Roger Penske is pulling out of his pact to acquire the remnants of GM’s Saturn. Is it taps for Saturn? It certainly looks like it. In a previous blog I waxed poetic about what Saturn once was, stood for, meant to me personally (when we met, my husband drove a Saturn, with an ironic fuzzy dice dangling from the rear-view mirror…) Now all I can say is: Roger, what were you thinking? In buying Saturn, Penske was getting a brand and a concept, both tired and tarnished after more than a decade of degradation at the hands of GM’s former bosses. Penske, no fool, intended to revive it as a youthful, fuel-efficient car brand built on other auto makers’ spare capacity. If anyone could have pulled it off, it was the entrepreneurial Penske. Even so, it was an exceedingly long shot. Details are only now emerging but Penske’s announcement says the firm which had agreed to assume production had vetoed the plan, leaving him with no manufacturing base. That partner would appear to be Renault SA, whose interest in producing Saturns for Penske seems to have shriveled up and died. There’s one glimmer of hope for Saturn: As with GM’s Saab, which found a benefactor in Swedish super-car maker Koenigsegg in partnership with a Chinese auto maker, Saturn might find an overseas sugar daddy or mommy. Could the Chinese – who have been circling any number of sick American brands (think: Volvo, Opel, Hummer, Saab) – be on the phone to Penske even now? Stay tuned! Saturn may yet live. By the way, have a look at Saturn’s website. It proclaims: “We’re optimistic about the future.”
Archive for September, 2009
Paul Vigna and Eduardo Kaplan discuss the latest report on manufacturing and why it disappointed investors around the world.
India, Mergers & Acquisitions, Regulation, South Africa, Telecommunications / Comments Off
The protracted MTN-Bharti negotiations are over and done with. It’s a relief. On the surface, a tie-up between the big Indian and South African telecom firms made sense the way Daimler+Chrysler once did: Bring two mighty, complementary players together to create a ginormous entity with sparkling growth potential. MTN+Bharti would have instantly had 200 million subscribers and $20 billion in annual revenue with a vast span across continents and emerging markets. We all know how Daimler/Chrysler played out, leaving both firms in sorry shape, especially Chrysler. MTN-Bharti Airtel was heading in the same dubious direction, thanks largely to South African concerns about losing control of a national champion to a foreign buyer. As DJN colleague Robb Stewart recently wrote about the deal, which was scuttled Wednesday, “Cross-border telecommunications deals already have a poor history of success. Deals touted as mergers-of-equals tend to fare even worse.” You may recall that Daimler-Chrysler was also presented as a “merger of equals,” whereas reality soon proved otherwise. Ironically, over the years MTN itself benefited from the failure of a competitor to thrive amid convoluted ownership. As Robb wrote, “The companies may want to learn from Vodacom Group Ltd., a mobile venture that had been owned equally by South Africa’s Telkom SA ltd. and Vodafone Group PLC until the U.K. mobile giant bought control. Telkom managers have conceded that Vodacom was held back by its ownership structure and restrictions that prevented it from competing in marktes that were seen as belonging to Vodafone. The beneficiary of all this was MTN, which outgrew it.” Laissez-faire, anti-regulation types will wring their hands over the deal being effectively killed by politicians prioritizing South African corporate might over pan-markets industrial logic. I say: Don’t waste your time.
Investment Banking, Mergers & Acquisitions, Wall Street / 1 Comment
The largest bank in Australia isn’t a household name in the U.S. And Macquarie Bank may not want to become one. But it does plan to grow its business in the U.S. and today’s acquisition of Fox-Pitt Kelton Cochran Caronia Waller helps it do that.
Fox-Pitt is hardly a household name itself. It’s a boutique investment bank that specialiaes in bank and insurance investment banking. And is small – has a little less than 270 employees. But it made a tidy profit for its former owners, a group led by J. Christopher Flowers that bought Fox-Pitt for around half of the $130 million Macquarie paid for it.
Banks, Financial Markets, Financial Planners, Investing, Mergers & Acquisitions, Mortgages, Wall Street / Comments Off
Welcome to the big leagues, Ameriprise Financial.
Already one of the largest financial advisory firms in the U.S., Ameriprise today became one of the largest asset-managers as well with the acquisition of Columbia Management’s long-term fund business from Bank of America. (It didn’t buy the money-market funds business).
Ameriprise is picking up an asset management busiess that appears to be on the mend. Net outflows from Columbia’s equity business are slowing and there have been net inflows on the fixed-income side. (See flow charts below)
My mother’s house is lined with newspapers; she’s an old-school news junkie who still takes scissors to paper to clip out articles of interest to her grandchildren, daughters and sons-in laws – not to mention friends and acquaintances across the globe. But we all know Mom’s kind is rapidly dwindling. Even those of us in the newspaper business find ourselves migrating to paperless news-surfing. Which makes Gannett’s optimistic third-quarter earnings forecast rather interesting. Are revenues of disciplined companies such as Gannett, which have slashed costs to survive the economic and media-industry downturn, about to turn the corner and take off? Or are these firms fated to barely bumble along on the back of continued cost cuts, helped as a few advertisers tiptoe back to print media amid a slow-motion economic recovery? Gannett’s shares soared nearly 20% after it said third-quarter earnings, excluding restructuring charges, would come in above analysts’ estimates. Gannett’s quarterly revenue forecast was disappointing, but investors seemed to focus on the earnings outlook. DJN colleague Nat Worden cited John Miller, an Ariel Investments portfolio manager, as saying the profit forecast signals print and broadcast media are broadly recovering from the recession’s low point. “We think there is more upside here as advertisers return to the market,” Miller said. Personally, I’m skeptical (but always hopeful – it’s my beloved industry, after all!) Yes, advertisers will “return” to print media – but they’ll do so at the weak levels seen 12 to 18 months ago, when the broad-based advertising migration away from print media was getting worse irrespective of the economic climate. People like my mother have been print media’s best friends; unfortunately, folks like Mom are rare.
Earnings, Health Care, Pharmaceuticals, Retailing / 1 Comment
Successful companies don’t stop innovating during tough times. And they get even smarter about cost control without giving up customer service. those two factors seem to be behind Walgreens strong earnings report today which sent sales up 7.6% while earnings fell 1.5%. (The stock closed at $37.35 a share, up 9.24%).
Walgreens has redesigned stores and cutback on new store openings to focus on the business it currently has and those moves have been paying off. On top of that, it has been looking for ways to attract new business.
The breathless beginning to the press release (“Fares are falling! Fares are falling!”) is almost enough to make you hop online at southwest.com and start buying some of those cheap airline tickets. That is until you go to Expedia and see that, well, these new Southwest fares are and aren’t cheaper than what some competitors offer.
There are restrictions and travel must occur between certain dates. And the prices we mention below are all before taxes. So, here’s what we found. Southwest, in its press release, offers a new low fare between Phoenix and San Diego for $59 each way (we are looking at travel on Oct. 13 and returning Oct. 19) – for $118. USair already offers a fare of $117. Looking to go from Chicago to Columbus, Ohio? Round trip on Southwest will be $138, while United is offering $117. Southwest does offer the lower fare between Boston and Chicago ($178 versus the $188 on JetBlue.)
Bottom line – just because it’s a sale doesn’t mean it’s the cheapest around. Oh, and one of the other Southwest restrictions? Good for travel every day except for Friday and Sunday. That’s 28% of any week and likely when most people would like to get away: on the weekend.
Singaporean sovereign wealth fund GIC lost more than 20% of its value in fiscal 2009 – or about 59 billion Singapore dollars according to one person familiar with the matter.
That’s not pretty, but not a disaster, either, given the horror show on global equity markets between their Oct. 2007 peak and the lows hit in March 2009. The run-up in stocks since then and GIC’s exit last week from Citigroup, which reaped S$2 billion-plus in profit, suggest the fund – like pretty much all others – is in for a better year. GIC calculates its annualized gains over the last 20 years at 5.7% – neither the best nor worst place to have put your money.
The financial crisis put the spotlight on SWFs, first as saviours of traditional banks – for GIC, read Citi and UBS – and then, when fear set in again, as another example of how finance had become a shadowy and untethered game played by elites. Funds run or sponsored by Arab or East Asian states deploying bucket-loads of money to prop up the banks where the average westerner deposited his salary was either a grand exercise in back-scratching or, more nefariously, a takeover bid for the financial system.
It wasn’t that long ago when Xerox was focused on paying down debt.
At its 2Q earnings conference call on July 23, an analyst asked Xerox Chief Financial Officer Larry Zimmerman about share repurchases and acquisitions. Zimmerman’s response, according to a transcript of the call: “…we stay where we are in this environment on what we’re doing with cash. right now, we’re paying down debt. We have debts third and fourth quarter going forward here that we want to pay down. We want to have a good cash balance. And i think we would evaluate if we want to change next year if the economy got a lot better. If the economy stayed where it is, I think (audio gap). I think on the acquisition side, we have done some small distribution ones. we’re still looking at those, but they would be on the small side (audio gap) forward and we’ll reevaluate.”
That was two months ago. Today, Xerox offered $6.4 billion in cash and stock to buy Affiliated Computer Services and along with it, assume some $2 billion of debt.