Date: Sunday 30 Sep 2012
The board of Xstrata is to recommend Glencore’s revised $80bn (£49bn) merger offer in a move which will create a global commodities and mining powerhouse. The Telegraph understands that Xstrata’s board, led by Chairman Sir John Bond, has this weekend agreed to the final points of its recommendation. Those points include a commitment to Xstrata retaining the majority of directors on the combined board amid fears Glencore chief executive Ivan Glasenberg would attempt to wrestle control. What is more, the recommendation will receive the backing of Qatar Holding, Xstrata’s second largest shareholder with a 12 per cent stake. It is expected the recommendation will be delivered to City investors at 7am on Monday – to coincide with the Takeover Panel’s deadline, The Sunday Telegraph reports.
Spain is braced for a downgrade of its sovereign credit rating that could see it reduced to junk status, heaping pressure on the authorities to seek a bailout. Moody´s had delayed its conclusion pending an independent audit of the country’s banking sector. That report, released on Friday, said the banks need €59.3bn (£47bn) in extra capital to shore up their balance sheets and ride out the downturn. Madrid is likely to take less — €30bn-€40bn — from the €100bn banking facility agreed with the European authorities in July. But uncertainty continues over whether Spain will go further and request an international bailout, which would see the European Central Bank intervene to buy Spanish bonds. A decision could come as early as this week, though Madrid may wait until regional elections on October 21, The Sunday Times says.
Sportingbet, the online gambling group, has rejected a £350m bid from William Hill. In the past few days, the board has unanimously turned down a 52½p per share offer from Britain’s biggest bookmaker, which is bidding in partnership with Gaming VC, an AIM-listed online gambling company. The offer, submitted by letter, comprised 45p in cash from William Hill and 7½p in shares in Gaming VC. One Sportingbet insider described the offer as “low-ball”. Analysts believe Sportingbet, which sponsors Wolverhampton Wanderers football club, would probably succumb to an offer pitched above 60p. The shares closed on Friday at 51½p. William Hill is thought to be keen to get its hands on Sportingbet’s lucrative operation in Australia, where it commands a large share of the market, and some of its European businesses, writes The Sunday Times.
Wolseley is set to return several hundred million pounds to investors when the building materials supplier reports annual results this week. Ian Meakins, the chief executive, could reveal a special dividend of between 100p and 200p, according to analysts at UBS. This would result in a cash return of about £286m at the bottom end of the range and up to £572m at the top. The FTSE 100 company had previously indicated it would consider returning excess capital to shareholders if there were no sizable acquisition opportunities. “We believe the market is increasingly expecting a special dividend given the significantly improved balance sheet,” UBS said in a research note to clients this month, The Sunday Times reports.
City watchdogs have thrown down the gauntlet to banks on lending, declaring that there is now no excuse for them not to support small businesses and homebuyers. Senior sources at the financial policy committee (FPC), the powerful new body that will oversee banking, said recent policy changes meant that banks could no longer use tighter regulation as an excuse for rationing loans. Banks have blamed demands for big capital reserves for the dearth of lending that threatens to choke Britain’s recovery. “We have taken that argument off the table,” a source close to the FPC said. “This is just regulators trying to dodge responsibility for their actions, rather in the way they tried to dodge responsibility for the banking crisis five years ago,” one bank chief executive said. The coalition is desperate for a rapid increase in credit to help lift Britain out of the double-dip recession, The Sunday Times explains.
Aerospace and defence groups BAE and EADS are this weekend piling pressure on the governments whose approval is needed for their proposed £30billion merger, by threatening to walk away from the deal unless all but a few formalities are completed by October 10th. An extension of talks beyond the deadline will be sought only if the French, German, British and US governments have largely agreed to the terms of the merger. Top executives in both companies are not prepared to see the talks drag on indefinitely, The Financial Mail on Sunday reports.
BP is in talks with both AAR and state-controlled Rosneft over a possible sale of its 50% stake in the venture, which analysts value at $25bn (£15.5bn). Hopes of a favourable deal with Rosneft were raised when BP chief executive Bob Dudley and Rosneft chief Igor Sechin met Russian President Vladimir Putin a fortnight ago. They discussed plans for BP to take a major stake in Rosneft, in a deal that could pave the way for joint exploration projects. But last week AAR signalled its intent to take on the Kremlin,indicating it would make an all-cash offer for BP’s stake and suggesting that litigation against BP could be dropped as a sweetener. The threat of legal challenges from the oligarchs hangs over BP’s sale plans. The Telegraph has learned that AAR’s latest move followed its repeated efforts to prevent BP disclosing information about the venture to Rosneft, in an apparent attempt to frustrate the sale.
The City regulator will this week announce a clampdown on listing rules aimed at preventing the kind of scandals which have surrounded foreign mining companies such as Kazakhstan's ENRC and Indonesia's Bumi. The Financial Services Authority is set to demand much greater corporate governance compliance and strong non-executive director representation from overseas groups that trade their shares in London. It will also tighten rules on using cash-shells as an easy way to float and call for larger free floats and more controls over majority shareholders. Bumi, backed by financier Nat Rothschild, last week ordered an investigation into alleged financial irregularities which could amount to as much as $500m (£310m). It shares slumped as a result. Corporate governance group Pirc said this was not a lone case: "Bumi is one of a number of recently listed companies that, while traded on the UK market, is essentially an overseas business, The Independent on Sunday writes.
Improvements at Tesco’s American, Asian and Euro¬pean operations are unlikely to make up for a continued slide in its home market as Britain’s biggest grocer prepares to post its first fall in profits for ¬almost two decades. Chief executive Philip Clarke will this week launch a defence of his £1bn turnaround strategy for the group, which issued its first profits warning for 20 years in January and posted a 1.5% fall in sales during the spring. Tesco has fought back by hiring an extra 4,300 staff to stock shelves and serve customers, along with the refurbishment of 100 stores. But City analysts have warned Clarke’s recovery plan needs to start being reflected at the chain’s checkouts. Richard Cathcart, an analyst at Espirito Santos, said: “At some point, commentary from management and the hard sales data will have to move in the right direction if investors are to have confidence that Tesco can recover,” The Scotsman on Sunday says.
The owner of Scottish Power has pulled out of a multibillion-pound plan to build atomic reactors, dealing a blow to Britain’s faltering nuclear renaissance. The decision by Iberdrola, the Spanish energy giant, means there is now a question mark over two of the three groups that planned plants. Ministers hoped the trio would build a dozen reactors generating roughly a fifth of Britain’s power over the next 20 years. However, only one of the three, a joint venture between EDF and Centrica, is ploughing ahead. It will spend £14bn on two reactors at Hinkley Point, Somerset, subject to agreement about power prices, according to The Sunday Times.
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