industrial and financial benefits from pushing Valentino and Boss together.
Kuwait makes sensible retreat from dollar peg 21 May 2007 The oil exporter has irritated its Gulf neighbours by linking the dinar to a currency basket. But a weak dollar brings instability. The global oil economy should work in the stable euro, not the falling dollar. Other exporters could follow the Kuwaiti lead.
New credit index sharpens buyout bears’ claws 21 May 2007 An index of credit derivatives on junkrated loans is about to debut. It could further stir the frothy LBO debt market. But it may also lure some credit bears out of their lairs. They can use it to bet on a buyoutbusting downturn in the junk loan arena.