Category Archives: European economy

Alpha Natural Resources Announces Completed Sale of Amfire Mining Assets to Rosebud Mining

 According to Yahoo Finance, Alpha Natural Resources, Inc. (ANR) announced that its subsidiary AMFIRE Mining Company, LLC has completed the previously announced divestiture of substantially all of its assets to Rosebud Mining Company.  The transaction included total consideration of approximately $86 million, including $75 million in cash and the assumption of certain liabilities.  The assets, which include ten mines and four preparation plants and loadouts, are located in Cambria, Centre, Clearfield, Elk, Greene, Indiana and Somerset counties, Pennsylvania.

Alpha Natural Resources affiliates continue to operate two mines in southwestern Pennsylvania that are not connected with the transaction, the Emerald and Cumberland mines near Waynesburg.  More than 1,100 workers are employed by these Greene County operations.

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U.K. M&A Deals: What a U.S. Buyer Should Expect

This article explores the significant differences between market deal terms in the U.S. and U.K., with an additional focus on what buyers should expect when a business is being sold by a U.K. private equity fund.

Typically, U.S. private stock deals are executed on a ‘cash-free, debt-free’ basis, incorporating upward and downward adjustments to the agreed-to purchase price based on post-closing metrics.

Conversely, the ‘locked box’ method is gaining prevalence in the U.K. This approach involves an equity price being established using a historic set of accounts which the buyer has no ability to adjust after closing. If changes to these accounts occur, the buyer’s only right of claim is under contract.

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World Led by U.S. Poised for Fastest Growth Since 2010

According to Bloomberg,

The world economy is primed for its fastest expansion in four years, with the U.S. propelling the improvement in output.

Global growth will accelerate at least 3.4 percent in 2014 from less than 3 percent this year as the euro area recovers from recession and China and other emerging markets stabilize, according to economists at Goldman Sachs Group Inc., Deutsche Bank AG and Morgan Stanley. The U.K. will be a standout, while Japan risks damping the mood by suffering a mid-year slowdown after an April increase in sales taxes.

“So far it’s been a very bumpy, below-par and brittle expansion,” said Joachim Fels, co-chief global economist at Morgan Stanley in London. “Next year could bring a very important transition: a transition to a sounder, safer and more sustainable recovery.”

The upturn should prove bullish for equities and bearish for bonds. If it boosts corporate confidence in the durability of growth, it could further fuel demand, raising the odds that 2014 will break the pattern of recent years and come in better, rather than worse, than projected.

“An improving global-growth picture is widely forecast but, in our view, also still doubted in the investor community,” said Dominic Wilson, chief markets economist at Goldman Sachs in New York. “We therefore see room for markets to price in a better cyclical story.”

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EU’s Highest-Paid Bankers in U.K. as Bonus Awards Exceed Cap

According to Bloomberg,

Top U.K. investment bankers were paid an average of 1.95 million euros ($2.65 million) in 2012, as bonuses continued to exceed caps set to take effect next year, according to the European Union banking regulator.

The highest-paid bankers in the U.K. had an average bonus-to-salary ratio of 370 percent, according to the European Banking Authority survey of EU finance workers who earn more than 1 million euros a year. In France, the ratio was 495 percent.

The EU brokered a deal in February to outlaw banker bonuses that are more than twice fixed pay, a move lawmakers said would prevent excessive payouts and curb irresponsible risk-taking. The U.K. government challenged the caps at the EU’s highest court in September, saying they were illegal.

“Self-regulation does not work and the report illustrates why the European Parliament took the unprecedented step of inserting a hard bonus cap in the absence of action by the industry,” Arlene McCarthy, a U.K. lawmaker in the European Parliament’s Socialist group, and lead legislator on a previous round of EU bonus rules, said in an e-mail.

Britain was home to 2,188 investment bankers earning more than 1 million euros in 2012, the highest amount in the EU, while Spain had 37, the London-based EBA, set up in 2011 to harmonize banking rules in the EU, said in the survey. France and Germany had 117 and 100.

Capping Bonuses

Workers Pass Clocks in the Canary Wharf Business District (Bloomberg)

Workers Pass Clocks in the Canary Wharf Business District (Bloomberg)

The EBA said in May that any banker paid more than 500,000 euros should be covered by the new rules capping bonuses. The watchdog also targeted the best-paid 0.3 percent of staff in a bank, and some bankers with bonuses higher than 75,000 euros.

The boost to fixed pay means “less alignment between performance and pay,” Syed Kamall, a U.K. Conservative party lawmaker who represents London in the European Parliament, said in an interview.

Senior retail bankers in Spain were better paid than their investment banking colleagues, and were the highest-earning in Europe in 2012, making an average of 2.2 million euros a year, according to the report. That’s compared to 1.7 million euros for investment bankers there.

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Euro Zone: Fizzling Growth Seen to Back Draghi Cut Case

According to Bloomberg,

Bank of Spain (Bloomberg)

Bank of Spain (Bloomberg)

Euro-area growth data this week may show the region’s nascent recovery slowing to a crawl, supporting Mario Draghi’s case for an interest-rate cut to help the economy get back to its feet.

Gross domestic product in the region rose just 0.1 percent in the third quarter, according to the median forecast of 41 economists in a Bloomberg News survey. In the 3 1/2 hours before that report on Nov. 14, economists predict a series of data releases to show growth slowing in Germany and stalling in France, with Italy remaining mired in an unprecedented slump.

Such an outcome would confirm that the recovery is grinding after a second-quarter growth spurt of 0.3 percent that ended the region’s record-long recession. The data are due one week after the European Central Bank president’s surprise rate cut to 0.25 percent. Draghi said at the time that the euro zone faces the danger of a “prolonged” period of low inflation.

“There are a few minor bright spots, for example Spain, (SPNAGDPQ) but Italy will continue to remain in contraction and growth in France will likely be flat at best,” said Nick Matthews, a London-based economist at Nomura International Plc. “That plays into the scenario the ECB is seeing, which is a very weak and fragile recovery.”

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Armajaro Trading Sold to Ecom After Loss of $7.6 Million

According to Bloomberg,

Armajaro Holdings Ltd., founded by Anthony Ward and Richard Gower, agreed to sell its soft commodities trading unit to Ecom Agroindustrial Corp., the world’s second-biggest coffee and third-largest cocoa trader.

Armajaro won’t disclose the price, Brian Buckley, a spokesman at the company’s public relations representative Brunswick Group LLP, said by phone from London today. The company’s trading arm, Armajaro Trading Ltd., reported a loss of $7.6 million in the year ended September 2012.

“Our stakeholders in both companies will benefit greatly from the combined service offerings and strengths of the companies,” Andrew Halle, Ecom’s chief executive officer, said in a statement e-mailed today. “It moves us further down the path of being the leading integrated soft-commodity company.”

Alain Poncelet, deputy CEO of coffee and cocoa at Pully, Switzerland-based Ecom, will become CEO of Armajaro Trading, according to the statement. Mark Dendle, Ecom’s chief financial officer, will have the same role at the newly purchased unit.

Armajaro Trading posted the loss after a profit of $17.3 million in 2011, a filing with U.K.’s Companies House showed. The company received $30 million from Armajaro Trading Group Ltd. in 2012, according to the filing. Andrew Stone, former CEO at the London-based company, left in August, the second CEO to resign in less than a year. Richard Ryan departed in 2012.

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Currencies: Race to Bottom Resumes as Central Bankers Ease Anew

According to Bloomberg,

The global currency wars are heating up again as central banks embark on a new round of easing to combat a slowdown in growth.

Race to Bottom Resumes as Central Bankers Ease Anew: Currencies (Bloomberg)

Race to Bottom Resumes as Central Bankers Ease Anew: Currencies (Bloomberg)

The European Central Bank cut its key rate last week in a decision some investors say was intended in part to curb the euro after it soared to the strongest since 2011. The same day, Czech policy makers said they were intervening in the currency market for the first time in 11 years to weaken the koruna. New Zealand said it may delay rate increases to temper its dollar, and Australia warned the Aussie is “uncomfortably high.”

“It’s a very real concern of these countries to keep their currencies weak,” Axel Merk, who oversees about $450 million of foreign exchange as the head of Palo Alto, California-based Merk Investments LLC, said in a Nov. 8 telephone interview. ECB President Mario Draghi, “persistently since earlier this year, has been trying to talk down the euro,” Merk said.

With the outlook for the global economy being downgraded by the International Monetary Fund and inflation slowing to levels that may hinder investment, countries and central banks are revisiting policies that tend to boost competitiveness through weaker currencies.

Mantega’s ‘War’

The moves threaten to spark a new round in what Brazil Finance Minister Guido Mantega in 2010 called a “currency war,” barely two months after the Group of 20 nations pledged to “refrain from competitive devaluation.”

“We’re seeing a new era of currency wars,” Neil Mellor, a foreign-exchange strategist at Bank of New York Mellon in London, said in a Nov. 8 telephone interview.

The ECB lowered its benchmark rate on Nov. 7 by a quarter-point to a record 0.25 percent, a reduction anticipated by just three of 70 economists in a Bloomberg survey. Draghi said the cut was to reduce the risk of a “prolonged period” of low inflation and the euro’s strength “didn’t play any role” in the decision. Euro-region consumer-price inflation has remained below the ECB’s 2 percent ceiling for the past nine months.

The euro slumped as much as 1.6 percent against the dollar on the day of the rate cut, the most in almost two years, before ending the week at $1.3367. It rose 0.3 percent today to $1.3406 at 12:14 p.m. in New York.

 

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