Home > Uncategorized > Business this week: 17th – 23rd February 2007

Business this week: 17th – 23rd February 2007

Business this week

Feb 22nd 2007
From The Economist print edition

In a closely watched decision America’s Supreme Court overturned punitive damages of $79.5m against Philip Morris that were handed down by a jury in 1999. The case centred on an Oregon man who had smoked for 42 years and died of lung cancer. The Supreme Court ruled that the jury’s award to his widow had overstepped the mark by punishing the cigarette-maker for harm done to others, but it failed to set any limits on future punitive-damage awards and sent the case back to Oregon’s state Supreme Court for a new hearing. See article

The European Commission slapped its biggest-ever antitrust fine, €992m ($1.3 billion), on five lift manufacturers it accused of operating a cartel. Germany’s ThyssenKrupp and America’s Otis were among the companies the commission said had “artificially bloated” the construction and maintenance costs of buildings in European countries.

After years of intense rivalry, Sirius and XM announced their intention to merge. Once considered the new kids on the block, the satellite-radio networks have been struggling to respond to competition from recent advances in broadcasting, such as through the internet. Their merger is far from certain; America’s communications and antitrust regulators promised that the $4.6 billion deal will be heavily scrutinised. See article

Google encroached further into Microsoft’s territory by offering businesses a new set of web-based word-processing and spreadsheet services. The internet company released a similar package to consumers last year.

Another effort is under way to combine Warner Music and EMI. Warner confirmed it had approached EMI after obtaining support from IMPALA, the trade group for independent music-labels in Europe. Last year IMPALA complained to the EU that consolidation among big music companies would hurt competition.

The board of Portugal Telecom rejected an improved €11.8 billion ($15.5 billion) bid from Sonae, a Portuguese conglomerate, and bolstered its defences by announcing a €6.2 billion shareholder-remuneration package. The saga of what would be Portugal’s biggest takeover has been rumbling on for a year.

Banco Bilbao Vizcaya Argentaria made its biggest acquisition outside Spain when it agreed to buy Compass Bancshares in a $9.6 billion transaction. BBVA has been steadily increasing its business in the southern and south-western United States, on account of the region’s growing Hispanic population. Compass, based in Birmingham, Alabama, operates more than 415 banks from Arizona to Florida, including 164 in Texas.

Sberbank, Russia’s largest savings bank, looks likely to have raised $8.8 billion from its share offering, the country’s second-biggest following last year’s issue by Rosneft, an oil firm. Sberbank’s sale raised a bit less than had been forecast by analysts. Some investors had grumbled that the prospectus was only available in Russian and that the bank (unlike Rosneft) won’t be selling shares on foreign exchanges.

HSBC replaced the head of its North American unit, which has been reeling from losses in the subprime mortgage market. Meanwhile, the share price of NovaStar Financial plunged by 40% as it revealed losses in the subprime market.

EADS, the parent company of Airbus, delayed launching a long-awaited restructuring plan because of “cross-national” difficulties about job costs and workloads related to the A350XWB. Last year Airbus was beset by production delays surrounding its A380 super-jumbo; both projects are crucial to Airbus’s future competition with Boeing.

A plan to merge India’s two biggest state-owned airlines, Air India and Indian Airlines, came closer to fruition after it was approved by the country’s aviation minister. The proposal will create a national carrier that could compete as one of the world’s top 30 airlines. The minister also said that a promised merger announced last month between two private domestic carriers, Jet Airways and Air Sahara, would be permitted.

Sweden’s Volvo agreed to buy the 81% of Japan’s Nissan Diesel it does not own in a SKr7.5 billion ($1.1 billion) deal. The combined company will overtake DaimlerChrysler to become the world’s biggest maker of heavy lorries.

Japan’s Topix stockmarket index (a broader measure than the Nikkei) reached its highest level since November 1991, helped by share prices of big banks which rose in response to the Bank of Japan’s decision to raise interest rates by one-quarter of a percentage point, to 0.5%.

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