European Business News (EBN), 96-11-05

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated November 5 0900 CET

CONTENTS

[01] Russian President Boris Yeltsin undergoes heart surgery

[02] France's CGIP bids $1.17 billion for control of Valeo

[03] Gehe bids $1.05 billion in cash for Lloyds Chemists

[04] British Airways posts 9.3% profit gain for first half

[05] Americans head to the polls

[01] Russian President Boris Yeltsin undergoes heart surgery

The operation came after months of uncertainty about the president's health and his ability to govern his vast, turbulent nation. A Kremlin spokesman said only that the operation had begun at 7 a.m. (0400 GMT) at the Moscow Cardiological Center in western Moscow, but gave no other details. Doctors said the heart bypass operation could take up to eight hours.

The government said Yeltsin earlier transferred his powers temporarily to Prime Minister Viktor Chernomyrdin, including control over Russia's huge nuclear arsenal. Yeltsin was expected to reclaim the powers as soon as possible after the operation. 'Since that moment, all power, including control over the so-called nuclear button, belongs to the prime minister in accordance with the Russian constitution,' a terse Kremlin announcement said. If the president should die or become incapacitated, Chernomyrdin would take over, then call elections within three months.

The Kremlin announcement came after a convoy of vehicles swept out of the government rest centre where Yeltsin had been preparing for the operation and headed for the heart centre. The Kremlin had announced the operation would go ahead after doctors said that Yeltsin was ready for the surgery. The Interfax news agency reported top Russian heart surgeon Dr. Renat Akchurin was peforming the operation with a team of leading doctors. American heart surgery pioneer Dr. Michael DeBakey is advising the Russian surgeons.

The government has spent weeks preparing for the operation, consulting top heart specialists and bringing in special medical equipment. Uncertainty about Yeltsin's health and a virtual government freeze on information created widespread speculation that the president was too ill for the operation. The uncertainty has given an impression the government has lacked leadership with Yeltsin's aides and rivals squabbling for power.

But Yeltsin has insisted that he remained in full control and that he intends to return to work as soon as possible after the operation and serve out the four year second term he won in July. Doctors believe that Yeltsin is fit enough for the bypass surgery. They feel the 'optimal functioning of all organs and systems' makes it possible 'to perform surgery with a high degree of certainty and confidence.' In addition to heart trouble, he had an under active thyroid, internal bleeding and severe anemia. DeBakey has said that Yeltsin needs a triple or quadruple coronary artery bypass and should be able to resume a full schedule after six to eight weeks of recuperation.

The Kremlin has been stingy with information about Yeltsin, even going so far as to cover up a heart attack during his re-election campaign. DeBakey acknowledged last week that Yeltsin's family wants a news blackout until after the operation.

[02] France's CGIP bids $1.17 billion for control of Valeo

The acquisition by Seilliere's holding company Cie. Generale d'Industrie & de Participations has been expected since Seilliere first publicly declared his interest six weeks ago. The tranction marks the end of Carlo De Benedetti's quest to sell his main French asset, thus freeing up cash for his debt-laden Italian industrial empire, which includes ailing computer maker Olivetti.

De Benedetti's French holding company, Cerus, will sell its stake in Valeo for 330 francs per share to a consortium led by Seilliere's CGIP. That price is a 6% premium to Monday's closing price, but is nevertheless below the 350 francs Cerus had indicated it sought.

Valeo is France's second-largest supplier of auto components, behind tire maker Michelin, and provides European motor manufacturers with a broad range of parts from clutches to braking systems. Although De Benedetti isn't French, his decision earlier this year to sell his controlling interest in Valeo provoked a flurry of nationalistic comments from some French industrialists and politicians.

Their worries about seeing control of the group slip out of Europe were exacerbated when General Motors' Delphi Automotive Systems and TRW of the U.S. were cited as potential bidders. The most outspoken critic of any le to foreign interests was Peugeot Chairman Jacques Calvet, one of Valeo's largest clients. He threatened to boycott Valeo if it was sold to a buyer of which he dipproved.

Despite the prominence given in French press reports to the search for a so- called French solution, CGIP officials have played down any suggestion that the group is reacting to government pressure. Instead, they stress that Valeo is a strong company with a large international presence in a market that has been thriving as motor manufacturers increasingly delegate production of entire component systems to suppliers.

In addition, they note that Seilliere of CGIP already knows the group and the motor industry well, since he is a board member of both Valeo and Peugeot . Seilliere has won plaudits from the stock market for his role as a long-term investor who has taken significant stakes in a handful of key French companies and helped them develop abroad before selling out at a profit.

[03] Gehe bids $1.05 billion in cash for Lloyds Chemists

Gehe said it is offering 500 pence for each of Lloyds' ordinary shares and 322.6 pence for each preference share. Unichem has submitted a £657.6 million bid in cash and stock. Dieter Kammerer, Gehe's chairman said he thought his company's offer would be accepted because ‘unlike Unichem's bid it is all cash and is therefore risk-free for Lloyds' shareholders.'

'We are confident that Lloyds shareholders will prefer the security of the Gehe cash takeover offer to the risks attached to Unichem's share exchange offer,' he added.

[04] British Airways posts 9.3% profit gain for first half

Operating profit in the period slipped 2.1% to £512 million. But BA said operating profit would have risen 10.5% had it not been for an extra £51 million on its fuel bill and the impact of a threatened pilots strike in July. 'The economic outlook for the main countries in which we operate remains generally encouraging with forecasts of continued steady growth in supply and demand,' chairman Sir Colin Marshall said.

But chief executive Robert Ayling said the rise in oil prices along with some increase in flying pushed BA's fuel and oil costs up by a third so far this year and warned that further increases in air fares could be on the way.

'It's for each individual airline of course to take their decisions on this but I think some of these costs we can expect to see coming out in increased fares in due course,' he told Reuters in a post-results interview. 'I think all the airlines have been taken by surprise. I would be surprised if you found many airline managers who guessed it correctly before Christmas last year. We didn't.'

BA said it flew a record 20 million passengers in the half year with passenger traffic up 4.6% and sold an average of 75.2% of available seats per flight.

[05] Americans head to the polls

But the race for control of Congress appears to be less of a sure thing. Television networks will call the presidential race as soon as the 270 electoral votes are secured, but the party controlling Congress will likely not be known until tomorrow. That's because of a number of tight races and a redistricting issue in Texas that could cause further complications if the margins are close. And it's the outcome of those elections that will determine the nature of the next presidency, regardless who wins. In an effort to avoid Republican gains, Clinton campaigned on behalf of Democratic candidates around the country, although how much he would be able to help his fellow Democrats was a matter for debate. In New Hampshire, he praised Democrat Dick Swett, challenging Sen. Bob Smith, as someone who 'would be a positive, uniting force, not a divisive, rancorous force.' Much of the suspense revolved around seats with no incumbents on the ballot, including Maine, Oregon and four Southern states where Republicans had their biggest hopes for picking up seats. Democrats were looking for their first Senate victory in Wyoming in 20 years.

Elsewhere, veteran lawmakers pleaded their case for another term. As many as a dozen races remained close in late public opinion polls. Republicans hold a 53-47 majority in the current Senate, meaning that Democrats must gain three seats for control, assuming Clinton is re-elected and Vice President Al Gore is available to break a tie. There were 34 races on the ballot, none more important than the 14 open seats, eight where Democrats chose to retire this year and six where Republicans didn't run for re- election.

Political observers abound in this election, and they all have their strategies for calling the Congressional race before the final figures are in. Should open seats in the Northeast go to Democrats and seats in the South remain Democratic, 'that's a good indication that Democrats can go to bed very drunk and very early,' says Larry Sabato, a political science professor at the University of Virginia. Republicans are 'goners' if the open seats in the South stay Democratic, he says. On the other hand, if Republican Senate candidate Susan Collins wins Maine, Republican Representative Dick Zimmer takes New Jersey and Democrat Max Cleland wins Georgia's open Senate seat, 'that shouts divided government to me,' says Sabato.

Sabato warns observers against calling either chamber too soon. 'It's over 60 races that I think are critical; you just can't pick out one or two,' he says. 'It's very misleading in an election with this many close contests.' Gary Jacobson, professor of political science, University of California at San Diego, says if Clinton wins by large margins in Eastern states - especially Maine - and is 'holding his own' in Southern states, 'then you'd expect it to be a good night for the Democrats.'

Other indicators of a 'good night' for the Democrats will be how Democrats fare in the California and Washington House races, Jacobson says. Democratic performances in California, where they now have a narrow 27-25 majority, and Washington, where the Republicans has a 7-2 edge, are key.

Democrats must keep their California seats and win back three to four Washington seats to regain majority control of the House, Jacobson says. Stephen Hess, a senior fellow specialising in government studies at The Brookings Institution, says he plans to follow the close Senate races in the Eastern states and proceed West. Should Massachusetts and New Jersey stay Democratic and Democrats win Maine, 'you're starting to look like Democrats have a real chance on capturing the Senate,' he said.

However, before the votes are tallied, there are other signs to watch on election night. How - and when - the networks call the races could have an impact on voter turnout and voting results, says John Kohut, senior contributing editor to The Rothenberg Political Report, a political newsletter. 'If the networks go ahead and start predicting at 9 p.m. (New York time) who has won the presidential race, there's no doubt' California's congressional races will be impacted, he says. 'It's a lot harder to convince people to stay in line and vote for someone who's already been announced as the loser.'

But Jacobson and Sabato disagree. 'I can't believe they make much of a difference. Anyone who reads a newspaper knows Dole isn't going to be the winner,' says Jacobson.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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