The morning deal: Charged up for an IPO
The final pricing of Tesla Motors’ shares is expected later today. The electric car maker has yet to make a profit, and does not expect to make money until its Model S starts selling in significant volume. How strong will investors’ appetite be for his company?
* Offshore oil and gas driller Noble agreed to buy privately held FDR Holdings for $2.16 billion. The deal, plus new Noble drilling contracts with Royal Dutch Shell, indicate the industry is preparing to increase offshore exploration despite the worst-ever oil spill in U.S. history.
* Markets are on the mend but budget deficits need to be slashed and borrowing costs need to rise to avoid a new crisis, says the Bank for International Settlements in a call for action.
* New rules have been agreed upon for Wall Street, but in the end banks won concessions that watered down the financial regulation proposals that could have been most damaging to their profits. It is not the end of life on Wall Street as we know it.
* At the G20 summit in Canada, world leaders abandoned a global bank levy and eased the timetable for new capital requirements. Unable to muster the unity of the past three crisis-era G20 summits, the leaders fell back on the “Sinatra doctrine,” leaving each country to do it “my way,” move at its own pace and adopt “differentiated and tailored” policies. See the factbox here.
* You don’t get to 500 million friends without making a few enemies, says the teaser trailer for the upcoming Facebook movie. See it here.
Should banks or regulators come up with “living wills”?
The idea that financial firms whose collapse could create trigger broad economic problems should come up with their own living wills has been gaining traction lately.
After the confused attempt to bailout or save Lehman Brothers, Bear Stearns and AIG in 2008, some regulators have been suggesting that banks and important financial institutions plan for their own demise.
A senior Canadian finance official said on Wednesday that the Group of Twenty (G20) are thinking about the idea as a way to avoid financial meltdowns.
Even one of the top financial advisors unwinding Lehman Brothers’ has said a living will would have helped.
But is it the banks or the regulators that oversee them who should come up with these living wills? Should they come up with them together? Who would have better incentives to prevent systemic issues?
The issue was discussed on Wednesday at a Practising Law Institute conference in New York by H. Rodgin Cohen, a mergers & acquisitions lawyer at Sullivan & Cromwell in New York, who personally worked on deals like JPMorgan-Bear Stearns, Barclays-Lehman, and Wells Fargo-Wachovia last year. Here is what Cohen told the conference:
“I do think we have it somewhat backwards on all this emphasis on the living wills for these institutions. Actually the living will isn’t the institution’s responsibility. It is truly surprising to me that sitting in a locked desk somewhere there isn’t a living will which the relevant supervisor has for each institution. Clearly that did not exist last year, and hopefully we have it today. “
No.
There,obviously,is a reluctance to look at the real reasons and the remedy,by those concerned,and this casts doubts on the integrity of the G20 as a whole,whose members,it seems, are using the printing press to save a few big players in Derivatives.Subprime lending and Derivatives Trading are the reasons for the present Financial Crisis.While the first one, is a fait accompli,there is still time to BAN the second one,the ONLY solution.
Can the G20 save the world?
Rumors of the death of globalization and capitalism have been greatly exaggerated. The world’s 20 leading nations have committed to resolve the economic crisis together, which if followed through – emphasis on “if” – will probably keep globalization alive. They also look largely committed to resisting the temptations of protectionism, an issue which was increasingly worrying multinationals.
All this bodes well for continued cross-border M&A. However, tighter and globalized regulation of financial markets will mean that raising acquisition finance will never again be as easy as it was during the roaring noughties. The highly leveraged buyout may now indefinitely remain a footnote in the history books.
The prospect of “shadow” banking systems being more regulated could also reduce funding sources. Besides the ongoing market pressures this could see less hedge funds and private equity groups over the long-term. One of their edges, besides leverage, was being less regulated than other financial type organizations. And on the subject of leverage, the promise of more regulation and stricter controls on lending could favor equity as a source of funding over debt. The restricted use of credit will shift the focus to creating value rather than financial engineering making acquirers more selective about their targets. A sort of back-to-basics.
Offshore tax havens also look increasingly endangered, making it harder to extract tax efficiencies from deals and to hide opaque structures. Even though regulatory arbitrage will diminish, it won’t disappear. High-tax countries will still skew the rules to favour inward investment. Rather than being executed, it appears that globalisation and capitalism are being muzzled.
(From Acquisitions Monthly, reporting by Justin Pugsley)
Deals of the day:
* IBM cut its offer for Sun Microsystems Inc to $9.55 a share after a thorough vetting and may soon unveil details of its largest-ever takeover, a source with knowledge of the matter said.
Canary Wharf’s bankers don denim, brace for protests
Some in Canary Wharf swapped their emblematic pin-striped suits for more casual gear on Thursday as London’s banking bastion braced for anti-capitalist protesters.
“We have advised staff to dress casually and security around Canary Wharf has been tightened significantly,” said Robert Whitton, chairman of Whitton Investments, an investment management firm based in the district.
The majority of G20 protests are expected to migrate from the City of London towards the summit epicentre at the nearby ExCel complex in the London Docklands on Thursday. Businesses on the nearby Canary Wharf estate, which houses banks such as HSBC, Citi, Barclays, Bank of America and Morgan Stanley in a cluster of London’s tallest buildings, are on high alert for trouble.
“Batten down the hatches!” yelled the April 1 front page of The Docklands, a free newspaper, but by 1000 GMT on Thursday, the area around Canary Wharf Underground station seemed undisturbed, barring a few extra security guards and perhaps quieter-than-usual streets.
Did you see the protests as rather ironic especially politicallly inclined left protestors attacking a bank supported by the centre left government.
