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following early gainsstimulated by the Greekelection result, sank back

down. Benchmark Brentcrude printed $96.05 abarrel, registering pricesas low as they have been

since January.The Eurozones blue chip Euro

STOXX 50 index ended down 1.2 percent at 2,155.64 points, despite spik-

ing on the early news.Spains IBEX and Italys FTSE

MIB indices fell three per centand 2.9 per cent respectively,weighing heavily on pan-Europeanmeasurements of equity prices and were themselves draggeddown by under-pressure bankingstocks.

Bankia ended down 8.7 per cent,UniCredit lost 4.3 per cent and

Banco Santander shed 4.6 percent during trading hours.

In London, the FTSE ended upnarrowly, rising 0.22 per centto close on 5,491.09.Yet the index lost most of the

ground gained earlier in the day,when it had spiked on opening totouch levels around 5,550.

The Greek vote has just been asideshow on the Eurozone debt cri-

sis. Investors focus is now back onthe structural problems faced by

both Italy and Spain, said Natixisanalyst Alex Koagne.

With fearsrising over the

state of the countrys financial sec-

tor, Spain plans to channelEuropean aid into the banks.Yields on government 10-year

bonds shot up to touch 7.3 per cent

during the days trading, before eas-ing slightly to 7.16 per cent a riseof 28 basis points.

Some investors fear that seven percent is the point of no return fortroubled Eurozone states yields,after which they are in danger of

spiralling upwards.Italian yields also continued their

upward trend, reaching 6.08 per

cent after gaining 15 basis pointsduring the day.And internationally, markets were

knocked by bearish sentiment. Oil,

UNIMPRESSED markets quicklythudded back down to reality yester-day after a relief rally on the back ofGreeces elections results provedshort-lived.

Despite equities soaring on thenews that the pro-bailout NewDemocracy party had scraped itsway to a narrow victory in Sundaysvote, ongoing worries over thefuture of the single currency soonweighed on investors sentiments.

As Greek coalition talks rumbledon, stocks pared earlier gains whilethe euro itself lost ground from aone-month high against the dollar.New Democracy hopes to form amajority government with the pro-bailout socialist Pasok party, butwas yet to conclude talks last night.

And even if a coalition is success-fully formed today, wider concernsover the debt crisis continue toplague the Eurozone.

We have avoided drach-mageddon, but were still ina very weak situation, saidSteven Bell, a hedge fund man-ager at GLC. Its almost like:Lets move on from Greeceand lets focus on Spain, he said.The Bank of Spain revealed yester-

day that bad loans had grown to 8.72

per cent of total lending in April, thecountrys highest level for 18 years,extending the troubled Eurozonestates recent string of gloomy news.

FTSE 100 5,491.09 +12.28 DOW M12,739.47 -27.70 NASDAQ 2,894.74. +21.94 /$ 1.57 unc / 1.25 +0.01 /$ 1.26 unc

MORE: Pages 5, 6, 23, 24 , 25

BUSINESS WITH PERSONALITY

LONDON2012

days to go

STRIKER HOPES TO FIRE ENGLAND INTO QUARTER FINALSWHAT A SOCIALIST WIN MEANS FOR THE FRENCH ECONOMY See Debate, Page 23 38

www.cityam.com FREEISSUE 1,655 TUESDAY 19 JUNE 2012

ROONEYS RETURN

BY JULIAN HARRIS

Certified Distribution

30/04/12 till 27/05/12 is 132,076

MARKETS REFLECT ONGOING EUROZONE WORRIES

Euro STOXX 50 closed down, despite an early spike

12pm11am 2pm1pm 4pm3pm 5pm8am 9am 10am

2200

2175

2150

2,155.6418 Jun

YIELDSNOWAT

6.08%

YIELDSNOWAT

7.16%

-0.3% $96.05abarrel

FROM RELIEF TO DESPAIRAS ELECTION RALLY DIES

The FTSE spiked upon opening, but pared gains

12pm11am 2pm1pm 3pm 4pm8am 9 am 10 am

5540

5520

5500

5480

5460

5440

5491.0918 Jun

Brent crude in Londonsank by $1.56 a barrel

ITALYS

SPAINS

See Pages34-35

The euro dippedagainst the

dollar

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[email protected]

Follow me on Twitter: @allisterheath

PLUS Markets yesterday gainedapproval for the disposal of its stockexchange business to ICAP, followingweeks of controversy over the move.

The sale of Plus-SX, home toArsenal FCs listing, for 500,000was passed at yesterdays generalmeeting but a substantial numberof abstentions means less than athird of investors backed the deal.

Kuwaiti fund Amara Dhari owns17 per cent of Plus Markets and hadcampaigned against the decision tohand directors 423,000 insettlement costs as part of thesale. But it reluctantly abstained inorder to preserve shareholder value,allowing the deal to progress.

One activist shareholder said thevote was a stitch up, adding thathe expects the chairman, chiefexecutive and finance director tolose their jobs at next weeks AGM.

You could bet your house on theexisting directors that are up for avote being removed, said investorSimon Chapman. I dont thinktheres any doubt, particularly asthere no longer any FSA concernsabout whos running the company.

But he hinted that Plus Marketsmay still have a future: There arenow moves afoot to create a newbusiness. We have a shell with somecash and a listing. I think we shallsee a group rising like a phoenixfrom the ashes.

Plus Markets

wins investorvote on saleBY JAMES WATERSON

SFO drops investigationinto Vincent TchenguizTHE SERIOUS Fraud Office (SFO) wasyesterday forced into an embarrass-ing climbdown after dropping ahigh-profile fraud investigation intoflamboyant property tycoon VincentTchenguiz.

The regulators decision to admitthat there are no longer reasonablegrounds to consider Tchenguiz asuspect could leave it with a substan-tial bill for damages to his businessinterests.

He has previously signalled hisintention to sue the SFO for morethan 100m.

I have consistently explained tothe SFO that they had got it com-pletely wrong but, as their investi-gation collapsed around their ears,they stubbornly maintained thatthey regarded me as a suspect,Tchenguiz said in a statement.

It is a huge relief that, under thenew director of the SFO, this shadowhas now been lifted and I can get onwith rebuilding my life and my busi-ness interests. The damage, however,has still to be accounted for.The probe began when brothers

Vincent and Robert Tchenguiz werearrested in March 2011 in dawn raidson their homes and offices that weresplashed across the news.The investigation stemmed from

the brothers dealings with Icelandic

Sants: Citys status under threatLondons position as a global financialcentre is under threat because the UKfinancial sector is not rethinking itsbusiness models quickly enough in theface of a new political atmosphere andregulatory change, says Hector Sants, thedeparting chief executive of the FSA.Sants warned that banks, brokers andinsurers all need radical re-engineeringover the next five years because ofchanges in savings patterns, the shift ofgrowth to the developing world andtougher regulation.

Morgan Stanley discusses penancewith Irish nuns over bond lawsuitA group of Irish nuns is close to reaching asettlement US bank in a dispute aboutlosses they incurred from an investment ineuro-denominated notes.

Aegon head admits life assurersmarket over-complex productsThe head of one of the biggest lifeassurers, Aegon chief executive AlexWynaendts, admits his industry suffers acredibility problem because it has soldover-complex products to savers.

Times investigation: tax avoidersThousands of wealthy people in Britainpay as little as one per cent income taxusing below the radar accountingmethods, part of a tax avoidance industrythat costs the country billions of pounds.

Hornby online and on track for saleor floatThe former boss of Alliance Boots hasdipped a toe back into the health marketby joining the board of internet chemistPharmacy2U.

LSE chief says regulation killing theequity markets'New regulations are killing the equitymarket, according to Xavier Rolet, chiefexecutive of the London Stock Exchange.Rolet said many of the rule changesbrought in since the banking crisis haddone more harm than good to financialmarkets.

Clarks and Ford workers startindustrial actionClarks Shoes has been hit by work-to-rule industrial action over pay.

New Carrefour CEO sets stage forretrenchmentDays after announcing Carrefour's exitfrom Greece, chief executive GeorgePlassat said he would look to furtherreduce the French retailers globalfootprint and improve efficiency.

Russia prepares for economic stormsWith prices for oil, its main export,sliding, Russia is already gearing up foreconomic troubles, says First DeputyPrime Minister Igor Shuvalov.

WHAT THE OTHER PAPERS SAY THIS MORNING

PENSIONERS could face areduction in income of up to 20per cent if new European Unionrules on capital requirements areimplemented, according toaccountancy firm Deloitte.

The Solvency II reforms are setto shake-up the continentsinsurance business by settingcommon standards and increasingcapital requirements.

But this could have the sideeffect of forcing annuity providersto hold significantly morereserves, causing them to switchfrom investing in corporate bondsto lower-yielding assets such as

government debt.Research by Deloitte suggests

that in the best case scenario thiswould reduce annuity rates by fiveper cent, but it might lead to a fallof up to 20 per cent, depending onthe outcome of ongoing EUnegotiations.

For a pensioner with a 100,000pension fund, these changes couldreduce their income by between300 and 1,100 a year.

The amount that annuity rateswill fall by depends on whetherthere is a favourable outcome tonegotiations, said DeloittesRichard Baddon. Whatever theoutcome, it is likely that insurancecompanies will need to chargemore in future for annuities.

EU rules could

push up costof retirement

Earlier this year Vincent Tchenguiz put 250,000 UK homes up for sale for around 3bn

2 NEWS

BY JAMES WATERSON

BY JAMES WATERSON

To contact the newsdesk email [email protected]

FORGET about Greece, Spain oreven Italy. And no, I havent gonemad: if somebody ends the euro,it will be Germany. This would be

a great paradox. So far, Germany hasbeen the big winner from the singlecurrency but it may soon find thatthe costs of membership are

becoming greater than the benefits ifit is forced to pick up everybody elsesdebt. If and when that happens, andGermany decides that it has become anet loser from the single currency,the game will be up.There are many lessons to be learnt

from Germanys reaction to thelaunch of the euro. It did all the hardwork of regaining competitiveness,made sure its unit labour costs wereunder control and reduced publicspending as a share of GDP. It under-went an internal devaluation: itreduced its costs the real, hard way. It

EDITORSLETTER

ALLISTER HEATH

Why Germany could eventually lose patience with the euro

TUESDAY 19 JUNE 2012

also enjoyed an external devaluation:the euro is valued much lower in themarkets than the Deutsche Markwould have been. Germanysexporters have also gained immenselyfrom the disastrous collapse in com-petitiveness of countries such as Italysince the euros launch. Germanyboasts huge current account surplus-es with many EU countries; its rela-tionship with them is increasinglysimilar to the relationship betweenChina (which sells goods, helped in

part by an undervalued currency) andAmerica (which buys them, and paysfor them by issuing debt).When the single currency was

launched, relatively low domesticinflation compared with that seen inother Eurozone countries resulted inGermany having among the highest

real interest rates in Europe andhigh inflation countries enjoying thelowest real interest rates. Thisdepressed German growth and slowlystarted to trigger bubbles in the likesof Spain. The German establishmentsoon realised that the only way tocope with such relatively high realrates was to slash costs (in the past,the Bundesbank would have cut inter-est rates, and this might have trig-gered an external devaluation via alow Mark, but with the euro and onesize fits all interest rates, this was nolonger possible).

look for and find work.This was revolutionary stuff for a

social democracy like Germany. Theextent of the changes was greaterthan anything the UK coalition isdoing today, albeit from a differentstarting point. The result was to pavethe way for Germanys recent export-

driven renaissance, following thirtyyears of relative decline and severallean years after the botched reintegra-tion of East Germany. All of this ishighly relevant to the euro: theGermans went through change, theyargue, so why cant other countries?Germany may be a strong economy,but even it cannot afford to take oneverybody elses debt. The real risk tothe euro is not Greece it is Germanyfinally losing patience.

As Ryan Bourne of the Centre forPolicy Studies notes, Germanysunions decided to protect jobsthrough wage restraint, allowingemployers to capture productivitygains. This improved the profitabilityof domestic production and the com-petitiveness of German industries in

international markets. A series of dra-matic changes were also introducedto the labour market. Over a period ofa few years in the early noughties,Germany cut taxes on company prof-its and capital incomes, slashed non-wage social security costs, cutregulations on temporary, agency andpart-time employment, reduced bene-fits to the long-term unemployed,reduced the duration of unemploy-ment benefits for older workers, dilut-ed unfair dismissal rules andintroduced a minimum income sys-tem closely tied to a requirement to

bank Kaupthing, which loaned them180m in March 2008 only to collapsemonths later.

Regulators had accused VincentTchenguiz of duping Kaupthing byoverstating the value of the propertythat he pledged as collateral.

But the case against Vincent began tounravel after he successfully appliedfor a judicial review of the case inNovember 2011.A month later the SFO admitted that

there were factual errors in informa-tion used to obtain the search war-rants against Vincent and offered toreturn some seized documents.The watchdog confirmed yesterday it

had informed Mr Vincent Tchenguizthat there are now no longer reason-able grounds to consider him a suspectin the investigation into the collapse ofKaupthing Bank.

It said that the investigation intoRobert Tchenguiz remained ongoing.

The new jobs website for London professionalsCITYAMCAREERS.com

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AFTER four years with no majorinvestments, manufacturing buyoutspecialist Melrose yesterday con-firmed it is in talks to buy Germanengineering firm Elster Group.

Following speculation over theweekend, Melrose yesterday con-firmed it was pursuing an all-cashdeal that values Elster at $2.3bn(1.4bn), offering $20.50 per ElstersAmerican depositary share. The priceis a 25 per cent premium to Fridaysclosing price.

Elster, whose shares rose 18 percent to $19.41 yesterday, is reportedto be holding out for seven per centmore than the bid. However, analystssay its unlikely to succeed in raisingthe offer.

Melrose said that it would not goahead with the deal without a rec-ommendation from Elsters board oran undertaking from its majorityshareholder, Rembrandt Holdings, aunit of private equity firm CVCCapital Partners.According to analysts, Melrose is in

a strong position with CVC, and arecommendation is considered like-ly.

If successful, the investment wouldalso be Melroses largest to date.

Melrose in talks

over 1.4bn bidfor Elster GroupBY TOM YOUNG

Although it doesnt appear like abargain, its a high quality target withmargin headroom, Ben Bourne, equi-ty analyst at Liberum Capital told CityA.M.

Melrose has an excellent trackrecord of creating value so we thinkthe deal will be supported, saidBourne.

Elster embarked on a cost savingprogramme in the first quarter,including closing four major facilitiesand consolidating operations andsites.

The restructuring programme inplace would add two per cent to themargin and thats before Melrose hasworked its wizardry, added Bourne.

Melrose plans to finance the majori-ty of the deal through a $1.87bnrights issue.

INVESTEC is acting as financial adviser toMelrose on its recommended cash offerfor the entire issued share capital ofElster.Investecs Keith Anderson, co-head ofcorporate broking and Investec veteran,is leading the deal.Anderson has advised Melrose before,having worked with Investec managingdirector Chris Baird on the companyssecondary share placing in April.He was also recently appointed as a bro-ker to Halma, a FTSE 250-listed UK

technology provider, having advised thefirm in previous years while the pairworked at Dresdner Kleinwort.Anderson joined Investec in 2002 havingbeen previously at WestLB Panmure,where he was head of corporate brokingand a member of the investment bankingmanagement committee. He is also amember of the Institute of CharteredAccountants of Scotland.Investec has picked up a string of clientssince taking over Evolution in Septemberlast year, including engineering groupRicardo and Halma.Simpson Thacher & Bartlett is represent-ing Melrose on the legal aspects of thedeal.Simpson Thacher is a long time adviserof Melrose. The US firm represented thefund on its disposal of Dynacast to KDIHoldings, in June last year.

ADVISERS MELROSE BID FOR ELSTER

KEITH ANDERSONINVESTEC

Microsoft reveals its new Surfacetablet in bid to challenge AppleMICROSOFT last night drew back

the curtains on Microsoft Surface,its first, long-awaited tablet as itlooks to step up competition withApples iPad.

At a private event held atMilkwood Studios in Hollywoodyesterday evening, the technologygiant showed off two versions ofthe Windows-powered Surfacedevice, a thinner 9.3mm model forthe Windows RT version and13.5mm for the Pro version.

BY KASMIRA JEFFORD Surface features a 10.6-inch HDwidescreen display, USB and microSD card slots, and a 3mm fold-out

cover that also acts as a keyboard.The tablet also come with anbuilt-in kickstand that will allowusers to prop it up for watchingfilms.

The worlds largest softwaremaker is on track to launch itstouch-friendly Windows 8 operatingsystem this autumn and wants tomake a big impact with its owndevice to spark demand.

The tablets will be available when

Windows 8 ships later this year,according to a Microsoft statement.

No details on pricing were

mentioned, except that it would becomparable with current ARMtablets and Intel-poweredUltrabooks.

Microsoft shares rose slightly inafter-hours trading. They closeddown 0.6 per cent at $29.84 in theregular Nasdaq session.

Sales of tablets are expected totriple in the next two years, topping180m a year in 2013, outpacinggrowth in traditional PCs.

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GETTY

GREEK politicians were edgingtowards forming a pro-bailout coali-tion last night, after a finely balancedgeneral election left no party with anoverall majority.

New Democracy leader AntonisSamaras is set to become PrimeMinister after winning 29.7 per centof the vote.As the largest party in parliament is

awarded an extra 50 bonus seats, thatgives him 129 seats in the 300-strongparliament.

New Democracy is expected to forma coalition as early as today withsocialist party Pasok, which camethird with 12.3 per cent of the voteand 33 seats.

Headed by former finance ministerEvangelos Venizelos, Pasok also sup-ports the130bn (104bn) bailout andis likely to join New Democracy inpushing through the tough spendingcuts and financial reforms which arerequired if the government is toreceive the cash it desperately needs.

Bailout parties

stumble towardcoalition deal

BY TIM WALLACE Officials hope fourth-largest partyDemocratic Left could also join thegrouping, strengthening the coalitionfurther with its 17 seats.Analysts expect the parties to push

for some relief on the bailout package,and the troika of the IMF, EU and ECBwill have to ensure the new govern-ment will go along with the agree-ment before handing out more cash.

We would expect negotiations to becompleted within a month and thenext EU-IMF tranche could then bereleased some time in the second halfof August, said Barclays AntonioGarcia Pascual, noting that this meansthe government will run short of cashbefore the tranche is handed over.

Funding for the government in theinterim could be done via delayedexpenditures (ie running arrears), hesuggests.

Radical leftist party Syriza was invit-ed to join the coalition, but refused asits members oppose the bailout.

Syriza came second in the electionwith 26.9 per cent of the vote and 71seats in parliament.

DO YOU THINK THE GREEK ELECTIONRESULTS WILL HELP THE EUROZONECRISIS? Interviews by William Orr and Lisa Moravec

I dont think its going to have any majorimpact on the Eurozone in the short run.

Greece needs to get its people on side before the govern-ment can start to get anything done. It is going to take along time for them and other countries like Spain andItaly to get out of this crisis.

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

TIM SHARMANCCE

Merkel refuses to soften rescueterms despite GDP collapse fearsTHE GREEK recession is gettingdeeper, ratings agency Fitch

warned yesterday, underlining theneed for the country to ease itstough austerity programme andrenegotiate some of the terms ofits EU bailout.

Fitch believes there may besome room to cut the interest rateon the loans to the government under the plan as it stands thestate will pay around 6bn (4.8bn)per year to the Eurozone or toextend the time period over which

BY TIM WALLACEthe loans must be paid back.

But German Chancellor AngelaMerkel yesterday shattered hopesof even a minor renegotiation,

arguing that the government mustpress on with spending cuts andeconomic reforms.

There is no leeway on theissue, she said at the G20 summitin Mexico, insisting anygovernment that is formed muststick with the commitments thathave been made.

Hopes had earlier been raisedwhen Merkels foreign ministerGuido Westerwelle hinted that the

time frame of the bailout could beextended.

However, officials later deniedthis was official policy, saying

Westerwelles comments had notbeen agreed and that arenegotiation is not on the table.

Fitch said that the establishmentof a pro-bailout government inGreece will remove the imminentrisk of a euro exit, but warned theseverity of the systemic crisisengulfing the Eurozone is unlikelyto diminish until leaders come upwith a solid plan for much greaterfiscal and financial integration.

Antonis Samaras is on the verge of becoming Prime Minister in a pro-bailout coalition

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I think overall the election result is positive. Abit of stability cant hurt, and for Greece as a

society the whole social fabric has been torn apart overthe last six months to a year, so to get something a bitmore concrete in place instead of playing around in thedark can only be a good thing.

CHRIS BEEVERSBADENOCH & CLARK

The relief is going to be relatively short-livedand even if the coalition is formed I dont

think it is going to have that much of an impact on thecrisis. The focus will just shift to other countries like Spainand Italy, which are much larger economies and havemuch greater potential to de-rail things.

JONATHANBENFORTHCIBL

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THE FIVE BRICS emerging economies

have agreed to contribute to theInternational Monetary Fund and toexplore currency swaps as part ofefforts to promote global stability.

Leaders of developing world powersBrazil, Russia, India, China and SouthAfrica met on the margins of the G20summit in Los Cabos, Mexico, andagreed to enhance their own contri-butions to the IMF, they said.

The group did not say how muchcash they would offer the IMF, whichis seeking a $430bn infusion of funds,but underscored that the monieswould came with conditions on howthey were used and were linked toreforms that would five the develop-ing world more say at the IMF.These new contributions are beingmade in anticipation that all thereforms agreed upon in 2010 will befully implemented in a timely man-ner, including a comprehensive

reform of voting power and reform ofquota shares, the countries said.The five leaders also discussed swaparrangements among national cur-rencies as well as reserve pooling.

BRICS agree toadd money toIMFs firewall

BY CITY A.M. REPORTER

INVESTORS are now better placed toidentify risky government debtthanks to the growth in the sovereigncredit default swaps (CDS) market, anew report has found.

However, that has had a negativeimpact on debt-laden governments asinvestors find it easier to see when astate like Greece is struggling, accord-ing to the International Organisationof Securities Commissions (IOSCO).The products, which insure against

states failing to pay their debts,became increasingly popular in thefinancial crisis as investors sought to

protect themselves from a default.Many EU politicians argued in 2010

that hedge funds short-selling CDSlinked to Greek debt made it morecostly to put together the countrys

Greece hurt bytransparency in

bond marketsBY TIM WALLACE

first bailout package.It led to the EU approving a law to

ban naked short-selling of sovereignCDS from November this year. A nakedor uncovered CDS contract is onewhere the buyer does not own theasset being insured from default.

However, this report found no firmevidence that short-selling raisedGreeces borrowing costs.

RBS: Spain will need bailout ofat least 300bn to resolve crisisSPAINS growing bad bank debtproblem means the governmentwill have to seek a 300bn (241bn)bailout like Irelands and Portugals,top economists warned yesterday, asaid offered so far will not be enoughto resolve its problems.

Central bank data showed banksbad loans rose to 8.72 per cent oftheir outstanding portfolios in April the highest level since 1994, andup from 8.37 per cent in March.

Loans that fell into arrearsincreased4.7bn on the month to153bn in April, while depositsdropped 2.5 per cent.

This steady worsening ofconditions in the financial sector,combined with a large budgetdeficit, means the government isincreasingly likely to need a bailoutfar in excess of the 100bn bankrecapitalisation on offer from theEUs bailout funds.

BY TIM WALLACE We think Spanish banks willneed to generate 134bn of capitalover the next three years, on risingbad loans and increasingregulation, said RBSs Alberto Gallo.

Not all banks will be able togenerate enoughearnings to coverthese needs, andthe sovereign willstruggle tosupport them all.Our ratesstrategistsexpectSpainto askfor afull

European Stability Mechanismbailout and to suffer from morerating downgrades.

Such a bailout could be upwardsof300bn, Gallo warned, as the stateas well as the banks will need help.The proposed 100bnrecapitalisation simply keeps therisk in Spain, but moves it to thepublic sector, he said. On top ofthat, it creates a liability which issenior to existing bonds, making itharder for Spain to borrow on thebond markets.

Meanwhile the countrys treasuryminister Cristobal Montorodemanded the European CentralBank help the government, sayingit should respond firmly, withreliability, to market pressures thatare trying to derail the joint europroject.

IN BRIEFAmericans wealth declinesn US households saw their wealthdecline by more than a third between2005 and 2010 as home values andshare prices plummeted, leaving manywith weak safety nets to weather thetough economy. The median householdnet worth dived 35 per cent to $66,740in the five year period, the CensusBureau said yesterday, although itwarned that inflation adjustments madecompletely accurate figures difficult.

ECBs Hansson: no deflation riskn Estonias new central bank governorsaid yesterday that he did not seedeflation risks in the Eurozone and said

the debate over whether governments

should push for growth or push forausterity was misplaced given highdeficits in Europe. I don't like this kindof growth vs austerity comparison,Ardo Hansson, who is on the EuropeanCentral Bank policy setting council, said.I think the growth agenda is all aboutthe single market and the structuralreforms and so on.

Italy calls for limits on spreadsn Italy will push this week at a meetingof Eurozone finance ministers for asemi-automatic mechanism involvingthe European Central Bank or thepermanent bailout fund ESM to reducespreads of Eurozone bonds overGermany, Italys European Affairs

Minister Enzo Moavero said yesterday.

CDS volumes rose with market worry

Oct 11Oct 10Oct 09Oct 08

80%

70%

60%

50%

40%

30%20%

10%

0%

Portugal

Ireland

Italy

Germany

CDS

,grossnationalamountongovernmentdebt

PM Mariano Rajoy hasasked for a bank bailout

PRIME Minister David Cameronbluntly criticised French PresidentFrancois Hollande yesterday overhis tax plans for top earners.

Speaking at the G20 he said: If

the French go ahead with a 75 percent top rate of tax we will roll outthe red carpet and welcome moreFrench businesses to Britain andthey can pay tax in Britain and pay

Cameron squares up to Franceand Argentina at G20 summit

BY CITY A.M. REPORTER for our health service and schoolsand everything else.

He also warned against a slidetowards protectionism,reminding Argentinean leaderCristina Kirchner that Britain

believes Falkland Islanders should

determine their own future.At the Mexican summit the

Prime Minister urged sweepingeconomic reforms in Europe toavoid perpetual stagnation.

David Cameron said the bloc faces perpetual stagnation if it does not reform its economies

TUESDAY 19 JUNE 20126 NEWS cityam.com

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THE EUROPEAN Central Bank is doingall it can to help boost economicgrowth, a top official said yesterday,hitting out at critics who have calledfor it to directly increase lending tofirms and households.

Executive board member JoergAsmussen defended the ECBsrecord, saying it has reducedliquidity risk dramatically throughrefinancing operations, expandedthe range of securities it takes as

collateral, provided foreign currencyliquidity and bought covered bonds.

ECB rejects newdirect lending

BY TIM WALLACE

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IN BRIEFHedgie calls on Lloyds to improve its capital basen A prominent hedge fund has called for Lloyds BankingGroup to boost its capital by ditching its contingentconvertible debt (cocos). Chris Hohn of the ChildrensInvestment Fund has written to the FSA to claim Lloyds cocoshave too low a strike price, meaning the securities would notabsorb losses until the bank was in severe financial trouble,and therefore should not count towards the bailed-out bankscore capital. The activist hedge fund manager suggested thatLloyds should swap its so-called Enhanced Capital Notes forcommon equity, boosting its capital but diluting shareholders.

Nine Elms residential towers granted planning consentn A scheme to add a pair of high-rise residential towers toLondons South Bank was granted planning consent last nightby Wandsworth council. The One Nine Elms project, pro-posed by Green Property and CIT Group, will see the existing1970s Market Towers replaced with 58 and 43 storey skyscrap-ers, with 500 homes, offices and shops. The highest tower willreach 200m, making it one of Londons tallest.

VODAFONES 1.04bn offer for Cable& Wireless Worldwide was yesterdayapproved by shareholders after thebids main objector withdrew itsopposition.After weeks of threatening to vote

against the deal, fund managerOrbis which owns 19 per cent ofCWWs stock surrendered yesterdaymorning after the telecoms companyrevealed it already had the backing of59 per cent of its investors.The news sent CWWs shares rocket-

ing, closing just shy of 38p in a vastimprovement on CWWs 20p shareprice before Vodafone admitted it wasconsidering a bid.

Orbis, which had criticisedVodafones 38p per share offer forundermining the value inherent inCWW, said: We now believe that the[deal] will eventually succeed, even ifOrbis were to vote against it today...Our opposition would only serve toprolong the process. This is not in theinterests of any CWW stakeholder.The scheme, which needed 75 per

cent shareholder approval in order forVodafone to win total control ofCWW, was backed by 99 per cent ofthe vote.

Vodafone wins

key support for1bn CWW deal

BY LAUREN DAVIDSON Subject to regulatory and antitrustapproval as well as certain other condi-tions, CWWs last day on the LondonStock Exchange is expected to be 25July, with the takeover scheme becom-ing effective two days later.The deal will create the UKs second

largest telecoms operator by revenue after BT with domestic revenue of6.97bn based on last years combinedresults.

CWW has had a turbulent time sinceits demerger in 2010, thrashing its waythrough three chief executives and ahandful of profit warnings in a year.But the telecoms group will bring toVodafone a large roster of blue-chipclients and a strong fixed-line net-work, alleviating some of the pressurefrom increasing data demand.

Vodafones Vittorio Colao is closing in on Cable & Wireless Worldwide

Vodafone Group PLC

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THE owners of German chemicalcompany Evonik yesterdayscrapped plans for what could have

been Europes biggest initial publicoffering (IPO) in more than a year,saying it would only resume effortsfor a listing if markets recover.

Many big investors indicatedtheir willingness to invest in Evonikin talks last week, but due to thehigh level of uncertainty in themarkets, especially over the furtherdevelopment of the Eurozone, the

price that could be reached is farfrom a sufficient valuation of

Evonik pulls float until marketsrecover enough to raise its price

BY CITY A.M. REPORTER Evonik, the RAG Foundation said.RAG owns 75 per cent of Evonik,

which makes battery chemicals,animal feed additives, acrylic glassand super-absorbents for diapers.Private equity firm CVC holds theremaining 25 per cent.

The banks promised too much.Expectations were created that

were too high, said one investmentbanker involved in the IPO.

Deutsche Bank and GoldmanSachs led preparations for the IPO,in which RAG and CVC planned tofloat about 30 per cent of Evonik.

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BUSINESS secretary Vince Cable

yesterday blamed the destruction ofBritains building societies for thelack of mortgage lending, andhinted at plans to help spark ahouse-building boom that couldboost the construction sector.

In a speech to the Centre Forumgiven in the City, Cable comparedtodays economic slump with thedepression of the 1930s.

He said the existence of 1,000building societies in the 1930s hadhelped stimulate lending and inturn housebuilding and describedtheir destruction from the 1980s asone of the great acts of economicvandalism in modern times.

Cable emphasised that thegovernment could do more to helphousing associations get access tocheap credit by using governmentguarantees, which he said couldtrigger a significant volume of

housing investment.The public sector balance sheet

has to be used to leverage in privatecapital, particularly in housing, headded.

Cable calls forhouse buildingto lift economy

BY KASMIRA JEFFORD

STRICKEN hedge fund Man Group yes-terday responded to poor performanc-es and investor disquiet by droppingits finance chief.

Outgoing finance director KevinHayes has been replaced with imme-diate effect by Jonathan Sorrell, son ofbillionaire WPP chief executive SirMartin Sorrell.The fund, which is the worlds sec-

ond largest by assets, has made theswitch following a dire 12 monthsthat has seen its share price fall byalmost 70 per cent.

In April, Man shareholders warnedthe funds chief executive Peter Clarke

that they expected an improved per-formance in six to nine months. Lastweek Man dropped out of the FTSE100 blue-chip index.There was speculation yesterday

Shake-up startsas Man Group

hires SorrellBY TOM YOUNG

that Sorrell will be tasked with cuttingstaff costs while balancing investmentperformance.

In his new position, Jonathansexperience in financial markets, espe-cially his deep working knowledge ofthe hedge fund industry, will beextremely valuable as we continue todevelop in challenging world mar-kets, said Clarke yesterday.

AS yet it is unclear whether a 34-year oldwho enjoyed the best of the Citys boom-ing noughties is best placed to help digout Man Group from a large-scale crisis.But Jonathan Sorrell certainly has pedi-gree.Son of Sir Martin, the head of advertisinggroup WPP, he studied law at Cambri dge,from 1995 to 1998.After graduating, Sorrell joined the ranksof Goldman Sachs, where he rose rapidlyover the following 13 years.As well as leading investments in hedgefund firms, he also worked in Goldman's

securities and investment banking divi-sions.Arguably Sorrells highlight at Goldmanwas his engineering of a number of high-profile investments for the banksPetershill fund, a private equity-stylevehicle aimed at alternative fund man-agers that was sold to top Goldmanclients.Sorrell then joined Man last August ashead of strategy and corporate finance.Since joining, he has played a key role inthe proposed acquisition of London-based investment firm FRM.

Man Groups chief executive Peter Clarke is hoping for a turnaround within six months

Man Group PLC


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Hong Kong Exchanges and Clearing Ltd

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PROFILE: JONATHAN SORRELL


HKEx investors show concernover LME deal as shares fallSHARES in Hong KongExchanges and Clearing (HKEx)fell by the most in two weeks yes-terday on concerns the stockexchange operator overpaid inits $2.2bn deal for the LondonMetal Exchange (LME).

In the first session since theacquisition was announced lateon Friday, HKEx shares slipped asmuch as 4.5 per cent to an intra-day low of HK$107.30, theirbiggest percentage fall since 4June. The benchmark Hang SengIndex was up 1.6 per cent.

HKEx, the worlds second-biggest bourse by market value,is paying 58 times LMEs adjust-ed 2011 earnings to get access to

BY HARRY BANKS the commodities trading plat-form, which it sees as key forfuelling future growth as the paceof IPOs slows. This compares witha price-to-earnings (PE) average of37.4 for similar deals in the past,according to Credit Suisse esti-mates.The LME made a net profit of just

7.7m last year due to its con-strained-profit model.

The question is: have you seen asuccessful merger of exchangesbefore. I havent. Not to mention at58 times FY11 PE ratio (paid), saidone HKEx shareholder, whodeclined to be identified becauseof the sensitivity of the issue.

Meanwhile, China DevelopmentBank (CDB) emerged yesterday asthe surprise bankroller behind the

1.4bn bid, according to reports inIFR, which said CDB had leant $1.8bnto HKEx through a three-year bilater-al facility.The loan is expected to replace a

bridge facility provided by a consor-tium including Deutsche Bank, HSBCand UBS.

AS THEIR shares fell 4.5 percent yesterday, owners ofstock in Hong KongExchanges and Clearing

(HKEx) may have beenwondering why it had fought sohard to acquire the LondonMetal Exchange (LME). At1.4bn, the Hong Kong boursehad to pay a premium to wrestEuropes last open outcryexchange from the rivalattentions of IntercontinentalExchange, yet the marketseemed to be giving the deal animmediate thumbs down.

But while the price was high,putting the commodity boom inemerging markets together withthe exchange handling 80 percent of the worlds metal futurestrading could still make sense.

Its true that the LME hasnt

BOTTOMLINE

MARC SIDWELL

A costly acquisition may still show its mettle

been making huge sums, thanks to aconstrained-profit model: just11.4m in pre-tax profit in 2011 and12.5m in 2010. However, the LMEsnew user fee of $0.79 per lot comesin from next month, showing a freshcommitment to increasing revenues.HKEx has committed not to raise feesfurther, but only until 2015, when itcould choose to reinvent the LME as afar more profit-driven enterprise.

Also, the acquisition of LCH.Clearnet

by the London Stock Exchange later

this year will bring a windfallestimated at more than 31m,thanks to the LMEs eight percent stake in LCH.

While both those effects willimprove the numbers in the nearterm, the real question is

whether HKEx has the power toopen doors in China, whichconsumes over 40 per cent of the

worlds metals. The revelationyesterday that the ChinaDevelopment Bank is backingHKExs purchase with a $1.8bnloan, seemed to suggest themainlands blessing. HKEx hasstated that its rationale for

buying the LME is based ongrowth in Asia and China. If itcan deliver on this expansionplan, the economic energy of theEast can still help this City

institution earn its price.

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G E T T Y

SUPERMARKET giant Tesco yesterday

ended a nine-year attempt to crackJapans tough retail market by effec-tively paying Aeon, the countrys sec-ond-biggest general retailer, to take itsloss-making business off its hands.The deal, which will allow Tesco to

focus on fixing its main British busi-ness after a shock profit warning inJanuary, will re-heat speculation overthe groups long-term commitmentto its much larger loss-making Fresh& Easy business in the United States.

Many foreign retailers, includingCarrefour and Boots, have abandonedoperations in Japan, hampered byfickle consumer tastes, a super-com-petitive landscape and prolonged,profit-sapping deflation.Tesco, which trails Carrefour and US

industry leader Wal-Mart by annualsales, put the Japanese business up forsale last August, hiring GoldmanSachs to find a buyer.

Japan is the smallest of Tescos 13international businesses, consisting

Tesco pays todispose of itsJapanese arm

BY HARRY BANKSof 117 stores in greater Tokyo.The deal with Aeon will see Tesco

exit Japan in two stages. It will first sell

50 per cent of its shares in Tesco Japanfor a nominal sum.Tesco will then invest 40m as a jointventure partner to finance restructur-ing, after which it will have no furtherfinancial exposure.

Given ongoing trading losses ofabout 30m after approaching adecade in the market, Tesco appears toour minds to have taken the correctapproach with funded withdrawal,said Shore Capital analyst Clive Black.

Tesco, led by Philip Clarke, is leaving Japan so it can focus on improving in the UK

Tesco PLC


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WITH the future of Greeceand perhaps the entireEurozone hanging in thebalance, now is probably

not the best time to look towards abig initial public offering in theLondon market.

IPOs themselves have had a dis-

mal few weeks, what with GraffDiamonds postponing its listing inHong Kong (the doubts over thescheduled deal going ahead werefirst reported in this newspaperafter it emerged that demand wasdisappointing). Graffs shelvedfloat was yesterday joined by thatof German industrial groupEvonik, and both these cancella-tions come just days after FormulaOne and Manchester United

delayed listings of their own in thefar east.

Meanwhile there has been adeathly quiet in London, wherethere is currently virtually no newissues market give or take a fewfund-raisings on AIM, the juniorlistings market.

So it was somewhat surprising tohear bankers in London yesterdaystill hopeful there could at least be

one major share offering in thedomestic market before the end ofthe year that of Direct LineInsurance.

Direct Line Group, which includesbrands such as Churchill and DirectLine itself, is being offloaded byRBS, the bank majority-owned by

the UK government, and must bepart sold off by the end of the yearto satisfy European competitionrules.The group already has three

investment banks working on theflotation or sale and it is also inter-viewing public relations firms thatwill manage the process in themedia.With a large percentage of the UK

general household insurance mar-

ket Direct Line has 18 per cent ofthe motor insurance market and 17per cent of the household market the business will undoubtedly beoffered to institutions as an anchorincome stock with an emphasis onsustainable profitability.

In the first quarter of this year,

the group, which is in the middle ofa restructuring process, made anoperating profit of 84m, up from67m a year ago.

Equity capital market bankerspoint to the success of theNorwegian insurer Gjensidige,which raised 10.7bn crowns(1.14bn) in December 2010. It wasa strong brand name, so there wasplenty of demand for the issue,said one banker. Before he added:

But insurance is a deeply com-moditised business.

Most are agreed that RBS will haveto avoid being greedy on pricing.The bank is a forced seller; financialconditions are unlikely to be opti-mal even by the autumn; and UKinstitutions will likely only show

interest if they can sense therebeing a bargain to be had.There could undoubtedly be alter-

natives to an IPO, such as a tradesale or disposal to a private equitybuyer but an IPO seems to be thepreferred route at the moment, per-haps in September or October.

How London could do with thedeal going well.

[email protected] me on Twitter @hellierd

INSIDETRACK

DAVID HELLIER

London needs a successful IPO of Direct Line Group

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IBMS Sequoia has been crowned the

worlds fastest supercomputer,propelling the US back to the topspot after it was knocked off byChina in 2009.

The Californian computer is morethan 1.5 times faster than the secondranked machine, Japans K computerbuilt by Fujitsu.

IBM said: Sequoia is a majorachievement in computing. It sets anew world record [for operationsspeed] by a considerable margin andits technology requires one tenth ofthe space than the previous numberone.

Based at the Lawrence LivermoreNational Laboratory in California,Sequoia will work as a critical part ofPresident Obamas nuclear securityagenda by enhancing theunderstanding of weaponsperformance.

Sequoia will enable simulations

that explore phenomena at a level ofdetail never before possible whichwill result in the extension of the lifeof nuclear weapons without theneed for actual underground tests.

Sequoia also represents continuedAmerican leadership in high perform-ance computing, key to the technolo-gy innovation that drives high-qualityjobs and economic prosperity, saidThomas DAgostino, an administratorat NNSA, a division of the USDepartment of Energy.

The US lays claim to three of theworlds top ten fastest computers,with China and Germanycontributing two each and Japan,France and Italy filling in the gaps.

IBM built five of the top ten speedypowerhouses.

IBM unveils theworlds fastestcomputer ever

BY LAUREN DAVIDSON

GETTY

Eversheds bossBryan Hughes

LORD Bells management buyout ofBell Pottinger was yesterdayapproved by 63 per cent of parent

group Chimes investors, despiteopposition from its biggestshareholder.

The 19.6m deal is expected tocomplete on 30 June, with newcompany Bell Pottinger Private(BPP) commencing business on 1

July as one of the UKs top fivepublic relations groups.

But Chimes largest shareholderWPP, with just over 21 per cent ofthe stock, voted against the deal.

WPP boss Sir Martin Sorrell hadpreviously spoken out against the

way the new company was valued,and said it sets a terrible

Bell Pottinger buyout passesvote despite Sorrells rejection

BY LAUREN DAVIDSONprecedent for Chime to retain a 25per cent stake.

Lord Bell said this would notsour relations between him andSorrell, telling City A.M.:Weve

been firm friends for 30 years, Ihave huge admiration for him.

Lord Bell will step down fromChime, after more than 20 years atits helm, to become chairman ofBPP. He will be joined by long-standing colleague Piers Pottingeras deputy chairman and JamesHenderson as chief executive.

Its time for a new adventure Im absolutely delighted. Its out

with the old and in with the new,Lord Bell said.

He declined to give specificdetails of his plans for BPP, but saidhe was thrilled not to be runninga public company anymore.


Lord Bell will become chairman of new company BPP when it starts trading on 1 July

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JOIN THE DEBATE PAGES 22-23

M&A leans towards emergingmarkets amid Eurozone woesCOMPANIES are increasinglylooking to the east for plannedM&A activities as fears overEurozone instability continue,according to research from theEconomist Intelligence Unit.

Although the worst of lastyears market turmoil may bebehind us, the macroeconomicand political uncertainties of 2012

continue to create an unstableenvironment for M&A, saidMatthew Layton, global head ofcorporate at Clifford Chance,

which commissioned the report.But there are clear signals that

at a company level confidence isrising for many and M&A forms akey part of strategic plans.

Of the 377 people surveyed, allfrom firms with revenues over$1bn, 56 per cent said the keyfocus of their growth strategy isemerging markets, compared tothe 22 per cent who pointed todomestic or developed markets.

A quarter of those polled wouldlook to China for M&A, with 19per cent interested in South EastAsia and 18 per cent in India.

The report also showed that 37per cent of respondents wouldprefer a joint venture or strategicpartnership in cross-border dealactivity, while 32 per cent are infavour of more traditional M&A.This is a turnaround from twoyears ago, when mergers andacquisitions were the preferencewith 39 per cent to JVs 34 percent.

But more than half of the firms

involved in the research said theyare discouraged from buyingoverseas because of concernsabout bridging cultural gaps.

BY LAUREN DAVIDSON

BRITISH LAW firm Evershedsannounced a jump of 14 per centin partner equity profits yesterdayand a three per cent increase inrevenue as it unveiled its 2011-2012 financial results.

Revenues rose three per cent to366m, while partner equity prof-its increased to 632,000.The firm, which has 16 offices

globally, achieved its highest everlevels of profitability, with netprofit increasing by 10 per centyear-on-year to 70.1m.

The f irms f inancial services dis -

pute resolution practice grew 16per cent, capital assets grew by20 per cent and its offices inAsia and the Middle Eastgrew by 26 per cent and 100per cent respectively.

Chief executive BryanHughes said: This is areturn to growth for thefirm following three years ofdeclining or flat revenueswhich is very encouraging,and through contin-ued focus onmanagingthe mar-gins it ispleasingto seet h i s

Partner profitsup 14 per cent

at EvershedsBY TOM YOUNG growth cascade down to the bot-

tom line.Hughes added that although the

firm is targeting top line growthagain, he did not anticipate a largeincrease in partner profits thisyear.

We see now as the time toincrease investment particularlyinternationally, and we also expectto add equity partners in the busi-ness, both through promotionsand lateral hires, he said.

Despite Hughess caution thefirm has continued to pick up newmandates throughout June.

Its UK office advised Segro,

Europes leading owner-manager and developer ofindustrial property, onexchanging conditionalcontracts to sell four ofits non-core industrialestates for 204.5m last

week.In May it also advised

Sepura, which designs,develops and supplies

Tetra digit al radios, on theacquisition of Vienna-based

3T Communications a supplier of

infrastructurefor Tetra.

7/31/2019 Cityam 2012-06-19

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BRIT Group yesterday announced thesale of its Brit Insurance business toCanadas Fairfax in a deal wortharound $300m (191m).The disposal is the last major step in

Brit Groups restructuring underchief executive Mark Cloutier, whowas brought in by the firms privateequity owners at the end of 2011 andhas aimed to make its capital workmore eff iciently.

Cloutier told City A.M. that the dealwill enable the group to put all itsresources into Brit Global Specialty,the groups Lloyds of London busi-ness. Management will be now able

to focus completelyon the core busi-

ness of becom-ing a leadingspeciality insur-er and reinsur-er, he said.This will

release a signifi-cant chunk of cap-

ital, potentiallyallowing us

t o

Brit Insurance

sold to Fairfaxin 190m dealBY JAMES WATERSON

return some to shareholders, headded.

Fairfax will buy Brit Insurancethrough its RiverStone runoff unit,which specialises in managing insur-ance books that are closed to newbusiness.

The Canadian firm, led by leg-endary investor Prem Watsa knownas the Warren Buffett of the North says that the $300m cost of buyingthe unit is a substantial discount on abook value of around $530m and thatthe deal is expected to close in thefourth quarter.The announcement follows the sale

of renewal rights on regional BritInsurance policies to QBE in April.

Explaining the reasoning behindhis restructuring of the group.Cloutier said: We have gone fromapproximately 800 people at the endof 2010 in three business units andtwo underwriting platforms doing1.4bn a year in gross premiums. Therestructured company will have 375-400 people and the dominant busi-ness will be our Lloyds operation.

[We will have a] business tradingmarginally less premium on probablyhalf the infrastructure size.

Facebook snaps upanother photo firmFACEBOOK yesterday announced its

acquisition of Face.com, the facialrecognition software company, foran undisclosed amount believed tobe around $100m (63.9m).

Rumours of this deal, whichcomes just weeks after Facebookbought photo app Instagram for$1bn, have been circulating sincelast month.

The companies did not specifyplans for the partnership, butFace.com hinted in a blogpost that it

BY LAUREN DAVIDSON AND

WILLIAM ORR

could be working with the socialnetwork on its mobile features.

Facebook shares jumped five percent to $31.49 on news it had bought

the Tel Aviv-based startup, whichalready has two apps on Facebook.Meanwhile Facebook yesterday

unveiled its official Olympic page,which will allow athletes tocommunicate with fans and providepersonal updates from the Games.

But the page will not carry anyadvertising due to the clean venuerules which stipulate that theOlympic stadia should remain free ofbrands and marketing.

Fairfax CEO Prem Watsa made billions bettingagainst the US housing market last decade.


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INDITEX BUYS FLAGSHIP ZARA STORE IN WEST END FOR 155MInditex, the world'slargest fashionretailer, yesterdayannounced it hasbought the flagshipZara store at theheart of LondonsWest End for 155m.The Spanish-listedgroup, which ownsZara, said it had

bought the 7,000square-metreproperty at theintersection ofOxford Street andNew Bond Streetfrom German fundmanager Deka. Lastyear Inditex spent350m on stores inNew York and Milan.

THE ECONOMIST Group enjoyedrecord global circulation andprofits last year, as revenues rosefour per cent to 361.8m.

The publisher said circulationof the Economist jumped six percent to top 1.5m print copiesand 123,000 digital editions.Revenues from online operationsalmost doubled, making up for a17 per cent drop in UKadvertising revenue.

Pre-tax profits for the year to

the end of March rose 8.3 percent to 65m.

Record profitsfor Economist

BY MARION DAKERS

CONTRACT electronics makerCelestica will stop making productsfor its biggest customer, Research InMotion, by the end of the year as theBlackBerry maker seeks to cut costsby shrinking its global supply base.

RIMs decision to trim the numberof companies that build itssmartphones illustrates the fallingfortunes of the once-dominantsmartphone maker as it looks to cut$1bnfrom its operating costs thisyear. Major layoffs are planned.

Celestica will likely take a near-term hit due to RIMs move.

RIM to scrapCelestica deal

BY CITY A.M. REPORTER

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ANUMBER of City of London-

based businesses, includingHiscox, Aviva, British Land,IVG UK and Aon, have clubbed

together with the City of LondonCorporation to create Great StHelens: Sculpture Space in theheart of the City.

Set among Londons iconic archi-tectural landmarks, including theGherkin and the Lloyds building, afree curated exhibition comprisingseven sculptures will be open to all-comers until January 2013.The curator of the exhibition

chose works by internationallyrenowned artists such as MichaelCraig-Martin, Tracey Emin, AngusFairhurst, Dan Graham, ThomasHouseago, Julian Opie and YayoiKusama.The organisers hope the artworks

will draw visitors to the City andencourage them to engage withbold and striking art.

The works have been chosen by aboard, which is made up of mem-bers of the organisations involved.

The new sculptures add to thebuzz around the City these days,ahead of the Olympics celebrations.This weekend sees Celebrate theCity, four days of activities includ-ing music, walking tours and astreet fair.

The Citygains seven sculptures

LAURALEAN/CITYA.M.

Some of the works that are part o f the Citys new Sculpture Space exhibition, including (top right) Yayoi Kusamas flower

Got A Story? Email

[email protected]

17cityam.com

cityam.com/the-capitalistTHECAPITALISTSATELLITE TV giant BSkyB isholding its prestigious sum-

mer drinks party tonight, whichunfortunately for hosts and guestsalike clashes with a rather critical

England v Ukraine football match.Needless to say, given that Skyprides itself on being the live sportspresenter of choice, it will be show-ing the match at the Oxo restau-rant, the venue for the occasion.

But in doing so it will be showcas-ing rival ITVs coverage, since ITVhas the rights to the game on thisoccasion, given that the EuroChampionships are traditionallybroadcast by free to air channels.

ITVs joy at upstaging its rival willbe short-lived it if manages to missone of the crucial goals, as it hasdone at least once in the past.

BSkyB will no doubt be celebratingits recent victory in renewing itsPremier League live rights packagefor the next three years. It has justagreed to pay 2.28bn to show 116Premier League football games perseason from the season after next.

Meanwhile there will be someinterest in whether any politiciansshow up for tonights drinks afterthe rows over access to ministersduring the News Corp bid for BSkyB.

Culture secretary Jeremy Hunt,who was recently at pains to dismissclaims that Rupert Murdochs NewsCorp was privy to a back channel tohelp it proceed with its bid forBSkyB, is unlikely to be there forobvious reasons.

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ITALIAN notebook maker Moleskineplans to list in Milan this year and

has hired investment banks to runthe sale of stock in the company,whose thread-bound jotters arebased on originals favoured by thelikes of Vincent Van Gogh andErnest Hemingway.

Goldman Sachs, Mediobanca andUBS will run the offering formajority-owner Syntegra Capital,aiming to add to the list ofupmarket brands which havelured investors in defianceof generally tough stockmarket conditions.

Private equity firmSyntegra plans to filelisting documents forMoleskine, in whichit owns a 68 percent stake, in earlySeptember and isaiming for amarket debut in

the fourthquarter, saidMarco Ariello, apartner at Syntegra.

An IPO is the right

thing for the future of thecompany, Ariello said yesterday.

While a string of flotationsworldwide have been blown off

course by choppy markets, withGerman chemical company Evonikthe latest casualty, high-end brandshave fared better with investordemand boosted by the industryperforming well despite globaleconomic uncertainty.

In April, Italian cashmere houseBrunello Cucinelli and high-endluggage maker Tumi Holdings bothsaw their stock surge on their

debuts in Milan and New Yorkrespectively.Moleskine, a company whichwas created in 1997 to revive

the style of notebookfavoured by artists and

writers in the 19th and20th Centuries, hasseen growth ofaround 25 per cent ayear since Syntegrabought a 75 per cent

stake for around60m (48.1m) in 2006.

Majestic Wine finds reason tocelebrate with record profitsTHE BOSS of Majestic Wine saidthe UK public was as much inlove with food and wine as ever,after consumers spending onspecial occasions helped to driverecord full-year profits.

The wine retailer posted pre-tax profits of 23.2m, up 14.5per cent in the year to 2 April,helped in part by growingdemand for fine wines priced at20 per bottle or more.

Thats counterintuitive,chief executive Steve Lewis toldCity A.M. But if you think aboutit, a Pinot Grigio in a good pizzarestaurant will cost you 15 abottle for a few pounds moreat home you can have a wineyou can really talk about.

The group, which owns 181wine warehouse stores in theUK, said total revenues increasedby 8.9 per cent to 280.3m,driven by a like-for-like sales

increase of 2.6 per cent.

BY KASMIRA JEFFORD The sale of fine wines increasedby 18.5 per cent and now repre-sents 6.2 per cent of total sales.

New World wines proved espe-cially popular, in particular NewZealand wines, which account for19 per cent of still wine sales.

The number of customers whomade purchases increased by 11per cent to 568,000, while theaverage bottle price of still winewas up to 7.34 from 6.94 theprevious year.

Lewis said that while the past12 months had been challengingfor the company and otherretailers, consumers werebehaving in a rational way,choosing to buy better wine butless of it.

When there is a real reason forthem to come out and spend, likeChristmas and the Jubilee, theycome out in droves. In the othermonths they are being morecautious and that is entirelynatural, reasonable behaviour.

Sales to restaurants, bars and

pubs grew 6.9 per cent, representing24 per cent of total revenue whileMajestics online sales rose by 7.8 percent to 10 per cent of total sales.

Majestic opened a record 16 newstores in the year in places like Surreyand Edinburgh. It plans to openanother 16 stores over the next year,eventually expanding to 330 stores.

The group upped its total dividendby 20 per cent to 15.6p.

Lewis said while he was a naturaloptimist he saw no signs of theretail environment improving in thenext twelve months.

Majestic Wine PLC

15 Jun 18 Jun12 Jun13 Jun 14 Jun

420.00

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415.00

412.50

410.00

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405.00

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p 403.0018 Jun

PATRICK COFFEYLIBERUM

We expect con-sensus profit

before tax expectationsto fall around five percent to 24.5m due tolower en primeur sales in2013. The macro-outlookremains uncertain in 2013,however the excellent long term structuralgrowth story remains intact and the rolloutstory should protect earnings if themacro worsens. We reiterate buy.

ANALYST VIEWS WHAT LIES IN STORE FOR MAJESTIC WINE IN THEYEAR AHEAD? By Kasmira Jefford


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Quintain partners withHong Kong firm QUINTAIN ESTATES revealed

yesterday it has struck up ajoint venture with Hong Kong

billionaire Henry Cheng Kar-Shun, in a deal that will helpkick-start one of the UKsbiggest housing projects.

The regeneration specialistsaid Chengs investment vehicleKnight Dragon has taken a 60per cent stake in its Greenwichpeninsular project, sendingshares soaring 15 per cent yes-terday.

Knight Dragon will buyAustralias Lend Lease out of its50 per cent stake while alsobuying 10 per cent ofQuintains joint share in the 96acre riverside scheme.

In exchange, Quintain willreceive a 300m credit facility,helping the firm to bring for-ward the ambitious project tobuild 10,000 homes as well asshops, schools and hotels.

The deal will also return over150m to Quintains balancesheet over the next six years.

BY KASMIRA JEFFORD

PHILIP DORGANPANMURE

Good figuresfrom Majestic,

driven by strong growthin all the major metricsand an excellent increasein the final dividend of 22per cent. We believe thatMajestic has significantmarket share opportunity as it builds on itsposition as the UK's pre-eminent specialistwine retailer. We see many years ofhighly visible profit growth.

WAYNE BROWNCANACCORD GENUITY

Whilst the currenttrading backdrop

is challenging and con-sensus forecast are likelyto move closer to ourbottom of the range pre-tax profit of 23.9m, weremain positive over themedium to long term. Overall sales will bene-fit from last years increased opening pro-gramme and margins are likely to besupported by the fall in the euro.

Celebrities including BradPitt use Moleskine products

Notebook firm pensplans for Milan float

BY HARRY BANKS

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IN BRIEFRhoen investors sell to Freseniusn Rhoen-Klinikums two biggestinvestors are selling their holdings toFresenius, putting the Germanhealthcare group well on its way totaking over the hospital operator.Fresenius in April unveiled a plan tobuy Rhoen for 3.1bn (2.5bn).Fresenius, which controls dialysisspecialist Fresenius Medical Care, saidyesterday that Rhoen founder and

chairman Eugen Muench and his wifehave tendered their 12.5 per cent staketo Fresenius, as expected. Separately,Swedish pension firm Alecta said ithad decided to sell its 9.1 per centstake in Rhoen to Fresenius as well.

Botswana accident hits Gemn Gem Diamonds said initialproduction at a mine in Botswanawould be delayed until the first half of2014 following an accident that killedtwo employees. Production at theGhangoo mine was scheduled to startin 2013 at an initial rate of 100,000carats per year, rising to a peak steadystate of production of 780,000 caratsper year, according to the companyswebsite.

Liberum wins Mediterranean OilnMediterranean Oil & Gas saidyesterday it had hired Liberum Capitalto be its nominated advisor and jointbroker. Chief executive Bill Higgs said:We look forward to working withLiberum as we focus on developinginto a leading independent oil and gascompany in the wider Mediterraneanregion. GMP Securities Europeremains as joint broker, the Aim-listedcompany added.

REUTERS

SHARES in Rolls-Royce rose to out-perform the general market yester-day, after it confirmed it had signeda contract worth more than 1bnwith the ministry of defence todeliver reactor cores for the UKsnuclear-powered submarine fleet.The deal includes the refit of Rolls

submarine propulsion reactor facto-ry at Derby in central England,where Rolls plans to introduce thelatest technology and manufactur-ing techniques, the company said.The investment will protect 300

jobs at the factory and many others

at suppliers elsewhere, sources said.This demonstrates the high level

of trust the Ministry of Defence hasin both our technology and theexpertise of our highly skilled work-force, said Jason Smith, Rolls-Royces chief operating officer andsubmarines unit president.The UK government moved a step

closer to renewing its Tridentnuclear weapons system last month,awarding 350m worth of contractsto design a new generation of

Rolls-Royce islifted by 1bn

Trident contractBY HARRY BANKS

British submarines.Prime Minister David Cameron has

stated that his goal is to establish anew fleet of submarines to ensureBritains independent nuclear capa-bility survives beyond 2028.

But the Liberal Democrats arepushing for cheaper and less potentalternatives, arguing that the cur-rent capability the ability to oblit-erate Moscow is an outdatedhangover from the Cold War.The final decision as to whether

Trident will be replaced is not due totake place before 2016.

Shares in FTSE 100-listed Rolls-Royce closed up 2.1 per cent yester-day, outperforming the index.

Rolls-Royce Holding PLC

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AN INDIAN consortium saidyesterday it was no longerconsidering making an offer for

Cove Energy, confirming the battlefor the Mozambique-focusedexplorer is a two-horse race

between PTT and Shell.Indias Oil and Natural Gas,

through its Videsh unit, and GAILIndia said in February they hadteamed up to look at making anoffer for Cove before saying

yesterday, after three months ofsilence, that they were no longermulling a takeover approach.

The withdrawal of the Indian

Indian consortium pulls out ofbidding war for Cove Energy

BY CITY A.M. REPORTER consortium leaves Shell and PTTvying for Cove, with the lattercurrently in pole position.

PTTs 1.2bn, 240p per shareoffer for Cove is higher than

Shells, although a number ofanalysts expect the oil major toreturn with a higher bid, possibly

before the first closing of PTTsoffer on Friday.

At stake is access to East Africashuge gas resources through Coves8.5 per cent ownership of a blockoff the coast of Mozambique. East

Africa is set to become one of theworlds largest gas exporters toAsia, after a string of discoveriesacross Mozambique and Tanzania.


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Coves John Craven is considering offers from PTT and Shell

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THE RESERVE Bank of India hasflouted calls to cut interest rates orto reduce banks cash reserverequirements, opting yesterday notto provide more monetary stimulus

for the country.Indias central bank chose to keepthe repo rate at eight per cent andthe cash reserve ratio at 4.75 percent, in order to prevent inflationgetting out of hand rather thanseeking to jolt the flaggingeconomy into growth.

Yet Rahul Bajoria, an economistat Barclays, said rates could still becut by about one per cent after thebanks next review on 31 July.

India refusesto slash rates

BY LISA MORAVEC

G E T T Y

THE NUMBER of over-60s strugglingto keep up with mortgage pay-ments is on the rise, a leading coun-selling group said this morning,while separate figures show thatpeople hoping to buy a home arebeing squeezed out of the market.

Among people who have a mort-gage, an inability to keep up withpayments is increasingly hittingthose over 60 years of age.The number of over-60s seeking

advice due to trouble with mort-gage arrears has rocketed by 44 percent since 2009, the debt charityConsumer Credit CounsellingService (CCCS) announced thismorning.Across all other age groups, there

has only been a three per cent risein people contacting the charity forhelp, the CCCS said.The trend is particularly worry-

ing given the current low interestrates, said Delroy Corinaldi fromthe charity. With many older peo-ple taking higher levels of debtwith them into retirement, thiscould be the start of a long-termtrend towards far higher levels ofmortgage difficulty in later life.

Mortgagewoes

grow for olderhouse ownersBY JULIAN HARRIS

Over a thousand older people withmortgage arrears visited the CCCSlast year, it said, with the averagearrears found to be an eye-watering4,375.

Clients [were] an average of sixand a half months behind withtheir mortgage payments last year,the report said.And at the other end of the mar-

ket, people are finding themselvesstuck in the rental sector.At the beginning of t his year the

number of properties coming tomarket for resale was down by 2.53per cent on the same time in 2011,data from information collatorExperian showed yesterday.

Hopeful first time buyers areincreasingly forced to rent, analystssay, boosting the rental market. Thenumber of properties advertised forrent between January and Marchwas up 6.34 per cent compared tothe same period last year.The trend is exacerbated in

London, according to the Experianfigures. The capital saw 35,789properties to let, almost double thenumber of properties put up for sale(19,996) and making up 20 per centof all rental properties in the UK,the report said.

More and more over-60-year-olds are struggling to meet mortgage repayments


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Eurozone threatensLondons optimismBUSINESSES in the capital aresignificantly more bullish about

economic prospects than theywere six months ago, a leadingsurvey reveals today althoughthe Eurozone crisis is threateningto dampen the mood.

Over four in 10 respondentsfrom London firms reported amore optimistic outlook for theeconomy over the next sixmonths, the study from the CBIand KPMG found. Back inDecember, a paltry 13 per cent

BY JULIAN HARRIShad reported growing optimism.

Yet the reports authors say thatominous events in the euro areaare holding back economic

activity. Increased Eurozoneanxiety means employers arereluctant to invest, take on newpeople or expand their business,said Sara Parker of the CBI.

Half of surveyed employers inLondon are now freezing theirrecruitment, the report found, upfrom 23 per cent six months ago.

Yet nearly half (47 per cent) ofrespondents are more optimisticabout their firms prospects.

THE OUTLOOK for Americashousing market received a boost

yesterday as confidence among USbuilders climbed to a fresh five-year high.

A widely-regarded surveyconducted by the National

Association of Home Builders(NAHB) and Wells Fargo

cityam 2012-06-19

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