Contributed by Martin Mitchell of the Corporate Training Group.
The E.U. unveiled new rules to create a new Eurpoean Systematic Risk Board. The pound fell to a low of £0.9078 against the euro, its weakest level since April. Goldman Sachs tops Dealogic’s third quarter M&A list. These are but a few highlights of important market events that we’ve gathered to help you start the week well informed.
- The European Union unveiled new rules that it hopes will prevent a repeat of the financial crisis. The draft legislation will create a new European Systemic Risk Board warning of threats to financial stability. The board’s main members will be the 27 central bank governors as well as the president and vice president of the ECB. There will also be a European System of Financial Supervisors to oversee individual banks and financial groups, although day-to-day supervision will remain with national supervisors.
- A technical analysis of sterling’s performance since 2007 published in the Bank of England’s quarterly report brought about a substantial fall in the pound. The article highlighted changes to Britain’s economic outlook, including the perceived riskiness of its assets and the need to rebalance the economy away from domestic consumption. The pound fell to a low of £0.9078 against the euro, its weakest level since April.
Mergers and Acquisitions
- Dealogic published its third quarter M&A league table. The top ten by deal values were as follows: (1) Goldman Sachs ($467bn); (2) Morgan Stanley ($451bn); (3) JPMorgan ($400.8bn); (4) Citigroup ($352.7bn); (5) Bank of America Merrill Lynch ($289.1bn); (6) Lazard ($272.2bn); (7) Deutsche Bank ($258.6bn); (8) UBS ($225.9bn); (9) Credit Suisse ($184.0bn); (10) Barclays Capital ($149.8bn).
- Unilever has agreed to pay €1.27bn in cash for Sara Lee’s personal care business. Unilever was advised by JPMorgan, Sara Lee by Goldman Sachs.
- Dell made a move into IT services by launching an agreed $3.9bn cash offer to buy Perot Systems. The deal was priced at a 68% premium to Perot’s closing price at the end of last week.
- The ‘put up or shut up’ deadline for the Cosmen family and CVC Partners consortium bid for UK travel company National Express is to be extended by a further two weeks. The extension will give the consortium added time to perform due diligence.
- HSBC announced that its chief executive Michael Geoghegan will relocate to Hong Kong from London, signaling its determination to expand in China and across Asia. HSBC is also close to selling its Canary Wharf tower to a South Korean investment group for an estimated £800m in a sale and leaseback deal.
- Nomura announced plans to raise up to Y511.3bn ($5.6bn) in equity to get ahead of any tightening of capital requirements and enable it to make investments in key markets. Nomura will issue an additional 800m shares, or about 28.5% of existing stock.
- Standard Chartered Bank has started legal action in Mumbai to recover around $1m in losses from currency hedges sold to India’s main sugar export/import company. The dispute with Indian Sugar relates to rupee/dollar and dollar/yen currency hedges dating back to 2006. Indian Sugar claims it was not adequately informed of the risks associated with hedges.
- Around 300 Credit Suisse bankers are set to share around £1.1bn worth of stock next spring under a performance-based retention plan instituted nearly five years ago when the bank was struggling to retain staff.
- Royal Bank of Scotland (RBS) is considering a £3bn-£4bn share issue to reduce the stake it would have to hand to the UK government to join its toxic assets insurance scheme. RBS is due to issue about 19bn of non-voting B shares to the government as a fee for putting £325bn of toxic assets into the ‘Asset Protection Agency’, that would see the government’s stake increase from 70 per cent to around 85 per cent.
- Banks will pay an insurance fee to the UK’s Asset Protection Agency and agree to absorb losses up to a certain level, beyond which 90% of the loss will fall to taxpayers. RBS is planning to insure £325bn of toxic assets and Lloyds Banking Group £260bn. Both RBS and Lloyds look likely to have to dispose of significant parts of their business as a result of the EU’s state aid rules. Under the rules, beneficiaries of government bail-outs usually have to restructure their operations to compensate for the advantage they have enjoyed.
- French bank Société Generale is initiating a programme to reinvent itself in the wake of the financial crisis. The plan will see it move away from risky trading and towards the safer realms of private banking. The five-year plan will be launched next year and is to be called SG Ambition 2015.
- The Singaporean sovereign wealth fund GIC sold half of its 9% stake in Citigroup, making $1.6bn. The stake was purchased during the US-government led refinancing of Citigroup earlier this year.
- The world’s second largest bank by market capitalisation, China Construction Bank was allowed to roll over $36bn of bail-out bonds from the Chinese government for a further 10 years. The bonds were issued a decade ago in exchange for non-performing loans and were due to be repaid this week.
- The Financial Times charted banks’ foray into the commodities markets highlighting estimated revenues and staff numbers at four banks: (1) Goldman Sachs’ revenues are above $3bn from 300 staff, and it is particularly strong in oil; (2) Morgan Stanley’s revenues are just below $3bn from 330 staff, it is strong in crude oil and agriculturals; (3) Barclays Capital revenues exceed $2bn from 300 staff, with the Lehman acquisition boosting exposure to the US power and natural gas markets; (4) JPMorgan’s revenues are between $1bn and $1.5bn with 450 staff and it has a huge presence in the US natural gas and power markets.
- The US is set to introduce regulations that could limit the number of commodity-based contracts that investors can hold and place restraints on Wall Street banks trading commodities. The regulations are the result of complaints from politicians that higher commodities prices were the result of speculators. In response, the provider of the most popular index – the S&P GSCI, is exploring an index that will exclude the US.
- Spain’s second largest bank, BBVA has completed a sale and leaseback deal with a subsidiary of Deutsche Bank’s RREEF Limited. The deal will raise €1.15bn for nearly 950 branches and other properties. BBVA will book a €830m gain on the deal.
- Majority owner of Canary Wharf, Songbird Estates confirmed plans to raise more than £1bn to help repay debt and position the company for growth. Most of the money will be used to repay an £880m senior loan from Citigroup that was due to expire next year. The money has been raised from existing investors including Qatar Holdings and Morgan Stanley Real Estate Funds as well as a new investment from China Investment Corporation, the Chinese sovereign wealth fund.
- Heidelberg Cement raised €4.4bn in an equity issue to enable it to reduce its €11.3bn debt pile.
- Deutsche Bank and Morgan Stanley led the banking consortium as existing investors were offered one new share for every two at a discount of around 15%. The group’s main shareholder and some of its banks also sold some shares.
- UK directory company Yell announced plans for an equity offering to pay down around £500m of debt. The publisher of the yellow pages is struggling under a £3.8bn debt burden and is negotiating a refinancing package with 300 creditors led by HSBC.
- There was some activity in the hotel sector, as a team of investors pooled up to €500m to buy distressed European hotels, believing the hospitality industry assets are near the bottom. Meanwhile, Europe’s biggest hotel group, Accor reduced its debt by selling 158 of its budget Formulae 1 hotels for €272m and leasing them back.
- The US state of California began to sell $8.8bn in short-term notes, only three weeks after it stopped issuing IOUs to stave off a budget crisis. $1.5bn of the cash raised by the issue of these revenue anticipation notes (RANs) will be used to repay JPMorgan for a loan to redeem thousands of IOUs issued over the summer.
- Lloyds Banking Group is set to sell more than £2.8bn of new bonds backed by residential mortgages. The notes will be secured by a portfolio of UK prime residential mortgages originated and serviced by Bank of Scotland under the Halifax name. The bookrunners for the deal, the first RMBS issue since the summer of 2007, are Lloyds, JPMorgan and Barclays.
- Shanda Games, China’s leading online gaming group has priced its Nasdaq share offering at the top of its range and is set to raise $1.04bn in the US’s largest IPO this year. The IPO was 10 times subscribed and the joint bookrunners were Goldman Sachs and JPMorgan.
- The top ten cities of the world ranked as ‘Global Financial Centres’ were published, with marks out of 1000: (1) London: 790; (2) New York: 774; (3) Hong Kong: 729; (4) Singapore: 719; (5) Shenzen: 695; (6) Zurich: 676; (7) Tokyo: 674; (8) Chicago: 661; (9) Geneva: 660; (10) Shanghai: 655.
- Underlining the preponderance of Asian cities, figures from Dealogic showed that Asian issuers had raised $28.4bn in IPOs this year, compared with just $5.4bn combined from European and US issuers. Chinese IPOs dominated, raising $21.9bn and the two biggest were China State Construction Engineering and Metallurgical Corp of China.
- Twitter is set to secure a valuation of $1bn as it raises $100m in new funding from a consortium of new and existing investors led by Insight Venture Partners.
- The UK real estate and construction sectors saw a flurry of capital raisings – Liberty International placed 56.1m shares at a 10 per cent discount to raise £280m, whilst housebuilders Barratt Developments and Redrow announced rights issues and placings that will raise £720m and £150m respectively.
- A coalition of US companies, directors and investors proposed a radical overhaul of executive pay, including the elimination of severance payments, tax refunds and the personal use of corporate jets. The ideas are aimed at quelling the public anger over excessive compensation and to stave off government action on the issue.
- Ernst and Young agreed to make an undisclosed ‘substantial’ payment to the liquidators of Akai Holdings, Hong Kong’s biggest corporate failure. The liquidators began pursuing the accounting firm for a $1bn negligence claim in 2004.
Note : The details contained in this article have been drawn from a daily review of the Financial Times.