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.
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.
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.
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.
Only beer goggles make AB InBev deal look right 8 Oct 2015 Cost savings in previous brewery mergers suggest the Budweiser maker is far from covering the 37 pct premium in its $100 bln offer for SABMiller, based on Breakingviews calculations. Sales growth and disposals might help. Sweetening the bid, however, is a tall order.
UK Tories still blind to housing crisis truth 7 Oct 2015 David Cameron promises 200,000 affordable “starter homes” by 2020. Even if the Conservative prime minister delivers, the supply squeeze is set to worsen, pushing house prices even higher. Like the previous Help to Buy ruse, a few people will gain, but the whole nation loses.
Bud almost has the SAB keg tapped 7 Oct 2015 AB InBev’s $99 bln cash offer for SABMiller is robust. The alternative stock package is unusual, but looks cleverly designed to meet the tax needs of Altria and BevCo, SAB’s 41 percent shareholders. It also eases post-deal debt pressures. MegaBeer is almost here.
SABMiller’s growth focus raises Budweiser stakes 6 Oct 2015 The South African-born brewer used the G-word six times in the first three sentences of an ostensibly ordinary Q2 trading statement. The intention looks clear. Seven days ahead of Anheuser’s deadline to launch a formal $100 bln-plus offer, SAB is saying: pay up or shut up.
BoE’s Carney sails between honesty and expediency 6 Oct 2015 Full disclosure from the UK central bank governor could shake investors’ view that rates won’t rise for at least another year. But this might be inconvenient for Mark Carney since it would result in an economy-harming stronger pound. Carney may try for a calibrated compromise.
UK takes needless risk with Lloyds retail sale 5 Oct 2015 Britain is to hawk 2 bln stg of its remaining 12 pct bank stake to retail investors at a discount. Shareholder democracy is all very well. But further institutional sales would have meant more value for all taxpayers. And if shares tank, an avoidable political storm will erupt.
Darty may squeeze more from French suitor 1 Oct 2015 The electricals retailer is mulling a merger with French rival Fnac. Darty would get 45 pct of the merged group, ease its strained balance sheet and enjoy some cost savings. Even though 14 pct shareholder Knight Vinke supports the plan, there’s room for improvement on price.
Sainsbury draws blood in UK grocer fightback 30 Sep 2015 Shares in the supermarket group popped as much as 14 percent as it said sales and pre-tax profit are beating expectations. Price cuts and cost savings seem to be kicking in. To make sustained progress on earnings, however, established grocers need to win back pricing power.
Wolseley follows Glencore into equity market funk 29 Sep 2015 Shares in the 10 bln stg UK-listed building products group sank 11 pct, just one day after the miner-cum-trader’s stock fell 30 pct. Each company has its challenges, but the stock moves look exaggerated. For both, the most serious threat looks to be skittish investors.
Glencore shares priced for commodity apocalypse 28 Sep 2015 The Swiss trader’s shares fell by a quarter after an analyst suggested its equity could be worthless. The fear rests on cataclysmic maths. But Glencore’s quirky model means its valuation is highly dependent on confidence in management – a resource that is much depleted.
Shell’s Arctic retreat better late than never 28 Sep 2015 The Anglo-Dutch major faces a write-off of up to $4.1 bln after ditching oil and gas exploration in Alaska. Environmentalists will be happy. But if the group wants to bed down BG and ride out low oil prices, investors should cheer the demise of costly and brand-dilutive forays.
Vodafone and Liberty may yet converge 28 Sep 2015 Talks between the two telcos over a potential swap of European assets have come to nothing. Regulatory headwinds may be an issue, but the sticking point seems to have been price rather than strategic rationale. That means a deal – eventually – can’t be ruled out.