Vodafone’s Essar victory gives it an uphill task 31 Mar 2011 The UK mobile operator is buying out Essar's 33 percent stake in its Indian joint venture for $5 billion. Though the deal ends a messy dispute, Vodafone has to pay a chunky valuation. Its challenge now is to extract value from India's cutthroat mobile market. That won't be easy.
JPM creates loan envy with $20 bln AT&T financing 31 Mar 2011 Jamie Dimon's record loan to the telecom giant is turning bankers green the world over. With this as the new benchmark for credithungry corporate executives the risk is that banks wind up competing in a game of oneupmanship that leads some to fly solo on far dicier deals.
China’s hot property: a guide for the perplexed 31 Mar 2011 The country has not one real estate bubble, but many. Prices in big cities are sky high, while ghost towns sit empty. China tolerated a boom for too long and is now in a tough spot. Falling prices would threaten growth and social stability but fall they must, says John Foley.
Buffett’s elephant tramples on dealmaker powwow 31 Mar 2011 M&A lawyers and bankers zeroed in on the prospects for deals, activists and proxy battles at their annual jamboree in the Big Easy. Outside the main hall, though, the conversation turned to the fallout from the Lubrizol acquisition. Not surprisingly, everyone has an opinion.
Nationalisation not the answer for Tokyo utility 31 Mar 2011 Tokyo Electric Power may be too big to fail, but government ownership of the stricken nuclear operator looks unlikely, undesirable and unnecessary. Tokyo should push shareholders and creditors to provide needed capital, and step in only as a last resort.
Caja bust-up puts Bank of Spain on the spot 31 Mar 2011 A merger involving four troubled savings banks has collapsed, raising doubts about Spain's financial restructuring. It's a reminder that political dogfights and bad loans are still a big risk. The central bank may have little choice but to nationalise the weakest caja.
Medvedev takes power struggle to Russia’s boards 31 Mar 2011 The Russian president has ordered government ministers off the boards of stateowned companies in an overt attempt to curb the influence of Vladimir Putin's associates. Medvedev's confidence that he can assert his authority is obviously growing. But he risks a backlash.
AIG’s chief Benmosche sounds like a whiney baby 31 Mar 2011 He says the Fed's decision not to sell $15 bln of mortgage bonds back to the insurer will hurt its stock sale, and thus U.S. taxpayers. True or not, Benmosche's comment implies he feels AIG is entitled to special treatment. That's not the way to run a competitive business.
Euro zone crisis no better after Irish stress test 31 Mar 2011 The tests' verdict a capital hole of 24 bln euros wasn't a shock, and senior bank bondholders got a further reprieve. But clarity on capital won't help Irish banks obtain access to market funding overnight. Suitably punitive but longterm ECB funding is still needed.
Citigroup may hold key to whether Sokol did wrong 31 Mar 2011 If the SEC wants to determine whether Warren Buffett's onetime successor violated securities laws and it should it needs to know what Citi told him about Lubrizol's interest in a deal, and when. While uncomfortable, it's by no means damaging territory for Citi.
Bank liquidity could use some CoLA refreshment 31 Mar 2011 Lenders have to raise 4.5 trn euros of longterm debt to meet new rules. One solution is to issue bonds whose duration lengthens in times of stress. CoCo bonds have helped banks raise capital. Contingent liquidity arrangements CoLA bonds could do the same for funding.
Woodstock of capitalism just turned into Altamont 31 Mar 2011 At Berkshire Hathaway's April 30 annual meeting in Omaha, Warren Buffett will take queries from a trio of journalists. Without being too presumptuous, Breakingviews suggests a few he must answer to assuage concerns about succession, ethics and, well, whether he's lost his mojo.
Euro zone political void puts Trichet in hot seat 30 Mar 2011 The ECB president seems to be the only remaining active authority in the euro zone as member governments are embroiled in political problems. The bank's intention to raise rates may conflict with its increased support of troubled lenders. Trichet is the man on the high wire.
Barclays’ HQ move talk puts regulators on the spot 30 Mar 2011 The bank may trade London for Manhattan if UK capital charges go too high. Funnily enough, U.S. banks complain new rules give Europeans the upper hand. Most of this is saberrattling, but it highlights the risks of watchdogs clamping down without some global harmonization.
Warren Buffett’s succession plans hit turbulence 30 Mar 2011 David Sokol, a top candidate to succeed Buffett, abruptly resigned, saying he wanted more money. He also traded Lubrizol shares while telling its bankers that Berkshire might have an interest in a takeover. Questions over succession won't be the only ones Buffett must answer.
Investors should learn to love Europe’s bailout plan 30 Mar 2011 The euro zone's decisions on sovereign restructuring are spooking markets and prompting downgrades. Yet investors shouldn't overreact; the plan makes default a possibility, but it isn't the cause of the crisis. It could discipline markets and make future shocks less acute.
UK consumer hits a brick wall 30 Mar 2011 A profit warning from electrical retailer Dixons follows bad news from grocer Sainsbury last week. Higher VAT and job insecurity are taking their toll. Consumer confidence may improve when government cuts are done. But with rate rises ahead, things could be tough for a long time.
Markets still beat regulators when sounding alarm 30 Mar 2011 Sure, investors mispriced risk in the boom, and policymakers have rightly ditched their blind faith in selfcorrecting markets. But it's far from certain that watchdogs will be able to spot risks that others don't. For all their flaws, markets offer important warning signs.
Monetary shift poses new investment threats 30 Mar 2011 Global investors are focused on shocks but inflation is the core concern of policymakers. A rate hike is close in Europe. The U.S. is changing its tune. Tighter money points to a firmer dollar, weaker euro and yen, retreating bonds, stalling commodities and nervous equities.
Biotech buyer tries rare bid experiment 30 Mar 2011 Valeant's unsolicited $5.7 bln offer for Cephalon bucks a trend in the drug discovery business. Aggressive approaches don't usually work because founders with big stakes can marshal opposition and scientists can just walk. But in this case, neither factor is a barrier.
Obama pushes on open door with energy independence 30 Mar 2011 Every president since Nixon has aimed to curb America's foreign oil addiction. Obama is almost sure to have more success. Energetic pumping and peaking gasoline demand are cutting imports even without Washington's nudge. But without a carbon price, progress will only go so far.
Activist investors embark on fight of their lives 30 Mar 2011 Uppity fund managers like Bill Ackman prefer to be on the attack. Now they're on the back foot as the SEC mulls siding with poison pill guru Marty Lipton to curb activists from quietly building stakes. The battle should heat up as M&A lawyers and bankers hold their annual confab.
Portugal’s bank clean-up can only go so far 30 Mar 2011 Following BCP's 1.1 bln euro capital increase, the country's three largest lenders now have strongish reserves. But they are still heavily addicted to European Central Bank funding. There's a limit to what they can do as long as Portugal's government debt problem is unresolved.
Peru’s election offers unusual spread of outcomes 29 Mar 2011 Five presidential candidates are all within 6 pct in polls and cover the full political and economic spectrum. Peru has benefited from high commodity prices, but isn't yet fully on investor radar screens. Depending on April 10's result, it could turn into Chile or Bolivia.
Uncle Sam must not play fool on corporate taxes 29 Mar 2011 When Japan cuts the rate companies pay on April 1, America's will be the highest among advanced economies. Even its effective tax rate is way above average despite the likes of GE spending billions to game the labyrinthine code. A smarter approach would be to substitute a VAT.
GE’s $3.2 bln buy comes with motivated managers 29 Mar 2011 The purchase of Converteam brings GE's energy M&A spree to $11 bln since October. The firm boasts impressive growth and promises handsome synergies. And with Converteam's top dogs slated to pocket an extra $125 mln, they've got a strong incentive to make the deal work.
BP’s Russian jam should make oil rivals pause 29 Mar 2011 The oil major's troubles in Russia may say more about its own mistakes than about Moscow's treatment of energy investors. But rivals tempted to step in to fill the void should think twice before they consider big investments in a country fraught with political and legal risks.
Consolidation is next step in UK pension reform 29 Mar 2011 Occupational pension schemes manage total assets of 1.5 trillion stg in the UK. But they still look like a fragmented cottage industry. Pension schemes in other countries benefit from more concentration. Mergers in the UK would create value that could be passed on to members.
King of Beers dilutes itself for premium’s sake 29 Mar 2011 For $91 bln AnheuserBusch InBev, spending $39 mln on craft brewer Goose Island is a drop in the barrel. But the move highlights a trend toward premium beers as massmarket sales slump. Though valuations of brewers like Samuel Adams' Boston Beer are high, more M&A seems likely.
Glencore chair will determine governance discount 29 Mar 2011 The commodities trader needs a tough chairman to lead its possible IPO. If prospective investors aren't convinced their interests will be protected, the valuation will suffer. The new chair could show his or her mettle by taking a robust line on the appointment of nonexecs.