UK’s ruling Labour government has kick-started a debate over a new takeover rule that has now come to be known as the “Cadbury law”. The Labour party in its General Election 2010 manifesto has suggested that it may bring in a new super-majority rule for corporate take overs. Once this legislation comes into effect it would mean prospective buyers of British companies must secure two thirds of the shareholders consent to complete any successful takeover. This proposed law has been informally given the name ‘Cadbury law’ following the recent successful takeover of Cadbury by American counterpart Kraft Foods — a deal that caused considerable resentment among select local communities. The law aims to discourage small pockets of investors (like hedge funds) from attempting to cash in on short-term windfalls by buying and selling stake in large British companies. The Labour party manifesto said it seeks to “encourage a culture of long-term commitment to sustainable company growth, requiring a super-majority of two-thirds of shareholders in corporate takeovers.” It is not yet clear if this rule will be made a universal code for all possible takeovers or would it be restricted only to critical industries in the utility and infrastructure sectors. The voice of British industry CBI, gave a guarded response reacting to this proposal. Responding to this new proposal, John Cridland, deputy director general told the The Guardian newspaper, that it was time the national interest test was reviewed. The UK faced risks that it had not a decade or so ago, such as cyber-attacks, he said. “Are there parts of the national infrastructure which are so critical to the wellbeing of the nation that need a different treatment to an entirely open market? It’s an idea worth examining. The devil is in the detail,” said Cridland. Quite predictably, the unions welcomed the Labour party proposal. Unite (the union) deputy general secretary, Jack Dromey, said: “It was wrong that Kraft — a debt-laden American multinational — took over Cadbury, a successful British business. Labour’s ‘Cadbury law’ will help protect successful British companies against predatory bids and plundering by hedge funds making a fast buck.” The proposed change is likely to be met with some resistance among investing groups. The Association of British Insurers (ABI) said, “Changes to the rules on takeovers must promote good governance and be technically workable. Any plans to require shareholders to vote by a two-thirds majority in company takeovers may fail this test, and entrench weak boards.” There is also a general fear among investors that such a stringent rule might be interpreted as a protectionist move by British politicians, particualrly ABI members who constitute over 90 per cent of the insurance market in the UK and 20 per cent across the EU. They control assets equivalent to a quarter of the UK’s capital. ABI describes itself as the risk managers of the UK’s economy and society. It may however be recalled that the three biggest takeovers of British companies by India’s Tata Group — Tetley Tea, Corus steel and car maker Jaguar Land Rover — would have passed the test of the new Cadbury law, as they were all complete takeovers, with the Tata Group securing 100 per cent interest in these companies. |
Friday, April 16, 2010
UK debates proposed law for takeovers
Tata Steel asks Brit MP to be less critical
Tata Steel Vice-Chairman B Muthuraman today asked a member of British Parliament not to be “over-critical” about the company’s strategy in dealing with problems in Corus. Muthuraman has written to Redcar MP Vera Baird saying her continued criticism of Corus is damaging the company’s efforts to find a new strategic partner for Teesside Cast Products (TCP). “Continued criticism of the company and of Corus CEO and MD, Kirby Adams, in particular, was unfair and unwarranted. Such criticism was unhelpful to the company and its workforce,” he has said. Muthuraman also wishes to meet Vera Baird to discuss issues of mutual interest. “The Redcar plant was mothballed after a consortium of buyers cancelled a legally-binding 10-year agreement. Corus kept the plant going for as long as it could and at a cost of unsustainable losses of over £150 million to the company.” Muthuraman said Adams and his team have worked tirelessly to find a solution and continue to do so. He further said Tata Steel remained open to any credible offer that ensured long-term solution for steel making in Teesside but most offers received so far had been without substance or credibility. Since the mothballing of TCP operations in northeast UK earlier this year, local activists, union leaders and politicians have been critical about Tata’s approach to the problem that has left nearly 1,700 jobless. Vera Baird, Redcar MP and Solicitor General for England and Wales, has been particularly very vocal about her views on Tata’s approach to the Corus TCP issue. Last week commenting on the resignation of Phil Dryden, a senior member of the Corus management team, Baird said, “I intend to ask Tata Vice-Chairman Muthuraman, what is going on? Phil Dryden told me that he spent six months, between March (2009) when the consortium left, and the December decision to mothball the plant, seeking out an equity partner and trying to negotiate a deal which could have saved our steelworks.” “He was the management member who knew the customers of TCP and the plant’s closest details best. I am disappointed that he has left, however, it is more than a month since a US Dow Jones contact told me of market rumours that he had gone. Corus have simply declined to explain his absence and failed to disclose who is currently carrying out the sale negotiations.” It may be recalled that an internal restructuring exercise in Corus had cost the company three senior executives over the last four months. Apart from Dryden, the company had lost Marjan Oudeman, head of strip products and Scott MacDonald head of distribution and building systems. |
Vedanta sees record production
S Kalyana Ramanathan / London April 9, 2010
Vedanta Resources, the UK-based mining and metals major, today reported a record quarterly production of iron ore and aluminum for the fourth quarter ended March 31, 2010.
In a statement issued today, the company said iron ore production in the last quarter and 2009-10 was 7.8 million tonnes (mt) and 21.4 mt, respectively, an increase of 59 per cent and 34 per cent over the corresponding periods.
The surge in production was attributed to a 3.6-mt contribution from Dempo’s operations (in Goa) and increased throughput from existing Sesa Goa operations.
During the March quarter, Sesa Goa shipped 7.4 mt of iron ore (with 1.8 mt contributed by Dempo), compared to 5 mt in the corresponding quarter. Despatches for the year were 20.5 mt, an increase of 36 per cent compared to 15.1 mt in the corresponding period.
The expansion of iron ore capacity to 50 million tonnes per annum (mtpa) by 2012-13 was progressing well through a combination of mining and logistics capacity enhancements, the company said. It added expansion of the pig iron plant capacity to 625 kilo tonnes per annum (ktpa) and associated expansion of metallurgical coke plant capacity to 560 ktpa was also progressing well for the scheduled commissioning by the first quarter of 2011-12.
Mined metal production in the fourth quarter was 194,000 tonnes, marginally lower than the corresponding quarter. Full-year production, however, increased five per cent to 769,000 tonnes from the previous year.
Refined zinc and lead production in the reported quarter was 150,000 tonnes and 20,000 tonnes respectively. Full-year production of zinc and lead was 578,000 tonnes and 72,000 tonnes, an increase of five per cent and 11 per cent respectively over the previous year due to higher operational efficiencies. The new 210-KTPA zinc smelter at Rajpura Dariba and the new 1-MTPA concentrator at Rampura Agucha were commissioned during this quarter — three months ahead of schedule.
Consequently, the total zinc smelting capacity increased to 879 KTPA. Silver production was 1.65 million ounces in the fourth quarter, nine per cent higher than the corresponding period. Full-year silver production was 5.7 million ounces, 34 per cent higher than the previous financial year. Construction activities at the 100-KTPA lead smelter at Dariba and the 160-Mw captive power plant is progressing well for scheduled completion in second quarter of the current financial year, the company said.
It further added the Sindesar Khurd mine project was on schedule for progressive commissioning from first quarter of this financial year. Copper cathode production at the Tuticorin smelter was 80,000 tonnes in the fourth quarter, lower than the corresponding prior quarter, primarily due to low copper grades. Cathode production for 2009-10 was 334,000 tonnes, an increase of seven per cent compared to the previous year.
Aluminium output at record level
Aluminium production in the March quarter was a record 159,000 tonnes, a 19 per cent increase over the corresponding prior quarter. Full-year aluminium production was 533,000 tonnes, 15 per cent higher than the previous year. The increases were mainly on account of 264,000 tonnes contributed by the Jharsuguda aluminium smelter, partially offset on shut down of Balco I smelter in the first quarter.
The Balco II smelter continues to operate above its rated capacity. The company sold 956 million units of power during the quarter, compared to 435 million units sold in the corresponding quarter. This was mainly on account of surplus power from Balco I due to the shut down of aluminium operations, and from the Jharsuguda captive power plant. For the full year, 3,279 million units of power were sold, compared to 882 million units in the previous financial year.
UK flights stay grounded, travellers take land route
S Kalyana Ramanathan / London April 17, 2010 The situation in UK’s air travel industry remains grim for the second day, as all airports remained closed due to smoke and ash emanating from an Icelandic volcano over the last 36 hours. Passengers in major airports remained stranded, even as alternate land transport services were pressed into action to cope with the increased demand. Eurocontrol, the European Organisation for the Safety of Air Navigation, said the cloud of volcanic ash was continuing to move east and south-east and the impact would continue for at least the next 24 hours. Eurocontrol is an intergovernmental organisation, made up of 38 states and the European Community. It also said that airspace was not available for operation of civilian aircraft in Ireland, UK, Belgium, Netherlands, Denmark, Sweden, Norway, Finland, Estonia, the north of France, including all Paris airports, parts of Germany including Düsseldorf, Cologne, Hamburg, Berlin and the airspace around Frankfurt, parts of Poland including Warsaw airport. National Air Traffic Services (NATS), the UK’s leading air navigation services provider, said the cloud of volcanic ash continued to cover much of the UK and the eruption in Iceland continued. “Following a review of the latest Met Office information, NATS advises that restrictions preventing flights in English-controlled airspace will remain in place until 0100 (UK time) tomorrow at the earliest,” it said. NATS said the flights in Northern Ireland and the Western Isles of Scotland, to and from Glasgow and Prestwick would continue to be allowed until 1900 (UK time), subject to individual co-ordination. North Atlantic traffic to and from Glasgow, Prestwick and Belfast might also be allowed in this period. Alternate transport service provider like Eurostar today started providing additional seats for air passengers, wished to connect to continental Europe to Paris and Brussels. National Rail, one of largest railway network in UK, said coach services to and from Scotland and London were on sale today, with hundreds of extra seats added to help people stranded as a result of the airport closures. Eurolines, the European coach operator, added nearly a thousand extra seats to Europe, with its services to Dublin, Paris and Amsterdam most in demand. “Demand is very high, but more coaches are being added on a regular basis,” a note from National Rail said. Paul Bunting, National Express managing director, said, “Coach travel is proving to be very popular and we are adding in as many extra services as possible to cater for demand, especially to and from Scotland. Eurolines coach services to Europe are particularly busy, with people still wanting to get their destination across the Channel.” Despite the large number of passengers stranded at airports, hotels in London did not report any unusual surge in demand. However Premier Inn, a large network of budget hotels, said it was witnessing an increase in bookings at the airport sites. This group also said it was not running out of rooms for those travelling on a budget. Stocks prices of airline operators British Airways and Ryanair dropped on London Stock Exchange. BA stocks fell by 1.65 per cent to £238.6, while low-cost carrier Ryanair fell by 2.63 per cent to £3.89. Stock prices of European operators Lufthansa and Air France-KLM, however, improved by 3 per cent and 3.9 per cent respectively on LSE. (all changes as of 3:30 pm, UK time). Analysts said that a few days of flight disruption would not be financially damaging for airline operators. However, it would worsen if the situation continues to remain grim for a longer period. |
Volcanic eruption in Iceland stops air traffic to London
S Kalyana Ramanathan & BS Reporters / London/New Delhi/Mumbai April 16, 2010
A volcanic eruption in Iceland on Wednesday afternoon spewed smoke and ash over many parts of northern Europe, disrupting air traffic.
Britain, in particular, was substantially affected. All flights into and out of the UK were cancelled for safety reasons, with all major airports ordered closed. The restrictions would be reviewed tomorrow.
The potential threat to airplanes from volcanic ashes is more than just a perceived one. In 1982, a Boeing 747 operated by British Airways lost power in all four engines when flying at 37,000 ft. The flight avoided a major catastrophe and it was discovered that the cause was volcanic ashes only after it had safely landed.
As many as 14 direct flights to London from India were cancelled by various airlines. They said any decision on the flights to be operated tomorrow would be taken only then.
However, flights from India to the other major destinations of Paris and Frankfurt weren’t affected.
“We will not be able to operate services from (the affected) airports until further notice. Customers booked to travel on a cancelled flight can claim a full refund or rebook their flight for a later date,” said a release from British Airways here.
Since it was not certain whether the restrictions on flights would continue on Friday as well — there were reports that the visibility and safety problems could continue for 36 hours, which would mean till well into tomorrow evening — airlines were declining to give any clear assurance.
Travel agencies are advising leisure travelers to avoid England and Nothern Europe for the time being. “Most people go to the UK for higher studies, business trips or to meet friends and relatives. Very few go for leisure. We are advising the leisure travellers to consider other locations and suggesting they avoid Northern Europe,” said Subash Goyal, chairman, Stic travel group.
“All flights for today have been cancelled. Airlines are permitting rescheduling without any extra charges. We are communicating with the people who booked with us and reviewing their travel plans,” said Sabina Chopra, co-founder, of Yatra.com a travel portal.
“If the grounding does continue for another day, we will likely refund passengers who may want to cancel or provide the option of flying to Paris,” said a spokesperson for Air India. Jet and Kingfisher Airlines were working on similar plans.
Flights to London constitute seven per cent of the total international capacity from India, according to data available from the Centre for Asia Pacific Aviation. The worst effected would be British Airways, which has a 39 per cent share of the capacity, followed by Jet which has 24 per cent. Then comes AI (21 per cent), Kingfisher (seven) and Virgin (five), says Capa.
Sunday, April 11, 2010
Restructuring claims three bigwigs in Corus
The new structure aims to service customers better. An internal restructuring exercise in steel major Corus has so far claimed three big names. Over the last four months, three top executives in the Tata Steel-owned UK steel major have left the company. The three who left were Phil Dryden, division head for Corus Long Products, Marjan Oudeman, head of strip products, and Scott MacDonald, head of distribution and building systems. Corus, however, remained unfazed by these losses and said the heads of these divisions had chosen to leave on their own. Details of this new internal structure in Corus are still being worked out. Hence, the company is unable to provide details of the proposed new structure or the possible benefits it hopes to gain from the change. It said the new structure would be a “unified, one-sided, customer facing structure” integrating the management of all divisions within the company. The idea behind attempting to realign the company was to service customers better, the company further said. From a customer’s point of view, Corus at present has nine major divisions — aerospace, automotive, construction, consumer products, energy & power generation, engineering, packaging, rail and security & defence. Corus is Europe’s second-largest steel producer (after ArcelorMittal) with annual revenues of around £12 billion and a crude steel production of over 20 million tonnes. The combined strength of Corus, along with parent Tata Steel, adds up to 28 million tonnes, with over 80,000 employees in four continents. Corus has been part of Tata Steel since April 2007, with the latter acquiring the UK-based steel maker for £6.2 billion in that year. The departure of these top executives also comes at one of the most difficult periods in the company’s history. With the global steel industry still trying to come out of recession and the resultant slack demand, Corus, in particular, has been affected by a forced mothballing of its Teesside Cast Products (TCP) plant in northeast UK. Politicians, community workers and union leaders have been exerting considerable pressure on the company to find a new buyer for the TCP plant or other ways and means to keep the plant running. The partial mothballing of the TCP plant in February this year had resulted in 1,700 job losses in the company. In 2009, a global consortium of steel buyers prematurely dropped out of a 10-year buying contract, directly affecting TCP’s operations. This one contract was expected to consume nearly 80 per cent of the plant’s output. Political leaders in Redcar (where TCP is located) have been campaigning for the revival of the steel works in the region. Vera Baird, member of Parliament for Redcar, reacting to the exit of Phil Dryden, said, “I intend to ask Tata Vice-Chair Muthuraman, what is going on? Phil Dryden told me that he spent the six months, between March (2009) when the consortium left, and the December decision to mothball the plant, seeking out an equity partner and trying to negotiate a deal which could have saved our steelworks. He was the management member who knew the customers of TCP and the plant’s closest details best. I am disappointed that he has left; however, it is more than a month since a US Dow Jones contact told me of market rumours that he had gone. Corus has simply declined to explain his absence and failed to disclose who is currently carrying out the sale negotiations.” While there have been media stories suggesting a possible buyer for TCP may have been found, there is no official statement from Corus supporting this. Meanwhile, the company is also proceeding with legal course against the buyer-consortium that had broken the 10-year contract and landed TCP in trouble. |