European Business News (EBN), 97-06-23

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

Page last updated Mon, June 23 5:56 PM CET

CONTENTS

[01] G-7 moves to further integrate Russia and Africa into the 'economic mainstream'

[02] Tobacco shares fall worldwide as U.S. pact unsettles industry

[03] Compaq acquires Tandem for $3 billion in stock

[04] Kirch reaches agreement with CLT-UFA to operate Premiere

[05] Reed Elsevier strikes $447 million deal with ABC

[06] ProSieben Media announces price range for preferred shares

[07] ICI is set to sell its stake in ICI Australia

[08] Lonrho's pretax profit slumps by 38%

[09] Barclays reportedly considering a bid for NatWest

[10] Delhaize invests $5.4 million in joint Thailand supermarket venture

[11] German producer prices rise 1.1% year-on-year

[12] Hagemeyer plans part-merger with Computerij

[13] WH Smith's chief executive set to join BT

[14] Guinness, Grand Met see merger completed by year-end

[15] Corporate and Economic Briefs

[16] World News Briefs

[01] G-7 moves to further integrate Russia and Africa into the 'economic mainstream'

The main accomplishments of the three-day annual Group of Seven summit were moves to further integrate both Russia and Africa into 'the economic mainstream,' as one U.S. official put it.

Though the progress was largely symbolic and rhetorical, leaders of the U.S., Japan, Germany, Britain, Canada, France, and Italy did announce a big step for Russia, welcoming Moscow into the Paris Club of creditors. Membership will make it easier for Russia to collect payments for loans to developing countries. Moscow, in return, agreed to write off more than half of its estimated $120 billion in such credits - much of that to one-time African client states of the former Soviet Union.

The summit here was marked by some disputes between President Clinton and his counterparts, the most serious of which concerned curbing environmental damage from economic development. While Europeans pressed for an agreement to cut carbon dioxide emissions by 15% by the year 2010, Mr. Clinton refused to accept specific limits.

The final communique released yesterday reflected a compromise: The U.S. agreed to a 2010 deadline for emissions reduction, while saying that it intends to 'commit to meaningful, realistic and equitable targets that will result in reductions of greenhouse-gas emissions.'

European Commission President Jacques Santer blasted the American intransigence, saying, 'I am frankly disappointed that not all our partners were able . . . to take quantified commitments on the reduction of greenhouse-gas emissions.' French President Jacques Chirac said that 'Americans are great polluters,' more concerned with 'economic activity' than environmental protection.

That dispute was just a prelude to what promise to be bigger fights between the U.S. and its allies at the United Nations Earth Summit beginning today in New York, and at an environmental summit in Kyoto, Japan, later this year.

Environmental questions weren't the only ones to spark disagreements between the U.S. and the other six countries. Blessed with the strongest economy in the G-7 this year, Clinton administration officials have been urging Western Europe and Japan to jump-start their sluggish economies by easing regulations, loosening social safety nets, and embracing more American-style free-market reforms.

U.S. officials inserted a line in the final economic statement calling on France, Germany and Italy to attack their double-digit unemployment rates by increasing 'efficiency of government action and, where necessary, reshape its role in their economies, including through reforms of tax and social-security systems.'

The Europeans, however, expressed doubts about the U.S. prescription. Mr. Chirac said that German Chancellor Helmut Kohl urged their fellow leaders to accept a 'social market economy.' Mr. Chirac, in a news conference, approvingly quoted Mr. Kohl as saying that 'as we move to the global market economy, we shouldn't forget the word 'social' and concentrate on markets alone.'

[02] Tobacco shares fall worldwide as U.S. pact unsettles industry

'There's a feeling that governments may develop a common policy toward tobacco,' a French broker said as markets reacted negatively to the pact. Shares in French tobacco company Seita fell 1.68% to 186.80 francs, while shares in industry giant B.A.T Industries are 19 pence lower at 570 pence.

Meanwhile, shares in B.A.T Industries opened lower after the company said it expected its Brown & Williamson unit to make an initial payment of around $1.7 billion under the landmark U.S. tobacco litigation settlement. Under the agreement, the tobacco companies will have to pay a total $368 billion over a 25 year period.

B.A.T's Brown & Williamson unit's share of the settlement is $1.7 billion for the first $10 billion of the planned payment, but concerns that the final settlement may be much harsher, with the deal still having a long way to go before it reaches the U.S. Congress, has prompted the downturn in shares in line with other markets. U.S. giants Philip Morris and RJR Nabisco fell sharply on Wall Street Friday when the deal was announced and overnight Japan Tobacco saw its shares fall.

In Washington, the agreement faces months of scrutiny, but key players appear to want to turn it into law. The main points of the accord plan that tobacco companies would pay $368.5 billion in the first 25 years and then $15 billion a year indefinitely.

Of the total, $25 billion is to go toward health care for uninsured children, and some of the funds will also finance antismoking education and advertising, as well as enforcement of the settlement.

[03] Compaq acquires Tandem for $3 billion in stock

The combined company would be the world's leading supplier of servers, the powerful computers that run networks of personal computers, and will offer a wide range of products to businesses.

Compaq, based in Houston, Texas, has annual sales of $18.1 billion and sells its products in more than 100 countries.

Tandem, based in Cupertino, California, has $1.9 billion in sales and nearly 7,000 employees. It makes computer systems designed to operate continuously and overcome such problems as power failures. Its strengths include providing data security systems, or encryption, for transactions with banks and retailers.

The companies said they expected the deal to be concluded in the third quarter of this year. It requires approval by Tandem shareholders and federal antitrust clearance.

The combined company will offer one-stop shopping for businesses, with products ranging from handheld and portable computers to powerful computer servers to manage company networks, said Eckhard Pfeiffer, the president and chief executive of Compaq.

'Our total addressable market has been doubled to approximately $650 billion,' said Pfeiffer. 'This offers opportunity for significant revenue growth.'

In the takeover, Compaq will issue approximately 29 million shares of common stock and exchange 0.21 share for each share of Tandem common stock. Tandem would become a wholly owned subsidiary of Compaq. In connection with the deal, Compaq rescinded previously announced plans to repurchase its own stock.

[04] Kirch reaches agreement with CLT-UFA to operate Premiere

The move brings to an end a long-suffering battle between Kirch and Bertelsmann - which via its UFA TV unit owns half of CLT-UFA. It also signals Canal Plus' exit from Premiere. Currently, Canal Plus and Bertelsmann each hold a 37.5% stake in Premiere, with the Kirch Group owning the remaining 25%.

Under the proposal, Kirch's pay-TV decoder technology will be accepted as the standard platform for pay-TV in Germany. Deutsche Telekom has also been offered the right to use the decoder technology for cable television, Kirch said.

Kirch added that a detailed agreement will be completed within the next few weeks. Financial details weren't immediately provided.

In a separate report, the company, owned by German media magnate Leo Kirch, conceded that it has 'financial needs' but rejected reports that it is in serious trouble, according to the Wall Street Journal Europe.

'We are nowhere near a financial disaster,' said Dieter Hahn, a managing director with Kirch, in a telephone interview. 'We are in a phase where we are strongly investing into the future. But we are comfortable with the level of investment.'

The company's need to explain itself comes after a report in the German monthly Manager Magazin, which says Kirch is near the end of his financial rope and cites what it calls internal documents that it says show the media magnate is losing massive amounts of money.

For months, both U.S. film studios and German media circles have been speculating just how far Kirch stretched his finances by launching DF-1, a German digital-television service that is costing billions of dollars in film deals and technology but severely lags expectations.

The confidential analysis of Kirch's financial status obtained by Manager Magazin and purportedly prepared by Kirch for banks, asserts that the company has debts of 3.1 billion Deutsche marks ($1.79 billion) and needs 1.5 billion marks in fresh credits, with a majority of its assets already pledged for loans.

Until 2000, the company's annual losses will exceed 500 million marks, according to the magazine. This year, for instance, Kirch faces negative cash flow exceeding one billion marks as it runs up costs of nearly two billion marks while generating revenue of 1.5 billion marks, the report estimates.

[05] Reed Elsevier strikes $447 million deal with ABC

Reed Elsevier co-chairman Nigel Stapleton said the acquisition, its second major U.S. acquisition this year, should immediately support earnings and that it will be funded from existing cash resources. The publishing group bought MDL Information Systems through the group's scientific publishing division for $320 million earlier this year.

Despite these and other takeovers over the last year Reed Elsevier executives stressed that the group would continue to pursue an active aquisitions policy.

Chilton, based in Radnor, Pennsylvania, is a trade publisher. Its core activity, the publication of 39 trade magazines, made up 86% of its 1996 revenues.

Reed-Elsevier said it would merge Chilton's core trade press business with its own U.S. business magazines unit, Cahners Publishing, which has a stable of over 90 titles. It quoted its co-chairman Nigel Stapleton as saying Chilton was an ideal match for Cahners.

'Chilton fits superbly...and this acquisition offers attractive opportunities for revenue growth and operational synergies,' Stapleton said.

Chilton also owns the Professional Exposition Management Company, which organizes trade shows for the manufacturing and jewellery retailing sectors, and Chilton Research Services, which provides research to major U.S. companies.

Chilton had a 1996 pretax profit of $28 million on revenues of $203 million. As of Dec. 31, it had net assets of $25 million. Since 1992, Chilton has had compound annual growth of 8% in revenues and 17% in pretax profit, Reed Elsevier said.

The transaction should be completed by the end of July, pending U.S. government approval.

[06] ProSieben Media announces price range for preferred shares

ProSieben Chairman Georg Kofler dismissed criticism that the IPO range was too high. 'If we remain below the market average, then it will be shown that we were relatively humble and there will be a little potential for price gains,' he said.

Kofler based his remarks on the company's price-earnings-ratio, forecast to be around 18 next year, which he said was lower than the market average. Some analysts found the range cheaper than expected, however.

'I'm surprised at how cheap it is, we had expected 68 to 78. I now expect we will get a bookbuilding price of 72 marks which I would be very pleased with and we recommend subscribing to the shares,' said Pierre Drach, head of Frankfurt-based equity analysis group Independent Research.

The offer is attracting interest from foreign investors, who have few opportunities to buy into the fast-changing European TV industry, apart from exceptions like France's TF1 and Canal Plus, or Britain's BSkyB . On the unofficial grey market, a kind of futures trade in shares about to list, ProSieben stock was being offered in a range of 100-110 marks, an indication that shares could surge after its debut in official bourse trade on July 7.

The book building period for the initial public offering will run from June 24 to July 3, with the final price per share to be set Saturday, July 5. Trading will begin July 7. Pro-7's offering of some 17.5 million preferred shares is one of the biggest IPOs in Germany this year.

Kofler also said Pro-7 will use the proceeds of the share listing to invest in programming and make acquisitions.

Advertising its IPO to potential investors cost Pro-7 under 10 million marks, although the value of television advertising alone lay between 15 million and 20 million, Kofler said. Costs were held down by the fact that television advertising spots ran on the company's own ProSieben and Kabel 1 channels.

[07] ICI is set to sell its stake in ICI Australia

ICI is selling out of ICI Australia to help finance the purchase of Anglo- Dutch conglomerate Unilever's speciality chemicals business for US$8 billion in cash.

The U.K. chemical concern said it will sell its holding in ICI Australia through a retail and institutional offer in Australia and a separate offer to international institutions outside Australia. ICI owns a total 62.4% of ICI Australia, a stake worth over A$2.3 billion (US$1.7 billion) at the subsidiary's current share price.

ICI Australia plans to buy back 30 million, or about 10%, of its own shares from ICI. The remaining 52% stake that ICI owns is to be sold in the offer, with the majority offered to Australian investors. The retail offer opens on Wednesday and the global institutional offer next Tuesday, with the final offer price announced on July 12.

Since announcing the sale, speculation has persisted that investors in the offer will be gazumped by a major chemicals company willing to pay a premium for the entire stake.

The final price and size of each offering will be determined following a book-building process where institutional investors will bid for shares in ICI Australia.

[08] Lonrho's pretax profit slumps by 38%

Lonrho said the profit of £129 million made from the sale of Lonrho Sugar will be recorded in the full year results, with part of the proceeds used to repay debt and reduce net borrowings.

The company said sterling's strength alone reduced profit by £5 million, while poor precious metal prices caused a further £8 million reduction. Moderate trading in its African businesses was cited for a further £5 million easing in profit, combined with a £7 million reduction due to Lonrho's reduced interest in its Ashanti gold field in Ghana.

On March 17, Lonrho warned investors that profit could fall as much as one- third due to the impact of sterling's strength, which resulted in the company's share price falling 10% to 143 pence a share.

[09] Barclays reportedly considering a bid for NatWest

Barclays and Nat West have both refused to comment on the reports and any deal would be the subject of intense scrutiny from competition regulators. However, following last week's profit warning from NatWest and the huge cost savings that could result from a merger the impetus for some sort of deal is strong.

Barclays Chief Executive Martin Taylor said a report in London's Sunday Telegraph about Barclays's consideration of buying NatWest was 'pure speculation' and that he had 'absolutely nothing to say' about it. However, he wouldn't deny that Barclays is examining the possibility of buying NatWest, which has a market capitalization of £12.8 billion ($21.1 billion). He noted that NatWest's problems were well-known, particularly those facing its investment-banking unit.

A NatWest spokesman, Ivor Godfrey-Davies, also declined to comment on the rumours of the contemplated takeover. 'We wouldn't know if Barclays is about to launch a bid,' Mr. Godfrey-Davies said, adding that speculation about NatWest's future 'has become a weekly occurrence for us.'

Last week, NatWest said it expected its first-half profit would be below analysts' estimates. Its investment-banking unit reported a £77 million loss from mispricing of options earlier this year.

If Barclays and NatWest merged, the combined company would be the largest United Kingdom bank in terms of total assets at £371.3 billion.

[10] Delhaize invests $5.4 million in joint Thailand supermarket venture

Delhaize, Belgium's second largest retailer, will develop the chain in co- operation with Thailand's Saha Group and The Mall Group, also of Thailand, Delhaize said. Both Delhaize and The Mall Group will have a 45% stake in the new company - Bel-Thai Supermarket - with the remainder held by the Saha Group.

Delhaize has made expansion in Asia a priority, and has been seeking a joint venture partner for some time. The company has said it intends to expand in the region via partnerships, rather than acquisitions. Delhaize said that thanks to growth in Thailand, 'purchasing power has increased dramatically, as well as the number of potential customers.'

It said it will bring its know-how, merchandising strategy, information technology, accounting systems and general operations skills to the venture. 'The contribution of the Mall and Saha groups will be local knowledge of the food retail operation, like buying, advertising, human resources and advising on real estates operations,' Delhaize said.

The Mall Group is Thailand's 'leading operator' of shopping malls and the second-biggest operator of department stores in Thailand, according to Delhaize. It had sales of $13.3 billion last year. Saha Group, meanwhile, is a conglomerate which markets products such as detergent, cosmetics and food. It had estimated 1996 sales of $3 billion.

The total registered capital of Bel-Thai will be 1 billion Thai baht ($38.9 million). The company will begin operations with one supermarket, operated currently by the Mall Group, and will develop two additional shops.

The share price of Delhaize has risen in the wake of its announcement.

[11] German producer prices rise 1.1% year-on-year

The price index is exactly in line with the expectations of economists surveyed by Dow Jones.

Producer prices were up by 0.2% in May compared to April, when they rose by 0.3%.

Upstream price pressures have increased somewhat since the sharp depreciation of the Deutsche mark against the dollar started last summer, but most economists say the inflation environment remains benign.

In western Germany alone, producer prices in May rose 0.1% from April and 1.0% from a year earlier, the agency reported.

Among the higher prices compared with April were those for fresh pork, up 6.7%, roasted coffee, up 4.1%, and light heating oil, up 1.9%. The price of liquid gas, meanwhile, fell 7.1% the agency said.

In eastern Germany, producer prices rose 0.6% on the month and 2.4% on the year. The price of metal products increased 3.2%, while nutritional products rose 2.1%.

[12] Hagemeyer plans part-merger with Computerij

Hagemeyer said it will have a 51% shares in the new company, with current shareholders and the management of Computerij holding a 49% stake.

Hagemeyer gave no financial details of the planned transaction, but said the merger is expected to have a positive impact on Hagemeyer's earnings per share. However, the company noted that this impact will be modest in 1997.

Hagemeyer said the merger will create one of the larger operations in the Benelux market for personal computers, networks and related software, with combined annual sales of 800 million guilders and 600 employees.

[13] WH Smith's chief executive set to join BT

Chairman Jeremy Hardie said, 'Bill Cockburn joined us in November 1995 and has been a catalyst for change within the group. As a result of his strategic review, we disposed of a number of non-core businesses, most notably Do It All and Business Supplies, and we are now focused on our core retailing and wholesaling operations.

Bill Cockburn said, 'Normally I would have wanted to see my plans through to fruition. My decision to join BT was not taken lightly but it is the chance of a lifetime for me.'

WH Smith Group also said its results for the year to May 31 - to be announced on Aug. 27 - would be within market expectations and would show continuing benefits from the recovery program begun last year. In the second half of the year to May 31, 1997, sales were up 6% on the year, with same-store sales up 3%.

[14] Guinness, Grand Met see merger completed by year-end

The news follows the European Union Commission's decision to extend its inquiry into the merger. The Commission said it had 'several concerns,' notably the 'significant overlaps resulting from the proposed merger and the large portfolio of leading brands which will be brought together.'

The two companies said that the Commission's decision should be made by the end of October, and the proposed merger should become effective 'two or three months later.'

[15] Corporate and Economic Briefs

The union for production and automation technicians working on Norway's offshore oil and gas platforms said it would accept a wage offer from employers, bringing to an end this year's wage negotiations in the offshore sector.

Union Pacific Resources Group said it has renewed its attempt to acquire Pennzoil Co after its previous advances were rebuffed, offering a two-step cash and stock transaction valued at about $6.4 billion.

Gold prices look to be heading southward and the lowest values since 1993 or even beyond are looming, dealers and analysts said.

The Slovak Finance Ministry said it was considering a plan to give tax breaks to foreign investors to help boost sagging direct investment.

[16] World News Briefs

Turkish forces killed six Kurdistan Workers Party rebels in a clash in the southeastern province of Bingol, officials at the emergency rule governor's office in Diyarbakir said. They said the clash took place near the village of Cevirme in Bingol province late on Sunday. Two of the dead guerrillas were women.

Four Algerians were convicted of attempting to smuggle weapons and explosives to Islamic radicals in their homeland and sentenced to prison terms of up to 32 months. Two sons of jailed Islamic Salvation Front leader Abbasi Madani, Salim Abbasi and Abou el-Kacem Ikbal Abbasi, were found guilty of belonging to a criminal gang, forgery of documents and obtaining false papers. The state court sentenced Salim Abbasi to 32 months in prison and his brother to 28 months. Another suspect was convicted of illegally importing automatic weapons into Germany and drew a 31-month prison sentence. A fourth who was found guilty of document forgery received a 10- month term.The defendants have denied the charges.

Defying an order from a top Chinese leader, prosecutors are refusing to release a jailed Australian businessman whose case highlights the dangers of dealing with China's haphazard legal system, according to a source close to the case. The release of James Peng, who was abducted from the neighbouring Portuguese colony of Macau in 1993, would have been a reward to Australia for taking a less confrontational stand toward Beijing's human rights record

A bomb blast rocked the Ajaccio office of the Corse-Matin daily newspaper, causing slight damage and no injuries, police said. No one immediately claimed responsibility for the blast on the Mediterranean resort island, which has been racked for more than two decades by separatist guerrillas seeking increased autonomy for the island from mainland France. The newspaper, the Corsican edition of the regional daily Nice-Matin, has twice before been the target of bombing attacks.

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