Diversification is the buzz word in pharmaceuticals as the feared 2010-2012 patent "cliff" looms nearer, when many of world's top medicines lose patent protection.

New Glaxo CEO Andrew Witty, 43, is embracing the concept wholeheartedly via a bold deal with South Africa's Aspen that takes the world's second biggest drugmaker into generics in emerging markets and a strategy to broaden out the group.

But how long will Glaxo's not-so-patient shareholders have to wait to reap the rewards?

Witty gave a confident performance during a two-hour meeting with analysts this week, but a sliding share price the day after suggests investors see little to cheer about just yet.

Investing for diversity to de-risk the business may make sense, but bulking up in non-prescription healthcare products, vaccines, biotech and emerging markets will take time -- as well as money, as evidenced by the decision to delay completion of the company's 12 billion pounds buyback programme.

"You can't turn a supertanker on a dime," says Deutsche Bank analyst Brian Bourdot.

Yesterday, UBS put out a research note saying Lehman was likely to make a sizeable asset sale, which may include the disposition of its investment management unit Neuberger Berman.

Today, Morgan Stanley said in a research note that although the bank may make a “meaningful” asset disposition, it was unlikely to sell Neuberger.

This apparent contradiction isn’t the first, let’s say, difference of opinion among analysts, reporters, lawyers, bankers and other Wall Street mandarins who have waxed eloquent and written reams on the fate of Lehman, the smallest surviving major independent Wall Street investment bank after the near collapse and takeover of Bear Stearns.

Last week’s flavour was a debate over whether Lehman would go private after a Fox-Pitt Kelton analyst said that may be the best course of action for the brokerage and the New York Post reported that the investment bank was indeed weighing such an option. The idea was quickly shot down in a series of articles, research notes and such that rattled off a host of problems with it.

At least some of Lehman’s issues may just be phantom problems dreamed up by speculators, one investment banker said last week.

“Like the market knows more than the management team and auditors of Lehman Brothers? How’s that possible? What do they know? They don’t know sh*t,” the banker said. “I am not here to defend Lehman. But let’s get real.” 

Still, many of the notes and reports are considered opinions from people who one would suspect do understand a thing or two about how the business works.

And the difference in opinion about the best way forward could very well illustrate the problem Lehman Chief Dick Fuld and his team are facing today — there are no easy solutions before the investment bank.

So what do you think Lehman will do?

(Photo: This Reuters picture shows a Sotheby’s employee look at ”Fortune Teller,” a painting by late Swiss artist Albert Anker.)

Is it Last Call for Wall Street at Anheuser-Busch?

On Anheuser-Busch's conference call Wednesday to discuss second-quarter earnings, the tone was more like a wake than the tailgate parties of old.

Well, previous calls never really had galloping Clydesdales, singing frogs or a hard-partying Bull Terrier. But quarter after quarter, investors and analysts from both the "buy" and "sell" sides would still dial in after the close of New York trading for the latest color on beer sales.

Wednesday's get-together -- likely the second-to-last one before the brewer gets swallowed by Belgian brewer InBev -- was different. 

First, the earnings were released at 11:12 a.m. ET, (instead of the usual 2:30 p.m.), just as Wall Street's beverage analysts were listening to PepsiCo CEO Indra Nooyi , on her conference call, discuss ways the company is changing its business to cope with the current economic uncertainty.

The Bud call started at noon, immediately following the Pepsi call.

While Chief Financial Officer W. Randy Baker said the teleconference was "earlier to accommodate the increased interest of European investors and analysts," one U.S.-based analyst, who agreed to speak on the condition of anonymity, guessed that the near overlap with Pepsi's presentation was no coincidence.

"Structurally, they set it up so that they wouldn't really have to talk. I understand why they did that," said the analyst, adding that the context and timing of the call kept off a lot of analysts, who were likely tied up with Pepsi.

Gone was the typically long Q&A session with analysts including Morgan Stanley's Bill Pecoriello, Stifel Nicolaus's Mark Swartzberg, UBS's Kaumil Gajrawala, Deutsche Bank's Marc Greenberg, JP Morgan's John Faucher and Goldman Sachs' Judy Hong. Bryan Spillane from Banc of America and Anthony Bucalo from Credit Suisse lobbed the only questions from the usual suspects.

In their places were London-based analysts who cover InBev, such as Chris Pitcher of Redburn Partners and Philip Morrisey of Citigroup.  

"It was partially timing and partially like, 'Hey guys, if you're not going to make our lives easy, we're going to go out and try to talk to our clients about a stock that matters now," the analyst said. 

Edward Jones analyst Jack Russo, who said he was on the conference call but did not ask a question, told Reuters that timing wasn't the only issue.

"I think a lot of people are pretty much assuming this deal is done, that the company is going to no longer be an independent company by the end of the year, so I think interest kind of trails off as a result of that."

He noted that some people might have tuned in for an update on the status of the deal, but that they'll probably have to listen to an InBev call for that.

InBev, or the soon-to-be-called Anheuser-Busch InBev, will release earnings on August 14. Let's hope InBev CEO Carlos Brito changes its call time to make it more convenient for the U.S. investors.

(Photo: Reuters)     

Financial services companies are bleeding red and thousands of Wall Street workers are losing their jobs. So when one looks around and sees only the ruins left behind by the credit crisis, there is little to smile about.

Some people, though, haven’t lost their perspective — or their sense of humor.

If you call the chief operating officer of Freeman & Co, an independent adviser to the financial services industry, you are greeted by a rather unusual voice mail message:

“Hi, you have reached Eric Weber at Freeman & Company. Although financial services is melting down, we are still out doing business … Please leave me a message and I will return your phone call as soon as I can. Thank you.”

Many financial services bankers say things have been busy despite the obvious slowdown in the industry. But Weber’s motivation for saying that in his voice mail message goes beyond that.

“I have whimsical messages from time to time,” Weber said. “My friend reminded me that my message had gotten a little boring so I updated it.”

Weber says his previous voice mail was “boring.” But a little while ago, he says he had something like this to say to callers he missed:

“Hi, it’s Eric Weber, I am sorry I am not here. I am out closing a deal for one of our clients. Please leave me a message and I’ll call you back shortly.”

(Photo credit: Reuters)

General Electric’s $8 billion joint venture with Mubadala Development Co to provide commercial finance in the Middle East and Africa sounds like an excellent idea for both parties. It also happens to reflect impeccable timing for GE as the U.S.-based global conglomerate struggles on its home turf.

Under the deal, each party will invest $4 billion over three years. That $8 billion will then be leveraged up to five times with debt — which means that as much as $40 billion could be invested in the Middle East and Africa.

It’s a win-win situation. GE, with an open-ended investment horizon, will benefit from orders for Abu Dhabi’s “carbon-neutral, zero-waste” Masdar City. There is sure to be plenty of demand for GE’s clean-energy technology there.

It’s also a good time for GE to be investing in emerging markets — the conglomerate’s shares have taken a beating this year due to concerns about its consumer and commercial finance units, hurt by weak U.S. consumer confidence.

Moreover, as analysts have pointed out, GE gets a floor on its stock price — Mubadala said it plans to become one of GE’s 10 largest shareholders over time. That would mean buying, at the very least, nearly $3 billion of GE shares in the open market. (GE’s current tenth-largest institutional shareholder, Wellington Management Co, owns 101.3 million shares worth about $2.96 billion).

For Mubadala too, it’s a great deal. It’s a different type of investment for the fast-growing Abu Dhabi-backed investment and development arm which owns, among many other things, a 7.5-percent stake in private equity firm Carlyle Group and a 5-percent stake in Ferrari.

This deal allows access to GE technology, products, services and knowledge — invaluable elements for a developing economy.

And expect more from Mubadala. The investment vehicle, which manages more than $10 billion in assets, said earlier this year it is planning more acquisitions in aerospace, energy and real estate.

As volte faces go, the Yahoo-Carl Icahn slugfest-turned-lovefest is a definite keeper for some future annal of corporate history. Until last week, Yahoo couldn't slam Icahn enough, mocking the activist investor's knowledge of technology, calling his agenda risky, and pointing to his failure to articulate clear alternatives to a Microsoft deal.

But since they made nice on Monday, rest assured we're going to hear nothing but a din of welcome notes from Yahoo, as they sell to shareholders the idea that Icahn and his two designees are good for the board.

Yahoo Chairman Roy Bostock set the sweet, full-of-possibility tone about Icahn on Monday, and Yahoo President Sue Decker picked up where he left off in a CNBC interview today:

I have not met Carl. I think you really have to distinguish what happens in a PR war and proxy contest from reality. I'm totally looking forward to meeting him. I'd love for him to learn about our business and I'd love to get his advice. So there are absolutely no hard feelings of any sort. I think the best thing I can say is that we're moving forward and we'll have the distractions behind us, and I want that for our employees and I want that for our company.

Yahoo shareholders may buy into the company's new attitude and vote accordingly at next Friday's annual shareholder meeting. But proxy advisory firm Glass Lewis, which recommended that shareholders vote against three directors, did issue a word of caution about Icahn: "Shareholders should monitor Mr. Icahn's ability to devote sufficient time and attention to the company."

And The Wall Street Journal too wondered, in a recent story, if Yahoo might come to regret its move.

(Photo: Reuters)

The cheap dollar is helping to tease more investment out of a notoriously shy foreign investment pool - Japan’s insurance industry. In what would be the largest acquisition by a Japanese financial firm in the U.S., Tokio Marine said it plans to buy non-life insurer Philadelphia Consolidated Holding Corp for about $4.7 billion. Tokio Marine is Japan’s largest non-life insurer, and has offered a 73 percent premium to Philadelphia Consolidated investors. Meanwhile, Nippon Life Insurance said it would take a 5 percent stake in U.S. fund and index group Russell Investments. Over the past year, the dollar is down more than 10 percent against the yen, though it is well off lows hit in early March. Japanese insurers, which earn 80 percent of their profit at home, have long been under pressure to diversify abroad to deal with an aging population and slow growth at home.

Shares in British lender HBOS rose more than 12 percent, lifted by market talk of bid interest from Spanish rival BBVA and a broad recovery across the financial sector, traders said. Britain’s largest mortgage lender has underperformed the battered sector in the run-up to its 4 billion pound ($8 billion) rights issue, and concerns about the overhang effect have also weighed, as just 8.3 percent of the shares were taken up. A deal to take on HBOS would be a radical departure for BBVA, Spain’s second-largest bank, which has focused its expansion on emerging markets in Latin America and China and in the southern United States.

Other deals of the day:

* British energy company Centrica is doubling its interest in Belgian generation and supply company SPE SA to 51 percent for 515 million euros ($820 million), overturning a deal by France’s EDF to buy the stake.

* Brazil’s Oi Participacoes bought 947 million reais ($599 million) worth of preferential shares in Brasil Telecom as part of its takeover of the No. 3 telecommunications player, the BM&F Bovespa stock exchange said.

* Thai PTT Chemical said it had agreed to buy a 50 percent stake in a Malaysian oleochemicals firm from German chemicals maker Cognis for 104 million euros ($164 million).

* GlaxoSmithKline, the world’s second largest drugmaker, took a step into the branded generics marketplace via an alliance with South Africa’s Aspen Pharmacare Holdings.

* The head of KT Corp, South Korea’s top fixed-line and broadband firm, has said full integration with its mobile service unit KTF Co would be “desirable”, a KT spokesman said.

* China’s central government and the Shanghai city government are discussing merging Shanghai Airlines with China Eastern Airlines, major Chinese business magazine Caijing reported on its website on Wednesday.

If for some reason you assumed that Yahoo's deal with Carl Icahn would quiet the chatter about a deal, you were mistaken. The conference call to discuss quarterly earnings made that clear.

Past distractions, future possibilities, it was all there for listeners. The only problem is that for all the chatter on the call about deals, there was no real insight offered about what Yahoo might do.

Here's a look at what Yahoo's executives said about M&A during the call:

• Frankly, I think Yahoo's ability to perform is especially impressive in light of the extraordinary events surrounding the company this year. It has been nearly six months since Microsoft made an unsolicited proposal for Yahoo and everyone here, the board, management and over 14 thousand Yahoo's around the world have continued to work for one central goal, maximizing value for our shareholders.
• Significantly, we have also actively explored a number of alternatives to maximize value for the company, and we remain open to value creating transactions that provide real tangible value.
• I don't want to speculate on any potential transactions or spin-outs that might have been mentioned in the press. I will say that we have examined various alternatives for Asia and will continue to do that.
• We have looked at just the about every alternative you could imagine as far as looking at how do we best position the company to go forward either through transactions and/or financial options. At this point, we clearly are still looking at what the best ways for us to continue to drive shareholder value. We don't have anything specific that we will talk about but clearly, we view that we continue to have very strong balance sheets and we have ability to generate cash, so we're going to take that in act as we think about what's the best way to move forward.

OK, we get it. Yahoo wants to maximize shareholder value ... whatever that means.

Deep-pocketed sovereign wealth funds from Asia and the Middle East have made the headlines over the past year by snapping up stakes in stock exchanges, hedge funds, banks and private equity firms. Should they now set their sights on making acquisitions in the insurance sector?

That’s the thesis of a new research paper from accounting and consulting firm Deloitte.  Using a ‘don’t forget your own backyard’ type of argument, Deloitte points out that sovereign wealth funds have not spent much of the $3 trillion at their disposal on this sector — even though it could boost development of insurance services in their own regions, a critical area of need.

“If any of these cities or countries plans to become a world-class financial center in the range of New York or London, it must necessarily attract a large number of insurance and reinsurance companies,” according to the report, since as nations accumulate assets, they need more protection.

Insurance is a logical next step in developing the financial services industry of these emerging markets, said Deloitte.

“Insurance markets in the Middle East present high potential for growth, but are acutely underdeveloped, neglected and undercapitalized,” wrote the report’s author Priti Rajagopalan.  Even though the Middle East is one of the world’s wealthiest regions,  it accounts for less than 1 percent of global premiums, according to Deloitte.

A similar deficiency has emerged in China, albeit for different reasons. “China has a well-developed insurance industry, but it is state-owned with significant structural weaknesses. An investment in an insurance carrier would facilitate access to the best practices, modernized systems and infrastructure required to bring China’s insurance industry out from under the legacy of state ownership,” said the report.

Only time will tell if sovereign wealth funds see opportunity in insurance. But one thing is certain — insurers already see potential in these regions, and are actively exploring ways to tap into what could be key areas of growth in the not too distant future.

It couldn’t come at a better time as far as insurers are concerned. Insurance rates are softening in many other parts of the world, leaving the industry searching for new pockets of growth.

(Photo credit: This Reuters photo shows construction of  part of the Palm Jumeirah breakwater, a land reclamation project being undertaken by the government of Dubai.)

While credit problems plague private equity buyouts and other corners of the M&A world, we’ve seen plenty of strategic deals going through and the Biotech sector is starting to look downright buoyant. Roche’s $43.7 billion bid to buy out the remainder of Genentech is set to be the largest biotechnology acquisition ever and comes on the heels of a spate of big-ticket purchases. Industry analysts expect more to follow. “Just about every major drug company you talk to says they are devoting a much higher proportion of their own research and investment in stuff they are buying to biotech,” said Paul Diggle, an analyst at Nomura Code. “I suspect Amgen and Genzyme will be the two companies people think about next.” Big biotech deals over the recent past include Takeda Pharmaceutical’s agreement to buy Millennium Pharmaceuticals for $8.8 billion, AstraZeneca’s purchase of MedImmune last year for $15.6 billion, Novartis’s purchase of Speedel for about $880 million and GlaxoSmithKline’s record $3.3 billion insomnia drug licensing deal with Actelion.

Senior Goldman Sachs investment banker Ken Wilson will take a leave of absence to advise U.S. Treasury Secretary Henry Paulson on the nation’s banking crisis, people familiar with the matter said, while The Deal hinted the position may be less temporary. Wilson is a vice chairman of investment banking and chairman of financial institutions business at Goldman, where Paulson was CEO until 2006. Wilson has played a key role advising banks on capital raising and reorganizations. He is expected to help address the crisis gripping banks, Wall Street firms and mortgage lenders, the sources said. He is expected to serve without pay through January, when President George Bush’s second term ends.

Other deals of the day:

* British fund manager F&C Asset Management announced a tie-up that will create a UK-owned business with 8.5 billion pounds ($17 billion) of property assets under management.

* Singapore’s Neptune Orient Lines has formally expressed interest in buying German shipping company Hapag-Lloyd, estimated to be worth over $7 billion, sources briefed on the deal said.

* Japan’s Nippon Life Insurance plans to invest about 30 billion yen ($282 million) in Russell Investments and form a business alliance with the U.S. investment and index group, sources familiar with the matter said.

* Datacraft Asia said its South African parent Dimension Data plans to privatize Southeast Asia’s largest computer network builder by buying the remaining shares in it for $276 million.

* Private equity firm Segulah said it would make a cash offer worth 1.62 billion crowns ($272 million) for Swedish industry group Gunnebo Industrier.

* Roche Holding said it has acquired Mirus Bio Corp, a privately held U.S. company that focuses on RNAi or gene silencing as a way to fight disease, for $125 million.

* U.S. computer giant International Business Machines sold $77.3 million worth of shares in top Chinese PC maker Lenovo at the bottom of a range, a source said.

* British driving services firm Trafficmaster has agreed to acquire vehicle tracking company Tri-Mex Group for up to 4.75 million pounds ($9.49 million).

* Shares in China’s Semiconductor Manufacturing International Corp jumped as much as 16 percent on a news report that the Datang Telecom group may buy a 20 percent stake in SMIC, the nation’s biggest contract chip maker.

* A plan by Qatar Telecom to buy the remaining shares in Indonesia’s PT Indosat Tbk will be blocked by a regulation limiting foreign ownership to 49 percent, officials said.

* India’s Tata Capital and Mizuho Corporate Bank said they had signed a memorandum of understanding for a strategic alliance for a range of activities in the financial services sector.

* A unit of the Qatar Investment Authority, the sovereign wealth fund, said it was dropping a proposed offer for a stake in Monaco casino and hotel group Societe des Bains de Mer due to management opposition.