Business this week: 31st March – 6th April 2007

articles from this week’s edition of The Economist
Multinationals | Iran and the West | Russia’s Muslims | American trade policy | IBM and globalisation | A new explanation for depression | “Open skies” shake up Europe’s airlines | Mexico’s new president | BAA’s troubled future | The fighting gets worse in Somalia | Japan and China: a burgeoning friendship | How to make aid work | Insuring against political risk | France’s presidential candidates | Paul Lauterbur, father of MRI

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Business this week

Apr 4th 2007
From The Economist print edition

Texas Pacific Group, a private-equity firm, approached Spain’s Iberia airline with a euro3.4 billion ($4.5 billion) bid, the first attempt at a cross-border takeover in the airline industry since the agreement by European ministers to an “open skies” treaty with America. There was speculation that several other carriers were circling with rival bids.

Aeroflot, Russia’s state-owned airline, emerged as a surprise bidder for Alitalia. Italy’s government is selling its controlling stake in the national carrier and has whittled the list of buyers down to three consortia. All include some involvement from Italian firms, but Aeroflot’s has the least. Its partner, UniCredit bank, has a 5% stake in the bid.

Bottomless pockets

Kohlberg Kravis Roberts said it would take over First Data, which processes credit-card and other payments, in a $29 billion buy-out. The deal is unusual in that, given its size, it was made by a single private-equity firm (and not a “club” of firms) with the backing of several banks that are committing equity as well as debt.

In what would be Australia’s biggest takeover, Wesfarmers, a conglomerate based in Perth, revealed it owned more than 11% of Coles, a retailer, and was “pursuing discussions”. Wesfarmers is making its A$19.7 billion ($16 billion) offer in conjunction with several private-equity investors, including Macquarie Bank. A rival private-equity consortium, led by KKR, is also negotiating with Coles, having had its initial bid rejected.

Sam Zell, a property mogul based in Chicago, won the auction to buy Tribune, a media conglomerate which includes the Los Angeles Times and Chicago Tribune in its stable. Mr Zell fended off a rival bid from two Californian billionaires with his deal, valued at $8.2 billion. In order to pay down its debt, Tribune will sell some assets, including the Chicago Cubs baseball team.

The end for Endesa

The 18-month saga to take control of Endesa, Spain’s biggest power company, seemed to reach a conclusion. E.ON, a German utility, agreed to drop its euro42 billion ($56 billion) bid in return for some of Endesa‘s assets. It had faced both competition from an Italian-Spanish alliance that holds a 46% stake in the company and strong opposition from the Spanish government (which is being sued by the European Commission for hindering E.ON). Endesa will now be split among E.ON, Enel, an Ita
lian rival, and Acciona, a Spanish construction firm. See article

As the battle for Endesa drew to a close, another politically contentious takeover attempt for a European company looked set to begin. Italy’s telecommunications minister said he was “very concerned” at an offer from AT&T and América Móvil, a Mexican mobile operator, for most of the controlling stake in Telecom Italia held by Pirelli, a conglomerate and compatriot. See article

Auctions continued of the former assets of Yukos, a private Russian oil firm that was forced into bankruptcy by government tax claims. Eni and Enel, two Italian energy firms, became the first foreign firms recently to win control of Russian oil and gas fields. However, the pair have given Gazprom, the state gas company, the option to buy a controlling stake in the venture.

Dubai Aerospace agreed to buy two aircraft-maintenance companies in North America, one in Canada, the other in Arizona, from Carlyle Group for $1.8 billion. Charles Schumer, an American senator who opposed the takeover of operations in American ports by a company from Dubai last year, said this acquisition did not raise the same level of security concerns.

Apple announced that EMI had become the first big record label to unlock the digital-rights technology on its music sold through Apple’s iTunes online music store in an effort to boost sales. The news came shortly before the European Commission said it was initiating an antitrust investigation into whether agreements made between record companies and Apple restricted online music-sales through iTunes. See article

Google made its biggest foray into television advertising by announcing a partnership with EchoStar. The deal will allow the internet company, which has been experimenting with “offline” advertising over the past few months, to replicate its online system for buying, selling and measuring the impact of ads on EchoStar’s 125 satellite channels in the United States.

Planning a short break?

Mercer, a consultancy, released its annual quality of life index of cities around the world. The survey evaluated 215 cities on 39 factors, such as transport, education and political stability, and ranked them accordingly. European cities accounted for half of the top 50 places in the list and North American cities for 13.