Home > Uncategorized > Business this week: 2nd – 8th June 2007

Business this week: 2nd – 8th June 2007

articles from this week’s edition of The Economist
Innovation lessons from Apple | India’s economy continues to overheat | After the end of ETA’s ceasefire | Saying goodbye to Tony Soprano | Tax breaks for private equity | The worsening war in Sri Lanka | Getting wind farms off the ground | Muslims in the Caribbean | Slum clearance in China | Turkey mulls an invasion of Iraq | Two internet firms team up | The promise of modern cancer therapy | Books about Hillary Clinton | Indar Jit Rikhye, an Indian peacekeeper

Business this week

Jun 7th 2007
From The Economist print edition

Private-equity firms came under the spotlight after Gordon Brown, Britain’s chancellor of the exchequer, promised to bring “justice and equity” to the industry’s tax regime. Mr Brown, who will become prime minister later this month when Tony Blair leaves office, was speaking at a union conference where there was much discussion about the recent criticism, from the chairman of a prominent fund, of how managers at such firms pay a lower rate of tax than their office cleaners do. Private-equity managers have faced similar criticisms in America, where Congress held hearings in May. See article

Two private-equity firms agreed to buy Avaya, which provides telecoms equipment and networks to businesses, for $8.2 billion, the latest in a series of big buy-outs of technology-oriented companies.

It emerged that Ron Burkle, a supermarket magnate from California, has been approached by the employees’ union at Dow Jones, the publisher of the Wall Street Journal, about the possibility of a rival bid to Rupert Murdoch’s offer for the company. Mr Murdoch is in negotiations with the Bancroft family, which controls Dow Jones. Mr Burkle failed recently in a bid, with another investor, to buy the Tribune media group.

Vladimir Putin criticised BP’s Russian joint venture, TNK-BP, over its failure to meet production targets at the Kovykta gas field in eastern Siberia, in which the firm owns a majority stake. Speaking three days after regulators delayed a decision on whether to revoke the licence to exploit the field, the Russian president dismissed TNK-BP‘s argument that the authorities and Gazprom, the state-owned gas giant, were to blame for Kovykta’s slow development. Analysts expect TNK-BP to lose the licence unless a last-minute deal can be reached to sell a stake in the $20 billion project to one of Russia’s state energy firms.

Colony Capital, a private investment firm based in Los Angeles, won the bidding for control of Tamoil, a Libyan state-owned company that operates oil refineries and petrol stations in Europe. Colony will pay euro4 billion ($5.4 billion) for 65% of Oilinvest, Tamoil’s parent company, and Libya, which initiated a privatisation programme in 2003, will retain the remaining 35%.

Elevation Partners, a private-equity firm that lists Bono, a rock singer, as a partner, agreed to take a 25% stake worth $325m in Palm. The maker of hand-held mobile devices has been struggling of late to compete with wildly popular products, like the BlackBerry. The agreement with Elevation will bring in a new management team, including Jon Rubinstein, who headed Apple’s iPod unit, as executive chairman.

Ryanair reported that net profit had risen by 33%, to euro401m ($515m), for the year ending March 31st. But Europe’s biggest low-cost airline said it expected profit to slow in this fiscal year because intense competition with other carriers would lead to heavy discounting of passenger fares.

The $565m takeover of Wild Oats Markets, America’s second-biggest natural- and organic-food retailer, by Whole Foods Market, its biggest, was thrown into doubt when the Federal Trade Commission said it would try to block the deal. The FTC is concerned about the effect on competition among specialist retailers in natural and organic groceries, but Whole Foods argues that the regulator has excluded the big supermarket chains, which are expanding their natural and organic lines, from its analysis.

Segro, a British property company, said it would sell its portfolio of science-research parks and properties in California to Health Care Property Investors for $2.9 billion. The portfolio includes the Genentech complex near San Francisco. Segro wants to concentrate on Europe’s market for office space.

Stockmarkets endured a rocky week. The Dow Jones Industrial Average had its biggest two-day drop since February as comments made by Ben Bernanke, chairman of the Federal Reserve, made markets think an interest-rate cut was much less likely. In China, the government tried to calm investors following last week’s losses, caused by an increase in a tax on share trading that was intended to cool the markets. In response to the official reassurances the Shanghai composite share index fell by 8.3% on June 4th.

The European Central Bank raised its benchmark interest rate for the euro area by a quarter of a percentage point to 4%, its highest level since September 2001. Jean-Claude Trichet, the bank’s president, cautioned that inflation risks remained “on the upside”. Markets do not think the ECB had finished raising rates yet. See article

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