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February 8, 2013 2:49 pm
The big deal this week was the return of the big deal. John Malone’s Liberty Global bid $23.3bn for UK cable operator Virgin Media, but shareholders on both sides should ask why. In another multibillion-dollar move, Michael Dell is attempting to take his namesake company private for $24.4bn, but it is still unclear what he can do with the company out of public markets that he could not do in them. On a smaller scale, drug company Elan sold its main asset to Biogen for $3.3bn, but investors may not see much of the cash as its chief executive appears to be intent on an acquisition.
Another company eyeing a big buy, Chinese oil major Sinopec, unveiled a $3bn share placement as it continues to reduce its dependence on refining. BG Group is also in transition, but its move from go-go explorer and acquirer to ho-hum producer is proving difficult. However, oil is still a better bet than nuclear. Centrica is the latest to decide that investing in atom splitting is not worth the risk.
Elsewhere, amid results from the likes of TimeWarner, Baidu and ArcelorMittal, the telecoms sector grabbed the limelight. The chief executive of ailing telecoms equipment maker Alcatel-Lucent stepped down after four years to forget. Carlos Slim’s America Movil is still on a steep learning curve in Europe, where it may be compelled to participate in KPN’s larger-than-expected $4bn rights issue. Meanwhile Iraq’s second largest mobile operator launched an IPO that doubled the total value of the Baghdad exchange.
The banking world is still dealing with the fallout from the financial crisis. The UK government is agonising over the fate of RBS as the chancellor hinted at a more aggressive approach to regulation including “electrified” ringfences. Ireland decided to liquidate Anglo Irish. And Swiss banks UBS and Credit Suisse, which have taken different approaches to cost cutting, were both insisting that they had the right set-up for the future.
Finally, investors should be wary of the latest catchphrase, “the great rotation” – a phenomenon in which investors will sell low-returning bonds and buy stocks - as it is dangerously vapid.
John Casey, Lex Publisher
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