Business this week

Nov 23rd 2006
From The Economist print edition

The London Stock Exchange rejected a second takeover bid by the American NASDAQ exchange. The LSE said the new £2.7 billion ($5.1 billion) offer still “substantially” undervalued it, and spurned a proposal for further talks. After NASDAQ revealed it had increased its stake in the LSE to almost 29%, attention turned to the Americans' chances of getting the LSE's biggest investors to support their offer. See article

Tributes were paid to Milton Friedman, who died on November 16th, aged 94. The American economist, a champion of free markets, laid the intellectual foundations for the ending of the post-war Keynesian consensus. Mr Friedman urged governments to cut spending and privatise state services, but gave warning that “Hell hath no fury like a bureaucrat scorned.”

America's treasury secretary, Hank Paulson, gave a speech in which he called for balance in regulatory oversight of capital markets. Mr Paulson said that legislation should not be “excessive” or impose “needless costs”, but he stopped short of calling for an overhaul of Sarbanes-Oxley rules, which critics say are intrusive. See article

A long-running TV drama?

A fight broke out for control of ITV, Britain's biggest commercial broadcaster. BSkyB, a pay-TV channel that is part of Rupert Murdoch's empire, bought a 17.9% stake in ITV, which was interpreted as an attempt to stymie a £4.7 billion ($8.9 billion) merger bid from NTL, a cable and phone operator in which Sir Richard Branson is the largest shareholder. Sir Richard called on regulators to intervene in what he fumed was BSkyB's “blatant attempt to distort competition”, but ITV rejected NTL's offer as too low. See article

In a significant step towards an accommodation between newspapers and internet companies in lucrative classified advertising, several firms representing 176 newspapers in America reached a partnership with Yahoo! to share content and advertising online.

Google's share price continued to rise and pushed past $500 for the first time. The share price has gone up by around 40% since February, when investors took fright at negative reports about future growth. Google now has a market capitalisation of some $155 billion, more than eight times that of General Motors.

General Motors' share price came under pressure as it emerged that Kirk Kerkorian has cut his stake to 7.4% from 9.9%. Mr Kerkorian recently failed to persuade GM to create an alliance with Renault and Nissan and remains critical of GM's own blueprint to restructure its business.

Buy, buy, buy!

Hot on the heels of last week's $26.7 billion agreement to buy out Clear Channel Communications, a radio and outdoor-advertising company, the rush for big private-equity deals continued. In the largest-ever leveraged buy-out, Blackstone continued its property-acquisition spree by offering $36 billion for Equity Office Properties, America's biggest real-estate investment trust. It also emerged that Australia's Qantas Airways had been approached about a potential buy-out, said to value the airline at around A$11 billion ($8.5 billion). See article

Mining and metals firms also had an acquisitive week. Freeport-McMoRan secured a $25.9 billion deal for Phelps Dodge, a bigger mining rival which failed to cement an ambitious three-way merger with Inco and Falconbridge earlier this year. And in the largest investment by a Russian firm in America, Evraz, a steel group controlled by a Russian oligarch, Roman Abramovich, said it was buying Oregon Steel Mills for $2.3 billion.

CSN, a Brazilian steelmaker, approached Corus, an Anglo-Dutch rival, about a takeover. The move puts pressure on India's Tata Steel to raise its recent offer for Corus. See article

The planned merger between Gaz de France and Suez was thrown into doubt again when the French courts said the deal could not be completed until workers facing privatisation at GDF had had more time to consider the agreement. The combination of the two utilities has been mired in controversy since the French government unveiled the plan in February.

Markets responded positively as the Ifo institute's index of German business confidence, seen as an indication of future growth in the euro area, reached a 15-year high.

Sinking economic foundations

Construction started on new homes in America at an annual rate of 1.49m in October, the lowest level for six years. The rate was 27% below October 2005—the biggest year-on-year decline since March 1991 (the housing market's slump has been blamed for weak growth in the third quarter). Meanwhile, the White House lowered its GDP growth forecast for 2007 to 2.9%.