8/7/2019 Cityam 2011-04-06

1/32

WLPL 0844 826 8000 WickedTheMusical.co.uk

APOLLO VICTORIA THEATRE SW1V 1LG

MOSTPOPULAR

SHOWOlivier Awards

2010

WINNER!BEST

WEST ENDSHOW

Whatsonstage.com

Awards 2011 & 2010

WINNER!

PREMIUMTICKETS

AVAILABLE

WickedTheMusical.co.uk

Fed split as

QE2 set tocontinue

DIVISIONS within the US FederalReserve were exposed last night, withthe news that senior officials clashedover the controversial second phase ofquantitative easing dubbed QE2.

A few participants indicated thateconomic conditions might warrant amove toward less-accommodativemonetary policy this year, the Marchminutes of the Federal Open MarketCommittee (FOMC) said.

The minutes said that a few mem-bers warned that the size of the Fedsbalance sheet could lead to publicdoubt over its tightening credibility,and risk upward pressure on inflationexpectations.

Those unnamed members hawkishviews contrasted with those of a fewother members, who argued thatexceptionally loose policy could evencontinue beyond 2011.

Yet despite signs of a split, almostall participants felt that there was nocase for the Feds asset-purchasing pro-gramme to be curtailed.

The minutes suggest that themajority of officials want to see QE2through to the end, said Paul Dales ofCapital Economics.

Positive words on the US recovery,plus the apparent commitment tocontinue with QE2, saw US treasuriesfall.

Meanwhile, growth in the US serv-

ice sector slowed in March, accordingto the ISM non-manufacturing surveyreleased earlier in the day.

UK SERVICES BOUNCE BACK: P4-5

BY JULIAN HARRIS

US ECONOMYs

Silicon Valleys banker of choice Frank Quattrone (above) comes back with a bang toadvise National Semiconductor on its sale to Texas Instruments. Right: In the 1990s hefaced trial over alleged IPO kickbacks following the dot.com crash.

ONE of Wall Streets biggest players inthe last dot.com bubble yesterdayreturned with a bang to advise on thebiggest tech merger this year, as fearsmount over a fresh Silicon Valley crisis.

Former tech-banking heavyweightFrank Quattrone has been catapultedback into the limelight as adviser toNational Semiconductor on its $6.5bn(4bn) sale to Texas Instruments.

Advising the firm has put his bou-tique investment bank QatalystPartners in the big league, as the third-largest player in technology mergerand acquisition activity so far this year.

Qatalyst has played a role in $10.3bnworth of technology deals in 2011,according to data provider Dealogic.And just two of Wall Streets bankinggiants are placed higher GoldmanSachs and Morgan Stanley.

The boutiques involvement repre-sents one fifth of all deal activity in thesector so far this year, as the volume ofmergers and acquisitions hits its high-est level since 2007. In total, 1,500deals have been proposed, at a com-bined value of $59.3bn.

Yet the prince of Silicon Valley hasreturned as storm clouds gather.

The high valuations being placed onseveral technology firms have spookedsome analysts, who fear a new bubbleis emerging.

Right now it looks like the money

is getting crazy big, says principal ana-lyst at Enderle Group Rob Enderle.Theres certainly a lot of money

being tossed around near the likes of

BY RICHARD PARTINGTONTECHNOLOGYs

www.cityam.comIssue 1,358 Wednesday 6 April 2011 FREE

UK SERVICESECTOR UPMARCH SURGE

CONFIRMS GDP

REVIVAL P4-5

READ SAM TORRANCESGUIDE TO THE MASTERSEXCLUSIVE GOLF COMMENT P28

BUSINESS WITH PERSONALITY

Facebook and Twitter, where their rev-enues nowhere near stand up to valua-tions.

Quattrone helped to bring hundredsof Silicon Valleys fledgling firms publicin the 1990s, including Amazon.comand Netscape.

But he all but disappeared frominvestment banking after charges heblocked an investigation into IPO kick-

backs following the dot.com crash.He took time out to fight his casethrough two trials, which were leftunresolved. He ultimately reached a

deal with prosecutors.Quattrone has since rebuilt his

reputation as Silicon Valleys go-tobanker, after he set up Qatalyst in2008.

Yet analysts have warned of a newdot.com bubble should companieswith high valuations and low rev-enues go public.

The interest [in Facebook and

Twitter] suggests IPOs could be phenom-enal, and if they peak and crash thenthey could take a lot of things withthem, Enderle said.

Certified Distribution

31/01/11 - 27/02/11 is 107,265FTSE 100 t6,007.06 --9.92 DOW t12,393.90 -6.13 NASDAQ s2,791.19 +2.00 /$ 1.63s+0.02 / 1.15s+0.02 /$ 1.42 unc

HES BACK: RETURN OF THE

DOT.COM GODFATHER

8/7/2019 Cityam 2011-04-06

2/32

News2 CITYA.M. 6 APRIL 2011

Commerzbankto repay state

GERMAN lender Commerzbank istoday expected to outline plans for acapital increase of up to 10bn(8.7bn) in a long-awaited plan toescape from the multi-billion eurogovernment bailout it received at theheight of the financial crisis.

Commerzbank, Germanys secondlargest bank, required an 18.2bnbailout from the government in 2009.

The German government holds a25 per cent stake in Commerzbankvia so-called silent participation, aspecial form of non-voting capital.Commerzbanks management hassaid it would like to free itself fromgovernment influence as soon as pos-sible.

Germanys second-biggest lenderhas said its repayment options

include raising capital, retainingprofits and using unneeded capitalreserves that are freed up asCommerzbank reduces risky assets.

Commerzbank would need permis-sion from its shareholders to proceedwith such a large share sale.

A vote on the repayment plan isexpected to take place at its share-holder meeting scheduled for 18 May.Commerzbank is believed to be flexi-ble on how much it wants to raisethrough the capital increase.

Commerzbank declined to com-ment last night.

BYKATIE HOPE

BANKING

Clegg being too simplistic on interns

SO Nick Clegg wants to discourageunpaid internships, which he believesentrench privilege. It is indeed desper-ately important to make it easier forchildren from poorer backgrounds toget on in life. But Cleggs broader argu-ments are overly simplistic and couldactually end up reducing, rather thanincreasing, opportunities.

It is much harder for poor young-sters to work for free than it is for mid-dle-class children. Some do it by takingsecond, paid jobs in shops or restau-rants at weekends and the evenings, orby using some of their student loans.

But internships can also help outsidersproportionately more than wealthierchildren, who would be more likely toget good jobs anyway, even withoutthe benefit of the right internships.

They are the perfect opportunity forbright, young people from impover-ished backgrounds to impress and toshow that they have the drive, determi-nation and other relevant skills to suc-ceed. Because the application processfor internships tends to be less extremethan that for actual jobs, the barriers toentry that they face are lower in everyrespect apart from the (admittedly cru-cial) need for self-financing. In the vastmajority of situations, less attention ispaid to the background, university orschool of an intern applicant than of afully-fledged job applicant. Firmsarent scared of making a mistake withinterns but they are much more wor-ried about getting it wrong with real,contracted staff.

Forcing firms to pay interns theminimum wage would lead to a col-lapse in the number of internships and

hence opportunities. Experiencedworkers would become relatively moreattractive. And if employers were com-pelled to pay, they would become pick-ier it would become even harder for

outsiders to break in.So what is the answer? First, dontforce firms to pay interns. Second,dont exaggerate the role of intern-ships: good grades in the right subjectat the right university, and learning theright soft skills, are most important.Third, raise money for scholarships topay for the work experience living costsof 10,000 poor kids. Fourth, apprentice-ships must go mainstream.

Ultimately, the dominant barriers tosocial mobility are poor schools and aculture of low expectations. That iswhat politicians such as Clegg ought tobe focusing on.

IN PRAISE OF TALL BUILDINGSIf anybody hasnt been around LondonBridge recently, I would recommend avisit. The skyline has changed drastical-ly with the emergence of the remark-

ably tall Shard, developed by Sellar.Some people will hate it but I love it.

Skyscrapers are sprouting up acrossLondon, adding to the existing forestin Canary Wharf and the Square Mile

and transforming our city and itsoffice stock for the better. They includethe Pinnacle (or Bishopsgate Tower),developed by Arab Investments anddue in 2013, subject to funding. TheHeron Tower at 110 Bishopsgate wasdeveloped by Gerald Ronsons Heron.The Walkie Talkie (20 FenchurchStreet) is being developed by LandSecurities and Canary Wharf and duein 2014, as is the Cheesegrater (122Leadenhall Street), from British Landand Oxford Properties. I cant wait.

Some dislike skyscrapers becausethey are built for commercial use,unlike St Pauls Cathedral or the Palaceof Westminster. Rubbish. Tall build-ings are a symbol of confidence, ofrebirth and of modernity exactlywhat Britain needs today.

allister.heath@cityam.comFollow me on Twitter: @allisterheath

BUDGET talks in the United Stateshave hit a stalemate after the WhiteHouse failed to reach an agreementwith the Republican-led House overcuts.

Washington is now braced for ashutdown in federal services notincluding armed forces and emer-gency services which could start nextweek should lawmakers fail to reach adeal by midnight on Friday.

Republicans want to push the dead-line back a week and impose another$12bn (7.4bn) in cuts, yet Democratshave called it unacceptable.

President Barack Obama met theHouse speaker John Boehner yester-day. He told a press conference he hadagreed to $33bn in cuts sought by theRepublicans, but that talks had stalled.

Opponents argue Obamas planswill do little to tackle the US deficit,projected to hit $1.4 trillion this year.

Analysts said a shutdown appearsunlikely, as neither side benefits.

BYRICHARD PARTINGTON

US ECONOMY

Obama budget talks stallPresident Barack Obamas budget talks with Republicans have hit an impasse.

NEWS | IN BRIEF

Former GSK chairman criticisedThe former chairman of pharmaceuticalgiant GlaxoSmithKline, Sir RichardSykes, has been heavily criticised for hisrole in a controversial mining deal in theDemocratic Republic of Congo. Thechairman of the parliamentary group onthe great lakes region of Africa, Eric

Joyce, said Sir Richard had done his rep-utation immeasurable harm in over-seeing Eurasian Natural ResourcesCorporations purchase of mining assetsin the country.

BA ups longhaul fuel surchargeBritish Airways will raise its fuel sur-charge on longhaul flights as the highprice of oil further squeezes Europeanconsumers. BA will add 10 to the costof an economy flight and 20 to a pre-mium ticket. The airline, which formedthe International Airlines Group when itmerged with Spains Iberia last year,raised its surcharge two months agoand had warned of further ticket eepricerises. BA chief financial officer NickSwift said: As customers will knowfrom the price at the petrol pumps, thecost of fuel has continued to rise signifi-cantly over the past three months.

EDITORS LETTER

ALLISTER HEATH

7th Floor, Centurion House,24 Monument Street, London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: news@cityam.com www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowNight Editor Katie HopeBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Craig GaymerPictures Alice HeppleCommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

Editorial StatementThis newspaper adheres to the system ofself-regulation overseen by the Press ComplaintsCommission. The PCC takes complaints about theeditorial content of publications under the EditorsCode of Practice, a copy of which can be found atwww.pcc.org.uk

Printed by Newsfax International,Beam Reach 5 Business Park,Marsh Way, Rainham, Essex, RM13 8RS

Distribution helplineIf you have any comments about the distributionof City A.M. Please ring 0207 015 1230, or emaildistribution@cityam.com

Commerz bank chiefexecutive MartinBlessing has promisedthe bank will repaystate support this year

KEY INVESTORS FLOCK TO GLENCOREFLOTATIONDemand from key institutionalinvestors for shares in Glencore on itsflotation has been well above thegroups expectations, particularly inAsia and the Middle East, accordingto bankers involved in the initial pub-lic offering. The Swiss-based companyplans to allocate between 20 and 30per cent of its IPO to so-called corner-stone and anchor investors, whichcommit themselves to buy ahead ofthe launch of the flotation and usual-ly are locked in for a certain period.

CAPITA FREEZES BASE PAY FOR SENIOREXECUTIVESCapita, the public sector outsourcingspecialist, has played down any hopesof generous pay rises for its 37,000employees as it froze the base salaries

of its senior executives. But unionsdismissed as hollow the claim from

Capita that the management teamwas keen to lead by example and

demonstrate salary restraint through-out the organisation.

INVESTORS IN VALE VOTE FOR NEWCHIEFShareholders of Vale, the worldsbiggest miner of iron ore, have votedto replace its current chief executive,Roger Agnelli, with a former directorof the company in a move seen asaimed at increasing government con-trol over one of Brazils key export sec-tors. The companys group ofcontrolling shareholders nominatedMurilo Ferreira as the new chief exec-utive to replace Mr Agnelli.

LIVINGSOCIAL RAISES $400M FOREXPANSIONLivingSocial, the leading contender toGroupon in the market for daily dealson the internet, has raised an extra$400m. The latest fundraising could

value the company at more than$3bn, according to a formal filing.

PETROL PRICES AT RECORD HIGHS ASHUHNE SAYS OIL MARKETS NEEDREALITY CHECKPetrol prices returned to record highsyesterday, less than two weeks afterthe Government pledged to alleviatethe pain of motorists and cut fuelduty. Motoring organisations calledfor a global meeting of energy minis-ters to address a surge on internation-al oil markets which took the sterlingprice of crude to its highest ever level.

LONDON, THE FIRST CHOICE FORSECOND HOMESOne in four of Citi Private Banks rich-est European clients is consideringmoving abroad to escape high taxes,the Citigroup subsidiary has found.However, it said its richest clients, orultra-high-net-worth individuals those with $10m to invest still

regarded London as a leading metro-politan hub for the next ten years.

VODAFONE CHALLENGES $2.5BNINDIAN TAX BILLVodafone has raised concerns aboutbig ticket purchases of Indian compa-nies, as it has gone to an Indian courtagain over a $2.5bn (1.5bn) tax bill.The mobile phone giant has askedIndia's top court to stop the Indiangovernment from demanding penaltypayments on the tax bill, which wasissued last October.

QATARIS $700M FORAY INTO BIGGESTDOWNTOWN DEVELOPMENT INAMERICAThe Qatari government has made itsfirst foray into the US property mar-ket by financing the $700m (430m)construction of CityCentreDC inWashington. Qatari Diar Real Estate,the property arm that has so farfocused on investments in London,

has emerged as the backer of the 10-acre project.

TRANSOCEAN EXECUTIVES TO DONATESAFETY BONUSESSenior executives at Transocean saidthey will donate their bonusesreceived based on the rig-ownerssafety performance last year to thefamilies of victims of the companysDeepwater Horizon explosion in theGulf. Five senior executives willdonate more than $250,000 to a fundset up for the victims, the companysaid.

LIONS GATE FINALISING NETFLIXDEAL TO STREAM ALL SEASONS OFMAD MENLions Gate Entertainment, which pro-duces the hit television series MadMen, is finalising a deal with Netflixto stream all seven seasons of the crit-ically-acclaimed show about a 1960sadvertising agency, according to peo-

ple close to the situation. The deal isworth between $75m and $100m.

WHAT THE OTHER PAPERS SAY THIS MORNING

8/7/2019 Cityam 2011-04-06

3/32

PRICES of spot gold notched a recordhigh yesterday while Brent crudeended above $122 a barrel, at a 2-1/2year high, as Middle East unrest andfears over Portugal fuelled a drive forsafety.

Brent crude prices rose as worriesabout supply from oil-producingcountries in Africa and the MiddleEast overshadowed Chinas rate hike.Brent futures settled up $1.16 at$122.22 a barrel, while US crudefutures were down 32 cents at $108.15.The oil price rise fed inflation fears,

supporting gold prices. Spot gold roseto above $1,450 an ounce.

PORTUGAL will go to the market for1bn (873m) today in its second debtsale in a week as the sovereign scram-bles to avoid a bailout.

Following a second ratings agencydowngrade yesterday by Moodys,economists estimate that Lisbon has4.6bn of funds left, but needs to refi-nance 9.2bn of debt and fund 5bn ofdeficit spending between now and theresult of national elections in June.

That means the sovereign will needto raise at least 10bn during a periodin which it has no government toreign in spending and when yields arealready at record highs.

Whats more, sharp and sustainedfalls in market yields seem unlikely asthere is a significant risk that the gov-ernment will fail to meet its budgetdeficit goal, says Capital EconomicsEmilie Gay.

Newedges Bill Blain yesterdaycalled the situation pretty messy.

Yields jumped yesterday afterMoodys slapped a downgrade onLisbons debt, lowering it from A3 to

Baa1, and said further actions couldfollow. The move follows a similardowngrade from S&P last week, andleaves the cost of Lisbons five-yeardebt at ten per cent and ten-year at8.75 per cent.

Moodys cited growing politicaluncertainty Lisbons governmentcollapsed after failing to pass an aus-terity budget recently and worse-than-expected deficit figures for 2010as reasons for the downgrade.

Portugal has a target of 4.6 per centof GDP for its deficit this year, but itsmost recent release saw numbers for2010 revised upwards to 8.6 per cent,versus its 7.3 per cent target.

And the signs are that Lisbonsoptions are narrowing, as theEuropean Central Bank (ECB) is increas-ingly reluctant to intervene in bondmarkets to keep yields under control.

Although the ECB could wade induring todays sale, economists ulti-mately see its bond-buying pro-gramme as incompatible with awidely anticipated rate rise, since thelatter will erode the value of sovereignbonds and exacerbate the banks capi-tal losses.

Lisbon funds

running outas yields rise

DEPUTY Prime Minister Nick Clegghas promised to open the doors ofopportunity in a launch of policiesmeant to improve social mobility.

They include setting up a commis-sion to tackle the issue, increasingaccess to pre-school education, spend-ing 2.5bn on the pupil premium,extra money for those from deprived

backgrounds, by 2014/15 and bringingprofessionals and high-profile speak-ers into state schools to discuss theircareer tracks.

Clegg said: A fair society is an opensociety where everybody is free toflourish and where birth is never des-tiny. But he faced charges of hypocrisyon the issue of unpaid internships,which he benefited from himself.Clegg said that he was wrong to haveemployed an unpaid intern in the past.

WHAT COULD

BE SIMPLER THAN

SPREADS?

NOTHING.

Clegg unveils drivefor social mobility

US securities regulators yesterdayunveiled a long-awaited plandesigned to protect the markets fromvolatile price swings, following the 6May flash crash.

The so-called limit up-limit downproposal from the Securities andExchange Commission, wouldrequire trades in US-listed stocks to beexecuted within a range tied to recentprices.

If approved, it would replace exist-ing single-stock circuit breakers thatwere implemented through a pilot

programme shortly after the flashcrash.

SEC plans endto price swingsRush for safetysees gold surge

BY JULIET SAMUEL

EUROZONE CRISIS

MARKETS

MARKETS

Clegg was forced to backtrack on his past practice of employing unpaid interns Picture: Micha Theiner/City A.M.

BY JULIET SAMUELPOLITICS

News 3CITYA.M. 6 APRIL 2011

8/7/2019 Cityam 2011-04-06

4/32

GROWTH in the UKs service sectorsurged at its fastest rate for a year inMarch, suggesting the economy hassprung back from the reported con-traction at the end of 2010.

The economy is now estimated tohave grown by up to 0.8 per cent in thefirst three months of this year, accord-ing to Markit, which compiled yester-days service sector data.

At the end of 2010 the economystagnated, but the severe winter freezeresulted in a 0.5 per cent contraction according to figures from the Office ofNational Statistics.

Yet Britains largest sector hit anindex score of 57.1 in March, spikingfrom the 52.6 reading the previous

month, Markits purchasing man-agers index (PMI) showed.

All figures above the no-changerate of 50 indicate growth. The datadoes not include the ailing UK retailsector.

Services activity growth surprisedwell to the upside in March, andpoints to the strongest expansion ofthe sector since the economy was surg-ing out of its recession early last year,said Markit economist Paul Smith.

Incoming new business jumped at

its fastest rate for a year, while the datashowed the first rise in work outstand-ing since September 2007.

And firms in the sector increasedtheir number of staff in March, for thefirst time in nine months.

Meanwhile, yesterdays data weremirrored in the Eurozone, wherestrong services data contrasted witha sluggish high street sales.

Retail sales across the single cur-rency area fell 0.1 per cent inFebruary, compared to January -- anannual rise of just 0.1 per cent.

Yet service sector activity jumped to57.2 according to Marchs PMI survey, athree and a half year high.

The composite index, which meas-ures services, manufacturing and con-struction, reached 57.6 last month,and has now signalled economic

expansion for 20 consecutive months.However, there is a widening gap

between the rallying core economiesof the single currency area and thestruggling periphery. Output growtheased sharply in Ireland, Spain fellback into a services-led contractionand the downturn in Greek manufac-turing continued, the report said.However, Germany and France sawsolid increases in new orders in bothservices and manufacturing.BUT OECD WARNS ON UK CUTS: P17

ADaimlerBrand

Always desirable, now irresistible.The E-Class, from 369 a month.*

Official government fuel consumption figures in mpg (litres per 100km) for the E-Class range: urban 15.0(18.8)-45.6(6.2), extra urban 30.4 (9.3)-67.3(4.2),combined 22.1(12.8)-57.6(4.9). CO2 emissions: 299-129 g/km. Model featured is a Mercedes-Benz E 200 CDI BlueEFFICIENCY SE Saloon at 29,645.00 on-the-road including complimentary metallic paint and exteriorstyling package at 710.00 (on-the-road price includes VAT, delivery, 12 months Road Fund Licence, number plates, first registration fee and fuel). *Finance example based on a Mercedes-Benz E 200 CDI BlueEFFICIENCY SE Saloon with manual transmission and

complimentary metallic paint on a 36 month (3+35 profile) Operating Lease agreement with an advance payment of 1,107.00. All payments subject to VAT. Excludes maintenance. 180.00 acceptance fee is payable in addition to and at the same time as the first

rental. Based on 10,000 miles per annum. Excess mileage charges may apply. Rental includes first years Road Fund Licence only. Written quotations available on request, including alternative contract lengths and mileages. Credit provided subject to status by

Mercedes-Benz Financial Services UK Limited, MK7 8ND. Guarantees and indemnities may be required. These offers are available on E-Class Saloon models ordered/credit approved between 1 April and 30 June and registered by 30 September 2011, excluding AMG

and special request engines. Offers cannot be used in conjunction with any other published offer from the Retailer. Offer subject to availability. Terms and conditions apply. Prices correct at time of going to press (04/11). Visit mercedes-benz.co.uk/offers

*For business users only.

Advance payment and fee applies.

News4 CITYA.M. 6 APRIL 2011

BY JULIAN HARRIS

UK ECONOMY

ANALYSIS l Service Sector PMI

2004 2005 2006 2007 2008 2009 2010 2011

65

60

55

50

45

40

35

HOW IS THE SERVICESECTOR MEASURED?

The purchasing managers index(PMI) data does not include theretail sector. In fact, high streettrade is not included in any of thePMI surveys, conducted by Markitand the Chartered Institute ofPurchasing and Supply (CIPS). Thesurveys originally began to fill a gapin the Bank of Englands data,Markits chief economist told CityA.M. The retail side was covered,but there was a need for in depthanalysis of the UKs services indus-try. Financial services, includinginsurance and pensions provisionand financial intermediation, con-

sist of almost a fifth (18.8 per cent)of the private sector services. ThePMI data provides prompt evidenceof the state of the economy as awhole, as well as a detailed break-down of the three main sectors services, manufacturing and con-struction. The data is now used tomeasure economic growth or con-traction in 26 countries and keyregions, including the Eurozone andBRICS (Brazil, Russia, India andChina).

18.8%FinancialServices

11.2%Other Personal

Services

14.3%Transport, Storage &

Communication

SECTORAL BREAKDOWN OF SERVICES OUTPUT

49.5%Real Estate, Renting &

Business Activities

6.2%Hotels &

Restaurants

Lift in UK services sector confirmsdramatic bounce-back in growth...

8/7/2019 Cityam 2011-04-06

5/32

HMVs chief executive Simon Fox saw the companys shares drop again yesterday after a third profit warning

MUSIC and DVD retailer HMVplunged further into trouble yester-day as it issued a third profit warn-ing.

The embattled company saw itsshares tumble by up to nine per cent,despite assurances that its creditfacilities were solid.

HMV warned that profit before taxand exceptional items for the full-year would be around 30m.

That is 8m down on what thecompany estimated just a monthago.

However, the music retailer saidits banking facilities remain fullyavailable and lenders continue to besupportive.

It said lending tests would be heldon 2 July rather than 30 April to giveit more time to shore up its finances.

It said in a statement: The groupsbanking facilities remain fully avail-able, the groups lenders continue tobe supportive and the group is main-taining a regular and constructive

dialogue with them.Last month, HMV said it expected

to fail tests set by its lenders if theytook place in April.

The company first admitted inJanuary that profits would be at thelower end of expectations, guidinginvestors then to expect 46m inprofits before tax and exceptionalitems.

It further lowered expectations atthe beginning of March, saying prof-its would not meet the markets low-est expectations, which were then45m.

Seymour Pierce analyst KateCalvert said: The speed of deteriora-tion in profitability of this businessconfirms that managements strate-gy is not arresting the very real struc-tural pressures on the core retail

business from online.More radical action is needed, we

believe, in terms of store closures orbreaking up the business.

Last month HMV put itsWaterstones chain of book stores upfor sale, having already decided inJanuary to shut 60 of its stores.

The company has been underintense pressure as consumers havemoved to download music ratherthan buy CDs.

The past week has seen a flood ofbad news from the UK high street,with off- licence Oddbins officiallyentering administration and Dixonsissuing a surprise profit warning.

There were also disappointingupdates from retail stalwartsMothercare and Laura Ashley, and alleyes will be on Marks & Spencerssales figures this morning, whichanalysts expect to fall by around sixper cent.

...but retailers arestill feeling the heatBY JOHN DUNNE

RETAIL

FOR MORE NEWS

www.cityam.com

News 5CITYA.M. 6 APRIL 2011

ANALYSIS l HMV

p

10 Jan 28 Jan 17 Feb 9 Mar 29 Mar

30

25

20

15

10

12.255 Apr

8/7/2019 Cityam 2011-04-06

6/32

PROCTER & Gamble has agreed to sellpotato crisps brand Pringles toDiamond Foods, in a deal worth$1.5bn (921.6m) in shares.

Offloading the 45-year-old brand,known for its crisps sold in more than140 countries, will mark the conglom-erates departure from the food sector.

US-based Diamond Foods, whichowns a variety of snack brands includ-ing Kettle chips, will triple the size ofits existing business with the pur-chase.

Diamond will pay using 29.1mshares of common stock and will takeon Pringles $850m of debt.

The deal is expected to be tied-up bythe end of this year, which will requireDiamond to pay about $100m to com-

plete the merger.The California-based snack compa-

ny, which also owns Emerald nuts andPop Secret microwave popcorn, is pro-jecting net sales of about $1.8bn by2012.

The firm expects to see its salesmore than double in the US and UK byadding Pringles to its stable.

The deal will also give Diamond afoothold in the fragmented snack mar-ket, currently dominated by PepsiCosFrito-Lay snack business.

Janney Capital Markets analyst JohnSan Marco said: It is still a fraction ofFrito-Lays snack business, literallyabout one-tenth of the size.

Aside from Frito-Lay, there are noother real true global powerhouses.Pringles is certainly in better strategichands as part of a dedicated snackbusiness.

Diamond pays

P&G $1.5bnfor PringlesBYRICHARD PARTINGTON

CONSUMER

News6 CITYA.M. 6 APRIL 2011

How good a job do you feel GeorgeOsborne is doing as chancellor?

In association withPoliticsHome.com

Apply to join today atwww.cityam.com/panel

Were restarting our weekly readerspanel with PoliticsHome.com to letyou have your say on politics and theCity.

To answer the above question andmore, including your views on SirJohn Vickers IndependentCommission on Banking, apply to join

at www.cityam.com/panel.You could be in with the chance of

winning a free luxury weekend toParis. In September, well put panel-lists who have responded to at least80 per cent of surveys into a prizedraw.

Full T&Cs available on request.

PoliticsHome.comPoliticsHome.com

$3.1bnnet 2010 sales forP&G snacks and

pet care division

$249mDiamonds 2010 net sales for

culinary & retail nuts

$321.4mDiamonds 2010 snack netsales (combined figure forEmerald, Pop Secret and

Kettle Crisps)

Diamond says Pringles,which it is buying fromP&G, will contribute tosales of $1.8bn by 2012

Diamond Foods existing brands include KettleBrand crisps, Pop-Secret and Diamond nuts

8/7/2019 Cityam 2011-04-06

7/32

For more information visitwww.cityindex.co.uk/world

Spread betting and CFD trading can result in losses that exceed your initial deposit.

%"$!%%!%###%$!#

Place any trade with City Index for a chance to win amazing

experiences including an incredible round the world trip for two*

AROUNDTHEWORLD

WITHEVERYTRADE

8/7/2019 Cityam 2011-04-06

8/32

THE Australian government has said itintends to reject the SingaporeExchanges proposed $7.8bn (4.8bn)bid for Australias stock exchange, rais-ing concerns that political challengescould harm other exchange tie-ups.

The Singapore Exchange launchedits agreed takeover bid for Sydney-based ASX last October, with a view toward off the threat from alternativetrading platforms and cut costs.

But Australian Treasurer WayneSwan said yesterday he would rejectthe bid on advice from the ForeignInvestment Review Board (FIRB).

FIRB informed SGX that I had seri-ous concerns about the proposal andthat, subject to further consideration, Iintended to accept the unanimousFIRB advice that the takeover wouldnot be in the national interest, he said.

As well as approval from the FIRB,the deal is subject to the Australiangovernment removing legislation thatprohibits any one party from owningmore than 10 per cent of ASX.

Though Swan said that a final deci-sion had not been made, the marketsresponse implied the market doubtedthe deal could be saved. ASX sharesclosed down 3.3 per cent, while SGXshares closed 4.5 per cent higher.

Parties involved in ongoingexchange mergers around the worldwill be watching the deliberationsclosely, with many also awaiting regu-latory clearance of accepted bids.London Stock Exchanges bid to buyToronto Stock Exchange operator TMXGroup needs to overcome oppositionfrom Canadian banks and the homegovernment in Ontario.

Australia may

block SGX bidfor exchangeBY ELIZABETH FOURNIER

EXCHANGES

THE London Stock Exchange, whichis currently seeking to buy theowner of the Toronto StockExchange, said yesterday it had soldits non-core Italian unit ServizioTitoli to Computershare.

The LSE said it would sell the unitfor an initial amount of 30m(26.2m).

Servizio Titoli provides sharehold-er management services to listedcompanies in Italy. The LSEs pro-posed C$3bn purchase of TMXGroup, which runs the TorontoStock Exchange, would create a

$7bn transatlantic exchange doing$4 trillion in trading annually.

LSE to sell Italy

unit for 30mEXCHANGES

News8 CITYA.M. 6 APRIL 2011

Australian Treasurer Wayne Swans (left) decision willbe eagerly awaited by Singapore exchange boss MagnusBocker (above), who would head up the new group

ASX boss Robert Elstone (left) and Atsushi Saito, head ofthe Tokyo Stock Exchange, which owns a 4.9 per centstake in SGX, is happy for the deal to go ahead

NYSE Euronexts board of directorsplans to meet by 14 April to consid-er Nasdaq OMX Groups unsolicitedtakeover bid, though no firm datehas been set, a person familiar withthe plan said yesterday.

On Friday, Nasdaq partnered withUS-based Intercontinental Exchangeto make an $11.3bn (6.9bn) offerfor the Big Board parent, an attemptto thwart a friendly $10.2bntakeover offer from GermanysDeutsche Boerse. The counterbidwould bring together fierce USrivals Nasdaq and NYSE and hand

the target companys profitablederivatives business to ICE.

Mid-April talks

set for NYSE bid

EXCHANGES

ANALYSIS l ASX

AUD

Jan Feb Mar

39

38

37

36

35

34

33.705 Apr

8/7/2019 Cityam 2011-04-06

9/32

A new Herman Miller chair by Yves Bhar. Affordable as it is innovative.

To find out more call 0845 2267202 or visit www.hermanmiller.com2011HermanMiller,Inc.

8/7/2019 Cityam 2011-04-06

10/32

RUNNING MACHINEPASSERS-BY on the South Bank yester-day morning stared in disbelief at thesight of a grown man running a fullmarathon on a treadmill inside oneof the capsules of the London Eye.

That high-altitude human runningmachine was Noel Bresland, a seniorconsulting manager at Deloitte, whohas set himself the task of running223 marathons over the next tenyears in aid of childrens charitiesChildren With Leukaemia and Bliss,after his nephew Ethan died tragical-ly just 223 days into his life.

Bresland, 35, is no stranger toadventurous marathons, having com-pleted one in the North Pole in 2004,but his next feat running theLondon marathon in 12 days timedressed as Little Miss Naughty is hismost outlandish yet.

We hope to break the world recordfor the fastest book character catego-ry, which is currently four hours andfour minutes, he told The Capitalist.Its going to be challenging: the cos-tume is very big and it weighs 20kg soIll need to get used to that. I startedpractising today in the pod, actually.To support Bresland, please visithttp://223challenge.com.

HIGHLAND FLINGNOT to be outdone, Michael Savage,partner at Killik Capital, has ralliedthe investment funds troops to put

together a team of six to take partin the Artemis Quadrathlon nearScotlands Loch Tay on 9 July.

The brokers will swim 1.3km,kayak 11km, cycle 54km and

run 25km over sevenmunros, all within aday and Savage reck-ons the quadrathlonwill be the mostgruelling physicaltest any of us haveundertaken.

So the other fiveteam members Tim Shaw, BenMcKeown, JerOMahony, SamYounger andGordon Smith aretaking no prisonerswith their trainingschedules, fitting in

feats such as theThree Peaks

Challenge, the Paris and Edinburghmarathons and the Volcano triathlonin Lanzarote before they undertakethe Perthshire race. If they have anyenergy left, that is.

LIFE LESS ORDINARYTHE adrenaline rush that decidedthe course of Risk Capital Partnerschairman Luke Johnsons life camewhen the Dean of Oxford Universitythreatened to send him down if hecarried on having riotous parties inhis rooms in Magdalen College.

Undaunted, the 18-year-old Johnsoncame up with the idea of switchingthe venue for his raucous parties to a

local nightclub, where he and his col-league had the bright idea of charg-ing guests on the door, while the clubtook the bar money.

On the opening night, I arrived 20minutes early and there was alreadya queue, he told an audience ofyoung entrepreneurs at The HospitalClub. In that split second, I knewthat is what I wanted to do with mylife: I wanted to spend my careerbuilding companies as an owner.

As good as his word, Johnson (pic-tured left) famously went on tobecome the chairman ofSuperbrands, Giraffe Restaurants andChannel 4, to name but a few of hissuccessful operations.

Just dont remind him of his foraysinto diet software, restoring classiccars and reselling share registers.

I think its fair to say [those proj-ects] were resounding flops, he said.

But a life without risk-taking is a lifetoo boring to contemplate.

COMING SOON TO ANOLD PUB NEAR YOU... A

BRAND NEW WAITROSEWAITROSE wants to grow butBritain seems strangely bereft of suit-able sites for the grocer, which isfighting a bitter convenience storewar with its bigger rivals. So a desper-ate Waitrose has launched a highlyunorthodox appeal to landlords tohelp it out.

All sites and all properties will beconsidered, says the grocer frompubs to petrol stations and if thoseopportunities run dry, the businesswill turn to developing brownfieldsites and arterial and out-of-townlocations. Its radical stuff from thegreen-logoed retailer.

Sites urgently required for 2012,says Waitrose, in a property industrymagazine advertisement plea the

second within a fortnight askingleaseholders to make contact with itsteam of regional estate agents withany suitable locations.

We are looking at everything,

said a spokesperson for Waitrose,who said that while sites have beensecured for this years further 15openings including in PrinceCharless model village Poundbury inDorset the business is not yet surewhere we are with 2012 yet.

It is astonishing that at the heightof a High Street crisis, which is seeinga wave of shops go bust, that a retail-er such as Waitrose is being forced tohunt down old pubs to grow.

However, Tom Keys-Toyer, partnerin the Bristol office of King Sturge,who oversaw the leases for theplanned Cardiff and Shrewsburyshops, insists that it is about makingsure every site is profitable and hasthe right customer base, he said.

So if you are desperate to get a localWaitrose, you know what you have todo. You just need to convince yourlocal publican to sell up to the chat-tering classes favourite retailer.

Waitroses OldBrompton Roadstore, which openedin January, is one ofthe 23 convenienceshops the chain willlaunch over 2011.But the retailermay soon be usingsome less orthodoxsites for its newstores.

Londons living landmarksSee over 750 animal species in the heart

of the capital

The Zoological Society of London (ZSL) is acharity devoted to the worldwide conservation ofanimals and their habitats. Registered Charityin England & Wales: no 208728

Book your Zoo tickets online at zsl.orgZSL Members go free

CAMDEN TOWN

REGENTS PARK

UNDERGROUND

VOTED LONDONS BESTTOURISM EXPERIENCE

Visit London Awards 2010

The Capitalist10 CITYA.M. 6 APRIL 2011

High-flier: Breslands Eyeathon

Waitroseurgentlyneeds sites

for the shopsplanned for2012, with alllocations andall propertiesconsidered

EDITED BY

HARRIET DENNYSGot A Story? Emailthecapitalist@cityam.comFollow The Capitaliston Twitter: @citycapitalist

8/7/2019 Cityam 2011-04-06

11/32

CATASTROPHE insurer Amlin yester-day said it expected to lose up to150m in claims from the twin earth-quake and tsunami catastrophe to hitJapan last month.

Amlin, a Lloyds managing agent,said it estimated its Japan losseswould range from 80m to 150mbased on a $12-25bn (7.4-15.5bn) lossto the overall industry.

It was exposed to a 110m loss fromthe earthquake that decimated

Christchurch in New Zealand inFebruary, while floods in Australia inJanuary would cause 15m of claims,it said in an update on its first-quartercatastrophes.

Its maximum loss already this yearcould therefore hit 275m before anyclaims from US hurricanes, whichstart in about August, are added.

But underwriting director SimonBeale said it was protected againstany further heavy losses this year.

Amlins reinsurance programmes

provide increased levels of reinsur-ance protection for any further catas-trophe events during 2011, he said.

The losses in Japan will be to itsmarine insurance, commercial prop-erty and reinsurance business lines.

But Beale said insurance premiumrates were showing signs of rising inareas affected by the disasters, offer-ing some hope that the losses couldbe offset by higher income in future.

Early market signs suggestthat...loss affected areas will seestrong rate increases, he said.Amlins shares closed up 0.75 per cent.

Amlin Japanlosses set toreach 150m SHARES in Tokyo Electric Power slid18 per cent to a 60-year low yesterdayon fears the firm wont have enoughmoney to compensate victims of its

crippled nuclear plant and uncertain-ty over the governments ultimateintentions for the utility.

Tokyo Electric, or TEPCO, is consid-ering early compensation paymentsto victims of the disaster at its strick-en Fukushima Daiichi nuclear plant,executive vice-president TakashiFujimoto told a news conference.

The company is yet to determinethe extent of the damage from the 11March earthquake and tsunami thatknocked out a fifth of its power-pro-ducing capacity. But Bank of America-Merrill Lynch estimated last weekTEPCO could face compensationclaims of more than $130bn (80bn).

TEPCO has so far offered 200m yen(1.5m) in condolence money to 10towns to aid people forced to evacuatefrom near its stricken plant or affect-ed by radiation leakages. This is sepa-rate from any formal compensation.

The price of insuring TEPCO debtagainst default has spiked as moreinvestors bet the company will strug-gle to pay creditors.

The share price plunge to 362 yencomes as India yesterday banned allfood imports from Japan.

Tokyo ElectricPower sharesat 60-year low

Amlin expects losses between 80m and 150m from Japans disasters Picture: REUTERS

BYALISON LOCK

INSURANCE

ENERGY

News 11CITYA.M. 6 APRIL 2011

ANALYSIS l Amlin

p

10 Jan 28 Jan 17 Feb 9 Mar 29 Mar

420

400

380

389.605 Apr

ANALYST VIEWS: ARE THESE LOSSES BETTEROR WORSE THAN EXPECTED? Interviews by Alison Lock

SARAH LEWANDOWSKI | PEEL HUNT

Amlins estimated loss of 110m for the second New Zealand earth-quake is substantially below its 160m loss to the first earthquake in September.Losses from New Zealand and Japan are close to triggering its reinsurance pro-tection, and if estimates deteriorate they will be partly recoverable.

EAMONN FLANAGAN | SHORE CAPITAL

Overall these losses are broadly where we might have expected forAmlin, if not slightly lower. Crucially, the reinsurance programmes remain intactand available, if required, for the 2011 hurricane season.

NICK JOHNSON | NUMIS

The upper-end estimated loss of 150m appears to be broadly in linewith our expectations. Positive commentary on the outlook for premium rates islikely to support its valuation, but we prefer Lancashire and Hiscox as the key win-ners post-Japan, based on their superior positioning for growth.

8/7/2019 Cityam 2011-04-06

12/32

site launched by the British BankersAssociation (BBA) and supported byLloyds, Barclays, HSBC and RBS,promises to give small enterprises achance to appeal if they believe theirrequest for credit has been unfairlyrefused.

The appeal will be judged byanother individual at the bankwho has not previously beeninvolved in the case, with for-mer CBI small businesscouncil chair RusselGriggs appointed toproduce ana n n u a lr e p o r to n

THE UKs major lenders have goneon the offensive to convince smallbusinesses that they are freeing upcredit, signing up to a new lendingcode and launching a website to helpbusinesses access loans.

But a survey of 500 small business-es released yesterday showed that 75per cent of respondents have seen nochange in banks attitude since thegovernment rolled out ProjectMerlin, a deal between the banksand the treasury in which theypromised to increase credit availablefor small firms by 15 per cent thisyear.

Just over 40 per cent of thosequeried by Hotfrog, an internationalsmall business directory site, saidthey were most likely to usepersonal savings to expandtheir business.

A new lendingcode and web-

the effectiveness of the newcode. The BBA is nowembarking upon aroadshow to pro-mote the newwebsite.

News12 CITYA.M. 6 APRIL 2011

INVESTMENT banks have raked intheir largest first-quarter fees poolsince 2007 with fees up eight percent globally on last year, accordingto Thomson Reuters data releasedyesterday.

The UK and Ireland saw fees drop5.4 per cent, however, versus northAmerica, where fees income rose13.4 per cent.

Barclays Capital was the biggestgainer among banks, with its feesup 41.5 per cent to $925.8m, enoughto boost the bank three placesfurther up the rankings to sixthglobally.

JP Morgan retained its position atthe top of the league, bringing in

$1.39bn, while Goldman fell from

second to fourth on what the bankhas admitted has been a slow startto the year. Its fees income rose sixper cent to $1.96bn, but it was over-taken by Bank of America/MerrillLynch and Morgan Stanley, both ofwhich saw their fees revenues jumpby more than a quarter.

Another faller was Citigroup,where fees rose only five per cent to$908m, dropping the bank to eighthplace from fifth.

Strikingly, the four biggest fee-pay-ers include three firms bailed out bythe US government, with FannieMae, Freddie Mac and AIG account-ing for 22.3 per cent of all feesthat investment banks charged glob-ally.

Since 2009, the three institutions

have handed over $3.6bn in fees to

investment banks. The third largestfee-payer was Citigroup, which paid$1.42bn to its rivals, mostly for equi-ty transactions.

Work on mergers and acquisitions(M&A) brought in the most cash,generating $7.06bn in fees in thefirst quarter of this year, up slightlyfrom $6.84bn in the same period lastyear. Morgan Stanley had the largestwalletshare in M&A, its traditionalstrength, accounting for 6.8 per centof earnings. The rise in fees will pro-vide some relief for banks thatsaw business slow in the latterhalf of last year, particular-ly as bond tradingdried up due to theEurozone sov-ereign debt

crisis.

Relief for banks as2011 sees fees riseBY JULIET SAMUEL

BANKING

Small firms see no effect from Merlin asbanks sign up to new lending codeBANKING

INVESTMENT BANKING FEES Q1 2011

Q1 2011 Q1 2010 Banks Fees (bn)

1 1 JP Morgan $1.39

2 3 BoA/Merrill Lynch $1.36

3 4 Morgan Stanley $1.21

4 2 Goldman $1.20

5 6 Deutsche $1.02

6 9 BarCap $0.926

7 7 Credit Suisse $0.925

8 5 Citi $0.908

9 8 UBS $0.677

10 12 Nomura $0.411

NEWS |IN BRIEF

Eaton sued for gender biasTwo New Jersey women filed a $150m

(92m) lawsuit accusing their former employerEaton Corp of gender discrimination in pay and pro-

motions. Yesterdays complaint, filed in the US districtcourt in Manhattan against Eaton and three male managers

contends that the century-old maker of industrial products pro-motes a culture of gender hostility, especially in its electrical serv-

ices sector.

Louis Dreyfus weighs up listing or mergerLouis Dreyfus, one of the worlds top commodity firms, is considering a stock mar-

ket listing, a merger or bringing in a private investor to fund future projects.Margarita Louis-Dreyfus is holding talks with the companys minority shareholders, who

can demand that the group buy them out from next year, and said that Louis Dreyfus had to beprepared for all options. Merger talks between Louis Dreyfus and smaller Singaporean rival Olam

International Ltd failed earlier this year. It has also been reported to have held merger talks with otherrivals, including Swiss-based Glencore International.

8/7/2019 Cityam 2011-04-06

13/32

COMPANY managers across Europemay have to put their pay packets to ashareholder vote and introduce aquota for women executives underproposals from the EuropeanCommission announced yesterday.

The European Unions executiveCommission published its proposals asit considered how to boost shareholderinvolvement in the running of compa-

nies in the EUs 27 member states.While banks would not be the onlyfirms covered by any new law, risingpay in Londons financial centre andelsewhere has increased pressure towiden last years EU rules that cut theamount of cash bankers can receive inbonuses.

In the EU document outlining thereach of potential legislation, officialssaid a mismatch between perform-ance and executive directors remuner-ation has... come to light and theyproposed a mandatory disclosure of payas well as a shareholder vote on pay.

The EU proposal, which is now openfor public comment and could changebefore becoming law, also considersgender quotas to boost the number ofwomen on management boards andlimits on the number of jobs for non-executive directors.

EU officials estimate that roughly

one in 10 seats on supervisory boardsare occupied by women.

THE charge of Russian companieslooking to London to go public pickedup yesterday, as mid-size bank Nomos

confirmed plans to float 20 percent of its stock and several moreissuers eyed talks with investors.

The easing of market volatili-ty, which spiked last month

on fears of a nuclear crisis in

Japan and unrest in theArab world, has sparkedrenewed interest in list-ings, with Russianfirms leading thecharge.

Nomos kickingoff the roadshowfor its $700m(430m) listingmeans fourRussian issuersare now touringinvestors, seekingto raise a com-bined total of justover $3bn -- morethan half the$5.5bn raised byRussian firms inthe whole of2010. The compa-ny, Russias

e i g h t hb i g g e s t

bank, was the last of the quartet toannounce a price range for its sharesale.

The order book on sugar and porkgroup Rusagros $300m listing isalready fully subscribed ahead of apricing on Friday, a source close tothe deal said.

Mobile phone retailer Euroset isseeking up to $1.52bn it said on on 1April, while real estate developerEtalon began roadshows for an up to

$650m float on Monday.Nomos, whose offering willclose with pricing on 19 April, said itwould place ordinary shares at $32 to$37, or $16.0 to $18.5 per globaldepositary receipt (GDR), in Londonand Moscow.

The initial public of fering (IPO) willlargely comprise the sale of existingshares by 18.7 per cent shareholderRoman Korbacka, as well as the plac-ing of new shares worth around5.5bn roubles ($195m).

The banks other major sharehold-ers, Russian businessman AlexanderNesis (pictured left) IST group andCzech PPF Group, controlled by Czechtycoon Petr Kellner, do not plan toreduce their stakes in the bank dur-ing the IPO.

At present, PPF Group holds 28.24per cent in NOMOS-Bank, while ISTgroup holds 18.66 per cent.

The bank said the offering wouldvalue it at $2.8bn to $3.2bn, while a

source close to the deal said previousmarket estimates of $700m remainedthe fund-raising target.

Last week the IPO market was setback when Omani based Renaissancepulled the 1bn flotation of its oilservices subsidiary Topaz Energy.

The banks took the decision onthe day they were supposed to be pric-ing the float after it became clearthat demand had been lower thanexpected.

BYHARRY BANKS

RETAIL

NEWS | IN BRIEF

Intesa board set to back capital hikeIntesa Sanpaolos boards were set yesterday to back a 5bn cashinjection as Bank of Italy head Mario Draghi said the coun-trys lenders response to his call for them to boost theircapital was very encouraging. Traditionally conser-vative, Italian banks weathered the global finan-cial crisis better than many European rivals.

Intesa Sanpaolo, Italys largest retailbank, already enjoys a core Tier 1ratio of 8.1 per cent, whichwould increase by another1.5 per centage pointsonce the hike isapproved.

EU proposesvote on payfor investors

REGULATION

Moncler seeks Italian IPOOuterwear maker Moncler, known for its

trendy goose down jackets, is seeking aninitial public offering (IPO) on the Milan bourse, the

company said yesterday. Global coordinators are IntesaSanpaolo's Banca IMI, Morgan Stanley and Bank of

America Corp's Merrill Lynch, it said in a statement. Revenueslast year were 429m ($608.5m) and net income 52m, it said.

Earnings before interest, tax, depreciation and amortisation were102m. Marco De Benedetti, an executive with leading shareholder Carlyle

Group, said in a February newspaper interview that a listing could take placeby this summer.

Mercedes-Benz recalls M-Class over cruise control worriesDaimlers Mercedes-Benz is undertaking a global recall of some of its older-model M-Class

sport utility vehicles for issues related to cruise control that may lead to a crash, Daimler and USfederal safety regulators said yesterday. A wide majority of the vehicles being recalled are model

year 2000-2002 M-Class SUVs, but there are a small number of 2000-2004 AMG performance vehiclesalso involved. Some 136,751 vehicles will be recalled in the US and about 50,000 in Germany, said Mercedes-

Benz representatives in those two countries. Daimler representatives at its world headquarters in Germany didnot provide a global recall figure. No crashes or injuries have resulted from the issue, said Mercedes-Benz USA

spokesman Rob Moran.

MEET THE ADVISERS

PATRICK FROWEIN

DEUTSCHE BANK

NEWS |IN BRIEF

Nomos leads theRussian IPO charge

DEUTSCHE Banks advisory team toNomos is being led from Frankfurt bymanaging director in equity capitalmarkets Foruhar Madjessi, the banksglobal head of diversified industrials.Patrick Frowein worked from Londonon the proposed dual listing. Froweinjoined Deutsche Bank in 2006 fromUBS, where he took on various roles,including as executive director inUBS industrials team. He started hiscareer at Deutsche Bank as head of

European capital goods.

CITYA.M. 6 APRIL 2011 News 13

8/7/2019 Cityam 2011-04-06

14/32

8/7/2019 Cityam 2011-04-06

15/32

SHARES in road maintenance groupMouchel dropped further yesterdayafter both Costain and Interservewalked away from their takeoveroffers, amid uncertainty about thecompanys future.

Mouchels shares have tumbledmore than 40 per cent since rejectinga string of bids at the end of March,and yesterday analysts downgradedtheir forecasts.

Numis analyst Francesca Raleighcut pre-tax profit forecasts by nineper cent, adding that an unsuccess-ful outturn following 13 months ofvarious bid approaches could poten-tially lead to an investor backlashagainst the board, leading to board

changes.Chief executive Richard Cuthbert

has been with the firm since 2002.Other analysts said the board is

mostly made up of new members fol-

lowing a reshuffle in 2010, and thatsupport for the firms tough stanceon takeover interest suggests thatshareholders will back the board.

Some investors in Mouchel, includ-ing Schroders, which holds a fif th ofthe firms shares, have also voicedconcerns about the companys abilityto improve financially.

The firm last week reported a pre-tax loss of 1.53m after several profitwarnings.

Costain, however, has beenapplauded for walking away fromthe takeover, though its shares alsodropped yesterday.

Andy Brown at Panmure said:[Costains] strategic aims will nowbe met by smaller moves, which islikely to be better received byinvestors.

Mouchel shares closed down 4.5per cent at 78p, well below Costainsfinal offer price of 153.2p per share,while Costain shares lost 5.4 per centto close at 247.8p yesterday.

Mouchel fallsafter bids failBYMARION DAKERS

M&A

SATYAM Computer Services and itsformer auditor PwC agreed to pay acombined $17.5m (10.7m) to settleUS probes into an accounting fraudthat in 2009 became Indias biggestcorporate scandal.

Satyam, an outsourcing companynow known as Mahindra Satyam, willpay $10m to settle US Securities andExchange Commission (SEC) chargesit fraudulently inflated revenue,income and cash balances by morethan $1bn over five years.

Separately, India-based affiliates ofPwC agreed to pay $7.5m in recordsettlements of related charges by theSEC and the Public CompanyAccounting Oversight Board (PCAOB).

The SEC called its $6m accord with

five PwC affiliates its largest involvinga foreign-based accounting firm,while the PCAOB said the $1.5m pay-ment by two of those affiliates repre-sents its largest civil money penalty.

Satyam founder and former chair-man Ramalinga Raju surprisedinvestors in January 2009 when hesaid the company had overstatedearnings and assets for several years,in a fraud dubbed Indias Enron.The revelation caused Satyams sharesto plummet. Satyam agreed to pay$125m to settle US shareholder litiga-tion over that decline.

The fact that Satyams former topofficers were able to maintain a fraudof this scale represents a company-wide failure of extreme proportions,Cheryl Scarboro, chief of the SECs for-eign corrupt practices act unit, said.

BYHARRY BANKS

REGULATION

Satyam and PwCsettle US fraud case

"!!

)!

% ( )""

!%#!!

"%&"%&!!

"()!'

#,-.++$#*"

%""%&%!)"(

#"!!!

!%( *

%(%!&"%!

#)"!%!!(

!#

EQUINOX extended its $4.8bn(2.9bn) bid for Lundin Mining, andpostponed a vote on the deal by twoweeks yesterday, as it awaited a for-mal $6.5bn takeover offer fromChinas Minmetals Resources.

Minmetals, Chinas biggest metalstrading firm, unveiled plans tolaunch a C$7 a share bid forCanadian firm Equinox on Monday,chasing its copper assets in Zambiaand Saudi Arabia.

Equinox said it was consideringthe proposal and would updateinvestors on it in the coming days.

Equinox postponed a shareholdervote on the Lundin deal to 26 Aprilto give investors time to consider theboards and any other recommenda-tions on Minmetals share offer andthe Lundin deal before they have to

vote. Minmetals, which already hasa 4.2 per cent stake in Equinox, saidit would only go ahead with theoffer if Equinox dropped its bid forLundin.

Equinox delaysLundin decisionto consider deal

MINING

News 15CITYA.M. 6 APRIL 2011

Mouchel chief executive Richard Cuthbert has been with the firm since 2002

NEWS | IN BRIEF

BTG sees full-year results in lineSpecialist healthcare company BTG hassaid results for the year ending Marchwill be in line with their previous guid-ance. Revenue is predicted to fallbetween the range of 108m to 114mwith recurring revenue accounting foraround 98m to 102m of that. Themarket consensus for 2010-11 is110m. The group added integration ofthe biocompatibles business it boughtin January is in line to meet the target-ed cost saving of 3m.

Tanfield dips as losses continueShares in Tanfield Group fell eight percent to 37p yesterday despite the firmhaving announced it expected 2011 tobe a transitional year of recovery. Themaker of aerial work platforms man-aged to slightly reduce its operating

loss before impairments in 2010 to15.8m, compared to a loss of 16m in

2009. In the year ending 31 DecemberTanfield saw a turnover of 43.5m, arise from 43.1m a year earlier.

Wells Fargo settles SEC chargesA unit of Wells Fargo & Co settled civilcharges yesterday alleging thatWachovia violated federal securitieslaws when it sold mortgage-backedsecurities to investors in the lead-up tothe housing crisis. The Securities andExchange Commission said that WellsFargo Securities will pay $11m (6.8m)in disgorgement and penalties to settlethe administrative charges againstWachovia Capital Markets, a unit ofWachovia, acquired by Wells Fargo inlate 2008. The SEC said Wachovia hadviolated the law in two different ways.In one instance, it sold overpriced col-lateralised debt obligations, or CDOs, to

the Zuni Indian Tribe and another indi-vidual investor.

Water under the bridge for CostainCostain, the construction firm thatwalked away from Mouchelsstonewalling after four months, hasplenty to be getting on with.

The firm has a forward orderbook worth 2.4bn, including a con-tract to build the first major road tocross the River Thames in 20 years.

While Mouchel seems to haveslipped through the net for now(Costain has reserved the right towade in again under the rules ofthe City Code), analysts expect thefirm to instead move its attention topicking out smaller acquisitions.

Mouchel, meanwhile, is leftfloundering in the public sectorservices market alone.

Both Costain and Interserve cut

their offers after examining thefirms books, and last weeks resultsmissed forecasts that were alreadyrevised downwards. The company isalso likely to sell off assets in orderto meet a debt repayment in May2012 further distraction from theday-to-day work that Mouchel man-agement is desperate to focus on.

Mouchel needs to stage a spectac-ular turnaround to justify spurningtwo suitors that could have helpedshield the firm from public sectorturbulence. Only the most patientinvestors will stick around.

BOTTOMLINEAnalysis by Marion Dakers

8/7/2019 Cityam 2011-04-06

16/32

News16 CITYA.M. 6 APRIL 2011

Call.03002001999

Click.www.oxfam.org.uk/

ivorycoast

Text.DONATEto70066to

give5*

Shockingviolencehasfor

cedmorethan100,000pe

ople

WRHHWRQHLJKERXULQJ/LEH

ULD0DQ\DUHLQGHVSHUDWH

QHHG

RIIRRGDQGZDWHUHelpsa

velivesnow.

NEWS | IN BRIEF

Blockbuster bidding auction beginsA bankruptcy auction for movie rentalchain Blockbuster began with a $284m(174.4m) bid from Dish Network yester-day, quickly topped by rival groups led bybillionaire Carl Icahn and hedge fund

Monarch Alternative Capital. The Icahngroup bid $291.4m, while Cobalt Video, ahedge funds led by Monarch, offered$290m, said Blockbuster lawyer StephenKarotkin, who was leading the auction.

Geithner in corporate tax overhaulThe Obama administration is preparing acomprehensive proposal for corporate taxreform in an effort to kickstart the legisla-tive process in Congress, US Treasury secre-tary Timothy Geithner said yesterday.

Geithner said the proposal would have to berevenue neutral, so that a cut in the corpo-rate tax rate would have to be offset bynew revenue from the elimination of specialpreferences.

Protests about tax payments have no effect

SOMETIMES no change at all canbe as interesting as dramaticmovements and that is certainlythe case when we look at brands

that have been targeted by UK Uncutover the past five months.

The protest movement has attempt-ed to shame brands that it claimshave dodged UK taxes. A series ofactions began on 27 October last yearwhen Vodafones Oxford Street store

was closed by protesters. Similar shut-downs have occurred across the coun-try since then and following TheMarch for the Alternative on Saturday26 March a number of stores includ-ing Topshop and Boots on OxfordStreet were closed and Fortnum andMason occupied.

But the net result of this action onconsumer perception has been zero.If we look at f ive of the key brands tar-geted; Vodafone, Boots, Tesco and the

Arcadia Groups BHS and Topshopthere has been no real movement intheir corporate reputation score sincethe protests started with the com-bined score of the five being +77 back

on Oct 24 and a near identical +78this Monday.So UK Uncut has either failed to

interest people in its campaign orinterested them but not moved theirviews of the targeted companies. Theattention scores for those brandsshow that it is the first of those prob-lems that they have.

Once again we see that there hasbeen no significant change in thenumber of people hearing anything

(either positive or negative) about thebrands.

We can conclude that the actionsof UK Uncut are going largely unno-ticed (at least in terms of the specific

brands it targets) and therefore can-not impact on the general popula-tions views.

Stephan Shakespeare is chief executive ofYouGov.

BRANDINDEX

STEPHAN SHAKESPEARE

ANALYSIS l Brands' reputation

Source: YouGov

1 10 19 28 37 46 55 64 73 82 91 100 118

40.0

30.0

20.0

10.0

0.0

Bhs Boots 5 Brand average

ANALYSIS l Attention received by brands

25 10 2010 02 12 2010 11 01 2011 30 03 2011

60.0

50.0

40.0

30.0

20.0

10.0

0.0

Tesco Vodafone 5 Brand average

Source: YouGov

8/7/2019 Cityam 2011-04-06

17/32

INFLATION in the UK will reach 4.8per cent this year, a leading City pricewatch monitor said yesterday.

The release came ahead of tomor-rows Bank of England announce-ment on interest rates.

Starting today, the monetary policycommittee (MPC) will discusswhether to begin normalising Bankrate, after more than two years at thehistoric low of 0.5 per cent.

The annual consumer price index

rose from four per cent to 4.4 per centin February -- the 41st consecutivemonth above the governments twoper cent target, the report fromLloyds said.

Although we expect inflation todrop back over the medium term,there is a clear risk that rising inf la-tion and inflation expectationsbecome entrenched, said Lloydseconomist Adam Chester.

Arguably the largest risk to stableprices in the UK comes from theBanks policy of quantitative easing,the report said.

An extra 200bn of cash (13 percent of nominal GDP) has been inject-ed into the economy, it states.

So far, it appears this money islargely lying idle in commercialbanks reserve accounts but if this

money starts to become more activelyemployed, inflation pressures couldescalate rapidly.

And on top of some tentative evi-dence of inflation expectations fol-lowing through to wage settlements,the UK also faces a risk from morepersistent input price inflation, thereport said.

The risk from imported inflationcould come from a sharp deprecia-tion in sterling, or if pressures onglobal spare capacity continue torise.

However, Lloyds still expects infla-

tion to drop below two per cent by thesummer of next year.

The Bank of Englands chief dove,Adam Posen has said he will not runfor a second term at the Bank if infla-tion persists above the two per centtarget rate through to the middle of2012.

Inflation setto hit 4.8pc,warns LloydsBY JULIAN HARRIS

UK ECONOMY

OECD warnson impact ofcuts on UK

BRITAINS growth over the next threemonths will be roughly one third thepace of other major world economies,according to forecasts from theOrganisation for Economic Co-opera-tion & Development (OECD)

The Paris-based thinktank predictsannualised quarterly growth inBritain of just one per cent for thethree months to the end of June, sub-stantially lower than the average 2.9per cent for the G7 leadingeconomies excluding Japan.

Last month the OECD slashed theUKs growth forecast for 2011 to 1.5per cent from 1.7 per cent warningthe economy faces significant head-winds from spending cuts and ris-

ing commodity costs.The OECD said private sector

investment and growing internation-al trade were boosting G7 economies.

Growth in the G7 economies out-side Japan could rise to an annu-alised rate of about three per cent inthe first half of 2011.

However, Japan faces a severe eco-nomic knock from the natural disas-ter that struck in March.

The full cost of the disaster is notyet known, but the authorities pre-liminary estimate is that the loss ofphysical capital amounted to 3.3 to5.2 per cent of annual GDP, it said.

Growth in Japan could be hit by upto 0.6 per cent for the first-quarter ofthe year and up to 1.4 per cent fromApril to June, the OECD calculatedyesterday.

BY JULIAN HARRISWORLD ECONOMY

CHINA HIKES RATES

INTEREST rates in China were hiked for the second time in 2011 yesterday. Benchmark one-year deposit rates rose 0.25 per cent to 3.25 per cent and one-year lending rates went up 0.25per cent to 6.31 per cent. The central bank has tightened policy since food price inflationsoared upwards last year, provoking widespread concerns. MORE: P22-P23 Picture: GETTY

NEWS | IN BRIEF

EU regulation hits small firmsThe Federation of Small Businesses(FSB) warned yesterday that microfirms will be hard hit by the large num-ber of regulations that come from theEuropean Union, despite the start ofUK governments moratorium on regu-lations. The overall cost of red tape tobusinesses in the EU is 124bn yearly.

Homeowners upbeat on pricesThree out of five 59 per cent of

homeowners in the UK expect houseprices to rise over the next six months,

according to the latest survey by prop-erty website Zoopla. It also reportsgrowing optimism from homeowners.

Australia keeps rates on holdAustralias central bank kept interestrates steady at 4.75 per cent for a fifthmonth yesterday, arguing that a loftyAustralian dollar, moderate wagesgrowth and intense retail competitionwould help keep inflation at bay for theyear ahead. The Australian dollar has

jumped by around 13 per cent in thelast twelve months.

Exit activity at record levelsPrivate equity backed exits remainedat record activity in the first threemonths of the year, researchers atPrequin revealed yesterday. Fundmanagers are realising the mega-sizedinvestments made during the buyoutboom-era, said Prequins ManualCarvalho. The number of new deals,and their value, both fell from the finalquarter of 2010. New deals numbered623, worth $49.9bn (30.6bn) down

eight per cent in number, and 26 percent in aggregate value.

Economics 17CITYA.M. 6 APRIL 2011

ANALYSIS l Consumer Price Index

%

Source: ONS

Aug 09 Feb 10 Aug 10 Feb 11

6

5

4

2

3

1

0

4.4%

Yes I think it should start toincrease Bank rate. Mainlybecause inflationary pressuresare too heavy at the moment,and the rise inoil pricesmeans aninterest rateincrease is all

but inevitable atsome stage.

ANTHONY JEFFERYS |AXA INSURANCE

As someone with a mortgage, Iwould prefer interest rates tostay as low as possible, really.Also, with the economy as it is, Ithink that we needto be encour-aging peopleto spend, notdissuading

them fromspending.

OLIVER STAPLE |HORN & CO

No, not yet, this isnt the righttime for the Bank of England tobe hiking rates. It could damagethe recovery and besides, itlooks as if pres-sure on infla-tion couldcome downin the near

future in anycase.

MATTHEW HART |ALLIANZ

CITY VIEWS: SHOULD THE BANK OF ENGLAND RAISE INTEREST RATESTOMORROW? Interviews by Phoebe Torrance and Robert Leedham

8/7/2019 Cityam 2011-04-06

18/32

HOME Retail Group saw its sharesjump yesterday after US private equi-ty firm Madison Dearborn CapitalPartners upped its stake.

The Argos and Homebase ownerissued a profit warning last monthbut was buoyed by the move fromacross the Atlantic.

Tradewinds Global Investors, con-trolled by Chicago-based Madison,held 4.25 per cent of Home Retailsvoting rights as of the end of March,the retailer said. The stake was only3.2 per cent in mid-March. The FTSE250 company has been the subject oftakeover speculation and is seen as apotential target for Asda owner Wal-Mart.

Freddie George, an analyst atSeymour Pierce, said: It takes a leapof faith, in our view, to invest in acompany on speculation, when HomeRetails profits have declined eachyear over the last four years at a timewhen Internet channel sales have

been very strong.Home Retail chief executive officer

Terry Duddy lowered the companysprofit outlook on 10 March, warningdifficult and volatile conditionswere damaging sales at Argos. HomeRetail now expects to make profitsbefore tax of between 250m and255m for the year to 26 February,down from its January forecast of263m and the 293m made on 2010.But the stakebuilding by Madison isseen as a positive move in investorseyes. Home Retail shares closed 1.7per cent higher at 208.1p.

US investor

gives HomeRetail a boost

Corporate lift for Park Group

#&!#!%)

!&'#"'%'

#"#"

#&!#$&'

*!"#(%'$&'

#"#"

(''#)!!'+###!

!"$

CHRISTMAS hampers and voucherspecialists Park Group said it expects

trading to be in line with marketexpectations for its year ending 31March and Christmas 2011 orders areup five per cent year-on-year.

Liverpool-based Park Group willreport full results on 14 June, but saidit had performed well despite thefreeze before Christmas which hit theconsumer sector.

It said corporate voucher and pre-

paid card sales performed well in itslast financial year as the number ofclients increased year-on-year, in atough trading environment.

Parks corporate vouchers are used

by many firms for staff incentiveschemes, which were hit in the reces-sion.

Meanwhile the groups flexecashcard, a pre-paid card launched lastyear and redeemable at 24 retailersincluding HMV, Argos and New Look,has over 300 corporate clients.

The retailer said: While still asmall part of the business, demand

has been growing rapidly and its per-formance has exceeded the boardsexpectations.

Its online operation grew duringthe year with over 100m in sales

taken via its website.The Irish business, acquired inOctober 2010, has now been success-fully integrated, Park said in a state-ment.

It added: The Board expects toreport a positive financial perform-ance in line with market expecta-tions for the year ended 31 March2011.

BY JOHN DUNNE

RETAIL

BYHARRY BANKS

CONSUMER

CARLSBERG, the worlds fourth-biggest brewer, is adapting a new glob-al slogan in hopes of doubling itsbrands profits by 2015, the companyannounced yesterday.

The new slogan that calls for aCarlsberg replaces one of advertis-ings most famous taglines: Probablythe best beer in the world, originallyvoiced by actor Orson Welles.

Chief executive Jorgen BuhlRasmussen said that while Carlsbergs

green logo is known around the world,its sales do not measure up to its brandrecognition.

Carlsbergs operating profit rosefrom 9.39bn Danish kroner (1.1bn) in2009 to 10.25bn Danish kroner in 2010.

Carlsberg said it hopes the newbranding will help it reach its goal tobecome the fastest-growing globalbeer company.

Carlsberg rebrands in bidto double profits by 2015

FOOD & BEVERAGE

News18 CITYA.M. 6 APRIL 2011

NEWS | IN BRIEF

Quercus flies thanks to LarssonQuercus, the independent publisherbehind Girl With The Dragon Tattoo,yesterday announced an eight-fold surgein profits to a record 7.5m. Quercuschief executive Mark Smith is buildingon the success of Stieg Larsson's

books known as the MillenniumTrilogy. Smith, who co-founded Quercusin 2004, is paying a first-ever dividendof 5p and a further one-off dividend of7p. He has also signed up Susan Watt,the HarperCollins publishing directorwho commissioned Jeremy Paxman,Boris Johnson and Conn and HalIgguldens Dangerous Book For Boys, tolaunch her own Quercus imprint, HeronBooks. The company is taking on 40more staff.

McInerney folds seven firmsMcInerney Holdings Group has putseven of its UK units into administra-tion, with the housebuilding group blam-ing the continuing poor health of theproperty market. The companies affect-ed by the administration includeMcInerney Group, McInerney Homes,Alexander Developments (North East),Lancing Homes, Gold Homes, WilliamHargreaves and Bowey Homes. Severalbuilding projects in the Midlands andnorth of England were immediately puton hold. Richard Heis, Brian Green andPaul Dumbell of KPMG have beenappointed as administrators and arelooking at forming a number of deals tomanage the transfer and continuation ofsome development sites. Heis said thedifficult economy had limited the com-panys ability to function without thesupport of additional finance. The sevencompanies employ a total of 161 staffmembers for 32 development sites.

ANALYSIS l Home Retail Group

p

10 Jan 8 Feb 29 Mar9 Mar

240

220

230

210

180

190

200

208.105 Apr

VICE, the media group that includes thefamous monthly magazine of the same name,has attracted funding from Sir Martin SorrellsWPP, the leading communications agency, aspart of a multi-million dollar fundraising.

Vice has long had an anarchic reputationin the publishing world, not leastbecause of bombastic state-ments from co-founder ShaneSmith. Speaking about thelatest round of investments,Smith said: Vice has longbeen accused of havingambitions for totalglobal domination.Today, we acknowl-edge the truth.

We are forming anunholy alliance that willensure no other media companywill ever stand a chance againstVices relentless onslaught.

Vice was formed by Smith,with friends Suroosh Alvi andGavin McInnes, in 1994 as asmall punk magazine inMontreal, Canada, and hassince grown into a global youthmedia brand. Today, the glossytitle has over 1.1m readersacross more than 30 coun-tries and has estimatedannual sales of $8.4m.

BYEUGENIO MONTESANOMEDIA

WPP bets on eccentricmagazine moguls plan

VICE CO-FOUNDER SHANE SMITH

8/7/2019 Cityam 2011-04-06

19/32

Your Requirements Conscientious trader with a proven trading record

Dedicated to education and teaching others

Experience of working in a UK financial regulatory environment

Our Commitments Pioneering trading room technology

Many distinct advantages over current live trading rooms

Financial package in excess of 100k OTE

For further details about this opportunity

email your CV with a brief covering letter to

careers@tradermanagement.com

We are looking for experienced Foreign Exchange traders to share their

knowledge and experience with others through our bespoke live trading room

platform.

The retail FX industry is growing at a phenomenal rate and new FX traders wantto learn how to trade FX and follow professional day traders.

If you are a successful Forex trader with experience of working within the financial

services industry, contact us today to learn how you might become our nexttrading room host.

FX day tradersrequired...

News 19CITYA.M. 6 APRIL 2011

SHARES in Drax Group rose threeper cent yesterday after the firmagreed a tax deal to release 180mfor the business.

Drax, which owns the Drax coal-fired power station in Yorkshire,has settled tax issues linked to itsEurobond financing and otherminor legacy tax issues, the firmsaid in a statement.

Around 117m of cash that wasring-fenced last year will now bereleased onto the firms balancesheet, along with 63m remainingagreed losses that will be realisedover the next few years.

The Eurobond debt structurewas set up in 1999 during the pur-

chase of the Drax power stationfrom the National Grid. The firmpre-paid interest during its listingin 2005, and expected to get taxrelief up to 2015 before HMRCchanged the rules on taxdeductibility.

The firm then wound up theEurobond structure, crystallisinglosses of 220m, subject to HMRCconfirmation.

We are delighted to havebrought these complex matters toa conclusion, said finance directorTony Quinlan. We would like tothank HMRC for their professional-ism and commitment which hasallowed an efficient resolution tothis process.

If we receive appropriate regula-tory support, this cash will form an

integral part of the capital requiredto deliver our biomass strategy,which in turn will provide the UKwith cost effective, reliable andflexible renewable electricity.

Shares in the FTSE 250-listedcompany bounced 3.1 per centbefore settling 1.2 per cent higher.

Drax bounces afterit settles tax issuesBYMARION DAKERS

ENERGY

SHARES in National Grid shed 1.7 per cent yesterdayas HSBC downgraded its rating on the power utility tounderweight from neutral, on valuation grounds,underperforming a broadly weaker utilities sector.

HSBC said in a note the networks regulationimprovements are now priced in and failure to gener-ate Ofgem savings could dilute long-term returns,while the benefit of the cold winter weather will onlybe temporary. National Grids shares have risen 6.6per cent in 2011, compared to a 1.6 per cent rise onthe FTSE 100, and are hovering near overbought terri-tory on its relative strength index, HSBC said.

National Grid trades on a forward price to earnings

ratio of 12.4 times, roughly in line with its sectorpeers.

National Grid hit byHSBC downgrade

ENERGY

NEWS | IN BRIEF

Porvair four-month revenues upFiltration and environmental technologygroup Porvair yesterday announced rev-enues for the first four months of 2011have grown by around eight per cent onthe same period last year. In its interimmanagement statement the companysaid profit for tax was ahead of manage-

ments expectations and well ahead ofthe same period last year.

US long-term borrowing boostedHigher charges placed on banks thatlend overnight funds to the FederalReserve are having an anticipated posi-tive effect of making long-term bor-rowing relatively more attractive forbanks, the Federal Deposit InsuranceCorp (FDIC) said yesterday. The FDICintroduced the higher fees as called forin last years Dodd-Frank financialreform law. The higher charge has ledsome companies to step out of theshort-term lending markets, exacerbat-ing an already low supply of Treasurybills used to back borrowing.

Assura trading beats forecastsHigh sales in its pharmacy business havecaused Assura to surpass expected trad-ing results for the year ending in March.

The primary healthcare and pharmacygroup, which recently acquired AHMedical Properties, predicted revenuefrom its wholly-owned pharmacies toexceed 33m, compared to 31m in 2010.

Xstrata chief Mick Davis told analysts about the firms plan to expand coal operations

NORTH SEA oil producer EnQuestwarned that the governments recenttax raid on oil profits will make somesmaller projects in the region impossi-ble, but said it is well-placed to snap upprojects as the hike dents asset values.

EnQuest said it was very disap-pointed by the recent unexpected UKBudget decision to hike the oil profitlevy from 20 to 32 per cent, addingthat it will render some small fieldinvestments uneconomic.

But the firm posted a pre-tax profitof $169.4m (104m), up from a pro-forma profit of $24.9m last year, and

said that its developments still havesignificant potential.

Chief executive Amjad Bseisu saidthe tax increase might help the firmsacquisition drive: We can acquire

assets at prices that are lower thanthey were just a few weeks ago, hesaid on a conference call.

We can look at an acquisition inthe half a billion to a billion dollarrange quite easily.

EnQuest would consider assets putup for sale by oil majors such as BP inthe North Sea, Bseisu said, but waswary of taking on high decommis-sioning costs at some of the moremature fields.

EnQuest also plans to spend $300mon drilling and exploration this year,according to its results statement.

Pro-forma production rose 55 percent on last year to 21,000 barrels ofoil per day, as EnQuest ramped up

work on the North Sea assets ofPetrofac and Lundin Petroleum thatit acquired last year when it floated.

Reported revenues more than dou-bled to $583.5m during 2010.

EnQuest could buyup North Sea fields

after oil tax hikeBYMARION DAKERS

ENERGY

ANALYSIS l Drax

p

10 Jan 8 Feb 8 Mar 29 Mar

430

420

410

400

360

390

380

370

420.105 Apr

GERMANYS TUI has said it is in talks to sell a stake incontainer shipping business Hapag-Lloyd, that it hadearlier said it wanted to float, boosting its shares byfive per cent.

TUI is currently in talks with potential investorsover the sale of shares in Hapag-Lloyd, the travel groupsaid in a statement.

Sources close to TUI said that talks with several inter-ested parties including Oman and Chinas fourth-largest airline group HNA were at an early stage, withone saying the size of the stake was 10-15 per cent.

An official at Omani state-owned Onyx Investmentssaid it had reached an agreement in principle to buy a

stake in worlds fifth-largest container shipper, but thatnegotiations about the price were continuing.

TUI in talks on sale ofHapag-Lloyd shippingSHIPPING

XSTRATA could raise its coal outputby 80 per cent over the next five yearsto cash in on rising demand, accord-ing to a company presentation.

Xstrata, which has taken mininganalysts to its new Mangoola coal

mine in Australia this week, couldpush its annual output to 145m met-ric tonnes by 2016, Nomura said in anote.

The company told analysts on the

trip that its coal resource base hasrisen 80 per cent since 2005, withmost of the growth coming from theNew South Wales region of Australia.Its expansion is set to come frombrownfield sites.

Xstrata said the surge in demandfor coal was coming from China,Indonesia, India and Brazil.

Analysts at UBS said in a note thatthe Mangoola project, which is in itsfinal months of process testing,appears well-constructed with thecapacity for expansion.

BYMARION DAKERS

MINING

Xstrata plots coal surge

8/7/2019 Cityam 2011-04-06

20/32

News20 CITYA.M. 6 APRIL 2011

Nikko AMThe Asian investment managementcompany has appointed Violet Pacileo

as assistant director of product man-agement in the firms London office,responsible for representing the Asia-

based portfolio management teams inEurope. Prior to joining Nikko AM,Pacileo was assistant portfolio manag-er on the Japan desk at AberdeenAsset Management in Tokyo.

PricewaterhouseCoopers

Robert Bridson