Home > Uncategorized > Business this week: 12th – 18th May 2007

Business this week: 12th – 18th May 2007

Business this week

May 17th 2007
From The Economist print edition

DaimlerChrysler found a buyer for its troubled North American division. The German carmaker agreed to sell an 80.1% stake in Chrysler for $7.4 billion to Cerberus Capital Management, which said it would continue with Chrysler’s restructuring blueprint and also assume multi-billion-dollar liabilities for workers’ health-care and pension plans. Chrysler’s biggest labour union welcomed the deal, but negotiations are expected over the management and burden of benefits. See article

Meanwhile, DaimlerChrysler reported that quarterly net profit had more than doubled, to euro2 billion ($2.6 billion), compared with a year ago because Mercedes, its luxury-car unit, had revved up its performance, offsetting losses from Chrysler.

Hanson, once one of the world’s best-known conglomerates and now a supplier of building materials, agreed to an £8 billion ($15.8 billion) takeover from HeidelbergCement. Co-founded by the late Lord Hanson in 1964, the Hanson group made a series of “corporate raids” that gave it diverse interests, including tobacco, gold mining and chemicals. The conglomerate was split in four in 1996. See article

Tyco settled class-action lawsuits brought by shareholders for $3 billion. The conglomerate’s share price collapsed in 2002 amid an accounting scandal for which its former boss, Dennis Kozlowski (of the infamous $15,000 umbrella stand) and former finance chief were convicted. It is soon to split into three companies.

Warburg Pincus, a private-equity firm, said it would take over Bausch & Lomb in a $4.5 billion deal. The eye-care company was dealt a serious blow last year when it had to recall contact-lens solution that had been found to produce fungal eye infections.

Reuters and Thomson made their merger official in an £8.7 billion ($17.2 billion) transaction to create the world’s largest provider of financial data. The trustees that uphold Reuters’ independence gave their approval, but the deal will be scrutinised over the coming months by competition regulators in America and Europe.

Spain’s Telefónica sold its 75% stake in Endemol, a Dutch media-production company that is responsible for starting the fashion for reality-TV with programmes such as “Big Brother”. The stake was bought for euro2.6 billion ($3.5 billion) by a consortium that includes Mediaset, the Italian media group controlled by Silvio Berlusconi, Italy’s former prime minister. The low cost of Endemol’s programming is a hit with broadcasters worldwide. Telefónica is divesting its interest to focus on its core telecoms business.

Germany’s Merck said it would sell its generic-drugs business to Mylan, based in Pennsylvania, for euro4.9 billion ($6.6 billion). The deal provides Mylan with a foothold in 90 countries where Merck retails the drugs, but some analysts fear that the price Mylan is paying, which is greater than its own market value, is too high.

Citigroup had its best day on the stockmarket in four years after it emerged that Edward Lampert, a hedge-fund manager with a reputation for investing in undervalued shares, had bought a stake in the bank worth $800m.

Amazon said it would open a digital-music store later this year, underscoring the desire among online retailers to offer music free from digital-rights protection and enable downloads on to all types of music players. Following a similar deal with Apple, EMI will make its catalogue of songs available on Amazon’s site.

Harrah’s Entertainment declared it would build a casino and resort at Biloxi, Mississippi, that will cost around $1 billion. Named Margaritaville, the venture is being planned together with Jimmy Buffett, a singer-songwriter, and is described by the company as the single largest investment in the Gulf state since Hurricane Katrina struck in 2005.

The Organisation for Economic Co-operation and Development invited Chile, Estonia, Israel, Russia and Slovenia to begin membership talks. The Paris-based club of industrialised countries, which has admitted only one member in the past decade, is also strengthening its ties with Brazil, China, India, Indonesia and South Africa.

A raft of statistics indicated that the housing market in America is still anaemic and might remain so for some time. The number of building permits, a signal of future construction, fell in April to its lowest level for ten years. The housing-market slump continued to have knock-on effects. Quarterly net profit at Home Depot, America’s biggest home-improvement retailer, dropped by 30%, compared with last year, to $1 billion.

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