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[email protected]

Follow me on Twitter: @allisterheath

IN BRIEFClegg: Tories bowed to Murdoch Britains political class competed to

bow and scrape before mediatycoon Rupert Murdoch, Deputy PrimeMinister Nick Clegg will say today, incomments aimed at setting his LiberalDemocrats apart from the countrystwo other main parties. The Lib Demshave had relatively few dealings withMurdoch and his News Corp mediaempire, which paid them littleattention until they came to power in2010 as part of a coalitiongovernment. In a speech he isexpected to make later today at theopening of a summit tacklingBritains broken establishment,Clegg will say: Almost the entirepolitical class competed to bow andscrape in front of Rupert Murdoch. Thewhole thing was rotten, and itinevitably came crashing down.

Warsi fights back over expenses Baroness Warsi has asked the LordsCommissioner for Standards toexamine allegations she claimed foraccommodation while staying rentfree with a party colleague. It hasbeen alleged that the Tory party co-chairman received allowances of165.50 a night at a time when shewas staying at a friends London flat.I take these allegations veryseriously," Warsi said yesterday inMalaysia, where she was on an officialvisit. Its why I said right at theoutset that I would fully cooperatewith any investigation, she told ITV,denying that she had done anythingwrong.

GETTY

Closure looms for criticallink in Londons oil supplyTHE Essex oil refinery that alsosupplies around a fifth of the fuelrequirements of London and thesouth-east is to close, after PwCyesterday announced that it hadfailed to find a buyer at the 625mprice necessary to sustain the site.

However, concerns over Londonspetrol supply as a result of the clo-sure were met by governmentassurances that supplies were notunder threat and that it would bebusiness as usual on petrol stationforecourts.The Department of Energy and

Climate Change said: Continuingjetty operations at Coryton meansthat there should be no loss of sup-ply through the terminal toLondon and the South East...Theres overcapacity in Europe, soas far as were concerned therewill be no security of supplyimpact.

Petroplus, the Swiss companywhich owns Coryton, filed forinsolvency in December after itcould not meet its debt obliga-tions.

Coryton has been hit by lowermargins in refining following therecord highs reached in 2008.While margins have risen fromtheir 15-year lows at the end of

Disclosure reprieve for activistinvestorsActivist investors appear to have won atleast a reprieve from new regulation thatwould force them to declare their handearlier when building a stake in acompany.The passage of the Jobs Act by Congressin March has forced the Securities andExchange Commission to delay anexamination of changes to the rulesaround disclosure of activist positions,according to people familiar with thesituation.

Fenchurch poaches new chairmanfrom rivalFenchurch Advisory Partners has poachedCliff Hampton to be its chairman fromrival independent advisory groupEvercore to bolster its client relationships.

Cyberwar fears after bug targetsTehranThe discovery of a malicious computerprogramme that appears to be collectingsensitive information from Iran andothers indicates the global cyberwar hasmoved to a new level, warn securityexperts.

Fitness First offers plan to trim thefatThe struggling gym business Fitness Firstis to propose a rescue deal with landlordsthis week that would give unsecuredcreditors a share of the spoils if itrecovers.

Adidas India chiefs accused of hugewarehouse fraudAdidas has accused executives in India ofusing a network of secret warehouses tosiphon off Adidas shoes and clothing.

Richard Desmond claims Channel 5transformationChannel 5 has moved back into the blackafter a cost-cutting programme at thebroadcaster led it to reverse a 48.4moperating loss in 2010 to a 26.2m profit.

Ofcom chief neutered by applicationto BBCThe chief executive of Ofcom has beenforced to step aside from any discussionsinvolving the BBC after applying to be itsDirector General.

Japanese car makers report strongsales in AprilJapans three biggest car makersreported April surges in domesticproduction and sales, highlighting theirrecoveries after last year's earthquakeand tsunami battered supply chains andhit demand.

Art market bright despite globalgloom, Christies saysDespite global economic uncertainty,Christies International says its artbusiness has proved resilient.

WHAT THE OTHER PAPERS SAY THIS MORNING

A CODEINE addict whose drug-swapping scam ended up costingReckitt Benckiser 2.4m in a hugerecall of Nurofen Plus packets was

yesterday jailed for 18 months forcausing a public nuisance.

Christopher McGuire sparkedpanic last August when strips ofanti-psychotic drug Seroquel werefound in packets of the pharmacy-only painkiller Nurofen Plus.

Reckitt spent 2.4m recallingdrugs and trying to find the causeof the mix-up after a handful ofcustomers in London reported therogue products.

Two men complained of sideeffects after inadvertently takingSeroquel, and the MHRA medicine

watchdog issued a safety alert. Fourpackets in south east London werefound to have been tampered with.

A court heard that McGuire hadbeen swapping his ownschizophrenia medication intopackets of Nurofen because hecould not afford to pay for his 32painkiller pills a day habit.

He tried to buy Nurofen Plus ona card that he knew would bedeclined, in order to swap over thepills and hand back the Nurofenpacket containing different drugs.

McGuire, from Bromley in southLondon, was arrested in Septemberafter police traced the Seroqueldrugs and he admitted his ruse.

Man jailed for

drug scam thatcost Reckitt 2m

Some 850 jobs are at risk at the Coryton refinery in Essex

4 NEWS

BY MARION DAKERS

JOHN DUNNE AND

MARC SIDWELL

To contact the newsdesk email [email protected]

CONGRATULATIONS: youve juststarted to work for yourself.Today is tax freedom day, the daywhen Britons stop working for

the chancellor and start working forthemselves. The Adam SmithInstitute has calculated that for thefirst 149 days of the year, every penny

earned by the average UK residentwill be taken by the government intax. This years tax freedom day fallstwo days later than it did in 2011; nettax hikes mean the government istaking a larger share of our hard-earned income than before. Thatremains true despite the chancellorshumiliating and confusing partial u-turn on the pasty and caravan taxeslast night.Apparently its too tricky to work

out whether a caravan is static or not so the VAT hike is being cut to fiveper cent, not 20 per cent. As to the

EDITORSLETTER

ALLISTER HEATH

Osbornes U-turn comes as UK celebrates tax freedom day

TUESDAY 29 MAY 2012

pasties, an ultra-complex new rulemeans that hot chicken or pies inwarming units in supermarkets willbe taxed at 20 per cent (a massivehike) but hot pasties left out to coolwont be (even if they are just as hot).Greggs will win but other retailerswill lose. So much for tax simplifica-tion the whole saga has been a disas-trous joke for the chancellor and hisofficials, who have been exposed asboth politically nave and technicallyinept. It still seems that the govern-

ment is doing all of this to avoid anadverse ruling in the European courts fish and chips shops pay tax butfor some reason nothing is made ofthis by the Treasury.

Britains Tax Freedom Day still fallslong after Americas (17 April) and most intriguingly of all Australias,

on 4 April. In my view, Australia is therole model for the UK to follow whenit comes to tax and spend its citi-zens live in a highly civilised societywith great healthcare and pensionsbut with public spending of just 33.8per cent of GDP this year, comparedwith 49 per cent for the UK.

At least our tax burden isnt quite ashigh as Frances, which will have towait until July to celebrate its own taxfreedom day. There is some goodnews: the cost of government day,which includes the governments bor-rowing as well as tax, will fall on 23

specify which national scheme willprovide protection.

For banks that are covered by the UKscheme the overwhelming majori-ty depositors will have to be remind-ed explicitly that they are onlyprotected up to a total of 85,000 bythe FSCS, the UKs deposit protection

scheme. Depositors need to behavemore like investors not put all theireggs in the same basket and acceptthat governments will not always bailthem out. But I would have gone evenfurther than the FSA and explainedthat even governments can go bust risk cant be abolished completely.That is especially true of Eurozonegovernments, of course: they cannotprint themselves out of trouble. It ishigh time everybody understood this.

June, seven days earlier than last year.Following George Osbornes partial u-turn on VAT, he should now pay a visitto Australia to learn how drasticallylower public spending and a greatquality of life can go hand in hand.

YOU CANT ABOLISH RISK

For once, something sensible fromthe Financial Services Authority. It isrightly going to require all banks andbuilding societies to prominently dis-play posters and stickers in branchesand on websites explaining whichdeposit guarantee scheme applies totheir customers deposits. If cus-tomers are using the UK branch of aforeign bank from the EuropeanEconomic Area, the posters will haveto set out that those customers arenot covered by the UKs FinancialServices Compensation Scheme(FSCS). In this case they would have to

2010, they have not recovered suffi-ciently to save the refinery.Overcapacity in the face of decliningfuel demand in Europe has forcedthe sale or closure of a number ofrefineries across the industrialisedworld. The site currently employs500 staff as well as 350 contractors.The administrator confirmed therewould be substantial redundan-cies and that the business would bewound down over the next threemonths, although it could stoprefining crude oil soon after theJubilee weekend.

It added: The current economicenvironment, the challenge of rais-ing $1bn (625m) of funding for therefinery, including the $150m capi-tal expenditure turnaround projectultimately proved prohibitive in theface of an oversupplied Europeanrefinery market for both buyers andinvestors.

Despite the investment required tokeep the site competitive as a refin-ery, its good location and jetty serv-ices mean that talks are ongoingabout converting it into an oil termi-nal for storage and distribution.

BLAIR AT LEVESON: Page 15

The new jobs website for London professionalsCITYAMCAREERS.com

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THE BILLIONAIRE head of BPs part-ner in Russia resigned yesterday, put-ting the oil giants relationship withTNK-BP under further strain.

Mikhail Fridman, the chief execu-tive of TNK-BP and a key investor, willstand down at the end of June for per-sonal reasons, the firm said.

But sources close to Alfa-Access-Renova (AAR), the group of oligarchsincluding Friedman who own 50 percent of TNK-BP, said his departurewas a sign of deteriorating relationsbetween the two investors.

The AAR consortium has lost confi-dence in BP as a partner. The statusquo cannot continue, the source toldReuters.While BP played down Fridmans

role at TNK-BP, saying he had been aceremonial leader, the Russian bil-lionaire has loomed large in manyrun-ins with BP management.AAR managed to scupper BPs ambi-

tions in Russia last year by bringinglegal action to halt its planned 10bnshare swap and exploration deal withRosneft.The two sides are still in arbitration

over whether the failed BP-Rosneftdeal violated an exclusivity clause inthe TNK-BP shareholder agreement,with further hearings expected

Oligarch leader

of BPs Russianventure quitsBY MARION DAKERS

towards the end of this year.But hopes that Fridmans departure

marks an end to boardroom hostili-ties are likely to be premature. Aslong as he owns it, he will de facto runit, said a well-placed source inMoscow energy circles.

This is just a way to formally disas-sociate himself from the manage-ment. Looks like preparing the shipfor a storm.

His resignation creates another bighole in TNK-BPs board, after it losttwo independent directors at the endof last year. The firm cannot pay out adividend while its board is inquorate costing both BP and AAR dearly.The firm did not comment on

whether Maxim Barsky, a favourite ofAAR who left TNK-BP last year but haslong been touted as Fridmans succes-sor, could rejoin the firm.

Diamond slams government forbreaking taxpayer confidentialityBARCLAYS chief executive BobDiamond has slammed the

government for hitting the bankwith a huge retrospective tax billearlier this year and for damagingits reputation by effectivelynaming Barclays as the culprit in atax avoidance scheme.

In a letter to Andrew Tyrie, chairof the Treasury Select Committee ofMPs, Diamond complains both thatthe Treasury applied a change in taxrules retrospectively, hitting thebanks profits from a 2.5bn debt

BY JULIET SAMUEL buyback, and that the governmentbroke its confidence.

We were therefore surprised to besingled out in the way that occurred,

not only through a retroactivechange of law but the effectivenaming of Barclays by the exchequersecretary... accusing the bank ofentering into a highly abusivescheme, Diamond writes. Webelieve that the confidentiality oftaxpayers affairs is an importantprinciple of UK tax law.

Treasury minister David Gaukedid not name Barclays directly butreferred to a bank that had recently

avoided 300m of tax on profitsfrom a debt buyback. Barclays nameemerged quickly because it was theonly British bank to have recently

bought back billions of debt for cash.Diamond says in his letter:Unnecessary damage was placed onBarclays reputation just at a timewhen the focus should be onrebuilding confidence andaccelerating growth, notundermining it. He also argues thatthe bank was treated unduly harshlygiven that it proactively disclosedthe scheme to HMRC.G

ETTY

Barclays chief executive Bob Diamond says the bank should not have been identified

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TIMELINE | BPS FRAUGHT RELATIONSHIP WITH ITS RUSSIAN PARTNERSFebruary 2003BP establishes $7bn Russian joint ven-ture with AAR, named TNK-BP. MikhailFridman, one of the four oligarchs thatmake up AAR, is one of the founders.

March 2008Russian police raid the offices of BP andTNK-BP in Moscow, prompting specu-lation that the Kremlin wants to buy outthe Russian billionaires. The disputeforces Bob Dudley, then TNK-BP chiefexecutive, to flee Russia.

January 2009BP agrees to cede some influence toAAR to end a boardroom dispute.

May 2009Acrimony flares up again as AAR puts

up its own candidate, Maxim Barsky, to

replace Fridman as chief executive.Fridman is later kept on for at least twomore years.

January 2011BP unveils historic 10bn deal withRussian oil firm Rosneft to explore theArctic. AAR starts injunction proceed-ings, arguing TNK-BP should have beengiven first refusal for BPs activities inRussia.

May 2011Rosneft deal flops as BP fails to convinceAAR to drop its injunction. Exxon thenswoops in to take BPs place.

Summer 2011Ongoing arbitration hearings betweenBP and AAR begin. BP denies rumours it

plans to sell its TNK-BP stake.

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G E T T Y

SHARES in bust lender Bankiaplunged 13.4 per cent yesterday afterdetails emerged of a controversialbailout plan that will see the Spanishgovernment take a 90 per cent owner-ship stake in the bank.

Analysts estimated that the num-ber of Bankia shares in existencecould rise by a factor of six to nine dueto the 19bn (15.2bn) bailout thatwill be paid to unlisted parent groupBFA, with12bn passed on to Bankia.

Bankias parent BFA last nightrestated its 2011 results to account forthe rescue, and now reflects a loss of3.3bn rather than the previously stat-ed profits of41m.

Markets are also worried about theform the bailout will take. It emergedover the weekend that Madrid is con-sidering an unusual plan that wouldsee it inject capital using its ownbonds rather than cash.

In turn, Bankia would use thebonds to tap the European CentralBank for a mountain of cash.

But the ECB has not yet indicatedwhether it would authorise such a

Spains unusualBankia bailoutspooks markets

BY JULIET SAMUEL bailout and it would require Bankia totake out new loans from the centralbank each month because there arecurrently no plans to hold anotherauction of long-term three-year cash.

It would also be controversialbecause it loads the ECB with moresovereign debt that could fall in value,making its balance sheet more risky.

It would be a neat solution for thesovereign, said Berenberg BanksHolger Schmeidung, pointing out thatit supplies both a buyer for public debtand a capital source for Bankia.

Yields on Spains ten-year debtjumped by 16 basis points to 6.47 percent yesterday.

Spanish prime minister Mariano Rajoy is mulling bailing out Bankia with government bonds

FOUR Greek banks have received18bn (14.4bn) in a bid torecapitalise the stricken sector.The funds will be divided betweenNational Bank, Alpha, Eurobankand Piraeus Bank.

The money has been released bythe European Financial StabilityFund to the Greek body in chargeof distributing the funds.

It is part of Greeces secondbailout that was signed off by the

Greek banks get 18bn rescueBY CITY A.M. REPORTER European Union and the IMF in

March.That deal was for 130bn and

hinged on an agreement byEuropes major banks and otherfinancial institutions to write-off alarge part of their loans to Greece.

National Bank, the biggestGreek lender, has received7.43bn, the largest share of thenew financing. Piraeus bank willreceive 4.7bn, Eurobank will get

3.97bn and Alpha is to be handed1.9bn.

TUESDAY 29 MAY 20126 NEWS cityam.com

QHow will this bailout work?

AIt is not entirely clear, but Madridis considering a plan where,instead of buying a 90 per cent stakein Bankia for cash, the Spanish gov-ernment will hand over billions of itsbonds instead.

QHow will that help when Bankia needscash?AThats where the European CentralBank comes in. The ECB will acceptgovernment bonds as high quality col-lateral in return for giving out cash.So Bankia will go straight to the ECB,post Madrids debt as collateral andget a big cash injection.

QAs the rest of Europes banks did earlierthis year?ANot quite, because the ECB is nolonger offering three-year cash though many analysts think it willdo so again. Instead, Bankia willtap its monthly lending facility.

QWhat is the advantage of doing thebailout this way?AIt means that Spain will nothave to tap private markets forthe billions required to bail out itsbanks. That is vital because bondinvestors are now demanding apunitive 6.5 per cent interest rateto lend to Madrid on a ten-yearbasis.

QWhat makes thisunusual?AIt is not that unusual to bail out abank via a debt-for-equity swap.What is unprecedented is the role ofthe ECB. The key part that couldmake this plan work is that the ECB isprepared to treat Spanish bonds dif-

ferently from how markets treatthem. Rather than classing them asan increasingly risky asset, the ECBstill classes Spanish debt as high qual-ity collateral. So this is, in effect,another kind of sovereign bailout byFrankfurt, only it is taking place viathe ECBs collateral specificationsrather than through direct bond pur-chases.

QAandBankias unusual bailout

Bankia SA


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Madrid hopes the ECB will playalong in its backdoor bailout

WE LEARNED on Friday thatthe bailout for Bankia andits parent BFA is to beabout four times the size

analysts were estimating just a fewweeks ago, at19bn.

In a sense, that is good news. Itshows the bank and thegovernment are facing up to thescale of the problem. Whether theycan solve it is another matter.

What is now causing the mostworry is what this means for therest of Spains banking sector andthe eventual burden on thesovereign.

So how far has the rot spread?Nomura analysts reckon that onlythree of Spains major banks canavoid a bailout: BBVA, Santanderand Sabadell (which all happen tobe among the countrys biggestdiversified banks with significantinternational and casinooperations).

As for the others, Nomuraestimates the capital shortfall at106bn-140bn, versus profitgeneration last year of19bn.

The governments mootedsolution appears to take the form of

the kind of financial jiggery pokerywe have now come to expect fromEurozone politicians.

That is, recapitalise the banks byswapping their equity for sovereigndebt and then get the banks todump the debt at the ECB in returnfor cash. This skips over theinconvenience of tapping privatemarkets for cash.

But the ECB has already blurredthe line between liquidity supportand bailouts, both throughgovernment bond-buying and its 1trillion auction of three-year loansfor banks.

Whether it will be prepared to goa step further and give the Spanishgovernment what could be seen as

another kind of backdoor bailout isunclear.

BOTTOMLINE

JULIET SAMUEL

International Consolidated Airlines Group SA


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SHARES in British Airways parentcompany International AirlinesGroup nosedived 2.7 per cent

yesterday on news its largestshareholder Bankia would need todispose of assets to raise cash.

The troubled Spanish bank has a12 per cent stake in IAG followingthe bailout of Caja Madrid, which

was a major stakeholder in Iberiabefore its merger with BA to formIAG.

Bankia, which has called for afurther 19bn from the Spanish

government, is IAGs biggestshareholder along with anotherSpanish bank, Banco Financiero yde Ahorros.

Bankia chairman Jose IgnacioGoirigolzarri confirmed over the

weekend that he will logicallylook to start a sale process of the

IAG stocks nosedive as majorSpanish investor looks to sell

BY JENNY FORSYTH

7NEWScityam.com

banks assets and will give detailedplans to shareholders late nextmonth.

Other companies in Bankiasportfolio include energy firmIberdrola, hotel company NH, foodcompany SOS, and financialhouses Bancofar and Inversis.

Yesterday shares fell 3.8p to137.1p, making it the FTSEs third-

biggest faller.

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GETTY

THE EUROZONE crisis has forcedpension funds out of risky equitymarkets, an industry study showed

yesterday, but the funds are also try-ing to avoid safe haven bondsbecause of the low yields on offer.

Funds are being pushed towardsalternative assets and emerging mar-kets, according to Mercers asset allo-cation survey, as they try to maintainlong-term returns for investors.

Of the 1,200 funds studied acrossEurope, 21.4 per cent of non-Britishfunds plan to decrease their invest-ments in domestic equities, whilejust four per cent forecast anincrease.At the same time bond invest-

ments held steady as funds adopt await and see approach to the mar-ket.

Meanwhile 50 per cent now holdsome alternative investments, upfrom 40 per cent a year ago.The most popular alternatives

include hedge funds, emerging mar-

ket debt and high yield bonds, withalmost 20 per cent of European

Pension fundsflee risky euroequity markets

BY TIM WALLACE schemes having allocations to one ormore of these areas. Larger funds areparticularly keen in these areas 60per cent of schemes with over2.5bnin assets have alternative allocations,

up from 40 per cent in 2011.As the Eurozone crisis continuesunabated, pension funds are facedwith the dual challenge of managingportfolio risk brought on by marketvolatility, while at the same timeidentifying opportunities that willgenerate returns to support futureliabilities, said Mercers Nick Sykes.

Liquid asset classes are alsofavoured, as investors value access totheir assets in such turbulent times,he added.

ITALIAN business confidenceplummeted to a near three-yearlow in May, official data showed

yesterday, as the country continuedto struggle through recession,reforms and spending cuts.

Istats manufacturing confidenceindex dropped from 89.1 in April to86.2 in May, its lowest since August2009.

Employment expectationsworsened further, from minus 13to minus 19, while the assessmentof order books remained almost

unchanged, up from minus 46 tominus 45.

Italian business confidencedown on sustained recessionBY TIM WALLACE Meanwhile confidence in the

construction sector fell from 83.7in April to 81.8 in May, and theservices sector index droppedfrom 75.8 to 72.7.

I think business and consumerconfidence will keep falling

because people have been talkingabout fiscal austerity since Montiarrived, but the main impact is

going to be felt from now on, saidBarclays economist Fabio Fois.

Fois said hikes in property taxwill only take effect in June, whilean increase in value added tax has

been pencilled in for October,

further eating into Italians'dwindling purchasing power.


I CAN PREDICT THE WEATHER,

GIVE TRAVEL UPDATES ANDEVEN

BE AN ACCORDION.

Italian PM Mario Monti is struggling to maintain confidence as he reforms the economy

IRISH voters are set to approve theEurozones fiscal compact inThursdays referendum, according toa range of opinion polls, althoughother European leaders are alreadypushing to change the treaty.

The compact, which seeks toimpose limits on government budgetdeficits to reassure markets andprevent a re-run of the currentsovereign debt crisis, needs to beapproved by each government before

they can be bound by it.As voting began in Irelands mostremote areas, a series of opinionpolls have indicated the vote is likelyto pass by a margin of three to two.

Irish politicians have successfullyframed the vote around a clause inthe treaty that states only those whosign up can access the Eurozonespermanent bailout fund, theEuropean Stability Mechanism,warning of unpaid wages and emptybank machines should voters say no.

Irelands current bailout from theEuropean Union and InternationalMonetary Fund expires in 2013, afterwhich it is supposed to return tofunding itself via bond markets.

But with the Eurozones debt crisisstill far from resolved, it couldstruggle to borrow at af fordablerates even if the treaty is approved.

French leader Francois Hollande

has called for the treaty to be recast,to reduce the pace of spending cuts.

Ireland likelyto vote yes tofiscal compact

BY TIM WALLACE

Europe's stocks continue to slump

MayMar Apr

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Marubeni president Teruo Asada flew to New York last week as deal talks advanced

IN BRIEFMisys gets go-ahead for salen Financial software firm Misys saidyesterday it had won approval from theHigh Court for the scheme that will allowVista Equity Partners to complete itstakeover. Misys said it expects its last day

of trading on the London Stock Exhange tobe 30 May, ahead of the official delistingand implementation of the scheme on 1June.

Three plead guilty in FSA proben The FSA said yesterday that three peoplehad pleaded guilty to insider trading. JamesSanders, a director of contracts fordifference brokerage firm B lue Index, hiswife Miranda Sanders and co-director James

Swallow pleaded guilty to 10, five and threecharges respectively, and will be sentencedon 19 June. Christopher Hossain and AdamBuck were acquitted.


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MARUBENI, the Japanese tradinghouse, is nearing a deal to buy USgrain trader Gavilon for more than$5bn (3.2bn) and could announce thetransaction as early as today, accord-ing to people familiar with the deal.Japans fifth-largest trading company

has been in advanced talks to buyGavilon since early May.The company has confirmed its

interest in Gavilon but also said no

decision had been made.

Although the deal is pending finalapproval, the proposed terms valueGavilon at more than $5bn includingdebt, and Marubeni has lined upfinancing for the deal, sources close tothe matter said.

Marubeni had earlier dispatched ateam of auditors to Gavilons Nebraskaheadquarters to assess its operationsand finances, sources said.

In addition, Marubeni presidentTeruo Asada traveled to New York last

week with other executives as discus-

sion of the deal reached the finalstages, a person familiar with the tripsaid.

Gavilon, whose owners include bil-lionaire investor George Soros andhedge fund manager DwightAnderson, is the USs third-biggestgrain handler. The deal would deepenMarubenis control of grain suppliesfrom North America and help itincrease its share of the lucrative busi-ness of exporting grains to China.

A CITY A.M. REPORTER

Marubeni is set to buyUS grain trader Gavilon

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biggest player in the market forcachaa, a spirit made from fer-mented sugar cane also knownas Brazilian rum, as well as acachaa distillery, a bottling

plant and a warehouse.It is likely to benefit from a

rise in drinks consumptionwhen the Brazil hosts thefootball World Cup in 2014and the Olympics two yearslater.

Brazil is an attractive,fast growing market for

Diageo with favourabledemographics andincreasing disposableincomes. The acquisi-tion of Ypica gives usthe leading premiumbrand in the largestlocal spirits category,said Diageo chief execu-tive Paul Walsh.Ypica, whose origins

go back more than 160years, had net sales ofR$177m (57m) lastyear.

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per monthDRINKS group Diageo is toast-ing the 300m acquisition ofone of the producers of Brazilsmost popular spirit, cachaa.The maker of Guinness and

Smirnoff has agreed to buyYpica from its family own-ers as it continues to growits emerging markets busi-nesses to offset weakdemand in Europe.The celebrations for

another, larger deal,remain on ice, however,as the group continuesits efforts to take a stakein Jose Cuervo, theworlds leading tequilabrand which is valuedat $3bn (1.91bn). It hasheld talks but offeredno update on itsprogress yesterday.The purchase of

Ypica, from the fami-ly-owned YpiocaAgroindustrial group,gives Diageo the third-

Spirits rise as Diageo

makes 300m dealBY PETER EDWARDS

Diageo chief executive Paul Walsh has presided over a series of acquisitions beyond the traditional territories of Guinness and Johnnie Walker

Diageo PLC


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bolt-on emerging market dealpositively, offering local premi-um brand leadership as well asdistribution synergies over themid-term for Diageos interna-tional spirits, said UBS analystMelissa Earlam.

She calculated that Diageopaid a multiple of around 19times earnings before interest,tax, depreciation and amortisa-tion for the business.

Morgan Stanley advisedDiageo on the purchase, whichis due to complete in a month.Diageos shares closed down0.03 per cent at 15.30.

TIMELINE | THIRST FOR GROWTH:DIAGEOS EMERGING MARKETS DEALS

October 2010Reported to be interested in bid to buythe 66 per cent of Moet Hennessy it does

not already own from LVMH.

January 2011Agrees to pay about 33m for a 23.6 percent stake in the Hanoi Liquor Joint StockCompany, known as Halico, andVietnams leading spirits producer.

February 2011Chief executive Paul Walsh tells the Citythat bolt-on acquisitions or acquisitionsin the developing world are veryimportant to us.

February 2011Later that month Diageo confirms a dealto buy the Turkish spirits group Mey Iki,Turkey's leading maker of raki, for 1.3bn.

May 2011Enters talks to buy tequila brand JoseCuervo. It has the first option to buyCuervo because it has international dis-tribution rights for the brand.

June 2011Wins backing from Chinese regulators tobuy baijiu brand Shui Jing Fang.

May 2012Posts a six per cent first-quarter sales risewith fast-growing emerging markets anda recovery in North America offsettingfalling sales in Europe.

May 2012Agrees to pay 300m for Ypica, one ofthe producers of Brazils most popularspirit, from its family owners.

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Sumitomo Mitsui admits insider trading probe

THE HEDGE fund set up by star trad-er David Harding plans to open abase in Switzerland in order to tapinto the pool of talent which hasbeen swelled by scientists pursuingthe origins of the universe.Winton Capital Management,

which uses scientific research tospot patterns in market behaviourand currently has about 110researchers, will open its firstbranch in continental Europe inZurich in July.The pure research office will be

run by a German particle physicist

and will tap into Switzerlands bur-geoning reputation as a home foradvanced science.

Zurich is home to a top class uni-versity and major maths and scienceresearch centre in the ETH, whilethe Large Hadron Collider, based atthe Cern laboratory near Geneva,was set up to pursue the Higgsboson, known as the God particle.

We are looking to expand ourresearch department by some 15 percent this year and are focusing onhiring the very best people, saidHarding.

Our intention remains... to keepreinvesting in the highest quality

scientific research so that our hardearned expertise in financial mathe-matics can continue to grow.Winton currently has more than

260 staff in Kensington,Hammersmith, Oxford and HongKong but is bringing its Londonteams into one building inHammersmith, for its executive,marketing, back office, research,risk management and trading func-tions.

Harding, a Cambridge natural sci-ences graduate, set up the firm afterleaving AHL. His wealth stands at800m, according to the SundayTimes Rich List.

Hedgie Harding looksfor brain gain in Zurich

BY PETER EDWARDS

SUMITOMO Mitsui Trust saidyesterday it was fullycooperating with a probe bythe Japanese Securities andExchange SurveillanceCommission into allegedinsider trading.

Reports emerged over theweekend that the company known as Chuo Mitsui AssetTrust and Banking Company

until a merger in April wasbeing investigated for allegedlytrading on information aheadof a share offering by MizuhoFinancial Group in June 2010.

It is true that Securities andExchange SurveillanceCommission is investigatingthis issue, and we are fullycooperating with SESCconcerning the investigation,the company said in astatement yesterday.

The group also said thealleged trades were carried out

by a former employee.Shares of Sumitomo, which is

facing its second fine forinsider trading in two months,fell 0.5 per cent yesterday.

Shares in Nomura Holdings,which was an underwriter onthe 780bn (6.25bn) Mizuhooffering, also suffered, aftersources said a Nomuraemployee provided the tip-off.

BY ELIZABETH FOURNIER

GETTY

THE SHARD CLOSE TO SIGNING ITS FIRST TWO TENANTSThe Shard,Europes tallestbuilding, is saidto be close toclinching its firsttwo officetenants, in dealslikely to involvetwo whole floorsof the 1,017 fttower. US

managementconsultant ATKearney and anunnamed MiddleEastern bankhave been linkedto Irvine Sellar'siconic tower inLondon Bridge.

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HEFTY increases in premiums couldcause the UK car insurance businessto record an underwriting profit forthe first time since 1994, accordingto a new report by Deloitte.

Last year the sector had acombined ratio of 106 per cent meaning it paid out 106 for every100 it earned in premiums,equivalent to an underwriting lossof 600m.

But Deloittes James Rakow saidthis was a drastic improvement on aratio of 120 per cent in 2010 andfurther increases this year couldpush the underwriting businessinto the black.

We expect improved results to bedelivered by motor insurers in 2012and we could see an underwritingprofit for the industry. The last timethis was seen was in 1994, he said.

With total premiums nowreaching 14bn a year, the market isstill attractive for insurers who aresuccessful at attracting andretaining profitable customers orselling add-ons to basic cover.

Despite the underwriting losses,returns on investments haveallowed the UK car insurancebusiness to remain profitable.

Car insurers inblack for first

time since 1994JAMES WATERSON

PRUDENTIAL yesterday announcedPaul Manduca as its new chairman even though he initially led the com-mittee tasked with finding a replace-ment for outgoing Harvey McGrath.

Manduca founded British fundmanager Threadneedle in 1994 andhas been Prudentials senior inde-pendent director since January 2011,as well as being current chairman ofinsurance broker Aon UK.

He will resign his existing roles andtake over at the Prudential on 2 July.

Barrie Cornes, an analyst atPanmure Gordon, told City A.M. thatManduca is a safe pair of handswho was initially brought in tostrengthen the financial servicesexperience on the board.

Cornes also played down concernsthat Manduca was too close to therecruitment process: As I under-stand it he stood down and [Lord]

New Prudential

chair led searchfor his own job

JAMES WATERSON Turnbull took over once his namewent into the ring.

One of Manducas main concernswill be the future of the Prudentialsbooming Asian arm, which could behit hard by the forthcoming SolvencyII reforms on capital backing.The company has repeatedly threat-

ened to relocate its headquarters ifthe new rules are introduced in theircurrent form and could be temptedto split the company in half.

Resource deals make up recordslice of investment bank incomeINVESTMENT banks are increasinglyreliant on income from energy and

natural resources deals, accordingto new data that shows the sectorhas provided 21 per cent of globalinvestment banking (IB) revenue sofar in 2012.

Research by data providerDealogic shows how energy andnatural resources deals areresponsible for a record percentageof IB revenue on a year-to-datebasis, well above the last decades15 per cent average.

But although the sector has

JAMES WATERSONincreased its share of total IBrevenue, real earnings from energyand natural resources deals havefallen by a fifth on a year-on-year

basis to $5bn.Nevertheless, the sector hasbecome more important for banksbecause the rest of the market hasdropped at a faster rate.

Substantial deals this yearinclude Brazilian oil giant Petrobasdecision to issue $7bn of corporatebonds in February, Americanpipeline firm Kinder Morgans$13.3bn leveraged takeover of rivalEl Paso and the $11.8bn of loansthat enabled US refiner Phillips 66

to demerge from parent firmConocoPhillips.

On a country-by-country basis,the US leads the 2012 energy and

natural resources fee rankings witha 50 per cent share of the marketand $2.5bn in revenue.

Canada is in second withrevenues of $736m, while China is adistant third with $290m ofincome.

For individual banks, CreditSuisse leads the sector revenuerankings with 7.6 per cent marketshare, followed by JP Morgan with6.7 per cent and Citi with 6.3 percent.

Incoming Prudential chairman Paul Manduca will give up the equivalent role at Aon UK

Prudential PLC


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INVESTORS looking for the nextbig opportunity beyond the Bricshave been offered a new place toput their money Britains 100ma year divorce industry.

Novitas has launched a divorcelitigation fund to create analternative lending source forpeople who need help to pay fordivorce costs.

It plans to raise 5m frominvestors and is offering them anannual return of eight per cent.

The reduction in bankingcredit, coupled with theGovernment cut backs to legal aid,means that people seeking adivorce can face a hefty financial

Fund managers head for thecourts to cash in on divorces

BY PETER EDWARDSburden. We are aiming to providean alternative lending source tohelp divorcing couples, said JasonReeve, fund founder and aqualified high net worth financialadvisor.

The fund is targeting lending on

individual cases typically ofbetween 5,000 and 100,000,although it will lend up to250,000, with an average loanlasting 12 months.

Novitas is not the first firm toinvest in this way, however, ashedge funds have providedfundings in very high net worthdivorce cases. Hedge funds havetraditionally provided assistance inpersonal injury or commerciallitigation cases.


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CASINO firm 888 Holdings yesterdaybecame the latest online gaming

firm to pay back-taxes to the Spanishgovernment, part of a cash raid bythe countrys government.

Spain is in the process of issuingnew e-gaming licences for all onlinebookmakers and is using theleverage to extract retrospectivepayments from internet gamblingcompanies that operated betweenJanuary 2009 and May 2011.

After completing a self-assessment tax return 888 has madea one-off payment of7.4m (5.9m)in back-taxes, plus surcharges andinterest of up to 1.3m.

All of the taxes and charges werefunded from the firms cashreserves.

Following this payment, 888believes that it has fulfilled allrequirements necessary to receive aSpanish e-gaming licence, withawards set to begin at the start ofJune, the firm said in a statement.

Last week rival Bwin.party said ithas paid 26.56m to the Spanishgovernment in back-taxes, whileSportingbet also announced that itis in discussions with the SpanishMinistry of Finance on the matter.

The tax claims are based oninterpretations of laws dating from1966 and 1977 that had neverpreviously been applied to onlinegambling operations.

Shares in 888 Holdings closeddown 0.7 per cent at 68.25p.

Gambling firm888 pays 9min back-taxes

BY JAMES WATERSON

GETTY

GERMAN real estate group DeutscheWohnen said yesterday it has agreedto buy a real estate portfolio valuedat about 1.24bn (992m) fromBarclays.

The deal comprises about 23,500apartments with a low averagevacancy rate of 2.7 per cent, most ofwhich are located in or near cities

including Hanover, Berlin andMagdeburg, Deutsche Wohnen said.

BY HARRY BANKS Investors are f locking to theGerman property market, attractedby a steady rise in values in the lastcouple of years, which contrasts withthe boom-and-bust of the Spanishand Irish real estate markets.

Sources had said earlier thismonth that other parties interestedin Barclays apartments includedDeutsche Wohnens peer GSW andformer owner Whitehall Funds.

Deutsche Wohnen said it will useequity and debt to finance the deal,

in which it is paying about 13 timesannualised net rent to boost its stockof apartments by almost half to73,500.

Last week Barclays sold its 20 percent stake in asset managerBlackrock at a discount to thecompanys closing price, after newBasel III regulations governing theamount of capital that banks musthold against minority stakes in asset

managers and other firms made itless profitable.

Woodford is said to be considering a deal

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AIRPORT owner BAA has beengiven permission to appeal againsta competition ruling that forces itto sell off Stansted Airport.

BAA said it look[s] forward topresenting our arguments beforethe Court of Appeal after it was

allowed to fight against theCompetition Appeal Tribunals

BAA wins permission to appealruling on Stansted Airport sale

BY MARION DAKERS February ruling.The tribunal had upheld an

earlier case that required BAA todispose of Stansted to create morecompetition in the UK airportsector, the latest court case in athree year dispute.

BAA, owned by Spanishinfrastructure firm Ferrovial, last

month sold Edinburgh Airport toGatwick owner GIP for 807m.


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IRELANDS oldest stockbrokingfirm Bloxham has ceased trading,

on the orders of the central bank,after the discovery of financialirregularities.

Bloxham said yesterday that itsincome had been overstated over anumber of years.

The firms f inancial par tner wasimmediately suspended andmanagement has hired a firm offorensic accountants to study itsaccounts.

Rival broker Davy said it hadacquired Bloxhams assetmanagement business, handlingassets exceeding 700m (559m)in value. It did not disclose termsof the deal.

As part of the deal Bloxhamsasset management team, led byPramit Ghose, will move across toDavy, which will continue to dis-tribute funds through existing rela-tionships with Irish Life and NewIreland.

When the requirement arose toaddress our capital requirements,Davy, as a well resourced and mar-ket leading regulated entity wasthe obvious par ty, said Ghose, whowill become managing partner atDavy.

Referring to the investigation,Bloxham said that client fundswere safe and would not be affect-ed.

The broker said in a statementyesterday that it no longer holdssufficient capital to meet thelicensing requirements of thecentral bank to carry on trade as astockbroker.

As a result, on Friday eveninglast the central bank issued adirection to the firm to suspendtrading, it said.

Bloxham said the sale of itsprivate client business to Davy,which was agreed last year, hadalso been completed. Client assetswill be transferred on 6 June.

Irish brokerBloxham toldto halt trading

BY CITY A.M. REPORTER

Woodfords $60m job tribunal put on holdTHE $60m (38.3m) tribunal casebrought by former Olympus bossMichael Woodford was adjournedyesterday, prompting speculation hecould reach an out-of-court settle-ment with the disgraced firm.

Woodford, who was ousted as chiefexecutive and president in October,declined to comment last night afterthe hearing was cut short.The case is due to resume today at

East London tribunal service.

BY PETER EDWARDS If there is an extra lag, there isalways a chance to settle and it to gono further, said Jo Keddie, partnerand head of employment law atWinckworth Sherwood.

But it could also give the judgeneeded more time to prepare, orenable both sides to finalise their

arguments, she added.Woodford, who has hired Simmons& Simmons, is seeking up to 10 yearslost salary and says he sufferedunfair dismissal on the grounds ofwhistleblowing and discrimination.

Olympus, which is being represent-ed by Slaughter and May, claimed hefailed to understand the firms man-agement style and culture.Any payout is likely to fall short of

$60m but could still prove to be arecord.Woodford began the tribunal in

Britain because of Olympus signifi-cant presence here. Its British head-quarters are in Southend, where theformer boss and his wife have ahome.

Olympus has surprised some legal

experts by failing so far to reach a set-tlement with Woodford, who hasalready published a book in Japaneseabout his experiences and plansanother in English in the autumn.

Camera and endoscope firmOlympus has endured heavy criti-cism in corporate Japan following the

exposure of a $1.7bn accountingscandal stretching back more than adecade.A series of arrests have followed and

an independent report said Olympuspractices had been rotten.

Barclays sells German property

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R E U T E R S

TONY Blair yesterday told theLeveson inquiry that British politi-cians have little choice but to courtmedia tycoons because the alterna-tive is press attacks that are full on,full frontal and day in, day out.The former Prime Minister said

that as a result he chose to managerelations with newspapers during histime in office, rather than directlychallenge their authority.

With any of these big mediagroups, you fall out with them, youwatch out, because it is literallyrelentless and unremitting once thathappens, Blair told the inquiry intomedia ethics.

My view is that that is what cre-ates this situation in which thesemedia people get a power in the sys-tem that is unhealthy. I took thestrategic decision to manage this andnot confront it but the power of it isindisputable.

Blair was consistently criticised bythe left wing of his party for courtingmedia tycoon Rupert Murdoch andright wing newspapers during hisleadership of the party.

But he explained that it was a nec-essary measure to win elections and

Blair claims he

feared wrath ofmedia barons

BY JAMES WATERSONimplement policies.

If you fall out with the controllingelement of the Daily Mail, you arethen going to be subject to a hugeand sustained attack, he said.

Blair added that Rupert Murdochdidnt lobby him on media issuesand that his government had nevergiven an assurance to Mr Murdoch oranybody else that they would haveseek permission for major policychanges.

But he admitted that he wouldapproach appropriate media outletsto prepare the way for new announce-ments.

Proceedings were briefly disruptedwhen a protestor wearing a whiteshirt and chino trousers ran into thecourt room from a supposedly securecorridor. He was removed by securityguards after shouting This man is awar criminal and JP Morgan paidhim off for the Iraq war.The man was identified as David

Lawley-Wakelin, 49, a film makerwho made a documentary entitledThe Alternative Iraq Enquiry.After he was removed Blair said that

what he said about Iraq and JPMorgan is completely and totallyuntrue.

Fighting spreads in Syria as KofiAnnan begs for end to violencePEACE envoy Kofi Annan yesterdaycalled on the Syrian government to

take bold steps to resolve thecountrys crisis without furtherbloodshed.

But even as he denounced themassacre of at least 108 people including dozens of children inthe Syrian town of Houla, moreviolence was spreading throughoutthe country.

Assads forces killed at least 41people in an artillery assault on thecity of Hama, activists said, shortly

BY JENNY FORSYTH after the UN Security Councilcondemned the killings at Houlaand put at least partial blame onAssads heavy weaponry.

The government, however,continues to blame the atrocity onknife-wielding Islamists.

Yesterday foreign secretaryWilliam Hagues plea for Russia tochange its stance on Syria appearedto fall on deaf ears.

Russias foreign minister SergeiLavrov insisted that both sides inSyrias conflict were responsible forthe deaths at Houla. By declining toblame the government alone,

Russia and China kept theirdistance from Western and Sunni-led Arab countries that say Assadmust step down.

With international criticismgrowing of Assads methods intrying to crush a 14-month-olduprising, UN and Arab League envoyAnnan visited Damascus for talkson his faltering peace plan.

He called on the government toshow it is serious in its intention toresolve this crisis peacefully beforeadding: This message of peace isnot only for the government, butfor everyone with a gun.

Tony Blair told the inquiry that Rupert Murdoch didnt lobby him on media issues

RADICAL cleric Abu Qatada willstay in prison for at least anotherfive months until his deportationappeal in October, a judge ruled

yesterday.The extremist, who has been

described as Osama Bin Ladensright-hand-man, is fightingdeportation to Jordan, where he isaccused of involvement in several

bomb attacks.But yesterday a Special

Immigration Appeals Commissionjudge denied Qatada bail, on the

Extremist preacher Abu Qatadawill stay jailed during Olympics

BY KASMIRA JEFFORD grounds that the 51-year-old mightabscond if freed and jeopardisepolices ability to protect the pub-lic when their resources were inhigh demand during the Olympic

games.Lawyers for Qatada also said

yesterday that it was almostinevitable that the case would go

back to the Europe justice systemif the appeal goes against him inOctober.

The preacher lost a last-minutelegal bid to make a final appeal to

Europes human rights judgesearlier this month.


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Entertainment One profit risesas Twilight and Peppa pay offA TIE-UP with Amazons LoveFilmhelped Entertainment One double

its pre-tax profits last year, thefirm said yesterday.Profits at the Peppa Pig co-owner

rose to 23.1m in the year to 31March from 11.4m in the previous12 months, on revenues that grewseven per cent to 502.7m.

The firm also confirmed it wasin talks to buy Canadian producerAlliance, which financed lastyears Oscar winner The KingsSpeech.

BY ELIZABETH FOURNIEREntertainment One said it had

doubled digital sales since lastyear after a five-year deal withLoveFilm to provide films for the

on-demand service.Big hitters for the companyduring 2011 included the latestinstallment of the Twilight filmseries, and cartoon Peppa Pig.

The firm said US licensing forthe pre-school favourite was ontrack for later this year,including a potentially lucrativemerchandising deal.

The growth in our televisionbusiness and doubling of digital

sales have been particularhighlights, said chief executiveDarren Throop.

Entertainment One co-owns the rights to kids favourite Peppa Pig

Entertainment One Ltd


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ROLLS-ROYCE said yesterday it hadwon 100m in engine service con-tracts with the Royal Air Force thelatest in a string of recent deals.

Under the latest contract wins thecompany will provide ongoing sup-port for the UK militarys C-130Hercules transport and VC10 tankerfleets.

Rolls-Royce has also won an exten-sion to its contract to provide techni-cal support for Conway engines,which will power the VC10 tankeruntil it f inishes service in 2013.

We take pride in supporting theRoyal Air Forces fleet of C-130s andin our successful partnership withLockheed Martin, MarshallAerospace and the Ministry ofDefence, said vice president incharge of defence contracts at theFTSE 100 company, Paul Craig.

It is particularly pleasing that wehave continued to deliver high levelsof aircraft availability at a time whenboth the C-130 and VC10 have recent-

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THE controversies surroundingthe historic $104bn flotation ofFacebook in the US should havereminded all of us that

although the New York financialmarkets may currently be the placeto go for technology flotations, theyare not infallible.

What is disappointing is that withso much wrangling about how thefloat was handled, very few peopleare putting the case for London tosomehow take advantage.When commentators refer to the

problems of Nasdaq, which closeddown for around 30 minutes at a cru-cial time in the proceedings, theytalk about Facebook maybe movingon to the New York Stock Exchange.

Theres no-one cheeky enough to sayit should consider listing on theLondon Stock Exchange, not even theuber-optimistic Mayor of London,Boris Johnson.There are many reasons for this.

New York is firmly established as theplace to go for technology listings. Ithas the research base and the

investor appetite, as well as therecent history, with LinkedIn,Groupon et al recently f loating there.

London, alas, has had its own valua-tion issues, with investing institu-tions thoroughly fed up by what theyview as companies overpricing them-selves as they come to the market.

Mention the likes of Ocado, Betfairor Perform and those names wontproduce much of a smile from UKinstitutional shareholders.

But surely now is the time to look atwhether we can do something to bemore competitive in the tech spacearea. London needs to be moreissuer friendly, says a technologybanker at a large investment bank.Its a less flexible market, with less

scope to change pricing late on, forexample, he added.While companies the size of

Facebook look unlikely to rethinkNew York for the time being, thereare a clutch of smaller tech firms thatmight be tempted to try here.

We have a clutch of high quality

London based companies, includingMind Candy and JustEat, that are ator approaching the point when theycould float here... Im hopeful that afew success stories will help open themarkets more widely, says NicBrisbourne, a partner at DLJ Esprit,whose recent investments includeLoveFilm and The Cloud.

Post the Facebook debacle, it willbe easier for London to show it is the

best place for those companies tolist.

BLOCK TRADESWhile IPOs continue to struggle onthe London markets, there doesntseem to be any shortage of buyers forstock in good quality companies.

When the Reimann family wantedto sell a five per cent stake in ReckittBenckiser it hired Bank of AmericaMerrill Lynch to do the business, inwhat was to be the largest acceleratedplacing of shares in EMEA in 2012.The deal, done at a 6.1 per cent dis-

count to the market price, movedMerrill up to second place in the equi-ty capital markets tables.

[email protected]

INSIDETRACK

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The Facebook debacle deserves a reaction from London

ly been involved in high tempo opera-tions.

Our innovative approach, whichcontinues to ensure availability forcritical operations, has been greatlyappreciated by the RAF.

Rolls-Royce has contracts with 5,000airlines across the globe, while 160armed forces are also on its books.At the end of 2011 the companys

order book stood at 62.2bn. Rollsemploys 40,000 people in 50 coun-tries.The companys shares rose one per

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City A.M.is offering readers the chanceto win a pair of VIP tickets to a fundrais-ing dinner at Boisdale restaurant inCanary Wharf.The event takes place on Monday

week, 11 June, and marks the openingof Motorexpo, the UKs largest free toenter motor show.All you have to do to enter the draw is

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cityam.com/the-capitalistTHECAPITALISTIF youre feeling peckish today then head over to Canary Wharf,Liverpool Street or Oxford Circus. A free lunch yes, it really isfree, according to organiser Barclaycard is being laid on for

10,000 Londoners to mark the wider launch of PayTag, thecontactless way to pay.PayTag is an extension of a customers credit card account andonly available to Barclaycard Visa cardholders.To celebrate the lunch offer, food artist Carl Warner hasrecreated London landmarks, including the Gherkin and theShard, made entirely from everyday foods which were pasttheir sell by date. Needless to say, the free food is fresh.For the full list of lunch locations check @barclaycard on Twitterand #freelunch

TUESDAY 29 MAY 2012

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HARGREAVES Services yesterdaysaw its stock plummet after itissued a profit warning triggered byproblems at its coal mine inYorkshire.

It said that between 12m and16m could be wiped off its profitin the year to May 2013, sendinginvestors running for cover.The lowering for forecasts from

analysts estimates of around48m was caused by geologicalproblems at its Maltby coal mine.

Shares in the company, whichspecialises in coal supply and deliv-ery, nosedived by almost 30 per

cent after the companys shockstatement to the market.

Hargreaves believes the incidentat Maltby, which involved pullingback operations because of safetyconcerns after water, oil and gasseeped into a new section of themine, to be a one-off.

Production division director GerryHuitson said: This is a very unusu-al situation and to our knowledgethis has never happened before inMaltbys long 100-year history.

Shares plungeat Hargreaves

after coal blowBY JOHN DUNNE It is highly unlikely that theseconditions will be found again inany subsequent panels.

Maltby employs 500 people and itscoal is primarily used to supply theDrax Power Station, Europes largestcoal-fired power plant in NorthYorkshire, which is owned by Britishpower producer Drax.The company also imports coal

and other minerals.Chief executive Gordon Banham

said in a statement yesterday:Whilst we are bitterly disappointedby this development but there wasnothing that could have been doneby the mining team to foresee oravoid this situation.

Hargreaves Services could see 16m wiped off its profit after problems at Maltby

Hargreaves Services PLC


800

700

900

1,000

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1,200 p760.0028 May

The group has issued a trading update regarding an unexpected andunprecedented geological conditions. It acknowledges the impact of this devel-opment but believes in the long term viability and profitability of themine and is working to mitigate the results of this occurrence.

ANALYST VIEWS

This is obviously a blow to the company. However it is very well runand in the medium and long term things will get back on track. It was a geologi-cal problem and very unfortunate, but any problem like this is going tohit the stock.

While this kind of incident is rare at Maltby (and Hargreaves, surely one

of the only companies disappointed to find oil....), it does little to dispel mediumterm concerns that issues out of its control may always affect the shareprice and profitability of the company.

HOW BIG A BLOW IN THELONG TERM ARE THEPROBLEMS AT MALTBY?Interviews by John Dunne

PETER ASHWORTH CHARLES STANLEY

JUSTIN JORDAN JEFFERIES HOARE GOVETT

PAUL JONES PANMURE GORDONJonathanRowland,chairman ofJellybook


JELLYBOOK, the Aim-listed

investment company focusing onsocial media start-ups, has clockedup a 300,000 loss in its first 10months as a company and failed tomake its promised acquisitions.

The vehicle, run by JonathanRowland, son of the property tycoonDavid Spotty Rowland, raisedmore than 11m in June 2011 to tapinto the growing frenzy for socialnetworking.

Investors, however, are yet to seeany benefits, with the companyreporting a 295,000 loss in the 10months to 31 December, includingstart up expenses of almost200,000.

Rowland said the board hadreviewed a number of potentialacquisitions but the majority werenot of a suitable size and scale.

The social media sectorcontinues to demonstrate extremely

strong growth despite the widereconomic uncertainties

and the number andrange of potentialinvestments isexpandingcommensurately.

Jellybook cashshell racks up300,000 loss

BY KASMIRA JEFFORD

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Aveva, led by chief executive Richard Longdon, hopes to expand its presence in China, Latin America and India

OIL explorer Gulf Keystone yesterdaysaid that its performance in 2012would build on what it brandedoutstanding success last year.

The company said it has beenbuoyed by successful operations inKurdistan, though its shares fell 2.5per cent yesterday after the update.

Gulf Keystone said it wasplanning the next stage of workon its Shaikan field, whose oilestimates have beenincreased twice. Chiefexecutive ToddKozel believes the

BY JOHN DUNNE scale of Shaikan find could behigher than the 13.4bn barrels of oilforecast. The company has toldinvestors that it hopes to produce

40,000 barrels per day from asearly as next year.

Losses before tax widened to$63.7m (40.6m), from $26.8m ayear ago, as mounting expenseskept pace with a surge in

revenues, which came in at$6.9m compared to

$808,000 during 2010.


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Todd Kozel is upbeat onthe companys outlook

Gulf Keystone hails booming yearas both revenues and losses soar

ENGINEERING and design softwaregroup Aveva yesterday posted a 14per cent rise in adjusted profit,helped by a strong demand at theend of the year from the oil and gasindustries, increasing its confi-dence for the current year.The group reported adjusted pre-

tax profit of 62.3m, ahead of mar-ket forecasts of 60m. Revenueswere up 13 per cent to 195.9m forthe year to the end of March.The company, whose software is

used to design ships, oil refineriesand nuclear power stations, said itexpected a better performance inChina after a restructuring.

Chief executive Richard Longdonsaid: The strong close to last yearhas put Aveva in a very good posi-

tion to deliver against our strategyand to continue our focused invest-ment to expand the business in allareas.

We expect growth in the oil andgas industry to continue apacealong with our expanding pres-ence in mining.

Power is set to provide a solidbase of customers continuing toprepare for the growth in nuclearwhilst marine is expected toremain slow.The companys shares jumped by

10.7 per cent to 16.38 after theannouncement.

Longdon said that the prospectsin China and Latin America werepositive, adding that the firm isdeveloping a much larger organi-sation in India.

Milan Radia at Jefferies said

Aveva continues to benefit fromstrong demand in the integratedoil and gas sector, supporting hisdouble-digit organic growth fore-cast for 2013.

Premium growth is becomingscarce and Aveva accordinglydeserves an emphatic premium rat-ing, said Radia.

Growth in oil and gasfuels Avevas profits

BY JOHN DUNNE

AVEVA Group PLC


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TUESDAY 29 MAY 2012 23

DC Advisory PartnersThe corporate finance advisoryfirm has appointed Jack Dessayas an executive director in itstechnology, media andtelecommunications team. Hejoins from Deutsche Bank, wherehas worked for the past six years.Dessay has also held senior postsat Citigroup, working from itsNew York and London offices.

KPMGCharlie Patrick has been appointed KPMGs new head of itsanti-bribery and corruption practice. He takes over fromBrent McDaniel, who is returning to the US. Patrick is adirector in the firms risk consulting division and has beenwith KPMG for 20 years. He has over 15 years experiencein forensic and accounting matters within the UK andabroad. He spent two years as a project managerinvestigating the fate of the assets of Holocaust victims.

SEIThe provider of outsourced fiduciary managementinvestment services has appointed David Hickey as adirector within its institutional group. Prior to joining thefirm, Hickey spent the majority of his career at BarclaysWealth, latterly as head of UK and Ireland pensionorigination. He has also worked for PwC.

Northland CapitalSteven Baird has been appointed as a director in theinvestment banks sales and broking team. He has over 25years broking experience, and started his career in UKequities at James Capel. He has since worked for Nomuraand Societe General, and was one the first employees atOriel Securities.

Kleinwort BensonThe private banking and wealth management firm hasannounced the appointment of Andrew Wheeler to thenew position of executive director, business developmentwithin private wealth management. He joins from

Absolute Fund Managers, where he was a partner and leddevelopment and marketing of its private client-focusedhedge fund range. Wheeler has previously held senior

roles at Deutsche Bank Private Banking and Dexia PrivateBank.

MNWalter van Gent has been named as the successor to Dirkde Heer as head of UK risk and operations at the Europeanfiduciary manager. He joins the UK team from MNs Dutchoffice, where he has been team manager operations since2008. Additionally, Ross Leighton has joined the firm, asUK risk and operations manager, from JP Morgansperformance measurement team.

BDOThe accountancy firm has appointed Michelle Carroll andNeil Griggs as partners in its financial services team. Carrolljoins from Kinetic Partners, where she managed itsinternational audit practice. Griggs also joins from Kinetic,where he started as an audit partner in 2007.

WHOS SWITCHING JOBS Edited by Tom Welsh

+44 (0)20 7092 0053morganmckinley.comSPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

EUROPEAN shares ended innegative territory yesterday,reversing earlier gains in thintrade as concerns surrounding

Spains banks returned to theforefront of investors minds.The FTSEurofirst 300 closed down

0.1 per cent at 984.01, having earlierreached a high of 993.21 boosted byopinion polls suggesting Greeces pro-bailout parties may be able to form agovernment committed to staying inthe Eurozone.

But trade was light as a number ofEuropean markets were closed, accen-tuating the moves, with theFTSEurofirst 300 trading just twothirds of its 90-day daily average.

Spains IBEX was the biggest faller,

down 2.2 per cent, weighed by bank-ing heavyweights Santander andBBVA, with sentiment dampened bythe growing cost of shoring uplenders.

CAPITAUBS has upgraded the outsourcing group from neutral to buy and raisedits target price to 725p from 700p, saying that a buying opportunity had beencreated by its recent share issue and that the shares depressed valuation doesnot reflect the brokers view of an improving trading momentum.

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BRITAINS main equity indexended little changed aftergiving away most of its gains inlate trade yesterday, in a sign

investors lacked the confidence tosustain a recent rally in the absenceof greater visibility on the Eurozonecrisis.The FTSE 100 closed up 4.81 points,

or 0.1 per cent, at 5,356.34 points, hav-ing stretched as high as 5,413.83points in morning trade.Traders said investors were happy to

book their intra-day profits as uncer-tainty surrounding the Eurozone,where concerns about Spanish bankssent local government bond yieldsjumping and the common currencyslipping towards two-year lows, madeit too risky to bet on a sustained mar-ket recovery.

Most of the people on the buy sidewe spoke to are more bearish thanbullish, Oliver Stansfield, director ofequity sales at Fox-Davies Capital, said.

They are also still concerned thatvolumes are going to remain fairlythin over the next few months, with

the summer and the Olympics.With Wall Street shut for MemorialDay, the FTSE had traded little overhalf of its 90-day volume average bythe close. Low volumes amplify shareprice volatility and, with fewerinvestors, also make it harder to get inand out of positions quickly.The FTSE has so far failed to validate

a bullish trading pattern known as adouble bottom, where two lows ofincreasing height are formed.

A support base has shaped around5,254 and has allowed for a temporarystabilisation Nicolas Suiffet, a techni-cal analyst at Trading Central, said.

Suiffet said a push above todayshigh of 5,413 would call for a limitedrecovery towards the indexs recenthigh of 5,465 and the indexs bearish20-day moving average at 5,495.

Miners added most points, boostedby hopes of more stimulus from

China, the worlds largest metals con-sumerte its economy.

LONDON REPORT

FTSE rising butinvestors wary

EUROPE REPORT

Spanish woesweigh markets

HOMESERVEPeel Hunt has a sell rating on the home emergency repair membershipservice, and has lowered its target price on the stock from 220p to 130p.The broker says the move reflects a 23 per cent downgrade to its 2014earnings estimates, as well as the impact of an o ngoing FSA investigation.

SPORTECHPanmure Gordon has kept its buy rating on the pool and tote betting supplierand upped its target price from 67p to 71p, saying the groups US operations are

significantly undervalued, particularly considering the company seems wellplaced to benefit from state regulation of online betting.

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IN BRIEFBoJ fears investors hooked on QE Bank of Japan policymakers agreedto ease monetary policy in April toensure the economy resumes arecovery, but signalled a pause bycomplaining of misunderstanding inmarkets that they will keep offeringmonetary stimulus automatically untilone per cent inflation was in sight,minutes of the meeting showedyesterday. At the 27 April meeting, theBank boosted asset purchases by 10trillion yen (80.2bn), offering itssecond stimulus in just over twomonths in a show of its determinationto achieve its one per cent inflationtarget set in February. Membersmade note of some misunderstandingthat the Bank would continue toincrease the size of its asset-buyingprogramme automatically until itjudged that one per cent inflation willbe in sight, the minutes showed.

OECD calls for Africa jobs boost Young people represent 60 per centof Africas unemployed, and of these40m youths around 22m have given uplooking for work, according to a reportout yesterday from the OECD. That rep-resents a threat both to Africaschances of reducing poverty, and to

social cohesion, said the report.Improving education in agriculture aswell as adopting new technologies willhelp improve the conditions for busi-ness growth and boost youth employ-ment prospects, it explained. Exportdiversification beyond raw material andprivate sector development are impor-tant to mitigate the continents suscep-tibility to external shocks, but thattakes time, added director EmmanuelNnadozie.

FEARS over the weak economy andthe chance of a Eurozone collapsehave pushed up risk premiums andhit lending to such an extent thatinterest rate cuts barely affect themarket, monetary policy commit-tee (MPC) member Ben Broadbentsaid in a speech yesterday.This is hitting investments in

areas such as research and develop-ment which are designed to boostproductivity, he said, damagingthe supply side of the economyand so the long-term growthoutlook.

In response to the financialcrisis and recession, the Bankof England cut interest ratesand printed money in aneffort to stimulate the econo-my.This did bring down nominal

interest rates on bank loans,but credit was still dif ficultto obtain as banks cut

Bank: Low ratescannot counter

Eurozone woesBY TIM WALLACE lending to rebuild balance sheets.

Such a re-balancing may havebeen expected to have led to recov-ery, Broadbent explained, but theongoing crisis in the Eurozone hasmaintained the pressures in themarket.

We are now suffering from amore general rise in the premiumdemanded for all risky investments,however theyre financed, he said,pointing to the rising cost of credit

in securities markets.Broadbent claims thatthe Bank of Englandsvery loose policy helped

in 2008 and could help

again in certain cir-cumstances.

But, in terms ofstopping an extremeEurozone outcomefor the time being atleast, the most impor-

tant decisions affectingthe UK are being

taken in otherparts of the

c o n t i -nent.

BRITONS are spending two moredays working for the governmentthis year than in 2011, the Adam

Smith Institute revealed today in itsTax Freedom Day report.

Calculating the tax paid by theaverage worker over the year, theinstitutes figures show that everypenny earned so far this year has

gone to the government, and onlyfrom today are workers earning forthemselves.

The double-dip recession, lastyears VAT increase, fuel duty andhigh income taxes are allcontributors, said the institute.

Workers are paying two daysmore wages in tax this year

BY TIM WALLACE Once government spending andborrowing is taken into account,the cost of government day fallson 23 June down from 30 Junelast year, meaning the deficit

reduction plan has knocked sevendays-worth from state activity.

In the Middle Ages a serf onlyhad to work four months of the

year for the feudal landlord,whereas in modern Britain peoplehave to toil five months forOsbornes tax gatherers, said ASIdirector Eamonn Butler.

Just as the rest of us have hadto cut back, so should the

government. The UK economywould be a lot healthier for it.

Eamonn Butler is the director of the Adam Smith Institute

Ben Broadbent saidlow rates are helping

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WHEN economic crisesstrike it can take a whilefor economists to keep up.But one of the confusingoutcomes of events since

2008 has been policymakerspresenting established policies such as what is now being calledquantitative easing (QE) as beingnovel, and policymakers andcommentators using different termsto mean the same thing (and indeedthe same terms to mean differentthings).When asked if he was engaging in

QE, Mario Draghi, president of theEuropean Central Bank was right toreply that every jurisdiction has notonly its own rules, but also its own

vocabulary.

IF LONDON is to retain its status asa global capital for business in theface of technological revolutionand the rise of mega cities in theSouth and East of the globe, it is

vital for property developers torespond to changing business needs.This is not just building new offices

that are well designed, environmen-tally efficie

cityam 2012-05-29

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