Home > Uncategorized > Business this week: 14th – 20th July 2007

Business this week: 14th – 20th July 2007

Business this week

Jul 19th 2007
From The Economist print edition

EADS announced that it was streamlining its management structure. The European aerospace and defence company has been hampered by meddling politicians in France and Germany, its primary backers, and the dual-management structure was criticised by many for being unwieldy. Louis Gallois will become EADS‘s sole chief executive. Tom Enders, currently EADS‘s other co-chief executive, becomes head of Airbus. See article

The board of Altadis, a Franco-Spanish cigarette company, accepted a third takeover offer from Britain’s Imperial Tobacco. The euro16.2 billion ($22.4 billion) deal gives Imperial Altadis’s continental and Moroccan operations and its profitable cigars business (it has a 50% stake in Cuba’s Habanos). Imperial’s bid trumped a rival offer from CVC Capital Partners, thus raising further questions about whether the private-equity boom was tapering off. See article

There was another big deal in the plastics industry. Basell, a private firm which is owned by Len Blavatnik’s Access Industries, agreed to meld with Lyondell Chemical, based in Houston, in a transaction valued at $19 billion. The acquisition is welcome news for Mr Blavatnik, an industrialist who sits on the boards of RUSAL, Russia’s biggest aluminium company, and TNK-BP, BP‘s joint venture in Russia. Last week Apollo Management, a private-equity firm, managed to tempt Huntsman, a chemicals company, away from an agreed takeover by Mr Blavatnik with a $10.6 billion offer.

J. Sainsbury received a preliminary approach from a property investment-fund that is owned by the government of Qatar and which already holds a 25% stake in the British supermarket chain. The retailer rejected a putative private-equity buy-out in April.

The chief executive of Whole Foods Market, America’s biggest natural- and organic-food retailer, apologised for posting derisive comments about Wild Oats Markets, a rival with which it wants to merge, on an online financial message-board. John Mackey said the remarks, which were posted under a pseudonym and are now being investigated by regulators, were an “error of judgment”. See article

EMI recommended that shareholders accept a buy-out offer from Terra Firma Capital Partners after Warner Music decided not to make a rival bid. The British and American music companies have danced around a merger several times over the past few years.

A consortium of banks led by Royal Bank of Scotland sweetened its euro71 billion ($95 billion) bid for ABN AMRO by raising the cash proportion of its offer. All eyes are on the response of Britain’s Barclays, which first unveiled a takeover plan in an all-share offer that was accepted by the Dutch bank in April.

Merrill Lynch and JPMorgan Chase reported a rise in second-quarter net profit of, respectively, 31% and 20% compared with a year earlier. The investment-banking and asset-management businesses of both firms remain robust, but worries persist about their future exposure to defaults in America’s housing market.

Rupert Murdoch came a step closer to taking over Dow Jones when the company’s board recommended to shareholders a $5 billion offer from News Corp, Mr Murdoch’s media conglomerate. The remaining obstacle to a deal is the Bancroft family, which controls 64% of the voting shares in Dow Jones. It will meet next week.

Japan’s best-known shareholder activist, Yoshiaki Murakami, a former trade-ministry official, was found guilty of insider trading and sentenced to two years in prison. His Murakami Fund was charged with receiving inside information from livedoor, whose boss, Takafumi Horie, is appealing against a separate sentence. Prison convictions in white-collar cases are rare but, unusually for Japan, both men pleaded innocent.

China’s GDP in the second quarter grew at its fastest rate in 11 years, and inflation rose to 4.4% in the year to June. Analysts debated what, if anything, the government could do to cool the economy.

The euro reached another record high against the dollar as investors shied away from American assets amid concerns about the fallout from losses in America’s subprime-mortgage market. Meanwhile, Nicolas Sarkozy continued to press the European Central Bank over its policy on the euro. The French president thinks the currency’s strength is hurting exports and growth and hinted that Germany was moving towards his position on the matter. But Angela Merkel, Germany’s chancellor, reiterated her view that the ECB should remain focused on holding inflation down.

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