European Business News (EBN), 97-06-27

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Page last updated Fri, June 27 7:02 PM CET

CONTENTS

[01] U.K. blocks Bass merger with Carlsberg-Tetley

[02] Germany and France both show widening April trade surpluses

[03] Zurich Insurance Group confirms majority control purchase of Scudder, Stevens & Clark

[04] Britain posts first quarter GDP up 0.9%

[05] Kohl predicts Europe will satisfy EMU criteria on time

[06] United News & Media agrees $620 million bid for HTV

[07] E.U. opens proceedings against Spain over digital TV

[08] Swiss Re sees profit growth above 20%

[09] Krupp Hoesch sees strong operating results

[10] Austrian Die Erste, GiroCredit sign merger deal

[11] BCH, Rothschild forge investment, banking ties

[12] AT&T-SBC merger plans are crumbling

[13] Nomura to sue former president

[14] Handover Watch: British protests won't stop Chinese troops flooding into Hong Kong within hours of takeover

[15] Corporate and Economic Briefs

[16] World News Briefs

[01] U.K. blocks Bass merger with Carlsberg-Tetley

Earlier today Margaret Beckett, President of the U.K.'s Board of Trade said it has decided not to permit the acquisition by Bass of Carlsberg-Tetley. Beckett said that prohibiting the merger is the only means of adequately dealing with the competition concerns arising from the significant shift in market power it would cause.

Beckett also asked the Director-General of Fair Trading to seek an undertaking from Bass to divest its existing 50% interest in Carlsberg- Tetley.

Carlsberg said that, although it was disappointed with the British Board of Trade's decision not to permit the acquisition by Bass of Carlsberg-Tetley, it had already made preparations for the refusal by way of a contingency plan.

'We have always been aware that the British brewing industry is watched very closely by the competition authorities, and during the past year we have therefore worked seriously on a thorough rationalization plan for Carlsberg-Tetley in case the merger was disallowed,' Michael C. Iuul, Carlsberg's chief financial officer and head of its international division said.

Bass announced it would buy Allied Domecq's 50% stake in Carlsberg-Tetley for £200 million in August 1996, although it was referred to the Monopolies & Mergers Commission in December on competition concerns.

Beckett said she doesn't agree with the Monopolies & Mergers Commission's view that the adverse impact of the merger can be adequately addressed by the divestment of around 1900 Bass pubs.

'I agree with the MMC's finding that the greater concentration in brewing, the company's stronger brand portfolio and its enhanced position in wholesaling reinforced by ownership of a large tied estate would lead to significantly increased market power for Bass,' Beckett said.

'I have also accepted the MMC's conclusion that the proposed merger may be expected to operate against the public interest, in that over the longer term competition for the supply of beer at the wholesale level would be reduced, wholesale prices would be higher than they would otherwise have been and there would be a consequential increase in retail prices in the on- trade.

[02] Germany and France both show widening April trade surpluses

The German Federal Statistics Office said April's current account surplus was 2.8 billion marks, smaller than the March surplus of 2.9 billion marks. March's surplus was revised from the 2.3 billion marks reported originally. German exports in April were 12.4% higher than a year earlier, while imports were 9.2% higher, the statistics agency said.

The trade and current account surpluses for April were higher than economists' expectations. A survey of economists by Dow Jones prior to the data's release brought average estimates for a trade surplus of 10.2 billion marks and a current account surplus of 1.8 billion marks. The statistics agency also provided information on 'invisibles,' such as services and investment flows.

According to the latest statistics the French April trade figures showed a surplus of 18.57 billion francs, on an unadjusted basis, compared to a surplus of 16.62 billion in March. The March figure was revised from a previously estimated surplus of 9.82 billion francs.

Also released today was the June survey of French industry leaders, showing that manufacturing activity over the past six months was relatively strong in all sectors except the automobile industry. The survey, conducted by the national statistics institute, Insee, found business leaders' personal perspectives on output good and improving as far as their own individual enterprises are concerned.

However, their general perspective for industry in coming months continued to worsen as it has in every month since February.

[03] Zurich Insurance Group confirms majority control purchase of Scudder, Stevens & Clark

Zurich Insurance issued a statement confirming reports of the purchase in The New York Times and The Wall Street Journal.

The Swiss insurer and financial services company said its Zurich Kemper Investments unit signed a definitive agreement to acquire the firm for $867 million in cash and an undisclosed amount of stock from Zurich Kemper Investments. It was the Zurich Group's second foray into the U.S. mutual- fund business after its 1996 purchase of the Chicago-based Kemper for more than $2 billion.

Scudder will be combined with Zurich Kemper to form Scudder Kemper Investments. The purchase, subject to approval by regulatory authorities, is expected to be completed by the end of this year, the company said.

'The new firm, to be headquartered in New York, will be core to Zurich's global investment management, significantly strengthening Zurich's market position in mutual funds and asset management,' the statement said. The acquisition will put the Zurich Group in a strategic position 'to capitalize on the investment management opportunities emerging throughout the world,' it went on to say.

The new firm is to have about $200 billion in assets under management and a combined value in excess of more than $2 billion. Zurich will own 69.5% of the new firm, and senior employees of Scudder Kemper Investments will hold the remaining 30.5%.

Zurich, one of Switzerland's largest insurance companies, had a net income last year of 1.14 billion Swiss francs (about $850 million), with gross premiums of 31.9 billion francs ($24 billion).

[04] Britain posts first quarter GDP up 0.9%

U.K. gross domestic product rose a seasonally adjusted 0.9% in the first quarter from the fourth quarter, unrevised from the previous estimate. The Office for National Statistics said that GDP was up 3.1% in the first quarter compared with the same period a year earlier, revised up from a previous estimate of 3%.

Meanwhile, Britain's current account surplus grew to a seasonally adjusted £1.46 billion ($2.3 billion) in the first quarter, almost treble the downwardly revised £508 million in the fourth quarter of 1996, as the invisible trade surplus grew to £3.51 billion from £3.12 billion.

Economists said the figures suggested there was less spare capacity in the economy than previously thought and provided further evidence that interest rates would need to rise to prevent surging demand from pushing up inflation.

The U.K. surplus, reported by the ONS, was the largest since the first quarter of 1983 and more than three times the £400 million economists were expecting. The ONS attributed the improvement in the current account during the first three months of the year to a fall in the deficit in goods and services of around £500 million and a rise of a similar amount in the surplus on investment income. This more than offset a small increase in the deficit on transfers.

Peter Wood, a corporate dealer at BankBoston in London, said the emphasis of business in the City appeared to have been on the pound, which started to gain after the release of figures showed that the U.K.'s year-on-year GDP growth in the first quarter was revised up.

This coincided with other figures showing that the country's current account surplus rose sharply in the first quarter from the last quarter of last year.

Wood said it helped allay fears that sterling's strength was crippling the economy by undermining exports. And, along with the GDP data, once again raised the spectre of an early rise in British bank base rates. As sterling continued to rise to five-year highs, most people acknowledged that the currency was overvalued, Wood said. But, he added, 'you can't argue with interest rates.'

[05] Kohl predicts Europe will satisfy EMU criteria on time

Hammering home his theme that a delay in the euro currency would hurt the German economy, Kohl said he was certain a stable new money will debut on time Jan. 1, 1999 and that Germany would meet fiscal criteria to qualify for it.

'The euro will come,' the German leader said in a speech to parliament. 'We all would have to pay dearly if the euro failed.'

Germany, like most European countries, is struggling to meet debt and deficit limits for the euro currency, but Kohl has vowed to stick to the timetable.

In complete contrast, however, Deutsche Bundesbank official Reimut Jochimsen reiterated his belief that Germany will have trouble meeting the deficit criterion to qualify for Europe's 1999 currency union and won't achieve the Maastricht treaty's limit on debt.

'Its becoming increasingly clear that it's impossible to meet the debt criterion,' Jochimsen said in a speech at the University of Bonn.

'Only Luxembourg meets all the criteria at the moment. Almost all of the others have problems,' Jochimsen said. 'Germany is no exception. It will be difficult for Germany to meet the deficit criterion.'

[06] United News & Media agrees $620 million bid for HTV

The acquisition of HTV builds on United News' ownership of ITV regional affiliates Meridian, in southern England and Anglian, in East Anglia. It also holds a 29% stake in Channel 5.

Roger Laughton, the chief executive of United Broadcasting & Entertainment, said United Media was keen to develop HTV's broadcasting and rights interests. 'There is a compelling strategic case for this acquisition which brings with it clear opportunities for cost savings and revenue growth,' he said.

The 420 pence-per-share cash offer is a 27% premium on HTV's closing price on Thursday. During the past year, United News had made two buying raids on HTV and under takeover rules has to offer the same price paid in topping up its stake last November.

United, which wants to develop HTV's broadcasting and rights interests, expects the acquisition to bring 'clear opportunities for cost savings and revenue growth.'

[07] E.U. opens proceedings against Spain over digital TV

In a statement, the Commission said Spain's digital TV law also was not notified to the Commission and is incompatible with the directive on television transmission standards.

'The matter is of extreme urgency because of the potential adverse effects on the development of the market for digital TV services in Spain,' said Single Market Commissioner Mario Monti.

Spain has been given 15 days to reply to the Commission's 'letter of formal notice' on the matter.

If Spain fails to respond 'satisfactorily' within that time period, the Commission may send a reasoned opinion (the second stage of formal infringement proceedings).

'Should the law not be amended to the Commission's satisfaction, the Commission may bring the case before the Court of Justice and request 'interim measures' to suspend application of the law,' the Commission said.

The Commission had expressed concern in the past about Spain's digital TV laws.

[08] Swiss Re sees profit growth above 20%

'Business has been favourable up to now,' Chief Executive Walter B. Kielholz told the company's shareholder meeting.

Kielholz said profit will be boosted by the acquisition of Mercantile & General Re of the U.K. and of France's Societe Anonyme Francaise de Reassurances, which it later sold to PartnerRe Ltd. of Bermuda for cash and Partner Re shares. Swiss Re now holds 22% of PartnerRe, which specializes in the reinsurance of natural catastrophe risk.

Swiss Re's CEO also said his company has seen a 'satisfactory' development in claims in the first half of this year. 'There have been almost no large losses up to now,' he said.

In addition, the company's investment result will benefit from favorable financial markets, Kielholz said. In September, Swiss Re will publish a statement of first-half results for the first time, he said.

[09] Krupp Hoesch sees strong operating results

Krupp Hoesch added that the outlook doesn't take into account the planned merger of its steel operations with those of Thyssen, in which Thyssen will hold a 60% stake and Krupp Hoesch 40%. The new company will be Europe's largest steelmaker.

Krupp Hoesch wasn't more precise in its earnings outlook for the year. In 1996, it posted an operating profit of 336 million, down from 644 million in 1995.

[10] Austrian Die Erste, GiroCredit sign merger deal

In response, the Vienna bourse suspended trading in the shares of the two companies until July 4, pending an announcement concerning the companies' preferred shares.

Together, the two companies form the country's second biggest banking group with combined assets of more than $55 billion and a total of 360 branches across Austria. The trade suspension is because of 'price relevant information,' that will be released by the banks, the exchange's spokesman said.

Die Erste said the trade suspension was needed ahead of a July 4 meeting of its supervisory board in which measures necessary for the merger will be decided. Neither stock is listed among the Vienna Stock Exchange's continuously traded shares, and prices for both are normally quoted just once a day on the market.

[11] BCH, Rothschild forge investment, banking ties

Also, the groups will launch two new private investment entities: CHR Private Finance in Switzerland, a joint venture with equal participation by BCH and Rothschild, and Central Hispano Banking Services, which will be a BCH-owned unit managed by Rothschild in the Channel Islands. The companies wouldn't comment on the total size of the investment involved in forging the joint strategy, which BCH said took 15 months to negotiate.

'This agreement creates a unique model for private banking in Spain,' said Emilio Novela, director general of BCH and vice chairman of its private banking unit, Banco Banif Banqueros Personales. 'It solidifies our strategy for the rest of Europe as well,' he said at a news conference at BCH headquarters here.

For its part, Rothschild hailed the accord as an important gateway to promising new markets. 'It has always been Rothschild's strategy and goal to build up solid relationships and this is the best way to access the Spanish and Latin American markets,' Phillipe de Nicolay, a Rothschild executive, said at the news conference.

Although BCH hasn't invested as aggressively in Latin America as its Spanish competitors Banco Santander and Banco Bilbao Vizcaya, the bank has regional agreements and alliances that give it an extensive retail network throughout Central and South America.

Domestically, the agreement gives Banif the opportunity to offer a wider variety of investment services and greater access to other European markets, Mr. Novela said. Banif, which is also half owned by Banco Comercial Portugues, will advise Rothschild on Spanish equities.

[12] AT&T-SBC merger plans are crumbling

Efforts to forge the single biggest deal ever attempted have been hobbled in recent days by concerns about opposition in Washington, the legal difficulties of getting SBC into the long-distance business, and disarray at AT&T, said people close to the talks.

Some insiders involved in the negotiations now say the chances of crafting a deal are slim at best. 'There is a definite sense that things are bogging down. People are beginning to realise that this is a daunting task,' said one executive close to the discussions.

Coming up with a workable financial and management structure for a merged AT&T-SBC has been a difficult task. Neither company has been particularly comfortable about exposing its battle plans and finances to the other. Both sides underestimated the firestorm of protests by federal regulators and industry rivals in response to reports of the merger talks.

The task got all the harder yesterday when the Federal Communications Commission shot down SBC's request to be allowed to offer long-distance service in Oklahoma - a decision that AT&T, curiously, immediately applauded in a public statement.

In their merger discussions, the companies can't agree on how to structure the deal so that it wouldn't be viewed as anticompetitive. They have also differed over what steps SBC should take to open its local markets and thereby gain faster entry into long-distance service, an approval it would need to join up with AT&T.

In addition, SBC executives are said to be chafing at the unusual public campaign waged by AT&T Chairman Robert E. Allen, who has challenged sceptical White House and federal regulators in arguing in favour of a merger he has refused to confirm even seeking. SBC executives 'were flabbergasted,' said one person familiar with the reaction at the San Antonio-based Bell.

[13] Nomura to sue former president

The leading Japanese brokerage house said it is seeking to indict in Tokyo District Court Hideo Sakamaki, former president, and Shimpei Matsuki and Nobutaka Fujikura, former managing directors, for violations of the securities trading law and the commercial code.

Nomura also said that in future it will have no more dealings with anti- social groups such as racketeers, known in Japan as 'Sokaiya.'

Nomura said 855 people attended the shareholders' meeting, the largest attendance ever and three times more than attended last year's shareholders' meeting.

In May Sakamaki was arrested for his alleged involvement in paying off the corporate racketeers. And Japan's securities watchdog filed a criminal complaint in May against Nomura Securities and four former executives, alleging illegal compensation of a client.

[14] Handover Watch: British protests won't stop Chinese troops flooding into Hong Kong within hours of takeover

The deployment is one of the most sensitive issues surrounding the switch of sovereignty at midnight on Monday, because many Hong Kong people mistrust and fear the People's Liberation Army in the wake of the 1989 crackdown on the pro-democracy movement in Beijing.

It has long been known that China would move up to 10,000 troops into Hong Kong soon after it regains the territory, but this was the first word of just when and how the bulk of the force would arrive.

The outgoing British governor, Chris Patten, acknowledged China's right to send in troops but objected sharply to the method, saying it meant armoured personnel carriers moving through urban areas. He called that a 'very bad signal to Hong Kong and the rest of the world.'

The incoming government's announcement of deployment plans came shortly after the close of Hong Kong's stock market, which hit a record high on the last day of its pre-handover trading, a sign of investor confidence in the territory's economic future.

After the sovereignty switch, authorities will be able to cite Chinese national security in banning demonstrations. So protesters were taking the opportunity to raise their voices now on sensitive subjects.

About 20 democracy campaigners demonstrated outside China's de facto embassy in Hong Kong to protest the reported jail beating of China's most famous dissident, Wei Jisheng. And four supporters of Tibet independence unfurled a Tibetan flag in a downtown square. Dignitaries, meanwhile, were beginning to arrive for Monday night's handover ceremonies.

Former British Prime Minister Margaret Thatcher, Britain's signatory to the 1984 Joint Declaration laying out the terms of the handover, flew in today. U.S. Secretary of State Madeleine Albright was due in Saturday, as is Prince Charles.

After the handover, border controls between Hong Kong and China will remain in effect. Hong Kong is to be semiautonomous and keep its lifestyle, laws and capitalist economy. But it will be under Chinese sovereignty, and today rules were announced for flying the red, five-starred Chinese flag in Hong Kong.

It will fly alongside Hong Kong's flag at designated spots including courts, the legislature and the office of Hong Kong's new leader, Tung Chee-hwa.

[15] Corporate and Economic Briefs

British house prices are rising at their fastest rate for nearly eight years, Nationwide Building Society, the nation's fourth-largest mortgage lender said Friday. Average house prices were 11% higher in June than the same month a year earlier, the fastest rate of increase since the third quarter of 1989, according to the Nationwide building society's monthly house price index.

Italian state-controlled energy company ENI said its Agip unit, along with the U.S.'s Phillips Petroleum, has been awarded two exploration permits off the coast of Ireland. The two permits cover a total area of 2,875 square kilometres, subdivided in 12 blocks. ENI said the permits cover an area which is particularly interesting from a mineral point of view and is found at depths of 700 to 2,000 metres. Both Agip and Phillips, which is the operator for these two exploration areas, will hold a 50% stake in the permits

A consortium led by French municipal services conglomerate Suez Lyonnaise des Eaux, has won a tender offer to manage water distribution and sewage treatment in La Paz, Bolivia and its El Alto suburb. Suez-Lyonnaise said the 30-year contract, to take effect July 27, will require $360 million in investment and will realise $20 million is revenues in the first year. The company said that in constant dollars, the consortium will have revenues of $1.1 billion over the life of the contract.

[16] World News Briefs

Protesters in Kashmir threw stones at police whom they accused of preventing pro-separatist leaders from holding a public rally. Shops and businesses closed in an impromptu strike. Buses and trucks stayed off the roads. Using bamboo sticks, nearly 100 policemen pushed crowds back into their homes in the Maisuma district of Srinagar, the summer capital of the Indian state of Jammu-Kashmir.

Israeli paratroopers blew up a vehicle carrying Shiite Muslim Hezbollah guerrillas in south Lebanon and killed at least one guerrilla, the army said. The explosion occurred last night just north of Israel's self- declared security zone in south Lebanon. The army did not say what kind of vehicle was blown up. Security officials in southern Lebanon confirmed that a Hezbollah guerrilla was killed in fighting with Israeli forces, but said the circumstances were not clear.

Palestinians threw stones and firebombs at Israeli troops and burned an Israeli flag as clashes resumed after a week-long lull. Israeli troops responded with rubber bullets, and one protester was injured. At one point, soldiers broke into a Palestinian elementary school to get access to the roof for use as a firing position. Most of the stone throwers were young teen-agers. When they ran out of ammunition, they carried more stones in buckets to the front lines.

At least five people have been injured in student riots on the streets of Managua, Nicaragua. Some one-thousand university students clashed with police in the capital Managua during a protest against a presidential veto that will cut the university budget. Police fired tear gas and bullets to disperse the students. The students were protesting Congress' approval of a presidential veto on a university budget bill. According to the constitution, universities must receive 6%.

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