Unstructured Finance

A British-Iberia merger could squeeze American

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British Airways and Spain’s Iberia are in talks to create the world’s third-largest airline and inject some “long-overdue” consolidation in the industry, in the words of BA CEO Willie Walsh.

Where would a combined BA-Iberia leave American Airlines, which was in talks to form a transatlantic alliance with the two airlines? Would a BA-Iberia merger scuttle American’s chances at an alliance?

The argument for forming an alliance and seeking an antitrust waiver was that the “Open Skies” agreement — which frees up restrictions on carriers flying between the United States and Europe — is set to increase transatlantic competition among airlines. That’s a harder pitch to sell if a BA/Iberian merger, creating Europe’s largest airline, shrinks the number of major players in the market.

Getting regulatory approval for the alliance was uncertain to begin with. An immunized alliance between American, the largest U.S. airline, BA, Europe’s third-largest carrier, and Iberia, Spain’s largest airline and the biggest operator of flights to Latin American player, would create the most extensive network between Europe and the Americas.

To make things even more complicated, British Airways has 40 percent of takeoff and landing slots at Heathrow, by far the largest share of any airline. In 2006, BA and American held over half the capacity between Southeast England and the United States between them.

J. Crew’s mea culpa shows Mickey’s modest side

mickey.jpgJ. Crew is getting personal with an emailed mea culpa apologizing to customers who may have had “issues” while shopping online in recent weeks.

While the email’s introduction sounds like a missing line from Sinatra’s “My Way“, it goes on to plead for patience. Humility is in fashion!

The apology also appears at the bottom of the company’s home page.

Here is the full text of the email (lowercases included):  

we’ve made some mistakes….

(too many in our mind).

we want to say that we’re sorry for any issues you have experienced while shopping J.Crew online or over the phone over the last few weeks — we know we’ve let you down.

Check Out Line: Talbots’ makeover includes board

talbots3.jpgCheck out the majority owner of Talbots exerting more control.

The women’s apparel retailer, which has endured hardships in recent months including falling sales, job cuts, an executive departure and a credit problem, said on Thursday that Tsutomu Kajita would become chairman of its board.

Kajita is senior vice president of international operations for Japan’s Aeon Co, Talbots’ majority owner.

“The appointment of Mr. Kajita as non-executive chairman further signifies Aeon and its management’s commitment and confidence in our continued success and ability to execute our long range strategic plan,” said Talbots Chief Executive Trudy Sullivan in a statement.

Reality Bites

An unidentified protesting shareholder faces Deutsche Bank CEO Ackermann during the annual shareholders meeting in FrankfurtDeutsche Bank‘s latest writedown comes with a reality check – the global credit crisis it had largely fought off is still snarling away. The top German bank’s $3.6 billion in fresh writedowns come with a reversal of optimism from CEO Josef Ackermann. “We remain cautious for the remainder of 2008,” he said as his bank became one of the world’s top crisis casualties. As late as November, Ackermann had been suggesting no further writedowns would be necessary, and had stood by a 2008 pretax profit goal of 8.4 billion euros. Now, with no indication that the books are completely cleaned of toxic paper, further write-offs seem a lot less unlikely and that full-year profit goal is going quietly by the wayside.

Japan’s TDK Corp said it plans to buy German electronic parts manufacturer Epcos for $1.9 billion in cash, as it pursues growth overseas and seeks to expand sales of industrial-use components. TDK said in a statement it would launch a friendly tender offer for all shares of Frankfurt-listed Epcos, offering 17.85 euros ($27.81) per share, a 29 percent premium to the closing price on Wednesday and valuing the deal at 1.2 billion euros. TDK said the offer would begin at the end of August. The acquisition is expected to boost TDK’s global market share of capacitors and inductors just as price falls hit earnings at rivals such as Murata Manufacturing and Kyocera, analysts said.

Global lender HSBC is likely to stand firm on its $6.3 billion bid to buy Korea Exchange Bank from U.S. private equity firm Lone Star as a formal deadline looms, cheered by a more accommodating South Korean government. The long-running deal, mired in outstanding legal issues, is seen as a test of whether South Korea is genuine in its pledge to open its financial sector wider to international investors. A successful deal would be the biggest cross-border move in South Korea’s banking sector and catapult HSBC into the ranks of the country’s top local banks.

Huntsman and Hexion spar anew

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Chemical maker Huntsman Corp’s second-quarter earnings have triggered a new round of sparring with its disgruntled suitor, Hexion Specialty Chemicals.

Hexion, a unit of Apollo Management, jumped on Huntsman’ssecond quarterresults, saying they showed that a material adverse change had occurred in Huntsman’s financial condition. Hexion has claimed the $6.5 billion purchase of chemicals maker Huntsman is no longer feasible and the combined company would be insolvent. The two companies have already filed lawsuits against each other.

Hexion said Huntsman’s EBITDA (earnings before interest, taxes, depreciation and amortization) had dropped 19 percent from prior year and its net debt — adjusted for asset sales — was more than 25 percent higher than a year ago.

Clear Channel closes — finally

drumroll.jpgDrumroll, please: Almost two years after radio station and billboard company Clear Channel Communications began exploring strategic options, its $17.9 billion takeover finally closed on Wednesday.

The deal, slowed by legal battles in two states and negotiations to lower the purchase price, became a symbol of the buyout industry’s glory days and the subsequent struggles of the credit crunch.

Clear Channel had agreed to be acquired by private equity firms Thomas H. Lee Partners and Bain Capital Partners last year. The market quickly changed and credit to fund the acquisition became more costly and difficult to secure.

Europeans are coming

beer1.jpegTwo takes from the latest data on U.S. M&A activity so far: The Europeans are coming like never before — and buying their beer here — and the credit crunch has really taken the pizzazz out of the ‘p’ in private equity.

The latest numbers from Thomson Reuters show that so far in 2008, about one-third of U.S. targets were acquired by foreign companies, up from 19 percent in the same period last year.

The weak dollar and slumping stock prices of U.S. companies has created a window of opportunity for international buyers to snatch up American icons.

Check Out Line: International strength pretties up Avon profit

lips1.jpgCheck out how international sales and the weak dollar continue to lift quarterly results at U.S. companies.

Second-quarter profit at cosmetics firm Avon Products Inc more than doubled, as demand in Latin America and other overseas markets more than made up for sagging U. S. results.

Office Depot posted a 6 percent drop in North American retail sales, but a 13 percent rise in international sales during in its most recent quarter.

Refried Beans

Organic vegetables are shown at a Whole Foods Market in LaJolla , CaliforniaA U.S. appeals court decision to revive antitrust proceedings against Whole Foods Market‘s takeover of rival Wild Oats may be too little too late to resurrect the organic market, but that might not be the point. S&P points out that Wild Oats is being quickly digested. The appeals court rejected Whole Foods’ argument that the FTC appeal is irrelevant because the agency does not have the authority to undo a completed merger. Federal courts “have the power to grant relief on the FTC’s complaint, despite the merger’s having taken place, …” the court said. Howard University law professor Andrew Gavil said the ruling could be important for the FTC as it sets a precedent strengthening the agency’s hand in seeking a preliminary injunction in future cases. The reversal drew a sharp dissent from one of the three judges on the panel, Appeals Court Judge Brett Kavanaugh, who accused his colleagues of trying to “unring the bell.”

German ball-bearing firm Schaeffler launched a hostile $18 billion bid for tire-to-brakes firm Continental in what would be the biggest takeover so far this year in Europe. It’s been a nasty business so far, with the two companies sparring publicly. Schaeffler appears to be more interested in picking up stakes privately, as its offer is about 3 percent below where the share is trading. Schaeffler has about 36 percent of Continental’s stock.

A unit of Dubai sovereign wealth fund Investment Corporation Dubai has teamed up with private equity group Blackstone and others to buy British media group Informa, the Financial Times reported. A consortium of private equity groups Providence Equity Partners, Carlyle and Hellman & Friedman have been in talks to buy Informa for about 3.2 billion pounds ($6.4 billion). The FT said Dubai World Trade Centre, one of the biggest events organizers in the Middle East, is seeking to buy Informa’s IIR conference and events division. Blackstone and other private equity groups, possibly including Permira, would keep Informa’s Taylor & Francis academic publishing division, while seeking trade buyers for other units, such as the Datamonitor business information arm, the paper said.

The SENSEX – the low

image007.gifSince the somewhat manic reaction to the government’s confidence vote victory, the SENSEX has retraced fully under the weight of falling overseas markets and the Reserve Bank of India’s latest monetary tightening.
From a technical point of view on the daily chart we have settled around support at 14,206 on Wednesday.
Nevertheless the short-term indicators are still bullish with the Parabolic-SAR and MACD pointing to the upside.
The black right pointing arrows on the chart mark where we got good technical signals for medium term trend movements. The upward pointing arrow is the possible signal we are getting now about the current possible turning point.
The Alpha-Beta study has turned neutral but has yet to confirm an uptrend. This is the green line (signal line) on the chart which is current between the upper and lower lines. Confirmation of a new trend will come when the A-B turns bullish and that will be when the signal line cuts down through the lower line.
image0093.gifOn this chart you can see the major technical support at the long-term trendline in Q1-Q2 and when that broke around the 38.2 pct Fibonacci retracement level in Q2. You can see both these supports clearly on the chart.
Since the 38.2 pct support broke the next big level on the downside is 11,900 which is a 50 pct retracement of the entire low to high BSE upmove. As you can see we have bounced off good support around 12,500 which was the high reached before the 2006 sell-off and the 2007 low.
There is very good long-term technical support for this market between 11,900 and 12,500.
The bounce we had from 12,500 was clearly too steep as you can see and the market is currently settling into a more sustainable trend. We need to be looking for more technical confirmation that this was indeed the bottom of this year’s decline. All things considered, as long as the oil price continues to moderate, inflation doesn’t roar away and the political backdrop remains more positive we could have seen the trough everyone has been looking for.

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