Business this week: 2nd – 8th December 2006

Pfizer’s share price plunged after higher-than-expected mortality and side effects reported during a clinical trial led it to scrap a drug it had been developing since 1992. Torcetrapib boosted “good” cholesterol and had been touted by the company’s head of research as the biggest advance in cardiovascular medicine in years just two days before he pulled the plug. The decision leaves Pfizer without anything in the highly lucrative cholesterol-drug market to replace Lipitor when its patent expires in 2010. See article

Two of America’s most venerable financial institutions agreed to merge in a $16.5 billion deal. The combination of Bank of New York, which Alexander Hamilton helped to set up in 1784 before he became America’s first treasury secretary, and Mellon Financial, founded in Pittsburgh in 1869, creates the world’s biggest firm in the business of safeguarding and administering securities, with $16.6 trillion in assets under custody. See article

The merger of NYSE Group, owner of the New York Stock Exchange, and Euronext, operator of several European stockmarkets, came a step closer when it was approved by regulators in Europe. The deal has faced opposition from those who claim it will lead to American financial regulations being imposed on Europe, which NYSE and Euronext addressed by creating a regulatory structure to assure the independence of the European exchanges. The decisive hurdle for the deal is a vote by Euronext’s shareholders on December 19th.

Ups and downs

Airbus launched the delayed A350XWB (bad reviews led to a redesign). The jet will enter service in 2013 and is crucial to troubled Airbus in its competition with Boeing. However, Airbus’s cheerier mood was dampened when Lufthansa, a reliable customer, decided not to add to its order of A380 super-jumbos and went with an updated version of Boeing’s 747 instead. See article

The Italian government confirmed it would sell part of its 49.9% stake in Alitalia. The size of the chunk it is selling, 30.1%, is bigger than had been indicated, but conditions were attached to the sale including job security at the airline.

NTL, a cable and telephone operator, abandoned its attempt to win control of ITV, Britain’s biggest commercial broadcaster. NTL‘s plans were scuppered when BSkyB, a rival television company that is part of Rupert Murdoch’s News Corp, took a 17.9% stake in ITV. NTL complained to regulators about what it says are the “serious competition and public interest issues” of BSkyB’s stake.

Gallaher confirmed it had received a preliminary takeover approach, speculated to be from Japan Tobacco. The British tobacco firm, valued at some $15 billion, has expanded its business in Russia and is an attractive target for cigarette-makers wishing to peddle their wares outside America and Europe, where smoking is on the decline.

The Hard Rock chain of restaurants and casinos was sold to a subsidiary of the Seminole Tribe of Florida, which pioneered the opening of casinos on Native American land, for $965m. Rank, the sellers of Hard Rock, want to concentrate on their gambling businesses in Britain.

A recipe for success?

The chief executive of Yahoo! restructured its senior management and created a new unit that will focus entirely on advertising sales. Concern about the company’s future revenue from advertising is one reason behind the 30% fall in its share price this year. The management shake-up was nicknamed “Project Soufflé”.

Meanwhile, a new venture was unveiled between Yahoo! and Reuters to use amateur images from events such as the Asian tsunami and London tube bombings in online news reports. Material uploaded to You Witness will still be seen by editors.

LSI Logic, a chipmaker that specialises in semiconductors for DVD recorders, data storage devices and personal music players, said it would buy Agere Systems, an integrated-circuit components company, for $4 billion. The deal gives LSI a presence in the market for mobile-phone chips.

The fall in America’s housing market hurt profit at Toll Brothers, a builder of luxury homes, which reported that net income had dropped by 44% in the three months to October 31st compared with a year earlier. However, Toll Brothers’ share price rose after its boss said the market was “dancing on the bottom or slightly above” and appeared to be stabilising.

What to make of it

New orders for manufactured goods at America’s factories dropped by 4.7% in October compared with the previous month, the biggest fall since July 2000. Orders for durable goods fell by 8.2%.