Mergers & Acquisitions

Dow Chemical Co—Union Carbide Corp: In a merger that will create the world's second-largest chemical company, Dow Chemical Co said it would acquire Union Carbide Corp in a stock deal worth $11.6 billion.

TD Bank —Canada Trust: Toronto-Dominion Bank Canada's fifth-largest, said it would take a second crack at growth through acquisition by buying the country's largest trust company, Canada Trust, for C$8 billion.

Merck—Sibia Neurosciences Inc: Merck & Co Inc said it would widen its focus on central nervous system drugs by buying California biotech company Sibia Neurosciences Inc for about $87 million in cash.

KLM—Alitalia: KLM Royal Dutch Airlines and Italian carrier Alitalia said they planned to create Europe's biggest passenger network and could transform their global alliance into a full merger.

Mirror—Trinity: Britain's Mirror Group Plc and Trinity Plc said they agreed to merge in a £1.24 billion ($2.0 billion) deal to create the country's biggest newspaper publisher by weekly circulation.

 

U.S. may buy back its debt

The United States said it may buy back billions of dollars of its own debt in a move that could mean lower interest rates and less reliance on foreign borrowing.

While no final decision on the historically rare step has been taken yet, Treasury Secretary Lawrence Summers said the government aimed to have rules in place by January 1, 2000, for conducting such buybacks.

Summers said it would be a good way for the government to use excess cash in a way that would sustain economic growth and help individual Americans by making it cheaper to borrow.

With about $3.6 trillion in publicly traded U.S. debt outstanding, Summers said savings of billions a year were possible if the government's interest costs for borrowing can be shaved down.

"It means less reliance on borrowings from abroad to finance American investment," he said. "It means less pressure on interest rates and thus lower borrowing costs for businesses and for cars and homes for American families."

At the White House later, President Clinton sought to turn the buyback proposal to political advantage, calling it "the equivalent of a tax cut" for Americans as he vowed to veto a Republican-backed bill containing $792 billion in tax cuts if Congress sends it to him.

Clinton likened shrinking the debt to refinancing a home mortgage at a cheaper interest rate and said his administration had set the country on course to completely eliminate the national debt by 2015.

Debt buybacks would be done through "reverse auctions" in which primary dealers would turn in existing U.S. Treasury securities. Dealers would propose a price at which they were willing to sell and Treasury could accept it or reject it.

Drop in U.S. stockpiles lifts oil prices

Oil prices sped higher following a reported fall in U.S. gasoline stockpiles and a decision by Russia to slash exports of refined products.

Brent crude for September delivery was trading 50 cents better at $19.90 a barrel on the London market at 1345 GMT, reversing an early dip to a session low of $19.25 and within five cents of a 20-month peak touched on Friday.

The U.S. Department of Energy reported that t.S. gasoline inventories had fallen by about one million barrels and crude stockpiles slid by 3.4 million barrels in the week to July 30.

Reckitt to slash 1,500 jobs globally

British household goods manufacturer Reckitt and Colman Plc, which unveiled plans to merge with Dutch detergents group Benckiser last week, said it would shed 1,500 jobs worldwide.

Reckitt said it planned to consolidate, close or sell 15 plants worldwide as part of its plan to cut costs and restore earnings growth hit by weaker markets in Asia, Latin America and trade destocking in North America.

Indian stocks

Indian shares burst into a smart rally on speculative buying that spread across the board, initially spearheaded by the cement and software sectors, dealers said.

But dealers said the rally was probably just a technical jerk after the recent lull which saw only scattered buying in defensive stocks like software, pharmaceutical and fast moving consumer goods firms.

The top-30 share Bombay Stock Exchange index ended 2.58 per cent or 116.77 points higher at 4,644.07.

Seoul steps up pressure on Daewoo to sell cash cows

The South Korean government stepped up pressure on the Daewoo Group to sell its cash cows as foreign banks sought to retrieve $4.5 billion in loans to the crippled conglomerate.

The government also said that the crisis at Daewoo, the second biggest South Korean conglomerate would not lead to fresh financiai turmoil.

The Finance and Economy Ministry said that the government would ask Daewoo to include more units in its restructuring plans for selloffs and spin-offs to other firms, after creditors rejected a plan submitted by Daewoo.

Japan, U.S. may clash over GMO

Japan's Agriculture Ministry, under pressure from consumers, proposed that foods made with genetically altered crops be specially labelled—a move that could spark trade tensions with the United States.

Japan, believed to be the world's biggest importer of genetically modified organisms (GMOs), is heavily dependent on farm imports from the United States, the world's largest producer of genetically altered crops.

The United States has warned that if Jaban implements mandatory labelling of genetically modified foods, it could mislead consumers about food safety and disrupt agricultural trade.

Japan has approved 22 varieties of GMOs under its safety guidelines, including soybeans, corn, rapeseed, potatoes, cotton and tomatoes, but the ministry said labelling requirements should be imposed on those crops and food products that use them in order to allow consumers to make an informed choice of foods.

The ministry expects, however, that the proposed rules will affect only a small portion of Japan's imports of U.S. crops, since exemptions are granted to any food products in which DNA or protein resulting from gene alteration cannot be detected using existing technologies.

Soybeans used to produce soyoil and soy sauce, which are exempted from mandatory labelling, account for about 75 per cent of Japan's annual soybean imports.

And corn used for feed and syrup, which are also exempted from labelling requirements, accounts for about 80 per cent of Japan's annual corn imports. There are also no food products made from rapeseed or cotton that would require labelling.

Japan imports no genetically modified tomatoes and its 700,000 tonnes in annual imports of processed potatoes are also exempted from the proposed rules.

Joint action to rein in yen unlikely

The United States signalled it was hesitant to join forces with Japan and support Tokyo's anxious bid to cap the recent rise in yen that could slow a recovery in the world's number two economy.

Instead, new U.S. Treasury Secretary Lawrence Summers— whose first month in office has been marked by a steady decline in the dollar's value—kept markets guessing and merely vowed to keep in touch with his Japanese counterpart on economic developments, including moves in the two key world currencies.

Amid mounting worries over the outlook for the greenback, which has been hurt by expectations of a slowing U.S. economy and a pickup in Japan's frail growth rate, Summers and Japanese Finance Minister Kiichi Miyazawa got on the phone to talk about their economies and recent moves in the yen/dollar rate.

 

Results

StanChart: Standard Chartered Plc reported a 35 per cent fall in first-half profits as bad debt charges of £240 million ($387.8 million) again hit the Asian-focused banking group hard, particularly in China. The group's pre-tax profit of £271 million was towards the lower end of analysts' forecasts.

Hoechst: German drugs and chemicals group Hoechst AG reported a 63 per cent fall in second quarter earnings. Hoechst said second quarter operating profit fell to 128 million euros ($138 million) from 349 million, partly as a result of its restructuring programme and non-recurring items.

Orange: Orange Plc, Britain's third biggest mobile phone company said its core British operations turned in a modest quarterly, pre-tax profit of three million pounds as it posted a 35 per cent improvement in underlying half-year losses to 32.2 million pounds ($52.3 million).

NatWest: Britain's National Westminster Bank Plc unveiled better than expected first-half profits. NatWest raised profits before tax by 18 per cent to £1.14 billion ($1.84 billion), ahead of market forecasts which had been centred on a figure of around £1 billion.

BAT: British American Tobacco Plc, the world's second largest cigarette company, with brands such as Lucky Strike and State Express 555, reported first half profits to June 30 of £661 million ($1.07 billion), helped by an absence of any exceptional charges.

KLM: KLM Royal Dutch Airlines said competition and overcapacity had slashed first quarter operating income by 37 per cent. The airline reported a 96 million guilder fall in first quarter 1999-2000 operating income to 166 million guilders ($80.35 million).

HSBC: HSBC's pre-tax profit for the six months to June 30 rose 10 per cent to $4.068 billion when analysts had expected it to fall seven per cent. The result was above the too end of the analysts' forecasts which ranged from $3.12 billion to $3.90 billion.

Lloyds: Leading British retail bank Lloyds TSB Group Plc said its pre-tax profits overshot forecasts with a 16 per cent rise to £1.85 billion ($3 billion) and the bank raised its interim dividend by 21 per cent to 8.1p per share on earnings of 24.2p.

 

China plans more firms to take over bad loans

China will soon set up three more asset-management companies to take over the nonperforming loans of its stateowned commercial banks, officials said.

The three firms will be named the Huarong, Changcheng and Dongfang Asset Management Companies (AMCs), Wang Wanbin, deputy director at the State Economic and Trade Commission, said.

The three new AMCs will take over the non-performing loans of the Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China respectively, he said.

Debt-to-equity conversions would start in the second half of 1999, so that AMCs which have taken over the non-performing loans can convert the debts owed to the banks by stateowned enterprises into shares, he said.

SFE embraces $169m Computershare offer

The Sydney Futures Exchange (SFE) embraced a A$260 million ($169 million) takeover offer by financial markets software group Computershare Ltd, agreeing to exclusive talks to reach a final deal.

The board of the SFE whose ownership is up for grabs amid plans to demutualise, said it believed the Computershare offer was "in the best interests of all SFE members".

The decision dealt a further blow to a rival attempt to woo the SFE by the Australian Stock Exchange Ltd (ASX), whose bid ran foul of Australia's competition watchdog last week.

Sales of Korean cars shoot up

South Korea's major carmakers reported robust sales for July as the recovering economy fanned demand for luxury cars.

The country's largest carmaker Hyundai Motor Co Ltd. a unit of the Hyundai Group, sold 110,322 units in July, including exports, up 187 per cent from a year earlier.

Kia Motors Corp, also a unit of Hyundai Group, said its July vehicle sales jumped 57 per cent to 78,601 units.

Daewoo Motor Co Ltd. an unlisted unit of the Daewoo Group, reported vehicle sales in July totalled 94,252 units, up 11.4 per cent from July last year.

Wall Street's losses hit Asian markets

Most Asian stock markets sagged under the weight of Wall Street's losses, and worries about a strong yen added to pressure on Tokyo shares.

But Hong Kong's Hang Seng index closed up 1.9 per cent at 13,435.43, on hopes of strong results from HSBC Holdings and Hang Seng Bank Ltd.

Tokyo's Nikkei 225 average ended 0.2 per cent lower at 17,825.70, weighed down by two straight days of losses in U.S. stocks and the dollar's slump below 114 yen.

The dollar was at 114.36/41 yen at 0930 GMT, compared to 114.47/57 in late New York on Friday. After hitting a Tokyo intraday high of 114.95 yen, the dollar slid to a five-and-a-half month low of 113.95.

In Seoul, the Korea Composite Stock Price Index closed down 1 per cent at 959.81 as foreign and institutional investors lost their appetite over the lack of visible progress in restructuring embattled Daewoo Group.

Renewed tension with China battered Taiwan's key TAIEX index down 1.8 per cent to close at 7,195.94 after falling through technical support at 7,200.

Singapore's Straits Times Index closed 0.8 per cent lower at 2,128.65 as fears of a U.S. interest rate hike overshadowed good interim results.

Russia gets relief from Paris Club

The Paris Club of country creditors said it had struck a deal with Russia to reschedule about $8 billion of Soviet-era debts falling due by the end of 2000 which will now be repaid within 15 to 20 years.

Talks on "comprehensive solutions" to Russia's mighty debt mountain will begin in the autumn of 2000, Paris Club Chairman Francis Mayer said at the end of marathon discussions with Russian Finance Minister Mikhail Kasyanov.

The accord followed hot on the heels of a pledge by the International Monetary Fund to give the struggling Russian government a $4.5 billion loan over 18 months, saving Moscow the humiliation of having to default on interest arrears.

Russia's total foreign debt obligations amount to some $150 billion, Mayer said, with around $38 billion of that owed to Paris Club members and a further $32 billion owed to the London Club of commercial creditors.

BA to spend £2.5b on 50 new short-haul aircraft

British Airways wants up to 50 new short-haul aircraft worth almost £2.5 billion to replace its fleet of Boeing 757s.

The "World's Favourite Airline" has invited Boeing Airbus Industrie and British Aerospace to bid and has told Rolls-Royce, General Electric and Pratt & Whitney that they will be competing to power the new 100-seat aircraft.

The new fleet will replace BA's Boeing 757s on shuttle routes in Britain and destinations such as Frankfurt, Rome and Paris in continental Europe. The 757 carries about l95 passengers on domestic flights and 150 on European journeys.