Business this week: 15th – 20th December 2006

Business this week

Dec 19th 2006
From The Economist print edition

Nokia and Siemens put back the planned merger of their telecoms-equipment businesses (agreed on last June) because of a widening investigation into a bribery scandal at Siemens. German authorities are looking into various allegations, including that company money, amounting to possibly euro420m ($550m), was siphoned into secret accounts to sweeten potential customers.

Apple Computer delayed filing its annual report (for the year to September 30th) because it needs to restate some earnings to account for stock-option grants. The company is the biggest out of dozens this year, mostly in the tech industry, to have reported the backdating of stock options.

Biomet agreed to a $10.9 billion buy-out from a group of private-equity firms. The designer and maker of artificial joints also said it would postpone its quarterly earnings after an internal review found that its procedures for granting stock options “were not well documented”.

End of the road

Italy‘s Autostrade and Spain’s Abertis scrapped their euro25 billion ($33 billion) plan to merge. The cross-border deal, which would have created the world’s biggest toll-road operator, faced strong political opposition in Italy.

Japan Tobacco made an offer to buy Gallaher, a British cigarette-maker. At £7.5 billion ($14.7 billion), it would be the biggest-ever foreign acquisition by a Japanese company. Speculation mounted that rival bids were being prepared.

Private-equity firms Kohlberg Kravis Roberts and Permira bought a controlling stake in ProSiebenSat.1, valuing the German commercial broadcaster at around euro5.6 billion ($7.4 billion). The new owners want to combine their new purchase with other media assets they hold in Europe, so presenting a challenge to RTL, a broadcaster that operates in 11 countries and is owned by Germany‘s Bertelsmann.

Thailand‘s central bank was forced into a humiliating retreat after imposing capital controls designed to rein in the soaring baht. After the stockmarket plunged, it removed curbs on foreign equity investors, but left restrictions on other non-trade inflows. See article

Housing trust

Apollo Management, a private-equity firm, agreed to pay $9 billion for Realogy, a real-estate company that includes the Century 21 and Coldwell Banker franchises in its portfolio. Some analysts viewed the deal as a vote of confidence in America’s housing market amid signs that this year’s price falls may be bottoming out. Realogy was formed this year after the break-up of the conglomerate Cendant.

Express Scripts made a counterbid for Caremark, valuing its rival at $26 billion. Both companies manage pharmacy services to consumers and health-care firms. Last month CVS, America’s biggest retail-drug chain, made an offer to acquire Caremark, but the deal failed to inspire investors.

Australia‘s competition regulator said it would review the A$11.1 billion ($8.6 billion) bid for Qantas Airways from a private-equity consortium led by Macquarie Bank. The carrier’s board initially rejected the offer but then approved it to shareholders after the consortium dropped its break fee. The regulator will investigate whether, among other things, Macquarie’s 49% stake in Sydney airport would hinder airline competition.

Westinghouse Electric won a much-sought contract to build four nuclear reactors in China, which is expanding its use of atomic power. Much was made of the politics behind the deal. Westinghouse is owned by Japan‘s Toshiba, possibly signalling a thaw in Sino-Japanese relations, but is based in America. The news came after trade talks in Beijing between senior American and Chinese officials.

Statoil, Norway’s state-controlled oil company, agreed to buy the oil and gas assets of Norsk Hydro, a compatriot in which the Norwegian government has a 44% stake. The combined company will have a market value of some NKr616 billion ($97 billion) and will be the world’s largest offshore operator. Both companies have been looking at ways to expand since they (and others) were passed over as potential partners in the Shtokman gas field by the Russian government in October.

Back to earth

Following a 4% cut in output that came into effect in November, the Organisation of Petroleum Exporting Countries said it would reduce production by a further 2%, to 25.8m barrels a day, from February 1st. The oil cartel’s decision came despite the urging of Samuel Bodman, America’s energy secretary, not to do so. Meanwhile, OPEC announced that Angola would become its 12th member from January 1st, the first country to join the organisation since Gabon (which has since left) in 1975.