Economics
Housing The number of new homes being built is set to fall to the
lowest level since 1945 this year, making it nearly impossible for the
Government to meet its targets on housing. Work will start on 147,700 houses
across the UK this year, down from 203,900 last year and the lowest since
the war ended in 1945, when 29,700 houses were started, the Construction
Products Association said.
UK competition Alistair Darling will announce the formation of a group
to look at competitiveness in an attempt to repair the Government’s
relations with the City. The Chancellor has asked Stuart Fraser, the
chairman of the City’s Policy and Resources Committee, to oversee its
launch.
Inflation in the eurozone rose to a record high of 3.7 per cent
year-on-year in May, up from a previous estimate of 3.6 per cent. Prices
rose 0.6 per cent month-on-month in May. Underlying growth in consumer
prices — excluding the impact of volatile prices such as energy, food,
alcohol and tobacco — was 1.7 per cent in May, up from 1.6 per cent in
April.
Bananas, Britain’s most popular fruit, have joined the ranks of dairy,
meat and wheat products, all of whose prices are set to rise on the back of
higher fuel costs. Chiquita, one of the world’s biggest banana groups, said
that the price of the fruit had risen by 36 per cent last month, against the
same period a year ago.
Corn prices rose to an all-time high, as flooding in the world’s
biggest exporter devastated crops and fuelled inflation fears. The surge in
corn prices, which broke the $8 barrier for the first time, came as heavy
rains in the US damaged crops and delayed plantings, adding to fears that
there will not be enough corn to meet global demand for food and biofuels.
South Korea The country’s economy could grind to a halt this week amid
calls for “domino strikes” aimed at closing down the country’s biggest
industries. The industrial action could ruin President Lee’s reputation as
the country’s business-friendly “chief executive”.
Banking
& finance
Barclays Opaque foreign investors could own almost a fifth of one of
Britain’s biggest banks, under the terms of a capital-raising being
considered by Barclays. It said that it was mulling over Britain’s largest
placing and pre-emptive offer of shares, which is likely to be about £4
billion. An announcement is expected within a fortnight. It is thought to be
lining up a cash injection from sovereign wealth funds.
Bear Stearns The US Government is close to bringing the first criminal
charges against Wall Street executives relating to the credit crunch.
Brooklyn prosecutors are preparing to indict Ralph Cioffi and Matthew
Tannin. It is understood that they managed two Bear Stearns hedge funds that
went into meltdown last summer under the weight of sub-prime investment
losses, and could be charged this week. Bear Stearns as a company is not
expected to be charged in the investigation.
AIG Robert Willumstad, the insurer’s new chief executive, did his best
to reassure investors that he would take dramatic action to end its woes by
insisting that “nothing is off the table”. Mr Willumstad plans to meet
Maurice Greenberg, the man who helped AIG become the world’s biggest insurer
before being forced out three years ago.
Lehman Brothers made a quarterly loss of nearly $3 billion (£1.52
billion), the first time that the US investment bank has recorded a loss
since going public in 1994. The loss was in line with company forecasts and
follows a tumultuous week in which it was forced to raise $6 billion in
fresh capital and unexpectedly demoted two of its top executives.
BlueBay Asset Management. Shares in the London hedge fund tumbled by as
much as 19 per cent after it said that its full-year pre-tax profit will be
lower than previous forecasts. It blamed the profit warning on declining
performance fees and poor credit market conditions.
Construction
& property
Carillion has sold its stake in four fully operational Public-Private
Partnership (PPP) projects for £35.9 million. The four PPP projects are
Lewisham Hospital, James Cook University Hospital, Barnsley Schools and
Redcar and Cleveland Schools. It said that it had a pipeline of projects
that have a potential equity requirement of up to £80 million.
Great Portland Estates has sold one of its Regent Street sites, held in
a joint venture with Liverpool & Victoria Friendly Society and formerly
occupied by Liberty but now by tenants including Gap, for £96.6 million in
line with its March 2008 book value.
Consumer
goods
Coor Brewers has promoted David Heede from strategy director to finance
director, after the promotion of Stewart Glendinning to the job of global
chief financial officer of its American parent company, Molson Coors Brewing
Company.
Engineering
Lamprell has been contracted by Riginvest to build a $186 million
(£94.7 million) drilling rig for delivery in June 2010. It is to construct
and deliver a LeTourneau-designed, self-elevating Mobile Offshore Drilling
Platform of a Super 116E Class design.
Health
GlaxoSmithKline has signed an agreement with Mpex Pharmaceuticals,
potentially worth hundreds of millions of dollars, giving it access to
Mpex’s expertise in developing antibiotics against drug-resistant
organisms. The privately owned US biotech company will get an $8.5 million
(£4.3 million) payment upfront and a $6.5 million equity financing
commitment from Glaxo. It is also eligible for milestone payments, depending
on product progress, which could be worth between $200 million and $250
million for each product.
Industrials
ArcelorMittal has agreed to buy Bayou Steel, a United States
manufacturer of structural steel products, for $475 million (£241 million).
Bayou Steel, which operates plants in Louisiana and Tennessee, posted
revenues of $331 million in the 2007 fiscal year and employs 630 people.
Leisure
Danoptra, the fruit machines-to-leisure club operator formerly known as
Kunick, will be taken over by a group of financial institutions led by
Credit Suisse and BlueBay Asset Management. The consortium announced an £85
million funding package that will be used to refinance its estimated debt
burden of £80 million and provide money to further develop the business.
GuestInvest, the buy-to-let hotel operator backed by Bank of Scotland,
issued a statement refuting rumours that it was seeking a buyer owing to
financial difficulties. “We are committed to the UK market and will continue
to buy, develop and sell hotel rooms,” it said.
Media
News International, the UK parent of The Times, announced plans to
abandon its efforts to build a standalone magazine business. It will sell
Love It!, its real-life weekly, and will offload the Sky customer magazine
either to BSkyB or a third party, whilst retaining The Sunday Times Travel
magazine. Further launches will not take place.
Independent News and Media chief executive Anthony O’Reilly said he had
raised his stake in the publisher of the Independent newspaper titles to 28
per cent. The group’s second-largest shareholder, the fellow Irishman and
dissident shareholder Denis O’Brien, raised his stake to just over 25 per
cent in May. He has previously called for the board to be halved.
Natural
resources
Oil prices surged to a new record high of nearly $140 a barrel as
traders brushed aside a decision by Saudi Arabia to start pumping crude at
its fastest rate since 1981. The latest rally in the price of a barrel of
light, sweet crude oil for July delivery to a record $139.89 on New York’s
Nymex exchange came as the British and American energy ministers welcomed
the Saudi decision to increase production by 200,000 barrels per day.
TNK-BP BP’s Russian partners hurled insults at the British company,
accusing BP of arrogance and mismanagement of the TNK-BP joint venture. They
also likened Peter Sutherland, BP’s chairman, to Josef Goebbels, the Nazi
propaganda chief. Mikhail Fridman’s outburst, published in a Russian
newspaper, was followed by further accusations and threats that the Russian
shareholders would seek the removal of Robert Dudley, the BP-nominated chief
executive of the venture.
Gazprom, the Russian gas giant, and several Chinese companies are
interested in replacing Royal Dutch Shell in the Ogoniland region of the
Niger Delta after the Nigerian Government’s decision to award the oilfields
to another company, according to local reports. Shell abandoned the fields,
which hold proven reserves of more than 10 trillion cubic metres of gas, 15
years ago after its relations with the local Ogoni people broke down.
Retailing
Majestic Wine told its customers that wine is going to get more
expensive. The retail chain, which sells wine by the case, said that the
strong euro and short harvests in France, northern Italy and Australia meant
that it would increase prices by up to 10 per cent in the coming weeks.
Land of Leather, the furniture retailer, is expected this week to
unveil the first rights issue in the retail sector for four years as part of
a £18 million rescue fundraising. The group, which has issued three profit
warnings since Christmas, said that it had been in discussions with
shareholders about the move and was close to finalising the terms of the
cash call.
Primark, the discount clothing chain owned by Associated British Foods,
said that it had dismissed three factories in India after discovering that
they sub-contracted work to children. It said the factories broke Primark’s
Code of Conduct by failing to meet its “strict ethical standards” which
expressly ban the use of child labour.
Instore The owner of Poundstretcher said that it had received a
takeover approach. The Huddersfield company, which has more than 100 stores
across the UK, declined to reveal the identity of the potential suitor.
Speculation has centred on the non-executive director Aziz Tayub, who is the
controlling shareholder of Crown Crest, a discount food retailer that owns
more than 30.8 per cent of Instore.
Support
services
De La Rue, the British banknote printer, has agreed to sell its cash
counting business to Carlyle Group, the private equity firm, for £360
million. The disposal of the cash systems unit, which provides mechanisms
for bank ATMs, will leave De La Rue with its security paper and print
business, which produces more than 150 national currencies and provides
travellers' cheques and passports.
Technology
Kewill Systems, the provider of supply chain control software, reported
a higher full-year pre-tax profit of £1.96 million and said that it remained
confident on its outlook for the current year and beyond, with healthy sales
pipelines.
Telecoms
European Union The EU will put forward a proposal that could lead to
mobile phone users paying for receiving calls as well as making them. It
argues that shifting to a business model known as bill-and-keep would reduce
bureaucracy and boost competition. Under this system, the norm in the United
States, each network agrees to terminate calls from the other at no charge.
In Europe, mobile phone operators pay charges to other operators for
connecting a call on its network.
Alcatel-Lucent has been chosen by Linkem, a wireless broadband service
provider in Italy, to supply a wireless network in the Lazio region. Linkem
has licences in 13 Italian regions covering 80 per cent of the population.
Transport
Tankers Talks aimed at avoiding another strike by tanker drivers will
resume today in an attempt to agree a pay deal for drivers contracted to
distribute fuel for Shell. The four-day strike forced petrol rationing in
some parts of the country.
ArabJet, a premium-class airline that will be based in Dubai, is
reported to be talking to the administrators of Silverjet, the failed
British business class carrier, about a possible sale.
Utilities
Helius Energy has been given the go-ahead by the Government to
construct a 65-megawatt biomass power station in Lincolnshire. Planning
permission has also been granted to build an additional biomass processing
facility, bioethanol and biodiesel refinery near the station. The plant will
be fuelled by waste wood and the leftovers from timber processing activities
in the UK and Europe.
