Companies in the news ... and how they were assessed
Lloyds: trouble on the cards?
In its pre-crisis pomp, Lloyds was a bank that loved to do deals. It looks like it’s back in business, said Harry Yorke in The Daily Telegraph. Lloyds has emerged as “the front runner” to secure MBNA, Bank of America’s £7bn credit card business in the UK. You can’t blame António Horta-osório “for wanting to seal his turnaround” of the bank “with a monster takeover”, said Jim Armitage in the London Evening Standard. “After years of ditching assets and closing operations, what alpha male boss wouldn’t want to finish the job with some chest-thumping M&A?” But, as City analysts point out, it’s questionable whether splurging £7bn of Lloyds’s “cherished capital” on MBNA is “altogether wise” just as new regulatory burdens are requiring banks to set aside higher capital buffers. The biggest risk of all, however, is “the time in the cycle”. Loan losses to credit card companies are currently low thanks to the “benign economy”. But the “good times for bad debts” may not last. The seller, BOA, clearly has its doubts. Still, perhaps all will be well. Given that Lloyds’s last major takeover was HBOS – a move that sent it hurtling into state ownership – “what could possibly go wrong”?
Rio Tinto: Guinea foul
Talk about “shock and ore” at miner Rio Tinto, said Simon Goodley in The Observer. Last week, the company fired two senior executives following an internal investigation into irregular payments made in Guinea, West Africa – home to “the world’s biggest untapped iron ore deposit”. Leaked emails dating back to 2011 suggest that some $10.5m was paid to a French middleman to help secure the massive Simandou field. Now, the country’s former mining minister claims he, too, was offered a bribe, said Marcus Leroux in The Times. The latest developments add to “an increasingly acrimonious situation” within Rio – one of the fired executives, Alan Davies, is suing, claiming “there were no grounds for his sacking”. This scandal looks like it “could escalate into a prolonged legal headache” for Rio, said Iain Dey in The Sunday Times. It seems “inevitable” that both the Serious Fraud Office and the US Department of Justice will investigate. The leaked emails suggest that the payments “were made with the full knowledge” of two past chief executives. “Maybe it was all above board, but whatever happened went right to the top.”
Mclaren: car crash
The world of Formula 1 is agog at the goings-on at Mclaren, where one of motor racing’s most esteemed patriarchs, Ron Dennis, has been forced out following a boardroom coup, said Peter Campbell in the FT. Dennis was ousted after 35 years at the F1 team-turned-“supercar maker” by two rival investors – the TAG investment trust and Bahrain’s sovereign wealth fund – following “a falling out” over strategic direction. The move raises big questions about the future of the company, which recently turned down a proposed £1.6bn offer from a Chinese consortium and was, prior to that, in discussions about a sale to Apple. “Mclaren without Ron Dennis is like Dyson without James Dyson,” said Alex Brummer in the Daily Mail: he’s the “walking, talking and sleeping intellectual capital of the business”. Dennis intends “to sue the pants off his former partners”. The risk is “a car crash” for British engineering.