Markets live chat transcript for the chat ending at 12:08 on 3 Nov 2009. Participants in this chat were: Neil Hume, FT (NH) Miles Johnson, FT (MJ)
NH:
and time for another slice of Markets Live
NH:
FT Alphaville’s daily markets discussion
NH:
and this morning we are drowning
NH:
Lloyds has announced the largest ever European ECM transaction
MJ:
and also the most complicated
MJ:
and most extensively leaked in history
MJ:
So much so that there are no surprises in today’s statement
NH:
not one, all as we expected.
MJ:
and to cap it all off
MJ:
Gordo and Darling are trying to claim credit for a new era of competition in British banking
MJ:
which just takes the breath away
NH:
have these people no shame
MJ:
Well, after what we have seen this year no one will be suprised
NH:
aside from the Lloyds cash call
NH:
RBS have announced its APS deal with the govt
NH:
and then we have the small matter of a market melt down on our hands
NH:
where’s the FTSE 100 at the moment?
MJ:
off 99 points at 5004
MJ:
But has been as low as 4992
MJ:
and the strange thing is
MJ:
no one is really sure why
MJ:
given that only yesterday the market was motoring on the back of stronger than expected US economic data
NH:
this market has become very volatile over the past week
MJ:
Just check out the VSTOXX
NH:
yes, both have spiked
NH:
perhaps Bob the Bear at RBS is right
NH:
and it is going to be a painful end to the year
NH:
for those who missed the post yesterday
NH:
RBS’s chief strategist made the following predictions
NH:
Outlook:
We said in late Aug that S&P would get to 1100/1120 by end Oct/early
Nov. We said growth would peak in Aug and then weaken (see above) into
and in Q1. This is all playing out. As this plays out, I expect S&P to
be in the mid-900s by y/e, and mid/low 800s by Q1 2010. Credit spreads
will weaken materially, IG will do better than HY, QUALITY (strong
balance sheets) will be the winner. I look for 750 Crossover by late
2009/early 2010, and then further weakness as Q1 unfolds. Govvies shud
rally – I prefer BUNDS to USTs or GILTS. The USD will probably rally,
but I dislike any currency where PMs are simply printing. GOLD please.
GET DEFENSIVE RE RISK.
NH:
Thereafter, its all about the PM response.
MORE policy in the UK/US may help risky assets very briefly (2/4mths),
but because growth weakness in the PS is/will be a sustained feature
(IMHO) for many many quarters, MORE policy will very quickly be seen as
THE risk. The USD and GBP would then be at huge risk as (PM)
CREDIBILITY, SUSTAINABILITY and LACK OF SUCCESS are exposed badly. Bond
yields will then rise dramatically I think – NOT because of bogus CPI
inflation, but because debasement/monetisation will be seen as FAILED
POLICY and which will then be PUNISHED, as opposed to the current
outcome, where such policy has so far been given the benefit of the
doubt and ‘rewarded’.. This will lead to a truly ugly 2010 with New Lows
in stocks (500-handle S&P), New/Near New Wides in HY, IG spreads another
50% wider. The EURO and the Bund are where to be in this world, as well
as the HIGHEST quality balance sheets in credit and equity land (global
big caps). Gold goes to $1500. THINK ABOUT IT – this is the world where
USTs, GILTs, the USD, the GBP AND risky assets ALL SELL OFF…….This
will also be the time to consider going massively OW USD/GBP, as well as
OW USTs/GILTS. Why? Because 2010 and beyond will then see us FORCIBLY
abandon Reckless Policy (the driver of the sell off) which would then
quickly be followed by a new era of DEFLATION and AUSTERITY.
NH:
I have something to say on this
NH:
yesterday a member of the Long Room
NH:
copied that note and gave it to Zero Hedge
NH:
that’s right and we are trying to find out who it is
NH:
we know it was stolen
NH:
because many posts in the LR
NH:
to give them an Alpha watermark
NH:
a life ban with no chance of parole
NH:
We have no problem sharing info
NH:
but people should at least have the good grace to tell us what they are doing
NH:
and when the a contributor to ZH
NH:
lets look at these banks
NH:
what’s the price action Miles?
MJ:
well, RBS is getting hit
Royal Bank of Scotland Group (RBS:LSE): Last: 36.81, down 1.84 (-4.76%), High: 38.60, Low: 36.50, Volume: 81.75m
MJ:
But Lloyds is holding up well
MJ:
Especially considering the wider market
Lloyds Banking Group (LLOY:LSE): Last: 86.20, up 1.2 (+1.41%), High: 90.35, Low: 83.25, Volume: 96.64m
NH:
and what about Barclays?
NH:
following the executive of their retail banking chief?
MJ:
Shares are off – down 10p at 320p
NH:
that should have been execution
MJ:
I cant help but think that this smells a bit of news management
MJ:
Today, as that lady Jo Moore said, would look like at good day to bury bad news
NH:
except this is not bad news
NH:
basically the head of the retail bank
NH:
has been reshuffled out of a job
NH:
Barc are bringing their corp and IB division together
NH:
so they can cross sell
NH:
which leaves retail out on its own
NH:
so Fritz Seegers had no choice but to resign
MJ:
So, could this mean the retail bank is going to be span off?
NH:
well, that’s the view the market is taking
NH:
here’s the sort of stuff that’s flying around
NH:
BARC LN BUY … Whilst the MKT is absorbing the LLOY & RBS
news today ..BARC LN 9.30 RNS is a clear sign they intend to
demerge the group .. RETAIL -TOXIC -BARCAP .. VALUATION of
BARCLAYS will be HIGH .. STRONG BUY HERE …
MJ:
If Diamond Bob gets shot of the retail bank, then they really will look like Goldman Sachs
NH:
precisely, we are witnessing the birth of a giant IB that may rival GS in Bob’s dreams
NH:
and cross selling Bar Cap products
NH:
to the corporate client base
NH:
seems to be the director
NH:
and one wonders if they did spin off the retail bank
MJ:
Hmmm. Wonder what Darling and Gordo would think about that
NH:
now down 118 points at 4,986
MJ:
Should we just put that BARC statement up from this morning?
MJ:
For those who missed it
NH:
Barclays today announces the broadening of its Executive Committee and changes to its structure and senior management responsibilities, positioning its businesses to deliver strongly in the evolving financial services industry.
The Executive Directors of the Group, John Varley, Group Chief Executive, Robert E Diamond Jr, Group President, and Chris Lucas, Group Finance Director, will be joined on the Executive Committee by the leaders of a number of Barclays business units and control and governance functions, promoting new talent to the most senior executive level. The Executive Committee, which is chaired by John Varley, has responsibility for executing the strategy determined by the Barclays Board.
The changes are as follows:
*
A new business grouping, to be called Global Retail Banking (GRB), comprising UK Retail Banking, Barclaycard and the former GRCB Western Europe and Emerging Markets businesses, will be led by Antony Jenkins, currently Chief Executive of Barclaycard. He will report to John Varley.
*
A new business grouping, to be called Corporate and Investment Banking (CIB) and Wealth Management, comprising Barclays Capital, Barclays Commercial Bank and Barclays Wealth, will be led by Group President Robert E Diamond Jr. Jerry del Missier and Rich Ricci will be co-Chief Executives of the Corporate and Investment Bank. Tom Kalaris, Chief Executive of Barclays Wealth, will continue to lead the Wealth Management business. Jerry del Missier, Tom Kalaris, and Rich Ricci will report to Robert E. Diamond Jr.
*
Maria Ramos, Chief Executive Officer, Absa (the Group’s majority owned South African subsidiary) will report to John Varley.
*
As a result of the above changes, Antony Jenkins, Maria Ramos, Jerry del Missier, Rich Ricci, and Tom Kalaris will join the Group Executive Committee.
*
In addition, Mark Harding, Group General Counsel, Robert Le Blanc, Chief Risk Officer and Cathy Turner, Group Human Resources Director will join the Group Executive Committee. Mark Harding will continue to report to John Varley. Robert Le Blanc will continue to report to Group Finance Director Chris Lucas. Cathy Turner, who is responsible for Group HR, strategy, corporate affairs and brand & marketing, will report to Robert E Diamond Jr.
As a result of these changes, Frits Seegers, currently Chief Executive, GRCB, will leave Barclays following a handover and resigns as Director of Barclays PLC and Barclays Bank PLC with immediate effect.
Barclays will release its Interim Management Statement for the third quarter of 2009 as planned on 10 November 2009. Profit before tax for the Group for the third quarter was consistent with the run rate for the first half of 2009.
NH:
very significant change I think that
MJ:
And it wont be making the news today
NH:
it will on Alphaville
MJ:
Which brings us back to Lloyds and RBS of course
NH:
do we have any idea what the cash call is going to be pitched at?
MJ:
well, from reading between the lines it looks like
MJ:
the issue is being underwritten at 15p
MJ:
but the final pricing will be announced later
MJ:
a release from one of the banks involved
MJ:
Fully Underwritten Rights Issue
To Raise: c.£13.5bn / $22.1bn
New shares to be issued at a price equal to the higher of (i) 15 pence per new share and (ii) a price per new share which is within a range of 38% to 42% discount to TERP
Final rights issue price expected to be announced on or around 24 November
HM Government has undertaken to subscribe in full for its 43% entitlement
Expected Timetable:
Nov 3rd: Transaction announced to the market
Nov 24th: Announcement of Final Rights Issue Price
Nov 26th: General Meeting
Nov 26th: Subscription period starts
Nov 27th: Rights commence trading
Dec 11th: End of subscription and rights trading period
Dec 14th: Announcement of take-up and Rump Placement (if any)
Dec 17th: Settlement of Rump
Joint Global Co-Ordinators and Bookrunners: BofA Merrill Lynch, Citi, UBS
Joint Bookrunners: Goldman Sachs, HSBC, JP Morgan
Co-Bookrunner: Lloyds TSB Corporate Markets
NH:
done and dusted by Xmas
NH:
and a huge discount for the underwriters
MJ:
Well, 38-42 per cent discount tot TERP is not too crazy
NH:
but the banks are taking a £500m fee no?
MJ:
And the Treasury is getting some of that as well
MJ:
Just for taking up its rights
MJ:
. . . the Company has agreed to pay to HM Treasury (or to such other person as HM Treasury may direct) the HMT Commitment Commission. If HM Treasury had not committed to participate in full in respect of its entitlements under the Rights Issue, then the Group would have sought to ensure that HM Treasury’s entitlement under the Rights Issue would have been covered by the underwriting commitments given by the Underwriters in which case an amount similar to that to be paid to HM Treasury would have been expected to have been paid instead to the Underwriters.
MJ:
Commitment Commssion – bet other shareholders wish they could get one of those
NH:
yesterday a lot of people were asking about the contingent covertibles
NH:
and Lloyds have announced £7.5bn of them today
MJ:
well, have they got a choice?
MJ:
they have a gun at their heads
MJ:
from Gary Jenkins at Evolution Securities
MJ:
Details of the much awaited Lloyds bond swap are now out, with various UT2, T1 and preference shares available to exchange into “Enhanced Capital Notes”, which will be new lower tier 2 instruments which will automatically convert into ordinary shares if the Groups published consolidated core tier 1 capital ratio falls below 5%.
They make it clear that the existing securities will be subject to EC rules regarding the discretionary payment of coupons / dividends on hybrid capital issued by institutions that have received state aid, no doubt to encourage bondholders to participate in the exchange. It is along the lines of “we’re gonna make you an offer you can’t refuse”.
MJ:
The exchange will close on 20th November and it gives holders of exchangeable securities 4 options:
1) exchange into the new Enhanced Capital Notes (ECNs) or if failing remain with the existing securities
2) exchange into ordinary shares (or into cash at LBG’s discretion or possibly into ECNs if maximum approved amount of shares issued)
3) exchange into ECNs or if failing that into cash
4) exchange into ECN’s or if failing that into ordinary shares (or cash at LBG’s discretion)
A list of priority for exchange into ECNs and a separate priority list for exchange into shares or cash are provided with the exchange documentation.
The new securities will have a coupon between 1.5-2.5% higher than that of the relevant existing securities. The ECN’s will be issued by one of two issuers: LBG Capital No 1 guaranteed by LBG and LBG Capital No 2 guaranteed by Lloyds TSB.
MJ:
The ECNs will have a bullet final maturity; existing securities with no call date will exchange into ECNs with a maturity of approximately 15 years, existing securities with a call date before the issue date of the ECN will have a maturity date of approximately 12 years, other securities will have a maturity date equal to the the first call date of the existing bond subject to a minimum maturity of 10 years.
The conversion price will be calculated by taking the greater of
a) arithmetic average of Volume Weighted Average Price of ordinary share for 5 consecutive days starting 11 November to 17 November and
b) 90% of the closing price on 17th November
and then multiplying it by the rights issue factor.
The 5% trigger level at which ECN’s would convert into equity should leave considerable comfort for holders of the new ECNs:
NH:
that’s a very handy round-up
NH:
and the bit about the coupons on exisiting securities
MJ:
and we can put some more of this up in the LR later today with some handy spreadsheets
MJ:
for people into that sort of thing
NH:
OKay lets to turn RBS
NH:
the EC has come down on them
NH:
and are forcing to sell more businesses than they want to
MJ:
And its all rather got the better of Mr Hester
MJ:
Royal Bank of Scotland has criticized the agreement it was forced to make with regulators in Brussels as part of the three-way deal to insure the bank’s toxic assets.
While Stephen Hester, chief executive, described the UK’s asset protection scheme as “lighter-touch” to benefit taxpayers, the government and the bank, he criticised the number of assets the group will be forced to dispose of.
MJ:
What did he expect to happen?
NH:
the govt 84% of this bank now
NH:
a bigger bailout than Citigroup
MJ:
Here is a excert from what Lex has to say this morning
NH:
(thanks Tracy – Have just posted exchange offers in LR, if anyone wants:
http://ftalphaville.ft.com/longroom/tables/fixed-income/lloyds-exchange-offers/)
MJ:
Gordon Brown certainly has chutzpah. Claiming credit for introducing fresh competition into the banking sector is as preposterous as asserting that Britain was “best placed” to weather the recession. UK consumers have to thank Neelie Kroes, European Union competition commissioner, not the government. Even investors with the shortest memories can recall that the Treasury blessed both banks’ recovery plans in February and that the prime minister not only brokered Lloyds’ merger with Halifax Bank of Scotland but also threw in a waiver from competition rules. Either way, the news yesterday that RBS must now undertake disposals marks the start in earnest of the dismantling of Sir Fred Goodwin’s empire.
MJ:
Darling is trying to make it lok like it was all his idea in the first place
MJ:
From GMTV this morning
MJ:
what we’ve got to do is to complete that repair job that we started. At the same time though, what I want to do is to make sure that we do get more competition on the high street. That is important for people looking for mortgages, for small businesses looking for loans.”
MJ:
This is part of a step to bring increased competition to the UK high street banking market. We’re going to see something like 14pc of the UK personal account and small business market transfer to new ownership, new entrants,” he told BBC TV. “With patience the taxpayer will not only get back the money we’ve invested but a very good profit … but it will take time
NH:
this is pretty shameful attempt to re-write history
NH:
who forced through the merger of Lloyds-HBOS merger in the first place?
NH:
what have the analysts made of all this
NH:
what’s the view from the market?
MJ:
Obviously everyone is over the moon that Williams and Glyn will return to the British high street
MJ:
And here is a bit from Nomura on RBS
MJ:
The RBS capital restructuring increases the diluted market capitalisation to some £40.8bn. We would argue that this requires PBT of some £10bn. This is similar to the peak made in 2007 of £10.4bn. We believe normalised PBT is near £9bn, before the dilution from disposals and other issues, such as APS and contingent capital fees. We therefore regard the shares as still demandingly priced.
We estimate that the increased capital and lower APS cost will raise the TBVPS to 50.8p, compared with 39.4p on a pro forma basis at the end of 2009. However, this could reduce if credit impairments exceed the original first loss piece.
Using normalised PBT of £9bn, we would venture normalised EPS of 5p, prior to any dilution from disposals.
We estimate the common equity Tier 1 ratio at end 2009 of 10.6%, very similar to the 10.9% figure we were estimating under the original APS.
Size of APS pool reduced from £325bn to £282bn.
RBS first loss piece is increased to £60bn from £42bn. However, the company does not expect in its base case to call on the insurance, only in the stressed case.
MJ:
Cost of the APS is now an annual fee of £700m for 2009-11, falling to £500m thereafter, payable in cash, deferred tax or B shares. The company plans to exit the scheme within five years, implying a maximum fee cost of £2.9bn, compared with some £16.5bn under the original scheme.
HMT will subscribe for £25.5bn in B shares, equivalent to the maximum envisaged in the original APS. HMT will commit to subscribe for an additional £8bn, if the core Tier 1 ratio falls below 5%, for a 4% fee.
The EU state aid related disposals include RBS Insurance, 14% of the UK retail branch network, Global Merchant Services and the Sempra stake. A further £60bn of assets would be disposed of in the event the contingent capital is triggered. The businesses identified for disposal excluding the UK branches contributed profits of £1.07bn in 2008. We estimate the UK branch businesses could generate PBT of £300m-400m on a normalised basis. This implies the disposal businesses contribute some 15% of estimated normalised PBT.
The company says that credit impairments are showing signs of plateauing.
MJ:
That was from Robert Law
MJ:
And here is a bit from Cazenove on Lloyds
MJ:
Withdrawal from APS, agreement with EC, IMS, capital raising
Exiting the APS benefits Lloyds by £4.5bn based on our estimates and net of the exit fee. The
result is that Lloyds is more exposed to the performance of the UK economy, but based on the financial performance year to date, management is more confident in the outlook; specifically it continues to expect rising preprovision profits and falling impairment. As foreshadowed by the company on 29 October, the cost of the EC sanctions is not material. We estimate the divestments will reduce potential earnings by £0.5bn.
The capital ratios are robust. We estimate year end core tier 1 capital of £41.3bn post rights and
a ratio of 8.4%.
Contingent capital, which triggers at a core tier 1 below 5%, is worth 160bp to the ratio upon
conversion.
The proposals announced today are subject to shareholder approval (General Meeting 26
November).
MJ:
EC sanctions
Though subject to final ratification by the EC, Lloyds has reached agreement on the remedies
required to compensate for the receipt of state aid.
c. £180bn asset reduction by 31 December 2014, which is consistent with management’s prior
guidance for £200bn reduction in the balance sheet. The assets are specified within the
agreement.
within four years, divestment of retail banking businesses with at least 600 branches, 4.6%
share of personal current accounts and approximately 19% of the group’s mortgage book (c.
£70bn)
C&G savings accounts, C&G branchbased mortgages and C&G branches (not the brand)
Lloyds TSB Scotland, including all branchbased customers (not the brand)
TSB brand
Some Lloyds TSB branches in England and Wales
Intelligent Finance
2year prohibition on discretionary coupon payments and calls on existing hybrids; no
restriction on new issuance. Therefore no ordinary dividend for two years; it appears Lloyds will
be able to declare a final dividend for the year ending December 2011E as the restriction
expires 31 January 2012.
Prohibition on making “certain” acquisitions for approximately 3 to 4 years
Lloyds estimates that the banking businesses subject to divestment made a pretax profit of
£0.5bn in 2008 after incurring £0.3bn of impairment. The impairment charge is equivalent to
c.43bp on the £70bn customer loan portfolio suggesting some higherrisk mortgages are
included but also a normalised impairment charge is probably less than £0.1bn. The impact from
the divestment on potential earnings, when impairment is assumed to be low, is c. £0.7bn pre
tax or £0.5bn posttax.
NH:
The prospect of a RBS Insurance IPO raises some interesting questions.
MJ:
Especially on the day Delta Lloyd makes its market debut
NH:
And how is she sailing?
MJ:
Unfortunate day to debut really
MJ:
Shares are off about 3 per cent and the CEO is trying to look like he is not panicking
MJ:
RTRS-DELTA LLOYD CEO SAYS BOOKBUILDING FOR IPO WAS TWO TIMES OVERSUBSCRIBED
RTRS-DELTA LLOYD CEO SAYS NOT EXPERIENCING COMPETITION FROM OTHER BANKS’ RIGHTS ISSUES, CAPITAL MKTS ‘DEEP ENOUGH’
NH:
Shouldn’t be saying things like that then.
MJ:
This idea about the “depth” of the capital markets
MJ:
came up after HSBC unloaded its whopper rights issue earlier in the year
MJ:
So post-Lloyds we could well see more discussion of crowding out, and the like
NH:
But on the IPO front, this market could be making all the private equity sponsors priming listings a bit nervous.
NH:
this just appeared on Reuters
NH:
11:35 03Nov09 RTRS-UNITY MEDIA TO SEEK 500 MLN EURO IN DECEMBER IPO -SOURCES
MJ:
Delta Lloyd may have been two times oversubscribed
MJ:
but it was not priced that aggressively.
MJ:
Private equity folks will be likely to try and squeeze a lot more cash when floating portfolio companies
MJ:
more than Aviva anyway
MJ:
And if this market doesn’t hold, they could have problems
NH:
whihch presumably explains why Yell got a nasty case of the wobbles
NH:
was down 20% at one point
NH:
and they are looking to raise £500m before Xmas
NH:
competing with Lloyds
MJ:
Where are the shares?
NH:
they have rallied a bit, now down just 15% at 42.4p
NH:
Lloyds in negative territory now
MJ:
Not a single riser now
NH:
we should have a quick look at the GBK to see how it has reacted
MJ:
Down about 0.5 per cent against the dollar
NH:
that should be $1.6297
NH:
(Suisse T, of course)
NH:
what’s the Cadbury price doing?
MJ:
Shares are down 2p at 779p
NH:
hmmm, Kraft have results today
MJ:
Its been hard to pay attention to that this morning
MJ:
But from what Ihave heard and read, no one is really expecting an offer until the deadline day
NH:
we switch sides again
NH:
and support Cadbury in fight for independence
MJ:
Neil! You can;t just do that
MJ:
beacuse Cadbury sent in a massive load of choclolotee
NH:
when the facts change sir…..
NH:
and yesterday’s goody bag
NH:
led to me to re-rate Cadbury’s prospects going forward
NH:
and it was a huge bag
NH:
much bigger than the first
MJ:
People will start to think you are a soft touch
MJ:
Although it was very tasty I must say
NH:
I guess we should Kraft the right of reply
NH:
before we make our final decision
NH:
Bid deadline is next Monday
NH:
Oh yes. With all this banking news I almost forgot about H&M capital’s new venture.
NH:
For those who weren’t with us yesterday, we are road testing this new iPhone trading gadget from City Index.
MJ:
Using imaginary money, of course
NH:
And we have each put on a series of trades until the end of the week.
MJ:
My aim was to try and blow up in a spectacular fashion
MJ:
So I bought a virtual position in Lloyds, and shorted BA
NH:
All things considering, those aren’t looking to bad today.
MJ:
lloyds was good until about ten minutes ago
MJ:
how is your and Murph’s quant fund ticking along?
NH:
I’ve already said, it’s a black box. I can’t tell you anything about it at all apart from the returns at the end of the year. and of course the positions
MJ:
Sounds suspect to me…
NH:
Miles do we have any RAW
RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
MJ:
Everyone has been looking at the banks
MJ:
But here has been a little development in this Cisco bid
MJ:
For the Norwegian company Tandberg
NH:
from a senior Cisco executive
NH:
now, if this had happened in the UK
NH:
the takeover panel would be hopping mad
MJ:
We should put an exceprt up
MJ:
Cisco’s proposed TANDBERG acquisition 
At the end of last week, there was some significant speculation and rumor in the media about our offer to acquire TANDBERG, a global leader in video communications. As a result, I wanted to reiterate a few important points about the transaction and Cisco’s broader M&A principles.
We strongly believe our offer is a very good price for Tandberg shareholders. We have commenced a cash tender offer, unanimously recommended by the Tandberg Board, to purchase all the outstanding shares of TANDBERG for 153.5 Norwegian Kroner per share for approximately $3.0 billion. As Tandberg noted in its own communications to the Oslo Exchange, Cisco’s offer represents a 38.3% premium to the closing share price on July 15 – which is one day prior to major media reports of a possible transaction. The price also represents a 102% 12 month return for Tandberg shareholders, far surpassing global market index returns.
Cisco has established a strong record as an acquirer by creating good returns for shareholders of both the companies it acquires as well as Cisco. This deal is no different – we have focused on ensuring strong returns for Tandberg and Cisco shareholders. Cisco’s strategy has always been about maximizing value and opportunity while minimizing risks. The value of the combination of Tandberg and Cisco has been widely covered and discussed, but the risks, from capturing synergies and executing on our first ever acquisition of a European public company, to the overall integration complexity associated with engineering and sales spread across both Norway and the UK, are also important. We have also been required to consider currency exchange costs which, at the current rates, have added at least $100m to our overall expense. Our offer price reflects this balance and is based on a simple premise for both sets of shareholders – fairness and value. Is a 38.3% premium fair for Tandberg shareholders? Absolutely. Does it lock in a superior return for Tandberg shareholders and protect them from future market risk? Yes. Does it also fairly reflect risks borne exclusively by Cisco shareholders? Yes.
MJ:
The bottom line is that Cisco will always act with fiscal prudence. The collaboration market is a $34 billion dollar opportunity where voice is currently the largest application. We believe that video will become the core of the collaboration market, but, it will require substantial innovation and investment to drive this market transition. We’ve already seen increased competition for the traditional video players in the market, as broad based collaboration vendors increasingly focus on video. For all these reasons we believe the time is right for Cisco and Tandberg to come together to help accelerate global adoption of collaboration technology through interoperable, standards-based products. However, no acquisition should be pursued or completed if it runs counter to the broader principles of prudence and financial fairness.
Given all the speculative “noise” last week, I wanted to take the time to reiterate these points because it is important to me, and to Cisco, that all of our stakeholders understand our position as we near the end of the offer period.
NH:
that does not pull any punches
NH:
looks as if an increased offer ain’t coming
NH:
what’s that done to the Tandberg price, Miles
MJ:
Which is below the terms
MJ:
Not too long ago it was trading through them quite a bit
NH:
that’s odd. there has to be a very real chance of a deal break here
NH:
neither the refusnik shareholders or Cisco
NH:
seem willing to budge
NH:
although Cisco have not said in their offer doc
NH:
this is a final offer
NH:
so this could be bluff
NH:
but bluff nonetheless
NH:
1st tender data is next Monday
NH:
although I expect Cisco will extend
NH:
Just heading back to RBS for a moment
NH:
wil forgot to put up one gem
NH:
about the bank’s behaviour
MJ:
Ah yes, how could I forget
MJ:
It is this banking ASBO they have been given
MJ:
RBS now not allowed to be above fifth in the global debt league tables
NH:
do you have the quote on this
MJ:
I’ll just dig it out – one sec
MJ:
Behavioural commitments include that RBS will rank no higher than number 5 in the combined all debt league tables globally for 3 years.
NH:
so the govt wants them to lend
NH:
does not want them above No 5
NH:
is this supposed to be a sign
NH:
that the cash goes to small businesses?
MJ:
And does this mean we will start to see
MJ:
the banking equivilant of match fixing
MJ:
Bankers throwing pitches and stuff
NH:
(Good point from Monkey)
MJ:
So aisde from banks, what else is there left to look at?
NH:
Well, Autonomy are up to their old tricks
NH:
announcing the power-up of a new server
NH:
Cambridge, UK and SAN FRANCISCO – November 3, 2009 – Autonomy Corporation plc (LSE: AU. or AU.L), a global leader in infrastructure software for the enterprise, today announced that Jet Airways, India’s premier international airline, has implemented Autonomy Interwoven’s web content management solution to enhance the performance of its websites, including jetairways.com, jetlite.com and 9wagents.com. With Autonomy Interwoven’s TeamSite, the airline is able to provide its guests with a more compelling online experience through an increase in dynamic content, including video, images, blogs, social media tools and online surveys.
MJ:
This sort of PR puff really should be banned be banned from RNS
NH:
and Autonomy are perhaps the worst offender
NH:
shares down 50p at £12.80 at the moment
NH:
while we are talking about Autonomy
NH:
they are backing a cash call
NH:
at a company they recently spun off
NH:
a video search software company
NH:
Blinkx PLC (“blinkx” or the “Company”) proposed placing of 27,927,971 new ordinary shares at a placing price of 18 pence per new ordinary share
blinkx announces that it is today placing 27,927,971 new ordinary shares, with a nominal value of 1 penny per share (“Placing Shares”), representing approximately 10 per cent. of blinkx’s existing issued share capital, with Autonomy Corporation plc (“Autonomy”) and institutional investors (the “Placing”). The Placing is expected to raise approximately £5.0 million before expenses.
blinkx’s video search engine is built on a technology that was conceived at Cambridge University, enhanced by $150M in R&D over 12 years and is now protected by 110 patents. blinkx’s TV and Video search index performs over 17.4 million searches every day and the company has partnered with over 650 media companies, including CBS, NBC Digital Media, Fox Sports, ITN and Time Inc. In 2007, blinkx introduced AdHoc, a contextual advertising platform for online video. AdHoc delivers advertising based on a patent-pending combination of technology, which enables it to place relevant advertisements in relevant videos at the most relevant points in time.
NH:
have outperformed all morning
Man Group (EMG:LSE): Last: 310.70, down 0.8 (-0.26%), High: 315.30, Low: 307.50, Volume: 3.42m
NH:
and that’s on the back of a push from UBS
MJ:
Have you got the note?
NH:
U.pgrade to Neutral Upgrade to Neutral
We are upgrading Man to Neutral, from Sell. The upgrade reflects 1) reduced regulatory risk from the CFTC, 2) increased dividend forecasts, as we now expect Man to maintain its 44c DPS in FY10, and 3) recent share price underperformance. Last week, Man’s share price fell 12% to underperform the FTSE 100 by 8%. At 313p, Man’s shares are yielding 8.6%. Headwinds remain from weak AHL performance
Our upgrade is primarily on valuation grounds, as Man still faces a number of headwinds. The most significant is AHL’s on-going poor performance. Last week, AHL fell 3% and is now 12% below its high water mark. AHL troughed at -15% in June, which makes this AHL’s slowest ever rebound (see chart on page 5). H1 10 results due on 5 November
Man’s H1 10 results have been well-flagged in a detailed pre-closed statement at end-Sept.
Man’s AuM at end-Sept were US$43.8bn, up marginally from US$43.3bn at end-June. The group guided that H1 10 PBT will fall 66% to US$270m, from US$793m in H1 09. Man did not pre-announce its H1 10 DPS. We expect the group to pay an unchanged H1 10 DPS of 19.2c. Valuation – Target price up slightly to 320p
Man is trading on a Cal 2011E EV/NOPAT of 8.5 times, and yielding 8.6%. We value Man on a sum-of-the-parts basis. Our target price has increased to 320p, from 310p, to reflect lower regulatory risk from the CFTC
NH:
time to wind things up
NH:
where’s the index now?
MJ:
Down 112 points at 4992
NH:
miners doing most of the damage.
NH:
the vol in this sector is off the clock
Xstrata (XTA:LSE): Last: 873.00, down 48.5 (-5.26%), High: 906.00, Low: 864.50, Volume: 6.13m
Eurasian Natural Resources Corp (ENRC:LSE): Last: 833.50, down 45.5 (-5.18%), High: 872.50, Low: 831.50, Volume: 560.52k
Lonmin (LMI:LSE): Last: 1,455, down 80 (-5.21%), High: 1,524, Low: 1,451, Volume: 423.71k
Fresnillo (FRES:LSE): Last: 731.00, down 37.5 (-4.88%), High: 762.00, Low: 713.50, Volume: 255.14k
MJ:
But completely different picture yesterday of course
NH:
yep, all flying on the US eco data
NH:
thanks for joining us today
NH:
if we have a further melt down
NH:
ML may return this afternoon
MJ:
Thanks for the comments
NH:
thanks for logging in
NH:
and what’s interesting
NH:
is that readership is well up this morning
NH:
market down, markets live up
NH:
markets up, markets live down
NH:
we must have a reputation as being bearish or something
NH:
poorer FKA poorertoday and butthenarentweall
NH:
all the old bears coming out to plauy
NH:
now the market is heading lower
NH:
thanks for joining us
NH:
we will pass your comments on to PM
NH:
and see if he can cover some of the US M&A
NH:
that there is quiet a bit of it over there
NH:
LYO – a very good suggestion
NH:
we will be back tomorrow
NH:
if the market really tanks
