UK business groups expect economy to shrink this year

Leading business groups in the UK have downgraded their economic forecasts and called for action from the government.

The British Chambers of Commerce (BCC) announced today that it expects the UK’s gross domestic product (GDP) to shrink by 0.4% in 2012, down from its earlier forecast for growth of 0.1%.

It claimed that the prospects for recovery are complicated by headwinds from the slowing global economy and the continuing crisis in the eurozone, as well as the austerity drive in the UK. In addition there are new risks from recent rises in food and oil prices, the BCC said.

Next year the organisation expects the UK economy to show growth of 1.2%, a decrease from its earlier prediction of a 1.9% rise in GDP.

The BCC has urged the government to adopt a hybrid strategy that delivers both deficit reduction and growth. It said that swift action is needed to support business investment, incentivise job creation and stimulate construction, particularly in the housing sector, and that this can be achieved by changing spending priorities or with limited extra borrowing.

“Politicians need to get some political backbone and show leadership,” said BCC director general John Longworth.

Yesterday another business organisation, the Confederation of British Industry (CBI), cut its GDP forecast for 2012, saying that it now expects the economy to shrink by 0.3% in 2012. This is a significant fall from the previous forecast in May of 0.6% growth, reflecting a more negative first half and a more modest rate of growth in the second half than was expected in May.

The CBI expects growth to return to the UK economy towards the end of the year and it forecasts GDP growth of 1.2% in 2013, revised down from its previous estimate of 2%. This matches the BCC forecast. The CBI noted, however, that the ongoing global uncertainty means there is a risk that growth could be lower.

Despite the coalition government’s austerity measures, both the CBI and the BCC have predicted that the government will end up borrowing more in 2012 and in the coming years. The BCC believes that public sector borrowing will overshoot the target by GBP14bn to GBP17bn in each year until 2015 and it said that the task of eliminating the government’s structural budget deficit will probably take two to three years longer than envisaged.

 

London-listed healthcare firm Care UK acquires Whitwood Care

British health and social care services provider Care UK plc (LON:CUK) has taken over specialist adult residential care operator Whitwood Care, Care UK said without providing financial details.

The buyer said that the deal complements its existing services for individuals with learning disabilities across the range of outreach, care at home, supported living, residential homes and respite live in care. The company will also add a staff of 140 with expertise in personalised support.

Whitwood Care operates three West Yorkshire-based care homes, namely Whitwood House, Whitwood Hall and Whitwood Grange. The homes provide purpose built residential facilities offering specialist care and support for 48 people with learning disabilities, including those on the autistic spectrum.

Libby Eastley, Business Development director for Community Services, Care UK, commented that Whitwood Care’s facilities will complement the company’s services focused on individuals with learning disabilities. Eastley said further that Whitwood Care’s staff will join Care UK’s community services division.

Care UK, established in 1982, operates GP centres, hospitals, care homes and provides support for people within the community. The company’s services for older people care focus on support at home, supported living services, day clubs and residential or nursing homes. Its healthcare services include treatment centres, GP practices, NHS walk-in centres, out of hours GP support and clinical assessment and diagnostics facilities.

Broadcaster ITV acquires production firm So Television

British broadcaster ITV Plc (LON:ITV) said it had purchased production company So Television for a maximum price of GBP17m (USD27m/EUR21.5m), as part of plans to boost its capability in the production of TV entertainment programming.

ITV, carrying out the deal through its fully-owned unit ITV Studios Ltd, will provide GBP10m of the total price in cash upfront and an additional cash payment based on SO Television’s profits to 31 July 2016, the buyer said.

The acquired business, set up by Graham Norton and Graham Stuart 12 years ago, produces entertainment and comedy programmes such as The Graham Norton Show and The Sarah Millican Television Programme.

The Graham Norton Show was recommissioned by BBC earlier in 2012 through 2014 and it is also distributed internationally and broadcast in 100 other countries.
The deal serves ITV’s five-year transformation plan to build world-class content for free and pay platforms in the UK and abroad, the buyer said.

ITV Studios’ managing director Kevin Lygo said in a comment that his company can bring scale to So Television. The new owner will keep The Graham Norton Show as a top programme, while adding new programming, Lygo explained.

Graham Norton and Graham Stuart welcomed the transaction, saying that under the umbrella of ITV, So Television will have the strength needed to continue its growth.

BT sells stake in Indian IT firm Tech Mahindra for $250m

British communications services provider BT Group Plc (LON:BT.A) said it had disposed of 14.1% in Indian IT services firm Tech Mahindra Ltd (BOM:532755) for a total gross cash price of INR13.95bn (USD250.4m/EUR203m).

The vendor said it had sold 17.9m Tech Mahindra shares to institutional investors at a price per unit of INR777.73 and cut its stake in the Indian IT firm to 9.1%. It could further reduce that interest, BT Group noted in its statement.

BT will report the financial impact of the stock sale as an income statement specific item in its next financial results.
The Indian company, which offers technology services to telecommunications companies, will remain a key supplier to BT Group.

The divestment was earlier reported by various media, including Bloomberg and Reuters, which said that BT had hired Credit Suisse Group AG (NYSE:CS) and JPMorgan Chase & Co (NYSE:JPM) to handle the process.

Reuters also cited earlier reports by the Indian media as saying that some global private equity firms had expressed interest in BT’s stake in Tech Mahindra.

BT offers its communications services and solutions to customers in over 170 countries. Its portfolio comprises global networked IT services, local, national and international telecommunications services, broadband and Internet products and services, as well as converged fixed/mobile products and services.

Domino’s UK arm to acquire Domino’s Pizza Switzerland

Domino’s Pizza Group Plc (LON:DOM), which holds the master franchise for US pizza delivery company Domino’s Pizza (NYSE:DPZ) in the UK, Ireland and Germany, said today it had agreed to buy the business of Domino’s Pizza Switzerland AG for a maximum of CHF7m (USD7.3m/EUR5.8m) in cash.

Through the purchase, the company will add 12 more stores, which generate annual sales of CHF12m. The target also plans to open at least 25 further stores over the next five years. According to the group, the Swiss network could be further expanded to reach some 65 outlets.

As part of the agreement, the buyer will initially pay CHF5m on completion and up to CHF2m, depending on the sales performance of the target’s existing stores over a two-year period. The deal also includes a master franchise agreement (MFA), under which the company will get the exclusive right to operate and franchise Domino’s stores in Switzerland, Liechtenstein and Luxembourg as well as an option to acquire the MFA for Austria until the end of 2014.

Domino’s Pizza Group said that the Swiss market offers attractive opportunities due to the current growth of quick service restaurant sector and the country’s predominantly metropolitan-based population. As the brand is not well recognized at present, the buyer intends to take measures to improve product quality and intensify the focus on delivery service and online sales. It also plans to make investments in refurbishing the existing stores or moving some of them to stronger locations.

The company said it expects to incur a short-term loss of CHF750,000 in 2012 as a result of these measures, which, however, will have a positive impact on the Swiss business in 2014.

Completion of the deal is seen in late September and is subject to the seller’s shareholder approval. With the latest purchase, the company will hold the master franchises for seven European countries, out of a total Domino’s global business of 73 international markets.

Spanish deposits shrink by €74bn as recession deepens

Depositors in recession hit Spain withdrew EUR74bn from the country’s banks in July, according to figures from the European Central Bank (ECB).

The deposit loss equals 7% of Spain’s GDP in a single month, with the total loss at about 11% in the first seven months of 2012.

The flight of funds from Spain mirrors the situation of Greece, with analysts speculating that the capital is being diverted to German bank accounts and perceived safe havens, such as London property.

Official figures in Spain, released yesterday, show that the country is in a double-dip recession and the region of Catalonia approached Madrid for a EUR5bn rescue package.

Spain’s statistical office said on Tuesday that the country’s economy contracted in the second quarter, with GDP sliding by 1.3% compared to the second quarter of 2011.

Sponsor Clayton Dubilier & Rice in $1bn deal to acquire David’s Bridal

US private equity group Clayton, Dubilier & Rice LLC (CD&R) has entered into a definitive agreement that will make it the new owner of David’s Bridal Inc, the US retailer specialising in wedding gowns and related accessories.

Leonard Green & Partners LP, which bought David’s Bridal in 2006, will retain a minority stake in the business. CD&R said that the deal values the target company at about USD1.05bn (EUR842m) and is expected to close during the fourth quarter. Paul Pressler, operating partner at CD&R, will become chairman of David’s Bridal once the purchase is finalised.

David’s Bridal has been in business for more than six decades and currently sells its wares through 300-plus US stores, five outlets in Canada and an online store. In addition to designer bridal gowns, the company also offers special occasion dresses and accessories.

CD&R partner Richard J. Schnall said that David’s Bridal had the advantage of being a unique and strong business operating in a sizeable and stable industry. CD&R looks forward to helping the company solidify its leadership and make the most of its scale by expanding into new segments, channels and geographies, Schnall added.

David’s Bridal president and chief executive Robert D. Huth said that the company was excited to have the CD&R team on board. Their operational expertise will be most welcome as David’s Bridal accelerates its growth strategies, Huth stated.

CD&R, which received legal advice from Debevoise & Plimpton LLP, has secured financing commitments from Bank of America Merrill Lynch, Barclays plc (LON:BARC), Goldman Sachs Bank USA and Morgan Stanley (NYSE:MS). David’s Bridal had Bank of America Merrill Lynch and Barclays as financial advisers, while Latham & Watkins LLP provided it with legal counsel.

France’s Areva to exit Canadian gold miner La Mancha in $320m deal

French nuclear power group Areva SA (EPA:AREVA) said on Tuesday it had finalised the disposal of its holding in Canadian gold mining company La Mancha Resources Inc (TSE:LMA) in a deal that fetched some CAD315m (USD319.5m/EUR254.3m).

The 63% stake was taken by Weather II Investments, a business managed by Egyptian businessman Naguib Sawiris, which agreed last month to buy all shares of La Mancha. The company paid CAD3.50 per La Mancha share, or a premium of 55.6% to La Mancha’s closing on 12 July and 43.1% above the 20-day volume weighted average as of that day.

Areva expects to receive the proceeds from the divestment in the coming days. The money will go for further limiting the company’s debt and for funding its investments.

The sale of La Mancha’s stake is in line with Areva’s Action 2016 strategy, the French group noted.

When announcing the agreement with Weather II Investments in July, La Mancha’s president and CEO Dominique Delorme said the deal provided a significant premium to all shareholders and would allow La Mancha to continue developing its projects with partners in Sudan, Cote d’Ivoire and Australia.

The Canadian gold producer, which is active in Africa, Australia and Argentina, generated revenues of CAD184.7m and EBITDA of CAD83.8m last year, data by Areva shows.

France’s Credit Agricole still interested in selling stake in Spanish Bankinter

French banking group Credit Agricole SA (EPA:ACA) views the stake it owns in Spanish peer Bankinter SA (MCE:BKT) as non-strategic and it is still considering all options regarding a further sale of Bankinter shares, CEO Jean-Paul Chifflet told a news conference on Tuesday.

According to Chifflet, Credit Agricole has recently cut its stake in the Spanish bank below the 20% threshold, but has made no decision as to the rest of the Bankinter holding.

However, Chifflet added that the Bankinter stake is among several non-strategic foreign investments that his bank plans to lower.

In an interview published by French newspaper Les Echos in December 2011, Credit Agricole’s chief executive said his company remained open to all options regarding its Bankinter interest. The stake the French bank holds in Portuguese lender Banco Espirito Santo SA (ELI:BES) was also mentioned by Chifflet as a potential target for sale.

Bankinter is the parent of domestic financial group Grupo Bankinter, which also includes financial firms Bankinter Gestion de Activos SGIIC, Bankinter Seguros Generales SA de Seguros y Reaseguros, Hispamarket SA, Intermobiliaria SA, Bankinter Consumer Finance EFC SA, Bankinter Capital Riesgo SGECR SA, Bankinter Sociedad de Financiacion SA and Relanza Gestion SA.

As of 31 December 2011, the bank’s main shareholder was Madrid-based Cartival SA with a stake of 23.91%.

China to decide on Glencore’s acquisition of Canada’s Viterra next month

Canadian grain handler Viterra Inc (TSE:VT) said the Chinese Ministry of Commerce (MOFCOM) will continue into September with the review of its planned CAD6.1bn (USD6.2bn/EUR4.9bn) combination with Swiss commodities trader Glencore International Plc (LON:GLEN).

The clearance by the MOFCOM is the sole remaining regulatory nod needed to wrap up Glencore’s acquisition of Viterra, the Canadian firm said. Glencore is cooperating with the Chinese ministry to secure its approval as soon as possible.

The buyer initially expected to complete the deal in Viterra’s fiscal third quarter, it has said.

Glencore agreed on 20 March to buy Viterra at CAD16.25 a share, saying it would use existing cash and debt to finance the deal which would serve its goal of becoming a top global player in grain and oilseeds markets.

The deal provides Glencore with a strategic platform for growth in Canada, while boosting its operations in Australia and allowing it opportunities to expand in fast-developing global markets, the buyer has said.

In an earlier comment, Chris Mahoney, director of Glencore’s Agricultural Products division, said the takeover reflected the Swiss group’s belief in the potential of the Canadian and Australian grain markets and the benefits for farmers and customers in the two countries, as well as others.

Viterra has operations in Canada, the US, Australia, New Zealand and China, as well as offices in Japan, Singapore, Vietnam, Switzerland, Italy, Ukraine, Germany, Spain and India.