Google wins by leaving Yahoo in lurch 5 Nov 2008 Its outsourcing agreement with Yahoo derailed Microsoft s attempt to buy Yahoo and gave Google a deep look into its rival s business. The search giant may have walked away just before the pact annoyed government and advertisers enough to act.
Senate filibusters may moderate US economic policy 5 Nov 2008 Republicans held on in some tight Senate races, preserving their ability to block bills they oppose. Party unity will be difficult to maintain against moderate legislation, but much easier against clearly partisan overreaches. The net result may be better government.
M&A boutiques pounce on big bank woes 5 Nov 2008 Greenhill s selling $80m of new stock to help grow its advisory business, and opening in Chicago. Perella Weinberg, Evercore and others are snapping up talent. The timing is perfect as megarivals contract and pay prospects dwindle. They d better hope the M&A market cooperates.
Monte dei Paschi could suffer third curse of ABN Amro 5 Nov 2008 Italy s bank bailout is still up in the air but Banca Monte dei Paschi looks increasingly underwater, after overpaying Santander for ABN Amro s Antonveneta. The Sienese bank is short of capital and can t sell assets now. It looks like a leading candidate for a government recap.
Mega buyout funds may not be so mega after all 5 Nov 2008 Private equity investors are getting cold feet on commitments to giant funds. Buyout bosses are stuck between letting investors off the hook and forcing them to pony up. But with the LBO business dead, the best solution is simply to avoid asking for more money.
Wells Fargo boots Wachovia risk back to taxpayer 5 Nov 2008 Chairman Dick Kovacevich boasted he didn t need government aid to trump Citigroup s FDICbacked offer for the ailing Charlottebased bank. But by halving the amount he s raising for the Wachovia deal from shareholders to $10bn, he is effectively going back on his word.
TXU’s PIK-toggle surprise batters bondholders 5 Nov 2008 Even stablelooking buyouts like the Texas utility are flicking the switch on PIKtoggle debt. That causes bondholders even savvy ones like Warren Buffett grief. Bondholders should steer clear of issues with these options, no matter how unlikely their exercise appears.
BNP Paribas’ good-guy model is tested by crisis 5 Nov 2008 France s biggest bank has taken a E1.2bn crisisrelated hit in the third quarter. BNP s model remains resilient and it s profitable across the board. The bank says it doesn t need new capital, but investors might find a 5.6% core Tier 1 ratio too low for comfort.
Google snub reduces Yahoo’s negotiating leverage 5 Nov 2008 The search giant has walked away from their muchballyhooed advertising deal via a blog. This isn't only embarrassing. It eliminates one of Yahoo s key methods of creating value outside Microsoft's clutches. Yahoo is back in play, but at a lower price.
Financial scavengers begin to flex their cheque books 4 Nov 2008 Buyout firms are raising cash to snap up juicy insurance, pension and asset management titbits. It shows there s capital available and that the bottomfishing season is open. But private investors ability to help pension providers keep their expensive promises is limited.
Swiss Re bends before hurricanes 4 Nov 2008 Financial storms hit the world s biggest reinsurer hard, bringing $2.4bn of investment losses so far this year. Add in more traditional hurricane claims, and Swiss Re reported its first quarterly loss in six years. Bad weather is set to continue, but Swiss Re is well protected.
Kravis’s art investing can’t hold candle to buyouts 4 Nov 2008 The KKR founder sold a Degas painting Monday for just over $37m. That s more than the $28m he paid in 1999, for an IRR of about 3% a year. Of course that s without the benefit of leverage. And you can t put a buyout prospectus on the dining room wall.
Tim Geithner is the right man for the Treasury 4 Nov 2008 The New York Fed boss s pragmatism, marketsavvy and respect from both bankers and politicians make him the best choice for the country s top finance job. He s also less conflicted than Paulson and not afraid to inflict pain on Wall Street.
Shell comes of age 4 Nov 2008 The scale of the culture change at the AngloDutch company is remarkable. In 2004, the company was a twoheaded monster which seemed to have lost its way in national fiefdoms. But now neither chief executive nor chairman is British or Dutch. This change is welcome.
Accounting changes can’t disguise RBS troubles 4 Nov 2008 The UK bank dodged £1.2bn of writedowns by taking assets from the line of marktomarket fire. But October saw £1bn of further losses and bad loans are rising. Repayment terms on the government s new preference shares are easy, but RBS isn t in great shape to take advantage.
Who is top of the bank capital hit parade? 4 Nov 2008 Since Lehman went bust, banks have scrambled to raise capital. Some have paid through the nose; others have got surprisingly cheap terms. Jeffrey Goldfarb and Hugo Dixon rank 10 deals private schemes like Goldman and Barclays, as well as state bailouts.
Beating average is poor selling point for hedgies 4 Nov 2008 Take OchZiff. The alternative asset manager s funds outperform the indices. Fine, but the results were still terrible. And its assets under management are shrinking. A controlled descent is of no value if it still leads to a crash.
Brazil and Argentina dominoes have moved apart 4 Nov 2008 Argentina s 2001 default caused contagion in Brazil, which came close to default in 2002. However an Argentine default now would not infect Brazil. Its relations with the West and the IMF are much better. And Brazil s economic policies and debt management are much sounder.
KKR’s IPO delay is fortuitous 3 Nov 2008 The plan to go public by merging with its Amsterdamlisted vehicle has been delayed. KKR says the delay is due to logistics. They're lucky to have such problems. The deal is complex, investors don t buy the valuation and public buyout shops are struggling.
Courtship of Japanese gadget heavyweights makes sense 3 Nov 2008 Panasonic looks set to acquire Sanyo, and create a sumosized electronics firm. The combination should cut capacity albeit in gentle Japanese style and give Sanyo s green technologies a bigger platform for growth. It sets a good example for others.
Barclays’ shareholders may have a better option 3 Nov 2008 Voting down the pricey Middle Eastern capital without an alternative would be foolhardy. But existing investors could put up some cash and tap the UK authorities for the rest. It s a potentially cheaper solution. Grumbling investors can put their money where their mouths are.
Commerz breaks German capital standoff 3 Nov 2008 The bank has finally agreed terms with the government with tough pay limits. It will tap the state for E8.2bn of capital and E15bn of guarantees. Others are in line for similar treatment. But Deutsche Bank is resisting taking the medicine which could leave it looking ill.
Brazil looks like last great leverage frontier 3 Nov 2008 Banco Itau s $15bn swoop on rival Unibanco shines the spotlight on a country still relatively underleveraged and where loans are growing by a third annually. Throw in synergies and Itau s logic and timing looks impeccable.
US bank credit logjam worsens automaker woes 3 Nov 2008 Despite Bernanke s helicopter assaults, lending tightened sharply over the last three months. Industrial borrowers are facing the toughest loan market in recent memory. And even prime consumers can t get loans which contributed to a collapse in US auto sales.
Lloyds/HBOS shareholders get hope on dividend 3 Nov 2008 The UK government still won t let the bank pay a dividend before repaying £4bn of preference shares. But the redemption premium on the prefs has been set low, so the bank could get dividends back by the end of 2009. That might ease the pain of £10bn of HBOS writedowns.
Ethanol producers black out after binge 3 Nov 2008 Verasun is just the latest US alternative fuel company to go bust. It won t be the last. Collapsing gasoline demand and ethanol oversupply will cause others to crash and burn.
UK bankco sends out right signals 3 Nov 2008 The government has picked a good team to manage its large stakes in nationalised banks. The new entity looks pretty arm s length, reducing fears about political meddling. It also seems determined to maximise taxpayer value and reprivatise the banks as soon as it can.
SocGen raises ratios in spite of flattened earnings 3 Nov 2008 The French bank soothed market fears with a small profit in the third quarter and assurances that eastern Europe won t cause significant damage. The core Tier 1 capital ratio rose to 6.8%. This will come in handy with the French government moving into bullying mode.
Counting US Senate seats gives clues to future policy 3 Nov 2008 Future legislation hinges on the Senate makeup. If Obama wins and the Democrats get a filibusterproof majority of 60 seats, they can pass their legislative wishlist unchecked, including businessunfriendly items. With 12 Republican seats of 49 seriously contested, it's close.
Hedge fund lock-ups give lie to liquidity 3 Nov 2008 One of the advantages of hedge funds compared to private equity was supposed to be that you could get your money out when you needed it. But the current crisis shows that, when push comes to shove, you can t. In future, investors should demand an illiquidity premium.