Market Sense

Trade unions across the world have gathered to fight to save the thousands of job cuts resulting from takeovers. Initiative has tightened by the spur of job cut in the takeover battle for Dutch bank ABN Amro.

The meeting has been called by UNI, an international confederation of unions, representing 14 million working men and women. The unions involved aim to increase transparency and to ensure that staff representatives from across the companies affected by the bids, can share information and develop strategies to safeguard jobs.

The objectives of the union’s conglomeration are:
• Avoid compulsory redundancies

• Preserve union negotiated agreements

• Preserve staff terms and conditions and observe core labour standards.

• Enter into negotiations with UNI on a global framework agreement on core labour standards and social dialogue.

To protect the workers rights, UNI has summon to the CEOs of ABN-Amro, Barclays, Royal Bank of Scotland, Santander and Fortis demands detail report of the deal, including financial, economic status and social backgrounds to the bids.

A union meeting is scheduled today at the office of Unite, the newly formed union created by the merger of T&G and Amicus. In the meeting unions from Belgium, Brazil, Greece, Italy, the Netherlands, Spain, Panama, Switzerland and the UK will assemble.

UNI came into action in the ABN Amro takeover fight, as the takeover battle poses the fear of possible job cut in ABN Amro’s home base of the Netherlands and in Britain and other locations around the world. Suitor bank Barclays said that if it would get ABN Amro than bank would possibly slash 23,600 jobs from the 216,000 combined workforces. The RBS-led consortium, also acknowledged the possible job cut.

In the biggest ever takeover battle for the any bank has entered in the very crucial face. Previously ABN AMRO has agreed for a £45bn takeover from Barclays, but later RBS led consortium increases its bid and gave another lucrative option for the shareholders. Deal is already in the under scrutiny of court as ABN AMRO has accepted the bank of America’s offer for its American arm LaSalle, but RBS drag deal to the court and Dutch court stipulate the deal. American bank also threaten for the compensation, if deal will not signed.

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Via: guardian

Increasing threat of global warming and incessantly rising oil prices has forced America to think beyond oil and ponder over other energy sources. Escalating consumption of oil and combustion of coal for the energy has left the earth on the burning hearth; therefore, the desperate need for renewable energy resources has risen.

Receiving sarcasm from rest of the world, America is taking interest to increase its renewable energy sources. President Bush has announced that after ten year down the line United State will replace 20 percent of its gasoline with ethanol.

The U.S. government is now materializing its plan into action as the government has offered a tax credit of 51 cents a gallon or 13.47 cents a liter, to ethanol producers and maintains a tariff of 54 cents a gallon on ethanol imported from Brazil. Government has issued renewable portfolio standards for more than 20 U.S. states, which mandate that utilities derive a fixed percentage of their power from renewable sources.

The private sector is trying to get an upper hand on the future’s profitable business, and all set to mark their presence by constructing wind farms, solar arrays and ethanol plants. The Renewable Fuels Association, disclose that currently State have 85-ethanol under construction projects, which would double its existing capacity of six billion gallons by end of 2008.

Future energy source has been accelerated as president announces states vow for renewable energy source. The chairman of Cambridge Energy Research Associates in Cambridge, Massachusetts Daniel Yergin said

There’s a huge boom going on in alternative, renewable and new technologies, and it wouldn’t be happening without the bouillabaisse of incentives, mandates, subsidies and the related group of ingredients

State is not leaving any stone unturned to get maximum out of it. Government is giving subsidies generously and charging minor custom duty. Alluring with the subsidies and future possibilities of expanding business, investors are standing in a queue to get State’s permission to invest in alternative fuel sector and have turn booms into bubbles.

But some experts are analyzing subsidies as a clear-cut case of market distortion. They equate the resent boom in the alternative energy sector as an additional burden on the consumer’s pocket. Market gurus analyses that ethanol, other combustion free energy will be much, much costlier to the existing petroleum industry.

Although critics has very strong reason to push States effort to on back foot, but oil and coal is not long lasting. Different surveys suggest that majority of oil sources will shrink by the 2050; therefore, we have to take initiative to tackle the coming challenges. As renewable sources of energy on its niche, government has to support it and as it will establish itself firm, private sector will definitely take the challenges.

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Via: iht

Towergate, Britain’s largest private insurance company, is mulling a sale, which could lead to a huge windfall for its founder and chairman Peter Cullum. If a sale does happen, Peter will be on course for an overwhelming £2 billion profit over his investment.

It is learnt that Towergate has been approached by a number of private equity groups for a proposed takeover. The companies that are in line for a potential buyout of Towergate include Blackstone, Charterhouse, TA Associates and Candover. They have valued the company at £3 billion in its entirety.

Towergate is considering ‘all offers - for majority or minority stakes,’ according to Andy Homer, non executive director of the company. Towergate has instructed its adviser Lexicon Partners to arrange for any potential sale.

Peter Cullum has a 65 % stake in the company. He has insisted that he will not sell unless the offer price reaches at least £3 billion. This despite a £1 billion valuation which was made last year following a deal with two hedge funds as a part of refinancing.

Based in Maidstone, Kent, Towergate was formed in 2005 by the merger of two insurance businesses initiated by Peter Cullum. Since then, the company has grown on to become Europe’s largest in dependent insurance business by acquiring more than 100 of its small rivals. The company currently employs 3,500 employees in its 100 offices spread all-over Britain.

Towergate reported earnings of £94 million and sales worth £1.1 billion in 2006. It has grown so rapidly by targeting niche markets in the insurance sector. It is one of the very few companies that offer insurance of caravan parks and holiday homes.

Crowned Ernst & Young entrepreneur of the year in 2005, Peter Cullum is an avowed philanthropist. He owns a charitable trust that funds children’s charities. He is believed to have paid half of his £9.2m bonus into it last year. Any windfall for him and philanthropy would certainly move up on his list of priorities.

A potential sale would certainly benefit Towergate’s employees. Many of them could then expect windfalls of £45,000 through an employee share plan.

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The biggest takeover battle in the banking history, expected to take interesting turn, as a consortium of banks led by Royal Bank of Scotland PLC have to revive its bid for the Dutch bank ABN AMRO as they previously asserted that they would reconsider its fresh offer on 27th may.

But on the preset period, announcement will not appear as due date is felling on the holiday, therefore the decision to raise bid or not, will make public on Tuesday. Previously, the banks had declared that conglomerate is planning to make a mostly cash offer worth around 38.40 euros per ABN Amro share, or $94.1 billion.

The acquisition battle, started in April and deal stalled when ABN Amro agree to sell its US arm LaSalle Bank Corp to Bank of America for $21 billion, That was widely seen as a poison pill measure to ward off the hostile bid from RBS, which also wants LaSalle.

Now, for the RBS-led consortium, have to comfy with the Dutch law to proceed ahead as conglomerate have to clear its position. Some analysts expect that the group have three options in the deal as they can leave the bid, or group can ask for more time to make a decision or it can put a new offer for ABN AMRO on the table.

The seeker group has indicates that it would top Barclays offer with $94.1 billion, but a consortium bid is contingent on ABN AMRO reversing the $21 billion sale of LaSalle to Bank of America.

Now, ABN AMRO is finding them on the crossroad as Bank of America has threatened, if bank will back out, they will claim for compensation. Dutch court has blocked the signed deal of LaSalle to Bank of America because deal could not get the shareholders approval. ABN AMRO appealed against the ruling, which is pending in the court.

ABN AMRO’s shareholders will ultimately end the months long fuss over the whole deal includes LaSalle sale. Shareholders will vote on it, in an extraordinary shareholder meeting for which a date has to be decided.

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Via: Chicago tribune

Nasdaq Stock Market Inc. agreed to buy Nordic stock exchange operator OMX AB for $3.67 billion (£1.87bn) on Friday. This deal signifies first major acquisition by Nasdaq in the European markets. Its earlier bid to cross the Atlantic had failed when its offer to but out London Stock Exchange was rejected.

The acquisition of OMX AB, which is the operator of seven Nordic and Baltic exchanges, was made at 25.1 billion Swedish kronor. OMX has varying stakes in the share markets in Stockholm, Helsinki, Copenhagen, Iceland and the Baltic States.

Nasdaq, the largest electronic stock market in America, paid a share price which went at 16 per cent premium to OMX’s closing share price in Stockholm on Thursday. Nasdaq offered 208.1 kronor a share in cash and stock.

Robert Greifeld, Chief Executive Officer of Nasdaq, said:

Our organizations bring together very complementary businesses, and we see many new opportunities for growth in an era of unprecedented change and development for exchanges.

OMX said the boards of both the companies had recommended the deal and that their shareholders supported the merger. Both exchanges have agreed to form a new group to be called NASDAQ OMX Group with headquarters located in New York. Nasdaq’s Robert Greifeld will be the CEO of the new group and Magnus Bocker, the CEO of OMX, will be the president. Its board will have 15 members — nine from Nasdaq and five from OMX, as well as Greifeld.

Shares of the new group will be listed on both Nasdzq in the USA and on the OMX Nordic Stock exchange. With a combined market capitalization of $7.1 billion, the new group expects cost and revenue synergies of around $150 million in three years.

The deal closely follows NYSE’s acquisition of Euronext for $14 billion, last month. NYSE Euronext marked not only the very first trans-Atlantic stock market, but also the world’s largest.

On the face of it, Nasdaq seems to have paid too much, considering that it is heavily indebted in the States. There is, however, more to the purchase than meets the eye. Both the companies have one thing in common; they’ve failed in their respective efforts to buy London Stock Exchange in the past.

Nasdaq’s hostile takeover bid for LSE was rejected by the London Stock Exchange’s shareholders, earlier this year. OMX, similarly, had a failed attempt to buy London bourse in 2001. The deal could see Nasdaq push to increase its share in the London exchange; it currently holds a 30 per cent stake in the London market. The increased influence of Nasdaq-OMX group might see them up the ante in this pursuit.

Already, the agreement is being hailed for crating the largest exchange going by the sheer number of the listed companies. The new group will host companies like Swedish carmaker Volvo, Microsoft and Finland’s Nokia.

The deal may also see the new group target other markets, primarily in Asia.

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In the past European companies were ruling the corporate world, but now it is losing their shin to America.

All big market leaders from Europe are facing stiff business from US rival, many of them has lost into the mist of American’s unprecedented growth and their grasp on the world market.

Airline giant Airbus has lost most of its market shares to its only competitor American Boeing. Europe’s leading engineering group Siemens, which known for its quality products has lost its creditability, even in the eyes of its own customers.

Name like PSA Peugeot Citroen, is not new for luxury seekers, but unfortunately its outdated models pushed it back to the last seat to watch Detroit’s made eye catching models, which not only get a applaud from the customers but successfully grab the market also.

It is not just Airbus, Peugeot and Siemens, but other prominent European companies in turmoil include Daimler and Renault. Global competitions lingered European market representatives. Many disheartened once business leaders worry that the turmoil among Europe’s finest could herald the end of their success in the past ten years whereas jubilant entrepreneurs take it as a challenge.

Economy structure might be a huge factor for the European degradation from the acme. Study reveals that Europe’s productivity is one-third lower to the American’s. The lethargic productivity has reduced the possibility chance of competing with the advanced economies. Europe is facing desperate needs for the innovative ideas and a competitive environment to implement them too.

Political motivation should be behind the every deal, if, from now Europe wants to guide the world again. Europe has to leave aside the past, but they needs to ponder over their plans to float their flagship brands on the world competitive business dais.

Although Europe has successfully introduced their mutual currency euro, but little more effective and productive initiates has to be taken.

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Source: Economist

The struggling housing industry shows a sign of improvement as sales for new home surged astonishing 16 percent, highest in 14 years.

In the season, new home sales reported to adjusted annual rate of 981,000 units, but median prices plunged to record $229,100, an 11.1 percent decline from the previous month.

Market experts are in a fix, whether industry is improving or its because of builders are deliberately reducing the price to sell theirs unsold homes. Analysts expecting that the drop in prices probably reflected efforts by builders to cut prices more aggressively to sell homes.

All analysts have pointed, to be cautioned against surge, as market experiences a huge jump in the sale after facing three excruciating consecutive months of declines. Market gurus’ emphasis to reassure the data as it is subject to wide revisions. It is speculating because market gain strength from the South, as it topped with the 27.8 percent, while in the west sales recorded up by only 8.5 percent, whereas in the north it was slightly up 3.8 percent, which expected to force by weather-related.

Economist worries for the further housing slum as Chief economist of National Association of Home Builders, David Seiders, raise apprehension that market can face degradation in the sales of new homes to fall by 18 percent for the whole year, matching last year’s decline.

However, the Central Jersey real-estate brokers rule out all anxiety and clear that they are getting good prices for their houses, those are positioned at good location. But, still do not discard the possibility raises by the market analysts. Despite all the developments, most of the economists don’t expect real estate market to fully recover from the slump, at least in this year or might be take a long time.

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Via: Thnt

Bank of New Zealand (BNZ) is planning to offer subordinated bonds worth up to NZ$300 million to the public. It designs to sell these bonds in June. It is proposed that the issue will open, close and price by mid-June. BNZ wants to retain the right to accept over-subscriptions.

The bonds will be unsecured, subordinated debt obligations, issued under a Deed Poll and Investment Statement.

The bonds will mature after a period of ten years but will be callable after five years. In the event BNZ doesn’t call them after five years, the issue margin will be increased by 0.50 per cent. The issue is a rarity in that it is a subordinate issue. Its proceeds shall be used for general corporate purposes.

The bonds that BNZ proposes to issue will carry a fixed rate of interest payable half-yearly. The interest rate payable has not yet been decided but it will be a margin above the five-year swap rate. The interest, however, shall not create any obligation or commitment for BNZ. No money is currently being sought. Money will also not be accepted unless the subscriber has received an investment statement.

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The US stock market rebounded as another series of corporate acquisitions stimulated investors to continue a largely uninterrupted months-long buying streak. The Dow Jones industrial average registered its 24th record close this year and the Standard & Poor’s 500 index came within striking distance of its record high. Further than the takeover news, which has offered optimism to the markets for months, a stronger-than-expected reading on consumer response helped investors put on the back burner some concern that consumers unsettled by higher gas prices would pull back on spending and overturn the economy’s smooth slowdown. Announced mergers and acquisitions involving US companies this year has already touched $993 billion, marking 62 percent more than at the same time last year.

A flood of mergers and acquisitions has instilled buoyancy into the market. Among the multibillion-dollar deals announced this week were the purchase of Chrysler by the Cerberus Group; the buying of Bausch & Lomb by investment funds controlled by Warburg Pincus; and the takeover of the online ad agency aQuantive by Microsoft. Recent record acquisitions have been apparently a driving force behind the US market’s surge. Particularly, Microsoft’s recent acquisition of online advertiser AQuantive Inc for about 6 billion dollars has helped push the blue-chip Dow Jones Industrial Average to its ninth record in May.

The latest series of buyouts pointed towards the massive amount of liquidity that has lubricated global stock markets in recent months does not look as if on the edge of evaporating. In addition to it, investors seem to be unfazed by rising oil prices, in its place focusing on corporations’ continued appetite for buyout deals. The disposition of consumers stays crucial to the economy as consumer spending makes up about two-thirds of US economic activity. Other developments that might have given investors further room for confidence, retailers J.C. Penney Co., Kohl’s Corp. and Nordstrom Inc. on Thursday each posted earnings that exceeded Wall Street’s anticipations.

In a separate significant development, bonds slipped as the market seemed to look past China’s announcement of an interest rate hike and a widening of the range at which the yuan can trade. A rising Chinese currency would make Chinese imports less competitive in the US.

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Shares in China’s Bank of Communications highlighted the current Chinese penchant for new listings on Tuesday. Having an initial offer price of 7.9 Yuan, the shares shot up by nearly 71 per cent to close at 13.54 Yuan, at the end of days trading. With this kind of performance, BoCom baffled several market analysts.

Analysts had expected a strong investors’ response, but the sharp rise in the share price was well beyond their highest estimates. They had expected BoCom shares to debut at about 12 to 13 Yuan. Instead, the market sentiments pushed the debut price up at 14.2 Yuan on the Shanghai Stock Exchange. The price went as high as 14.99 Yuan during the early trading.

The bank had offered a total of 3.19 billion shares. It received an overwhelming response from the investors and received about 1.455 trillion Yuan of subscriptions during the IPO. The price, yesterday, gives HSBC a profit of $11.8 billion on its initial investment of $1.7 billion, back in 2004. HSBC’s stake in BoCom has fallen from being nearly 20 per cent to 18.6 per cent, as a result of yesterday’s offering. However, Jiang Chaoliang, chairman of BoCom, said that he expected HSBC to restore the current stake back to the original status. China’s ministry of Finance has also reduced its stake from 21.78 per cent to 20.36 per cent after yesterday’s offering.

The overzealous market response to BoCom’s listing yesterday is a reflection of the bullish sentiment in the market. Several experts fear that conditions are akin to an investment bubble. Chinese households are heading towards the stock markets because the bank rates are well below the inflation rate. The one-year benchmark rate is 2.79 percent and inflation was 3 percent in April. Quick profits are luring the investors into opting for share trading. Central bank Governor Zhou Xiaochuan this month said domestic shares are rising too fast and an equity bubble may be building.

Interestingly, the prices of BoCom’s shares yesterday were in sharp contrast to the overall market, which drooped 3.6 per cent. The shares did well away from the mainland, spurred by the response back home. On the Hon Kong Share Market, BoCom shares rose 1.07 per cent to close at HK$8.52.

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