A round up of some of the week’s most significant corporate events and news stories.
Barclays $150m penalty casts shadow over lenders
Benjamin Lawsky may no longer be in charge, but the New York Department of Financial Services still packs a punch when it comes to cracking down on banks that have stepped out of line, writes Martin Arnold in London.
The DFS, under interim boss Anthony Albanese, on Wednesday announced that Barclays would pay it a $150m penalty for allegedly using its foreign exchange electronic trading platform to reject unprofitable trades and lying to clients about why their transactions were turned down.
The findings are another embarrassment for the UK bank and come on top of a $2.4bn fine that it paid in May to a group of regulators for foreign exchange trading abuses. They also come as Jes Staley, the former JPMorgan executive, prepares to take over as Barclays chief executive next month.
The latest Barclays settlement could also signal further legal trouble for other banks facing similar investigations by the DFS for their forex electronic trading platforms, including Deutsche Bank, BNP Paribas, Credit Suisse, Goldman Sachs and Société Générale.
Mr Albanese said: “This case highlights the need for greater oversight and action to help prevent the misuse of automated, electronic trading platforms on Wall Street, which is a wider industry issue that requires serious additional scrutiny.”
The Deutsche Bank investigation is the most advanced because like Barclays, DFS has had an independent monitor since last year at the German lender who helped discover issues with the electronic trading platforms.
● Related Lombard note: Market makers who game clients should get stuffed
Starwood deal opens door to 1m rooms for Marriott
Marriott International surprised the hotel industry on Monday by announcing a $12.2bn deal to acquire Starwood Hotels & Resorts, a move that will create the world’s largest hotel company by number of rooms, writes Malcolm Moore in London.
Starwood had been on the market since conducting a strategic review in April, but Marriott had previously suggested it was not interested in a tie-up. Instead, Hyatt, Intercontinental Hotel Group and Chinese bidders were linked with a deal.
But Arne Sorenson, Marriott’s chief executive, said certain factors helped change his board’s mind.
“From our initial unenthusiasm, we saw a couple of things,” Mr Sorenson said. “There was about a 15 per cent swing in our equity values . . . That was one of the things that changed.”
“And we were watching a lot of the online travel agencies consolidate and the platforms like Google doing more in the travel sphere. All of these things caused us to conclude that having 1m rooms and more resources to apply against this would allow us to compete better.”
The acquisition, which is set to complete in the middle of next year, will create a company with a portfolio of 1.1m rooms in more than 5,500 hotels around the world, including the upscale lifestyle brands for which Starwood is best known.
It is the most significant deal in the hotel sector since buyout group Blackstone struck a $26bn deal to take Hilton Hotels private in 2007.
It comes as hotel companies rush to consolidate as room rates and occupancy levels reach record highs.
Square shares surge from low initial offering price
The company, which is co-founded and led by Jack Dorsey, co-founder and chief executive of Twitter, had been highly valued by investors in the private market, but had to accept a lower valuation on the public markets.
Square priced its offering at $9, far below its indicated range, then saw shares jump during its first day of trading.
The shares reached $13.05 by Friday lunchtime, before closing at $12.85, well under the $15.46 level that private investors were willing to pay during Square’s fundraising in October 2014.
Despite the challenging reception that tech start-ups are getting in the public markets, Uber and Lyft, the ride-hailing services, are both embarking on large-scale private fundraising efforts. Uber is looking to raise $1bn before the end of the year, at a valuation between $60bn and $70bn. Lyft is aiming to raise $500m at a valuation of $4bn.
Both companies are spending heavily to recruit more riders and drivers, with Uber in the midst of an international push, while Lyft is focused on expanding its market in the US.
However, the headline valuation figures for companies such as Uber, Lyft and Square are being met with increasing scepticism when they go public. Many of Silicon Valley’s biggest private companies, such as Uber and Airbnb, the accommodation listing company valued at $24bn in the summer, are expected to go public within the next two to three years.
● Related Lex note: Square — Round hole
● Related Richard Waters column: A lesson for start-ups
● Related Big Read article: Unicorns face end of the ‘steroid era’
● Related On Wall Street column: Unicorns beware
Air Liquide urges investors to appreciate deal benefits
Air Liquide, the French industrial gases group, agreed a $13.4bn deal to buy Airgas, the US gas distributor, in a vote of confidence in the wider US manufacturing sector, writes Ed Crooks in New York.
The offer of $143 per share gave a healthy premium to Airgas’s market valuation — it is 20 per cent higher than the stock’s highest level over the past 52 weeks.
That troubled some investors, and Air Liquide’s shares fell sharply when trading opened on Wednesday, after the deal had been announced on Tuesday evening.
Speaking to the Financial Times, however, Benoît Potier, Air Liquide’s chief executive, said he expected the company would “just need to wait another week or so” to give investors time to appreciate the benefits of the deal.
By the end of the week, the markets were already starting to prove him right: Air Liquide’s shares closed on Friday just 2 per cent lower than the price at which they opened the week.
For Air Liquide, the deal gives it a much stronger presence in the US, which is expected to be the fastest growing of the large developed economies as a market for industrial gases over the next five years.
Airgas will also strengthen Air Liquide’s operations in the unglamorous but steady and cash-generative business of distributing gases in cylinders.
For Airgas, the price is a vindication of its decision to reject a previous takeover bid, from Air Products of the US, which failed in 2011. That bid was worth just half as much as the offer from Air Liquide.
● Related Lex note: Air Liquide / Airgas — high as a kite
And finally …the lighter side of the news
● Talk about being at the Sharp end. Having got blood, sweat and pay cuts out of staff, the electronics group is raising the bar for devotion: to hit sales targets, employees are being asked to purchase the very goods they create. There is a sliding scale so the lowest paid are expected to buy less than executives, but that is little comfort. Expect sewage plant workers to be in the vanguard of the fight against this insidious practice.
● Have you traded in your social skills for an encyclopedic knowledge of computer code? Then you could be quids in. Thanks to a moral panic fuelled by data-leaking websites and reruns of The Matrix, the hottest job vacancies today are in cyber security. Lack the requisite tech savvy? Just dress as if you picked random items of attire in the dark. Large public companies are too terrified of geeks bearing gifs to sack anyone in IT.
● In an era when vulgar bling is hailed as an art form, the discovery of a 1,111 carat diamond in Botswana will have some gold diggers salivating. Canadian mining group Lucara Diamond thinks it has hit the jackpot with valuations of up to $80m. However, anyone hoping to have a stone the size of a small orange crafted into jewellery would need the taste and style of an oligarch’s moll — and the strength of a Russian Olympian to wear it.
● Shares in postal operator UK Mail fell faster than a weighty parcel labelled fragile after it announced a dividend cut and warned of “softened” performance. Among the reasons for the price tumble were inefficiencies at the logistics group’s £20m automated sorting hub. It seems that even when you employ robots as staff, there is still a risk they will have the mental agility and manual dexterity of Laurel and Hardy. Alexander Gent