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December 2005

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  • A spate of poor deals gets the investment bankers thinking. After a difficult October, in which initial public offerings met with a variety of fates, attention last month swung once again to the IPO process itself.
  • Cash offer for O2 prompts concerns that telecoms sector might be about to embark on another debt binge.
  • As the festive season approaches, speculation is rife about who will get the lion’s share of this year’s bonus pool. But that’s nothing compared to the build-up to the Morgan Stanley staff pantomime. As the bank is again generously sponsoring the season at London’s Old Vic Theatre, where Kevin Spacey is artistic director, its employees also get the chance to tread the theatre’s hallowed boards. After the Old Vic production of pantomime ‘Aladdin’, Morgan Stanley takes over the theatre for one night in January to put on its own show.
  • GSAM's boutique structure provides a potential model for other asset managers.
  • Australia’s new-issue market heated up this month with the announcement of three large IPOs. Goodman Fielder, a leading Australian foods business, controlled by New Zealand entrepreneur Graeme Hart, intends to raise about A$2 billion ($1.48 billion) from a listing in Australia and New Zealand. Singapore Power’s holding company for its Australian electricity assets, SP AusNet, has also filed a prospectus for a simultaneous IPO in Australia and Singapore that is expected to raise approximately A$1.6 billion. Another electricity asset, Spark Infrastructure, filed in November for an IPO that aims to raise A$1.8 billion to fund the acquisition of minority interests in Australian power assets held by Hong Kong’s Cheung Kong Infrastructure.
  • Although deals by large listed companies grab the headlines, BEE is having an impact at all levels of South African economic life. Despite its short investment horizon, some bankers see a natural fit between private equity and BEE.
  • US private equity group Elevation Partners, which has U2 front man Bono as a partner, announced its first investment in two video game companies, Pandemic Studios and BioWare. The deal will bring the two companies together and, as a result of a $300 million investment, Elevation Partners will become the majority shareholder of the combined group. Elevation Partners closed a $1.9 billion fund in August.
  • Banks get together to create industry utility.
  • Greater anonymity, leverage and lower trading costs are seen as incentives.
  • First non-investment grade trade shows the spoils to come in distressed debt trading.
  • Report says lower risk weighting will encourage banks to look at MMFs.
  • But UK regulator will not ask for position data.
  • Help could be at hand for market makers in jumbo Pfandbriefe that want to hedge spread movements between different issuers.
  • With “no comment” seemingly the stock response to any question that is not about the latest all-singing, all-dancing enhancement to their internet trading platform, senior level appointment or record day, being a press officer or PR for an FX player is probably the easiest job in the market. To encourage more openness, it might be time for Euromoney to launch new categories in its highly regarded and prestigious polls – “most and least helpful press officers of the month”. Polling has already started.
  • According to a new compensation survey by executive search and consulting firm Options Group, M&A bankers will enjoy the biggest increase in overall compensation (salary and bonuses) in 2005, up 20% to 25% on average compared with 2004. Those M&A bankers in Europe are set to get the biggest increases.
  • The wounds from the region’s financial crisis may have healed on company balance sheets but the trauma remains
  • America might still run the internet, but even the biggest bank in the world has to take its time when it comes to cyber-squatting.
  • According to Morgan Stanley’s chief economist, Stephen Roach: “India is on the cusp of something big.” Roach professes to be as excited about India as he was about China in the late 1990s. The source of this excitement is the country’s burgeoning consumer sector, which, as a share of GDP, is already higher than that of Europe, Japan and China.
  • Explanations for the market's significant retreat in November are more complex than for previous years.
  • But Singh’s government must hold steady on the road to reform.
  • It may not be the sort of lead arranging mandate Deutsche Bank normally undertakes, but it’s for a very good cause.
  • Fast food chain McDonald’s has come under pressure from an activist hedge fund to restructure. Pershing Square Capital Management wants the company to spin off two-thirds of its restaurants and borrow $14.7 billion against its real estate to buy back shares. McDonald’s dismissed the idea as a “financial engineering exercise”.
  • Chinese bonds have no relative value. Its equity market is convoluted and stagnant. So why all the hype and hysteria? Theodore J Kim reports.
  • “It’s nearly impossible to say which one you would choose when they go head to head in a pitch for passive mandates. They’re 10-ton gorillas that joust at the top.”
  • There has been no let-up in the spread war, highlighted in last month’s issue. Deutsche Bank has tightened up its spot FX prices even further to selected customers in response to Barclays’ introduction of precision pricing. Sources say that the bank is currently evaluating the impact, before deciding whether to roll it out further. A bank official says: “Deutsche Bank has recently introduced laddered and dynamic pricing to clients. This allows us to price liquidity to our clients more accurately.”
  • The decision of £118 billion ($202 billion) pan-European fund manager F&C to dissolve negotiations to outsource its operational functions to Mellon Financial Services strikes another blow to back-office operations providers. Earlier this year, Schroders and JPMorgan cancelled their outsourcing agreement, and consultants say it’s a sign that fund managers and service providers are realizing that outsourcing is not as easy to conduct as was once thought.
  • M&A activity is changing the Asian banking landscape and the relative positions of banks in Euromoney’s rankings.
  • Bond returns have come closer to matching equity returns over the past 25 years, according to Deutsche Bank. European credit strategists Gary Jenkins and Jim Reid looked at more than a century’s worth of data from the US. They found that, over a 105-year sample, equities produced a real total annual return of 6.53%, compared with 1.42% for US Treasuries and 2.5% for corporate bonds. But since 1980, equities outperformed corporates by just 1.5 percentage points.
  • General Electric’s consumer finance division is entering agent banking, hoping to get business from retail banks seeking to outsource their credit card businesses. Industry commentators believe the move could bring GE $250 million of additional profit over the next five years.
  • As bankers work feverishly to complete mandated China and Hong Kong IPOs before the final window shuts ahead of the Christmas break, there are hints of investor indigestion.