PRESS DIGEST – Financial Times – May 3

Financial Times

DEVELOPMENT BANKS WARN ON EU HEDGE REGULATION

The Association of European Development Finance Institutions
has written to the European Union to warn that proposals for the
regulation of hedge funds and private equity will hit some of
the most poverty-stricken countries. The organisation, a group
of 15 European state-owned development banks, invests billions
of euros in emerging economies and believes the EU’s directive
could prevent it from achieving its developmental aims.
Development finance institutions, including the UK’s CDC and
Norway’s Norfund, question the introduction of a one size fits
all policy and CDC’s chief executive Richard Laing is quoted as
saying: “Why have such a wide net to capture everything from a
Kenyan small and medium-sized enterprise fund to a pan-African
infrastructure fund?”

MOVE CIVIL SERVICE JOBS OFFSHORE, PARTIES URGED

The Management Consultancies Association has urged the next
government to move thousands of civil service jobs offshore to
India and elsewhere, in order to help reduce the UK’s 163
billion pound deficit. The organisation, the trade body for
management consultants, said offshoring and other efficiencies
could result in savings of 25 billion pounds a year. While
noting previous concerns about data privacy and security,
William Benn, head of public sector at offshoring specialists
Alsbridge, says that the offshoring industry now has high
standards and points to the fact that it is increasingly used by
the private sector.

WATCHDOG ADDS TO CALLS FOR BANKING INQUIRY

Peter Freeman, the chairman of the Competition Commission,
has said there is “compelling logic” to Bank of England governor
Mervyn King’s suggestion that an investigation into the
competitiveness of the banking sector is justified. Competition
experts have said that state bailouts and other emergency
measures brought about by the financial crisis have distorted
the market and King believes that greater competition is
required, given people’s dependence on the big four, Barclays
(BARC.L: ), Royal Bank of Scotland (RBS.L: ), Lloyds Banking Group
(LLOY.L: ) and HSBC (HSBA.L: ). While Freeman stressed that his
statements were not aimed at any particular political party, the
comments echo wider calls for the next government to examine the
effect these measures have had on consumers.

BA CHIEF BAFFLED BY UNION LINE ON PAY OFFER

British Airways (BAY.L: ) chief executive Willie Walsh has
criticised the Unite union’s refusal to encourage members to
accept the airline’s latest offer to end the dispute with cabin
crew, calling it “bizarre”. As the union warns of further strike
action, Walsh said Unite’s ability to damage BA had been
“significantly restricted”. While informing union members that
BA’s recent offer was “an improvement”, Unite’s joint general
secretary Tony Woodley said it could not recommend the proposal.
He accused BA of laying down “vindictive and discriminatory”
conditions related to restoring the discounted travel rights
withdrawn from striking crew in the wake of March stoppages.

BMG LOOKS TO BUY UP UK RIVALS BUT RULES OUT NEAR-TERM EMI
BID

Music publisher BMG is on the acquisition trail in the UK,
to extend its market reach through purchasing UK rivals.
Returning from agreeing a deal in the United States, chief
executive Hartwig Masuch said the group would now be seeking to
replicate the success of its U.S. deal-making in the UK. Masuch
signalled that “something like 50” potential deals could be in
the offing and hinted at two or three larger deals in the months
ahead. However, the BMG head ruled out the possibility of any
near-term bid for indebted rival EMI, instead highlighting the
opportunities to exploit the trend in artists, such as Paul
McCartney, removing their music catalogues from larger
companies.

VODAFONE TO RETURN TO INDIA FOR DEALS

Mobile network operator Vodafone (VOD.L: ) is bidding for
radio spectrum in an auction that began on April 9 in India and
which is due to end this week. The UK-based group is hoping for
deal-making opportunities once the Indian government moves to
liberalise rules, which presently do not sanction consolidation
between India’s mobile operators. But analysts say the Indian
market is ripe for consolidation and widely predict the New
Delhi government will move to relax rules preventing more
industry tie-ups, easing the existing situation where 15
operators are battling in a vicious price war. It is speculated
that Vodafone’s foray into the Indian market could result in
acquisitions of Idea Cellular and Aircel.

PIMLICO TO SELL STAKE TO DYNO-ROD’S FOUNDER

Plumbing services provider Pimlico Plumbers has confirmed it
is in early talks to sell a minority stake in the firm to Jim
Zockoll, founder of drain cleaning business Dyno-Rod. Pimlico
founder Charlie Mullins said he is hoping to raise 25 million
pounds from the sale of a 30 to 40 percent stake in the business
to finance expansion into cities like Manchester and Birmingham.
Mullins said he would also be hoping to draw on some of
Zockroll’s expertise in the UK plumbing industry to further
expansion plans. Zockroll has been credited with founding
Dyno-Rod in 1963 and building the company into a franchise
network known throughout Britain, which he sold to Centrica
(CNA.L: ) for 57.6 million pounds in 2004, netting himself a
multi-million pound payout in the process.

BIDDERS QUEUE UP TO BUY GB RAILFREIGHT

Highly leveraged transport company FirstGroup (FGP.L: ) is
selling its rail-freight operator GB Railfreight, spurred by the
trend in which a wave of consolidation has resulted in operators
in Europe being sold at high valuations. FirstGroup has been
looking to cut its debt since its takeover of Greyhound bus
owner Laidlaw International for 2.4 billion pounds in 2007.
Among the front-runners being tipped to buy GB RailFreight by
industry insiders are the UK’s Freightliner, described as best
placed to make a buyout, and SNCF [SNCF.UL], which could give
the French company a firm foothold in the UK market. However,
the bidding process has been described by one source as
“complicated”.

MINERS’ PROFITS UNDER THREAT

FTSE-100 listed miners are facing a threat to their
earnings, following the Australian government’s announcement of
plans for a 40 percent supertax on profits. Mining groups, which
comprise 14 percent of the index, are expected to face stiff
headwinds when the market reopens after the bank holiday break
and analysts estimate that BHP Billiton (BHP.AX: ) (BLT.L: ) and Rio
Tinto (RIO.L: ) (RIO.AX: ) will be among those whose profits will be
particularly affected. The two miners account for 7.5 percent of
the index and both have extensive operations in the country.

LLOYDS PLANS UK AND GERMAN INFRASTRUCTURE FUND

Lloyds Banking Group’s (LLOY.L: ) project finance department,
which was formed after the bank’s takeover of HBOS, is preparing
the launch of a new infrastructure fund to help finance key
public sector projects in both Germany and the UK.
Infrastructure, and the private finance initiative in
particular, is seen as a resilient investment class. HBOS was
among the biggest lenders to PFI projects and Lloyds appears to
be just as committed to it. Gershon Cohen, the former head of
infrastructure at HBOS and head of project finance at Lloyds, is
leading talks with investors to sound out the level of support
for the fund.

Investment Basics

Prepared for Reuters by Durrants

PRESS DIGEST – Financial Times – May 3