European Business News (EBN), 97-04-21

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

Page last updated April 21 1500 CET

CONTENTS

[01] French stocks and currency decline under shadow of snap ballot

[02] Cordiant announces three-way split

[03] German M3 growth slows in March

[04] Astra profit remains nearly flat as buyers hoard drugs at year end

[05] Alliance & Leicester's share price price jumps on first day of trading

[06] Viag buys Th. Goldschmidt

[07] Siemens warns of job cuts if U.K. misses EMU targets

[08] Lufthansa said it expects to show improved first-quarter results

[09] London hit by bomb threats, throwing transport into chaos

[10] Standard Life expected to launch bank plans

[01] French stocks and currency decline under shadow of snap ballot

Political uncertainty damps markets as it becomes more likely Chirac will call for parliamentary election

Political uncertainty weighed on the French franc and the Paris Bourse as the probability that French President Jacques Chirac will call parliamentary elections increased.

Chirac was scheduled to make a television address Monday night during which he is seen as likely to announce that he is dissolving the Parliament and will call new elections.

The move is seen as an attempt by Chirac to try to avoid an election defeat one year from now when legislative elections would normally be held.

Traders said that the mark was likely to continue strengthening against the franc and could rise as high as FF3.3780-FF3.3800.

Much of the trading activity Monday morning is in the futures market, where volatility has nearly doubled and trading is particularly nervous in the three-month contracts, said one Paris-based trader. One trader suggested that the dissolving of the Parliament has been priced into the market as it already began dropping late last week on increasing rumours that such a move was in the works.

In that case, traders said the franc is not seen moving much lower than FF3.3800 to the mark just on the dissolving of parliament. As the election campaign heats up, the market will be looking for signs of whether or not the socialists are likely to gain control

. On the Bourse, stocks opened down, with the CAC 40 index of most actively traded French blue-chip stocks was down 1.36% in early trading. 'With little in the way of corporate news and the political issues at hand, we should see much the same activity as Friday,' one trader said.

[02] Cordiant announces three-way split

They will also each own a 50% stake in media services business Zenith. Saatchi & Saatchi group will exist as a worldwide advertising network while Bates will concentate on marketing communications.

Zenith, to be jointly owned by Bates and Saatchi & Saatchi, will be an independently managed media services group.

'...The demerger will energise the operators in the networks and unlock the considerable potential residing in our businesses,' Bob Seelert, the group's chief executive said.

Restructuring is apparently aimed at improving share value, as Cordiant's stock price has been underperforming the London Stock Market for the past 12 months. Cordiant executives have been under pressure to lift the share price, and a separation has long been touted as a way to realize each agency's hidden worth and revenue potential.

Annual ad billings exceed $6 billion for Bates's clients, ranking it 13th- largest in the ad-agency field after a number of setbacks in recent years.

Cordiant returned to profitability last year after posting a loss for 1995, when the company was still reeling from a turbulent split with the Saatchi brothers and the subsequent loss of clients including British Airways and confectionery and pet-food maker Mars. The company's history has been marred by such high-profile client defections, as well as financial uncertainty and management upheavals.

But in addition to the strong 1996 results, Cordiant's comeback was confirmed last month, when Saatchi & Saatchi won the Delta Air Lines account, estimated to have annual billings of around $100 million.

The group said it plans to hold an extraordinary general meeting of shareholders on the demerger in October and said it expected dealings in shares of Saatchi & Saatchi and Bates to start in December.

[03] German M3 growth slows in March

The figure is down slightly from the 9.1% annualised rate of expansion in February, but still above the Bundesbank's 1997 target of 3.5%-6.5% growth. It is almost exactly in line with consensus forecasts for a growth rate of 8.2%, according to economists surveyed last week by Dow Jones Newswires.

With German producer prices, released earlier, flat for the month, analysts said the March M3 figures also reflect no real danger of inflation, even though the annualised rate remains above the Bundesbank's target corridor.

`I don't draw any negative conclusions for inflation from these figures,' said Gerhard Grebe, chief economist with Bank Julius Baer in Frankfurt, noting also the release earlier in the session of March producer price data, which showed prices flat in the month and up only 0.7% from a year earlier.

'There is still no inflationary pressure here and the economy still doesn't look good,' Grebe argued.

Despite a surge in revenues from quarterly tax payments, public-sector indebtedness rose by 14.1 billion Deutsche marks in March, up sharply from a rise of only 4.6 billion marks in March 1996. Public-sector bodies borrowed a net 6.2 billion marks in direct credits and a net 7.9 billion marks through securities.

However, it added that weak borrowing by the private sector and large outflows from Germany on the capital account restrained overall M3 growth.

[04] Astra profit remains nearly flat as buyers hoard drugs at year end

First quarter pretax profit remained nearly flat at 3.46 billion kronor ($451.2 million), compared with 3.44 billion kronor the year earlier.

Analysts had been expecting profit to reach 3.96 billion kronor, with some projections as high as 4.2 billion kronor. Astra's stock price was hit hard as a result of the market disappointment.

The stockpiling of pharmaceuticals was especially evident in Sweden, where changes in pharmaceutical reimbursements were introduced on Jan. 1, 1997.

Sales were up 8.5% to 10.13 billion kronor in the first quarter, from 9.34 billion kronor a year earlier.

[05] Alliance & Leicester's share price price jumps on first day of trading

Many had expected small investors to lock in gains on their 250-share allotments, leaving institutional investors to fight it out for available stock.

A&L handed out 580 million shares to its 2.3 million members to convert from a mutually owned lender to a publicly listed bank.

But retail banks, who offer broking services to their customers, reported a flood of buyers trying to increase their A&L holdings or jump on the band wagon, while large orders from institutions squeezed A&L's stock price well above expectations.

'It's the man in the high street buying shares on the back of favorable press comment,' said Paul Williams, head of dealing services at NatWest stockbrokers.

During the first few hours of trading, retail buyers outnumbered sellers by a ratio of seven to one, he said.

But the combination of retail buying and underlying institutional demand might have bid A&L too high for professional investors. They balked at paying 570 pence a share, the level around midafternoon. That's up 39% from estimates of around 410 pence A&L made last October. Institutions said they were waiting for demand to ease off before they'll enter the market.

Alliance & Leicester shares opened the session at 522.078 pence, the average price obtained at the first auction of 9% of its shares, held last Friday.

[06] Viag buys Th. Goldschmidt

Viag signed two agreements that will give it a controlling majority in industrial chemicals group Goldschmidt. After the deal is finalised, Viag said Monday it will own a 56.24% share of Goldschmidt's base capital and control 50.34% of the voting rights in the company.

'The aim of the majority takeover is to develop the company while retaining its own profile and to strengthen its strategic position on the world market,' Viag said. Viag's activities span the production of gas and electricity, packaging materials and chemicals as well as distribution and logistics.

'The acquisition makes sense because Viag's previous holding in Goldschmidt was too small for Viag to make its influence felt,' said an utilities analyst, welcoming Viag's move to expand its chemicals business. Analysts also predict globalisation will effect many more changes in the industry as a whole.

Viag bought 27.95% of Goldschmidt's capital and 25.02% of the voting rights from Ruetgers, and acquired 10.38% of Goldschmidt's capital and 9.29% of voting rights from Allianz Versicherungs.

Until now, Viag said it had held a 17.91% stake in Goldschmidt's capital and 16.03% of the votes. The parties involved have agreed to refrain from announcing details of the deal, which must still be approved by the cartel authorities, Munich-based Viag said.

Viag said Goldschmidt will cooperate with its chemicals unit SKW Trostberg, but Viag doesn't plan to merge Goldschmidt with SKW at this time. The two units will work together especially in the silicon and tenside areas, it added. Viag said it will hold the Goldschmidt stake directly.

[07] Siemens warns of job cuts if U.K. misses EMU targets

The German electrical engineering giant said the plans of Siemens U.K. to invest up to £1 billion in Britain and create 4,000 new jobs will be at risk if the UK government does not take part in European monetary union, reported British Sunday newspaper The Observer.

Jurgen Gehrels, chief executive of Siemens U.K., told The Observer that as a major exporter, Siemens needs exchange rate stability. 'If Britain decides not to join the single currency it will definitely affect our investment decisions in the future. I am quite sure the same applies to others - especially companies that serve not just the U.K. markets but world markets,' he is quoted as saying.

Siemens is one of the largest overseas investors in the U.K., employing more than 14,000 people.

The Observer said the German electrical engineering group currently employed 14,000 people in Britain.

[08] Lufthansa said it expects to show improved first-quarter results

The German national flag carrier said it will disclose its earnings on May 7 at its annual press conference. Last year, the company posted a first quarter pretax loss of 49 million Deutsche marks ($28.6 million) on a 5.8% rise in sales.

First quarter data is traditionally negative, reflecting industry wide trends in a weak winter passenger season.

Lufthansa said its overall load factor, showing utilisation of passenger and freight capacities, rose by 1.2 percentage points in the first three months of the year to 69.7%, compared to the same period a year earlier.

While the passenger load factor 'improved appreciably,' the freight load factor fell slightly, Lufthansa said.

In addition, the revenue ton kilometres flown in the first quarter totalled 3.48 billion, up 6.7% from the first three months of 1996.

Lufthansa noted, however, that the number of domestic passengers had dropped by around 9% in the first quarter, due mostly to 'fiercer competition.'

While passenger numbers to European destinations outside Germany rose, those for long-haul international flights gained the most, Lufthansa said.

[09] London hit by bomb threats, throwing transport into chaos

The bomb threats forced the evacuation of four mainline London rail stations and two airports this morning, snarling the capital's transport system.

BA said all of its flights from Heathrow and U.K. regional airports are operating normally. Gatwick staff were trying to find a vacant hangar in which thousands of stranded passengers could sit and relax. South terminal duty manager Mike Cook said up to 8,000 people were becoming tired and frustrated.

As many as 4,000 passengers were stuck on the tarmac in planes that had been able to land, but not start disembarkation. At Heathrow, west of London, a bomb alert closed part of Terminal Three and caused small delays, but the airport got back to normal quickly, a spokeswoman said. Flights from Stansted Airport, north of London, also were delayed while searches were carried out.

There were no explosions and no immediate claim of responsibility by the main suspect - the IRA - but security alerts dislocated most movement in the heart of London. 'Basically west London and central London are closed,' said Royal Automobile Club spokesman Peter Brill said at midmorning. 'This is going to be some of the worst traffic chaos that we have seen in London for many years, if ever.'

The mainline stations were reopened by noon and the centre of he city began to move again. It was the second major security alert in four days. The Irish Republican Army claimed Friday's explosion and bomb threats, which disrupted highways and rail lines in northern England. With national elections due on May 1, the outlawed organisation is believed to be making a show of strength at a time of maximum publicity.

[10] Standard Life expected to launch bank plans

The operation will be a direct rival to one recently launched by another insurer, Prudential. It will offer a range of services and products, including a savings facility, personal loans and mortgages. Standard Life already offers a deposit facility to customers with maturing endowment policies.

The new operation is expected to be based on Standard Life's existing relationship with Bank of Scotland, although the insurer, which has assets of £46 billion, has not ruled out applying for its own banking licence in future.

The new services and products will be marketed through independent financial advisers from which Standard Life already gets its investment and insurance business, the paper added.

Standard Life introduced a deposit account last October with the underlying banking carried out by the Bank of Scotland.

It is not believed the new operations will require an extension of this service and Standard Life has not ruled out applying for its own banking licence in the future, the Sunday Telegraph said.

The new banking operation will be headed by Jim Spowart, whom Standard Life poached from rival insurer Direct Line earlier this year.

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

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