Funds Hub

Morning Line-Up: EMI, “dodging the real problem”, NYSE Euronext

News and views on the asset management industry from Reuters and elsewhere:

Citigroup  eyes EMI sale - New York Post

Investors lambast report in banks’ practices – Daily Telegraph

NYSE Euronext shareholders skeptical of Nasdaq, ICE  bid- Reuters

Trust the Cadbury trustee to get a deal

Warren Buffet may think Kraft isn’t doing a good deal by taking over Cadbury. With Kraft shares falling, Cadbury’s shareholders may not think the deal too sweet either and some disgruntled British consumers may be appalled that a much loved brand will be sold to a non-British group – and one that sells  chocolate symbolised by a lilac cow at that.

But one party is sure to get a good deal: the Cadbury pension fund trustees.

While Cadbury fans are digesting the takeover news, the trustees have lost no time in seeking a dialogue with Kraft to make sure they do get a good deal for the workers they represent. Call it fiduciary duty if you like but be sure pension trustees, used to a sponsor that “stood behind the pension fund for more than a hundred years”, will give Kraft a hard and cold look to assess its credentials as a sponsor – what the pension industry calls in vaguely biblical terms “the covenant”. 

In theory there is no need for a fight — Kraft was swift to assure it would honour “the existing contractual employment rights, including pension rights”. But did the multi-national really know what this pledge would cost, at least in pension terms?

Almost certainly no, because truth to tell the pension trustees themselves do not know. The fund is waiting for the results of its triennial valuation, which should give an accurate picture of the fund’s financial shape.  Independent consultant John Ralfe told me he thought trustees could present Kraft with a cash injection bill of £200 million or more.

Whether the assessment of an independent consultant not involved with the scheme in question proves right or not, it is fair to assume this kind of money would still be a small price to pay for the successful completion of a £11 billion deal.

If it turns out to be more, Kraft will still be careful  not to antagonise the pension trustees because they may not be able to scupper a deal recommended by the board, but a prolonged struggle could attract the attention of The Pensions Regulator.

from Commentaries:

Anglo dresses interims up as a defence

    Anglo American hasn't yet received a formal bid from Xstrata. But the miner's interim results read very much like a defence document.     The highlights alone give a pretty good idea of what chief executive Cynthia Carroll and new chairman John Parker will focus on if Xstrata does eventually pounce.     Anglo's case hinges on four things.     First, that its plan to cut $2 billion of costs by 2011 is ahead of target. Second, that it is getting on top of its $11 billion net debt, and third, that progress is being made in restructuring its problem child Anglo Platinum <AMSJ.J>. Lastly, Anglo acknowledges that it is an objective to reinstate the dividend.     Added to these elements, lest they appeared to have too defensive a flavour, is the promise of growth, largely through its Minas-Rio iron ore project in Brazil and its Los Bronces copper development.     Of these, cost savings are a crucial point of contention in the Xstrata debate, with the rival miner's chief executive Mick Davis confident he can squeeze a further $1 billion out of a combination with Anglo, taking the total to $3 billion.     Anglo isn't making any promises beyond those already given but the tone of the language -- which includes talk of being ahead on "asset optimisation", procurement and job reductions -- hints that it may be able to find more savings on its own, without handing anything to Xstrata.     So far the market seems largely happy to let Carroll stick to her plan -- highlighting Anglo's leading position in platinum, diamonds and iron ore alongside its cost cutting success. But investors might ask more searching questions in the event that Xstrata did come back offering a premium.