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Oct 5, 2010
via Breakingviews

Roman Abramovich’s Irish assault could backfire

Roman Abramovich is unhappy. The owner of Chelsea football club thinks that the Irish government is about to let him down, and if it doesn’t see things his way, he’s threatening legal action. Both sides are playing a high-stakes game, where the result could have much more impact on Ireland’s impoverished government than it will on him.

Abramovich’s investment vehicle, Millhouse, bought subordinated, government-guaranteed debt in Irish Nationwide Building Society in August 2009. Millhouse now describes the purchase as its contribution towards the survival of INBS. Possibly the 13 percent coupon also weighed.

Sep 13, 2010

UK fund managers had it coming

By Neil Collins

LONDON, Sept 13 (Reuters Breakingviews) – They don’t come more pugilistic in the City of London than Terry Smith. Growth companies, competitors, box-ticking shareholders, the Association of British Insurers; he’s thumped them all. Now he’s squaring up to the fund management industry. It should be quite a contest.

Smith has a habit of voicing what others think but dare not say. His research which demonstrated how companies could recycle bid provisions into bogus profits cost him his job as an analyst at UBS. He went on to build a leading domestic UK stockbroker, Collins Stewart, and a money-broking business, Tullett Prebon.

Sep 8, 2010
via Breakingviews

It’s 50 years since shares looked this cheap

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

Successful long-term investors buy good assets when nobody wants them, and sell when the risk-averse are piling in. Bonds are considered “safe havens” today, after shares’ lost decade. That could be about to reverse; the great bull market in government bonds is probably over.

Jun 3, 2010
via Breakingviews

UK governance code fails at BP and Prudential

(Republished on Oct. 19 with the following disclaimer: Neil Collins owned shares in BP when he wrote this article; he bought shares shortly before and after)

BP  and Prudential are two of Britain’s biggest and most respected companies. Their lavish annual reports contain dozens of pages on how these great corporations are run. Both boast of their compliance with the code of corporate governance, which encourages proper boardroom debate to avoid bad decisions, boosts the chairman, and insists that he cannot also be the chief executive, lest one person become too powerful.

May 14, 2010
via The Great Debate UK

UK high-flyers should brace for bad news

— Neil Collins is a Reuters Breakingviews columnist. The opinions expressed are his own —

Election first, manifesto afterwards. While there may be a Conservative prime minister in Downing Street, quite a few among the millions who voted for David Cameron will have a shock when they see the price they are paying for his pact with the more left-leaning Liberal Democrats.

Apr 27, 2010
via The Great Debate UK

Election reality that dare not speak its name

— Neil Collins is a Reuters Breakingviews columnist. The opinions expressed are his own —

Since Labour came to power in 1997, it has pursued a policy of expanding the numbers employed by the government or its agencies. The result is that today 6.1 million people are on the state payroll, an increase of about 900,000 in 13 years.

Apr 19, 2010
via Breakingviews

How to stop worrying and love that volcano

It’s tough on the flower-growers of east Africa, the salmon-farmers of the Orkney Islands, and almost everyone in or near the airline industry. For the rest of us, the eruption of an unpronounceable volcano is a heaven-sent chance to reflect.

There are many worse fates than being a stranded tourist in a desirable location, especially when you’re having the holiday the next lot booked, as well as your own. A wedding on a far-flung beach, relayed by webcam, avoids the need to mix with all her ghastly relatives.

Mar 29, 2010
via The Great Debate UK

Tories panic with tax cut pledge


Neil Collins is a Reuters columnist. The views expressed are his own

National Insurance contributions make an unlikely battleground for the British election. They lack the sexiness of income tax cuts. But NI is a bad tax and the Tories are right to pledge to overturn Labour’s plan to raise it.

Unfortunately, their timing smacks of desperation as their poll lead melts away. More to the point, it flies in the face of their commitment to cut Britain’s vast budget deficit.

Nov 25, 2009
via Commentaries

Rights and wrongs at Lloyds Banking

If you’ve ever wondered how the big-shot investment bankers “earn” their bonuses, the document launching Britain’s biggest rights issue will give you a clue. Lloyds Banking Group is issuing 36,505,088,579 new shares, to add to the 27,161,682,366 currently in issue.

The new shares will raise 13.5 billion pounds, of which 500 million pounds will disappear in the expenses of the offer. Much of this is paid to the banks which are guaranteeing that Lloyds gets its money, a reward for the risk they are taking that the shareholders will fail to take up their rights.


So just how big is this risk? Here’s one way to look at it. The rights price is 37 pence, and as long as the Lloyds share price remains above that, the risk is minimal. At 37 pence, engorged Lloyds, with 63,666,770,945 in issue, would be capitalised at 23.5 billion pounds, including the 13.5 billion pounds of new money. On Tuesday, the day the issue was priced, with Lloyds old shares at 91 pence, the business was valued at 23.5 billion pounds.

Nov 23, 2009
via Breakingviews

A Carnival instead of a wake for Cadbury

It may be fantasy M&A, but little GFI Securities has a suggestion for putting Cadbury and Hershey together without bankrupting the buyer. Compared to the blunderbuss approach from Kraft, it’s elegant and at least provides some food for thought.The idea is the dual listed company (DLC), a corporate structure that allowed Carnival, the world’s largest cruise line, to take over P&O Princess. Like Cadbury, P&O was a FTSE100 company, and, through the DLC, has been replaced by Carnival in the index.It’s obvious that Hershey is culturally and philosophically the best partner for Cadbury, assuming it is obliged to find one. But Hershey is too small to pay cash, while a Pennsylvania law requires the Hershey Trust to retain control of the business.GFI proposes that Hershey tenders for 11 percent of Cadbury shares at a big premium, followed by a merger of operations, with existing Cadbury shareholders owning 55 percent of Cadbury-Hershey. The vexed issue of control might be tackled by special provisions in the DLC, or by differential voting rights between Cadbury-Hershey plc and Cadbury-Hershey Inc.This is head-banging stuff, even before the little matter of constructing a tax-efficient DLC, something GFI admits would be “highly complex”. In practice, the firm can expect little more than an acknowledgment of its letter to Todd Stitzer, the Cadbury chief executive.Yet it should not be dismissed out of hand. The argument in this takeover battle so far has all been about what price Kraft needs to pay to win, but few doubt what would happen to Cadbury if it did so. The UK employees are right to be apprehensive.Kraft cannot afford an all-cash offer, and UK shareholders tend to sell foreign equity issued in takeovers. Besides, Cadbury is the only way sweet-toothed British investors can find exposure to the sector, and the bulls believe it will be eventually worth much more than 820 pence, the price at which many expect Kraft to win. There is a long way to go with this bid, but something like GFI’s proposal might produce a happier ending than death by cheese slices.

    • About Neil

      "City Editor, The Daily Telegraph 1986-2005 City Editor, The Sunday Times, 1984-1986 City Editor, Evening Standard, 1979-1984 Director Templeton Emerging Markets Investment Trust plc, Finsbury Growth and Income Trust plc Passion: fly fishing (and wife Julia and seven-year-old twins)"
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