System stress test flatters Spanish banks 9 Nov 2009 The Bank of Spain has run the numbers and says the country s banks are profitable enough to write off 40% of loans to property developers. But the exposure to the dodgy loans varies widely. Santander looks fine, but some savings banks could have trouble coping.
US Treasury lets Fannie slip deeper into care 9 Nov 2009 It rejected the mortgage zombie s plan to sell nearly $3bn of tax credits it can t use to Goldman. It had its reasons, but with Fannie already calling for another $15bn of aid, any sort of market mechanism that reduces the need for government handouts ought to be embraced.
Kraft incites Cadbury holders to rise up 9 Nov 2009 By formalising its £10bn bid the US group is hoping the UK confectioner s shareholders will lobby the board to talk. Without adding a penny yet that s risky. But it also brings in arbs whose view of value is simply a profit. That could shift the outcome in Kraft s favour.
Latest KKR/GA buyout is back to the future 9 Nov 2009 The firms are buying Northrop Grumman s defence consulting division for $1.65bn. The carveout looks like the opportunistic deals that were traditional before buyouts got huge. It has a manageable capital structure too. The new model for LBOs is becoming clearer.
Axa tries for cash-lite $10bn buyout 9 Nov 2009 The French financial group wants full control of the Asian businesses in its 53%owned unit. Its plan: rival AMP buys the whole company, and then Axa buys most of it back. Axa puts up only $1.7bn in cash, but minority holders are unhappy. They get mostly hardtovalue shares.
Socialist US senator proposes most capitalist bill 9 Nov 2009 Bernie Sanders Too Big to Fail act proposes that if a firm is so big that its failure would threaten the system, it should be broken up not protected by a bailout. As simple as it sounds, its explicit tone trumps competing bills in capitalistic clarity.
A still lower dollar could be good for the world 9 Nov 2009 Globalisation should lead to a convergence of US and emerging market labour costs. High US unemployment and stellar productivity growth suggest this may be occurring with painful speed. US wages are too high for the new reality. A less valuable greenback would push them down.
Sprint bets the farm on WiMax standard 9 Nov 2009 The US carrier s customers are melting away. Yet it has scrimped on capex to double down on wireless broadband. Putting another $1bn into cashburning group Clearwire, while a rival technology is catching up, amounts to a binary bet for shareholders.
Ghost of Carr’s last deal haunts Cadbury defence 9 Nov 2009 The chocolatier's chairman plotted the most recent winning UK hostile bid: Centrica s £1.4bn takeover of Venture Production. Now Roger Carr must taste his own dish. Kraft s cheeky hostile offer for Cadbury seems inspired by that very deal.
Primerica’s pseudo-sale emblematic of Citi mess 6 Nov 2009 The megabank is hiving off the insurer, one of Sandy Weill s first acquisitions. But it s not a clean break. Citi is keeping much of Primerica s earnings and will remain a major shareholder for now. It s a fittingly complex way to mark the dismantling of Citi s sprawling empire.
RBS true to form with £1.8bn quarterly loss 6 Nov 2009 The UK bank may have cut its reliance on state loanloss insurance. But while the risks of financial doomsday have lessened, RBS s latest results show why the bank sees its basecase scenario as little improved. Despite some welcome surprises, RBS s stabilisation is tentative.
ICBC should consider buying Standard Chartered 6 Nov 2009 China is spreading its trade tentacles through Asia and Africa. Merging its biggest bank with the emergingmarkets lender would create a financial giant to match. ICBC would gain both assets and expertise. Given the headwinds ICBC faces, now would not be a bad time to pounce.
Productivity surge could signal further jobs gloom 6 Nov 2009 US unemployment has reached 10.2% in spite of a growing economy. Meanwhile, productivity is surging. That s normal in recoveries, but it began early and may continue. If so, jobs may be slow to return and unemployment could reach a record, weakening banks and depressing wages.
BA still struggling for survival 6 Nov 2009 The UK airline is haemorrhaging cash and frantically cutting costs to deal with a probable £1bn fall in sales this year. It is hard to see how BA can pull off its longdiscussed merger with Spain s Iberia in this state. But while progress is slow, BA s fortunes may be bottoming.
Mixed results for private equity in the public eye 6 Nov 2009 Fortress and Blackstone both went public in 2007 in highprofile, overpriced IPOs. Both have since been beaten heavily down. But their thirdquarter earnings underline the larger Blackstone's apparently superior ability to diversify its business and keep investors on side.
Marchionne’s Chrysler blueprint needs a road test 5 Nov 2009 The Fiat boss s plan to take the Motown carmaker out of the wrecker s yard sounds promising. His success in Turin gives him some credibility. But like his statement that the unprofitable firm has boosted its cash by $1.7bn, Marchionne s vision must do more than stand up on paper.
TPG patches together $5.2bn post-crisis buyout 5 Nov 2009 The private equity firm is leading a buyout of drugs market research company IMS. But oldstyle LBO financing is missing. The buyers are putting in a whopping 40% as equity. The rest is coming courtesy of Goldman and mostly from funds it manages, not its own balance sheet.
Cable & Wireless fluffs a sensible demerger 5 Nov 2009 The once troubled UK telco has transformed itself into two profitable, geographically distinct businesses. A demerger announcement has come at the right time. But management has messed up by accompanying it with a profit warning instead of detail on how the split will work.
For sale: weak stake in strong investment bank 5 Nov 2009 Morgan Stanley is selling its stake in Chinese securities firm CICC because the Wall Street bank couldn t advance its strategic ambitions without control. The compensation could be annualised returns of 30%. The new owner should see this as a purely financial play.
Disney comes under China’s economic spell 5 Nov 2009 Vast domestic tourism and new infrastructure make a Disney resort in Shanghai worth the investment risk. It s a smart way for the House of Mickey Mouse to build the brand in a market where media is tightly controlled. But Disney must learn from past financial mistakes.
Yankees prove they’re the Goldman Sachs of baseball 5 Nov 2009 The team, which clinched its 27th World Series, is the sport s most valuable franchise, top moneymaker and pays more than anyone else for talent. And like the investment bank across the river from the Bronx, its success inspires either deep admiration or intense scorn.
Market softens up CVS Caremark for US regulators 5 Nov 2009 The Federal Trade Commission fancies the drugs group as an antitrust target. Investors, meanwhile, gave its stock a beating after the company lost contracts worth billions in the latest quarter. The market is helping overworked officials by putting CVS Caremark on the back foot.
UK, world’s biggest money printer, gets nervous 5 Nov 2009 The Bank of England s decision to print another £25bn smacks of compromise. Some policymakers may have wanted more. Others may have feared that quantitative easing has already gone too far. The money printing will have to stop one day. For now, the UK continues on its risky road.
Cisco’s issues more than a good quarter deep 5 Nov 2009 The US networking giant sold more gear than expected and cut costs during its latest quarter. It also upped the amount of cash it promises to return to shareholders by $10bn. But Cisco s longterm strategic challenges remain to be tackled.
BNP Paribas emerges stronger from crisis 5 Nov 2009 The eurozone's largest bank by deposits posted a 45% jump in Q3 net profit thanks in part to its Fortis acquisition. BNP continues to draw strength from its nononsense universal banking model. With a rights issue having boosted capital, BNP mustn't become too conservative.
Telefónica puts the screws on Vivendi in Brazil 4 Nov 2009 The Spanish operator had already topped the French media group s offer for Brazilian telecom upstart GVT. Telefónica has now raised its bid by 5% more to $3.8bn. As a result of Brazilian takeover laws, that leaves Vivendi even further in the dust.
Unitymedia opens private-equity cable harvest 4 Nov 2009 The IPO of Germany s number two cable operator could be the first of several from the sector. But while cable has weathered the recession well, valuations are still recovering. Unitymedia s owners, BC Partners and Apollo, would be well advised not to try selling down too much.
GM can get to work on Opel restructuring 4 Nov 2009 The US carmaker has scrapped the sale of its European division to Canada s Magna after Brussels questioned German state support for the deal. Angela Merkel will be irked. But GM can now aggressively restructure the struggling subsidiary with less political meddling.
Kraft’s humdrum results highlight Cadbury charm 4 Nov 2009 The Oreomaker beat profit estimates for the third quarter, but cut its sales forecast for the year. That makes fastergrowing Cadbury even more attractive. Yet Kraft would still struggle to justify raising its offer for the UK confectioner much more.
Rewarding bosses for going shopping is daft 4 Nov 2009 Pfizer awarded CFO Frank D Amelio a $1.2m bonus for his role in buying rival Wyeth. Executives may need incentives to sell it often means they ll lose their job. Paying for purchases, on the other hand, encourages empire building.