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GREECES economic nightmare continued

apace last month as industrial output plum-meted again, according to figures releasedyesterday, while Portugals banks were forcedto tap the European Central Bank (ECB) for arecord amount of funding.

Unemployment figures due out onThursday are expected to show another risein Greek joblessness in January 21 per

cent were unemployed in December, andthe situation is expected to worsen.Weak domestic and export demand,

against a backdrop of tough austeritymeasures, pushed industrial output down

by another 8.3 per cent in t he year toFebruary.

The sovereign debt crisis also continued

to pound Portugal, where banks borrowed arecord 56.3bn (46.4bn) from the ECB lastmonth, up from 47.5bn in February.

Although the countrys borrowing costsfell over March from a peak of 14.1 per cent

on 10-year debt to 11.1 per cent, they havesince risen to 12.2 per cent as worriespersist over the peripheral nations ability

to pay their debts.Meanwhile, Greek dockworkers begin atwo-day strike against austerity today,which will hit ferry services which are vitalto tourism.

social networking site as it has donewith previous acquisitions.

Spending $1bn in cash and stockalso marks a departure for Facebook,which has typically focused on small-er acquisitions worth less than

$100m. Zuckerberg said Facebook didnot plan on doing many more ofthese [acquisitions], if any at all.The company, which is expected to

launch a $5bn initial public offeringin May, said it expects to complete the

deal later this quarter.Instagram was founded in October

2010 by Stanford University graduatesKevin Systrom and Mike Krieger withthe aim of recreating snapshots takenon old Polaroid cameras.

Mark Zuckerberg said Facebooks biggest-ever acquisition was a milestone for the firm

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SOCIAL NETWORKING giant Facebookhas snapped up Instagram, a two-year-old photo-sharing application thatemploys just 13 staff, for $1bn(629m) in its largest acquisition todate.The hugely popular application

allows users to add filters and specialeffects to photos taken on their smart-phones and share them throughInstagram or other networking siteslike Facebook, Twitter and Tumblr.

Since its launch in January last year,Instagram has attracted some 30musers. But despite a loyal followingthe start-up has yet to book any profit.

In a post on his profile page yester-day, Facebook chief executive MarkZuckerberg said the deal marked animportant milestone for the socialnetworking giant because its thefirst time weve ever acquired a prod-uct and company with so manyusers.

He said the company planned togrow Instagram independentlyrather than integrating it into the

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Systrom has said he was firstapproached by Mark Zuckerberg tojoin Facebook in 2004 while he wasstill at Stanford, but he turned downthe offer to finish his studies.

Systrom, who is said to own around40 per cent of Instagram, is now likelyto land a windfall of around $400m asa result of the deal. Krieger, who issaid to hold about a 10 per cent stake,will net around $100m.

In a blog posted on Instagrams web-site yesterday, Systrom said he and histeam were psyched to be joiningFacebook and reiterated plans to keepthe application independent.

With the support and cross-polli-nation of ideas and talent at a placelike Facebook, we hope to create aneven more exciting future forInstagram and Facebook alike, hesaid.The company, which counts Twitter

co-founder Jack Dorsey among itsinvestors, reportedly closed a $50mfunding round last week frominvestors including Sequoia Capitalthat valued the company at $500m.

Greece falls deeper into recession as Portuguese banks ask for record ECB funds

FACEBOOK TO PAY $1BNFOR FIRMWITH 13 STAFF

BY TIM WALLACE

ALLISTER HEATH: Page 2

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[email protected]

Follow me on Twitter: @allisterheath

AOL announced yesterday it is tosell 800 of its technology patents toMicrosoft for nearly $1.1bn (690m),sending shares in the internet firmsoaring by 43 per cent.

The company did not say whatthese patents cover but they aresaid to include rights from itscurrent and former businesses,spanning from Netscape andMapQuest to CompuServe and

Advertising.com.Microsoft will also be granted a

non-exclusive licence to a portfolioof over 300 patents that AOL hasdecided to keep.

AOL, which has been facingpressure from activist investors topursue the auction, said it intendedto return a significant portion ofthe sale proceeds to them.

The agreement with Microsoftrepresents the culmination of arobust auction process for ourpatent portfolio, said chiefexecutive, Tim Armstrong.

The sale process kicked off lastautumn and has attracted a stringof online suitors including Amazonand eBay, in what has in recent

years become an increasinglyexpensive battleground for patents.

Technology companies have beenspending billions on intellectualproperty assets primarily to defendthemselves against the rising tide ofpatent litigation.

Microsoft buys

patents fromAOL for $1.1bnBY KASMIRA JEFFORD

GETTY

Firms wont be forced tooffer third way pensions

THE GOVERNMENT will not forcecompanies to offer new definedambition pensions, ministerSteve Webb said yesterday as heannounced plans to find a third

way for private sector workers tosave for their retirements.Webb wants more businesses to

offer pensions that guaranteesome certainty for employees,despite the near extinction ofdefined benefit schemes yet willnot oblige them to do so.

This is another option forfirms, the pensions minister said.Were not going to force anybodyto do this but we are aware that anumber of schemes are looking atsharing risk with their employeesas part of auto-enrolment.The coalition wants to help firms

move towards schemes that offermore certainty than defined con-tribution pensions, which areprone to investment fluctuations.Yet the government is not expect-

ed to back the move with cash,instead expecting employers andemployees to share the risks asso-ciated with retirement packages.

There must be somewhere inthe middle between the old finalsalary schemes where absolutelyevery risk was on the firm howlong you lived, what happened to

Pensions minister Steve Webb wants schemes to o ffer more certainty

2 NEWS

BY JULIAN HARRIS

To contact the newsdesk email [email protected]

WHILE the City was enjoyingits Easter Monday off, WallStreet was out in force. Themost astonishing deal

signed yesterday was Facebooks $1bnpurchase of Instagram. This was thesocial networks biggest purchase todate and comes as a prelude to

Facebooks flotation but the realstory was that Instagram is just 551days old and employs no more than13 employees.The firm had just 100,000 users on

13 October 2010, 200,000 a week later,300,000 eight days after that andreached 1m by 21 December that year.Six weeks later, it had doubled again,and then again three months and a

bit later. It had 27m at last count,which means that Facebook is payingabout $37 each. Nice work if you canget it for Instagrams founders andinvestors, and they have produced a

EDITORSLETTER

ALLISTER HEATH

Facebook must beware a return to the dot.com bubble days

TUESDAY 10 APRIL 2012

great piece of software that allowsmobile users to share photographs

but as we learnt during the globalcredit bonanza of the noughties, if itfeels and sounds like a crazed bubble,it almost certainly is one.

It may just be that Facebook runby the 27-year old Mark Zuckerberg is clever enough to make its acquisi-tion pay after all, Instagrams usersupload 5m pictures every day and itsnew Android app has been phenome-nally successful, with 1m downloads

in just 24 hours. But others shouldbeware: the last time people paid for-tunes for users and eyeballs, ratherthan for cash flows, it all ended intears. And even Facebook could stum-

ble: its corporate culture and therules it imposes on its users may notmesh well with Instagrams

approach. There have been lots of dis-astrous takeovers in the tech world inrecent years, where companies payhuge amounts for an asset which sub-sequently loses much of its value.There are plenty of good internet

firms out there today, unlike in 1999-2001, but that is no excuse to pay sillyprices for trendy properties and yes,that means even you, MarkZuckerberg.

CREDIT BRITAINWe all know that there has been mas-sive deleveraging in the UK, right?

cent at peak in the first quarter of2009 to 101 per cent late last year

but this was just 69 per cent 15 yearsearlier. We wont need to go all the

way back down but greater delever-aging will be required. For non-finan-cial firms, debt as share of GDP isdown from 121 per cent in the fourth

quarter of 2008 to 105 per cent butthat remains far higher than the 82per cent seen a decade ago or the 58per cent seen 15 years ago even

before pension fund deficits, whichensured that overall corporate liabili-ties actually rose last year. The UK canprobably bear more debt than 15

years ago but not this much.One thing is sure: we will all have to

tighten our belts for many more yearsto come.

Wrong. As Citigroups excellentMichael Saunders calculates, includ-ing net public debt (which officiallyrose to 64 per cent of GDP at the endof last year), the total debt/GDP ratiofor the UK (excluding financial firms)

was 270 per cent at end-2011, similarto the level of a year earlier (271 per

cent) and little changed from thepeak (278 per cent of GDP in the thirdquarter of 2009). It remains far abovelevels of 10 years ago (191 per cent inlate 2001) or 15 years ago (169 per centof GDP in late 1996).The situation in the private sector is

better but not sufficiently so. The pri-vate debt/GDP ratio (excluding finan-cial firms) fell to 206 per cent atend-2011 from 231 per cent in late2008. But this remains far higherthan 10 years ago (160 per cent) or 15

years ago (127 per cent). Taking justhouseholds, the ratio fell from 111 per

inflation, what happened to invest-ments and a pure defined contri-

bution scheme where you put themoney in but you have absolutelyno idea what pension youre goingto get at the end, Webb told BBCradio.

Henry Tapper of pensions firmFirst Actuarial said that the govern-ment would have to go further toconvince businesses and private sec-tor workers. It is not enough to pro-mote ways of rearranging deckchairs on the Titanic, Tapper said.Webb is going to have to offer some

genuine help to the private sector.Shell became the final FTSE 100

firm to close its final salary schemeat the beginning of this year. Yetsuch pensions, which guarantee anongoing proportion of a workerssalary upon retirement, remainavailable to workers in the govern-ment sector.The Institute of Directors respond-

ed unenthusiastically yesterday, say-ing that employers would be verynervous about government plansfor more private sector guaranteeson pensions.

QWhat is a definedambition pensionscheme?

AThese arepensions that offer

some certainty to retired workers.Yet unlike defined benefit schemes,not all the risk is piled on employers.

And unlike defined contributionschemes, less risk is left with thepension holder.

QHow does that work in practice?

AIn several ways. One is for ascheme to come with a minimum

annual income, with more moneyadded if investments perform well thus protecting pensioners if

investments turn sour.

QIs this an entirely new idea?

ANo, several companies alreadyoffer such pensions. Supermarket

Morrisons guarantees a pension potfor employees, which the firm topsup if the stock market performs

badly. Yet payments also depend onannuity rates, so there is still anelement of risk for the pensioner.Other firms offer more guarantees ifemployees work to an older age.

QWill this affect the auto-enrolmentscheme?A

No, it shouldnt. Auto-enrolmentstarts in October but will only

oblige firms to offer definedcontribution schemes.

QAand

Defined ambitionpension schemes

AstraZeneca faces calls for shake-upSome of the biggest investors in AstraZenecaare calling for a radical shake-up of the boardand executive team, as a new chairmanprepares to join the underperforming Anglo-Swedish pharma group. With the companytrading on the lowest price/earnings multiplein the sector, some shareholders have beenlobbying to replace David Brennan as chiefexec and push for a fresh business strategy.

Spectrum sale in UK fans 4G hopesEverything Everywhere, the UKs largest

mobile operator by customer numbers, hasappointed Morgan Stanley to sell spectrumthat could be used to roll out 4G mobilebroadband services in the UK.

Heathrow night flights proposedMinisters are to study a contentious proposalto fly A380 superjumbos in and out ofLondons Heathrow airport late at night.Emirates Airline, the Gulf carrier, says it cancut noise levels by flying the big airliners intoHeathrow on steeper-than-normal descents,and landing them part way down the hubairports runways, reducing the number ofhomes in west London affected by the dinfrom jets.

Investors hold back over Indian taxreformsOne of Indias most powerful bankers has hitout at government proposals to hit foreigncompanies with retrospective taxes oninvestments they have made in India, warningthat the countrys rate of economic expansionis likely to suffer. Chanda Kochhar, chiefexecutive of ICICI, Indias biggest private sectorbank, told The Times that the new tax ruleswere forcing foreign investors to shelve plansto invest in Asias third biggest economy atrend that is likely to dent GDP growth. The taxproposals would allow authorities potentiallyto tax transactions dating back to 1962.

Russia: we would build safe UK nuclearplantsRussia's state atomic energy agency hasplayed down fears over its safety record as itconfirmed its interest in building nuclearpower stations in Britain. Rosatom is said tobe eyeing a stake in Horizon, the jointventure put up for sale by RWE and E.ON.

Olympic-hit businesses in court moveScores of small businesses are planning aclass action lawsuit against the organisers ofthe Olympics over planned road closures andrestrictions they claim will put jobs at risk.

Indian firm seeks to book the PlazaAn Indian conglomerate has made anunsolicited $600m offer to acquire the PlazaHotel in New York, but the deal would needapproval of two owners: an Israeli-ownedholding company and a Saudi Arabianprince.

Uniqlo plans store on US West CoastJapanese clothing chain Uniqlo is opening itsfirst West Coast location as parent FastRetailing rolls out its plan to open hundreds ofstores in the US, even as American retailers areretrenching.

WHAT THE OTHER PAPERS SAY THIS MORNING

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Clinton project picks IPO banks

n For-profit higher education companyLaureate Education, which has former USPresident Bill Clinton as honorarychancellor, has picked banks to lead aninitial public offering that could raise asmuch as $750m. Laureate has chosenMorgan Stanley and Barclays to lead theproposed offering, sources said. Citigroup

is also an active bookrunner in the IPO.

GSK and Merck give cheap vaccines

n International vaccines group GAVI hasstruck a deal for bulk buying rotavirusshots from GlaxoSmithKline and Merckwhich cuts the price by two-thirds and willallow poor countries cheaper access. Thevaccines, GSK's Rotarix and Merck'sRotateq, combat the main cause ofdiarrhoea the second-largest killer of

children under the age of five worldwide.

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THE CITY jobs bloodbath hashelped drag property rental pricesdown for the sixth month in a row,according to research out today.

As banks cut headcounts andfreeze pay, rents in prime Londonhomes fell 0.1 per cent in March and the very top of the market has

been hit hardest, claims estateagent Knight Frank.

Houses with rents topping 1,500

a week in the most desirable areashave seen rental prices fall 1.2 percent on last year, while propertieson Knight Franks books with rentsabove 500 are up 1.5 per cent.

And renters are staying putrather than risking a move, withthe number of new tenanciesfalling seven per cent. This comes

City jobs cull hits prime rentsBY MARION DAKERS as vacancies in the financial sector

dropped eight per cent in Marchalone, according to MorganMcKinleys London research.

These figures underline thatthe lettings market has beenstruggling since November last

year. The Morgan McKinley data isa strong indicator for corporaterelocation and is a concern, saidKnight Franks head of residentiallettings Tim Hyatt.

But he also pointed out that

recent drops have come in thewake of record highs for primeLondon property last year.

For owners outside the capital,all but the most expensive countrypiles are also seeing values eroded.Prime country prices fell 0.5 percent in the first three months of2012, Knight Frank said.

Bond bubblefears grow as

investors querydebt valuationGOVERNMENT bonds are increasing-ly overvalued, according to a grow-ing majority of personal financeadvisers, stoking fears that money-printing and the markets flight tosafe haven assets are inflating acatastrophic bond bubble.

More than three quarters of 520professional investment advisers

quizzed by the CFA Society UK, theirindustry body, now say that govern-ment debt is overvalued, accordingto research released today.And the data shows that this view

is hardening: 78 per cent of invest-ment advisers call the bonds over-

valued in the second quarter of2012, versus 72 per cent in the firstquarter. Forty-three per cent of thosequeried called government bondsvery overvalued.They also call corporate bonds (49

per cent) and gold (61 per cent) over-valued.

CFA UK chief executive WillGoodhart said: While fixed incomesecurities have been attractive onaccount of their perceived safehaven status, our survey suggeststhat they may no longer offer good

value.Some economists have been warn-

ing for months that the cumulativeeffect of money-printing and mis-

BY JULIET SAMUEL pricing of risk is leading to a bubblein public debt.

Philip Booth of the Institute ofEconomic Affairs said: Youd expectquantitative easing to lead to a bub-

ble in bond values thats one of itspurposes. But he said that whilequantitative easing is a short-termfactor propping up gilt prices, thereis also a long-term problem.

I dont think people have quite

gotten to grips with the fiscal situa-tion the UK is in, he said. Its prettygrim [Investors] are underestimat-ing the long-term risks in the UK, USand EU government bond markets.At a recent bond auction, the UK

was able to borrow at negative yields paying interest at rates lower thaninflation, with investors effectivelypaying the government to borrowfrom them.That has prompted the chancellor

to consult on issuing 100-year bonds,but his plan could be dealt a blow ifdemand for government debt soft-ens. The CFA Survey is the secondsign of weakening demand after asharp sell-off in US Treasuries last

week.Andrew Lilico, director of Europe

Economics, said: The market hastended to be far too relaxed aboutthe inflation risk. Most of the risklies in a crash in [nominal bond]prices rather than a rise.

ADVISERS ARE INCREASINGLY CONVINCED THAT BONDS ARE OVERVALUED

Very undervalued Somewhat undervalued Fair value Somewhat overvalued Very overvalued

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GOVERNMENT BONDS CORPORATE BONDS GOLD

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Iberia cancels150 flights asstrikes begin

BY HARRY BANKS

GETTY

STRUGGLING holiday groupThomas Cook confirmed yesterdaythat it is close to a deal to roll oversome of its 1.2bn debt pile.The 170-year-old firm said it is in

advanced talks and expects tohave an agreement with its lenders,who include RBS and Barclays, intime for its half-year results in May.Thomas Cook added that it was

looking into selling and leasingback some of its planes in order torelease cash.The travel group has been forced

to consider a raft of fundraisingproposals after it issued three prof-

Thomas Cooknears a 1.2bn

deal over debtBY MARION DAKERS

it warnings last year due to familiescutting back on holidays and thesoaring popularity of travel web-sites.Those close to the firm said share-

holders could lose out as lenderslook to take an equity stake of up tofive per cent and hike interest ratesin return for extending the loandeadlines.

Interim chief executive SamWeihagen has spent months tryingto thrash out a deal with lenders assales continued to slide.A syndicate of 17 banks have been

in talks since November, when theyagreed a 200m rescue package,over easing pressure on Thomas

Cook by extending its loan facilitiesthrough to 2015.

Last month Thomas Cook reportedthat bookings were beginning to sta-bilise, following a dire 2011 that ledto the departure of veteran chiefexecutive Manny Fontenla-Novoa inAugust.

The firm has seen a good level ofinterest in its Indian business,which was put up for sale inFebruary as part of a strategicreview. IAG, run by Willie Walsh, has been hit by the first of 30 strikes by Iberias pilots

Thomas Cook Group PLC20.505 Apr

2 Apr30 Mar 3 Apr 4 Apr 5 Apr

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TUESDAY 10 APRIL 20124 NEWS cityam.com

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PILOT STRIKES at British AirwaysSpanish sister Iberia grounded 150

flights across Europe yesterday, inthe first phase of industrial actionthat could cause travel miseryduring the peak summer season.

Staff walked out yesterday in thefirst of 30 one-day strikes to protestagainst the start-up of low-costcarrier Iberia Express, owned byInternational Airlines Group,which also controls BA.

Iberia estimates the strikes willcause damages of3m (2.47m) perday.

Pilots union SEPLA says IberiaExpress is a threat to jobs andconditions, but the company says itis vital to increasing profitability.

The pilots, who plan to strikeevery Monday and Friday until July,say Iberias new low-cost servicecontravenes deals struck whenIberia and British Airways mergedin January 2011.

Last week, Iberia petitioned acourt to ban strikes by pilots andcabin crew planned over the nextfew months and to seekcompensation for 12 days of strikesheld between December andMarch.

The strikes were briefly called offin March and pilots went into talkswith the company, butnegotiations broke down.

No one at Iberia was available forcomment.

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Why most investors dont care if Diamond gets rich

ter, a piddling amount compared tothe 30 per cent or so held by foreigninvestors. Chief among these are theruling families of Abu Dhabi andQatar, who account for about 20 percent of the Barclays register, andBlackrock, the US fund manager that

holds around 11 per cent. In the wordsof Peter Mandelson, these foreigninvestors are intensely relaxed aboutDiamond getting filthy rich as longas he is delivering when it comes tostrategy and shareholder value. Onthe latter measure, the Abu Dhabiroyal family must be more thanhappy. It has made about 3bn of

profit on its Barclays investment, asum that dwarfs the 18m or so thatDiamond stands to pocket.

It is true that Barclays is somethingof a special case. The Qataris and AbuDhabi bought into the bank at theheight of the financial crisis in 2008in a controversial deal brokered by

the impeccably-connected AmandaStaveley. Existing shareholders feltthe terms on offer to the MiddleEastern investors were too generous(although its worth rememberingthat most of them balked at the ideaof participating in a recapitalisationthemselves) while the governmentwanted Barclays to accept a state

bailout.But the rise of the foreign investor ishardly limited to Barclays. Foreignownership of shares issued by Britishcompanies now stands at 42 per cent,up from a sixth in 1993 and just sevenper cent in 1964.These international shareholders

dont give a fig about what the Britishestablishment thinks about bonuses.They are global investors who take aglobal view on executive pay, andthey have decided that Britain is pret-ty competitive when it comes toboardroom remuneration.

This internationalisation of Britishshares will continue apace over the

coming years. UK institutions areunder pressure from the governmentto huff and puff more vocally aboutinvestor pay, but they are quickly los-ing the power to do anything about it.

BARCLAYS is relaxed about the rowover bonuses for its top executives andwould be unfazed if an expected 10per cent of shareholders vote againstits remuneration report, said a sourcefamiliar with the banks thinking.

The bank has shrugged off criti-cism amid suggestions that four of itsbiggest British institutional share-holders could cast their ballotsagainst the pay awarded to top man-agement at Barclays annual generalmeeting at the end of the month.

It is understood that in privatemeetings with shareholders ahead ofthe larger gathering, Barclays is keento emphasise its nine per centincrease in dividend. It also points outthat average bonuses fell 26 per centlast year.

Though returns have been a dismalseven per cent below the cost of cap-ital the bank argues it is midwaythrough a strategy of ditching or over-hauling its failing businesses.

Four major shareholders in thebank Fidelity, Standard Life, Avivaand Scottish Widows are said to be

Barclays shrugsoff criticism ofexecutive pay

BY JULIET SAMUELplanning to vote against the banksremuneration report.

And the Pensions and InvestorsResearch Consultants (Pirc), a groupthat represents institutional share-holders, has recommended that chiefexecutive Bob Diamond should receiveno bonus at all for failing to deliverreturns.

Pirc also says that investors shouldvote against the whole annual report,claiming that the accounting stan-dards the bank follows do not give atrue and fair view of its finances.

SharesSoc, a similar group for indi-vidual shareholders, seconded the callto vote against Barclays pay practices.

Barclays chief Bob Diamond is not bothered by complaints over his bonus

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[email protected]

Follow me on Twitter: @davidcrow83

Abu Dhabi Sheikh Khalifa bin Zayed bin Sultan Al Nahyan (pictured): 12.4%

BlackRock (including funds): 10.9%

Qatar Investment Authority: 6.7%

Legal & General: 3.9%

Scottish Widows: 2.1%

Norges Bank: 2.1%

Upper Chance Group: 2%

Appleby Trust: 2%

Fidelity: 1.7%

Barclays Personal Investments: 1.6%

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IT used to be big news if the likesof Standard Life, Scottish Widows,Fidelity and Aviva combinedforces to vote against a companys

remuneration report. Such a roster ofbig British institutions would havehad the clout and the votes to makethe company reconsider itsintentions or risk a very bloody nose.

Hence all the excitement about thefact that these four investors areminded to vote against the paypackage of Barclays boss BobDiamond later this month.Times have changed. Together these

shareholders account for just 6.45 percent of the Barclays shareholder regis-

As of September 2011

Fannie Mae to sell $500m billsn Fannie Mae, the largest US homefunding source, said yesterday it willsell $500m of benchmark bills onWednesday, 11 April. The sale willinclude $250m of three-monthbenchmark bills due 11 July 2012, and$250m of six-month bills due 10October 2012 in a Dutch auction. In

such uniform price auctions,successful bidders pay only the priceof the lowest accepted bid ratherthan the actual price as in aconventional multiple-price auction.Bids will be accepted fromauthorized dealers from 9am (1pmGMT) until 9.45am (1.45pm GMT).

Investor Icahn sues Amylinn Carl Icahn has sued AmylinPharmaceuticals to blockenforcement of a bylaw that preventsthe billionaire investor fromlaunching a proxy fight that couldlead to a sale of the maker ofdiabetes drugs. Icahn, whose 8.94per cent stake has made him Amylin'sthird-largest shareholder, faulted thecompany for failing to reveal itsrejection of a $3.5bn unsolicited

takeover bid, or $22 per share, fromBristol-Myers Squibb. In a complaintfiled in Delaware Chancery Court,Icahn urged that Amylin not beallowed to enforce a bylaw requiringshareholders to provide advancenotice of board candidates. Theactivist investor said shareholdersdeserve another chance to nominatedirectors who could push for a sale,given developments since theoriginal 25 January deadline.

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LABOUR candidate Ken Livingstonewill today pledge to introduce a

series of technologicalimprovements that he claims willsave London money and increaseefficiency.

His manifesto will include acommitment to creating a SmartCity where City Hall uses data tomonitor the usage of services andimprove quality of life. Specificproposals will include cuttingcongestion by placing sensors inparking spaces to enable drivers tosee where a space is available,improving cycle safety by linkingtraffic light sensors with microchipson bicycles and cutting bills byoffering Londoners smart energyand water meters.

At a time when Londoners arestruggling with the cost of living, weneed to embrace technologicaladvances that enable businesses andservices to be run more eff iciently,

reducing prices, he will say.Livingstone, who is trailing in the

polls, will also pledge to supportefforts to make local governmentdata easily available to thirdpartydevelopers.

Today also sees the launch of themanifesto for Brian Paddick, theLiberal Democrat candidate formayor. A former policeman, he is adistant third in the polls and hismanifesto is expected to focus on hisexperience fighting crime.

Ken pledges tomake capitala Smart City

BY JAMES WATERSON

nesses to grow and hire more peoplerather than concentrating on riskierstartups.

Funding would come from the70m allocated to boost Londons eco-nomic growth by chancellor GeorgeOsborne in last months Budget.Johnsons campaign is keen to

emphasise that its candidates closerelationship with theConservativeled government meansthat he is well placed to lobby formoney from the Treasury.

City Hall plans to work alongsidepartners such as the Federation ofSmall Businesses to administer therevolving fund, which would be man-aged by privatesector fund man-

agers contracted through the LondonEnterprise Panel.At the launch Johnson will also

promise to increase the number ofBusiness Improvements Districts toassist struggling high streets andboost apprenticeship schemes, sayinghe can generate up to 250,000 suchpositions over the next mayoral term.The current Mayor will also promise

to fund 100 paid Mayoral intern-ships for young people at the likes ofTfL, City Hall and the Met Police.

LAURALEAN/CITYAM


Boris Johnson and Ken Livingstone clash in the battle to be Mayor of London

BY JAMESWATERSON

MAYORALELECTION

BORIS Johnson will today announceplans for a new 35m fund forLondon that would provide low-costloans to the capitals small and medi-umsized businesses, City A.M. canreveal.

The fund would provide averageloans of around 100,000 for eachcompany, and if successful in attract-ing other funds, could drive growth

for around 500 companies, Johnsonis expected to say at todays officiallaunch of his campaign.

The funding would be a loanenabling repayments to be usedagain and again to help more smallbusinesses in London throughout mynext term.The Conservative candidate will

pledge to introduce the fund as soonas possible if he is reelected, claim-ing that it would boost Londonseconomy by allowing existing busi-

Boris promises35m fund for

London firmsEXCLUSIVE

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DIRECTORS of Alliance Trust and theactivist investor leading a campaignagainst its chief executive KatherineGarrett-Cox are set to begin lobbyingshareholders in the run-up to acrunch vote on the management ofthe fund.The 2.1bn investment trust believes

ensuring a high turnout will help it tobeat hedge fund Laxey Partners,whose public call for the manage-ment to be outsourced has piled pres-sure on Garrett-Cox.Aberdeen Asset Management, led by

Martin Gilbert, is waiting in the wings

Alliance set torouse investorsto fight Laxey

BY PETER EDWARDSand is thought to have put proposalsto major shareholders about takingover the management of the trust. Itwill not launch a hostile approach butis widely expected to tender for thecontract if the opportunity arises.Alliance chairman Karin Forseke is

today due to meet Colin Kingsnorth,her Laxey counterpart, who is con-cerned about the discount to net assetvalue (NAV) at which Alliances sharestrade. Forseke, who last week publiclybacked Garrett-Cox, is expected to crit-icise his stance as short-termist.Alliance shareholders, mostly long-

term individual investors, will vote onLaxeys resolution on 27 April, whenturnout could be key. Last yearAlliance defeated Laxeys call for anautomatic buyback policy as turnouthit an unprecedented 60 per cent,nearly double the normal level.

Laxey, a 1.7 per cent shareholder, isthought to have the backing of fellowshareholders Brewin Dolphin andinvestment management firm Speirs& Jeffrey for its current questioning ofthe role of Garrett-Cox.Alliance, Laxey and Aberdeen

declined to comment.

Alliance Trust PLC366.80

5 Apr


374

372

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368

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p

Lines are open 7 days a week, 8am-8pm, except bank holidays.

Call us free on your landline; standard network charges apply to all calls made from a mobile phone.

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TUESDAY 10 APRIL 2012 cityam.com8 NEWS

WORRIES over the Eurozone crisishave made investors increasinglycautious, pushing up the cost oflisting a company on AIM andreducing the funds raised, a newstudy revealed today.

Including listing fees and brokercharges, the cost of listing hit 10.6per cent of all funds raised in 2011,up from 7.3 per cent in 2010 thebiggest jump in costs in five years,according to research from UHYHacker Young.

New listings on Aim raised 518mlast year down 46 per cent on959m in 2010, as investors looked toput their cash into less risky assets.

Capital markets worldwide arestill reeling from the global flightfrom risk and AIM is no exception,said UHY Hacker Youngs LaurenceSacker. Many companies havereportedly struggled to raise fundsthrough the markets as externalfactors have caused investors to shyaway from equities in favour of moretraditional assets.

As a result, costs have risen as aproportion of total funds raised.

The sheer fact that companies arestill coming to list on Aim is atestament to the confidenceinvestors have in Aims long termstability, said Sacker. Aim will needto repay this confidence down theline, by bouncing back strongly fromthe economic slowdown.

Eurozone woesraising the costof listing firms

BY TIM WALLACE

Alliance boss Katherine Garrett-Cox, top, Martin Gilbert, left and Colin Kingsnorth

Bank fees from private equityfirms fall 42pc during early 2012FEES paid by private equity firms toinvestment banks decreased by 42

per cent in the first quarter of 2012after being hit by a decline in M&Aactivity within the sector.

Research by data providerDealogic shows that financialsponsors mainly private equityinvestment funds who engage inleveraged buyouts accounted forjust 15 per cent of total investment

BY JAMES WATERSONbank revenue in the first threemonths of 2012.

This is down from 21 per cent inthe same period last year. Before the

credit crunch private equity-backeddeals accounted for as much as aquarter of all investment bankincome.

Total fees paid by financialsponsors were $2.4bn (1.5bn) in thelast quarter.

Apollo Global Management ledthe way, paying $180m in fees while

Goldman Sachs Capital Partnerswas second with $139m and KKRwas third with $115m.

On the banking side, Credit

Suisse captured 10.1 per cent of themarket with $237m of financialsponsor fees paid. JP Morgan andGoldman Sachs followed with a 9.8per cent and 7.4 per cent sharerespectively.

Following a drop in both buyoutsand exits, worldwide financial spon-sor M&A fees were just $435m.

Fees paid to investment banks by financial sponsors

#1ApolloGlobal

$180m

$139m$115m $109m

$82m $79m$55m $49m $46m $44m

#2GoldmanSachs

#3KKR

#4CarlyleGroup

#5Apax

Partners

#6CVCCapital

#7Advent

International

#8TPGCapital

#9BlackstoneGroup

#10WarburgPincus

$200m

$50m

$100m

$150m

Investment bank revenue from financial sponsors

2,000

6,000

1,000

0

5,000

4,000

3,000

5%

25%

0

20%

15%

10%

2009 2010 2011 2012

3Q 4Q 3Q 4Q 3Q 4Q 1Q1Q 1Q2Q 2Q

IB revenue from financial sponsors% of IB revenue from financial sponsors$m

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NEW YORK REPORT: Page 19


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Portable hotelfirm looks fora home on Aim

BY MARION DAKERS

Snoozeboxs shipping container hotel rooms have appeared at the Silverstone Grand Prix

PRIVATE equity house Oaktree CapitalManagement will fire the startinggun on an estimated $2.2bn (1.38bn)listings bonanza in the US this week.The Los Angeles buyout group is one

of eight firms due to price shares, stir-ring hopes of a revival in the mori-bund market for initial publicofferings (IPOs).

Energy and industrial companiesfeature strongly, including waste-to-biofuel firm Enerkem and EricksonAir Crane, but Oaktrees move to gopublic will attract most interest as themarket looks for clues to the IPO byprivate equity giant Carlyle Group

Market watchesOaktree IPO forseeds of hope

BY PETER EDWARDS planned for later this quarter.Oaktree, which had about $75bn in

assets under management at the endof last year, expects an offering of11.3m Class A shares to be pricedbetween $43 and $46 each.

Co-founders Howard Marks andBruce Karsh could pocket up to$117.2m each by selling a slice of theirstakes in their debt-focused privateequity firm.

Proceeds from US-listed IPOs fell bynearly 60 per cent to $6.5bn in thefirst quarter from a year ago but ana-lysts are more upbeat about the cur-rent period.

Phil Drury, co-head of equity capitalmarkets in the Americas at Citigroup,said: We feel constructive about theUS economic landscape for equitiesand IPOs.The other firms due to price shares

this week are aluminium producerAleris Corp, industrials companyMRC Global, oil and natural gas devel-opment product maker ForumEnergy Technologies, solar thermalpower plant developer BrightSourceEnergy and clean energy firm LucaTechnologies.

Dividends at UKs largest firmsincreased by 16 per cent in 2011DIVIDENDS at British businessesrose by 16 per cent during 2011,

according to analysis bystockbroker Shore Capital.The report, which covered 191

of the UKs biggest quotedcompanies, shows that a huge 80per cent of the firms coveredincreased their final year-on-yeardividend.

A further 15 per cent of

BY JAMES WATERSONdividends were unchanged while

just five per cent of companiesdecreased their payout.

[Last years] results have

confirmed strong dividend growthin the UK. This was of no surpriseto us and we retain our bullishstance on dividend growth in theUK, based on strong corporate

balance sheets and macrotailwinds improving, said AlexStewart, the analyst who wrote thereport.

The figures also reveal that manyfirms decreased their final payoutfrom their interim results, possibly

because the Greek sovereign debt

crisis was at its peak while manydividends were being set.It also shows the range of stocks

that contribute to income hasbecome more balanced. In 2007,more than a quarter of UKdividend income came from the

banking sector; today it is just atenth.

THE REPERCUSSIONS of a weak USjobs report were felt throughoutglobal equity markets yesterday,with worries over the globaleconomic recovery weighing down

on stocks.Crude oil also fell as investorsreacted to the disappointinggovernment report, which lastFriday showed that only 120,000 USjobs were created in March wellbelow expectations for a further200,000 new jobs.

Brent crude settled down 76 cents

Disappointing American jobsdata weighs on global stocks

BY JULIAN HARRISto $122.67 a barrel yesterday, whileUS oil fell 85 cents to settle at$102.46 a barrel.

On Wall Street the S&P 500 lost1.14 per cent and the Dow Jones shedone per cent. The MSCI Asia PacificIndex, which includes Japan, was

down 0.3 per cent last night.And MSCIs all-country worldequity index slipped 0.7 per cent totrade near lows last seen a monthago. Yet some losses were pared inlater trading, suggesting that traderscould finally be shrugging off thejobs data.

SNOOZEBOX, which providesportable hotel rooms at festivals andsports events, plans to float on theAlternative Investment Market (AIM)by the end of the month.

The firm, whose upmarket roomsoffer flatscreen TVs, Wi-Fi and airconditioning, has hired PanmureGordon to help it raise 10m to fundexpansion.

Im quite a big fan of Aim as amarket and the company fits in wellthere, founder and chief executiveRobert Breare told City A.M. Theliquidity is important, as is theavailability of capital going forward.Its a more f lexible way of expandingthe company than private equity atthis stage.

Snoozebox launched at theSilverstone Grand Prix last July andBreare, who is also chairman at TedBaker, now hopes to license thefirms box designs to events andcompanies across Europe.

Im a fan of motor racing myself,and it was a natural place for us togo and try our prototypes, but we arevery keen to be very broadly basedacross all types of events, he said.

The firm also offers lower-standard Contrax boxes aimed atairports, work sites and even forlocal government use. It hasbookings for boxes at the Downloadrock festival, the Isle of Man TT racesand the Queens jubilee celebrations.

US LISTINGS THIS WEEK

Oaktree Capital Management F inance $43 to $46Enerkem Energy $17 to $19Erickson Air Crane Aviation $8 to $9Aleris Corp Manufacturing $15 to $17MRC Global Energy $21 to $23Foru m En ergy Techn ol og ies E ne rg y $18 to $2 0Brightsource Energy Energy $21 to $23Luca Technologies Energy $11 to $13

Firm Sector Range

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A MAJOR shareholder inTesco has called on theretailer to rethink itsstrategy and improve itsstruggling domestic

business.Legal & GeneralInvestment Managementsaid the company neededto think about its capitalallocation and return oncapital.

It needs to think longand hard about what itwants to be -- can it be

everything to everyone, orshould it focus on its gem,the British grocerybusiness? asked RichardBlack of L&G.

Of course, this is likelyto raise questions about

other areas of thebusiness,such asAmericaand thebank.

HARRY BANKS

G E T T Y


KOREA Development Bank, partof state-owned KDB FinancialGroup, said yesterday it has signeda memorandum of understandingto buy HSBC Holdings retail

businesses in South Korea.No value was given to the deal,

which will see KDB acquire 11HSBC branches, including alldeposits and mortgage-lending

bonds.Kang Man-soo, the chairman of

Korea Development Bank inksdeal for HSBC local retail base

BY ELIZABETH FOURNIER the Korean group, had indicatedearly last week that a deal wasclose to being completed.

HSBC has been selling off assetsin peripheral markets in recentmonths to focus on its core client

bases in Europe and Asia.KDB is planning to go public in

an initial public offering beforethe end of this year, in a listingthat could raise in to $2.5bn,

including $1.5bn for thegovernment.

Tesco boss Philip Clarke isunder pressure from investors

Tesco facing investorpressure over strategy

QATAR has built its stake in mininggiant Xstrata up to five per cent, in amove that bankers said could helpsmooth the path of a 23bn mergerwith Glencore.

The Qatar Investment Authorityhas boosted its Xstrata holding,worth 1.7bn at current prices, tofive per cent through stock marketpurchases, up from three per centbefore Glencore announced its merg-er interest in February.This makes Qatars sovereign

wealth fund the third biggestinvestor in Xstrata, after Glencoreitself, which has a 34 per cent hold-ing, and Blackrock, which hasaround 5.4 per cent.

Getting the Qataris on board willbe good for Glencore. They are notactivist investors and wont be look-ing at gaining management influ-ence, said a Dubai-based banker.

But they are opportunistic andwont commit a pound unless theyare seeing clear benefits.

Glencore chief Ivan Glasenberg andXstratas Mick Davis are preparing to

BY MARION DAKERSset off on a global investor roadshowthis month, aimed at convincingshareholders of the value of theirmerger agreement.The deal needs approval from 75 per

cent of investors, excluding Glencore.But some large shareholders, includ-ing Schroders and Standard Life, havesaid the all-share agreement is a rawdeal for those holding Xstrata stock,and are demanding a premium.

Qatar, which has spent billions ofpounds on energy and commodityholdings in recent years, surprisedmany observers when it decided notto invest in Glencores enormousstock market float last year.

Xstratas Mick Davis (left) and Glencores Ivan Glasenberg will hold investor roadshows soon

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GETTY

TECHNOLOGY group Sony is thoughtto be cutting 10,000 jobs, about sixper cent of its workforce, as newchief executive Kazuo Hirai looks tosteer the electronics and entertain-ment giant back to profit after fouryears in the red.

Investors will closely monitor abriefing on Thursday by Hirai, whoformally took over this month aschief executive from HowardStringer, for further clues on howSony plans to revamp its business.

Under a new CEO, its easier to cutjobs or go in a new direction, saidYuuki Sakurai, head of fund manag-

er Fukoku Capital, which holds asmall stake in Sony.The Nikkei newspaper said half of

the latest round of job cuts wouldcome from consolidating the firms

BY HARRY BANKSchemicals and small and midsize LCDoperations.

Sony said last month it was selling achemical products division, account-ing for some 3,000 people, while on 1April it merged its Sony Mobile dis-play unit, which had about 2,000workers, with the small LCD panelbusinesses of Toshiba and Hitachiinto a new firm called Japan Display.

IN BRIEFBrasserie Bar wins 6m injectionn Brasserie Bar Co, the restaurant groupfronted by celebrity chef Raymond Blanchas secured a 6m facility from Barclaysto fund its expansion. The company,which recently acquired eight formerChez Gerard sites, plans to grow itsFrench eatery chain Brasserie Blanc from11 to 19 restaurants by the end of the yearand a total of 40 outlets by 2016.

Hedgie boost in the first quartern Hedge funds enjoyed their bestquarter since 2006 at the beginning ofthe year, according to the Hennesseegroup of advisers. Hennessee announcedyesterday that its hedge fund index wasup 0.6 per cent in March, although fundsstill lagged equity markets as managerswere conservatively positioned, thegroup said.

LLOYDS TO SLIM SAVOY DEBT EXPOSURE


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Sony set to cut10,000 jobs as

part of revamp

Sony Corp1,6449 Apr

4 Apr2 Apr 5 Apr 6 Apr 9Apr

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LLOYDS will shrink its exposure to the growing debt of London's luxury Savoy Hotelin its new round of refinancing this year. It is understood that when the hotel seeksto roll over 230m of its debt following an expensive refurbishment, it is planning totap up a syndicate of investors rather than going back to Lloyds for the lot.

Avon calls onMcCoy to be itsnew chief exec

BY HARRY BANKS

COSMETICS company Avon yesterdaynamed Johnson & Johnson executive

Sherilyn McCoy as its new chiefexecutive, ending a four-monthoutside search for a fresh face torefocus the company and turnaround sales at home and abroad.

The news comes a week after theworlds largest direct seller ofcosmetics rejected a $10bn (6.3bn)takeover bid from fragrance companyCoty.

This is likely a clear sign thatAvons board is actively resistingCotys acquisition offer, especiallygiven the timing of todaysannouncement so quickly on theback of last weeks public offer byCoty, Bernsteins AliDibadj said.

McCoy faces thetask of turningaround a companythat has sufferedsliding sales at

home and abroad.

Sherilyn McCoyhas taken thetop job at Avon

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THERE is much that separatesBDO, Britains number sixaccountancy firm, from the so-called Big Four. One of the lesser

known differences is that SimonMichaels, the managing partner ofBDO, didnt go to university, insteadtaking a training place at theaccountant immediately after his A-Levels in 1987.

It certainly hasnt held him back. InFebruary, he was elected for a secondterm as managing partner of BDO,which has global revenues of $5bn(3bn) and around 50,000 staff.When we meet in the groups Baker

Street offices, he is clearly passionateabout the school leavers that the firmrecruits these days. Over the next five

years it wouldnt surprise me if we takeon as many school leavers as we dograduates, he tells me.

The kids are making different choic-es themselves. They dont want to go touniversity and load themselves up withdebt. They can join us from A Level andin five years get the same accountingqualification but with much moreexperience and a salary of some sorts.Although BDO is offering more oppor-

tunities to school leavers, Michaels saysthere is a risk of a lost generation ofkids, because there are not enough jobsout there to keep them happy. The eco-nomic outlook is, he says, grim, whilethe UK is facing five years of lowgrowth. The school leavers being pro-duced are absolutely fantastic, he says,but competition is fierce and thereare just not enough jobs to go around.According to Michaels, one area

where competition just isnt fierceenough is the audit sector, which isdominated by the Big Four PwC, Ernst& Young, KPMG and Deloitte. He is oneof the leading voices calling for newrules that would force the market toopen up.

There are a lot of people talkingabout how the profession doesnt needto change, not us, but a number of ourcompetitors. That to me strikes as self-serving. Self-serving to say everythingsfine, we cant do anything better. I dontbuy that.

The man with the

He offers a variety of remedies that thinks would improve thinAccountancy firms who audit a fircould be banned from selling it othlucrative services, such as advisowork, meaning BDO and others wouget more business. He also wants ban banks from insisting that the firmthey lend to use a Big Four auditoJoint audits, where a Big Four firwould be joined on the ticket bysmaller player, would also open up tmarket, he says. And he is clear aboone thing: There wont be a lot change until it is forced.

Many will say this is special pleadinespecially as BDO would profit conserably if these measures were intduced, but Michaels views are sharby regulators in high places. TCompetition Commission is probithe audit market following a referral

Audit market mustbe forced open, BDOboss Simon Michaels

tells David Crow

INTERVIEW12TUESDAY 10 APRIL 2012

Simon Michaels, BDOs managing partner,

There are a lot ofpeople who say that theprofession doesnt needto change. That strikesme as self-serving

8/2/2019 Cityam 2012-04-10

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g Four in his sights

cityam.comINTERVIEW 13

the Office of Fair Trading while the EUis also pursuing its own shake-up.

Michaels insists that BDO is not toosmall to take on the big boys. It is a per-ception thing. BDO is an internationalnetwork that turns over $5bn. We haveover 50,000 people in 135 countries. Yetsometimes were told were not bigenough. There is no other industry inthe world where with that sort of sizeyou would be told youre not bigenough.

But when I ask whether BDO wouldbe able to audit Barclays if it won thecontract tomorrow, he admits theanswer is no. There are about 35companies in the FTSE 100, the largest

financial services companies, thelargest pharma, oil companies, that we

wouldnt have the capability to audit,he says, adding that he is more interest-ed in focusing on the firms core mar-ket mid-market firms and FTSE 250companies.

We could build the capability toaudit the very largest businesses overtime, but theres no point recruitinghundreds of people to sit on the bench

when theres no likelihood in the short-term that the market will open up.

Still, if regulators introduce thereforms championed by Michaels, BDOcould soon have more work and moreaccountants on its hands.

er Street

LAURALEAN/CITYAM

CV: SIMON MICHAELSAGE: 42WORK HISTORY:Was first elected as manag-ing partner in April 2008. Joined BDO in 1987

as a trainee. Headed up the firms Business

Restructuring division from 2004 until his

election as managing partner

EDUCATION: Went to school in EdgwareFAMILY: Married with two boys and two girls,aged nine, eleven, thirteen and fifteen.

Theyre good at maths but I wouldnt go as

far as recommending them to accountancy.

LIVES: HertfordshireHOBBIES: Running marathons, most recentlyin Dubai. Has set himself a target of running

one on every continent. Im really good

round the first half of the marathon and then

my legs start hurting, but I get round.

Enjoys skiing, especially in Canada.

8/2/2019 Cityam 2012-04-10

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PRIVATE equity firm KSL Corp has

raised its bid for Great Wolf Resortsby 12 per cent to $234m (147m) as itworks to top rival buyout groupApollo Global Management in theirbattle to acquire North Americaslargest operator of indoor waterparks.

Great Wolf said it had received anunsolicited letter from KSLproposing to buy the company for $7a share in cash. That bid came inreaction to the companys latestagreement to sell itself to Apollo for$6.75 a share, or $225.7m.

Apollo originally struck a deal inMarch to buy Great Wolf for $5 ashare, or around $165m. But KSLmade an unsolicited bid of $6.25 ashare for the water park companylast week, prompting larger rival

Apollo to strike a new, 35 per centhigher deal on Friday.

Great Wolfs popularity as a

holiday destination has shielded itfrom slow economic growth, makingit a hot property in the eyes of

buyout firms looking for assets withstrong cash flows.

In 2011, its earnings beforeinterest, tax, depreciation andamortisation close to doubled to$83m. As part of its arrangement

with Apollo, Great Wolf could haveto pay up to $9m for a breakup feeand expenses should it walk awayfrom the deal.

KSL Corp hasanother bite atGreat Wolf

BY HARRY BANKS

GETTY

AIRPORT retailer Dubai Duty Freehas mandated banks for a $1.1bn(692m) multi-tranche loan facili-ty to help fund the expansion ofDubais international airport, thecompany said in a statement yes-terday.

Citibank along with DubaiIslamic, HSBC and Emirates NBDhave been hired to arrange andcoordinate the debut internation-al transaction, the company saidin an emailed statement.Abu Dhabi Commer cial Bank has

already committed to contribute

to the loan but will not beinvolved in arranging it.

Dubai Duty Free (DDF), which isowned by Investment Corporationof Dubai, said the facility includesIslamic and conventional tranch-es.

Dubai was looking to raise atleast $500m by selling debt basedon future revenues at DDF.The city, whi ch has clawed back

from the depths of a crippling2009 debt crisis, has been examin-

Dubai Duty Freepicks banks for

$1.1bn loan dealBY HARRY BANKS ing ways of raising finances to

expand its existing aviation infra-structure after deciding to go slowon a $34bn new Al Maktoum

Airport facility designed to becomethe biggest in the world.

Sales at Dubai Duty Free, whichcovers a sprawling 18,000 squaremetres of retail space at DubaiInternational Airport, rose 15.7 percent to a whopping $1.46bn in2011. The firm is among the

biggest airport duty- free sellers inthe world.The operator, which sponsor s

high-profile sports events such asthe Dubai tennis championship

and is famous for lavish giveaways,has seen business boom on the

back of sales of branded perfumes,watches and designer cl othes.

Duty Free is expected to add anadditional 8,000 square metres bythe end of 2012.

The purpose of the facilities is tooptimise DDFs capital structure inorder to support the further devel-opment at Dubai International

Airport, DDF said in yesterdaysstatement. Sales at Dubai Duty Free reached an eye-watering $1.46bn last year


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ROBERT Chote, chief of theOffice of BudgetaryResponsibility, recentlyrevealed his and the

Treasurys favoured means ofestimating the chances of a Eurozonebreakup: looking up the odds onWilliam Hill (its a 1/5 shot against, bythe way).

But there is another burning ques-tion on bankers lips: who is going toreplace Bank of England governor

Mervyn King when he steps down nextyear?

It turns out the book is open for betson his replacement with rival bookiesPaddy Power and following Chotesadvice weve checked out the odds.Favourites include famous regulatorslike Adair Turner (5/2) and Bank veter-an Paul Tucker (5/2).

But The Capitalists favoured choice isHarry Potter star Warwick Davis whoplays Professor Flitwick in the movies,a great bet at 500/1. After all, who bet-ter to continue the Banks flagship pol-icy of conjuring money out of thin air?

T

imes are hard for investorsstruggling even just to hold on totheir cash. But even so The

Capitalistwas surprised to see aparticularly savvy and news-consciousscammer touting access to a 15mfund of the late Colonel Gaddafismoney via an investment made withFidelity in an account called SECRETCODE INVESTMENT. Nice try, but evenFTSE 100 firms usually have bettersecret code names than that.The next Mervyn King?

*Conditions apply. See eduation.gov.uk/teaconditions for full details.Brought to you by

IN ASSOCIATION with Repskan.com, CityA.M. is measuring the relative Olympic mediabuzz around the London 2012 Olympic andParalympic Games partners, week by week.The leaderboard, right, reflects their ranking

over the past week, in this case fromWednesday 28 March to Wednesday 4 April.

British Airways has had a bumper Olympicnews week, with a set of stories that havebeen well-reported in traditional and socialmedia alike. The first of nine aircraft withspecial Dove liveries was unveiled by artistTracey Emin and the British designer PascalAnson. British Airways has also announcedthat long-haul flights will have new menus,inspired by earlier examples going back tothe last time London held the Olympics in1948. A short film about a carpenter workingat the Velodrome will also be premiered on

flights.

OLYMPIC MEDIA BUZZLONDON 2012 PARTNERS

Brand Position change

British Airways 9

Coca-Cola 0

DOW 2

Adidas -3

Cisco -2

McDonalds 2

Samsung -1

Visa -4

Acer -2

Panasonic 2

%

7

77

4

3

6

Blogs

National News

Regional News

Topicals

Twitter

Other

3BRITISH AIRWAYS OLYMPIC

MENTIONS BY CATEGORY

TOP TEN PARTNERS BY MENTIONS

Got A Story? [email protected]

Follow The Capitaliston Twitter: @citycapitalist

15cityam.com

cityam.com/the-capitalistTHECAPITALIST

TUESDAY 10 APRIL 2012

MY SUBWAYS BIGGER THAN YOURS

THEY might look like webs woven by confused spiders, but these strange squiggles are in fact to-scale maps of subways systems inglobal cities, as drawn by graphic artist Neil Freeman. But can you guess which name matches which scribble? London, second fromthe left, and New York, to its right, should be easy. And the others? Beijing on the far left and a diminutive Paris on the right.

Mervyns magical

money machine

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STRONG demand from a resurgent USboosted Japans economy in February,official data showed yesterday.The countrys current account bal-

ance swung back into surplus asexports jumped and gains from over-seas investments reversed the recorddeficit registered in February.The surplus came in at 1.78 trillion

(13.7bn) according to finance min-istry data the strongest surplus infive months and well up on the437.3bn deficit in January.That remains 30.7 per cent smaller

than the surplus recorded a year earli-er, in part reflecting the slowdown in

Asia and Europe which continues topose a risk to the economy.

We could still see some tradedeficits in the future, said HiroakiMuto, senior economist at Sumitomo

Japan returnsto surplus as

exports surgeBY TIM WALLACE Mitsui Asset Management.

However, they will shrink as exportsrecover due to a pickup in the globaleconomy, led by improvement in theoutlook for the US economy.

Meanwhile the economy watcherssurvey rose to an eight-month high,pointing to increased growth as theyen weakened and reconstructionprojects continued.

2011 2012

Japans current-account balance (trillion)

2.0

1.5

1.0

0.5

0.0

-0.5

-1.0

London leads UK recovery, butlarge retailers drag on growthTHE ECONOMY is growing oncemore and London led the recovery

in the first quarter, influentialsurvey data showed yesterday.However, other indicators pointed

to weakness in some parts of the UK,with increasing numbers of retailersentering administration in the firstthree months of the year.

Every English region except thenorth east registered rising businessactivity, Lloyds/Markit purchasingmanagers indices showed.

For the UK as a whole the index

BY TIM WALLACErose to 53.3 in March, up from 52 inFebruary and firmly above the nochange level of 50.

Londons firms boomed in the

month, accelerating from 53.5 to57.1, indicating much more rapidgrowth in economic activity.

However, data out yesterday fromDeloitte showed a 15 per cent rise inretail administrations comparedwith the first quarter of 2011.

A total of 69 firms fell intoadministration, up from 60 in thesame period of last year, and 10,000people lost their jobs when majorfirms like Peacocks and Game failed.

Whilst the quarterly rent dayoften sets the timing for theinsolvency, a significant trigger in anumber of recent administrations is

that many retailers have too manymarginal stores, said Deloittes LeeManning. As online retailing growswhilst overall spending is weak, thefixed costs and poor performance ofsome stores drags on the business.

Meanwhile the Centre forEconomics and Business Researchargued cutting bank holidays couldboost the economy as each one costs2.3bn in lost output, even aftercounting higher retail spending.

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JOB vacancies in the UK rose at their

fastest rate since November 2008 lastmonth, led by a boom in IT hiring,according to data out today from anonline recruiter.

Opportunities rose eight per centover the year to March, the MonsterEmployment Index showed, with ITvacancies up 25 per cent to theirhighest level since February 2008.

The outlook for the UK doesremain mixed, but more than twothirds of industries across the UKhave exhibited annual growth whichindicates that the job opportunitiesonline are picking up again, saidMonsters Julian Acquari.

However, forecasts out yesterdayfrom the Institute for Public PolicyResearch (IPPR) pointed to a lessupbeat outlook for jobs.

Its analysis suggests 100,000 publicsector jobs will be lost this year and200,000 private sector positions

created.However, they also expect the

workforce to rise even more quickly,leaving unemployment 100,000higher by the end of 2012.

Rise in hiringas economystarts growing

BY TIM WALLACE

G

ETTY

CONSUMER prices in China rosemore sharply than expected inMarch, official figures showed yes-terday, raising fears that the author-ities may have less room than hopedto stimulate economic growththrough lower interest rates.

Inflation jumped to 3.6 per cent inthe year to March, up from 3.2 percent a month earlier and represent-ing a substantial deviation from thetrend of declining price rises experi-enced in recent months.

Pork and vegetables drove the rise,with the price of the staple meatshooting up 11.3 per cent and veg-

etable price inflation hitting 20.5per cent.

Overall food prices rose 7.5 percent, while non-food pricesincreased 1.8 per cent in the year,

Price jump hitshopes of easy

money in ChinaBY TIM WALLACE China economist at Barclays.

However, there will be no aggres-sive monetary easing policymakersare aware of the upside risks to infla-tion from the pick-up in oil pricesand uncertain food prices, andtherefore will only ease at a meas-ured pace.

Producer prices fell 0.3 per cent onthe year.

HIGHER taxes may boost the blackmarket, a pressure group claimedyesterday as figures revealed theTreasury loses tens of billions ofpounds from illicit sales of alcohol,tobacco and fuel.

The government lost out to thetune of 28.5bn from illegal salesbetween 2005-06 and 2009-10,figures from the TaxpayersAlliance showed.

The group used data from HMRevenue and Customs, and warnedhigher taxes will make theproblem worse.

Duties on fuel, cigarettes and

Black market booze, cigarettesand diesel lose taxman 30bn

BY TIM WALLACE alcohol hit those on low andmiddle incomes hardest. saiddirector Matthew Sinclair.

High taxes also create fat profitsfor criminals.

With new tax hikes, andproposals for a minimum price onalcohol, the chancellor runs therisk of making that black marketeven more profitable.

Trade in illicit cigarettes was thebiggest cost to the taxman, losing12.2bn in revenues.

Diesel followed at 6.4bn, withillegal sales of hand rolling tobaccoworth 4.5bn in tax, illegal beersales accounting for 3.2bn andspirits coming in at 2.3bn.


cityam.com

Not all illegal cigarettes are successfully found and destroyed Photo: AFP

NEW JOBS

NEW COMPANIES

EVERYDAY

CITYAMCAREERS.com

WWW.CITYAMCAREERS.COM

OVER

OR SCAN HERE

2500

FINANCE, LEGAL & I.T

SALARIES UP TO

JOBS 300K

The week ahead couldoffer signs of recovery

T

HE Easter Bank Holiday may

have shortened the week,but the market may not beshort on volatility. Given

the lack of major economic andcorporate announcements, thisweek, volume could well bebelow average. However, traderswould be unwise to take theireyes off the ball. It is usually attimes like these that volatilityincreases and the opportunity forshort-term profit ramps up acouple of notches.The job market could be a

theme this week. With the LloydsEmployment Confidence num-bers out today and recruitmentfirms Hays and Michael Page alsoreporting, analysts will be watch-ing closely for signs of recovery.

TODAYUK economic figures released:

Lloyds Employment Confidence.UK corporates reporting:

MANOJ onthe MARKETS

MANOJ LADWA

THURSDAY

UK economic figures released:Total Trade BalanceUK corporates reporting: PunchTaverns,JD Sports,Aggreko,Mothercare, Hays, Intertek.

FRIDAYUK economic figures released:Producer Price Index.UK corporates reporting:Kalahari Minerals.Manoj Ladwa, professional trader atETX Capital, is running an openlong/short portfolio using his system-atic trading method. To followManojs trading journey more closelygo to: www.etxcapital.co.uk/manoj

Vedanta, United Energy,Panmure Gordon, and XtractEnergy.

WEDNESDAYUK economic figures released:British Retail Consortium saleslike-for-like year-on-year.UK corporates reporting: MichaelPage, Matchtech, Gulf KeystonePetroleum, andAmbrianCapital.Ex-dividends announcements:BG Group, Charles Taylor,

Cenkos Securities, Filtrona,John Wood Group, Logica, andWSP Group.

compared with 1.7 per centin the 12 months toFebruary.

Rising oil prices also posean inflationary risk to theeconomy, and economistsbelieve the two factors com-bined will prevent any sharpmonetary loosening, despiteeconomic forecasts pointingto growth of around eightper cent this year the slow-est rate in almost a decade.

The latest growth slow-down and inflation reboundare still within policymak-ers expectations, and wecontinue to expect selectiveeasing on credit, more fiscalspending, and support fornew and continuing proj-ects to ensure a soft landingfor the Chinese economy in2012, said Jian Chang,

Chinese inflation rose again in March

J an 20 09 J an 2 01 0 J an 2 01 1 J an 2 01 2

10

8

6

4

2

0

-2

%annualriseinconsumerprices

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GETTY

GETTY

HOUSE prices fell again in March,despite higher buying activity aheadof the expiry of the stamp duty holi-day, industry figures showed today.Ten per cent more surveyors report-

ed prices falling than rising in the

BY TIM WALLACE three months to March, according to

the Royal Institution of CharteredSurveyors (RICS) survey. The fall repre-sents a slowdown from the net balanceof 13 per cent reporting falls in theFebruary survey, and is the strongestreading since June 2010. New buyerenquiries edged up, with nine per cent

Boeing inks Dreamliner dealPLANEMAKER Boeing said

yesterday it has f inalised a dea lwith Russias Transaero Airlinesfor four 787-8 Dreamliners,

worth $744m (468m) at listprices.

Boeings Dreamliner is alightweight carbon-compositeaircraft that was three years lateto market but is popular withcustomers.

The plane-maker, whichcompetes for orders with EADS

unit Airbus, has about 850orders for the plane on its

books.Boeing last week said it

delivered 137 commercialairplanes in the first quarter, up32 per cent from the sameperiod a year earlier.

The company is increasingproduction on all of itscommercial airplane models tomeet increased demand. Thecompany also is ramping up

production on the 787 to 10 permonth by the end of next year.

HOW many times since Octoberhave you heard the words, Ithink the equity market hasrun up too fast and Im waiting

for a correction before I commitmoney? The answer is lots, of course.

Second question: how many of thesepeople will be committing money tothe market now weve seen a bit of acorrection? The answer is not many.Welcome to the wall of worry and

the lemming-like nature of the herd.There are some really smart equitymarket players out there who haveoutperformed wonderfully since theturnaround in these markets, but they

are in the minority.The FTSE 100 is still up 16 per cent

from 4 October, when it was 4,944. Lastweek the Footsie closed at 5,723, hav-ing fallen just over four per cent fromits 2012 high.All in all weve had a great run. Its

not quite as impressive as the 34 percent uptick weve seen in the Dax sinceits September lows, but then UK stocksnever fell as far on the way down.

So for all those who said they wouldbuy the equity market once they saw acorrection but are now finding newexcuses, whats keeping them in not-so-yummy yielding cash and gilts? Lotsof things, which on the surface are asworrying as ever.

Last week, we saw yet more evidenceof the failure of Europe to create anysemblance of growth. From Spanishemployment and auctions toEuropean PMIs and auto data the pic-ture was sadly familiar. In fact, theprop that had come from the US alsofell away with payroll numbers thatwere distinctly underwhelming.

On the corporate front, there is a per-sistent school of thought that saysweve seen peak earnings on both sidesof the Atlantic. Many analysts are con-cerned that the divergence in equitymarket performance and earningsexpectations has gone way too farsince October and needs a serious cor-rection. That said, estimates have beenscythed so much that there is a hopewe will get some nice surprises in theseason that starts officially again todaywith Alcoa.

Were hardly being ebullient in fore-casting low single digit growth in earn-ings in the S&P for the first quarter.This time last year we got nearly 20 percent growth. So what are the reasons

to buy? Goldman Sachs thinks weshould embrace a long good buy forequities based on valuations comparedwith government bonds and the factthat we may all just be a tad too pes-simistic in our economic projections.Theres also the hope of easy money

to help prop up equities. This has beena key part of the Eurozones moreconstructive policy effort, says BrewinDolphins chief strategist MikeLenhoff. He says this, along with asteady look to the US economy anddeveloping world growth, means equi-ties remain supported.These various cases could leave us in

equilibrium for a large part of 2012and give us a prolonged, low volumesideways move in the market. A bit of ayawn if that proved to be the case, butat least it will buy time for the herd toline up their excuses when they fail tocapture the next big move when it

eventually comes.Steve Sedgwick is an anchor at CNBC

House prices continued to decline in March


STEVE

SEDGWICKCNBC COMMENT

Excuses andfear could keepmarkets down

House prices struggledespite duty incentive

more surveyors reporting increases

rather than decreases in demand thehighest level in almost two years, sug-gesting the final weeks of the stampduty holiday for first time buyers sawmore seeking to beat the deadline. Yetthe only region with rising prices wasLondon, where a net balance of 58 percent of surveyors saw prices rise.

There has been a gentle increase inactivity across the market in the earlypart of the year but it remains to beseen is whether this can continue,given the changes in the Budget andongoing problems affecting the econo-my, said RICS Simon Rubinsohn.

Meanwhile a Lloyds study of thehousing market across 2011 showedthe lowest number of sales since 2008.

Only 40 per cent of towns saw anincrease in activity in the year overallsales fell four per cent to 630,389.

The overall level of housing marketactivity across England and Wales has

weakened over the past year, reflectingthe concerns over the outlook for theUK economy, said Lloyds Sureb Thiru.Additionally, consumers are experi-encing difficulties in raising the neces-sary deposit, which is preventing manypotential home buyers from enteringthe market.

SPLUNK, which makes software thatcollects and indexes data, said itexpects its initial public offering of13.5m shares to be priced between $8and $10 apiece.

In a filing with the US Securitiesand Exchange Commission, thecompany said it plans to sell about12.5m shares, with its sellingstockholders offering the rest. At thetop of its expected price range, thecompany would have a market valueof about $925.3m.

Splunks revenue has nearlydoubled each year for the last fiveyears, but the company has notposted a full-year profit in theperiod. The company, which expectsto list its stock on the Nasdaq underthe symbol SPLK, is backed by privateequity firms Sevin Rosen, AugustCapital and Ignition Partners.

Separately, Tumi Holdings, whichmakes luxury baggage and travelgoods, said it expects its initialpublic offering of 18.8m shares to be

priced between $15 to $17 each.At the midpoint of the expectedprice range, Tumi will raise about$301m in gross proceeds.

Splunk expects$10 IPO pricing

BY HARRY BANKS

AT&T will keep 43 per cent of the business

BY HARRY BANKS

AT&T sells off Yellow PagesAT&T said on yesterday that itwould sell a 53 per cent stake in itsdeclining Yellow Pages business toprivate equity firm CerberusCapital Management in a deal

worth $950m including debt.Under the terms of the deal,

AT&T will receive $750m in cash,subject to adjustment, andCerberus will take on $200m indebt. AT&T will keep a 47 per

cent stake in the business, YPHoldings.

BY HARRY BANKS

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TUESDAY 10 APRIL 2012 19

Oriel Securities

The UK corporate andinstitutional stockbroker andadvisory firm has announced theappointment of David Knox ashead of equities. Knox joins inJune from JP Morgan Cazenove,where he served as head ofequity research and a member of the executivecommittee.

GW Pharmaceuticals

The AIM-listed pharmaceutical company hasannounced that David Kirk, its finance director, is

stepping down from the board on 1 June. He hasspent 10 years in the role and will be replaced byAdam George, who has served as company secretary

and group financial controller since 2007. Georgehas previously held the positions of finance directorat Believe It Group, a telecommunications serviceprovider, and group financial controller at HelphireGroup. Kirk will continue to be available to GWPharmaceuticals in a consulting capacity.

Artesian

Artesian, a provider of cloud-based social customerrelationship manager and brand relationshipsoftware, has announced that Chris Hoskins is to be

appointed to the newly-formed role of chiefmarketing officer. Hoskins has held a number ofsenior roles in his 20 year marketing career. He joins

from Lithium Technologies, where he acted as headof marketing. He will report to chief executiveAndrew Yates.

Mapfre Assistance UK

Pablo Alvert has been appointed to the position ofchief executive and regional director for MapfreAssistance, the UK arm of Mapfre Assistencia, Spainslargest insurance company. The firm providesinsurance solutions to the automotive, travel andfinance sectors, and has a presence in 43 countries.Alvert has been with Mapfre Assistencia for the past

twenty years and has held various positions in thecompany, including acting as general director forseveral key subsidiaries and as regional director for

cityam 2012-04-10

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