cityam 2011-05-31

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THE CRISIS at world footballs gov-erning body Fifa deepened last nightas lucrative sponsors of the embat-tled organisation became embroiled

in the unfolding scandal.Coca-Cola branded the latest

round of bribery allegations against

its highest ranking officials as dis-tressing and bad for the sport.Adidas added that the storm is nei-ther good for football nor for Fifa

and its partners. Neither was said tobe considering removing their spon-sorship at this stage but Fifa will be

alarmed at the increasingly negativetone being taken against it.Fifas president Sepp Blatter and

secretary-general Jerome Valcke

were forced to defend an email in which Valcke said Qatar hadbought the World Cup. He claimed

he was referring to the gulf nationsfinancial strength.The email was leaked by suspended

member Jack Warner. The only chal-

lenger in tomorrows presidentialelection was also suspended over sep-arate bribery allegations and has

withdrawn from the race. SponsorsEmirates, Sony and Visa were unavail-able for comment last night.

FIFA SCANDAL LATEST: P35

FTSE 100 5,938.87 +57.88 DOW 12,441.58 +38.82 NASDAQ 2,796.86 +13.94 /$ 1.65+0.01 / 1.15t-0.01 /$ 1.43+0.02

Top sponsors Coca-Cola and Adidas fuel growing Fifa rowBY STEVE DINNEEN

BUSINESS OF SPORT

Many young people have entirely given up hope of raising a deposit to buy their own home. Picture: PA

A GENERATION of Britons fear beingsqueezed out of the property marketand doomed to a lifetime of renting,a survey reveals today.

Nearly two thirds of 20 to 45 yearolds who do not already have a mort-gage say they have no prospect

whatsoever of buying a home,according to a report by the NationalCentre for Social Research and theHalifax.

Large, mandatory deposits and theperception that banks are not lend-ing have deterred the group dubbedGeneration Rent by the reportsauthors.

Just five per cent of this group aremaking sacrifices to save for adeposit, with 95 per cent eitherunable or unwilling to put moneyaside each month.

Britain is set to become more likesome neighbouring European coun-tries where renting is seen as thenorm, according to nearly half thesurveyed 20 to 45 year olds.

This could open up a widening ofthe wealth gap that already exists

between home-owners and nonhomeowners, commented reportauthor Alison Blackwell.

And people in Generation Rentrisk insufficient finances at retire-ment, she added.

Over nine in 10 (92 per cent) ofthose surveyed said it was hard forfirst time buyers to get a mortgage,

while almost two thirds (61 per cent)say that many wish to avoid thestress and anxiety of applying for amortgage.

Of course, not everyone wants toget on the housing ladder, saidStephen Noakes of the Halifax,

However, 77 per cent of people inour research expressed a real desireto own their own home, but for two-thirds its an impossible aim.

We therefore want GenerationRent to be aware of the opportuni-ties available to them, and dispel anymyths about the mortgage process,Noakes added.

Prospective first time buyers whomanage to jump on the property lad-der by the end of the year are set to

be rewarded with a resurgence inhouse prices, according to separateresearch also revealed today.

BY JULIAN HARRISPROPERTY

www.cityam.comIssue 1,392 Tuesday 31 May 2011 FREE

IPO BLUESRUSSIAN GROUPPULLS ANOTHER

LONDON

FLOTATION P6

WE TRY OUT BRANSONSAFRICAN SAFARI RETREAT

HOLIDAYS IN THE SUN P30-31

BUSINESS WITH PERSONALITY

Prices will fall by 1.4 per cent this year, but then surge back by 16 percent by 2015, the Centre forEconomic and Business Research haspredicted.

We think the market is currentlyclose to the bottom for the UK as a

whole, said CEBR chief DouglasMcWilliams. Prices in London willrise two per cent faster than in the

rest of the country, the CEBR alsoexpects. But other economists stillexpect further house price declines.

ALLISTER HEATH: P2;ECONOMICS: P4; 1M HOMES : P12

Certified Distribution

04/04/11 - 01/05/11 is 103,899

GENERATION RENTGENERATION RENT

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News2 CITYA.M. 31 MAY 2011

BCC backsdeficit cutsTHE governments deficit reductionplans received a boost from theBritish Chamber of Commerce (BCC) yesterday despite the organisationdowngrading its growth forecasts forthe UK economy.

The BCC slashed its growth predic-tion on Sunday from 1.4 per cent to1.3 per cent, with growth for 2012also being cut from 2.3 per cent to 2.2per cent. The governments Office forBudget Responsibility has forecastgrowth of 1.7 per cent for this yearand 2.5 per cent for 2012.

The BCC said the governmentstough austerity measures, combinedwith higher than expected inflation, will squeeze disposable incomes,meaning economic recovery wouldbe slower than previously thought.

But David Frost, director general ofthe BCC, told the BBC: We have hugelevels of debt in this country. Eventhis year well be spending about124bn more than well be getting intaxes. We have to deal with this.

The defence came after Treasurycommittee chairman Andrew Tyrie branded plans to rebalance the UKeconomy as an incoherent mish-mash. He said: There are half adozen ways to define what rebalanc-ing means and I dont think minis-ters have used the term withsufficient precision.

BY STEVE DINNEEN

UK ECONOMY

Time to celebrate Tax Freedom Day

WELCOME back to the office: today isthe first working day you actually getto keep the money you earn, ratherthan hand it all over to the state to payfor public spending. Its Tax FreedomDay a date which keeps moving laterinto the year as taxes keep going up. You may feel that the governmentspends too much, as I do or you mayactually want it to do even more. Butit is essential to remember that gov-ernment has a cost and that some-body has to generate wealth to pay forall the spending and to think thatevery single penny earned by every

single person working in the UK so farthis year has all been spent on payingfor the public sector does put mattersinto perspective.

Tax Freedom Day, compiled in the

UK by the Adam Smith Institute,measures all tax revenues direct andindirect taxes, local taxes and nationalinsurance contributions as a per-centage of net national income atmarket prices. This year taxes come to40.8 per cent of the economy on thatmetric; this is then converted intodays of the year, starting from 1January. After working for the state for149 days, the first day of the year thatBritons work for themselves ratherthan the taxman is Tax Freedom Day this year this fell on 30 May. In 2010,Tax Freedom Day fell three days earli-er the delay is due to the govern-ments decision to push throughsevere tax increases to start pluggingthe budget deficit.

There are other interesting find-ings. If we had to fully fund our 2011expenditure through taxes, and not

borrow from global investors via thegilts markets, we would be unable tocelebrate Tax Freedom Day until 1 July. The tax burden also varies byregion, depending largely on incomes

and employment in the differentparts of the UK. Taking just incometax, it takes Londoners 51 days to paytheir income tax bills, against just 35days for the Welsh.

Taxes are needed to pay for spend-ing. But constantly hiking taxes, espe-cially those that damage incentives to work or invest, grinds the economydown and reduces growth. One keyreason why the economy has beensluggish in recent months is that sofar the bulk of George Osbornes fiscaltightening has come from tax hikes. Total public spending hit a recordhigh in April yet Vat and nationalinsurance has gone up, the top rate ofincome tax is now 52 per cent (includ-ing NICs) and everybody is being clob-bered. We cant borrow ourselves outof debt but taxing ourselves to obliv-ion isnt the answer either.

BUILD MORE HOMESGENERATION rent that is the latest buzzword to describe the plight of younger Britons. Last week I wroteabout the retirement crisis befalling

millions of asset-less Brits; todaysfront page describes an entire genera-tion squeezed out of the housing mar-ket by high prices and vast deposits.

At the height of the bubble, toomany people were led to believe thatthey were entitled to own a home,regardless of income, savings or abili-ty to repay. Down that road lay sub-prime lending, 110 per cent mortgagesand total disaster.

But the dream of a sustainableproperty-owning democracy can still be rescued. The answer is to allowvastly more homes of the kind thatpeople actually need to be built. Thatwill push prices down and eventuallyallow young people back into the mar-ket. Anybody for a New Town, some-where close to London?

[email protected] me on Twitter: @allisterheath

LORD Myners has taken the role ofUK chairman at Swedish investmentfirm Cevian.

He will join the Cavendish Squareoffices of the Stockholm-based firm,where he will work closely with theboards of companies Cevian investsin. Cevian has had a UK presencesince 2009 and has taken stakes infirms including Wolseley and OldMutual. The firm fits well with

Myners vocal championing of activistinvestors, as he is known for engagingwith its target firms.

The former City minister has beenmuch sought after since leaving thegovernment, becoming chairman of Justice Holdings and joining JacobRothschilds listed investment trustRIT Capital Partners. He gained plau-dits during his time as chairman ofGartmore between 1987 and 2001.

City A.M. contacted Myners for acomment last night but was unableto reach him.

BY STEVE DINNEEN

FINANCIAL SERVICES

Myners to chair Cevian UKFormer City minister Lord Myners will take another financial role

NEWS | IN BRIEF

Italys Berlusconi defeatedPrime Minister Silvio Berlusconis coali-tion suffered a humiliating defeat inmayoral elections in Milan and Naplesyesterday, casting doubt over the con-troversial Italian leader's future. Thedefeat in Milan Italy's economic capi-tal was seen as the most symbolically

significant and a bellwether for anti-Berlusconi sentiment. Berlusconi, 74, iscurrently facing charges ranging fromhaving sex with an underage prostituteto corruption and perverting the courseof justice.

Brent crude nears monthly dropBrent crude oil fell below $115 a barrelyesterday, heading for its first monthlydecline this year, as investors weighedthe prospect that Europes debt crisisand a sputtering US economy may slowdemand. Public holidays in the US andUK yesterday kept trading volume atless than five per cent the daily norm.The US Memorial Day holiday weekendmarks the official beginning of summerdriving season, when gasoline demandusually rises. Prices are down nine percent for the month of May, the biggestdecline since May of last year.

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]

British Chamber ofCommerce directorgeneral David Frostdefended the need toslash the deficit

WALL STREET MISPRICEDLINKEDINS IPOA prominent Facebook investor anddirector accused Wall Street of under- valuing the LinkedIn initial publicoffering earlier this month, con-tributing to the doubling of its shareson opening day. Peter Thiel, an earlyFacebook investor and co-founder ofPayPal, said banks did not under-stand the full potential of the latestinternet companies and warned thatthe next Silicon Valley darlings wouldnegotiate hard when their turncomes to go public.

TAKEOVER PANEL URGED OVER M&ASPENSION TOLLUKs largest corporate pensionschemes are pressing the Take overPanel to ensure that acquiring com-panies take account of a target com-

panys retirement plan when makinga bid. They want the panel to force

bidders to set out in formal docu-ments how an offer will affect a pen-

sion scheme and its members.TESCO PLANNING TO BOOST SALESWITH NEW BRANDS Tesco, Brtains biggest retailer, ispreparing to launch the first of arange of new brands over the new few weeks as it seeks to bolster its per-formance. Philip Clarke, the newchief executive, is expected to launchthe new brands in both the food andnon-food businesses.

SMALLER HOTELS OFFER TRAVELODGEROOMS FOR GROWTHHotels in the UKs big budget chainsare getting smaller, with the openingby Travelodge of sites with as few as20 rooms half the companys usualminimum size. The so-called Metroconcept will allow the countrys sec-ond-biggest budget hotel chain totake over unusual locations such as

pubs, defunct cinemas or office build-ings.

ENERGY WATCHDOG MISLED PUBLICOVER PRICE RISESBritains energy regulator has beenaccused of misleading consumerswhen it claims that suppliers are tooquick to raise prices and too slow tocut them. Ofgem has come underpressure on the issue after an inde-pendent report commissioned by thetrade body Energy UK said that theregulators analysis cannot be reliedupon, calling into question itsmethodology. The report was con-ducted by the consulting firm Nera.

SOUTHERN CROSS TRIMS RENT AS ITSTRUGGLES TO STAY AFLOATSouthern Cross is cutting its rent by30 per cent and remains locked innegotiations with its landlords tofind a longer-term solution as it strug-gles to stay afloat. The group, which

said that it would pay nearly a thirdless rent for the next four months.

EU PLANS TO STRIP UK OF BANK REGU-LATION POWERSSovereign control of financial regula-tion is under threat from Europeanmoves to harmonise rule books acrossmember states, the three men at theheart of the future Bank of Englandhave warned. Paul Tucker, the Banksdeputy governor for financial stabili-ty, Hector Sants, who will becomedeputy governor for prudential regu-lation, and Andrew Bailey, the Bankschief cashier, said the UKs proposedregulatory system risks becoming lit-tle more than a local police force forEuropean rules.

CASH-STRAPPED FAMILIES SWITCH60BN-WORTH OF MORTGAGES TOINTEREST-ONLYUp to 300,000 households haveswitched more than 60bn of mort-

gage debt from repayment into inter-est-only deals in the last three years.

FAMILY DETERMINED TO KEEP HERMESFamily shareholders of French luxurycompany Herms said they are deter-mined to keep their grip on the com-pany, while larger rival andshareholder LVMH Moet HennessyLouis Vuitton SA sought to portrayitself as a legitimate shareholder. Thetwo sides have been locked in a fightover a family-holding company and aregulatory investigation into howLVMH bought its shares.

EXTRA AIRLINE FEES SOARAirline revenue from add-ons to tick-et sales jumped to almost $22bn lastyear and continues to soar as morecarriers chase extra sources ofincome. Faced with rising fuel pricesand intense competitive pressure tohold down airfares, a growing num-ber of carriers world-wide are charg-

ing passengers for services onceincluded in ticket prices.

WHAT THE OTHER PAPERS SAY THIS MORNING

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CUSTOMERS in the UK and Irelandare increasingly dissatisfied withtheir bank, new research shows.

A survey of 2,500 current accountholders by Accenture found 73 percent were satisfied with their bank,compared to 84 per cent in 2007.

Only 46 per cent planned to buytheir next financial product fromtheir bank, compared to 66 per centfour years ago.

The percentage who had com-plained rose from 14 per cent to 17per cent and one bank received com-

plaints from nearly one-in-three cus-tomers over a 12-month period.

CROWDS of at least 30,000 have beengathering in Athens Syntagma Squareover the weekend in the countrysbiggest protests so far, as reports circu-lated that the crippled nation wouldhave to give up sovereignty over its pri-vatisation scheme to receive any morebailout money.

Meanwhile, it emerged that the EUis currently putting together a newbailout package worth around 65bn(56bn), which would bring Athenstotal rescue funds to175bn.

Markets are also on tenterhooks tosee the results of the IMFs fiscal reviewof Greek finances in the next few days,with investors focused on whether itwill admit to a funding gap for 2012.

If so, it would mean that Athens had violated the terms of its original110bn bailout, under which it was toreturn to private markets for fundingnext year, and would mean that theIMF is unable to pay out the nexttranche of aid, worth12bn.

Economists at ING said; The choirof voices claiming that the emperorhas no clothes is growing The debt-to-GDP ratio is heading to 160 per cent

over the next three years.To tackle its enormous debt pile, the

Greek government has outlined plansto sell50bn worth of assets, includingports, railways, gas companies, waterutilites and defence firms.

Yesterday, a spokesman for theEuropean Commission denied thatthe EU or IMF have demanded that aninternational authority administerthe sale or the collection of taxes, assome had suggested, saying: I dontthink you can do that in a sovereigncountry.

Kathleen Brooks, research directorat Forex.com. said: This type of helpis exactly what Greece needs at thisstage of its financial rehabilitation;however it would be a big step thatcould jeopardise the economic sover-eignty of Greece.

But INGs Peter Vanden Hout castdoubt on the importance of the assetsell-off: A privatisation programmewould clearly buy time but is no guar-antee for success... In that regard, theidea of a (voluntary) debt restructuringis unlikely to disappear, he said.

A recent opinion poll showed thatPapandreous Socialist Party had lostits lead for the first time since its elec-tion in 2009.

Greek anger

as EU plots apower grab

INSURER Novae is putting together a bid for Omega Insurance Holdingstoday, having been in discussionsabout a deal with its weakened rival.

City A.M. understands that Novaeintends to formally announce itsinterest in buying Omega today, but will not indicate a potential pur-chase price.

Omega has already announcedthat it has received bids fromCanopius, the privately held insurerand reinsurer, and the US employ-ment insurer Delphi.

Analysts value Omega at around200m, or 82p per share, reflectingthe downward trend in its pricesince early 2009, when its stock wasworth 131p. Its current price bringsit within range of takeover offers byrivals like Novae.

Novae set to makemove for Omega

FRENCH finance minister ChristineLagarde pledged to push reforms togive Brazil and other emergingeconomies more influence at theInternational Monetary Fund (IMF) asshe kicked off a worldwide tour yes-terday to win support for her candida-cy to lead the global lender.

The backing of Brazil could helpease discontent among developingcountries over the long-standing prac-tice of choosing a European to headthe Washington-based IMF.

Brazilian finance minister Guido

Mantega said Brazil had yet to decidewhether to support Lagarde.

Lagarde eyesBrazil backingBank customercomplaints up

BY JULIET SAMUEL

EUROZONE

BANKING

WORLD ECONOMY

GREEK Socialistprime ministerGeorge Papandreouis negotiating thecountrys secondrescue since hecame to power.

Picture: REUTERS

BY JULIET SAMUELINSURANCE

News 3CITYA.M. 31 MAY 2011

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LENDING to small manufacturingbusinesses has picked up in the sec-ond quarter of the year, a leadingindustry body announced today.

Just as many small companiesreported a rise in the availability ofloans over the past two months, asthose that reported a fall.

The result marked a strong upturnin credit supply to small factories.

In the first quarter of the year, thesurvey conducted by EEF revealed a

negative balance of 11 per cent ofrespondents reporting a decline infinance.

For the first time since the reces-sion ended, manufacturers arereporting improving access tofinance, said EEF chief economistLee Hopley.

A negative balance of seven percent of medium sized manufactur-ers still reported decreased availabil-ity of credit, yet this was still animprovement on the negative bal-

ance of 11 per cent in the f irst quar-ter.

Hopefully, this will translate intobetter news on new lending in thecoming months. But availability isonly part of the story and we alsoneed to see costs coming down,Hopley added.

A positive balance of 22 per cent ofmanufacturers reported an increasein the overall cost of credit in Apriland May.

And 28 per cent more companiessaid that the cost of new loans isincreasing, compared to those who

reported cheaper lending.Ensuring companies have access

to the finance needed to invest andgrow is critical for the recovery.Hopley said.

Higher interest rates for the sectorare mirrored by the cost of personalfinance. Rates on personal loanshave struck a 10-year high, the web-site Moneyfacts revealed last week.

A loan of 5,000 costs an averageof 12.7 per cent, its research hasfound.

Green shootsfor lending tosmall firms

THE Bank of England will faceintense criticism from a Westminsterthink tank today for its increasingly

wayward inflation forecasts.The Bank predicted inflation of 1.9

per cent on average between August2007 to May 2010, yet the out-turn

was actually 3.2 per cent, the Centrefor Policy Studies claims.

Considering that inflation was

only meant to be two per cent, this isa significant error, the report states.

The latest consumer price indexshowed inflation of 4.5 per cent.

The Banks forecasts have wors-ened progressively since 2000, theCPS says.

Given the justification for currentultra-low interest rates is the forecast-ing of low inflation in the medium-term, these forecasting errors arecause for concern, a spokesperson

warned.

Bank of England inflationforecasts come under fire

ANALYSIS l Bank of England forecasting errors, one year ahead

p

Aug 02 Aug 03 Aug04 Aug 05 Aug 06 Aug 07 Aug 08 Aug 09 Aug 10

2.5%

2%

1.5%

1%

0.5%

-0.5%

-1%

0%

Source: CPS

Bars show the gapbetween each of theBanks inflation forecasts

and how inflation actually turned out

BY JULIAN HARRIS

UK ECONOMY

Economics4 CITYA.M. 31 MAY 2011

BY JULIAN HARRISUK ECONOMY

NEWS | IN BRIEF

Spanish inflation slowed in MaySpanish inflation eased slightly in May,according to the harmonised EuropeanUnion measure, released yesterday.Consumer price inflation (HICP) came inat 3.4 per cent, down from 3.5 per centthe previous month. Meanwhile, Belgianconsumer price inflation held steady at

3.4 per cent. Given further increases infood and core inflation, in combinationwith oil price base effects, inflation is setto increase further in the comingmonths and reach a peak of just belowfour per cent, said Steven Vanneste ofBNP Paribas. Today the European Unionreleases a flash estimate of inflationacross the Eurozone area.

Eurozone retail sales take a dipRetail sales in the Eurozone fell for thefirst time in three months, according toa survey released yesterday. The retailpurchasing managers index for the sin-gle currency area, compiled by Markit,slipped to 48.8 in May, from 52.2 inApril. Figures below 50 signal a contrac-tion in activity. Italian retail sales fell atsharpest pace for nearly a year.

Canadas GDP growth at 3.9pcCanadas economy grew at an annu-

alised rate of 3.9 per cent, official datarevealed yesterday. Growth in the finalthree months of last year was reviseddown to a year-on-year rate of 3.1 percent, from 3.3 per cent. Meanwhile, cur-rent account deficit narrowed in thefirst quarter on strong exports of energyproducts to the United States, StatisticsCanada also said. The deficit shrank toCa$8.9bn (5.54bn) from Ca$10.3bn inthe previous quarter, according toStatistic Canadas revision from the pre-viously reported Ca$11.1bn shortfall.

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ITALIAN fashion brand Moncler yester-day got the green light from regulatorsto raise up to 500m (433.8m) in aninitial public offering.

The Milan stock exchange gave clear-ance for a float of more than 50 percent of Monclers capital, which thefirm hopes to complete by the end ofJune, according to reports.

Moncler has already begun a road-show to market the float to potentialinvestors, and is expected to startanother round of presentations thisweek.

Books on the offering were due toclose either towards the end of June,according to people familiar with thefloat plans.

Monclers IPO will be made up main-ly of existing shares mostly from USprivate equity firm Carlyle, which

owns 48 per cent stake of the company.The offering is being run by Bank of

America Merrill Lynch, IntesaSanpaolos Banca IMI and MorganStanley.

Last month Moncler reported 2010revenues of429m and a net income of52m. The firm, best known for itsrange of goose down jackets, has out-lets across Europe and has recentlyopened stores in Beijing and Seoul.

Moncler also has a branch on SloaneStreet in Chelsea.

The firm follows fashion rivals Pradaand Ferragamo in planning a summerfloat. Catwalk titan Prada hopes tobecome the first Italian company to listin Asia by raising up to $2bn on theHong Kong market.

Leather goods firm SalvatoreFerragamo applied to list in Milan lastmonth.

Moncler did not respond to requestsfor comment yesterday.

Moncler getsIPO go-aheadBYMARION DAKERS

RETAIL

CLEARING house LCH.Clearnet con-firmed at the weekend it was intalks about a possible takeover ormerger, as confusion reigned overthe identity of the interested com-panies.

The London Stock Exchangeruled itself out of the fight, afterearlier reports named the bourse as

a contender, while a person close toDeutsche Boerse told City A.M. thefirm would play no part in thetalks.

NYSE Euronext, which plans tomerge with Deutsche Boerse, andNasdaq have been named as inter-ested parties, but neither has com-mented on their interest so far.Markit, a financial data firm said to be joining NYSE in its bid, alsodeclined to comment yesterday.

LCH.Clearnet, which was formedin 2003 when London ClearingHouse and Clearnet merged, saidon Saturday that talks about vari-ous proposals were in an earlystage and that no transaction wasimminent.

Clearing houses have becomemore attractive since the US Dodd-Frank Act banned banks from trad-ing certain derivatives directly lastyear.

Two exchanges ruled out ofLCH.Clearnet tie-up talksBYMARION DAKERSM&A


Moncler, best known for its goose-down jackets, hopes to wrap up a float this summer

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MOSCOWS busiest airport hasbecome the latest group to fallvictim to shaky investor confi-

dence in Londons initial publicoffering (IPO) market.

DME Limited, the offshorecompany that ownsDomodedovo airport,announced the withdrawal ofits planned $700m-$1bn (424 -

607m) float in London late onSunday night, having publishedits intention to float documentjust under two weeks ago.

The company blamed thedecision on market condi-tions and a desire to price thedeal at fair value. Some sug-gested that political risks,underlined by a bombing at theairport in January, meant thatbuyers were unwilling to meetthe desired price.

But the timing also promptedspeculation that the Kremlincould be involved following crit-icism of DME Limiteds offshoreownership structure by theRussian prosecutor general.

Domodedovos float with-drawal follows a similar moveby Russias biggest coal miner,SUEK, which postponed its float

last week.City A.M.revealedin Marcht h a tS U E K was hop-ing tof l o a t

$ 1 b n worth of

shares inJune, but

the miner said last week thatmarket conditions were notoptimal.

Sources close to the deal toldCity A.M. that SUEK still plans topush on with the float at theend of the summer after a oneor two month delay.

The two IPO delays are the lat-est in a string of problems to hitLondons equity capital-raisingmarket.

Last week, senior executivesat BlackRock, one of the worldsbiggest investors, sent a letter toinvestment bankers criticisingfrustrating practices in theLondon IPO process. The lettersaid: We expect to value com-

panies seeking to float at a dis-count to such a peer group.

One senior banking sourcetold City A.M. that someinvestors are particularly dis-gruntled over the current book- building model for Londonfloats, whereby companieschoose a price range after gaug-ing demand.

This compares to the tradi-tional model formerly commonin the City, whereby bankerswould evaluate demand in theindustry and then build a bookaround a fixed price that repre-sented a discount to a compa-nys sector.

And one blue chip investoralso said that many sellers inRussian floats were not pre-pared to price in enough politi-cal risk.

But another senior bankersaid that with a lot of privateequity cash available, I dontsee why banks should be bend-ing over backwards to makefund managers happy.

THE withdrawal of Domodedovosplanned $1bn float is a blow forDmitry Kamenshchik, who owns100 per cent of DME Limited,which owns the airport. Hemade his fortune by startingthe East Line Group, acompany that transportsgoods to Russia from Chinaand invested in buildingMoscows busiest airport.

CITY OF LONDON CORPORATION

REPORT OF LOCAL GOVERNMENT OMBUDSMAN

The Local Government Ombudsman has issued a report followinghis investigation of a complaint against the City of LondonCorporation. The complaint was about adult care services. TheOmbudsman found that there had been maladministration and thishad caused injustice to the complainant.

The City of London Corporation has agreed to implement therecommendations of the Ombudsman and provide a satisfactoryremedy for the complaint.

Copies of the report are available for public inspection duringnormal office hours from Community and Childrens Services, Cityof London Corporation, Guildhall, North Wing, PO Box 270,London, EC2P 2EJ for three weeks starting on 1 June 2011. Anyoneis entitled to take copies of the report or extracts fromit. Copies will be supplied at a reasonable charge.

Chris DuffieldTown Clerk and Chief Executive

Date: 31 May 2011


www.cityam.com

London jitters thwart

Moscow airport floatBY JULIET SAMUEL

CAPITAL MARKETS

RUSSIA COMPANIES WITH LONDON* FLOAT PLANS IN 2011 (*EXCEPT WHERE OTHER LOCATION SPECIFIED)

Company Deal Intended capital-raising Outcome

Nord Gold Float of a 25% stake $1bn Pulled in February afterGold miner failing to agree on price

KOKS Float of a 20% stake $520m Pulled in February citingPig iron producer market conditions

ChelPipe Float in London Up to $688m Pulled in FebruarySteel pipe maker and Moscow

Euroset Float of 30-40% stake $1.25bn Pulled in April citingMobile phone retailer market volatility

SUEK Float of 12-20% stake $1bn Planned for June butCoal miner now postponed to Q3

Nomos Float of 20% stake $718m Successfully floatedBank in London and Moscow

Yandex Float on NYSE $1.3bn Successfully floated,Search engine catching tech boom

Russian Helicopters Float in London $500m Pulled in May afterState defence firm failing to agree on price

Domodedovo Float of a 20% stake $1bn Dropped deal over

Airport, Moscow the weekend

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GERMANY plans to shut all nuclearreactors by 2022, Chancellor AngelaMerkels ruling coalition said yester-day, in a policy reversal drawn up in arush after the Fukushima disaster in

Japan. The coalition, sensitive to accusa-

tions it may increase dependence onhighly polluting brown coal, said itplanned to cut power use by 10 percent by 2020 and further expand the

use of renewables such as wind andsolar power.

Merkels bid to outflank the opposi-tion will smack of opportunism tomany Germans but could ease analliance with the anti-nuclear Greensthat may be her best bet to stay inpower. Polls clearly show that mostGermans dislike nuclear energy.

In nine months, she has gone fromtouting nuclear plants as a safebridge to renewable energy andextending their lifespan to pushing a

nuclear exit strategy that rivals theambitions of the Social Democrats andGreens.

Her change of heart coincides witha string of disastrous election resultsfor her Christian Democrats (CDU) andtheir Free Democrat (FDP) allies thathave been partly blamed on herunpopular pro-nuclear policy so far.

I dont think she will take manyvotes from the Greens, who have pro-moted this issue for decades, saidCarsten Koschmieder, a political scien-tist at Berlins Free University.

But with the FDP so weak andMerkel looking for other allies, whomight be the Greens, the atomic issue

was the main obstacle that needed tobe removed, he said.

Merkel may be hard pressed to sellthe plan as anything but a politicaldefeat at the hands of her SocialDemocrat (SPD) and resurgent Greenrivals.

Tens of thousands of people demon-strated against nuclear energy at the

weekend all across Germany.

Germany setto turn off itsnuclear power CONCERNS over the global recoveryhave hit benchmark government bond yields in many core Westerneconomies in recent weeks.

Rising concerns over the Eurozonedebt crisis have combined with sur-prisingly weak economic data incountries such as the UK and the USto knock investor confidence.

In the UK, 10-year notes dropped to3.29 per cent at the close of businesson Friday, down more than 13 percent since early April.

Double-digit drops over the lasteight weeks have also been recordedfor US 10-year bonds, which closed at3.07 per cent on Friday, and German10-year bonds, which closed at 2.99per cent.

In France 10-year notes closed at3.34 per cent, over 11 per cent lower

than their April peak. A spike in American unemploy-

ment claims last week coincided withnews that growth measured just 1.8per cent annualised in the first quar-ter of the year, below the expectationsof economists.

Slower growth, and the apparentlyimpending end of the US FederalReserves quantitative easing pro-gramme, have dampened inflationexpectations in leading Westerneconomies.

RETAIL stalwart Simon Burke hasthrown his weight behind mobileshopping technology, after joiningsmall mobile voucher specialist EagleEye Solutions as chairman.

Burke, best known for turningaround Virgin Megastores and bidding940m for WH Smith, declared yester-day: Mobile vouchers are the next bigthing in retail and leisure.This technol-

ogy offers the only easy way to redeemthese vouchers securely and in a way

which tracks the usage, both of whichcan be invaluable to businesses.

Burke will remain chairman ofHobbycraft and Mitchells & Butlersalongside his Eagle Eye duties.

Russell Buckley, who joined as chiefexecutive earlier in the month, toldCity A.M.: Simon is very committed tohelping us expand and we have gotsome major new partners in thepipeline.

Gloomy outlookstokes drop inkey bond yields

Simon Burke takes job atmobile vouchers company

Burke has high hopes for mobile vouchers firm Eagle Eye SolutionsBYHARRY BANKS

ENERGY

WORLD ECONOMY

NewsCITYA.M. 31 MAY 2011

BYMARION DAKERSRETAIL

7

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RBS taps into Chinas investment marketThe Royal Bank of Scotland Group and its local Chinesepartner launched their joint venture Huaying Securities

yesterday, hoping to tap a piece of the booming invest-ment banking business in the country. From today,Huaying is licensed to underwrite and sponsor stocks andbonds issued in mainland China, tapping Chinas huge andgrowing investment banking market, they said in a state-ment ahead of a launch ceremony in the eastern city ofWuxi, not far from Shanghai. Foreign players are rushingto get into the lucrative underwriting business in China.In January, the securities regulator approved the jointventures of J.P. Morgan Chase & Co and Morgan Stanley ,enabling the two to underwrite stocks and bonds in thecountry.

Canada open to selling Chrysler stake to FiatCanada is open to selling its 1.7 per cent stake in Chryslerdirectly to Italys Fiat, but will wait to see what price theUS government gets for its shares in the automakerbefore deciding, Canadas finance minister Jim Flahertysaid yesterday. Fiat took operational control of Chrysleras part of the Detroit-based automakers US andCanadian-backed bankruptcy restructuring in 2009. It isin the process of exercising an option to buy the USTreasurys six per cent stake and the two sides are negoti-ating a purchasing price.

RTL signs Indian joint ventureRTL Group and Indian media conglomerate RelianceBroadcast Network Limited yesterday announced a

joint venture agreement to launch a series of new TVchannels in India. The initial investment will include twoEnglish-speaking channels; a reality channel with inter-national content and a channel primarily targeting maleviewers with action-oriented content. The joint venturewill source content from RTLs UK-based productionarm FremantleMedia. An RTL spokesman said India hasa young population which loves TV and has impressivepotential for further growth.

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City must engage in debate over Big Society

L AST week, the coalition govern-ment published a White Paperthat puts further flesh on the bones of the Prime Ministers

vision for the Big Society. The proposals in the Paper are

designed to spur growth in charitable

giving and in volunteering. It includedan additional 40m in support for thevoluntary sector.

It is imperative that the City engagesin this debate and this initiative. The

City can not afford to stand aside fromsuch an initiative. Too often the City isseen as a world apart unjustly so, asthe reality is different, but that can bethe perception. A perception we mustaddress, as I know many people in theCity are well aware.

I have seen how regeneration, sup-ported by the City through financeand the Corporations own initiatives,helps local communities create jobsand foster enterprise.

As Lord Mayor I am promoting therole that philanthropy can play in

improving lives. My Lord Mayors Appeal, Bear Necessities BuildingBetter Lives, raises money for two wor-thy causes: childrens charity Coramand the disaster relief charity RedR.

The Citys livery companies andguilds have worked with the young,elderly, the disabled and many othergroups, across all sections of society,for centuries. This work goes on today.

But as David Cameron has outlined,community involvement is also abouthands-on action in the shape of volun-teering and skills sharing. I knowmany City workers already do a hugeamount in this way

Last years entrants to the LordMayors Dragon Awards, which high-light exactly this kind of sustainable

support, created almost 500 jobs,helped over 30,100 school pupils andprovided over 43,000 people with freelegal advice through innovative proj-ects with community organisations.

This can be multiplied many timesover since 1987, when the Awardsbegan.

The Dragon Awards named afterthe Citys mythical guardians, posi-tioned at various points along theSquare Mile boundary demonstrate businesses of all sizes can do some-thing, even in this time of austerity, tosupport the third sector.

Indeed, two-third of SMEs nowengage in local community projects. Ifevery firm in the UK did even a little,or a little more, the potential for local

communities is huge. That is why I am calling on City

firms to prove they are world leaderswhen it comes to corporate responsi-bility, by putting forward their initia-

tives for recognition atwww.dragonawards.org.uk.The deadline for applications is 13

June, and we will be recognising excel-lence across a range of fields atMansion House later this year.

The Big Society gives us a canvas onwhich to paint a positive picture of theCity and a spur to expand our philan-thropic activities, for the benefit ofeveryone, in the Square Mile and waybeyond it.

Michael Bear is Lord Mayor of the City ofLondon

CITY COMMENT

MICHAEL BEAR

MOBILE shopping could beworth 4.5bn to the UK economyby 2016 and more than 17.5bn by 2021, according to newresearch by eBay.

This represents a four-foldincrease over the next five years, with consumers increasinglylikely to make purchases usingsmartphones and tablets.

However, the online auction

site says the market is beingheld back by unreliable mobilebroadband.

It says an effort must be madeto develop the 16 per cent of theUK in which mobile commerceunder performs the average byaround a fifth.

According to the survey thecost of data is customers biggestgripe, with coverage, reliability

and speed of networks also fac-

toring highly.EBay is submitting the

research as evidence to theOfcom 4G consultation, which itsays currently makes no consid-erations for mobile commerce.

Global mobile sales at eBay areset to double in 2011 to over $4bn(2.4bn) with more than 16mpeople using an iPhones to placebids.

Angus McCarey, UK Retail

Director for eBay UK said: Highquality and reliable mobilebroadband coverage throughoutthe UK has to be our ambition,giving consumers choice over when and how they shop,encouraging spending, thereby benefitting online and highstreet retail, and giving a muchneeded boost to the fragile eco-nomic recovery.

EBay to urge Ofcom to consider M-commerce in 4G report

BY STEVE DINNEEN

TELECOMS

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arriving by helicopter before being grilledby Sky presenter Mariella Frostrup abouthis Icarus-like fall from grace, asrevealed in his new memoir.

Meanwhile, the president of EngineGroup Robin Wight, who stepped down

from the board of the advertising busi-ness when private equity firm HIGCapital took a 40 per cent stake in thegroup, was the life and soul of the partyat the alternative How The Light Gets Infestival at the other end of the village.

Wight was in town to listen to the ses-sion by his friend John Hegarty, the adver-tising guru behind the Levi laundretteads, and he was still going strong in histurquoise patent shoes at 2am. Not badgoing: as Wight cheerfully reminded TheCapitalist, he is pushing 70.

COUNTRY HOUSE ALSO adding glamour to the coun-tryside was Liz Hurley, the guest ofhonour at a Friday night gatheringhosted by her old friend William Cash

of Spears, the wealth managementmagazine described by GQ as the

bible of the banking fraternity.On Sunday, it was GQ editor Dylan

Joness turn to throw a party jointlywith Nick Jones of Soho House at acountry house wedding-style sit-downdinner for 200 at Cabalva, the

Whitney-on-Wye home of the HayFestivals chair Revel Guest.

Spotted among the trestle tables were Gail Rebuck, chairman andchief executive of Random House

Group (pictured left with literary agent EdVictor and her author Nigella Lawson),

as well as culture minister Ed Vaizeyand Sunday Telegraph columnistMatthew dAncona, who camestraight from interviewing DavidMiliband on leadership issues.

MINT CONDITIONHERES an offer you cant

refuse: The Capitalisthas 200 freetickets to watch team City A.M.New York compete in the Mint

Polo in the Park tournament onFriday at the Hurlingham Club in

West London.Following the Twenty20 format

that has been so successful in cricket,World Polo has brought in new rulesto make the game faster and moreaccessible even to newcomers.

To apply for passes, please email [email protected] with the number

of tickets you would like, maximumten per request, giving your email

address and phone number.

BARCLAYSMAKES HAY

AS THE PLOTTHICKENS

THE PLOT thickens at the Hay Festival, with news that Camilla, Duchess ofCornwall will be making an appearancetoday at the famous literary event.

But Camilla isnt the only surprise addi-tion to the programme at the Hay-on-Wye

books festival. Next Saturday, Wikileaksfounder Julian Assange will make a rarepublic appearance when he gives a talkcalled, simply, Wikileaks. Back on theofficial schedule, former M&S executivechairman Sir Stuart Rose is due to appeartomorrow, where he will debate whether

big business can be sustainable with thechief executive of Co-op, Peter Marks.

Rose, who launched M&Ss eco-strategy

Plan A, will argue his case in the capa-cious Barclays Wealth Pavilion, asBarclays wealth management businessmarks its fifth year as a key sponsor ofthe artistic gathering. Supporting theliterary world reinforces our commit-ment to thought leadership, said aspokesperson for the bank, whose execu-tives seized the chance to engage withclients in a unique setting.

The biggest draw of the Bank Holiday weekend was rehabilitated Hollywoodstar Rob Lowe, who lit up a large cigar on

The Capitalist10 CITYA.M. 31 MAY 2011

Jack Kidd, captain of the winning 2010 Mint team

Brought to book: Mariella Frostrup interviewed Rob Lowe on his Icarus-like fall from grace

BarclaysWealth meetsWikileaks at

this yearsHay Festival

EDITED BY

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

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Why risk assets need another shot in the arm

Equity markets have been caughtin a gloomy place for much ofMay. Despite some gung-ho risk-on days, the overall trend for

risk assets has been lower. SeanCorrigan from DiapasonCommodities Management still

thinks we might not be through the worst of the energy sell-off. But hesays risk assets are looking foranother shot in the arm. We shouldlook for it in one of three places.

CHINA AND FED ARE KEY BOOSTERSFirstly, China might decide that it hascooled its economy sufficiently andgive up the inflation fight (or claimthat it has been won). This couldcause long-term damage to the econo-my, of course, but would be a boon forrisk assets in the short term.

Secondly, we could see a change ofheart from the Federal Reserve on

withdrawal of monetary stimulus.If we get a further run of weak data

from the US and the political mood

shifts, we could see the Fed findingreasons to be easy again.

BANK OF JAPAN DECISION And finally, if the Bank of Japan

decides to help the Japanese govern-ment further with its rebuildingefforts, markets could see a greenlight for the Yen to carry trade onceagain and enjoy the cheap fundingthat results.

You would be forgiven if the sug-gested triggers for the shot in thearm do not fill you with confidence.

RISK ASSETS RACE COULD RETURNAll three events, were they to happen,could mean a short term return tothe races for risk assets, but long term

they could all come back to haunt us.Underlying economic weakness

resulting in more stimulus does notfill me with enthusiasm.

DOW MAY HEAD TOWARDS 20,000James Altucher at Formula Capital inthe US said this week that he sees theDow heading towards 20,000. Thats alot higher than we are now.

His view is not based on a newshot in the arm for markets but onthe view that markets have yet to ben-efit from the previous jab.

He says we have not seen QE2 (theFeds soon-to-end second quantitativeeasing plan) really flowing into themarkets yet because these relation-ships all work with a lag.

That may come as a big shock tothose who have suggested commodityprices have been driven broadly high-er this year precisely because of thewall of money coming from the US.

One of our viewers was so con-cerned with James call that he askedif he had been taking any illicit sub-stances. James said he hadnt, but hedrinks a lot of coffee. One thing isclear, however: the full impact of QEon asset prices remains an area ofacute debate. Time to watch thesepesky risk assets like a hawk.Anna Edwards co-anchors CapitalConnection and Squawk BoxEurope weekdays on CNBC.http://europe.cnbc.com

RISK ON, RISK-OFF: P24

SPORTSWEAR giant Adidas said it isbraced for further blows to its sales in Japan if there are more power cutsover the summer.

The German company said thatalthough the earthquake and nuclearcrisis at the Fukushima plant couldhave been worse the state of thecountrys power network was unclear.

Adidas has said that its sales in

Japan would fall between 15 and 25per cent as a result of closed shops.

Chief executive Herbert Hainersaid: It will be in the summermonths ... there could be more poweroutages that will affect air condition-ing units which make it difficult forshops.

But he said that overall the depthof the countrys problems were noweasier to gauge, allowing businessesto draw up recovery plans.

Heiners comments came as he

unveiled the companys target of hit-ting 100m more UK sales through itspartnership with the London 2012Olympic Games.

Adidas will kit out athletes, includ-ing Team GB, with designs by StellaMcCartney, in a campaign to stealmarket share in the UK from archrival Nike.

The London market is whereAdidas struggles and the retailer seesthe Games as the perfect springboardfor improvement.

Adidas braced for sales dip

THE borough of Kensington andChelsea saw the highest number of1m plus property sales in Londonlast year, according to figuresrevealed today by specialist private

bank Investec.A total of 4,530 properties sold for

over 1m in 2010 with 912 of themsold in Kensington and Chelsea alone.

City of Westminster saw 790 proper-ties sell for over 1m while Camdensold 423.

The average price for a detachedhome in Kensington and Chelsea last

year was over 8m compared to3.64m in City of Westminster and3.29m in Camden.

The number of 1m plus propertiessold in London last year increased by67 per cent on 2008.

Kensington and Chelsea has most1m plus house buyers in London

PROPERTYBY JOHN DUNNE

RETAIL

CNBC COMMENT

ANNA EDWARDS


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RUSSIAS central bank surprised mar-kets yesterday by hiking its overnightdeposit rate by a quarter of a percent-age point, to 3.5 per cent.

Its other rates were held steady, asexpected, the key refinancing ratesticking to 8.25 per cent and the reporate at 5.5 per cent.

The decision was made taking intoaccount still-high inflation expecta-tions and risks to steady economicgrowth, the central bank said in astatement.

The achieved level of interest ratesis seen by the central bank as securingan acceptable balance between risksthat inflationary pressure will persistand that economic growth will slowin the coming months, the centralbank stressed.

Annual inflation in Russia, record-ed at 9.7 per cent in May, is a majorissue ahead of parliamentary elec-tions in December of this year and apresidential election in March nextyear.

Since the start of the year, con-sumer prices have already risen 4.6per cent, challenging the centralbanks full-year target of six to sevenper cent and the governments infla-tion ceiling of 7.5 per cent.

The central bank said, however, thatmonetary drivers of inflation were becoming less of a concern. It saidthat a slowdown in money supplygrowth in May would contribute to adecrease in inflation over time.

Analysts had widely expected thecentral bank to keep all interest ratesunchanged due to the slowing pace ofrecovery.

Low deposit rates facilitate capitaloutflows, which policy makers are nothappy about, said Aurelija Augulyte,an analyst at Nordea Bank.

Augulyte and other analysts saidthat the deposit rate hike signaled thecentral banks intent to make interestrates a more effective policy tool bynarrowing the gap between its depositrates and lending rates.

Despite being surprised at yester-days hike, analysts expect interestrates to rise later this year.

Shock lift for

Russias rates

How interest rates compare across the world Picture: GETTY

BY JULIAN HARRIS

RUSSIAN ECONOMY

India

6.25%

China

6.31%

Russia

8.25%refinancing rate

Brazil

11.75%

UK

0.5%

US

0.25%

Eurozone

1.25%

Australia

4.75%

8/6/2019 Cityam 2011-05-31

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UK BUSINESS veteran Allan Leightonis set to take up the chairmanship ofstruggling TV set-top box maker Paceover the next few days.

Leighton has been lined up toreplace Mike McTighe, who has beenchairman since 2006.

His appointment will beannounced by the company thisweek, City A.M. can confirm.

The news comes less than a weekafter Leighton was unveiled as thenew chairman of budget fashionchain Peacocks.

Since leaving the top job at Asdain 2000 after overseeing thesupermarkets sale to Walmart, Leighton has

held a string of high-profileroles including the chair ofRoyal Mail, where he faceddown a national postalstrike.

He has also helped turnaround Canadian supermar-ket chain Loblaw as part ofhis advisory work for the Weston family, and sitson the board of broadcaster BSkyBas a non-executivedirector.

Leighton has alsoput his retail expe-rience to work forthe Westons in theUK, taking up therole of deputychairman attheir family-o w n e dSelfridges in2004.

He describedhis careerchange asgoing plural,and has sinceset up anadvice site forthose hopingto workacross severalcompanies.

He will havehis work cut outfor him at Pace, which saw300m wiped offits market capearlier this

month after a profit warning. The firm, which makes set-top

boxes for receiving digital TV and broadband, warned that supplychains issues linked to the Japaneseearthquake and delays to a US con-tract would mean operating profitwould be below consensus estimatesof 114m.

Despite the shock announcement,board members were comfortably re-elected at the AGM three days later, with McTighe himself getting 95.5per cent support from investors.

But McTighe told shareholders at ameeting that the performance wasdisappointing and that the board

needed to learn lessons from theprofit warning.

Analysts said at the timethat the firm faces an

uphill struggle inrebuilding confidence,with several predicting amanagement shake-upas part of the overhaul.

Pace declined to com-ment yesterday, while

Leighton was unavail-able.


Leighton setto chair Pace

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TECHNOLOGY

CANADIAN utility Fortis unveiled its$700m (425m) purchase of theCentral Vermont Public ServiceCorporation (CVPS) yesterday, as thefirm charges ahead with its ambitiousgrowth plans.

Fortis will pay $35.10 per share incash for New York-listed CVPS, as wellas taking on $230m of the firmsdebts. The purchase price represents a

44 per cent premium to Fridays close.CVPS has almost 160,000 electricitycustomers in the US state of Vermont,and will remain autonomous afterthe deal, Fortis chief executive andpresident Stan Marshall said.

The acquisition of CVPS representsthe initial entry by Fortis into the USregulated electric utility marketplaceand establishes a foundation for Fortisto grow our utility business in theUnited States, said Marshall in a state-ment.

CVPS will push Fortis total assetsup seven per cent to $13.9bn, onceshareholders on each side approve thedeal, as well as boosting the groupsearnings per share in the first full yearof ownership.

Fortis said in results earlier thismonth it would spend $5.5bn over thenext five years on growing the compa-ny, adding that acquisitions in theNorth American electric and gas utili-ties would make up at least part of itsgrowth push.

Fortis unveils $700m plan forVermont electricity companyBYMARION DAKERSM&A

ANALYSIS l Pace

p

28 Feb 18 Mar 7 Apr 3 May 23 May

240

220

200

80

100

120

140

160

180

114.9030 May

NEWS | IN BRIEF

European Commission probesEU regulators opened in-depth probesyesterday into two takeover bids in thecomputer hardware sector involving twoAsian companies and two US peers, say-ing it was concerned the deals wouldreduce the number of rivals. US-basedSeagate Technology has said it wants tobuy Samsungs loss-making hard diskdrive unit for $1.4bn (849m). WesternDigital plans to purchase Hitachis harddisk drive business for $4.3bn. TheEuropean Commission said it wanted totake a closer look.

Korea sees Edwards expandVacuum pump company Edwardsshrugged off its failed London float

attempts yesterday with the opening ofa new manufacturing site in South

Korea. Business secretary Vince Cableand British ambassador Martin Udentook part in the opening ceremony yes-terday, as part of Cables tour around thecountry to meet with government minis-ters and UK companies ahead of an EUfree-trade agreement coming into forcein July. Edwards hopes to double itsheadcount in Korea to 700 in the nextyear.

Renault appoints new COOCarmaker Renault has appointed CarlosTavares as chief operating officer. Chiefexecutive and chairman Carlos Ghosnsaid Tavares will oversee the Renault2016 - Drive the Change programme,which is aimed at increasing the groupsgrowth in international markets and its

share in new technology, particularlyelectric vehicles.

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LUGGAGE maker Samsonite, backed by private equity firm CVC CapitalPartners, moved closer to a $1.5bn(911m) Hong Kong initial public offer-ing, setting an indicative range for thedeal yesterday as it bets on Asiandemand for global consumer brands.

Samsonite will join companies suchas LOccitane and luxury brands suchas Prada and Coach that have targetedHong Kong to raise their profile

among Asian consumers or tap deep-pocketed investors to fund expansionin the region.

Luxembourg-based Samsonite willoffer 671m shares in the IPO, with anindicative price range of HK$13.5 toHK$17.5 each, two sources with directknowledge of the deal said.

About 82 per cent of the shares inthe IPO are existing shares, with 18 percent coming from a primary offering,said the sources, who declined to benamed because the details were not

yet public. At the top end of its price range,

Samsonite would be trading at 22times its projected earnings in 2011,according to the consensus estimatesof banks underwriting the IPO. Thatcompares with an average P/E ratio of20.1 times for Asia ex-Japan consumercompanies.

Chinese company Powerland, whichlisted in Frankfurt in April and makesluxury handbags and suitcases, tradesat a 7.7 times projected 2011 earnings, while US-based Coach trades at 20.7

times and British luxury firmBurberry, which is seeking a HongKong listing, trades at 22.1 times,according to Macquarie Research.

Samsonitesets price forits HK listing

Samsonite chief executive Tim Parker is hoping to raise $1.5bn when the company lists in Hong Kong next month

BYHARRY BANKS

CONSUMER

Founded in Denver in 1910 by Jesse Shwayder Bought by CVC Capital Partners in 2007from a consortium including Bain Capital. Did a debt-for-equity swap with its biggestlender RBS in 2009 after a slump in sales.

FAST FACTS | SAMSONITE


Beware saturation as brands flock EastBY betting on the future spendingpower of Chinas consumer mar-

ket, Samsonite is the latest in astring of retailers looking to makethe most of the countrys boomingluxury goods market.

French skincare groupLOccitane priced a $700m initialpublic offering (IPO) in Hong Konglast year, and fellow aspirational brands Burberry and Prada arealso wooing Asias investors.

Though Asia is currentlySamsonites fastest growing mar-

ket, making up around a third ofits sales total, the company doesnt

quite fit the mould of the regionsother success stories.

Neither bargain basement norluxury high-end, Samsonite lug-gage falls in the tricky mid-rangeprice bracket traditionally aharder sell, particularly in a coun-try where fakes are plentiful andbrand names highly prized.

Timed against a rush of similar-ly themed companies entering themarket, its a risky move for the

US-founded firm, which is onlyjust recovering from having to be

rescued by its biggest lender RBSthrough a debt-for-equity swap in2009.

Hong Kong may have been theworlds top destination for IPOs forthe past two years running, but forSamsonite it could be a step toofar.

BOTTOMLINEAnalysis by Elizabeth Fournier

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HEMSCOTT CORPORATE ADVISER RANKINGS Q2 2011 BROKERS

JP MORGAN Cazenove has main-tained its place at the top of the Citys

broker advisory tables despite losingfive clients since last quarter, accord-ing to the latest figures from finan-cial data firm Hemscott.

The company now has 239 clients still a fair way off its peak of 251 inearly 2010 but streets ahead of closestrival Numis, which has 127.

JP Morgan Cazenove is also stillleading the way in advising the UKs

blue chip companies, with 37 clientslisted in the FTSE 100.

The ranking of the big four audi-tors remained unchanged from theprevious quarter, with KPMG retain-ing the top spot with 376 clients,ahead of PricewaterhouseCoopers317.

But the gap between the top twonarrowed slightly, with KPMG losingseven clients in the quarter to 6 May,

while PwC added one.PwC also continued its dominance

of the FTSE 100, representing 38clients compared to joint-secondplace PwC and Deloittes 22 each.

BDO is still the only non-big fouraccountancy firm to represent a FTSE100 client.

JP Morgan Cazenove also kept itsfinancial advisers crown, retaining104 listed clients to stay well ahead ofsecond-place Seymour Pierce.

FinnCap jumped into the top tenadviser rankings, climbing to ninthplace from eleventh after addingthree clients during the quarter.

The top three financial PR rankings

also remained unchanged, withFinancial Dynamics, BuchananCommunications and Pelham BellPottinger leading the board.

JP Morgan isCitys numberone adviserBY ELIZABETH FOURNIER

FINANCIAL SERVICES

Details listed client gains and losses amongmain adviser groups during the quarter First compiled in 2005, when neither Cenkosnor FinnCap were ranked and JP Morgan was14th in the adviser rankings.

FAST FACTS | HEMSCOTT RANKINGS


EVOLUTION Securities is fastbecoming the go-to house for AIM-listed companies, adding severalclients in the past quarter to pushit up the ranks in both the brokingand advisory categories.

Evolution, led by Alex Snow (pic-tured), is now placed sixth in theoverall broking and financialadvisers tables, having jumpedthree and four places respectivelyfrom last quarters placings.

Though it doesnt make the top15 of the FTSE 250 or 100 lists,Evolutions AIM gains mean it hasswapped places with Arbuthnot inthe broker rankings for Londonsalternative market, with a total of60 clients to its rivals 54.

It is also the finan-cial adviser of

choice for 51 AIMcompanies, hav-ing added threeto its rostersince lastquarter.

AIM clientshelp Evolutionclimb ranking

BYELIZABETH FOURNIER

FINANCIAL SERVICES

ALEX SNOW

Freshfields beats Links as Slaughtersmaintains its FTSE 100 legal crownMAGIC circle law firm FreshfieldsBruckhaus Deringer has overtaken

rival Linklaters in the number ofFTSE 100 clients that it advises,according to the latest Hemscottrankings.

Since last quarter the number ofFTSE 100 clients that Freshfieldsadvises has risen by one, despite itslong-term client Invensys beingpushed out of the blue-chip index bynewly listed Glencore earlier thismonth.

In contrast, Linklaters number of

FTSE 100 clients fell by three over thequarter, meaning it fell from second

to third place in the rankings, switch-ing places with Freshfields.

During that time Linklaters clientAlliance Trust was also squeezed outof the index, after its market capitali-sation ranking fell below 110th.

Slaughter and May maintained itshold on the top spot of both the FTSE100 and overall adviser rankings,helped by key clients ITV and WoodGroup both joining the FTSE 100after the indexs March review.

CURRENT CHANGE FROM Q1 CLIENT NUMBERS CHANGE FROM Q1

1 - JP Morgan Cazenove 239 -5

2 - Numis Securities 127 1

3 - Cenkos Securities 102 -2

4 - Investec Securities 84 2

5 - UBS Investment Bank 82 2

6 3 Evolution Securities 81 5

7 -2 RBS Hoare Govett 80 -8 1 Matrix Corporate Capital 77 1

9 -1 Seymour Pierce 77 -2

10 -2 Collins Stewart 76 -2

11 1 Bank of America Merrill Lynch 72 -1

12 2 Finncap 69 1

13 -2 Brewin Dolphin 68 -7

14 1 Panmure Gordon (UK) 68 -

15 2 Canaccord Genuity 66 5

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WORRIES over the burden of new reg-ulation on insurance companies havesoared in the past year, pushing it tothe top of a list of insurance industryrisks published today.

Insurers believe regulation is now a bigger threat than meeting toughnew capital requirements or the riskof stagflation in the world economy,the Centre for the Study of FinancialInnovation/PwC survey shows.

And though catastrophe losses

have already hit record levels thisyear and caused reinsurers to aban-don full-year profit forecasts, insurers view natural disasters as only thefifth-largest risk to their businesses.

The unprecedented industry con-cern at the cost and complexity ofregulation such as Solvency II and theUK Retail Distribution Review followsan escalating level of industry opposi-tion to the changes in the past year.

Insurers are concerned that toomany large and costly regulatory

regimes are being brought in at once.The fear is that these initiatives

will load the industry with heavycosts, and distract management fromthe task of running profitable busi-nesses, the report said.

Regulation was placed fifth in the2010 survey, behind threats such ascapital requirements, investment per-formance and the wider economy.Natural catastrophes were ranked 22in the 2010 ranking after an unusual-ly disaster-free year.

New to the 2011 ranking was a bat-tle for talent, as despite high UK

unemployment insurers struggled tofill positions. Political risk and corpo-rate governance also each moved nineplaces up the rank.

Insurers rateregulation asbiggest risk THE UK travel industry expects no fur-ther growth for this year but has so farshied away from mergers as a way to

weather the rocky market.Over half of travel agencies, airlines

and cruise companies expect to see nogrowth in passenger numbers this year, claims research by BarclaysCorporate today, while a further 36 percent predicted a contraction in 2011.

Travel firms including TUI Traveland Thomas Cook have said unrest inthe Middle East, rising fuel costs andan uncertain outlook for consumershave all dented profits this year.

Companies said they plan to targetorganic growth this year, with acquisi-tions identified as the least likely routefor the travel sector over the next 12months.

However, more than 40 per cent ofthose surveyed expect to see a rise inpassenger numbers in 2012.

We are facing the most challeng-ing conditions in decades, but in just12 months time there are significantexpectations of growth, said ChrisLee, head of travel at BarclaysCorporate.

The survey found over half of thefirms will be more confident in grow-ing sales next year with only 26 percent expecting to be more cautious.

Travel firms totarget organicgrowth in 2012

Insurers see natural disasters as only their fifth biggest risk Picture: GETTY

BYALISON LOCK

INSURANCE


1 Regulation (5)2 Capital (3)3 Macro-economic trends (4)4 Investment performance (1)5 Natural catastrophes (22)

Source:Study of Financial Innovation/PwC

TOP FIVE RISKS ACCORDING TO UK

INSURERS (2010 RANKING IN BRACKETS)

BY SHIBA BABAMIRITRAVEL

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WALL STREET WEEK AHEAD

Muted gains for FTSE areexpected with US payrolls

WHILST UK and US stockmarkets were closedfor an extended holi-day weekend yesterday,

other global markets struggled tofind direction in thin volume,doing little more than drift side-

ways. Greek troubles continue topermeate investor caution.

In out-of-hours trading, GFT isforecasting the UK index to edgehigher, with prices suggesting anopen of up 5 points from last

weeks close, at around 5,943.The unusual denial by the IMF

that Greece had missed its fiscaltargets, as was circulating in arumour at the weekend, will pro-

vide a modicum of respite to thelingering fears over Europesoverign debts.

Looking ahead its shaping upto be a relatively quiet shortened

week on the corporate front, butdo be aware of Vodafone, NationalGrid and WPP all going ex-divi-dend three FTSE 100 heavy-

weights which between them willknock around 17 points off theindex on Wednesday.

On the economic front, all themajor action is across the pond

where its non-farm payrolls timeagain.

After the previous numbershowed that US companies werecreating jobs at their fastest rate

for five years, the figure thisFriday for Aprils data is expectedto be less rosy, with consensus esti-mates coming in at around190,000 jobs.

The data release closely relatedto the nonfarms number the

ADP employment report is outon Wednesday, and along with theISM manufacturing survey andfactory orders for April, there will

be more than enough cues totrade, and we could well see risk

being sold ahead of these keyevents.

Martin Slaney is director of globaldealing operations for GFT.

MARTINONTHE MARKETS

THE world looks a lot moredangerous than it did only afew months ago and US stockinvestors are starting to

demand more for the added risk. With important manufacturing

and jobs data due this week, itcould start to get even riskier.

That means nervous investorsare likely to keep a lid on equityprices this year as they grapple

with slowing global growth and ahost of geopolitical risks from the

Arab Spring to debt defaults in theEurozone.

The actions of some big WallStreet banks best show the shift inthe risk-reward nexus. Over the lastfortnight, UBS, Citigroup andGoldman Sachs have lowered their

view of what investors will be will-ing to pay for a dollar of corporateearnings this year.

Jonathan Golub, chief US equity

strategist at UBS in New York, kepthis S&P 500 Index target on hold,

but increased his expectations of what S&P 500 companies wouldlikely earn this year and next.

Earnings are going to continueto surprise to the upside, butinvestors will continue to be reluc-tant to believe in the sustainabilityof earnings, Golub said.

He argues that weak economicdata pointing to slowing manufac-turing, a weak housing market and

stubbornly high unemployment isweighing on investor sentiment.

MARTIN SLANEY

p

18 Mar28 Feb 7 Apr 3 May 23 May

6,100

5,700

5,600

5,500

5,800

5,900

6,000

ANALYSIS l FTSE 5,938.8727 May

18 Mar28 Feb 7 Apr 3 May 23 May

7,600

6,800

6,600

6,400

7,000

7,200

7,400

ANALYSIS l Dax Index7,160.30

30 May

BEST OF THE BROKERS


ANALYSIS lSportingbet52

48

44

40

p 40.7527 May

SPORTINGBETEvolution Securities rates the onlinebookmaker buy and has a target priceof 70p. The broker thinks the 119macquisition of Australian rival Centrebetmakes strong strategic and financialsense, coupled with high qualityEuropean business and good currenttrading. Evolution adds that trading inMay has been robust.


ANALYSIS lAviva480

460

440

420

p430.80

27 May

AVIVAKillik & Co rates the insurance group abuy with a target price of 428p. Thebroker sees long term potential for thecompany, which aims to shore up itsreturns in new and strategic markets,though it does not expect to see highgrowth in the short term. Killik addsthat Aviva is trading below its enterprisevalue and its net asset value.


ANALYSIS lMan Group290

270

250

p

253.3027 May

MAN GROUPNumis Securities rates the alternativeinvestment firm an add and hastrimmed its target price by 2p to 290p.The broker believes Man is an attractiveshort to medium term risk-reward tradeoff, even if returns in its AHL fundsremain volatile. But the broker has cutits pre-tax profit forecast by 41 per centto $354m due to lower fee incomes.

TravelexMichael Ball will join the foreignexchange firm in September as chieffinancial officer. Ball will join fromMcCarthy & Stone Group, where he hasbeen chief financial officer since 2007.

Morgan McKinleyThe professional recruiter has madethree promotions in its FinancialServices division. Steve Leeson has beenappointed to the newly created role ofoperations director, financial servicesnew business; Hakan Enver has been

appointed as operations director offinancial services permanent; and JoeDavies has been promoted to associatedirector of financial services permanent.

White & CaseThe law firm has appointed John Benjaminas counsel in the London IntellectualProperty and Information Technologygroup. Benjamin joins from Eversheds,where he was an associate in the intellec-tual property and technology group.

KPMGThe professional services firm has appoint-ed Rees Aronson as head of financial serv-ices audit in the UK. Aronson has been apartner at KPMG since 1989.

PenningtonsAndrew Casstles has been appointed asa partner in the law firms social housinggroup, based in the City office. Casstles

joins from Devonshires Solicitors, wherehe was a partner for four years.

Osborne ClarkeThe law firm has appointed David Blairas head of financial regulation. Blair joinsfrom Addleshaw Goddard to supportPaul Anning, the head of the firmsFinancial Services Sector Group.

HSBC Private BankThe private bank has appointed RussellPrior as head of philanthropy. Prior will joinin July from the Charities Aid Foundation,where he is executive director of enterpriseand philanthropy development.

CITY MOVES |WHOS SWITCHING JOBSEdited by Harriet Dennys

BDOThe accounting and professional servicesfirm has appointed Tom Taylor as a riskdirector. Before joining BDO, Taylor worked

at Lloyds Banking Group for four years,where he worked as chief risk officer andoperations director in the banks Europeaninsurance operation. Prior to that, Taylorspent seven years as a director at Ernst &Young and held a variety of roles at EagleStar, Allied Dunbar and Norwich Union.

+44 (0)20 7557 7245 morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to

[email protected]

SPECIALISTS IN GLOBALPROFESSIONAL RECRUITMENT

in associationwith

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SAFETY IN THE

WORKPLACE IS

A KEY SERVICESOPHIE SPINKHEAD OF GOVERNMENT AND INDUSTRYAFFAIRS, ZURICH INSURANCE

IT SEEMS obvious for an insurer to say this, buthealth and safety matters. It saves many livesevery year. It provides insurers and brokers witha reference point from which risk management

strategies can be developed. At the same time, therehas been misinterpretation and misapplication ofhealth and safety law and this had led to a greatdeal of negativity surrounding something which hasmany positive aspects. Were all used to reading ofchildren unable to play conkers, charity events beingcancelled and first-aiders prevented from givingassistance, all because of fear of injury and subse-quent litigation.

The governments recent plans to reform health

and safety laws, based on Lord Youngs review, havebeen monitored closely. We understand the need tosimplify and, in some cases, cut red tape, but thismust be done without lessening standards.

What we do agree with is that a more commonsense approach is needed to help the economy andreduce bureaucracy. But we also need to raiseawareness that insurers play a vital, enabling role.There is a myth out there that insurers are block-ers but this couldnt be further from the truth.

The governments new strategy says that respon-sible employers will no longer face automatic healthand safety inspections. This will reduce the numberof inspections in the UK by at least a third. Instead,high-risk locations, such as major energy sites orrogue employers, will be targeted.

While this has practical appeal, insurers will con-tinue to provide their customers with guidancewhere necessary indeed, there may be evengreater need as the Health and Safety Executivelooks to others to become involved. What matters isthat this is provided by someone competent not

just a tick-box exercise.The introduction of a register of health and safety

consultants will stop less qualified consultants con-ducting inspections, and we are contributing to thedevelopment of a potential code of practice forinsurers in making decisions about health and safety.However, this will be no easy task, given the diversi-ty of businesses in the UK.

The Department for Work and Pensions is lookingclosely at health and safety law and ProfessorRagnar Lofstedt has been tasked with the review.Everyone whether City office, services business,shop, manufacturing business or something else should be watching this one closely.

For more visit: www.zurich.co.uk/expertise orspeak to your insurance broker.

Emerging markets are

big business for the UKPhilip Salter looks at the growing opportunities around the globe forone often-forgotten sector where British companies still lead the world

BRITAINS diverse business andprofessional services sectormakes up a vital, under-recog-nised part of this countrys

economy. Ranging from accountingand credit information to recruit-ing and management consulting,its companies are leading their com-petitors in capitalising on the devel-opment of emerging markets.

AT THE VANGUARDThe financial director of Hays, Paul Venables, says emerging marketsnow make up 10 per cent of its busi-ness. These are growing markets forthe global recruitment company.Three years ago, emerging marketsmade up just 3 per cent. Similarly,Steve Varley, managing partner des-ignate in the UK and Ireland forErnst & Young, says: With eachpassing year, these emerging mar-kets become more and more impor-tant to our global organisation.Last year,

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