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FTSE 100 5,870.08 -125.93 DOW 12,201.59 -140.24 NASDAQ 2,735.38 -29.27 /$ 1.62-0.01 / 1.14+0.01 /$ 1.42 -0.02

SOVEREIGN debt fears gripped mar-kets on both sides of the Atlantic yester-day, after the USs triple-A debt ratingwas put on a negative outlook by rat-ings agency Standard & Poors andinvestors moved to price in a Greekrestructuring as early as June.

Greeces deteriorating publicfinances have sparked worries that arestructuring could set off a chain reac-tion of bank collapses and threaten theviability of the single currency.

And in Washington, S&Ps shockwarning was provoked by the materi-al risk that US policymakers might notreach an agreement over how to solveits colossal government deficit.

The US governments debt stands at$14.27 trillion (8.8 trillion) while theannual deficit is around $1.4 trillion.

Debt is predicted to reach 84 percent of GDP by 2013, S&P announced inits statement yesterday.

We see the path to agreement aschallenging because the gap betweenthe parties remains wide, S&P said, in

reference to ongoing clashes betweenDemocrat and Republican proposalsfor deficit reduction.

The Democrat-controlled Senate is

expected to reject the Republicans lat-est proposal to slash $5.8 trillion of fed-eral spending in the next 10 years.

Last week President Obama attackedthe proposals, which would involvereforms to Americas large state-fund-ed healthcare programme, Medicare.

Even if a settlement is reached,implementation could take time,S&P warned. And future politicianscould decide to at least partiallyreverse fiscal consolidation, it added.

Obamas government swiftly hit back at the accusation.We believeS&Ps negative outlook underestimatesthe ability of Americas leaders to cometogether to address the difficult fiscalchallenges facing the nation, saidMary Miller, a senior Treasury official.

Shorter-dated US Treasury debtprices rose as investors scrambled forthe lowest-risk investments. But eventhough 30-year bonds reversed earlygains to trade negative in price, the 10-year yield remained comfortably under3.5 per cent and 10-year prices postedmodest gains in the afternoon.

In Europe, reports that Germany isnot expecting Greece to make it

through the summer withoutdefaulting on its debt caused turmoilin debt markets.

The yield on Greek debt reached

unprecedented levels, with two-yearrates soaring over 20 per cent.

The cost of insuring Athens paperhas also risen to eye-watering levels: itnow costs more than 1.15m (1m) toinsure 10m of five-year Greek debtwith a five-year credit default swap.

The Eurozone does not have a planfor how to handle a default, with fearsfor the single currency sending yieldsup even in Spain, which analysts haddeclared to be immune to contagion.

Madrid saw demand drop, selling4.7bn of 12- and 18-month bonds. Theaverage yield of 2.77 per cent was a sub-stantial increase on the 2.13 per cent atits last equivalent sale.

Analysts expect the resulting hair-cuts on Athens debt to set off anotherfinancial crisis in Greece, wheredomestic banks have heavy exposure tothe sovereign.

International banks will also suffer:Barclays has 4.6bn of exposure toGreek debt and Societe Generale has4bn of exposure.

Meanwhile, a rush to safe havenssaw gold rally, touching $1,497.20 anounce. Brent Crude dropped to a ses-

sion low of $121, also affected bySundays announcement of a cut inMarchs output from Saudi Arabia.

MORE: ALLISTER HEATH P2

BY JULIAN HARRIS AND JULIET SAMUELWORLD ECONOMY

www.cityam.comIssue 1,367 Tuesday 19 April 2011 FREE

THE MANWHO RUNS

THE IVYRESTAURANTS

P27

ALASTAIR COOK EYESUP ENGLAND CAPTAINCY

ASHES HERO INTERVIEW P29

BUSINESS WITH PERSONALITY

Certified Distribution

28/02/11 - 03/04/11 is 105,180

S&Ps downgradeof US debt outlookrocks global markets

Eurozone yieldssoar as sovereigndebt crisis intensifies

US told it mustslash budget deficitor lose AAA-rating

2 years at 20.3%

fell 1.3% inthe futuresmarket to$121.84 abarrel

OIL

hit a high of$1,497.20 an ounce.Spot gold rose 0.8per cent to$1,495.60 an ounce

GOLDPRICE

2 years at 3.6%

GREEKBONDYIELD

SPANISHBONDYIELD

dipped to 116.72yen (from Y119.96

on Friday)

EUROVS

YEN

dipped over2%, butrecoveredto closedown 1.14%DOW

SINKING SHIPS

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News2 CITYA.M. 19 APRIL 2011

AV campaignsupport fallsCAMPAIGNERS supporting a changeto voting rules are set to suffer anembarrassing defeat in next monthsreferendum according to a newGuardian/ICM poll.

The Lib Dem-backed motion tointroduce the alternative vote (AV), which is also supported by seniorLabour politicians, trails the No cam-paign by 16 points, after leading bytwo points just two months ago.

The poll follows a week of growinganimosity between the two sides,with George Osborne questioning theinvolvement of the Electoral ReformSociety in the Yes campaign.

Three quarters of Conservatives areplanning to vote against the changeand a small majority of Labour sup-porters are also opposed. Two thirds

of Lib Dems will vote in favour of AV.A significant number of people

23 per cent say they are still unde-cided.

The latest poll, unlike those preced-ing it, includes Northern Ireland. Thisgroup was expected to vote in favourdue to differences in their voting sys-tem, making the latest poll evenmore depressing for the Yes camp.

National voting intentions swungslightly in favour of Labour, with 37per cent, compared to the Tories on35 per cent, down two, and the LibDems trailing on 15 per cent.

BY STEVE DINNEEN

POLITICS

Decision time for profligate America

IT pains me deeply to have to write thisbut America could already be in termi-nal decline. Like in many otherWestern countries, a short-termist andself-interested political elite has con-vinced a deluded electorate that low-ish levels of tax can go hand-in-hand with exploding amounts of publicspending, forever. They cant. Americafaces three choices: either long-term bankruptcy; or the adoption of aEuropean style social democracy withmuch higher taxes funding a bloated welfare state, as many Democratswould like; or the unwinding of many

spending programmes and the returnto a small government model, as pro-posed by the Republicans Paul Ryan.

Given that the US budget deficit willbe close to 10 per cent of GDP this year,

and that the IMF thinks the US willeventually need a fiscal consolidationworth 11.3 per cent of GDP to stabilisethe national debt, Standard & Poorswas right to slap a negative outlook onAmericas AAA credit rating yesterday.

Americas fiscal challenge is evengreater than that facing the UK ormost other rich nations, as document-ed by Michael Tanner of the CatoInstitute in his paper, Bankrupt:Entitlements and the Federal Budget.Over the past 40 years, federal spend-ing (excluding states and local govern-ments) has averaged about 21 per centof GDP, while revenues have beenroughly 16.6 per cent of GDP, leaving asmallish structural deficit (the highestever tax take was 20.6 per cent of GDPin 2001). That deficit wasnt ideal butit wasnt a catastrophe either becausethe economy grew by roughly that

same amount, which meant that thedebt to GDP ratio was relatively con-trolled. However, the tax take now isjust 14.9 per cent or so while spend-ing has soared, mostly permanently.

The problem is 0this is not merelycyclical: a recovery would increasereceipts and cut spending, but not byenough and if there is no change tocurrent policies, Tanner calculates, by2050 federal government spendingwill exceed 42 per cent of GDP. Addingin state and local spending, the state inits entirety would consume nearly 60per cent of everything produced in theUS. Assuming it hadnt gone bust bythen, America would have been trans-formed into a socialist country, a pointmade by Dambisa Moyo in her best-selling How the West was Lost.

The main reason why spending isout of control are entitlement pro-grammes, especially social security(state pensions) and Medicare (healthcare for pensioners), which provide themiddle classes with vast benefits andas such have been deemed untouch-

able (and were increased hugely byBush, whose spending policies wouldhave made even Gordon Brown blush). Yet by 2050, those two programmesplus Medicaid will consume 18.4 per

cent of GDP as the population ages andthe cost of medical care rockets.The lefts answer is higher taxes. But

in a report from the Mercatus Centerat George Mason University, Veroniquede Rugy and Jason J. Fichtner calculatethat the bottom 50 per cent of earnerspay a mere 2.7 per cent of federalincome tax revenues. The top one percent already pay 38 per cent and thetop 10 per cent pay 69.9 per cent. A bitmore tax could be wrung out of thesystem but only a national valueadded tax would raise real money.

If that were to happen, however, thebattle would have been won by thoseseeking to turn America into aEuropean style social democracy, initself a recipe for gentle decline. Itsdecision time for America.

[email protected] me on Twitter: @allisterheath

PIETRO Ferrero, joint chief executiveof the Italian chocolate-makinggroup Ferrero, has died in an acci-dent.

The confectionery giant behindNutella spread and Rocher chocolatessaid in a statement that Pietro, 48,was riding a bike during a trainingrun in Cape Town while on a businesstrip to South Africa when he fell off.

Ferrero, which in over 60 years has

turned itself into a 6bn (5.25bn)business without making an acquisi-tion, has recently expressed its inter-est in buying Parmalat, themultinational Italian dairy and foodcorporation, to keep it out of foreignhands.

The business is still family-ownedand patriarch Michele Ferrero, son ofcompany founder Pietro Ferrero, theman who invented Nutella in 1946, isItalys richest man with a personalwealth of $17bn (10.45bn), accordingto Forbes.

BY EUGENIOMONTESANO

CONSUMER

Ferrero Rocher chief diesPietro Ferrero, joint chief executive of chocolate-maker Ferrero, died yesterday

NEWS | IN BRIEF

Twitter in talks to buy TweetdeckTwitter is believed to be in advancedtalks to buy TweetDeck for around$50m (30.7m). TweetDeck a third-party app designed to integrate withTwitter filters conversations based onkeywords and messages, while allowingusers to write tweets in excess of the

default 140 character limit. TweetDeckhas at least 15 employees, the majorityof which are located in the UK. Twitterand TweetDeck have worked closelytogether in the past, according to theWall Street Journal which originallyreported the talks. A Twitter spokesmandeclined to comment.

GLG to limit size of key fundGLG Partners, a hedge fund firm with$23bn (14bn) of assets under manage-ment, is closing its market neutral fundto new investors when it grows beyond$1bn. A spokesperson confirmed themove to City A.M. last night, adding thatthe move doesnt mark a change in fundmanagement strategy for the company,but said that it was a move specificallyrelated to performance, with this sizeoptimal in enabling it to exit or enternew positions relatively quickly.

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 of

self-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]

Animosity intensifiedthis week, withchancellor GeorgeOsborne hitting out atthe Yes campaign

UKRAINES RICHEST MAN SNAPS UP AWINDOW ON HYDE PARK FOR 136MRinat Akhmetov, Ukraines richestman, has bought the UKs mostexpensive flat at the One Hyde Parkresidential development in LondonsKnightsbridge. Akhmetov was behindthe purchase of the penthouse, whichsold for 136.6m. The identities ofbuyers at One Hyde Park have beenone of Londons best-kept secrets,closely guarded by confidentialityagreements with developers and pro-tected by offshore ownership struc-tures and Swiss corporate advisers.

PGI TAKES UP A MAJORITY STAKE INFINISTERRE CAPITALUS asset manager Principal GlobalInvestors has taken a majority stakein Finisterre Capital netting theLondon-based hedge funds five

founders an estimated $52m (32m).The move is another example of long-

awaited hedge fund and asset man-

agement industry consolidation.VOLKSWAGEN REVAMPS BEETLE Volkswagen has unveiled the firstredesign of the Beetle since theGerman carmaker relaunched itsbest-known model in 1998. The styleof the latest incarnation draws on theshape of the original Beetle, whichmade its debut in 1938, before beingrevamped 60 years later as the NewBeetle.

EVACUATION OF MISURATA BEGINSInternational aid agencies began toevacuate thousands of stranded civil-ians from the besieged rebel city ofMisurata yesterday, despite continuedshelling of its population by Libyangovernment troops. As efforts intensi-fied to contain the humanitarian cri-sis Libyas third largest city, about1,000 people boarded a ship sent by

the International Organisation forMigration, a UN agency.

BRANSON TO CREATE SANCTUARY FORLEMURSSir Richard Branson has triggered aconservation row over a plan toimport lemurs to the Caribbean, halfa world away from their natural habi-tat in Madagascar. The British entre-preneur said ringtailed lemurs wouldbe transported and released into therainforest of Moskito island, a tropi-cal hideaway he owns in the BritishVirgin Islands.

PRICES FOR AGRICULTURAL LAND HITRECORD HIGH Agricultural land prices in Britainhave hit record levels following thesurge in global food prices, accordingto figures from Savills. An acre ofprime arable land in East Anglia isfetching up to 8,500 compared witharound 3,000 in 2005, with demand

driven by the dramatic increase inwheat prices over the past year.

RESPITE FOR SOUTHERN CROSS ONCOVENANTSEmbattled care homes operatorSouthern Cross saw its shares surge7.1 per cent after it reached an agree-ment with lenders to postponecovenant tests by a month. The com-pany said its lenders were aware of animpending covenant breach andtherefore agreed terms that wouldallow it to postpone a covenant testuntil 31 May.

ORANGE TELLS CALL CENTRE WORKERSTHEY CAN KEEP THEIR JOBS IF THEYRELOCATE TO THE PHILIPPINESOrange has apologised after telling itsemployees they could only keep theircall centre jobs if they moved to newoffices... in the Philippines. The firmtold 40 night shift workers at itsDarlington call centre that they could

take alternative, less lucrative roles, orrelocate 7,000 miles to Manila.

NOMURA PLANS SHAKE-UP IN EUROPENomura is set for a shake-up of itssenior ranks in Europe as part awholesale review of its staff, accord-ing to people familiar with the situa-tion. The Japanese bank plans toreplace underperformers and cutemployees in areas where it decides itcan't afford to compete. WilliamVereker, co-head of global investmentbanking at Nomura, is understood tobe keen to upgrade the talent pool,according to one person close to thebank.

BMW HALTS SHIPMENTS TOARGENTINAGermanys BMW AG suspendedexports to Argentina because ofimport restrictions imposed by theSouth American countrys govern-ment, a spokesman said yesterday.

Currently around 700 BMW vehiclesare stuck in Argentine customs.

WHAT THE OTHER PAPERS SAY THIS MORNING

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JOHN Nelson, chairman of shoppingcentre developer Hammerson, wasnamed the next chair of the Lloyds ofLondon insurance market yesterday.

Nelson, who is also deputy chair-man of home improvement firmKingfisher, will take over from long-standing chair Lord Levene in October.

He will receive a 525,000 salaryplus benefits for the post, which willtake up about three days of his timeper week, Lloyds revealed. He willretire from Kingfisher this year.

It is a great honour for me toaccept this role and I look forward toplaying my part in steering the

worlds leading insurance marketthrough the next stage of its evolu-tion, he said in a statement.

Richard Ward, Lloyds chief execu-tive, said: Johns business experiencemakes him the perfect candidate totake on this role and help Lloyds

build on its position as the pre-emi-nent market for specialist insurance.

A chartered accountant and invest-ment banker, Nelsons City careerspans more than 30 years atKleinwort Benson and then Lazard,

where he was head of corporatefinance and vice chairman. He

became chairman of Credit SuisseFirst Boston Europe in 1999 butretired in 2002 and took a series ofdirectorships in major UK companies.

As Hammerson chairman, Nelsonsuccessfully led it through a difficultrecession and 584m rescue rightsissue in 2009 to a strong recovery.

Levene, a former government advis-er and banker, steps down after nine

years leading Lloyds.He is widely credited with restoring

the group to financial health andexpanding it into major emergingeconomies. He also oversaw its adop-tion of new technologies on the trad-ing floor, replacing the brokerspaper contract slips with iPads.

Hammersons

Nelson to beLloyds chair

A COURT in Milan has clearedCitigroup, Bank of America,Deutsche Bank and Morgan Stanleyof market-rigging in a high-profiletrial related to the 2003 collapse offood giant Parmalat.

The four international banks hadbeen charged for allegedly helpingthe Italian food group mislead

investors at the time of the Parmalatscandal, dubbed Europes Enron. An Italian prosecutor had asked

earlier this year that they should befined and that about 120m (105m)of their profits should be impound-ed.

The four banks had repeatedlydenied any wrongdoing. The Milancourt also cleared all the executivesat the four banks that had beencharged in the trial.

Banks cleared afterprobe into Parmalat

BYALISON LOCK

INSURANCE

The Lloyds build-ing at the heart ofthe City

Picture:Micha Theiner

/ City A.M.

BYHARRY BANKSBANKING

News 3CITYA.M. 19 APRIL 2011

INVESTMENT banker turned indus-try leader John Nelson is to fill thelarge shoes left by Lloyds chairmanLord Peter Levene from October.

A City grandee whose financecareer started at KleinwortBenson and continued atLazard, where he ran itscorporate finance divi-sion for 13 years, Nelsonis now best known forhis leadership of bell-

wether UK companies.He retired from

finance in 2002 afterthree years as chairmanof Credit Suisse FirstBoston Europe, saying hedid not want to miss theopportunity to doother things in

business.He has

since

served as a non-executive director atBT, and is now chairman of realestate giant Hammerson and

deputy chair of DIY specialistKingfisher.Nelson has remained a voice in

the City, advising European buyouthouse Charterhouse, and has held

non-executive roles at JPMorgan Cazenove andWoolwich in the past.

While he has not worked in insurance before, nor had Leveneupon his arrival. Levenedescribes Nelson as anexperienced businessman

with a successful record.Levene, who joined

Lloyds nine years ago, is itslongest-serving chairman in

125 years. He is also chair-man of new bank

NBNK.

City veteran tries insurance

BYALISON LOCK

INSURANCE

JOHN NELSON

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RUSSIAN private bank Nomos haspriced its London share offer at thehigher end of expectations, as the fal-tering market for listings in the capitalbegins to show signs of life.

Nomos will look to sell ordinaryshares in Moscow for $35 (21) apiece, while it will sell global depositoryreceipts (GDRs) for $17.50 per unit inLondon, valuing the business at$3.2bn.

The combined proceeds from the

initial public offering (IPO) for thebank will be $718m (443m) before theexercise of an over-allotment option.

The bank, which is Russias eighth biggest by total assets, had initiallylooked for between $32 and $37 perordinary share and $16 to $18.50 perGDR.

Demand for the offer quickly filledthe order books of bankers atDeutsche, Credit Suisse, Citi and VTBCapital, leading to a tightening of theprice range late last week.

Slovakian businessman RomanKorbacka will sell down almost all ofhis stake in the bank, and could exitNomos completely if he exercises hisover-allotment option.

Meanwhile, billionaire oligarchAlexander Mamut, who is best knownin Britain as the backer of blogging siteLivejournal, will become a cornerstoneinvestor in the firm when its sharesstart trading early next week.

The deal could help to kick-startLondons IPO market, following a tor-rid few weeks for stock market listingsin the capital.

Several floats, including those of fel-low Russian firm Euroset and British vacuum technology group Edwards,have been put on hold due to uncer-tain market conditions.

Observers are also hoping a success-ful listing by commodities colossusGlencore could bolster investorappetite for IPOs. The Swiss firmunveiled its $11bn blockbuster offer-ing last week, and is set to completenext month.MORE ON GLENCORES IPO: PAGE 9

Nomos pricesshare offer toraise 443m OIL services giant Halliburton beatWall Street forecasts with its quarterlyresults yesterday, despite a $105m(64.6m) revenue hit from interna-

tional unrest and disruption.Halliburton, which offers engineer-

ing, maintenance and equipment foroil firms, reported net income of$557m, excluding a $46m chargelinked to sanctions in Libya.

Production revenue for the firstthree months of 2011 rose 62 per centon last year to $3.2bn, with continuedgrowth in unconventional oil sourcessuch as shale gas and heavy oil morethan making up for political issues innorthern Africa and the ban on deep-water drilling in the Gulf of Mexico.

Halliburton was a contractor on theDeepwater Horizon rig, which killed11 workers and caused environmental

havoc when it exploded last April.Drilling and evaluation revenue at

Halliburton rose 17 per cent to $2.1bn,partly due to the start of work withExxon in Iraq.

Going forward, I feel even moreconfident about the prospects of ourNorth America business in 2011 and beyond, said chief executive DaveLesar. We believe there is upside for both revenue and margins as werespond to the continued increases inservice intensity.

Bumper threemonths for oilfirm Halliburton

BYRICHARD PARTINGTON

CAPITAL MARKETS

ENERGY


LVMH, the worlds biggest luxuryretailer, posted a higher than expected17 per cent jump in sales for the first-quarter of 2011 yesterday, boosted bydouble-digit revenue growth across allsegments.

Demand for its luxury line-up, which includes brands like LouisVuitton, Givenchy, Moet and Chandonand Christian Dior, delivered hugereturns as sales for the first three

months of the year were 5.25bn

(4.6bn), up from 4.47bn a year earli-er, and a profit of3.03bn.

Analysts had expected the threemonths to March sales to be 4.97bn.

Organic growth reached 14 per cent,the company said, above the expectedrange of seven to 11 per cent.

The France-headquartered companyhas reported strong performances inthe United States, Europe and Asia,despite the earthquake that recentlyshocked Japan a key luxury marketfor the company.

BY EUGENIOMONTESANO

CONSUMER

LVMH bags massive profitLouis Vuitton parent LVMH has seen strong demand in Europe Picture: GETTY

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CITIGROUP yesterday revealed aslump in revenues and profits in itsquarterly results compared to last

year, emphasising the banks ongoingfight to rein in its backlog of strug-gling consumer business lines.

Revenues dropped 22 per cent year-on-year to $19.7bn (12.1bn), but thefigure was a seven per cent improve-ment on the fourth-quarter of 2010.

Its cards business and retail bank-ing lost 15 per cent of revenues andseven per cent of sales compared tolast year.

Costs in the groups core businessrose for the third consecutive quarterto $9.6bn, despite a fall in credit costs,

with the bank blaming higher spend-ing on marketing and technology inNorth America. Compensation and

benefits costs rose four per cent to$6.16bn.

The bank tried to sell an optimistic,high-growth story to investors in itspresentation for analysts, highlight-ing that emerging markets repre-sented over 50 per cent of Citicorpsearnings before tax.

But the figures show that theCiticorp divisions pre-tax profits fromdeveloping economies increased onlyslightly from $2.9bn to $3.2bn.Instead, recovery in pre-tax profits inadvanced economies fuelled theimprovement at the end of 2010,

jumping from $1bn to $2.9bn.Citi Holdings, the groups non-core

division, continued steady progress inshrinking its balance sheet, withassets decreasing by 6.2 per cent onthe previous quarter to $337bn.

In total, Citigroup plans to sell$12.7bn of bad assets, such as sub-prime loans and mortgage-backedsecurities, which it said carried a dis-proportionately high risk weightingunder the new Basel III capital rules.

Revenues fall

at Citigroupas costs riseBY JULIET SAMUEL

BANKING

Citi chief executiveVikram Pandit stillhas a herculeantask ahead

Picture: REUTERS

Focus on Citigroup6 CITYA.M. 19 APRIL 2011

Patchy progress across the groupsbusinesses continues to dog Pandit

CITIS stock price shot up out ofthe gate yesterday, rising to$4.50 by lunchtime in New

York (or $45, as well learn tocall it soon after the groups upcom-ing reverse stock split, whichmerges every ten shares into one).

That a 5.7 per cent slump in pre-tax profits was enough to beat expec-tations points to chief executive

Vikram Pandit ongoing problems indragging this banking behemothout of the doldrums.

Admittedly, it wasnt all glumnews: mortgage delinquencies havecontinued a steady downward trendand Citi Holdings has managed toshift enough non-core assets to feed

through to less damaging losses on

the bottom line.But on the core side, steady

improvement seems elusive. Eventhe banks non-retail businesses

went backwards compared to last year, with revenues in investmentbanking down 19 per cent and equi-ty and fixed income dropping nineand 22 per cent respectively.

American retail banks are havinga tough time, but Citis patchy recov-ery extends beyond its consumer

business lines. Even with the returnof its dividend next quarter, Citi ishard to get excited about.

BOTTOMLINEAnalysis by Juliet Samuel

JP Morgan Chase kicked off the first-quarter reporting season last Wednesdaywith a dramatic recovery in earnings com-pared to the start of 2010. Pre-tax profitsjumped 78 per cent to $8.06bn (4.95bn). The investment bank recorded its secondmost profitable quarter ever, with fees rev-enue up 23 per cent on the first-quarter of2010 at $1.79bn.

The retail bank saw earnings drop, butstill made money, with pre-tax profit comingin at $1.49bn. JP Morgan Chase was the first bank toestimate its core tier one capital ratio understringent Basel III rules, putting it at 7.3 percent, above the overall minimum but likelybelow the 10 per cent minimum for systemi-cally important financial institutions. Earnings per share came in at $1.28, at

the high end of analysts expectations. Bank of America Merrill Lynch (BAML) wasnext, reporting last Friday. It posted a surpris-ingly sharp drop in first-quarter profits ashome foreclosures hit its mortgage business. Despite making a profit of $2bn(1.23bn), BAML, the largest US bank, lost astaggering $2.39bn on its portfolio of homeloans.

Income in the bank's retail division fell 49per cent as service charges plunged, thoughdeposits were up. Investment bank revenue and profit alsofell from last year s record quarter. Sales andtrading revenue was down 30 per cent, butoverall investment banking income was up24 per cent. Earnings per share came in at the low endof analysts expectations at $0.17.

FAST FACTS | US BANK RESULTS SO FAR

ANALYSIS l Citigroup

$

24 Jan 11 Feb 15 Mar 13 Apr

5

4.9

4.8

4.7

4.6

4.5

4.4

4.3

4.4218 Apr

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press (04/11). Visit mercedes-benz.co.uk/offers

JUPITER, the fund management firmrun by Edward Bonham Carter (pic-tured), brother of actressHelena, has seen 333m ofnet inflows over the firstthree months of this yeardespite volatile marketconditions.

The strong inflows,helped by demandfrom internationalinvestors, boosted

assets under manage-ment (AUM) to 24.5bn.

Mutual funds con-tributed fresh investments

worth 397m, driven bythe asset managers fund offund range.

It suffered outflowsof 71m, caused

by a singleclient whodecidedto

redeem part of their portfolio.Jupiter had attracted 772m of new

money in the last quarter of 2010 and509m in the corresponding quartera year ago.

Bonham Carters firm saidit expected its business to

continue in line withmanagement expecta-tions. Chief executiveBonham Carteradded: Against a backdrop of volatilemarkets and falling

UK consumer dispos-

able income, Jupiterhas had a steady start

to 2011.Numis analyst James

Hamilton said: We believe another positivequarter for mutual fund

flows, despite a slowdownacross the industry, under-

lines the quality andr e s i l i e n c e

of the busi-ness.

Jupiter fundsenjoy freshinvestment

ACTIVIST hedge fund Elliott Advisorssuffered a setback in its battle withSwiss biotech company Actelion yes-terday after a major shareholder

backed the firms board.BB Biotech, which holds almost five

per cent of Actelions shares, said itwould back all the boards proposalsin the annual meeting on 5 May.

It means about 15 per cent ofActelions shareholders now publicly

favour the board, after 5.5 per centshareholder Rudolf Maag voiced hissupport last month.

We have managed our investmentin Actelion actively over many yearsand have enjoyed excellent returns,Zurich-based BB Biotech, a pure-

biotech investor, said in a statement.BB Biotech admitted it had been

disappointed by the results of somepast decisions taken by the board.

But we have never doubted thecompetence of Actelions scientists, the

commitment of their management orthe veracity of their board, it said. We

wont change our minds now.Elliott, which holds around seven

per cent of the firm, wants sevenmembers of the board to step down,including founder Jean-Paul Clozel,and six directors of its choice to join.

It has complained of poor corpo-rate governance, criticised Actelionsdrug pipeline and demanded a strate-gic review viewed widely as a call for asale or merger with another firm

Major Actelion investor backs board over activist

BYRICHARD PARTINGTON

ASSET MANAGEMENT

PHARMACEUTICALS


CITYVIEWS: COULD THE US CREDIT OUTLOOK DOWNGRADETRIGGER ANOTHER CRISIS?Interviews byEugenio Montesano

IN ASSOCIATION WITH

www.RateSetter.com Customer Phoneline: 0844 249 0115

Save or Borrow peer to peer at RateSetter.com

No, I think the institutionsare better prepared, but fund-ing will be more expensivenow. Obama isnot taking thehard line like theUK has, but theirrecovery looksmore sta-ble.

ASHLEY KEET |CLARKSONS

Yes, I think there are manyindicators of a possible dou-ble dip recession in the US.Im surprised theUK didnt getdowngraded aswell after postingits growth fig-ures for2011.

MATTHEW PAIN |NEWLINE GROUP

Yes. It could, because it dam-ages market confidence.And Obama has his share ofresponsibilities his administrationis not managingthe day its nottaking toughdecisions.

DANIEL MELTZER |PLEXUS LAW

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THE TRUE cost of rolling out fibre broadband to 5m homes in ruralareas could dwarf the figures

being discussed by Fujitsu, accord-ing to industry experts.

Analysts at RBS have placed thecost of providing fibre-to-the-prem-ises (FTTP) to rural areas at around4.5bn far above the 1.5bn to2bn projected by Fujitsu.

The Japanese hardware and ITservices company says it will needto secure 500m of the 830m gov-ernment funding earmarked for

broadband rollout in order to hitthe 5m homes target and willpump in between 1bn and 1.5bnof its own money.

However, industry sources saythere is no guarantee Fujitsu will

be able to secure the funding, for which it will face fierce competi-tion from rivals when it is releasedin sections by the government.

The Japanese firm admitted theentire project will be unviable if acertain level of funding is notsecured, but was unable to disclosethe tipping point.

Sources at rival provider BT haveaccused Fujitsu of smoke and mir-

rors over its insistence BT shouldslash its wholesale prices for usingits duct and pole infrastructure aspart of the deal.

A Fujitsu spokesman told CityA.M.: We have seen several priceestimates for the project but wehave studied this in depth andthink we have priced it right.

Fujitsu is currently involved in a700m legal action with the NHSover the failed project to electroni-cally store the health records ofmillions of UK patients. Aspokesman said this will notimpact on the broadband project.

MORE: GEEK SPEAK P26

Fujitsu may not hitbroadband target


NEWS | IN BRIEF

Walmart moves to social mediaWal-Mart said yesterday it had agreedto buy social media company Kosmixfor an undisclosed sum, as the worldslargest retailer aims to win over moretech-savvy US shoppers. Wal-Martsaid Kosmixs founders and team willoperate as part of a newly formed

group called @WalmartLabs that willcreate technologies and businessesaround shopping online or with smartphones.

NHS patients taking up choicesMany patients are actively exercisingtheir right to choose where to receive

NHS-funded treatment, according tonew research by the Royal EconomicSociety. The study, which analyseddata on the choices made by morethan 50,000 NHS patients, found outthat four out of ten hip replacementpatients choose not to receive treat-ment at their nearest hospital.

MORE NEWSONLINE AT

www.cityam.com

HIGH-flying banker NaguibKheraj is to return to his alma

mater Barclays as a part time sen-ior adviser, the bank said yesterday.

Kheraj, who spent ten years atBarclays from 1997, including three

years as its group finance director-from 2004, has returned to advise it ona range of commercial and policy mat-

ters, the bank said.He is also taking the title

vice chairman, but will nothave a seat on the board.

The appointment followshis surprise exit from Lazardafter just two months as

chief executive of its international opera-tion, to focus on his philanthropic work.

Kheraj, a protege of chief executive BobDiamond, has held a string of top positionsat banks, including chief executive at

JPMorgan Cazenove, asset manager RobertFleming and Salomon Brothers, which

became part of Citigroup.He said: This is a business and manage-

ment team I know well and admire. I lookforward to playing a part in ensuringBarclays continued success.

His advisory role at Barclays will take upless than 30 per cent of his time, alongside

which he will continue to chair theNational Committee of the Aga KhanFoundation (UK) and the EndowmentCommittee of the Aga Khan DevelopmentNetwork.

Kheraj back at Barclays

NAGUIB KHERAJ

BYALISON LOCK

BANKING

BY STEVE DINNEEN

EXCLUSIVE

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TEXAS Instruments yesterday warnedof slower-than-typical quarterly salesgrowth as it scrambles to restart pro-duction after Japans massive earth-quake, and said it was unclear whenthe supply of the silicon and wafers itneeds will return to normal.

Shares of the chip maker, whichplans to buy National SemiconductorCorp for $6.5bn (4bn) in a bid toexpand its hold over a booming ana-log chip market, slid 2.5 per cent after Texas earnings were also hurt byquake-related expenses.

Texas is projecting growth of aboutfive per cent for the current quarter,

versus a typical nine per cent or moreas the company contends with supplyshortages as well as damage to itsown factories.

Texas on Monday forecast second-quarter earnings of 52 cents to 60cents per share on revenue of $3.41bnto $3.69bn. Analysts had expected rev-enue of $3.52bn.

Its first-quarter earnings alsomissed Wall Street expectations by apenny. Profit in the first-quarter roseto $666m, or 55 cents per share, from$658m, or 52 cents per share, in theyear-ago quarter. Revenue rose six percent to $3.39bn from $3.21bn, in line

with the average analyst expectationfor $3.39bn.

NEGOTIATIONS over Glencores valua-tion are set to focus on the mininggiants trading arm as commodityinvestors worry about the possibledeparture of key traders and the intan-gible nature of the people side of thebusiness.

When you have hard assets youknow the price for a metal and on thatbasis you are able to have a relativelyhigh level of certainty, OlivetreeSecurities Christian Georges told CityA.M. Whereas with trading... theres aquestion mark over the ability of atrader to get it right.

Glencore argues that its tradingarm should add a premium to itsvalue because it makes its earningsless volatile than those of equivalentpure commodity producers.

Its sizeable share of the market fortraded commodities it trades 60 percent of marketable zinc and 50 percent of marketable copper couldalso give the company a degree ofpricing power, although there is nosuggestion that it could manipulatethe market.

But mining investors are wary of buying into a trading arm wheremany of the key figures could cash outafter a few years. Therell be a little bitof pressure on pricing because fundmanagers wont want to feel theyretaken advantage of, says RenaissanceCapitals Jonathan Williams.

Many have compared Glencoresfloat to that of Goldman Sachs in1999, with one industry source saying:Theyre seen as flash and arrogant, a bit like the Goldman Sachs of theindustry.

A third sky-high valuation from oneof the banks on the deal emerged yes-terday, with Bank of America MerrillLynch analysts valuing the companyat a maximum of $70bn (43bn) inaddition to the $9-$11bn to be raised by the float. Barclays Capital andCredit Suisse have put similarly highvalues on the firm.

Oriel Securities Charles Cooper saysthat Glencores equities assets, whichinclude stakes in Rusal and Xstrata,were worth $20bn alone. But on corpo-rate governance he said: Who would-nt have concerns with a companywith stakes in state-run mining enter-prises from Armenia to Zimbabwe?

Trading arm

is the key tominers value

Texas Instruments disappointsas Japan weighs on production

BY JULIET SAMUEL

COMMODITIES

TECHNOLOGY


Looking for an independent voice on Glencore

AMONG all the many big beasts advis-ing on the forthcoming flotation ofcommodities trader Glencore, onefirm stands out in its unusualnessand lack of big beastliness, and that is

Liberum Capital.Liberum is an employee-owned

investment bank whose Latin namemeans independent, whereas the restof the advisers including Credit

Suisse, Morgan Stanley, Bank ofAmerica Merrill Lynch, BNP Paribas,Barclays Capital, Societe Generale andUBS are all the bulge bracket banks,who offer placing power, share distribution and underwriting servicesalongside their advisory capabilities.

In a world where relationships arestill all important, Liberums link toGlencore is Michael Rawlinson, aboard director who heads the mining,resources and energy team. He joined

from Cazenove after its merger withJP Morgan. There he had worked onthe initial public offerings of BHPBilliton, Xstrata, Vedanta and AngloAmerican.

Rawlinson also worked on theflotation of the Russian aluminiumgroup Rusal, where Glencore chiefexecutive Ivan Glasenberg is a direc-tor, and with Vallar, the mininggroup run by Nathaniel Rothschild.

As one adviser to the Glencore floatput it: Michael is a superb authorityin the sector and he gives verystraight advice.

Last July Liberum came up with a$60bn (37bn) figure for Glencores

valuation, which has since become abenchmark. As we wrote yesterday,analysts at Credit Suisse and BarclaysCapital have now suggested thatGlencore could be worth as much as

48bn (including new money raised).As yet, there is little research fromanalysts whose banks are not on thesyndicate. But one industry afficiona-do who does have a view is StandardBanks mining analyst Peter Davey, who told me yesterday: Glencoredoesnt deserve a premium rating.

I think it should price at a dis-count to the miners. With them, youhave real tangible earnings whereashere, a lot of the money is earned by

traders who own the company andmight leave after a time.

With so little UK M&A happeningat the moment, it looks likely thatthis Glencore flotation will dominate

much of the discussion in the Cityover the next few weeks and therewill be a heated debate over valuation(as well as the groups corporate gov-ernance record), with some going forthe 48bn or so figure and others,such as Davey, arguing for somethingcloser to 35bn. It will be fascinatingto see whether any of the syndicatemember banks agree with Daveyslower figure.

Just dont hold your breath.

INSIDE TRACK

DAVID HELLIER

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some payment methods attract a handling fee. See website for details.

Roll on summer!

CORPORATION tax should be cut to 18per cent in order to give a much-need-ed boost to the UKs global competi-tiveness, the Confederation of BritishIndustry (CBI) will demand today.

Britains attractiveness plummetedbetween 2000 and 2010, the CBI said.

The clock is ticking on the govern-ment to halt the decline and prevent

businesses from departing theseshores, CBI chief John Cridland said.

Levels of personal tax, business tax,and excessive regulations have hit theUKs appeal as a place to do business,according to a CBI survey.

A negative balance of 84 per cent ofsenior FTSE leaders cited personal taxlevels as harming the UKs attractive-ness since 2000, the survey revealed.

The 50p tax rate on earnings over

150,000 is seen as a critical blockeron both attracting internationallymobile staff to the UK, and keepingtop UK talent here, the CBI claimed.

The government should reduce the

50p rate as soon as public financesallow, said Cridland, who praised thereview into the amount of revenue itraises for the exchequer.

An independent study by the AdamSmith Institute has found that thehigher rate causes tax revenues to fall,as business moves elsewhere.

Reversing the UKs growing regula-tory burden is more difficult,Cridland said, comparing the task toturning around a tanker.

One company told us how it hadcomplied with disability regulations

by installing an access ramp to itspremises, the CBIs report says, onlyto be fined by another government

body and told to take it away againbecause it was a listed building.

Business secretary Vince Cableresponded to the report by defendingthe UKs attractiveness to investors.

The UK inward investment regimeis amongst the most welcoming in the

world and remains one of the topthree recipients of foreign directinvestment in the world, Cable said.

Cut business taxto 18pc, says CBI


BY JULIAN HARRISUK ECONOMY

NEWS | IN BRIEF

Inflation on course to riseGlobal inflation is set to rise to 3.8 percent in 2011 from 3.4 per cent last yearand could hamper growth perspectivesfor the world economy, research byLloyds Bank Corporate Markets claimedyesterday. The World Economic Quarterlyreport forecast a moderate expansion for

G10 economies to grow 2.3 per cent thisyear, and improve in 2012 to reach 2.7per cent. It also predicts a steady andstrong performance from emerging 10(E10) countries, growing by 7.1 per centthis year and 6.9 per cent next year.

Mixed views on bank holidaysAlmost one third (30 per cent) of theUKs small and medium sized enterprisesexpect the two consecutive bank holidayweekends in April to bring more benefits

than disruption to their businesses, a sur-vey of 501 business owners and financialdecision makers by the market researchagency BDRC Continental showed yester-day. However, 45 per cent remain scepti-cal about any economic boost over thebank holidays.

Small firms downbeat on jobsEmployment at small firms took a knockin the first three months of the year, theFederation of Small Businesses (FSB) saidyesterday. A negative balance of -6.5 percent of companies reported a decreasedheadcount in the first-quarter, the FSBslatest index showed. The figure wasworse than expected, after a negativebalance of just -2.5 per cent expectingany reductions in staff at the end of2010. The confidence index remained in

negative territory in every quarter lastyear.

Emerging economies hoard dollarsUS dollar reserves in emerging economieshave more than doubled in the lastdecade to maintain undervaluedexchange rates and defend their export

competitiveness, according to researchby the Royal Economic Society (RES).However, this has not prevented theirshare prices from falling during the globalfinancial crisis just as much as they did inhigh-income countries, the researchrevealed. The correlation betweenreserves and the pressure of outflowsduring the crisis seems to be negative,and in 75 per cent of the developingeconomies studied, share prices in thebanking sector had peaked before 2008.

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Foreign investment in the UK fellfrom $186.4bn (114.6bn) in 2007 to$45.7bn in 2009, as the recessiontook its toll.

Between eight per cent and 12per cent of UK companies have notyet decided where their primarylocation will be in five years, a CBI

and Deloitte survey found. The UK was ranked 89th out of139 by the World Economic Forumfor having the biggest regulatoryburden on business, on a par withNigeria.

In maths education rankings, theUK lags behind France, Germany, theNetherlands, Japan and many otherpeer countries.

In science, the UK ranks belowGermany, the Netherlands, Korea andJapan, yet ahead of some other peercountries, such as France and the US.

The UKs top rate of income tax ishigher than in France, Germany, theUS, Brazil, Switzerland and manyother countries.

Of 16 measures of attractivenessto business, the UK fell back in 11 ofthese between the years 2000 and2010 including personal tax, busi-ness tax and regulation.

The internet, if taken as a sectorof the economy, would now be alarger contributor to GDP than con-struction, education and transport.

BRITAINS PLACE IN THE WORLD

NewsCITYA.M. 19 APRIL 2011 11

Delivering band-width at a trulyindustrial scale isa truly essentialingredient fordriving creativeindustries for-ward, and ensur-ing the UK isntleft behind.

Many business leaders are telling us thatthe UK no longer holds the same attrac-tion it once did, and are unsure whetherthey need to be here at all.

Smaller firmsneed to be ableto access both

short and longterm finance.Many firms haveshown good rela-tionships withthe banks are stillpossible today.

We need to create a regulatory and fiscalenvironment that gives global businessconfidence to back the UK as the place formajor investments.

A serious risk isthe lack of skills inengineering and

science, vital forthe innovationneeded to becompetitive in aglobal market.Plus, the 50p taxrate is very high.

A marginal tax rate of 62 per cent forour most mobile employees, including NI,does nothing to encourage enterprise orretain expertise and skills.

THE CLOCK IS TICKING | THE GOVERNMENT URGENTLY NEEDS TO PROVE THAT BRITAIN IS OPEN FOR BUSINESS, INDUSTRY LEADERS ARGUE

JOHN CRIDLAND, DIRECTOR GENERAL,CONFEDERATION OF BRITISH INDUSTRY

DAVID SPROXTON, CO-FOUNDER,AARDMAN ANIMATIONS

LUCY ARMSTRONG, CHIEF EXECUTIVEOFFICER, THE ALCHEMISTS

IAN POWELL, CHAIRMAN AND SENIORPARTNER, PRICEWATERHOUSECOOPERS

ANDREAS GOSS, CHIEF EXECUTIVE,SIEMENS UK

ROBERT HIGGINBOTHAM, CEO EUROPE,FIDELITY INTERNATIONAL

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SWISS medical device maker Synthesyesterday confirmed it is in takeovertalks with Johnson & Johnson (J&J)over a deal that could value the firmat about $20bn (12.3bn).

The move would be J&Js biggestever acquisition, giving it a leadingposition in equipment to treat trau-ma. Synthes, which posted sales of$3.7bn in 2010, makes nails, screwsand plates to fix broken bones, as wellas artificial spine discs.

A Synthes spokesman said: Inresponse to market speculation,Synthes confirms that it is engaged indiscussions with Johnson & Johnsonabout a potential business combina-tion transaction.

A spokesman for J&J declined tocomment.

Key to any deal will be Syntheschairman Hansjoerg Wyss the sec-ond-richest person in Switzerland,with a net worth of $6.4bn accordingto Forbes. Wyss holds 40 per cent of

Synthes directly and another eightper cent through family trusts. Someanalysts doubt he will be willing toplay ball with J&J, which would effec-tively kill off the deal.

Shares in British knee and hipmaker Smith & Nephew (S&N) fellmore than three per cent on the newsthat J&J is looking elsewhere.

Last year the firm confirmed it hadrejected a 7bn bid from Johnson &Johnson and investors had hoped theUS giant would come back with a big-ger offer. One option for S&N could bea tie-up with US rival Biomet.

GOLDMAN Sachs has moved to topplace for the first time since 2002 inthe table for issuance of high yieldbonds.

The US investment bank has dis-placed Deutsche Bank perhaps onlytemporarily because these positionshave a habit of changing quickly after completing a deal for the leisuregroup GEO.

Goldmans other recent deals haveincluded bond issues for Boparan, thechicken producer that has taken overNorthern Foods, the clothing groupMatalan, the drinks group PernodRicard and Phones 4 U.

A record number of high-yieldbonds were issued last year, and vol-umes this year are already surpassingthat, according to data from Dealogic.Globally, $354bn (218.2bn) of high-

yield bonds were issued last year, of which $62bn came from Europeanissuers also a record, according tothe data provider.

Bond issuance this year is runningat roughly twice the rate of last year,the data suggests.

Goldman has taken pole positionwith an 11 per cent share since thestart of the year. Deutsche Bank is cur-rently claiming 10.7 per cent, accord-ing to Bloomberg data, with CreditSuisse having an 8.8 per cent share.

Goldman Sachstops high yieldbond league

J&J boss William Weldon appears to have lost interest in UK firm Smith & Nephew

BY STEVE DINNEEN

PHARMACEUTICAL

CAPITAL MARKETS


ANALYSIS l Synthes

CHF

24 Jan 14 Feb 7 Mar 28 Mar 15 Apr

140

135

125

130

120

115

146.5018 Apr

SYNTHES has not officially confirmedwhich banks it has hired to advise it onthe possible Johnson & Johnson (J&J)takeover but City A.M. understands itwill be using its regular bank CreditSuisse.

The Swiss bank last month retainedits top spot for M&A advisory work.

It is acting as financial adviser tofellow medical firm Community HealthSystems, which recently increased itsoffer for Tenet Healthcare Corporation.

It is also acting as joint global co-ordi-nator and bookrunners on theGlencore flotation, which is due toclose in May.

Credit Suisse advised Prudential onits failed $35.5bn (23bn) bid for AIAlast year and then advised AIA on itssuccessful IPO in Hong Kong inOctober, where it was valued at morethan $35.5bn.

Credit Suisse, Synthes and J&J alldeclined to comment.

ADVISER: CREDIT SUISSE

SYNTHES ADVISER

CREDIT SUISSE

J&J in 12bnmerger talkswith Synthes

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The Capitalist14

Right: Former EnglandTest cricketer AndyLloyd and JohnMaloney of Maxus

Below right: FormerWorld Cup footballerTrevor Steven

Pictures:Micha Theiner/

City A.M.

THE first City A.M. Golf Day took placeat Kingswood Golf & Country Club inSurrey, designer James Braids finestparkland golf course in England.

Braid, the five-times British Openchampion who is famous for his golf

courses at Carnoustie, Gleneaglesand Hankley Common, builtKingswood in the 1920s duringthe same building boom asSurreys other private estatessuch as Wentworth, St GeorgesHill and Coombe Hill.

Over the past three winters,the bunkering on the champi-

onship course has been com-pletely remodelled to adjust to

todays longer hitters, and City A.M.s40 big shots wasted no time step-ping up to the bar under theexpert eye ofCity A.M.s columnistSam Torrance OBE, the 44 times

Pro winner.The pressure built up afterevery shot as the players fol-lowed the scores live ontheir handheld devices, butit wasnt long before CityA.M.s Martin Muncasterand Chris Amor fromOmnicom agency OMD

UK emerged as the fron-trunners in the individ-ual competition.

The contest was soclose it came down to thelast putt on the last hole,

where Muncaster three-putted to lose by one to

Amor, who is as we speakclearing his diary to fix uphis prize of a round of golfagainst Torrance just assoon as the former prorecovers from his shouldercomplaint.

Muncaster, who camesecond on the countbackafter tying on 38 points

with Joel Williams fromthe Gaucho restaurant

group, said: The pressure got to meas I knew that I needed to make thehole in two putts to win, but I rolled atwo-and-a-half footer around the cupto miss out.

Further down the individualleaderboard, former England crick-eter Andy Lloyd came in twelfth place

with 33 points, and footballing leg-end Trevor Steven finished in twenty-eighth place with 28 points.

The three players calling them-selves Red Rum Mark Taylor fromMT Squared, Steve Booth from ArenaMedia and Jim Kelly from WelbeckGroup won the team contest, whilehonourable mentions go to Kelly,

who won the longest drive on holesix, and John Stevens fromMindshare, who got closest to the pinon the seventeenth.

City A.M. thanks Kingswood,Callaway, Golf Buddy, VPAR and YourGolf Travel, who made the day possi-

ble. Full results can be seen ath t t p : / / c o r p o r a t e . v p a r -golf.com/live/cityam.

Clockwise from above:John Stevens fromMindshare, Ben Dowdingfrom Epsom Racecourse,Martin Williams fromGaucho (standing), andSteve Booth from ArenaMedia (left) with Sam Torrance GOLF ON THE HOUSE

Kingswood Golf & Country Cluboffers full annual membership at699 for the clubs pay-as-you-goscheme where golfers can book alltee times, play in all tournamentsand access maximum advancedbooking rights. Country Club mem-bership costs 299 and offers morerestricted rights, but players can stillbook weekend times before 7.30amand after 11.30am, and will receivefour vouchers to play within the peakweekend tee times. So come alongfor a round of golf in April or May,when joining fees are reduced by 50per cent as an extra incentive, ifCity A.M. readers decide to sign up,the first round is on the house. Forfull membership details, see www.kingswood-golf.co.uk.

Left: Tim Bullman fromMint Partners, LawsonMuncaster from CityA.M., Andrew Palmerfrom World Spreads,Chris Amor from OMDUK, and City A.M. golf

columnist and formerpro Sam Torrance

Below left: Post-gamedrinks on the terrace atKingswood

Ben Dascombe from Brand Links(above) and Gary Thompson fromWorld Spreads (below)

CITY A.M. BIG HITTERSTEE UP TO MAKE GOLFDAY GO WITH A SWING

EDITED BY

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

CITYA.M. 19 APRIL 2011

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THE 20-year-old son of ChelseaFootball Club owner Roman

Abramovich has followed his fatherinto the oil and gas business by pur-chasing a stake in an investment vehi-cle specialising in the energy sector.

Arkadiy Abramovich, who is theRussian oligarchs oldest son, has

bought a 26 per cent stake in Crosby

Asset Management for 3m.The purchase, undertaken throughhis investment vehicle ARA Capital,caused shares in the AIM-listed invest-ment firm to rocket yesterday.

Abramovich bought the stock fromIrish energy tycoon John McKeon, theentrepreneurial founding sharehold-er of Circle Oil, and investment

banker Ilyas Khan.The pair still hold significant stakes

in the company, which is incorporat-

ed in the Cayman Islands.Based in Hong Kong, the vehiclewill focus on investments in naturalresources in Australia, as well asNorth and South America.

Roman Abramovich built hisRussian oil and gas empire during theearly 1990s, amassing a fortune esti-mated at around 7.4bn.

Shares in Crosby closed up 48 percent at 4.72p per share.

Chelsea owners son buys3m stake in oil investor

Arkadiy Abramovich (left) is following in his father Romans footsteps Picture: REX

BYRICHARD PARTINGTONASSET MANAGEMENT


NEWS | IN BRIEF

Pubs outperforming retail salesGrowth among the UKs leading restau-rant and pub groups slowed in March, butthe market still comfortably outper-formed retail, according to the latestCoffer Peach Business Tracker figures.

The research shows like-for-like salesgrew 0.9 per cent in March, with totalsales, which include new site openings, up3.4 per cent on March 2010. March saleswere 22.3 per cent ahead of February,

though March was a five-week monthcompared to a four-week February.

Capital Pub Co to resume dividendThe Capital Pub Company expects its full-year results to be in line with market fore-

casts and the firm will resume payingdividends, it said yesterday. The companysaid London has remained a buoyant mar-ket and its pubs, including the Marquis ofGranby, have traded strongly.

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DEUTSCHE Bank was forced toscrap the sale of its subsidiary BHFto Liechtenstein bank LGT yesterdayafter the German f inancial regula-tor blocked the deal on tax evasionconcerns.

Sources familiar with the situa-tion told City A.M. that watchdogBaFin had doubts over the reliabili-ty of LGTs funding sources given itshistory of probes for tax evasion.

LGT, which had targeted BHFmainly for its wealth managementarm, said it had decided not to pur-

sue this complex transaction fol-lowing discussions with BaFin.

LGT has been under German reg-ulators spotlight since 2008, whenclient data stolen from it revealedthat former Deutsche Post chiefexecutive Klaus Zumwinkel had atrust with the group. LGT paid a50m (44m) fine last December tosettle the regulators tax probe, anddid not admit guilt. Zumwinkeladmitted tax evasion and received asuspended jail sentence.

In a statement, Deutsche Banksaid it regrets the fact that thetransaction did not come about.

BaFin spokesman Ben Fischer

told City A.M.: We have to check whether the buyer has reliablefunds and the sources of the moneythat it was investing were solid.

Watchdog blocksDeutsche unit saleBYALISON LOCK

BANKING


NEWS | IN BRIEF

Knight Frank agents form firmThree former Knight Frank agents andan ex-surveyor for the property firmhave set up their own company,Companies House documents show.Agents Nigel Gillingham, TraceyPollard and Woody Bruce, alongsidesurveyor Rupert Bentley Smith, are

listed as the sole directors of BruceGillingham Pollard. The agents leftKnight Frank last month and havealready secured several shopping andrestaurant leasing mandates.

N&P slapped with 1.4m fineThe FSA has fined mutually owned

savings and loans company Norwich &Peterborough 1.4m for poor clientadvice on products sold by the failedKeydata company. The watchdog saidin a statement yesterday that N&P hasalso agreed to set aside some 51m topay out to customers in relation to theaffair.

MORE NEWSONLINE AT

www.cityam.com

ANALYSIS l Deutsche Bank


50

46

38

42

40.0018 Apr

EMERGING markets could experience a private equityboom over the next two years, as investors turn to devel-oping economies for better returns, a global survey hasfound.

Typical investors surveyed expected to hold between16 and 20 per cent of their global private equity portfo-lios in emerging markets by 2013, according to the latestresearch from Emerging Markets Private EquityAssociation (EMPEA) and Coller Capital.

Investors currently hold between 11 and 15 per centin emerging markets, the review of 156 private equityinvestors in North America, Europe and Asia finds.

The survey also found that Brazil has overtaken Chinaas the most attractive market for investors this year.

Emerging marketsset to see a boomPRIVATE EQUITY

APPLE has sued rival Samsung Electronics claiming thatSamsungs Galaxy line of mobile phones and tabletslavishly copies the iPhone and iPad, according tocourt papers.

Galaxy products use Googles Android operating sys-tem, the lawsuit says, which directly competes with Apples mobile software. However, Apples claimagainst Samsung focus on Galaxys design features, suchas the look of its screen icons.

The lawsuit, filed on Friday, alleges Samsung violatedApples patents and trademarks. This kind of blatantcopying is wrong, Apple spokeswoman Kristin Huguetsaid in a statement. A Samsung representative could notimmediately be reached for comment.

Samsung sued byApple over phonesTECHNOLOGY

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EXPLORER Tullow Oil is suing its for-mer partner in Uganda, Heritage Oil,to recover $313m (192.7m) thatTullow paid to cover tax on fields itbought from Heritage.

Uganda said Heritage was liable forcapital gains taxes on the sale, whichthe Jersey-based company, led by for-mer mercenary boss TonyBuckingham, denies.

Tullow paid the government the$313m to secure approval of thechange in field ownership, and is nowseeking to get the money back from

Heritage through the High Court inLondon.

OIL explorer Desire Petroleum yester-day admitted that it had not found oilat its latest well in the Falkland Islandsand needs fresh funds for any furtherdrilling, wiping over half the valuefrom its shares.

AIM-listed Desires shares tumbled60.6 per cent to close at 15.75p yester-day, sending it to the bottom of theLondon market fallers and knockingmore than 200m from its value toleave it with a market cap of just136.9m.

Desire said while its latest well,named Ninky, had oil shows and hadfound a thin zone of oil, the fuel wasin a poor quality reservoir and conse-quently the well will be plugged andabandoned.

Desire said its remaining funds of22m would not stretch to pay foranother well.

Given our continuing confidencethat oil will be discovered on Desiresacreage, further wells will need to bedrilled, said Desires chairmanStephen Phipps in a statement yester-day, hinting at a cash-raising drive tofollow Septembers 22.8m share plac-

ing. Analysts said the failure does not

spell the end of the Falklands as alucrative oil prospect.

Todays news doesnt have any deci-sive impact on the Falkland Islands asa whole, in terms of their viability as apetroleum province but it raises issuesspecifically for Desire, said MirabaudSecurities analyst Alex Martinos.

A large discovery made byRockhopper at its Sea Lion well in theFalklands in 2010 has raised hopesthat a new hydrocarbon basin will beopened up, but so far no other firmhas managed to strike commercial oil.

Exploration in the area has sparkedprotests from Argentina, which claimssovereignty over the islands.

Desire hit as

it fails to findFalklands oil

IRISH mining firm KenmareResources yesterday posted a narrow-er full-year loss yesterday, drivenmainly by foreign exchange gains andstronger demand from Europe and Asia, and said it was on track toincrease its production capacity by 50per cent in 2012.

The Dublin-based miner, which

started work at the Moma titaniummineral mine in Mozambique in1987, said the mine was operatingwell and production was broadly inline with expectations.

Pre-tax losses for 2010 were $16.3m(10m), compared with $30.4m a yearago. The results were boosted by forexgains of $16.7m, compared with aforex loss of $2.9m last year.

Revenue rose more than threetimes to $91.6m.

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Kenmare is bullishas its losses narrow

BRITISH oil and gas explorer EnCoreOil has said it is spinning off its explo-ration assets into a new company as itfocuses on its key projects in the UKNorth Sea.

The new company, XEOExploration, will be listed on theAlternative Investment Market (AIM)towards the end of May.

EnCores exact percentage share-holding in XEO would depend uponthe amount of funds raised by XEO,the company said.

EnCore finance chief Eugene

Whyms will become the chief execu-tive of XEO.

EnCore to spinoff explorationTullow to sueHeritage in UK

BYHARRY BANKS

ENERGY

OIL & GAS

OIL & GAS

BYHARRY BANKSMINING


ANALYSIS l Desire Petroleum

p

12 Apr 13 Apr 14 Apr 15 Apr 18 Apr

45

35

40

25

30

15

10

20

15.7518 Apr

GROUPEEurotunnels first-quarter 2011 totalrevenues haverisen to 179.2m(157m), excludinginsurance indemni-ties, a growth of 24

per cent comparedwith 2010. AEurotunnelspokesman saidthat passengernumbers hadstayed strong afterincreasing duringlast years ashcloud.Picture: REUTERS

EUROTUNNEL REVENUES JUMP AFTER ASH CHAOS

FOR MORE NEWSwww.cityam.com

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PHILIPS is offloading part of its TVarm in the first step by new chiefexecutive Frans van Houten to boostflagging profit at Europes biggestconsumer electronics maker.

Philips is moving its loss-makingTV business into a joint venture withHong-Kong based monitor maker TPVand has the option to sell out.

The deal means that the Chinesecompany now owns 70 per cent of theTV arm.

The Dutch group, which did notdisclose financial details of the deal,has struggled to compete with lower-cost Asian rivals Samsung and LGElectronics after once being one ofthe market leaders.

Van Houten, a restructuring expertwho took over as chief executive thismonth, said he is assessing the prof-itability of Philips 400 or so businessareas and taking the blanket off itslaggards, a hint that further divest-ments could be on the cards.

We are not yet firing on all cylin-ders...Theres much unlocked poten-tial in Philips, Van Houten said.

Philips did not give a value for thedeal, saying it would receive a

deferred payment from TVP.All 3,600 employees at the TV busi-

ness will transfer to the Hong Kongcompany.

TPV, which controls about 33 percent of the global computer monitormarket, posted a near 20 per cent risein 2010 profit.

Van Houten said that Philips, which competes with GermanysSiemens and General Electric in thehealthcare and lighting business isnot planning to switch away fromconsumer goods.

Siemens has been concentratingmore on industrial customers.

Philips indicated that it was look-ing for a new path for its TV businessin September last year, as part of ashake-up of the business.

SHARES in online gaming firms thathave avoided the US crackdownsurged yesterday, with Europeanfirms set to be the big winners.

Shares in Bwin.Party, the firmformed by the recent merger betweenBwin and poker site PartyGaming,jumped by almost 30 per cent.

888 recouped losses suffered after

merger talks with Ladbrokes brokedown last week. Software provider

Playtech also made big gains after theshock US action, which claimed gam-ing firms PokerStars, Full Tilt Pokerand Absolute Poker had tricked banksinto committing elaborate criminalfraud. The sites founders could face20 years in prison if found guilty.

Execution Noble analyst GeetanjaliSharma said: The US facing opera-tors have been a drain on the prof-itability of the European operators.

The closure of the main competitors

operations and the US legal proceed-ings initiated against them should ben-

efit European listed operators.

Shares in European gaming firms surgepost US crackdown on gambling sites

NORWAYS Telenor faces losing itsinfluence over Russian mobile opera-tor Vimpelcom after fellow leadingshareholder Altimo said it wants toscrap the companys shareholderagreement to reflect the Russian tele-com groups recent blockbustermerger.

Vimpelcom last week closed a $6bn(3.7bn) cash-and-shares deal for 51.7

per cent of Orascom Telecom and 100per cent of Italys Wind, giving their

Egyptian owner Naguib Sawiris 30.6per cent of voting shares in the unitedgroup.

The 2009 agreement, thrashed outafter years of courtroom and board-room battles between Telenor andRussian billionaire Mikhail Fridmans Altimo, was designed to give Altimoand Telenor roughly equal say inVimpelcom. One of the key elementsof the agreement was a balanced boardroom, with three independent

directors balancing Altimo andTelenors three directors a piece.

Telenor could soon losesway over VimpelcomTELECOMS

FRANCE Telecom and DeutscheTelekom plan to jointly buy networkgear, mobiles and other informationtechnology to save money, the twogroups said yesterday.

The project has the potential to saveabout 1.3bn (798m) annually afterthree years -- a little under 900m forFrance Telecom and around 400m forDeutsche, they said.

The companies plan to finalise theformation of a 50-50 jointly owned

and operated venture in the comingweeks, subject to board approval and

antitrust clearance.The new joint venture will offer amore efficient sourcing organisationthat will lead to more effective part-nerships with suppliers, said OlafSwantee, executive vice-president atFrance Telecom.

The tie-up is the latest step in an ini-tiative the groups unveiled inFebruary, which identified five areasof cooperation, including radio accessnetwork sharing in Europe.

France Tel and DeutscheTel join forces to cut costsTELECOM

SHARES in marketing softwareprovider Alterian surged over 17 per

cent yesterday to close at 113p despitethe firm saying its revenues would belower than previously thought.

The market was buoyed when thecompany, which counts AstraZenecaand Jaguar Land Rover among its cus-tomers, did not issue a third profitwarning in a month in its latest trad-ing update.

It now expects revenue to bearound 37m and says that profitswill be f lat on last year.

Chairman Keith Hamill said: Inspite of this serious setback, I still believe that the company has goodand competitive products addressinggood markets and many very able

people.Alterian stock slumped more thana third last week after its second prof-it warning in just over a week.

It said its full-year results would bematerially lower than anticipated.

Earlier this month its shares lostalmost a fifth of their value after issu-ing a profit warning owing to thedelay of a 4m licensing contract,which will cut ten per cent off its full-year revenues and profits.

The bombshell led to the resigna-tion of its founder and chief executiveDavid Eldridge, who had led Alteriansince founding it 14 years ago.

Alterian soars despite revisionBY STEVE DINNEEN

TECHNOLOGY

Philips seals

China TV dealas profit slipsBY JOHN DUNNE

RETAIL

BY STEVE DINNEEN

GAMING


Chief executive Frans Van Houten is revamping the retailer.

NEWS | IN BRIEF

DDD posts full-year lossDDD Group yesterday posted a full-yearloss, but said the current year started inline with expectations, with growingdemand for its 2G-to-3G conversion tech-

nology for desktops and TVs. Last month,the company said it hopes to break evenin 2011 and post a first profit in 2012 asdemand grows for 3D televisions, person-al computers, and mobile phones. Pre-taxloss from continuing operations for 2010,was 921,000, compared with842,000 the year before. Revenue wasup 12 per cent to 1.3m.

GE and Google invest in wind farmGeneral Electric, Google, and twoJapanese partners will invest about$500m (307.6m) in a wind farm underconstruction in Oregon, the partnerssaid yesterday. The $2bn Shepherds Flatproject, due to be completed next year,will stretch over 30 square miles ofnorth-central Oregon and generateenough energy for 235,000 US homes.The sites developer is Caithness Energy.GE said the collaboration is part of itsstrategy of drawing private investmentto the US wind market. GE and Googleare partnering with the US unit ofJapans Sumitomo and a unit of Itochu.

Strong quarter for TD AmeritradeTD Ameritrade yesterday said netincome increased 5.6 per cent to$171.7m (105.6m), or 30 cents pershare, in the second-quarter that ended31 March, from $162.m, or 27 cents pershare, a year earlier. Analysts on aver-age were expecting 29 cents per share.Revenue rose 13 per cent to $718.2m,beating Wall Street estimates of$703.6m. Omaha, Nebraska-based TDAmeritrade said clients added a net$11.5bn in new funds in the quarter, anincrease of 13 per cent from a year earli-er. Clients made an average of 439,158trades per day, compared to 378,714 ayear earlier.

ANALYST VIEWS: IS PHILIPS ON THE RIGHTTRACK WITH ITS SHAKE UP? Interviews by John Dunne

JONATHAN JACKSON | KILLIK & CO

Philips is well positioned to take advantage of increasing income levels

and the expansion of the middle class. In addition, its healthcare and lifestyleproducts play to the trend of an ageing population driving increased spending onhealth and well-being. Buy.

VICTOR BARENO | SNS SECURITIES

TPV Technology was a logical partner, as it was one of Philips mostimportant outsourcing partners. The key was to get the TV business off the com-panys profit and loss sheet. In Europe, austerity measures have some impact inSouthern Europe and the UK but Northern Europe is on track.

MARTIN PROZESKY | SANFORD BERNSTEIN

My expectation is that it is not likely to get a lot of value out of thejoint venture. The TV business would probably continue to lose market share, butthe deal is positive on the whole.

ANALYSIS l Philips

24 Jan 7 Feb 28 Feb 21 Mar 15 Apr

24.5

25

25.5

24

20.5

22

22.5

21.0

21.50

23

23.5

20.7518 Apr

ANALYSIS l Alterianp


220

180

100

140

113.0018 Apr

ANALYSIS l Bwin Party

p

12 Apr14 Mar22 Feb2 Feb24 Jan

220

180

140

170.0018 Apr

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ONLINE retail is growing six timesfaster than high street sales and isforecast to hit 37bn a year by 2014,according to a retail survey.

The rapid expansion is hitting highstreet retailers who are struggling toremain competitive with 40,000shops closing over the past decade.

Smartphones are fuelling the rapidonline sales growth as customersplace orders on-the-go.

The Webloyalty Online RetailReport by Verdict Research predictsthat current internet spending willgrow by 14bn from 2010 to 2014.

Many more familiar brands willdisappear from town centres as agrowing number of retailers closeshops and trade solely on websites,according to the research.

Chains including Woolworths,Etam, Littlewood and Zavvi (all pic-tured right) have already movedonline after their stores were closedfollowing plummeting sales and

expensive overheads.Just over half of UK consumers cur-

rently use their mobiles during thepurchasing process, but in the nextfive years this is expected to hit 80 percent, according to the research.

Neil Saunders, an analyst atVerdict said: Shoppers after a betterdeal will use their mobile to compareand find prices.

Retailers that survive on the highstreet will be those that combinetheir online stores with mobile appsthat offer shoppers a better dealusing location-based offers.

Almost half of all Brits own asmartphone which will be howshoppers locate and compare the bestprices in the very near future, he said.

This move away from the high streetis also reflected by the continuedgrowth of out-of-town shopping cen-tres. Out of town retail space grew 34per cent from 2000 to 2009, while highstreet space shrank by 8.9 per cent, theresearch found. The move was trig-gered by the soaring costs of rents andrates, according to the report.

Online retail

sucks life outof high street

Nestle expands in China deal

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NESTLE, the worlds biggest food com-pany, yesterday agreed to take a 60

per cent stake in Chinas Yinlu FoodsGroup for an undisclosed price,becoming the latest multinational totarget Chinas fast-growing food and

beverage sector.Family-owned Yinlu had sales of

about SwFr750m (515m) in 2010,Nestle said in a statement yesterday.Nestle did not disclose financialdetails of the deal and said it was sub-

ject to regulatory approval in China. Yinlu, from Chinas southeastern

Fujian province, is known for itspeanut milk and instant porridgeproducts.

Analysts said the deal is most likelyto be approved because Yinlu oper-ates in a niche segment of the marketdespite being a brand with a largeregional presence.

In 2009, Chinas regulators killedCoca Colas bid to buy well-known

juice maker China Huiyuan JuiceGroup on monopoly concerns.

There is a decent chance the deal

will get approved because it is not acomplete takeover. But there will still

be some regulatory scrutiny becauseright now the government is wary offoreign companies making too much

money here, said Shaun Rein, man-aging director of China MarketResearch Group.

Nestle has been operating in Chinafor more than 20 years and employs14,000 people.

Analysts said the deal is beneficialto both Nestle and Yinlu. It providesNestle a way into a different marketsegment, they said.

BY JOHN DUNNE

RETAIL

BYHARRY BANKS

RETAIL

JAPANESE carmaker Toyota said yes-terday it had resumed operations atall its domestic plants, which had

been shut down since the earthquakeand tsunami on 11 March, with pro-duction volume still at around 50 percent due to a parts shortage.

Toyota said it had started measur-ing radiation levels of its export vehi-cles, parts for overseas assembly and

service parts and found no abnormal-ities.

Of the Toyota groups 18 assemblyplants in Japan, three had already been in operation and the restresumed production yesterday,according to a statement from thefirm.

The plants are operating withabout 50 per cent of production dueto the shortage of auto parts, a

Toyota spokeswoman said.

Production resumes atToyota plants hit by quakeAUTOMOTIVE

Consumer News 19CITYA.M. 19 APRIL 2011

NEWS | IN BRIEF

Motor misery over Easter holsLondon motorists hoping to escape tothe north over Easter are set for mas-sive delays, as the government admittedthat the M1 motorway is likely to remainpartially closed over the bank holidayweekend. Two northbound lanes and one

lane going south were shut yesterday inBorehamwood, north London, as emer-gency repair work continued on a bridgebadly damaged by a fire at a nearbyscrapyard. Roads minister Mike Penningsaid the road between junctions one andfour might not reopen until the middleof next week.

Boris picks new deputy mayorMayor of London Boris Johnson hasappointed Edward Lister, theConservative leader of WandsworthCouncil, as his deputy mayor followingthe death of Sir Simon Milton. Lister willstep down from Wandsworth Council,where he has been a councillor since1976, to work as Johnsons chief of staffand deputy mayor for planning. Miltondied suddenly last week, aged 49.

Funds of hedge funds shrinkingThe average fund of hedge fundsshrank in the last three months,according to figures from alternativeassets researcher Preqin. The meanfund of hedge funds has $2.18bn(1.34bn) in assets under manage-ment down more than 20 per centsince 2010 and compounding an aver-age 24 per cent loss between 2008and 2009. Preqin estimates that theindustry now has $910bn of assetsunder management, down from $1.25trillion in 2008 before the financial cri-sis hit, though it expects growth duringthe next financial year, it says.

Online retail salesare predictedto exceed

37bna year by 2014.

Internet spendingwill grow by

14bn(61 per cent) from

2010 to 2014

40,000stores have already

abandoned thehigh street in the

last decade

Source: Verdict Research

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DeloitteAnna Marks, an audit partner based inDeloittes Reading office, has been

elected to the companys board of part-ners in the UK. The business advisoryfirm

cityam 2011-04-19

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