JPMorgan Asset Management to lift stake in Channel Island-based Aqua Resources

Channel Islands-based water infrastructure fund Aqua Resources Fund Limited (LON:H2O) said on Tuesday that the private equity arm of JPMorgan Asset Management had offered to buy more of its stock and raise its stake in it to as much as 29.9%.

Under the terms of the deal, which is subject to final terms being agreed with Aqua Resources Fund’s board, JPMorgan Private Equity Limited and JPMorgan Special Opportunities Fund, combining 15.7% in the target, want to buy additional up to 10.29m of its shares, or 14.2%, at USD0.35 (EUR0.28) apiece.

The price is 20.7% higher than Aqua Resources Fund’s closing price on 13 August, the target company said, adding that it had agreed that a tender offer be carried out for the required stock.

Aqua Resources Fund plans to delist its shares from the London stock exchange by the end of October 2012, as it no longer meets the free float norms of the UK listing, it said. The UK Listing Authority requires public companies to have 25% of its shares held by public shareholders.

The delisting needs regulatory clearance and and shareholders’ approval at their extraordinary meeting which would be held in September, the company said.

Aqua Resources Fund also amended its investment strategy to show it would make no new fund investments, it added.

BBC Radio 4 explores ways to fix Britain’s broken banking system

On Saturday afternoon BBC’s Radio 4 reached the halfway point in a new series looking at what is wrong with British banking and how it might be repaired.

‘Fixing Broken Banking,’ presented by Michael Robinson, is an often wistful look at British banking’s past, present and future.

While the series’ first episode explored the emergence of contemporary British banking stained by scandals and a mechanical drive for efficiency and profit, the second episode, aired on Saturday, showed the personal touch still can thrive and prosper.

‘Fixing Broken Britain’s first episode explored the recent scandal of Payment Protection Insurance (PPI).

Theoretically existing to protect borrowers who find themselves unable to make loan repayments because of unexpected events, PPI was quickly transformed  from a form of protection into a hugely profitable form of attack – on the public.

Banks targeted the sick and the self-employed who were never eligible for payout  in the first place. Deliberately complicated fine print hid badly structured policies that many were unaware they actually bought. Bank customers handed over up to £5.5 bn per year for the High Street banks at its peak in the mid-2000s.

‘A fire hose of money coming in then going straight out,’ is how one PPI insider describes the practice.

‘I always thought the point of insurance was to protect people,’ says one interviewee. ‘Instead, it became a kind of insurance racket.’

Related article: Streets paved with gold: the Council that works for banks

Radio 4’s ‘Fixing Broken Banking’ places the responsibility for the scandal at the feet of a rotten banking management culture and automation.

A former consultant with McKinsey described how the drive for efficiency saw computers outflank decision-making by local bank employees with a knowledge of their customers.

While the financial regulators finally intervened in the PPI market in 2007 after finding evidence of harm done to consumers, the reputational damage to British banks was already done, Robinson argues.

In the second episode, aired on Saturday, Robinson travels to North England and Germany to find possible remedies for the reputational damage. There he finds banks successfully toiling under the ‘local banking for local people’ banner.

From Cumberland Building Society in Cockermouth to Handelsbanken, a successful new arrival from Sweden which now has 132 British branches; Robinson discovers that small and local can often thrive.

The success of Cumberland Building Society, which reportedly sailed largely unscathed through the financial crisis, is due to it following ‘one of the old rules of banking,’ Robinson says: ‘ Really knowing who you lend to.’

Eschewing the automated lending assessments of High Street banks, banks such as Cumberland and Handelsbanken use trained individuals to decide loan applications.

Travelling to a town in southern Germany, near Stuttgart, Robinson praises another El Dorado of ethical financial services where ‘nearly everybody banks locally.’

‘I’m not allowed to go outside my area to solicit customers,’ says the German local bank manager before adding, ‘I compare it to going to your doctor. You have to take down your pants. It’s the same going to your bank.’

The rationale is simple. While Plato may have written ‘Know Thyself,’ the aphorism to successful modern banking appears to be ‘Know Thy Customer.’

Fixing Broken Banking continues on Saturday 18 August at 12:00.

Written by  of  The Bureau of Investigative Journalism.

Private equity funds sponsor a possible MBO of China’s Focus Media

Chinese interactive digital media firm Focus Media Holding Limited (NASDAQ:FMCN) said its board is reviewing a going-private offer received from a consortium comprising its chairman and CEO Jason Nanchun Jiang and a group of private equity funds including US Carlyle Group.

The consortium, which also comprises Chinese private equity investors FountainVest Partners, CITIC Capital Partners, CDH Investments and China Everbright Limited (HKG:0165), has proposed to buy Focus Media at USD27.00 (EUR21.85) per American depositary share (ADS), or USD5.40 per ordinary share, the target company said.

In a letter sent to Focus Media’s board, the consortium said they would form a new company to carry out the acquisition and had been in touch with some banks over securing debt financing, which they would use to cover the price along with equity funding.

The proposal offers a 16% premium to the target’s share price at closing on 10 August, the buyers said, adding they had hired advisors and could complete due diligence in a timely manner while negotiating a definitive agreement.

Focus Media has put together a committee of independent directors to evaluate the non-binding bid, with Simpson Thacher & Bartlett LLP acting as advisor. So far the committee has made no decision regarding the proposal and there is no certainty that an agreement would be reached, Focus Media said.

According to Bloomberg data, the transaction values the Chinese target at some USD3.5bn.

The buying consortium has retained the advisory services of Fried, Frank, Harris, Shriver & Jacobson LLP, Sullivan & Cromwell LLP, Skadden, Arps, Slate, Meagher & Flom LLP, Zhong Lun Law Firm, Conyers, Dill & Pearman and Ernst & Young LLP.

European competition authorities delay probe into planned TNT deal

The European Union’s (EU) competition regulator has temporarily interrupted its probe into the acquisition of Dutch express delivery firm TNT Express NV (AMS:TNTE) by US rival United Parcel Service Inc (NYSE:UPS) in order to gather more information, according to a European Commission (EC) official cited by Reuters.

The EC will continue its investigation into the EUR5.16bn (USD6.72bn) deal as soon as it has all needed information, the official said, without elaborating.

The pair agreed on the transaction in March 2012, when UPS said it would step up its growth strategy, while diversifying its geographic presence and boost offering.

Meanwhile, the EC started on 20 July a 90-day in-depth probe into the merger, after its preliminary investigation revealed potential competition worries in the small parcel delivery services sector, mainly the international express services in a number of EU states. It said at the time that the combined group would have a very high share of these markets. The regulator was notified on the deal on 15 June, it said.

The Commission was to deliver its ruling on 28 November, but the decision to halt the probe could delay the process, Reuters said.

The combination is seen to create a top global logistics groups with annual revenues of over EUR45bn and a wider integrated global network, benefiting the customers of both parties and provide increased opportunities for employees, the companies have said.

The buyer expects the merger to generate annual run-rate pre-tax cost synergies of some EUR400m to EUR550m by the end of the fourth year, it has said.

The deal, to be financed with UPS’ existing cash and new debt, will see TNT going private.

For more on this story, click here.