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Business - Need to Know

Morning Edition

Another multi-billion pound British technology firm has succumbed to an American buyout. Telecity isn’t exactly a household name but it’s a chunky business nevertheless - it runs high speed data centres for the likes of Spotify and Facebook.

Earlier this year, Telecity, which is based in London, agreed to a merger with Interxion, a Dutch rival. Then Equinix, a US operator, made an approach to crash the arrangement. Today an agreement has been reached whereby Telecity will accept an £11.45-a-share offer, worth £2.3 billion, from Equinix, which is run by Steve Smith, a former aide-de-camp to the Commander in Chief of the US armed forces.

As one transatlantic merger is born, another is in trouble. Synergy, a hospital sterilisation business that washes bedsheets and cleans surgical equipment, has admitted that its £1.2 billion buyout by Steris of the USA is to be blocked by the Federal Trade Commission on competition grounds. That’s very bad news for Richard Steeves, a former hospital physiologist who founded Synergy - he stood to make £54 million from the transaction.

In the fitness industry, LA Fitness has agreed to a buyout by rival, Pure Gym. Most of the 43 LA Fitness sites are to be rebranded as Pure Gym under the auspices of Pure's private equity owner, CCMP Capital.

The deal has been driven, according to Pure Gym's boss Humphrey Cobbold, by strong demand for "affordable, high quality and no contract fitness centres". LA Fitness has about 123,000 members.

Elsewhere, there are figures this morning from Afren, the oil and gas exploration company. Carillion, the construction group, has bought a Canadian business called Outland that provides accommodation for industrial workers in remote areas of the prairies.

A G7 finance ministers’ meeting wraps up in Germany today at which George Osborne, the chancellor, is likely to put pressure on his European counterparts to strike some sort of a compromise deal to put a stop to the endless Groundhog Day of negotiations with Greece. The Greeks are due to make an €367 million repayment to the IMF on June 5 which they may or may not be able to afford, depending on which Greek government minister you happen to be listening to on any given day.

Later this morning, we’ll get the second reading of US GDP figures for the first quarter of 2015. An initial official estimate was that the world’s biggest economy grew by 0.2 per cent. However, the figure could well be revised downwards into negative territory - economists are expecting it to show a drop of as much as 0.8 per cent as a trade deficit grew, a labour dispute disrupted ports and harsh winter weather took its toll.

For updates throughout the day, check out on our new look Business Now live blog, which now pops out.

Finally, this week's Business podcast features myself, Patrick Hosking, Financial Editor, and Alistair Osborne, Chief Business Commentator, discuss next week's Bank of England interest rate decision, Greece and which day’s data may make us cry. Click here to listen or download it from Soundcloud and iTunes.

Don't forget you can follow me on Twitter for regular updates throughout the day - @clarkaw.

Have a great day.

Andrew Clark
Deputy Business Editor
The Times
andrew.clark@thetimes.co.uk

Even the reliable Swiss economy isn’t immune to glitches. Swiss GDP shrunk by 0.2 per cent in the first quarter, the biggest fall since 2009 according to official figures which suggested the wealthy nation is hurting from a drop in exports of chemicals, pharmaceuticals and … watches.

Richard Fuld, the disgraced boss of Lehman Brothers, has used his first public appearance since 2008 to declare that he has “no regrets” about the collapse of the bank that sparked a global financial crisis. Addressing a finance conference in New York, Mr Fuld joked that his 96-year-old mother still loves him. Joanna Walters was there for The Times .

People join companies but quit managers. The main reason people resign from jobs is because of bad bosses, argues Sathnam Sangera.

The Nikkei 225 has closed up 0.06 per cent this morning at 20,563. The FTSE 100 is expected to open two points 7043 when trading begins shortly.

London shrugged off disappointment over the UK’s first quarter growth data and instead took heart from some positive company trading updates. The FTSE 100 inched up by 0.1 per cent or 7.6 points to close at 7,040.9. The broader FTSE 250 was flat in percentage terms and finished just half of one point lower at 18,237. Read here for Alex Ralph’s market report.

Shares eased on Wall Street yesterday as concern over Greece’s debt talks dominated sentiment. The Dow Jones Industrial Average fell by 36.9 points or 0.2 per cent to close at 18,126.1 while the S&P 500 surrendered 2.7 points or 0.1 per cent to finish at 2,120.8. And, just a day after reaching a new high, the Nasdaq index lost 8.6 points or 0.2 per cent to 5,097.9. Around 5.7 billion shares changed hands, below the recent daily average of 6.2 billion.

Oil prices rose in New York after a choppy day in which new figures from the US Energy Information Administration showed American stockpiles fell by 2.8 million barrels last week. Brent crude for July settlement rose by 1.3 per cent to $62.88.

Sterling fell for a fifth day against the US dollar - down 0.3 per cent at $1.531 - after UK economic growth in the first quarter was not revised upwards as expected. Against the single currency, the pound fell by 0.6 per cent to €1.399.

IAG is close to landing Aer Lingus after six months of negotiations. But is the Irish flag carrier worth it, wonders Tempus? Serco has a new chairman with strong opinions but then the current chief executive is no shrinking violet. Could be interesting. LED lighting is the future, so we need some illumination on why Dialight is failing to capitalise on this. Read on for more about the Tempus tips of the day.

The Times
The former boss of Lehman Brothers broke cover for his first voluntary public outing since the 2008 global financial crisis by telling a financial conference in New York yesterday that he had “no regrets” about what happened.
read full update
Daily Telegraph
The International Monetary Fund has hinted that Greece could be forced out of the eurozone, as the country edges closer to judgment day with its foreign creditors.
read full update
Financial Times
A wave of consolidation sweeping across the chip industry has produced the biggest acquisition seen in the technology world since the late-1990s dotcom bubble, as Singapore-based Avago agreed yesterday to pay $37bn in cash and stock for US rival, Broadcom.
read full update
City AM
Britain's bosses have piled more pressure on Fifa’s sponsors to end their support for the under-fire football governing body.
read full update
Economics

GDP: The pound fell and expectations of a base rate rise receded into next year after a widely expected upward revision to Britain’s sluggish first-quarter GDP growth figure failed to materialise.

Banking & Finance

+0.07%

Dick Fuld: The former boss of Lehman Brothers, who was vilified over its collapse, broke cover for his first voluntary public outing since the 2008 global financial crisis by telling a financial conference in New York that he had “no regrets” about what happened. Mr Fuld blamed regulators, borrowers and the government for the 158-year-old bank’s implosion under debts of $619 billion.

Libor fixing trial: Goldman Sachs offered the trader alleged to be the “ringmaster” of an international conspiracy to rig global borrowing rates a guaranteed $3 million signing-on bonus to join the Wall Street bank. Senior executives at UBS were so worried that Tom Hayes might leave that they made an “exceptional” offer to keep him with the Swiss bank, Southwark crown court was told.

Odey European: The €3.1 billion fund lost 19.3 per cent in April, compared with a 0.1 per cent gain in the MSCI Europe index, and clients of Crispin Odey’s hedge fund lost more than €500 million on paper after the star money manager was wrongfooted by the oil price rally, the fall in the US dollar and the power of the European Central Bank’s stimulus plan.

Business loans: Lending to small businesses under the Bank of England’s Funding for Lending scheme grew by £600 million on a net basis in the first quarter, against an £800 million drop in net lending in the previous three months. The FLS, which was introduced in 2012 to provide cheap money to banks on condition that they lend to British businesses and households, was changed last year to focus solely on small business lending.

Royal Bank of Scotland: The bank may have to give a financial boost to Williams & Glyn, the challenger bank being spun out of it, to make it a strong competitor in the politically sensitive small business banking market. The government said that it was asking the Competition and Markets Authority to consider its impact as a stand-alone bank.

PayPoint: The payment processing system, which allows consumers to top up their mobile phones and pay household bills at convenience stores, reported that pre-tax profit had grown by 7.7 per cent to £49.6 million in the year to March 31. It hit back at accusations by the National Federation of Retail Newsagents of “deplorable” behaviour, defending its treatment of small retailers after altering the way it pays shops commission on transactions. Page 46

Visa: The American financial services giant has warned Fifa that it would “reassess” its sponsorship deal for the 2018 World Cup finals if world football’s governing body did not deliver immediate change. Other leading sponsors — McDonald’s, adidas and Coca-Cola — had already expressed grave concern at the latest allegations of systemic corruption with Fifa.

Consumer goods

+0.30%

Tobacco: A report by KPMG for the big four manufacturers — British American Tobacco, Imperial Tobacco, Japan Tobacco International and Philip Morris International — suggests that the illicit trade remains rife, with a total of 56.6 billion illegal cigarettes consumed in 2014, or 10.4 per cent of total consumption and costing more than €11 billion a year in lost tax revenue.

Tate & Lyle: The food ingredients group said that its adjusted pre-tax profit was down from £322 million to £224 million in the year to March 31, off sales down 14 per cent to £2.7 billion. Stripping out a one-off exceptional charge of £142m, profits fell to £51 million pre-tax.

Engineering

+0.20%

CH2M: The American civil engineering company formerly known as CH2M Hill has struck a deal with Apollo Global Management to invest $300 million in a transaction that will solve its cashflow problems and values the engineering group at about $2 billion. The group played a leading part in the 2012 Olympics and has roles on HS2 and UK nuclear decommissioning projects.

Infinis Energy: The company, which floated on the stock exchange last year, used its annual results to allay concerns that the ending of subsidies for new onshore wind farms and the handing of responsibility for approving wind farms to local councils would cast an immediate chill over the industry.

Health

+0.64%

Teva Pharmaceuticals: The Israeli generic drugmaker, which is engaged in a $40 billion hostile takeover battle, has agreed to pay $1.2 billion to refund customers that it overcharged for a wakefulness drug. The settlement relates to a suit brought by the US Federal Trade Commission against Cephalon, a company acquired by Teva in 2012. Cephalon was accused by the FTC of illegally protecting its monopoly on Provigil, a drug used by people suffering sleep disorders, by paying drug makers to drop challenges to its patent.

Leisure

+0.13%

Hogg Robinson: The business travel and corporate services group has restarted the search for a chairman after Tony Isaac, who was to have assumed the role at the annual meeting in July, said that he would no longer be able to do so “due to personal reasons”.

Sportech: The football pools and tote betting group has sold its 50 per cent stake in Sportech-NYX Gaming for up to £12 million to its joint venture partner in the business, NYX Gaming Group, which is listed in Toronto.

CMC Markets: Peter Cruddas, the spread-betting tycoon and former Conservative party co-treasurer, inched closer to a £1 billion flotation of his betting business after reporting a surge in profits and customer numbers.

Natural resources

-0.18%

Premier Oil: The exploration company has heralded the discovery of oil at its Isobel Deep well off the Falkland Islands as a “play-opening discovery”. Importantly, the pressure in the reservoir suggests that it would be moveable and potentially easy to extract.

Gold: The Connemara Mining Company said that it had found “encouraging” grades of gold in boulders near the historical Glentogher lead and silver mine in Inishowen, Co Donegal, in Ireland.

Retailing

+0.45%

Kingfisher: The group reported first-quarter sales of £2.6 billion, down 4.6 per cent on a reported basis, although up 2.7 per cent after excluding currency fluctuations. While like-for-like sales at B&Q fell by 1.1 per cent, sales at Screwfix, the bulk of which are to the trade, jumped 15.4 per cent.

Sports Direct International: The company said that while underlying earnings for the year to April 26 would be in line with market expectations at £380 million, both earnings per share and pre-tax profits would be ahead of forecasts. It said that this was primarily because of the group’s “continued and prudent depreciation policy” and lower interest charges on its net debt, which has fallen from £212 million to £60 million during the year on the back of strong cashflow.

Moto: Britain’s biggest motorway services company is being lined up for a sale by Macquarie Group that could reap £1.1 billion for the Australian infrastructure company. A potential sale is planned in advance of a deadline to refinance Moto’s debt in March.

Signet Jewelers: The American owner of the Ernest Jones and H Samuel has reported a 45 per cent jump in quarterly sales to $1.5 billion, lifted by demand from British consumers. The world’s largest retailer of diamonds said the UK added significantly to its $118.8 million profit in the three months to May 2, compared with $96.6 million a year earlier, and enabled the company to fund a $22 million buyback.

Applegreen: The petrol forecourt retailer outlined plans to raise about €70 million through a flotation on the Alternative Investment Market and the junior ESM in Dublin next month. The group, which has a significant presence in Ireland, wants to use the money raised to expand.

B&M: The Liverpool-based low-cost retailer said that it planned to add 60 stores in this financial year as its first financial results showed adjusted pre-tax profits grew 56 per cent to £135 million in the year to March 28. Sir Terry Leahy, the former Tesco chief executive, who is its chairman, said that the results were “pleasing”.

Technology

+2.17%

Buzzfeed: The online media group, whose videos boast more than a billion views a month, has set its sights on a stock market flotation, according to Jonah Peretti, the founder and chief executive.

Trustpilot: The consumer brand comparison website has raised $73.5 million in a new investment funding round led by Vitruvian Partners, the private equity firm, lifting total investment to date to $118 million.

Jawbone/Fitbit: Jawbone has thrown a sucker punch at Fitbit, claiming its soon-to-be listed fitness technology rival has stolen commercially sensitive data. Jawbone is suing Fitbit for allegedly poaching its staff and stealing intellectual property and confidential trade data, but Fitbit said that it was “unaware” of any confidential information from Jawbone in its possession.

Transport

-0.31%

Aer Lingus: Ireland’s parliament approved the sale of its 25 per cent stake in the airline to IAG, the owner of British Airways, clearing a hurdle for the takeover of the airline and limiting political damage for the government.

City Link: In a column written for the Institute for Turnaround’s in-house magazine Jon Moulton, the founder of Better Capital, has blamed the media, the unions and “idiotic” laws on consulting employees about job losses for aggravating the “nightmare” Christmas Day collapse of the courier group that his private equity group owned with the loss of more than 2,500 jobs.

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