Companies in the news ... and how they were assessed
Qualcomm/broadcom: chips on the table
Technology deals keep getting bigger, said James Titcomb in The Daily Telegraph. The biggest to date was last year’s $65bn sale of EMC to Dell, but that record could now be in danger. This week, chipmaker Broadcom tabled a $130bn bid for its San Diego rival Qualcomm – the world’s leading designer of smartphone chips – which was promptly rejected on the grounds that it didn’t value the company highly enough. The $70-a-share offer is a 28% premium to Qualcomm’s share price prior to news of the bid, but “barely above” its price a year ago. A recent dispute with Apple over royalty payments had seen shares drop 20%; hence, perhaps, Broadcom’s opportunistic approach. This recordbreaking bid “comes amid a flurry of deal-making in the $300bn microchip industry”, said James Dean in The Times – and it could well turn hostile. If Broadcom gets its way, it would create the world’s third largest chipmaker, after Samsung and Intel. The semiconductor industry has enjoyed “a barnstorming run” on markets this year, “reflecting optimism over rising demand for chips” in everything from smartphones and self-driving cars, to artificial intelligence and bitcoin “mining”, said Michael Mackenzie in the FT. With so much to play for, the Qualcomm/broadcom saga could run and run.
Johnston Press: catching a Salmond
The Scotsman newspaper opposed independence for Scotland in the 2014 vote, said Maiya Keidan on Reuters. So how will it feel about having Alex Salmond in charge? That now looks like a very real prospect. The newspaper’s owner, Johnston Press, is under siege from its largest shareholder, the Custos Group, to ditch its current management and appoint a new team chaired by the former SNP First Minister. The beleaguered newspaper group, whose other local and regional publications include The Yorkshire Post, was once “a stock market darling, outperforming media stocks across Europe as it scooped up newspapers across Britain”, said Iain Dey in The Sunday Times. In early 2007, the shares topped £40; they’re now “more or less worthless”. Why? Blame Google. Regional newspaper executives used to speak about the “three rivers of gold” – cars, jobs and houses. Those adverts all went online, along with another crucial revenue source: classified ads. Christen Ager-hanssen, the Norwegian activist shareholder behind Custos, says he has “lined up” asset managers and private equity firms to take on Johnston’s “crippling” £220m debt. That will come as some relief. But plenty of people are wondering what exactly Salmond can do to improve Johnston’s fortunes.
London Stock Exchange: Rolet row
More than a fortnight after the LSE announced that its chief executive, Xavier Rolet, is leaving next year, a row has broken out over whether the Frenchman was “hustled unhappily towards the exit”, says Nils Pratley in The Guardian. One long-standing investor, The Children’s Investment Fund (TCI), is demanding answers. The continuing silence of the LSE and chairman Donald Brydon on the subject makes you wonder if TCI is “onto something”. Rolet is credited with a stellar turnaround of the LSE, but if he was that good, why is he going? “The affair would evaporate in an instant if Rolet declared that, actually, he wanted to leave.” But he hasn’t. “TCI should keep pressing. It may turn out there is no mystery, but shareholders deserve better than the LSE’S lofty obfuscation.”
Any rise in interest rates spells good news for savers after a long famine, but don’t expect many to “jump for joy” yet, said Charlotte Nelson of Moneyfacts in The Times. The banks are up to their old tricks – lifting the cost of borrowing immediately, while dragging their heels on improving savings rates. Indeed, “the link between the base rate and savings rates appears to have been severed”. HSBC and Yorkshire & Clydesdale have already raised some of their mortgage rates in line with the 0.25% rise. Millions more mortgageholders on standard variable and tracker deals will see their bills tick up from 1 December. According to research by the online broker Trussle, quoted on Moneywise, the quarter-point rise will see the average variable-rate borrower pay an extra £198 per year.
Since this week’s rise is likely to be the beginning of a steady run of increases (estate agent Savills predicts a base rate of 2.25% by 2022), the best advice for anyone on an SV mortgage is to “run off to a mortgage broker and nab yourself a fixed-rate loan before they all run out”, said John Stepek on Moneyweek.com. The best high-street deals are disappearing fast. Last week, Barclays was offering a fiveyear fixed rate of 1.65% with an £899 fee, said The Times. That has already risen to 1.79%.
Houses and shares
The well-flagged prospect of an imminent rate rise has so far done nothing to dampen Britain’s housing market, said Emma Haslett in City AM. UK prices rose by 2.3% between August and October to hit their highest on record, according to Halifax figures; the average UK house is now worth £225,826. Shareholders also cheered the move, sending the FTSE 100 to a fresh record high of 7,560, said Daniel Grote on Citywire. Ordinarily, rising interest rates tend to boost the value of the pound. Not this time. Traders reacting to the Bank’s cautious, “dovish” language sent the pound tumbling 1.8% against the dollar – great news for FTSE 100 companies, which derive about 70% of their collective earnings overseas. Indeed, partially thanks to the falling pound, UK investors saw “healthy returns from almost all major markets last week”.