Obama’s watchdogs call AT&T’s $39 bln wager 31 Aug 2011 The No. 2 U.S. mobile company bet it could persuade regulators that buying No. 4 T-Mobile would benefit consumers. The U.S. DOJ senses a weak hand. With the industry a near duopoly, the government’s read looks right. AT&T isn’t folding but looks on the verge of a bad beat.
Exxon’s Russian coup rubs salt in BP’s wounds 31 Aug 2011 The U.S. oil group’s Arctic exploration agreement with Rosneft mimics BP’s aborted deal but without the $16 bln share swap. Instead, there’s Russian access to U.S. drilling projects. Assuming no hidden snags, Exxon could become the big winner from BP’s botched Russian strategy.
Spin-off trend isn’t just for investment bankers 31 Aug 2011 Companies from HP to Kraft to Conoco are splitting up. It’s tempting to think only Wall Street’s advisory ranks, who helped create these conglomerates in the first place, really benefit from such fads. But a few examples - Marathon Oil and Motorola - suggest investors can, too.
Fluctuating gas estimates needn’t freak investors 31 Aug 2011 Opponents of fracking pounced on a sharply lower government tally of the likely store of gas in one of America’s biggest shale areas. But investors, buffeted by swings in estimates, shouldn’t be too alarmed. Even the ultra-cautious reckoning amounts to 109 years of production.
Vodafone’s Greek tie-up tests mobile M&A limits 31 Aug 2011 Vodafone is proposing a small Greek wedding. The resulting mobile-market duopoly might be hard for Europe’s competition police to swallow, even given Greece’s exceptional problems. But consolidation means big savings. A go-ahead for Vodafone here could spur larger European deals.
China’s new M&A rules may hurt its Internet stars 31 Aug 2011 A freshened regulatory framework adds clarity to the way China treats stock listings and takeovers. But mainland Internet firms which raise money overseas may have to change if they want to be listed at home, or even to secure their domestic operating licenses.
Europe should strive for bank funding backstop 31 Aug 2011 The European Banking Authority wants to free up bank funding markets by enhancing the euro zone’s rescue fund. That could prove politically contentious with member states tired of ever-increasing bailout liabilities. But a debilitating credit crunch would be far worse.
Greek bank M&A shows no mercy on weaker partners 31 Aug 2011 Eurobank EFG is giving less troubled Alpha the lion’s share of the value created by their planned union. The deal leaves Piraeus, the smallest of Greece’s top banks, needing a partner. NBG is the obvious candidate. But Piraeus may, like Eurobank, have to take asymmetric terms.
Qatari Greek bank bailout looks like strategic bet 31 Aug 2011 The 500 mln euro investment by little-known Qatari investment vehicle, Paramount, supporting the merger of Alpha and EFG is opportune. But the emirate might also expect to extract strategic dividends from its support of euro zone troubled banks.
Peabody’s $5 bln Aussie buy now looks a stretch 30 Aug 2011 Macarthur has finally succumbed to its U.S. rival and ArcelorMittal. More than a year on, Peabody has its target’s precious steel-making coal and Asian access in its grasp. But in the interim, the global growth outlook has dimmed. Demand will have to hold up to justify the price.
Tar sands pipeline environment fears are overdone 30 Aug 2011 Despite a sanguine State Dept, there’s heavy opposition to a $7 bln pipeline bringing Canadian oil to Texas. But oil sands are less dirty than their reputation, and the U.S. buys crude from worse polluters. There are better ways to control emissions than boxing in Canada’s oil.
Groupon’s gaffes give fair warning to investors 30 Aug 2011 The run-up to the web coupon company’s IPO has been a string of embarrassments. Promised profits disappeared in filings, the chairman put his foot in his mouth and now the CEO has made comments that appear to skirt SEC rules. Forget valuations, this company should be avoided.
Obama’s new economist faces political headwinds 30 Aug 2011 With U.S. unemployment hovering above 9 pct, Alan Krueger - a Princeton labor market expert - is suited to be the next White House chief economist. But his job creation ideas may not get much of a hearing. With Obama campaigning, political pros will have the president’s ear.
CCB sale underlines BofA’s slow road to recovery 30 Aug 2011 Offloading some $8 bln of the Chinese bank’s shares is a double boost to capital. Along with Buffett’s investment and future earnings, it should help put BofA back on track. But none offers a quick fix. Economic and mortgage woes will leave shareholders dangling for some time.
Mother Nature threatens another mark on markets 30 Aug 2011 Just days after a rare earthquake, Wall Street faces a more serious disturbance from Hurricane Irene. The storm may still fizzle out. But it’s heading for a region with $12 bln of daily output and could cripple finance’s capital at a time when investors are already jumpy.
Bernanke’s inaction, even if temporary, is welcome 30 Aug 2011 Stock investors may have been briefly underwhelmed, but the Fed chairman was right not to promise new easing in his Jackson Hole speech. Aside from its likely ineffectiveness, he faces dissent at the Fed. That’ll make the now extended September meeting a new focus for markets.
Temasek’s smart CCB trade may have strategic costs 30 Aug 2011 Singapore’s state investment fund is buying shares in China Construction Bank from Bank of America - at a valuation 21 pct below where it dumped the stock last month. That has financial logic. But it may look too clever for Beijing, and hurt Temasek’s access to deals in China.
South Korean equities offer bargains for optimists 30 Aug 2011 Its stocks dived 21 percent this month as leveraged bets soured. Now they look cheap. Big names such as Samsung Electronics trade below 10 times projected earnings. High debt will keep things volatile, but investors sanguine about global growth may want to revisit Seoul.
Market crash compounds Russia’s lack of appeal 30 Aug 2011 Russia’s stock market has been one of the biggest casualties of the global turmoil, again illustrating its extreme sensitivity to risk. Although investors should be poised for an eventual rebound, the latest crash underscores the diminishing allure of Russian stocks.
Worldwide trade has worrying weaknesses 30 Aug 2011 Global trade faces triple vulnerabilities: slowing demand, affordable funding, and protectionism. The first is already happening. Memories of the last crisis should safeguard against the second and third - but there are worrying signs that the lessons haven’t been learned.
Greek bank consolidation escapes Catch-22 29 Aug 2011 Cost-cutting mergers between Greek lenders are essential. Trouble is, they double exposure to sovereign debt. Alpha and EFG may have solved the problem by raising 500 mln euros from Qatar. Combining M&A with new private capital makes sense, but other deals may not come so easily.
Apple wouldn’t be first to weather succession 26 Aug 2011 IBM, Wal-Mart and General Motors show how an obsessive focus on design, customer needs and tight control over supply chains can be ingrained in a company by a visionary creator. But these examples also provide some warning signals about how the post-Steve Jobs era could go wrong.
Demand Media takes cake with galling stock buyback 26 Aug 2011 The content farm’s shares have halved since Goldman and Morgan Stanley took it public in January. Now it’s spending a third of the cash it raised to repurchase stock. That contravenes the promised use of proceeds in its prospectus - and does nothing to fix its damaged business.
Goldman chips away at fixed cost problem 26 Aug 2011 The bank is trimming base pay for some senior UK bankers. The 2009 shift from bonuses to higher fixed comp was a bit slippery, but the move back rightly reinstates pre-crisis flexibility. Rivals should follow but may struggle unless they, too, foresaw the need in the small print.
Buffett’s $5 bln endorsement won’t end BofA’s woes 26 Aug 2011 Winning the Sage of Omaha’s backing is a coup for CEO Brian Moynihan - and the terms aren’t painful. But the deal offers no fix to BofA’s mortgage black hole nor does it immediately boost common capital. Those concerns may prove to be more enduring than Buffett’s thumbs up.
EU bank stress tests look soft on funding 26 Aug 2011 The European Banking Authority’s stress test of bank solvency last month included various assumptions about funding costs in adverse markets. But judging by the wholesale rates implied by current bank CDS levels, the EBA test may not have been bearish enough.
Take Chinese bank earnings with a pinch of salt 26 Aug 2011 Bad loans are falling, capital buffers look healthy and earnings are shooting ahead - so why have China’s bank valuations fallen so far? Look deeper and there are signs that a slowing economy is hurting, potential problems lurk off the books, and small banks are struggling.
Japan’s DPJ should choose the least popular leader 26 Aug 2011 The party’s leading candidates to take over as prime minister are competing to avoid the unpopular policies of tax hikes to fund reconstruction and draconian spending cuts. But with debt at 200 pct of GDP and another Moody’s downgrade, it’s time for a grown-up to take charge.
Bloomberg LP spares no expense on first big deal 25 Aug 2011 The New York mayor’s financial information company is paying $1 bln for legal publisher BNA. At 36 times earnings, no public company could reasonably compete. But the price also reflects Bloomberg’s ardor to expand its influence and build a cushion against Wall Street.
Abu Dhabi’s Aabar sticks out for the wrong reasons 25 Aug 2011 The state-owned investor has carried on spending as others have been told to cut back. But multi-billion dollar bets on Glencore and Malaysia’s RHB are under water. Aabar’s turn of fortune underscores the fund’s lack of a focused strategy.