Glencore getting smaller but maybe not wiser 13 Oct 2015 The embattled commodities trader is hacking back production in a bid to reduce its debts. The latest cut could be a fifth of its copper production. Companies with strong, single-minded leaders often choose to shrink rather than change after crisis hits. That leaves them at the mercy of markets.
Worldpay IPO justifies owners’ sale snub 13 Oct 2015 The UK payments processor has listed with an enterprise value of 6.3 bln stg. That values it at just below the sector average – about right given modest growth – and close to what bidder Ingenico had offered. Worldpay’s private equity backers were right to float rather than flip.
Sergio Marchionne revs pre-IPO Ferrari to the max 12 Oct 2015 The Fiat Chrysler boss has cranked up margins at the sports car firm, which he chairs. That could help justify a near $10 bln market cap and a bumper multiple. The need to keep the investment tank full and get the top line growing, though, may mean margins and the valuation fade.
AB InBev makes an offer SABMiller shouldn’t refuse 12 Oct 2015 Budweiser’s parent has made a fourth proposal for the UK-listed brewer at some $103 bln. The cash-and-shares bid is 42 pct above SAB’s stock price before the latest approaches were made, and comes at nearly 15 times last year’s EBITDA. It is just about time to say “I do.”
Deaton’s taste for reality brings economics Nobel 12 Oct 2015 Academic economists often rely on complex and unrealistic models. Angus Deaton is a master of equations, but the Princeton professor focused on people’s actual behaviour. His concern for the world’s poorest sets an excellent example for a sometimes hard-hearted profession.
EU needs better capitalised banks, not bigger ones 12 Oct 2015 SocGen and Barclays warn big European broker-dealers are being outmuscled by U.S. rivals. That’s true, but American superiority is partly due to better capital positions. Sorting this out, even at the expense of short-term competitiveness, makes more sense than easing regulation.
Hugo Dixon: European populism can be tamed 12 Oct 2015 Demagogic movements of the left and right have gained traction in most European Union countries in recent years. A mixture of competence, fairness and leadership can combat them. There are signs that the fightback is succeeding.
Credit Suisse wins first-to-the-trough equity edge 12 Oct 2015 The Swiss lender is readying a share sale as part of a strategic review. Adding 5 bln Swiss francs would suffice, but raising more means firepower for acquisitions and regulatory caprice. Boss Tidjane Thiam stands to gain from beating Deutsche Bank and StanChart to the punch.
German nuclear relief masks deeper power shortage 12 Oct 2015 Shares of E.ON and RWE jumped more than 10 pct as regulators approved the sector’s 38 bln euro nuclear provisioning. But overall prospects remain dismal. Rules favouring green energy production dent wholesale prices. Exposure to carbon-rich lignite is an Achilles’ heel.
Aggressive AB InBev risks joining sorry M&A club 9 Oct 2015 The Bud brewer is as close to a hostile bid for SABMiller as possible without formally going directly to shareholders. About half of big, unsolicited, cross-border deals eventually close. The results, however, are often disastrous, as Vodafone, RBS, Mittal and others can attest.
The Devil’s Dictionary of Post-Crisis Finance 9 Oct 2015 Ambrose Bierce wrote “The Devil’s Dictionary” a century ago, ranging acerbically across government, commerce and life. Breakingviews’ original re-use of the form for finance – in 2007, when the crisis was barely beginning – is no longer adequate. Herewith part one of the sequel.
StanChart takes bet on management incompetence 9 Oct 2015 The UK-listed emerging markets lender is to cut a quarter of its 4,000 top people, Reuters reports. Something is definitely needed to improve StanChart’s capital and returns. But this plan will only work if 1,000 high earners aren’t paying their way.
SABMiller’s Budweiser fightback lacks punch 9 Oct 2015 The Peroni brewer’s promise to find $550 mln of new cost savings by 2020 is paltry in the context of the $100 bln approach from AB InBev. SAB might have more powerful defences in its locker. It had better, if it wants to stay independent from the Budweiser brewer.
Prognosis is bleak for Shire’s troubled Baxalta bid 9 Oct 2015 The rout in pharma stocks has made the Irish group’s all-share offer less attractive for its recently spun-off U.S. rival. Shire would have to add much more stock to offer Baxalta the $30 bln it initially touted. It should delay – even if it then misses its chance altogether.
Madrid could go from star pupil to class dunce 9 Oct 2015 Spain is likely to miss its EU-agreed budget deficit targets this year and the next. Arguably, the bar was set too high and economic growth is quite promising. Even so, Spain can do more to put its finances on a more sustainable path.
Volkswagen just spins its wheels before Congress 8 Oct 2015 U.S. CEO Michael Horn offered lawmakers a few new tidbits about the carmaker’s emissions scandal and response. He lacked answers to basic questions, though, and the politicians failed to ask tougher ones. Getting to the bottom of the mess requires both sides to kick it up a gear.
SABMiller’s best defence: debt and deliverability 8 Oct 2015 The Peroni brewer has leverage in the face of AB InBev’s aggressive $100 bln bid approach. It could gear itself up instead of letting the suitor take the spoils. It is also hard to see how the bidder could deliver value from SAB’s various partnerships without the board on side.
Deutsche writedown shows evil of ancient goodwill 8 Oct 2015 The German bank has belatedly recognised that it paid 5.8 bln euros too much for acquisitions dating back to 1999. It’s a little nutty, but to be expected. The real problem is the economically bizarre technique of accounting for premiums paid in acquisitions.
Bruised investors try out double-whammy insurance 8 Oct 2015 Equities and bonds are supposed to move in different directions. But recently both fell, even though slowing global growth should be good for bonds. Such unusual times are leading asset managers to demand unusual insurance policies that were once the preserve of hedge funds.
Regulators give Deutsche rebirth a helpful shove 8 Oct 2015 The German lender’s 6.4 bln euros of writedowns were prompted partly by supervisors demanding more capital. Co-chief John Cryan wants to slice or scrap the dividend to keep the balance sheet perky. With rule changes coming, it’s the only way Deutsche Bank can avoid a cash call.