Tuesday, 15 April 2008

Virgin to takeover bmi

A £750 million takeover bid for bmi is discussed by Sir Richard Branson with Dubai International Capital (DIC), the $12 billion sovereign wealth fund, about financing a possible takeover. The billionaire entrepreneur is understood to have joined senior executives from Virgin Group when they visited Dubai recently to discuss potential deals in the health, mobile phone and airline sectors.

Sir Michael Bishop, who owns 50% plus one share in bmi, is widely expected to put his stake up for sale this year, although he insists that he is under no pressure to do so. However, Lufthansa, is a 30% shareholder in bmi and has an option to buy out Sir Michael. However, if Lufthansa passes on Sir Michael's stake, then Virgin Atlantic will try to take control of the airline. Alternatively, there are rumours that Lufthansa and Virgin may co-operate in a deal to buy bmi and create a European super-carrier.

Virgin will not be able to takeover bmi without a fight from rival British Airways, which revealed last year that it would be interested in acquiring bmi. Virgin and DIC were partners last year in the failed bid for the struggling Northern Rock bank. The recent meetings are thought to have been preliminary discussions on how the two groups could co-operate in the future.

Other than bmi, the possible joint ventures could include developing a Middle Eastern Virgin mobile operation and expanding the presence of Virgin Active health clubs in Dubai.

Virgin is also interested in bmi because it would give it a short and medium-haul feeder network. This would bring passengers from across Europe to its base at Heathrow, allowing them to transfer to long-haul Virgin flights. (source: Timesonline)

In a move to create the US largest air operator, Delta Air Lines agreed a $3 billion (£1.5 billion) takeover of Northwest Airlines. The all-share offer has to secure regulatory approval although analysts do not expect it to hit unsurmountable obstacles with the competition authorities. The new airline will fly under the Delta flag, be based in Atlanta and employ 75,000 people.

Airlines in the US are seen as under great pressure to consolidate as they face a range of challenges including high fuel costs, a weakening domestic economy, and competitive threat from European operators.

Delta and Northwest both came out of bankruptcy last year. Delta believes that the takeover will generate $1 billion (£500 million) in annual savings but it has said that no hubs will be closed. The two operators have very little geographical overlap so the merger will initially take no capacity out of the system. The takeover is likely to take months to complete. (source: Timesonline)

One of the key contenders, Joseph Brandon, to take over Berkshire Hathaway when Warren Buffett eventually retires was taken out of the running yesterday after he resigned amid federal pressure over a fraud case. Mr Brandon stepped down as chief executive of Berkshire's General Re insurance group.

His departure comes after the convictions in February of four of the firm's former executives for fraud. Franklin “Tad” Montross, General Re's co-president, will assume Mr Brandon's position immediately.

The defendants helped to add $500 million (£250 million) to AIG's loss reserves - a key indicator of an insurer's health, prosecutors said. One AIG executive was also convicted.

Neither the US Securities and Exchange Commission nor prosecutors has charged Mr Brandon with any wrongdoing. However, the conviction of his fellow executives in relation to the AIG case and an ongoing inquiry into General Re appears to have made his position untenable.

Other possible candidates to succeed Mr Buffett included David Sokol, chairman of Berkshire's MidAmerican Energy, and Ajit Jain, who runs the Berkshire Hathaway Reinsurance Group.

Berkshire owns more than 60 businesses, including furniture, jewellery, restaurants, natural gas and corporate jet companies, although its biggest exposure is to insurance. (source: Timesonline)

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