Wednesday, September 30, 2009

Some of the G-20's New Rules

The G-7 is out. Its irrelevant. The G-20 is in. Rapidly developing nations have had economic but little political power under the G-7 contingency.
This group of 20 are quickly moving to work to make the economy work. Over the course of the G-20 summit in Pittsburgh the group came to a series of agreements including:

  1. The countries will require higher levels of capital at banks and financial institutions, so as to give these institutions a buffer against unexpected losses that occur after making risky moves.
  2. The Group of 20 will outline a long set of principles for tougher rules. The governments have pledged to develop this set of regulations by the end of 2010.
  3. It was decided that bonus caps would be set in place for financial executives. The caps would defer the payout of bonuses for several years. It is hoped that the deferred payout would reduce the incentive for financial institutions to take short-term gambles. Countries are free to impose tougher restrictions as they see fit.
  4. It was agreed that the nations would revive talks to reach a new global trade agreement by the end of 2010. For one, the talks could lead to a reduction in barriers to agricultural exports.

G-20 Gives Nations Homework

As we walk away from the G-20 it appears that various nations have been given homework so as to improve the global economic crisis:

The United States are being asked to increase its savings rate, reduce trade deficit and work towards improving its huge budget deficit.
China, Japan and Europe (Germany in particular) are expected to reduce their dependence on exports. They are being asked to promote more internal consumer spending and investment as opposed to relying on the rest of the world for financial support.

Of course all changes will take time but I think that if it can be done these would be relatively efficient ways to improve financial standings.

Tuesday, September 29, 2009

Confidence in M&A Growing

Despite a slow start to the year, M&A is currently picking up in part due to deals such as those of Kraft, Disney and Skype. Both consumer and investor confidence seems to be picking up as American stocks opened much higher this week than last. The increased consumer confidence is due in part to the realization that M&A is not dead and that companies are still trying to build and produce a greater profit unlike what it had earlier seemed when many companies were just trying to stay afloat. The seeming return of M&A is being looked at as a correction to the problems of the recession.

Taiwan to Allow Chip and LCD Makers to Invest in China

Taiwan and China have had a pretty icy relationship ever since China gave up Taiwan to Japan. However there are some actions being taken to improve fair trade between the two countries. Taiwan is finally allowing the country's Chip and LCD manufacturers to invest in Chinese companies. There is no specific time table as to when these new regulations will come into effect, but its one step in the right direction towards improving economic ties between the nations. Ends Deal for Focus Media has decided to scrap a deal with Focus Media. The deal would have been worth $1.7 billion. The deal which had been settled on back in December had not yet gained approval from the Chinese government. It is speculated that the delay for approval caused the two companies to rescind.

Monday, September 28, 2009

Xerox to Buy Affiliated Computer Services

Xerox has announced that it will be paying $6.4 billion for the acquisition of outsourcing company Affiliated Computer Services. Xerox will be paying $63.11 in cash per stock of A.C.S. It is expected that Xerox revenues will triple to about $1o billion next year, up from $3.5 billion in 2008

Unilever Buys Sara Lee Home Care Brand

Unilever has agreed to buy Sara Lee's personal care brands for 1.275 billion Euros. Unilever believes that brands Sanox and Radox will act as a good complement to their existing brands such as Axe and Dove. The deal is subject to approval by the European Commission

Update on Volvo Bidding

Since Volvo was put up for sale in December of 2008 a series of interested parties has come forth to put in their bid, however there are only 2 remaining buyers that Ford seems to be serious about. One of these companies is Shanghai Automotive Industry Corp, the other is Geely Automaker, both are Chinese. Geely is the currently frontrunner with a bid of $2.5 billion. The bid is much higher than expected considering Volvo has sold 25% less this year than last.

The main draw of Volvo has been not only the company's name but the safety technology the company has developed over the past few years.

Friday, September 25, 2009

Areva Selling Unit

Areva SA, the largest builder of nuclear reactors in the world, is selling one of their units so as to raise money to develop uranium mines and buy Siemen AG's share of a nuclear-reactor joint venture. The company has already begun to accept bids and of the three they have received, all have been under $4 billion which is less than the $4.25 billion the unit is estimated to be worth. As of right now the bidders include General Electric Co which has teamed up with CVC Capital Partners on the deal, Toshiba Corp. and Alstom SA in partnership with Schneider Electric. Since one of the major shareholders is the French state it is likely that the winning bidder will be from France.

BlackRock - Barclays Deal Approved

The deal for the acquisition of Barclays by BlackRock has officially been approved by the European Commission. A representative of the European Commission noted that the sale would not be a hinderance to any other European competition. The sale will give Barclays a 19.9 percent stake in the joint business.

Thursday, September 24, 2009

China's Interest in Australia and the U.S.

Lately China has been making a lot of international investments, particularly in Australia and the United States. China's interest in Australia is of no surprise considering China's increased need for natural resources and minerals so as to support their massive population. China's Outbound Foreign Direct Investment program is supported by 8,500 investors and is currently valued at 55.91 billion U.S. dollars an 111% increase from 2007. Investment in Australia increased 26.7% between 2007 and 2008. The U.S.'s activity with China is moving a little more slowly than Australia because of a series of regulations but it is nonetheless increasing as the OFDI increases.

Dell to Buy Perot Systems

Dell Inc has announced that it will be purchasing Perot Systems for $3.9 billion in cash. Dell which focuses mainly on the PC business has been losing a lot of its revenue recently and this deal comes as an attempt to open up its market so that it compete with companies such as HP. Such a deal would also give Dell a much needed boost in international business while gaining some of Perot's reputable clients, including the U.S. government.

Looking to Europe for New M&A

Yes, M&A has been slow. It has been impressively slow. Yet, despite how cool the market for M&A has been of late, with deals like that of Kraft and Cadbury and a resurgence in talks concerning Deutsche Telekom possibly buying Sprint Nextel Corp. to merge with T-Mobile things are looking up. The belief that there is a possible rise to M&A, especially in Europe, stems from the fact that high-end good manufacturers and sellers are having a hard time these days and that they may have to take action in order to save themselves. Also, with such major deals like that of Kraft taking place, there is going to be a resounding fear of being left behind while the rest of the industry continues to shift and expand. The fields that we see as having the most potential for expansion in M&A are those of the pharmaceutical industry (considering many companies are losing patents to their drugs in 2012), beverages (especially beer) and other high-end luxury goods. Hopefully once these take off the majority of other industries will soon follow. European companies are currently being seen as at the fore-front in possibilities for M&A, so it is very likely that things will really start off there.

U.S. Credit Card Defaults on the Rise

Credit card defaults tend to rise after a period of high unemployment rates, but according to Moody's default rates have reached an all-time high. The Moody's credit card charge-off index rose from 10.52% to 11.49% from July to August. The credit card charge-off index measures the amount of credit card loans that banks do not expect will be repaid. Moody's expects that unemployment rates will continue to rise next year so it should be expected that credit card defaulting will continue to rise.

Wednesday, September 23, 2009

Europe is Only Losing When it Comes to China

Europe may be China's single largest trading partner but China doesn't particularly seem to care. A series of events that started with the 2005 retracted promise of lifting the trade embargo placed on China after the Tiananmen Square incident of 1989 and extends through the EU's pressure on China to alter their human rights code have led to a Chinese distrust and dislike of Europeans. China is seemingly unwilling to deal with the EU unless they have to which could ultimately impede European chances of smoothly transitioning out of this recession. It also hinders a large amount of trade between the two bodies as the Chinese government is likely to step in to prevent any trading with Europe that they do not deem as being necessary. China is picking and choosing various European nations to deal with but is wary of the whole. The Chinese are currently in talks with the UK; Germany and France are also working to get on China's good side. Overall though, relations look bleak.

Wednesday, September 16, 2009

Bernanke Thinks the Recession is Over

Federal Reserve Chairman Ben Bernanke thinks that the recession in America is "very likely" over. Bernanke stated that America is out of the recession, unfortunately unemployment probably will not get much better for a while longer. According to Bernanke we have to continue with the stimulus plans to make sure that we keep moving out of the recession.

Europe Sees America as Fading

Thanks in part due to what many see as the failure of the Bush administration America's relations with the outside world is on edge and there is a continually growing belief that America can not free itself from financial burden and recession without the aid of other nation's like those of the G20. Although Europe appreciates the differences between the Obama and Bush administrations, clearly preferring Obama, it is noted that there exists a general inclination to no longer do as the United States tell because of the protectionist walls they had to put up during the Bush administration. So unless America and Europe can come to terms once more it almost seems that Europe will not be a willing participant in coming to America's aid, thus helping promote a continued American downfall.

Tuesday, September 15, 2009

Avaya May Gain Nortel Unit

Avaya recently made a top bid for a unit of Nortel that makes networking and communications equipment for corporations and governments. The bid is worth $900 million, however the deal has to overcome some hurdles before it can go through. Verizon is apparently arguing against the deal in a bankruptcy court, stating that this deal could be of relevance to national security. It is expected that the bid will go through despite Verizons concerns.

Monday, September 14, 2009

U.S. Infuriates China Over Tire Tariffs

The United States is currently testing China for the sake of tires and buying American. The Obama administration has imposed trade regulations on the importation of Chinese tires. It is a move that may not be all too smart considering that the U.S. needs China's cooperation and alliance when it comes to issues of the environment, power and nuclear standoffs. China is furious with the decision and has called it a protectionist move that is in violation of global trade regulations. The question now is whether or not the Chinese will further retaliate.

Friday, September 11, 2009

Bloomberg L.P. Shows Interest in BusinessWeek

BusinessWeek, which was put on sale in July, by the McGraw-Hill Companies, has still yet to have found a suitable buyer. However, Bloomberg L.P. appears to have some interest in acquiring the magazine despite already having their own (Bloomberg Markets). Of course this does not yet constitute a bid on Bloomberg's part, but it is a possibility.

US and China to Become Solar Energy Powerhouses

Although Germany is still the world's solar energy producer it is believed that Germany will be overtaken by the United States in 2013 and China not long after. The two countries have already been laying out plans on how to expand their solar-power based operations. It is expected that they will install 5 gigawatts worth of solar installations between 2009 and 2011. Both countries' solar power industries are expected to continue to expand at least until they begin to outproduce Germany.

Thursday, September 10, 2009

Tri-Tech Holdings Announces IPO

Tri-Tech Holdings, a Chinese based company that designs customized sewage treatment and odor control systems for China's cities and municipalities has announced its IPO of 1,700,000 million shares worth $6.75 each. Tri-Tech expects to make approximately $10.18 million from their IPO. They will be listed as TRIT on the Nasdaq.

Please refer to the Press Release for more information.

Finally, G.M. Decides Opel's Fate

After several dramatic months of ups and downs G.M. has finally decided to sell Opel to Magna. The bid will give Magna a 55 percent stake in Germany-based Opel, as well as Vauxhall, based in Britain. G.M. will keep a 35 percent stake, while Opel’s employees will keep 10 percent. Although we do not know the details of the decision the deal is ultimately coming with some strings attached.

Wednesday, September 9, 2009

Closing in on an Opel Deal?

The German Minister is tired of waiting around for the decision concerning Opel's future and has asked for a decision on the company by the end of next week. Conflict has arisen about who to sell to or if to even sell Opel at all. Magna has been largely considered the forerunner for the sale but many in Opel's managment team currently prefer Belgian RHJ or just not selling at all and allowing G.M. to continue running Opel. The entire situation seems like a mess. Hopefully we'll find out what is going on this week.

PerkinElmer Acquires Sym-Bio Lifescience in Shanghai

PerkinElmer (NYSE:PKI) has acquired Sym-Bio Lifescience, a supplier of diagnostic products to hospitals in China based in Shanghai for RMB 435 million. Sym-Bio is active in the infectious diseases area and has manufacturing in the Shanghai area. PerkinElmer said that it is seeking to expand its prenatal and newborn screening business in China.

Tuesday, September 8, 2009

Maybe M&A Isn't So Terrible After All

I guess we were too fast to say that M&A had struck a real low note. Obviously the industry is not as healthy as it once was but it is definitely not as bad as we had thought. As recently as the last week of August it was believed that monthly lows in M&A had reached its lowest point since 1994, however after a stellar week, capped by deals involving Disney and Skype among others, August was only the worst we've seen since last November. Not that horrible. Of course its too early to say that things are in full recovery but its definitely not as bad as it once seemed.

Europe and China Having Business Troubles

It seems like China and Europe just can not get along when it comes to business. The European Union is currently claiming that the Chinese are attempting to keep them out of China. Supposedly, Chinese business discriminates against foreign companies, enforces arbitrary laws and regulations, and abuses the nation's World Trade Organization obligations. Although China too has complained about European and American protectionist policies, America does not appear to have as much issue doing business in China as Europe. The EU has come up with a list with about 500 ways China could make business easier for them. We'll have to wait and see what China's response is, but I don't think they're going to change. China has always been very protective and they realize that the European economy needs them despite the EU's claims otherwise.

Friday, September 4, 2009

EU Investigates Sun-Oracle Deal

The European Commission has been widening its investigation of the proposed $7.4 billion deal between Oracle and Sun. The commission has found that the deal would inhibit the abilities and competiveness of other companies in the field. The commission however has yet to decide whether or not to allow the takeover of Sun to go through and has until January 19th to deliberate.

Thursday, September 3, 2009

China Makes Foreign M&A Difficult

China has many policies concerning M&A and they have no qualms about it. The government routinely involves itself in M&A activity dealing with foreign investors and has shut down several possible acquisitions including a multi-million dollar deal concerning Coca-Cola. The Chinese government states that they are trying to prevent certain companies from maximizing their benefits within the nation and in turn protect their citizens. I think this is perfectly legitimate reasoning but it is a shame that the government is limiting M&A potential.

Decrease Exports to Rebuild

Just about every nation struck by the economic recession believes that the prime way to start the process of regrowth is to export. Of course this is a highly valid way of stimulating the economy, however the problem is that when everyone wants to focus on exporting, no one imports and no one wins. A former World Bank economist claims that the only way to exit the recession is for the nations at the center of the problem to be among the first to emerge. In this sense Asia might have to cut back on its exports while the United States increases their's if we are going to get out of this. Europe and Asia seem to slowly be getting back on track, now that France, Germany and Japan have joined the bandwagon, now we just have to wait for the U.S. to get climb on.