Commerz probe to test Merkel’s financial diplomacy 8 Jul 2014 The German bank is the next target of American prosecutors’ scrutiny on dealings with blacklisted countries, after BNP Paribas. Commerzbank is partially state-owned. Potential mega-fines could stretch U.S.-German relations already strained by spying scandals.
Doubling down on First Data may be KKR’s best bet 7 Jul 2014 The extra cash just injected into the payment processor means the $29 bln buyout has now absorbed a whopping $10 bln of equity. KKR seems, however, to have avoided the sunk cost fallacy of throwing good money after bad. A Breakingviews analysis suggests a return finally beckons.
Supercharged IPO tax spoils need splitting 7 Jul 2014 KKR and Silver Lake are listing web hosting outfit GoDaddy. The use of what’s called an “Up-C” structure means the company will float with big tax deductions. IPO investors and existing owners will both benefit, but other IPOs with Up-Cs have seen more dubious arrangements.
Half-decade of $100 oil more blessing than curse 7 Jul 2014 The five-year average crude price is in triple digits for the first time. Global growth has been sluggish but not disastrous. The period also brought better efficiency, the fracking boom, cheap solar, and new products like Tesla’s. It’s a score for innovation against pessimism.
ADM goes M&A wild – sort of 7 Jul 2014 The $30 bln U.S. food giant is buying Swiss natural ingredient maker Wild Flavors for $3 bln. It’s ADM’s biggest deal, and a shift from its commodity business. A small add-on with like customers makes sense but won’t change how investors see the firm. The question is, what next?
Capacity doubt hangs over booming longevity market 7 Jul 2014 The pension scheme of UK telco BT has offloaded 16 bln stg of longevity risk in the largest deal of its kind. Demand is fed by reinsurers. Yet reinsurance capacity will only go so far. Conventional capital markets may have to play a bigger role.
U.S. inflation poses threat to 2007-style market calm 4 Jul 2014 An index of financial stress has dropped below the pre-crisis level, when blind panic quickly replaced foolish calm. Central banks are now smothering market volatility. If the recent rise in U.S. inflation is more than a blip, history could easily repeat.
Review: An American-Chinese morality tale 4 Jul 2014 Stephen Roach presents the relations between the world’s two largest economies as a dangerous codependency. The former Morgan Stanley economist’s national parallels are not always persuasive. But his criticism of America’s irresponsible policymaking rings true.
Robust U.S. jobs growth is more than a Q2 rebound 3 Jul 2014 Hiring dipped in the winter but roared back in April to June, averaging 272,000 new jobs monthly. That confirms a bounce after the weak Q1. Six and 12-month average job creation are at their highest in this recovery. With other data also positive, growth is finally building.
Volkswagen can’t afford another truck stop yet 3 Jul 2014 It wants to buy U.S. rival Paccar next year, reckons Daimler exec Wolfgang Bernhard. VW says this is “complete rubbish”. Good. It’s already pursuing a complex European truck merger. Paying $30 bln or so to add a transatlantic partner would be crazily ambitious even for VW.
Quickie stock sales toy with Volcker Rule spirit 2 Jul 2014 Wall Street has used block trades to move $23 bln of equity for public companies this year, almost as much as IPOs have raised. They’re a handy tool and easy way for banks to gain league-table credit. But at times the line blurs between capital-raising and banned prop trading.
China energy patent boom makes output look a bust 2 Jul 2014 The Middle Kingdom topped the world in filings for oil and gas inventions last year, but that hasn’t translated into surging production. Many of the applications cover dodgy ideas fueled by government incentives. It will take more than paperwork to speed the flow of crude.
Roche gifts biotech founder a double-dip fillip 2 Jul 2014 It’s snapping up Seragon for at least $725 mln. CEO Richard Heyman only set up the one-drug biotech firm a year ago, spinning it out before getting $650 mln from J&J for its parent company. With pharma giants desperate for new product, such deal-making is likely to be replicated.
Babywear bid target must prove it can stand alone 2 Jul 2014 Mothercare rebuffed a $453 mln approach from U.S. suitor Destination Maternity. There are understandable concerns about financing and strategy. But the ailing UK firm must show how it can develop healthily alone. Otherwise investors will throw their toys out of the pram.
Edward Hadas: The stupidity of student debt 2 Jul 2014 Education loans keep growing in the U.S. and the UK. The new reliance on debt is financially dangerous and shows weak economic thinking. The sensible way to fund the social good of higher education is pay-as-you-go: with affordable tuition, donations and government money.
No moral high ground in banks’ fight with U.S. law 2 Jul 2014 It’s reasonable to question America’s ability to use the dollar’s global status to impose its foreign policy on a recalcitrant world – and then go after lawbreakers like BNP Paribas. But the financial industry, whether offshore or on, isn’t credible enough to make the case.
Jamie Dimon’s illness puts succession center stage 2 Jul 2014 The JPMorgan CEO has throat cancer – curable, he says, but serious nonetheless. Being so open with shareholders is to be applauded. The board must now ensure the U.S. financial behemoth is ready for whenever Dimon leaves, a task it has fallen short on in the past.
Twitter takes Wall Street brain drain to new level 1 Jul 2014 The microblogging site enticed former Goldmanite Anthony Noto to become its CFO with a $60 mln-plus signon bonus. That easily prices banks out of the battle for talent. It also poses a threat to private equity and hedge funds – where Noto was heading before Twitter chirped up.
Tax-arbitrage M&A requires a deep discount 1 Jul 2014 U.S. companies seeking to relocate by mergers were a big part of the $1.8 trln first-half deal boom. The benefits of such ill-conceived combinations will be fleeting. Tax reform is already being discussed. And the more inversions there are, the more likely the law is to change.
U.S. cooks up penalties with anti-foreign flavor 1 Jul 2014 New research shows that overseas firms like BNP Paribas do in fact pay bigger fines and plead guilty more often than U.S. companies. One reason may be that prosecutors target only the most serious cases abroad. But the gaps feed suspicions that America is playing favorites.