Business this week: 3rd – 9th February 2007

Business this week

Feb 8th 2007
From The Economist print edition

Vornado Realty Trust withdrew its bid for Equity Office Properties, leaving the way clear for shareholders in America’s largest real-estate investment trust to accept Blackstone Group’s offer of $38.9 billion. The transaction sets a new record for a leveraged buy-out, underscoring the relentless takeover of public companies by private-equity firms. See article

Blackstone Group was one of four private-equity firms making up a consortium that expressed a keen interest in acquiring J. Sainsbury. The British supermarket chain has a market value of around £9 billion ($18 billion); if successful, the leveraged buy-out would be Europe’s biggest. See article

London’s latest landmark, the Gherkin, was sold for £600m ($1.2 billion), a record for the capital’s booming commercial-property market. The seller, Swiss Re, will remain in the building as its main tenant until at least 2031.

Steve Jobs called for an end to digital-rights management technology that protects music sold over the internet. DRM was insisted upon by big record labels, but Mr Jobs thinks it is inhibiting the growth of the online-music market. Some observers reckoned that Apple’s chief executive was trying to deflect criticism aimed at iTunes’ own FairPlay system from regulators in Europe. See article

The long and winding road

Meanwhile, a settlement was reached in a trademark dispute between Apple and Apple Corps, the Beatles’ music company. The agreement gives Apple ownership of all the “Apple” logo trademarks, but the computer-maker will license some trademarks back to Apple Corps. The two sides have been arguing since the early 1980s; fans now hope they can come together and make the Beatles’ songs available on iTunes.

There was more bother for YouTube over copyright infringement. Viacom, the owner of MTV, asked that all of its content be removed from YouTube’s website after the two sides failed to reach a distribution deal. Meanwhile, Jeff Zucker chose his first day as boss of NBC Universal to chastise YouTube for failing to address media copyright on video clips.

Eastman Kodak unveiled its line of desktop printers and low-cost ink cartridges. Troubled Kodak is hoping its new products will encroach on Hewlett-Packard and others by addressing consumers’ gripes about the cost of replacement cartridges for their printers (by weight, the ink within them costs more than caviar).

A case to answer?

A three-man panel of a federal appeals court in San Francisco ruled that the biggest sex-discrimination case in American history could proceed against Wal-Mart as a class-action lawsuit. The suit was brought on behalf of past and present female employees, who claim the retailer is biased towards men in pay and promotion. An estimated 2m women could join it. Wal-Mart fulminated against the legal basis of the case and said it would fight all the way to the Supreme Court if it had to.

The long-running takeover battle for Endesa moved closer towards completion when the board of the Spanish energy company recommended E.ON‘s latest €41 billion ($53 billion) offer to shareholders.

HSBC said that high rates of bankruptcy in America’s subprime mortgage market meant it would take a much higher charge than expected (estimated to be around $10.5 billion) on bad debts for 2006.

With the threat of huge lawsuits against cigarette-makers seemingly receding in the United States, Britain’s Imperial Tobacco decided to enter the market, agreeing to buy America’s Commonwealth Brands for $1.9 billion.

Chung Mong-koo, the chairman of Hyundai Motor, received a three-year prison sentence for embezzling company funds. The jail term surprised those used to the comparatively light sentences handed down in South Korean corporate cases. However, the court decided not to send the head of the country’s biggest carmaker to his cell straightaway, citing the need to protect the national economy during his appeal. Investors have been pushing for more transparency in the country’s chaebol.

Still full of eastern promise

The Shanghai stockmarket recovered somewhat after losing 11% of the value of its domestically traded shares in five days. The index surged last year, as improved earnings at Chinese companies spurred investor confidence. With one senior Chinese politician now warning that the market was overheated (and that most of the index’s companies should be delisted), some pondered if this was the inevitable end to a Chinese bubble. Cooler heads said it was just a market correction. See article