Time for an FPC “Draghi moment” on UK house prices 1 May 2014 The ECB president famously eased the euro zone crisis with a pledge to do “whatever it takes.” The UK’s Financial Policy Committee has been too timid about making a similar commitment to restrain booming house prices. Its June meeting is the moment for Draghi-style boldness.
Barclays U.S. bankers are a Skip away from a jump 29 Apr 2014 The UK lender’s Wall Street chief has quit after finding regulatory box-ticking duller than dealmaking. Skip McGee’s exit will hurt morale, as the ex-Lehmanite was a foil to CEO Antony Jenkins’ aborted war on pay. The flipside is that Jenkins should now have more clout Stateside.
There’s something unhealthy about robust UK 29 Apr 2014 The first quarter’s 0.8 pct GDP gain looks nice, but is buoyed by foreign cash flowing into hot London property. New calculations will boost output and increase the savings rate, but the statistical shift won’t change one sobering fact: GDP is still not back to the 2008 level.
Pfizer tax arbitrage will hasten more deals 29 Apr 2014 The biggest charm of the U.S. drug giant’s $99 bln offer for the UK’s AstraZeneca lies in switching to a lower-tax domicile. The latest and largest such deal raises the odds Congress will tighten rules. Until then, Pfizer’s validation of the tactic will encourage copycats.
Uncle Sam’s Putin sting also threatens investors 28 Apr 2014 Sanctions can cut both ways. The U.S. is targeting Rosneft boss Igor Sechin. Will Russia retaliate against BP, which owns 20 pct of the oil giant? Probably not, thanks to the British company’s approach. But all foreign business partners are subject to Putin’s wrath.
Pfizer needs to do more to win AstraZeneca 28 Apr 2014 The U.S. pharma group is pressuring Astra to engage by revealing fleeting past discussions about a $99 bln cash-and-stock approach. Pfizer will want to see this through. To extract more value, Astra CEO Pascal Soriot can rubbish Pfizer’s bid currency and talk up other deals.
BG’s CEO exit highlights bid vulnerability 28 Apr 2014 Chris Finlayson is leaving the UK gas group abruptly after another profit warning. BG says it is a question of leadership, not strategy. Chairman Andrew Gould looks like a safe caretaker. But until a new CEO is in place, BG’s takeover defences are weak.
RBS strategy derailed by UK politics – again 25 Apr 2014 George Osborne has blocked the 80 pct state-held bank from awarding bonuses worth twice the recipients’ base pay. That goes against what other investors want, and the chancellor’s own hostility to the EU law on bonus caps. But the need to be seen as strict on pay takes priority.
AstraZeneca can avoid self-medicating with M&A 24 Apr 2014 Reported interest from Pfizer puts pressure on Astra CEO Pascal Soriot. He could bulk up by buying a rival like Actelion or Shire. Or he could find a merger partner. But as Q1 results show, Astra is refilling its pipeline and investors recognise this. Plan A is working.
London gives BoE an emerging economy problem 23 Apr 2014 Foreign capital inflows are supporting a housing bubble in London, and have helped push up sterling - even though the UK’s trade position is almost dire. An unbalanced economy is getting worse. As pre-crisis emerging markets learned, this is a problem with no easy solution.
Primark sweet spot sugars ABF’s conglomerate pill 23 Apr 2014 Shares in UK-based Associated British Foods leapt 8 percent as its Primark discount retailer outlined bold U.S. expansion plans. ABF’s sugar processing unit also seems to be coping with a changing regulatory regime. The shape of the whole business is odd, but seems to work.
ARM offers a non-alarming mini-disappointment 23 Apr 2014 Shares in the $23 bln UK microchip designer fell 4 pct after royalty revenue for using its blueprints barely grew. But licences are strong, smartphone demand growth could return soon, and the “internet of things” is promising. The company’s high-margin model is still holding up.
GSK and Novartis treat each other’s problems 22 Apr 2014 The pharma giants are swapping assets worth up to $23 bln and merging others to focus on their respective strengths. Investors are cheering synergies, capital discipline and strategic focus. It’s a way to transform both businesses while avoiding the perils of a mega-merger.
Manchester United’s crisis has silver lining 22 Apr 2014 The English soccer club fired David Moyes, hapless successor to star manager Alex Ferguson, after one awful season. But the drama has an upside. Turmoil at the top of the game sustains fan and sponsor interest. As one of football’s biggest brands, United should benefit.
Pfizer stock poses best argument against mega-deal 21 Apr 2014 Sure, buying $84 bln AstraZeneca would yield tons of savings, and put cash trapped overseas to work. But big pharma deals often create more harm than good. Pfizer’s deal binge last decade led to poor investment returns. Subsequent slimming down has caused it to nearly double.
Market sees UK economy through rose-tinted glasses 17 Apr 2014 Sterling and gilt yields have risen as traders put the best possible gloss on recent economic snapshots and bet on an early 2015 rate rise. Market optimism could well persist, pushing the pound even higher. But there are good reasons for the Bank of England to be less sanguine.
Time for Barclays to speed up chairman succession 17 Apr 2014 David Walker always envisaged he would step down in August 2015. The current lack of clarity over who will be running the board wouldn’t matter if things were going well. But with Barclays at a strategic crossroads, it needs solid and sustained leadership as soon as possible.
Securitisation reboot is harder than it sounds 17 Apr 2014 Central bankers, from the ECB’s Mario Draghi to the Bank of England’s Andy Haldane, want to revive securitisation - a change from regulators trying to kill it. That is a worthy goal when banks are shrinking, but it is tricky to achieve. And there is still a way to go.
Tesco promises much but delivery is doubtful 16 Apr 2014 Phil Clarke, CEO of Britain’s largest grocer, touts a “big and bold plan.” He needs one, given poor trading and intensifying competition. But his proposals are vague, and he’s been too timid before. Tesco’s beaten-up shares bounced. But investors should stay sceptical.
Diageo throws money at Indian empire-building 15 Apr 2014 The UK distiller is again trying to tighten its grip on India’s United Spirits. It’s offering $1.9 bln to nearly double its stake to 54.8 pct. A sky-high multiple of 38 times EBITDA gives this offer better odds than the last. And there’s industrial logic to offset the huge price.