Deals du Jour
Details emerge of the Swiss government’s disposal of 9 percent stake in UBS. Traders snapped up the 332 million shares at the top end of the expected price range in a heavily oversubscribed sale, a source told us.
Talks over a complicated merger between telecommunications firms MTN and Bharti Airtel are extended for a second time until the end of September. As uncertainty over a successful completion drags on one shareholder we talked to said the extension showed that the deal may be too complex.
For the latest Reuters stories on M&A and investment banking, click here.
For a round-up of other stories featured in the media today take a look at our market chatter.
UBS’ Tax Break
UBS shares are on the rise after news of a deal in principle to end U.S. government tax litigation against the Swiss wealth management giant. This probably involves the bank handing over the names of 5,000 U.S. clients holding secret Swiss accounts, or 10 percent of the names Washington was after. The best news for investors right now is there is no fine involved.
Hardly the end of uncertainty the market would normally crave. While the deal will not formally violate Swiss bank secrecy rules, it’s hardly going to end pressure on Switzerland and UBS — and the entire offshore financial world — to stop shielding the wealthy from paying their dues.
For now, the ebbing threat of a fine, removing the risk of more capital-raising by UBS, is being welcomed. Now, all the bank needs is a business model built on better citizenship. Perhaps they can manage something dramatic before they report quarterly results tomorrow. UBS is expected to post a second-quarter net loss of 1.1 billion Swiss francs ($1 billion). It lost billions of business from wealthy clients after it handed over about 250 names in February to settle a separate U.S. criminal probe.
Its still only 10%, that’s not a victory for Washington its more like an insult. Swiss banks have become so powerful because they’ve always been a haven for dirty money. Nazis, dictators, drug cartel bosses they all found a safe place with no questions asked. The word fence comes up in my mind.
Is Genentech taking over Roche?
Roche’s megabucks Genentech buy is looking more like a reverse takeover — in some ways, at least.
The Swiss drugmaker splashed out $47 billion to buy out its biotech partner to secure access to Genentech’s impressive new drugs. But Roche’s U.S. operations are to operate under the Genentech name and research, development and commercial operations are all being based at the U.S. group’s South San Francisco headquarters.
Now Roche doesn’t even consider itself Big Pharma. It says it will leave the industry group Pharmaceuticals Research and Manufacturers of America (PhRMA) but will retain Genentech’s membership of the Biotechnology Industry Organization (BIO).
“As part of the world’s largest biotechnology company, Genentech and Roche believe that BIO’s purpose is closely aligned with the direction of the new company and, therefore, can represent the company’s interests in Washington, among policymakers, legislators and the general public,” Roche said in a statement.
PHOTO CREDIT: People are reflected in a window (R) as they walk past the headquarters of Swiss pharmaceutical company Roche in Basel February 4, 2009. REUTERS/Christian Hartmann
Please tell me what happened to my DNA stock? It just disappeared out of my portfolio. How much was I paid per share and where did the money go? Janice NIchols
Investors long for UBS happy end
Die-hard UBS investors who have stayed with the bank through thick and thin are hoping new boss Oswald Gruebel (sitting) will return the Swiss icon to its former splendour thanks to a bitter medicine of thousands of new layoffs and heavy cost cuts announced on Wednesday.
But their patience is running out.
“The only reason why we are still with UBS is because hope dies last. But if this carries on, we will not tolerate it anymore,” said Blandina Heyne, a UBS investor for seven years, as she and her husband came to attend the bank’s annual general meeting in Zurich.
Both clients and shareholders have turned their back to Switzerland’s largest bank after the crisis forced UBS to post the biggest loss in Swiss corporate history and shares plummeted to historic lows.
Shareholder anger forced former CEO Marcel Rohner to quit in February and chairman Peter Kurer (standing) was giving his last speech on Wednesday before leaving his job after just one year of what some investors say are empty promises.
“When I was little my mother used to read me one of these bedtime stories from the Grimm’s brothers and she said they were the greatest fairytales ever written,” shareholder Rudolph Weber says. “She got it wrong. It was Mr Kurer who wrote the greatest fairytale.”
Gruebel, a no-nonsense German who once turned around UBS’ rival Credit Suisse, told the shareholder assembly the bank would post yet another loss and announced thousands of job cuts.
I think anybody\’s patience will run out. I am not a die-hard UBS investors but really feel sorry for the investors who have stayed with the bank through thick and thin are hoping new boss Oswald Gruebel will return the Swiss icon to its former splendour. Now with more lay offs and heavy cost-cutting, don\’t know if it will regain its vigour again.
investing
UBS dodges bigger bullet in tax pact
Embattled Swiss bank UBS struck a deferred prosecution agreement with the U.S. Justice Department that will cost them $780 million. It could have been worse.
Though paying a hefty fine, the Swiss bank is paying ZERO punitive fines, despite conceding that they helped U.S. residents – estimated to number 250 — avoid paying income taxes over an eight year period.
The agreement announced on Wednesday specifies that UBS will give up $380 million of profit from eight years of cross-border business — of which $200 million will be paid to the U.S. Securities and Exchange Commission and $180 million to the Department of Justice — and $400 million for back taxes, tax penalties and restitution for unpaid taxes and interest .
But it will not pay a penalty. In addition to wining points for its cooperation, Uncle Sam evidently took pity on a bank that has already suffered billions of losses from fixed-income trades and investments during the credit crunch. Halfway down Page 3 of the agreement Reuters found this little nugget:
“In recognition of the current international financial crisis and after consultation with the Federal Reserve Bank of New York, the government will forgo additional penalties.”
Not bad considering the 43-page agreement spells out some seriously naughty behavior.
“Beginning in 2000 and continuing until 2007, UBS, through certain private bankers and managers in the United States cross-border business, participated in a scheme to defraud the United States and its agency, the IRS…”
UBS means “you and us”…according to UBS’s latest television commercial. Somehow, UBS is trying hard to connect UBS’s message of “hope” to Senator Schumer’s videotaped remarks that the American taxpayer supposedly doesn’t care about “pork” or earmarks attached to congressional legislation.
We don’t get the connection. We don’t think that UBS Warburg gets the connection either.
We of the Middle & Working Class don’t get UBS at all, Mr. & Mrs. Reader. Our average IRA/401(k) was cut in half when the stock market tumbled from a Dow of 14,093.08 on October 12, 2007, to where the Dow Jones Industrial Average is now, i.e., hovering around 7,000.
We think that President Obama is absolutely correct. That is, in his remarks last night he said that the wealthy few are simply going to have to pay higher taxes. He has drawn the line at taxable incomes above $250,000.
Okay, that takes care of the line in the sand.
Now the question is what will the top marginal rate being increased to? It was lowered to 70% from 91% in 1964. Messrs. Reagan, Rostenkowski, Stockman, O’Neill and others of the so called Reagan Revolution lowered the top rate even further to 50% in 1981, and then to 28% in 1986.
That’s when the progressive tax system was flat out broken.
George H.W. Bush attempted a repair in 1990, raising the top rate to 31%. Bill Clinton went further in 1993, raising the top marginal rate to 39.6%. Something clicked and the deficit was gone by 2000. The U.S. Public Debt was being paid down, and the Social Security Trust Fund ceased to be raided to mask the annual federal budget deficit.
Unfortunately, George W. Bush and William Marshall Thomas reversed course and lowered the top marginal rate to 35% in 2001. Now we’ve got a $3 trillion deficit, a $5.6 trillion FY 2009 federal budget & a $13 trillion U.S. Public Debt. The U.S. Public Debt at the beginning of the Reagan administration in 1981 was $1 trillion (about $2.3 trillion after inflation today). The annual budget in 1981 was a mere $700 billion ($.7 trillion)…jumping to $3.1 trillion in FY 2001…even before adding the bailout, the stimulus & Mr. Bernanke’s toxic waste buyout program (the additional $2.5 trillion altogether).
Yet even with such a mess, the Privileged Class doesn’t want to even pay the Bush top rate of 35%…so here comes UBS for wealth management and tax avoidance. Wow!
The original ratio of bottom marginal rate to top marginal rate in 1913′s first tax rate schedule was 7:1.
That’s what America needs again. The top rate should be 1964′s 70% and the bottom marginal rate should be 10%…thus 7:1 again, i.e., the 15% and bracket should be merged with the 10% bracket and a “line in the sand” on the bottom end of the scale being $250,000 (at most $300,000).
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