Apr 9, 2014 12:11 UTC

Banks swap rewards for risk on public deals

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By Dominic Elliott

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Investment bankers are wising up about reputational risk. Deutsche Bank and UBS are now loath to offer long-dated swaps to municipalities. New capital rules making it less attractive to enter into long-dated interest rate swaps partly explain why. But the legal tussles and bad publicity from dealing with public sector clients are a bigger factor.

Apr 9, 2014 06:58 UTC

China tech rout sifts IPO haves from don’t-needs

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By John Foley 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Falling prices of internet stocks are a headache for companies yet to join the market. The sell off that began in the first week of March and broke on April 8 hit Chinese companies particularly hard. It may leave investors pickier about coming initial public offerings of tech companies from the People’s Republic. The haves will be sorted from the don’t-needs.

Apr 8, 2014 17:45 UTC

Rob Cox: Crazy valuations not only sign of bubble

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By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Crazy valuations – even after a recent dip – are not the only signal that parts of the U.S. stock market, particularly internet companies, are in bubble territory. The willingness of investors in hot initial public offerings to accept second-class stock and governance that favors insiders suggests an imbalance between providers of capital and its consumers. Add head-scratching market caps based on contorted metrics, and this risks storing up trouble when the inevitable headwinds arrive.

COMMENT

Well, the flipside is that it may mean that the times of Henry Ford’s vision have arrived. Does it mean that generating income is not the only driver of change for such companies anymore?

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Apr 8, 2014 15:42 UTC

Trendy new buyout clubs may let down eager patrons

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By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Trendy new buyout clubs may disappoint their eager would-be patrons. Blackstone Group is enlisting some of its fund investors to help buy auto-parts maker Gates for $5.4 billion. Such collectives are increasingly displacing teams of private equity firms in bigger deals. Returns from so-called co-investing, though, could make it a passing fad.

Apr 7, 2014 18:55 UTC

Grubby assets shine in $5.6 bln tax arbitrage deal

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By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Grubby assets are being given a shine in a $5.6 billion tax arbitrage deal. Mallinckrodt, a specialty drugs company, is paying a 27 percent premium for Questcor, a rival barraged by regulatory inquiries. Why do it? The transaction moves profits to Ireland, where the acquirer is domiciled for tax purposes. It may be buying as many problems as taxman savings, however.

Apr 7, 2014 16:05 UTC

Ranbaxy sale shows risk in Japanese M&A adventures

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By Peter Thal Larsen

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Daiichi Sankyo has just reminded corporate Japan of the dangers of overseas adventures. The drugmaker is handing control of its ailing Indian affiliate Ranbaxy to local rival Sun Pharmaceutical in a $3.2 billion deal. The investment has lost almost 40 percent of its value in six years.

Apr 7, 2014 14:02 UTC

A field guide to shareholder-friendly activism

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By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The rise of shareholder activism has made it harder to distinguish between different species. Many corporate agitators say they are acting for all investors. Billionaire Carl Icahn’s online mission statement, for instance, touts “a platform from which we can unite and fight for our rights as shareholders and steer towards the goal of real corporate democracy.” Whether that’s true depends largely on the goals and methods used. Breakingviews provides a field guide to the activist animal kingdom.

Apr 4, 2014 17:02 UTC

Anadarko’s $5.1 bln settlement adds up in market

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By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Stock investors seem to have a firm grip on Anadarko Petroleum’s toxic waste settlement. The record $5.15 billion settlement on Thursday, covering years of environmental claims, was at the low end of a court-defined range which had a midpoint of $9.8 billion. The 15 percent jump in the oil company’s market capitalization is mostly explained by those numbers. And it brings Anadarko’s 12-month stock performance nearly back in line with the S&P 500 after a bumpy ride.

Apr 4, 2014 13:57 UTC

Carlyle descends into a public-private inferno

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By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A Carlyle Group investment in Montana lays bare why so many roads are paved only with good intentions. The mayor of Missoula, a city of about 70,000 once known as Hellgate Trading Post, is trying to seize the local water utility from the buyout firm. The confrontation shows why joint efforts between public and private entities to improve infrastructure don’t proliferate.

COMMENT

I think it is important to make it clear just why Carlyle, not the local government, is in the better position to own and operate the water utility. Unlike the local government, Carlyle with both the personal wealth of its managers and its institutional investors at stake, has a powerful incentive to operate the utility efficiently and increase its value to make a profit when it is sold. The fact that this is the business of Carlyle puts an added pressure on firm — its future business is at stake if the firm’s reputation for increasing the value of assets is tarnished.
Nothing like these incentives are at work when a government owns and operates a business, which is a leading reason why “our” infrastructure is in the shape it’s in. The role of government is generally to regulate private operations—not be put in a conflicted position of regulating itself.
David Haarmeyer

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Apr 4, 2014 05:43 UTC

China stock market opening is opposite of Big Bang

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By Peter Thal Larsen

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

China’s approach to opening up its stock market is the opposite of a Big Bang. Investors are once again getting excited about the prospect of mainland shareholders being allowed to buy Hong Kong stocks. But such hopes have proved premature before. As with any loosening of China’s capital controls, progress is bound to be gradual.