SoftBank’s U.S. mobile retreat is least bad option 6 Aug 2014 The Japanese group has bowed to hostile regulators and scrapped its Sprint unit’s $32 bln takeover of T-Mobile US. Withdrawing avoids months of antitrust limbo and leaves open the option of a future deal. For now, SoftBank’s ambitions in American mobile will be more modest.
Slow growth may help Indonesia catch second wind 6 Aug 2014 The economy grew 5.1 percent in the second quarter, the weakest in five years. But the slowdown is good news for incoming President Joko Widodo. It will allow him to scrap fuel subsidies without having to worry about an inflation scare. Energy reforms will fuel the next spurt.
Xiaomi creative destruction may reach beyond China 6 Aug 2014 In just four years, the frugal yet funky upstart has passed mighty Samsung as the top smartphone seller in the People’s Republic. Financial success is unclear: margins are probably thin. Even so, Xiaomi’s combination of cheap phones and software could threaten rivals elsewhere.
Murdoch miscalculation points to Time Warner value 5 Aug 2014 The media mogul abruptly yanked an $80 bln offer after failing to anticipate his quarry’s resolve and price demands of investors. Fox shares rallied while Time Warner’s retreated toward their pre-bid level. That leaves refusenik boss Jeff Bewkes with something more to prove.
Bank living-will flop may open door for boutiques 5 Aug 2014 Watchdogs have again rejected crisis breakup plans from the likes of JPMorgan and Goldman Sachs. Granted, this Dodd-Frank requirement is not as important as once thought. But if mega-banks can’t get it right, perhaps their smaller rivals’ restructuring units would have more luck.
Gannett split puts digital on wrong side of divide 5 Aug 2014 The media company is spinning off newspapers, including USA Today, to unburden its TV arm. Cars.com, which Gannett is buying at a $2.5 bln valuation, would have buffered the weaker half in a similar way to Rupert Murdoch’s News Corp carve-up. Instead, print must stand on its own.
Investment is America’s key to African riches 5 Aug 2014 Africa’s goods trade with the U.S. totaled only $63 bln in 2013, a fraction of exchanges with China and the EU. America finds many resources nearer home. But as the $14 bln of investments on show at Tuesday’s Washington summit show, its big companies can tap into African growth.
Vivendi can push for more in GVT sale 5 Aug 2014 The French group got a 6.7 bln euro bid for Brazilian broadband unit GVT from Telefonica. Some natural counter-bidders will struggle to respond but Vivendi could still try to start an auction. At the least it could demand a higher price and more cash from its Spanish suitor.
Credit Agricole’s BES exit is predictably clumsy 5 Aug 2014 The French farmers’ bank has taken a 708 mln euro hit from the bailed-in Banco Espirito Santo. CredAg had been trying to manage an exit from its Portuguese stake to avoid a repeat of losses in Greece and Spain. But it still had to wait for BES to implode to make its departure.
BES bail-in leaves CDS traders struck out 5 Aug 2014 Banco Espirito Santo’s bail-in meant a killing for any traders that bought the bank’s senior debt and shorted its subordinated bonds. But not all arbs will be celebrating. A technicality means those who shorted credit default swaps on BES’s junior debt have lost out.
Chinese shares pumped up by acronym rally 5 Aug 2014 The stock market’s best month since 2012 rests on four abbreviations. There’s GDP, which has stabilised; SOEs, some of which are poised for reform; and PSL, a rumoured plan to pump liquidity into the economy. But don’t forget TBTF: everything that matters is still too big to fail.
Microsoft’s China dream sorely strains credibility 5 Aug 2014 After 22 years, it’s hard to believe how little the U.S. tech giant has achieved in China. The country looks to account for just 2 percent of Microsoft’s revenue. Cloud services and Xbox sales may multiply that. But an antitrust probe raises the cost of business - possibly too high.
Vladimir Putin is the new bad weather 4 Aug 2014 The bogeyman of Ukrainian unrest is replacing snow as a reason to expect worse earnings. Just ask VW, Adidas or McDonald’s. The World Cup goes the other way, helping Adidas (again), Twitter and maybe Disney. The message could be muddled when Russia and soccer converge in 2018.
U.S. corporate émigrés may one day long for home 4 Aug 2014 High-flyers at firms like Goldman Sachs sometimes think they can do better striking out alone – only to fail for lack of the business card they’d undervalued. So it may prove with U.S. companies that invert, merging with foreign firms to gain domicile overseas and save on taxes.
Old-style IMF sado-austerity suits Ghana 4 Aug 2014 The African nation responded to oil wealth with a massive increase in public sector wages and headcount. Now the cedi is collapsing while the economy remains overheated. Traditional tough IMF medicine, not the sweeter post-2008 syrup, is needed to bring back stability.
BES’s flawed bailout mixes timidity and bad timing 4 Aug 2014 Had the Portuguese bank collapsed in July 2015, new EU bail-in rules would have made it easy to force the bank’s senior lenders to stump up the needed 4.9 bln euros. As it is, Lisbon can argue the legal details aren’t yet in place – and arrange another taxpayer-backed bailout.
Higher rates can’t come soon enough for HSBC 4 Aug 2014 Subdued activity and higher compliance costs led to a decline in the global bank’s underlying pretax first-half profit. Interest rate hikes will let HSBC squeeze out better returns from its huge deposit base. They will also test the bank’s claim that it is taking less risk.
Treasury Wine resistance withers under KKR assault 4 Aug 2014 The Australian wine maker has agreed to open its books after the buyout group raised its cash offer to $3.15 billion. The bid could yet turn sour, or other suitors may come forward. But Treasury’s spell as a listed company looks like it will soon be coming to an end.
Evercore finds smart route to dubious expansion 4 Aug 2014 The M&A house is spending up to $400 mln to buy ISI group and take full control of its equities unit. Though there’s little information on profitability, Evercore has negotiated admirable schmuck insurance. The bigger question is whether the firm should be trading shares at all.
Steady U.S. jobs one facet of new, rockier normal 1 Aug 2014 Another decent employment report followed a GDP rebound amidst a solid S&P 500 earnings season. Yet Argentina’s default, Gaza, Ukraine and a breakdown in trade talks are among the darker clouds. Thursday’s selloff suggests what could happen if investors refocus on bad stuff.
Wall Street’s independent banks bemuse investors 1 Aug 2014 Evercore, Greenhill, Moelis and Lazard turned in most of the second quarter’s best M&A results. Their financial performances were pretty close, too. Yet their stocks trade on wildly different multiples. Individual quirks explain some of the divergence, but not all of it.
Chevron’s gas deal setback a blessing in disguise 1 Aug 2014 The energy giant’s Canadian project is in doubt after partner Apache said it wants out. That may seem a blow to boosting flagging production. Like Exxon, though, Chevron has other gushers in the pipeline to help. And any reduction in capex after a couple of misfires is welcome.
P&G boss A.G. Lafley fixing everything but growth 1 Aug 2014 He’s ditching 100 flagging brands after already cutting costs, selling its pet food unit and hiking the dividend. Lafley’s making the $209 bln consumer giant leaner and more focused. But his moves since coming out of retirement have yet to do much to address P&G’s weak sales.
French T-Mo bid looks like peak TMT Entrepreneur 1 Aug 2014 A debt boom has allowed TMT dealmakers like John Malone, Masayoshi Son and Patrick Drahi to finance their ever-bigger dreams. Now French billionaire Xavier Niel has made an unexpected $15 bln bid for 57 pct of Deutsche Telekom’s T-Mobile US unit. He risks over-reaching.
Underwriters share blame in Portuguese bank fiasco 1 Aug 2014 Banco Espirito Santo’s shares have tanked 70 pct since a rights issue barely two months ago. UBS and Morgan Stanley, which led the 1 bln euro equity raise, hoisted red flags. The banks could have heeded their own findings and refused the job. Customers have a right to be angry.
Low yields don’t soothe pain of euro "lowflation" 1 Aug 2014 Regional borrowing costs have fallen. But so has inflation. Adjust for national price rises, and bond yields don’t look so low for Spain or Italy. The periphery most needs a pick up in inflation to erode debt. And Germany looks to benefit most from lower real interest rates.
WTO failure weakens trade’s role as global glue 1 Aug 2014 India’s rejection of a global trade pact throws fresh sand at an already creaking wheel. International commerce is no longer seen as a byword for growth, which puts the promised trillion-dollar gains from removing barriers in doubt. The prospect for ambitious accords is dimming.
Tesla performance befits company one-third as big 1 Aug 2014 Elon Musk’s $28 bln electric car maker beat estimates and outlined impressive production targets of 100,000 vehicles by 2016. For all its success, and investor fetishization of Silicon Valley disruption, Tesla will only ever earn autoland returns. That suggests it’s worth $9 bln.
U.S.-backed China tech shows investment curb folly 1 Aug 2014 Foreign funds sank $5 bln into venture capital the first half of 2014 – three times what local funds raised. That the country’s next Alibaba will probably be funded by Silicon Valley investors may jar with national pride and official rules. But China’s economy is the undeniable beneficiary.