Monday, 14 January 2008

Regulators reviewing pre-M&A trades: report

(Reuters) - Securities regulators are reviewing whether investment banks' trades in shares of companies linked to M&A deals they were advising were based on coincidence or inside information, according to The Wall Street Journal on Monday.

Investment banks must keep their trading and merger advisory businesses separate, although one arm of a bank could buy shares in a company without knowing that another arm is advising on a deal involving that firm.

The report quoted Stephen Luparello, a top official at the Financial Industry Regulatory Authority (FINRA), as saying the issue was "definitely on our radar screen". FINRA is the largest non-governmental regulator of the U.S. securities industry.

Its interest stemmed from an academic study which found such trading happens more often than would be expected by chance, the report said.

The Wall Street Journal said it had reviewed stock ownership and deal records and found dozens of cases in which investment banks appeared to buy shares in companies that were targets of acquisitions by firms they were advising.
 

Sovereign Bancorp to take $1.58 billion charge

(Reuters) - Sovereign Bancorp Inc (SOV.N: Quote, Profile, Research), the second-largest U.S. savings and loan, said on Monday it expects to take $1.58 billion in fourth-quarter charges, hurt by worsening credit quality and a tough mortgage environment.

The Philadelphia-based thrift expects to write down $1.4 billion of goodwill. This includes $600 million related to consumer lending, which has been hurt by weaker credit and a decision to stop making some auto loans.

It also includes $800 million related to operations in the New York area. Sovereign in June 2006 paid $3.6 billion for Brooklyn, New York's Independence Community Bank Corp, and said revenue and deposit growth have been lower than expected.

Results also reflect a $180 million write-down related to preferred stock investments in mortgage financiers Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research).

Sovereign also said it will set aside $738 million for bad loans and leases, up from $650 million in the prior quarter. It also plans $27 million in charges related to financings to two mortgage companies that have defaulted.

Chief Executive Joseph Campanelli in a statement said Sovereign remains a "fundamentally sound financial institution," despite market and credit pressures. The company operates about 750 banking offices in eight Northeastern U.S. states, and ended September with $86.6 billion in assets.
 

Merck, Schering-Plough's Vytorin Misses Study Goal

(Bloomberg) -- Merck & Co. and Schering-Plough Corp. said their combination cholesterol drug Vytorin did no better job of reducing the risk of stroke by clearing arteries of plaque buildup than did Zocor, an older generic medicine that forms part of Vytorin.

The study examined the carotid artery and found ``no statistically significant difference between treatment groups,'' the companies said in a release distributed today by Business Wire. If that artery is blocked, it can cut blood supply to the brain and cause a stroke. The 720-person trial, called Enhance, is looking at the highest possible dose of Vytorin for patients with a genetic predisposition to high cholesterol.

The drugs had similar safety profiles, the companies reported. The results were submitted to the American College of Cardiology for presentation to a meeting in March.
 

IBM Beats Estimates on Emerging Markets; Shares Climb

(Bloomberg) -- International Business Machines Corp., the world's biggest computer-services company, posted earnings and sales that topped analysts' projections as orders from Asia and Europe bolstered results.

IBM advanced 8 percent in early trading, which would be the most in more than five years if it holds when U.S. markets open. Fourth-quarter profit climbed to $2.80 a share and sales rose to $28.9 billion, exceeding predictions by more than $1 billion.

Business in Asia, Europe and developing countries drove results, Chief Executive Officer Samuel Palmisano said today in a statement. The remarks eased concern that slowing economic growth in the U.S. will drag down technology company profits and marked a reversal from the previous quarter, when IBM disappointed investors with slack hardware sales.

IBM rose $7.85 to $105.52 in early trading after closing at $97.67 on Jan. 11 on the New York Stock Exchange. The Armonk, New York-based company's shares climbed 11 percent last year.

Analysts anticipated profit from continuing operations of $2.60 a share and revenue of $27.7 billion, according to the average of estimates compiled by Bloomberg.

The company plans to report full results on Jan. 17.
 

Friday, 11 January 2008

Mine go ahead for Uranium One

(FIN24) - Uranium One, the Canada-based uranium producer with a secondary listing on the JSE, on Friday received Australian governmental approval to proceed with the establishment of a new uranium mine.


The mine will be developed at Uranium One's Honeymoon Uranium Project, near Broken Hill in South Australia, at a capital cost of A$66m or R401m.


"Construction work on infrastructure at the Honeymoon site will be carried out according to our schedule of commencing production later this year," the company was quoted as saying by the Australian Associated Press (AAP).


The mine, which was rubber-stamped by the Uranium One board in August 2006, is expected to produce up to 400 tonnes of uranium oxide annually and generate about A$40m or R243m a year in exports.


Australia's fourth uranium mine will have a life of up to seven years. With nearly 40% of the world's uranium, Australia has the potential to make a major contribution to security in global energy supplies.


"Our industry remains optimistic that, over time, it will be able to expand operations to help meet the world's clean energy needs and, at the same time, help offset the cost of structural adjustment that may accompany Australia's own efforts to deal with its greenhouse emissions," Australian Uranium Association executive director Michael Angwin told AAP.


The Australian government's approval of the Honeymoon uranium mine comes after last year's decision by Australia's new federal government to ban the construction of nuclear power reactors, but allow additional exports of uranium to other countries.


Uranium One originally expected to start off production at Honeymoon in the first quarter of 2008, but in August said this would be delayed to the second quarter after a decision to modify the technology used in the treatment plant.
 

China, U.S. Make Plans for North Korea Collapse, Reports Say

(Bloomberg) -- China and the U.S.-South Korean alliance have begun planning for military intervention in case the Kim Jong Il regime in North Korea collapses, according to two newly published studies -- one of which foresees a race to occupy and control the impoverished communist country.

``If the international community did not react in a timely manner as internal order in North Korea deteriorated rapidly, China would seek to take the initiative in restoring stability,'' says a Jan. 3 report by Washington's Center for Strategic and International Studies and the U.S. Institute of Peace.

The report says its unnamed Chinese sources see North Korea as stable for the moment, ``but they worry that the potential for instability may grow.''

Meanwhile, U.S. and South Korean military planners were scheduled to complete by the end of 2007 a contingency plan for controlling the spread of weapons of mass destruction and dealing with refugees fleeing North Korea in the event of a collapse, according to an article in the January/February issue of the U.S. Army journal Military Review.

To beat China to the punch, joint planners should go farther and prepare for a South Korean occupation of the North, argues the author, Army Capt. Jonathan Stafford.

``A failure to prepare for this monumental task risks losing the Korean dream of reunification to Chinese hegemony,'' he writes. ``If South Korea cannot occupy the DPRK immediately and effectively, China will.''

DPRK stands for Democratic People's Republic of Korea, North Korea's official name.

Multilateral Approach

The authors of the CSIS-USIP report said Chinese specialists in North Korean affairs they interviewed hoped for a multilateral approach to North Korea rather than a contest for hegemony.

``In the event of instability in North Korea, China's priority will be to prevent refugees from flooding across the border,'' says the report, entitled ``Keeping an Eye on an Unruly Neighbor.'' If Chinese troops need to go into North Korea, ``China's strong preference is to receive formal authorization and coordinate closely with the United Nations,'' it says.

China's People's Liberation Army has contingency plans for at least three possible missions in the country, the report says. One is humanitarian: refugee assistance, or helping with the aftermath of a natural disaster. The second is policing the country to maintain order. The third is to secure North Korea's nuclear weapons and fissile material, or clean up nuclear contamination in the event of a strike -- the report does not specify by whom -- on North Korean nuclear facilities near the border.

China's Reaction

A Chinese foreign ministry spokeswoman on Jan. 8 denied knowledge of the plan, according to Agence France Press. ``I have never heard of nor seen the so-called plan mentioned in the report,'' AFP cited the spokeswoman saying.

Regarding nuclear-related contingencies, ``some Chinese experts say explicitly that they favor holding a discussion on stability in North Korea in official channels with the United States,'' the report says.

China is the organizer and host of ongoing talks with the U.S., North and South Korea, Japan and Russia on denuclearizing the North.

Stafford in his article argues that ``the Chinese have been busy laying the political, diplomatic and historical foundations for an occupation and perhaps even an annexation of North Korea.''
 

Gold Futures Rise to Record $900.10 on Interest-Rate Outlook

(Bloomberg) -- Gold futures rose to a record $900.10 an ounce on speculation the Federal Reserve will further cut U.S. interest rates, weakening the dollar and boosting the investment appeal of the precious metal. Silver also climbed.

Interest-rate futures show a 68 percent chance the Fed will lower borrowing costs 0.5 percentage point to 3.75 percent by Jan. 30 after Fed Chairman Ben S. Bernanke suggested cuts may be necessary to guard against an economic slowdown. Gold rose 31 percent last year when the Fed slashed rates 1 percentage point, sending the dollar 9.5 percent lower against the euro.

``If the Fed drops rates, a lower dollar will propel gold higher,'' said Leonard Kaplan, president of Prospector Asset Management in Chicago. ``Everything we buy is going to be more expensive. Any raw material will go through the roof. The smart people see inflation.''

Gold futures for February delivery rose $4.70, or 0.5 percent, to $898.30 an ounce at 11:55 a.m. on the Comex division of the New York Mercantile Exchange. The price reached the record at 10:40 a.m. The record level was confirmed by Nymex.

Silver futures for March delivery rose 2 cents, or 0.1 percent, to $16.295 an ounce. The price earlier reached $16.415, the highest since January 1981. The metal gained 15 percent last year.

HSBC Securities USA Inc. and Morgan Stanley predicted the Fed will reduce its benchmark rate by half a percentage point this month after Bernanke's comments, up from their previous forecast of a quarter point.