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FTSE 100 6,055.75 +48.38 DOW 12,380.05 -29.44 NASDAQ 2,780.41 -15.73 /$ 1.64+0.01 / 1.13-0.01 /$ 1.45 +0.02

Kroenke tolaunch bidfor Arsenal

ARSENALS much cherished status asan independently-owned football clubwas under threat last night after itemerged that the US businessmanStan Kroenke had done deals to takehis shareholding up to 62 per cent.

Kroenke, who already owned 29.9per cent of the clubs shares, was saidto have agreed to purchase the sharesof a sick Danny Fiszman and NinaBracewell-Smith.

A statement from Kroenke is dueout this morning but last night theclub was making no comment.Kroenke is expected to now offer theprice he paid for his latest purchases,11,500 each, to any of the remainingshareholders in the club, as takeoverrules stipulate.

At the current share price Arsenalis valued at around 700m. It is afamously well-run club commercially,although many of its supporters feelit should at times spend more on itsteam.

Kroenke will be expected today togive some idea how he is financinghis latest investment.

There is widespread cynicism inthe UK about US stewardship of clubssince fans at Manchester United andLiverpool, where there has been arecent history of US ownership, havebeen unhappy about aspects of theircontrol.

Alisher Usmanov, Arsenals remain-ing large shareholder, has not made itclear how he will react to Kroenkesmove. MORE: PAGE 30

BY JAMES GOLDMAN

LEISURE

ICB chair Sir John Vickers holds the fate of Britains banks in his hands Picture: GETTY

www.cityam.comIssue 1,361 Monday 11 April 2011 FREE

ALLIANCESHOWDOWN

KATHERINE THE

GREAT UNDER FIRE

P11

MCILROYS MASTERSMELTDOWN AT AUGUSTA

SCHWARTZEL CASHES IN P31

BUSINESS WITH PERSONALITY

Certified Distribution

31/01/11 - 27/02/11 is 107,265

VICKERS VERDICT:REFORM FOR BANKSBRITAINS banks will this morningfind out what sort of shake-up theindustry is facing as John Vickerspublishes the IndependentCommission on Bankings (ICB)interim report into competitionand stability in the financial sector.

Banks have been given 90 min-utes to read and respond to thereport before markets open at 8am,with the stock prices of Lloyds andBarclays seen as particularly sensi-tive to hints of a hard-line attitudefrom the ICB.

Moves to undo parts of the Lloyds-HBOS merger or prevent cross-sell-ing between investment and retailbanks would have a dramaticimpact on both banks bottom lines.

Legal experts have raised strongconcerns about the practical impli-cations of the policies the commis-sion is considering.

The ICB is looking at differentforms of ring-fencing to create fire-breaks between parts of a bank sothat a collapse of one business linedoes not lead to the failure of thewhole institution. The idea wouldbe to make each part a separatelegal entity or subsidiary.

But lawyers have said the idea isunworkable. Simon Gleeson, a part-

BY JULIET SAMUELBANKING

ner at Clifford Chance, says: A bankis a bunch of systems with a legalstructure on top. It isnt practicable tosay that one part or another is a sub-sidiary. Its like telling someone todivide their body in half.

PricewaterhouseCoopers RichardKibble says: There is no compellingevidence that universal banking con-

tributed to the crisis...It is also unclearwhat problem would be addressed by

ring-fencing particular activities orwhat the proven benefits are.

Others have suggested that thering-fencing proposals will have to befleshed out in great detail to generateconfidence. It has to be sold in theright way because people are going tobe looking at it very carefully, saysFTI Consultings Vicky Pryce.

The ICB will now enter a secondconsultation phase, which Pryce says

means lobbying left, right and cen-tre, as well as public meetings togauge reaction to the interim propos-als. It will close the consultation inJuly and write a final report over thesummer to hand to chancellorGeorge Osborne in September.

A committee, including bothOsborne and business secretary Vince

Cable, will implement the proposals.ALLISTER HEATH: P2, MORE: P5-7

Sir John Vickerswill present hisinterim report onthe future of thefinancial sector

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News2 CITYA.M. 11 APRIL 2011

Risk appetitespikes in 2011RISK appetite at FTSE companies hashit its highest rate since a leadingsurvey of chief financial officersbegan in 2007, it was revealed today.

Four in ten (41 per cent) CFOsthink this is a good time to take ongreater risk on their firms balancesheets, according to a Deloitte survey up from 32 per cent at the end of2010, and just 25 per cent lastautumn.

However, CFOs remain downbeatabout the UKs economic prospects,with two thirds saying theres a lessthan 50 per cent chance of inf lationfalling back to the Bank of Englandstwo per cent target.

Only seven per cent of CFOs thinkthere is a very good chance of infla-tion falling back down, as the Bank

expects.While still optimistic about their

companies prospects, CFOs are lessconfident than last year. Deloittesoptimism balance fell to its lowestreading since the first quarter of2009.

While corporate profits haverebounded strongly from their lows,high inflation and the prospect ofhigher interest rates may limit thescope for margin growth from here,said Deloittes chief economist, IanStewart.

Nonetheless, CFOs showed anappetite for adding leverage, raisinggearing and there was a furtherincrease in the proportion reportinga proposed hike in capital expendi-ture over the next 12 months.

Analysts hope that a boost in capi-tal expenditure could help offsetweak consumer spending in the UK.

BY JULIAN HARRIS

UK ECONOMY

Let us hope we get the right reforms

It was spun by George Osborne as anattempt to take the politics out ofbanking. Yet the IndependentCommission on Banking (ICB) hasachieved the opposite: its interimreport, out this morning, will merelykick-start the bitter row over howbanks should be regulated. Banker-bashing, which had subsided in recentweeks, will rear its ugly head again;and as usual politicians will competeto call for the most crippling possibleaction to be taken, with no regard toBritains competitiveness, the econo-mys real interest and jobs.

But its not all bad. Substantialreform is needed, as I have been argu-ing for years, to ensure that no institu-tion is ever bailed out again and thatthe City can once again grow in a sta-

ble manner. Many changes havealready happened. Regardless ofwhether the ICBs recommendationsturn out to be sensible or silly, at leastthere will now be a more intellectualbackdrop to the discussions. It wontjust be about emotion or a simplistic,incomplete understanding of theevents of the past few years. Here are afew principles against which todaysreport should be assessed.

First, market forces should beallowed to discipline large institutionsonce again firms should be able togo bust and taxpayers should neverhave to be called in again. We needmore capitalism (not less) and an endto the socialisation of losses. One ofthe main problems with large banks and also nation states such as Portugal is that they benefited from implicitbailout guarantees, which meant that

they felt more relaxed about riskierdecisions. Crucially, bank sharehold-ers were wiped out - but not bondhold-ers - while those staff who retainedtheir jobs also retained their con-

tracts. There was no real Plan B. Whatis needed instead is special bankrupt-cy rules tailored to the needs of large,systemically important financial insti-tutions. Under such schemes, share-holders are wiped out, bondholderslose much of their money, all con-tracts can be renegotiated and bustfirms can be wound down in a gentleand controlled manner. The threat ofthis would focus everyone. To achievethat, some subsidiarisation and ring-fencing of activities may be necessary;living wills in the form of detailedmanuals on how to wind-down com-plex firms definitely so.

A related rule is that innovativefinancial instruments can make thebanking system more resilient. Co-cosor other such instruments can allowan automatic recapitalisation if capi-tal falls below a threshold.

A third rule ought to be that govern-ments should not try and micro-man-age the industry. As long as there is afear of failure, and that firms are hold-ing enough good quality capital to

withstand a serious, low probabilityevent, the rest shouldnt matter.Capital levels were too low previously but that doesnt mean they shouldbe increased to ridiculous levels delib-erately to reduce profits and wages,especially given the move to longer-term remuneration policies.

Fourth, the best way to improvecompetition is to empower con-sumers, not impose arbitrary break-ups. It ought to be made easier tochange bank. Account numbers oughtto be made portable, just like mobilephone numbers. Switching bankshould be almost instantaneous.

These are some of the principlesthat a rational, radical bank reformerought to pursue. We shall soon findout how the ICB measures up.

[email protected] me on Twitter: @allisterheath

NEWS | IN BRIEF

Citigroup tower up for saleThe iconic Citigroup tower in CanaryWharf has been put on the market formore than 1bn, according to a report inthe Financial Times. Private investorsGlenn Maud and Derek Quinlan havehired agent Jones Lang LaSalle to scopeout interested bidders for 25 Canada

Square, which is currently the UKsthird-tallest building. Maud and Quinlanare said to be selling the tower to helppay off large debts racked up during theproperty boom. Jones Lang and Citicould not be reached for comment lastnight.

Ronson forms private equity firmProperty tycoon Gerald Ronson haslaunched a private equity group, backedby Middle Eastern investors, to buy upcentral London real estate. RonsonCapital Partners is funded by the Heronfounders personal fortune and investorsincluding an Omani sovereign wealthfund. Its first investment is an officebuilding in Marylebone, which wasowned by Targetfollow before being putin the hands of administrator Deloitte.The site on Chiltern Street had an askingprice of around 65m.

EDITORS LETTER

ALLISTER HEATH

7th Floor, Centurion House,24 Monument Street, London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: [email protected] 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 [email protected]

ANALYSIS l Will inflation fall back to target in two to three years?

%ofrespondents

Likely

Unlikely

Source:Deloitte

50

40

30

20

10

0

7%

Very good chance

(over 75% chance)

Good chance

(between 50% and

75% chance)

Some chance

(between 25% and

50% chance)

Not much chance (less

than 25% chance)27%

47%

19%

ANALYSIS l How will revenues, costs and margins increase over next 12 months

Net%ofCFOsExpectingIncre

ase

Revenues Operating costs Operating margins

60

50

40

30

20

10

0

55%

43%

3%

2010 Q4

2010 Q3

Source:Deloitte

BIG MEDIA NAMES BACK BOUTIQUEBANK RAINEEric Schmidt, Sean Parker, PeterChernin and other big names fromthe media and technology sectorshave invested in a merchant bankstarted by two ex-Wall Street dealmak-ers and Ari Emanuel, head of WilliamMorris Endeavor talent agency.

CAPITAL RULES DEAL A BLOW TO LIFEASSURERSMore than half of UK life assurerswill need to restructure their busi-nesses to cope with new Europeancapital rules, while a number arelooking at changing their homecountry to escape the regime,according to a survey. The UK indus-try is also losing confidence thatthey will be ready for the Solvency IIrules when they come into effect in

2013, according to research by theEconomist Intelligence Unit.

STATOIL LOOKS TO ARCTIC FIND

Statoil says it has struck oil in a newlyexplored area of the Barents Seadescribing it as the most significantNorwegian oil discovery for a decade.The Skrugard field is estimated tohold at least 150m-200m barrels of oilequivalent, with a possibility of up to500m. The discovery highlights theenergy industrys sharpening focus onthe Arctic, amid predictions theregion could hold up to a quarter ofthe worlds undiscovered oil and gas.

FEARS OVER GERMAN GAMING RULESInternational betting companies hop-ing to enter the German sports bet-ting market when it is liberalised nextyear will face tough rules that couldmake it risky to do business inEuropes largest economy. Accordingto a confidential agreement, a bettingcompany could have its operationsshut down if German punters use a

companys websites that are aimed atother markets.

BATTLE LOOMS OVER RETURN OFINFLATION-PROOF SAVINGS BONDNational Savings & Investments isheading for a row with the banks andbuilding societies as it prepares topoach billions of pounds of thenations savings by resuming the saleof inflation-protected bonds.GrahamBeale, chief executive of theNationwide building society, told TheTimes that the impact could be enor-mous.

LANDLORDS URGED TO IMPROVETRANSPARENCY TO OFFICE TENANTSUK office tenants paying a total of4.06bn a year in service chargesshould demand better transparencyand accounting procedures fromtheir landlords, a report has found.The report claims many commercial

landlords are failing to account forhow they spend the money.

GORDON BROWN ADMITS: I MADE ABIG MISTAKE ON BANKSGordon Brown has admitted he madea big mistake in the way he tackledfinancial regulation before the bank-ing system collapsed. n his first clearadmission of some responsibility forthe financial crisis, the former primeminister claimed he had not under-stood how entangled the worldsfinancial institutions had become.

'100 VICTIMS' OF NEWS OF THE WORLDPHONE HACKINGRow over the News of the World hack-ing scandal intensified after companyprivately admitted there could be upto 100 victims. The disclosure came asa senior politician who has conducteda parliamentary investigation into theaffair suggested that further arrests

were likely to follow, with one sourcesaying they could be this week.

OGILVY TO LAUNCH CHINA DIVISIONOgilvy & Mather, advertising unit ofWPP PLC, is launching a new Chinapractice in an attempt to grab moreadvertising dollars from Chinesecompanies expanding overseas, theagency's top executive said. Theagency is investing an initial $1m toopen the New York-based China-focused division, Ogilvy & MatherChief Executive Miles Young said inan interview. Ogilvy has tappedLyndon Cao, a former senior managerat state-run newspaper China Daily

SEC BOOTS UP FOR INTERNET AGEFederal securities regulators areweighing demands to make it easierfor fast-growing companies to usesocial networks such as Facebook andTwitter to raise money by tappingthousands of investors for very small

amounts of shares. The SEC is lookingat adapting its rules.

WHAT THE OTHER PAPERS SAY THIS MORNING

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THE BALANCE of opinion is turningtowards a gradual rise in interestrates, the Bank of Englands chiefhawk Andrew Sentence said yester-day.

Im not sure I am swimmingagainst the tide because I think thebalance of opinion has been shiftingin that direction, Sentance said,referring to the growing support fornormalisation of Bank rate on themonetary policy committee.

Sentance was a lone voice on the

committee for much of last year, vot-ing for higher rates from June

onwards. This year he has been joinedby two other members of the commit-tee Martin Weale and Spencer Dale who are voting for a rise. Weale andDale want a 0.25 per cent rise, whileSentance is pushing for 0.5 per cent.

Many of the factors pushing upprices in the UK may not be as tem-porary as some economists predict,Sentance said on Sky News.

We can see the VAT impact isgoing to be temporary but some ofthe other factors coming from theglobal economy, we cant be sure thatthey will subside quickly because the

world economy is growing strongly,he added.

THE DIRECTORS of NYSE Euronexthave snubbed a rival merger bid fromNasdaq OMX Group, giving rise tothe possibility of a hostile takeoverattempt.

The firm said it still firmly backs anoffer from Deutsche Boerse, saying thejoint Nasdaq / InterContinentalExchange offer carried significant exe-cution risk and was less likely to close.

The board of directors also raisedconcerns about the level of debtinvolved in the merger proposal.

The bid proposed a radical restruc-turing of the exchange, which wouldsee Intercontinental Exchange snapup NYSEs European assets.

NYSE Euronext chairman Jan-Michiel Hessels said: Breaking upNYSE Euronext, burdening the pieceswith high levels of debt, and destroy-ing its invaluable human capital,would be a strategic mistake in termsof where the global markets aregoing, and is clearly not in the bestinterests of our shareholders.

The highly conditional break-upproposal from Nasdaq / ICE wouldalso require shareholders to shoulder

unacceptable execution risk.We are confident that the combi-

nation with Deutsche Boerse will cre-ate compelling value for ourshareholders.

The outright rejection of the bid understood to be 16 per cent higherthan the Deutsche Boerse offer islikely to anger some NYSE Euronextshareholders, who will questionwhether it has been thoroughly con-sidered.

Frankfurt-based Deutsche Boersehas agreed to acquire the NYSE ownerin a stock bid worth $9.5bn (6.8bn).The combined entity would be theworlds largest exchange. It is the lat-est development in a wave of consoli-dation sweeping through the worldsexchange markets.

NYSE rejects

merger bidfrom Nasdaq

LEGAL action will be taken to clawback billions of pounds of Britishsavers cash from collapsed Icelandicbanks, the chief secretary to theTreasury has signalled.

Plans to pay back money lost inIcesave accounts were rejected for asecond time by Icelanders in a refer-endum held over the weekend.

Danny Alexander called the devel-opment disappointing and said thegovernment would use the Europeancourts to reimburse Britons who lostmoney.

It looks like this process will nowend up in the courts, he told BBC1sAndrew Marr Show.

He added: We have a obligation topeople in this country who had savedwith those banks, we have an obliga-tion now to get that money back, and

we will continue to pursue that untilwe do.About 3.5bn is owed to the UK

and the Netherlands, who stepped into compensate savers who lost moneydeposited in Icesave accounts.

Icelandic lender Landsbanki ranthe accounts, but collapsed in 2008along with two more of the countrysbanks.

Sixty per cent of Icelanders votedagainst the latest repayment plan.

Iceland faces court over itsrefusal to pay out for Icesave

Tide is turning towards interestrate hike, says Banks Sentance

BY STEVE DINNEEN

M&A

UK ECONOMY

Danny Alexander will use the courts to get investors money back Picture: GETTY

BYRICHARD PARTINGTONPOLITICS

News 3CITYA.M. 11 APRIL 2011

ANALYSIS l NYSE Euronext

$

10 Jan 28 Jan 17 Feb 9 Mar 29 Mar 7 Apr

40

38

36

34

32

30

38.708 Apr

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LONDON mayor Boris Johnson, astaunch defender of the City, hassaid that he supports a form of ring-fencing, or subsidiarisation, ofbanks activities to promote finan-cial stability.

The mayor was speaking a daybefore the publication of an interimreport by the IndependentCommission on Banking (ICB), whichwill release its initial findings thismorning.

Boris support for subsidiarisation,whereby a bank hives off certainactivities into a separate legal entity,thrusts him into the charged politi-cal atmosphere surrounding theICBs report.

The ICB will deliver its final rec-ommendations to the CabinetCommittee on Banking inSeptember, which includes bothchancellor George Osborne and busi-ness secretary Vince Cable.

They will be in charge of imple-

menting its findings, although theyare not formally obliged to acceptany of them.

While Osborne is believed to bemore sympathetic to banks con-cerns about a level playing fieldinternationally, Cable has in the paststated his preference for a full-scalebreak-up of retail and investmentbanking, calling the latter casinobanks.

His harsh language was echoed byLiberal Democrat Danny Alexander,first secretary of the treasury, yester-day.

Alexander said: Our priority as agovernment is to make sure thatthose people who recklessly gambledwith our economy are no longer ableto be bailed out by taxpayers... thosepeople who engage in that sort ofcasino banking (should) take respon-sibility for themselves.

Implementing the report is likelyto open divisions in the coalition,with senior Liberal Democrats anx-ious to show they are taking a toughline on banks.

Boris favoursring-fencingof UK banks

The spotlight will today be on thefamous five members of theIndependent Commission onBanking (ICB) as it presents its 200-page interim report.

Two of the commissions fivemembers come from a banking back-ground, which banks might hopewill make them sympathetic to thedifficult of running a major lender incurrent regulatory conditions.

Bill Winters was co-chief executiveof JP Morgan Investment bank untillast year. He had worked at the banksince 1983, moving from New York toLondon in 1992.

Martin Taylor is chairman ofSyngenta and was chief executive ofBarclays from 1994 to 1998.

The other three members come tothe task from outside the industry,however. Sir John Vickers is an

Oxford economics professor, leavingthe university for two years in 1998 toserve on the monetary policy com-mittee and then the Office of FairTrading.

Clare Spottiswoode is known as awarrior for consumer rights, havingbeen director general of Ofgas andacted for policyholders in negotia-tions with Aviva.

Martin Wolf is chief economicscommentator of the FT and hasworked at the World Bank.

Spotlight onfamous five ofthe Commission

BY JULIET SAMUEL

POLITICS

BANKING

Focus on Vickers 5CITYA.M. 11 APRIL 2011

City in partial support of Vickers

In association withPoliticsHome.com

Apply to join today atwww.cityam.com/panel

THE majority of people working in theCity believe banks should be forced todraw up contingency plans for theirown demise, with eighty-four per centin favour of mandatory living wills forbanks, according to the latest CityA.M./PoliticsHome Voice of the Citypoll.

The support for wind-down plansthrows the weight of the City behindproposals that Sir John VickersIndependent Commission on Bankingis expected to make this morning, andshows there is now very little appetiteto see the UK government prop up fail-ing banks with further financialbailouts.

The survey also found that 64 percent of City workers and the samenumber specifically in the banking sec-tor support the idea of ring-fencingcertain bank operations.

Examples given included critical

operations such as retail deposits andpayments processing as candidates forsegregation, but the devil will be in thedetail when it comes to exactly howringfencing could work.

But Vickers is likely to face stronglobbying against some of his other keyproposals. Just 34 per cent of respon-dents felt that enforcing demergers to

increase competition was desirable,with support falling to 28 per centwhen focused on the banking sectorsresponse.

The Lloyds-HBOS merger is expect-ed to be heavily criticised in this morn-ings report, and with mandatorybranch sales a possibility for someinstitutions the banks are likely tolobby strongly against the findings.

The City also poured cold water onthe idea of a complete separation ofbanks investment and retail arms,with 69 per cent of the banking com-munity rejecting Vince Cables call fora UK version of Glass-Steagall.

With friction already rife within thecoalition on the subject, the debate islikely to rumble on as the Commissionheads for its final report, due inSeptember.

PoliticsHome interviewed 513 peo-ple from the specially recruited 'Voice

of the City' panel by email between 6-8 April 2011. Members of the panelthat respond to at least 80 per cent ofsurveys between now and Septemberwill be entered into a prize draw towin a luxury weekend in Paris. FullT&Cs available on request.

New members can apply to join atwww.cityam.com/panel.

PoliticsHome.comPoliticsHome.com

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Focus on Vickers6 CITYA.M. 11 APRIL 2011

The Panel (l to r): Bill Winters, Martin Wolf, Sir John Vickers, Clare Spottiswoode and Mart

TIME LINE | WHAT HAPPENS NOW?

11 April 2011: The Independent Commission on Banking (ICB)releases its interim report this morning at 7am. The report will layout all the policies the commission is considering for inclusion in itsfinal recommendations.12 April 2011: A second consultation period begins. The ICB willsolicit written responses to its interim report and will meet againwith banks, the FSA, the Bank of England, the Treasury and otherinterested parties.April-June 2011: A second series of public meetings will take place,after the five held last autumn, as part of the consultation. The ICBwill effectively go on a roadshow to gauge public sentiment towardsits interim report.July 2011: The ICBs second consultation will close and the commis-sion will spend the summer writing up its final recommendations forsubmission to the Cabinet Committee on Banking (CCB).September 2011: The final report will be published with decisionson implementation turned over to the CCB. The committees mem-bers include chancellor George Osborne, business secretary VinceCable and former HSBC chairman Stephen Green.

Citys competitive

edge is at stake

Hands off, Mayor Bloomberg:Barclays is ours. And so is HSBC.The feverish media speculationeven has Nicholas Sarkozy in on

the act, trying to lure the headquarters

of banks over the Channel. Londonobviously has no God-given right to bethe banking headquarters rather thanNew York or Hong Kong or Paris; wehave to earn it by being a better placeto do business. We are a better place tolive, and we have the time zone, lan-guage and workforce. It is tax and reg-ulation the deciding factor for banks that are in play.

It is very welcome that the chancel-lor has said that he wants the UK to bethe best country in the world to dobusiness, with the most competitivetax regime. The politics of bankingremain hostile, but unlike many otherpoliticians (including some coalitionministers) the chancellor recognisesthe importance of London remaininga global financial centre, and is notfrightened of saying so.

But possibly the biggest test so farwill be today, with the publication of

the ICBs interim report.I dont want to wade into the debate

on narrow-versus-universal bankingother than to point out that despitethe wishes of banker-bashers, narrowbanking is no panacea. From FannieMae to Northern Rock to LehmanBrothers, more focused financial insti-tutions are not immune to failure.Meanwhile, universal banks like HSBCneeded no government support.

But the fundamental point forLondons future is whether or not weend up with regulation that makes lifeeasier for those queuing up to lure ourfinancial institutions away.

Londons rivals will trumpet withglee anything that puts us at a disad-vantage.

The ICB are, thankfully, aware of the

risks of damaging Londons competi-tiveness, but we are still the only finan-cial services centre in the worldactively discussing whether we shouldbreak up the banks that operate here.

It is now a dead issue in the US, andwas never a live issue elsewhere. Weare at present the only banking centrewith a special banking tax, and unlikeour rivals, we have the regular plopplop of European legislation, whichusually makes us less competitiverather than more.

But it is just an interim report, andplenty of lobbying will follow it. Evenafter the final report is published, thegovernment will have to decidewhether to adopt the recommenda-tions.

It will have to think very carefully tomake sure it gets that right nothingless than Londons future could be atstake.

Anthony Browne is an adviser to theMayor of London

VIEW FROM CITY HALL

ANTHONY BROWNE

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Focus on Vickers 7CITYA.M. 11 APRIL 2011

ICB has to strike adifficult balance

With such a broad mandate torecommend how to promotegreater financial stabilityand competition within UK

banking, the IndependentCommission on Banking has a widerange of options to choose from.

And while the level of concern with-in UK-based banks is understandable,it is important to remember that the

paper is merely an interim report, set-ting out the areas the commission willbe looking at in the months to come.

The ICB has an important task and itis only right that it looks at every possi-ble solution.

From the Citys perspective, the toppriority must be to address the under-lying problems whilst safeguardingour international competitiveness this is a difficult balance to strike.

According to early reports, the ICBwill resist pressure to include the phys-

ical splitting of UK-based banks intoseparate retail and investment institu-tions in its report.

This is good news for the banks.More importantly, it is good news forthe UK economy and the consumer.

With other jurisdictions showing noappetite for such a move, splitting upthe banks would have serious implica-tions for the ability of UK-based banksto compete in the global marketplace.

And while there are compelling rea-sons why financial institutions contin-ue to want to be based in London, ourrivals overseas are well aware thatfirms do not see the UK as the welcom-ing business environment it once was.

The greatest danger facing the UKfinancial services industry is if the ICBrecommends that the Governmentacts out of step with our internationalpartners.

Significant steps towards greater sta-

bility have already been taken at aninternational level through Basel andthe G20 and this is exactly theapproach we should be taking.

Striking out on our own, while expe-dient politically, could severely com-promise our internationalcompetitiveness while offering noguarantees that it will get to the rootof the very problems we are trying tosolve.

Stuart Fraser is Policy Chairman at theCity of London Corporation

CITY COMMENT

STUART FRASER

ICB | MAKING SENSE OF THE REPORT

Glass-SteagallLikely to appear as an example of whatthe ICB is not recommending, the USGlass-Steagall Act of 1932 forced banksto choose between wholesale/investmentbanking activities, and retail banking. Theact forced JP Morgan to sell off itsinvestment banking operations, establish-

ing Morgan Stanley in 1935.

SubsidiarisationRefers to the establishment of a separatelegal entity within a group for tax andregulation purposes. Each subsidiary hasto be capitalised separately, so bankscannot seamlessly move loss-absorbingassets between them.

Functional subsidiarisationThis would require banks to turn differ-ent business lines into separate sub-sidiaries and would please hard-linerslike business secretary Vince Cable. Ithas been touted as a possible way ofimplementing Glass-Steagall light - awholesale/retail divide under one owner-ship in a banking group.

Operational subsidiarisationThis could be a middle-ground compro-mise between banks and their critics. It

would require them to hive off essentialoperations into a well-capitalised sub-sidiary that could withstand the failureof other parts of the bank. The ideawould be to keep operations like pay-ments systems and access to retailaccounts going if a bank collapses, allow-ing for an orderly bankrupcty.

Living will or resolution planCreating a plan for an orderly wind-up inthe event of a bank failure is already due

to become a requirement under EU law,but the ICB could mandate a particularform of living will that could, for exam-ple, involve operational subsidiarisation.

Bail-in bondsThese are bonds that could force holdersto take losses if a certain trigger is

reached, for example if the government isforced to take over a failing bank. Theregulator would then decide what hair-cut was to be taken by bond-holders, orcould turn the bonds into equity.

Contingent convertible (co-cos)Bonds that automatically convert intoequity upon an established trigger, forexample if a banks core tier one capitalratio drops below a certain threshold.The ICB could require banks to issuesuch capital to give bond-holders anincentive to monitor banks capital levels.

Free if in credit (FIIC)This refers to the UK retail banking prac-tice of giving free current account servic-es to those who keep a positive balancein their account and making those withoverdrafts pay large fees to cover thecosts. The system has been criticised foreffectively making those under financial

strain pay a cross-subsidy to those withcash in their accounts.

Account market concentrationMany critics of the banking industryargue that it is too concentrated, withLloyds, RBS, Barclays and HSBC holding78 per cent of business current accountsand, after its government-backed mergerwith HBOS during the financial crisis,Lloyds alone holding 30 per cent of per-sonal current accounts.

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GLENCORE, the worlds biggest com-modities trader, is narrowing down itslist of candidates to take over as chair-man of the company after its flotation.

Simon Murray, chairman of Asia-Pacific investment firm GEMS and adirector on the board of Essar Energyand Richemont, is one of the con-tenders, with former LazardInternational chairman Ken Costa alsomentioned as a potential candidate.

Glencores current chairman, Willy

Strothotte, is leaving the post in partdue to his dual-chairmanship of FTSE100 miner Xstrata, of which Glencoreowns 30 per cent.

Glencores $60m (37m) float,which is said to be ready for launchthis week, will list a portion of shares

in London and a portion in HongKong. But the float process is likely tokick off earlier in London because itusually takes around four weeks in theUK, versus as little as ten days in HongKong.

Investors are looking for a solid floatof Glencore to restore confidence aftera tumultuous period that has seenmany initial public offerings (IPO)pulled due to market volatility.

But those familiar with the deal saythat Glencores float will not be indica-tive of wider market strength becauseof its size and the quality of the com-

pay.After issuing an intention to float

document, expected this week,Glencore will enter a pre-marketingprocess of meeting with investors andwill then publish a full prospectuswith a suggested price range.

Glencore huntfor chairmanintensifies

BHP Billiton is plotting a 30bntakeover of Australian energy firmWoodside Petroleum, in a strategicswitch into oil and gas by theworlds largest miner.

The Anglo-Australian firm is saidto be in talks with Royal DutchShell, Woodsides largest sharehold-er, over a deal to buy its stake tomount a takeover challenge.

Led by chief executive MariusKloppers and chairman Jac Nasser,BHP has failed in three takeoverapproaches in recent years.

A $39bn (23.8bn) bid forCanadian miner Potash was blockedby the countrys authorities lastyear on grounds of national interest.

Any deal to buy Woodside out-right could again draw fire fromrulemakers, despite BHP being con-sidered a native business inAustralia. Its listing in both Sydneyand London could lead to an investi-gation by the foreign investmentregulator.

Analysts had dismissed specula-tion that BHP would look to buy theenergy firm, given the high premi-

um Woodsides shareholders woulddemand.

BHP Billiton eyes Shell dealto buy Australian energy firm

BY JULIET SAMUEL

CAPITAL MARKETS

MINING


EGYPTIAN PROSECUTORS SUMMON MUBARAK

Egypt's public prosecutor yesterday summoned former president Hosni Mubarak as partof probes into the killing of protesters and the embezzlement of public funds, but theousted Mubarak said allegations against him of wrongdoing were lies. Mubaraks sonsGamal and Alaa were also summoned in the embezzlement probe Picture: REX

NEWS | IN BRIEF

Gadaffi said to accept peace planMuammar Gaddafi has accepted aroadmap for ending the conflict in Libya,South African president Jacob Zumasaid yesterday after leading a delegationof African leaders at talks in Tripoli. Ihave some commitment which is com-pelling me to leave now but we have

completed our mission with the brotherleader [Gaddafi], Zuma said after sev-eral hours of talks with the Libyanleader at his compound. The brotherleader delegation has accepted theroadmap as presented by us. We have togive ceasefire a chance.

Global military spending risesWorldwide military spending edged upin 2010 to a record $1.6 trillion(977bn), according to research by theStockholm International Peace ResearchInstitute out today. Global spending rose1.3 per cent in real terms, a slowdownfrom 5.9 per cent the year before as theeconomic downturn hit military spend-ing, the report said.

Hayward role at TNK-BP in doubtEmbattled former BP boss TonyHaywards place on the board of thefirms Russian joint venture TNK-BP is in

doubt , with the board understood to beconsidering his position. If he is oustedfrom the role it would cut his last tie tothe company he headed up for threeyears. He was criticised for his handlingof the Deepwater Horizon spill in theGulf of Mexico.

BHP would be better off shoppingabroad than plotting Aussie dealJUST two months ago BHP Billitonused its impressive half-year resultsto offer shareholders a $10bn(6.1bn) buyback. Now it seems tobe on the acquisition trail again sono one could blame investors forbeing a little confused.

BHPs cash pile has been steadilyincreasing as recent acquisitionattempts failed despite fees lost onboth the Potash bid and the RioTinto iron ore joint venture theminers reserves have swelled to$15.4bn and a bid for Woodside isa safer bet for BHP than its recenttakeover attempts. With BHPs focuson mining and metals, an oil andgas purchase would be unlikely toraise competition concerns.

But there are reasons to be scepti-cal. Previous buybacks have beensuspended shortly before a dealannouncement, but Fridays tenderwent ahead as planned. And inFebruarys results BHP execs saidthe company was focusing onpipeline projects to avoid inflatedprices. With the rumouredAUD$46bn (29.6bn) bid at a 23 percent premium to Woodsides mar-ket cap, tax uncertainty and projectcosts mean the Anglo-Australiangiant is better off looking for cheap-er international buys for now.

BOTTOMLINEAnalysis by Elizabeth Fournier

ANALYSIS l BHP Billiton

p


2600

2150

2200

2300

2400

2500

2585.508 Apr

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Peel Holdings, the majority share-holder in Pinewood Shepperton, willbe forced to pay substantially morethan its initial 190p per shareapproach for the film studio, accord-ing to a source close to the deal.

On Friday, Pinewood disclosed thatit had received an offer of 190p pershare from Peel Holdings, whichowns 29.7 per cent of the film studio,to take full control of the companythat is best known as the home of the

James Bond and Harry Potter films.But a source predicted the early

negotiations between Peel andPinewood will result in a reason-able takeover bid of between 220pand 225p per share, based on the dealstruck by SVG Capital, which lastmonth sold its remaining three percent stake in Pinewood to Peel.

This is a credible approach andone that is highly likely to lead to afirm offer, the source told City A.M.It is not a done deal, but the days of

Pinewood Shepperton as an inde-pendent company are numbered.

Crystal Amber Fund, which owns28.9 per cent of PinewoodShepperton, welcomed Peelsapproach.

Richard Bernstein, investmentadviser to Crystal Amber, said: Wehave always said we believe there issignificant untapped potential [inPinewood Shepperton], and we wishto see the unlocking of that value.

Pinewood said in a statement: Thisapproach may or may not lead to anoffer being made for the company.

Peel must upbid to securefilm business RUPERT Murdochs planned takeoverof BSkyB should not be affected by hisUK news arm admitting a long-run-ning phone hacking scandal, politi-

cians said yesterday, but the scandalthreatened to overshadow theprospective deal.

News International, parent compa-ny of the News of the World tabloid,said on Friday it would admit liabilityand pay compensation in some civilcases, and issued a statement on pagetwo of yesterdays paper.

It was an about-turn from themedia groups previous denial that itknew journalists were accessingvoicemail messages of the royal fami-ly, politicians, celebrities and sportsstars.

Some critics said the admissionraised questions about News Corps

8.5bn planned purchase of BSkyB,which is set to be given the greenlight by culture secretary JeremyHunt in the next few weeks.

But the Liberal Democrat chief sec-retary to the Treasury DannyAlexander said that while policeinvestigations must continue into aserious scandal, it did not raise ques-tions over the deal. The decisionabout BSkyB and News Corp is some-thing which is being considered com-pletely separately, he told the BBC.

Phone hackingscandal hangsover Sky deal

Michael Grades chairmanship of Pinewood may be coming to an end Picture: REX

BYHARRIET DENNYS

MEDIA

MEDIA


ANALYSIS l Pinewood Shepperton

p


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120

150

140

130

160

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180

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The Capitalist10 CITYA.M. 11 APRIL 2011

EDITED BY

HARRIET DENNYSGot A Story? [email protected] The Capitaliston Twitter: @citycapitalist

WHY BICKSCHILEAN

MINOR HASX APPEALCHARLIE Bick, the teenage son of Square1Consultings chairman David Bick, looksset to follow in the footsteps of fellow OldHarrovian James Blunt, as his appear-ances on the Chilean X Factor are winninghim an army of female fans.

Charlie, 19, entered Chiles first XFactor contest after his host family inSantiago where he is learning Spanishbefore he goes to Manchester University tostudy in the autumn heard the formerchoirboy singing around the house.

The low point in the contest was a ren-dition of a Robbie Williams song that wasso flat the judges turned the backingmusic off, but Bick soon pulled things

back by bowling over the attractiveblonde X Factor judge by singing a JulioIglesias number in Spanish.

From there, he stormed through theBoot Camp and Judges Houses stages, andis now one of the final 12 acts in the com-petition as part of a three-piece bandcalled Aduana with Paulina and Camilafrom Chile, with 5,000 and counting female friends on Facebook.

However, the attention hasnt gone tothe singers head, according to his proudfather, speaking to The Capitalistahead of

Charlie Bick performs on the Chilean X Factor with band members Camila (left) and Paulina

THE co-owner of riversiderestaurant High Timber nearSt Pauls, Neleen Strauss, wassurprised when 14 bankersfrom a major internationalCity firm racked up a sub-stantial bill in the private din-ing room while (mostly)sticking to their Lent resolu-tions. Following an indulgentfew weeks post-bonus, theparty only ordered two bot-tles of Vergelegen from the

restaurants selection of40,000 bottles to accompa-ny their five-course menuincluding goose, haddockand beef, spending the restof the lunch drinking VR,the non-alcoholic drink fromNorway. Apparently, thebankers wanted to keeptheir minds as clear aswater for the businessdeal they are currentlynegotiating.

BILL OF THE WEEK

Charlies second televised performance onChilean network TVN tonight.

Bick senior added: We have no ideawhere his musical talent comes from.Because if I sing, I make glass break.

COST CUTTERSWHO has been behind the dra-matic transformation ofCarphone Warehouse overthe last two years?

Not the firms founderand chief executive CharlesDunstone, says theManagement ConsultanciesAssociation, but youveguessed it management

consultancy Boxwood, which was reward-ed for saving the mobile phone retailer90m of costs with the overall prize at theMCAs annual awards last Thursday.

This sort of skilled work will play a cen-

tral role in helping the UK build its eco-nomic recovery, the MCAs chiefexecutive Alan Leaman told his 600guests at the Lancaster London Hotel.

Other star achievers at the awardsincluded Olivier Fusil from Accenture,named as Change ManagementConsultant of the Year and MelindaMcKinley from Deloitte (pictured left),named as Performance ImprovementConsultant of the Year, who wereamong the six individual winners tocollect awards on the night.

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FINDUS Group, the frozen foodscompany that makes CrispyPancakes, is in discussions withbanks with a view to funding a pos-sible 1bn acquisition war chest.

The private-equity owned foodgroup confirmed it has met with itsbanking syndicate, which includesLloyds, RBS and JP Morgan. It addedthat it is considering all options,including making acquisitions andinternal growth.

A spokesman said: The company

confirms that it has approached itslending syndicate to seek an appro-priate long term financial structureto fund the businesss future expan-sion. It is expected that this growthwill predominately be organic innature, whilst not ruling out bolton strategic acquisitions.

The new structure, if agreed,will increase the companys abilityto expand and will be in sterlingthereby significantly reducing thesubstantial currency effects ofFinduss current euro-denominatedborrowings.

Findus did not say how much it

was hoping to raise, although the itis understood to be aiming for 1bn.

Weetabix owner Lion Capitalacquired Findus and rival frozenfoods business Youngs for a com-bined 1.1bn in 2008 from privateequity house CapVest.

Lion also bought French frozen-food firm Picard Surgeles from BCPartners in July last year in thecountrys biggest leveraged buyoutsince the September 2008 collapseof Lehman Brothers. People familiarwith the matter said the deal placedan enterprise value of about 1.5bn(1.3bn) on Picard.

Findus in talks overbuilding war chestBY STEVE DINNEEN

FOOD

FOR MORE NEWS

www.cityam.com


ACTIVIST shareholder group LaxeyPartners yesterday claimed it iswinning investor support in itsbattle against the managementteam of Alliance Trust, the UKslargest investment trust, led byKatherine Garrett-Cox (pictured).

Laxey has accused the manage-ment team of running the compa-ny contrary to shareholdersinterests, ahead of full year resultsto be published tomorrow.

Laxey is pushing for the trust tointroduce a discount controlmechanism (DCM) to automatical-ly buy back shares if their discountto net asset value currently at 16per cent exceeds 10 per cent.

The group believes the reasonAlliance has not yet adopted the

system is that the board is afraid ofexposing the real amount of totalexpenses, including salaries, toshareholder scrutiny.

Colin Kingsnorth, Laxeys co-founder and chairman, told CityA.M.: There will be a very signif-icant vote in favour of our resolu-tions as we have the support ofmany major shareholders. Theylike to think that this is some-thing they can brush aside, butwe wont let it go.

Alliance chief executiveKatherine Garrett-Cox, willissue a statement to investorsthis week. An Alliancespokesperson said: Theboard has always beenclear theybelieve theDCM is notin theinterest oft h efirmsl o n g

t e r mshare-h o l d -ers.

Laxey: Many investors supportus in Alliance battle

BYEUGENIOMONTESANOINVESTMENT TRUSTS

KATHERINE GARRETT-COX

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BUSINESS output soared at the endof the 2011s first quarter, marking apositive development for the UKseconomic recovery, a leading surveyrevealed today.

Output jumped to 99.3 in March,the index showed, up sharply from94.8 in February one of the largestmonthly increases since the reportbegan in 1996, according to account-ancy network BDO.

All figures above 95 indicategrowth, while the 100 mark indicatestrend growth.

However, inflation expectationscontinue to escalate, rising to theirhighest level since November 2008,according to the poll.

The BDO inflation index jumpedone point in March to 106.2, from105.2 in February.

The inflation index was at 98.6 oneyear ago, yet has remained above the

100 mark since then as price pres-sures continue to build.

Although this months data showmarked improvement, the recovery isstill far from guaranteed, said BDOsPeter Hemington.

The current rate of growth [indi-cated by the index] merely returnsthe UK economy to its position priorto 2010s quarter four contraction of0.5 per cent, rather than heraldingsustained economic recovery, thereport said.

Nonetheless, business confidencealso peaked in the business trendssurvey, up to 98 in March from 95.5in February its highest readingsince April last year, although stillbelow trend.

Employment prospects rose abovetrend in March, to an index rating of

100.5, the highest since September2008.

The employment index hasjumped 6.9 points since Decembersmiserable reading of 93.6.

UK businessoutput risesBY JULIAN HARRIS

UK ECONOMY

CONSUMER price inflation in Marchcould have edged closer to five percent, economists expect.

Official data released tomorrow willshow whether inflation has movedfurther upwards from its 28-monthhigh of 4.4 per cent in February.

Factory gate inflation data out lastweek showed an annualised rate of 5.4per cent -- its highest since October2008.

Producer input prices surged 3.7 percent compared to February, rising 14.6per cent above levels from March lastyear.

The factory gate price data tallywith our business survey data, whichshowed a record increase in March,said economist Chris Williamson ofMarkit.

Worse may be yet to come, as oilprices have since hit a record high insterling terms and supply chain dis-ruptions from the Japanese earth-quake could also drive up prices forcertain highly sought-after compo-nents, Williamson said.

Bank of England governor MervynKing has warned that consumer priceindex (CPI) inflation could hit five percent this year, as the squeeze on house-holds tightens.

BY JULIAN HARRIS

UK ECONOMY

Worries over pricepressures heighten

THE UK faces the biggest squeeze onhousehold incomes for 90 years,according to the Centre forEconomic and Business Research(CEBR).

Disposable incomes, allowing forinflation, are likely to fall by two percent over the course of 2011, theCEBR has forecast.

On top of a 0.8 per cent fall in realincomes last year, this would be thebiggest drop since 1921, excludingWorld War Two and the GeneralStrike.

We have been pointing out thepressures on household incomes forover a year, during which the under-lying position has deteriorated asaverage earnings growth hasremained very low while commodityprice inflation has accelerated, said

the CEBRs Douglas McWilliams.The think tank has published one

of the gloomiest forecasts for UKgrowth in 2011, expecting just a oneper cent expansion in GDP.

Real wage drophits fastest ratesince the 1920s

UK ECONOMY


CHINA REPORTS A SURPRISE TRADE DEFICIT

China yesterday revealed a rare trade deficit during the first quarter of the year, on theback of domestic economic strength and rising global commodity prices. From Januaryto March, China imported $1.02bn (623m) more than it exported, marking its firstquarterly trade deficit since 2004 according to the General Administration of Customs.

Picture: GETTY

ANALYST VIEWS: WILL INFLATION CONTINUETO RISE IN THE UK? Interviews by Julian Harris

GEOFFREY WOOD | CASS BUSINESS SCHOOL

Yes, and it is already too high, after the Bank yet again madethe mistake of keeping rates at 0.5 per cent. For years they have gravelyunderestimated external price influences, and so consistentlymissed its two per cent inflation target for CPI.

IAN STEWART | DELOITTE

Most people have a similar view to the Bank, that inflation islargely due to transient, external shocks. It is not clear what drivers ofunderlying inflation might be. But credibility of the temporaryshock argument falls, the longer above-target inflation persists.

HOWARD ARCHER | IHS GLOBAL INSIGHT

The data is expected to show annual consumer price inflationclimbed to a 30-month high of 4.6 per cent in March. We expect it toreach a peak of 4.9 per cent in the second quarter, but will hopeful-ly start trending lower in the second half of the year.

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NEWS | IN BRIEF

Production restarts at LongbridgeThe former MG Rover plant atLongbridge is to produce its first bigorder of cars in almost six years thisweek. Chinese owner Nanjing AutomobileCorporation, which bought the plant in

2006, will see its first batch of MG6 carsroll off the production line on Wednesday,though most of the work will have takenplace in China and only the finishingtouches done at the site in Birmingham.

Disney to build park in ShanghaiWork has started on Disneys firstamusement park in mainland China. Thepark in Shanghai is expected to cost2.3bn to build and is due to open by2016. The attraction, on the site of the

2010 Expo, will be home to the ShanghaiDisneyland, two hotels, a lake and a shop-ping mall. The entertainment giant is alsoexpanding its Hong Kong resort, withwork expected to end in 2013.

THREE Barclays Wealth bankers havequit the firm to join boutique wealthmanagement service Vestra Wealth.

Andrew Palmer, Bandish Gudkaand Oliver da Cunha have all beenhired as portfolio managers inVestras London office in a move thatwill be seen as a slap in the face forthe bigger bank.

The team managed UK and interna-tional resident nondom accounts forBarclays Wealth.

Vestra has grown its assets undermanagement by around 1bn a yearsince it was founded in 2008 and saysit will break the 3bn barrier thisyear. Sources close to the firm say themove is part of a wider industry trendof bankers defecting from large insti-tutions to work for boutique banks.

A year ago Vestra settled out of

court with UBS after managing part-ner David Scott left with 60 people toset up the firm.

Andrew Palmer, representing thethree bankers, said: Having workedtogether for a number of years wejoined Vestra as a team, combiningour specialist skills to add value to ourclients. We were attracted to the entre-preneurial culture that David Scotthas created, where the firms interestsare very much aligned to the clients.

Three bankers defectfrom Barclays Wealth

Oliver da Cunha (left) and Bandish Gudka have joined Vestra as portfolio managers

BY STEVE DINNEENBANKING

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OFFICIALS from the EuropeanCommission, European Central Bankand IMF will visit Lisbon today fortalks on an 80bn (70.7bn) bailoutfor Portugal, a commissionspokesman said at the weekend.

The mission will lay the ground-work for political-level talks betweenthe so-called troika and Portugalspolitical parties the following week,the spokesman said.

The experts will meet tomorrowwith Portuguese finance ministryofficials to discuss the technicaldetails of the plan, he added.

The European Union and IMFoffered to save Portugal from a debtcrisis on Friday but warned that in

return Lisbon would have to imple-ment more public spending cuts, taxrises and far-reaching privatisations.

The commission hopes to meetwith all of Portugals political par-

ties to discuss the rescue pro-gramme ahead of snap elections on5 June.

The goal is to have the strongestpossible consensus and a clear com-mitment, whatever the outcome ofthe elections, the spokesman said.

A political meeting of EUCommission representatives withdifferent Portuguese political par-ties will take place [next week], hesaid.

Socialist prime minister JoseSocrates asked for the bailout afterparliament last month rejected aus-terity measures proposed by hisminority government, promptinghis resignation.

Portugal is the third Eurozonecountry to go cap in hand to the EUand IMF after Greece and Ireland

received multi-billion euro bailoutslast year.

Portugal has received bailoutsfrom the IMF twice before - in thelate 1970s and early 1980s.

Troika set tovisit PortugalBYHARRY BANKS

EUROZONE CRISIS

US PRESIDENT Barack Obama willoffer a long-term plan for deficit reduc-tion this week in preparation for biggerUS spending battles ahead, the WhiteHouse said yesterday.

Senior White House adviser DavidPlouffe said Obama would exploresavings in defence spending and thepopular Medicare and Medicaidhealth programmes for the elderlyand poor as he seeks to reduce the$1.4 trillion (855bn) annual deficit.

White House officials said Obamawould release his plan on Wednesday.

Republicans and Democrats ekedout a deal to avert a government shut-down on Friday, agreeing to cut$38bn in spending for the last sixmonths of this f inancial year.

Much harder battles lie ahead overthe budget for the 2012 fiscal yearthat begins in October, and over theneed to raise the current $14.3 trillionlimit on US government borrowingauthority in the next few months.

Were going to have tough dis-agreements. Its going to be hard tobridge divides, Plouffe said in a TVinterview, adding the budget dealshowed compromise was still possiblein Washington.

Representative Paul Ryan said heexpected a political fight over thedebt ceiling.

There will be some kind of negoti-ations and yes it probably will go upto some sort of a deadline, he said inan interview, adding: Our strategy isnot to default. Our strategy is to getspending under control.

BYHARRY BANKS

US ECONOMY

Obama readies hisplan to cut deficit

A NARROW majority of Germans is infavour of the EUs multi-billion-eurobailout package for crisis-hit Portugal,a poll suggested yesterday, with 90per cent believing it would not be thelast.

A poll for a German newspapershowed 50 per cent agreed with theEUs decision to bail out debt-wrackedPortugal to the tune of around 80bn(70.7bn).

According to the survey, 45 per centbelieved it was the wrong decision.

However, nine out of 10 of thosepolled thought that Portugal wouldnot be the last Eurozone country tofall, as speculation mounts that Spaincould be the next country to need abailout from Brussels.

Portugal last week became thethird Eurozone country to ask

European authorities for a bailoutafter Ireland and Greece.

The latter bailout in particular wasextremely unpopular in Germany,the blocs top economy.

Just half of allGermans backPortugal rescue

EUROZONE CRISIS


Portuguese prime minister Jose Socrates last week asked for an EU bailout Pic: GETTY

NEWS | IN BRIEF

Triton buys German engineerGerman private equity firm Triton hassnapped up engineering firm DywidagSystems International (DSI) for around370m (327m). Dywidag, whichworked on Wembley Stadium, has beenowned by lenders Barclays and Bank ofAmerica Merrill Lynch since a debt forequity swap last year. Triton andDywidag signed a sale and purchaseagreement at the start of the month, andexpect the transaction to complete bythe end of May. DSI is based in Munichand specialises in strengthening bridgesand underground tunnels.

Splits emerge in LSE probeA Canadian committee investigating theproposed merger between the LondonStock Exchange and its Canadian rivalTMX Group has delayed publishing its

report amid disagreements between thepanel members. Gilles Bisson, a New

Democratic Party member of the provin-cial parliament, is expected to release hisown report opposing the committeesrecommendations for the internationaltie-in. Ontario last week delayed publish-ing its report by more than two weeks,and is now expected to report its find-ings on 21 April.

Hurdle for Barclays hotel bidAttempts by the Barclay brothers to takecontrol of the Maybourne Hotel Grouphave hit a snag, after a Malaysian sover-eign wealth fund bought up debts linkedto the firm. 1Malaysia Development Fundis thought to have paid 50m for debtsheld by the Irish government againstshares owned by one of Maybournesbiggest investors, Derek Quinlan. TheBarclay brothers, who already own TheRitz, first made advances towards the

owner of Claridges, the Berkeley and theConnaught hotels in January.

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1. TBR 3Q10 x86-based servers: Buying Behaviour and Customer Satisfaction Study, November 2010. 2. All prices stated exclude VAT and are the IBM estimated retail selling

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GUILLAUME Rambourg and RogerGuy could launch a new hedge fundas soon as this year, according to Citysources.

Rambourg has been holding pre-liminary talks with a number of peo-ple about his future since being

cleared of wrongdoing by theFinancial Services Authority (FSA) last

month, although analysts say he islikely to move abroad.

He was suspended from fund man-ager Gartmore after directing tradesto favoured brokers. An internal inves-tigation found no evidence of person-al gain but the FSA launched aseparate investigation, leading to hisexit from the firm to focus on hisdefence.

His partner Roger Guy left shortlyafterwards, sparking a massive with-

drawal of funds and eventually lead-ing to Gartmore being sold for halfthe value of its IPO just a year earlier.

Rambourg said at the time he isworking to regain his licence fromthe FSA and get back to work as soonas possible.

It is thought the pair are consider-ing London, Paris and Geneva as abase for any new operations.

A Rambourg spokesman declinedto comment last night.

Former Gartmore stars mull new alliance

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ONLINE payments group Skrill willthis week test market appetite for ini-

tial public offerings (IPOs), following atumultuous period for company list-ings.

Management at the firm, whichoperates as Moneybookers and hasbeen cast as a European rival to PayPal,

is in the final stages of drumming upinterest in the listing.

Sources close to the process saidorders for stock were still coming in,ahead of a f loat by Thursday.

Despite tough market conditions,the price range on the deal has notbeen tightened to the lower end ofexpectations, one source added.

Skrill plans to list for between 235pand 335p per share in order to raise up

to 184m.But doubt was cast over the strength

of the IPO market last week, after theplans of British vacuum technologygroup Edwards was left in tatters.

Volatility driven by unrest in theMiddle East and the Japanese quakeand tsunami has hit investor confi-dence, while firms are also said to beat the mercy of investors who refuse tomeet managements price demands.

Skrill to test IPO market

BYRICHARD PARTINGTON

CAPITAL MARKETS

THE CHIEF executive of online gam-ing site 888.com has quit, as protract-ed takeover talks with high streetbookmaker Ladbrokes continue fol-lowing five months of negotiations.

Gigi Levy, who has been in chargeat 888.com since January 2007, isstepping down to pursue otherinterests, the firm said.

He will continue to commit half ofhis time over the next six months tohelp smooth a transition to a newchief executive, and will remain onthe board following his departure.

A search for his successor is nowunderway, and in the meantime sen-ior independent director BrianMattingley will work closely withmanagement on all aspects of thebusiness, the firm said.

Levy first joined 888 as chief oper-ating officer in 2006, having previ-ously worked for US softwareprovider Amdocs.

The online poker firm has been atakeover target for Ladbrokes sinceDecember, when the two begannegotiations.

A spokesperson said Levys depar-ture was unrelated to the takeovertalks.

Yet no clear progress has yet beenmade on the deal, drawing specula-tion that the two sides have strug-gled to reach a price.

Ladbrokes had initially offered 70pper share for the business, valuing itat around 240m. Earlier thismonth, sources close to the negotia-tions said the bookmaker could upits offer.

888 reported a steep fall in 2010profits earlier last month, hit by

falling poker revenues and anincreased marketing spend.Its share price closed at 46p per

share last week, giving it a marketcapitalisation of 158m.

888 chiefquits amiddeal talks

THE ROYAL wedding bank holidaywill cost parents a combined 206mfor extra childcare, research outtoday reveals.

This years extended Easter breakand back-to-back bank holidays willlead to 3.5bn in child-related costs,said insurer Liverpool Victoria (LV).

With an average 13 weeks ofschool holidays a year, parents willfeel pressured to find the cash tokeep their kids entertained, andkeep boredom at bay, said LVs MarkJones.

Over a third (39 per cent) of par-ents reported that cost around thisyears school holidays are unafford-able, while around one in four (24per cent) are looking at ways to cutback.

Children will have 64 days holidayfrom school this year, on average, LVsaid. Nearly half (49 per cent) of par-ents need to pay for childcare duringthese holidays.

Over all the school holidays thisyear, parents will spend 18.8bn ontheir offspring, equivalent to 1,429per child.

Childcare accounts for 6.9bn ofthis - around 533 per child. Around12bn goes towards keeping theirchildren entertained, giving an aver-age of 895 per child.

Raising a child from birth to theage of 21 costs an average of210,000, according to LVs Cost of aChild report.

And parents spend 8,147 of thattotal on holidays for their child inthe first 21 years of their lives, thereport found.

As the squeeze on parents takes

hold, over half (55 per cent) of fami-lies reported that they will not havea holiday abroad this year, while 29per cent will forego any break awayin the UK, the report said.

Parents facehuge bankholiday cost

BP chief executive Bob Dudley is fac-ing a particularly gruelling week,with a deadline for the firms 10bnshare swap with Rosneft due onThursday, the same day as the oilgiants first annual shareholder meet-ing since last Aprils Gulf of Mexicospill.

BP management are expected tocome under fire at the firms AGM,

after awarding bonuses to several topstaff despite the Gulf disaster.

Dudley is also racing to eke out adeal with Russian partners Alfa AccessRenova (AAR) to extend the deadlineon its Rosneft deal, first inked inJanuary, before the share swap andexploration agreement expires.

AAR has a temporary injunctionblocking the deal, but both sides are

keenly awaiting a final decision froman international arbitration panel.

Tough week ahead for BPENERGY

Skrill chief executive Martin Ott is targeting a successful listing

BY JULIAN HARRIS

PERSONAL FINANCE

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LEISURE

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THE TELEVISION production compa-ny behind Peep Show, Shamelessand Midsomer Murders, All3Media,has called in UBS to undertake astrategic review of the firm as it eyesthe US to fuel its global growthambitions.

Following reports at the weekendthat ITV has rejected the idea of buy-ing the TV production group, themost likely outcome of the review isbelieved to be a sale of All3Media toa US broadcaster like Time Warner.

The groups private equity ownerPermira is understood to have set aminimum price target for the com-pany that is considerably higher

than the 600m price tag the mar-ket was expecting, based on thegroups 2011 forecast earningsbefore interest, taxes, depreciationand amortisation of 63m to 65m.

The firm already produces a num-ber of shows in the US, includingAre You Smarter Than a FifthGrader, Ramsays KitchenNightmares and the American ver-sion of Skins. Ownership by anAmerican broadcaster is understoodto fit with the companys plans toimprove its presence in the US,where turnover is expected to dou-ble this year.

All3Media is also looking to adaptfurther formats for the US, such asITV2s The Only Way Is Essex, and tobecome more active in the enter-

tainment sector.All3Media was founded by Steve

Morrison, David Liddiment andJules Burns in July 2003, after theybought the former Chrysalis TVassets with 45m from private equi-ty firm Bridgepoint.

Following a string of acquisitions,the group was sold to private equitygroup Permira for 320m threeyears later, with managementretaining a 40 per cent stake.

In the event of a trade sale, thedeal which will be completed thisyear is likely to be structured toallow the management to receive anearnout, based on the businessachieving set goals. Revenue for2011 is forecast to grow 15 per centto more than 450m.

All3Media to crack

the US by trade saleBYHARRIET DENNYSMEDIA

Steve Morrison, chief executive of All3Media, has ambitions to conquer the tough US market through a possible trade sale

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Businesses should take a lesson from Twitter

I

anchored CNBCs coverage of theEuropean Central Bank (ECB) Rate

Decision Special show last week.This involved saying: Welcome

to CNBC. Jean-Claude Trichet isspeaking. Lets listen in, then tweet-ing snippets of the proceedings to myTwitter followers, of whom there areliterally dozens, including severalwho think Im the librarian inMassachusetts who happens to sharemy name.

This is a simple task and Im faintlyembarrassed to admit I get paid to doit. The tougher element is decipher-ing what the devil Trichet is saying.

He did say monitor very closely,but he did not make any mention of

being vigilant. Apparently that iscode for the ECB might raise rates the

month after next.Then Trichet pro-duced a white hanky and started dab-bing at his nose. My twitterspherefriends and I (under the T witter han-dle @BeccyMeehan) speculated thismight be a further layer of code, butit turned out the poor chap doesactually have a cold.

Speaking of unfathomable codes,I recently went to RBS to interviewchief executive Stephen Hesterabout his results. I was handed apresentation from which I learnedgood jaws drive improved prof-

itability. Hmmm. I thought I wasjust being dim, until later that day I

interviewed a Very Successful CityBig Cheese, who shall remain name-less. As he flicked through theslides, he turned to me and said:Ive no idea what all this jaws stuffis about I dont believe anyone canmake head nor tail of this lot,theres just so much info.

Im all for full disclosure, butimagine a world in which we all justspeak like normal human beings,get to the point and then shut up.

Which brings me back to Twitter.Not necessarily the natural habitat

of normal human beings, but never-theless, the most important mes-

sages might benefit from being pareddown into 140 characters.

For instance, Jean-ClaudeTweet-chet (sorry) could post:Inflation is still rising. We mightraise rates again, but were not sure.Were happy Portugal asked for help.I have a cold today.

Ryanairs chief Michael OLearymight also be well-suited to theplatform. This wonderful quotefrom him is clear in meaning andwould definitely fit into atweet: Youre not getting a refund

so **** off.Beccy Meehan is an anchor at CNBC.

CITY COMMENT

BECCY MEEHAN

NEWS | IN BRIEF

Shell to join Chevron gas projectEnergy giant Chevron said yesterday thatRoyal Dutch Shell will join its Wheatstoneliquefied natural gas (LNG) project off thecoast of Western Australia as an equity par-ticipant and natural gas supplier to the proj-ect. Chevron will sell 6.4 per cent of its staketo Shell and remain the operator of the proj-ect with 73.6 per cent stake. The agreementcomes as Chevron prepares to make a finalinvestment in the project, which is expectedin the second half of the year. The first phaseof the Wheatstone project will have a com-bined capacity of 8.9m tonnes per annum ofLNG as well as a domestic gas plant.

Egypt inflation hits 11-month highUrban consumer inflation in Egypt accelerat-ed in the year to March to an 11-month high,pushed up by soaring food prices that con-tributed to the mass protests that eventuallytoppled president Hosni Mubarak. Urbanconsumer inflation in Egypt rose to 11.5 percent in the 12 months to March, its highestlevel since April 2010, up from 10.7 per centin February. On a monthly basis, it increasedto 1.4 per cent in March from 0.1 per cent inFebruary. Several economists had expectedan increase in the rate - the most closelywatched indicator of prices - as a result of aweaker pound and imported inflation.

MIDSOMERMURDERS: Now inits 14th series, themurder mysteryshow is shown in225 countries

SHAMELESS: With an audience ofmore than 3m, the Bafta-winningdrama has been running for six years

THE F WORD: The show where Gordon Ramseycooks for a restaurant full of celebrities is producedby Optomen Television for Channel 4

PEEP SHOW: The longest running sitcomon Channel 4 is now in its seventh series

ALL3MEDIAS UK LINE-UP

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LandmarkThe serviced offices provider has

appointed Tim Kiddy as group finan-cial controller, as Landmark prepares

to open its fifth centre in the City ofLondon at the Heron Tower this sum-mer. Kiddy joins from NB Real Estate,now part of Capita Symonds, wherehe was financial controller.

AFME

The Association for FinancialMarkets in Europe has appointedGerry Cross as managing director.Cross will work in Brussels asAFMEs principal representative tothe European political authorities.

Caledonia InvestmentsCaledonia has appointed Duncan

Johnson as head of unquoted invest-ments and Stephen Mitchell as headof Caledonias new income andgrowth pool of investments. Duncanwas formerly a founding partner atRJD Partners, and Mitchell was mostrecently chief investment strategist

for EMEA at JP Morgan.

Legal & GeneralHenry Staunton has been appointedas senior independent director andvice chairman. Staunton was firstappointed to Legal & Generals boardin May 2004, and additionally holdsnon-executive directorships at

Standard Bank, WHSmith, TheMerchants Trust and Capital &Counties Properties.

JP Morgan Asset ManagementJohn Anderson has been appointedportfolio manager for JP Morgan

Asset Managements fixed incometeam. He joins the firm fromGartmore Asset Management.

PKFRichard Bint has been promotedfrom head of professional services tosenior partner at the accountancyand business advisory firm.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

Cazenove CapitalEuan Dangerfield has been confirmed as thehead of Cazenoves private wealth manage-ment team in Jersey, effective from 4 July.Dangerfield will sit on the board of CazenoveCapital Management (Jersey), subject to regu-

latory approval, and will take responsibility forthe Jersey office, including marketing thefirms wealth management services. Euanjoins from Asset Risk Consultants, based inJersey, where he was managing director.

+44 (0)20 7092 0053morganmckinley.com

To appear in CITYMOVES please email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

WALL STREET WEEK AHEAD

Euro fears to take edge off FTSE rally this week

SURGING commodity prices spurredUK shares on to another weekly gainon Friday, and a seven-week high forthe blue-chip FTSE 100 index. Yet weexpect the market to take a hit on thopen this morning, with focus shift-

ing back towards Europe.In out-of-hours trading, GFT is fore-

casting the UK index to open down 20points from last weeks close, ataround 6,035. The German DAX isquoted to open down 28 points at7,189 and the French CAC is calleddown 15 points at 4,046.

Portugal finally succumbed to theinevitable bail-out request onThursday, although the incumbentcaretaker Socialist government isrefusing to discuss the details of theterms of the rescue funds with oppo-

sition parties, increasing the likeli-hood of renegotiation with the EUfollowing elections in June.

The diverging issues facing theEurozone were highlighted by theECBs decision to raise interest ratesto counter rising inflation in severalEuropean countries, pitted againstthe backdrop of the third EU memberto seek aid and ultimately brace itselffor severe austerity measures.

The ECB has taken a much harderline than the UK against inflation,which is running at just 2.6 percent in the Eurozone. Tomorrow seesthe release of consumer price indexdata for the UK, and we expect a 30-month high of 4.6 per cent. This islargely as a result of continued risesin oil and commodity prices, and willweigh on shares ahead of the release.

The Bank of Englands stubbornrefusal to raise interest rates is never-theless proving a boost to the FTSE,where mining and commodity stocks

are underlying the current rally asgold and silver continue to breakrecords thanks largely to preciselythose inflation concerns.

MARTINONTHE MARKETS

The upcoming US earnings seasonmay not be the time for investors tobuy aggressively, because this year'swinners already reflect earnings opti-mism.

The first-quarter reporting period,which begins today with results from

aluminium company Alcoa, followsthree months of solid gains that have

brought stocks close to two-and-half-year highs.

Other top names reporting nextweek are JP Morgan Chase & Co, Bankof America and Google.

Some gains have been in anticipa-tion of a strong earnings season, par-

ticularly for the energy and othercyclical sectors, analysts said, raising

questions about whether this quar-ters reports will be enough to keepthe recent uptrend intact.

Stocks have been going up inanticipation of earnings that aregoing to be what the real consensus isbasically expecting, said Ken Fisher,

chairman and chief executive ofFisher Investments.

Some investors see the rise in ener-gy and other stocks that benefit whenthe economy starts to recover asunsustainable and have been paringback positions.

We believe commodity inflation isprobably near a peak as is the interest

level in many deeper cyclicals includ-ing the energy sector, said Tom

Galvin, managing director and leadportfolio manager at ColumbiaManagement.

Overall, first-quarter earnings forS&P 500 companies are expected tohave increased 11.4 per cent from ayear earlier, but

cityam 2011-04-11

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