PRESS DIGEST – Financial Times – May 25

Financial Times

LEADERS ASSESS PLANS TO STRENGTHEN GOVERNANCE

Leaders across the European Union will use two days of talks
on June 17-18 to evaluate plans to strengthen the eurozone’s
economic governance and avoid a sovereign debt crisis that could
have global repercussions. The talks are expected to provide a
basis for better budgetary discipline and coordination of fiscal
policy, as well as addressing macroeconomic imbalances in the
euro area such as the competitiveness of Germany relative to
south European countries. Germany, the UK and the Netherlands
have all said that any new plans must not allow governments to
force other EU countries to redraft their budgets.

SPECULATORS’ BETS AGAINST STERLING HIT RECORD LEVEL

Data from the Chicago Mercantile Exchange has shown that
speculators extended their bets against sterling to record
levels in the week ending on May 18, with bets in that period
extended from 72,188 contracts to 76,745, equivalent to 4.7
billion pounds. The figures, which came a week after the
formation of the Conservative-Liberal Democrat coalition
government, indicated the fourth consecutive weekly rise in
short positions in sterling, with the ratio of short-to-long
positions now at nine-to-one. Rabobank analyst Jeremy Stretch
said the new coalition’s formation had “failed to arrest
sterling negativity”.

BOOST TO STUDENT NUMBERS TO BE HALVED

The Department for Business, Innovation and Skills said on
Monday that it planned to halve the planned increase in
undergraduates studying science subjects from 20,000 to 10,000,
restricting a new spending pledge made in the Labour
government’s spring budget and saving 118 million pounds.
However, 150 million pounds saved in Monday’s government-wide
spending cuts will now fund 50,000 apprenticeship places. Lee
Hopley, chief economist at the EEF engineering employers’ group,
said that shifting skills funding in favour of higher-level
apprenticeships was a “big boost” to companies experiencing
skills shortages. The CBI employers’ group said that “painful
decisions” needed to be made to reduce the public deficit.

NEW LENDERS IN BUY-TO-LET SECTOR

The UK’s buy-to-let sector received a boost earlier this
week with news of two new market entrants. Precise Mortgages,
which is backed by the U.S. private equity firm Elliott
Associates, will offer buy-to-let loans from Tuesday, while
Aldermore bank, owned by venture capital firm Anacap Financial,
has already begun lending on residential and buy-to-let
business. David Whittaker of Mortgages for Business described
the news, which follows The Mortgage Works’ decision to increase
its loan to value on buy-to-lets to 80 percent, as “a very
positive sign” for the market.

CADOGAN ASKS TAKEOVER PANEL TO PROBE U.S. HEDGE FUND

Gas explorer Cadogan Petroleum (CADP.L: ) has asked the
Takeover Panel to look into the activities of a U.S. activist
hedge fund, Weiss Asset Management, that is trying to remove
Cadogan’s management and wind the company down. Cadogan has
asked the panel to investigate whether Weiss is colluding with
an anonymous investor to gain control of the company. Weiss,
which denies the charges, holds a 27 percent stake in Cadogan
and has called for investors in the explorer to vote on
replacing the board before distributing any remaining cash to
investors. Cadogan said the vote, scheduled for June 2, would
now be postponed while the panel investigated.

STRIKE THREAT OVER ROYAL MAIL PLANS

At its annual conference in Bournemouth on Monday, the
Communications Workers’ Union vowed to campaign against the new
government’s plans for part-privatisation of the Royal Mail
[GBPO.UL]. CWU deputy general secretary Dave Ward said that the
union would not hesitate to take industrial action in order to
secure its members’ jobs and pensions. The previous government
was forced to shelve part-privatisation plans, following
opposition from the CWU and Labour backbenchers, but CWU
secretary Billy Hayes noted that the new coalition government’s
majority would make for a more difficult battle this time.

NIGERIAN TYCOON DENIES PLAN TO BUY ARSENAL STAKE

Nigerian tycoon Aliko Dangote has denied reports that he
intends to buy the 15.9 percent stake in Arsenal Football Club
held by Lady Nina Bracewell-Smith. The club’s two biggest
shareholders are U.S. sports baron Stan Kroenke and Russian
steel magnate Alisher Usmanov, with stakes of 29.9 and 26.4
percent respectively, and if either were to acquire
Bracewell-Smith’s stake it would take them above the threshold
that requires them to make a mandatory bid. Bracewell-Smith, a
former director at the club has appointed private equity group
Blackstone to sell her stake and the speculation surrounding
Dangote, whose worth Forbes estimates at 1.4 billion pounds, is
thought to have been fuelled by his friendship with Arsenal’s
former vice-chairman David Dein.

GULF KEYSTONE TO LAUNCH FUNDRAISING

Aim-listed Gulf Keystone Petroleum (GKP.L: ) intends to launch
its second cash call of the year as early as this week and has
hired Mirabaud Securities and Russian investment bank
Renaissance Capital to launch the share issue. The
Kurdistan-focused oil explorer will attempt to raise up to 117
million pounds and shares are expected to be placed with
institutional investors at between 75 and 80 pence-a-share. This
would represent a slight discount to Monday’s closing price of
84.5 pence, which valued the group at 438 million pounds.

CIF FUNDS BELLZONE’S GUINEA PROJECT

China International Fund, the Hong Kong investment company,
will fund a 1.9 billion pound project to develop a mining
facility in Guinea owned by Bellzone Mining (BZM.L: ). The project
is the first step in developing a multi-user railway and port
system required to produce and transport a minimum of 50 million
tonnes a year from the Kalia iron project. Bellzone said it
intends to develop the Kalia mine itself and would transfer to
CIF half of an adjacent project and form a joint venture to
develop another permit. CIF will have the right to purchase all
the iron ore from the Kalia mine.

PREMIUM PORK DEMAND DRIVES CRANSWICK

Cranswick (CWK.L: ), the food producer, reported a pre-tax
profit of 43.8 million pounds for the year ending March 31.
Revenue rose 22 percent to 740 million pounds. The 26 percent
increase in profits is a result of an increase in purchases of
pork products as cash-strapped consumers have turned to the
cheaper meat during the recession. The figures have also been
boosted by the acquisition of CCF Norfolk, a supplier to Tesco,
in June 2009. Cranswick’s chief executive Bernard Hoggarth said
he expected consumers’ preference for pork products to continue
and the company was expanding the capacity of its factories to
cope with the demand.

Stock Market Basics

Prepared for Reuters by Durrants

PRESS DIGEST – Financial Times – May 25