Star-crossed Zodiac deal works at half the price 15 Mar 2017 Engine maker Safran’s 8.2 billion euro offer for its plane-seat making compatriot looks a bit sick after Zodiac popped out a profit warning. It’s a chance for the buyer to renegotiate a poor deal. But the value at which it would make sense is far, far lower.
Engie can offer RWE a new spin on spinoff 14 Mar 2017 The French utility is reported to be interested in bidding for Innogy, which is majority owned by RWE. The latter wants to retain at least a 51 percent stake in the 19 bln euro business that it carved out in 2016. Yet a minority stake in enlarged Engie may be just as good.
EU bank repairs are a race against time 10 Mar 2017 Regulators are rushing to streamline how lenders assess the riskiness of assets. An end-2018 deadline is ambitious since the review spans 68 institutions. Global Basel IV rules may also be delayed. Slippage is a headache for banks facing big changes to how they account for loans.
Draghi is tugged towards tricky end of ECB easing 9 Mar 2017 The European Central Bank boss sees less need for more stimulus. It’s hard to say otherwise when inflation is on target and likely to stay near there. Yet Europe’s fragile economy makes ending asset purchases a treacherous task that he will want to postpone as long as possible.
Suez’s $3.4 bln GE deal just holds water 8 Mar 2017 The French company is paying a higher multiple for General Electric’s H2O unit than recent takeovers even though its target has lower margins. And promised revenue synergies look meager. Cost cuts and a global need for water infrastructure, though, should help this deal flow.
Markets’ latest distortion: riskless company debt 7 Mar 2017 Some 200 billion euros of corporate bonds are trading below interbank swap rates – usually seen as a floor for credit risk. That renders one measure of companies’ creditworthiness redundant. This distortion comes courtesy of central bank meddling and German parsimony.
Macron pitches novel way to imperil EU banks 6 Mar 2017 The French presidential favourite wants ministers, not regulators, to set capital rules for banks and insurers. Despite the ECB’s best efforts, oversight remains far from harmonised. Handing the reins to politicians would just add financial stability concerns to the mix.
Peugeot’s Opel deal shows shrewd engineering 6 Mar 2017 At a price of 1.8 bln euros, the French carmaker should get a good return from GM’s European business. The U.S. auto group lacked sufficient size to run Opel and Vauxhall efficiently. By taking PSA warrants, GM also gets insurance against appearing to have sold too cheaply.
Dimming Olympic flame casts long shadow on bloat 1 Mar 2017 Budapest saw the light and became the fourth city to drop its bid for the 2024 Summer Games, leaving only Los Angeles and Paris in the race. With the ranks of potential hosts getting exhausted, one good way to save the global athletic fest would be to cut events back to basics.
France’s Macron faces peril of becoming mainstream 1 Mar 2017 Former front-runner Francois Fillon is persisting with a presidential bid despite new legal woes. That should help Emmanuel Macron. But the centrist is rapidly losing the useful cachet of being an outsider in what’s becoming a straight contest with far-right leader Marine Le Pen.
What Christine Lagarde might say to Marine Le Pen 28 Feb 2017 The presidential candidate wants France to quit Europe’s single currency. The possibility that she might win is already spooking markets. Breakingviews imagines the advice Le Pen might get from her compatriot, International Monetary Fund head Christine Lagarde.
Pilot error poses biggest risk to Thales ascent 28 Feb 2017 A successful restructuring has left the French defence and aerospace group well positioned to benefit from any increase in governments’ defence spending. The biggest hazard is that growing financial strength may tempt boss Patrice Caine into value-destroying big-ticket M&A.
RSA flies the flag for insurance simplicity 23 Feb 2017 The UK group’s operating profit rose by a quarter in 2016, pushing its shares up 6 pct. The results vindicate CEO Stephen Hester’s small-is-beautiful strategy. Diversified giants like Axa and Allianz should benefit from scale. But performance - and valuations - suggest otherwise.
Modest goals show why Peugeot lusts for Opel 23 Feb 2017 After a stellar 2016, the French carmaker lifted its target for operating margins to 4.5 pct. That’s still well below the 6 pct it achieved last year, suggesting current earnings are unsustainable. It helps explain why boss Carlos Tavares is keen to snap up GM’s European brands.
Le Pen’s French referendum pledge is tall order 21 Feb 2017 The far-right politician’s promise to hold a plebiscite on EU membership and leave the euro is spooking investors. To call such a vote, however, she would have to find constitutional loopholes. That would be an even bigger challenge than winning France’s presidential race.
Air France takes off, but only for a short flight 16 Feb 2017 The French carrier's profitability improved faster than expected in 2016, while headcount and debt levels fell. Yet the airline's real progress is slower than headline numbers suggest. The recovery is largely thanks to cheap fuel, and that tailwind is likely to be temporary.
French corporate debt immunity to Le Pen will fade 15 Feb 2017 Even the slim possibility that far-right leader Marine Le Pen might lead France out of the euro zone has pushed up government bond yields. By contrast, corporate debt has suffered relatively little damage. Savvy investors will make this anomaly disappear soon.
Peugeot-Opel deal steals a march on Marchionne 15 Feb 2017 Fiat Chrysler's boss has for years advocated consolidation in the car industry. A tie-up between Peugeot and Opel may prove his point but hurt his company. Finding a European partner becomes harder and Sergio Marchionne's hand is weakened in any future talks with GM in America.
EU second-tier banks could get yield curve leg-up 15 Feb 2017 Credit Agricole and ABN Amro posted forecast-busting fourth-quarter earnings on loan growth. Expectations for higher rates could eventually boost pricing in their mainly fixed-rate mortgage books, too. But political uncertainty in the Netherlands and France merits buyer caution.
GM can afford to pay billions to offload Opel 14 Feb 2017 A sale to PSA could bring in cash or a 15-20 pct stake in a larger European carmaker. But in return the $56 bln GM may have to cover up to $10 bln of unfunded pension obligations. A boost to profit plus a higher valuation multiple might even justify handing over all of that.