Merrill Lynch to write-off £8 billion this year

Merrill Lynch, the troubled US investment bank, which is expected to be hit by a total credit crunch write-off of $16 billion (£8 billion) this year, is understood to be in advanced talks with the Singapore Government’s Temasek Holdings over a $5 billion (£2.5 billion) injection of capital. Merrill has been one of the world's biggest sub-prime casualties and is expected to write down a further $8 billion (£4 billion) in the fourth quarter, which could take its total mortgage losses this year to $15.9 billion (£8 billion).

It is understood that this morning, the board of Temasek has been given preliminary approval for the investment in Merrill, although price, timing and regulatory issues have yet to be negotiated. Analysts have suggested that if Merrill’s write downs get much worse, it could sell its 20% stake in Bloomberg, the financial information company, or its 49% stake in BlackRock, the US fund manger. Temasek Holdings is one of two Singapore Government investment vehicles and one of the oldest sovereign funds, with an estimated $108 billion (£54 billion) of assets and owns 15.3% of Standard Chartered, the Asian-focused UK bank.

On Wednesday, rival bank Morgan Stanley said it would sell a 9.9% stake to state run China Investment Corp for $5 billion (£2.5 billion) and last month Citigroup, received a $7.5 billion (£3.75 billion) of fresh cash from the Abu Dhabi Investment Authority. (source: Timesonline)

Oracle proves everyone wrong

Concerns that slowing economic growth would cause key customers to throttle technology spending, were shucked yesterday by software industry mainstay Oracle. An expansion into specialty software markets and a tight rein on expenses helped Oracle turn in a strong second quarter and issue an upbeat outlook for the third, as net income rose 35%, to $1.3 billion (£650 million) in the quarter that ended November 30Th. Revenue increased 28%, to $5.3 billion (£2.65 billion), surpassing the $5.04 billion (£2.52 billion) expected by analysts. Sales of new software licenses, a closely watched indicator of future revenue, climbed 38%, exceeding Oracle's forecast that the bookings would increase between 15% and 25%.

CEO of Oracle, Larry Ellison, said “Oracle plans to expand into additional industry areas. That's our strategy for growth." Oracle also said revenue would increase between 21% and 24% in the current quarter, which ends in February. Analysts expected Oracle to increase revenues by 18% in the third quarter.

Oracle is the top supplier of database software and an emerging power in business applications, which companies use to forecast sales, plan production schedules, and manage budgets. Oracle has spent more than $24 billion (£12 billion) to buy more than 40 companies since the beginning of 2005 to gain ground in the applications market from leader SAP.

Analyst expected Oracle to fail in buying so many companies as they would fail to integrate all application. But they're just obliterating revenue and earnings expectations by acquiring companies. It proved that Mr Larry Ellison was right yet again as Oracle stock gained 6.6%, to $22.12 (£11.06), in extended trading. As of the close, Oracle shares had risen 21% in 2007, while shares of SAP have slumped more than 4%. (source: Businessweek)

Viacom Inc. said yesterday that it has selected Microsoft Corporation as its internet advertising partner in a five-year agreement initially valued at an estimated $500 million £250 million) that involves online games, shows and movies. Microsoft will help Viacom place advertising on Viacom's U.S. Web sites and be the exclusive seller of its remnant display advertising, or ad space Viacom has been unable to sell.

As part of the deal, Microsoft will also license on a non-exclusive basis long and short-form television and movies from Viacom for the MSN portal and the Xbox 360 game system's online network. Microsoft has also agreed to buy ads on Viacom's broadcast and online networks over five years and help Viacom establish itself as a publishing partner on Microsoft's casual Internet gaming sites.

The Redmond, Washington-based software maker has attempted to make inroads against Google Inc. online advertising business over the past year as each company has raced to purchase new advertising businesses. Yahoo signed a deal in April with Viacom to provide search advertising for 33 of its Web sites, which remains in place. (source: Reuters)

The Competition Commission has made its decision on the BskyB stake in ITV and confirmed that, the satellite broadcaster, should cut its stake in ITV to below 7.5% because the shareholding reduces competition in the all-TV market and works against the public interest.

If BSkyB sold 10.4% of its 17.9% ITV holding at the price of 84.2p, it would crystallise a loss of £205 million. John Hutton, the Secretary of State for Business, has until January 29, 2008, to consider the Competition Commission's report and announce final decisions, but in publishing the findings early he has indicated he is minded to accept its possible remedies.

The move re-opens the door for Virgin Media and other potential suitors to attempt a merger with ITV. As the market opened, shares in ITV rose by 1.2p to 84.2p on possible takeover speculation, while BSkyB shares were virtually unchanged.

The watchdog decided against forcing BSkyB to sell the whole of its 17.9 per cent stake as demanded by Virgin Group, saying that a partial sale was less intrusive and that with a holding below 7.5% Sky would be unable to materially influence ITV's strategy.

A statement from BSkyB said that the broadcaster was considering the contents of the Commission's report carefully. It said: "The next phase of this process lies with the Secretary of State. We will be making representations to him in due course." BSkyB snapped up the stake in ITV for £940 million, or 135p a share, in November 2006 when NTL, its pay-TV rival, was trying to mount a takeover.

BSkyB, where former chief executive James Murdoch replaced his father Rupert as non-executive chairman this month (News Corporation on taking over Dow Jones), has always insisted that it had not broken any merger rules when it acquired its ITV stake, which it called a long-term investment. (source: Timesonline) - Heathrow voted worst airport (article on BSkyB ITV shares), Virgin Lost 40 000 customers & Sainsbury's Bid dropped (includes aticle on Virgin & BskyB sales)

New bidder for Northern Rock

A newcomer to save Northern Rock, Bradford & Bingley, has approached the stricken bank about buying assets. According to reports, the buy-to-let firm and mortgage lender is not looking to buy the troubled Newcastle-based bank outright, but could become part of a private-sector rescue package.

Two preferred bidders, Virgin Group and Olivant, are vying to take control of the stricken bank as discussed in earlier articles and press releases. Northern Rock has an attractive portfolio of mortgage assets which Bradford & Bingley would be happy to hold.

Bradford & Bingley, which has been plagued by concerns over its liquidity since Northern Rock's problems emerged, has, on paper, a more risky portfolio of lending since more than half of its business is in the buy-to-let market and 20% of its lending is on self-certified mortgages. Adding Northern Rock's quality assets to Bradford & Bingley should give ballast to the buy-to-let specialist's loan book.

Last month Bradford & Bingley went some way to easing fears over its liquidity by selling £4.2 billion of loans, which gave it a substantial cash cushion in preparation for further tightening of credit markets. Northern Rock's shares rose 6.6% this morning to 91.7p in early trading, while Bradford & Bingley's climbed 0.5% to 258.75p. (source: Timesonline) - Northern Rock dreams fading, New Bid for Northern Rock by Olivant, Northern Rock offers below value, Final bids for Northern Rock today, New player in Northern Rock bid, Virgin pushes forward in takeover, BAA must halve queueing times to avoid fines, SAB Miller to buy Royal Grolsch, BHP Billiton's offer rejected, News Corporation on taking over Dow Jones

Sports Direct today reported a 70% slump in first half profits and failed to name a new chairman for the troubled sportswear retailer after a seven month long search. The company, has issued two profit warnings since its flotation in February and blamed the decline on bad weather and the England football team's failure to qualify for the European Championships.

Profits for the six months to October 28 fell from £70.1 million to £21.2 million as sales fell by 7.1% to £668.1 million. Since floating in February, Sports Direct's shares have fallen in value by 70% to a current all-time low of 84.25p.

Sports Direct has been without a non-executive chairman since May when David Richardson, the former finance director at Whitbread quit after differences with the board.

Sports Direct refused to comment on its search for a chairman or its stake in Umbro, which is being pursued by Nike. Mike Ashley, Sports Direct's owner, added he had no intention of taking the company private. (source: Timesonline) - Northern Rock dreams fading, Alitalia SpA in sight for Air France-KLM, Sports Direct to block Nike takeover

The internet auction house formerly known as QXL Ricardo has been agreed to be bought by Naspers, Africa's largest media group. The sale for Tradus (new name for QXL), has been set for an all cash deal £946 million, which is £18 per share.

Having weathered the dot-com bust of the late 1990s, the FTSE 250-listed group has since been embroiled in a series of long-running legal disputes over the ownership of key assets, bitter shareholder wrangles and failed bids. The takeover will also unlock a £123 million payout to three managers of Tradus’s Polish operations.

The group of Polish executives, led by Arjan Bakker, was accused by the main board of what was then QXL Ricardo of wresting control of the Polish business "fraudulently", through an improper share issue. A three-year legal battle followed and that was finally settled with the fast-growing Polish unit, which also includes operations in the Czech Republic, Ukraine and a Hungarian joint venture, being reintegrated into the parent company.

EBay, the US online auction giant, which is currently planning a revamp of its own business, has held talks several times over the years with Tradus. Shares in Naspers fell as much as 11% in Johannesburg, with investors concerned over the agreed price.

The Naspers proposal represents a 19% premium to share price before Tradus revealed that it had received an approach, on November 7. Ahead of the approach being made public, Tradus traded at about 63 times earnings for the previous year, compared with about 26 times for eBay.

The company, which operates sites in Poland, Czech Republic, Hungary, Ukraine and Russia, is also is diversifying from trading & auction sites into classifieds advertising, price comparison sites and online payment services.

When the group received a failed bid from Florissant, a private equity group, in 2005 it was valued at less than £30 million. At its peak, the former dot-com darling, founded by the journalist Tim Jackson, was briefly worth more than £2 billion. Florissant, which holds a 15% stake, will join Izaki, the Israeli investor group, with 14%, in also receiving a windfall profit from the sale to Naspers.

Tradus recently reported a 165 per cent jump in first-half pre-tax profit, to £3.68 million. Naspers, meanwhile, has been expanding overseas. The group, which owns South Africa's largest daily newspaper, the Daily Sun, and the pay TV outfit MultiChoice, has been building up its operations in sub-Saharan Africa, China and Russia. (source: Timesonline)

Velocity Interactive Group - New Investment Company

Two high-profile media and Internet executives will join with venture fund ComVentures to form a new investment company with $1.5 billion in assets. The two high-profile executives will be, former AOL Chief Executive Jonathan F. Miller and former Fox Interactive Media President Ross Levinsohn. The partnership with ComVentures will form a new group focused on investing in Internet and media companies, and will be announced today. The firm will be named Velocity Interactive Group.

ComVentures, Palo Alto, California, has focused on early-stage investments in communications equipment and services and the current fund of ComVentures's will move to the new company. It is providing the $1.5 billion (£750 million) in funding. Partners at the new firm said they will try to raise more money next year.

The firm is looking for investments in both early-stage companies and larger growth companies. Investments will be as small as $500 000 (£250 000), though Velocity expects investments in a company could grow to between $5 million (£2.5 million) and $30 million (£15 million). Velocity also plans today to announce its first investments. They include NDTV Networks, an Internet video and television producer in India. In the U.S. the firm has funded three companies that include Fabrik, a Web site consumers can use to store and manage their videos, photos and other digital creations.

Mr. Miller was chief executive of Time Warner Inc.'s AOL division from 2002 to 2006. Mr. Levinsohn formed News Corp.'s Internet division in 2005 and spearheaded the purchase of the social networking Web site MySpace.com. Mr. Levinsohn left News Corporation. in late 2006. (source: The Wall Street Journal)

Nintendo, makers of the sought after Wii video games console, will miss out on an estimated $1.3 billion (£639 million) in sales this Christmas by failing to meet soaring global demand for its Wii video games console.

Production has been hit by shortages of components and it insists it is doing all it can to meet demand. Some analysts believe, however, that the company privately welcomes tight supplies because it wants to delay market saturation to prolong interest in the console.

Nintendo has raised production targets several times in recent months and now plans to ship 17.5 million units globally this year, up from 14 million. It said that demand “has been higher than we could ever have anticipated and the company is withdrawing planned television advertising for the Wii because of severe shortages of the games console in the run-up to Christmas.”

Stock market investors appear to believe that Nintendo can maintain its success. Over the past two years the group’s shares have risen fivefold to make the company Japan’s third most valuable quoted business. However, last month Sony’s PlayStation 3 beat the monthly sales of the Wii in Japan for the first time, signalling that the battle between the two next-generation consoles may yet have further to run. Sony sold 183,217 PS3s in Japan in the four weeks to November 25, against sales of 159,193 for the Wii. (source: Timesonline)

Air France-KLM sought to deal a death blow to the rival airline bidding for Alitalia, Italy's loss-making national carrier, by unveiling a £530 million plan to refurbish the carrier's fleet. Yesterday, analyst saw the Franco-Dutch giant as the heavy favourite to win the 49.9% stake that is being auctioned by the Italian government. Air France is bidding against Air One, a domestic Italian carrier. Under Air France's plan, it would raise the £530 million through the issuance of new shares, which it would use to update the interior of Alitalia's planes and to launch a marketing plan to attract international clients back to the carrier. It would also replace the company's old Boeing 767s and McDonnell Douglas MD80s with new aircraft.

The Italian government is expected to make its decision today. If a definitive winner is chosen, it would bring to an end a long and sorry chapter for the Italian government, which first signalled its intention to sell its stake in the carrier a year ago. The process has run into problems repeatedly, most recently in October when the last of the previous bidders dropped out of the auction over objections to onerous terms that were being imposed by the government. (source: The Independent) - ArcelorMittal to by China Oriental Group Co., Alitalia SpA in sight for Air France-KLM

Arriva outperforming Virgin Rail

Arriva boasted today that the sacking of Virgin from the long-distance CrossCountry train network has led to an immediate and dramatic improvement in performance. After a decade of disappointments since privatisation and despite the introduction of smart Voyager trains, Virgin Rail - a joint venture between Sir Richard Branson and Stagecoach - was relieved of CrossCountry on 11 November 2007.

In a thinly veiled attack on previous management, Arriva said today: 'With 86.3% of services arriving on time over the first four weeks of operation, that is substantially better than the equivalent services run in the same period last year.'

Arriva has not been immune from hashing up in the past, having been sacked from its North of England train franchise in a maelstrom of strikes and poor services, but it claims things have changed. According to the most recent National Rail Trends 2007-8 performance report, it is confirmed as the UK's most improved rail operator with 92.3% of its services arriving on time compared with 85.7% for the same period last year.

The company, which also runs buses in London, said it is on track to make the £121 million pre-tax profits expected by analysts. (source: thisismoney.co.uk)

Tata, is to be named as the preferred bidder for Ford’s Land Rover and Jaguar brands in the next few days as the Indian Company is trying to bring the world’s cheapest car to the South Asian country. Tata is the front-runner in a race that includes Mahindra & Mahindra, a fellow Indian car group, and One Equity, the American buyout group.

Tata is set to roll out a 100,000 rupee (£1,200) “People’s Car” next year. Ratan Tata, the chairman, has said that he wants the cut-price vehicle to help poorer Indians to upgrade from motorcycles, which currently transport entire families, to cars.

If Ford chooses Tata, it will be an historic moment for the car industry, marking the first time that a major Western car group has been bought by an Indian company. Ford, the US carmaker is expecting to make up to £1 billion from the sale, although it is expected to keep some form of equity interest in the devolved business.

Tata, a conglomerate whose interests range from salt mining to software engineering, has been gradually expanding in the UK, where it owns the Tetley tea brand, and it is now the world’s fifth-largest steelmaker after buying Corus. Jaguar and Land Rover together employ 15,000 in Britain. It is understood that Tata plans to retain all three of the UK factories, at Solihull and Castle Bromwich in the Midlands and Halewood on Merseyside.

Ford sold Aston Martin earlier this year. The company is struggling to return to profitability after record $12.7 billion (£6.3 billion) losses last year. Tata’s image as a mass-market supplier took a knock at the beginning of the year during protracted negotiations over land for its small car plant in West Bengal, which ended in violence. (source: Timesonline) - Acer & Tata in today's news

Northern Rock dreams fading

There are only two interested parties left in the dying dreams of Northern Rock - Sir Richard Branson's Virgin Group and Olivant, the firm led by former Abbey National banker Luqman Arnold. Even that might be over optimistic as Olivant wants to bypass the formal process, which has a February deadline. It wants its executives in place by Christmas and thinks delay would further damage Northern Rock.

Olivant's interest is fading, and it was probably no coincidence that Adam Applegarth, the Rock's chief executive, was pushed out very early yesterday. His departure was an admission that Olivant is right about one thing: it is time to get real. It is also time to drop the pretence that this is an auction. Nobody has ever proposed buying Northern Rock with all its assets and all its liabilities. It has been a competition to see who could best safeguard taxpayers' money.

Solutions to Northern Rock – Olivant’s proposal is to repay £10 billion to £15 billion of the £25 billion immediately and this gap between the figures illustrates the degree of wishful thinking running through the plan. The Virgin solution - on the sketchy public details - doesn't sound much better. Its management has no experience of running a bank with a £110 billion mortgage book, and the Virgin name has made little impact on the financial services industry in 10 years of trying. When the taxpayer is on the hook for £25 billion, those facts can't be ignored.

Things actually got worse last night and The Virgin Group was stripped of its preferred bidder status in the battle for Northern Rock after rival Olivant threatened to walk away unless it was put on an equal footing with Sir Richard Branson’s company. Northern Rock agreed to the measure at a meeting with representatives of the Treasury, the Bank of England, the Financial Services Authority and the bidding consortium, which is led by Luqman Arnold, the former chief executive of Abbey. In exchange, Olivant agreed to remain in the auction until at least mid-January.

In a preclose statement yesterday, the Rock unveiled a £281 million write-down on sub-prime mortgage investments, including a £118 million hit on structured investment vehicles (SIVs) and a further £32 million from higher-risk SIV-lites. It did not change its September forecast of underlying pretax profits in 2007 of between £500 million and £540 million.

Meanwhile, Andy Kuipers, Northern Rock’s sales and marketing director, yesterday replaced chief executive Adam Applegarth with immediate effect but the move failed to comfort shareholders, who saw the bank’s stock plunge more than 13%. (source: Guardian & Timesonline) - New Bid for Northern Rock by Olivant, Northern Rock offers below value, Final bids for Northern Rock today, New player in Northern Rock bid, Virgin pushes forward in takeover, BAA must halve queueing times to avoid fines, SAB Miller to buy Royal Grolsch, BHP Billiton's offer rejected, News Corporation on taking over Dow Jones

The Controversial Sports Direct founder and Newcastle United football club owner, Mike Ashley, faces a legal threat to his attempt to acquire Les Ambassadeurs, the London casino.
Although Mr Ashley’s estimated £95 million offer is believed to be the highest bid on the table, it is understood that Las Vegas Sands, the American gaming behemoth, is claiming it had previously agreed a deal at about £75 million, and the owner of Las Vegas Sands and one of the world’s richest men (£13 billion) is threatening to sue. The reason for sueing is because Mr Sheldon Adelson was understood to be the original bidder at £75 million.

Mr Adelson is also believed to have contacted rival bidders through his lawyers, Mishcon de Reya, claiming he has a binding verbal agreement to buy Les Ambassadeurs and threatening legal action against them if they attempt to gazump him.

In the early stages of the sale process analysts were tipping Harrah’s Entertainment, another Las Vegas gaming giant and the owner of LCI, the casino’s former owner. However, Harrah’s is itself the subject of a recommended $27.8 billion (£13.9 billion) takeover by Apollo Management and TPG Capital, and the buyout firms are said to have vetoed a purchase of Les A in the light of tough trading conditions in the UK.

Las Vegas Sands is believed to view Les Ambassadeurs as a strong brand that could be rolled out as part of Mr Adelson’s ambitious expansion plans. In addition to the Venetian Resort Hotel Casino and the Sands Expo and Convention Center in Las Vegas, it runs the Venetian Macao Resort Hotel and the Sands Macao.

Las Vegas Sands declined to make any comment, while Mr Ashley could not be reached for comment. (source: Timesonline) - Alitalia SpA in sight for Air France-KLM, Sports Direct to block Nike takeover

ArcelorMittal to by China Oriental Group Co.

The world’s largest steelmaker, ArcelorMittal, agreed to take over China Oriental Group Co. to gain a foothold in the fastest-growing steel market, valuing the company at a minimum of HK$18.6 billion ($2.4 billion or £1.2 billion). ArcelorMittal offered at least HK$6.355 for all the China Oriental shares it doesn't already own and said it plans to raise its stake to 73.13% from 28%.

The takeover may allow Chief Executive Officer of ArcelorMittal, Lakshmi Mittal, to bypass laws that restrict overseas control of steelmakers in an economy that expanded more than 11% in the first three quarters of the year. China has accounted for 65% of global growth in steel production in the past 10 years, and is now four times the size of the U.S. steel industry.

``Strengthening our position in the fast-growing Chinese market is one of the important elements in ArcelorMittal's strategy,'' Mittal said today. “We plan to develop China Oriental into a leading producer of heavy sections, focusing on leadership, quality and sustainability.''

Mittal is however still waiting for approval of his 2006 accord to buy a 38% stake in state-owned Laiwu Steel Corp., after the Chinese government last year tightened scrutiny of acquisitions by overseas companies. ArcelorMittal already holds about 29% stake in Hunan Valin Steel Tube and Wire Co. and has 12% of a Shanghai- based venture with Nippon Steel Corp. and Baoshan Iron & Steel Co. that supplies sheets to the automotive industry.

Hong Kong-listed China Oriental makes billets and strips, producing more than 3 million tons of crude steel a year. It posted a 769 million yuan ($104 million) profit from sales of 6.65 billion yuan for the six months ended June 2007. China Oriental will resume trading in Hong Kong at 2:30 p.m. local time after being suspended since Nov. 7, when they closed at HK$5.40. (source: Bloomsberg) - Merger would not affect ArcelorMittal

The internet search engine, Microsoft, has agreed to buy the privately owned British company, Multimap. Multimap is snapping at the heels of Google, the dominant online mapping service. The deal, understood to be worth slightly above $50 million (£24.4 million) and will further expand Microsoft’s fast-growing footprint in online and mobile advertising.

It will also deliver a $25 million (£12.5 million) windfall to Sean Phelan, the Multimap founder, who owned a majority stake in the business that he founded 12 years ago. Multimap’s 120 staff will share a further $13 million (£6.5 million), with an unnamed angel investor who holds the remaining 25% receiving a similar amount.

Multimap’s consumer-orientated website attracted more than four million unique users in the UK last month. It placed the site second in the British rankings, sandwiched between the market-leading Google Maps, which attracted about 11 million users last month, and Google Earth.

Multimap also operates in the commercial market, where it supplies online maps for websites run by other businesses. Clients include Ford and Royal Mail. The business-to-business service traditionally has delivered the lion’s share of Multimap’s revenues, but the consumer site is growing more quickly, Mr Phelan said.

The company is expected to post revenues of about £12 million this year. It made profits of nearly £900,000 in 2006. (source: Timesonline)

Air One was expected to be named at the preferred bidder for Alitalia by The Italian Government last night. Air One, owned by Carlo Toto, the Italian entrepreneur, faced competition from Air France-KLM. Air One was said to be the preferred bidder partly because it offered an “Italian solution” and partly because Air France-KLM wanted to downsize Milan Malpensa Airport.

Mr Toto said, “Obviously, some think that the Italian solution is the best right now”. However, Anpac, the pilots’ union, said that Air One’s business plan offered “no real European integration for the future Alitalia.”

AP Holding, the parent company of Air One, said that it had the support of four banks – Intesa Sanpaolo, Nomura, Morgan Stanley and Goldman Sachs. Reports said that AP Holding was ready to buy the Government’s 49.9% stake in Alitalia and try to buy out minority shareholders. Air One had guaranteed that it would maintain Alitalia’s two national hubs, at Rome and Milan, and up-grade international routes, with 90 new aircraft for short and medium-haul flights and 20 for long-haul services. It also planned to cut 2,750 jobs in a staff of 19,000. Air France-KLM said that it would cut jobs if its bid was successful.

Alitalia, which has been hit by strikes over restructuring plans and loses €1 million (£719,000) a day, has been trying to find a buyer for nearly a year. Maurizio Prato, the chairman, has indicated that he favours the Air France-KLM offer, but union leaders said that “if Alitalia were to go to a foreign company we would, in effect, be the only big European country not to have a flag carrier”. (source: Timesonline) - Alitalia SpA in sight for Air France-KLM