8/3/2019 Cityam 2012-02-03

1/36

FTSE 100 5,796.07 +5.35 DOW 12,705.34 -11.12 NASDAQ 2,859.68 +11.41 /$ 1.58 unc / 1.20 unc /$ 1.31 -0.01

Facebook

surges ingrey trade

THE VALUE of Facebook hit $123bnin grey market trading yesterday,after the social networking phenom-enon announced it would raise $5bnin a public offering later this year.

Financial spread betting firm IGGroup, which is running a grey mar-ket in Facebook, said the website hadattracted an unprecedented levelof demand.

IG Indexs chief market strategistDavid Jones told City A.M.: We hadlots of buyers coming in at onepoint the market cap was pushed ashigh as $123bn. Its clear the view ofour clients is pretty bullish.

IG Index ran similar markets priorto the Ocado and Betfair flotations in2010. According to Jones, the greymarket valuations were not a mil-lion miles away from the actualmarket capitalisations on flotation.

At close of trading yesterday, IGstraders priced Facebook at $112bn.

A valuation close to this price willmake millionaires of many, includ-ing about a third of Facebooks 3,200staff, who hold company stock.Facebook Europe boss JoannaShields, based in London, stands tomake a fortune. Other London staffwill also benefit.

They will be joined by graffiti artistDavid Choe, who accepted stock over

cash when he decorated theFacebook offices in 2005. He couldreap $200m.

MORE: P8, THE FORUM: P20

BY LAUREN DAVIDSON

TECHNOLOGY

MINING giants Xstrata and Glencorehave revealed they are in talks over amerger that would create the worldsfifth largest commodities company,potentially worth over 50bn and withrevenues of nearly $200bn.

If the deal goes ahead, Glencoresoutspoken chief Ivan Glasenberg is setto cede the chief executive spot to hislong-time rival and head of XstrataMick Davis.

But two sources familiar with thesituation said that the plan would befor Glasenberg to take a deputy roleonly temporarily, so that Davis couldcollect some of the benefits of themergers synergies before moving onfrom the company.

Glasenberg is prepared to cede con-trol to get the deal done, said onesource, but not on a permanent basis.The source also said that Xstrata chair-man Sir John Bond is being lined up tohead the resulting entity, which couldleave Glencores eccentric figurehead,Simon Murray, out in the cold.

Aside from boardroom personalitydifferences, the source warned therecould be competition issues.

Any deal would consist of a share-swap billed as a merger of equals,

which a second source said indicatesthat Glencore is likely to pay only askinny premium to Xstrata share-holders.

GLENCORE SET FOR50BN MEGA-DEALBY JULIET SAMUEL & DAVID HELLIERCOMMODITIES

www.cityam.comIssue 1,563 Friday 3 February 2012 FREE

BUSINESS WITH PERSONALITY

The source added that Davis hadheld out for some years despite pres-sure from Glencore, which alreadyowns 34 per cent of Xstrata, in thehopes of getting a significant bonusover the miners share price.

But since Glencore floated in May

last year, mitigating concerns over thedifficulty of valuing its trading arm,the argument for a premium hasdiminished, said the source.

If the merger goes ahead, it willreunite two firms that were originallypart of the same mining enterpriseand which are now based only a fewmiles from one another in the Swisstowns of Zug and Baar. Glasenbergsaid yesterday: Weve always had the

belief that these two companiesshould be together.Xstrata was spun off from a collec-

tion of coal assets owned by Glencore

in 2001, enabling its parent to concen-trate on commodities trading overmining. Since then, Xstrata hasexpanded into nickel, zinc and copper.

But the combined entity would bepredominantly a miner. Analysts haveestimated the deal would generate

synergies of $700m.Under British takeover rules,Glencore now has until 1 March tomake a bid. MORE: P6-7

Certified Distribution

28/11/11 till 01/01/12 is 92,879

Xstrata chief Mick Davis could take over control of the merged firm, but Glencore boss Ivan Glasenberg may only cede control temporarily

W W W . C I T Y A M C A R E E R S . C O M

THE BEST ROLES NEEDTHE BEST CANDIDATES.

New from City A.M., we bring you the latest

OUR NEW JOBSSITE FOR LONDONPROFESSIONALSLAUNCHES TODAY

PAGES 13 & 22

8/3/2019 Cityam 2012-02-03

2/36

News2 CITYA.M. 3 FEBRUARY 2012

Regulator nowcosts 580mTHE CITY regulator has demanded anextra 80m from the firms it supervis-es in order to cover a 16 per cent rise incosts in the run-up to its abolition.

The Financial Services Authority,which admitted several failures in theperiod leading up to the financial cri-sis, said it would need 578.4m for2012-13, up from 500m for this year,sparking anger in the Square Mile.

It said it needs the money as itinvests in technology to prepare for itsreplacement by two agencies coveringcompanies and consumer protection.

The British Bankers Associationssaid it was in favour of smart regula-tion but added: We want to see anincrease in fees going on quality regu-lators and not a hike in bureaucracyand red tape.

Simon Morris of law firm CMSCameron McKenna said: A regulatoron whom the sun is setting should capits expenditure accordingly.

Otto Thoresen, director general ofthe Association of British Insurers, whose members own a fifth of thestock market, said the increased bur-den would push up insurance pricesfor consumers and companies.

The FSA said large firms will bearthe brunt of the increase, reflectingtheir greater use of its resources, with42 per cent of regulated companiespaying only the minimum 1,000 fee.

BY PETER EDWARDS

REGULATION

RISKY DEBT USE ON REPO MARKETHITS 2008 LEVELSThe use of lower-rated debt in a keyUS funding market has returned topre-crisis levels, fuelling fears that theso-called shadow banking system isbecoming riskier. The repo market isan important part of the shadow banking sector, which consists ofunregulated financial institutionsand activities.

ROYAL CARIBBEAN CRUISES WARNS INAFTERMATH OF CONCORDIA DISASTERRoyal Caribbean Cruises yesterdaybecame the first operator to reveal afull and detailed impact of the CostaConcordia disaster on its bookings,saying first-quarter earnings pershare could be 20-60 per cent lowerthan expectations. The statementcame after Carnival, whose sub-

sidiary Costa Crociere operated theCosta Concordia, said in a regulatory

filing on Monday that in percentageterms its bookings were down in the

mid-teens.INDIAN COURT REVOKES 122 MOBILEPHONE LICENCESIndias congested telecoms market ispoised for a shake-up after the 122mobile telephone licences awarded in2008 by Andimuthu Raja, the coun-trys fomer telecoms minister, werecancelled in a surprise move by thesupreme court.

QUINN FAMILY IN CHALLENGE TO ANGLOThe family of bankrupt Irish business-man Sean Quinn has alleged thatAnglo Irish Bank lent them more than2bn (1.7bn) to prop up the compa-nys share price illegally. In a prelimi-nary court hearing in Dublinyesterday, lawyers for Quinns wife andchildren challenged Anglos claimthat they owe the money and shouldpay it back. The lawyers also accused

Anglo of serious illegal activity on apersistent and ongoing basis.

ASDA PROPERTY CHIEF HEADS FORTHE DOOR IN NEW SHAKE-UP Asda has parted company with itsretail development director in a fur-ther sign of upheaval at the supermar-ket. The property and retaildevelopment unit, which acquiressites for new stores, is being over-hauled and its leader, Steve Masters,and Bob Simpson, the director of sus-tainable development, are leaving.

RUNNING WITH THE NEW LEADERS ATFITNESS FIRST The Fitness Industry Association vowed to work with new manage-ment of the worlds biggest fitnessclub operator after a brutal board-room clearout by its private equityowner. Almost the entire board ofFitness First was axed by BC Partnersthis week in an attempt to stem

potential losses of hundreds of mil-lions of pounds on its investment.

CAIRN INDIA BOSS NETS 6.6M INSHARE SALERahul Dhir, chief executive of oil andgas producer Cairn India, has netted512.68m rupees (6.6m) by selling halfof his stake in the company, ahead ofreceiving another round of stockoptions. Mr Dhir sold 1.5m sharesbetween 30 January and 1 February,with shares worth 339 rupees at closeyesterday. He is expected to becomeeligible to exercise options to by2.24m shares in the next two months.

PHYSICAL BOOK SALES NOSEDIVEThe number of paperback books soldin the UK has slumped dramaticallysince Christmas due to the increasingpopularity of e-readers. Sales of print-ed novels over the first four weeks of2012 fell by a over a million copiescompared to the same month a year

ago, according to industry figuresseen by The Daily Telegraph.

CHINA REINFORCES ENERGY SUPPLIES A unit of China National Petroleumagreed to buy a big slice of a shale-gasplay in Canada from Royal DutchShell, bolstering Beijings footprint inNorth Americas energy patch, as twoother Chinese firms sealed energydeals in the US and Europe.PetroChina said that it bought a 20 percent stake in Shells Groundbirch nat-ural-gas development in BritishColumbia.

EGYPT RIOT STOKES ANGER AT POLICEPolice fired tear gas at thousands ofprotesters who flooded Egypts capitallast night to vent rage at securityforces who they blamed for negligencein allowing at least 74 people to bekilled in a football-match riot.Demonstrators filled the streets sur-rounding Cairos fortress like Ministry

of Interior, chanting against Egyptsinterim ruling military regime.

WHAT THE OTHER PAPERS SAY THIS MORNING

FSA is missing a trick on living wills

ENTIRELY unsurprisingly, the FSA isincreasing its budget, by a cool 16 percent. One thing it should do with themoney is to accelerate its plans for anew bankruptcy code for complexbanks. This crucial reform known asa special resolution scheme would bebased around living wills: a detailedguide explaining what to do tounwind the most complex universalbank in an orderly fashion while pro-tecting the rest of the system and econ-omy, as well as taxpayers. Suchschemes, discussed at length by theFSA, the G20 and Vickers, have yet to

be finalised, and are the missing piecein the jigsaw of financial reform.

Capitalism requires that bad firms be allowed to go bust, wiping outshareholders and staff contracts and

hitting bondholders. Without thisauto-corrective mechanism, losses risk being nationalised while profitsremain privatised; not only does thiswarp incentives and encourages exces-sive risk-taking, it also robs the systemof its basic morality. Any industry notsubject to proper capitalist disciplinewill end up being regulated to death.

Lehmans disorderly collapseshowed that banks are different tomany other companies because oftheir inter-connectedness; uncon-trolled and unmanaged failure cantrigger havoc, unlike with the bank-ruptcy of a small manufacturer. Yetthe same is true of some other kinds ofcompanies, such as nuclear powerplants or airports; yet special bank-ruptcy codes already exist for theseindustries. They are covered by special,pre-agreed plans to allow them to con-

tinue to operate and be transferredseamlessly to new owners if the exist-ing ones go bust. Similar proceduresneed to be introduced for banks.

Under such a system, bailouts (state

provided equity capital or guaranteesfor bondholders) will become a thingof the past. If another UK bank hits therocks, the authorities would be able toforce through a bail-in by turning sen-ior unsecured debt (and possibly alsoother kinds of liabilities) into equityovernight. On top of their equity buffers, all the big UK banks havemuch more loss-absorbing capacitythat could be used to protect taxpayersand depositors.

It is a tragedy that such wind-downschemes were not in place four yearsago. Regulators, who write bankruptcylaw, are to blame. RBS could have beenbailed-in without the need for taxpay-er cash. Arguably, large insurance com-panies and the Big Four accountancyfirms should also be covered by suchrules. Some accountants and policy-makers have been discussing this for

the past year or so; the issue is to makesure the Big Four could never suddenlybecome the Big Three or even the BigTwo, eradicating competition and trig-gering government intervention.

There is intense frustration amongthose bankers who understand theneed for urgency that the FSA isstalling on this issue. There are appar-ently too many other issues on the reg-ulators plate. But this is a tragedy: theUK should pioneer resolutionschemes, with UK banks used as globaltest cases. The only way the City willever regain the moral high ground is iffinance is finally truly reprivatised.

CITYAMCAREERS.COM A QUICK public service announce-ment: City A.M. is today launching ourlong-awaited jobs website for Londonprofessionals so do go to www.cityamcareers.com and browseto your hearts content (and see p13and p22). Have a great weekend.

allister.heath@cityam.comFollow me on Twitter: @allisterheath

AMERICAS public finances are clear-ly unsustainble, Ben Bernanke said yesterday although the FederalReserve chief advised the governmentagainst immediate strong cuts.

Referring to the need for fiscal con-solidation, Bernanke told the House budget committee that even moreaggressive strategies than have beenpursued recently are warranted overthe longer term.

Yet he warned that cuts must notjolt the recovery by coming in all atonce, adding: As long as theres acredible, strong plan over time...and we move into that plan [then] wellachieve most of the objectives of fiscalsustainability.

The US state has debts in excess of$15 trillion.

Bernanke also defended the US cen-tral banks policies against chargesfrom Republican politicians that theyrisked sparking inflation, saying theeconomy still needs plenty of support.

BY JULIAN HARRIS

US ECONOMY

Fed: cut harder but slower

US SENATORS have voted to block bonuses for directors at bailed-outmortgage financers Fannie Mae andFreddie Mac.

Americas upper chamber moved toban the payouts, worth nearly $13m,under a bill amendment put forward by Republican John McCain andDemocrat John Rockefeller.

The bill, approved by a huge major-ity of 96-3, also needs to be passed bythe House of Representatives before itbecomes law.

Fannie Mae and Freddie Mac wererescued by the US government in2008 as they struggled to cope withthe subprime mortgage crisis.

The chief executives of both compa-nies are due to leave this year, having joined in 2009 to steer the firmsthrough their bailouts.

Ban on bonuseslooms at Fannieand Freddie

Federal Reserve chief Ben Bernanke proposed a long-term plan Picture: GETTY

POLITICS

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

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 emaildistribution@cityam.com

The FSA, led by HectorSants, is soon to bereplaced by freshregualators, yet wants80m more cash

4th Floor, 33 Queen Street, London, EC4R 1BRTel: 020 3201 8900 Fax: 020 7248 2711Email: news@cityam.com www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Gavin BillennessPictures Alice Hepple

CommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

8/3/2019 Cityam 2012-02-03

3/36

THE DESIGN house run by Lord Fosterhas increased sales and profits for ayear in which it completed a series ofmajor projects in London, Spain and

America.Foster + Partners, which is responsi-ble for some of the best-known build-ings in the City, took turnover up 18.8per cent to 159.27m while operatingprofit rose 13.3 per cent to 49.64m.

The firm is backed by 3i, Britainsoldest private equity house, whichtook a 40 per cent stake in 2007.

Mouzhan Majidi, who took overfrom Foster as chief executive in2007, described the 12 months to30 April as a record perform-ance and highlights the success ofits push for global growth.

Despite the continuing fragili-ty of the world economy we havebeen effectively gauging thegeo-economic markersaround the globeand responding byseeking out newopportunities in

regions wherehealthy eco-

nomic growth continues, he said inaccounts to be published soon.

The firm completed 16 projectsincluding the Walbrook offices inLondon, the Museum of Fine Arts inBoston, the Faustino Winery inCastilla y Leon in Spain.

Projects in Asia, China, NorthAmerica and the Middle East make upabout two-thirds of its work.

The firm, which was set up in 1967,has worked on major projects includ-ing the Gherkin, City Hall, theMillenium Bridge and the UK head-quarters of HSBC, all in London. It also

worked on the Reichstag parlia-ment building in Berlin.

Today Lord Foster (pic-tured) is chairman.

He recently produced a blueprint for the worldslargest airport in the

Thames Estuary. The project would include a four run- way airport on the Isle ofGrain in Kent and a road and

rail hub and would cost50bn.

F+Ps level of debt wasflat at 322m. Pre-tax

profit was 10.98m, upfrom 1.67m.

Global visionhelps Fosterto build profit

THE PRESIDENT of Blackstone hasmounted a vigorous defence againstattacks on the private equity industry.

Tony James spoke out againstvicious, politically motivated criti-cism after Mitt Romney, the formerBain Capital boss, came under fire inthe race to be the US Republican presi-dential candidate.

Blackstone, the largest publicly list-ed alternative asset manager, alsoreported lower fourth-quarter earn-ings. Performance fees fell 21 per centto $358m (226.5m) but fee-earningassets under management increased25 per cent to a record $137bn.

Total assets under managementincreased 30 per cent to $166bn onstrong fundraising. Its dry powdercapital available for deals hit a high of$32.9bn at the end of 2011.

Cash-rich Blackstone hits outat attacks on private equityBY PETER EDWARDS

ASSET MANAGEMENT

News 3CITYA.M. 3 FEBRUARY 2012

Fosters designs define the London skyline Picture: GETTY

ANALYSIS l Blackstone Group LP

$

2 7 Ja n 3 0 J an 3 1 Jan 1 F eb 2 F eb

16.75

16.25

15.75

15.25

16.682 Feb

BY PETER EDWARDS

EXCLUSIVE

CITY HALL WEMBLEY

MILLENIUM BRIDGE THE GHERKIN

CANARY WHARF UNDERGROUND

8/3/2019 Cityam 2012-02-03

4/36

DEUTSCHE Bank was plunged into thered by the Eurozone debt crisis at theend of last year, Germanys biggestlender revealed yesterday.

It lost 351m before taxes in thefourth quarter of 2011 due to extrememarket conditions, the bank said, adramatic reversal from the same peri-od the previous year, when it booked a707m pre-tax profit.

Deutsches private client and wealthmanagement business was forced to

take a 144m hit in large part fromwrite-downs on Greek bonds, the fulleffect of which is still being negotiatedwith Athens.

But Deutsches investment bankwas also hit hard by what it called sig-nificantly reduced client activityacross the industry. The division lost422m during the fourth quarterdespite a drop a nine per cent its costbase due shrinking bonus packages.

Bonuses were cut due to falling rev-enues, which dropped by over 35 per

cent to1bn in debt sales and tradingand by 38 per cent to 539m in equi-ties. But the banks primary advisory business saw an even worse decline:revenues nearly halved to 430m.

The only part of the wholesale bankto see a marked increase in revenuesin the fourth quarter was its loan prod-ucts division, where the top lineswelled by over a fifth to 61m.

Overall, the bank was forced to putaside more cash to cover credit losses,for which provisions rose by a quarterto 540m for the quarter, mostly dueto integrating its acquisition ofPostbank.

Debt turmoiltips Deutscheinto the red EUROPEAN banks are still looking tooffload some 2.5 trillion in non-core assets, according to researchreleased today by PwC, suggesting

that the region will have to sufferthrough a flood of more deleverag-ing before it can produce sustainedgrowth again.

But PwC also estimates thatlenders will try to jettison loanswith a face value of around 50bn,indicating that banks are trying tohold onto their unwanted assetsuntil their values rise.

But in a worrying sign about thehangover of toxic assets from thefinancial crisis, the research alsosuggests that lenders are holdingaround half a trillion euros of non-performing loans, on which bankswill have to take some kind of loss.

The research is supported by anuptick in non-performing loansshowing up in banks fourth quarterresults, particularly in peripheralEurozone economies.

PwC partner Richard Thompsonsaid: While the main markets fortransactions over the next year arelikely to be Spain, the UK andIreland, we expect increasing activi-ty in some of the other Europeanmarkets, including Germany andItaly.

PwC: non-coreEU asset valueis 2.5 trillion

Francisco Gonzlez, BBVA chairman and chief executive Picture: REUTERSBY JULIET SAMUEL

BANKING

BANKING

News4 CITYA.M. 3 FEBRUARY 2012

SPANISH bank BBVA yesterday posted a35 per cent fall in net profit for 2011, asit was hit by provisions for bad proper-ty loans at home and a one-off chargeon its US business.

BBVAs 2011 net profit fell to 3.0bn.Its bad debts ratio declined to four percent of total loans, versus 4.1 per centin September.

The bank has borrowed11bn fromthe ECBs new 3-year lending facility atthe December auction.

The results came as the Spanish

economy ministry ordered banks inthe country to raise an extra 50bn tocompensate for foreclosed loans andbad loans to housebuilders on theirbalance sheets.

Banks must make a specific provi-sion from results totalling about25bn across the entire sector, econo-my minister Luis de Guindos said.

In addition, banks must put asidecapital equal to 20 per cent of the bookvalue of undeveloped lots and 15 percent for unfinished developments.

BBVA income falls as Spainorders banks to raise cashBANKING

ANALYSIS l Deutsche Bank AG

27 Jan 30 Jan 31 Jan 1 Feb 2 Feb

34.00

33.00

33.50

32.50

32.00

33.902 Feb

8/3/2019 Cityam 2012-02-03

5/36

PROFITS at insurer Munich Re plum-meted 71 per cent during 2011 aftera series of earthquakes and floodshammered the firms bottom line.

Preliminary figures show 2011 year-end net profit of710m(591m), down from 2.43bn in2010.

The company has promised a

return to its previous levels of prof-itability this year, emphasising thatalmost all of 2011s earnings camefrom the final quarter.

Jrg Schneider, the firms financechief, said 2011 was an exceptional

year as extreme burdens from nat-ural catastrophes combined withthe financial crisis to rack up enor-mous losses.

Given the huge strains theseplaced on results, it is a notable

achievement that we still posted aprofit of0.71bn, he said in a state-ment.

Munich Re took a 1.5bn hit fol-lowing the Japanese earthquakeand increased its claims estimatefor the New Zealand earthquake tothe same amount.

Tax clawbacks provided a 550mboost but the firm wrote down the value of Greek government debtholdings by1.2bn.

Munich Re profits slump onthe back of natural disastersBY JAMESWATERSONINSURANCE

News 5CITYA.M. 3 FEBRUARY 2012

TULLOW Oil, the FTSE 100 oil explor-er, yesterday parted company with itslong-standing corporate brokers,Bank of America Merrill Lynch (BAML)and RBS Hoare Govett, appointingBarclays Capital and Morgan Stanleyin their place.

BAMLs position had been precari-ous ever since the bank parted compa-ny with corporate broker AndrewOsborne in November.

Osborne, whom Tullow describedyesterday as a very valuable broker tothe company left BAML after beinginvestigated by the Financial Services

Authority over claims that he passed

over inside information to a largeshareholder in a client, PunchTaverns, in 2009. Osborne maintainsthat he did not deliberately breachany rules and is considering appeal-ing against a 350,000 fine.

BAML says it will maintain a close

BYDAVID HELLIER

ADVISERS

POLITICIANS have called for the direc-tors of Network Rail to turn downtheir bonuses.

Tom Harris MP yesterday tabled amotion, signed by 27 other Labourpoliticians, urging chief executive Sir

David Higgins and other directors to

reject any bonus payments after therail watchdog ORR censured thegroup for major asset failures, con-gested routes and poor managementof track conditions.

But transport minister NormanBaker said the government had

extremely limited powers to step in.

Labour calls for Network Railexecs to forfeit their bonusesTRANSPORT

BUSINESSMAN and TV personality DonaldTrump is endorsing Mitt Romney (inset) in the

race for the 2012 Republican nomination, sourcessaid yesterday, a day after US media said Trumpwould be endorsing Romneys rival NewtGingrich.

Tullow Oil to

ditch BAML

as its broker

How we predicted the loss in December

TRUMP BACKS ROMNEY FOR THE WHITE HOUSE

relationship with Tullow, to whom itis a lender and an adviser.

RBS Hoare Govett, which has beensold to Jefferies, also expected to losethe mandate.

BarCap will be especially pleasedwith the win. It has been picking up big UK broking clients like British Airways owner IAG, and 3i, the pri-vate equity group. Alastair Gain andBertie Whitehead were on the pitch,

while Andrew Foster and Tom Perryled Morgan Stanleys campaign.

8/3/2019 Cityam 2012-02-03

6/36

THE merger of equals of Glencoreand Xstrata will create a corporatetitan worth an estimated 50bn.

The firms are headquartered with-in 3km of each other in Switzerland,and have been the subject of specula-tion over a possible tie-up formonths.

A merger would mean a combinedworkforce of 127,500 with revenue of$175.5bn (110.9bn).

The deal brings together Xstrata a miner with decades of practicalexperience with the marketingmight of Ivan Glasenbergs Glencore,

which completed a high profile IPO

last year.Some analysts suggested that

bringing together the two strandswould mean the forming of a newpowerhouse to line up against thelikes of rivals Rio Tinto and BHPBilliton.

Glenstrata: a

company toreckon with300 INSURANCECONTRIBUTION

4 YEARSSERVICING

4TH YEAR EXTENDEDGUARANTEE

UP TO 3 YEARSROAD TAX*

3 YEARS 6.4% APRREPRESENTATIVE

CHOOSE 3OFFERSON YOUR NEW CR-V,

JAZZ OR INSIGHT

YOUR HONDA,YOUR WAY.

Fuel consumption figures for Honda range in mpg (l/100km):Urban Cycle 23.2 - 61.4 (12.2 - 4.6), Extra Urban 40.4 - 67.3 (7.0 - 4.2),Combined 32.5 - 64.2 (8.7 - 4.4). CO2 emissions: 201 101 g/km.

Call: 0845 200 8000 to find your localHonda dealer, or visit: www.honda.co.uk

Models shown: Jazz 1.4 ES Manual in Azure Blue Metallic at 13,935, CR-V 2.0 ES Manual in Urban Titanium Metallic at 24,235 and Insight IMA EX in SpectrumWhite Pearl at 21,435. Terms and Conditions: Offers valid on new retail CR-V, Jazz ( including Jazz Hybrid) and 11YM Insight models ordered from 16 December2011 to 31 March 2012 and registered by 30 June 2012. Offers applicable at participating Dealers and are at the Promoters absolute discretion. Servicing: Fouryears complimentary servicing or 50,000 miles, whichever comes first, and includes a maximum of four services. Complimentary servicing covers the manufacturers

scheduled servicing only. 4th Year Extended Guarantee: Additional coverage extends the original Standard Warranty to 4 years / 120,000 miles (whichever occurs

first), and will Guarantee the vehicle is free from material and manufacturing defects (mechanical and electrical items only, excludes items which can be expected to

wear). Road Tax: *Jazz/11YM Insight - monetary amount equivalent to the cost of Road Tax ( Vehicle Excise Duty) for the first three years of the vehicles life will bepaid at time of purchase at the prevailing rates of First Year and Subsequent Year VED. CR-V - monetary amount equivalent to the cost of Road Tax (Vehicle Excise

Duty) for the first year of the vehicles life will be paid at time of purchase at the prevailing rate. Insurance contribution: Monetary amount of 300 willbe paid at time of purchase as a contribution to insurance costs. Honda Aspirations (PCP): Indemnities may be required in certain circumstances.Finance is only available to persons aged 18 or over, subject to status. All figures are correct at time of publication but may be subject to change. Credit

provided by Honda Finance Europe PLC, 470 London Road, Slough, Berkshire SL3 8QY. You do not have to pay the Final Payment if you return the car at the end

of the agreement, you have paid all other amounts due, the vehicle is in good condition and has been serviced in accordance with the Honda service

book and the maximum permitted mileage of 10,000 per annum has not been exceeded. LOVE HEARTS , SWIZZELS MATLOW LTD.

Scan me to seethe latest offers

BY JOHN DUNNE

M&A

Mining mega-merger6 CITYA.M. 3 FEBRUARY 2012

ANALYSIS l Xstrata PLC

p

27 Jan 30 Jan 31 Jan 1 Feb 2 Feb

1,250

1,200

1,150

1,100

1,230.502 Feb

A STRING of advisers are involved inthe negotiations over the potentialmerger between Xstrata and

Glencore. JP Morgans Ian Hannam is

expected to be one of the key advisersto Xstrata. Hannam is regarded as thedoyen of the mining industry by cor-porate financiers. Xstrata has alsocalled on Nomura, Goldman Sachs andDeutsche, while Glencore has recruit-ed Citigroup and Morgan Stanley.David Wormsley at Citigroup andThomas Gottstein at Credit Suissehave advised the firm before.A total of $140m in fees is up for

grabs for the banks advising.

ADVISERS: JP MORGAN

IAN HANNAM

CHAIRMAN OF

CAPITAL

MARKETS

It aint over until Ivan Glasenberg singsIT aint over till Ivan Glasenbergsings. Everyone knows the rationalefor the deal: massive scale, a raft ofcost-saving synergies, and a much-improved presence for Glencore incommodity markets.

Indeed one of the main reasonsthe famously secretive Glencore went public was so it could bagXstrata, whose other shareholders

were cold on a merger when the pri-vately-held Glencore was so difficultto value.

This isnt yet a done deal though. We understand that several bigshareholders in Xstrata thinkGlencore should pay a sweetener. If

Glencore, which already owns 34per cent of Xstratas shares, insistson a nil-premium merger of equals,it could end up struggling to acquirethe other 17 per cent or so it needsto take control.

Xstratas management has recent-ly suggested it has outgrown its bigbrother and nothing has happenedto suggest this is no longer the case.

Competition authorities are alsolikely to pay close attention to thepower wielded by such a firm. As amassive commodities-trader-cum-miner, the combined company

would surely have some influenceon prices; the Chinese, for one,

would be very unhappy.If the merger goes through, we

should expect a flurry of similardeals in the sector. Anglo Americanis the most likely to consider a tie-upor acquisition in order to retain its

scale within the market. We still think a merger is themost likely outcome, although prob-ably with a bit of cash for Xstratashareholders. But this is far from adone deal.

david.crow@cityam.com

BOTTOMLINEAnalysis by David Crow

HOW A COMBINED COMPA

57,500 70,000

127,500

EMPLOYEES

GLENCORE XSTRATA

$3.8bn* $10.4bn*

$14.2bn

OPERATINGPROFIT

GLENCORE XSTRATA

$145bn* $30.5

$175.5b

REVENUE

GLENCORE XST

*based on 2010 accounts

8/3/2019 Cityam 2012-02-03

7/36

MERGING Glencore and Xstrata willcreate fierce competition for posi-tions on the new board and mostof the potential directors alreadyknow each other.

The two firms have a long historyof sharing board members and are

based just 3km apart in the twintowns of Zug and Baar, Switzerland.

Mick Davis was a Glencore employ-ee when he was appointed asXstratas chief executive in October2001, ahead of the mining companygoing public.

The man who appointed himGlencores chief executive IvanGlasenberg, is now a rival as the twomen thrash out details of the mergerand decide who gets to run the com-

bined firm. Both are South Africanand highly competitive.

Three members of Glencoreboard, including Glasenberg, are non-executive directors of Xstrata whileSteve Kalmin, Glencores chief finan-cial officer, used to work for Xstrata.

Both firms have high profile chair-men, and one man will lose his posi-tion. Glencores Simon Murray is aformer French legionnaire who head-ed Asian operations for DeutscheBank, while Xstratas Sir John Bond isa former chairman of HSBC and

Vodafone.

Directors scrapfor positionspost-merger

M&A

Mining mega-merger 7CITYA.M. 3 FEBRUARY 2012

Current Glencore chief exec Ivan Glasenberg is vying with Mick Davis for the top spot

Simon Murray (L) and Sir John Bond (R) are chairs of Glencore and Xstrata respectively

WOULD LOOK

Baar

Zug

GLENCOREThe worlds largestcommodities trading housealso extracts, ships andrefines raw materials inthree groups metals andminerals; energy products;and agricultural products.

XSTRATA

One of the worlds biggestmining groups, whoseassets include copper minesin South America, zinc inSpain, and ferrochrome andvanadium in Australia andSouth Africa.

The two companies arealready headquartered just3km apart in Switzerland,with Glencore settled in Baarand Xstrata resident in Zug

8/3/2019 Cityam 2012-02-03

8/36

Facebook float8 CITYA.M. 3 FEBRUARY 2012

ZYNGA shares jumped 17 per cent yes-terday following Facebooks revelationthat 12 per cent of its 2011 revenuescame from the social gaming company.

Facebooks IPO filing on Wednesdayalso confirmed that Morgan Stanleywill lead the troupe of underwriters,who could accept a fee of just one percent in their keenness to land the deal.

However, at an estimated valuationof $100bn this would still amount to$1bn a staggeringly large fee com-pared to other tech IPOs.

According to Capital IQ, Russiansearch engine Yandex paid its under-writers a sizable 40.3m, while Zyngaoffered a fee of 20.9m and LinkedInsbanks earned 15.3m.

But the social networks ultimatemarket capitalisation is still underquestion. While grey traders havehiked Facebooks value to around

$100bn, the companys financial dataand investment risks will undergogreat scrutiny in the run-up to its IPO.

Concerns have been raised aboutthe slowing rate of growth at the net- work, which already has penetrationrates of 80 per cent in some countriesand 60 per cent in the UK and US, andits heavy dependence on advertising, which is currently not compatiblewith the fast-growing mobile site.

It also remains to be seen whetherFacebook will successfully break intothe Asian markets, where other socialnetworks dominate. Facebook reachesless than 15 per cent of Japan andRussia, and is restricted in China.

But Zuckerbergs power in the com-pany is more concrete. Though heowns a 28.4 per cent stake, he controls56.9 per cent of voting rights due tothe dual class stock and allegiances with early investors. As a controlledcompany, Facebook is not obliged tohave majority independent directors.

Zynga soarsbut Facebookhas yet to flyBY LAUREN DAVIDSON

TECHNOLOGY

BARCLAYS Capitals claims to be oneof the major players in the world ofequity capital markets will only have been enhanced by its inclusion asone of the book-runners inFacebooks $5bn flotation.

It is the only UK-based bank on thelist and that alone can act to rein-force the view that it picked up agold-mine when it bought the US

business of the collapsed Lehmanbank in 2008. The Facebook mandate follows

hard on the heels of the banksinvolvement in the Groupon flota-tion, where it was a book-runner, andthe flotation of Freescale.

And BarCap came second overalllast year as an adviser for US technol-ogy IPOs.

But its not just been floats thatBarCap is getting itself involved in.On the mergers front, BarCap was

the lead adviser to Hewlett Packardlast year when it bid $10.3bn for MikeLynchs Autonomy Group.

In London, BarCap has been goingout all guns blazing to win corporatebrokerships, with a view to winningmore company related financingdeals.

Recent wins include IAG, the par-ent of British Airways and Iberia,Clive Cowderys Resolution Groupand 3i. Yesterday it won joint broker-ship of FTSE 100 company Tullow Oil.

BarCaps mandate on $5bnfloat shows its growing cloutBYDAVID HELLIERADVISORY

27-year old Mark Zuckerberg will control 56.9 per cent of Facebook Picture: GETTY

www.RateSetter.com Customer Phoneline: 08442490115

In association with RateSetter: A better way to Save and Borrow, Peer to Peer

VIVEK ABRAHAM | TATE BANK OF INDIA

I think hes in it for the money - hes getting a big chunk of it!This way his investors can get out of the business. I dont believehe just wants to build the technology.

REBECCA HOBBS | RECRUITER

Its for financial reasons. Facebook is all free at the moment andalthough he makes enough out of the advertising he probablywants to get out. Theres a big incentive to take the money.

ALEX GOULD | RECRUITER

He realised there was an opportunity to build a business and hesexploited it. But I think hes realised theres only so far you can takethe company, hes made a lot of money and he wants to cash in.

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

CITY VIEWS: DO YOU BELIEVE ZUCKERBERG WHEN HE SAYSWE DON'T BUILD SERVICES TO MAKE MONEY; WE MAKEMONEY TO BUILD BETTER SERVICES? Interviews by James Waterson

8/3/2019 Cityam 2012-02-03

9/36

8/3/2019 Cityam 2012-02-03

10/36

MARKETS rose yesterday as ChinesePremier Wen Jiabao suggested thecountry will invest in the Eurozone

bailout fund but fell later whenEurogroup leader Jean Claude Junckercast doubt on the success of Greekdebt talks.

Wen (pictured) said the countrysupports efforts to stabilise the cur-rency, and could invest some of itshuge foreign currency reserves in theEuropean Stability Mechanism (ESM).

The euro rose on his comments,although he stopped short of givingany firm commitment to invest in the

bailout fund which is planned tostand at 500bn by July.

Premier Wen made the com-ments, and stressed the impor-tance of a Eurozone recovery toChinese and world economicgrowth, after meeting GermanChancellor Angela Merkel.

However, the cur-rency droppedagain, ending theday 0.9 per centdown against thedollar, after

Juncker described

the on-going Greek debt talks asultra-difficult. The negotiationsneed to be complete by 20 March toprevent the country defaulting on itsdebts.

Juncker also said the steps taken byEU leaders on Monday to toughenrules on fiscal discipline are largelyinsufficient, potentially undermin-ing markets confidence in the deal.

Positive news came as Spain andFrance both sold bonds at interestrates below those seen last month,and the UK issued 2029-dated index-linked bonds at negative real yields.

However, weaker figures came ascar registrations dropped 0.3 per centin January in Germany and 21 per

cent in France.The data reflect the ongo-

ing concerns of householdstowards big-ticket expendi-ture, said Marion Labourefrom Barclays Capital.

Meanwhile producer pricesfell 0.2 per cent in the

Eurozone inDecember, potential-ly opening the doorto further monetaryloosening by theEuropean CentralBank next week.

NEW claims for unemployment bene-fits in the US fell more than expectedlast week, pointing to more healing inthe nations battered jobs market.

Data on jobless claims zigzaggedover the last few weeks, but the figuressuggest employers are less eager to layoff workers, offering hope they couldalso step up hiring as the economy

recovers.Initial claims for state unemploy-

ment benefits dropped 12,000 lastweek to a seasonally adjusted 367,000,the Labor Department said yesterday.

A separate report from the depart-ment showed growth in US nonfarmproductivity slowed in the fourthquarter, which also suggested compa-nies might be closer to squeezing allthey can out of their current staff.

For the moment thats a goodthing because it means that anyexpansion in demand will lead to hir-

ing, said Pierre Ellis, an economist atDecision Economics in New York.

Meanwhile, US home prices fell in2011 for the fifth year in a row,

weighed down by distressed sales ofhouses scooped up at bargain prices,data analysis firm CoreLogic said.

CoreLogics home price index fell4.7 per cent in 2011. Excluding distresssales, prices declined just 0.9 per cent.

The report also showed home pricesfell for the fifth consecutive month inDecember, down 1.4 per cent com-pared to the previous month. But

without distressed sales, home pricesgained 0.2 per cent.

American jobs market showing signsof gradual recovery, new data shows

CHINESE people save around ninetimes more than Britons, as a propor-tion of income, according to figuresreleased yesterday.

Since 2001 the savings ratio inChina spiked from 27 per cent to astaggering 47 per cent, according toresearch from Lloyds TSB.

In the UK the recession saw the sav-ings ratio rise to seven per cent,

where it is expected to remain in thenear future, the report said.

And 11 per cent of British adultshave no savings whatsoever, com-

pared to just three per cent of non-savers in China.The typical (median) UK house-

hold has an average of 5,009 in sav-ings and investments this is around3,600 lower than the typical Germanhousehold, Lloyds TSB found.

The typical UK household has onlyaround a quarter of the amount insavings and investments owned bythe typical Chinese household 19,334, it said.

Brits savings dwarfed bylarge Chinese nest eggs

PERSONAL FINANCE

THE FINANCIAL crisis will leave theUK with a higher rate of structuralunemployment, and even when theeconomy recovers joblessness willremain elevated, according to areport published today by theNational Institute for Economic andSocial Research (NIESR).

Economic output will fall by 0.1per cent over 2012 as a whole, beforerecovering strongly to grow by 2.3per cent in 2013, the think tank

believes.

However, this return to growthwill not stop unemployment risingto around nine per cent, and remain-ing higher than in the boom yearsfor the decade or more ahead.

NIESR expects joblessness toremain one per cent higher than

before the crisis.Unemployment at this elevated

level for such a long period is likelyto do permanent damage to the sup-ply side of the economy, with largelong-run economic costs, the report

warned.The think tank also believes con-

sumer price inflation will fall below

two per cent in the second half ofthis year and hit 1.4 per cent in 2013.

NIESR also cut its growth forecastsfor the global economy by 0.5 per-centage points to 3.5 per cent this

year and four per cent in 2013.This assumes a delayed but ulti-

mately successful resolution of theeuro area crisis, NIESR said.Nevertheless, we expect a mildrecession in the Euro Area as a

whole, as well as in the UK.We forecast growth of about two

per cent in the US this year, whileChina and India, although slowing,

will continue to drive world growth.

Recession will cause unemployment tobe permanently higher, think tank says

UK ECONOMY

MONETARY Policy Committee (MPC)member Adam Posen yesterday

revealed he had pushed colleagues toextend quantitative easing beyondgovernment bonds.

The arch-dove wants the Bank tobuy corporate debt as part of a widerseries of reforms to boost lending,particularly to small businesses.

Posen has long argued in favour ofquantitative easing, and believes ithas successfully boosted economicgrowth.

The MPC is widely expected to

announce another 50bn of asset pur-chases at next weeks meeting,though currently only UK govern-ment bonds are purchased.

The aim is to take the assets from

financial services firms, which willthen invest in other assets like corpo-rate debt, lowering interest rates and

boosting borrowing.If the Bank of England bought cor-

porate bonds itself, if could directlylower those borrowing costs thoughdifficulties may come in deciding

which firms debt to buy.There is too much of a fear of a

public role in creating financial infra-structure, he said. It would not be

the end of the world if the MPC were,as part of the asset purchases, to buythings other than gilts.

Speaking to a Trades UnionCongress (TUC) audience, he also

argued that greater competition inthe banking sector in part thoughthe establishment of a state invest-ment bank standardised loan appli-cation forms and the development ofa junk bond market would all helpSMEs.

We need more diversity and com-petition to get credit flowing, hesaid, saying UK firms rely too muchon bank lending and not enough on

bond markets.

Posen: Extend QE beyond giltsBY TIMWALLACE

UK ECONOMY

Chinese may

invest in eurobailout fundsBY TIMWALLACE

EUROZONE

BYHARRY BANKS

US ECONOMY

News10 CITYA.M. 3 FEBRUARY 2012

THE WEAK UK housing market andcuts to government building budgetshave slowed growth in constructionactivity, Markits purchasing man-agers index (PMI) showed yesterday.

The headline index fell from 53.2in December to 51.4 in January, whilethe employment index fell to 50 theno-change mark.

Construction output has nowincreased for 13 consecutive months,

but January saw the weakest growthin four months and fell below thelong-term trend rate of expansion.

Commercial activity increased inthe month, but declines in housingand civil engineering slowed overallgrowth.

It is clear that many businesseshave replenished their levels of opti-mism and have high expectations forimproving economic conditions andnew contracts, said an upbeat David

Noble from the Chartered Institute ofPurchasing and Supply.

Construction sector stillexpanding but rate slows

BY TIMWALLACE

UK ECONOMY

CHRIS HUHNE TO LEARN FATE OF SPEEDING CASE TODAY

Energy secretaryChris Huhne willlearn this morningwhether he is to beprosecuted over

claims he lied toavoid a speedingban, in a decisionthat could derail hispolitical career andforce a cabinetreshuffle. The LiberalDemocrat ministerhas denied anywrongdoing overallegations he askedhis estranged wifeVicky Pryce to takeresponsibility for aspeeding offence in2003.

8/3/2019 Cityam 2012-02-03

11/36

8/3/2019 Cityam 2012-02-03

12/36

The cocktail party is one of the high-lights of the worlds largest mining invest-ment conference, which starts nextMonday in Cape Town although theexpected 7,000 delegates start flying outfrom today to maximise the weekend.

The elephant in the room when SouthAfricas mineral resources minister SusanShabangu (below) takes to the stage nextTuesday will be Impala Platinum, after the

worlds largest platinum producer yes-terday sacked 17,200 workers for ille-

gally striking. We hope Shabanguwill reassure people it is still safe todo business in South Africa, saidthe director of one Aim-listedexplorer as he prepared to fly out.

Ministerial delegations from theDemocratic Republic of Congoand Sweden are among thoseattending, as are representa-tives of Stellar Diamonds,the FTSE 250-listedCentamin, Liberia-based Aureas andHummingbird Resources,the gold miner run by 35-year-old Daniel Betts that

is undergoing lightning growth.Glencores executives are otherwise

occupied as they manoeuvre the $80bnmerger with Xstrata, but Xstratas localSouth African team will still be making anappearance. I know this, because theycalled me on another matter, said anIndaba spokesperson.

The same Xstrata that pre-Glencoretakeover announcement was rumouredto be looking at a number of companiesitself such as Nkwe Platinum, the Australian-listed explorer led by PeterLandau. But all that is now on hold,says a mining mole.

STOCK CHECKSHARE PRICES of the companies attendingIndaba tend to go up in the run-up tothe event, says an observer, because theconference that translates as news inthe local dialect is the ideal place to makea big announcement.

Petra Diamonds, whose stock soared10.5p, or eight per cent, as the delegatespacked their suitcases yesterday, seems tobear that out.

HUMAN CAPITAL THOMAS Edison tried more than 9,000experiments before he invented the firstsuccessful lightbulb. And the vacuumcleaner created by James Dyson that is

now found in a third of all British homeswas launched in a recession.

Two facts, says HSBC Private Banksmanaging director Charlie Hoffman, thatshow why a downturn acts as a catalyst forgrowth for entrepreneurs and small busi-nesses. Economic hardship or uncertain-ty can drop or reshape barriers to entry, itcan free up human capital, and it can cre-ate diamond ideas from a coal seam, hesaid as he launched the nominations forthe HSBC and PwC-backed PrivateBusiness Awards.

This years voting panel includeDechert partner Miriam Gonzales, CarlaStent, the chief operating officer of VirginManagement, and Paul Dreschler of WatesGroup, last years Private Business Awardschief executive of the year.

DA VINCI CODECREDIT SUISSE gave its senior bankers apreview of the Leonardo da Vinci exhibi-tion as the lead sponsor of the sold-outshow (The Capitalist, 23 November).

And, not to be outdone, Bank of America Merrill Lynch is bankrollingthe restoration of one of da Vincis earli-est manuscripts at the Castello Sforzescoin Milan.

Five Marc Chagall paintings at the TelAviv Museum of Art and a collection offirst-century BC Urartian jewellery atIstanbuls Rezan Has Museum are alsobeing restored, as this years recipients ofMerrills art conservation programme.

GOLDMANSOUTSPOKEN

PRESS AIDESIGNS OFFLUCAS VAN Praag was well-known for fir-ing cerebral, elegantly worded scorn onanyone who crossed paths with GoldmanSachs. So the PR mans exit from thebank, as confirmed yesterday, was similar-ly well-phrased.

Cest la vie, emailed Goldmans chiefspokesman, the logical conclusion to theleak earlier this week that Jake Siewart,former aide to Treasury secretary TimGeithner and press secretary in theClinton administration, was in talks totake over his role.

Goldman declined to comment butthe reshuffle marks an end of a commu-

nications era at the bank, a reign wherevan Praag memorably presided over LloydBlankfeins Sunday Times interview where the Goldman CEO said thatbankers do Gods work.

The Rolling Stone profile that describedthe bank as a vampire squid also fellunder van Praags watch, as did earlierthis week the retort to the Wall Street Journals questions about rumoursBlankfein is planning to resign. It is pre-posterous that the Wall Street Journal would even consider publishing sucheffluent, fumed van Praag.

So where now for the man whoreached Goldman in 2006 via theMerchant Navy, the Bankers Trust andfinancial comms house Brunswick, where he was said to be a right-handman to Alan Parker, the PR guru whomade Gordon Brown his sons god-father? No doubt van Praag will,in time, supply an elegantly word-ed statement.

OUT OF AFRICAIT SEEMED like a good idea atthe time when Richard Williamson of JendensSecurities dived into thefountain at MirabaudSecurities party at theIndaba mining conference. This year, the industry ishoping for a repeat per-formance.

Chief spokesman Lucas van Praag (inset) is set to leave the building at Goldman Sachs New York HQ Picture: Getty

*Fare applies to one-way flights to selected destinations in Germany, seat availability is limited and subject to change. For other European destinations, please check the respective fares and conditions on lufthansa.com

DiscoveriesA product of Lufthansa.

Over 100 fascinating destinations in

Europe are just waiting to be explored.

Start exploring Europe at surprisingly low fares

full-service experience included. Easy online

and mobile check-in, generous luggage allowance

and complimentary food and drinks.

Book now at lufthansa.com

The Capitalist12 CITYA.M. 3 FEBRUARY 2012

EDITED BY

HARRIET DENNYSGot A Story? Emailthecapitalist@cityam.comFollow The Capitaliston Twitter: @dennysharriet

Charlie Hoffman, MD of HSBC Private Bank

8/3/2019 Cityam 2012-02-03

13/36

New from City A.M., we bring you the latest

THE BEST ROLES NEED

THE BEST CANDIDATES.

W W W . C I T Y A M C A R E E R S . C O M

F I N A N C E B A N K I N G L E G A L I T

8/3/2019 Cityam 2012-02-03

14/36

ROYAL Dutch Shell yesterdayannounced an expansion plan aimedat ramping up oil production.

Unveiling a profits rise of 50 percent to $28.6bn (18.1bn) for 2011, thecompany said it would pump $30bninto new oil and gas projects this year.

The profits, which fell short of ana-lyst estimates, compare with $24bn in2011, when production fell and prof-its were mainly fuelled by higherprices.

Production averaged 3.215m bar-rels of oil equivalent per day in 2011, athree per cent drop on 2010.

Chief executive Peter Voser saidthat world global demand for oil wasincreasing but that volatility in theenergy sector had been triggered byevents such as the earthquake inJapan and the Arab Spring.

In a world of volatility, volatileearnings are a fact of life. We stayfocused on the longer term, he said.

We are balancing the payouts forinvestors and the investment neededfor the company.

Shell has been in the process ofscaling back its refinery operationsand Voser said that shift in the busi-

ness was keeping to the timetable ithad laid out.

The company said that in the finalthree months of 2011 net income was$6.5bn, up from $5.7bn for the com-parative period the year before.

Shells downstream division swungto a quarterly loss of $278m after itsrefinery margins were hammeredand sales of oil products dropped.

Voser said that the companys divi-dend would be hiked in 2012, thoughat a lower level than some analystshad been expecting.

The company said it would add$0.01 to its first quarter dividend for2012, to $0.43 per share.

Shells Class A shares shot down 2.3per cent after the announcement, butsettled to close down 0.15 per cent.

BT is today expected to unveil plans tolaunch ultra-fast broadband thatwill become available to most Britishhomes and businesses next year.

The telecoms firm, which willreport its third quarter results today,has completed trials of a new fibre-overlay technology that would seethe company offer speeds of up to

300mbps, a source said last night. This compares with the current

average UK broadband speed of7.6mbps.

The group will carry out furthertests this summer and hopes to makeit commercially available by spring2013.

The move would come as welcomenews to the government, which haspledged to provide 90 per cent ofhomes and businesses with access tosuperfast broadband by 2015. Itwould also propel the UK ahead of its

European peers in the race for thefastest broadband speed.

BT currently provides the majorityof its fibre connection only as far asthe so-called cabinets situated inthe street, with copper wire makingthe final link with the end user.

However, new fibre overlay tech-nology would make it viable for BT tobring fibre optic connections directlyto homes and business, deliveringfaster internet speeds.

The service is expected to be avail-able on a wholesale basis to other

internet service providers as well asBTs own retail business.

BT is set to unveil plans to roll outultra-fast broadband across the UK

SMITH & NEPHEW, Europes biggestartificial knee and hip maker,trimmed costs to shore up profit inthe last three months of 2011, puttingit back on track for what it expects tobe a tough 2012 after a disappointingthird quarter.

The groups trading marginbounced back to 25.2 per cent, from19.8 percent in the third quarter,

resulting in fourth quarter tradingprofit of $279m, down one per cent

but ahead of analyst expectations.Smith & Nephew, which also has

endoscopy and advanced woundmanagement units, has struggledwith high costs, and chief executiveOlivier Bohuon is cutting $150m(94.8m) from the business, includingshedding seven per cent of its 11,000-strong workforce.

Demand for replacement kneesand hips, made by Johnson &Johnson, Styker and Zimmer as well

as Smith & Nephew, stalled whenglobal economies weakened.

Smith & Nephew resultsfuelled by cost cuttingMANUFACTURING

DEFENCE technology companyQinetiQ said yesterday it expects tomeet full-year profit forecastsdespite uncertainty on future levelsof military spending in Britain andthe United States.

Late last year the company said itwould beat its own earnings expecta-tions for the year by 20 per cent afterrestructuring and cost cuts drove a45 per cent surge in first-half profit.

QinetiQ is expected to post an

average pre-tax profits of 126m forthe year to end-March according to

analysts.During its third quarter QinetiQ won a 38m naval combat integra-tion contract from the Ministry ofDefence. However, it said budgetsand spending priorities were stilluncertain in the US delaying theaward of contracts.

The US, easily the worlds largestdefence spender, has capped its mili-tary budget at last year's levels for2012.

QinetiQ to hit forecastsdespite defence cutbacksDEFENCE

UK REFINERY Coryton has attractedmore than 40 interested parties follow-

ing the insolvency of its owner, Swissrefining group Petroplus and some ofthem are very credible, its adminis-trator said yesterday.

There have been over 40 expres-sions of interest from the speculativeto the highly credible, said KatherineHowbrook, a spokeswoman for PwC.

There have been a wide variety [ofinterested parties] including frommajor European oil companies to trad-ing houses and companies from the

Middle East and Russia. The Coryton refinery, which can

process 175,000 barrels of crude oil perday, has been in UK administrationwith PwC since 24 January.

The administrator bought one cargoof crude on Tuesday, allaying fearsthat a lack of supplies would force it tostop operations.

The plant is the most sophisticated and most profitable of the compa-nys refineries. Coryton supplies 10 percent of the UKs fuel overall and 20 percent in the south east.

Energy minister Charles Hendry has been working to keep the site openand has expressed fears that petrol

supplies could be hit. East of EnglandMEP Richard Howitt also said hefeared petrol supplies would be affect-ed and any job losses would have adevastating impact on the local

economy.However, analysts from KBC EnergyEconomics said that other UK refiner-ies had been running at only around80 per cent of capacity in 2011, mean-ing they had plenty of spare capacityto make up for a shortfall fromCoryton.

Even before Petroplus filed for insol- vency, Coryton had been refining atsignificantly below its maximumcapacity.

Coryton attracts 40 suitorsBYHARRY BANKS

ENERGY

Shell targets

growth afterprofits missBY JOHN DUNNE

ENERGY

BYKASMIRA JEFFORD

TELECOMS

News14 CITYA.M. 3 FEBRUARY 2012

ANALYSIS l Royal Dutch Shell Plc

p

27 Jan 30 Jan 31 Jan 1 Feb 2 Feb

2,280

2,260

2,240

2,220

2,265.002 Feb

IS SHELLS STRATEGY A WINNER IN VOLATILE MARKETS? By John Dunne

RICHARD HUNTER

HARGREAVES LANSDOWN

The initial disappointment of thisupdate does not detract from the longer termview, where Shells drive for progressive busi-ness and dividend growth remains strongly ontrack. the market consensus of the shares as abuy and the sectors preferred play is likely tostay intact. Shell is striving to boost produc-tion and is expecting some of its proj-ects shortly to reach full production.

STUART JOYNER | INVESTEC

We are concerned about Shell's ever-rising investment expenditure, which could mean the company is spending"more for less" with costs coming in higher than forecast, for less return. We expect to see material downgrades to theconsensus FY2012/13 earnings numbers. The overall result represents a substantial undershoot. Gearing fell to13 per cent so the company has the ability to sweeten the earnings and capex disappointments if it choses to.

TONY SHEPARD

CHARLES STANLEY

The share price has been weakahead of these results and understandably,the share price has initially fallen on publi-cation of the results but longer term, Shellhas set out a strong set of new growth pri-orities. Our recommendation remainsAccumulate.

Peter Voser saidShell plans toramp up itsproductionPicture: GETTY

VOSERS NEW STRATEGYShell surprised analysts yesterdayby unveiling an aggressive growthstrategy for the next six years.The oil major said it plans tomove back into productiongrowth through 60 new projects

containing a potential 20bn bar-rels of oil, turning around itsdownward output trend over thelast ten years. The firm is target-ing a 50 per cent rise in cashflowand a 25 per cent rise in gas andoil production by 2018.To achieve this, Shell will splashout $30bn this year, up from$31.5bn a year ago, chiefly onexploration and extraction. And itwill renew its focus on tight oilprojects, which have the potentialfor higher margins than naturalgas, which has fallen in price.

8/3/2019 Cityam 2012-02-03

15/36

8/3/2019 Cityam 2012-02-03

16/36

ASTRAZENECA is cutting a further7,300 jobs and expects earnings to fall14-18 per cent this year as patents onkey drugs expire and governments inEurope and the US squeeze prices.

Britains second-biggest drugmakersaid yesterday the latest phase of cuts,equivalent to 12 per cent of the work-force, would deliver an extra $1.6bn(1.02bn) in annual benefits by theend of 2014. It will cost $2.1bn toimplement.

The drugmaker faces loss of exclu-sivity on many of its top-selling drugsover the next five years and has fewobvious replacements in its pipeline.

The antipsychotic medicineSeroquel, its second-biggest drug, willlose exclusivity in the US in Marchand also goes off patent in Europeancountries this year.

That will contribute to a tough year, with group sales expected todecline by a low double-digit percent-age in 2012.

The company has already imple-mented two earlier rounds of cut- backs involving 21,600 job lossessince 2007, which has reduced itsworldwide headcount to 61,000.

AstraZeneca now expects recentlylaunched products and the pipelineto contribute $2-4bn to sales by 2014,down from $3-5bn estimated a yearago and $4-6bn seen in 2010.

It now expects overall revenues inthe period up to 2014 to be in thelower half of the previously forecastrange of $28bn to $34bn a year. Saleswere $33.6bn in 2011.

Despite the challenges,AstraZeneca is committed to return-ing cash to shareholders and plans to buy back $4.5bn in shares in 2012,more than analysts had expected. The2011 dividend was raised by 10 percent to $2.80 a share.

In the fourth quarter of 2011, earn-ings rose 16 per cent to $1.61 pershare on flat sales of $8.6bn.

MERCK & Co yesterday reported bet-ter-than-expected fourth quarterearnings, helped by a decrease inresearch spending, and predicted rel-atively flat 2012 results as the second biggest US drugmaker girds forcheaper generic forms of its biggestproduct, asthma drug Singulair.

Merck posted a fourth quarter net

profit of $1.51bn (955m), or 49 centsper share, compared with a loss of

$531m, or 17 cents a share, a year ago, when the company took a $1.7bncharge related to a major clinical set-back.

Merck earned 97 cents per shareexcluding items, including acquisi-tion and restructuring expenses,

Global revenue rose two per cent to$12.2bn, just shy of Wall Street expec-tations of $12.53bn.

Sales of Singulair, whose US patentlapses in August, jumped eight per

cent to almost $1bn, well above anyother Merck product.

Sales of its Januvia diabetes drugsoared 42 per cent to $96m, while arelated combination product called Janumet jumped 34 per cent to$386m suggesting the fast-growingdiabetes franchise will be able to helpoffset Singulairs approachingdecline.

Merck said it expects full-year 2012earnings of $3.75 to $3.85 per share,excluding special items.

The forecast reflects earnings 0.5

per cent lower to 2.1 per cent higherthan those seen in 2011.

Merck profits impress Wall Street asresearch spending is trimmed in 2011

VIACOM posted a lower quarterlyprofit yesterday due to weaker thanexpected advertising sales at its stableof cable networks, including MTVand Nickelodeon.

Viacom shares dropped initially byaround four per cent in early trading before recovering as Viacom execu-tives assured investors they had seena recovery in the market during the

current quarter.The media company said advertis-

ing revenue fell three per cent in itsfiscal first quarter, surprising someanalysts.

Viacom said earnings from contin-uing operations in the quarter to 31December fell five per cent to $591m(374m). But earnings per share rosefour per cent to $1.06, boosted byaggressive share buybacks.

Revenue rose three per cent to$3.95bn, helped by a double-digitincrease in fees paid by cable, satellite

and phone distributors for carriage ofits networks.

Viacom shares drop afterweaker advertising salesMEDIA

ELECTROLUX faces further head- winds in debt-ridden Europe this year while the US offers a glimmerof hope, the household appliancesmaker said yesterday as it reported anear 40 per cent fall in 2011 coreearnings.

Makers of fridges, washingmachines and vacuum cleaners have been buffeted by weak consumerconfidence on both sides of the Atlantic and have expanded into

faster growing emerging markets. They pushed through price rises

in 2011 to offset soaring raw materi-als costs, but 2012 is still lookingchallenging.

Electrolux, which makes 65 percent of its sales in mature markets,said 2011 earnings before interestand tax before non-recurring itemsplunged 39 per cent year-on-year to3.98bn Swedish crowns (364m).

In the fourth quarter alone, coreearnings fell 16 per cent to 1.44bncrowns.

Electrolux earnings fallas it faces a tough yearRETAIL

TROUBLED electronics company Sonyis set to make its fourth consecutive

annual loss the worst run in its 54years as a listed firm as the groupyesterday upped its loss forecast from90bn (750m) to 220bn.

Sony also slashed its previous oper-ating income forecast of 20bn to a95bn loss.

The third quarter usually lifted bythe Christmas season brought lossesof 91.7bn, down from a 137.5bnprofit in the same period last year.

Sony saw sales drop over 17 per

cent to 1.8 trillion, blaming theexceptionally strong yen, the earth-quake in Japan, flooding in Thailand and the state of theeconomy.

It also mentioned the 63.4bn one-off chargeincurred from exiting itsflat-screen TV partnershipwith Samsung.

The grim news followsWednesdays announce-ment that exec-utive vicepresidentK a z u oHirai (pic-

tured) will take over as chief executivefrom Sir Howard Stringer in April.

Despite its struggling TV divi-sion, which could lose up to

230bn this year, Hirai told

journalists the company would maintain its aim tosell 20m TV sets this year.

But the firm cut forecastsof digital camera sales from23m to 21m and PlayStation3

consoles to 14m.Sony said it aims to

halve losses on its TVs next year andcollect operatingprofit of 200bn.

Sony to lurch further into redBY LAUREN DAVIDSON

TECHNOLOGY

AstraZeneca

cuts jobs astakings diveBYHARRY BANKS

PHARMA

BYHARRY BANKS

PHARMA

News16 CITYA.M. 3 FEBRUARY 2012

WATCHES SHINE AS SWISS EXPORTS DECLINE

THE SWISS watch industry was the star performer among the countrys exporters last year,with shipments climbing 19.2 per cent in 2011 from a year earlier, the Federation of theSwiss Watch Industry said yesterday. Watch sales, including luxury brands such as Piaget,vastly outperformed other industries, where demand for Swiss goods fell. Total exports fromSwitzerland fell in December by a real 1.6 per cent.

NEWS | IN BRIEF

Botox makers earnings riseAllergan said yesterday its fourth-quarterearnings rose 6.4 per cent, as higher salesof its eye drugs Lumigan and Restasis off-set lower-than-expected sales of wrinkle

treatment Botox. The company's forecastfor the year was lower than anticipated,sending its shares down 1.8 per cent inmid-morning trading, although some ana-lysts consider the outlook to be conserva-tive. Net income rose to $279.8m(176.8m), or 90 cents a share, from$263m, or 85 cents a share, a year ago.Product sales rose 7.2 per cent to $1.38bn.Revenue rose to $1.4bn from $1.3bn.

Statoil seeks Iraq sale consentNorways Statoil wants to sell its stake ina giant 12.9bn barrel oilfield in southernIraq to Russias Lukoil, and the Iraqi oilministry has no objection in principle,an Iraqi oil official said yesterday. Statoilholds 18.75 per cent of the West QurnaPhase-2 field, with Lukoil at 56.25 percent and Iraq's North Oil Company 25per cent. The Norwegian state companyhas considered quitting Iraq for sometime and turning its attention to less-risky assets elsewhere, industry sourcessaid. It is planning billions of dollarsworth of investments in areas such asoffshore Norway and in the US.

International Paper beats StreetInternational Paper, the packaging pro-ducer trying to buy rival Temple-Inland,posted a better-than-expected quarterlyprofit yesterday as it cut costs to offsettenuous demand. The weak economy hastaken a bite out of packaging sales, espe-cially in North America where 70 per centof IPs business is centered. The companyposted fourth-quarter net income of$257m (173.8m), or 59 cents per share,compared with $316m, or 74 cents pershare, in the year-ago period. Operatingprofit at the company's printing papersunit dropped 20 per cent to $189m butrose at the company's three other units.

ANALYSIS l AstraZeneca PLC

p

27 Jan 30 Jan 31 Jan 1 Feb 2 Feb

3,050

3,000

2,950

2,900

2,984.002 Feb

8/3/2019 Cityam 2012-02-03

17/36

CONSUMER goods group Unileversaid 2012 will be a difficult year asgrowth in emerging markets, whichaccounts for more than half its busi-ness, slows and demand in Europeand North America stays flat at best.

The gloomy outlook sent shares inthe Anglo-Dutch group sharply lower yesterday after it broadly matched2011 sales growth and profit marginforecasts.

Unilever, which pushed up theprices of brands such as Dove,Hellmanns, and Knorr to offset high-er commodity costs, said growth inemerging markets had now sloweddue to these price rises and weak con-sumer confidence.

Finance director Jean-Marc Huetsaid growth in emerging marketssuch as Africa, Asia and Latin Americastayed strong but the company need-ed to do better in Russia and easternEurope, where its performance wassluggish.

The worlds third-biggest consumergoods group said underlying sales in2011 rose 6.5 per cent in line with fore-casts of 6.4 per cent, with annualgrowth of 6.6 per cent compared to

rival Procter & Gamble which saw afour per cent rise.

Its fourth quarter underlying salesrose 6.6 per cent, just missing fore-casts of 6.8 per cent, but the rise wasmade up of 6.5 per cent from priceand just 0.1 per cent from volumegains.

Emerging markets, which make up54 per cent of Unilevers business,grew 11.5 per cent in 2011. In productterms, its personal care goods like Luxand Sunsilk were the fastest growingat 10 per cent while its foods grew justover three per cent.

Overall annual turnover rose fiveper cent to46.5bn, and it paid a quar-terly dividend of 22.5 cents a sharecompared to 20.8 cents the same timein the previous year.

DOW CHEMICALS quarterly profitand revenue missed Wall Streetsexpectations yesterday as demand forelectronics, plastics and coatingsplunged, causing the company toslash production and aggressively dis-count some products.

The results sent shares of Dow, thelargest US chemical maker by rev-

enue, down 1.2 per cent.Dows operating rate, a reflection

of its full capacity, fell nine percent-age points to 72 per cent in the quar-ter, levels not seen since the lastrecession.

Most of the capacity cuts came inEurope, where the continents debtcrisis has sharply affected exports andwhere demand for Dows products is weakest, chief executive AndrewLiveris said.

We quickly intervened and startedmoving volume and basically gave up

on price, he said yesterday. Europeis a headwind for the whole year.

The US economy is actually recov-ering nicely, with electronic salesimproving from a weak fourth quar-ter, though weak constructiondemand is a concern, he said.

For the fourth quarter, the compa-ny posted a net loss of $2m, or twocents per share, compared with netincome of $426m, or 37 cents pershare, in the year-ago period.

Excluding one-time items, the com-pany earned 25 cents per share.

Revenue rose two per cent to$14bn. Analysts expected $14.1bn.

Dow Chemicals shares slide after itsrevenues fail to impress the markets

COMPASS Group, the worlds biggestcaterer, said yesterday first-quartersales rose more than eight per cent,as continued strength in NorthAmerica and emerging markets off-set weakness in Europe, putting iton track to achieve its full-year out-look.

We have seen good levels of new business wins and the improved

level of retention we achieved in thesecond half of last year has contin-

ued into the new financial year, thecompany said in a statement.

Compass provides meals for office workers, members of the armedforces and schoolchildren world-wide.

North America and emergingmarkets had helped the companypost a rise in full-year profit, helpingoffset tough economic conditions inEurope and the earthquake in Japan.

Shares in Compass closed up 0.75

per cent at 605.5p yesterday, valuingthe company at just over 11.4bn.

Caterer Compass gets aboost from US business

SUPPORT SERVICES

MASTERCARD reported a higher quar-terly profit yesterday as consumersaround the world spent more moneyusing credit and debit cards, but a liti-gation-related charge took a large biteout of its earnings.

The worlds second-largest creditand debit card processing networksaid it incurred a $495m (312m) after-tax charge related to merchant litiga-tions in the US over the fees they payon credit card transactions.

This special item represents thecompanys financial portion of a

potential settlement in these cases,chief executive Ajay Banga said in astatement.

For the fourth quarter, the compa-ny, which has consistently beaten ana-lysts expectations for seven straightquarters, posted a net income of $19m,or 15 cents a share, compared with$415m or $3.16 a share last year.

Total revenue was $1.72bn, up 20per cent. Excluding items, the compa-ny posted a net income of $514m.

Mastercards results arehit by litigation charges

SUPPORT SERVICESGREAT PORTLAND Estates, the

London property developer, has seen

its net asset value jump in the quarterafter landing two major pre-lets withmedia firm UBM and property agencySavills.

The group said the value of its port-folio rose 2.6 per cent in the threemonths to 31 December and gained10.6 per cent to 1.9bn in the year.

Chief executive Toby Courtauld said:Whilst macro-economic conditionsfor the UK as a whole remain challeng-ing, London and its property markets

continue to fare relatively well;investor demand, particularly fromoverseas, remains strong whilst tenanttake-up has increased over the quarterto the long run average level.

A lack of debt finance is keeping atight lid on new development startsand landlords will benefit as a result when economic growth returns,Courtauld said.

The company completed 35 new let-tings in the period, generating 11.8mper year, and began the developmentof a 237,000 square foot site for mediacompany UBM in south London.

Great Portland said enabling worksat its 100 Bishopsgate skyscraper were

progressing well and were on track tobe completed by July 2012. However,they said the scheme will only go-ahead once a major pre-let is secured.

Great Portlands NAV jumpsBYKASMIRA JEFFORD

PROPERTY

Outlook grim

for Unilever asmarkets slowBYHARRY BANKS

CONSUMER

BYHARRY BANKS

CHEMICALS

News 17CITYA.M. 3 FEBRUARY 2012

MILK CUTS INTO DAIRY CRESTS GROWTH

Dairy Crest unveiled a two per cent rise in sales in the first nine months of the year despitewhat it called a challenging business environment. The cheesemaker said its f ive keybrands Cathedral City, Country Life, St Hubert Omega 3, Clover and Frijj were up eightper cent compared with the previous year. But trading remained tough in its Dairies busi-ness where high milk purchase prices and lower cream selling prices has hit its profitability.

NEWS | IN BRIEF

LVMH expects an excellent yearLVMH, the world's biggest luxury goodsgroup, said yesterday the outlook for 2012was excellent and hiked its dividendafter rapid growth in Asia and at its Louis

Vuitton brand helped it post a forecast-beating rise in full-year operating profit.The French group, which last year boughtItalian jeweller Bulgari, shrugged off con-cerns about the global economy with a 22per cent rise in profit from recurring oper-ations to 5.26bn (4.38bn) on sales up16 per cent at 23.66bn. Chief executiveBernard Arnault said business trends inJanuary had been the same as at the endof last year, adding that the company'spriority remained organic growth.

Game Group gets loan lifelineStruggling retailer Game Group has won alifeline from its lenders, after they agreedto revise the terms of the firms loan facili-ties. Game said last night it now has sup-port from its stakeholders and lenders,and expects to meet its loan covenanttests at the end of the month having low-ered the limits on its loans. The firm pre-dicted a pre-tax loss of 18m for the yearto 31 January and said it will provide anupdated strategy soon. Chief executive IanShepherd said: Were pleased to reachagreement with our lenders, but should beunder no illusions about the challenges inour market or the hard work that isrequired to deliver our strategic plan.

CME surprises with dividendCME Group has surprised investors with ahuge increase in its dividend, sendingshares soaring about six per cent andovershadowing disappointment with bothits earnings and a new insurance fund toprotect farmers from another MF Global-like collapse. CME, the biggest US futuresexchange operator, said it sought toattract new investors with a 59 per centincrease in its quarterly dividend, anincrease in its payout target and the intro-duction of a new special annual payment.

ANALYSIS l Unilever NV

27 Jan 30 Jan 31 Jan 1 Feb 2 Feb

25.80

25.60

25.40

25.20

25.00

24.80

24.772 Feb

ANALYSIS l Great Portland Estates PLC

p

27 Jan 30 Jan 31 Jan 1 Feb 2 Feb

375

370

365

360

363.602 Feb

8/3/2019 Cityam 2012-02-03

18/36

BfinanceThe independent consultant hasappointed Michel Haski as head ofEMEA institutional coverage. Haski joins

from Allianz Global Investors Europe,where he held the roles of chief execu-tive officer and co-head of sales, in addi-tion to his position of director general of

Allianz Global Investors France.

Broadwalk AMSimon Strong has joined BroadwalkAsset Management to work withfounder Charlie Cottam to expand thefirms investment portfolio. Strong was

most recently a director at EvolutionSecurities, covering the software and ITservices sector.

State StreetState Street Global Markets hasappointed John Minderides as head ofits portfolio solutions business forEurope, the Middle East and Africa,based in London. Previously, Minderideswas managing director and global head

of transition management at JPMorgan, with responsibility for teams inLondon, New York, Sydney and Tokyo.

Healthcare LocumsSue Bygrave has been appointed aschief finance officer, to succeed interim

CFO Bill Jessup. Bygrave, who movesfrom Aim-listed Biome Technologies,where she was group finance director,will start as executive director on theboard on 6 February.

Novo AltumSabimir Sabev has joined as sharedservices and outsourcing practice leader.He moves from Everest Group, where hewas managing partner, Europe.

Edison Investment ResearchEdison Investment Research hasopened an office in Berlin, to be led byReena Dennhardt, the founder andmanaging director of logistics andretail firm CCBGmbH, which she ran

from 2000 to 2011. Dennhardt movedto Germany after starting as a Cityanalyst, first at Dresdner KleinwortBenson and then at JP Morgan.

KKRKohlberg Kravis Roberts & Co hasappointed Vincent Policard as a directorin its infrastructure team, based inLondon. He joins KKR from the infra-structure fund team at Morgan Stanley.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to citymoves@cityam.com SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

Investors wait forkey US jobs report

INVESTORS largely took a wait-and-see approach yesterday as USstocks ended little changed aheadof todays key employment report,

but tech shares rose after strong earn-ings from chipmaker Qualcomm.

Recent economic data suggestingthe economy is on a slow but steadypath to recovery has helped fuel a rallyin stocks.

Todays nonfarm payrolls report,which is expected to show the improv-ing labour market trend remainedintact in January, will be a key test ofthe rally.

The optimism over the labour mar-ket was reinforced as new claims for jobless benefits dropped more thanexpected in the latest week, accordingto data released yesterday.

A decent number, and I wouldexpect equities to continue theiradvance, a not decent number and well have a correction. Its that sim-ple, said Frank Lesh, a futures analystand broker at FuturePath Trading inChicago.

US employment growth probablyslowed in January as temporary work-

ers hired during the busy holidayshopping season were laid off, but the

underlying picture is expected toremain relatively positive, say econo-mists.

Nonfarm payrolls likely rose by150,000 after increasing 200,000 inDecember, according to a Reuters sur- vey. The unemployment rate is seenholding steady at a near three-year lowof 8.5 per cent.

Technology shares outperformedthe broader market. Qualcomm hit itshighest level in 12 years after first-quarter profit trounced estimates. Itsshares gained two per cent to $60.73

after hitting a high of $61.95. The Dow Jones industrial averagedropped 11.05 points, or 0.09 per cent,to 12,705.41. The Standard & Poors 500Index gained 1.45 points, or 0.11 percent, to 1,325.54. The NasdaqComposite Index rose 11.41 points, or0.40 per cent, to 2,859.68.MasterCard rose 6.7 per cent to$381.57 after the payment processorbeat analysts estimates for the seventhstraight quarter.

Healthcare shares were among thelosers. Drugmaker Merck & Co, thenumber two US drugmaker, said profitwould be little changed in 2012. Theshares fell 0.5 per cent to $38.44.

Insurer Cigna posted a lower-than-expected fourth-quarter profit, hurt byperformance in its disability and lifecoverage business and internationalplans.

Cigna also forecast 2012 earnings

below Wall Streets target, sendingshares down 3.4 per cent to $44.13.

BRITAINS top share indexpaused yesterday after recentsharp gains with a rally in min-ers on the prospects of a big

sector merger counterbalanced bywarnings from bluechips of a toughyear ahead.

The FTSE 100 finished 0.1 per cent,or 5.35 points, higher at 5,796.07,retreating from a six-month intra-day high of 5,809.82 after stumblinginto resistance above the key 5,800level.

News that mining group Xstrataand commodities trader Glencoreare in merger talks to create a com-bined group worth more than 50bnboosted sentiment for the sector andfanned speculation that other dealscould follow.

Its good for sentiment. Obviouslystocks are better, it may force other businesses to think again [aboutM&A[, Arthur Gordon, co-head of UKsales at Canaccord Genuity invest-ment bank, said.

I think the market is going high-er, equities are very attractive relativeto other asset classes. My favouritesare E&P [exploration and produc-

tion], the mining sector. The global financial crisis had

choked off the European mergersand acquisition market, but UBSexpects it to start picking up this yearthanks to the recent stocks rally,falling volatility and improving earn-ings momentum.

The FTSE volatility index fell for athird session in a row, pointing toimproved investor risk appetite.

Shares in Xstrata jumped 10 percent to six-month highs, with tradingvolumes nearly three times their 90-day average. Glencore added sevenper cent.

The broad mining sector was upthree per cent, also getting a boostfrom a bigger than expected fall inUS weekly jobless claims.

Coupled with news of a rise inglobal manufacturing activity onWednesday, the data bodes well forfuture demand including for met-als as the world economy slowlyheals.

Consumers, however, remain in acautious mood.

London-listed consumer goodsgroup Unilever led the FTSE 100 loserboard after it warned that 2012 willbe a difficult year as problems in thedeveloped world filter through toslower growth in emerging markets.

Shares in the soups and soapsmaker fell 4.4 per cent.AstraZeneca also warned investorsof harder times ahead as patents onkey drugs are due to run out, sending

shares in Britains second-biggestdrugmaker 3.4 per cent lower.

The possibility of a messy defaultin Greece remained the biggest con-cern for investors, with Eurozonefinance ministers now aiming toagree a second bailout for Athens onMonday.

You do get the sense that there ismoney on the sidelines waiting for aresolution of the Greek situation andif there was a positive resolution, theFTSE could push higher in the nearterm, Bill McNamara, technicalstrategist at Charles Stanley, said.

If something like that happened,

a run up to 5,935 is not impossible,that was a level from the summerlast year.

Meanwhile, European shares hit afresh six-month closing high yester-day after US weekly jobless claimsshowed the market was im