Cyprus exit risk is real – and manageable 21 Mar 2013 The European Central Bank has threatened to cut off Cyprus’ banks if Nicosia doesn’t take a bailout, potentially triggering a euro exit. The ECB has been pragmatic before, and will want the euro to stay intact. But an exit is manageable, and better than having the ECB buckle.
Forget a flood of telco deals after EU thaw 21 Mar 2013 The EU is rightly easing up on the sickly sector. But competition concerns seem likely to prevent an M&A bonanza. Until the “single market” Brussels wants becomes a reality, many local deals will consolidate markets too much. And cross-border ones will lack financial sense.
Mining saga highlights pitfalls of Chinese M&A 21 Mar 2013 The $1.4 bln takeover of Australia’s Sundance is under pressure after the apparent arrest of its suitor’s chairman. Chinese bidders must grapple with demanding regulators, fickle financiers, and shifting patronage. For their targets, it’s a reminder to treat offers sceptically.
UK rightly tackles company pension power imbalance 21 Mar 2013 For years, pensions regulation has seemed to treat firms purely as entities to pay retirement payouts. A line in George Osborne’s budget heralds a more realistic approach: regulators should consider employers’ growth prospects too. Scheme sponsors and pensioners can both cheer.
Optimism over M&A may be deserved – at a discount 20 Mar 2013 Bankers and lawyers telling a PR firm that specializes in deals they expect to see more merger activity makes for sweet echo-chamber music. Even pessimism expressed in the same survey in past years has proven too rosy. Maybe factor a typical premium of 30 pct into the answers.
Fed’s supertanker looks destined to make big waves 20 Mar 2013 The U.S. central bank shows no signs of scaling back $85 bln of monthly bond buys and says much time would elapse between ending purchases and raising rates. Yet the Fed’s 2015 target of up to 4.5 pct is a far cry from six years near zero. The rapid turn could shock the system.
Billionaire Batista’s X factor becoming big loser 20 Mar 2013 The Brazilian entrepreneur needs to sell part of MPX, a $3 bln electricity firm, to calm creditors. He borrowed against ventures that went public too early and have slumped 70 pct in value. The prospect of more margin calls is a gloomy one for his creations’ battered investors.
Hostile $5.7 bln real estate bid is a long shot 20 Mar 2013 American Realty’s offer for Cole Credit III is a better deal than the target’s plan to buy its adviser and go public. But Cole’s investors don’t get a vote. So American Realty’s only leverage is to dangle the prospect of reputational damage to appeal to insiders’ long-term greed.
UK edges towards "anything goes" central banking 20 Mar 2013 The Bank of England is printing money and tolerating above-target inflation. Until now, this arrangement was considered exceptional. Under the BoE’s new remit, announced in the budget, it will count as pretty much normal. It’s an invitation to an inflationary adventure.
UK budget takes two steps forward and one back 20 Mar 2013 Finance Minister George Osborne is making new savings to fund investment projects and tax cuts for business and low earners. That’s the right policy. The moves are marred by a plan to boost construction by risking taxpayer funds on new homes. But overall, his budget does no harm.
Europe can afford to hang tough on Cyprus 20 Mar 2013 The Cypriot parliament’s rejection of a plan to tax bank deposits, and rumours that Russia might make a play on the country’s banks or gas fields, have triggered speculation about alternative plans to the euro zone bailout. Europe has the power to hold firm.
Elusive future gas riches can’t help Cyprus now 20 Mar 2013 Even if early estimates of huge gas reserves prove right, recent finds off the Mediterranean island’s coast will take time and money to exploit. The dicey politics of exporting gas from Cyprus also poses risks to development. For now, Cyprus’ natural gas potential remains just that.
Hugo Dixon: All Cyprus plan Bs look dreadful 20 Mar 2013 Unless Germany bends over backwards and gives a big grant to Cyprus, the tiny island has three main options: sell its soul to Russia; default and possibly quit the euro; or patch together a new deal with the euro zone. The last option is the least bad for all.
China rail reform skirts big question: who pays 20 Mar 2013 Building high-speed railways makes sense. Burdening the new operator with $420 billion of debt doesn’t. Passengers aren’t rich enough to bear the investment costs. Yet with some creative financing, it’s possible to tap those who benefit most: industry and local governments.
India’s banks stuck in a monetary trap 20 Mar 2013 A quarter-point rate cut, designed to spur lending, has little chance of reaching borrowers. Banks need all the income they can get to attract depositors and lay aside provisions for bad debt. Only when inflation is tamed, and banks recapitalised, can credit flow efficiently.
Besieged boards need updated defender-in-chief 19 Mar 2013 Over a long career, lawyer Martin Lipton has become synonymous on Wall Street with takeover defense. But with shareholder activism ascendant and often on target, his contrarian screeds sound dated. This week’s M&A confab in New Orleans could put them further to the test.
John Malone establishes new tyrannical minority 19 Mar 2013 The U.S. cable magnate is buying a 27 pct stake in Charter from buyout firms for $2.6 bln. He’s no garden-variety minority owner, though. Even heavyweights like Rupert Murdoch and Barry Diller can attest to Malone’s cunning use of smaller stakes. Charter should keep its guard up.
Cyprus crisis shows unwelcome return of randomness 19 Mar 2013 The specifics of straightening out the Mediterranean island’s banking system matter less than the way policymakers are making things up as they go along. They seem to backtrack and abandon principles. It’s all too reminiscent of the shifting responses during the 2008 crisis.
Cyprus must accept a less Russian future 19 Mar 2013 Nicosia is negotiating with Moscow on how to tax Cypriot bank account holders. If insured funds are spared, the island’s Russian depositors would end up paying 60 pct of its bailout bill. Beyond that, de-russification is the price Cyprus has to pay for staying in the euro zone.
Ethical economy: Cyprus and the danger of promises 19 Mar 2013 Under the current plan, Cypriot savers’ deposit guarantees will not be truly honoured. Countries with negative real interest rates already violate the spirit of their commitments to savers. Rather than hold governments to impossible promises, it would be better not to make them.
Icahn’s payout plan could put driller in a hole 19 Mar 2013 The billionaire activist is pushing Transocean for a $1.4 bln dividend. That’s nearly half the U.S. drilling outfit’s annual cash flow and could preclude upgrades to its aging rig fleet. The company’s counter of an $800 mln payout should appease investors while keeping operations humming.
Walgreen-Boots deal adds helping to full plate 19 Mar 2013 The American and European drug chains haven’t finished merging their cross-border operations. They’re adding distributor Amerisource to the mix by taking a minority stake. Cost savings and negotiating heft may follow, but the combined firms’ management could be stretched thin.
UK cannot afford a budget giveaway 19 Mar 2013 George Osborne is public enemy number one. Critics want him to reverse austerity. He would do better to reinforce it in health and education. But that’s a political no go. The best he can do is provide a mini stimulus via more housebuilding and tax cuts for the low paid.
Sainsbury’s cunning "no horse" strategy pays off 19 Mar 2013 Unlike most peers, the UK supermarket didn’t find equine DNA in its food products. Its reward was a 3.6 pct jump in like-for-like sales in the fourth quarter. If Sainsbury can also deal with a squeeze on real UK incomes and price wars, it could deserve more investor support.
Alwaleed’s valuation dispute has simple solutions 19 Mar 2013 The Saudi prince’s investment vehicle, Kingdom Holding, has a small free float, poor liquidity and a volatile share price. That has created controversy over its true value. A bigger free float would help investors set its value. Alternatively, delisting would end the controversy.
The cost of Qatar’s punchy spending style 19 Mar 2013 The Gulf state is splashing cash everywhere. The strategy is part financial, part geopolitical - each investment forges a new link to the global system. But tiny Qatar may be overstretching itself in its determination to cultivate alliances.
India in depth: Gold is not the villain 19 Mar 2013 The finance minister’s claim that a “passion” for imported gold widens the trade deficit misses the point. Demand for the yellow metal is a symptom of fears the government will print money to finance deficits. A broader tax base would ease Indians’ demand for an inflation hedge.
Philippines has an unhealthy upgrade obsession 19 Mar 2013 Manila is on a low-debt diet as it pursues an investment-grade sovereign rating. But with foreign money pouring in, the government needs to sell more bonds to mop up excess liquidity. Mistimed austerity creates the risk of mispriced bank credit and asset bubbles.
Cure for U.S. housing malaise may sustain disease 18 Mar 2013 A Senate bill seeks to forbid Congress from raising Frannie’s fees to pay for federal spending. It sounds sensible. But in the alternate universe that is Washington, it may kill one of the few ways available to reduce taxpayer support for housing and bring back private capital.
Bank rule loophole on mortgages should be a no-no 18 Mar 2013 Basel III could allow banks like Wells Fargo to push hard-to-value mortgage servicing rights off balance sheet without giving up the lucrative business of processing home loans. Such financial engineering, however, could add even more confusion to an already complex market.