Posted by: Mark Scott on November 09
After months of planning, Kraft finally made its move on Nov. 9 for British candy maker Cadbury. Unfortunately for the Northfield (Ill)-based food giant, Cadbury reply was short and sweet: 'Thanks, but no thanks.'
The British firm's rejection of Kraft's hostile takeover isn't surprising. Under the proposal, the U.S. company is offering a cash-and-stock offer that values Cadbury at $16.5 billion. That's considerably less than most Cadbury shareholders had wanted, and mirrors the terms first offered to the company in late August. Since then, though, Cadbury's share price has jumped more than 30%, while Kraft's stock has fallen roughly 5%. No wonder, then, that Kraft's bid was quickly turned down.
So what next? Under Britain's so-called 'Put Up or Shut Up' rule, Kraft now has 28 days to convince Cadbury shareholders of the deal's value. Shareholders will then have an additional 60 days to make up their minds. Yet if market conditions don't change remarkably, Kraft will either have to walk away or increase its offer, particularly the cash component.
Unfortunately, its already-hefty debt burden makes any large-scale cash injection hard to justify. And convincing shareholders to take a less-than enticing offer will certainly be a tough sell. For Kraft, the questions now are: how much do we really want Cadbury? And how much are we willing to spend?
Posted by: Carol Matlack on November 05
Financial products based on 8th-century religious laws may seem an unlikely haven during a global crisis. But Islamic banking and financial services, based on traditional Muslim laws known as Sharia, are enjoying a major resurgence.
A survey released on Nov. 5 by The Banker magazine found that assets held by Sharia-compliant banks rose 28.6% in 2009 to $822 billion, while assets held by conventional banks grew only 6.8%.
True, Islamic finance still accounts for only about 1% of the global financial-services market, according to the Organization for Economic Cooperation and Development. But Sharia’s strict rules against speculation, hedging, and off-balance-sheet holdings are attracting investors worldwide. Already, some 50% of clients of Islamic financial institutions are non-Muslim, Anthony O’Sullivan, head of private-sector development at the OECD, said at a Nov. 4 conference in Paris on Islamic financing.
Continue reading "Islamic Finance: Lower Risk, But at What Cost?"
Posted by: Mark Scott on November 05
What's going on with Formula One? Only a day after Toyota pulled out of the world's most lucrative motor sport, French auto giant Renault is also thinking about pulling the plug. According to media reports, the company's board met on Nov. 4 to discuss the F1 team's future. No decision has yet been announced, but the future doesn't look too rosy.
Just look at Renault's financial position. It posted a $4 billion loss in the first-half of the year, with global revenues falling almost 24% to $23.7 billion. That came after the French auto giant reportedly forked out $394 million last season on its Formula One team, according to Formula Money, which tracks the sport's finances.
Faced with such losses, it's easy to see why Renault may balk at paying multi-million dollar sums for a place at motor sport's top table. A high-profile scandal involving Flavio Briatore, Renault's former F1 chief, who ordered one of the team’s drivers to crash on purpose also hasn't helped.
Continue reading "Renault Latest to Question Formula One Investment"
Posted by: Jack Ewing on November 04
Angela Merkel’s speech to the U.S. Congress Nov. 3 provided the German Chancellor with a nice distraction from the drudgery of forming a new government in Berlin. Back in Germany, though, business people are still trying to figure out what they can expect now that Merkel enjoys a majority in the Bundestag with her favored coalition partner, the pro-business Free Democrats (FDP).
On paper, Merkel’s Christian Democrats, the FDP and the Bavarian Christian Social Union have agreed to an ambitious program following their election victory Sept. 27. At the center are bigger-than-expected tax cuts for businesses and individuals. But UBS Economist Martin Lueck doubts whether Merkel will deliver fully on the tax cuts considering that the nation’s debt is already soaring because of stimulus spending. “The tax cuts are far from carved in stone,” Luecke says in a note to investors.
The new government is also unlikely to tamper with laws that make it hard to dismiss workers. Business has long pined for more flexibility to hire and fire employees, but weaker job protections are highly unpopular even among conservative voters. Merkel has made it clear she doesn’t plan to go there.
Continue reading "Business Expects Cautious Reforms From Merkel"
Posted by: Kerry Capell on November 03
British Chancellor Alistair Darling is proving to be a master in spin. On Nov. 3, Darling proclaimed the decision to inject an additional £25.5 billion ($41.6 billion) and £5.7 billion ($9.3 billion) of public money into Royal Bank of Scotland (RBS) and Lloyds Banking Group (LYG), respectively, as "a better deal for the taxpayer."
Moreover, Darling says, the decision to force RBS and Lloyds to sell branches equating up to 10% of the UK retail banking market will dramatically increase competition, another big win for the British taxpayer.
If anyone deserves credit for what promises to be a massive shakeup of British banking, it's outgoing European Union Competition Commissioner Neelie Kroes. Kroes is determined that Europe's state-funded banks have no advantage over their private sector rivals. Determined to promote competition, the EC has demanded the sale of 318 RBS branches and more than 600 Lloyds outlets over the next four years.
RBS will also sell its NatWest brand in Scotland, RBS Insurance and its card payment business, Global Merchant Services. And Lloyds will also part with its TSB brand in England, Wales and Scotland and mortgage broker Cheltenham & Gloucester, as well as the Intelligent Finance online business.
Lloyds, which is 43.5% government-owned, says it has no plans to join the Government Asset Protection Scheme (GAPS), which provides state insurance for past toxic loans. It will pay the government £2.5 billion ($4.1 billion) to cover the cost of the insurance it has received from the government since February. Instead, Lloyds plans to raise £21 billion ($34 billion), including a £13.5 billon ($22 billion) rights issue and a £7.5 billion ($12 billion) debt swap.
Continue reading "European Commission Forces UK Banking Shakeup"
