International Business News

Weakened by the crisis, the French capital again to make headlines in the business press but professionals are questioning the sustainability of a recovery that dare not speak its name.

The uncertainties in the sector are also the prospect of entry into force of new rules that regulators want to impose the financial sector, whether the standards of solvency of banks and insurance and new tax regimes on capital gains and bonuses of investment funds.

The Forum's capital organized by Reuters of 8 to 10 September in Paris will provide an update on the new standards and expectations of the profession after the excesses of the years 2004-2007 and the bursting of the credit bubble.

According to data compiled by Thomson Reuters over the period from January 1 to September 7, the activity of private equity in France, measured by value is more than six times lower than it was in 2006, a report close to that observed globally.

The nascent recovery is still tangible: the activity is about 60% higher than it was in 2009.

"There is still a little early to give a real trend for the end of the year, although there is still a 'stock' of deals that can be done," said Vincent Ponsonnaille, a lawyer specializing in capital at Linklaters.

"Especially on small and mid-cap activity there," says his side OSSMANN Remy, vice president of the consulting firm LEK in France.

Selling Frozen Picard, the largest operation in France since the bankruptcy of U.S. investment bank Lehman Brothers, however, showed that the billion euros was more impenetrable.

VIRTUOUS CIRCLE

But uncertainty over the economic environment and financial markets remain a brake, particularly in terms of IPOs (IPO).

"If the IPO market reopens for sizes and valuations fairly consistent, it is a bit of a virtuous circle for a variety of companies that are still in the portfolios," said Catherine Vincent, Chief Executive within the activity of investment bank Goldman Sachs in Paris.

Analysts said the IPO provided the chain of casinos Lucien Barriere will be a test.

But conversely, the withdrawal of the sale of fast food chain Quick or the retirement homes Medi-Partners also show that investors remain cautious.

"There is a fairly long list of transactions that have no takers, either for reasons of size or profile, for reasons of funding or pending award," notes Céline Méchain, director in charge of relationship with the investment fund at Goldman Sachs.

The continued funding of operations, moreover, remains uncertain because if the banks agreed to finance numerous records at the end of the first semester, they must organize now, that is to say, find investors interested in debt.

This process has also been launched on Monday by the banks in charge of LBO mounted for the redemption of Picard Frozen by Lion Capital.

"We can not consider access to the debt as an asset for the moment," he told Reuters late August Monique Cohen, managing partner of private equity group Apax.

NEW WAVE

The banks also require different ways to structure transactions so as to regain control faster business purchased by the funds in case of restructuring.

Because the crisis has shown the procedure to safeguard French was rather favorable to shareholders and creditors trying to turn faster debt capital.

The news of the capital since the outbreak of the crisis has been marked by restructuring banks that were very expensive to fund and precipitated the departure of certain officers.

In France, corporate restructuring or OMS Monier were characterized by such deadweight losses for the PAI, Sagard and Cognetas.

"We had a first wave of restructuring.By 2011, there could be a second for companies whose underlying economic activity is not to go and who only see their problem of excessive leverage, "says Catherine Vincent.

"2012 will be the first year where we will face a wall of refinancing," explained her side Céline Méchain.

"We'll see how some funds are recovering from their previous failures, particularly in the fundraising going and coming but for now there are many more records in 2009 rollover," said Olivier Tordjman, a lawyer with Ayache Salama.

"And if subjects remain restructuring, there is less risk of 'dead'," he says.

PSA Peugeot Citroen, after a first half marked by continued strong sales, think back to a positive operating profit this year despite the difficult months ahead in Europe.

The second European car maker said Wednesday it expected 2010 profit from recurring operations of about 1.5 billion euros after a loss of 689 million in 2009 due wholly to the crisis that hit the area the first half of last year.

"The economic environment has had a significant positive impact in the first half (…) Clearly, this will be less favorable economic environment and will have a negative impact in the second half," warned Philippe Varin, CEO of PSA during a press conference.

PSA Action opened up 1.3% at 25.20 euros on the Paris Bourse, before turning around. At 10:10, the title abandoned 3.32% to 24.05 euros.

"The results are solid and forecasts may reassure, but we wonder if the stock market will not suffer in the second half of the relapse of volumes expected in the automotive business in Europe," wrote analysts at Barclays Capital in a Note."We remain very cautious on the outlook for next 18 months."

PSA has resumed on the first six months of the year with profit from operations, stood at 1.137 million euros after a loss of 826 million a year earlier, with a net profit of 680 million against a loss of 962 million a year earlier.

The first half was also supported by the performance plan unveiled by the group last fall.This plan, which includes cost reductions and income gains, has contributed 854 million euros in operating profit.

Philippe Varin has not ruled out that the goal of contributing 1.1 billion euros to the result of the plan is passed this year.

FOCUS ON INTERNATIONAL

The group's turnover rose by 20.8% to 28.39 billion in the first half, still supported by subsidies still in force and by the success of several new models like the Peugeot 3008 and the crossover sedan DS3 Citroen, which allow PSA to increase its market share in Europe to 14.5% against 13.7% a year earlier.

Registrations of new cars by the first French sales rose 5.5% in the first six months of the year but fell 5.6% on the month of June with the shortness of the effect "scrappage".This was further reduced to 1 July, 500 euros against 700 euros in the first half and 1,000 euros for the whole of 2009.

The loss of aid will be added to the fact that the second half is usually less active than the first for the automotive sector sales, and that the surge in demand in late 2009 with the bonus of 1,000 euros a comparison very unfavorable product from one year to another.

Despite this, the division should be close to self-balance for the second part of the year.

SAP anticipates a decline of 7% of car market in Europe in 2010, slightly less than what he foresaw far.He put forward the emerging countries to find new sources of growth, as China is now its second largest market after France and that it provides a double-digit growth in 2010, and as Latin America where it sees growth significant figure.

To expand its presence in the Chinese market, the group relies on its new joint venture with Chang'An second PSA JV in China, which it expects to receive regulatory approval in early 2011.

The manufacturer hopes to make half of its vehicle sales in markets outside Europe by 2015, against 34% in 2009. The 508 is as such a symbol of the internationalization of PSA.New large sedan planned for 2011, it will be produced in Rennes (Ille-et-Vilaine), but also in China six months later. For the first time, a model for European motorists since its conception has incorporated expectations of Chinese customers.

Major European stock markets finished higher Wednesday for the first time in over a week, boosted by banks and U.S. companies quarterly results.

The Paris Bourse closed up 0.75% to 3493.92 points.

While the results of their strength tests will be published Friday, banking stocks were among the most requested on Wednesday.The Stoxx index of European banking core values thus gained 1.01%.

German Chancellor Angela Merkel said that resistance tests conducted with European banks to help restore confidence in the financial sector.

The maker of Durex condoms and Scholl sandals SSL International has jumped from his side of 33.45% after the announcement of its takeover by the British household products and health Reckitt Benckiser for 2.5 billion pounds ( 2.97 billion euros).

Home sales in Spain rose for the fifth consecutive month in May, according to data released Monday by the Institute of Statistics, a sign of market stabilization.

Housing sales rose 11.9% in May on a year to reach 37,787 units. In one month, the increase is 10.1%.

The Spanish housing market, which had been boosted by lower borrowing rates over the past decade, has collapsed since the start of the financial crisis, affecting the full brunt of the Spanish economy.

At the height of the housing boom, more than 80,000 homes were sold every month.After the bubble burst, this figure fell to touch a low of 29,178 in April 2009.

Despite the recent rebound, the experts polled by Reuters believe that prices will continue to decline in 2010 and during much of 2011.

Agricultural Bank of China (AGBANK), China's third largest bank, has priced its initial public offering dual Hong Kong and Shanghai, which should enable it to raise more than $ 22 billion (17.5 billion euros ) hypothesized high, bigger bet on the market ever.

The first trading day will be held July 15 in Shanghai and Hong Kong the next day. The official announcement of the award is scheduled for Wednesday.

AGBANK, founded by Mao Zedong in 1951, operates a large network of branches in the Chinese countryside and in larger cities.

Three years ago, AGBANK was technically bankrupt.His recovery, after a rescue of 30 billion dollars, has been boosted by the strong growth experienced in the country and the state control over the banking sector.

In Hong Kong, AGBANK sold 25.4 billion shares, representing 8% of its enlarged capital, at a price of 3.20 Hong Kong dollars part, totaling 10.4 billion U.S. dollars, it was reported Tuesday source close to the matter.

The bank had tightened Monday its price range, between 3.18 and 3.38 dollars per share in Hong Kong, against an initial range of 2.88 to 3.48 dollars.

In Shanghai, the price was fixed at the top of its indicative range which started at 2.52 yuan.AGBANK will sell 22.24 billion of yuan-denominated A shares at a price of 2.68 yuan coin, or 59.6 billion yuan (8.8 billion dollars).

In total, AGBANK rise $ 19.3 billion through its dual listing and even 22.2 billion dollars if the over-allotment option is exercised, an event likely in view of the application.

Previously, the largest ever IPO was that of Industrial & Commercial Bank of China with 21.9 billion in 2006.

OFFER 20 times oversubscribed

China International Capital Corp (CICC), Deutsche Bank, Goldman Sachs, JPMorgan, Macquarie and Morgan Stanley are the banks organizing the operation in Hong Kong, with the brokerage firm of AGBANK.

For placing on the market in Shanghai, banks are CICC, CITIC Securities, Guotai Junan Securities and Galaxy.

AGBANK is quoting on the stock market to allow the government to achieve its objective, namely to have the four largest banks in the country publicly traded.

Having for many of them had periods of insolvency, it are now among the largest banks – and companies – in terms of market capitalization.

A source familiar with the matter, it indicates that the offer of AGBANK in Shanghai was 20 times oversubscribed by institutional investors.

In Hong Kong, the institutional demand came from Asia to 4%, 30% U.S. 25% Europe thee, according to sources involved.

Individuals have however shown little enthusiasm in Shanghai, like Hong Kong.

The IPO allotment option included, values AGBANK about 150 billion dollars (nearly 120 billion euros), making it the fourth largest bank in terms of global market capitalization behind ICBC, China Construction Bank and HSBC .

Chaired by Xiang Junbo, headline writer and war hero, AGBANK operates 24,000 branches, employs 441,000 people and boasts 320 million customers.

The price for AGBANK bodes well for the four Chinese banks wishing to raise capital as is the case for Bank of China and ICBC.

The Shanghai stock market has lost nearly 25% since mid-April and fell sharply last week, partly because investors sold shares to participate in the offer AGBANK.

The Autorité des marchés financiers (AMF) announced Wednesday it had exonerated Natixis in an investigation into financial information of the bank in November 2008 at the height of the financial crisis.

In late 2008, the AMF had launched an investigation against the bank owned almost 72% BPCE (People's Savings Bank) after announcing a loss of 234 million euros and information from press reports at the same time a trading loss of one billion euros.

In its decision, the Sanctions Committee of the AMF does not hold grievances against the bank regarding the sincerity and accuracy of its financial information.

"It does not appear that the emergency situation in which it was placed to make before markets opened an initial response to articles in The Tribune, Natixis has disregarded the requirements of accuracy, precision and fairness set out in Article 223-1 of the AMF General Regulation, "reads the decision of the Sanctions Committee.

Contrary to the myth of the victory of 1998, a course team of France in World Cup-2010 has little chance of boosting consumption and cheer to the French morose for months, analysts said.

"Given the past, there is little chance that there is an impact on the morale of the French," explains Benoit Heitz, chief of the division at INSEE cyclical synthesis. While in 1998, "there was an improvement in consumer confidence in July, when the victory of France, but the improvement trend existed before. At best, it would have amplified the trend already existing" he continues, noting that these good results were anyway mostly related to the fact that the competition was held in France.

But this year the World Cup takes place in South Africa and French morale was already at half mast.This indicator summarizes the views of households on the economic situation and declining steadily since the beginning of the year and has dropped 8 points since January. And the chances of a reversal through the course of the France team is minimal.

"Only a victory in the final could possibly have an exhilarating effect, otherwise it will be marginal," said Alexander Law, chief economist at Global Xerfi. "If we win, it will have a positive impact on consumer confidence, but it is only on their morale.And only if we win, if we lose the first round or even the final, "added Nicolas Bouzou, an analyst at Aster.

Impact on sales of TVs

Whether this improvement would last, "it depends much more on attitudes to austerity plan that results in World Cup," says he, in all cases ensuring that the course would have the Blues no impact on consumption. "At the macro level, it has no impact," he insists.

"Often they say that the victories of 1998 and 2000 have generated growth but this is not the case, growth was already there, also notes Marc Touati, director of Global Equities. "The victory is the icing on the cake.The route of the France team can only be the icing on the cake, and if it does not cake …", continues the analyst.

The World should certainly have an impact on sales of televisions, which France won or not. The GfK account and an increase of 200,000 to 250,000 pieces by this event that will invigorate even more a market already in great shape (8.7 million sales in 2010). Good results could also French "boost sales of textiles, with the Blues jerseys, notes Alexander Law. "But not to be extremely high, especially since the team of France does not enjoy a good symbol of love," he tempers.

An early elimination should not have any effect on consumer sentiment. "The team has qualified in pain, his popularity rating has rarely been so low, so people just say + they knew they were unable +.Unfortunately, the French economy has disadvantages much heavier than the poor performance of its sports teams, "said Alexander Law. Failure" could generate a movement of depression, but temporary, "said Marc Touati of his side.

Further reading: The families that take in France