Sunday June 6 2010
Mail on Sunday
Shareholders in state-backed bank Lloyds Banking Group (LLOY.L) have written to the Treasury, Lloyds chief executive Eric Daniels and former chairman Sir Victor Blank, stating that they were misled into voting in favour of a takeover of rival bank HBOS when the takeover documents did not reveal the size of the 25.4 billion pound ($37.18 billion) loan the government had made to HBOS. Shareholders have launched a 14 billion pound claim against the recipients of the letters on the basis that they were misinformed of details of the deal that led to a crash in Lloyds’ share price and part-nationalisation of the group.
Sources have claimed that Sir Richard Branson is reviving plans to float his gym chain Virgin Active this year. The stock market listing would value the company at around one billion pounds. Virgin Active managed to record a strong performance in 2009, despite poor economic conditions, with profits before interest and tax rising by 18 percent to 101 million pounds. Branson, who owns a 75 percent stake in the chain, is believed to be in talks with potential advisers, but is expected to retain a significant holding after the stock market listing.
Online fashion retailer Asos ASC.L will outline plans to expand into America and Europe when announcing its annual results this week. Asos will launch a US website and dedicated sites for France and Germany in the autumn. Asos enjoyed a 35 percent increase in total sales to 223 million pounds for the 12 months to the end of March, with the UK accounting for the largest proportion of turnover. Although Asos is hoping to maintain its strong growth in the UK, which reached 23 percent last year, it has forecast that sales in the U.S. may match those in Britain by 2014.
The Bank of England’s Monetary Policy Committee will face mounting pressure to raise interest rates to bring inflation under control when it meets this week. The MPC is tasked with using interest rates to maintain an inflation rate of two percent, but economists polled by research group Consensus Forecasts have raised their inflation estimates from 2.6 percent to 2.9 percent. The MPC has maintained that recent price increases were due to short-term factors such as oil prices and tax increases but Andrew Smith, chief economist at accountants KMPG, said: “At some point, someone on the MPC may say: ‘we were wrong’.”
The government has been warned by senior bankers that hitting banks with a windfall levy in this month’s emergency budget, as promised in the Conservative manifesto, could result in them being forced to cut mortgage and small business lending by tens of billions of pounds. Early talks between industry leaders and the Treasury found lending would be restricted as the move would reduce banks’ capital buffers, which they are required to hold as protection against the loans they make. One senior banker warned that taking just one billion pounds out of banks would result in mortgage lending falling by 50 to 60 billion pounds.
Britain’s largest banks are being stress-tested by the Financial Services Authority over concerns they could be impacted by the eurozone’s financial problems. As part of a “risk map” of Europe being drawn up by FSA officials, banks have been asked to model a number of disaster scenarios, such as Greece defaulting on its loans. According to analysts, banks in Britain have a total exposure of more than 100 billion pounds to Greece, Spain and Portugal alone.
US POWER GROUP POISED TO RAISE HOSTILE OFFER FOR CHLORIDE
U.S. power giant Emerson Electric (EMR.N) is set to raise its 723 million pound bid for Chloride CHLD.L, the high-tech electricity supply systems manufacturer. It is expected that the improved hostile offer will be tabled in the coming fortnight. Chloride, which saw its shares rise 1.4 percent to 286 pence on Friday, rebuffed one takeover offer from its bigger rival at the end of April. David Farr, Emerson’s chairman and chief executive, has been talking to Chloride’s shareholders over the past week to see what price would be required to win their backing.
According to sources close to Prudential (PRU.L), the group is considering a daring attempt to resurrect its $30 billion takeover bid for AIA, the Asian arm of troubled American insurer AIG (AIG.N). It is understood that Tidjane Thiam, the Pru’s chief executive, believes he could have a chance to table another offer before the end of this year. Thiam’s plot comes in spite of last week’s takeover failure, which led to shareholders demanding his resignation. The Pru holds its annual meeting on Monday.
Research by not-for-profit group IFS Proshare, which represents employee share owners, has warned that at least 160,000 workers in staff share-saving schemes will be hit if capital gains tax is increased in the budget on June 22. The figure underlines how the impact of the tax changes will extend beyond just the highest earners. Roughly two million people have invested in company share schemes. Those with holdings worth more than 10,100 pounds incur CGT on disposal. The government plans to raise CGT from 18 percent to 40 percent or even 50 percent.
Broadcaster ITV (ITV.L) has seen advertising bookings for ITV1 rise by 30 percent on this time last year. The rise is mostly attributed to the World Cup, which begins on Friday. ITV last month told the City that it expected 22 percent growth in the second quarter of the year. The broadcaster, which is splitting World Cup coverage with the BBC, is also expecting a rise in income of 15 percent next month, contrasting with weak advertising figures at the same time last year. It will air England’s first fixture against America on Saturday in prime time.
The Treasury is considering allowing oil companies to “buy out” future tax liabilities by paying a one-off lump sum. The move seeks to address a long-standing issue for North Sea oil producers, and would provide a potential several billion pound windfall to help fill the hole in the government’s coffers. The move could be announced in an emergency budget on June 22. However, it is not the first time such a proposal has been aired. A similar suggestion came out of the North Sea tax review in 2007, but the government rejected it because it was laced with too many uncertainties.