Asia’s sovereign wealth funds may be loaded, but they don’t need long memories to recall the big losses they’ve suffered on seemingly sure-thing investments in Wall Street’s troubled banks. So with reports that Lehman Brothers came up empty in efforts to win funds from top Chinese brokerage CITIC Securities and state-owned Korea Development Bank, it’s anybody’s guess where it will come up with the cash it needs to deal with an expected $4 billion in writedowns before announcing results in September.
The path most traveled heads further east, to Singapore and the gulf, where investors could be equally, if not more gun-shy given the news flow. A ray of hope could shine from Singapore though. State investment firm Temasek said it was prepared to plunk more money into Western banks. An Singapore sling couldn’t come at a better time. This morning, Citi’s Prashant Bhatia became the latest big bank analyst to warn on Lehman and fellow investment banks Goldman and Morgan Stanley, lowering third quarter estimates for all three, and The Wall Street Journal says the Fed had called Credit Suisse last month to see if it had pulled a credit line from Lehman, acting to prevent a repeat of the cascading speculation that helped sink Bear Stearns.
U.S. private equity investor Lone Star is buying the rump of lender IKB, Germany’s most prominent casualty of the subprime crisis. The sale by state bank KfW closes an embarrassing and costly chapter for Europe’s biggest economy. IKB nearly collapsed a year ago under the weight of $24 billion in investments linked to risky U.S. home loans, making it Europe’s first major victim of the global financial crisis. The government brokered the first of three rescues to avert what the country’s banking watchdog warned could trigger Germany’s biggest financial crisis since the 1930s depression. But as the cost of the rescues spiraled towards 10 billion euros ($14.8 billion), Berlin started looking for a buyer.
In a Wagnerian triumph echoing through Europe’s car factories, ball-bearing maker Schaeffler has won the battle for control of tires-to-brakes firm Continental. Continental Chief Executive Manfred Wennemer, who had slammed Schaeffler as “egotistical, autocratic and irresponsible” after it covertly gathered 36 percent of Continental’s stock, will go by the end of the month, leaving the way clear for the creation of the world’s third-biggest car-industry supplier, with sales of $50 billion. The agreement allows Schaeffler’s stake to creep up to just under 50 percent. But with effectively 36 percent already, the Bavarian group owned by glamorous billionaire Maria-Elisabeth Schaeffler and her son already has control.
Mizuho Financial Group, Japan’s second-largest bank by assets, said it would invest $120 million in U.S. merger advisory firm Evercore Partners, marking the latest push by a Japanese financial company into the world’s largest economy. Mizuho and Evercore, a boutique company that advises on larger mergers and acquisitions, also agreed to work together on M&A deals between Japan and North America, the Japanese bank said in a statement. Though on a smaller scale than Mitsubishi UFJ Financial Group‘s $3.5 billion deal for UnionBanCal Corp last week, which was seen as providing the Japanese lender with a U.S. base for its M&A dreams, and Tokio Marine‘s $4.7 billion bid for Philadelphia Consolidated last month, it’s clear the Japanese are serious about overseas expansion, which is aimed at offsetting slackening growth in the domestic market. Acquisitions by Japanese companies abroad totalled $24 billion in the first half of this year, according to Thomson Reuters data, nearly matching the total for all of 2007.