City Republic: Jaguar and Land Rover find a new home
LONDON - Tata has secured Jaguar and Land Rover, reports Stephen Foster, but other buy-outs will be affected by market jitters.
Market jitters hit buyout deals
It seems the further east you go, the better chance you have of getting a deal away.
Indian carmaker Tata will announce later today that it's bought Jaguar and Land Rover from Ford for around £1bn, in the process persuading Ford to put £300m into the pension fund.
In the US, the much larger $19.5bn buyout of radio and poster group Clear Channel by a number of big private equity firms looks as though it's hit the buffers because the share price has fallen to $25. This is from the $39 it was when the offer was agreed.
Back in London, Charles Allen's Global Radio will learn today if it's succeeded in extending the time on its £371m agreed bid for GCap Radio to April 2.
It says it needs more time to do due diligence.
More due diligence usually means the price goes down.
The London FTSE 100 opened lower this morning, following a late fall on Wall Street yesterday as the US digested some pretty dire housing and consumer confidence stats. In themselves' these are hardly surprising and sales of existing as opposed to new houses are finally rising, albeit at historically low prices.
London was also hit by the collapse of another deal, the proposed merger between mining giants Xstrata and Brazil's Vale. Xstrata shares fell 10% in early trading.
What to do about those 'short sellers'
Short sellers are people who promise to sell shares at a certain price and, before the trade is due, actually buy them at a lower price because the price is falling. Usually they do this by "borrowing" the stock from a current holder of the shares, for a fee.
They then pocket the difference.
All perfectly legitimate, and some people made loads of money out of Northern Rock after realising that its business model, borrowing about 80% of the funds it needed from the wholesale banking market, and greatly increasing its mortgage lending at a time when interest rates were going up, was an accident waiting to happen.
The Northern Rock "shorting" happened over a period of months but in today's febrile markets you need to be in and out damn quick, so the "bear raid" on HBOS last week depended on the price going into freefall.
Which indeed it did on Wednesday, as did Lehman Brothers shares on Wall Street that week.
But a scam was detected, the Bank of England and the Financial Services Authority woke up, and dreadful consequences were promised for those traders caught spreading "false and malicious rumours" about HBOS and others.
Most of the papers think the villains won't be found, although it's pretty easy to find out who borrowed HBOS stock and lined up "short" trades. Indeed HBOS is expected to make a statement today.
Rumour-mongers could say that bank shares are over-valued and, anyway, HBOS has bought rather too many iffy mortgage packages (all mortgages are packaged these days).
Maybe, but least the short sellers can be identified, publically preferably.
One way to end this scam would be to ban stock lending.
Maybe it had a legitimate purpose in the days when stock markets had people like stockbrokers who made their money by taking commission on trades rather than speculating on their own account (like now).
But these days, most short sellers would think twice if they actually had to buy the stock (rather than borrow it) in the first place. If they had to do this the price would go up of course, hardly what a short seller requires. And institutions can't make that much money out of lending stock anyway.
Stock lending so often leads to trouble. One of the masters of it used to be "Captain" Bob Maxwell who used to use Goldman Sachs to borrow stock for him to keep his Mirror Group creditors at bay.
Eventually Goldman said "no more" and Cap'n Bob had to raid the pension fund instead.
So ban it guys and clean up the stables.
Olympics boycott moves ever closer
You don't get much credit for being the first to bring bad news but a week ago we said a Beijing Olympics boycott was a distinct possibility, thanks to the crisis in Tibet.
Well, it just got a whole lot closer following US Speaker Nancy Pelosi's visit to the Dalai Lama and her comments to the effect that the civilised world wouldn't put up with Chinese repression much longer (I believe Nancy, although a Democrat, voted for the Iraq War -- but there you go).
This one will obviously run and run and but it will be causing big time consternation in medialand.
On the subject of "I told you so" we also said a couple of weeks ago that the City could do with an image campaign to try to defuse some of the ordnance about to be aimed at it.
Well the ordnance is on its way, with this Easter Sunday the Archbishop of Canterbury and the Bishop of Rochester both taking aim at greedy speculators in the Square Mile.
Even hacks on the City pages are now joining the call for better (which means more) regulation and some accounting by those executives and traders who have walked away from the current turmoil with big profits and pay-offs.
It's only a matter of time before the politicians join the hue and cry.
We said it would get nasty, and it will.
3i pulls out of venture capital
The UK's biggest backer of start-up companies 3i is pulling out of the market to, in effect, turn itself into a private equity firm specializing in medium-sized companies.
This is very bad news indeed for the advertising and media sector as 3i has helped numerous entrepreneurs get their businesses off the ground.
3i was formed in 1945 by a syndicate of seven British banks and by the time it floated in 1995 held stakes in around 3,500 unquoted British companies. Now new CEO Philip Yea, former finance director of Diageo, reckons there's more money to be made backing buyouts than start-ups, particularly in the Far East where it currently has nearly £500m invested.
But it's a sad development for anyone wishing to start a new British business.
Stephen Foster is a former news editor of Campaign, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog www.editco.net and Politics of the Media for Brand Republic.
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