Business this week
Sep 14th 2013 |From the print edition
Verizon issued $49 billion in bonds, smashing the record for a sale of corporate debt. The telecoms company will use the proceeds to fund its $130 billion purchase of Vodafone’s stake in Verizon Wireless, their joint venture. Pension funds and insurance companies flocked to the sale, tempted by the higher yields Verizon offered compared with other, similar quality bonds.
Apple brought out two new iPhones, the 5C and the 5S. The 5S is the top-of-the range iPhone, with fingerprint ID replacing the traditional numerical locking code. The 5C is being billed as a cheaper handset, though at $549 in America and $733 in China, a market that Apple is keen to crack, it is still more expensive than many Android alternatives. Apple’s share price fell by 5%.
Koch Industries, a conglomerate, forked out $7.2 billion to buy Molex, which is based in Illinois and makes a wide range of electrical components and connectors used in industrial and consumer products, including the iPhone.
Icahn could not
Carl Icahn conceded defeat in his attempt to block the $24.8 billion buy-out of Dell by the computer-maker’s founder, Michael Dell, days before a shareholder vote on the issue. Mr Icahn, a legendary activist investor, had proposed an alternative plan to Mr Dell’s buy-out, which he thinks is undervalued. Mr Dell raised his offer to win over sceptics, leading Mr Icahn to claim that “shareholders would have gotten a lot less if I hadn’t shown up.”
Meanwhile, Southeastern Asset Management, Mr Icahn’s ally in his fight with Dell, revealed that it had built a 12% voting stake in News Corporation, making it the publishing group’s second-biggest investor after Rupert Murdoch. Its regulatory filing suggests the investment is “passive”.
The Committee on Foreign Investment in the United States, which assesses the risks to national security from foreign takeovers, gave its approval to the $4.7 billion offer for Smithfield Foods from China’s Shuanghui. When approved by shareholders it will be the biggest acquisition of an American company by a Chinese one, and create a global beast in pork products. Some American politicians had raised concerns about Chinese food-safety standards.
An investigation into allegations of corruption in the office that handles compensation claims for the 2010 BP oil spill found no wrongdoing among its senior management, and concluded that the processing of “honest” claims should continue. But the report, written by Louis Freeh, a former director of the FBI, also described the co-operation between some staff in the office and lawyers for the victims of the spill as “problematic”, and possibly causing a “conflict of interest”.
TSB returned to the British high street as a stand-alone bank, 18 years after being merged with Lloyds. Following its bail-out by the British government Lloyds was ordered by the European competition authority in 2009 to sell off assets in retail banking. TSB has been rebranded and is handling the accounts of 5m customers moved over from Lloyds. Lloyds will float TSB on the stockmarket next year.
Top hats and tails
An ongoing study of income distribution found that the richest 1% in America took 19% of national income last year, their biggest share since 1928. The top 10% of earners held a record 48.2%. During the recovery between 2009 and 2012 real family incomes rose by an average of 4.6%, though this was skewed by a 31.4% increase for the top 1%. For the other 99% incomes rose by just 0.4%.
Three companies are to be chucked out of the Dow Jones Industrial Average and three companies are joining, in the biggest shake-up of the stockmarket index in a decade. Alcoa, Bank of America and Hewlett-Packard are leaving, to be replaced by Goldman Sachs, Nike and Visa. The DJIA is composed of just 30 stocks and is price-weighted, so dearer shares count for more. The share prices of Alcoa, BofA and HP have tumbled over the past five years.
Japan’s economy grew at a much faster rate in the second quarter than had been thought, because of more corporate and public investment. A revised estimate put the pace of growth at 3.8% at an annual rate, up from the 2.6% initially reported.
Suntory, a Japanese company that sells a range of alcoholic and soft drinks, agreed to buy the Lucozade energy-drink and Ribena fruit-juice brands from GlaxoSmithKline, a British drugs company, for ￡1.35 billion ($2.1 billion). Both beverages are popular in Britain and elsewhere, and were marketed from the 1920s to the 1980s as aids to boosting health (Ribena) or recovery from sickness (Lucozade).