PRESS DIGEST - Financial Times - April 3

Fri Apr 2, 2010 11:43pm EDT

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Financial Times

SHAREHOLDERS ACT ON HIGH BANK FEES

The Institutional Shareholders Committee, whose member organisations represent more than a third of UK shareholders, has said it is in the early stages of a review of UK equity underwriting. In a move reflecting the growing disquiet over the cost of cash calls and mergers and acquisitions, the organisation will investigate the marked rise in the fees levied by banks for share issues. Last month, the Association of British Insurers wrote to the Business Secretary Lord Mandelson warning that the high fees charged by investment banks may be skewing the outcome of takeovers. The Office of Fair Trading is also looking at the rise in fees over the last 18 months and a decision on whether it will launch a formal investigation is expected within three to six months.

IT PAYS TO LOOK CLOSELY AT THE HEADLINE PRICES

A comparison of supermarket prices conducted by Mysupermarket.co.uk has revealed a complicated picture. The price comparison site looked at prices offered by Tesco (TSCO.L), Asda (WMT.N), Sainsbury (SBRY.L) and Ocado on March 1 and compared them with Jan 1 prices. During this period of price cuts and promotions 15 percent of prices had gone down, while 67 percent remained unchanged and 18 percent had gone up. Altogether prices rose 0.3 percent in the period. All four supermarkets have defended their pricing policies, with Sainsbury saying it is unable to verify the accuracy of the data, as Mysupermarket has, as yet, failed to share the necessary information on the products included in the survey.

LABOUR ON THE BACK FOOT OVER NI RISE

Growing criticism from business leaders has forced Labour cabinet ministers to defend next year's increase in national insurance. A letter was published this week backing Conservative aims to reduce the rise, with Tory plans publicly supported by 38 business leaders and six business groups. On Friday, Education Secretary Ed Balls attacked the Conservatives, questioning how the plans would be funded. The coalition opposed to Labour policy now includes Marks and Spencer (MKS.L) executive chairman Sir Stuart Rose, Kingfisher (KGF.L) chief executive Ian Cheshire and HMV HMV.L chief executive Simon Fox, as well as the CBI employers' organisation.

CREDITORS TURN TO THE COURTS

Records from the Registry Trust show that the value of County Court Judgments against businesses in England and Wales increased five percent to nearly 900 million pounds last year. The number of judgments against businesses increased nine percent on 2008 to a record 207,100, the fifth year-on-year increase in a row. Registry Trust chairman Malcolm Hurlston said the figures reflected the worsening economy. The number of searches of the Registry Trust's CCJ database has also increased by 58.5 percent.

CADBURY STAFF ISSUED WITH PENSION ULTIMATUM BY NEW OWNERS KRAFT

U.S. food group Kraft Foods KFT.N, the new owner of confectioner Cadbury, has told 3,600 Cadbury staff that they face a three-year pay freeze unless they leave the company's final salary pension scheme. Kraft has discovered a clause in Cadbury's pension trust deed preventing it from changing members' benefits in any way deemed "unfair or materially detrimental" by the scheme actuary. Kraft is not forbidden from closing the scheme, but would have to pay an insurer the full cost of taking it on if it did so. Cadbury's pension deficit was 258 million pounds according to its 2008 annual report.

FUND FOR STRUGGLING BUSINESSES

City investment company Merchant House has launched a 2.5 million euro fund targeted at supporting struggling businesses. Distressed firms hoping to take advantage of the fund must give up a majority share in their businesses and pay interest rates of up to 12 percent to borrow from the fund, with investors in the fund receiving 9.75 percent interest. Merchant House aims to invest between 250,000 pounds and one million pounds in businesses with strong management, sound products or services and valuable underlying assets. It plans to guide firms to strong recovery and then sell them within two years.

NEW RISK OPTION FOR L&G FUND

Financial services company Legal and General (LGEN.L) said it is offering investors in a one billion pound fund the opportunity to decide on the level of debt linked to their investments. L&G is enabling investors to choose their level of debt risk based on a scale ranging from zero to 50 percent. The decision by the firm to offer the fund comes amid calls by investors for greater accountability and transparency, after property funds nosedived during the two-year crash in UK property values. Bill Hughes, managing director of property fund management at L&G, said investors so far have welcomed the novel approach with "some first closings at 50 percent gearing, some at zero and others in between".

OFCOM'S CHANGES FOCUS 3 ON USER FIGURES

Mobile network operator 3 has signalled a move towards aggressively expanding its customer base following regulatory changes proposed by Ofcom, the telecoms watchdog. On Thursday, Ofcom announced proposals for cuts in charges mobile operators can levy for connecting calls to their networks. Since 3 started out in 2003, it has failed to deliver a pre-tax profit, which had sparked concern by authorities that it could be damaged by the merger of France Telecom's Orange UK and Deutsche Telekom's T-Mobile UK. But Kevin Russell, chief executive of 3, said the Ofcom changes mean he can concentrate on being "more aggressive" on voice pricing to build the firm's market share up.

RESURGENT TOWRY LAW SETS SIGHTS ON LISTING

Towry Law chief executive Andrew Fisher has said the wealth advisory firm is considering a main market float in the next 18 months. Fisher, who hopes the company will be a candidate for the FTSE 250 by the time it floats, made the announcement as the company reported a return to profit for 2009. Independent financial advisors have tended not to fare well on the public markets but Towry's business model sets it apart from its predecessors, as it relies on planning and management fees rather than commission. Towry, which reported pre-tax profits of 17 million pounds on revenues of 57.4 million pounds, also differs from other financial advisers in that it does not have to change its business model to comply with new regulations on financial sales, which come into effect in 2012.

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