European Business News (EBN), 97-09-12

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

Page last updated Fri, September 12 6:59 PM CET

CONTENTS

[01] German Ministry sets telecom tariff charges

[02] Rallye counters Promodes bid for Casino

[03] Shell buys Montedison's stake in Montell for $2 billion

[04] British Airways makes peace with flight attendants

[05] US retailers healthy in August; wholesale inflation under control

[06] IRI selling $1 billion Banca Di Roma stake

[07] Scots vote overwhelmingly for own Parliament

[08] French consumer prices rise 1.5% in August

[09] Air France CEO bullish over profit for 1997

[10] Heineken first half profit rises 9.8%

[11] Renault truck unit plans two cooperation projects

[12] UPM-Kymmene, APRIL announce proposals to merge fine paper operations

[13] Corporate and Economic Briefs

[01] German Ministry sets telecom tariff charges

Post Minister Wolfgang Boetsch called on Telekom, which is still 74% state- owned, to accept the ruling, which became necessary after Telekom and rival Mannesmann Arcor couldn't reach an agreement.

Mannesmann, which had asked the ministry to mediate, called the decision 'another important milestone to the opening of the telecommunications market ... which private customers will also profit from.'

In a statement, it noted the rate set by Boetsch - an average of 2.7 pfennigs (1.5 cents) per minute - was slightly above the rate in France and considerably higher than in Britain and the United States, where the telecommunications markets were opened to competition years ago. But it said the ruling showed Germany was trying to close the gap.

Deutsche Telekom had no immediate comment.

A ministry spokesman said the ruling is likely to affect two other new companies: o.tel.o, the telecommunications joint venture between utilities RWE and Veba, and Netcologne. They also have asked for mediation. Deutsche Telekom, currently the monopoly supplier for the household telecommunications market, will be able to charge its competitors for access to the network once the German telecommunications market is fully liberalized in 1998.

In August, Mannesman Arcor chairman Harald Stober, said he estimates that Telekom's new competitors may win more than one-third of the domestic market within four or five years.

[02] Rallye counters Promodes bid for Casino

The offer gives shareholders three different options based on a combination of cash, bonds and share swaps, significantly bettering Promodes' straight 340 French francs a share cash offer.

Rallye holds 28.8% of Promodes shares and has 36.3% of voting rights. With the support of the Guichard family, which holds 8% of the equity and 16% of the voting rights, Rallye refused the Promodes offer, saying it didn't adequately reflect Casino's growth potential.

Under the Rallye offer, Casino shareholders will receive for 6 ordinary shares a cash payment of 347 francs for 1 share and for the 5 other certificates. Those certificates will allow the shareholder to receive on December 1, 1999 the difference, if positive, between 400 francs and the average trading price of Casino over one month with a limit of 120 francs.

The company will also offer for 6 priority shares a cash payment of 277.50 francs for 1 share and certificates for the five others. Those certificates give the holder the right to the difference, if positive, between 320 francs a share and the average trading price of Casino, with the pay-out limited to 96 francs per certificate. The company will also pay 127 francs per Casino warrant.

[03] Shell buys Montedison's stake in Montell for $2 billion

Montell is a leading producer of polypropylene, one of the fastest growing products in the plastics market.

Montedison said that it was selling the stake in Montell, a 50/50 joint venture created by Montedison and Shell in April 1995, because its presence in the petrochemicals sector has been an increasingly marginal one. With the sale, Montedison said that it would be able to finance development in sectors it now considers strategic: energy, derivatives from emerging technologies in biosynthesis and fine chemicals. In addition, Shell said it will create a separate company, Shell Chemicals Ltd., providing strategy and operational advice for all its chemicals businesses. The move is a response to the increasingly competitive and global nature of the chemicals business.

The energy concern, one of the world's biggest, also signed an agreement to form a 50-50 plastics venture with BASF to produce polyethylene.

The venture will include Rheinische Olefinwerke, an existing venture of BASF and Deutsche Shell. The new business will start November 1, subject to approval by the European Union Commission.

[04] British Airways makes peace with flight attendants

The agreement with the flight attendants will save the company £42 million ($70 million) a year - part of chief executive Bob Ayling's goal of cutting costs by £1 billion pounds ($1.6 billion) annually by 2000.

The deal also ends a summer of feuding that included not just the three-day strike, but hundreds of flights that were cancelled later as cabin crew stayed off the job on sick leave, and separate disputes with ground workers at Heathrow Airport that have now been resolved.

'Touch wood and thank God - we're home free,' said Mike Street, the British Airways director of operations.

Street called the three-day strike by flight attendants and its aftermath 'an expensive little escapade' that the airline estimates cost it £125 million pounds ($200 million).

But achieving the savings will be worth the trouble in the long run, he said in a telephone interview. As the airline slashes costs, everyone in the company must be seen to be contributing, Street said.

[05] US retailers healthy in August; wholesale inflation under control

Retail sales rose 0.4% for the month to $213.68 billion, the third straight monthly increase, the Commerce Department reported. While the August increase was below analysts' expectations, the boost did provide further evidence of strong consumer demand in the economy.

The producer price index edged up 0.3% in August, but the index is still down 2.2% for the first eight months of the year, according to a report released by the Labor Department.

The August rise in retail sales followed a revised 0.9% increase in July and an unrevised 0.7% hike in June. The July increase previously was reported as 0.6%.

'June, July and August were three very robust months for retail sales,' said Chris Probyn, senior economist at UBS Securities. While the report shows that demand for goods is 'very solid,' it has not yet translated into higher prices, he noted.

That should keep the Federal Reserve from raising interest rates when the central bank's policy making committee meets on Sept. 30, Probyn said.

'I think these numbers will allow the Fed to relax and not do anything in September,' he said. But the Fed can't stay on the sidelines forever, he added.

'I think things are falling in to place for an eventual Fed tightening, probably in November,' he said. Paul Kasriel at Northern Trust in Chicago agreed.

'Although there is tangible evidence that demand in the economy is robust, the Fed still does not have a smoking gun to justify an increase in rates,' he said.

But Kasriel also says the story may be different when the Fed's Open Market Committee meets in November. 'We have a 25 basis point increase pencilled in then,' he said.

The bond market reacted favourably to the two reports.

In early New York trading, the 30-year Treasury bond was at 96 19/32 to yield 6.64%, up 21/32 from late Wednesday.

[06] IRI selling $1 billion Banca Di Roma stake

IRI's director general, Pietro Ciucci, said the forecast is based on a quotation of Banca Di Roma shares on the stock market of about 1,600 lire.

The holding company said it had approved a plan to sell the 13.9% stake it directly holds in Banca Di Roma as well as a 22.6% stake it indirectly owns through Cassa Di Risparmio di Roma Holding.

The 13.9% stake will be placed directly on the market while the stake it indirectly owns in Banca Di Roma will be sold through a three-year convertible bond issue.

Meanwhile Italian insurer Toro Assicurazioni said that it is planning to acquire a 7% to 8% stake in Banca Di Roma for an investment of about 700 billion lire.

Toro said that it would acquire the stake both by purchasing shares directly from giant holding company Istituto per la Ricostruzione Industriale and by subscribing to a three-year convertible bond issue.

Toro noted that Roma Vita, its bank insurance venture with Banca Di Roma, chalked up premiums of more than 250 billion lire in 1996, its first year of operation. Roma Vita is expected to have premiums of more than 500 billion lire this year, Toro said. The insurer has said previously that it was considering acquiring a stake in Banca Di Roma to strengthen their bank insurance relationship.

Earlier, Banca Di Roma noted that gross operating profit was 771.3 billion lire in the first six months, down from 767.9 billion lire in the same period last year. Both interest income and total income were flat over the same periods at 1.7 trillion ITL and 2.5 trillion ITL, respectively, the bank said.

[07] Scots vote overwhelmingly for own Parliament

Scotland's nearly 4 million voters - just under 10% of the British electorate - will take control of most domestic affairs, marking the most significant change in the United Kingdom since Irish independence in 1922.

With results counted in 31 of the 32 districts from yesterday's referendum, the vote for the parliament was 74.3% in favour, and 63.5% voicing support for giving the Edinburgh body's tax-raising powers.

'I am absolutely delighted that the Scottish people have backed our plans,' Prime Minister Tony Blair declared.

Two districts, the Orkney Islands in the north and Dumfries and Galloway on the southern border with England, voted against tax-raising powers.

Britain's battered Conservative Party, virtually the sole opponents of the 4 1/2-month-old Labour Party government's plan, conceded defeat. The Tories vowed to battle on to avert what it said were plans by Scottish nationalists to use the parliament to precipitate independence.

'It's been a decisive result. As a party we accept that,' Jackson Carlaw, deputy chairman of the Conservative Party in Scotland, acknowledged in the early hours. 'We don't want to see this parliament hijacked by anybody who favours independence.'

The Scottish and Welsh assemblies were a key pledge of Blair's winning platform in May 1 national elections. However, Blair regards the Scottish Parliament as a way of keeping Scotland in the UK, and the nationalists do not.

'We have embarked on a journey and the end of this journey will be independence,' declared Alex Salmond, whose Scottish National Party gets about one-fourth of the Scots' vote in national elections.

[08] French consumer prices rise 1.5% in August

According to provisional data released by the national statistics bureau Insee, prices rose 1.5% from a year earlier. Since the beginning of the year, prices have risen 0.8%. Insee said the significant rise in prices in August was due to seasonal factors and to a rise in prices of imported goods, particularly petroleum.

Excluding energy, consumer prices rose 0.2% in August from July. Energy prices in August rose 1.2% from July, while petroleum prices were up 2% from July. Energy prices were up 2.9% from a year ago.

Meanwhile, the provisional current account surplus narrowed 17% in June, totalling 18.4 billion French francs ($3 billion) on a seasonally-adjusted basis, from 22.3 billion francs in May, the French finance ministry said. In unadjusted terms, the current account surplus widened to 21.7 billion francs from 20.2 billion francs in May. For the first six months, and after consideration for first quarter revisions, the current account was in surplus by a seasonally-adjusted 111 billion francs, more than the 105 billion francs recorded for all of 1996 and up by nearly 70 billion francs from the first half of 1996.

[09] Air France CEO bullish over profit for 1997

In a questions-and-answer interview in the French business daily La Tribune, Blanc said, 'We say very easily that our net profit in 1997 will be at least 1 billion francs...and we should double that amount the following year.'

In his letter last week announcing that he wouldn't seek to renew his mandate at today's Air France board meeting, Blanc said that Air France's earnings, including earnings from the former Air Inter, would attain a profit in 1997 of 1 billion francs and would surpass that figure in 1998.

Previously, Air France had said it expected a profit of 500 million francs in 1997. In 1996, Air France reported a pretax consolidated profit for the fiscal year ended March 31, of 39 million francs, while net profit totalled 394 million francs, its first profit since 1989.

[10] Heineken first half profit rises 9.8%

The rise in net profit was above analysts expectations, who earlier in the week told Dow Jones they estimated an increase of between 4% and 7.4%.

Heineken said that lower prices of raw materials and packaging contributed to the growth in the first half and added this will continue in the second half of 1997.

It also noted the good summer weather in August in Europe which had a positive influence on turnover.

Exports to the US remained stable in the first half, due to the lowering of supplies in the US, but are seen increasing in the second half.

Sales rose 11% to 6.53 billion guilders with the newly consolidated units, Birra Moratti in Italy and Zlaty Bazant in Slovakia, contributing 6% of the increase.

The group increased its market share in Ireland, Slovakia and Poland, while its share remained stable in the Netherlands, France and Greece.

[11] Renault truck unit plans two cooperation projects

'Bringing together volumes and know-how is one way to generate significant economies of scale in the truck industry while assuring clients of the best technology,' Renault V.I. said.

Renault V.I. will expand a 1996 transmission cooperation agrement with Germany's ZF Friedrichshafen. As part of a proposed accord, Renault would put its Boutheon transmission business, which employs 433 people, into a joint venture that would be 60% controlled by ZF and 40% by Renault V.I.

The venture would produce Renault V.I. B9/B18 and ZF Ecomid transmissions. Renault said it would consult the staff council on the deal on September 23 with a view to signing an accord with ZF before the end of the year.

In the other announced agreement, it expects to sign a deal with US exhaust and filter specialist Nelson that will entail the sale of Renault's Comela muffler and airtank subsidiary employing 260 people. The sale is envisaged a year after the signature of the accord. Renault plans to avoid layoffs by offering internal transfers to 90 employees who would not be offered jobs by Nelson. The company declined to disclose the terms of the accords.

[12] UPM-Kymmene, APRIL announce proposals to merge fine paper operations

Under the alliance, the two companies will swap 30% of their respective fine paper operations in a non-cash transaction. In Europe, UPM-Kymmene will hold 70% and APRIL 30% of a new company called UPM-Kymmene Fine Paper, which will comprise the Finnish company's fine paper units Nordland Papier in Germany and Kymi in Finland.

The new company will be the largest fine paper producer in Europe, UPM- Kymmene said, with a combined annual capacity of 1.7 million metric tons of paper and 460,000 tons of related pulp.

Meanwhile, in Asia, APRIL will hold 70% and UPM-Kymmene 30% of a new company, APRIL Fine Paper, that will comprise APRIL's paper mills currently under construction in Sumatra in Indonesia and Changshu in China.

In Asia, production is expected to start during 1997 and 1998 and the mills will have a combined capacity of more than 1 million metric tons of fine paper yearly.

'We are taking a major step into the fast growing Asian markets (and) fine paper, which is based on local low cost short-fiber pulp, will play a dominant role in Asia and elsewhere,' said Juha Niemelae, president and chief executive of UPM-Kymmene.

'We expect the alliance to bring us considerable benefits in the Asian markets with other products as well,' he said. The alliance will be implemented by the end of this year, said UPM-Kymmene.

[13] Corporate and Economic Briefs

Spain's consumer price index was 0.4% higher in August from July, raising the year-on-year rate to 1.8% from 1.6% the previous month, the national statistics institute said. Underlying inflation, a measure of consumer prices excluding fresh food and energy prices, increased 0.2% in August, leaving the year-on-year underlying, or 'core' rate unchanged at 2.0% from July.

Portugal's consumer price index rose 0.5% in August from July, as the year-on-year growth rate rose 1.9% compared with a 1.7% rise in July, the National Statistics Institute (INE) said. The INE said higher food and beverage prices were the main factors in the month-on-month rise. In August the annualized average rise in the CPI was down at 2.6% compared with a 2.7% rise in July.

LucasVarity said its first-half pretax profit was £167 million ($267 million) from a pro forma £169 million a year ago. This half's results are the first interim statements for the combined Lucas Industries and Varity. Victor Rice, chairman of LucasVarity said: 'Although the strength of sterling and mixed trading conditions are having an effect, the merger related benefits which we had previously identified are being achieved and the reshaping of the group continues with several disposals and bolt-on acquisitions completed.'

Hungary's seasonally-adjusted industrial production in July rose by 3% from June and by 8.6% from a year earlier, the Central Statistics Office (KSH) said. The final figures released Friday differ from preliminary figures released earlier this month. Preliminary figures showed that industrial output in July was up 2% from June and rose 7.6% from July 1996. Final figures show industrial production in the first seven months increased 7.9% from the same period last year. Export sales in July increased 31.7% from July 1996 and domestic sales increased 4.9%. Total sales rose 6.6% in July from July the year before.

Technip said that its net profit rose to 283 million French francs ($46.8 million) from 248 million francs due to improved sales, better margins and lower operating costs. Sales rose to 5.34 billion francs from 4.89 billion francs. Technip Chairman Pierre Vaillaud said those numbers do not directly reflect the stronger dollar versus the franc, because the company operates in a variety of currencies in order to manage risk. The stronger dollar, which has boosted many French oil companies earnings during the first half of the year, will come into play in the medium term as those oil companies begin spending more money on overseas projects, in turn bringing more work to Technip.

MeesPierson, a unit of the international banking, insurance and investment group Fortis, said that it will open a new office in Belgium for investment banking. MeesPierson Investment Banking Belgium will advise clients on mergers and acquisitions, on public and private share offerings, on management buy-outs or buy-ins and on financial restructuring, the company said. MeesPierson is already active in banking and trust activities in Belgium. Bank MeesPierson, which has branches in Antwerp, Courtrai and shortly in Hasselt, is primarily active in the private banking market, which focuses on wealthy individuals. The new affiliate will be managed by Damien Coppieters 't Wallant and Guy van Dievoet, both ex-directors of Brussels-based Banexi.

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

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