European Business News (EBN), 96-11-13

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

Page last updated November 13 1130 CET

CONTENTS

[01] East Midlands accepts $2.15 billion takeover offer

[02] France sells remainder of Elf Aquitaine for $1.96 billion

[03] U.K. unemployment skids to 7.2% in October

[04] Westinghouse appears poised for $5 billion spin-off

[05] BASF shows 8.8% profit gain and projects full year earnings will at least break even

[06] Veba shows 25% profit gain and expects to maintain the momentum

[07] Former Sumitomo trader re-arrested on fraud charges

[01] East Midlands accepts $2.15 billion takeover offer

East Midlands said Dominion will offer 670 pence for each of the company's ordinary shares, a premium of 24.7% over the closing middle market price of 537.5 pence on November 5.

Executives from Dominion, which was making its first bid for a British power supplier, had met East Midlands management late on Tuesday with a takeover price top of the agenda, sources had said.

Dominion said last week it was considering a bid 'at a price not much in excess of 608 pence per share.' But East Midlands scorned the price, saying it would undervalue the electricity company's prospects.

East Midlands chairman Sir Nigel Rudd said in a joint statement that his board was recommending the offer 'because it represents fair value for an excellent business, which has successfully differentiated itself from the sector.'

The bid makes Dominion the fifth U.S. utility to bid for one of Britain's 12 cash-rich regional electricity suppliers. Seven regional electricity suppliers have already been snapped up since March, after the British government's protective golden share expired, five years after privatisation in 1990.

[02] France sells remainder of Elf Aquitaine for $1.96 billion

A 4.6% stake will be sold on the market while a 4.5% stake is being sold to Elf Aquitaine's Fingestval unit. Elf Aquitaine said that the sales were to be conducted at the same price. Based on the government's figures, shares were sold at about 402 francs a piece. Elf shares closed Tuesday at 425.5 francs.

The company said the operation would benefit the company's shareholders and earnings. 'This removes the uncertainty surrounding the French state's interest in the company, which has weighed on the share price. The acquisition will automatically improve earnings per share,' Elf Chairman and Chief Executive Philippe Jaffre said.

The 0.75% stake that the government is holding onto is comprised of petroleum certificates and free shares that will be given to Elf Aquitaine personnel who bought Elf stock during its 1994 privatisation. The Elf unit said the stake purchase was a long-term investment.

The 24.9 million shares that were sold had been held by the government through the Entreprise de Recherches et d'Activites Petrolieres. The total 10 billion francs raised will be applied to a special account that is used to fund capital increases in state-owned businesses, the government said.

[03] U.K. unemployment skids to 7.2% in October

The underlying annual growth of average earnings in September remained unchanged at 4%, in line with expectations, with the fastest growth in manufacturing. But for the three months to September, manufacturing unit wage costs on a year-on-year basis jumped 5.2%, compared with expected growth of 4.5%. Analysts said that data has spread expectations of another rate rise.

The number of unemployed in October fell by 40,800 to 2.03 million, much steeper than economists' forecasts of a drop of about 20,000 fall in the number of jobless.

An official of the Office of National Statistics warned, however, 'potential for a bounce back' in unemployment in November. There is a backlog in the processing of new unemployment claims, which has been only partially offset by a backlog in the removal of old claims from the jobless rolls.

He said the net result of these effects was likely an exaggeration of the fall in unemployment by around 10,000. a larger-than-expected decline in U.K. jobless figures and a sharp rise in September wage costs. Responding to the labor data, U.K. Treasury Economic Secretary Angela Knight said that 'more jobs are going hand in hand with historically low growth in average earnings. Britain is enjoying responsible and steady growth.

[04] Westinghouse appears poised for $5 billion spin-off

The company has scheduled a news conference at 8 o'clock Central European Time this evening on an undisclosed subject. For the past year, the Pittsburgh-based conglomerate has been shedding industrial assets and aggressively building its portfolio of media properties.

After acquiring CBS for $5.4 billion a year ago, Westinghouse in short order agreed to sell its Knoll furniture unit for $565 million and its defence electronics business to Northrop Grumman for $3.6 billion.

Last summer it agreed to buy Infinity Broadcasting, the nation's second- largest radio broadcaster, in a deal worth $3.9 billion and Telenoticias, the world's leading Spanish language news channel. Terms in the Telenoticias deal were not disclosed.

Ever since it said in June that it was weighing such a move, investors have expected Westinghouse to move to split the media business from the rest of its industrial operations.

The Wall Street Journal reported today that the company's board was meeting to approve a plan to split the businesses.

According to the Journal, people close to Westinghouse said management considered other options short of complete separation of the two groups. But ultimately, those people said, managers determined that splitting the company into two would make it easier for investors to understand and make the stocks of each company more appealing.

Initially the two companies will have roughly matching revenue of about $5 billion apiece. But the broadcasting side is expected to grow significantly after the split, which will not be finalised until the middle of next year. The spin-off requires extensive regulatory approval.

People familiar with the plans say management wants to assign the bulk of the overall company's total debt of more than $5 billion to the broadcasting side.

But even with much of the debt load going to the broadcast side, analysts have speculated that the industrial shares would be valued at less than $5, substantially lower than Tuesday's closing price of $20.625.

[05] BASF shows 8.8% profit gain and projects full year earnings will at least break even

Sales for the year are expected to edge up 3%.

Pretax profit in the nine months rose to 3.37 billion Deutsche marks ($2.25 billion) marks, but the company noted that pretax profits in the third quarter slipped 2.3% to 1.05 billion marks.

The German chemical maker said that business picked up after the summer months, and that it the increased activity to continue in the first months of 1997. However prices remained under pressure, the group added.

Referring to the third-quarter numbers, BASF said: 'For the first time this year, business in Germany, boosted particularly through gas sales, contributed to the overall increase.' Acquisitions and the sale of assets also contributed to results, the group said.

In the nine months, sales dropped 0.7% in Europe, which is BASF's largest market, but climbed 0.1% in Germany.

[06] Veba shows 25% profit gain and expects to maintain the momentum

The diversified German utility group also said it expected to maintain growth levels seen up to now. In the nine-months, net profit climbed to 1.23 billion Deutsche marks ($820 million). The company said that given good third quarter results, profit for the first nine months was 'better than expected.'

It also said pre-tax profit was up 15% to 2.51 billion marks, while worldwide consolidated group sales gained 1.4% to 55.3 billion marks.

Veba also said the trend so far this year should be reflected in full-year results. 'We are confident, based on profit achieved in the first nine months, that we will post a marked profit increase for the full year,' it said. Veba added it assumes it ‘will be able to hold the growth rate achieved so far.'

Fewer special costs as well as ongoing measures that Veba has implemented to strengthen its competitive position should contribute to a profit increase, it said.

[07] Former Sumitomo trader re-arrested on fraud charges

Hamanaka, already under arrest and in custody on forgery charges, was served a fresh arrest warrant in the Tokyo Detention Centre where he has been held since October 22.

Sumitomo had filed complaints with the prosecutor's office alleging their one-time star trader had committed forgery and fraud in connection with off- the-book copper trades that the company has blamed for its huge losses.

One of Hamanaka's lawyers has said he could face up to 10 years in prison if convicted of the fraud charges, compared with a maximum five-year sentence for forgery.

A statement by the prosecutor's office said Hamanaka was suspected of fraudulently procuring about $771 million from a Sumitomo Hong Kong subsidiary, under the pretext of purchasing copper warrants, to cover massive losses in off-the-book copper options transactions with Morgan Guaranty Trust of New York.

Morgan Guaranty joins Credit Lyonnais Rouse and firms from the Merrill Lynch group among those listed in Tokyo prosecutors' documents as counter- parties to Hamanaka's alleged off-the-books trading.

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

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