This Bud's for Whom?
It's hard to imagine, but Budweiser, one of the ultimate American icons, could go Belgian. On May 23, the Financial Times broke the news that InBev, the world's biggest brewer by sales and purveyor of brands such as Beck's and Stella Artois, is pondering a $46 billion bid for Anheuser-Busch (BUD). The St. Louis brewer said it's not interested, but the Busch family doesn't hold enough stock to block a deal if other shareholders and the board disagree. Anheuser shares jumped 7.7% on the news. The FT said on May 27 that InBev might go after SABMiller, No. 3 in the world, if it can't swallow Bud.
See InBev and Anheuser Might Be a Good Match"
Economic Body Blows
Oil is up, housing is down, and the economy is not at all happy. On May 28 crude closed at $131 on the New York Mercantile Exchange, double its price of a year ago. The day before, Standard & Poor's (MHP) announced a record 14.1% year-over-year drop in the S&P/Case-Shiller National Home Price Index in the first quarter. Reflecting the double whammy of oil and housing, the Conference Board's index of consumer expectations fell in May to its lowest level since December, 1973. Companies are edgy, too. The government said orders for durable goods slipped in April for the third month in four. In the long run, Americans can adapt to expensive energy, and falling prices will make dwellings affordable. But the blows are so abrupt that they could push the country into a recession if it isn't already in one.
Employees Win Twice
The Supreme Court, which recently has turned a cold shoulder to claims of workplace discrimination, issued two rulings on May 27 that could encourage more lawsuits against companies. The court gave wider latitude under federal civil rights laws to workers suing over allegations that an employer retaliated against them for complaining of bias. Separate decisions against Cracker Barrel and the U.S. Postal Service pleased liberals and alarmed business groups. Since 1995, retaliation claims before the Equal Employment Opportunity Commission have jumped to 22,000 from 11,000.
Spying in Germany
If you're a telephone company and you're annoyed about insiders leaking damaging info, the temptation must be great. Why not look in your data bank and figure out who's been talking to whom? Deutsche Telekom (DT) CEO René Obermann admitted on May 24 that the German telco misused call records during 2005 and 2006 in what German media reported was an attempt to discover who on the supervisory board was whispering to journalists. Obermann, who became CEO in November, 2006, turned material over to prosecutors and promised a thorough internal inquiry.
Vacancy at the Fed
Ben Bernanke is losing one of his most valued lieutenants—Fed Governor Frederic Mishkin, who said on May 28 that he's leaving as of Aug. 31 to return to teaching at Columbia B-school. Mishkin, 57, who joined the Board of Governors in September, 2006, was early to see the danger to the economy from the housing downturn and credit crunch. Last Sept.1 he delivered a paper arguing that the Fed should chop rates aggressively in case of a then-hypothetical collapse in home prices. His departure leaves the Fed shorthanded because Democrats in Congress refuse to act on President George W. Bush's nominations.
More Dents in Detroit
It was already shaping up as a rotten year for U.S. carmakers, so the last thing General Motors (GM) needed was a strike at a key parts supplier. But that's what it got, and GM announced on May 23 that the American Axle (AXL) walkout, now settled, will cost it $2.7 billion before taxes this quarter. Shares hit a 17-year low of 16.87 on May 27, closing at 17.15 on May 28. Ford (F) shares, meanwhile, fell more than 15% after the company said on May 22 that it would not make money in 2009, as previously promised, but will only break even. A Ford vice-president told a group of senior employees on May 23 that the company plans to shed 10% to 12% of its salaried staff—and this time, the departures won't be voluntary.
See "Ford Cuts Trucks"
An Empire Shrinks
With the sale of his trophy, New York's General Motors Building, for $2.8 billion on May 25, Harry Macklowe might have saved a portion of his real estate kingdom but cost himself a job. Since its near-collapse back in February, Macklowe Properties has unloaded $9 billion worth of assets, leaving the family with half a dozen buildings and sites. It's the second time Macklowe built an empire and watched it crumble—and likely the last. After maneuvering the company out of its dire straits, Macklowe's son, William, is expected to push dad out as chairman soon, said The Wall Street Journal on May 27.
Year after year, China routs India in the race for foreign investment. But when it comes to private equity, the South Asian nation may finally be giving its rival a run for the money. Private equity shops poured $19.5 billion into India in 2007, more than double the previous year's figure, according to a report from Four-S Services, an Indian consulting outfit; China netted just $12.9 billion. India boasts more private-sector companies than China, and progress in corporate governance there has made it safer for investors, says the report. One Indian sector that fared poorly last year was information technology and services, with private equity investment plunging 37.5%. The reason: A strong rupee and the U.S. slowdown have clouded the outlook for Indian outsourcing outfits. (The Economic Times (Mumbai))
Vodafone's CEO Hangs Up
Two years ago he was being vilified by investors, his board was feuding, and his company's stock price was tanking. Now he seems to be getting out while the getting is good. On May 27, Vodafone (VOD) CEO Arun Sarin surprised everyone by announcing that he's ringing off after five years running the world's No. 2 cell-phone operator. He'll be replaced on June29 by his deputy, Vittorio Colao. Sarin's controversial strategy of betting on the developing world seems to have paid off: Vodafone posted $13.2 billion in black ink for the year ending Mar. 31, up from a loss of $10 billion-plus the previous year due to writedowns.
See "CEO Sarin Hands Over a Better Vodafone"
A global giant is waiting to be born. If all goes according to plan, India's Reliance Communications, owned by Anil Ambani, and South Africa's telecom behemoth, MTN, will hook up to become a $63 billion juggernaut, with 116 million subscribers from Cape Town to Kabul. That would make it larger than AT&T (T) and many European players. Reliance's timing was dramatic: It entered the dealmaking fray within 48 hours after MTN's talks with India's Bharti Airtel collapsed. The two couldn't agree on who would wield control.
Buried in China's giant trash heaps lies gold for international engineering and waste management companies. By some estimates, China generates one-third of the world's output of garbage, and that figure is growing rapidly. Beijing projects billions of dollars in investment in waste management programs over the coming decade, with $10 billion pegged for incinerators alone. Local companies such as China Everbright and China Boqi, along with Europeans such as Hera and Interseroh, are among the best placed to cash in. (The Times (London))
United: Still Flying Solo
When Delta (DAL) and Northwest (NWA) tied the knot in April, airline investors hoped a wave of weddings would follow. Maybe, maybe not. On May 27 word leaked out that United Airlines (UAUA) had broken off its courtship of US Airways (LCC). The reason: United's brass concluded it would be too hard to meld the carriers' unions. The end came a month after Continental (CAL) spurned United. On the other hand, United Parcel Service (UPS) said on May 28 that it had signed a 10-year pact to airlift freight for Deutsche Post's DHL unit in North America, a deal that may be worth $1 billion a year in revenue.
Tinseltown's labor struggles inched closer to a happy ending as the American Federation of Television & Radio Artists, the second-largest and less militant actors' union, shook hands with studios on May 28, well ahead of the June 30 contract expiration. The deal, similar to one reached between the studios and Hollywood writers and directors, would pay fatter "residuals" for TV shows downloaded or streamed from the Internet. The Screen Actors Guild said it'll keep talking, so a cliffhanger could still be in the script.
One Big Union?
Workers of the world unite! Well, at least some. On May 25, the U.S. trade union United Steelworkers announced plans to merge with its British counterpart, Unite, to create the first transatlantic labor organization. The body would represent almost 3 million workers and hopes to join forces with other foreign unions in an effort to combat the effects of globalization. At first, each union is expected to keep its own leadership structure. An official merger announcement will be made in early June.
French President Nicolas Sarkozy, elected last year on a conservative pro-market platform, is sounding more and more populist as oil prices fuel 3.4% inflation and his popularity ratings plunge. In a May 27 interview, Sarkozy said he would not scrap the Socialist-enacted maximum 35-hour work week, a measure he earlier had described as an "economic catastrophe." Instead, his government is granting workers a tax deduction for voluntary overtime to increase their buying power. Sarkozy also called for a Europewide cap on oil excise taxes and pledged that he won't raise the minimum retirement age from 60 to 63, a move requested by the French employers federation. (RTL Radio)
Take That, Europe
Irked by rising European tariffs on a host of high-tech products, U.S. Trade Representative Susan Schwab on May 27 filed a complaint with the World Trade Organization. Over the past several years the European Union has slapped duties of up to 14% on items such as cable and satellite boxes that can access the Web, flat-panel computer monitors, and printers that can also scan or fax. The EU argues that these are new products and thus not subject to a 1996 accord to eliminate tariffs on info-tech goods. The U.S., which says Japan intends to join the case, says they're old products with new features.
Countries in the Persian Gulf are plowing much of their oil wealth into immense real estate developments. The value of such projects is estimated at $1.5 trillion, twice the combined economic output of the six states that make up the Gulf Cooperation Council. Dubai has already made headlines with its plan to build the world's tallest tower. But the rest of the region is determined not to be left behind, reports BusinessWeek Al-Arabiya in its May issue. In Saudi Arabia, no fewer than six new cities are on the drawing board. Kuwait, meanwhile, has earmarked $86 billion for Silk City, which will be bigger than Kuwait City itself. There's just one problem: Many of these plans are so ambitious that doubts are emerging as to whether they will ever come to fruition.