Silicon Valley exceptionalism only travels so far 28 Apr 2014 Airbnb has been sassing its way around New York, whose attorney general suspects the residence-sharing site’s users are breaking the law. A better lodging mousetrap and $10 bln valuation may resonate in the Valley, but it doesn’t mean nearly as much beyond the tech echo chamber.
Record U.S. oil stocks show need for policy shift 28 Apr 2014 There’s more crude on hand than at any time in the last 30-plus years – perhaps since 1931. That reflects booming production. Drillers are getting less for their oil than global market rivals. The gap will tend to widen unless lawmakers rethink a long-running ban on exports.
Uncle Sam’s Putin sting also threatens investors 28 Apr 2014 Sanctions can cut both ways. The U.S. is targeting Rosneft boss Igor Sechin. Will Russia retaliate against BP, which owns 20 pct of the oil giant? Probably not, thanks to the British company’s approach. But all foreign business partners are subject to Putin’s wrath.
BofA reclaims banking dunce cap with $4 bln flub 28 Apr 2014 The Fed has told the U.S. mega-bank to suspend its dividend hike and buybacks after the bank found an error in its capital calculations. The discrepancy is small. But it dents any returning faith in banks’ risk management and puts boss Brian Moynihan back on the defensive.
Alibaba control issues get fuzzier with Youku deal 28 Apr 2014 The Chinese e-commerce group is investing $1.2 bln in the online video channel. That’s logical, given Alibaba’s media ambitions. But a co-investment from founder Jack Ma’s private equity vehicle isn’t. Though Ma gives away his profit, that makes the complexity more unnecessary.
Pfizer needs to do more to win AstraZeneca 28 Apr 2014 The U.S. pharma group is pressuring Astra to engage by revealing fleeting past discussions about a $99 bln cash-and-stock approach. Pfizer will want to see this through. To extract more value, Astra CEO Pascal Soriot can rubbish Pfizer’s bid currency and talk up other deals.
Siemens’ Alstom proposal attractive but risky 28 Apr 2014 The German engineer has offered to swap assets with its French rival after a possible GE/Alstom deal ran into government opposition. Exchanging trains for turbines could create two strong players, and generate larger synergies. But antitrust obstacles may be tough to overcome.
BG’s CEO exit highlights bid vulnerability 28 Apr 2014 Chris Finlayson is leaving the UK gas group abruptly after another profit warning. BG says it is a question of leadership, not strategy. Chairman Andrew Gould looks like a safe caretaker. But until a new CEO is in place, BG’s takeover defences are weak.
Abe’s small hits weightier than big trade miss 28 Apr 2014 The Japanese prime minister’s failure to cut farm tariffs has delayed a key U.S. trade pact. But that doesn’t mean he is unable to open up Japan’s economy. Easier land and labour laws, greater tolerance of foreign workers and lower medical costs add up to a strong reform push.
China’s twitchy censors could clip tech valuations 28 Apr 2014 Four U.S. TV shows have been inexplicably banned from the web. For online video sites such as Youku-Tudou, which turned profitable for the first time last quarter, this could spell financial trouble. Investors can tolerate censorship – but unpredictability is a definite turn-off.
Dairy holds key to $1.2 bln Goodman takeover 28 Apr 2014 The troubled Australian food group has rejected a bid from Singapore’s Wilmar and Hong Kong’s First Pacific that values it at 8 times this year’s EBITDA. To convince investors it is worth more on its own, Goodman quickly needs to find a buyer or partner for its dairy business.
"Ford tough" takes on whole new meaning 25 Apr 2014 The U.S. automaker’s earnings dropped more than was expected in large part because of vehicle repairs. It’s the latest sign of how the industry is struggling to keep cars reliable as models get fancier and product cycles shorten. A complexity discount may be appropriate.
Suppose Brazilian CEOs saw light on pay secrecy 25 Apr 2014 Bosses of Vale, Ambev and other companies are fighting in court to keep their compensation under wraps. Concerns over privacy and kidnapping loom large. Yet there’s evidence that transparency could make them richer. Breakingviews imagines a closed-door meeting on the subject.
New gross output stat shows merit of Fed stimulus 25 Apr 2014 The measure, included in a new U.S. report on GDP by industry, focuses on what’s being made, not on consumption. It underlines how suddenly economic activity plunged from 2008 to 2009, and suggests monetary stimulus worked better than the too little, too late fiscal response.
Alstom split would energise business units 25 Apr 2014 Too much debt, a ropey rating and looming refinancing needs are Alstom’s key problems. The French engineering group would need more time to fix them than its shareholders seem to allow. A split would make sense, and GE can help.
RBS strategy derailed by UK politics – again 25 Apr 2014 George Osborne has blocked the 80 pct state-held bank from awarding bonuses worth twice the recipients’ base pay. That goes against what other investors want, and the chancellor’s own hostility to the EU law on bonus caps. But the need to be seen as strict on pay takes priority.
VAT hike is the missing piece in Spain’s tax plans 25 Apr 2014 With the economy humming, the government plans to lower taxes in the runup to elections. This may look like good politics, but the government needs to take tough decisions too. Madrid could balance tax cuts and lower social security payments with increases in VAT.
China’s offshore bond boom has further to run 25 Apr 2014 Companies like Tencent and CNOOC are looking overseas for financing. Tighter credit on the mainland is a factor. So is international expansion by Chinese groups. Though the yuan’s slide is a reminder of the risks of borrowing offshore, bond issuance should carry on rising.
Review: India’s Singh wasn’t king, Modi could be 25 Apr 2014 Sanjaya Baru’s “The Accidental Prime Minister” is an insider’s account of how Sonia Gandhi defanged the reformist Manmohan Singh. The ensuing gloom, though, could spell glory for Narendra Modi, who will want to vest more power in India’s top job. That’s also what investors want.
Rob Cox: Coke takes fizz out of shareholder spring 24 Apr 2014 Just as investors seemed to break through entrenched boards’ barricades, Coca-Cola owners - shockingly led by Warren Buffett - turned to jelly. A failure to challenge the transfer of vast wealth to 6,400 Coke soda jerks shows the agency problem still plagues Corporate America.
FCC opts for net reality over neutrality 24 Apr 2014 The U.S. communications watchdog will allow charges for carrying content faster but keep the internet open to all. That means data hogs like Netflix pay extra and others still get access. It’s a way to protect consumers while bowing to the need for more broadband investment.
U.S. investors see yet another big acquirer as hip 24 Apr 2014 Zimmer’s $13 bln deal for rival Biomet promises savings. But the medical device maker is giving too much away to its target’s private equity owners for that to justify a 15 pct, or $2.3 bln, pop in its market value. This time, enthusiastic share buyers are betting on growth.
Deutsche equity hike would need to hit $7 bln 24 Apr 2014 Germany’s largest bank opportunistically raised $4 bln in a share placing a year ago. A similar sized deal might just suffice to prepare Deutsche for ECB stress tests, new capital rules and litigation. But with investors supportive, a bigger rights issue would make sense.
Valeant’s M&A machine may soon overheat 24 Apr 2014 Some of the brain trust behind the hyper-acquisition strategy is leaving the board just as the pharmaceutical company embarks on its biggest deal. Buying Allergan would swell Valeant to $75 bln with debt of eight times EBITDA. Finding meaningful targets will be much harder.
GM avoids recall crash but road is still rough 24 Apr 2014 The carmaker had a decent Q1 aside from a $1.3 bln hit from its ignition switch-related fiasco. CEO Mary Barra even managed to keep earnings in the black – just. GM can afford more recall costs. The challenge is they’ll come with other drags, perhaps including slower U.S. sales.
French M&A: a guide for foreign buyers 24 Apr 2014 Deals for Publicis and Lafarge belie the sneers that France is closed to outsiders. If GE really wants to buy all of Alstom, it needs to be sensitive to local politics. Save some top roles for the French side. Maybe even rename the enlarged, “Paris-based” group Alstom-Electric.
GE/Alstom deal rumours test French reform drive 24 Apr 2014 Shares in the Paris-based engineer jumped 14 pct on reports it has received a bid. Alstom vaguely denied the story. But mere talk about a sale to the U.S. conglomerate will embarrass the French government just as its business-friendly reforms are proving a hard sell domestically.
AstraZeneca can avoid self-medicating with M&A 24 Apr 2014 Reported interest from Pfizer puts pressure on Astra CEO Pascal Soriot. He could bulk up by buying a rival like Actelion or Shire. Or he could find a merger partner. But as Q1 results show, Astra is refilling its pipeline and investors recognise this. Plan A is working.
Scania holdouts risk overplaying their hand 24 Apr 2014 Some minority investors oppose Volkswagen’s $9 bln bid for the rest of the Swedish truckmaker. But saying “nej” is risky. VW has effectively tied its hands, making a sweetener unlikely. The premium is already generous. If the buyout fails, Scania’s shares could fall steeply.
China’s state firm shakeup gets it only half right 24 Apr 2014 Private shareholders can bring extra discipline to the country’s 150,000 state-owned enterprises. CITIC and Sinopec have set the ball rolling. But for real efficiency, SOEs need to pay market rates for debt as well as equity. The key is to get on with half-finished bank reforms.