Home > Uncategorized > Business this week: 8th – 14th April 2006

Business this week: 8th – 14th April 2006

Business this week

Apr 12th 2006
From The Economist print edition

BAE Systems confirmed it had started talks to sell its 20% stake in Airbus to EADS (which owns the other 80%). The news marks the end of BAE‘s involvement with the project, which it joined in 1979. The proceeds of a sale, estimated at up to $8 billion, will probably be used to increase its presence in America’s defence industry, where the company is already a big supplier to the Pentagon. See articleE+

In the latest Vioxx court case, a jury in New Jersey awarded $9m in punitive damages to a man who claimed the painkiller had caused his heart attack. The decision was a blow to Merck because under New Jersey law the jury could make the award only if it believed the plaintiff’s case that the firm had withheld data on the risk from Vioxx.

Serono’s share price plunged after the Swiss-based biotechnology group said it is “terminating discussions” over a possible sale as it had received only inadequate offers. Several large drug companies have been mentioned as possible suitors for the firm over the past few months.

NASDAQ revealed it had become the biggest shareholder in the London Stock Exchange. It took a 15% stake for £448m ($780m), the bulk of which was sold by Threadneedle Asset Management. Two weeks ago, NASDAQ dropped a takeover offer that the LSE‘s board rejected as too low, but which pricked the interest of its institutional investors.

The Federal Deposit Insurance Corporation held an unprecedented hearing into Wal-Mart’s application to open a bank. The company insists it does not want to move into retail banking, but could save money by processing transactions through a state industrial bank (to be based in Utah). Opponents, from the banking sector and community groups, predicted that Wal-Mart will expand its plan, leading to the closure of independent banks serving rural markets.

The Enron trial in Houston saw Jeffrey Skilling, the firm’s chief executive for six months in 2001, take the stand. He has pleaded not guilty of the fraud that led to the energy-trader’s collapse.

The chairman of Hyundai Motor, Chung Mong-koo, apologised to South Koreans for becoming embroiled in a series of scandals involving political lobbying and slush funds. Prosecutors are to question Mr Chung and his son, who is the president of Kia, a Hyundai affiliate, over the allegations.

Compass, the world’s biggest food-services company, sold its travel-catering business. In a deal totalling £1.8 billion ($3.2 billion), a private-equity firm controlled by Sweden’s Wallenberg family will buy the firm’s railway and airport concessions, and Australia’s Macquarie Bank will buy its Moto motorway-service business in Britain. Compass will use some of the cash to complete its takeover of Levy Restaurants, an American counterpart that operates in large venues, such as Dodger Stadium in Los Angeles.

In the latest internet initiative by a traditional media company, Disney announced a two-month experiment that allows viewers freely to download popular series, such as “Desperate Housewives”, from its ABC website. Networks usually charge a fee to download programmes, but Disney’s plan relies on advertising revenue (viewers will not be able to fast-forward through commercials).

Samsung Electronics and Sony are expanding their joint venture in LCD flat-screens and will invest $2 billion in a factory in South Korea, just as other manufacturers are increasing their capacity. Analysts predict a further decline in the price of big-screen TVs, but LG.Philips, the world’s biggest maker of large LCD panels, said the drop in prices had hurt its profits, which fell in the first quarter by 85% from the last quarter of 2005.

The International Air Transport Association reached an agreement with Chinese authorities to open a new route that shaves half an hour from the flying time between China and Europe. Airlines have been pushing the country to ease restrictions on its airspace, of which only 30% is available for civil aviation.

The World Trade Organisation reported that exports in goods increased by 6% in 2005 (in real terms) and estimated they would rise by 7% in 2006. The surge in the price of oil and metals helped the share of fuels and mining products to reach 16% of global trade last year, its highest for 20 years.

The price of gold rose above $600 a troy ounce on April 11th for the first time since December 1980 before falling back. Investors looking for higher-yielding assets have helped raise the price of gold by over 40% in the past year. See articleE+

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