Qatar denial fails to dampen M&S takeover speculation

Updated 19 March 2013
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Qatar denial fails to dampen M&S takeover speculation

DUBAI: Marks & Spencer shares surged on speculation that a faltering turnaround effort and flagging profits have left Britain’s biggest clothing retailer vulnerable to a takeover.
Investors piled into the stock after a newspaper reported that Qatar was planning a bid, sending the shares up 9.4 percent to a 12-month high.
A source close to Qatar Holding denied the report, but the stock was still up 7.4 percent at 1130 GMT.
Analysts and investors said Marks & Spencer (M&S) could be a target for a private equity firm.
The company, which also sells homewares and food, traded poorly in 2012 and in January reported a bigger-than-expected drop in non-food like-for-like sales for the Christmas quarter.
“M&S is vulnerable to a bid, as trading and profits are under pressure, with nothing to show yet for the big investments made in online systems and warehousing and the changes in the clothing team,” said independent retail analyst Nick Bubb.
M&S declined to comment.
Marc Bolland, chief executive since 2010, has said he was confident steps being taken by a new general merchandise management team, led by former food boss John Dixon, would address the poor recent performance, although the impact would not be felt until autumn/winter collections hit the shops in July.
M&S investors such as Standard Life, which holds 1.5 percent of the company, have said Bolland has to get this range right to placate shareholders.
Although one senior retail banker gave the probability of a takeover at just 5 percent, some analysts said a recent improvement in the debt markets and the amount of cash currently in private equity meant a bid could happen.
“You could argue that the business could support quite a bit of debt if it wasn’t having to pay a dividend, making a private equity-style bid possible, but the trading outlook looks rather uncertain,” one of M&S’s top 20 shareholders told Reuters.
The Sunday Times newspaper had said the Qatar Investment Authority wanted to assemble a consortium to mount an 8-billion-pound ($ 12.1 billion) takeover.
The newspaper cited senior City of London sources as saying Qatar, which is already a 26 percent shareholder in Britain’s No. 3 grocer J Sainsbury, had approached several large private equity houses, including CVC Capital Partners, to gauge their interest in participating, and had spoken to lenders about financing an offer. CVC declined to comment.
A source close to the fund said Qatar Holding, the investment arm of the Gulf state’s sovereign wealth fund, was not considering a bid.
With an investment appetite of about $ 30 billion every year, Qatar has emerged as one of the world’s most aggressive investors, piling on stakes in companies ranging from top-tier banks such as Credit Suisse to carmaker Porsche and miner Xstrata.
The sovereign fund’s investments are widely seen as opportunistic, not following a specific strategy, as it has purchased a wide range of assets globally. It likes to engage in bilateral discussions with the seller and generally does not invest in a consortium.
Shares in M&S were up 27.5 pence at 400 pence at 1130 GMT, valuing the business at 6.45 billion pounds. However, its bonds weakened sharply and the cost of protecting its debt against default rose.
In 2004, the retailer fought off a 9.1 billion-pound bid approach from Topshop owner Philip Green.
There are many obstacles to a deal now.
M&S was arguably in a worse state in 2004 than today and the environment was less competitive with, for example, rival Primark yet to become the force it is now.
At the end of September 2012 M&S had net debt of 1.86 billion pounds, and as of March 2012 had a pension deficit of 290 million pounds.
While its property, last valued in 2004 at 3.6 billion pounds, could be attractive to private equity, the situation is complicated by the retailer’s pension scheme being part funded by income from a portion of its property portfolio.
“Some of the premium freehold sites would be attractive, but 1.5 billion pounds is tied up in the pension partnership and we believe there is a long tail of unattractive high street and suburban sites,” said analysts at Credit Suisse.
They say long-term institutional shareholders and M&S’s army of private investors would require a significant premium, having seen the shares below 4 pounds for most of the past decade, while the pension fund trustees could also demand additional funding.


Wells Fargo to pay $1B for mortgage, auto lending abuses

Updated 20 April 2018
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Wells Fargo to pay $1B for mortgage, auto lending abuses

  • Fine the latest in a series of setbacks for US bank
  • Federal Reserve in February prohibited lender from growing assets until governance issues addressed

Wells Fargo will pay $1 billion to federal regulators to settle charges tied to its mortgage and auto lending business, the latest chapter in years-long, wide-ranging scandal at the banking giant. However, it appears that none of the $1 billion will go directly to the victims of Wells Fargo’s abuses.
In a settlement announced Friday, Wells will pay $500 million to the Office of the Comptroller of the Currency, its main national bank regulator, as well as a net $500 million to the Consumer Financial Protection Bureau.
The action by the CFPB is notable because it is the first penalty imposed by the bureau under Mick Mulvaney, who President Trump appointed to take over the consumer watchdog agency in late November. The $500 million is also the largest penalty imposed by the CFPB in its history, the previous being a $100 million penalty also against Wells Fargo, and matches the largest fine ever handed out by the Comptroller of the Currency, which fined HSBC $500 million in 2012.
The fine against Wells Fargo had been expected. The company disclosed last week that it was in discussions with federal authorities over a possible settlement related to its mortgage and auto lending businesses, and that the fine could be as much as $1 billion.
The settlement also contains other requirements that would restrict Wells Fargo’s business. The bank will need to come with a risk management plan to be approved by bank regulators, and get approval from bank regulators before hiring senior employees.
“While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency,” said Wells Fargo Chief Executive Tim Sloan in a statement.
The $500 million paid to the Comptroller of the Currency will be paid directly to the US Treasury, according to the order. The $500 million paid to the CFPB will go into the CFPB’s civil penalties fund, which is used to help consumers who might have been impacted in other cases. But zero dollars of either penalty is going directly to Wells Fargo’s victims.
The bank has already been reimbursing customers in its auto and mortgage businesses for these abuses. Wells Fargo has been refunding auto loan customers since July and been mailing refund checks to impacted mortgage customers since December.
While banks have benefited from looser regulations and lower taxes under President Trump, Wells Fargo has been called out specifically by Trump as a bank that needed to be punished for its bad behavior.
“Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!,” Trump wrote on Twitter back in December.
The abuses being addressed Friday are not tied directly to Wells Fargo’s well-known sales practices scandal, where the bank admitted its employees opened as much as 3.5 million bank and credit card accounts without getting customers’ authorization. But they do involve significant parts of the bank’s businesses: auto lending and mortgages.
Last summer Wells Fargo admitted that hundreds of thousands of its auto loan customers had been sold auto insurance that they did not want or need. In thousands of cases, customers who could not afford the combined auto loan and extra insurance payment fell behind on their payments and had their cars repossessed.
In a separate case, Wells Fargo also admitted that thousands of customers had to pay unnecessary fees in order to lock in their interest rates on their home mortgages. Wells Fargo is the nation’s largest mortgage lender.
Wells Fargo has been under intense scrutiny by federal regulators for several months. The Federal Reserve took a historic action earlier this year by mandating that Wells Fargo could not grow larger than the $1.95 trillion in assets that it currency held and required the bank to replace several directors on its board. The Federal Reserve cited “widespread abuses” as its reason for taking such an action.
This settlement does not involve Wells Fargo’s wealth management business, which is reportedly under investigation for improprieties similar to those that impacted its consumer bank. Nor does this involve an investigation into the bank’s currency trading business.
Consumer advocates have been critical of the Trump administration’s record since it took over the CFPB late last year. However, advocates were pleased to see Wells Fargo held to account.
“Today’s billion dollar fine is an important development and a fitting penalty given the severity of Wells Fargo’s fraudulent and abusive practices,” said Pamela Banks, senior policy counsel for Consumers Union.