Thursday, August 2, 0730 BST
HEADLINES
Black accused of hiding €40m
BA, Virgin face £300m lawsuit
Murdoch at Dow within 3 months
Banks stuck with $500bn debt
Disney buys into social networking
Terra Firma secures EMI
Foreign makes overtake Detroit
TOP STORIES IN FULL
‘Hidden treasure’
First fraud and obstruction of justice. Now a leading private investigator
claimed in court that Conrad Black had hidden €40 million (£27 million)
overseas, The Times reports.
More on Conrad Black here
According to documents presented to the Chicago court which last month
convicted the former Telegraph chairman of looting his newspaper
empire, much of this money has gone through bank accounts in Gibraltar.
Black, free on a $21 million bond, refused to speak to the press as he
appeared before the court. But his Canadian barrister dismissed the claims
as “fabrication and mythology”.
The former press baron was ordered to remain in the US pending his sentencing
for fraud and obstruction of justice on November 30.
Headwind
The Guardian splashes with British Airways and Virgin Atlantic facing a
£300 million lawsuit brought by millions of air passengers in the UK and US.
More on BA here
The revelation came as BA was hit by record fines totalling almost £270
million from the Office of Fair trading and the US Department of Justice for
fixing the price of fuel surcharges for long-haul passenger flights and its
cargo business.
The newspaper says that the rulings will trigger a class action lawsuit by one
of America's top litigators, Michael Hausfeld, who is preparing to lodge a
writ in the UK during the next three months. Which? Is also consulting its
lawyers.
The Times commends the fines as big enough to allow capitalism to work
efficiently. It’s a lesson that the Financial Services Authority and the
water regulator Ofwat could usefully learn, it says.
More commentary here
The day after
Rupert Murdoch is likely to take control of Dow Jones within three months, the
Financial Times reports, and is to turn his attention to Washington.
More on Dow Jones here
The newspaper says that the Federal Communications Commission is expected to
examine whether the takeover raises any regulatory issues.
The Times reveals more detail of the deal, reporting that Dow Jones
will be forced to pay a break fee of $165 million (£81 million) in the event
that the agreed merger between the owner of The Wall Street Journal and
News Corporation is scuppered.
More on the deal here
In the Journal itself, an editorial said that there was no doubt who
was really in charge of Dow Jones despite a hard-won agreement with its
controlling Bancroft family to create independent oversight of the news.
Read the editorial here
Banks’ burden
Leading investment banks on both sides of the Atlantic are saddled with almost
$500 billion (£246 billion) in agreed leveraged loans that they are unable
to parcel out to other investors, says The Times.
More on debt here
European banks are struggling to clear a backlog of $208 billion worth of
leveraged loans that they would normally have sold on through syndication.
In the US, the figure is $269 billion.
RBS has been left holding the biggest debt pile in Europe, at $18 billion,
followed by JPMorgan with $17.4 billion and Barclays Capital, which has lent
$16.2 billion.
News of the glut of debt on the banks’ balance sheets comes as the shake-out
in credit markets produced new casualties and global markets were racked by
further volatility.
Disney’s Penguin
Walt Disney has logged in to social networking. It bought Club Penguin, which
operates an online virtual world for children, for a fee of up to $700
million.
More on Walt Disney here
Club Penguin, unlike social networking sites for older audiences such as
MySpace and Facebook, has a subscription-based business model. It has more
than 700,000 paid subscribers and 12 million “activated” users, mainly in
the US and Canada.
Club Penguin has soared to prominence by offering children the ability to use
their own virtual penguins to chat with friends, play games and earn coins
to buy items such as furnishings for their igloo homes.
Less than three years after its launch, Club Penguin’s three Canadian founders
will each initially receive more than $115 million for their stakes.
The music stops
EMI, the label that is home to the Beatles, Coldplay and Norah Jones, finally
succumbed to a takeover bid.
More on EMI here
Terra Firma, the buyout vehicle of financier Guy Hands, declared its £2.4
billion bid unconditional after it received the requisite 90 per cent
acceptances from EMI investors.
There had been fears that Citi, the investment bank providing £2.5 billion
debt, could back out if Terra Firma had failed to reach the 90 per cent
level.
The Telegraph comments that final consummation of the bid is only a
stepping stone towards the radical restructuring that the global music
industry needs. Though regulators are to blame for the loss of EMI’s
potential to the public markets, it says.
More here
Motown's beat
Detroit lost its leadership of the US automobile market for the first time in
July, says The New York Times. Imports outsold the three American
companies in a dismal month for sales.
More on Detroit here
The traditional American brands owned by General Motors, Ford and Chrysler
held 48.1 per cent of the market in July, according to an industry
statistics firm. In July last year, Detroit companies accounted for 52 per
cent.
Even taking into account the companies’ foreign brands, such as Volvo and
Mazda, which are owned by Ford, the Detroit companies only held 49.7 per
cent of the market last month.
Separately, Mattel's Fisher-Price division is recalling almost one million
toys made in China because their paint may contain too much lead. Reuters
says that the episode marks the latest in a string of recalls that have
fuelled tensions over the safety of Chinese products.
More on Mattel here
MARKETS
FTSE 100 (Tuesday close): down 109.50, or 1.7%, at 6,250.60
Dow (close): up 150.38, or 1.1%, at 13,362.37
S&P 500 (close): up 10.54, or 0.7%, at 1,465.81
Nasdaq (close): up 7.60, or 0.3%, at 2,553.87
Nikkei (latest): up 80.84, or 0.5%, at 16,951.82
Hang Seng (latest): up 236.11, or 1.1%, at 22,691.47
Sterling (latest): $2.0292
Oil (latest): West Texas crude up 13 cents at $76.66
Gold (latest): up 10 cents at $676.00
NEW YORK
Wall Street surged in a last-minute rally on Wednesday, lifted by computer and
consumer shares.
More on US markets here
Apple and Cisco Systems advanced, with the sector contributing
the most to the advance in the broad-based S&P 500 index. Merck,
the drugmaker, helped to give the Dow the biggest boost since July 12 on
hopes for expanded use of a vaccine.
Major indices zigzagged wildly throughout the session. The Dow Jones
industrial average swung between positive and negative territory dozens of
times and the S&P 500 changed direction even more frequently.
In the final minutes of trading, the Dow turned positive in a 180-point burst
and closed up 1.14 per cent. The S&P 500 gained 0.72 per cent and the
technology-laden Nasdaq advanced 0.30 per cent.
ASIA
The region’s markets rebounded after a late rally in US shares. Canon
led Japan's exporters higher after the yen weakened against the dollar.
Babcock & Brown, Australia's second-biggest investment bank, gained
after it said that its exposure to riskier US debt markets was
“insignificant”.
The Morgan Stanley Capital International Asia Pacific Index was up 0.3 per
cent in intraday trading after tumbling 2.9 per cent on Wednesday to its
lowest close since June 27. Japan's Nikkei had risen 0.5 per cent and Hong
Kong’s Hang Seng was 1.1 per cent higher in early trade.
More on Asian markets here
Paul Larter
paul.larter@thetimes.co.uk
LONDON
Friends Provident proved resilient to another U-turn in market
sentiment on rising speculation that a string of rivals are lining up to
spoil its agreed merger with Resolution.
Aviva was one name mentioned among traders, on talk that it is doing the
numbers to see if a deal would make sense. Old Mutual has already been
linked to a possible approach, and Zurich Financial Services is thought to
be considering an approach.
Potential suitors might wait and see if Pearl Assurance can break up the
Friends Provident deal by agreeing a merger with Resolution, in which it has
a near-16 per cent stake.
Aviva lost 26p to 665p while Resolution put on 1p to 661p.
Friends Provident closed unchanged at 187p as the FTSE 100 gave back most of
Tuesday’s gains to close down 109.5 points at 6,250.6. The benchmark index
had traded down as much as 172.9 points in early trade after the Dow Jones
industrial average fell 146 points on Tuesday after American Home Mortgage
pulled the plug on millions of dollars of home loans.
Cadbury Schweppes headed the large-cap fallers, tumbling 51p to 569p
after a profits slide and a warning that margins this year would be hit by
higher milk prices. ICI put on 3.5p to 627.5p on speculation that Dow
Chemical would enter a bidding war with Akzo Nobel to buy the UK company.
Whitbread’s shares were weaker in spite of positive broker comment from
Deutsche Bank, which changed its stance on the leisure group from “neutral”
to “buy”. The shares closed down 22p at £16.53.
BROKERS
Morgan Crucible gained 10.75p to 299.5p on the back of half-year
results from the engineering group.
The figures, which showed half-year pre-tax profits up 20 per cent to £36.2
million, were ahead of Arbuthnot’s forecasts, prompting the broker to
increase its rating from “neutral” to “buy”.
Investor sentiment was helped by an increase in the interim dividend, which is
rising 50 per cent to 2.25p.
The group also said it was buying NP Aerospace, a UK armour business which is
already a customer of the group.
Analysts flagged the possibility of higher profit margins, as moving
manufacturing to low-cost regions and innovation in product development puts
the group on course to achieve operating margins in the mid-teens.
Bridgewell reiterated its “neutral” stance, while Merrill Lynch restated its
“buy” rating and 360p price target. The US broker said its rating was based
on a sum-of-the-parts valuation.
Joe Bolger
joe.bolger@thetimes.co.uk
AGENDA
INTERIMS
Amvescap
Barclays
Centrica
Cookson Group
Danka Business Systems (Q1)
GKN
William Hill
Imperial Chemical Industries
Inchcape
Invesco
Invensys (Q1)
Laird Group
Mapeley (Q2)
Alfred McAlpine
Morgan Crucible
Nichols
Randgold Resources (Q2)
Rio Tinto
Senior
Smith & Nephew
Talisman Energy (Q2)
Trinity Mirror
Unilever (Q2)
Zetex
AGMs
Canaccord Capital
Detica Group
Invensys
Northumbrian Water
Silence Therapeutics
ECONOMICS
UK IDS pay settlements (0001 BST)
UK CIPS July construction PMI (0930 BST)
BoE rate decision (1200 BST)
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