Rob Cox: Pirelli flirts with joke version of hell 26 Mar 2015 That’s where the chefs are British, the lovers Swiss and the mechanics French. Pirelli risks becoming the corporate equivalent: the management Italian (as in the joke), its owner a Chinese state enterprise, and other partners Russian. Minority investors won’t find it funny.
Buffett-3G juggernaut can keep on truckin’ 26 Mar 2015 Kraft Heinz is the third time the Sage of Omaha and the trio behind AB InBev have joined forces, after swoops on the ketchup maker and Tim Hortons. The partners’ patience, financial firepower and industry experience give them big advantages. Bigger deals may lie down the road.
Flat euro yield curve is unused windfall 26 Mar 2015 ECB polices have almost eliminated the extra yield that usually comes with longer-term debt. Euro zone member governments gain from cheaper financing. They could do more. Additional bond-financed investment would stimulate the economy cheaply. That probably won’t happen.
Bumper European share sales carry risk of excess 26 Mar 2015 Banks have hawked big slugs of EU stock in overnight placings, with 5 bln euros worth offered in three days. For now, underwriters have support from QE-powered strong markets, so they’ll risk losses for the sake of league table kudos. But complacency seems to be creeping in.
Adidas misses chance of radical fresh start 26 Mar 2015 The underperforming German company unveiled a new plan designed to push growth and profitability. The goals are ambitious, but the steps incremental. Adidas is shunning drastic measures such as selling its struggling brands. Investors have good reasons to remain unimpressed.
ZTE’s turnaround not as impressive up close 26 Mar 2015 The Chinese telco equipment maker’s earnings almost doubled in 2014 – an improvement on the losses it was making three years ago. Yet revenue increased just 8 percent. ZTE is banking on smartphones and wearables to drive growth, but users don’t yet seem to be taking the bait.
DoCoMo woes challenge India reform rhetoric 26 Mar 2015 The authorities won’t allow Tata to pay the Japanese telco $1.1 bln to exit a joint venture. The deal will now go to arbitration. It is another example of India’s struggle to attract foreign investment. The government would prefer someone else make the difficult decisions.
Univision owners belatedly dial up profit gigante 25 Mar 2015 A $13.7 bln leveraged buyout of the U.S. Spanish-language broadcaster in 2007 ran headlong into an ad bust. A little pluck, in the form of a savvy deal with Televisa, and some luck, thanks to an unexpected source of revenue, turned things around. A decent payday now awaits.
Congress lines up a big wet kiss for small banks 25 Mar 2015 A new bill proposes excluding lenders with less than $50 bln in assets from Basel III capital rules. But small banks are already exempt from many stringent new regulations. Giving them more help is more a sign of Washington’s unending affection than genuine need.
Kraft investors bet Heinz can refill secret sauce 25 Mar 2015 The Velveeta cheese maker’s stock jumped a third – making the company worth nearly $50 bln – on news of its sale to the ketchup giant, which 3G Capital and Warren Buffett took private in 2013. The math works if Heinz can repeat its margin magic and leap hurdles to scaling Kraft.
Heinz and Kraft prove that one M&A bank is enough 25 Mar 2015 The companies have a single adviser each in their mega-merger: Lazard for the ketchup maker and Centerview for the mac-n-cheese king. The involvement of Warren Buffett and 3G helps, as does the absence of outside capital. But a lone consigliere per side suffices in most tie-ups.
Edward Hadas: Deutsche Bank’s long round trip 25 Mar 2015 The German bank spent two decades expanding massively into the capital markets business. Along the way, it lost touch with its original mission of serving German businesses and their owners, without finding a viable new one. The crisis has spurred a return to traditional values.
BayernLB’s rekindled growth drive may backfire 25 Mar 2015 Germany’s No. 2 Landesbank is still haunted by the past, as shown by a 1.2 bln euro impairment on loans to Austrian lender Heta. BayernLB also has yet to repay 2.3 bln euros of state aid. With much cleaning up still to do, plans for national growth look too ambitious.
Hermes shares look too glossy 25 Mar 2015 The French group weathered luxury market headwinds well in 2014 and will pay a 530 mln euro special dividend. Rivals Kering and LVMH were hit harder but are recovering. That makes the silk tie-maker’s luxury valuation of 32 times forward earnings more difficult to justify.
Accor CEO wins elbow room with investor selldown 25 Mar 2015 Backers Colony Capital and Eurazeo have sold 1.1 bln euros of shares in the French hotel group, halving their combined stake to 11.2 pct. That helps boss Sebastien Bazin, a former Colony employee, prove he is his own man – and makes Accor an easier sell to outside investors.
Kraft buyout may work with a slathering of ketchup 25 Mar 2015 Mac-n-cheese maker Kraft is reportedly in talks with the Brazilian group that took Heinz private with help from Warren Buffett. A Heinz-style takeout looks doable, but the equity required is daunting. A merger with Heinz might be the best way to make a deal stack up.
China brokerage IPO a triumph of wonky markets 25 Mar 2015 GF Securities is paying a high price for foreign currency and international prestige. It will sell $3.6 bln of new shares in Hong Kong around 50 percent cheaper than those already listed in China. Investors back home get diluted – except those connected enough to play both sides.
India in depth: Fear of Fed gives way to rate cuts 25 Mar 2015 A revolt by investors during the 2013 taper scare forced authorities to sacrifice output to preserve financial stability. But the risk of the U.S. Federal Reserve playing spoiler is retreating. The quest for growth is back. The economy can afford more monetary stimulus.
Amazon faces double whammy from shipping costs 24 Mar 2015 One of the internet retailer’s biggest weapons against rivals has been fast and cheap delivery. The associated losses have been a clever marketing expense, driving revenue growth. Increased competition and delivery costs are blunting this edge - and dimming Amazon’s prospects.
Banks may need bruises for living wills to impress 24 Mar 2015 HSBC, RBS and BNP failed to provide credible resolution plans again, regulators say. They join 11 big banks watchdogs demanded new failure schemes from last August. Stress test results improved when dividend cuts caused pain. Whacks may be needed here too for better results.
Google’s CFO search should have it feeling lucky 24 Mar 2015 There’s a dearth of executives with the financial, tech and government experience needed to help run a $400 bln company. Even fewer women fit the bill. Silicon Valley and Wall Street just can’t find enough Ruth Porats fast enough. The challenge is to create more like her.
Profumo leaves Monte Paschi with mixed record 24 Mar 2015 The veteran Italian banker will leave as chair of the Sienese lender after its next rights issue. Alessandro Profumo revamped MPS governance but the bank’s future remains up in the air. As with his previous role as UniCredit CEO, there have been hits and misses.
U.S. oil company drills to new depths – in markets 24 Mar 2015 Whiting Petroleum is raising up to $3.2 bln of new equity and bonds after failing to find a buyer. The deeply discounted share issue will slash debt added as part of the recent acquisition of rival Kodiak. The dilution stings, but getting ahead of the industry rush also is wise.
Forex reform is an uphill struggle 24 Mar 2015 Global supervisors are nobly trying to improve a market which has too often pitted traders against clients. Increased transparency and stricter discipline can help make the culture more professional, but it will be hard to stamp out profitable and entrenched bad behaviour.
QE froth leaves banks stuck with stocks and bonds 24 Mar 2015 Botched trades have left Credit Suisse, Deutsche Bank and others holding blocks of securities or forced to sell at deep discounts. With quantitative easing lifting prices to uncomfortable highs and sparking a glut of transactions, the risk of dealing for third parties has risen.
Good news: China’s bad debts are on the rise 24 Mar 2015 Agricultural Bank’s 28 percent increase in duff loans over six months looks modest next to what’s happening at some lenders. Across the board, write-offs and overdue loans are ballooning. Still, China’s economic slowdown may be giving cover for some welcome honesty.
Alibaba deal spree strains its financial strength 24 Mar 2015 The e-commerce giant barely explained its recent investments in an Israeli venture capital fund or U.S. chat app Snapchat. Similar purchases absorbed 75 pct of Alibaba’s operating cash flow in 2014. Though its core business is robust, returns on the new ventures are uncertain.
Elliott emits ray of pragmatism in Argentina feud 23 Mar 2015 The hedge fund and a U.S. judge say Citi can process two of the country’s bond payments, despite a court-ordered block. It’s a concession to cover the bank’s back, not a broader shift in holdout creditors’ intractable spat with Argentina. But it may qualify as progress.
Global water woes mix with trickle of good news 23 Mar 2015 The planet faces a 40 pct H2O deficit by 2030 as rising populations require more food and energy. Droughts in Sao Paulo and California may become harbingers of doom. But progress on everything from data to usage to business awareness to international agreements offers some hope.
Fannie, Freddie bailout fear revives reform debate 23 Mar 2015 A watchdog says the U.S. mortgage guarantors could lose $190 bln in a crisis. They lack capital cushions because Congress is stripping their cash. Changing that would require a policy rethink and could embolden undeserving equity holders. But the status quo is not sustainable.