PRESS DIGEST - Financial Times - March 6

Financial Times

PREDATORS POISED TO SWOOP ON UK SMALL CAPS

UK small-cap fund managers anticipate a wave of takeover activity as U.S. and European companies seek to spend surplus cash on acquiring smaller British firms, according to a poll conducted by rating agency Standard & Poor's. Fund managers said the weak pound meant overseas companies would be able to acquire British rivals cheaply. The survey indicated UK smaller companies funds are investing in engineering firms like Rotork (ROR.L) and Spirax Sarco (SPX.L), with some fund managers avoiding support services companies because of the likelihood of public sector cuts.

"TIME-TO-PAY" SCHEME KEEPS 160,000 BUSINESSES AFLOAT

According to government figures, the sum of corporate tax rescheduled via the business payment support service run by HM Revenue & Customs has reached five billion pounds, with over 160,000 businesses having negotiated "time-to-pay" arrangements since the service was launched in November 2008. The government-backed Enterprise Finance Guarantee scheme has secured 862 million pounds of loans for around 8,500 businesses. HMRC's scheme has been described as "one of the jewels in the crown" of support services by the Federation of Small Businesses' Stephen Alambritis for the way it aids struggling companies with the minimum of bureaucracy.

WEAK POUND BOOSTS UK SHARES

Equity strategists believe a weakening pound will cause shares in London-listed companies like HSBC (HSBA.L), Vodafone (VOD.L) and BP (BP.L) to rise over the coming weeks. Asset managers are rebalancing their UK portfolios and issuing new stock recommendations following sterling's continued poor performance in the currency market. Strategists at Goldman Sachs are encouraging investors to take long positions in UK firms with ties to foreign markets, but short-sell or avoid UK businesses which rely on the domestic economy. Stocks on Goldman's buy list include Unilever (ULVR.L), Diageo (DGE.L), AstraZeneca (AZN.L), Pearson (PSON.L) and Imperial Tobacco (IMT.L).

CENTRAL LONDON BUCKS TREND

February saw the strongest monthly growth in house prices in central London since August 2007, with prices up 3.2 percent, due to houses in the five million pound-plus bracket exceeding the peak market prices of March 2008. The Nationwide House Price index and the Halifax House Price Index have both registered a drop in average house prices elsewhere in the UK for the first time in months because of bad weather and a larger number of properties being up for sale. A total of 45 percent of purchases over two million pounds have been made by non-UK buyers over the past 12 months.

BAE SELLS HALF STAKE IN SAAB VENTURE

Borje Ekholm, chief executive of Swedish investment vehicle Investor, has welcomed defence group BAE Systems' (BAES.L) decision to sell half of its stake in Swedish defence firm Saab (SAABb.ST). Ekholm said Investor's acquisition of half of BAE's 20.5 percent stake "clarified the ownership structure in Saab" in a climate where there had been "less alignment of interests and the emergence of some overlapping businesses" between the two aerospace firms.

METRO SECURES LICENCE FROM FSA

The Financial Services Authority has granted a licence to Metro Bank, meaning the new bank can open on the UK high street within the next few months. Talks between Metro and the FSA saw the bank's founder Vernon Hill relinquish his role as chairman. Hill will now serve as vice-chairman, while Anthony Thomson will chair the bank. Metro intends to create a network of over 200 Greater London branches, but its decision to open just two central London branches initially means analysts have questioned its growth prospects. It intends to offer "superior service" compared to other banks, with branches open seven days a week.

DIAGEO HOPEFUL ON CHINA SPIRIT BID

Drinks group Diageo (DGE.L) said it is confident that Chinese competition regulators will not veto its attempt to take control of China's spirits maker Shui Jing Fang. In 2009, regulators blocked a 1.6 million pound attempt by Coca-Cola to acquire Huiyuan Juice, shocking global deal-making communities. If approved, the deal will be the first successful foreign takeover of a mainland Chinese-listed company not involving a financial institution. The move to secure a deal comes as Diageo seeks to increase its market share in Asia. Diageo's Asia-Pacific president, Gilbert Ghostine, said the UK company's takeover attempt is "completely different" from the larger Coke deal and he does not anticipate "any antitrust issue".

BIFFA'S LANDFILL POWER UNIT FOR SALE AT 350 MILLION POUNDS

Waste Management group Biffa [WSAQTB.UL] is selling its electricity and landfill gas business for 350 million pounds as part of a shift in strategy. Biffa, hit by 20 percent drop in commercial waste volumes, is expected to use the proceeds of the sale to finance the construction of new high-tech plants across the UK.

RBS PAYS NINE TOP EXECUTIVES SHARE BONUSES

Royal Bank of Scotland (RBS.L) has disclosed that it has awarded ten million pounds in deferred share bonuses to nine of its senior executives, in a move designed by the government-backed bank to retain top performing staff. The biggest payout of 5.9 million pounds is expected to go to the investment banking chief executive John Hourican, considerably less than the nine million pounds awarded to his counterpart at HSBC (HSBA.L). Compared to Barclays Capital and HSBC investment bankers, RBS staff earned an average of 173,000 pounds in salary and bonuses for 2009. RBS chief executive Stephen Hester said recovery would be "heavily dependent on having remuneration policies which are fundamentally reformed in structure but ensure that high performing staff are not disadvantaged by working at RBS relative to other competitor banks".

Prepared for Reuters by Durrants.