Business this week
Aug 17th 2013 |From the print edition
In a surprise move America’s Department of Justice filed a lawsuit opposing the merger of American Airlines and US Airways, specifically because it thinks air fares would rise as a result. In February the airlines announced they would combine, following the trend of consolidation among big American carriers. The merger recently won approval from European antitrust regulators. The American government’s opposition complicates American Airlines’ route to leaving bankruptcy protection, which it entered in 2011. See article.
BlackBerry, which a few years ago was producing the world’s most sought-after smartphones, set up a committee to explore its “strategic alternatives”, including a possible sale of the company. Despite the launch of a revamped range of BlackBerry 10 devices this year the company has seen its market share slip further. Its stockmarket value is now around $6 billion, down from $40 billion three years ago.
Carl Icahn, an activist investor who is marshalling the resistance to Michael Dell’s proposed buy-out of his computer company, revealed that he had acquired a small stake in Apple and had had a “nice” chat with Tim Cook, Apple’s boss, about boosting the size of its share buy-back programme. Earlier this year Apple was pressured into returning more of its cash pile to investors through dividends and share buy-backs. See article.
Bill Ackman, another activist investor, resigned from the board of J.C. Penney, a struggling department-store chain, after a public slanging-match with its management. Mr Ackman’s hedge fund owns 18% of J.C. Penney’s shares. In 2011 he pushed to rebrand the stores and recruited an executive from Apple to run the company, only to see his man removed and replaced with J.C. Penney’s former boss. See article.
América Móvil, Latin America’s biggest mobile-phone operator, bid to take control of KPN, offering 7.2 billion euros ($9.6 billion) for the 70% of shares in the Dutch telecoms company that it does not already hold. América Móvil, which is owned by Carlos Slim, the world’s richest man, bought a minority stake in KPN last year in its first venture into European telecoms.
Cisco, a big maker of networking equipment, said it would cut a further 4,000 jobs, or about 5% of its workforce. The firm is quitting consumer businesses and expanding into corporate cloud-computing.
The euro zone’s GDP rose by 0.3% in the second quarter compared with the first three months of the year, ending six consecutive quarters of contraction. Germany’s economy grew by 0.7%, the fastest pace in a year, and France’s by 0.5%. Italy and Spain were still mired in recession, but Portugal’s economy expanded by 1.1%. See article.
Japan’s economy grew by 2.6% at an annualised rate in the second quarter, well below most forecasts. The figure will fuel a debate about whether to increase the national sales tax to help reduce public debt. Some economists argue that raising the tax next year, as planned, will only dampen Japan’s soggy recovery.
A survey of house prices by Britain’s Royal Institution of Chartered Surveyors recorded the fastest rate of growth since November 2006 (measured as the proportion of surveyors reporting a rise in prices minus those reporting a fall). The index rose in every region of England and Wales, not just in London, as would-be house buyers surged into the market. In March the government unveiled a “Help to Buy” scheme that backs cheap loans for new buyers. Critics say this is merely creating a new property bubble.
The minutes from the latest meeting of the Bank of England’s Monetary Policy Committee showed that one of its members dissented from the introduction of “forward guidance” that the bank will keep interest rates at 0.5% until the unemployment rate falls to 7%. Martin Weale supported the policy in principle but voted against it because of concerns about inflation. Britain’s unemployment rate remained unchanged in the three months to June at 7.8%.
The first criminal charges were brought in the case of a derivatives trade that resulted in $6 billion in losses last year for JPMorgan Chase. Prosecutors in New York accused two former traders who worked in London of conspiracy and wire fraud, though Bruno Iksil, the trader nicknamed the “London whale”, avoided charges in an immunity deal. See article.
Paulson hits the right notes
Steinway Musical Instruments, arguably the world’s best-known maker of pianos, accepted a buy-out offer from John Paulson’s investment firm for $512m. In July Steinway had agreed to be bought out by Kohlberg & Company in a separate private-equity deal, but Kohlberg declined to match Mr Paulson’s overtures.