General Motors may soon get the long-delayed green light to sign over carmaker Opel to Canada’s Magna. EU antitrust regulators have no plans to block Magna’s acquisition of GM’s European arm, a European Commission spokesman said in Brussels, easing fears the transaction could run out of gas in debate over German state aid to the mostly German-staffed company.Magna hopes to conclude the deal within weeks of signing a contract. That should be that, right? Well, hardly. For one thing, Spanish workers at Opel’s plant at Figueruelas have voted to strike in protest at cuts included in the Magna package. And European politicians say GM and the Opel Trust should have the option of reopening the bidding process.But the jilted other bidder, RHJ, says it is no longer interested in doing a deal, so going back to the auction block is probably a nonstarter. And with European auto titan Volkswagen saying sales will likely stay stalled next year, the political will to get a deal done is about all Opel has going for it right now. The company is poised to run out of cash by mid-January.
As centers of innovation go, there are worse places to place a bet on the past repeating itself than California’s technology hub. Looking beyond the Internet, housing and credit bubbles, it’s still the preferred playground of such leading financial weathervanes as venture capitalists, gizmo nerds and software studs.Perhaps Wall Street, searching for reasons to remain optimistic about the market’s summer rally, should take heart from the spate of articles painting pictures of green shoots all over Silicon Valley. The Wall Street Journal’s Deal Journal notes that tech IPOs are staging a comeback, and asks if its time to party like it’s 1999?Our reporting shows that investors, encouraged by a growing number of acquisitions and public stock flotations in the past few months, are keeping a close eye on a coterie of promising startups in Silicon Valley. David Lawsky identified six privately held companies as the ripest for acquisition or readiness to go public, out of 34 cited in industries ranging from alternative energy to social networking.The top four are business social network LinkedIn, solar panel maker Solyndra, smart grid company Silver Spring, and Zynga, a casual games company whose products run on social networks like Facebook. Two others are Guidewire, which makes software for property and casualty companies, and LiveOps, which runs call centers using private contractors who work from home.But he reports that the Silicon Valley Six say they intend to keep growing organically rather than agreeing to be acquired or go public during the recession. Recession or no, there is clearly plenty of money looking for a ride. That’s the thing about bubbles; they tend to be more fun when you catch them early.
Known around the country as the no-frills airline, and among industry watchers as a most astute hedger of jet-fuel costs, Southwest Airlines showed it is willing to spend plenty to pick up bankrupt Frontier Airlines. Southwest appears to be spoiling for a fight with far bigger rival United Airlines on United’s — and Frontier’s — home turf in Denver.Southwest (owner of the heart-warming stock ticker LUV) boosted its offer for Frontier by about 50 percent to more than $170 million on Monday, far above a competing bid of $108.75 million from Republic Airways. Southwest says it is offering unsecured creditors 12 cents on the dollar, compared with Republic’s 8.7 cents. Frontier is set to hit the auction block on Thursday.Southwest said it wants to keep the bulk of existing Lynx Aviation, a Frontier subsidiary that serves 15 regional markets around Denver, but would transition to Boeing 737s and retire Frontier planes over a period of 24 months. These are the kinds of questions Southwest will need to answer to convince analysts that they know what they are doing with this deal. As Deepa Seetharaman reported in a July 31 analysis, integration issues are expected to cause some turbulence.If nothing else, raising the bid shows Southwest’s frugality has its limits.
Chinese demand for industrial commodities has long been the defining variable in establishing global market prices for everything from alumina to zinc. The modern engine of global manufacturing has made great strides toward embracing freer markets, but its deep roots in its command economy have clouded global markets’ ability to gauge demand. If Chinese allegations are true that Rio Tinto spied and adopted such unsavory tactics as bribery to gather market intelligence, the actions of the western company could be considered an attempt to attune its business practices to the local climate.Share of Rio Tinto were sagging on Monday after China stepped up its spying allegations. China’s state secrets agency said on its website over the weekend that Rio Tinto had spied on Chinese steel mills for six years, resulting in the mills overpaying $102 billion for iron ore, Rio Tinto’s biggest earner. Australia’s Foreign Ministry says there’s nothing new in the latest allegations. Rio declined to comment on the accusations, which followed China’s detention a month ago of four Rio employees in Shanghai, including Australian Stern Hu, on suspicion of stealing state secrets.When considering China’s motivation in this political drama, the brutal realities of the marketplace are also a key consideration. “Most observers see a link between the detentions and Chinalco’s failed attempt to up its Rio stake,” according to Reuters columnist John Kemp. “While a direct link is hard to prove, there is no doubt the allegations have been prompted by high-level frustration at the way the annual ore negotiations have been conducted.”
Singapore investment vehicle Temasek cut its losses in Bank of America and ran in the first quarter, dumping a 3 percent stake, for which it took a $3 billion hair cut. Having watched its relatively high-risk investment in Merrill Lynch turn to dust, the Singapore state agency turned to firmer ground: China.
Temasek was among the investors to gobble up a stake in China Construction Bank that Bank of America sold earlier this week as it further drew in its horns from the global recovery story. Sources say the move fits with Temasek’s focus on global companies that aim to grow in Asia, noting that Bank of America is losing whatever global allure it may have bought along with Merrill’s bad assets. Getting a “gentleman’s C” in the stress test doesn’t inspire much confidence either.
With GM‘s share price heading toward $1 and Chrysler close to consummating its shot-gun wedding with Fiat, Ford‘s raising $1.4 billion through the sale of 300 million shares puts some serious distance between it and the competition.
Having gone this far into the recession without government aid, Ford is making a big show of going green, consolidating its dealer networks and taking the kind of cost-cutting steps that GM is being chased into by the government and that Chrysler is hoping for from its merger with Italy’s Fiat.
Ordered by the federal government to find $33.9 billion of capital, Bank of America‘s Ken Lewis seemed to be acting the part of the visionary global business hawk yesterday when he detailed plans to retain a large stake in China Construction Bank. “It’s a strategic partner, and we always want to have a very large ownership position,” Lewis said on a conference call hosted by Calyon Securities.
A few hours later, the bank sold a block of 13.5 billion CCB shares for $7.3 billion, according to a source directly involved in the deal. A lock-up period on the block expired last Thursday. The rest of the bank’s CCB stake — about 10.6 percent — is still locked up, and will be until Aug. 29, 2011.
As Kristina Cooke reports, “While banks may be less hesitant to lend to each other if they feel their rivals’ books have been credibly vetted, that does not translate into confidence to make new loans to small businesses and consumers.”
It seemed only a bit odd that media star Arianna Huffington was the guest host on CNBC the day the all-important stress test results were due. Not to play down her credentials in media or commentary circles, but where were the celebrated bank analysts, the corporate chieftains and the investment gurus who so routinely enjoy a dose of the limelight on America’s Business Channel?
Wasn’t this the perfect day for a newsmaker rather than a news talker? The Huffington Post founder has been a good reality check on market cheerleaders who live on CNBC, but on Stress-Test Thursday, the less-than-casual viewer expects insiders with insight. It tasted like something strange and exotic had made its way into the DealZone coffee machine.