Walmex bribery woes may offer investors a bargain 24 Apr 2012 Wal-Mart’s Mexican unit saw more than $7 bln of market value vanish on allegations that its former boss authorized $24 mln of bribes. This looks like an over-reaction. Not only do Mexican authorities have bigger fish to fry, Walmex has no need to grease palms to keep growing.
Telus spat shows risk of shareholder caste system 24 Apr 2012 The Canadian telco is trying to get rid of its non-voting shares just as Google, for one, is introducing them. Telus is on the right governance track, but its tussle with a hedge fund over the exchange ratio shows why multiple classes of stock should be avoided in the first place.
China’s "investment imbalance" is mostly fictional 24 Apr 2012 Chinese investment is excessive, wasteful and will ultimately cause serious trouble. That claim has been around for years. The growth sceptics may eventually be right. But their logic is weak and their statistics doubtful. They also underestimate the government’s ability.
Spotify’s $4 billion pitch sounds high 24 Apr 2012 The music-streaming firm is seeking new backers at a hefty $3.5 to $4 bln valuation. Spotify boasts a neat idea, rapid growth and Facebook’s friendship. But big licensing fees, which rise in tandem with users, mean it lacks the economics of the best dot-com hits.
Fund managers are losing patience with India 24 Apr 2012 Foreign investment in the country’s equity market has slowed to a trickle. Ambiguity over tax changes is a major reason investors are holding back. India’s fragile economy can’t risk an exodus. But the rules haven’t yet come into law. The government still has time for a re-think.
China bank pay is the wrong target for reform 24 Apr 2012 In what looks like a response to public complaints, some Chinese bank chiefs have had their pay cut. Others are getting raises, but still earn a pittance. Yet the industry’s earnings grew 36 percent in 2011. It would be better to address the lack of competition that enables the banks to do so well.
Egypt-Israel energy ties look broken 24 Apr 2012 It is hard to believe that Egypt’s termination of a long-term contract to supply gas to Israel is a pure business dispute given the odd timing of the move. In the absence of a resolution Israel faces some difficult months. That’s bad for peace but doesn’t destroy it.
Facebook infected by Google’s antitrust limbo 23 Apr 2012 The social network isn’t even public, yet acquisition targets may already be concerned. Instagram commanded a 20 pct break fee if its $1 bln sale isn’t consummated by December. That’s a wise safety measure given the life cycle of apps and Facebook’s lurking antitrust risks.
Bribery case against Wal-Mart harder than it looks 23 Apr 2012 U.S. law bars payoffs for new contracts from foreign officials. But Wal-Mart Mexico allegedly greased low-level palms to grow existing business. That’s arguably not covered. Watchdogs should beware bending an already suspect law to punish what may technically just be unethical.
Biotech’s blistering M&A pace should continue 23 Apr 2012 The industry is off to one of its best years in a decade. As Pfizer’s sale of its nutrition business for $12 bln suggests, Big Pharma is forgoing mega-deals for smaller, targeted acquisitions of innovators like Ardea and Amylin, who are needed to refill empty drug pipelines.
Markets threaten no growth, no austerity Europe 23 Apr 2012 The presidential election shows French voters are tiring of austerity even before it arrives. Economic data shows the European recession is deepening. As the politicians vacillate, the region’s debt and the world’s equity and commodity markets look vulnerable to a correction.
Dutch government felled by austerity boomerang 23 Apr 2012 The country’s right-of-centre coalition has collapsed after failing to agree cuts that would reduce the deficit to the euro-wide target of 3 pct of GDP. A temporary budget may avert immediate crisis. But the splintering politics bodes ill for longer-term economic stability.
C&WW right to recommend Vodafone offer 23 Apr 2012 The UK telco is justified in recommending a 1 bln pound bid from Vodafone, even if top shareholder Orbis is unimpressed. The only rival bidder quit, and the premium is 92 pct. But Vodafone’s coyness on the synergies naturally fuels the suspicion it could afford to pay more.
Wal-Mart scandal demands spirit of Sam Walton 23 Apr 2012 Chairman Rob Walton must channel his father’s integrity and initiate an independent probe into how managers, including current executives, suppressed strong evidence of widespread bribery and corruption in Mexico. To recover, heads will need to roll without fear or favor.
Conoco’s last pre-split report better than it looks 23 Apr 2012 A decline in first-quarter profit to $2.9 bln suggests the U.S. oil giant, soon to split in two, is going out with a whimper. But underlying growth trends in chemicals and U.S. oil could boost prospects at the slimmed-down Conoco and at Phillips 66, the new standalone refiner.
French vote opens new phase of euro zone crisis 23 Apr 2012 A majority of French voters in the first round of the presidential election rejected the European recipe of reforms and austerity. The general “non” aided the ultra-right National Front, gave the Socialist Hollande the lead - and will influence the next president’s policies.
Pfizer baby food gives Nestle a $12 bln sugar rush 23 Apr 2012 The Swiss food giant is paying a hefty 4.9 times sales for the U.S. group’s infant nutrition arm. That’s partly down to an M&A tug-of-war with rival Danone. But it also reflects Nestle’s rock-solid balance sheet - and the scarcity of big emerging-market growth plays.
SABMiller’s CEO-chairman move is a red flag 23 Apr 2012 CEO Graham Mackay has served investors in the Miller Lite brewer very well. But no good company should be dependent on a single employee. That is why SAB’s decision to elevate Mackay to the chairmanship is disappointing. Shareholders should push for more independent oversight.
Hugo Dixon: IMF-euro conditions not what they seem 23 Apr 2012 The rest of the world is insisting that strings are attached to any new bailouts from the fund’s enlarged warchest. But the IMF is actually keen on less austerity in the euro zone, not more. It’s now in a stronger position to get its way.
Growth gap puts IMF in endless campaign mode 23 Apr 2012 The BRICs are already clamoring for more sway at the IMF - even before previous boosts in voting strength are finalized. With developing nations forecast to grow twice as fast as rich rivals in the next five years, haggling over heft will be a permanent feature of IMF meetings.
Cambodia must solve two big problems for takeoff 23 Apr 2012 Cambodia’s stock exchange opening shows the country’s relatively friendly attitude to foreign investors and markets. But meeting the needs of a rapidly growing population and reducing corruption stand in the way of the rapid growth other Asian tigers have delivered.
GE offers Citi starting point for fixing CEO pay 20 Apr 2012 Investors voted against Vikram Pandit’s comp largely due to his wooly incentive plan. Facing similar discontent last year, GE added decent hurdles to better align boss Jeff Immelt’s pay to the conglomerate’s performance and shareholder returns. Citi should go a step further.
Oil majors can’t afford to shun Argentina 20 Apr 2012 Beyond the YPF asset grab, Cristina Fernandez may overhaul the entire energy sector. But Argentina’s shale is too important to ignore and Big Oil knows how to navigate tricky regimes, including Venezuela’s. Even with risks higher and returns lower, the long game could pay off.
Review: Redeemers who led Latin America astray 20 Apr 2012 The Spanish-American War led a group of intellectuals and charismatic politicians to anti-Americanism. The resulting deep antipathy to free markets led to a century of relative economic decline. The continent should ignore its intellectuals and listen to worthy business leaders.
Hollande presidency bound for rocky start 20 Apr 2012 The French socialist leader has been mostly mum on the country’s major economic problems - excessive public spending and high labour costs. He’ll need to pay more than lip service to fiscal discipline before financial markets - and Germany - start taking him seriously.
Spain’s banks could use some disaster insurance 20 Apr 2012 Lenders have merged and raised fresh capital, but investors still worry about contagion. The euro zone could help by offering to insure balance sheets against extreme losses. Though this wouldn’t solve Spain’s deficit problems, it would provide some breathing space.
Formula One has much to lose in Bahrain race 20 Apr 2012 Holding the car race on the tiny island still reeling in its Arab uprising isn’t worth the controversy. The Grand Prix already has another foot firmly in the lucrative Gulf market. Sponsors are resilient to a point but the Bahrain race could yet test those limits.
How China can avoid a corruption crisis 20 Apr 2012 Graft need not stop growth in resource-rich countries. But China’s main resource - cheap labour - is running out. The distortions from decades of corruption could soon slow the economy. This burden can be lifted, but that requires breaking some idols, and bending some rules.
Three reasons to be optimistic about India 20 Apr 2012 Don’t say it too loudly, but India may be grasping the nettle on its corruption and bureaucracy. Plans to cut red tape for new businesses, a central bank warning about foreign investment, and a probe into suspect land deals are all steps, however small, in the right direction.
Ackman gets closer to permanent capital grail 19 Apr 2012 The activist hedgie’s planned $4 bln London-listed vehicle would dwarf other public funds, which often trade at a big discount to net asset value. The scale plus fee sweeteners may give Ackman an edge. And his focus on easily priced bets could shrink the NAV problem.