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Newspaper Briefing, including 'Facebook to make billions for founders and 1,000 millionaires in record sell-off' - The Times
The Times
Gilts: U.K. Government bonds took a stride backwards after manufacturing data from China, Germany, America and Britain proved surprisingly strong and Greece appeared to edge towards an accord with its creditors. The March gilt future settled 73 ticks lower at 116.52, while in the cash market the yield on ten year gilts rose five basis points to 2.03%.
Bet of the day: Spread-betters who bought the gold price at $1,530 an ounce at the end of last year were banking profits. Although the metal was higher again, after its best January for more than 30 years, punters were closing positions in readiness for possible weakness.
Deal of the day: IP Group, which commercialises bright ideas from British universities, jumped 14.5% to 101p, after a company in which it holds a 21% stake said that it would take further steps to make money from its know-how. Oxford Nanopore wants doctors to use its technology to “sequence strands” of DNA to help to identify and cure diseases.
Facebook to make billions for founders and 1,000 millionaires in record sell-off: Facebook Executives are set to become extremely wealthy after taking the first steps to becoming a publicly traded company in a move that could make the business worth up to $100 billion (61 billion). The company, which started life as a project in a university dormitory, filed for an initial public offering of shares (IPO) worth $5 billion, and is on track to become the biggest technology stock market debut in history.
Lloyds Chief to take away 5 million after state bail-out: David Cameron is facing a new row over rewards for banking failure after it emerged that Lloyds Banking Group is preparing to give its investment banking Chief a farewell package of up to 4.8 million.
Icap takes tough stance on bonuses: Icap has reined in bonus payouts to its City dealers as part of a cost-cutting drive that saved 20 million last year. The world’s largest interdealer broker — which stands between institutions in bond and derivatives deals — has also axed “a handful” of staff and renegotiated terms with suppliers.
To the world’s sovereign funds, Britain is a land of hope and glory: Britain has scooped more inward investment from the world’s sovereign wealth funds than Germany, France and Spain combined, a study of these secretive investment groups has found. The City U.K., which promotes the British financial services industry, estimated that Britain had attracted $68 billion, or 17%, of sovereign wealth fund investment in the six years to 2011, second only to the U.S.
Property is hit by City cuts: Only 1 billion of “bonus money” will end up in prime London property this year as the backlash against bumper payouts affects the property market. This compares with 5 billion invested at the peak in 2007.
The Independent
Retail guru Wrigley says the high street is in a ‘death spiral’: The former Chairman of the fashion retailer New Look has said the high street is in a “death spiral” and has recommended re-classing empty shops for residential use. Phil Wrigley, the Chairman of the retailer Majestic Wine, also criticised the recent report on the high street by Mary Portas, the self-styled Queen of Shops, as the “right diagnosis, wrong prescription”.
RBS sells historic stockbroker Hoare Govett to Jefferies: Royal Bank of Scotland has confirmed the sale of its historic U.K. stockbroking arm Hoare Govett to the U.S. investment bank Jefferies. The pair has been in talks for weeks over the deal, which comes as RBS’s Chief Executive, Stephen Hester, scales back dramatically the bank’s investment banking division.
Private equity firms vie for Iceland after Morrisons pulls out: The grocer Morrisons did not lodge a final-round bid to acquire Iceland Foods, the frozen food chain up for sale for up to 1.5 billion. The private equity firms Bain Capital and BC Partners are thought to be the only two parties that submitted second-round bids by the deadline of Tuesday.
Game may offload its loss-making overseas division: Game Group has appointed advisers at Rothschild to examine offloading parts of, or its entire, international operation. The troubled computer games retailer has 663 stores overseas, including in France, Sweden, Norway, Denmark and Australia, but the division made an operating loss of 15.8 million in the year to 31 January.
Low inflation sets up ECB rate cut: Mario Draghi, President of the European Central Bank, has breathing space to cut Eurozone interest rates to a new record low as the threat of rising prices fades, experts said. Inflation held steady at 2.7% across the single currency bloc in January, officials said – down on last August’s recent peak of 2.9%.
Financial Times
Johnson Matthey lifted by car industry: Strong demand from Asia and North America has helped Johnson Matthey to report a 34% jump in third quarter profits. The group said that revenues, excluding sales of precious metals, were 649 million in the three months to 31 December, an increase of 22% on the same period a year ago. Underlying profit before tax was 104.3 million.
Judge rebuffs BP on Transocean witness call: BP has been rebuffed by a judge over its bid to call Steven Newman, Chief Executive of Transocean, the drilling contractor, to appear in person at a trial in New Orleans this month over the Deepwater Horizon disaster.
Press regulator needs ‘investigatory arm’: Any new regulator of the press must have power to fine its members and should have an investigatory arm, the Leveson inquiry into press standards heard on Wednesday. Colette Bowe, the Chairman of Ofcom, the broadcasting regulator, told the inquiry that its statutory power to impose fines was very useful in maintaining the respect of broadcasters and other communications businesses.
BHP to abandon titanium mining: BHP Billiton is to abandon its involvement in titanium mining and has also confirmed cutbacks in nickel ore production in response to weaker metal prices and the impact of a strengthened Australian dollar. The world’s biggest mining company by market value confirmed on Wednesday it was selling its 37% stake in Richards Bay Minerals, the South African titanium producer, to Rio Tinto, which already owns a 37% stake.
Deloitte accused over MG Rover links: Deloitte and one of its former partners have been accused of misconduct over their links to the businessmen who presided over the collapse of British carmaker MG Rover.
GlobeOp shares soar after purchase by TPG: TPG Capital is to buy London-listed hedge fund administrator GlobeOp for 508 million ($805 million), in the U.S. private equity group’s first British financial services deal since it walked away from an investment in mortgage lender Bradford & Bingley in 2008.
Lufthansa reaches deal to dispose of BMIbaby: Lufthansa has reached a non-binding agreement with a U.K. group to dispose of its low-cost carrier BMIbaby. The move would shore up the price International Airlines Group has agreed to pay for the budget airline’s parent, BMI British Midland. The German flag-carrier has been working to offload the 14-aircraft budget airline ahead of the completion of the bigger disposal, since it would have to lower its 172.5 million asking price for BMI if BMIbaby remained part of the package.
Duke Street abandons effort to raise fund: Buy-out investor Duke Street has abandoned efforts to raise its next fund, in a strong indicator that the long-expected shake-out in the private equity sector has started in earnest. The mid-market buy-out group, which hit the headlines last year with its 215 million ($340 million) investment in Asian noodle restaurant chain Wagamama, has dropped attempts to raise a fresh 850 million fund after facing underwhelming investor demand, people close to the situation said.
Lex:
Facebook: doing it by numbers: There is, in the end, one number in Facebook’s IPO filing that really matters: 845 million people use Facebook every month. The user base is so big that it makes the traditional metrics for valuing an internet IPO look a little silly. It makes perfect sense to argue that Groupon, with its 29 million customers, is overvalued because its revenue growth is falling precipitously. But with 12% of the world population using Facebook’s product, the company could legitimately argue – as countless internet companies have illegitimately argued – that revenue is a secondary consideration in establishing a rational valuation. Facebook generated $3.7 billion in revenues last year (at a 27% net margin): about $5.11 in sales per user, a penny and a half a day. If they can increase that by 10% their revenues will grow by over $1 billion next year, even on the assumption that user growth stalls.
Nomura: a cautionary tale: Japanese group builds war chest, waits for stricken western rivals to sell discounted assets, then attacks. With Japan’s relatively well-funded banks currently eyeing a raft of likely European disposals, Nomura’s efforts to manage its ill-timed bid for bulge-bracket glory are still a cautionary tale. Since it bought large chunks of Lehman Brothers in the wake of the 2008 crisis and built up its operations in the U.S., Nomura’s shares have dropped 80%, underperforming domestic rivals such as Daiwa by 17% points. Nomura has also underperformed Barclays, the other bank to take on big Lehman businesses, by 50% points. Pretax profit margins averaged 16%, more than twice their level since. Now Nomura is four-fifths of the way through a $1.2 billion cost-cutting plan. It needs some global presence – four-fifths of all investment banking revenues still come from the U.S. and Europe, according to Dealogic. But a full-service global bank is not a path to profitability. Nomura’s rivals will almost certainly acquire more European assets – Sumitomo just bought RBS’s aircraft leasing business.
Benetton: the colour of money: Alessandro Benetton does not have to take his company private in order to restructure it. After all, the Benetton family owns 70% of the eponymous fashion label. However, the Deputy Executive Chairman is rich enough that the €280 million or so it will cost him to buy out the one-third of the company not already owned by Edizione, the family holding company with €7.2 billion of net assets, could be worth it. Benetton markets itself as a luxury retailer but shoppers are more likely to compare its pricey products to fast-fashion houses such as Zara or Hennes & Mauritz. As a result, Benetton has experienced zero sales and earnings growth over the past decade and shareholders have lost three quarters on their investment. The label has years of restructuring ahead of it and Mr Benetton will almost certainly cut the dividend to aid the company’s revamp, something that may further depress the share price in the short term. Edizione has offered minority shareholders about €4.60 a share, a premium of 50% to the undisturbed 30-day volume-weighted average share price, investors should probably take the money rather than risk a very uncertain future.
Lombard:
Investors underline need for Sly’s pay to mirror returns: The Company publishes the Daily Mirror, a tabloid whose punchy editorials are littered with bolding, italics and underlining. But disgruntled investors will be doing the straight talking when they meet new Chairman David Grigson. “How come,” they’ll ask, “Sly took home 1.7 million in salary, bonus and pensions contribution in 2006, 2007, 2009 and 2010 when the shares have fallen 90% since 2005?” The tough-minded former ad saleswoman earned almost as much in 2010 as Erik Engstrom, square-jawed Boss of Reed Elsevier, another media business. But Reed has a market capitalisation of more than 6 billion. That compares with a paltry 120 million for the newspaper publisher. Online competition, chunky debts and a decline in advertising have laid Trinity low. Ms Bailey’s base salary is 750,000. That looks about right for the Boss of a large but struggling business.
Phoenix flashback: A disciplinary complaint against retired accountant Maghsoud Einollahi and his erstwhile partnership Deloitte raises topical questions about the public responsibilities of bean counters. In 2000, four unimpressive Midlands industrialists called the Phoenix Four bought Rover Cars for 10 from BMW. The unprofitable Birmingham car maker, which had net assets of some 750 million, failed with 6,000 job losses in 2005. Meanwhile, Mr Einollahi, a corporate finance partner of Deloitte, helped the four who were, for a period, popular heroes in Birmingham, enrich themselves. According to a report from government commissioners published in 2009, this siphoned some 7.7 million derived from the car company’s tax losses into a Guernsey trust benefiting the quartet. Deloitte got fees of 1.9 million for that. Then there was Project Platinum, through which the men personally acquired Rover’s lucrative finance arm. The commissioners estimated the likely returns to the group at 14.3 million, adding to pay-outs and benefits of 36 million that were already “unreasonably large”. Deloitte’s total fees were 30.7 million.
The Daily Telegraph
John Clare wins Comet suppliers’ support ahead of OpCapita’s buy: Veteran retailer John Clare has secured the support of Comet’s major suppliers – just hours before the business is due to be sold to private equity. The former Dixons Chief Executive has met with the retailer’s key suppliers in recent days, after trade credit insurers placed their coverage of Comet “under review”, following the announcement that parent company Kesa planned to sell the business to OpCapita, a private equity firm.
U.K. manufacturing defies gloom with growth in January: The Markit/CIPS manufacturing purchasing managers’ index (PMI) rose to an eight-month high of 52.1, from 49.7 in December, where anything above 50 indicates expansion and anything below it indicates contraction.
BAE Systems pays Tanzania compensation after two years: Two years since BAE agreed to compensate Tanzania for the 30 million air traffic control system it sold the country and a year since the deal was rubber-stamped at Southwark Crown Court, the arms manufacturer is to pay up.
Bank account protection sought for large deposits: The Deputy Governor of the Bank of England has called for the creation of specialist bank accounts to protect people with temporary large deposits in the event of a bank’s failure. Paul Tucker, responsible for financial stability at the Bank, said that the accounts would be needed in the new era of bank reform, where only retail deposits of up to 85,000 will be insured.
The Questor Column:
Planned growth in dividend lights up National Grid: Utilities shares are attractive for widows and orphans – and the long-awaited dividend announcement from National Grid is what they wanted to hear. Every five years the companies have to submit a plan that balances the needs of investment, customer bills and a return on capital invested in the business. The U.K. regulated business constitutes about 60% of operating profit for National Grid. National Grid said it would raise its dividend by 4% in the year to March 2013. The group’s inflation expectations stand at about 3%, so this represents real growth in the payment. The RIIO-GD1 submission seeks baseline total capital and operating investment of around 13.5 billion over eight years, including 5.4 billion of replacement expenditure. If the business plans were adopted in full, the net impact for customers would be an increase in real terms of 1 a year on a typical household bill. It is looking for a return on equity of 7.2%, which is the figure investors should be interested in. In the U.S., National Grid has recovered $240 million (152 million) in deferred costs in New York approved last December. Questor downgraded the shares to a hold in October last year, when the shares were at 631½p. Questor is reassured by the fact that the group plans real dividend growth in the current period – and the yield is a very attractive 6.5% in the next financial year. National Grid at 632p +18½p. Questor Says “Buy”.
SSE is a hold as growth disappoints: Ofgem said it was fast-tracking proposals from SSE and ScottishPower and the regulatory timetable had been brought forward by eight months to April 2012. SSE said profit in the year to March will grow at the same rate as the last three years following a price rise in September. This means it will be in the 1.5% to 3% range, which is a little disappointing as some analysts may take a red pen to forecasts. The group is targeting 1,000 gigawatts of capacity a year from the site, which cost 500 million to build. It also expects power generation will resume from its 100-megawatt Glendoe hydro plant in Scotland in the middle of this year. The station, near Loch Ness, was closed soon after opening because of a rockfall in a tunnel, for which SSE is seeking damages from construction group Hochtief. SSE says it will deliver an increase of at least 2% more than RPI inflation in the full year dividend. This means the payout this year should be 80p a share. The prospective yield is 6.5%, rising to 6.8% next year. The shares were last tipped at 13.08 on 11 November last year, and are now 6% below that level against a market up by 3%. First tipped on 08 January 2009 at 11.83, the shares are now a hold. SSE at 12.23 +14p. Questor Says “Hold”.
The Guardian
Treasury rejects IFS thinktank’s suggestion of 10 billion budget tax cut: The Treasury is insisting that it will stick to its tough austerity plan despite being told by Britain’s leading financial thinktank on Wednesday that a 10 billion budget giveaway would be possible without running the risk of forcing the Bank of England to raise interest rates.
Job fears after BAE loses out in 7 billion Indian fighter jet deal: The government is again under fire for failing to support U.K. manufacturing after the Indian government declared France the preferred bidder to build 126 fighter jets in a deal worth 7 billion.
IMF official admits austerity is harming Greece: A leading architect of the austerity programme in Greece – one of the harshest ever seen in Europe – has admitted that its emphasis on fiscal consolidation has failed to work, and said economic recovery will only come if the crisis-hit country changes tack and focuses on structural reforms.
Tory MPs call for more knighted bankers to get Fred Goodwin treatment: Tory MPs are calling for Sir Victor Blank and Sir James Crosby to be stripped of their knighthoods for their roles in the merger of Lloyds and HBOS at the height of the financial crisis.
Daily Mail
Sanctions against Syria and economic woe in Spain take a toll on Imperial Tobacco sales: Imperial Tobacco’s sales have suffered a series of blows from international sanctions against Syria, economic gloom in Spain and destocking following price hikes in the U.S and Ukraine. The firm saw underlying volumes of the products it sold fall 7% in the final quarter of 2011, although revenues were down just 1% as it benefited from price rises and the sale of more expensive products.
Christie’s boosted by collectors as sales rise to record 3.6 billion: Art collectors are shrugging off recessionary worries by splashing out on lavish works to adorn their walls. For auction house Christie’s that is good news after sales in 2011 rose to a record 3.6 billion, a 9% rise on the previous year.
Tesco shifts U.K. Boss Bob Robbins after share sale row: The Tesco executive who pocketed more than 200,000 by selling shares in the company just days before a profits warning sent their price tumbling has been shunted out of his job running the group’s U.K. operations. Bob Robbins is being stripped of his responsibilities for day-to-day management of the business.
Broker Views:
Genus: Liberum Capital Ltd initiated the stock with “Buy” rating and a target price of 1200.00p
Synchronica: Paradigm Capital Inc maintained a “Buy” rating on the stock, with a target price of 31.61p
Cairn Energy: Canaccord Genuity Corp upgraded the stock to “Buy” and increased the target price to 327.00p
IP Group: Numis Securities Ltd upgraded the stock to “Add” and increased the target price to 98.00p
Travis Perkins: Goldman Sachs upgraded the stock to “Neutral” and increased the target price to 863.00p
Cove Energy: FirstEnergy Capital Corp downgraded the stock to “Market Perform” and decreased the target price to 165.00p
Daily Express
NYSE merger block: A $9 billion (5.7 billion) deal to create the world’s biggest operator of stock markets was blocked by the European Commission. The proposed tie between NYSE Euronext, whose interests include the New York Stock Exchange and markets in Amsterdam, Paris and Brussels, and German group Deutsche Boerse was blocked on competition grounds.
BAA’s Stansted blow: Airports group BAA must sell Stansted after losing an appeal against a ruling by the competition watchdog. The Owner of Heathrow airport said it was “dis¬appointed” by the decision of the Competition Appeal Tribunal and would consider whether to approve further challenges.
Unknown U.S. Boss hired to light up Argos: Home Retail Group has hired an American unknown in this country to run struggling catalogue business Argos. John Walden will take charge at the end of the month to revive sales at Argos which suffered a dire performance at Christmas as it lost out to supermarkets and internet rivals.
The Scottish Herald
Unexpected growth boost for manufacturing sector: U.K. manufacturing activity increased unexpectedly in January, a survey has revealed, but economists warned it was far too early to conclude the overall economy might avoid further contraction and technical recession in the first quarter.
Scottish retail sales lag behind rest of Great Britain: Scottish retail sales volumes grew by 0.7% in the fourth quarter of last year, trailing a 0.9% advance in this period in Great Britain as a whole, official data have revealed. The seasonally-adjusted rise in sales in Scotland in the final three months of 2011 followed a 0.2% drop in volumes north of the Border in the third quarter.
The Scotsman
Tate’s departure marks end of the Eric Daniels ‘old guard’ at Lloyds: The last of the old guard who worked for former Lloyds’ Boss Eric Daniels is quitting this month as part of a wider management shake up unveiled to ease pressures on his successor at the helm, Antonio Horta-Osorio.
Amazon says its drive for growth could see it slide into the red: Online retail giant Amazon has warned that the cost of its enthusiastic expansion could push it to a loss in the first quarter of the year. The Seattle-based firm has stepped up its spending on “fulfilment centres” such as its one million square foot base in Dunfermline, and has also been promoting its Kindle electronic book reader by selling it for little or no profit.
Standard Life wins 100 million case: Standard Life has won a legal dispute against a group of insurers who refused to pay out on a 100 million claim. The Commercial Court in London backed the Edinburgh-based life and pensions group, though the insurers have been allowed to appeal.
Fife firm showing extra energy as it moves into U.S.: M&C Energy, the Fife-based power consultancy specialist, extended its global reach by snapping up a U.S. rival in what is expected to be the first in a series of international deals over the coming weeks. The firm, known as McKinnon & Clarke until it was taken over by private equity firm Lyceum Capital in 2010, is understood to have paid a multi-million dollar sum for Arizona-based Coleman Hines.
Stork flying: Engineering group to unveil 25 million contract: Stork Technical Services will unveil a 25 million North Sea contract that will create 30 jobs at the company’s Scottish operations. The Dutch group bought Aberdeen-based RBG in May from private equity firm 3i and Dyce-based Ashely Group for an undisclosed sum and will rebrand the company under the Stork banner.
EDF snaps up controversial wind farm: EDF Energy has grabbed itself a larger slice of the Scottish renewable energy market after snapping up the operator of a controversial wind farm development in the Borders. The French power company remained tight-lipped about how much it had paid for Edinburgh-based North British Windpower, which is owned by 15 shareholders, according to documents filed at Companies House.
Cairn’s Brown elected to Icas role: Jann Brown, Finance Director and Managing Director of oil and gas explorer Cairn Energy, has been elected as junior Vice-President of accountants body Icas. The chartered accountant will succeed current Vice-Presidents Sir David Tweedie and Brendan Nelson to become Icas President in April 2014.
