European Business News (EBN), 97-03-25

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated March 25 1600 CET

CONTENTS

[01] Scottish Amicable accepts Prudential takeover offer

[02] Nomura tells Japanese officials it violated several securities laws

[03] Deutsche Morgan chairman to quit post in June

[04] BMW says Rover losses narrow, plans $970 million investment

[05] Germany shows a mixed inflation picture

[06] P&O restructuring proceeds ahead of schedule, but costs will hold down 1997 earnings

[07] Pilkington lowers profit outlook as markets remain weak

[08] French Economy should grow at 2.5%, picking up in the second half of the year due to the stronger dollar

[09] German steelworkers protest Thyssen-Krupp joint venture plans

[10] 'The English Patient' takes lion's share of Oscars, capturing 9 awards

[11] Economic and Corporate Briefs

[01] Scottish Amicable accepts Prudential takeover offer

The UK life insurer said Prudential's bid is worth more than £1.5 billion ($2.4 billion) to Scottish Amicable policyholders, plus £1.3 billion ($23 billion) in capital support.

Prudential will also buy what it and Scottish Amicable said are key strategic assets from the life insurer, shelling out £850 million from Prudential shareholder and policy holder funds.

Of that amount, £500 million will go toward all business operations of Scottish Amicable, including a value placed on future sales and synergies. Another £170 million will buy Scottish Amicable's fund-management operations, and the remaining £180 million applies toward the value of the life insurer's non-profit and unit-trust linked funds and other fund operations.

A tally of the outlay for the business operations of Scottish Amicable plus the payments to policy holders means Prudential will spend £2.42 billion up front.

Scottish Amicable said the capital injection it receives from Prudential will allow the company to make significantly boost investment in equities that are expected to provide higher returns over the long term.

The accord is expected to make both parties significant forces in the U.K. market for sales of insurance and pension products via independent financial advisers.

[02] Nomura tells Japanese officials it violated several securities laws

Earlier in the day, the Tokyo District Public Prosecutors Office raided Nomura on suspicion that the company gave money to racketeers in exchange for cooperation in controlling shareholder meetings.

The finance minister said he regrets the brokerage house violated securities laws for the second time. Nomura was involved in a similar scandal in the early 1990s.

According to Japanese prosecutors, a director at Nomura Securities illegally paid 38 million yen ($309,000) to a company run by a relative of a racketeer to avoid disruption of one of Nomura's annual shareholder meetings.

It is the first time that authorities have linked the official to racketeers since the company said on March 6 that two directors had made discretionary deals banned under Japanese law and funnelled profits to a corporate client.

Deputy chief prosecutor Kunihiro Matsuo said the former Nomura director accused of making the payment, Shimpei Matsuki, had not been detained.

He declined to comment on future plans regarding Matsuki and another former director, Nobutaka Fujikura. Nomura said on March 10 that Matsuki and Fujikura had been involved in irregular dealings and it had accepted their resignations.

[03] Deutsche Morgan chairman to quit post in June

Sir John Craven will step down from his post on June 30, according to Julian Prevett, a directory of Deutsche Morgan Grenfell. Prevett denied that Craven is leaving because of scandals at the MGAM subsidiary.

'He has been planning to retire for the past year and a half,' he said. 'He is taking up a board seat at Lonrho, so he will be busier.' Prevett also denied that Craven had been implicated in the Young and Horlick departures. 'Sir John has not had a managerial role for quite some time,' he said.

According to press reports, Craven is disillusioned because of two serious scandals that have hit Deutsche Morgan Grenfell Asset Management in the past six months: allegations of misappropriation of clients' European equity unit trusts by Peter Young and the January exit of the company's star institutional marketer and fund manager, Nicola Horlick.

MGAM has also lost a high-profile institutional client, Hiscox Select Insurance, a portfolio account worth £29 million ($46.4 million). Hiscox, an underwriting syndicate on the Lloyd's of London insurance market, has confirmed that it'll switch to fund manager Baillie Gifford in Edinburgh on April 1.

Young was fired by MGAM in September after the company said he was discovered to have made unauthorised, unlisted securities investments with client money. The firing led to the departure of several MGAM directors, including Chairman Keith Percy, and a rescue deal worth £400 million.

Of this, at least £180 million was spent by Deutsche Bank, the ultimate owner, to buy the unlisted stocks out of the European unit trusts. The remainder of the Young affair's cost is being incurred by Deutsche Bank, as it compensates investors for losses. The compensation package was agreed with the fund manager regulator, the Investment Management Regulatory Organisation, with compensation payouts scheduled to be completed in April.

A successor for Craven hasn't been announced, said Prevett, who speculated that Craven might not even be succeeded. 'Sir John has been responsible for the U.K. part of the Deutsche Morgan Grenfell board. The overall board is in Germany and is chaired by Dr. Ronaldo Schmitz,' he said.

Prevett said Craven would continue to have links with the investment banking group, as he will be joining the advisory board of Deutsche Bank in Germany. Nigel Tyler, treasury manager of the Hiscox Select Insurance, an investment trust at Lloyd's of London, confirmed that Baillie Gifford was succeeding MGAM as fund manager.

[04] BMW says Rover losses narrow, plans $970 million investment

The German luxury car maker also said that the first quarter of the year was 'satisfactory', with sales rising 22%, but the company warned that it couldn't maintain that rate for the full year.

Losses at the Rover unit narrowed to 279 million Deutsche marks ($165.3 million) from 335 million marks in 1995. At BMW's Aero Engines joint venture with Rolls Royce, losses from ordinary business activities narrowed slightly to 627 million marks from 652 million marks. BMW assumed the entire loss which, after tax, amounted to 274 million marks.

On the sales front, group revenue gained 22% and revenue at the Rover unit rose 21%. BMW Chairman Bernd Pischetsrieder warned that those growth rates won't be sustainable over the full year, although the company is optimistic for 1997.

BMW also said its operating profit rose 21% to 1.66 billion marks from 1.37 billion marks in 1995. Last week the company posted an 18% rise in net income to 820 million marks. BMW noted that it prepared its 1996 earnings by division using International Accounting Standards, although it continues to use DVFA methods to calculate its per-share earnings.

Many large German companies have over the past year or so adopted the more transparent IAS or even stricter U.S. Generally Accepted Accounting Principals for their full accounting. BMW Chief Financial Officer Volker Doppelfeld said the company won't fully adopt IAS until 'they have been revised and can be applied to the group's financial statements with discharging effect.'

BMW said its net income in 1996 saw no strong impact from foreign exchange rates. It noted that in the dollar area, differences have been largely smoothed out through its auto production in Spartenburg, South Carolina. Higher earnings from the rise in other European currencies versus the Deutsche mark were offset by declining earnings at the Rover group for exchange rate reasons, it added.

[05] Germany shows a mixed inflation picture

The Federal Statistics Office in Bonn said import prices in February rose 0.5% on the month and 3% on the year, spurred on by a strong dollar and higher coffee prices. In January, import prices had risen 1% on the month and 2.6% on the year.

That was slightly higher than economists' expectations of 2.9% for the year and 0.3% for the month. The last time import prices-an indication of inflation trends-were this high was in July 1991, when prices rose 3.3% on the year.

Since then, import prices had been declining until the dollar's recent surge against the Deutsche mark. 'There could also be other reasons behind it, but the dollar exchange rate is playing a considerable role,' a statistics office official said.

Import prices for coffee rose 26% from January, the statistics office said. Import prices for non-ferrous metals and precious metals rose 5.6% on the month. Meanwhile, import prices of heating oil fell 11% from January. In February from the previous month.

Meanwhile, the western states of Baden-Wuerttemberg and Hesse showed a decline in their consumer prices. Prices in Baden-Wuerttembert fell 0.2% in the month to mid-March and rose 1.4% from a year ago, the state statistics office in Stuttgart said.

In Hesse, inflation slowed to 0.1% from the previous month and rose 1.4% on the year, the state statistics office in Wiesbaden said. The pace of inflation in both states is lower than economists' expectations of an overall March western German inflation rate unchanged on the month and up 1.7% on the year.

[06] P&O restructuring proceeds ahead of schedule, but costs will hold down 1997 earnings

The UK shipping and construction firm said 1996 pretax profit rose 3.9% to £332.8 million ($532.5 million) as rising profits from the cruises, property and Bovis Homes divisions offset reduced contributions from container shipping and ferries.

Chairman Lord Sterling said the group's disposal program is proceeding ahead of schedule. The company said it sold £301 million of property last. year. After accounting for expenditures, including the purchase of the Britannic portfolio and on development property, net sales were £103 million.

'With the continued strength of the property market, we are confident that we will be able to exceed our original target' of selling £500 million of property assets by the end of 1998, Sterling said.

Sterling reiterated the company's intention to float Bovis Homes on the London Stock Exchange later this year. Looking ahead, Cruising has had a 'good' start to the year, with yields ahead of the same time last year. P&O plans to order two new cruise ships.

Lord Sterling said underlying profitability is 'set to improve sharply,' but that 1997 profits will be constrained by the costs of restructuring measures in containers and ferries.

P&O left its 1996 dividend unchanged and said the 1997 dividend is also likely to remain the same. Lord Sterling told Dow Jones Newswires 'We're much more likely to look at a dividend change in 1998.'

He said that while P&O is moving toward a target dividend cover of 2 times, 'We certainly won't wait until the dividend is twice covered to start raising it.'

[07] Pilkington lowers profit outlook as markets remain weak

The UK glass maker said pretax profit before exceptional items would come in at 'not less than £130 million ($208 million). For fiscal 1996, the company had swung to a loss of £248 million. Pilkington attributed its changing outlook to European market conditions, which it said haven't improved in line with expectations, particularly in Germany.

The company added that float glass price increases introduced in October had not been sustained and that there had been a significant drop in float glass prices since the end of 1996.

In fact, last week glass prices fell to their lowest level in around 15 years, Finance Director Andrew Robb told Dow Jones.

But Robb said it managed to force through a 20% rise in glass prices on the continent, effective April 1. 'We would expect at least half of it to stick because activity will ramp up in the summer,' he said.

Pilkington said it is accelerating a restructuring program it introduced in 1996. This will result in around £20 million in restructuring charges in each of the next two fiscal years, twice the level previously indicated.

Pilkington also said it will take an additional charge of £40 million in the current fiscal year to cover anticipated asset write-offs.

[08] French Economy should grow at 2.5%, picking up in the second half of the year due to the stronger dollar

As a result, unemployment earlier feared to reach 13% by June will reach 12.9% from the current 12.7%, said the national statistics bureau INSEE.

Meanwhile, INSEE said inflation remained low in February, rising at 0.2%, up 1.6% from last year.

The expected 2.5% annual growth rate during the first six months of 1997 would be nearly twice the meager 1.3% rate the year before.

The gross domestic product during the second half of the year should grow even more as the delayed effect of a stronger dollar - a rise in French exports - kicks in, INSEE said, without giving a precise forecast.

Such growth would comfort the government's efforts to keep its budget and social security deficit for this year to a combined 3% of GDP. In 1996, that deficit was 4.1%, but needs to be at 3% or less in 1997 in order for France to qualify for a single currency planned for 1999.

[09] German steelworkers protest Thyssen-Krupp joint venture plans

At least 25,000 men, women and youths were brought in buses from the Ruhr river industrial heartland and gathered around the mirror-glass headquarters tower of Deutsche Bank.

'Every year it's been getting worse and worse; they keep cutting jobs and cutting jobs,' Walter Sommerfield, 58, a worker at Thyssen for 35 years in Muhlheim am Ruhr.

Meanwhile negotiators for Fried. Krupp Hoesch-Krupp and Thyssen were putting together the final details for a proposed joint venture, to be announced Thursday. A combination of the two companies' steel units could create the world's third largest steel concern, and the biggest in Europe.

The merger would leave other units of Krupp and Thyssen intact, and allow Thyssen to manage the joint steel operation, cutting costs along with jobs in a country that is already experiencing a 64-year high unemployment rate of more than 12% that translates into 4.6 million jobless.

The steelworkers from both companies are blaming banks for promoting last week's hostile takeover bid by Krupp against its larger rival, Thyssen. Krupp suspended the bid when talks began, and yesterday both companies said they were so close to agreement that there would be no need to renew the unfriendly attempt.

That news sent Thyssen shares plunging on the Frankfurt Stock Exchange, as Krupp stocks rose. Thyssen shareholders had been anticipating big profits from Krupp's Dm 13.6 billion ($8.1 billion) bid.

[10] 'The English Patient' takes lion's share of Oscars, capturing 9 awards

Anthony Minghella won best director for 'The English Patient,' and its Paris-born co-star, Juliette Binoche, claimed the supporting actress statuette.

The last time a film won as many as nine Oscars was 'The Last Emperor' at the 1988 Oscar show. 'The English Patient,' which had the most nominations with 12, also won for cinematography, dramatic score, film editing, sound, costume and art direction.

Concluding his thanks, Rush gave special tribute to 'the unstoppable David Helfgott - you truly are an inspiration.' 'Shine' told the story of the real-life Helfgott's struggle to overcome a mental breakdown.

McDormand strutted to the stage and exclaimed: 'What am I doing here? Especially considering the extraordinary group of women with whom I was nominated.' She also complimented producers who allow directors to make 'autonomous casting decisions' not based on 'market value.'

The top acting honours prevented a sweep by 'The English Patient,' a burn victim's tortured recollections of his misdeeds in time of war. 'I'm so surprised,' said Binoche, who, like many, thought the statuette would go to Lauren Bacall. 'I didn't prepare anything. I thought Lauren was going to get it. And I think she deserves it.' Bacall, a star since 1944 but never before nominated, was named for her role as a domineering mother in 'The Mirror Has Two Faces.'

Winning the Oscar for best foreign language film was 'Kolya,' from the Czech Republic. ' Kolya,' set just before the fall of the Berlin Wall, is about an old man who marries a young Russian woman for convenience; she soon moves to West Germany, leaving her son in his care.

The only major award for Hollywood studios went to Cuba Gooding Jr., the football star who repeatedly asks his faltering agent to 'Show me the money!' in 'Jerry Maguire.' He won the supporting actor Oscar.

Another award 'The English Patient' didn't get went to Billy Bob Thornton, for his adapted screenplay of 'Sling Blade,' in which he also starred and directed. Besides McDormand's award, 'Fargo' also won for original screenplay.

Oscar specialises in sentiment, and a high point was reached when the documentary feature Oscar was presented to the producers of 'When We Were Kings,' which depicts a key fight in the career of former boxing champion Muhammad Ali. When the producers gave credit to Ali, who was seated in the audience, the crowd applauded wildly in a standing ovation. Ali, who has Parkinson's syndrome, made his way hesitantly to the stage along with one- time opponent George Foreman, who is also in the film. 'Well, thank heavens there wasn't a song in 'The English Patient' is all I can say,' said Andrew Lloyd Webber as he and Tim Rice collected the original-song Oscar for 'You Must Love Me' from 'Evita.'

Before the show, the contenders for top honours were largely unknown to most moviegoers. A full list of the Oscar winners

EBN's Akhtar Khan reports on the Oscar's

Caroline Westbook of Empire magazine on the awards

[11] Economic and Corporate Briefs

GERMANY'S main anti-trust watchdog said Tuesday it still has 'grave reservations' over the closer cooperation planned between the country's two largest construction groups, Philipp Holzmann and Hochtief. Federal Cartel Office President Dieter Wolf said the plan by Hochtief and Deutsche Bank, Holzmann's other major shareholder, to unite their stakes under a so-called pool agreement, is just as open to criticism as Hochtief's initial attempts to accumulate a controlling stake in Holzmann on its own, 'since Hochtief is the only party with entrepreneurial interests.'

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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