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News2 CITYA.M.5 JULY 2011

FTSE exceeds6,000 mark

THE FTSE pushed on from last weeks bullish trading yesterday, edging pastthe morale-boosting 6,000 mark toprint its highest score since May.

The blue-chip index added half aper cent (27.78 points) during the day to close at 6,017.54.

Strong gains in oil stocks morethan offset a dip in the fortunes of several leading banks, which were

widely hit by Standard & Poors warn-ing that a potential Greek debt deal

would amount to a default.Lloyds Banking Group was the

worst sector performer, off 1.8 percent, followed by Royal Bank of Scotland, down 1.5 per cent, asinvestors fretted that the Eurozonedebt crisis could be far from over.

Yet BG Group and peer Royal Dutch

Shell both rose on the back of positive broker notes from HSBC andGoldman Sachs respectively.

Conversely, British Land was one of the days best performers, up 2.3 percent after Deutsche Bank recom-mended that investors buy shares inthe estate group in anticipation of strong net asset value growth.

The upturn in equities was seenelsewhere in Europe, with theFTSEurofirst 300 index of topEuropean shares rising by 0.2 per centto 1,121.58 points, the highest close ina month.

BY J ULIAN HARRISMARKETS

Britain needs its own Ronald Reagan

HERO-WORSHIP is always a mistake.No statesman is perfect: all make mis-takes. But Ronald Reagan of whom astatue was unveiled in GrosvenorSquare yesterday was one of the few major figures of the 20th century toleave their country in a hugely betterstate than they inherited it. He helped

America regain its confidence, trans-formed its economy from theappalling basket-case he inheritedfrom Jimmy Carter and played a cen-tral role in defeating communism.

Reagans soundbites were brilliant;they still have much resonance in

todays Britain, where the economy isshackled by Kafkaesque burdens andan increasingly defeatist, declinistmindset. As he once put it, govern-ments view of the economy can be

summed up in a few short phrases: If it moves, tax it. If it keeps moving, reg-ulate it. And if it stops moving, sub-sidise it. Tragically, despite thecoalitions best efforts, this remainstrue in the UK today.

Reagan realised that cutting taxes isa way of liberating the economy,incentivising entrepreneurs and risk-takers and stimulating growth. Healso realised that reducing marginalrates on labour and capital can oftenpartly pay for themselves and insome cases, especially but not only

when rates are crippling, can actually bring in more revenue, even in theshort-term. By contrast to thisdynamic, supply-side approach totax, the static approach remains theorthodoxy in benighted Westminster:even under the coalition, the rule of thumb remains that every 1 fore-

gone by HMRC is 1 less than can bespent by politicians and that the only

way tax cuts can stimulate is by boost-ing consumer spending.

In fact, Reagan wasnt even that

original. The best exposition of how tax cuts can reinvigorate an economy remains Democratic president John FKennedys spectacular 1964 reforms,

which reduced the top rate from 94per cent to 70 per cent (Kennedy wasassassinated in 1963, of course, but histax cuts were agreed prior to hisdeath). Two years later, the federal taxhaul was 11 per cent higher than fore-cast: more people made more money and their taxable efforts more thancompensated for the reduced tax rate.Kennedy had been proved spectacular-ly right when he had argued that aneconomy hampered by restrictive taxrates will never produce enough rev-enues to balance our budget just as it

will never produce enough jobs orenough profits In short, it is a para-doxical truth that tax rates are toohigh today and tax revenues are too

low and the soundest way to raise therevenues in the long run is to cut therates now.

In 1981, Reagan reduced the toprate of income tax to 50 per cent. In

1986, he cut it again to 28 per cent. Of course, this benefited the richest dis-proportionately but they neverthe-less ended up shouldering a greatertax burden and paying for a greaterproportion of public spending. Theshare of tax raised from the best-paid1 per cent jumped from 19 per cent in1980 to 25.6 per cent in 1990. Themoral: to squeeze more tax out of therich, lower the top tax thresholds. Welearnt that in Britain starting in1979 but with top earners now taxedat 52 per cent and millions paying 42per cent, the lessons have been forgot-ten again. Britain needs to discover its

very own Ronald Reagan, a hopeful,optimistic, pro-individual liberty, pro-growth politician with an uncanny ability to communicate. Any takers?

[email protected] Follow me on Twitter: @allisterheath

FORMER IMF boss Dominique Strauss-Kahn will try to counter-sue French

writer Tristane Banon if she files aclaim of attempted rape against himas expected later today.

The revelation is the latest twist inthe ongoing sex claims surroundingStrauss-Kahn. Banon says the politi-cian attacked her in early 2003 whenshe was 22. Strauss-Kahn hasappeared resurgent in recent days

after the sex case launched againsthim by a New York hotel maid looksset to collapse amid allegations shelied to prosecutors.

Meanwhile, Strauss-Kahns chancesof running in the French Presidentialelection next year appeared to fade ashis Socialist party admitted it would

be the weakest of all possibilities. The party said it will not block a

surprise late entry into its primariesin October long after the June dead-line but feel his participation isincreasingly unlikely.

BY S TEVE D INNEENWORLD ECONOMY

DSK election hopes faThe French Socialists said it is unlikely Dominique Strauss-Kahn will be able to run

NEWS | IN BRIEF

C&WW investors alertedCable & Wireless Worldwide sharehold-ers have been warned that the telecomscompanys corporate governance couldcause further problems as the firmattempts to right itself following threeprofit warnings. The Association of British Insurers is thought to have told

shareholders that it has concerns overtop executives at C&WW standing togain from the companys currently lowshare price. The amber top warning isone level below the ABIs most seriouslevel of concern about a firms gover-nance.

Knight Vinke has plan for ComKesa Electricals' largest investor said ithas put forward a plan to the retailer'sboard for its loss-making Comet busi-ness in the UK that it wants consideredas an alternative to disposal. Activistshareholder Knight Vinke, which has a19.3 per cent stake in Kesa, Europe'sthird-biggest electrical goods retailer,said yesterday it met with Kesa lastweek and had made it clear that itwould not support any plan to closedown or liquidate Comet if there wereother options for the 250-store chain.

EDITORS LETTER

ALLISTER HEATH

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 at www.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 Land CEO ChrisGrigg saw his firmsstock jump by 2.3 percent in strong tradingyesterday

7thFloor, Centurion House,24 Monument Street, London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: [email protected] www.cityam.comEditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness Features EditorMarc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Craig GaymerPictures Alice HeppleCommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

PAULSON ENJOYS $500M LEHMANBOOST AS VALUE OF BOND RECOVERSPaulson & Co, the hedge fund thatmade billions from betting on a col-lapse in mortgage-backed securitiesduring the financial crisis, has mademore than $550m from a recovery inthe value of bonds it bought in failedinvestment bank Lehman Brothers.

BRUNSWICK TO CHANGE OWNERSHIPSTRUCTUREBrunswick, the public relations com-pany co-founded by Alan Parker morethan two decades ago, is preparing tochange its ownership structure andhand over equity to its partners. Theownership changes reflect growingpressure from partners for a broaderdistribution of equity in BrunswicksUS operations, which are growingfast. The move will allow shares to be

traded between partners, putting a value on the firm for the first time.

PRINCESS YACHTS SET TO INVEST INNEW FACTORY

Britain may be braced for an age of austerity but Princess Yachts, the lux-ury boat maker, is planning to invest35m in a superyacht constructionfacility in Plymouth. Yacht salesplummeted during the recession asthe super-rich tightened their beltsand shunned ostentatious signs of

wealth.

CDB $10BN FUND TO TARGET ASIANSMESChina Development Bank, one of thecountrys largest state-owned banks,is emerging as an increasingly activeoverseas investor, using its $10bn CDBcapital fund to take stakes in privateequity and hedge funds. The CDBfund is seeking to develop its expert-ise in and understanding of intellec-tual property associated with lendingto small and medium-sized compa-nies, a market Chinese banks have

never felt comfortable with due tothe risk of default.

HOW MANY CLUBCARD POINTS DO YOUGET FOR A CONSERVATORY?

The door-to-door double glazing sales-man may finally have met his match:

Tesco is inviting customers to addPVC windows and conservatories totheir shopping baskets. In the latestchapter of Tescos voyage beyond gro-ceries, Britains biggest supermarketgroup is to offer customers conserva-tories, windows and doors through acontract with Job Worth Doing, ahome maintenance company.

THIS INVESCO FUND IS A FAKE,INVESTORS WARNEDFraudsters are trying to sell bogusfunds under the Invesco Perpetual

brand name, the City regulator said yesterday. The FSA said that an organ-isation with the website,

www.invescoperpetualfunds.com, has

been marketing the Invesco AsianPrecious Metals Fund a fake.

SWITCHING BANKS IS TO BE MADEEASIERBank business and retail customers

will be given a guarantee that they can switch banks hassle free withinseven working days, the PaymentsCouncil has said. The industry body has said improvements can be madeto the way that banks handle cus-tomers transferring to rivals and thatreforms will take place over the nexttwo years.

GOVERNMENTS UK PATENT PROJECT INAMERICAN ENGLISHConcerns have been raised about thepoor implementation of aGovernment patent website after itemerged that large sections have beenlifted from an equivalent project inthe US without even changing thespellings in some cases. The UK Peer

to Patent site calls the initiative aprogram, for example.

TURKEY SEIZES ASSETS FROM LBANK

Turkey seized control of Libyan bank assets yesterday, one day after recog-nising Libyas opposition in Benghazias the country's legitimate govern-ment, in moves that effectively sev-ered remaining ties to Col. MoammarGadhafi. In a statement, TurkeysSavings Deposit Insurance Fund saidit had taken temporary control of Libyas 62.37 per cent stake in A&T Bank, formerly known as the Arab-

Turkish Bank.

IEA DEFENDS OIL RELEASE The International Energy Agency saysits release of strategic crude reservesis working, despite oil prices rebound-ing to the level they were before thestockpiles were tapped. The IEA saidit decided to release 60m barrels of oil

of emergency stocks to compensatefor the loss of Libyan crude.

WHAT THE OTHER PAPERS SAY THIS MORNING

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STANDARD & Poors has dealt a bruis-ing blow to Europes efforts to get

banks involved in a second bailout forGreece, claiming that the proposalcurrently on the table would be aneffective default by the sovereign.

EU officials and governments have been scrambling to strike a burden-sharing deal to share the cost of anew bailout with European banks. Butthey have been constrained by theneed for any deal to avoid a creditevent thought to involve a ratingsagency downgrade to default.

Last week, French and German banks agreed to participate in aGreek Brady plan, in which they

would roll over most of their Greek debt in return for high interest ratesand high-quality collateral.

But S&P says that even with its gen-erous terms, the plan would constitutea Greek default because the exposure

that banks would have to maintain to Athens would involve extending thematurity of the countrys debt andrestricting banks use of the bondsuntil their new maturity date.

S&P said the Greek Brady plan would be an effective default becausethe transaction is viewed by us as dis-tressed rather than purely opportunis-tic.

The agencys stance could make itmuch more difficult for Europeanpoliticians to pursue the face-savingplan to get banks involved, throwingnegotiations into chaos.

A default, or credit event wouldforce the ECB to ignore its own rules inorder to continue to accept Greek debtas collateral, without which it couldnot supply the emergency liquidity on

which the countrys banks depend.People familiar with the ECB have

previously suggested the central bank would accept Greek debt even if someratings agencies downgrade.

S&P: Greeceplan is defaultBY J ULIET S AMUEL

EUROZONE

BRITISH GAS is poised to announcethe rise of gas and electricity prices asearly as this month, with families fac-ing increased bills of up to 20 per cent.

Analysts expect its parent company Centrica to announce price increasesof at least 15 per cent ahead of its half

year results on 28 July to protect mar-

gins in the face of rising wholesaleprices. Prices could go up even higher,

however, in line with rival ScottishPowers 19 per cent gas hike and 10per cent electricity price rise lastmonth.

Centricas rival blamed a 30 percent rise in wholesale gas costs for theincreases, and others are expected tofollow suit.

Consumer groups have already slammed the widely expected indus-

try-wide price hikes as unfair on thepoorest households.

British Gas to announce hike inits energy bills later this month

ENERGY

BRITAINS biggest business lobby hasdemanded an investigation into how much proposals to ring-fence the retailoperations of UK-based banks will costthe economy.

The CBI called on the IndependentCommission on Banking (ICB) to carry out a rigorous cost-benefit analysisof the plans, adding it remainedunconvinced the policy will support

recovery.

John Cridland, director-general of the CBI, said: The ICB should not pro-ceed with the idea unless it stands upto a rigorous cost-benefit analysis.

The presence of a ring-fence aroundretail banks, which would have animplicit state guarantee in the event of another financial crisis, could lead toriskier lending, Cridland argued.

A one-size-fits-all solution wouldalso force banks to have exactly thesame business model, reducing com-

petition, increasing costs for business-

es and hampering growth, he added. The main banking lobby groupechoed the CBIs call for the ICB toexamine the effect of its plans ongrowth before making its final recom-mendations.

The ICB must do the analysis of theimpact on the economy of theiroptions... and that analysis must bemade public, said British Bankers

Association chief executive AngelaKnight.

CBI calls for probe into thcost of ring-fencing propoBY DAVID CROW

BANKING

News 3CITYA.M. 5 JULY 2011

HACKERS TAKE A BITE OUT OF APPLE

The Internet vigilante group Anonymous claimed to have broken into an Apple server and published a small number of usernames and passwords for one of Apples websites.

Anonymous said on Twitter that Apple could be a target and released the data as part of its Anti Security campaign. Apple, led by Steve Jobs (pictured), did not comment.

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MARKET participants have called onthe London Stock Exchange to consid-er a tie-up with Nasdaq, the US

bourse, after its failed bid forCanadian group TMX made it vulner-able as a takeover target.

Speculation has been rife in theCity that Nasdaq could table a bid forthe LSE, given the lack of a partnerfor both bourses in the midst of fren-

zied exchange takeover activ-ity worldwide.Nasdaq boss Bob Greifeld is

said to be under pressure toact, as biggest rival NYSEEuronext is in the throes of cre-ating a transatlantic super-exchange with DeutscheBoerse.

LSE boss Xavier Rolet(pictured) is said to havenot yet spoken with theNasdaq chief since the

failed TMX merger.Several City players, from tradersto analysts, have said they view the

LSE as a natural target for Nasdaq inthe current climate.

The LSE needs to dosomething, because as theother exchanges get biggerthey get smaller, whichcan only lead to them

being swallowed up, said asenior trader at an interna-tional broker in London.

City players view LSE asNasdaq merger targetBY R ICHARD P ARTINGTON

FINANCIAL MARKETS

News4 CITYA.M. 5 JULY 2011

ANALYST VIEWS: CAN THE LONDONEXCHANGE SURVIVE ALONE?Interviews by Richard Partin

WILL RHODE |TABB GROUP

They definitely could. They could be more nimble as a result. But its a bigbet to say Im going to be better off small and nimble than big and global.

JAMES HAMILTON |NUMIS SECURITIES

It can, although the question is if it will. The LSE is no longer whatyoud call a large exchange. There are plenty of bigger animals out there.

DAVID BUIK |BCG PARTNERS

In the long term it has no chance. If theyre going to make a quantumleap forward then theyve got to do it with a major player like Nasdaq

Nasdaq chief Bob Greifeld is said to be keen on a deal with the LSE

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THE TOTAL value of global mergersand acquisitions (M&A) surged by 40per cent in the first six months of this

year as dealmakers returned to makingtransactions.

The value of worldwide M&A totalled $1.5 trillion (934bn) in thefirst six months of this year, thestrongest first half total since beforethe recession hit in 2008, according to

Thomson Reuters.Banks have benefited from the deals

bonanza, seeing their combined totaltaken in fees increase by 18 per cent year-on-year to a massive $16.7bn dur-ing the first half of 2011, according toestimates by Thomson Reuters andFreeman Consulting.

Morgan Stanley trousered the mostin fees for M&A advisory work, rakingin $975.8m in fees in the first sixmonths of this year.

The Wall Street bank toppled rivalGoldman Sachs, the highest placedlender at this point last year, as the top

bank for fees taken from completedM&A transactions.

Dealmaking has returned to globalmarkets thanks to a surge in privateequity M&A, the data show.

The volume of private equity-backedM&A deals worldwide shot up by 54per cent in the first six months of the

year compared to the same period a year earlier. The total value of deals hit$123.4bn, boosted by European buy-outs.

Private equity deal making in theUK, Sweden, France, Italy and Germany has accounted for nearly three-quartersof activity in Europe so far this year. The energy sector was the mostactive for M&A in the first six monthsof this year, accounting for 17.2 percent of announced deals.

Total value of M&A deals up40 per cent THE TOTAL value of equity deals donein the first half of this year has shot up by 27 per cent on the same period a year earlier, handing investment

banks a boost from transaction fees.Equity market transactions, such as

company floats and share issuance, inthe first six months of 2011 hit $412bn(256.5bn), according to data provided

by Thomson Reuters. The bumper period handed invest-

ment banks a 22 per cent increase onthe fees they recorded for the sameperiod a year earlier, according to esti-mates from Freeman Consulting.

Fees from equity deals during thefirst half of 2011 totalled $10.8bn.

Goldman Sachs topped the leaguetable for fees taken from equity mar-ket deals, taking $42.4bn from 137deals and increasing its market share

by 3.2 per cent.Meanwhile, the total value of glob-al debt market deals hit $3 trillion inthe first six months of this year, a tenper cent increase on the same perioda year earlier.

JP Morgan topped the list of bankshandling debt market deals, withtotal proceeds of $212bn from justover 700 deals. Based on first half underwriting fees, JP Morgan toppedall other underwriters with an esti-mated $932.8m.

Equity marketdeals shoot upin the first hal

BY R ICHARD P ARTINGTON

CAPITAL MARKETS

CAPITAL MARKETS


Global Equity & Equity-Related Volume

1,600$400

0

200

400

600

800

1,000

1,200

1,400

$0

$50

$100

$150

$200

$250

$300

$350

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2

2006 2007 2008 2009 2010 2011

# o

f I s s u e s

P r o c e e

d s

( U S $ b )

Proceeds (US$b) # of Issues

Morgan Stanley chief James Gorman has seenhis bank shoot to thetop of the pile for feesearned from M&A deals

Top ten global debt market banks

Global equity market deals

Worldwide cross-border M&A volume

Top five M&A banks for fee earningsFinancial 2011 2010 No. of AdvisorAdvisor Rank Rank Deals Fees $m

Morgan Stanley 1 3 174 975.8Goldman Sachs & Co 2 1 162 845.2JP Morgan 3 2 133 811.7Citi 4 4 97 408.8

Bank of America Merrill Lynch 5 9 119 581.8

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VAST deposits of rare earth minerals,crucial in making high-tech electron-ics products, have been found on thefloor of the Pacific Ocean and can bereadily extracted, Japanese scientistssaid yesterday.

The deposits have a heavy concen-tration of rare earths. Just one squarekilometre (0.4 square mile) of deposits will be able to provide one-fifth of the current global annualconsumption, said Yasuhiro Kato, anassociate professor of earth science atthe University of Tokyo.

The discovery was made by a teamled by Kato and including researchers

from the Japan Agency for Marine-Earth Science and Technology.

They found the minerals in seamud extracted from depths of 3,500to 6,000 metres below the ocean sur-face at 78 locations. One-third of thesites yielded rich contents of rareearths and the metal yttrium, Katosaid in a telephone interview.

The deposits are in international waters in an area stretching east and west of Hawaii, as well as east of Tahiti in French Polynesia, he said.

A chronic shortage of rare earths, vital for making a range of high-tech-nology electronics, magnets and bat-

teries, has encouraged miningprojects for them in recent years.

PENNON the French waste manage-ment firm, is to build a new energy from waste plant in the UK that willtreat 60,000 tonnes of household rub-

bish. The companys subsidiary, Viridon,

which specialises in recycling, hassigned a deal with Devon county council and will spend 45m build-ing the plant on the site of the formerincinerator at Marsh Barton, nearExeter.

TIRU, a French firm which operatesa similar waste facility inLincolnshire, won the contract to runthe plant on behalf of Viridor for five

years.The Exeter project is part of its

long term strategic partnership withDevon County Council designed toassist Devon in achieving its landfilldiversion targets, Colin Drummond,chief executive of Viridor, said in astatement.

The new plant will have an electri-cal power generation capacity of around 3MW and will come onstream by 2014.

At that time Viridor is expected to

have around 1m tonnes of energy from waste disposal capacity and200MW of renewable energy capaci-ty.

Landfill is an increasingly unattrac-tive option for waste management aslandfill tax, currently set at 46 pertonne, is set to rise steeply each year

by 8 until it reaches 80 per tonne in2014.

Pennon group has several projects,including two other plants in the UK and has submitted planning applica-tions for four more energy from

waste plants across the UK. Viridors UK projects also include

Runcorn in Cheshire, which will bethe biggest waste management plantin Europe.

Pennon signs

energy fromwaste deal

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Rare earth mineral discovery inPacific a boon for electronics

BY KASMIRA J EFFORDENERGY

MINING


THE EXETER INCINERATOR PLANT

Q.WHERE DOES THE WASTE COMEFROM?A. The plant will collect residualhousehold rubbish, which is leftover after recycling has taken placein the Exeter and East Devon area.

Q.HOW IS THE RUBBISHPROCESSED?A. The waste goes into a bunker where it is then fed into a com- bustion chamber. An oscillating kiln,heated at 850 degrees celsius, movesthe waste around and mixes it withoxygen to ensure a complete burn.

Q.HOW IS THE ELECTRICITY GEN-ERATED?A. The heat from the combustionchamber is used to raise steamthat then drives a turbine which in

turn produces theelectricity. The steamis then cooled downand fed back through the system.

Q.WHAT IS AN AIR QUALITY CONTROL SYSTEM?A.Hot gases created by the com- bustion process have potentialpollutants inside then, which areremoved using activated lime andcarbon. The cleaned gases are thenreleased through a stack into theatmosphere.

Q.WHAT HAPPENS TO THE BOTTOASH?A. The leftover product, bottomash, will be recycled by a localaggregate company and turned intoroad building material and concrete.

Q A&

ANALYSIS l Pennon Group PLC

p

29 Jun 30 Jun 1 Jul 4 Jul

700

680

690

670

705.004 Jul

ANALYSIS l How the energy from waste process works

CombustionUnit & Boiler

Fly AshWaste In StorageStorageBunker

Flue Gases& Fly Ash

Filter System

Bottom AshFor Recycling

FilterSystem

FilterSystem

Steam

Heat &Electricity

Air QualityControl System

Air

QualityControlSystem

SteamTurbine Generator

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IN YET another twist at gaming firmRank Group, Ian Burke has been reap-pointed as chief executive less than a

week after he quit over a takeoverscrap with bidder Guoco.

The announcement coincided witha dizzying fourth U-turn in as many

weeks on the firms advice to share-holders regarding Guocos bid for thecompany. The board has now revertedto its original advice to reject the 150pa share offer, which it maintains sig-nificantly undervalues the company.

The confusion is partly down to theunclear motives behind the HongKong-based gaming firms bid. The

board argues that if Guoco takes con-trol of more than 75 per cent of thecompany the remaining shareholders

would be left with stock they couldnot trade.

The latest change of heart was brought about by a Guoco assurance yesterday that if it was to reach a levelof 75 per cent on the closing offer

closing date of 15 July, it would givethe remaining shareholders a furtherseven days to sell their stock.

An open offer to shareholders at150p a share received a higher thanexpected take-up, triggering a manda-tory bid for the entire firm. Guocoexpressed surprise that 15.6 per centof shareholders accepted its offer. Italready owned 41 per cent of the firm.

Burke has emerged from the crisiseven more powerful than before, tak-ing on the role of chairman in addi-tion to his regular duties until theoffer closes.

Rank makesyet anotherU-turn on bid PAI Partners hascompleted its saleof Kwik Fit, the

UKs biggest tyreretailer, to ItochuC o r p o r a t i o n ,confirming thenews reported

by City A.M. inearly March(see right) thatthe Japaneseconglomeratehad won theauction forthe auto repair business.

Itochu paid 637m, includingacquiring net debt of 457m, for partof the business that PAI bought in2005 for 800m. But PAI has sold off parts of the business since then, mak-ing it hard to determine the privateequity investors loss or gain on theasset.

Colm OSullivan, a partner at PAI,said: Kwik Fit moves into new own-ership in a much more robust posi-tion than when PAI bought the

business.Baker & McKenzie and Nomura

advised Itochu, while Morgan Stanley and Credit Suisse advised PAI on theauction.

PAI completessale of KwikFto Itochu Corp

Ian Burke is back in the top job at Rank despite quitting last weekBY S TEVE D INNEEN

GAMING

BY J ULIET S AMUEL

M&A


TIME LINE |THE ASTONISHING 720 DEGREE TURN AT RANK

6 May 2011Guoco raises its stake in Rank Group to 40.8per cent, triggering a mandatory offer when-ever a shareholder crosses 29.9 per cent.Rank board urges shareholders to reject the150p a share bid.

8 June 2011An unexpectedly high 15.6 per cent acceptthe offer, giving Guoco a controlling stakewithout paying a premium. The Rank boardresponds the next day with a strongly word-ed statement urging remaining shareholdersnot to accept the bid.

23 June 2011Rank performs an astonishing U-turn byendorsing Guocos hostile bid, saying t hedecision is based on the increasing possibilityof Guoco taking control of 75 per cent of thefirm, at which point it is entitled to delistfrom the stock exchange.

27 June 2011The board once again changes its recom-mendation to investors, saying they shouldreject the offer if they are worried about therisk of Ranks shares being delisted.

28 June 2011Ian Burke, chief executive and PaddyGallagher, finance director both quit as thefirm flip-flops again, telling shareholders toaccept the offer, citing the same reasons.

30 June 2011The Takeover Panel grants shareholders atwo-week reprieve to allow them more timeto make sense of the situation.

4 July 2011In perhaps the strangest twist in this bizarretale, Ian Burke is reappointed as the boardtells baffled investors to reject the offer afterall. Burke cites Guocos new terms.

ANALYSIS l Rank Group PLC

p


151.5

150.5

151.0

148.5

149.0

150.0

149.5

149.704 Jul

J a p a n e s es n a p u p K w i k - F i t B R I T A I N S l ar g e s t t y r e r e t ai l e r , K w iF i t , has b e e n s o l d t o a J a p ane s e c o nl o me r at e , I T O C H U C o r p o r at i o n, C i t

A. M . c an r e v e al .T he d e al , d e t ai l s o f w hi c h w i l l b e

anno unc e d p ub l i c l y t hi s mo r ni ng f o l -

l o w i ng i t s s i g ni ng y e s t e r d a y , s e e E ur o p e an p r i v at e e qui t y f i r m P A I

P ar t ne r s c as h o ut o f i t s s i x - y e ar o w ne r -

s hi p o f t he aut o r e p ai r c hai n f o r

6 3 7 m, w hi c h i nc l ud e s ne t d e b t s o 4 5 7 m.

T he s al e f o l l o w s a b i d d i ng p r o c e s hat k i c k e d f f i n e c e r w i t h l ai

i

B Y J U LI E T S AM U E L

E X C LU S I V E

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CITY experts welcomed sweeping pro-posed changes to how care for the eld-erly is funded yesterday, as they

would allow financial services firmsto help people meet their costs.

Economist Andrew Dilnot (pic-tured) called for the current system,

which forces people with more than23,250 in assets to fund their care infull, to be scrapped to stop people los-ing their life savings.

His Fairer Care Funding report pro-posed capping the amount individu-als pay and raising the means-testthreshold more than four times toensure care never swallows morethan a third of peoples assets.

About one in ten currently pay more than 100,000 forcare, usually by selling theirhouse, due to the unlimitedliability rule.

Dilnots report said carecosts should be capped at

between 30,000 and 50,000per person with the rest paid by the state and said thiscould create a new space for finan-

cial services firms to help cover thatcost. Care is the one major area of our lives where, at the moment, thereis no way for people to protect them-selves against the risk of high costs,Dilnot said in the report.

By defining the amount peoplemust pay, Dilnots system wouldallow banks or insurers to offer sav-ing products an equity release on aproperty, or a life insurance, pensionor annuity-type product to generatethe full contribution.

But with many in the UK already failing to save enough to fund a pen-sion it is unclear whether they couldsave extra for care.

We need a clear and sustainableframework to work from, so insur-

ers can help to establish a func-tioning market, said Association of British Insurerschairman Tim Breedon.

PwC partner David Brownsaid both new financial

products and more educa-tion was needed. The propos-

als should provide the impetusneeded for the financial serv-

ices sector to confidently re-enter this mar-

ket, he said.

City ready for

role in elderlycare fundingBYA LISON LOCK

POLITICS


CITY VIEWS: WOULD YOU WELCOME HIGHER TAXES TO FUND ELDERLY CARE?Interviews by Richard Partington

No. When the new government came in I thoughtthey should change the way tax money is used in thepublic sector. I thought that under Labour there wastoo much bureaucracy. They could take enough in tax

to pay for these things if they changed the way itwas distributed.

JOHN WILD |WILLIS

Yes. There should be a small increase in tax to pay for elderly care. There are people that wouldnt have theability to pay for care if there wasnt enough taken in tax to pay for it. The rich should have to subsidise thepoor, within reason.

NIGEL MEADE |IMPERIAL COLLEGE

No. I think its not sustainable in the long run. The pri-vate sector has to take up the slack in the system. Ithough the Dilnot report came up with some terribleideas. Its not easy but, in the situation we are in

financially, its something the private sector has tohandle instead.

MARK LEWIS |C LEWIS & CO

l Peoples contributions to social care inold age should be capped to preventthem selling their home and losing theirlife savings to pay for their care.

l An individuals personal liability forcare costs should be capped at between25,000 and 50,000, with the statecontributing the rest. Dilnot suggeststhat 35,000 is a fair figure for this.

l The current system that forces peoplewith assets totalling more than 23,250to pay their care costs in full should endand only those with more than 100,000would have to pay for their care in full.

l Nobody should spend more than 30per cent of their assets on care costs.

l People would have to contributeabout 7,000 to 10,000 per year to

cover living costs such as food andaccommodation when in residential care.

l Anyone entering adulthood with acare or support need would be immedi-ately eligible for full free state supportwithout a means test.

l All eligibility criteria for care shouldbe standardised nationally to end thepostcode lottery currently in evidence.

l A 35,000 cap would cost the gov-ernment 1.7bn in the first year, equiva-lent to just 0.22 per cent of UK GDP. Thecost would rise to 3.6bn at currentprices by 2015.

l A cap on contributions would benefitthe middle classes more than the poor-est, as they pay far more towards theircare than those on the lowest incomes.

IN FIGURES |THE DILNOT COMMISSIONS RECOMMENDATIONS

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NO LUNCHFOR BLAIRS

AT BANKINGAIDES BASHSO MANY social engagements, so littletime for Tony and Cherie Blair, who only had time for a quick drink at the fiftieth

birthday for Russell Chambers the mandubbed Blairs favourite banker beforerushing off without sitting down to eat.

Chambers, the Credit Suisse senioradviser who famously lent Blair a pair of swimming trunks while on holiday inBarbados with the former PM, chose theterrace of the River Caf for his birthday lunch on Saturday, as one of the restau-rants most loyal customers.

River Caf owner Ruth Rogers and herarchitect husband Lord Richard Rogers

were among the 150 guests, as were CBI boss Roger Carr and former M&S chair-man Sir Stuart Rose; RBS group chief exec-utive Stephen Hester; NewsInternationals Will Lewis and his brotherSimon, the head of AFME; and formerLloyds chairman Sir Victor Blank.

Advertising boss Johnny Hornby of CHIseized the moment by convincing theRiver Caf staff to join in a rendition of Happy Birthday, while PR chief RolandRudd of Finsbury who has knownChambers since the age of nine providedafter-lunch anecdotes about how

there but no matter how hard the Citysheadhunters try, the identity of the AlanPartridge of recruitment who is causingchaos by exposing his callings unethicalpractices remains a mystery.

Not even the colleague who sits next tothe turncoat writing the RecruitmentRehab blog is any the wiser. Who are

you and why are you giving our industry such a bad name? he unwittingly

emailed to his office neighboursFred Bayr pseudonym.

Because, as Bayr explained to TheCapitalist speaking in a disguised

voice: There are a lot of cowboy recruitment companies who are

lying to candidates and lying toclients, and the more they giveour industry a bad name, themore banks will bypass thesearch specialists and take theirrecruitment in-house.

Bayr will reveal his identity when the time is right in themeantime, the only clues to goon are that he has made a lotof money in recruitment buthas no plans to retire soon

Chambers wooed his Barbadian-born wifeMargaret, known as Monkey.

Of course, there was no competition with Rudds high-powered fiftieth justtwo weeks earlier although an obviouscomparison is that both parties clashed

with another top-level City social event:Rudds with George Osbornes fortiethand Chambers with PR leader Matthew Freuds summer party.

Which may have had something todo with the swift exit to Freuds homein Gloucestershire made by Will Lewisand Carphone Warehouse boss CharlesDunstone, one of Chambers longest-standing clients

ROYAL PROTOCOLSECURITY has been stepped up atSABMiller now the world knows thatPippa Middletons boyfriend Alex Loudon

(right) works in the Woking office of theSouth African brewer, as exclusively revealed in this column back on 24 May.

When The Capitalist called Loudon for achat about his advisory role in hisfirms hostile 6.2m bid for Fosters, nothis stop-start relationship with MissMiddleton, obviously the well-

briefed receptionist informed: Wehave to filter calls to Alex now.

No luck at SABMillers London- based press office, either. I canconfirm Alex Loudons job title,

but that is all, said a battle- weary spokesperson. Hes a cor-porate finance and developmentanalyst, just in case you missedit the first time around.

MAN OF MYSTERY THEY SEEK him here, they seek him

Sold down the river: Russell Chambers (inset) chose the River Caf for his fiftieth Picture: REUTERS

Recruitings Alan Partridge remains an enigma

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This advertisement is issued in the UK by the London Branch of Socit Gnrale. Socit Gnrale is a French credit institution (bank) authorised by the Autorit de Contrle Prudentiel (the French Prudential Control Authority). Socit Gnrale issubject to limited regulation by the Financial Services Authority in the UK. Details of the extent of our regulation by the Financial Services Authority are available from us on request. Investors capital is at risk. Investors should not deal in this productunless they understand its nature and the extent of their exposure to risk. We recommend that retail investors consult their own independent professional advisers. Exchange Traded Funds and Exchange Traded Notes are issued by Socit Gnrale

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Credit Suissebanker RussellChambers

invited hisBarbadoscompanionsthe Blairs tohis riversidebirthday

The Capitalist10 CITYA.M. 5 JULY 2011EDITED BY

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

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IKEA said yesterday it was seekingto open three superstores inLondon but was beingstymied by planning regu-lations.

Chief executive MikaelOhlsson (pictured) said he

wanted to build his storesin the capital in run-downindustrial areas.

But he said trafficplanning rules

were standing inhis way.

The Swedishretailer already has four stores inthe capital.

He told the Wall Street Journal: In theUK, they wantretail to get into thecity. But thats notgood for furnitureretail. Especially in

bulk. We prefer to be farther away fromthe city centre.

But the permits

are taking a lot of time. Rules arerules.

On a more upbeat note he said thecompany would keep prices low despite the soaring costs of materi-

als, including cotton.Speaking days after Habitats

administrators announced theclosure of all but three Londonstores, which are being sold toHome Retail Group, Ohlsson

said he was not concerned abouthigher commodity prices and

will cut prices this yearand next.

What decideshow much a lampshould cost? Only imagination setsthe limits, he said.

Separately thecompany said it was set to pressahead with itsexpansion inChina.

Ikea now hasnine stores inChina but the

company hasplans to have 15

outlets in place inthe country by 2015.

THE chief executive of the frozen foodproducer Birds Eye Iglo, Martin Glenn(pictured), has rejected a swoop tomake him chief executive at PremierFoods.

Premier, the owner of the Hovis andMr Kipling brands, is using head-hunters to find a replacement forRobert Schofield, who is leaving thecompany.

Glenn has run Birds Eye since soonafter it was bought by Permira, the

private equity firm, in 2006, and wasapproached over a potential moveto Premier, which issued a profit

warning last week. It is under-stood that some shareholdersare pressing for a new chief to

be appointed quickly so that theship can be steadied. Glenn, aformer chief executive of Pepsico in the UK, is arespected figure in thefood industry. Premier

would not comment on

its recruiting process but a source said yester-

day said it was making goodprogress in hiring a new leader.

Meanwhile Warburg Pincus,the private equity group thatowns more than 20 per cent of Premier, is understood to beamong investors open to the

idea of Schofield beingreplaced on an inter-im basis by Tim Kelly,the companys chief operating officer.Premiers shares

closed up 9.5 per centat 18.7p yesterday.

FRENCH retail giant Carrefour yester-day said its board had agreed a merg-er between its Brazil unit and thecountrys biggest retailer Grupo Paode Acucar (GPA).

But its rival Casino warned that it would block any deal using its con-trolling stake in GPA.

The French groups, both massive brand names at home, are slugging itout over the fast-growing Brazil mar-ket as their European sales fade.

In Paris, Casino issued a statementtelling Carrefour that its board could

be held liable for accepting the deal without Casinos consent.Casino has begun arbitration pro-

ceedings against the current GPA chairman, Brazilian tycoon AbilioDiniz, for allegedly negotiating withCarrefour without informing it.

I think Casino has all the aces,said RBS analyst Justin Scarborough.They dont need the cash. Theyvegot every right to say were not doinga deal.

Carrefour board suppoplans for Brazilian mer

RETAIL

NEXT has sold its third party cus-tomer contact arm in a deal worth65m.

The retailer offloaded Ventura tothe outsourcer Capita.

Next said it would use the pro-ceeds of the sale to buy back andcancel its own shares.

Earlier this year, Next outlined thepotential for 160m of share buy-

backs in the current year. It has now updated that guideline to 225m.

Ventura manages more than 50million customer contacts each yearfor a range of additional private andpublic sector clients.

The sale consideration is 65m ona cash free, debt free basis, of which63m is payable in cash on comple-tion.

In the year to January 2011 Ventura reported turnover of 156mand operating profit of 8m.

Capita said the acquisition would

increase its capacity for customermanagement services.

Next offloads its Ventuarm to Capita for 65m

RETAIL

HOTEL chain Travelodge today announced 22 new hotels, includingfive in London, as part of a 165mexpansion across Britain.

The company has also entered apartnership with clothing retailer

Arcadia Group. This partnership willsee the construction of a 96-room

Travelodge hotel above the Topshop

store in Princes Street, Edinburgh, with the establishment due to openin summer 2012.

Other new Travelodges includehotels at Gatwick airport in WestSussex, at Glasgow airport, atNewquay in Cornwall and atSittingbourne in Kent. The 22 hotelsrepresent 2,198 rooms. The company has opened 18 hotels in the first half of 2011 and is currently building 43.

Travelodge to splash out165m on new UK hotels

LEISURE

BAKERY chain Greggs said yesterday it has started a trial with IcelandFrozen Foods to test the potential forthe supermarket to sell frozen Greggs

branded sausage rolls for shoppers to bake at home.

This is a trial which will enableGreggs to assess the potential for itssavoury foods to be sold into thefrozen take home market, and toidentify any impact this could haveon its existing shop business, thefirm said.

The trial will see a four-pack of Greggs branded sausage rolls sold in10 Iceland shops in Liverpool, andother areas in the north west of thecountry.

Separately Greggs said that cus-tomers would for the first time beable to pay for purchases over 3 witha debit or credit card. Previously only cash payments have been accepted.

Greggs chief executive KenMcMeikan said the firm planned toattack the end of day take-home mar-ket as it seeks new revenue streamsin a trading environment which hedoes not expect to improve any timesoon. Shares in Greggs have increased

by nearly a quarter over the last year.Greggs opened 68 new shops in the

UK last year and plans to add another80 by the end of this one. There arenow more than 1,500 places to pick up their famous steak bakes andsausage rolls. More than 10m break-fast rolls have been sold since lastFebruary. The firm is also planning tosell healthier options.

Greggs set forfrozen marketin Iceland dea

RETAIL

Ikea growthis stunted bytraffic rules

BY J OHN DUNNERETAIL


FOREVER 21 TO OPEN AT LAKESIDE

US FASHION giant Forever 21 has announced it will open a new flagship store at CapitalShopping Centres Lakeside, in Essex. Forever 21 will open for Christmas 2013 after arevamp at Lakeside, which will also see new flagship stores for BHS and TopShop/TopMan.

A total of 35,000 sq ft of new space will be created.

Casino would be mad not to fight dealITS hard to argue with Carrefoursrationale for merging its Brazilianoperations with Grupo Pao de

Acucar (GPA), Brazils number oneretailer.

The combined company would

be a force to reckon with, withalmost a third (27 per cent) of theBrazilian grocery market and over$40bn in annual sales.

Brazil is already Carrefours sec-ond largest market after France.

After the deal, the worlds secondlargest retail group by revenue

would garner 40 per cent of its salesfrom emerging markets.

Around 50m Brazilians have

joined the supermarket-shoppingmiddle classes over the lastdecade and growth projectionssuggest tens of millions more willfollow.

The Brazilian economy is project-

ed to grow 3.94 per cent this yearand 4.1 per cent next, according tothe countrys central bank.

Theres just one problem.Carrefours biggest rival Casino,

which has a controlling stake inGPA, is trying to block the deal. Wethink the Seine will freeze over in

July before management atCasino let the deal go through.

Some have suggested that Casino

could walk away with a tasty premi-um for its stake in GPA, consideringthe 600m- 800m that Carrefourreckons it could save annually fromthe merger.

That would leave it free to con-

centrate on other, even faster-grow-ing Latin American markets. We still think there is plenty of

easy money to be made in theBrazilian grocery market. Casino

which holds all the cards would be mad to give up without a fight.

BOTTOMLINEAnalysis by David Crow

Birds Eye chief exec rejects top joboffer from struggling Premier Foods

BY J OHN DUNNERETAIL

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GROWING demand for office spaceand a booming London market areoffering some hope for the UKs ailingcommercial property market, a new survey revealed today.

And while the residential property sector continues to slump across theUK, house prices at the top end of theLondon market are expected to rise by nine per cent this year in anothersign of the capital producing a twotier property market.

Estate agent Knight Frank hiked itsforecast for prices on Londons tophomes, following a surge in demand

by 52 per cent. The soaring market has attracted

investors to build over 20bn-worth of new luxury London homes, accordingto research by EC Harris LLP, also pub-lished yesterday.

Yet sluggish activity in the rest of the UKs residential market has con-tributed towards a 12th straight quar-ter of negative housing equity

withdrawal, separate data released by the Bank of England showed.

Outstanding mortgage debt fell by 5.8bn in the first three months of the

year a slower decline than the record7.1bn drop recorded in the final quar-ter of 2010.

Large reductions in equity with-

drawal are largely due to a fall in thenumber of housing transactions,according to the Bank.

When more houses are bought andsold, there tends to be an increase inthe net flow of lending secured onproperties, the Bank has found.

In the commercial property sector,London is the only region in which rev-enues from rent are expected toincrease in the next quarter.

Across the UK as a whole, a negative balance for four per cent of respon-dents expect rents to fall, according toprovisional results from the RoyalInstitution of Chartered Surveyors(RICS).

In central London, a positive balanceof 16 per cent of surveyors expect rentsto increase, while greater Londonleads the way, with 18.5 per cent moresurveyors expecting a rise in rentsthan those anticipating a fall.

Across the country, office space isthe only sub-sector in which rents areexpected to increase. Expectations of revenue from industrial and retailproperty have picked up, but stillremain in negative territory.

Moreover, within the capital it isthe office sector which has enjoyed themost pronounced recovery, said RICSeconomist Simon Rubinsohn. Yetthere is little reason to believe that thisimprovement in London will fan out toother parts of the UK any time soon.

London defiesslow UK realestate marketBY J ULIAN HARRIS

PROPERTY

CALL US TO DISCUSSFIND YOUR NEAREST STORE

THE PRINT COMPANYTHAT NEVER SLEEPS



THE con struction industry contin-ued to grow last month, d atareleased ye sterday confirmed.

The sector printed 53.6 in a pur-chasing manag ers index (PMI) sur-

vey, down only slightly from the54 recorded in May .

All scores above 50 indicate eco-nomic growth.

June data rounds off a furthersolid quarter of growth , albeitdown on the first quarter, saideconomist Sarah Bingham fr omMarkit, wh ich compiled the data.

This contrasts with the surpris-

ing weakness seen in the o f ficialdata for t he first three months of the year.

Some eco n omists have raisedeyebrows at official figures fromthe Office of N ational Statistics(ONS) which show the construc-tion industry signi ficantly hold-in g back the UKs GDP growth.

A sharp slowdown in new orde rs (from 56.3 to 53.2) draggedon the headline index, whil e con-

fidence p lummeted to its first sub-60 reading of the year.Expectatio n s for future business

were still positive, yet the level of optimism was se v erely hit, fallingfrom 66.8 to 59.1 in the sub-index.

Job cuts in the industry, mean - while, were th e most severe in fivemonths. After growth in construc-tion sector em ployment wasrecorded in May with a score of 51.3, the level in June sank to 47.8.

Nearly one in five (18 per cent)of respondents noted a de crease instaffin g levels at their companies.

The manufacturing sector hi t a21-month -lo w in June, accordingto Markit data published late las t

week.Progress in services, the UKslargest sector, wil l be revealed intodays PMI figures, providing evi-dence of the economy s overall sec-on d quarter performance.

Construction industry still growingyet one in five firms are cutting jobsBY J ULIAN HARRIS

UK ECONOMY

UK familieneed 20pcmore cash

FAMILIES with children need to earnup to 20 per cent more than last year

just to hit an acceptable standard of living, the Rowntree Foundation

will argue today. A working couple with two chil-

dren need to earn 36,800 perannum simply to cover the familys

basic costs, a report by the founda-tion has found.

The squeeze in living standardscaused by the combination of risingprices and stagnant incomes is hit-ting people on low incomes hard,said author Donald Hirsch, an aca-demic from LoughboroughUniversity.

Over the last 10 years the cost of aminimum basket of goods hasrocketed by 43 per cent, Hirsch found higher than the 27 per centincrease in the wider consumer priceindex.

In the future, if rising worlddemand continues to push up com-modity prices, minimum costs couldagain rise faster than the officialinflation rate in the UK, Hirschadded.

The lot of families has declinedmore sharply than that of child-freeindividuals, the report found, due toreductions on tax credits coveringchildcare. Furthermore, child benefithas been frozen.

For families who need to usechildcare, it has substantially reduced the incentive to work on rel-atively low pay, Hirsch said.

BY J ULIAN HARRISUK ECONOMY

RONALD REAGAN STATUE UNVEILED IN LONDON

A bronze statue of the late Ronald Reagan was unveiled at the American embassy in Mayfair yesterday to mark the US presidents 100th birthday. Foreign secretary William Hague and Condoleeza Rice, US secretary of state under George W Bushs administra- tion, both spoke at the unveiling ceremony yesterday morning. Pic: REUTERS

NEWS | IN BRIEF

Sole traders stunted by red tapeOne in three sole traders looking toexpand their business would beencouraged to take on staff if theywere exempt from employment laws, asurvey from the British Chambers of Commerce has found. Half of the sur-veyed traders said that a reduced rateof National Insurance Contributions(NIC) would incentivise them to recruittheir first employees. Only six per centof sole traders were unemployed

before going into business alone, thereport also uncovered.

Eurozone producer prices slipProducer prices in the Eurozoneslipped more than expected in May,declining by 0.2 per cent, after a 0.9per cent jump the previous month.However, underlying data suggest thatprice pressures remain intense, accord-ing to Barclays Capital: The annualinflation rate for the core (excludingfood and energy) consumer goods PPIreached 1.3 per cent annualised in May,up from 1.1 per cent previously in

April. Industrial producer prices were6.2 per cent higher than last year.

Investor morale boost for EuroInvestor sentiment across theEurozone has taken a surprising upturnthis month. The German-based Sentixinvestor confidence index climbed to5.3 months in its July reading, up from3.5 in June. Relaxed commodity prices,and particularly the sharp downwardturn in the price of oil, helped easeinvestor concerns. The recent supportpackage for Greece also boostedmorale, according to the survey, which

was carried out between 30 June and2 July.


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MOBILE computer manufacturerPsion tanked more than 17 per centto 74.25p yesterday after issuing ashock profit warning.

It said it will report a loss of 4mfor the first half of the year, with rev-enues around four per cent lower.

The firm, which brands itself as aseller of rugged handheld technol-ogy, blamed the decidedly flimsy per-formance on supply chain issues anda weak pound.

The FTSE All Share company alsosaid launch expenses for its new enterprise personal desktop assistant(PDA) device the EP10 has weighed onits first half figures.

In the same period last year thefirm recorded a 700,000 profit. Itsprofits for the last year hit 5.7m onrevenues up 2.6 per cent to 174.5m.

However, Psion, which competes with US-based Intermec, said theshortfall in the first half would bepartly mitigated by the new, lowercost EP10 and new roaming technolo-gy for the US market.

It also said hardware orders booked in the first half are 16 percent ahead of last year on a constant

currency basis. It added that unitsshipped in the half are approximate-ly three per cent higher than thesame period last year.

The firm says it plans to press ahead with its strategy of building its busi-ness in the US, which it says is itslargest potential geographic market.

Psion, whose clients include car-makers Volkswagen and BMW hasseen its share price gain by nearly aquarter over the past year. It is valuedat around 125m.

A company spokesman said: TheBoard expects that the Groups full

year performance will be below man-agements expectations for the year

with a shortfall in the f irst half of the year partly mitigated by second half improvement.

NORWEGIAN oil firm DNO andEmirates-based RAK Petroleum havesigned an agreement to mergeRAKs Middle East and North

African subsidiaries into a sub-sidiary of DNO, the Norwegian com-pany said yesterday.

The two companies signed a non- binding heads of agreement for

DNO shares to be issued to RAK Petroleum in a price range of

between 8.25 and 10 Norwegiancrowns against RAK regional assets

valued at between $250m (155m)to $300m, DNO said.

The heads of agreement provides the basis of negotiation of definitive merger documents,including an integration announce-ment, DNO said in a statement.

DNO said that when the transac-tion closes, RAK Petroleum, basedin the United Arab Emirates, is

expected to have a total ownershipinterest in DNO of about 40 per

cent, compared with 30 per centtoday.

DNO managing director HelgeEide added: The enlarged DNO will

be a more robust company withhigher production and stable cashflow from a more diversified portfo-lio.

DNO investors welcomed theannouncement, sending the compa-nys shares up more than 16 percent yesterday to close at 6.99

Norwegian crowns, valuing thecompany at 5,699m crowns.

Norway's DNO and RAK agree to mergeassets in Middle East and North Africa

VOLKSWAGEN clinched a 55.9 percent stake in Munich-based truck-maker MAN yesterday, clear-ing the way for thecarmaker to start

building its Europeantruck empire.

Vo l k s w a g e n smajority stake allowsit to determine seats

on the supervisory board, a way to accel-

erate cooperation between MAN and VWs Swedish brand Scania.

Volkswagen is more than pleased with the result, Volkswagen chief

executive Martin Winterkornsaid.

VWs influential chairmanFerdinand Piech has beenitching to create Europes biggest truckmaker tocompete with rivals suchas Volvo and Daimler and

expand the reach of Volkswagens sphere.

Volkswagen clinches kestake in truckmaker MA

AUTOMOTIVE

SHARES in newspaper distributorand aviation services group JohnMenzies jumped 7.9 per cent to 545p

yesterday after the company said it was set to exceed expectationsthanks to a strong start to the finan-cial year.

John Menzies aviation division, which provides services such aschecking passengers and baggage onto planes and cargo management,said it was enjoying increased con-

tract win momentum and generally positive trading, the company said.

The newspaper arm, MenziesDistribution, continues to operatein challenging markets but manage-ments proven track record of inno-

vating and delivering cost savingscontinues to keep the division ontrack.

Edinburgh-based John Menzies was founded in 1833 and is one of Scotlands biggest companies. It usedto be best known as the operator of alarge chain of newsagents.

John Menzies soars aftupbeat trading statemen

SUPPORT SERVICES VODAFONE has sealed a long-awaiteddeal to buy out its Indian JV partner

Essar for an eye-watering $5.46bn(3.4bn). Vodafone said it will buy the 33 per

cent stake owned by a collection of Essar companies, giving it a majority 74 per cent shareholding in the

Vodafone Essar venture. The deal brings to an end a highly fractiousrelationship.

The price includes an $880m pay-ment for Indian taxes, which neither

Vodafone nor Essar believe is due and

will be returned to Essar if they areproved correct.

Vodafone is now likely to pursue anIPO of a small part of the business

between one and two per cent on

the Mumbai stock exchange after sur-passing Indian foreign ownershiprules.

However, Vodafone boss VittorioColao has signalled this could bedependent on a satisfactory resolu-tion to the ongoing $2.5bn tax dispute

with Indian authorities. He has previ-ously said it would be a positive movefor the Indian stock market to have afirm of Vodafones internationalstanding on its books.

The deal is part of Vodafones strate-gy to only own assets where it has con-trol, and follows the sale of its stake inPolish operator Polkomtel last week.

Vodafone buys out Essar JVBY S TEVE D INNEEN

TELECOMS

Psion slumpsafter warningon its profitsBY S TEVE D INNEEN

TECHNOLOGY

BY H ARRY B ANKS

ENERGY


NEWS | IN BRIEF

PetroChina buys Ineos assetsPetroChina has completed its purchase of UK chemical group Ineos assets for $1bn(621m), the firm said in a filing to theShanghai stock exchange yesterday.PetroChina will acquire a 50 per centstake in Ineos European refining business,including plants at Grangemouth inScotland and Lavera in France.

Essar Energy to vote on StanlowEssar Energy plans to ask shareholders toapprove the acquisition of the Stanlow oilrefinery near Ellesmere Port from ShellUK for $350m (218m) at a generalmeeting on 18 July. The meeting will beheld at Deutsche Bank in London at 9am.

Baidu in Microsoft Bing tie-upBaidu, which has three-quarters of Chinassearch market, signed a deal withMicrosofts Bing to offer English-languagesearch to Baidu users, as it eyes an over-seas expansion and Microsoft aims toincrease its presence in the worlds largestInternet market. Baidu dominates China'ssearch-engine market after Google pulledout last year following a high-profile fall-out with Beijing over censorship.

Fenner buys Tasmanian companyConveyor belt maker Fenner has bought abelting privately owned company inTasmania. Fenner is buying Statewide, aprivately owned company based in Burnie,Tasmania, with gross assets of A$3.95m(2.63m) as of the end of June 2010.Statewide specialises in the provision of belting products, accessories and installa-tion services to the mining and manufac-turing industries in Tasmania.

Sony restores PSN worldwideSony said it will fully restore allPlaystation Network videogame servicesin Japan, marking the resumption of allnetwork services worldwide after a mas-sive security breach forced the companyto shut them down in April.

ANALYSIS l Vodafone Group PLCp


166

164

165

162

163

165.004 Jul

ANALYSIS l Psion PLC

p


90

80

85

70

75

74.254 Jul SHARES in Australias Treasury Wine

Estates surged 11 per cent to a record yesterday, valuing the worlds second-largest winemaker at $2.6bn (1.6bn),following a report that Chinas BrightFood Group was considering a bid forthe company.

Treasury Wine, with brands includ-ing Wolf Blass, Rosemount andLindemans, was spun off by Fosters

Group in May to its shareholders afterthe brewer failed with an expansioninto wine that resulted in nearly

A$3bn in writedowns. Following thesplit, both companies were seen aspotential takeover targets and Fostershas already rejected a $10bn takeoveroffer from brewing giant SABMiller.

Bright Food could bid for Treasury Wines assets and make good use of its existing distribution network mainly in supermarkets, one analystsaid.

Chinese interest boostsshares in Treasury Wines

Treasury Wines owns brands like Lindemans and Wolf Blass Picture: REX

BY H ARRY B ANKSCONSUMER

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News 17CITYA.M.5 JULY 2011

Evolution SecuritiesThe investment bank has appointedMike Bessell to the research team tofocus on the property and housebuild-

ing sector. Bessell joins from StandardLife Investments, where he was invest-ment director on the larger companiesteam, responsible for covering the

chemicals, real estate and housebuild-ing and construction sectors.

Novo AltumRoy Barden has joined Novo Altum asshared services practice leader.Barden joins from The Hackett Group,

where he was the global leader forglobal business services advisorypractice, focusing on shared servicesand outsourcing advisory.

FairfaxCarole Ferguson has been hired as amember of the research team at thestockbroker. Ferguson was previouslydirector of UK equities at Soci tGenerale Asset Management, manag-

ing the mining and oil and gas sectors.

BerenbergRichard Brass is to join the manage-ment team of Berenbergs UK privatebanking business. Brass, a formerclient director at Schroders Private

Banking, will help expand the businessalongside Ross Elder and Fred Hervey,who founded Berenbergs privatebanking arm at the start of the year.

Towergate InsuranceTruett Tate, group executive director,wholesale at Lloyds Banking Groupwill join the board of TowergateInsurance as a non-executive director.Tate will also be appointed to the

board of sister firm Cullem CapitalVentures, subject to FSA approval.

TemenosThe banking software provider hasappointed Guy Dubois as chief execu-tive and as a member of the Temenos

board of directors. Dubois, formerlychief executive of mobile firm MACHGroup, succeeds Andreas Andreades,who becomes chairman.

JefferiesFrank Cerveny, formerly managingdirector at Credit Suisse, has joinedthe investment bank as a managingdirector and co-head of theInternational Credit business.

CITY MOVES |WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

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

in association with

Global shares uafter Greek dea

W orld stocks hit a 4-1/2 week high yesterday as investorsgrew confident over globaleconomic prospects after

Greece avoided an early debt defaultand data pointed to a moderate slow-

down in Chinas growth.Shanghai stocks hit a six-week highafter data last week showed Chinesemanufacturing growth moderated in

June, raising expectations that theeconomy may not be heading for asharp slowdown despite monetary policy tightening.

Over the weekend, Eurozonefinance ministers approved a 12bninstallment of aid for Greece and saidthe details of a second aid package

would be finalised by mid-September.But the euro erased gains after rat-

ings agency Standard & Poors said adebt rollover plan being consideredfor Greece may still put the country into selective default.

Banks effectively own Greece, andGreece, as an asset, is under pressure.I think banks will be under pressurefor some time, said RichardGreenwood, fund manager at Bedlam

Asset Management, which manages$700m.

However, the companies with pric-ing power, stable demand and goodmanagement will just do their busi-ness. Some healthcare and consumerstaples will continue to be very stable.M&A activities will also help stocks.

The MSCI world equity index rose0.47 per cent to hit its highest since

June 1. The benchmark index rose more

than 5 per cent last week, its biggest weekly gain since July 2010.

European stocks gained 0.2 per

cent while emerging stocks rose 1 percent, helped by Shanghai stocks which rose nearly 2 per cent.

US markets were closed for theIndependence Day holiday.

European markets look much hap-pier than they did just a week ago.Bears have been banished to the side-lines, said Darren Sinden, seniorsales trader at Silverwind Securities.

We may see some profit-takingacross the rest of the week, but that

would be as expected given the signif-icant gains posted by major Europeanindices in the last sessions.

Fund tracker EPFRs data showedinvestors piled back into emergingmarket equity funds in the week to

June 29 as hopes that Greece wouldavoid imminent default encouragedrisk taking.

Inflows into global emerging mar-ket funds tracked by EPFR hit a 12-

week high during the week, followingthree straight weeks of outflows.

I NTEGRATED oil and property stocks helped Britains top sharesend higher yesterday, when gains were limited by weaker banks

after Standard & Poors warned apotential Greek debt deal wouldamount to a default.

The FTSE 100 index rose for a sev-enth straight day, adding 27.78points, or 0.5 per cent, to 6,017.54,closing above 6,000 for the first timesince mid-May.

With US markets closed forIndependence Day, volume on theFTSE 100 was only 52 per cent of the90-day average.

Integrated oil stocks added themost points to the blue-chip index,despite a steadying crude price/

BG Group was up 0.8 per cent asHSBC became the latest broker to liftits target price for the company

which last week doubled its estimateof its share of reserves in Brazil.

Peer Royal Dutch Shell climbed oneper cent as Goldman Sachs said thefirm, likely to be supported by strongsecond-quarter results, remains oneof its top two picks in the integratedoils sector.

Oil explorer Cairn Energy shed 3.3per cent. It was the heaviest FTSE 100

faller following a JPMorgan targetprice cut, after the deal to sell a stakein its Cairn India unit to Vedanta wasrepriced last week.

British Land was up 2.3 per cent, asDeutsche Bank recommended thatinvestors buy shares in the blue-chipreal estate group in anticipation of strong net asset value growth.

Bullish broker comment alsohelped temporary power providerAggreko , up 1.9 per cent, withCitigroup lifting its target price andearnings forecasts, praising its strong

performance and pipeline.Imperial Tobacco climbed 1.2 percent after lifting prices across itsSpanish cigarette portfolio broadly topre-price war levels, promptingCitigroup to raise its earnings esti-mates and target price.

Elsewhere, banks fell after last weeks heady gains as credit ratingagency Standard & Poors warnedGreece would likely be in default if itfollowed a debt rollover plan promot-ed by French banks.

Lloyds Banking Group was the worst sector performer, off 1.8 percent, followed by Royal Bank ofScotland , down 1.5 per cent, asinvestors fretted the Eurozone debtcrisis is far from over.

My feeling is that with the short-term resolution on Greece, and thepayment likely to be made, we didhave a relief rally last week. Whether

it continues, I think the market isfairly sceptical on that, Martin

Dobson, head of trading at Westhouse Securities, said.

Traders said Fridays release of JuneUS non-farm payrolls will be moni-tored since investors are keen to putto one side remaining worries thatthe US economy has struck a softpatch.

Some of last weeks US data offeredcause for optimism, with equity mar-kets receiving a fillip after a forecast-

beating ISM manufacturing survey, which built on surprisingly strongregional business data.

But one swallow does not make asummer, said Michael Hewson, mar-ket analyst at CMC Markets.

Thats just typical of these mar-kets they cherry-pick the data they

want to see. Im not saying its wrong, but it highlights the fickle nature of markets.

What I would like to see is a goodpayrolls report, and I have a feelingthat were lining ourselves up for a bitof a disappointment on that.

Buoyant integrated oil stockspower FTSE past 6,000 markTHELONDONREPORT

THEWORLDREPORT

BEST OF THE BROKERS To appear in Best of the Brokers email your research [email protected]

ANALYSIS l National Express270

250

240

p

May Jun

259.104 Jul

NATIONAL EXPRESSNomura rates the transport group as a buy with a target price of 320p, andcalculates that its year-on-year growth in both its US schoolbus and Spanishoperations have improved sequentially in the second quarter. The broker seesmomentum at the company as positive at the moment, with a successful bid-ding season underpinning forecasts for 2012. Nomura forecasts earnings pershare of 28p for 2011, around eight per cent ahead of consensus.

ANALYSIS l L'Oreal90

86

82

May Jun

89.714 Jul

LOREALUBS reiterates its buy rating on the cosmetics and beauty giant with a tar-get price of 100 following a trip to its Indian operations in Mumbai. The bro-ker says that although India is still a small market for LOreal, with sales of 171m in 2010, China was in a similar position 10 years ago, and manage-ment predicts 1bn of revenue from Indian sales in the next ten years. UBSsees substantial medium term upside in the shares.

ANALYSIS l Imperial Tobacco2,300

2,100

1,900

p

May Jun

2,143.004 Jul

IMPERIAL TOBACCOCiti changes its rating of the tobacco group from hold/low risk tohold/medium risk with a target price of 2260p. The broker says thatImperials price raises in Spain mean it is more optimistic about tobaccing in general, and increases its full year estimates for 2011 by 1.8 per cand for 2012 and beyond by about five per cent. Though Citi expects thof the industry to follow on pricing, it may wait for tax changes instead

p

4 Apr 26 Apr 18 May 8 Jun 28 Jun

6,100

5,700

5,800

5,900

6,000

ANALYSIS l FTSE6,017.54

4 Jul

Compact GTLThe modular gas solution for oil and gas fieldshas appointed Simon Clark (pictured) as itsfirst chief operating officer. Clark joinsCompact GTL after spending the majority of his career at Centrica, where he developed

large-scale energy infrastructure projects suchas the North Sea oil and gas production busi-ness and the offshore windfarm operation. Thecompany has also promoted Iain Baxter, whohas worked at the firm for five years, to direc-tor of business development.

8/6/2019 Cityam 2011-07-05

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S TARING at a blank page, chewingon your pencil and trying to work out a trading strategy can be adaunting task. There are plenty of

guide books out there to aid you, of course. But is there any merit in takingan off-the-shelf trading strategy devised

by an experienced trader and using it yourself tweaking it to suit your needs?

By taking an existing plan, you areadopting a strategy which has been devel-oped and tested. Also, the key to a goodstrategy lies as much in when to exit atrade as when to enter into it. DeclanFallon is senior market technician forZignals.com. He points to the many advantages when looking for an off-the-shelf plan: with a pre-existing strategy,

you can filter during the selectionprocess to screen for strategies by stock,sector, risk, initial stop, trade frequency,percentage winners and more.

Social trading platform eToro has asimple way of adopting another tradersstrategy via their copytrader function.Much like following somebody on

Twitter, you can copy an expert trader by simply clicking on a follow button intheir profile, and selecting how muchmoney you want to invest in their per-formance. You can look at an expert trad-ers profits, trading style, portfoliostrategy and risk level.

CAVEAT NEGOTIATOR Though looking at existing trading strate-gies can set you off on your way, tradersshould bear in mind that these shouldonly be used as a guide, and you should-nt unquestioningly take on a thirdpartys strategy. Erik Voges, chief operat-

Using an expertsexisting plan canhelp point you in theright direction,writes Craig Drake

Looking at off-the-shelf CFD trading strategies

THE first half of the year came to a close lastThursday. Events in the final few days of June helpedto lift equity markets and temper earlier losses. TheFTSE 100 ended the month virtually unchanged,

while the Dax finished in positive territory rallying over 5per cent from its low-point. In the US, the Dow, Nasdaqand S&P ended 1 to 2 per cent lower in June, and whileeffectively flat for the quarter, all three indices a re now upover 5 per cent for the year. The first day of July broughtfurther stock market gains, boosted by some desperateshort-covering from traders anticipating a sell-off once theFeds QE2 stimulus programme concluded.

Helping to lift equities, the Greek parliament votedyes to further austerity measures, and even agreed overhow spending cuts, tax rises and its privatisation pro-gramme should be implemented. This was enough for theEU/IMF/ECB to release its next 12bn bailout tranche toGreece, and will also help the troubled country secureagreement from the troika for a second bailout. Yet mostanalysts believe that Greece will struggle to followthrough on its commitments, and that default is post-poned, not avoided.

Meanwhile, precious metals have come under intenseselling pressure. No sooner did they appear to recover fol-lowing the vicious May sell-off, than they suffered anoth-er concerted attack, driving them back to test significantsupport levels.

Initially, gold and silver appeared to be victims of ageneralised risk-off trade, which also saw steep falls inequity and commodity prices. But the stock market rallyhas countered that argument to some extent. Anotherpossibility is that leveraged long-side speculators are fly-ing out of precious metals following the conclusion of theFeds $600bn asset purchase programme. After all, theFeds stimulus has found its way into just about everyasset class imaginable, as primary dealers have soakedup the extra liquidity and hosed it back into riskier mar-kets. If so, then this could be the speculative froth finallybeing blown off precious metals. There could be more tocome, but the bulls will be hoping that the selling pres-sure now subsides, and that support holds on a closingbasis around $1,475 and $1,450 for gold, and $33.80 fol-lowed by $31 for silver.

AT HALF-TIMEGOLD NEEDS

A PEP TALKDAVID MORRISONCFD MARKET STRATEGIST, GFT

ing officer of Autochartist, advises cau-tion when simply taking the tradingstrategy developed by a professional trad-er and using it yourself. He points outthat the advantage of building your ownstrategy is that you will have a much bet-ter fundamental understanding of theattributes and idiosyncrasies of your sys-tem.

As with all important designs, sim-plicity invariably ends up winning theprizes, says Voges. However, this doesnot necessarily mean that its easy todevelop. Simplicity is what you want tohave as an end-result. Voges adds:

During the process of formulating yourtrading system, you will develop a multi-tude of tiny little theorems, that willeach be tested and, if they hold up, some-how weaved into your masterpiece.

Voges advises that there are threethings to keep in mind when consideringan off-the-shelf strategy. Firstly, youshould never trade a system you dontunderstand. Secondly, the process of

building a trading system automatically creates tacit knowledge with the develop-er, and adapting or tweaking a system

without having that tacit knowledge is a bit like searching in the dark.

There are a range of strategies available to you Picture: REX

Wealth Management | CFDs18CITYA.M. 5 JULY 2011

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G YM bun nies looking for the top-flight places to keep fit should headto the citys le ading hotels. Lavishsurroundings, less-crowded gymna-

siums and access to magnific ent s pasmake exercise a pleasure, even an indul-gence. Here are five of the best.

CORINTHIA HOTELPlush, in a word. The new Corinthia Hotelis a place of dazzling, no-expense-sparedopulence, an d its Espa Life spa and gym all four floors of it is no different. Theemphasis is more on th e spa side thereare treatments and treatment rooms galore but the gym has its fair share of cardio ,

weights, powerplates and rowingmachines, plus private personal training

Timothy Barber says top hotelsare the pl

cityam 2011-07-05

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