Accor’s newest broom would sweep governance aside 27 Aug 2013 The French hotel group’s board reckons appointing the head of its leading private equity shareholder as CEO can revive its fortunes. True, Colony’s Sebastien Bazin may speed up the sale of real-estate assets. But investors need to weigh short-term gains against a loss of control.
China’s debt molehills could turn into mountains 27 Aug 2013 Banks have reported low overall bad debt levels. But locally, risks are mounting. The east coast and retail sector are two areas where credit conditions are getting worse. In China, regional problems can escalate rapidly, and investors have poor visibility over where risks lie.
Amgen absorbs successful M&A therapy 26 Aug 2013 The mega-biotech is paying a near-50 pct premium to buy Onyx for $10.4 bln. Investors rewarded the pluck, adding more to Amgen’s market value since it first bid than it is shelling out to seal the deal. The cocktail of revenue gains and cost cuts is a winning merger prescription.
Time for Fed to rely on markets, not vice versa 26 Aug 2013 U.S. 10-year Treasury yields have doubled to 2.8 pct while the central bank has tried to keep them down, buying $85 bln of bonds monthly. Whatever the market’s message, the Fed is obscuring it. Ben Bernanke risks trouble if he doesn’t heed the upward pressure on rates.
Slim’s support makes own bid for KPN look cheap 26 Aug 2013 The Mexican tycoon is backing the Dutch telco’s disposal of its German business to Telefonica Deutschland. But the new price raises KPN’s standalone value, making the smallish premium in Slim’s offer for the parent seem miserly. KPN needs to squeeze more out of its lead investor.
Trump gives for-profit education an even worse rap 26 Aug 2013 American schools looking to make a buck have been scrutinized recently for taking students’ money but providing lackluster results. The Donald’s foray into the industry did it no favors. New York’s $40 mln lawsuit underscores the need for institutions to make credentials clear.
Asia sell-off will expose weak corporate defences 26 Aug 2013 Market turbulence invites comparisons with Asia’s last financial crisis. Though most economies are in better shape this time, corporate leverage has risen. Higher interest rates, slower growth, and falling currencies will lay bare companies that failed to learn past lessons.
China can learn from Russia on political martyrs 26 Aug 2013 The trial of Bo Xilai echoes that of Mikhail Khodorkovsky eight years ago. Like the jailed Russian oligarch, Bo could some day become a symbol for the regime’s failings. The difference: China’s leaders have a chance to keep their prosperity promises. Fail, and Bo may come back.
Nepotism is giving way to elite breeding 26 Aug 2013 JPMorgan’s family-related hiring in China is under investigation. Though the old practice of automatic jobs for the kids of the elite is on the decline globally, the young rich profit from privileged upbringings. The new nepotism is fairer, and more troubling, than the old.
Guest view: Eight windows for a new Microsoft 26 Aug 2013 Peter Clark, a lecturer at University College London and co-author of “Masterminding the Deal,” says shedding Xbox, Bing and a joint venture with Nokia should be three of eight top priorities in the post-Steve Ballmer era. Former IBM boss Louis Gerstner also provides inspiration.
New Microsoft CEO needs "less is more" mindset 23 Aug 2013 Steve Ballmer is finally on the way out. A $20 bln bump in Microsoft’s value on the news shows just how badly investors wanted a new approach. The wasteful “try everything” strategy should go. Ballmer’s successor can start by jettisoning most efforts outside business software.
Brazil’s $60 bln trade is bailout by another name 23 Aug 2013 The central bank’s plan to prop up the real is designed to paper over government and corporate blunders. Depreciation has created import inflation - hitting Brazil’s voracious consumers. Meantime, companies committed the cardinal sin of borrowing in dollars. This won’t end well.
Obama college cost-cutting plan gets gentleman’s C 23 Aug 2013 The president aims to hold down tuition and loans by rating schools according to the value they deliver. But a proposed cap on debt repayments could encourage even more student borrowing. That and similarly counterproductive details pull down an otherwise useful program’s grade.
Trading floors prove a shrewd trade for Blackstone 23 Aug 2013 The crisis yielded surprisingly few M&A bargains. Blackstone found one right at the heart of the City. In 2009 it bought half of the site that houses UBS and Icap from a wobbly British Land. Four years on, foreigners’ love of London property means the bet will pay off handsomely.
Bank capital reform means French gain and UK pain 23 Aug 2013 SocGen’s hybrid debt issue helps towards its capital and leverage ratios, the new yardstick for bank solvency. Yet UK rules mean similar bonds sold by Barclays will have less attractive terms. Regulators’ drive to improve capital standards could end up hurting competition.
Euro zone periphery avoids rates storm for once 23 Aug 2013 Euro zone peripheral bonds have dodged the taper tantrum. That’s because the hot money now deserting emerging markets never pumped up the euro zone’s sickly members. Rising rates could still hurt the periphery, but will be constrained by the euro zone’s low growth.
UK fracking furore reflects skewed view of risk 23 Aug 2013 If protests against the drilling technique keep up, they could scupper the country’s shale ambitions. Opponents cite risks which look manageable and often gloss over the problems of other sources of energy. Such fearful and narrow analysis is an invitation to bad policy.
Germany is not the euro zone – what a shame 23 Aug 2013 If the whole single currency zone could catch up with its largest member, the crisis and the recession would be history. But while the latest survey confirms that the euro area is picking up, Germany remains far ahead. This unbalanced recovery could lead to more trouble.
Nasdaq fail should be final nail for Bob Greifeld 22 Aug 2013 A three-hour trading halt comes barely a year after Facebook’s flubbed IPO. The CEO’s 10-year term is no disaster: he diversified the business, controlled costs and the stock bested the NYSE’s. But two botched big deals and techno tumbles should call time on Greifeld’s tenure.
HP throws M&A wrench in turnaround gears 22 Aug 2013 CEO Meg Whitman helped the troubled tech firm regain investor trust by patching the hole left in its balance sheet by predecessors’ deal-making. Now she reckons a return to M&A could stem HP’s declining revenue. No wonder shareholders have vaporized $6 bln of the stock’s value.
Investors finally getting the biotech IPO joke 22 Aug 2013 It’s the best year in a decade for such companies to go public. While quantity has gone up, though, quality has not. Biotechs offering barely more than science experiments appear able to attract funding. History suggests buyers may be disappointed. They may be starting to notice.
Letter to the Editor: Another Twitter IPO idea 22 Aug 2013 A consultant on Google’s initial stock sale says a Dutch auction, as suggested in a Breakingviews article, is only partly right. Finance professor Ann Sherman recommends a hybrid model used globally by the likes of SingTel to welcome both institutional and individual investors.
Time for UK banks to go legit 22 Aug 2013 The saga of bad behaviour continues. Dodgy mortgage insurance, dangerous interest rate swaps and now a 1.3 bln pound hit for helping sell needless credit card protection. UK banks need genuine reform, which starts with charging openly for current accounts. The regulator can help.
Markets defy European central banks’ plans 22 Aug 2013 Central banks want to keep policy accommodative, but despite their best efforts, euro zone and UK businesses and consumers still face higher interest rates and rising currencies. If this goes on, policymakers can fight back with words, and - last resort - with even looser policy.
Fed liquidity curbs will act as Asia’s detox plan 22 Aug 2013 Asia’s sliding trade surpluses were making it increasingly reliant on cheap foreign debt. Higher U.S. interest rates will cure the craving. Though markets may be turbulent, costlier local money or cheaper currencies will improve the trade balance for most countries in the region.
Wall Street enforcers stretch law to hide sloth 21 Aug 2013 U.S. Attorney General Holder is already late with plans to crack down. His DOJ is trying to buy time by suing banks under a statute meant to protect them. But that creates legal uncertainty. If watchdogs were serious about avenging the 2008 crisis, they could have pounced sooner.
Nest-flyers are poised to supercharge U.S. economy 21 Aug 2013 As jobs return, droves of 20-somethings will get their own places. They may rent not buy, but the effects still look deep. Between building and related activity like furniture sales, Breakingviews sees new households accounting for up to 30 pct of GDP growth through 2019.
Facebook effort could help poor, itself – and you 21 Aug 2013 Connecting the rest of the world to the internet won’t be easy or offer huge profits. The 2.4 bln people earning less than $2 a day aren’t quite an advertiser’s dream. But communication aids development, and improved data compression and transmission technologies benefit all.
Mexico’s GDP slowdown clashes with reform program 21 Aug 2013 Output shrank by 0.7 pct in Q2 and the economy has grown only 1.5 pct since mid-2012, barely outstripping population gains. That could make reforms like opening oil giant Pemex to foreign investment politically even tougher – despite the fact they would ultimately boost growth.
Edward Hadas: A dangerous lie about debt 21 Aug 2013 The 2008 crisis and the slow recovery have exposed a flawed financial system. Obvious culprits include bankers and policymakers. But some really bad ideas also bear responsibility. For example, the notion of a risk-free rate gives investors dangerous wrong ideas about safety.