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Business this week: 21st – 27th July 2007

July 26, 2007 Leave a comment

Business this week

Jul 26th 2007
From The Economist print edition

Britain’s Barclays raised its offer for ABN AMRO, a Dutch bank, to around euro68 billion ($93 billion) and added a cash component, of 37%, to its previous all-share proposal. The tender from Barclays remains lower than a rival bid for ABN AMRO from a consortium of European banks led by Royal Bank of Scotland, of which 93% is cash. In order to raise the money, Barclays sold small stakes in its business to a Chinese state-owned bank and a Singaporean government-controlled holding company, the largest overseas investments yet made by both China and Singapore. See article

Resolution struck an £8.6 billion ($17.7 billion) deal to merge with Friends Provident, so creating one of Britain’s biggest life insurers.

General Electric’s consumer-finance division unveiled the first credit card in the United States that offers “rewards dedicated to reducing cardholders’ carbon emissions”. The initiative is part of the company’s scheme to chalk up $20 billion in green sales by 2010.

Siemens ended months of market speculation about the future of its auto-parts unit when it announced a deal to sell it to Continental, a tyre manufacturer, for euro11.4 billion ($15.7 billion). It had been thought the unit, which is the biggest supplier of air-bag systems in the world, might be spun off as a separate company. As well as a sale, the German engineering group, which is in the midst of a restructuring process, made a purchase: Dade Behring, an American medical diagnostics company, for $7 billion. See article

Two oil and gas drilling companies, Transocean and GlobalSantaFe, agreed to merge in an $18 billion deal. Based in Texas, the combined company will run the world’s biggest fleet of oil rigs. The rents for oil rigs have been rising fast thanks to the scramble for deepwater oil reserves; some are leased out for as much as $500,000 a day.

Apple’s quarterly profit increased by 73% compared with a year ago, boosted partly by the sale of 9.8m iPods in the period. The company’s earnings relieved pressure on its share price, which fell earlier after AT&T reported that only 146,000 iPhones had been activated in its first weekend of sales, much lower than analysts had forecast. Apple said it sold 270,000 iPhones in the 30 hours to the end of June 30th, covered in its earnings.

TomTom, the market leader in portable mapping devices, said it would buy Tele Atlas, another Dutch company, for euro1.8 billion ($2.5 billion). TomTom has around half of Europe’s market for satellite-navigation products and a quarter of North America’s. But it could be hampered in the future by the fashion for adding built-in mapping systems to cars and phones.

Vodafone’s shareholders easily defeated a proposal from an activist investor (albeit with just 0.0004% of the company’s shares) that would have forced the mobile-phone giant to sell its 45% stake in America’s Verizon Wireless.

Amazon said quarterly net profit had more than tripled compared with a year earlier, to $78m. The online retailer’s North American sales are booming and the rate of growth of its operating profit, which slowed as Amazon invested heavily in new technology, was up. Amazon’s share price rose by 24%.

Merck also delighted investors when it reported a 12% rise in quarterly net income, compared with a year ago, and improved its profit forecast for 2007. The drugmaker is rebounding from a bad stint that saw it lose patent protection on its bestselling treatment for reducing cholesterol and fight lawsuits over the safety of Vioxx, a pain reliever. Merck is still contending some 27,000 of those suits, but sales of other drugs, including the first vaccine for cervical cancer, are soaring.

Credit markets had a wobbly week. Bankers postponed a sale of $12 billion in debt funding the buy-out of Chrysler, a sign of the difficulties Wall Street is starting to experience in raising money for leveraged buy-outs. The sale of some senior debt in Europe’s biggest LBO, of Alliance Boots, was also delayed.

There was more bad news from America’s housing market. Poor earnings from the country’s biggest independent mortgage-lender and nervousness about credit woes helped cause markets to plunge on July 24th (the Dow Jones Industrial Average had its worst one-day fall in more than four months). And figures for June showed that sales of existing homes were at their lowest level since November 2002. There was one glimmer of hope: the median price of a home rose, year on year, for the first time in 11 months, by $800, to $230,100.

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Politics this week: 21st – 27th July 2007

July 26, 2007 Leave a comment

Highlights from this week’s edition of The Economist
Demography | Sovereign-wealth funds | Five years of Sarbanes-Oxley | After Turkey’s election | Urbanisation in China | Gadgetry and aid workers | America’s prisons | Britain inundated, again | Congo threatens a return to chaos | Outsourcing grows up | How to make wind power hum | Mohammed Zahir Shah, last king of Afghanistan

Politics this week

Jul 26th 2007
From The Economist print edition

Getty Images
Getty Images

The Justice and Development (AK) Party won Turkey’s general election, handing prime minister Recep Tayyip Erdogan a second term in power and a mandate to continue with his reforms. The election had highlighted the tensions between Turkey’s secular establishment and the Islamic AK Party, but America and the European Union hailed the result as proof that Turkey’s democracy was maturing. See article

Unions in Italy accepted a pension-reform package drawn up by the government. Italy has Europe’s oldest population and the minimum retirement age will now rise to 60 in 2011. See article

A new round of negotiations on the future of Kosovo got under way after Russia stymied a United Nations Security Council vote on a plan drafted by its mediator, Martti Ahtisaari. Serbia’s parliament passed a resolution that threatened to cut ties with any country that recognised Kosovo’s independence. See article

Vladimir Putin, Russia’s president, said that the behaviour of Britain over its request to extradite the suspect in the murder of a former Russian agent in London last year was “clearly a remnant of a colonial mindset”. Russia expelled four British diplomats last week in a tit-for-tat response to the expulsion of four Russian diplomats from Britain over the Litvinenko affair. See article

Britain endured its worst flooding in decades, with towns and villages along the Severn and Thames rivers and their tributaries being particularly hard hit. It is the second bout of severe flooding in Britain this summer, caused by seemingly endless rain. See article

The Tour de France was beset by doping and other scandals. Michael Rasmussen, the Danish race leader, was dismissed by his Rabobank cycling team for allegedly lying about his whereabouts during training, which the sport’s rules require him to reveal.

Brazil’s president, Luiz Inácio Lula da Silva, sacked the defence minister after a plane crash last week killed 199 people at São Paulo’s Congonhas airport. The crash followed months of chaos in Brazil’s air traffic system, which is run by the air force. The government announced restrictions on flights at the airport, the country’s busiest, and hundreds of flights were cancelled or delayed because of safety fears over its use
in bad weather.

Venezuela’s leftist president, Hugo Chávez, said that foreigners who publicly criticised him while visiting the country would be expelled. He also said that a new draft constitution would allow indefinite re-election of the president, but not of state governors.

EPA
EPA

The Democrats held another debate. In an unusual format, the candidates took questions from video clips sent to YouTube, which co-hosted the event. Hillary Clinton was thought to have won. The only heated moment came when she disagreed with Barack Obama‘s position on talking to the leaders of hostile countries. See article

George Bush issued an executive order, required by legislation passed last October, setting out the legal boundaries of CIA interrogations. The order complies in broad terms with the Geneva Conventions’ ban against “degrading treatment”. Human-rights groups criticised it for its lack of detail about actual interrogation techniques.

The House Judiciary Committee found Joshua Bolten, Mr Bush’s chief of staff, and Harriet Miers, the former White House counsel, to be in contempt for not testifying to Congress about last year’s sacking of nine federal prosecutors. The committee’s findings will be sent to the House as a whole to vote on and could lead to a showdown with the president.

The minimum wage in America increased by 70 cents to $5.85 an hour, the first rise since 1997. The legislation was promised by the Democrats in last year’s mid-term election campaign.

Libya freed five Bulgarian nurses and a Palestinian doctor who had been sentenced to death (their sentences were recently commuted to life in prison) for, it was claimed, deliberately infecting 400-plus children with HIV/AIDS. The European Union said ties with Libya should be strengthened and encouraged its members to pay into a fund already worth $460m to help the children’s families and Libya’s health service. See article

Iran and the United States, in their second direct meeting on Iraq, agreed to set up a three-country security committee to find ways of ending the mayhem. But the Americans were cool about a suggestion from Iran’s foreign minister to involve more senior people in the talks.

Just after the start of celebrations to mark Iraq’s victory in a football match against South Korea, enabling it to reach the Asian Cup final for the first time, suicide bombs in Baghdad killed at least 50 people in two separate crowds of jubilant fans.

AP
AP

Britain’s former prime minister, Tony Blair, made his first foray to Israel and the Palestinian territories as envoy for the international quartet (America, Russia, the European Union and United Nations) trying to make peace there. See article

Ethiopia’s prime minister, Meles Zenawi, pardoned 38 opposition politicians and campaigners who had been sentenced to life imprisonment on charges such as “armed rebellion” arising from protests against flawed elections in 2005.

Cameroon’s ruling party won a landslide victory in elections. Opposition parties alleged “massive fraud”; the president, Paul Biya, is likely to stay in office.

In a blow to General Pervez Musharraf, Pakistan’s president, the Supreme Court reinstated the chief justice, Iftikhar Chaudhry, whom the general had tried to remove. Opposition parties in parliament demanded Mr Musharraf’s resignation. See article

India swore in its first female president, Pratibha Patil, an ally of the ruling Congress party and a controversial choice for a post traditionally above the political fray. See article

Taiwan formally applied for United Nations membership under its own name. The UN threw out the request on the ground that it infringed the organisation’s long-standing one-China policy.

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