Microsoft gives another reason to spin off Xbox 6 Jul 2007 It has been six years since the software giant made its games console debut. The business never came close to covering its cost of capital. Now Microsoft has missed lowered Xbox sales targets and will pay $1bn for a recall. It s time to stop pumping quarters into this project. Microsoft will now spend $1bn to repair faulty units. It s time to stop pumping quarters into this programme.
Akzo right to bide its time in £7bn ICI bid 6 Jul 2007 The Dutch paint producer s informal offer for its UK rival was last month rejected. Now ICI wants a formal proposal to end uncertainty. Akzo will have to comply with UK put up or shut up rules. But with no sign of rival bidders, it has nothing to gain from hurrying.
KKR’s £9bn Boots financing will test Euro market 6 Jul 2007 The buyout group has picked a tricky time to finance Europe s largestever LBO, with deals on both sides of the Atlantic facing resistance. Add the fact the deal is highly leveraged and covenant loose and it is bound to be a tough sell. Other issuers will be watching nervously.
Is KKR as selfless as it appears? 6 Jul 2007 The LBO firm says proceeds from its upcoming IPO won t be used to cash out partners. That contrasts starkly with Blackstone. But Kravis could change his mind. He could follow Apollo to the Gulf and sell a chunk or even modify the IPO if demand is strong. But Kravis could change his mind. He could follow Apollo to the Persian Gulf and sell a chunk or even modify the IPO if demand is strong.
Accor could be good private equity bet 6 Jul 2007 Blackstone paid top whack for Hilton. But Accor, the hotel group s French rival, owns more of its property and has more room for renovation. A buyer would have big shareholders to win over. But a 40% premium, or E21bn, might do it and still leave scope for a 30% return.
UBS shake-up leaves Ospel on top 6 Jul 2007 The Swiss bank cited generational and governance reasons for ousting CEO Peter Wuffli. But that hardly looks the whole story. UBS s investment bank hiccups may have played a part. Whatever the reason, Marcel Ospel who s staying on as chairman won t be too hurt.
Virgin Media tests Carlyle’s frugality 6 Jul 2007 Its boss, Bill Conway, told the firm to dial down its risk earlier this year. So it hasn t been splashing money around on expensive deals. Carlyle has spent only 20% of what KKR has this year. That looked smart. But it s now chasing big prey with a $23bn bid for Virgin Media.
UK should consider residency tax for non-doms 5 Jul 2007 But why not charge nondoms a tax linked to the value of their homes? The Swiss do that and rich foreigners still keep coming. The government doesn t want to tax rich foreigners because it fears it would drive them offshore, undermining the City s competitiveness.
Conglomeration isn’t all bad for private equity 5 Jul 2007 Buyout groups strenuously deny parallels with the heavily indebted, sprawling giants of the 1960s such as ITT or LTV. But girth has advantages. Look at Apollo s $6.3bn Huntsman bid. Synergies with its other chemical holding enabled it to make a better offer.
Is Martin Lipton losing his edge? 5 Jul 2007 The Wall Street s legal titan's clients have been involved in some highprofile setbacks. Dow Jones s Bancroft family looks like the latest. As his latest missive on Pfizer s invite to shareholders for a chat on governance suggests, Lipton may be living in a different era.
Street competes with itself to unload LBO bridges 5 Jul 2007 Underwriters agreed to place aggressively structured junk bonds when the market was roaring. But it fizzled last month. Now they re scrambling to unload the debt they couldn t sell. But they have to compete with a host of new deals waiting in the wings.
Spanish watchdogs in doghouse – again 5 Jul 2007 Brussels fine for Telefonica is an implicit attack on Spain s telecoms regulator. This follows wristslapping for the energy regulator. Spain has thrived despite watchdogs that seemingly favour national champions. In future, that won t be good enough.
World’s biggest arbitrage out of reach for most 5 Jul 2007 The valuation discount between the Hong Kong and Shanghai stocks of duallisted Chinese firms is a whopping 42%. Chinese capital controls make it hard to exploit this arbitrage in the usual way. So companies are doing it instead through lots of IPOs.
Telefonica not big loser from E150m fine 4 Jul 2007 The Spanish telecoms group can take the hit from Brussels a penalty for broadband mispricing. But Spain s telecoms regulator will suffer. It looks impotent after defending Telefonica. That won t bother the Commission, which wants to push former state monopolies around.
Top ten reasons why Alitalia should go bankrupt 4 Jul 2007 The Italian government is considering putting Alitalia into liquidation, according to Italian press reports. Here's why that would be the most sensible way to reform Italy s beleaguered airline.
Blackstone digs deep in $26bn Hilton deal 4 Jul 2007 The buyout group is paying a 40% premium for the hotel group, which it will split between its real estate and private equity funds. Hilton s property backing gives Blackstone plenty of options. But even so, it may need to write a hefty equity cheque.
Sterling likely to keep rising 4 Jul 2007 The Bank of England is likely to raise interest rates on Thursday. And it will keep pushing until inflation is mastered. That could take a while. The higher rates have to go, the more the pound already at a 27year high against the dollar will gain.
Danone shouldn’t fritter away E5.3bn windfall 3 Jul 2007 The company got a good price for the lagging 20% of its operations. Now it needs to find something to do with the money. Top of the list: mop up its sprawling minorities where it can. Then it should use its healthy aura and strong balance sheet to buy growth.
US economic recovery threatens markets 3 Jul 2007 It ought to be welcomed: a strong June manufacturing survey is another sign of stronger growth, after a weak first quarter. But in fragile markets, investors crave cheap money more than anything else. A strong economy brings inflation and, maybe, higher rates. It ought to be welcomed: a strong June manufacturing survey is another sign of renewed growth, after a weak first quarter.
AA-Saga merger shows need for interest tax rethink 3 Jul 2007 Operating profits have been strong at both UK companies. But they have been kept geared up enough to avoid paying any profit tax. The merged entity is likely to be equally debtheavy and taxlite. It s a sensible corporate strategy in response to bad public policy.
Private equity’s UK poster child comes unstuck 3 Jul 2007 Permira and Apax wanted £1.8bn for UK retailer New Look. But despite a rosy growth story, buyers balked at the price. The troubled auction process makes the company look like soiled goods, even if the owners will probably manage to wring more cash out of it.
BAA isn’t a disaster for Ferrovial 3 Jul 2007 The market is gloomy about Ferrovial s investment in the UK airports group. It seems to believe the deal destroys over £1bn of value. True, things don t look great for the Spanish construction company. But the market may be too pessimistic.
SAP will pay thrice for Oracle transgression 3 Jul 2007 The German software group has admitted its US subsidiary downloaded inappropriate materials from its competitor. The likely fallout: a slap on the wrist. But it also hurts SAP s image and its challenge to Oracle s cashcow software support business.
Kraft’s $7.2bn Danone deal looks like a binge 3 Jul 2007 Just like the cookie monster eats too many cookies, the US food giant looks to have paid too richly for Danone s biscuits business. The 13.7 times ebitda multiple suggests Kraft will need to double the amount of synergies on offer to reach its cost of capital.
KKR plays safe with $1.25bn mini-float 3 Jul 2007 If the buyout group is valued on a similar basis to Blackstone, then it will float just 4% of its equity with no cash going to partners. This curiously modest IPO is unlikely to trouble even a saturated market. But public scrutiny will test such a notoriously secretive firm.
FSA whistles in the wind on insider dealing 2 Jul 2007 The UK regulator has a very weak record on tackling market abuse and that s not about to change as a result of its latest review. A quarter of UK deals involve suspicious price moves. That s hardly surprising since the balance of risk and reward favours the villains.
Virgin Media looks more vulnerable target this time 2 Jul 2007 The UK cable group s new private equity suitor, Carlyle, looks to have a better chance than its predecessors of pulling off a deal. Virgin s drive to turn itself around is struggling. And Sir Richard Branson, its biggest investor, may turn a deal to his advantage.
How Marfin broke KKR’s fundraising record 2 Jul 2007 The littleknown Greek firm closed its book two weeks early after raising a record E5.2bn for its buyout fund more than KKR last year. Sure, Marfin boss Vgenopoulos has a dedicated local following. But this success suggests investors have not yet lost an appetite for risk.
Has Blackstone sapped the market of alt-asset demand? 2 Jul 2007 That's what KKR did when it raised a $5bn fund in 2006, three times the amount expected. But the stock slumped, closing the door to others. OchZiff now plans a $2bn US float. That will show whether Blackstone's megadeal, and aftermarket drop, cut enthusiasm for other assets.
Asian crisis lessons haven’t been learned 2 Jul 2007 A decade later, the Asians themselves aren t living on borrowed money. But their savings are fuelling financial exuberance around the world. Many of the same mistakes like believing liquidity will never dry up and that finance is a oneway bet are being repeated today.