VW equity story is emissions-gate’s worst casualty 23 Sep 2015 The German carmaker should be able to absorb the cash cost of cheating in emissions tests. The bigger concern is that VW’s engineering halo is dented. Investors put up with massive R&D, hoping VW will convert it into stronger sales and profit. That logic now looks much weaker.
BBA’s $2 bln airfield deal faces bumpy takeoff 23 Sep 2015 The UK-listed aviation services outfit is buying one of its larger U.S. rivals. The operational logic is sound. But the price looks toppy. BBA Aviation will also be left with a heavy cargo of debt – despite funding half the purchase price via a rights issue.
Swiss Re deal sidesteps insurance bad-M&A trap 23 Sep 2015 The Swiss group is paying Cinven 1.6 billion stg for Guardian Financial, a closed-book consolidator. Recent mergers in the sector have tended towards the value-destructive. Speeding up the capital release from Guardian’s policies should mean Swiss Re avoids that bad habit.
Spain’s Catalan bank warning overstates the threat 23 Sep 2015 The Spanish central bank governor has warned of a bank deposit freeze if the region votes to break away. Yet Catalan banks could access ECB funding by redomiciling to Madrid. That would create political and practical headaches – but capital controls aren’t one of them.
IMAX listing showcases China box office boom 23 Sep 2015 The big-screen movie company is floating its Chinese unit at a valuation of up to $1.6 bln. The offering gives private equity backers an exit and helps lock in local partners. More importantly, it allows IMAX to show shareholders back home the value of mainland audiences.
Paying Redstone a premium could clear CBS discount 22 Sep 2015 If the 92-year-old mogul doesn’t live forever as planned, his empire will be controlled by a trust. Either way, ending the dual-class share structure could lift the value of CBS by 20 pct, according to a Breakingviews calculator. The price of doing so would be more than worth it.
Breakdown: Rare drugs and their even rarer finance 22 Sep 2015 Shire’s $30 bln offer for Baxalta is the latest in a string of deals for firms targeting uncommon diseases. Therapies costing over $400,000 a patient and regulatory incentives encourage fast growth and acquisitions. Price pushback on parasite and TB drugs showcases one big risk.
GM penalty is peanuts next to food case outcome 22 Sep 2015 The U.S. carmaker hid killer defects but was fined only $900 mln. A Georgia nut company’s owner was sentenced to 28 years in prison for covering up a salmonella outbreak that led to nine deaths. The differences in the cases aren’t enough to justify the punishment discrepancies.
VW needs more than just a new CEO 22 Sep 2015 Martin Winterkorn should go, having presided over an emissions-cheating scandal that wiped a third off the German carmaker’s market value in two days. But VW’s over-complex structure and poor corporate governance look like culprits too. It is time for some urgent retooling.
Volkswagen’s CDS as flawed as its emissions tests 22 Sep 2015 The German carmaker’s credit default swaps have performed much worse than equity. That could be because credit investors are worrywarts. But it also suggests CDS are an increasingly problematic indicator in the new era of tight regulation.
Goldman can weather Lloyd Blankfein’s diagnosis 22 Sep 2015 The Wall Street firm’s CEO has “highly curable” lymphoma. Like JPMorgan’s Jamie Dimon last year, he’s being open about his illness and he’ll keep working. Were that to change, though, Goldman is better placed than its larger rival to ensure a smooth succession from within.
Investors fail to hold BofA board’s feet to fire 22 Sep 2015 In the end, 63 pct of them voted to let Brian Moynihan remain as both CEO and chairman - even though directors gave him the latter title last year against the clear instructions of shareholders five years earlier. BofA’s owners have missed a chance to keep the board honest.
VW could pass auto peers in payout hall of shame 22 Sep 2015 The German carmaker lost $18.6 bln in value after admitting rigging U.S. emissions. Peers paid less for blunders causing fatal crashes. But the environmental twist in VW’s case makes things more uncertain. The best analogy might not be cars but oil: BP’s $54 bln Deepwater fiasco.
European bond auctions are crying out for change 22 Sep 2015 The reliance on a small group of approved dealers is supposed to smooth government debt sales. But lately it hasn’t been working brilliantly in Germany and the UK due to a regulatory squeeze. It’s time to give final investors more access, and shrink the middlemen’s role.
Deezer’s IPO strikes a discordant note 22 Sep 2015 The music streaming service is to list in Paris, possibly at a valuation of 1 bln euros. Deezer is profitable in France and has big music labels as shareholders. But it doesn’t make money in its 180 other markets, and mixed trends in subscriber numbers could turn off investors.
China dumping fortifies Thai steelmaker debt woes 22 Sep 2015 Dumping by China has pushed struggling Sahaviriya over the edge: Thailand’s biggest steelmaker is in talks to restructure $1.4 bln of debt. As rival Tata Steel has found, buyers for high-cost European producers are scarce. That suggests SSI’s creditors will have to take the pain.
Japan Post’s mega-IPO had better be priced to go 22 Sep 2015 The landmark privatisation is Japan’s biggest listing in decades. Floating the postal operator, plus stakes in its banking and insurance arms, could raise $11.5 bln. But growth is low and follow-on share sales loom. Successful delivery requires low valuations and high dividends.
Xi Jinping parades Silicon Valley’s tech hostages 21 Sep 2015 The Chinese president’s U.S. trip starts by meeting the heads of Apple, Cisco, Microsoft and others. Kowtowing to the leader might pry that huge market open wider – or at least keep it ajar. Implied in Xi’s visit is that hacking sanctions on China may carry collateral damage.
Chicago’s lack of crisis makes fiscal rehab harder 21 Sep 2015 Mayor Rahm Emanuel wants a big property tax hike to shore up underfunded pensions. It’s an important move to get the city out of a $40 bln hole. Perversely, without lenders freaking out, as happened to New York in the 1970s and Detroit more recently, the job is actually harder.
IPO adds unusual twist to Schaeffler family saga 21 Sep 2015 The closely held car-parts maker, which once sprang a surprise raid on rival Continental, is opening itself to outside shareholders. Schaeffler has strong growth and high margins. But the family, which recklessly loaded the group with debt, isn’t giving up an inch of control.
Croatia takes EU bank political risk to new level 21 Sep 2015 The EU’s newest member has voted to hit lenders with the cost of switching citizens’ Swiss franc-denominated loans to euros. That’s tougher than similar Hungarian and Polish conversions, and the legal and social grounds are weak. As the ECB has warned, foreign investors may flee.
Silicon Valley disruption reaches illogical limit 21 Sep 2015 The maker of Apple’s top-selling app, ad blocker Peace, yanked it because the software “doesn’t make him feel good.” Upending industries from taxis to newspapers is the point of developing new technology. It’s too late now to have a heart. Google and others will face the music.
American Dream wakes amid home rental deal signs 21 Sep 2015 The merger of Starwood Waypoint and Colony American to create a company with $8 bln of homes suggests U.S. rentals will keep thriving. Cost savings will add financial strength as youngsters take baby steps into the housing market. Ownership prospects are on the rise, too, though.
VW emissions scandal could be auto sector’s Libor 21 Sep 2015 U.S. authorities say Europe’s biggest carmaker rigged emissions tests. The questions it raises recall bank rate-fixing scandals: how widespread the bad behaviour was, whether bosses knew, and who else was at it. Without rogue traders to blame, this could be harder to defuse.
Zurich’s loss of RSA nerve dents its credibility 21 Sep 2015 The Swiss insurer has binned plans to buy its UK peer - and issued a profit warning. A deal at the mooted 5.6 bln stg level could have worked, given RSA’s potential. If Zurich doubted RSA’s ability to recover, it shouldn’t have sniffed around in the first place.
Tsipras’ next task: winning over doubting markets 21 Sep 2015 The left-leaning Syriza party fared well in Greek elections, giving Alexis Tsipras a stronger-than-expected mandate. Yet bond yields show that investors aren’t sure he will push ahead with Greece’s bailout and keep it in the euro zone. Market pessimism makes Tsipras’ job harder.
Dialog’s U.S. chip deal has macroprocessing risks 21 Sep 2015 The Frankfurt-listed seller of power-efficient microchips is buying Atmel for $4.6 bln. The deal would reduce Dialog’s reliance on Apple, might improve its network-connected chips, and should give decent cost savings. But it brings sizeable integration challenges.
Bayer $11 bln plastic IPO looks far from fantastic 21 Sep 2015 The German pharma giant is floating its Covestro division. The unit is cash-generative and well positioned for growth. But it is also a capital-hungry and cyclical business that has destroyed value for years. Bayer might need to be more flexible on the float price.
Hugo Dixon: It’s all up to Tsipras now 21 Sep 2015 The leftist politician’s electoral triumph means domestic forces can’t impede him in implementing Greece’s 86 billion euro bailout deal. The big question is whether Alexis Tsipras has the will and the competence to do so. If not, his victory could soon turn to disaster.
Offshore yuan is poster boy turned problem child 21 Sep 2015 The untamed version of the Chinese currency has gone from a beacon of convertibility to a magnet for capital outflows. Beijing has a bad choice: Choke yuan liquidity in Hong Kong to kill speculation and China’s global dreams may suffer; or stoke it and be forced to devalue again.