Are steel companies really hurting from huge rises in the price of raw materials like iron ore? The biggest miner BHP Billiton reckons they aren't and hopes to sway anti-trust regulators who are reviewing its takeover bid for rival Rio Tinto.

Steel firms from China to Japan to Europe have cited rising raw material costs as they ramp up prices, with Germany's Salzgitter the latest to push the blame upstream.

Rio Tinto agreed record prices rises with China's Baosteel on Monday that nearly doubled the price of iron ore this year under long-term contracts and BHP may try to get even more .

Raw material costs, however, only make up about 30 percent of the price of hot rolled coil steel, a figure which has not changed much over the past seven years, BHP Billiton Chief Executive Marius Kloppers argued at a presentation on Tuesday.   

During the same period, iron ore prices have jumped 382 percent, metallurgical coal is up 599 percent and manganese ore is 486 percent more expensive. Tightness in the steel market is to blame for steel prices that have more than tripled and have allowed steelmakers to pass on all the the raw material costs to consumers, Kloppers said.   

"It basically shows that the very high steel costs have been driven almost entirely, certainly in the majority, by constraints on steelmaking capacity, and not raw material
costs," Kloppers said.  

He was floating an argument he hopes will win the day as BHP seeks competition approval for a marriage of Rio and BHP, the second and third biggest iron ore producers respectively, which will command over a third of the seaborne iron ore market.    

Steelmakers have vowed to oppose the all-share takeover offer worth $170 billion, while BHP argues that they are enjoying healthy margins despite the price rises in raw materials. Watch this space.

With Yahoo shares trading just above $20, investors must be desperate for any sign that buyout talks with Microsoft could be resuscitated. It's been relatively quiet since Yahoo struck the Google ad deal -- with nary a peep from the usually loquacious activist investor Carl Icahn, who has been blogging about CEO pay but keeping silent on where he will take his Yahoo proxy battle.

So it's no surprise that Yahoo shares jumped as much as 15 percent on Tuesday after TechCrunch reported that Microsoft and Yahoo are back in takeover talks, citing multiple sources at both companies.

But investors' hopes were short-lived with CNBC quickly knocking down that rumor, saying its source thinks there are no new negotiations between Microsoft and Yahoo.

Meanwhile, CNET on Monday raised the possibility of a sweeter offer from Microsoft for a partial buyout.

With so many rumors flying about, Sanford C. Bernstein analyst Jeffrey Lindsay tells Reuters correspondent Eric Auchard that Yahoo and Microsoft continue to hold low level talks but says people are attributing huge outcomes to very small pieces of information.

In this situation, there is so much disinformation about what is going on.
All these things are going on at the same time. Right now we are too much in the middle of it to really see what is going on.
We can see the end game and we know where we are now, but we just can't see how we are going to get there yet.
We think Microsoft will still buy Yahoo at the end of the day. It may be months after the annual meeting (on Aug. 1).
If Microsoft doesn't acquire Yahoo, it has almost zero chance of an online play. Yahoo on its own can't get close to the value that a Microsoft transaction would give it.

Who do you believe?

(Photo: REUTERS/Jo Yong-Hak)

Nudity, commerce and ego: Artist Natasha Archdale ticks all the boxes for her  clients in the financial sector. The London-based artist creates “nude female figures from coral-hued fragments of the Financial Times,” Bloomberg reports.

Blackstone Chairman Stephen Schwarzman received an Archdale portrait of his wife, Christine, as a present from Dorrit Moussaieff, Iceland’s first lady. The Financial Times snippets that Archdale used were all about the Blackstone Group chairman.

“It’s in his Park Avenue apartment, between a Rembrandt and a Picasso,” Moussaieff told Bloomberg. “I have yet to meet someone who does not want a naked picture of their loved ones with text about themselves.”

A Blackstone spokesman told Bloomberg that Schwarzman “prefers not to talk about what he may or may not own,” and Archdale declined to name any of her clients. But she did say that she has commissions for the next two years, charging up to $30,000 per portrait.

“Lots of people think I had this clever agenda of mixing the female nude with the Financial Times because the correlation is good: sex and money and business, and art at the moment is so prolific,” Archdale told Bloomberg. “But it wasn’t that well thought out.”

Fresh from having Yahoo slip through its fingers, Microsoft’s plan to leapfrog into Consumerville takes another hit with news that Nokia is paying 264 million euros ($410 million) to buy out other shareholders of Symbian, the dominant player in smartphone software. Nokia says it will dissolve royalty payments for the platform, making it more attractive when compared to Google’s rival free platform, Android. Symbian’s operating systemis already used in two-thirds of smartphones; Nokia makes 40 percent of all phones sold globally. “This puts a lot of pressure on Microsoft right at a time when they are trying to really push into the consumer space,” said Gartner analyst Carolina Milanesi. “For operators this offers a good alternative to Android.”

British gas producer BG Group launched a hostile $13.1 billion bid for Australia’s Origin Energy, as it seeks to boost its position in Asia-Pacific’s fast-growing gas market. BG is taking its A$13.8 billion all-cash bid, valuing Origin at A$15.50 a share, direct to shareholders after Origin’s board rejected it last month. Origin claimed then that its coal seam gas reserves alone were worth over $15 billion. Shares in Origin, which have surged over 85 percent this year, rose 6.2 percent to a record A$16.48 before closing up 5.8 percent at A$16.42, indicating investors expect an even higher offer. If successful, the deal would be the second-largest foreign takeover of an Australian company after Cemex, North America’s largest cement producer, bought Rinker Group last year for $14.2 billion.

Russian oil major Lukoil bought a 49 percent stake in Italian refiner ERG SpA’s Mediterranean plant for 1.35 billion euros ($2.1 billion), in a sign of the growing energy ties between Russia and Italy. Lukoil and ERG, Italy’s second-biggest refiner by market share, agreed a joint venture valued at 2.75 billion euros to control ERG’s Isab di Priolo refinery on Sicily. ERG will have 51 percent of the new company.

Other deals of the day:

* UBS said it had acquired Dutch wealth manager VermogensGroep.

* French aero engine and telecoms maker Safran said it had bought Dutch-based passport and secure ID document maker Sdu-Identifaction.

* Shares in China Oilfield Services, an arm of the CNOOC, jumped more than 3 percent as speculation grew about a potential takeover of Norwegian offshore driller Awilco Offshore.

* South Korean food group Dongwon said it will buy canned tuna company StarKist from Del Monte Foods for about $300 million, in the latest push by South Korean food makers for global expansion.

* Australian zinc and lead miner Perilya rejected as inadequate a takeover proposal from CBH Resources, both companies said, but Perilya left the door open to further talks.

* Flowers Foods, which produces baked goods, said it agreed to acquire Holsum Bakery in a cash and stock deal.

* Italy’s Banca Popolare dell’Emilia Romagna will launch a buyout offer for the 71.8 percent of its Meliorbanca unit it does not already own at 3.2 euros per share, BPER said.

* Hospital operator Tenet Healthcare said it will sell its interest in health care services company Broadlane Inc to TowerBrook Capital Partners for proceeds of about $155 million.

* Occidental Petroleum said it is buying a stake in a major Canadian oil sands project for C$500 million ($492 million), giving it a foothold in one of the world’s biggest developing oil plays as crude prices surge.

* Digimarc, a provider of secure identity technology, said it is spinning off its digital watermarking business as part of a deal with L-1 Identity Solutions, a photo and fingerprint identity equipment maker.

Rabble-rousing investors are an increasingly familiar, if unwelcome, sight for the boards of Internet and media companies like Yahoo and CNET. But these activist shareholders may next set their sights on IT hardware companies, Bernstein analyst Toni Sacconaghi said in a research note today.

Sacconaghi specifically identified three companies — storage equipment maker EMC Corp, printer maker Lexmark and Sun Microsystems – as likeliest to capture the attention of activist shareholders, in that order. “These stocks are at or close to multi-year valuation lows… and offer distinct opportunities for value creation,” Sacconaghi wrote. But he also outlined risks in each case that could squeeze the potential pay-offs to investors.

An activist investor could pressure EMC to spin off virtualization star VMware, of which it owns about 85 percent, and pump some value back into its stock, Sacconaghi said. Of course, EMC’s chief financial officer told Reuters just last month the company has no intentions of doing so. If EMC changes its mind and sells off the stake, VMware’s own high-flying stock price might plummet, limiting any gain EMC’s stock price would get. 

In the case of Lexmark, an activist shareholder could seek value by urging the company to explore a sale or other “strategic alternative” for its licensing business. The investor could also push Lexmark to trim its operating expense or provide more clarity on its laser printer business, which Sacconaghi said the market is “increasingly anxious” about. But a key question is whether the inkjet printer business is separable from the rest of Lexmark, Sacconaghi said. Also, Lexmark recently announced a debt and share buyback program.

As for Sun, Sacconaghi said a dissident shareholder could push the company to undertake a major restructuring, although he acknowledged that there are few examples of activist shareholders proposing to improve a company’s operations. What’s more, giant buyout shop KKR has held a board seat in Sun for the past year, and Sacconaghi reasoned that there’s been no “discernible improvement” in Sun’s profitability despite KKR’s presence. That could mean there’s little else to be done to improve Sun’s operations.

Photo: Reuters

Plain vanilla, in the box, straight financings are the future, or at least near future, of real estate deals, says Marathon Asset Managing Director Scott Schwartz.

"Either the Street kinda comes back and supplies leverage, or people have to get their returns without leverage. And right now we're at a point where people have to get their returns without leverage. So that's why there aren't a lot of deals happening," he said, speaking at the Reuters Global Real Estate Summit.

The heydey of commercial mortgage markets was greased by easy money from Wall Street banks, which routinely made short-term loans to investors who wanted to invest the proceeds in longer-term assets, such as commercial mortgage-backed securities. The onset of the U.S. credit crunch last summer has pinched banks' balance sheets, forcing them to rein in the credit they provided to these investors.

(Photo credit: Reuters)

What a difference seven weeks makes.

Goldman Sachs made a rather large U-turn on Monday, reversing its May recommendation to overweight the S&P 500’s consumer stocks and take a neutral position in the index’s financial stocks.

It was costly advice for those clients who took it : financial stocks are down 18 percent since Goldman’s initial call, and consumer stocks have dipped 7 percent, while the overall index has slipped a mere 5 percent.

“Obviously that forecast hasn’t turned out too well,” Goldman analysts led by David Kostin wrote in a note, providing a contender for understatement of the year. “Our thesis was clearly wrong in hindsight.”

The investment bank’s new recommendations are to underweight both sectors — 7 percent for “consumer discretionary” stocks, compared with an S&P 500 weight of 8.4 percent, and 13 percent for financial stocks, versus 15.1 percent in the S&P 500. Financial stocks have been so battered this year that they are now only the third-biggest component of the index, having been superseded by information technology stocks.

That weighting harkens to the late 90’s dotcom bubble, when Kostin’s predecessor Abby Joseph Cohen was running the shop. Looks like Kostin is finding it difficult to fill the shoes of the “Queen of the Bulls.”

Republic Services and Allied Waste Industries are tying the bag. The $6.1 billion all-stock deal has been in the works for more than two years, and puts a serious competitor together for top trash company Waste Management by combining the second- and third-largest waste and environmental services companies. Allied Waste shareholders will receive what amounts to a 17 percent premium for their shares, and will end up with about 52 percent ownership of the combined company. Last week, analysts were talking about the potential for higher trash hauling industry prices in the wake of the merger; investors are worried about antitrust issues for the very same reason.

Singapore’s Neptune Orient Lines, the world’s eighth-biggest container shipping firm, is looking to raise $5-$7 billion in loans, according to banking sources, the clearest sign yet it will bid for Germany’s Hapag-Lloyd. The merger of the two companies could potentially create the world’s number-three container shipping group, behind Danish shipping group A.P. Moller-Maersk and privately owned Mediterranean Shipping. The talks come as German tourism group TUI Chief Executive Michael Frenzel tours Asia to market Hapag-Lloyd, TUI’s container shipping business, which analysts value at around $7 billion, including debt.

U.S. fertilizer producer and oilseed processor Bunge has agreed to buy Corn Products International for $4.4 billion in stock. The company also raised its 2008 earnings forecast range by more than $2 a share. The deal, which was first reported by The Wall Street Journal, unites two of the oldest U.S. agricultural businesses and puts Bunge squarely in the business of finished corn products such as starches and sweeteners. It also expands Bunge’s operations in growth markets and diversifies its sources of revenue with a “solid cash-flow business,” Chief Executive Alberto Weisser said in a statement.

Other deals of the day:

* Safran said it has submitted an unsolicited offer to buy the secure ID business of Digimarc for $300 million in cash.

* Norwegian papermaker Norske Skog is selling its South Korean unit for 5 billion Norwegian crowns ($965.8 million) to reduce debt.

* KPN said it had sold its Getronics units in U.S., Canada and Mexico to CompuCom for cash and shares.

* Hochschild Mining has increased its stake in Lake Shore Gold to 40 percent.

* Oce has acquired Intersoft, a French distributor of printers, scanners and print media in the wide format graphic arts segment.

* Metso would acquire GE’s plant in Lachine, near Montreal, which manufactures large mining equipment.

* Israeli defence electronics firm Elbit Systems said its subsidiary Electro-Optics Elop has bought intelligence gathering systems firm Bar-Kal for an amount not material to Elbit.

* Norwegian telecom group Telenor has agreed to buy communications company Datametrix from Norwegian technology firm Ignis ASA for 226 million crowns ($43.65 million)

* Shares in BankThai surged over 40 percent after Malaysia’s CIMB agreed to buy a large stake in the small Thai lender for 5.9 billion baht ($177 million) to widen its Southeast Asian banking presence.

* Australian-listed Indophil Resources, the target of competing takeover bids, has lifted its stake in the Tampakan copper and gold mine in the Philippines by 1.73 percent, the firm said.

BOSTON - It’s no Maserati. The fuel-hungry, possibly damaged 2007 Coach Freelander Recreational Vehicle is the antithesis to the flashy, often glamorous stereotype of powerful hedge fund managers.

But it appears to be the getaway vehicle of choice for fugitive former hedge fund manager Samuel Israel III.

And unlike the larger than life returns Israel promised investors, the vehicle is big. Really big.

“Everything about the Coachmen Freelander Class C motorhome shouts out ‘big’, more storage, big tanks, large doors, tall ceilings, and big beds,” the company said in a press release.

The U.S. Marshals Service, which tracks fugitives, issued a release describing the nearly 30 ft, white Freelander. It has a blue 2005 Yamaha scooter attached to the back, possible damage to the rear passenger side, a New York license plate (EEN-5973) and sporty swoosh stripes — the kind that convey family fun.

And where would he go in such a vehicle?

RV Parks? Camp grounds? Highway rest stops, perhaps? Yes to all three places, say the Marshals.

Working in his favor is the time of year. It’s summer. And on U.S. highways that means one thing: it’s RV time.

Nearly 8 million U.S. households own at least one RV, according to the Recreational Vehicle Industry Association, and summer is the time when many are dusted off and hit the road — even as gas prices soar.

So RV campers beware. The balding 48-year-old man parked nearby could be the engineer of the $2 trillion hedge fund industry’s biggest and most brazen fraud.

Where do you think the co-founder of the Bayou Group is? We welcome your thoughts.

Japan’s Sumitomo Mitsui Financial Group may invest about $926 million in British bank Barclays, people familiar with the matter told Reuters, the latest in a string of subprime-hit Western lenders increasingly turning to Asia for funding. Japan’s third-largest bank is also considering a business alliance in Asia with Barclays, which is expected to raise about $8 billion from sovereign wealth funds and other investors and then offer shareholders the right to buy on the same terms. If Sumitomo Mitsui opts to invest it would give the Japanese bank a stake of just over 2 percent. Up to five outside investors are also expected to participate, and backers may include existing Singapore-based sovereign wealth fund Temasek and China Development Bank, plus the Qatar Investment Authority.

Steve Ballmer insisted Microsoft will not seek to make a spate of other Internet acquisitions (Facebook, we’re looking at you) in the wake of its failed bid for Yahoo, according to the Financial Times. “People don’t understand what they’re talking about,” Ballmer said. “At the end of the day, this is about the ad platform. This is not about just any one of the applications.” Meanwhile, over at Yahoo, a spate of executives are reported running for the hills, just as the company is trying to justify its decision to go it alone and to repel Carl Icahn’s proxy fight. Among the departed: Flickr co-creator Stuart Butterfield, whose bizarrely hilarious resignation letter could best be summed up as: “There Will Be Tin.”

The fate of the world’s largest leveraged buyout hangs in the balance ahead of Friday afternoon’s decision by the Supreme Court of Canada on whether BCE treated its bondholders unfairly in agreeing to a $34.8 billion ($34.5 billion) takeover. Ontario Teachers’ Pension Plan, with U.S.-based private equity firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity, are offering C$42.75 a share to take BCE, parent of Bell Canada, private.

More Deals of the Day:

** France Telecom declined to comment on a report in French paper Les Echos that it might be ready to make new concessions to improve its $41 billion cash-and-share offer for rival TeliaSonera.

** Malaysia’s second-largest lender, CIMB Bank, has agreed to buy a 42 percent stake in Thailand’s BankThai for about 5.9 billion baht ($177 million), the Bank of Thailand said on Friday.

** France’s leading sugar producer Tereos abandoned plans on Friday to bid for the sugar business of Danish food group Danisco, saying it would instead look for alternative acquisitions.

** Private equity firm Bain Capital will launch a $445 million bid to buy out Japan’s D&M Holdings Inc, the maker of Denon audio equipment, from U.S. buyout firm Ripplewood and the other shareholders.

** Australian-listed miner Indophil Resources NL said it had received a A$488 million ($465 million) bid that trumped a hostile offer from Xstrata Plc, and recommended shareholders take it.

** South Korean food group Dongwon said it was in talks to buy the StarKist seafood business from Del Monte Foods Co, sending shares of its key units higher.

** AviChina Industry & Technology Co Ltd said its controlling shareholder, China Aviation Industry Corporation II, was proposed to merge with China Aviation Industry Corporation I.

** Hynix Semiconductor Inc, the world’s No. 2 memory chip maker, said it would buy a 2 percent stake in Taiwan-based chip design house Phison Electronics Corp.

** Investment firm Guiness Peat Group Ltd said it had reached its target 35 percent stake in New Zealand insurance and fund management company Tower Ltd.

** Ithaca Energy Inc said it has received an unsolicited non-binding offer from Endeavour International Corp. The offer consists cash and shares at an indicative price of $3.25 per Ithaca share, it said.

** Norwegian offshore driller Prosafe Production sold its 30.1 percent stake in peer Teekay Petrojarl to U.S.-listed shipping group Teekay Corp for $258 million.

** Vienna’s bourse submitted the highest bid for a majority stake in Slovenia’s stock exchange, outbidding Greek bourse operator Hellenic Exchanges, the Greek bourse said on Friday. In a bourse filing, Hellenic Exchanges said its binding offer for Slovenia’s stock exchange was not the highest.

** The European Commission restarted on Friday its review of plans by Itema to buy specialised equipment used in textile production from Barco of Belgium.