Europe has as much to lose from Brexit as UK 2 Feb 2016 David Cameron looks set to secure limited concessions from the EU. That reflects the uneven hit to member states’ budget and trade - some countries might even gain from Brexit. But given what it might unleash politically, a sub-par deal is risky for Brussels as well as Britain.
Lesson from UBS: Who’d be an investment bank CEO? 2 Feb 2016 Andrea Orcel has made the Swiss bank’s broker-dealer arm the envy of rivals, but it could only squeeze out a 4.4 pct return in the fourth quarter. With deal volumes at rock bottom, the industry as a whole looks beset. Alternative careers may never have looked so appealing.
BP’s dividend may become unaffordable 2 Feb 2016 The UK-based oil major is slashing costs, cutting capex and selling assets. But it didn’t manage to make ends meet in 2015 amid tumbling oil prices. Debt is going up. BP can rely on more self-help, but absent a recovery in oil, big payouts to shareholders will be hard to justify.
Sainsbury’s Argos deal checks out 2 Feb 2016 The UK supermarket has bagged Argos owner Home Retail Group for 1.1 billion pounds, a price that leaves it ample room for error. Even if it does no more than cut back obvious overlap, the deal should create value. Both businesses were in a strategic pickle; Home Retail’s was worse.
New Alfa Laval boss can sweeten sour news 2 Feb 2016 The high-flying $7 bln Swedish engineer is being hit hard by collapsing orders in the marine as well as oil-and-gas sectors. Shares dropped 13 pct after a bleak outlook. Incoming boss Tom Erixon needs quick wins. As costs are under control, a share buyback could be his best bet.
Luxottica wears its dysfunctional governance well 2 Feb 2016 The revolving door at the Italian eyewear group hasn’t spooked the market as much as it should. The shares are up over 30 percent since Luxottica lost the first of three CEOs in 17 months. With steady growth and a rollout in emerging markets, it can afford the dramatics for now.
Wall Street loses Iowa election kickoff 2 Feb 2016 Ted Cruz beat Donald Trump while Hillary Clinton and Bernie Sanders were in a virtual tie in the first U.S. presidential balloting. The outcome partly reflects how bashing bankers resonates with voters. Goldman Sachs and its rivals can expect to keep hearing their names called.
Investment acronyms shift from optimism to angst 2 Feb 2016 BRICS has been buried. Just as well: it was a “Bloody Ridiculous Investment Concept”. Now VIIPs and TICKs vie to take its place. But searching for groups of vibrant economies jars with the gloomy mood. The most appropriate new acronym might be a set of worries labelled CFO.
Alphabet spells relief with R&D 1 Feb 2016 Google’s parent broke out the cost of chasing so-called moon shots like internet-by-balloon and driverless cars. Such investments lost $3.6 bln last year, but isolating them also revealed strong operating margins in ad-based businesses. Alphabet for now can have it both ways.
Express Scripts left vulnerable by contract spat 1 Feb 2016 Shares of the $48 bln drugs middleman were dealt a blow when heavyweight insurer Anthem went public with ambitions to get a better deal. Express will want a quick resolution before serial dealmaker Stefano Pessina at Walgreens Boots opportunistically lobs in a lowball bid.
Puerto Rico’s 46 pct haircut may grow, not reduce 1 Feb 2016 The broke U.S. territory is suggesting creditors write off nearly half some $49 bln of debt. There’s also an earnout if – big if – growth picks up enough. Puerto Rico would still be heavily indebted. Lenders will see it as an opening gambit, but they need to accept reality, too.
Online poker CEO gives shareholders an out 1 Feb 2016 The boss of Amaya, owner of PokerStars and other gambling sites, is offering to take the company private for up to C$4.4 bln. Though the shares have fallen by half over the past year, there’s a 40 pct premium in the woolly bid. It could pay to cash out now in case it’s a bluff.
Bank dark-pool cases deserve harsh light of trial 1 Feb 2016 Barclays and Credit Suisse will pay $150 mln to settle U.S. charges of duping clients in their trading venues. Ending costly probes makes sense, but it’s unlikely savvy investors didn’t know of high-frequency traders and other risks. A court test would clear up some mysteries.
European mobile mergers won’t kill competition 1 Feb 2016 The European Union is reviewing a UK merger between O2 and Three. Other deals are in the works. More concentration raises the spectre of higher bills for consumers. But past tie-ups suggest that’s not inevitable at all.
Alere board’s diligence brings 51 pct premium 1 Feb 2016 A $5.8 bln sale to $56 bln healthcare group Abbott caps a series of good decisions. Appointing a separate chairman, jettisoning Alere’s deal-hungry founder, rejecting his low-ball bid and focusing the business all helped. It shows what engaged investors and directors can achieve.
Brexit index: The “Out” risk is real 1 Feb 2016 Britons are warming to the idea of Britain leaving the European Union, says a new Breakingviews Brexit index. It crunches nine different metrics to show the “Out” camp is gaining ground. The inputs include asylum applications, consumer confidence – and Daily Mail front pages.
Oil slump seriously harms Saudi Arabia’s health 1 Feb 2016 Big cuts to healthcare spending show the many ways in which low prices are putting strain on the Kingdom’s economy. Treating Saudi’s population of diabetics would absorb 15 percent of oil export revenue at $20 a barrel. Private investors will be needed to fill the gap.
Dixon: How to rehabilitate capitalism 1 Feb 2016 The classic leftist response to capitalism’s unfairness - tax and spend - has failed. A better bet is to fight unfairness caused by corruption, vested interests and tax cheating, while investing in education. India and Italy show some of the right ideas.
Magic formula fuels Ryanair’s ascent 1 Feb 2016 The lure of cheap flights has proved a match for Europeans’ fear of terrorism. The Irish carrier lowered prices after attacks in Paris, attracted 20 pct more passengers in the latest quarter than a year earlier, and even expanded its margins. High-cost rivals can’t keep up.
Swiss 1MDB probe holds fat tail risks for Malaysia 1 Feb 2016 Switzerland’s attorney general has indicated $4 bln was misappropriated from state firms, undermining Prime Minister Najib Razak’s efforts to shrug off the mess involving the sovereign fund. Though he can manage the fallout at home, foreign investigations are a lingering threat.
China index: Xi’s annus horribilis 1 Feb 2016 Breakingviews’ Tea Leaf Index may have ended the year on a modest high, but a look back over 2015 shows China’s economy moving slowly. Sagging steel production, exports and rail freight contributed to the lowest 12-month average since President Xi Jinping first took office.