German co-op bank M&A shows Landesbanken the way 20 Nov 2015 The merger of cooperative banks DZ and WGZ is a lesson for Germany’s state-owned lenders. The deal generates 100 mln euros of annual cost benefits. Ropey Landesbanken are bogged down by regional vanities but cannot afford to leave that money on the table by dodging mergers.
Japan’s investor revolution is delayed, not dead 20 Nov 2015 Shareholders are souring on the hope that Japan Inc. can become better-run and more profitable. That’s too gloomy. Last year’s returns on equity were humdrum and there have been big disappointments. But real change is underway and the pressure for more is huge.
Bombardier subsidies offer crucial but costly lift 19 Nov 2015 The Canadian aerospace firm’s rail unit agreed to a $1.5 bln infusion from Quebec, days after the province struck a deal to invest in its wobbly jet project. Public cash buys time but comes with pricey terms and governance risks. Potential mergers may be harder to pull off, too.
Pfizer’s $150 bln plan is high-risk, low-benefit 19 Nov 2015 Buying Allergan would give the drug giant a low-tax domicile in Ireland and one good drug, Botox. At the reported price, Allergan would accrue nearly all of the obvious upside. Pfizer would be left with a possible integration hangover – and tax savings that might disappear.
UK shuts stable door after HBOS horse has bolted 19 Nov 2015 Regulators are to look at whether those responsible for the bust lender’s demise should face censure. Judging by another report into why HBOS failed, the answer may well be yes. But the meaningful penalties remaining – pension clawbacks or big fines – look legally tricky.
Starboard’s Yahoo flip-flop misses the point 19 Nov 2015 The pushy investor now wants the $31 bln tech company to offload its main business instead of its Alibaba holding. A switcheroo won’t erase a discount and residual tax liability on the stake. However it’s engineered, the real problems for Yahoo boss Marissa Mayer will remain.
Investors get too comfy over US-euro divergence 19 Nov 2015 Twin the prospect of higher U.S. policy rates with the chance of more euro zone easing and the result is eye-catching divergences in currency and interest rate markets. The problem is, such price trends are vulnerable to setbacks even if rate-setters do what’s expected of them.
Royal Mail is delivering in traditional style 19 Nov 2015 Shares in the UK postal service rose 6 pct on Nov. 19. Half-year revenue was flat but Royal Mail is squeezing costs. Hats off to CEO Moya Greene. Through old-fashioned hard work, the business is looking more and more sustainable. Still, the headwinds are unrelenting.
VW’s dieselgate may be Lonmin cash call decider 19 Nov 2015 The South African platinum miner wants to raise $407 mln to fund restructuring. The 46-for-one rights issue means investors that fail to subscribe will be diluted almost out of sight. Much of the investment decision rests on demand for catalytic converters as VW cleans itself up.
Public investors lasso Square to tame the unicorns 19 Nov 2015 Jack Dorsey’s payments firm has priced below its indicated range and at less than half the value of its last funding round. A two-timing CEO, rising competition and losses provided ammunition for old-school mutual fund managers demanding big discounts to lofty private valuations.
Coal India offers cheap and dirty play on reform 19 Nov 2015 A sale of another 10 pct of the lumbering state monopoly could raise $3 bln. It’s an appealing bet on Prime Minister Modi’s reform drive, since shaking up the power sector should lift coal demand. At current prices, a decent valuation and a fat dividend would help too.
Willis could kill merger-of-equals conceit 18 Nov 2015 The UK-based insurance broker’s $18 bln union with U.S. consultancy Towers Watson is on the rocks. Investors have turned some $5 bln of promised synergy value into $1 bln of value destruction. A rescue would probably unbalance the economics, undermining the promised equality.
ConAgra carve-up gives activists just a slice 18 Nov 2015 The $17 bln food giant is separating frozen fries from Chef Boyardee and Slim Jim. It’s the second big move for fast-acting boss Sean Connolly who joined in April and was followed into ConAgra by pushy investor Jana. Spinning rather than selling, however, demands more patience.
Wells Fargo shows rivals how CEO succession’s done 18 Nov 2015 JPMorgan boss Jamie Dimon has pushed out or lost possible heirs. BofA and Citi have created chaos at the top. But the most valuable U.S. bank has positioned Tim Sloan to replace John Stumpf while also grooming other long-serving executives to step in. It’s a lesson in leadership.
Chancellor: The illusion of debt-fuelled earnings 18 Nov 2015 Low borrowing costs enabled acquisitive drugmaker Valeant to ratchet up EPS with leverage. Earlier episodes of financial engineering - like Japan’s zaitech and the 1960s conglomerate boom - came unstuck after rates rose and stocks fell. It won’t be any different this time.
Rail deal needs more than $28 bln to stay on track 18 Nov 2015 Canadian Pacific justifies its hostile bid for Norfolk Southern by touting cost savings worth over $12 billion. But CP shareholders will keep $5 billion of that amount for themselves. Given antitrust risks, a higher offer will be necessary to bring this merger into the station.
Air Liquide’s bid for Airgas leaves value vacuum 18 Nov 2015 The French gas company’s $13.4 billion acquisition melds two complementary businesses – the larger Air Liquide supplies mainly big customers; its U.S. rival serves smaller outfits. Yet unless the buyer can superheat the synergies, the deal will leave its shareholders worse off.
UK fund fee crackdown a welcome detour from TBTF 18 Nov 2015 Asset managers this year managed to avoid too-big-to-fail status. The FCA’s focus on whether they deliver a good service is a worthier target. As savers take more investment decisions themselves and banks expand in a capital-light sector, duff performance is a bigger problem.
Bankruptcy overhaul could tame India’s tycoons 18 Nov 2015 A proposed insolvency code aims to tackle troubled firms swiftly, stop large shareholders from stripping assets, and limit the role of the stagnant courts. While India will need to build institutions to implement the overhaul, the days of moguls trampling creditors are numbered.
Record fine is least of Toshiba’s problems 18 Nov 2015 The scandal-hit Japanese group faces a record regulatory fine, a newspaper says. A $60 mln levy would be embarrassing but easy to bear. That leaves Toshiba free to face its real challenges: regaining investor confidence and restructuring laggard businesses as fast as possible.
Airgas schools market on long-term greedy 17 Nov 2015 Shareholders will receive $10.3 bln in cash selling to Air Liquide. That’s a 51 pct premium, which also means Airgas has outperformed rivals and the S&P 500 since early 2010 despite being the target of an unsuccessful hostile bid. Successive CEOs played their hand well.
Wall Street gets early warning from Veritas LBO 17 Nov 2015 Banks are on the hook for $5.6 bln of debt after pulling the refinancing for Carlyle’s buyout of the data-storage unit. It may be a blip, but raises fears of a high-yield market stall. It’s also a reminder of the risk lenders take helping pile leverage on low-rated companies.
Hyatt’s M&A fail is small win for good governance 17 Nov 2015 The U.S. hotelier lost to Marriott in the $12 bln takeover of Starwood. One factor was the Pritzker family’s tight grip on Hyatt. It conceded the flaw by offering to alter its super-voting share scheme in the bid. The rejection provides a warning to other feudal companies.
Media General ups M&A game with Goldman on side 17 Nov 2015 The U.S. local TV broadcaster rejected Nexstar’s $4 bln bid but said it would negotiate. That’s an improvement on sticking blindly to its own deal to buy Meredith, which looks worse for shareholders and strategically odd. New advisers may be helping – and Nexstar could pay more.
VW victims eclipsed by firms that bet on lawsuits 17 Nov 2015 A firm backed by hedge fund Elliott is bankrolling a case claiming the carmaker duped shareholders. There are other customer and investor actions, too. The financial muscle makes huge awards more likely. But the real losers may take a back seat if court fights are just business.
Dialog shareholders should short-circuit Atmel bid 17 Nov 2015 The Anglo-German chipmaker’s $4 billion-plus bid for its U.S. peer has been opposed by activist Elliott Management. Both sides have put forward doubtful theories to make their case. But Elliott is right on one thing: the integration risks look too big.
Cox: Quarterly reporting to get a major rethink 17 Nov 2015 From BlackRock’s Larry Fink to presidential contender Hillary Clinton, “quarterly capitalism” has become a four-letter word. Big publicly traded asset managers could change habits by abandoning their own three-monthly results. Watch for that in the coming year.
France can afford budget-busting security spend 17 Nov 2015 Prime Minister Manuel Valls says the deficit is bound to miss EU targets as security spending rises after the Paris attacks. Brussels is unlikely to kick up a fuss over this exceptional overspending. Nor will investors, who are used to serial French fiscal slippage.
EasyJet’s brio bodes ill for Lufthansa, Air France 17 Nov 2015 On the back of an 18 pct jump in pre-tax profit in 2015, the UK budget carrier is ordering more planes to step up growth and expand into new routes. The confidence is merited. High-cost legacy carriers are too bogged down by labour unrest to fight more nimble low-cost rivals.
Glencore can’t delay with $2 bln agri-sale 17 Nov 2015 The debt-laden commodities trader is slimming down in agriculture. But two months into the disposal process, one potential buyer says he thinks the business is “not really on the market”. With copper prices hitting a fresh six-year low, Glencore can’t afford to drag its feet.