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Issue 1,448 Wednesday 17 August 2011

Certified Distribution

04/07/2011 till 31/07/2011 is 93,093

GERMAN chancellor Angela Merkelrocked investors last night with ashock commitment to push for a EU-

wide financial transactions tax, oftenknown as a Tobin tax.

The plans for a Europe-wide levywould knock the Square Mile, threat-ening to push even more jobs tolower-tax corners of the global mar-ket.

The City could expect a hit to thetune of 20bn a year, according to theRobin Hood Tax campaign, which lob-

bies in favour of the charge.Speaking alongside French

President Nicolas Sarkozy in Paris lastnight, Merkel said: French andGerman finance ministers will table a

joint proposal at the EU level inSeptember for a tax on financialtransactions. This is a priority for us.

The move intended to raise gov-ernment funds and mitigate marketinstability has been pushed hard inBrussels by anti-capitalist groups andtrade unions, yet faced criticism fol-lowing Merkels surprise statement.

Tobin taxes dont reduce marketvolatility, they simply act as a blind-fold, said Sam Bowman of the AdamSmith Institute, arguing that the tax

could increase asset bubbles. Freeexchange allows the market to incor-porate new information into assetprices, and Tobin taxes just distort the

real world information that the pricesystem conveys.

In a joint statement that endorsedfurther integration of Eurozonestates, Sarkozy also said work was

beginning on a common tax on com-panies in terms of the tax base as wellas in its rate for German companiesand French companies.

We need a stronger interplay offinancial and economic policy in theEurozone, concurred German leaderMerkel.

Unimpressed markets slumpedduring the Franco-German confer-ence as the two leaders failed to reas-sure investors over the Eurozone debtcrisis. After three days of gains, equi-ties across the pond sank as Merkeland Sarkozy ploughed their waythrough the public conference.

The Dow Jones industrial averageshed 164 points, or 1.43 per cent,

while the Nasdaq lost more than twoper cent, before recovering slightly.

The euro also lost ground againstthe dollar, falling by 0.3 per cent atone point, as the core Eurozone lead-ers called for more political and fiscalintegration, yet failed to outline solidsolutions to the escalating debt crisis.

Earlier in the day the Eurozone washit by weak estimates for GDP growthin the second quarter of the year. The

French economy is thought to havestagnated, while Germany expandedby just 0.1 per cent.

MORE: P18-19 ALLISTER HEATH: P2

CITY SUPRTAXBY JULIAN HARRISTAXATION

PLANS FOR EUROPE-WIDE LEVY WOULD HIT SQUARE MILE

A NEW EUROZONE PRESIDENTA real economic government for the

Eurozone made up of heads of state. Itwill elect a president every 2.5 years.Current EU chief Herman Van Rompuywas proposed to be the first president.

FINANCIAL TRANSACTIONS TAXA priority for the leaders, it will be for-

mally tabled in September at the EU. A GOLDEN RULE ON PUBLIC DEBTAll members constitutions to oblige theirgovernments to set targets for budgets

to be balanced over time.MORE POWER GIVEN TO THE EC

When the European Commission criticis-es a profligate member state, the coun-try must not be able to put aside thewarning, but must restrain spending.

EURO CRISIS | THE MERKEL-SARKOZY PLANS THAT FAILED TO LIFT THE MARKETS

Picture:GETTY

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News2 CITYA.M. 17 AUGUST 2011

Sage eyes $1bn Aussie rivalSAGE is in the running to buy Australian accountancy softwarecompany MYOB (Mind Your OwnBusiness) in an increasingly rareexample of a UK-based firm attempt-ing to take control of a major foreignasset.

It is understood Bain Capital andKohlberg Kravis Roberts (KKR) havealso placed final bids for the firm,which is expected to fetch more than$1bn (610m).

Private equity firms Archer Capitaland HarbourVest Partners, which bought MYOB for about 287m in2008, are understood to have hiredUBS to advise on the sale.

In the first quarter of last year thenumber of foreign firms bought byUK-based companies, and the amountspent on them, fell to their lowestlevel in more than 20 years.

The total outward investment for2010 fell 75 per cent year-on-year tojust 6.7bn.

In contrast, a number of multi-bil-

lion pound firms have been snappedup by foreign investors. Earlier thismonth Northumbrian Water wasbought by Hong Kong tycoon Li Ka-shings Cheung Kong InfrastructureHoldings for 2.4bn.

Last year Cadbury was taken over

by US-based Kraft in an 11.9bn deal.And these are eclipsed by Telefonicas18bn deal for O2 in 2005. Sage,which has a market value of 3.4bn,is a supplier of business managementsoftware and related products andservices, mostly for small and medi-

um-sized companies.It has grown through acquisition,

typically moving into new markets bybuying a local provider of software,and now has more than 6m cus-tomers in over 50 countries.

The Newcastle-based group has notstruck any major deals in the lastthree years, choosing instead to paydown debt, but chief executive GuyBerruyer said in May that M&A wasstill part of its strategy.

Sage yesterday confirmed it is con-sidering a potential acquisition butstressed there is no guarantee the bidwill proceed. Sage shares dropped byjust over one per cent.

BY STEVE DINNEEN

TECHNOLOGY

Merkozys first outing fails to impress

IT was almost a case of goodbyeAngela Merkel and Nicolas Sarkozy; welcome Merkozy, the new Franco-German super-politician. Yesterdayssummit was classic Euro-fudge: radi-cal and possibly disastrous proposalscamouflaged by the fact that someother, equally disastrous proposals,were rejected. At any other time, thenews that France and Germany couldharmonise their corporation tax rates by 2013 would have been deemedhugely significant and a massive,blind leap into ever-closer EU centrali-sation; but because the issuance of

common Eurozone-backed euro bonds was rejected, for the timebeing, many commentators dismissedthe announcements as a damp squib.Merkel made it clear that such bonds

would be possible but only once theEurozone was more integrated.She also made it clear that the

European financial stability facility(EFSF) would not see its firepowerexpanded from the current 440bn.Whether such sentiments survive thenext Italian or Spanish scare remainsto be seen. Merkel is right to want toprotect taxpayers but she needs aplan B. At some point, the EuropeanCentral Bank, which bought 22bn inItalian and Spanish bonds last week,will panic; and the EFSF will run outof money. Either all countries will bebailed out forever and therefore abigger EFSF or a Eurobond is needed or countries will be allowed to go bust.If the latter, then a blueprint for anorderly default and euro exit isurgently needed, or else the conse-quences will be catastrophic. Sadly, we

saw only denial and delay yesterday. The other major announcement

was that Germany and France willunveil plans for a pan EU Tobin tax onfinancial transactions by September.

This is a declaration of war on theCity, for which trading bonds, equi-ties, currencies, commodities andderivatives amounts to huge businessand sustains tens of thousands of jobsand billions in income tax revenues.Introducing a Tobin tax within the EUwould send these jobs to New York orSingapore, while raising virtually nomoney. Even were it imposed globally,a Tobin tax would slash transactionvolumes and make markets less liq-uid. Germany which grew just 0.1per cent in the second quarter, andFrance which failed to expand would suffer a bit (their biggest com-panies would have to pay more to raisecapital or operate in the currency mar-kets) but the UK would be tipped intoa catastrophic recession.

France and Germanys long-termplan appears to be to merge, forming

a nucleus for an ever more integratedEurozone. They want their taxes har-monised because they hate the factthat countries must compete for peo-ple and capital. Sarkozy dreams of a

cartel of governments, which wouldgive politicians more power over peo-ple. The plans for a real economicgovernment for the Eurozone, on theother hand, were little more than win-dow-dressing, with heads of govern-ment meeting twice a year, and thusachieving nothing. Introducing a con-stitutional balanced budget amend-ment would be good but as we knowfrom previous golden rules, includingthe laughably ineffective one intro-duced by Gordon Brown, they can eas-ily be fiddled unless an independentbody polices the budget. The problemis that there will be no extra sanctionsto back up the new proposed amend-ments. All in all, lots of bad ideas and some useless ones. No wonderMerkozys first outing didnt impress.

[email protected] me on Twitter: @allisterheath

Sage boss Guy Berruyer said in May acquisitions remain part of his strategy

NEWS | IN BRIEF

BoA to shed real estate assetsBank of America is in exclusive talks tosell the bulk of Merrill Lynch's boom-time real estate investments toBlackstone for up to $1bn (607m). Thesale is still weeks away and would com-prise between $800m and $1bn ofunwanted property investments in

Europe, the US and South America. Thesale is part of the US bank's efforts todispose of non-core assets to clear up itsbalance sheet and bolster capital ratios.BofA declined to comment, whileBlackstone did not return calls.

ABN Amro sells private bank armABN Amro is selling its Swiss privatebanking operation to Union BancairePrivee for an undisclosed price. The deal,announced yesterday, will see UBP com-plete the purchase in the fourth quarterof the year. ABN Amro had11bn(9.6bn) in client assets under manage-ment at the end of this years first quar-ter. The acquisition will see UBP add 20per cent to its overall assets under man-agement and expand its core Swiss pri-vate banking operation. ABN Amro wasadvised by JP Morgan. Banca Leonardoand Caurus Partner advised UBP.

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 atwww.pcc.org.uk

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EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness 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

ANALYSIS l Sage

p

Jun Jul Aug

250

290

280

260

270

240

230

249.2016 Aug

CITIC ARM TO PRESS AHEAD WITH HKLISTINGCitic Securities is to go ahead with aplanned Hong Kong listing that couldraise up to $2bn for the Beijing-basedfinancial services group. Bankers saythat the listing is likely to take placeby the beginning of September. Thedecision comes as many other issueshave been pulled in the face of mar-ket volatility.

WEST COAST RAILWAY SWELLS UKSTATE COFFERSThe government has received a recordpayment from a long-distance railoperator, with Virgin Trains paying110m for running the London toGlasgow service last year. The WestCoast railway line, which carries 28mpassengers a year between Londonand Glasgow, is now the most prof-

itable long-distance franchise inBritain after Virgin turned a 40m

subsidy received from the govern-ment last year into a 110m payment

on 31 March.REGULATOR CENSURES BAYER FORDRUGS TWEETSBayer has been sharply reprimanded by the Uk pharmaceutical industryregulator for using Twitter to pro-mote two high-profile prescriptionmedicines to the public, in a pioneer-ing case highlighting the dangers ofsocial media for marketing.

BARCAP STAR TO GO AMID PROPTRADING EXODUSStar banker Todd Edgar and his teamof nearly a dozen fellow commoditiestraders are to leave Barclays as part ofa stream of cuts designed to shedoverheads. He and his colleaguesnow plan to set up a hedge fund bythe end of the year. People close to thesituation said it had become unten-able for BarCap to employ prop

traders in the light of US Dodd-Frankleglislation.

CHALLENGE TO EXCHANGE DEAL OVERBEIRUT BOMBDeutsche Brses proposed takeoverof the owner of the New York StockExchange is being challenged by thefamilies of victims of a 1983 terrorattack in Beirut, who are suing a sub-sidiary of the German exchange oper-ator for $250m. The case centres onClearstream Bank, a securities depos-itory owned by Deutsche Brse. It is being sued by nearly 1,000 familymembers and survivors of the 1983bombing of a US Marine Corps bar-racks in the Lebanese capital, whichkilled 241 US servicemen.

IRISH SUPPLIER PINS HOPES ON ANAMERICAN ROAD TRIPBig infrastructure projects in the UScould give the Irish building materi-als group CRH a boost as it fights

against high raw material costs andsluggish growth prospects.

HIGH EARNERS INCREASE THEIR USEOF OVERDRAFTSA third of high-income families nowrely on overdrafts of more than1,000, compared with 15 per cent in2008. According to a three-year surveyfrom Experian, the information serv-ices company, 52 per cent of thesefamilies regularly borrow moneyusing their overdrafts. This results inhigher repayments, as rates of intereston overdrafts tend to be higher thanon other credit products.

DYSON SAYS LACK OF ENGINEERS INTHE UK COULD FORCE VACUUM MAKEROFFSHORESir James Dyson, the inventor andbusinessman behind the eponymousvacuum cleaner, has warned that hemay be forced to take his research anddevelopment operations abroad if

Britain does not produce more engi-neers.

SPAIN'S GROWTH UPTICK SLOWSSpains tentative economic recoverylost momentum in the second quar-ter as the Eurozones fourth-largesteconomy suffered the effects of adeepening sovereign-debt crisis, offi-cial data showed yesterday. Spainsgross domestic product rose at a quar-terly 0.2 per cent rate in the secondquarter, down from a 0.3 per centexpansion in the first quarter, asfalling domestic demand was partial-ly offset by booming exports, Spainsnational statistics institute INE said.On an annual basis, second-quarterGDP rose 0.7 per cent.

HONDA STRUGGLES WITH SUPPLYHonda Motors US dealers say theyare headed for their most difficultmonth of sales since the 11 Marchearthquake in Japan disrupted pro-

duction at the auto makers factoriesat home and in North America.

WHAT THE OTHER PAPERS SAY THIS MORNING

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STUBBORN inflation bounced back upin July, official figures revealed yester-day, hitting 4.4 per cent in the con-sumer price index (CPI) up from 4.2per cent in June.

Yet despite being forced to writeanother letter to chancellor GeorgeOsborne explaining why inflationhas remained more than one per centabove target for the 19th straightmonth Bank of England governorMervyn King (right) appeared to brushoff the price pressures and focus ondownside risks to the economy.

Recent developments in worldstock markets and in the euro area areof particular concern, King wrote.There is a risk that this [Eurozone cri-sis] could lead to further severe stressand dislocation in financial markets.

The Bank nonetheless expects CPIinflation to soar past five per cent inthe coming months two and a halftimes its two per cent target rate.

Andrew Goodwin of the Ernst &Young Item Club said: Were likely tosee inflation rise significantly over thenext couple of months as the largeenergy price hikes begin to kick in.

Four of the big six suppliers havealready announced large price hikes with the other two likely to follow.

Inflation continues to hammer thenations savers, according to the web-site Moneyfacts: 10,000 invested fiveyears ago allowing for average interestand tax at 20 per cent would have thespending power of just 9,374 today, itcalculated. This time last year basicrate taxpay-ers had achoice of 91accounts tonegate theeffects ofi n f l a t i o n ,today there arejust eight and allare fixed-rate cashISAs.

The retail priceindex (RPI) andtax and priceindex (TPI) wereunchanged, atfive per centand 4.6 per centrespectively, theOffice forN a t i o n a lStatistics said.

UKs inflation

springs backagain to 4.4pc

RUPERT Murdoch must have beenconfused or misinformed over therole of Harbottle & Lewis in the phonehacking investigation, the law firmclaimed yesterday in an interventionthat looks set to reignite the row.

The firm dismissed Murdochsclaims that a 2007 report it carried outsuggested phone hacking was notwidespread at News International.

Harbottle & Lewis said its report

focused only on an employment dis-pute. The claim was part of a raft ofnew submissions released by themedia select committee yesterday.

Chairman John Whittingdale MPsaid he is minded to recall JamesMurdoch before the committee afterthe former News of the World headlawyer, Tom Crone, and ex-editor ColinMyler both said he was mistaken toclaim he had no knowledge of a smok-ing-gun email that allegedly proved

phone hacking was not limited to a

single rogue reporter.Meanwhile, the newspapers formerroyal editor Clive Goodman, the onlyjournalist to be jailed over the scandal,threw further fuel on the flames withclaims that phone hacking was wide-ly discussed at editorial meetings.

In a letter written four years ago butpublished for the first time yesterday,Goodman said phone hacking wasopenly discussed in front of then-edi-tor Andy Coulson.

New evidence set to reignitetabloid phone hacking row

UTILITY group npower is raisinghousehold energy bills by 12.2 percent from October, putting increasedpressure on consumer spendingalready dampened by the rising costof living.

The utility said the increases,which work out to 37p extra per dayfor dual-fuel customers, were due tovolatile trading conditions in whole-sale energy markets compounded bydiminishing production from ageingNorth Sea gas fields.

Scottish & Southern, E.ON and

Centrica have all hiked their retailprices in recent months.

We are now forced to buy energyon the volatile global wholesale mar-ket, according to Kevin Miles, RWEnpower chief commercial officer.

World events have pushed upprices, and we believe this trend willcontinue, he added.

Consumer watchdog groups lashedout the latest round of price increasesas a darkening economic backdropcontinues to squeeze householdbudgets.

Customers didnt feel much bene-fit when wholesale costs were low buthave seen prices rocket when costshave gone up, said Adam Scorer,

director of external affairs atConsumer Focus.

Npower slaps its customerswith big hike in energy bills

BY JULIAN HARRIS

UK ECONOMY

ENERGY

BY STEVE DINNEEN

MEDIA

News 3CITYA.M. 17 AUGUST 2011

Health:

0.6%Commu

ni

cations:

0.8%Alcohol

&Tobacco:

0.6%

Food&

non-alcoholic

beverages:

0.3%

Transport:

0.6%

Prices up

ANALYSIS l CPI inflation in July

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Markets cool

over GooglesMotorola bid

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GOOGLES $12.5bn (7.6bn)Motorola bid has lifted the globaltechnology M&A total for the year toa lofty $125.7bn the highest levelof activity in the sector since beforethe financial crisis.

Qatalyst Partners, fronted by dot-com godfather Frank Quattrone, hasmoved up to fifth in the tech adviso-ry league-table after working onfour deals worth over $18bn, withMotorola being the biggest in its his-tory.

The purchase the biggest inGoogles history marks the second

largest M&A transaction involvingtech companies announced this

year, behind Microsofts acquisitionof Skype in May.

Total M&A activity for the year sofar stands at $1.8 trillion, a 31 percent increase on the same time last

year.At $173.7bn for the year, telecoms

is the second most targeted sector inglobal M&A, behind property($186.5bn) and above healthcare($172.4bn) in third.

Total telecoms deals are up twoper cent in the year to date.Deutsche Bank is the leading advis-

er for global telecoms M&A in 2011with $69.3bn.

Blockbuster deal boosts globaltechnology M&A past $125bnTECHNOLOGY


MARKETS were yesterday digesting theimplications of Googles shock $12.5bn(7.6bn) bid for Motorola Mobility.

Google slumped 3.4 per cent, contin-uing the cool reception after theannouncement on Monday. However,investors across the sector appeared to

be cautiously optimistic, with hopesthat the bid will help to mitigate theadverse effects of future patent battles.

In theory, companies using Googlessoftware are now less likely to run intoproblems, with Google holding a size-able portion of outstanding patentsand unlikely to take action against itsclients. This pushed stocks in Asianphonemakers Samsung and HTC upsix and three per cent respectively.

Arch-rival Microsoft also gained onhopes that a Google-led Motorolacould drive competitors to its

Windows Phone 7 mobile operatingsystem as an alternative to Android.

Blackberry-maker RIM traded slight-ly lower yesterday after receiving a

bounce in the immediate aftermath of

the bid, with investors hoping it maybecome a target for further industryconsolidation.

The bid has also been seen as a vali-dation of Apple-style vertical integra-tion, with Google hoping tosupercharge its future releasesthrough seamlessly merging its hard-

ware and software.This could be especially important

in the race to develop a credible, andsaleable, alternative to the ApplesiPad. Motorolas Xoom avoided a criti-cal mauling but has failed to set thetablet market alight since its launchearlier this summer.

BY STEVE DINNEEN

TELECOMS

ANALYSIS l Google

$

Jun Jul Aug

525

625

600

550

575

500

475

53916 Aug

BlackBerry brand survives riots association

L AST week saw one story domi-nate the news and although the

bulk of the focus was on the riot-ers, the areas and buildings

being looted, the police and thepoliticians the one brand that wascontinually being talked about was

BlackBerry.It seemed that BlackBerry

Messenger was the communicationmethod of choice for the rioters, withthe free service allowing them to plan

among each other without policetracking what they were saying.On YouGovs BrandIndex there was

an immediate impact on the brand buzz, with a drop from +10 lastMonday to -8 by Thursday.

It dropped from sixth (trailingbehind Apple iPhone, iPad, Samsung,HTC and Android) to last of the 25mobile phone and PDA brands as thepublic heard negative news about thephone.

It has now recovered some of the

ground and is back up to -2 and 21stplace.

Interestingly there was no dis-cernible impact on the brand owner,Research In Motion, suggesting that it

is very much the brand not the com-pany that is known in the UK.So BlackBerry buzz saw a steep

drop but encouragingly for the firmthere was little real decline in itsIndex (a composite score of six keymeasures Impression, Quality,

Value, Reputation, Satisfaction andRecommendation) with a +22 scoreon Monday that was still as high as+20 by the end of the week andremains there this week.

It looks like this was a case of peo-

ple hearing about a brand being asso-ciated with something negative andregistering that, but the negativenews not actually impacting on howthey perceived the brand.

So for BlackBerrys owner it seemsthat there was not much harm donefrom its association with the rioters.

Stephan Shakespeare is chief executive ofYouGov

BRANDINDEX

STEPHAN SHAKESPEARE

ANALYSIS l Buzz

02/08/2011 05/08/2011 10/08/2011 15/08/2011

15.0

5.0

-5.0

Researchin Motion

BlackberryANALYSIS l Index

01/08/2011 05/08/2011 09/08/2011 15/08/2011

30.0

20.0

10.0 Research in Motion

Blackberry

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BBC Worldwide has sold its iconicmagazines portfolio, severing its 88-

year tie to the Radio Times.It has agreed to sell BBC Magazines,

whose 62 titles worldwide includeGardens Illustrated and CBeebies, toExponent Private Equity. It has also dis-posed of its 50 per cent shareholdingin Indian joint venture WorldwideMedia to media firm Bennett,Coleman & Co. Both deals combined

are worth a total of 121m.As part of the deal, titles like Top

Gear, Good Food and Lonely Planetwill remain in the BBC stable but will be published under contract byExponent.

Exponent will also acquire BBCMagazines stake in subscriptionsmanager Dovetail, distribution net-

work Frontline and specialist publish-er Origin.

A BBC spokesman said the sale ispart of BBC Worldwides strategy of

focusing on its international opera-tions and the development of itsmobile and DVD businesses. She addedthe magazines business is in need ofinvestment that BBC Worldwide is notin a position to make at this point.

BBC Worldwide chief executive JohnSmith said: The deal offers the bestprospects for the magazines businessto continue on its path of success,

while we pursue a strategy increasing-ly focused on international video anddigital services.

The consumer magazines market

faces a number of challenges, and thistransaction brings a focus and degreeof investment that BBC Worldwidealone is unable to provide.

BBC arm sellsits magazinesin 121m deal SHARES in Sportingbet surged sevenper cent yesterday after rival GVCHoldings said it is in exclusive talksregarding the possible purchase of

Sportingbets Turkish business.Investors hope the sale, which will

fetch around 35m, could smooth the way for Ladbrokes to take overSportingbet.

Ladbrokes made a preliminary offerfor Sportingbet in June, but analystssuggested legal restrictions over the

Turkish website could hold them back.Sportingbet said last month it was

reviewing strategic options in rela-tion to the Turkish website and futureprospects with Ladbrokes.

GVC shares have been temporarilysuspended, in accordance with AIMrules, as the transaction, if completed,

would be considered a reverse

takeover.Espirito Santo analysts said in a

note: In our view, the sale of theTurkish business would support boththe valuation and prospects ofSportingbet being bought out byLadbrokes.

James Hollins at Evolution said thedisposal would be materiallyenhance the likelihood of Ladbrokestaking over the firm.

Sportingbet shares closed at 53.5p,valuing the firm at 330m.

Sportingbet insale talks overTurkish website

BBC Worldwide has sold its iconic magazine portfolio for a total of 121mBY STEVE DINNEEN

MEDIA

GAMING

The BBC has been involved with the RadioTimes since its birth in 1923 Buyer Exponent says it believes the maga-zines, which have performed well in a toughmarket, have strong growth prospects.

FAST FACTS | BBC MAGAZINES

NewsCITYA.M. 17 AUGUST 2011 5

Exponent Private Equity, the new owner of the RadioTimes and other BBC titles, invests in a wide range of UKmid-market companies. The former owner of the TimesEducational Supplement was earlier this year part of theconsortium that bought Quorn from Premier Foods.Exponents experience in the media and publishing worldalso extends to PR group Gorkana, where it has been an

investor since 2006; recruitment media business GTI;and digital publisher Magicalia.

It has also invested heavily in bed retailer Dreams andtransport deals site thetrainline.com.Exponent director Richard Lenane (pictured) saidhe wasdelighted with the BBC Worldwidedeal, which is still pending OFT approval. Hesaid: Exponent invests exclusively in market-leading businesses that have strong growthpotential and great people. We believe thatBBC Magazines is such a business.

RICHARD LENANE | EXPONENT PRIVATE EQUITY

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A BIDDING war for City broker and wealth manager Evolution Grouplooked increasingly likely yesterdayafter it admitted it had received anumber of approaches.

Evolution has been viewed as upfor sale since it received anapproach from South Africa assetmanager Investec two weeks ago.

The news sparked the interest ofa number of finance groups includ-ing Canadian stockbrokerCanaccord Financial, which alsoadmitted it was in early stagetakeover talks yesterday.

Evolution is a sought-after assetdue to the strength of its fast-grow-ing private client wealth manage-

ment arm Williams de Broe.I would imagine that lots of peo-

ple will be throwing their namesinto the hat now, one industrysource told City A.M. It is not often

you get a 7.8bn block of privateclient money becoming available.Evolution is clearly up for sale and Ithink everyone will be interested.

Evolution said that afterInvestecs approach it had receivedapproaches from a number of otherparties interested in either part orthe whole of the company.

Potential bidders could rangefrom Canadian group RBC CapitalMarkets to City wealth managerssuch as Rathbones.

The news will pile pressure onInvestec to enter exclusive talks andavoid a bidding war.

Canaccord said its interestdepended on obtaining a unani-mous recommendation from theEvolution Board and the satisfacto-ry completion of due diligence,among other requirements.

Evolutions shares closed up 9.1per cent yesterday on the news.

Evo faces bid war asfresh offers pour inBYALISON LOCK

BANKING

THE IPO of jewellery makerPandora came under furtherattack yesterday when the Danishfinancial market regulator referredone of its advisers to the police.

Denmarks FinancialSupervisory Authority said NordeaBank Denmark had failed to reportthe fact that it held a large finan-cial position in Pandora prior to itsflotation last October.

Nordea Denmark was one of

four lead arrangers on the PandoraIPO, alongside Goldman Sachs, JP

Morgan, Morgan Stanley, andissued an investment analysis ofthe company ahead of the float.

But it failed to disclose that atthe time it owned 3.9 per cent ofPandora, worth an estimated1.23bn Danish krone (145m). TheDanish FSA said it would ask thepolice to investigate Nordea.

It is the FSAs evaluation thatthe general disclaimer does notsufficiently live up to the noticerequirements regarding theannouncement of significant

financial interests, it said.Pandoras 1.1bn IPO last year

was feted as a landmark deal butquickly soured on fears over its cost

base and sales mix.

Pandora IPO adviser gets referred toDanish police over disclosure failureRETAIL


ANALYSIS l Pandora

DKK

9 Aug 10 Aug 11 Aug 12 Aug 15 Aug

250

150

50

44.9016 Aug

ANALYSIS l Evolution

$

Jun Jul Aug

75

95

90

80

85

70

65

90.0016 Aug

A NUMBER of investment

banks have been linked withthe potential cash-cow ofadvising Manchester Unitedas it seeks a lucrative Far Eastflotation.

It is understood Credit Suissehas been hired to lead the listingprocess, although Morgan Stanleywas also believed to be in the run-ning to lead the IPO mandate. It isnot clear if any other banks will beadded to the advisory list.

Both Credit Suisse and MorganStanley declined to comment, asdid Manchester United.

Whoever eventually wins theprivilege will be tasked withachieving the maximum valuationfor a club whose worth varies wild-ly depending on who you talk to.

A group of potential bidderscalled the Red Knights valued theclub at 1bn but it is understood

the Glazers are hoping for a price-tag of more than double that num-ber. Analysts believe the true figureis around 1.7bn.

POSSIBLE ADVISERS

CREDIT SUISSE

MORGAN STANLEY

ManchesterUnited could becelebrating alarge scale floatsoon

United plans $1bnfloat in Singapore

MANCHESTER United ispreparing to launch an auda-cious Singapore float in which

it could raise more than 600m. The clubs controversial

American owners hope the IPO couldvalue their prized asset at more than2bn, taking advantage of the hugepopularity of the ManchesterUnited brand in the east.

It is understood between 20and 30 per cent of the club will

be made available to investorsin a float that could go through

before the end of the year.Speculation has mount-

ed that Hong Kong wouldbe the preferred destina-tion for an IPO after sev-eral rumoured bids

from foreign investorsfailed to materialiseearlier this year.

The IPO of a glob-

ally recognised brand such asManchester United would be a coupfor Singapore, which has been com-peting with Hong Kong for interna-tional listings.

Malcolm Glazer (pictured), whosefamily also own American Footballs

Tampa Bay Buccaneers, tooManchester United private followinga heavily leveraged 790m takeover in2005. The club now has gross debts of

more than 500m. This led to a long-running

fans protest, which culminatedin the formation of a group ofRed Knight rich businessmenwho said they would wrest con-

trol of the club.However, their valua-

tion fell far short ofthe Glazers and thebid petered out.

Manchester United

declined to com-ment on marketrumour and specula-tion yesterday.

BY STEVE DINNEENBUSINESS OF SPORT

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THE research and development facili-ty that was abandoned by pharma-ceutical giant Pfizer will be givenenterprise zone status today, in a bidto lure a new high tech firm to thearea by offering tax breaks andrelaxed planning rules.

Pfizers Kent base, which has beenrenamed Discovery Park, was put onthe market in June, after the

American firm decided to close the

facility and make most of its 2,400

staff redundant.Now the government is hoping itcan convince a new company to buythe research laboratories and produc-tion facilities by offering zero busi-ness rates for five years, worth up to275,000.

As an enterprise zone, the sciencepark will also benefit from highercapital allowances, super-fast broad-

band, and simplified planning rules.Pfizers decision to close the

research facility, announced in

February, came as a huge blow to the

government, which had pledged torebalance the economy away fromthe City to high tech manufacturingand engineering.

Meanwhile, the government willannounce 10 new enterprise zonesalongside the Discovery Park, in addi-tion to the 11 it announced at theBudget in March.

George Osborne, the chancellor, isexpected to say: It is time for us tohelp every part of the country togrow and realise its potential.

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POLITICS


MORE NEWSONLINE

www.cityam.com

What needs to be done to stopa repeat of last weeks riots?THIS week, were asking members ofour Voice of the City panel what needsto be done to prevent a repeat of lastweeks riots. Will the governmentsplan for non-military national servicehelp repair broken communities, andshould convicted rioters be evictedfrom their council homes or strippedof their benefits?

We also want to know whethermembers of the panel, which is spe-cially recruited to represent a cross-section of Londons business

community, think the Prime Minister isright to talk of British society as bro-ken.

And some have tried to pin part ofthe blame on bankers and their bonus-es. Is this a fair assessment?

Meanwhile, we want to knowwhether the government is being toosoft or too tough when it comes tometing out justice.

To have your say on these questions,and others like them, apply to join thepanel today at www.cityam.com/panel

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THE JOBS market in the City has beenleft in a dismal state by economic

uncertainty coupled with a head-count cull at a number of banks, anemployment survey out today claims.

Available roles in the financial sec-tor dropped 10 per cent during July,and candidates in the City were fight-

ing for 18 per cent fewer positionsthan a year ago, Morgan McKinleysmonthly jobs monitor shows.

People already in work have shiedaway from making the jump into the

jobs market, contributing to a 14 percent fall in new jobseekers in Julycompared with last year.

Thanks in part to the summer lull,the number of candidates tumbled44 per cent compared with June.

The average salary for those secur-ing new roles fell two per cent to50,591 in July, and companies aretaking around two months to decideon their preferred candidate com-

pared with just 10 days last year.Andrew Evans of Morgan McKinleysaid a perfect storm of economicuncertainty, banking job cuts and dis-appointing corporate results haddampened the market in July.

City jobs market shrinksBYMARION DAKERS

RECRUITMENT

EUROPES biggest clearing houseswill this morning announce plans tooffer coordinated four-way clearingto their members, in a movedesigned to streamline the processand improve competition.

EMCF, EuroCCP, LCH Clearnet andSIX x-clear will collaborate to offer afull clearing choice by 1 January2012, subject to regulatory approval.

Full interoperability will be avail-able for all traded equities on Chi-XEurope, with the exception of theSpanish market.

This is a significant milestone forthe European equities market. Fullfour-way interoperability has always been one of our key goals and this will further improve efficiencies inpan-European equities trading, said Alasdair Haynes, chief executive ofChi-X Europe.

Share-trading platforms BATSEurope and UBS MTF became thefirst to offer clients a choice of clear-ing provider earlier this month,paving the way for competitors toenter the race.

Previously, Europes exchangesand trading platforms have onlyused one clearing house, forcinginvestors to channel trades throughthe associated clearing providers andpaying whatever fees they demand-ed.

Interoperability will mean partici-pants can win market share by allow-ing their clients to consolidatebusiness and hit higher volume dis-counts.

The time is now to take the nextstep in opening up the Europeanclearing landscape. Interoperability

will make European markets moreefficient and it is a tool to open upthe clearing and settlement silos inEurope, said Jan Booij, chief execu-tive of EMCF.

More choicefor clearinghouse trades

DELL slashed its 2012 revenue fore-cast as the outlook for technologyspending this year weakened, send-ing its shares more than seven percent lower.

The personal computer makeryesterday lowered its estimate forfull-year revenue growth to just oneto five per cent, from five to nineper cent previously, adding thatsales this quarter would likely stayflat.

Shares slid 7.3 per cent to $14.65after hours, from a close of $15.80on the Nasdaq.

The worlds number two PCmaker, which in May said it antici-pated strong government spendingand a good back-to-school season,recorded sales of just under $15.7bn(9.5bn) in its fiscal second quarterended July.

Dell posted net income of about$890m, or 48 cents a share, in thequarter ended July, versus $545m,or 28 cents a share, a year earlier.Excluding certain items, it earned54 cents a share.

From a market standpoint, clear-ly theres a different demanddynamic as you think about rev-enue growth, Dell chief financialofficer Brian Gladden said. Its a bitof an uncertain environment.

Industry executives warn thatcorporate and government spend-ing may have begun to wane onfears of a second-half economicgrowth slowdown, while a high job-less rate pressures consumerincome.

But during its annual analystsday in June, Dell executives pledged

to maintain its pace ofacquisitions having completed its$960m purchase of Compellent inFebruary to gain access to corpo-rate clients, and safeguard margins.

Dell slashesits revenueforecasts

The number of available roles has fallen sharply Picture: Micha Theiner/City AM

BYHARRY BANKS

TECHNOLOGY

BY ELIZABETH FOURNIER

TRADING PLATFORMS

THE Institute of Directors hasappointed Simon Walker as its nextdirector general. Formerly chiefexecutive officer of the BritishPrivate Equity and Venture CapitalAssociation, Walker succeeds Miles Templeman, beginning his seven-

year term in October. Walker, who brings experience

from both business and political sec-tors, has held senior executive posi-tions at firms such as Reuters,British Airways and the BrunswickGroup.

He is a council member of theEuropean Policy Forum and servedas communications secretary to the

Queen and special adviser to formerprime minister John Major.

Commenting on his appointment,Walker said: I will be campaigningfor growth and the competitivenessof British business.

Walker believes that the countryhas an excessively high tax bur-den, with an over-regulated labourmarket, adding: Britain has lost its

competitive edge and radical reformis the only route to sustainablegrowth, stability and long-term joband wealth creation.

Given his experience of the work-ings of government, Walker shouldbe a valuable asset to the IoD.

The non-partisan group, foundedin 1903, aims to represent the inter-ests of directors to government.

The former royal PR set to take charge at the IoDBY LYDIA ELLIS

PROFILE

SIMON WALKER

8/6/2019 Cityam 2011-08-17

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WALMART suffered its ninth con-secutive sales fall last quarterdespite heavy discounting, as itwarned that the uncertain US eco-nomic recovery was taking its toll.

Same-store sales at Walmart inthe US, excluding fuel, were downby 0.9 per cent from a year ago.

However, net income rose 5.7per cent in the second quarter to$3.8bn (2.3bn). Total revenues were up by 5.4 per cent to$109.3bn.

Walmart, seen as a bellwetherfor the performance of the USeconomy, has shaken up its prod-uct ranges and cut prices in a bidto stimulate sales.

Bill Simon, chief of WalmartsUS business, said: We remain

concerned about the economicpressure on our customers andthe uncertain impact it can have

on their shopping behaviour. The worlds largest retailer

stressed its commitment to lowprices and widening its price gapversus competitors, following ana-lyst reports in recent weeks thatsuggested those gaps have nar-rowed in areas such as food.

Walmart said US same-storesales improved each month dur-ing the quarter. Fewer customers visited Walmart US stores, butthose who shopped spent more onaverage, the company said.

Sales fall atWalmart...BY JOHN DUNNE

RETAIL

NEWS | IN BRIEF

Sir Ken Morrison fined 210kFormer Morrisons chairman Sir KenMorrison has been hit with a 210,000fine for failing to disclose his reducedshareholding and voting rights to thecompany and investors. The 79-year-old businessman, who spent more than50 years turning the business into the

UK's fourth largest supermarket chain,reduced his stake in the company from6.38 per cent to 0.9 per cent after hestepped down in 2008. But he wastoday fined by the Financial ServicesAuthority after he failed to inform thesupermarket chain that he had reducedhis holding in the company after sellingmillions of pounds in stock.

Home Depot raises outlookHome Depot, the worlds largest homeimprovement chain, raised its fiscal-year profit forecast for the second timein three months yesterday as timelypromotions and renewed focus oncheaper products helped it gain marketshare from rival Lowes Cos. HomeDepot said it still expects fiscal-yearsales to rise 2.5 per cent. It forecastearnings of $2.34 a share excludingfuture stock repurchases, up from aprior forecast of $2.24. In the second

quarter, Home Depots same-storesales, or sales at stores open at least ayear, rose 4.3 per cent globally, includ-ing a 3.5 per cent rise in US same-storesales.

MCDONALDS European presidentSteve Easterbrook (pictured) has leftthe company to become chiefexecutive of Pizza Express, after18 years at the fast food giant.

Easterbrook will join theGondola Group parent compa-ny of the Pizza Express, Zizziand Ask restaurants fromOctober, replacing formerchief executive MarkAngela at the helm ofits 384-branch pizzachain.

E as t e r br ook s

departure means ashake-up ofMcDonalds exist-ing managementstructure, with

its executive vice president of globalsupply chain and real estate develop-ment Doug Goare taking on theEurope job at the end of next month.

He will be responsible for oversee-ing more than 7,000 McDonaldsin 40 European countries.

Goare will in turn be replacedby Jose Armario, currently grouppresident of McDonalds Canadaand Latin America.

Easterbrooks appointment atPizza Express will see

Gondolas chief execu-tive Harvey Smythreturn to his day job,having taken onresponsibility for

the restaurantgroup after Angelas depa

ture in earlyJuly.

McDonalds in shakeup as Europe boss

swaps fries for pizza

ANALYSIS l Walmart

$

Jun Jul Aug

51

55

54

52

53

50

59

51.9216 Aug

ASDA, which is owned by Walmart, yesterday reported a narrow 0.5 percent like for like sales rise between 1April and 30 June.

The company said it was pinning itshopes for growth on its acquisition of147 Netto stores.

Asda said sales growth acceleratedin the second quarter as its onlineprice guarantee, which undercutsrivals by 10 per cent, proved popularwith cash-strapped consumers.

But figures released yesterday bymarket research company Kantar Worldpanel showed that Asdas mar-ket share dropped from 17.6 per cent to17.1 in the 12 weeks to 7 August.

Overall grocery sales rose by 3.8 percent year-on-year in the 12 weeks to 7 August, lower than the 5.2 per centgrocery price inflation in the period.

But budget retailers Aldi and Lidlhave been benefitting from familiestightening budgets.

German chain Aldi now has a 3.6per cent market share and Lidl 2.6 percent.

... as Asda losesmarket share tobudget chains

BY JOHN DUNNE

RETAIL

Worlds largest retailer struggles in USWITH annual revenues of $420bn(256bn), Walmart is the worldslargest company by sales. So it isunsurprising that it tells us some-thing about the global economy.Its international business, whichaccounts for just over a quarter ofsales, is booming. Internationalrevenues grew by 16.2 per cent inthe second quarter, thanks tostrong performances in Mexico,China and Brazil.

Things arent looking so goodin the US. After years of domi-

nance, Walmart, like America, is

losing ground to more dynamicrivals. Dirt-cheap dollar stores,upmarket convenience shops andonline retailers such Amazon arechipping away at its market share.Like-for-like revenues at US storeshave fallen in each of the last ninequarters, although there are signsthey will turn positive againbefore the end of the year.

Even if Walmart turns thingsaround, however, American salesgrowth will be anaemic at best,and its US revenues will start to

shrink again before long. Because

consumer-facing businesses are attheir best when they are fightingfor market share and winning it.The most successful innovationscome from retailers who areexpanding, not those who aremanaging decline.

Walmart will be a force to reck-on with for many years to come,at least internationally, but itsglory years in the US have passed.

BOTTOMLINEAnalysis by David Crow

SAKS SIGNALS GROWTH AMID VOLATILITY

LUXURY US department store operator Saks forecast same-store sales growth and bettermargins for the rest of the year even as the volatile financial markets give it reason to becautious about autumn sales. Saks forecasted that same-store sales would rise by a mid-to-high single-digit percentage in the second half of the fiscal year, which includes the hol-iday season, when Saks gets 30 per cent of its annual sales. Picture: REUTERS

BY ELIZABETH FOURNIER

CONSUMER

8/6/2019 Cityam 2011-08-17

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8/6/2019 Cityam 2011-08-17

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The Capitalist12

SINKINGFEELING FOR

MAROONEDTECH MOGUL TRAGEDY was narrowly averted onMonday night, after the sea almostclaimed the life of American businessmanGeorge David in the Rolex Fastnet Race.

Shortly after rounding Fastnet Rock,Davids yacht Rambler 100 capsized inhigh seas after the keel broke off with asickening sound, sweeping the formerUnited Technologies chairman into theIrish Sea. There was no time to react,said crew member Mick Harvey. The boatturned turtle, just like a dinghy would.

Most of the crew climbed onto theupturned hull, but David and his part-ner Wendy Touton were among the fivesailors who were swept away out of

reach, linking arms in the water fortwo-and-a-half hours before being res-cued by Irish coastguards.

Meanwhile, ICAP Leopard, the 100-foot yacht owned by Helical Bar chiefexecutive Mike Slade, arrived safely inPlymouth harbour in the early hours ofyesterday morning although the 2007record set by Slade was demolished bythe Volvo Open 70 Abu Dhabi.

Not a great result for the City then TheCapitalisthears Slade is even consideringdeclaring this years Fastnet Race his last,

Rarden, vice president and head of exe-cution sales at State Street, who regular-ly uses his banking expertise to advisethe City of London Polices economiccrime team.

But last week, Rarden was in uniformto support the police as the riots gath-ered momentum, working from 2pm to2am last Tuesday night as a duty ser-geant, returning to the US bank onWednesday, and then putting in a 6pmto 2am police shift that evening.

Rarden was one of 37 City workers whovolunteered as a special last week, putting

in more than 500 hours of duty betweenthem. Other part-time police included Andy Rowe of Prudential, Darren

Sevket of Barclays Capital, RosiePhipson of PwC and Chris

Smith of trading technol-ogy firm Formicary

Collaboration, who was given timeoff by his chiefoperating officer

Howard Travers toallow him to work every shift.

ahead of a planned major refit for ICAPLeopard over the winter that will trans-form her into a luxury superyacht.Perhaps he can invite George David onboard for a well-deserved holiday

BERCOWS NEW HOMEHOME from home for Richard Desmond, who showed up to the launch of BigBrother as the reality show moves toChannel 5 for the first time.

Youve done us proud, declaredEndemol chief executive Tim Hincks as hetook in the new BB house, where noexpense has been spared to make sure itlooks glorious in HD broadcast.

In fact, the house is so comfortable that

some guests said they wouldnt mindmoving in for a spell themselves. Surelyits good enough for Speakers wife SallyBercow then (right), rumoured to be tak-ing part in the Celebrity Big Brother for-

mat that airs tomorrow it even containsa gym, for goodness sake.

We wont confirm the celebrities untilthe show starts, said The Capitalists manin the Diary Room, although he suggestedthe speculation is pretty accurate. Sothats a yes, then. Sally Bercow on thetreadmill this one could run and run

SPECIAL FORCESBANKER by day; special constable bynight. Such is the life of Patrick

Turning point: ICAP Leopard on its final Fastnet Race, ahead of its refit to a luxury superyacht

There wasno time toreact. said

one sailoraboard thecapsizedRambler 100.The boatturned turtle

Spacious: Channel 5s new Big Brother house

EDITED BY

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

CITYA.M. 17 AUGUST 2011

8/6/2019 Cityam 2011-08-17

13/24

RAIL commuters will face inflation-busting hikes in ticket prices next year,which could see some fares rise by asmuch as 13 per cent, following therelease of latest inflation figures yes-terday.

Under the revised scheme, whichwas set out in the Treasurys spendingreview last October, regulated faressuch as season tickets will rise bythree per cent on top of Julysretail price index (RPI) infla-tion rate of five per cent overthe next three years.

The formula for fareincreases was previouslyrestricted to the RPI figure plusjust one per cent.

Transport SecretaryPhilip Hammond (pic-tured right) said herecognised that thedecision had not beenpopular, but was nec-essary to help the gov-ernment fund railimprovements.

He said the moneyraised would gotowards funding

2,700 new rail carriages and LondonsCrossrail and Thameslink projects.

Due to the scale of the deficit,these investments would simply havenot been possible without the difficultdecision we have made to increase railfares, he said.

Train companies will also beallowed to increase fares on certainroutes by five per cent as long as theaverage increase across the operatordoes not exceed RPI plus three percent. This means that some com-

muters may be forced to pay an extra13 per cent for their journey.

Shadow transport secretaryMaria Eagle criticised the movesaying the government is total-ly out of touch with the cost ofliving crisis facing commuters.

David Mapp, commer-cial director at theAssociation of TrainO p e r a t i n gCompanies said:Increasing themoney raisedfrom fares willmean that taxpay-ers contributeless to the run-ning of the rail-

ways.

QANTAS Airways is setting up twonew airlines in Asia and ordering$9bn (5.5bn) of new Airbus aircraftas part of a do-or-die makeover to sal-

vage its loss-mak-ing international

business.Qantas will

also cut1 , 0 0 0

j o b sf r om

Australia as it shifts its focus to theworlds fastest-growing aviation mar-ket, triggering threats by unions to block the move and a governmentpledge to scrutinise the plans.

Qantas, which has been reviewingits offshore operations to cut costsand unprofitable routes, said it willlaunch a new, premium Asian airlineand a Japanese budget carrier, the lat-ter jointly with Japan Airlines andMitsubishi Corp.

The new airlines will fly Airbus

A320 jets; as Qantas rebases its loss-making international operations in

Asia, it also plans to give up some ofits long-haul routes and retire olderplanes.

JOHN Menzies saw profits from itsaviation division overtake the mediadistribution business for the firsttime, as newspaper and magazine vol-umes continued to decline in the firsthalf of the year.

A return of cargo-handling vol-umes to pre-recession levels andscores of new contracts for groundservices helped drive turnover at theglobal aviation arm by more than 10per cent, the company said yesterday.

Overall pre-tax profits rose to21.4m from 20.6m over the same

period the previous year on revenuesthat rose to 941.9m from 924m.But a five per cent drop in maga-

zine sales (and a decline in newspapersales) in the groups distribution divi-sion meant group sales were just twoper cent higher in the six months tothe end of June.

We will continue to expandMenzies Aviation by leveraging exist-ing customer relationships to winmore contracts, the company said.

John Menzies media firmdips as aviation takes offTECHNOLOGY

THE Competition Commission (CC)has cleared a merger between strug-

gling Thomas Cooks UK retail busi-ness and those of the Co-operativegroup and Midlands Co-operativeSociety, to create Britains biggestretail travel operation.

The deal will bring together threeof the biggest travel agents on theBritish high street.

Thomas Cook currently has 780stores, while the Co-op has 360 travelshops and the Midlands 100.

The CC has concluded that the

acquisition will not result in a sub-stantial lessening of competition inany markets in the UK, in particularfor customers buying package holi-days from high street travel agents,

the Commission said.Thomas Cook has issued three prof-it warnings in the past year, trigger-ing the resignation of chief executiveManny Fontenla-Novoa.

The relatively strong performanceof arch rival TUI has also piled on thepressure. The Co-op deal has beenquestioned by some analysts as theexpansion comes at a time when dis-posable income has been squeezed.

Thomas Cook plans to conduct its

tour operator business separatelyfrom the joint venture. The takeoverwas given the provisional go aheadlast month.

Thomas Cook gets Co-op OKBY JOHN DUNNELEISURE

Train ticket

prices to riseby up to 13pcBYKASMIRA JEFFORDTRANSPORT

BYHARRY BANKSAVIATION


I doubt the rise in fares will make any difference tothe way I travel. Its a take it or leave it situation forthose who work in London. Travelling by rail isalmost unavoidable and one of the moreefficient ways of getting round. We areleft with very little choice but to accept.

MICHAEL MBAH | AMLIN

The rise in rail fares wont have any effect on theway I travel because I live in London. Ill have tocontinue to use the tube to get to work regardlessof what they do because, realistically, I have noother option. I rarely leave the city, so I dontoften use trains.

TONY NUTKINS | COUTTS

Although my office is in the City, my work tends to take me overseas a lot, so I doubt I will be impacted as much as mostcommuters. I would expect that people will consider working from home more often. The fare rise is frustrating as the extramoney should be used for more frequent and reliable trains as opposed to upgrades that we wont see for years.

RICHARD LAWREY | AON HEWITT

* These views are those of the individuals above and not necessarily those of their company.

ANALYSIS l Thomas Cookp

Jun Jul Aug

550

650

500

450

52.2516 Aug

NEWS | IN BRIEF

HTC sues Apple over patentsSmartphone maker HTC Corp is suingApple, seeking to halt US imports andsales of Macintosh computers, iPads,iPods, iPhones and other devicesbecause of alleged patent infringements.HTC said it filed complaints with the USInternational Trade Commission and theUS District Court in Delaware. The latteralleged infringements of three patentsobtained in 2008 and 2010, and whichrelate to Wi-Fi capability. It is seekingcompensatory damages.

Goldman loses top Europe execGoldman Sachs EMEA chief operatingofficer Glenn Earle is to retire after serv-

ing 25 years at the investment bank, itwas revealed yesterday. Earle has

agreed to remain as an advisory directoruntil the end of the year. The HarvardMBA graduate joined Goldman in 1987,before becoming partner in 1996 andtaking the COO role in 2006. RobinVince is believed to be replacing Earle aschief operating officer.

OFT probes concrete industryCompetition watchdog the Office of FairTrading (OFT) has warned the UK aggre-gates, cement and ready-mix concretemarkets to prepare for a prolongedinvestigation, after an initial study raisedconcerns about the conduct of majorfirms towards smaller operators. It hasemerged that the sector, a 3.4bn a year

industry, is set for a referral to theCompetition Commission.

Qantas orders $9bn of new plans as itsets up two new airlines in Asia move

ANALYSIS l Qantas

AUD

10 Aug 11 Aug 12 Aug 15 Aug 16 Aug

1.66

1.64

1.62

1.60

1.58

1.56

1.54

1.52

1.5216 Aug

CITY VIEWS: WILL THE RISE IN RAIL FARES AFFECT THE WAY YOU TRAVEL?Interviews by Eshe Nelson and Kasmira Jefford

HOW HIGH COULD RAIL FARES GO?

Under new rules laid out by the Treasury inOctober, regulated fares, including seasontickets and off-peak journeys, will increase bythree per cent on top of Julys Retail PriceIndex rate of five per cent for the next three

years. Train companies are also allowed tovary fares on individual routes by an extrafive per cent, provided that the total faresacross the operator balance out at the eightper cent average. This means some routesmay see price hikes of 13 per cent.

HOW THE CHANGES

WILL AFFECT YOUR FARE

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RESOLUTION, the life insurance con-solidator, yesterday said it hadreturned almost 100m of cash toshareholders and was on track toredistribute a further 400m in thenext year after a successful first half.

Resolution said it made an underly-ing 189m profit in the first half, upfrom 151m in the first half of 2010,and also released a net 201m from itscapital reserves, boosting total profitsto 390m.

The group said it had hived off aportfolio of legacy closed-end prod-ucts into a new unit called Heritageheaded by Resolutions chief commer-cial officer Evelyn Bourke.

The portfolio policies are no longersold to new customers but highly cashgenerative and will be run off overtime, while the remaining new busi-ness group, which sells retirementincome, employee pensions and pro-tection products to new customers,will continue under the Friends Lifebrand.

Berenberg Bank analyst TrevorMoss said the move could be a firststep towards a sale of the heritageportfolio while leaving the new busi-

ness book as a quoted entity. The firststep is to demonstrate the cash flowthat runs off the back book, he said.

The value of new business throughResolutions Friends Life platform fellto 66m from 81m in the first half ofthe year as demand in the UK fell, butit said profitability was expected toimprove as synergies are delivered.

Resolution said it delivered 100mof capital synergies so far towards its235m target for 2011 and created283m of distributable cash, leaving itlikely to beat its full-year target of400m.

Resolution, which combined lifeassets from Friends Provident, Axa UKand Bupa, is on track to return 250mto shareholders this year and 250mnext year through share buybacks.

DUTCH insurance group Aegon soldits closed life insurance and pensionsbusiness Guardian Life to Europeanbuyout firm Cinven for 275m yester-day in a widely-trailed move.

Cinven will acquire Guardians7.4bn assets and run off the portfo-lio of existing policies.

The Guardian sale is the latest dis-

posal of non-core assets by Aegon asrecovers from its 3bn (2.6bn) Dutch

state bailout in 2008.Consistent with actions over the

past three years to dispose of, or runoff, certain businesses deemed non-core, Aegon has concluded that man-aging the closed business of Guardiancompanies no longer fits with ourstrategic objectives, said JanNooitgedagt, Aegons chief financialofficer in a statement.

Guardian manages more than300,000 UK life insurance policies but

has been closed to new business for adecade. It generated 23m in underly-

ing pre-tax earnings in 2010, and hadembedded value of 322m and bookvalue of 271m in June.

The sale is believed to be Cinvensfirst step into the closed life insur-ance market, which is dominated bycompanies such as Swiss Re, PhoenixLife and Resolution. Cinven may fol-low their lead by buying up and con-solidating closed portfolios to run off.Aegon recently completed the sale ofits Transamerica Reinsurance opera-

tions to Scor for about $900m. Itrepaid its bailout in full in June.

Aegon sells 7.4bn life insurance andpensions book to Cinven for 275m

PRIVATE equity analysts expect to seea wave of large investment banksreshaping their in-house private equi-ty businesses as a result of new regu-lation restricting their investmentactivities.

Investment banks are increasinglyspinning out all or parts of their cap-tive private equity arms, researchgroup Preqin said, in response to new

regulation such as the Volcker Rule inthe US. Deals include Bank of

America Merrill Lynchs decision tohive off its $6bn (3.7bn) North CovePartners firm in June.

In the near future we expect thereto be increased spin-out activity asbanks re-organise to comply with reg-ulatory requirements, said Preqinresearch analyst Adam Counihan.

Some banks have opted for a morefragmented approach, he added,such as spinning off units with aspecific geographic or industry focus

or investment style, such as foreignprivate equity operations.

Banks set to create spinoffs when regulations hit

PRIVATE EQUITY

JP MORGANs private equity division bought a portfolio of mid-marketinvestment assets from the suspend-ed Arch Cru funds for $91.9m(56.5m) yesterday.

The package of 38 mid-market co-invested companies are being boughtfrom three of the fund cells now run by Spearpoint, the fund managerappointed to take charge of the fundsafter their suspension in 2009.

The portfolio is primarily invested

in UK, Germany and France-basedcompanies. The deal is to be paid for

entirely in JP Morgan shares.Many of the funds are still in theirinvestment period, with an averageage of 3.6 years, and unfunded com-mitments are estimated to be 6.9m,said Numis analyst Charles Cade.

The deal is expected to speed upthe return of Arch Cru cash toapproximately 20,000 shareholders,who were locked into losses when thefunds were suspended due to morewithdrawals than they could meet.

JP Morgan private equitybuys up 56.5m portfolio

PRIVATE EQUITY TIME OUT owner Oakley Capital

saw its funds grow by 16m in the

first half of the year as the value ofits investments were revisedupwards, it said yesterday.

Oakley, which acquired a control-ling stake in Time Out America fora total $18.2m (11.1m) in May, saidits net asset value per share rose 23per cent to 1.80 in the first half ofthe year, at the top end of its previ-ously announced range.

Its funds under management roseto 230.9m in the period, largely

due to a 14.5m appreciation in thevalue of its investments in Germanprice comparison site Verivox anddata service provider Daisy Group.

It also invested23.1m in Emesa,

a Dutch leisure e-commerce busi-ness, in the first half of the finan-cial year.

Oakley has combined the USTime Out operation with the inter-national business it bought inNovember 2010 to reunite the com-pany as a global media group.

Chairman James Keyes said moregrowth in Oakleys net asset valuewas expected as its portfolio compa-nies underlying trading perform-

ance continued to improve.I am pleased to report another

period of steady progress, he saidin a statement, adding that thecompanys new

investmentsin Emesa and Time Out were capa- ble of gen-e r a t i n gs t r o n greturnsover thecomingyears.

Oakleys investments pay offBYALISON LOCK

PRIVATE EQUITY

Profits and

dividend riseat ResolutionBYALISON LOCK

INSURANCE

BYALISON LOCK

INSURANCE


Resolution founder Clive Cowdery has overseen strong progress Picture: REX

US NEWS | IN BRIEF

US housing starts edge downUS housing starts fell less than expectedin July as builders broke ground on newmultifamily units likely to meet demandfor rental apartments, while permits for

future construction dropped, a govern-ment report showed yesterday. Housingstarts were down 1.5 per cent to604,000 in July from a downwardlyrevised 613,000 in June. Meanwhile,import prices in the US were up 0.3 percent largely due to fuel costs.

American industry spikes in JulyUS industrial output recorded its bestgain in seven months in July as the autosector bounced back from supply disrup-tions wrought by Japans devastatingearthquake in March. Industrial outputincreased 0.9 per cent, the FederalReserve said yesterday, after a 0.4 percent gain in June nearly double econo-mists' expectations for a 0.5 per cent rise.

Republican hopefuls attack FedGOP candidates for the presidential racelined up to attack the Federal Reserveyesterday, as the race prompted somefiery rhetoric. Right-wing Texan gover-nor Rick Perry said it would be treaso-nous if Fed chairman Ben Bernankeannounced more quantitative easing,also adding: We would treat him prettyugly down in Texas. Rival MicheleBachmann was more measured in hercomments, saying she has written to theFed to oppose more monetary easing.

Fitch confirms US is gold-platedFitch Ratings said on yesterday that itaffirmed the USs top-notch credit ratingat AAA, giving the world's largest econ-omy a reprieve after it was downgradedby Standard & Poor's little more than aweek ago. Fitch said the outlook for therating was stable. However, it said theUS government had to show tangibleresults in its efforts to reduce the budg-et deficit.

ANALYSIS l Resolution

p

Jun Jul Aug

280

300

260

240

267.9016 Aug

ANALYST VIEWS: HOW IS RESOLUTIONSSTRUCTURAL OVERHAUL GOING? Interviews by Alison Lock

MARCUS BARNARD | ORIEL SECURITIES

These results look fine and the decision to separate the heritage book

will focus managements responsibilities in the right areas. One highlight was thedividend, as Resolution said it would pay the same amount of dividend followingthe buyback across the lower number of shares in issue.

TREVOR MOSS | BERENBERG BANK

This business is undergoing extensive surgery and there are a lot ofmoving parts. There are a lot of costs still to come in before you will see the fullbenefits, but they seem to have made a lot of strategic progress. Underlying profitwas about 170m once a 222m reserve release was taken into account.

JONATHAN JACKSON | KILLIK & CO

Todays announcement is reassuring and demonstrates Resolutions abil-ity to improve operational performance and release cash from the UK life industry.Though it alluded to the recent volatility in investment markets, the group is oneof the more defensive players in the sector.

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STATOIL, the Norwegian state-con-trolled oil and gas company,announced yesterday that two previ-ous North Sea oil discoveries are con-nected and together may representthe biggest find in Norways part ofthe continental shelf in 30 years.

Statoil said the Aldous Major Southdiscovery in the North Sea, may holdtwice as much oil and equivalents aspreviously announced last week, withthe field now estimated to contain

between 400 to 800m barrels of oilequivalent (boe).

The company also confirmed thatAldous is attached to another discov-ery, Avaldsnes, and the combinedprospect is estimated to hold between500m and 1.2bn boe, up to threetimes more than first thought.

The discovery marks the third timethis year that the energy firm hasmade a high impact discovery 250m barrels of oil equivalent this

year, following a find in the Arcticand the Peregrino South discovery offthe coast of Brazil.

The latest find will help Statoilachieve its goal of hiking its annualproduction by a third by 2020 to 2.5m

barrels of oil equivalent per day(boed), Tim Dodson, Statoils vice pres-ident of exploration, but would notchange its production estimates forthe next few years.

Statoil has struggled with declin-ing oil production in recent years andhas often revised downwards itsfuture production estimates. Last yearit produced 1.89m boed, down from1.96m in 2009.

The company also said yesterdaythat it will invest just under 15bncrowns (1.68bn) in building the

worlds first gas compressor on theseabed at its Aasgard platform in theNorwegian Sea, which will boost vol-umes.

Statoil shares climbed 2.77 per centto close at 126.10 Norwegian kroner.

A 3bn listing plan by the operator ofChinas new Beijing-Shanghai bullettrain, initially targeted for next year,

will be further delayed following lastmonths deadly train crash, sourcessaid yesterday.

The delay is the latest blow to thenations scandal-plagued rail systemafter China CNR Corp announced last

week it would recall 54 bullet trainsused on the showcase Beijing-

Shanghai line. Services would be cutby 25 per cent.

State-controlled Beijing-ShanghaiHigh-Speed Railway had hoped for aninitial public offering (IPO) in HongKong and Shanghai as early as in2012, but any listing is now unlikelyin the immediate future.

The 23 July accident, in which 40people were killed, had furthercomplicated the prospects ofreceiving regulatory

approvals as well as aplanned restructuring

ahead of the IPO, a source with directknowledge of the issue said.

China is not in a hurry to floatsomething, especially after thistragedy, said thesource.

Chinese bullet train operator to delay$5bn dual listing after crash in July

BRITISH social housing and homecare provider Mears reported a sevenper cent rise in first-half pre-tax profitand said it was well-placed to expandin its core markets.

Mears, which services hundreds ofthousands of local authority andhousing association homes and has arapidly growing care-in-the-home

business, made a pre-tax profit of14.1m in the first six months of 2011on revenues up 16 per cent to

292.6m. Its record interim resultsincluded an order book of 2.7bn.

Mears said that in its social hous-ing division its pipeline stood at over3bn, with 1.7bn of new contractopportunities available in the next 12months.

The firm, which has won over300m worth of new contracts sinceMarch, said it had 97 per cent rev-enue visibility for the current yearand was nearing 85 per cent for 2012.

Shares in Mears closed 6.3 per centup yesterday at 276.75p.

Mears mulls expansionafter a record first half

SUPPORT SERVICES

ROYAL Dutch Shell said oil continuedto escape into the North Sea after itdiscovered a second leak from itsGannet Alpha platform, in what has

been the largest spill there in adecade.

The Anglo-Dutch company con-firmed that whilst the main leak inthe flow line was stopped on

Thursday last week, it was still over-coming technical challenges to findthe exact source of a second smallerleak from the same pipe.

We believe that the small leakageis coming from a relief valve adjacentto the main leak and from the samesource, said Glen Cayley, technicaldirector of Shells exploration andproduction activities in Europe.

Once weve confirmed this, we will develop a series of mitigationoptions to stop this remaining leak.

More than 200 tonnes or 1,300 bar-rels of oil have escaped since the firstleak was discovered six days ago.

Shell said it has managed to reducethe rate of leakage from the flowlineto less than one barrel a day.

Shell closed down 10p at 2,005.5p.

Shell says Gannet Alphaoil rig has a second leakENERGY

WATER and waste company Pennonsaid it expects higher full-year profits

at its waste management unit,Viridor, on the back of strong trading.Waste management, recycling and

renewable energy company Viridoraccounts for a third of group profitsand Pennon had said in May the unit

would boost growth, as projects togenerate energy from waste gainacceptance in the UK.

The company said yesterday it haddecided to proceed with the financ-ing, construction and operation of a

350,000 tonne energy from wasteplant in Cardiff.

Pennon, which also owns South West Water, added trading for thewhole group since 31 March had been

in line with its expectations.South West Water has a solid plat-form in place for continued successduring the current regulatory peri-od, the company said, adding that

water restrictions in the region werehighly unlikely despite the dryspring.

In May, Pennon said it expectsViridor to continue boosting profits,as UK projects to generate energyfrom waste start to gain acceptance.

Over the past year, the companyhas got planning permission for fourenergy from waste facilities previous-ly stuck in planning.

Pennons Viridor is doing wellBYHARRY BANKS

SUPPORT SERVICES

Statoil makes

giant NorthSea discoveryBYKASMIRA JEFFORD

ENERGY

BYHARRY BANKS

TRANSPORT

Shell has not been able to fully stop the leak from its Gannet Alpha platform

NEWS | IN BRIEF

Heritage Oil boosts Russian outputProduction has more than trebled at oneof Heritage Oils Russian fields, as resultsfrom drilling and testing one wellexceeded expectations. The oil and gas

company announced that production atthe Zapadno Chumpasskoye Fieldincreased from 431 barrels of oil per day(bopd) to the current level of 1,600bopd. Well 363 is now producing at acontrolled rate of 1,205 bopd, and pro-duced up rates of up to 1,405 bopd dur-ing the flow test. The firm said that thewells potential is estimated to be 2,365bopd.

Witan Investment ups NAV returnWitan Investment Trust, which hit a 52-week low earlier this month, said its per-formance outstripped its benchmark inthe first half of 2011. The companys netasset value (NAV) total return rose by3.6 per cent. The investment trust saidthat eight of its 12 external fund man-agers in place at the end of 2010 beattheir respective benchmarks during theperiod. Those which underperformed forthe half year saw improved performancein the second quarter.

CRH to miss earnings forecastsIrish building materials group CRH saidyesterday it would miss analysts expec-tations for earnings growth of 11 percent this year as it grapples with highraw materials costs and poor economicgrowth prospects. A major player in theUS market, where it is the leading pro-ducer of asphalt for highway construc-tion, CRHs first-half earnings beforeinterest, taxes, depreciation and amorti-zation rose 10 per cent to 574m(504m). That was below the average590m forecast by seven analysts.CRH's chief operating officer AlbertManifold said that although the grouplooked forward to a year of earningsprogress, analysts had been expectingtoo much.


BRITISH recruitment and IT outsourc-ing services firm Harvey Nash Groupsaid it expected a 40 per cent rise infirst-half pre-tax profit on stronggrowth in placements, particularly inEurope, Germany and the Nordics.

The company also said it plannedto raise its interim dividend by 10 percent.

A strong financial position, combined with the broad portfolio of

services, has positioned the group well for the second half and there-

after, the company said.For the sixmonths ended 31 July, the groupexpects to report an increase of about20 per cent in revenue and profit.

Harvey Nash said it made goodprogress in the US particularly in per-manent recruitment.

Earlier in the month, rival RobertWalters posted a 23 per cent rise infirst-half net fees, helped by stronggrowth in its European and AsiaPacific markets. But peers includingMichael Page have warned that theUK market remains rough.

Shares in the company closed up6.5 per cent at 73.5p.

Harvey Nash upbeatBYHARRY BANKS

RECRUITMENT

ANALYSIS l Pennon

p

Jun Jul Aug

700

550

600

650

500

400

450

655.0016 Aug

ANALYSIS l Statoil

NOK

Jun Jul Aug

140

130

110

120

126.1016 Aug

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THE story of the crumbling Eurozonetook a new twist yesterday with a

joint press conference given byGerman chancellor Angela Merkel

and French president Nicolas Sarkozy. Thisfollowed an afternoon of meetings betweenthe two premiers, as they discussed ways toshore up the euro.

The plight affecting the euro has largely

been centered on the woes of the peripheryEurozone countries, as the stronger centraleconomies bailed them out lest they sankunder the weight of their debt burden,dragging the stronger economies down

with them. But this change became evenmore apparent when France posted zerogrowth in GDP and the perceived industrialpowerhouse of Germany posted only 0.1 percent quarter on quarter growth yesterday.

Piled on top of the doubts cast upon theability of German taxpayers to bail outtheir profligate European cousins via theECB and the EFSF, speculation aboundedthat French government debt was going to

be hit with a downgrade from its current AAA status. These worries triggeredrumours of the introduction of a combinedeurobond. But Merkel rebutted theserumours saying: I neither think thatEurope is at the point of needing its lastresort, nor do I think that we can solvethese problems with what I have called a

bang. I do not think euro bonds will help usin this.

But though Merkel brushed off specula-tion of a eurobond, the common theme ofthe conference was a move towards fiscalunion of Eurozone countries. Sarkozy saidthat proposals would be put forward toelect a Eurozone president for two and ahalf years, proposing current EC presidentHerman Von Rompuy for this post. Sarkozy

was less solid in his stance against the ideaof a Eurobond, but supported its introduc-tion only after further European fiscal inte-gration. According to Alejandro Zambrano,

The shake up of the Eurozone structure will have drastic effectson the long-term standing of the euro, writes Craig Drake

Sarkozy and Merkelannounce plans forcloser EU integration

JUST how volatile was currency tradinglast week? To understand it better, letstake a look at euro-Swiss franc and dol-lar-Swiss franc two pairs that carved

out enormous ranges in last weeks tumul-tuous markets. For the past 250 trading days,the average daily range in euro-Swissie hasbeen 149 points. Last week it expanded to474 points, and last Thursday it reached astaggering 664 points. In dollar-Swissie, therange expansion was similarly impressive. Ona yearly basis the average range was about110 points; last week that range nearlytripled to 293 points and on Thursday,when volatility was at its apex, dollar-Swissieput in a range of 449 points. As the famousfinancial blog Zero Hedge put it, Pre-inter-vention, the two week rise in the Swiss francwas a 7.8 sigma, one in 300 trillion event.

The recent moves in the currency marketshave been staggering. Still, we also know thatwhile price is notoriously difficult to forecast,volatility tends to be mean-reverting, sug-gesting that traders who are counting on fur-ther rollercoaster price moves in the Swisspairs may be sorely disappointed.

After appreciating to record highs againstthe euro and the dollar on safe haven flows,the franc quickly weakened last week afterthe Swiss National Bank suggested that itmight peg the unit to the euro.

Although the reality of a currency peg ishighly unlikely, just the possibility of such amove was enough to send dollar-Swiss francand euro-Swiss franc shorts scu

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