Accounting-driven convertibles may lose lustre 23 Jul 2007 About $90bn worth of convertibles that settle in cash, rather than stock, have been issued over the past several years. They re designed to flatter issuers earnings per share. But US accounting rulesetters may soon pull the plug on the market.
Anchor investors under spotlight after Itacare ruse 23 Jul 2007 Two hedge funds, Brevan Howard and Valuevest, received special terms by the AIMlisted Brazilian property fund to secure their investments. There s nothing obviously wrong with such deals. They may even be common. But they must be disclosed. Sadly, in this case they weren t.
Resolution and Friends plan sensible £8bn merger 23 Jul 2007 The two UK life insurers are roughly the same size and have opposite problems too much capital in Resolution and too little at Friends. Also, Resolution s model of buying cheap assets has lived out its brief life. So a planned merger is a natural if no one else breaks in.
Election gives Turkey chance to emerge 23 Jul 2007 Recep Erdogan s AKP party has won in a landslide. That may make Turkey a trickier foreign policy partner. But it s good for the economy. He offers Turkey a route away from the statist Ataturk model to the free market. In the long run, a richer Turkey is to everyone s benefit.
Expedia flies backwards with buyback 23 Jul 2007 In an embarrassing volteface, Barry Diller cancelled last month s plans to buy back up to $3.5bn of the travel website s stock. This isn t all that surprising. The deal wasn t much more than an overpriced, partial LBO disguised as a shareholderfriendly buyback.
Value of intellectual property is declining 23 Jul 2007 The drop in Pfizer's Lipitor sales is just one example. Patents aren't what they used to be. IP protection in emerging markes is limited. With Doha dead, it won t improve. Investors should prefer the pirates over the IP owners.
Goldman and Lehman dig deep on drilling deal 23 Jul 2007 Just as credit markets are wobbling, the firms are extending a massive $15bn bridge loan to merging drillers Transocean and GlobalSantaFe. But earnings visibility and the potential for growth make this a safe bet. The combined company will generate plenty of cash to pay debt.
Hypo’s deal with Depfa won’t move the needle 23 Jul 2007 The German real estate bank s E5.7bn swoop on the public finance specialist will create some interesting synergies, and help Depfa. But at less than E12bn combined, the new bank will still be small. This deal looks like a sideshow ahead of more profound consolidation.
Boston Scientific could face cash crunch 20 Jul 2007 The medical device group s $27bn Guidant purchase last year left it drowning in debt. Now, its two big business lines are suffering. Restrictive debt covenants and principal payments may cause a crunch. If it can t turn around its operations, it might have to sell assets.
Google needs a new market 20 Jul 2007 The internet search giant wants to increase its operating income every quarter. But it didn t in this past one. Google says fast growth caused this hiccup. But trouble at competitor Yahoo might point to broader problems in the search market.
Chile’s not the growth market it seems 20 Jul 2007 Citigroup s decision to buy Banco de Chile for $2bn isn t exactly what it appears. It only requires an upfront cash outlay of $322m. But Chile isn t what it seems either. Its economy is dependent on copper prices. After two strong decades it s reverting to a Latin norm.
Siemens shouldn’t forsake value in E11bn disposal 20 Jul 2007 New chief Peter Loescher inherits the planned float of the German giant s automotive parts unit VDO. But a trade sale would make more money. Blackstone s TRW might pay the most, but private equity comes with high political costs. Continental could be a good compromise buyer.
Pepsi has no need for extra fizz 20 Jul 2007 The US drinks group is growing fast, and its margins are high. So why would it want to do a deal with a megarival like Nestle? It lacks more zeitgeisty involvement with health and emerging markets. But the former can be built, while the second may be overrated.
Too soon to praise Citi’s turnaround 20 Jul 2007 The megabank s efforts to cut costs are bearing fruit, allowing it to crank out positive operating leverage for the second quarter in a row. That s encouraging. But even with a boost from its international ops, Citi s revenue growth still lags several of its domestic rivals.
Mike Ashley piles his plate ever higher 20 Jul 2007 Stakebuilding, activism, and now a reported bid for Foot Locker. The Sports Direct founder hasn't let up since floating his retail empire. But even the best managers can overdo it: look at Renault s Carlos Ghosn. And unlike Renault, Sports Direct s shares are firmly in reverse.
Bank of England faces debt challenge 19 Jul 2007 The Governor's desire to push rates up fast enough to squelch inflation has been slowed by dissent on the Monetary Policy Committee. The result: a highly indebted economy that could be crippled by higher rates. It won t be easy to avoid overkill.
Moody’s CMBS call puts it in a quandary 19 Jul 2007 It s putting principle before profit by tightening its commercial mortgage bond rating standards. That s smart for now. But if the subprime fiasco doesn t spread to CMBS, investors are unlikely to follow its lead. Then Moody s might have to eat its own words
Man has only itself to blame for US flop 19 Jul 2007 The hedge fund group clearly hoped to get a fat premium by spinning off brokerage business MF Global via a monster US IPO. But it backfired. After a 20% haircut and with 20% of MF Global still on its books, Man s investors might have preferred a simple demerger.
Italy gets real over Alitalia, at last 19 Jul 2007 The charade that Alitalia might find a bidder is over, and ministers admit that liquidation may be the carrier s only option. A humiliating Sabenastyle bankruptcy, or less ignominious Parmalat restructuring, will likely mark Alitalia s final end.
Loeb comes a cropper in Europe 19 Jul 2007 The US activist manager has fallen far short of his E500m target for Third Point s new listed fund despite a big helping hand from UBS. Blame market conditions. But Loeb better hope these don t extend to the way the fund trades or he may face some activism himself. Blame market conditions. But Loeb had better hope these don t extend to the way the fund trades or he may face some activism himself.
Redstone plays King Lear with Viacom 19 Jul 2007 He s decided to banish his daughter. To do so, they may have to untangle their stakes in Viacom, CBS and National Amusements. But his investors face a problem. Redstone seems to force out those who disagree with him. And businesses suffer without open debate.
Rosy airline profits mask lurking threats 19 Jul 2007 This is the first time in years that all the major US air carriers are out of bankruptcy. And they re reporting respectable profits. But airlines haven t solved their main problems overcapacity and spiralling costs. This may come back to haunt them.
Pfizer’s troubles arrive ahead of schedule 18 Jul 2007 The US drug giant s sales were expected to tread water until 2009, when Lipitor loses patent protection and the real pain starts. But its hard times might be starting three years early. Sales of the $13bnayear cardiovascular drug are now being hit by competitors.
Cracks appearing in emerging market bonds 18 Jul 2007 Rosneft postponed a $2bn eurobond this week. It s a sign the credit malaise has spread from US subprime mortgages and LBO financing. The next risk is bonds denominated in weak domestic currencies. Global hedge funds have provided liquidity. They could take it away.
Synergies triumph over debt in E16bn Altadis deal 18 Jul 2007 Imperial Tobacco won the Spanish rival s endorsement at the same price that private equity firm CVC said it would offer back in May. But times are now harder for highly leveraged borrowers. CVC won t easily beat industrial logic, listed shares and investmentgrade debt.
Debt costs will weigh on private equity returns 18 Jul 2007 Even with absolute rates at low levels, highly levered transactions are very sensitive to small increases in the cost of debt. Take KKR. Its cofounder expects returns to fall significantly. Rising rates on the debt it needs to raise will soon begin to bite.
Warner right to stand back from EMI 18 Jul 2007 The sector is in freefall and credit markets are wobbly. But Warner could still get what it wants by cutting a deal with Terra Firma. The US music giant has decided not to outbid private equity group Terra Firma s £3.2bn offer for its UK rival.
Qataris put the squeeze on Sainsbury 18 Jul 2007 Delta Two s £12bn bid for the UK retailer beats the last one from CVC. Think more money, fewer conditions, and better political connections. The Sainsbury family may have reservations. But the Qataris might get around them and other doubtful investors by offering equity.
When will Bernanke cease to soothe the market? 18 Jul 2007 The Fed chairman s testimony to Congress pacified the bond markets. But US consumer inflation remains high and real interest rates too low. This is eating away at his credibility. If inflation accelerates and rates have to rise sharply, he ll be the market s natural scapegoat.
JPMorgan sets a cautious tone 18 Jul 2007 Jamie Dimon is spending as much time saying how the bank can survive a downturn as trumpeting the latest set of good results. That s not a bad idea. Nervous investors seem to need reassurance. Despite bumper earnings, the stock fell about 2% in early trading.