cityam 2012-04-24
TRANSCRIPT
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BUSINESS WITH PERSONALITY
POLITICAL upheaval and gloomyeconomic data knocked markets inEurope yesterday, as investors growincreasingly concerned with theoutlook for the continent.A business survey for the
Eurozone showed an even fasterpace of recession than expected,dampening early sentiment. Themood was worsened by news ofDutch Prime Minister Mark Ruttetendering his resignation, after thecoalition government collapsedover austerity talks.The expected success of socialist
Francois Hollande in Frances pres-idential election had alreadyensured a dismal start to the week.The spread between French and
German bonds widened to 147basis points, while credit defaultswaps climbed in Holland.The pan-European FTSEurofirst
300 lost 2.3 per cent, falling to alevel not seen since mid-January.The bearish mood also affected
commodities, with Brent crudedown 0.56 per cent and copper los-ing 1.97 per cent. Gold prices easedto $1630.89 an ounce, extending
the more than two per cent lossesit has posted so far this month.
A SURGE in dealmakingoffered some much-neededcheer to the City yesterdayas blue-chip firms brushedoff fears over politicaluncertainty and the sover-eign debt crisis.
Mobile phone giantVodafone moved closer to seal-ing a hotly anticipated 1bn buy-out of Cable & Wireless Worldwide ona day when corporates in baby food,pharmaceuticals, healthcare and avi-ation also ate into their cash piles.Vodafone said it would become
Britains second-largest telecoms firmafter agreeing to buy strugglingCWW for 1.04bn in cash. Its 38p-per-share offer was supported by theboard of CWW but faces oppositionfrom fund manager Orbis, its largestshareholder with a 19 per cent stake,which said the bid was too low.
The largest deal of the day camefrom Nestl, which triumphed in thebattle for Pfizers baby food businesswith an $11.85bn (7.35bn) offer. TheSwiss food group beat competitionfrom French rival Danone to takePfizer Nutrition, providing it securesregulatory approval.
Meanwhile AstraZeneca, Britainssecond-largest drug-maker, agreed to
buy US firm Ardea Biosciences for$1.26bn, giving it access to a newdrug to treat gout. The $32 per shareacquisition at a 54 per cent premi-
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KEN AND BORIS NECK AND NECK AS MAYORAL RACE HOTS UP
FTSE 100 5,665.57. -106.58 DOW 12,926.86 -102.40 NASDAQ2,970.45 -30.00 /$ 1.61 unc / 1.23 +0.01 /$ 1.32 unc
MERGER MONDAYISSUE 1,618 TUESDAY 24 APRIL 2012
DONT TAX HERITAGE:LOYD GROSSMAN INTHE FORUM
See Page 21See Page 6
EUROZONE WOES: Pages 4-5
Certified Distribution
27.02.2012 till 01.04.2012 is 99,462
Strife in theEurozonehits markets
BY JULIAN HARRIS
Corporates spendcash piles despitethe global gloom
BY PETER EDWARDS
um to Ardeas closing price onFriday is worth $1bn after deduct-ing cash held by Ardea and is the lat-est in a wave of pharma buyouts.And global media giant Thomson
Reuters said it would sell its health-care arm to private equity firmVeritas Capital for $1.25bn in cash.The business provides data and ana-
lytics to hospitals, government agen-cies and healthcare workers to helpincrease efficiency.
It came as the sale of Edinburgh
Airport was finally agreed withCity Airport owner GlobalInfrastructure Partners for 807m.BAA had been forced to sell eitherEdinburgh or Glasgow airportbecause of Competition Commissionconcerns but the price still surpassedanalysts initial estimate of 500m.The sales provided a boost to M&A
activity in Europe, where 167 dealshave so far reached a value of22.8bn (18.59bn) this month, com-pared to 38.27bn from 340 deals in
March, according toMergermarket.
A series of other high-profile dealsare on the horizon as private equityfirms look to cash in. Yesterday FirstReserve, the majority shareholder inActeon, kicked-off the 1bn sale ofthe oil services firm after appointingJP Morgan as an adviser, while Lion
Capital is in talks to sell Weetabix toa Chinese government-owned foodfirm for 1bn.
807
BAAagreestosellEdinburgh
AirporttoGIPfor
$11.85
NestltobuyPfizer'sbabyfoodbusiness for
billion
million
$1.26
AstraZenecatobuyArdea
Biosciencesfor
billion
1.04
VodafonenearsdealforCable&
WirelessWorldwidefor
billion $1.25
ThomsonReuterstosellhealthcareunittoVeritasfor
billion
MORE: Page 8-9 & 13
TOO CLOSE TO CALL
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Follow me on Twitter: @allisterheath
IN BRIEFHermes flies in face of Deutschen Activist UK fund manager Hermes
has urged Deutsche Banksshareholders not to approve thesupervisory boards performance atnext months meeting. A source closeto the issue told City A.M. that HermesEquity Ownership Services, theinvestment advisory division of themulti-boutique asset manager, hasfiled a counter proposal against themotion of approval. The Hermes-represented group, which accounts for0.5 per cent of Deutsche Banksshares, is concerned aboutremuneration policies at the bank andthe manner in which the change ofleadership process was managed. Theannual shareholder meeting isscheduled for 31 May.
S&P lowers Argentina outlookn Ratings agency Standard & Poors
lowered its outlook for Argentinassovereign debt rating last night inresponse to the countrysrenationalisation plans. S&P said theSouth American nations abruptseizure of oil group YPF underscoresthe weakening system of checks andbalances in its government. Theagency now has a negative outlook onArgentinas highly speculative Brating, meaning it has a one in threechance of a downgrade in the nexttwo years. Spanish oil major Respol,which owns 51 per cent of YPF, hadearlier threatened legal action againstcompanies that invest in YPF. TheSpanish government has alsopromised economic sanctions inresponse to Argentinas plans.
Profligate states accusedof hijacking credit systemTHE GOVERNMENT was accused ofhijacking the credit system to fundits own profligacy by HSBCs chiefeconomist yesterday.
In a research note, Stephen Kingslams Western governments, includ-ing the US and the UK, for riggingthe credit system so that they canjump to the front of the creditqueue and impose low borrowingrates for states, while private sectorborrowers are crowded out andforced to pay more.
He uses the term financial repres-sion to describe the policy, wherebygovernments force savers and com-panies to lend to them for lowreturns or at a real-terms loss.
By borrowing heavily while havingthe Bank of England act as gilt pur-chaser of last resort, King arguesthat the government has managedto keep its borrowing costs down butthat it will only serve to live with ahigh debt burden and will notreduce it.
The note is a stinging critique ofGeorge Osbornes claim to be pursu-ing a policy of fiscal austerity andmonetary activism whereby thegovernment proceeds gradually withbudget cuts and relies on the Bank ofEngland to buy its debt.
By jumping to the head of thecredit queue, government is not sub-
Ex-Calpers chief accused of fraudThe Securities and Exchange Commissionhas accused Federico Buenrostro, formerchief executive of the California PublicEmployees Retirement System, and afriend of fabricating documents designedto show that $20m in fees paid by Apolloto Arvco, a placement agent, for helpsecuring the pension funds investmenthad been fully disclosed.
Tata consultancy arm in profit riseTata Consultancy Services has shrugged offthe tough conditions affecting rivals in
Indias outsourcing sector to deliverquarterly results broadly in line withexpectations. Indias largest IT services andsoftware group by revenue reported netprofits of Rs29.3bn (346m) in the fourthquarter, up 23 per cent on the year before.
Beijing hands CIC a further $50bnChina Investment Corp, the Chinesesovereign wealth fund, has received afurther $50bn in capital from thegovernment. The move was disclosed latelast week in Beijing by CIC officialsattending a forum for sovereign wealthfunds and pension funds that meets twicea year.
550 jobs to go at British Gas call centreThe closure of a British Gas call centre inSouthampton is likely to result in most ofthe 550 workforce losing their jobs. Thecompany claimed that customerspreferred to contact staff via e-mail thanover the telephone and insisted that theclosure would not affect its quality ofservice.
Back elected mayors, says PMCities that fail to back the idea of directly-elected mayors will lose out on jobs andinvestments, David Cameron warned.
Christopher Tappin granted bailMr Tappin, 65, is set to be released fromOtero Prison later this week after a US courtoverturned an earlier decision to hold himuntil his trial on weapons smugglingcharges. The millionaire was ordered tosubmit a $1m bond, including $50,000 cash.
Crime: in worlds top 20 economiesCrime generates an estimated $2.1 trillion inglobal annual proceeds or 3.6 per cent ofthe world's gross domestic product andthe problem may be growing, a seniorUnited Nations official has said.
Unilever takes Palm Oil in handUnilever PLC is negotiating to build a$100m palm-oil processing plant inIndonesia, in an attempt to accelerate itscommitment to sourcing the oil in waysthat do not destroy the environment.
United Continental nears Boeing dealUnited Continental will soon finalise adeal with Boeing for more than 100 of its737 single-aisle jetliners, according to aperson familiar with the matter. Boeinglast year placed far behind its rival Airbusin landing orders for small airliners.
WHAT THE OTHER PAPERS SAY THIS MORNING
THE POUND hit a 20-month highagainst the euro yesterday asnervous investors fled politicaluncertainty to put cash in the UK.
The euro fell 0.6 per cent in theday against the pound to 89.49p, itslowest since August 2010.
Expectations that quantitativeeasing is coming to an end has alsohelped push up the pound inrecent days, which has now risen7.5 per cent against a trade
weighted basked of currenciessince last June and to its highestlevel since August 2009.
Analysts believe the UKs safehaven status is behind theappreciation.
We believe the UK economy willshow gradual improvement and themarket will recognise the UK is in amuch better situation than theEurozone, said Sara Yates fromBarclays Capital. In the Eurozonethere are an awful lot of riskscoming up, that helps reigniteconcerns about the political side.
However, by making UK exportsless competitive and makingimports cheaper, that appreciation
will act as a drag on growth.M&Gs Jim Leaviss estimated the
rise since June is equivalent to a 1.8per cent monetary tightening.
There could be big headwindsfor the UK economy over the nextfew months, he warned.
Strong pound
could threatenUKs recovery
George Osbornes policy of monetary activism has been labelled financial repression
2 NEWS
BY TIM WALLACE
BY JULIET SAMUEL
The new jobs website for London professionals
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IF Boris Johnson loses the Londonmayoral election next week, hewill have just two men to blame:David Cameron and George
Osborne. Yesterdays latest pollshowing the London candidates in astatistical dead heat Boris on 51 percent including second preferences,
and Ken Livingstone on 49 per cent can only be explained by one factor.London is now a Labour dominatedcity. More Labour voters whopreviously would have backed Borisas Mayor but voted for their party inthe London Assembly elections thesame day now say they will vote forKen. That is the only real change Boris still retains just enough Labourvoters to win, but it is lookingextraordinarily tight.The big shift over the past few
weeks, of course, has been GeorgeOsbornes omnishambolic budget, the
EDITORSLETTER
ALLISTER HEATH
Boris is being dragged down by coalitions many mistakes
TUESDAY 24 APRIL 2012
governments inability to respond tothe criticisms and events itunleashed, and its incompetence overAbu Qatada. Low grade government isretoxifying the Tories in London tosuch a degree that it is chasing awaywavering Labour voters. Boris leadamong women is also dropping,which is worrying for him as theywere his stronghold. More peoplebelieve Kens pledge to cut TfL fares.
Boris is Camerons and Osbornesbiggest rival within the Tory party
but a Boris defeat would be lethal forthem. The Prime Minister is hoping aBoris re-election would cement hisfightback and the start of a phase ofbetter news for the government. Thestakes are high, not just for Londonbut also for the coalitions survival.
That said, Boris remains the
favourite. He was ahead of Ken (albeitin a diminishing way) until the end oflast year in the polls; then Kenenjoyed a brief period ahead afterticket prices increased; and Boris thenmoved ahead again a few weeks laterwhen the price hikes receded in peo-ples memories and the campaign gotgoing in earnest. The Mayor hasstayed in the lead ever since though isnow back to where he was inFebruary. The remaining days untilthe election will see the campaignsfollow careful strategies: Ken will goafter Labour voters; Boris will try to
to 47.9 from 49.2 and for manufactur-ing, down to 46.0 from 47.7. EvenGermany is being engulfed in theimplosion of the periphery nations:its overall PMI is down to 50.9, sug-gesting very little growth, with manu-facturing in deeply negative territoryat a 33-month low of 46.3.
Contrary to the received wisdom, itis not fiscal policy but monetary poli-cy that is triggering a demandcrunch. The money supply is beinghit as a result of banks being forcedby regulators to deleverage too quick-ly. Its madness. Of course, the supply-side is in urgent need of reform, andis responsible for the regions long-term woes. Short term, however, theEurozones problem is toxic: it faces anew credit crunch.
retain his own Labour voters; and theMayor will also try and maximiseturnout for his core voters in outerboroughs. For once, it seems, everyvote will really count.
EURO CRISISIT is all going very badly wrong in the
Eurozone. First we had the Frenchelections. Then the Dutch govern-ment collapsed yesterday, once againbecause of the fallout from the crisis.And then came the grim economicdata, oodles and oodles of it: firstquarter GDP shrank by 0.4 per cent inSpain and that was the least of theEUs worries. The Eurozone compositepurchasing managers index, a goodgauge of activity, slumped to 47.4 inApril, down dramatically fromMarchs 49.1; a number below 50means contraction. This collapse wasfelt for both services, which slumped
ject to the market forces that might, inother circumstances, impose disci-pline on its behaviour, King writes.
In addition, King highlights thatnew Basel III capital rules force banksand other financial firms to stock upon public debt because it is the onlyway to meet liquidity requirements,despite the fact that a lot of publicdebt is not highly liquid in a crisis.
Lending to government ends upartificially high and, by implication,lending to everybody else ends up toolow, he writes, adding: Thats unfor-tunate because, without economic
growth, its very difficult to bring debtback down again even under condi-tions of financial repression.
He also warns that financial repres-sion is likely to result in persistentlylower growth in Western countriesand that it will be hard for centralbanks to turn off the tap.
The central bank will find itincreasingly difficult to tighten mone-tary policy, he says, because politi-cians and central banks will continueto prioritise putting off short-termpain at the possible expense of long-term gain.
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CHANCELLOR George Osborne was
accused of playing with wordsyesterday after he informed theHouse of Commons that Britain willpay out 10bn to beef up the IMFsresources despite his previouspromise that he would not do so.
Tory backbenchers repeatedlyraised the concern that the IMF willeffectively be funding a Eurozonebailout by the back door with themoney, despite Osbornes insistenceotherwise. Were not pouringmoney into a Eurozone bailout fundby contributing, the chancellor said.
They were also incensed thatOsborne is paying out the maximumamount he can raise without havingto hold a parliamentary vote on thematter.
John Redwood MP has suggestedthat if the IMF bails out stateswithout knowing they can leave theeuro, it could contradict its mandate
that it should lend only where doingso will make a countrys debtssustainable. Redwood said Osborneshould urge the IMF to make surethat loans are only made availablewhen [a country is] in a position todevalue or withdraw from the singlecurrency.
Douglas Carswell MP quotedOsborne previously claiming the UKwould not pay out for a euro bailoutand asked: Has he changed hismind or is he playing with words?
Osborne facesbackbenchersanger over IMF
BY JULIET SAMUEL
FORMER Iceland Prime Minister GeirHaarde, the only politician to havebeen tried over the global financialcrisis, was yesterday found guilty ofonly the most minor of four chargesof negligence.The 61-year-old was con-
victed of failing to holddedicated cabinet meet-ings ahead of the 2008economic collapse acharge which does notcarry a prison sentence but was found inno-cent of three major
charges, includingneglecting to dealwith an overblownbanking sector. Theformer leadercould have facedup to two years injail if he were con-victed of the more
Ex-Iceland PMconvicted for
his role in crisisBY JENNY FORSYTH serious counts.
Haarde himself criticised the specialcourts mixed verdict, claiming thatjudges had only found him guilty ofone count to appease Icelandersanger at the politicians who allowedthe countrys banking system to growto ten times Icelands GDP before themeltdown.It is obvious that the majority of the
judges have found themselvespressed to come up with a guilty ver-dict on one point, however minor, to
save the neck of the parlia-mentarians who instigat-ed this, said Haarde.
Meanwhile, others
criticised the fact thatonly Haarde was puton the stand.
He was the cap-tain on the bridge,but there weremore ministers,said local pension-
er Arni Einarsson.Politicians thought thatIceland was like theTitanic, unsinkable. Theywere not on their guard.
Former PM Geir Haardecalled the verdict absurd
FACEBOOK last night revealed itwill list on the tech-favouriteNasdaq stock exchange when it
floats next month in the yearsmost anticipated IPO.
But in the same SEC filing thesocial network reported its firstquarter-on-quarter earnings slidein at least two years as its revenuesfell 6.5 per cent and profitsdropped 32 per cent on the finalperiod of last year.
Facebook put the sequentialquarterly decline down to seasonaltrends, saying that its advertisingincome traditionally slows in the
Facebook unveils Nasdaq listingahead of IPO as revenues slide
BY LAUREN DAVIDSON first three months of the year.First quarter profits were down
year-on-year, falling 12 per cent to$205m (127.2m) despite revenuesrising 45 per cent to $1.06bn.
The updated SEC filing alsorevealed that Facebook paid $300min cash and 23m shares for itsrecent acquisition of Instagram.
The internet giant announcedseparately yesterday that it hasagreed a $550m deal to buy 650
AOL patents from Microsoft, whichbought a trove of trademarks for$1bn earlier this year. Facebook iscurrently embroiled in a patentspat with Yahoo.
BOTTOM LINE: Page 8
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Zuckerbergs website saw a 32 per cent sequential fall in profits in the first quarter
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THE SPANISH government will force
banks to move all their real estateassets into a special holdingcompany within weeks, in a bid toreassure investors the lenders wontneed a further rescue, it emergedyesterday.
The real estate holding entityshould be up and running by thesummer, but the final form anddetails are still being discussed bythe banks and the state, agovernment source said. It isexpected to dissolve after 10 years.
Spains ability to avoid anexpensive state rescue for its fragilebanking system which wasdevastated by the 2008 crash of adecade-long building boom is keyto the countrys efforts to keep debtunder control and avert a Europeanbailout.
This will enable us to separateclearly the banking business from
the real estate one, the source said.Now that most of provisions
have been made against propertylosses, it should enable the banks toget cleaned up easily.
The Spanish government inFebruary forced the banks to writedown massively the value ofundeveloped land, unfinisheddevelopments and foreclosedproperties. That was a third roundof restructuring for the troubledsector.
Spain looks toa bad bank toclean up sector
BY HARRY BANKS
JOBS and output are falling acrossthe Eurozone, survey data showedyesterday, with even the relativelyhealthy German economy sheddingworkers.
Consumer confidence plummetedto a record low in Italy, Frances busi-ness climate deteriorated furtherand Spains central bank announceda further 0.4 per cent fall in GDP inthe first quarter, painting a verygloomy picture of the currencyareas prospects.The decline in services and manu-
facturing output accelerated in
April, with Markits purchasingmanagers indices (PMIs) falling to afive-month low of 47.9 in servicesand a 34-month low of 46.4 in manu-facturing.
In France the services index fellsharply below the no change levelof 50, from 50.1 in March to 46.4 inApril, while manufacturing contin-ued its fall at 47.3, slightly slowerthan the 46.7 seen a month ago.
Output growth in Germany slowedto a five-month low at 50.9, from
Activity dropsas euro areas
slump deepensBY TIM WALLACE 51.6, and employment fell for the
first time in over two years.Both the manufacturing and servic-
es sectors saw job losses, as the man-ufacturing PMI fell from 48.4 inMarch to a 33-month low of 46.3,while services accelerated from 52.1to 52.6.
Italian data agency Istat reported adrop in consumer confidence to 89,the lowest since records began in1996 and following months of toughausterity and economic reforms fromtechnocratic leader Mario Monti.
Meanwhile French agency Inseesbusiness climate index fell one pointto 95 in April.
Eurozone PMIs
Jan 99 Jan 03 Jan 06 Jan 09 Jan 12
Rest of Eurozone
France
Germany
30
40
50
60
70 PMI50 = no change
TUESDAY 24 APRIL 20124 NEWS EUROZONE CRISIS cityam.com
Rajoy - Spain
EUROZONE
Composite PMI 47.4
Manufacturing 46.4
Services 47.9
FRANCE
Business confidence
index down to 95 in April
Composite PMI 46.8
Socialist Franois Hollande
beat Nicolas Sarkozy into
second place in the first
round of the race to
be President
SPAIN
Economy shrank
0.4% in Q1
Spain
Eurozone output is falling
Mark RutteNetherlands
Mariano RajoySpain
Mario MontiItaly
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Dutch government falls as rowover cuts tears coalition apartEUROPES debt crisis toppled itslatest government yesterday, and
another teetered on the brink, ascoalitions in the Netherlands andthe Czech Republic tore themselvesapart in deficit reductionnegotiations.
The scale of the challenge wasfurther underlined by new EU datawhich showed a total deficit of 4.1per cent of GDP for the Eurozoneand 4.5 per cent for the EU as awhole.
Dutch Prime Minister Mark Rutte
BY TIM WALLACEoffered his resignation yesterdayafter failing to convince coalitionmember Geert Wilders, of thenationalist Freedom Party, to
support his cuts.Rutte was trying to pass a budgetwhich would cut between14bn(11.4bn) and 16bn in statespending to meet the EUsborrowing targets, but Wildersrejected proposals that could hit theelderly.
Meanwhile the junior partner inthe Czech Republics centre-rightcoalition broke up, threatening thegovernments stability.
However, it is thought thegovernment has sufficient backingto continue, and the Prime Ministerwas last night believed to be
considering calling a vote ofconfidence in his leadership for thisFriday.
Figures out yesterday fromEurostat showed the CzechRepublics deficit ran at 3.1 per centof GDP in 2011, compared with 4.8per cent in 2010 and 5.8 per cent in2009. The Netherlands came in at4.7 per cent last year, down from 5.1per cent in 2010 and 5.6 per cent in2009.
EUROPEAN Union quangos haveseen their budgets soar by a thirdin the last two years, according tofigures released yesterday.
Despite preaching austerity toits member states, Brussels ownspending on quangos now totals2.64bn (2.17bn) 33.2 per centhigher than in 2010.
There are now 52 EU-fundedquasi-autonomous agencies, twiceas many as there were in 2004, theOpen Europe think-tank said.
Open Europe, which campaignsfor reform of the EU, said that
European Union splashes 2.6bnon quangos, claims new report
BY JULIAN HARRIS while some agencies performvaluable services, others merelyduplicate work or suggest wasted
billions in taxpayer funds.The European Environment
Agency (EEA) paid 250,000 for aconsultant to assess its own mediacoverage, the report said. The EEAalso spent 300,000 having plantsattached to walls outside itsCopenhagen headquarters.
Ironically, many of these bodieswould never have survived thetype of austerity programmes thatthe EU is now drawing up for
member states, said OpenEuropes Pawel Swidlick.
NERVOUS investors weighed downon markets yesterday, after socialistFrancois Hollande won the firstround of voting in the Frenchpresidential election.
Hollande has been an outspokencritic of austerity measures in theEurozone and last week tweeted insupport of a fight againstfinance.
In Paris the CAC 40 indextumbled throughout the day,closing down 2.83 per cent.
Elsewhere in Europe the GermanDAX lost 3.36 per cent, and theFTSE closed down 1.83 per cent both partly affected by Hollandesfirst round win against theincumbent Nicolas Sarkozy.
French presidential election hitsmarkets as yield spread widens
BY JULIAN HARRIS
And the spread between yields onFrench and German governmentbonds climbed to a fresh high for2012, reaching 147 basis points.
The prospect of a new Presidentand new approach to dealing withthe Eurozone crisis has madeinvestors and European marketsnervous, commented David Miller,a Partner at Cheviot AssetManagement.
Well see muddled markets untilthe final result is declared.
The second round of votingbetween Sarkozy and Hollande isset for Sunday 6 May.
Far-right candidate Marine Le Penfell out of the race after coming inthird, despite registering 17.9 percent of the vote a record high forthe French National Front.
TUESDAY 24 APRIL 20125NEWS EUROZONE CRISIScityam.com
Germany
NETHERLANDS
PM Mark Rutte resigned after
failing to persuade coalition
allies to supporthis spending cuts
ds
ITALY
Consumer confidence
at record low of 89
in March
GERMANY
Composite PMI 50.9
Manufacturing 46.3
Services 52.6
Italy
*PMI scores above 50 indicate growth
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CITYVIEWS
KEN Livingstone yesterday blewthe race for Mayor of Londonwide open after a YouGov pollput him just two percentagepoints behind hisConservative rival.
Boris Johnson now leadsthe race by just 51 to 49per cent, with ten days togo until election day.
Previous polls had con-sistently given Johnson a
Election will goto the wire as
Ken closes gapsix point lead but Livingstone hasbelatedly begun to capitalise on thegrowing unpopularity of the nationalConservative party.
A vote for the Conservative candi-date in such a vital election is a votefor what the Tories are doing to ourcountry and our city. They will use itto vindicate the next phase of theirplans, he said in a speech yesterday.
Livingstone also issued a directchallenge to Johnson to have a TV
debate on fares policy thisThursday.
But Boris Johnson rejectedhis opponents offer, jokingto City A.M. he would not
wait that long to discuss the
issue: I challenge him to adebate tomorrow night, theidle spavined inspissated
newt! Im not going to wait cowardy custard.
Poll shows Labour voters arestill willing to back JohnsonLONDONERS increasingly preferLabour but many are stillwilling to make an exception forConservative mayoral candidateBoris Johnson, according to thelatest YouGov poll.
It shows Labour enjoy acrushing lead of 50 to 31 inWestminster voting intentionsamongst the capitals residents.
But when asked for theirmayoral voting intention thistransforms into a 43 to 41 defeat,mainly thanks to Johnsonsenormous personal popularity.
Brian Paddick, the LiberalDemocrat candidate, is on trackto hit eight per cent of the vote only slightly down on his resultin the 2008 poll.
Independent Siobhan Benita istied with UKIPs Lawrence Webbon three per cent.
Green party candidate JennyJones trails on two per cent while
the BNPs Carlos Cortiglia canmuster less than one per cent.The survey of 1,138 voters was
conducted over the weekend, inthe aftermath of a torrid period
for the Conservative-led coalitiongovernment.
Worryingly for Johnsons teamit suggests that just 11 per cent ofvoters feel he is in touch with theconcerns of ordinary people.
When asked which candidatethey would most trust to pay backa loan, 24 per cent of voters choseJohnson compared to just 17 percent for Ken Livingstone.
Tax continues to be an issue,with almost 40 per cent of votersbelieving that Livingstone has notpaid as much as he should andjust one in ten believing he ishonest.
But with the result within themargin of error much will comedown to the ability of the respec-tive parties to mobilise their sup-porters on polling day.
BY JAMES WATERSON
IN BRIEF
Macquarie fear over India taxn Macquarie's Asia hedge fund hasexited its short positions in Indiansingle stock futures in response to acontroversial set of proposed tax rulesthat could lower investment returns.Instead, it has decided to use a futurescontract linked to Indias 50-share NSEindex (Nifty) on the SingaporeExchange to get its short exposure toIndia, according to an investor letter ofthe fund. The $1.5bn Macquarie AsianAlpha Fund also cut India long
exposure in March.
ST-Ericsson to cut 1,700 jobsn Chip maker ST-Ericsson will cut 1,700
jobs and shift a key part of its product toparent STMicro, forcing the French co-owner to focus more on its loss-makingand volatile wireless business. ST-Ericsson said it would partner withSTMicro to develop application proces-sors, after failing to cut a deal with one offour other companies. The plan did littleto convince investors the joint venturewas getting back on track and shares ofSTMicro accelerated losses after the
statement to close down 13.8 per cent.
Bumi fall sparks Bakries headachen Indonesian group Bakrie has untilFriday to resolve a covenant breach on a$437m loan following a drop in the priceof its London-listed coal miner Bumi lastweek, sources familiar with the loan saidyesterday. The breach was the latest in aseries of debt problems for Bakrie Group,one of Indonesia's largest conglomerateswhich avoided a debt crisis last year byselling a stake in Bumi to an Indonesianinvestor for $1bn. Credit Suisse sent anotice on behalf of lenders to the bor-
rower after the breach.
These views are those of the individuals above andnot necessarily those of their company
I dont want any of them, I dontwant a Mayor. Get rid of them. Have
we got anything out of it? Somebodys claimingour fares will go down. I dont believe any of it.
NICK STEVENSONLLOYDS OF LONDON
Boriss sense of humour is just thebest, and thats what we are, it
works. Kens a socialist and a pain in the arse. Isay cut him out and get Boris back on the map.
JERRY PRINGLEMILES SMITHLAURALE
AN/CITY
AM
WHO WILL GET YOUR VOTE?Interviews by Clare Hill
Livingstone has fought hisway back into the race
PORT drinkers raised their glasses,a knight was converted and onesupporter suggested the Mayorshould join in with some BorisDancing its hard to imagine amore welcoming environment forthe Conservative candidate thanLeadenhall Markets St Georges
Day celebrations.Yesterday Johnson was cheered
by City crowds as he gave a stumpspeech that warned of a return tothe Jurassic epoch if his opponent
Boris takes fight to heart of CityBY JAMES WATERSON newtzilla returned to office.
Jeff Edwards, a hospital porterdressed as a medieval warrior, wasso impressed that he promptlyknighted the Mayor with a woodensword: Normally Im a Labour
voter but that man changed mymind today. Im from the East Endand hes what we call a geezer.
But Vimal Parekh of Leadenhall
greengrocer Sproutin was unsurehow hell vote on 3 May: Imundecided. If there was an electiontomorrow Id go with my gutinstinct and vote for Livingstone.
TUESDAY 24 APRIL 20126 NEWS
cityam.com
Johnson promised the crowd a modest, non-taxpayer funded celebration if he wins
Ill be voting Boris I just think hesgot a lot more to offer than Ken. Hes
spent a lot of money, but I thi nk that we cansee an improvement on public transport.
GORDON BOTTENRELIANCE
% %
31
43
88
50
41
118
WE STM IN ST ER VO TIN G IN TE NTI ON M AYO RAL VO TIN G 1 ST PRE FE RE NCE
Conservative Labour L iberal Democrats Other
BY JAMESWATERSON
MAYORALELECTION
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VODAFONE faces a possible shareholderrebellion over its 1.04bn bid for Cable &Wireless Worldwide after the ailing tele-coms companys biggest investor
expressed disappointment at the offer.Orbis, which holds a 19 per cent stakein CWW, refused to back Vodafonesoffer of 38p per share.A spokesperson for Orbis said: With
the transaction being accretive in thefirst year, the proposed deal is clearlyattractive for Vodafone shareholders.
However, we are concerned that theoffer price does not appear to reflect thevalue inherent in CWW.
Two months after admitting it wasconsidering a bid for CWW, Vodafoneyesterday unveiled a 1.04bn cash offerfor the struggling telco.The 38p per share bid represents a 92
per cent premium on CWWs last clos-ing share price before Vodafoneexpressed an interest in mid-February.The telecoms giant said it has unani-
mous backing from CWWs board andirrevocable undertakings and letters ofintent to vote in favour of the bid from
shareholders representing 18.58 per centof the companys stock.
But Vodafone, which insisted the offeris final and will not be increased,could struggle to obtain the 75 per centshareholder approval it needs for thescheme to go through if Orbis votesagainst the 38p offer.
Credit Suisse and Legal & General,which hold 5.2 per cent and 3.75 percent stakes in CWW respectively and didnot submit letters of intent to back theoffer, could tip the balance againstVodafone if they side with Orbis.
Vodafone agrees to hand over 1bnBY LAUREN DAVIDSON
Vodafone has put its long-standing team at UBS,headed by global co-head of investment bank-ing Simon Warshaw, on the case to guide itthrough its acquisition of CWW.Oxford-educated Warshaw joined the Swissbank in 1986 and has under his belt the formerpositions of head of EMEA investment banking,
joint head of UK investment banking and globalhead of UBS media investment banking arm.Vodafones advisory team at UBS includesJonathan Rowley, joint head of mergers andacquisitions EMEA, Mark Lewisohn, global head
ADVISERS VODAFONE AND CABLE & WIRELESS WORLDWIDE
SIMON WARSHAWUBS
JUST three months ago,everyone thought Cable &
Wireless Worldwide was abusted flush. After de-merging
from the C&W mobile business in2010, it was forced to make threeprofit warnings and went throughthe same number of chiefexecutives. A roster of impressive
blue-chip clients couldnt hide thefact it lacked the scale andstrategic vision needed to recover.
Then we entered the carcassphase. Bidders started to evaluateCWW not on its day-to-day
business selling communicationsservices to corporates, but ratheron the prize asset it had buried inthe back garden: a 20,000km fibreoptic broadband network. Itsshares, languishing at 19.8p in
February, surged by over 90 percent.
It is primarily for this network not the companys client base or itspeople that Vodafone has agreedto pay 1bn. The mobile giant,
which is dealing with a surge in 3Gtraffic, will be able to offload someof this onto the CWW fibrenetwork rather than paying thelikes of BT hundreds of millions topiggyback on their pipes. It willalso beef up its existing offering to
big corporates by offering them so-called unified communicationssolutions a mixture of fixed-lineand mobile services.
This carcass phase is somethingwere increasingly seeing with oncegreat technology companies, firmswho were pioneers but who havefailed to keep pace with newerrivals. It suggests that some of thelaggards of the tech world deserveto be reassessed, not on theirchances of staging a comeback buton the treasure they have gothidden away.
When Google agreed to payMotorola Mobility for $12.5bn(7.7bn), it had very little interestin the companys main business asa handset manufacturer. If the web
giant had wanted to develop itsown mobile phone, it would have
gone after a more successful firmlike Taiwans HTC. Instead it wants
BOTTOMLINE
DAVID CROW
Cable & Wireless Worldwide PLC
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Motorola Mobility for its patents,allowing it to compete in the so-called patent wars against Apple.
So what of the other technologycompanies who are struggling.Could they too be worth anotherlook? Nokia, which was once theundeniable king of mobile phones,has had a torrid time of late,marked by a string of profit
warnings and no obvious route
back to good health. Yet manyanalysts believe that its ownpatents it has at least 10,000 are
worth much more than its 10.5bnmarket value.
Blackberry has lost 75 per centof its value over the last year, but ittoo has some prize assets: a massivecorporate client base and the bestkeyboard in the mobile business,
which is of course protected bypatents. Kodak might betechnically bankrupt, but it valuesits own patent portfolio at $2.6bn.
Yahoo is approaching irrelevance,but as one of the first major webfirms its intellectual property must
be incredibly valuable.These titans of technology might
be nearing the end but they couldbe worth more dead than alive.
Carcass of a failed tech firm may
be worth more than you thought
Both funds declined to comment.Vodafone chief executive Vittorio Colao
said the acquisition will create a lead-ing integrated player in the enterprisesegment of the UK communicationsmarket and bring attractive cost savings
to our UK and international operatioThe deal will make Vodafone the
ond largest British telecoms operatoUK revenues behind BT, with domrevenue of 6.97bn based on last ycombined results.
of TMT, and Christian Lesueur, head of EMEAmedia and telecoms investment banking.The UBS squad also led the telecoms giantthrough its $5.9bn merger of Vodafone Australiawith Hutchison 3G Australia in 2009.
Batting on the Cable & Wireless Worldwide sideis a Barclays and Rothschild hybrid, led by MarkWarham and Nigel Higgins respectively.Warham, who formerly worked for 3i, Schrodersand Morgan Stanley, is co-head of BarclaysCapitals EMEA mergers and acquisitions divi-sion. He served as director general of theTakeover Panel in 2006 and 2007.Higgins has been chief executive of RothschildGroup for two years and is also co-head of thebanks global financial advisory division. He for-merly served as Rothschilds head of UK invest-ment banking and co-head of the banksEuropean investment banking activities.
CWW chairman John Barton (right) and the rest of the board unanimously backed the b
CWW is also working with Jack Callaway andStuart Ord from BarCap and Richard Murley andJeremy Boardman from Rothschild.Vodafones brokers are Citi and JP MorganCazenove, while Deutsche Bank and Jefferies
Hoare Govett are joint corporate brokers toCWW, marking Hoare Govetts first sizeable M&A
job since being bought by Jefferies in February.Chris Zeal, who was with Hoare Govett in its RBSdays, told City A.M., The joy of Jefferies is to bewith people who are equity focussed. This is thefirst large M&A transaction within the Jefferiesenterprise and its good that were this active.On the legal side, Iain Fenn and Clodagh Hayes oLinklaters which also advised on theGlencore/Xstrata deal are acting for VodafoneCWWs lawyers are Chris Haynes and JamesPalmer at Herbert Smith.
Lauren Davidson
Follow me on Twitter: @davidcrow83
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GETTY
for ailing CWW
dafone Group PLC
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TUESDAY 24 APRIL 20129NEWSMERGER MONDAY
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TIMELINE | CABLE & WIRELESS
1860sSir John Pender founds a number of British telegraph
companies.
1928Various radio and telegraph companies throughoutthe British Empire merge into Imperial & InternationalCommunications Limited, which becomes Cable andWireless Limited in 1934.
1947The Labour government nationalises Cable &Wireless. All its UK assets are integrated with those ofthe Post Office.
1981Cable & Wireless is one of the first nationalised com-panies to be privatised under Margaret Thatchersgovernment. It launches a subsidiary, MercuryCommunications, to rival BT.
1987Cable & Wireless acquires TDX Network, a long dis-tance fibre network in the US which is re-dubbed
Cable & Wireless Communications.
1997-2005Cable & Wireless expands its business by makingacquisitions across Central and North America andthe British Isles.
26 March 2010Cable & Wireless Communications demerges fromCable & Wireless, which is renamed Cable & WirelessWorldwide (CWW).
28 June 2011CWW chief executive Jim Marsh resigns, after issuingthree profit warnings in just over a year, to bereplaced by then-chairman John Pluthero.
14 November 2011CWW posts a half-year pre-tax loss of 433m com-pared to a 53m profit the year before. Chief execu-tive John Pluthero steps down and is replaced byGavin Darby, formerly an executive at Vodafone.
13 February 2012Press reports force Vodafone to admit it is consider-ing making an offer to CWW, whose shares jump by35 per cent.
18 April 2012Mumbai-based Tata Communications, which hadbeen raising money to bid for CWW, walks away fromdiscussions.
23 April 2012Vodafone offers 38p per share, or 1.04bn, for CWW.
one, led by chief Vittorio Colao (left)
Swiss food group Nestl is to buyUS drugmaker Pfizers baby food
business for $11.85bn, beatingout French rival Danone in the
battle for dominance of fast-growing emerging markets.
The worlds biggest foodcompany had to dig deeper thanexpected to win the high-stakesfight for Pfizer Nutrition, whichmakes 85 per cent of its sales inemerging markets and is Nestls
biggest deal to date.
The price tag is high, howeverNestl is securing a high
growth/margin business withhigh exposure in the emergingmarkets," said Vontobel analyst
Jean-Philippe Bertschy.Nestl said the deal would add
to earnings per share from thefirst year, and would allow costsynergies of $160m.
Bertschy expects it to addabout 0.5 per cent to earningsper share in the first year and1.5 per cent in the following
years.
Nestl eats up Pfizer divisionBY HARRY BANKS
PHARMA giant AstraZeneca ispoised to snap up US firm ArdeaBiosciences in a bid to boost itsdiminishing pipeline of new drugs.
The $1.26bn (782m) deal willgrant AstraZeneca a nearly-clearedtreatment for gout, described byboss David Brennan yesterday asan excellent opportunity toleverage our global specialty and
primary care sales andmarketingcapabilities.
The Ardea team hasdone a great job
developinglesinurad alongwith apromisingnext-generationgoutprogramme,Brennanadded. Thesecompoundshave real
AstraZeneca setfor $1.3bn deal
for biotech firmBY JULIAN HARRIS potential to benefit patients.
The embattled chief executive isunder pressure from shareholdersunhappy at the firms prospects.New non-executive chairman LeifJohansson takes over in September,a boardroom development thatcould turn up the heat onBrennan.
AstraZeneca will pay $32 pershare for the company, itannounced yesterday, a 54 per centpremium on Ardeas closing pricelast week.
Its own shares dipped 1.9 percent in London yesterday, whilestocks were down throughout the
European drugs sector.The deal seems consistent with
management strategy althoughthe target indication of the leadproduct candidate is gout, whichhas not, traditionally, been an easytarget for drug development,commented analyst SavvasNeophytou from Panmure Gordonyesterday. AstraZenecas firstquarter results are expected thisThursday, 26 April, with PanmureGordon predicting a fall in revenueof around five per cent yetretaining its buyrecommendation on the stock.
AstraZenecabrought in MorganStanley to advise onits acquisition onArdea, with thebank hoping tosecure business onfuture deals. Thepharma giant has signalled its intentionto snap up more firms at around the$1bn dollar mark. Morgan Stanley alsoadvised fellow drug firmGlaxoSmithKline in its failed bid to cap-ture Human Genome Sciences. Ardea,meanwhile, was advised by Bank ofAmerica Merrill Lynch.
ADVISERSMORGAN STANLEYBANK OF AMERICAMERRILL LYNCH
CEO David Brennanis under pressure
afone will benefit from CWWsline network, which will take somee pressure off its jam-packed wire-raffic, and will be able to offer itss a mixture of communicationses via one provider.the telecoms giant denied that
Ws capital allowances are key to thenale underpinning the offer. Ited, Vodafone does not believe ittilise CWWs tax losses.Ws shares, which have climbed 80ent since Vodafone came to thein mid-February but plunged whenCommunications declined to bideek, jumped 12 per cent to 36p.
DATA and analytics providerThomson Reuters said yesterday had agreed to sell its healthcareunit to an affiliate of privateequity firm Veritas Capital for$1.25bn (776m).The deal, likely to close in thenext few months, will help to freup cash at Thomson Reuters,
which has seen its share price fa30 per cent over the past 12months.
Thomson Reuterssells healthcare arm
BY ELIZABETH FOURNIER
The move to buy Ardea is thelatest bid by a multinationalpharmaceutical firm to acquirerelatively small biotechnologyinnovators.
GlaxoSmithKline said last weekit had offered to buy HumanGenome Sciences for $2.6bn, in abid rejected by the US firm, whileRoche has tried unsuccessfully tobuy Illumina for $6.8bn.
We will continue to do theseexternal deals, said AstraZenecas
research head Martin Mackayyesterday. I think we will betalking about more as the yeargoes on.
AstraZeneca PLC
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Treasury caves in toMPs on Bank scrutiny
FIRMS using and dealing
derivatives face the prospect ofregulatory chaos due to the EUand US regimes colliding, EUcommissioner Michel Barnier haswarned his Americancounterparts.
A spokesperson for thecommissioner said that he haswritten to US authorities tosuggest putting off rules that willhit any firm dealing a certainvolume of derivatives in Americanterritory, which could includesome energy and commoditytraders.
Firms that trade in both regionswill be hit by two new majorregulatory overhauls this year,with little work having been doneon how they will interact.
Commissioner Barnier has sentletters... encouraging them todelay the swap dealer registration
process as regards EU firms untilthere is legal clarity about thesubstantive conditions that suchregistration will entail, aspokesperson told Reuters.
Swaps dealersget an unlikelyhero in Barnier
BY JULIET SAMUEL
GETTY
THE TREASURY has written to banksto reassure them that it will go tobattle with the EU over new pen-sions regulation that it says wouldmake saving for retirement muchmore expensive.
In a private letter sent to lendersand seen byCity A.M., the Treasurysfinancial secretary Mark Hobanexpresses serious concerns aboutthe way the EU is going about regu-lating pensions.
At issue is a botched draft of pen-sion fund regulation by a newEuropean regulator, the European
Insurance and OccupationalPensions Authority (EIOPA), whichhas used insurance regulations as atemplate for writing its advice onpensions regulations, something
UK preparesfor pensions
battle with EUBY JULIET SAMUEL
Hoban says is inappropriate.I have serious concerns that har-
monising occupational pensionscheme capital rules with Solvency IIcarries a strong risk of locking capitalin pension schemes, reducing invest-ment in growth and significantly,Hoban tells banks in his letter.
Implementing EIOPAs recommen-dation would require pension fundsto hold capital in reserve in a similarway to insurers, despite EU commis-sioner Michel Barnier saying that thisis not the aim of the regulatory over-haul. Firms argue the rules wouldcreate a black hole worth billions ofpounds in otherwise adequate pen-sion funds.
I am very keen for my officials towork closely with the BritishBankers Association on this, Hobansays, referring to UK banks tradebody.
THE GOVERNMENT caved in todemands from the influentialTreasury Select Committee of MPslast night, agreeing to reopen adiscussion on how to hold the Bankof England to account in itsflagship financial services reformbill.
Andrew Tyrie MP, chair of thecommittee, withdrew anamendment that wouldrequire the Court of the Bankof England to publishextensive reviews of itsdecisions after theevent in order tohold it to account.
Tyrie droppedthe motion afterTreasuryminister MarkHobansignalled
BY JULIET SAMUELthat the government willimplement the changes itself oncethe bill returns from a vote in theHouse of Lords.
Before Hoban indicated that aclimbdown was on the cards, Tyriehad threatened to send specialistadvisers into the Bank of England
to scrutinise it on behalf ofMPs a position he could takeup again if the Treasury doesnot make the concessions.
We will not hesitate todo [so] if this legislationremains defective with
respect to the Bank ofEngland, Tyrie said.
Sending in specialistadvisers was asomewhatcumbersome routebut thats why itwould be farpreferable toimprove thislegislation so thatsuch action...
would not be
necessary.
Mark Hoban has told banks he supports them on the EUs botched pensions reform
Andrew Tyriechairs the
committee
THE UKs financial watchdog has losta key test of its powers to punishbankers for alleged supervisionfailures after a fine on a senior UBSbanker was overturned yesterday.
In a rare successful appeal againsta fine imposed by the regulator, JohnPottage was cleared of misconductby the Upper Tribunal overcompliance failings that occurredunder his supervision at UBSsBritish wealth managementbusiness, which he ran.
The Financial Services Authority(FSA) had sought to fine him100,000 for alleged failings as theunits boss, even though he was notpersonally involved in thecompliance issues.
We think that the actions that MrPottage in fact took prior to July 2007to deal with the operational andcompliance issues as they arose werereasonable steps, the Upper
Tribunal said in its ruling.The FSA said it accepted thedecision, but was undeterred frompursuing disciplinary action againstsenior management.
We have always recognised thatpursuing disciplinary action againstsenior management in large firms isvery challenging, said TraceyMcDermott, acting director ofenforcement and financial crime atthe FSA. But we also believe stronglythat senior management must takeresponsibility for the businesses theyrun.
The case has been watched by rivalbanks as a potential precedent-setterin terms of how far up the ranksresponsibility for failings can go.
Although wins against the FSA arerare, other senior bankers arefollowing this route. JP Morgandealmaker Ian Hannam was fined
450,000 for market abuse in earlyApril, a punishment he is appealing.
FSA loses caseagainst seniorUBS banker
BY HARRY BANKS
THE INSURANCE mis-sellingscandal has become a cash
bonanza for claims managementcompanies looking to exploit bankcustomers, according to consumerrights advocates Which? magazineand MoneySavingExpert.com.
They hosted a meeting yesterday,where major providers of paymentprotection insurance (PPI) andregulators discussed the scandal, in
which thousands of borrowerswere inappropriately sold uselessinsurance.
Which? publishing datasuggesting that a quarter of people
Claims companies cash in on PPIBY JULIET SAMUEL do not know how to file a
complaint themselves to get theirmoney back and that claimsmanagement companies, whichoffer to file it for them, often take a30 per cent fee.
Banks say that the companies areadding to the headache of goingthrough thousands of complaintsand yesterday pledged to make iteasier for individuals to claim.
The head of Charter UK PaulClark, who advises banks oncomplaints software, said: Up to25 per cent of the claims banks arereceiving from [these] companies
are from claimants who never hada PPI policy in the first place.
TUESDAY 24 APRIL 201210 NEWS cityam.com
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IN BRIEFDigby Jones joins Flybe board
nAirline Flybe said yesterday LordDigby Jones would be joining thecompany as a non executive director.The former trade minister and directorgeneral of the CBI has a string of otherboardroom roles such as thechairmanship of Triumph motorcycles.
Carnivals Costa chief steps down
nThe chief executive officer of theCarnival unit whose ship ran aground offthe coast of Italy in January is retiring andwill be replaced by the head of another ofthe cruise operator's European lines. PierLuigi Foschi, 65, will retire as CostaCrociere chief on 1 July, but will remain asCosta's chairman and keep his seat onCarnival's board. Foschi will be replacedby Michael Thamm of Aida Cruises.
ICE Futures to auction CO2 permits
nBritain has awarded a contract to ICEFutures Europe to auction carbon permitsin the third phase (2013-2020) of the EUemissions trading scheme in a move thatwill boost volume on the most liquid car-bon bourse. They could be auctioned asearly as November, subject to approval bythe EU.
Wal-Mart faces US investigationnUS politicians said yesterday they werelaunching an investigation into allega-tions of bribery at Wal-Marts Mexicanaffiliate. Two Democratic lawmakers senta letter to Wal-Mart chief executive MikeDuke to request a face-to-face meetingwith company officials over claims thecompany halted an internal probe intobribery in Mexico. Wal-Mart shares fell 4.7per cent yesterday.
OFCOM yesterday announced it haslaunched an investigation into SkyNews after the broadcaster accessedprivate email accounts.
Prompted by Sky News admission afew weeks ago that it had authoriseda journalist to access the email of indi-viduals suspected of criminal activi-ty, Ofcom is investigating fairnessand privacy at the news channel.The media watchdogs announce-
ment coincided with the appearanceof John Ryley, head of Sky News, at theLeveson Inquiry yesterday.
Lord Justice Leveson interruptedproceedings to demand of Ryley:
What you were doing wasnt merelyinvading somebodys privacy, it wasbreaching the criminal law.
Ryley responded that it was beforeconceding that Ofcoms broadcastingcode does not give any authority tobreach the criminal law.
The media regulator is examiningthe actions of Sky News reporterGerard Tubb, who was given permis-sion by the channels executives toaccess the email account of canoeman John Darwin.
Sky News facesOfcom probe
over hackingBY LAUREN DAVIDSON
Darwin used a canoeing accident in2002 to fake his own death so his wifeAnne could claim thousands ofpounds of life insurance and pensions.
Sky News said it handed the informa-tion it obtained to the police and thatit was pivotal in the successful prose-cution of the Darwins.The broadcaster added: We stand by
these actions as editorially justified.There are rare occasions where it is jus-tified for a journalist to commit anoffence in the public interest.This inquiry is distinct from Ofcoms
probe into whether BSkyB is a fit andproper broadcaster, although a nega-tive ruling for the news channel couldreflect badly on its parent body.
British Sky Broadcasting Group PLC
17 Apr 18 Apr 19 Apr 20 Apr 23 Apr
650
660
670
680
690 p 679.0023 Apr
TUESDAY 24 APRIL 201212 NEWS
cityam.com
Defence company Cobham hashired Robert Murphy, a member ofBAE Systems' executive committee,as its new chief executive.
Murphy will take up his new
role on 25 June, replacing AndyStevens, who is taking earlyretirement due to a recurring backinjury but will remain on the
board until further notice tosmooth the handover.
Murphys appointment marksthe end of a five-month search forthe new chief exec of Cobham. Heis currently executive vicepresident of BAE Systems productsectors, based in the US. He willrelocate to the UK to be near
BY MARION DAKERS Cobhams Dorset offices.BAE confirmed the move,
adding in a short statement thatemployees who were workingunder him will report to chiefexecutive Linda Hudson until areplacement can be found.
FTSE 250-listed Cobham iscurrently pursuing Danishsatellite communications companyThrane & Thrane, renewing its270m offer earlier this monthhaving withdrawn its bid.
The firm has said its offerrepresents a 43 per cent premiumto the price at which Thrane &Thrane shares were trading beforenews of its approach broke inFebruary.
Robert Murphy (inset) is taking over as Cobhams chief
Cobham picks BAE man Murrayto be its new chief executive
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GETTY
THE dismantling of BAAs British
interests moved forward yesterdaywhen it agreed to sell Edinburgh air-port to City airport owner GlobalInfrastructure Partners (GIP) for asurprise 807m.
GIP, an investment fund foundedby Credit Suisse and General Electric,beat a consortium led by JP MorganAsset Managements infrastructurefund. The price dwarfs the 500mfigure expected in the City andreflects the intense competition forthe airport, which also attracted theinterest of buyout groups 3i andCarlyle.
GIP is expected to quicken theamount of time passengers spend incheck-in, security and baggage han-dling. Chairman Adebayo Ogunlesisaid: We see significant opportunityto apply our tested and successfuloperational expertise and our knowl-edge of the global airports sector to
develop and enhance the perform-ance of Edinburgh Airport.
BAA offloadsEdinburgh forshock 800m
BY PETER EDWARDS The airport attracted 9.3m passen-gers last year and generated earningsbefore interest, tax, depreciation and
amortisation of 48.3m. It was recent-ly snubbed by Ryanair, which reducedits flights there, but yesterday thebudget carrier said the deal wouldfree it from the dead hand of BAA.JP Morgan Asset Management had
led a consortium including Incheon,South Koreas airport authority andUS teachers pension fund TIAA-Cref.However, TIAA-Cref pulled out earlierthis month.
BAA, part of Spanish infrastructurecompany Ferrovial, owns Heathrow,Stansted, Southampton, Glasgow andAberdeen airports.
It was made to sell one of itsScottish airports by the CompetitionCommission, and is contesting a rul-ing that it must off load Stansted.
If Stansted comes on the marketthen GIP is unlikely to be allowed tobid because of its controlling stakesin Gatwick, which it bought from
BAA for 1.5bn in 2009, as well as Cityairport.
THERES been a drama playingout over the past few days inLondon that in recent times wehavent seen enough of.A maker of luxury cashmere
sweaters worn by Prince William andJames Bond met fund managers togauge interest in a share flotation.
The fund management groups inattendance, who included CitadelGroup, Capital Ward Investmentsand Marshall Wace, were generallypositive about the company and did-nt automatically feel they were beingripped off by greedy private equitysellers advised by sharp-elbowed pri-vate equity advisers.
At the end of the presentations, inwhich the company extolled thevirtues of paying above average wages
to its workers in order to keep skillsfrom being exported to lower wageregions, the main worry for mostinstitutional investors was whetherthey would manage to get hold of anystock, with the offer eleven timesoversubscribed.
So far so good, but the problemwith this story as far as London is con-cerned is that the company, BrunelloCucinelli, is Italian and is listing not
in London but in Milan.Luxury goods companies tend to
head for the Far East these days butthe firms eponymous ownerBrunello Cucinelli is said to be quitenationalistic and preferred a float inhis home market.
How London could do with such an
enthusiastic backer.Whatever else the London StockExchange, the Mayor of London andthe Lord Mayor of the City of Londonare getting up to, between them theyhave failed miserably to make thecase for IPOs returning to London.The last major non-Russian IPO wasin July 2011 when Ophir Energy suc-cessfully raised 233m in London.
Indeed, London tends to make a rea-sonable case to oil and gas companies
but in so many other sectors it is fail-ing badly. I went to lunch last weekwith the London head of a leadinginvestment bank, who said his housewas advising at least two UK-basedcompanies on intended flotations inoverseas markets.
It is difficult to make complete
sense of the comments of DavidWootton, the Lord Mayor of the Cityof London, when he writes in City A.M.that London remains the worlds pre-eminent financial centre when suchan important aspect of finance amarket on which growth companiescan raise new equity remains effec-tively closed for business.
Of course, the disappointmentsthat followed the IPOs of companiessuch as Promethean World and
Supergroup, both of whom sufferedfrom sizeable share price falls lastweek, doesnt help Londons case.
But the time has now come foraction. An investment banker, whohimself doesnt much mind whichjurisdiction his companies f loat in,recently said that the more young
businesses go overseas for their equi-ty capital, the more that top talentwill follow the money. That must bethe likely outcome if the currenttrend continues.
Or instead the great and the good inthe City need to persuade those whoare thinking of going elsewhere thatthey will do all they can to make themarket attractive enough here.
INSIDETRACK
DAVID HELLIER
GIP boss Adebayo Ogunlesi has triumphed in another takeover battle
TUESDAY 24 APRIL 201213NEWS
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London needs a champion to revive new issue market
[email protected] me on Twitter: @hellierd
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Former City worker AjitChambers has been in touch tosay that he is being partnered bya billionaire investor to make a25m offer for the disusedBrompton Road railway stationin west London.
Chambers left the City to set upthe Old Underground Companywith a mission to make some-thing of Londons disused Tubestations. Hes talked to variouswould-be partners about holdingconferences, converting the sta-tions into rock climbing venuesand even holding wedding cere-
monies.In an ideal world Chambers
would re-open 26 empty Tubestations, deep-level shelters andman-made caverns for the pub-lic.
He first raised the idea withthe Mayor in a public meeting acouple of years ago, claimingthat he could create a companywith 200m turnover. BorisJohnson announced that thescheme was marvellous.The problem he now has with
Brompton Road, however, is thatthe station is currently not forsale, according to the Ministry ofDefence (MoD).The MoD says that all of its
sites, including Brompton Roadare under review.
Were reviewing the estate,says a press person, clearly agi-tated by the prospect of havingto answer questions about theproposed plans. And if we dodecide to sell assets they will besold under a competitive tender-ing process to get the best possi-
ble price for the department.Im afraid to say theres noth-
ing more to go forward with atthis stage.The MoD says there have been
discussions with Chambers butthese were in November of lastyear and a second meeting was
cancelled.The station itself is sometimes
used for training purposes and istherefore not a vacant site, saysthe spokesperson.
Maybe Chambers needs somehelp from Boris to get the projectoff the ground.
Entrepreneur makes a25m offer for station
Got A Story? [email protected]
14cityam.com
cityam.com/the-capitalistTHECAPITALISTMany economists have beenanticipating the return of the
drachma for some time but up until nowattempts to use the old Greekcurrency would have provedfutile. However, this week theReal Greek restaurant onBankside is accepting thedrachma for side dishesin a revival of thecurrency that went out
of circulation more than ten years ago.Diners dont have to worry about anexchange rate conversion (one suspectsthe drachma wont convert favourably
against most currencies) because theReal Greek is asking customers to
give what they think a dish isworth rather pay a fixed price.So, it may be time to search outall those old Greek notes andcoins.
TUESDAY 24 APRIL 2012
The drachma makes a City return
Ajit Chambers faces a stumbling block in his plans for Brompton Road
Outgoing SFO boss lets offsteam about Al YamamahThe outgoing head of the SeriousFraud Office has decided not to
go quietly.As his four-year term comes to
an end, Richard Alderman hasconcluded that massive damage
was done to the UKs reputation
for dealing with corruption whenit shelved a bribery investigationinto the Al Yamamah arms deal
with Saudi Arabia.I gave a presentation to some
judges in another jurisdiction inanother part of the world aboutthe UKs tough approach to
bribery. They listened. Theysmiled. And, at the end of it, theysaid, And now, Richard, tell usabout BAE and Saudi Arabia, hetold investigative website Exaro(www.exaronews.com).
The damage that was done by
what happened was great andwill last for a very long time, hesaid. It was very regrettable and
very unfortunate.The SFOs former head Robert
Wardle took the decision to dropthe probe but only after muchpressure from Tony Blair. Richard Alderman has hit out
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BREWER SABMiller said yesterdayits European chief Alan Clark willsucceed long-standing chief exec
Graham Mackay in July 2013 in areshuffle that will see the 62-yearold Mackay become chairman.
The move appears to fly in theface of the UK corporate
governance code, which suggestschief executives should not go onto become chairman of the same
group, although it can be allowed ifthe firm consults its shareholders.
Clark will be appointed chiefoperating officer at the groups
AGM in July. Meanwhile Meyer
Kahn will retire as chairman, andSue Clark, director of corporateaffairs, will take over from AlanClark as head of Europeanoperations.
BY HARRY BANKS
THE average trade size of FTSE 100stocks on the London Stock Exchange(LSE) shrank dramatically during thelast year, according to research byMorgan Stanley that sheds light onthe effect that automated trading ishaving on the market.
LSE data shows that the averagesize of a FTSE 100 trade was just over6,081 in January 2012, down from7,817 12 months previously.The change represents a 22 per cent
decline in trade size.Brian Gallagher, managing director
and head of European electronic
trading at Morgan Stanley, said thatthe trend is set to continue: Theaverage trade size will continue to beatomised as algorithmic tradinggrows. High-frequency trading firmspost quotes in multiple venues, andmany brokers have invested in tech-nology that allows them to hit sever-al quotes at one time.
This has driven marketmakers andhigh-frequency traders to quote evensmaller trades, and the overall tradesize will continue to get smaller, he
Computerisedtrading shrinks
FTSE 100 dealsBY CLARE HILL told Financial News.
Trading is becoming faster andmore compact, contrasting starklywith a decade ago when the averagetrade of FTSE 100 stock on the LSEwas around 60,000.
High-frequency traders, also knownas black-box players, plug algorithmsinto computers to generate numer-ous, lightning-speed automatic tradesthat are designed to make moneyfrom arbitrage on razor-thin price dif-ferences and movements.
Over the past ten years it has grownto become the dominant source ofliquidity for exchanges and alterna-tive trading systems but it has attract-
ed the interest of regulators.As a result, exchanges including the
LSE, Deutsche Boerse and Nasdaqhave all recently announced fines tocut out speculative trading in highvolumes that some of the high-speedtraders engage in.The industry hit the headlines in
May 2010, when it was blamed for theflash crash in the United States,when the stock market plummetedover a 1,000 points, or nearly 10 percent, in a matter of minutes.
Alan Clark (top) will replace Graham Mackay (l), while Sue Clark (r) will be Europe head
SABMiller PLC
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VIDEO rental company Netflix lastnight reported a first-quarter lossas the company pushed ahead withits expansion into internationalmarkets.
Netflix posted f irst-quarterrevenue of $870m, up 21 per centfrom a year earlier. Net income fell,and the company reported anearnings loss of eight cents a share.
Stocks, which had dropped fourper cent during the day, collapsedin after hours trading on the f irmsgloomy outlook, nosediving by afurther 16 per cent.
Netflix sharestank after loss
BY HARRY BANKS
TUESDAY 24 APRIL 201215NEWS
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SABMiller picks Alan Clark toreplace Mackay as chief exec
INVESCO is trying to sell its $18bn(11.2bn) wealth management
business, according to five sources.The Atlanta-based asset
management company wants to sellAtlantic Trust Private WealthManagement, which has $18bn inassets under management, becauseit is not core to its business, three ofthe sources said.
An Invesco spokesman declinedto comment.
Atlantic Trust has 11 officesacross the US and serves clientswith at least $5m in assets.
Invesco aims tosell $18bn arm
BY HARRY BANKS
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STAGECOACH yesterday reportedgrowth in its rail business, which
includes London commuterfranchise South West trains.The FTSE 250 transport company
gave an upbeat forecast for 2012across its businesses.
Stagecoach said that its like-for-like sales across its UK railoperations had risen by 8.8 per centin the 48 weeks to 1 April. Itsregional UK bus business posted a2.7 per cent increase in like-for-likesales weaker than rail.
That mirrored rival FirstGroupwhich said last month that lowereconomic activity, particularly inScotland and the North of England,had taken its toll on its bus division.
However, Stagecoachs NorthAmerica bus operations posted a 14per cent jump in like-for-like sales.
The US market has been a brightspot for UK transport operators.National Express Group also
reported a five per cent increase inNorth America revenue last month
while FirstGroup said its US schoolbus and Greyhound operationscontinued to perform well.
The company said: Overallcurrent trading remains good. We
believe the prospects for the groupremain positive and that each
wholly owned divisions remain wellplaced to at least maintain t heirlevel of operating profit in the yearto 30 April 2013.
UK rail divisiongives a boostto Stagecoach
BY HARRY BANKS
ROLLS-Royce yesterday said it hadwon a $598m (371m) contract toprovide engines for the US military.The 268 engines will be used in V-
22 Osprey aircraft.Rolls-Royce is the sole manufactur-
er of the engines for the V-22 and hasa string of contracts with the USarmed forces.
Patricia OConnell, Rolls-Roycespresident of customer business forNorth America, said: Rolls-Roycecontinues to be the world leader intilt-rotor engines and this long-termcontract reflects the confidence ourcustomer has in our expertise and
our technology.Throughout the length of this con-
tract, we will strive to furtherimprove performance and capabilityof this unique aircraft.
Rolls-Royce said the V-22 aircraftcan carry more troops, fly faster andhas greater range than the helicop-ters it will replace. The engines allowthe aircraft to take off and land like ahelicopter, but with better perform-ance.The manufacturer said that 70
Rolls-Royce andUS army agree
371m contractBY JOHN DUNNE
engines will be delivered in the firstyear of the contract for $151m.
A series of British engineers turnedin positive trading results last week,helping to buoy the sector.
Rotork, which makes valve controlsystems for the oil, gas and waterindustries, said first-quarter ordersrose 21 per cent, helped partly bygrowth in its gears business.
IMI reported higher first-quartersales after a strong performance fromits service arm, which deals withpower generation.
Rolls-Royce provides engines for 500airlines and 160 armed forces. Itemploys over 40,000 people in over 50countries.
Stagecoach chief executive Brian Souter sees promise in the firms rail division
CITYAM
Rolls-Royce Holding PLC
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Its a very satisfactory statement which provides scope for a modestincrease in our FY13 earnings forecast. But the good performance is fully reflect-ed in the share price, which seems to assume more growth in the US thanwe consider likely. We stick with our reduce recommendation.
ANALYST VIEWS
While some slowing in revenue growth was seen, the update broadlyreassured investors. Performance for its rail business remains solid, while expo-sure to the more buoyant US economy continues to serve it well. As suchanalyst opinion currently denotes a buy.
The message is reassuring the statement that the company expects all
divisions to at least maintain profitability has particular meaning for UK Busservices. With little dependency on concessions or contracts, it has con-sistently overperformed UK average growth rates.
WHAT IS THE OUTLOOKFOR STAGECOACH IN 2012AND BEYOND?By John Dunne
DOUGLAS MCNEILL CHARLES STANLEY
KEITH BOWMAN HARGREAVES LANSDOWN
PAUL HICKMAN PEEL HUNT
TUESDAY 24 APRIL 201216 NEWS
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IN BRIEFBP sues Argentinian firm Bridas
nBP yesterday sued Argentinas BridasCorp over a collapsed $7.06bn (4.37bn)asset sale, saying it is willing to pay a$700m breakup fee so long as it will notface fraud claims arising from itsconduct. The lawsuit stemmed from theNovember 2011 collapse of BPs plan tosell its 60 per cent stake in crude oilproducer Pan American Energy toBridas, which owns the remainder.
Borders dives despite gas find
n Oil explorer Borders & Southernyesterday said it made a significantdiscovery of gas condensate off thecoast of the Falkland Islands. It said thata well drilled on the Darwin prospect offthe south coast of the Falklands foundthe liquid, which often trades at apremium to crude oil. But shares in theAim-listed company fell by more than30 per cent as analysts said that the findcould take a long time to becommercially successful.
Gulf Keystone hails its best well
n Gulf Keystone, which focuses on oilprojects in Kurdistan, said that itsShaikan-4 well was producing 24,000
barrels of crude a day on test, making itthe companys best performing well. Thecompanys shares surged by more than 11per cent after the upbeat update.
FRENCH utility GDF Suezyesterday posted a 5.7 per centrise in first-quarter coreearnings, thanks to growing
demand for natural gas andcontract wins in fast-growingemerging markets throughBritish unit International Power.
At its annual shareholdermeeting yesterday, GDF Suezconfirmed it would detail itsnuclear review by mid-year, inthe wake of Japans Fukushimascare and countries subsequently
spurning nuclear power.GDF Suez said first-quartercore profit, or earnings beforeinterest, tax, depreciation and
amortisation rose to 5.8bn onrevenue up 10.5 per cent to28.2bn.
The group still expects 2012net recurring income to grow to
between 3.7bn and 4.2bn,
provided it completes theacquisition of the 30 per centstake it does not own inInternational Power.
RECENT calendar highlights boost-ed Greene King as strong sales onValentines Day, Mothers Day andSt Patricks Day drove business up4.5 per cent in the quarter.The pub operator said it sold
220,000 meals on MotheringSunday, a 16 per cent increase on2011 with wine sales up 18 per cent.
Greene King chief executiveRooney Anand said that following arecord Christmas the company iswell-placed to benefit from theDiamond Jubilee, the Euro 2012and the Olympics later this year.
Like-for-like sales at the Suffolk-based firm grew 4.6 per cent in the50 weeks to mid-April, with sales inLondon up 6.7 per cent.
Food sales have seen a 6.3 per cent
Mothers Dayboosts takings
at Greene KingBY LAUREN DAVIDSON rise, boosted by the launch of
Greene Kings new spring menus inthe run up to Easter.The group said its core ale brand
portfolio ended the 50 week periodup 0.8 per cent, compared to a 4.5per cent slump in the British alemarket.
ConocoPhillips lags forecastsas Kelloggs cuts 2012 targetsCONOCOPHILIPS, which issplitting into two stand-alonecompanies at the end of themonth, reported a lower-than-expected quarterly profit, hurt byweak refining margins.
Net profit for the first quarterwas $2.9bn, or $2.27 per share,compared with $3bn, or $2.09 pershare, a year earlier.
Excluding $330m on net specialgains, earnings were $2.02 pershare. That fell short of theanalysts average forecast of $2.08.
Refining and marketing profit
BY HARRY BANKSfell to $452m from $482m a yearearlier, while the oil and gasexploration and production armsearnings, excluding one-timeitems, declined to $2.13bn from$2.2bn.
Oil and gas production totalled1.64m barrels of oil equivalent perday in the quarter, down 65,000from a year earlier, but above the1.62m it had said earlier thismonth that it produced.
Meanwhile, shares in Kelloggsdropped after the worlds largestcereal company cut its full-yearoutlook following a disappointingfirst-quarter performance in
Europe and in some productcategories in the US.
Kelloggs now expects operatingearnings to fall two per cent tofour per cent in 2012, from itsprior forecast of flat or up slightly.It said sales should rise two percent to three per cent, down froma prior forecast for growth of fourper cent to five per cent.
There was also gloomy newsfrom toymaker Hasbro, whichreported a fall in sales and weaker-than-expected quarterly earningsas North American retailersstruggling with high inventoriesput off orders.
PROPERTY developer British Land has sold off five of the Virgin Active racquet sportsclubs it bought last July. The clubs in Gloucester, Neath, Manchester, Oxford and Poolehave been sold to three institutional buyers for a total of 33m, which the company saidrepresents an average net initial yield of 6.5 per cent.
BRITISH LAND SELLS VIRGIN ACTIVE SITES
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PHILIPS Electronics reported better-than-expectedquarterly results yesterday, buoyed by one-off gainsand a stronger performance at its consumer andhealthcare businesses, in the first signs of a long-awaited turnaround under new management.
Philips reported first-quarter net profit jumped80 per cent to 249m as sales climbed seven percent to 5.6bn. But the Dutch group warned that
the outlook for the rest of the year was stillworrying given the weak economic environment.
Philips surpriseswith turnaround
BY HARRY BANKS
TUESDAY 24 APRIL 201217NEWScityam.com
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GDF Suez benefits from gas as profits jumpBY HARRY BANKS