Business this week: 23rd – 29th September 2006

The spotlight stayed on Hewlett-Packard’s boardroom spying scandal as Congress prepared to grill company officials about the affair. The big question is how much Mark Hurd, HP‘s chief executive, knew about the methods used in an investigation to uncover a company leak? Mr Hurd is now chairman too: he took over when Patricia Dunn stepped down on September 22nd, soon after Mr Hurd gave his first public account of the shenanigans. Ms Dunn had intended to step down next January. See article

An American federal judge ruled that a claim filed in 2004 against tobacco companies, alleging that they misleadingly marketed “light” cigarettes as comparatively safe, could proceed as a class-action lawsuit. With the potential to include tens of millions of smokers, it is thought to be the country’s largest class-action suit yet. The share price of big tobacco firms fell sharply. See article

It emerged that Johnson & Johnson is seeking $5.5 billion in damages from Boston Scientific and Abbott Laboratories for breaching J&J‘s 2004 merger agreement with Guidant, a maker of medical devices. J&J eventually lost a protracted bidding war for Guidant to Boston earlier this year. Abbott was also involved in the deal.

A Parisian love affair?

Rick Wagoner and Carlos Ghosn held talks in Paris about the mooted alliance between General Motors, Renault and Nissan, Renault’s affiliate. It was the chief executives’ first meeting since the idea was floated by Kirk Kerkorian, an investor who owns almost 10% of GM, in June. Since then, speculation has increased that GM would rather concentrate on its own restructuring plans, but both sides agreed to continue exploring the “potential opportunities” of a deal and report in the middle of October.

PSA Peugeot Citröen announced cost-saving measures that include the loss of 10,000 jobs, or 7% of its European workforce. Europe’s second-biggest carmaker is suffering from an erosion of its market position, attributed to the staleness of its models.

Aer Lingus priced its initial public offering towards the lower range of expectations, valuing the Irish state-owned carrier at euro1.13 billion ($1.4 billion) when it starts trading next week. The flotation is regarded as a gauge of investors’ appetite for airline shares after recent security scares—Aer Lingus will be the first airline to make its debut on the London Stock Exchange since easyJet in 2000.

Jacob “Kobi” Alexander was arrested in Namibia, several weeks after he went on the run to escape charges in a stock-option scandal stemming from when he was chief executive of Comverse. American regulators are to ask for the extradition of Mr Alexander, whose flight initiated a global manhunt and numerous alleged sightings.

Andrew Fastow received a six-year prison sentence for the part he played in Enron’s collapse. The energy-trading company’s former chief financial officer had agreed to a ten-year term as part of a plea bargain, but the judge reduced this because of the “exceptional” help Mr Fastow had given to the prosecution.

Dragging E.ON and on

Germany’s E.ON raised its bid for Endesa by almost 40%, valuing a merger with the Spanish utility at around euro37 billion ($47 billion). E.ON acted after learning that Acciona, a Spanish construction group, had taken a 10% stake in Endesa, putting a further potential obstacle in the German company’s path. Spain’s government was criticised by the European Commission this week for its attempts to block the cross-border acquisition.

The battle for Endesa was not the only Spanish utility deal to excite investors. ACS, a Spanish building firm, bought a 6.3% stake, worth euro2.1 billion ($2.7 billion), in Iberdrola, the country’s second-biggest power company. ACS also dampened speculation that it was trying to pursue a merger with Union Fenosa, a utility of which it is the controlling shareholder, and displace Endesa as Spain’s biggest utility.

Consolidation among European drug companies continued apace as UCB reached an agreement to buy Schwarz Pharma for euro4.4 billion ($5.6 billion). The announcement came four days after Merck unveiled its acquisition plans for Serono, and Altana said it would sell its pharmaceutical business to Nycomed. See article

The price of oil briefly dipped below $60 a barrel for the first time since March. See article

Happy talk

American consumer confidence rebounded in September from August’s sharp fall (the news was one element pushing the Dow Jones Industrial Average towards a new high). Cheaper petrol prices were said to be the main factor fuelling the optimism.