European Business News (EBN), 97-08-11

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

Page last updated Mon, August 11 6:58 PM CET

CONTENTS

[01] Credit Suisse plans to merge with Winterthur, posts 70% profit jump

[02] United Utilities calls for special board meeting

[03] Thailand to receive $16 billion financial aid from international donors

[04] DASA chief calls for greater Airbus cooperation

[05] UK July producer price index rises 0.2%

[06] Republic makes bid for Eurodollar

[07] Yamaichi Securities says 11 top officials expected to resign

[08] Thyssen, Krupp consider broadening ties

[09] Corporate and Economic Briefs

[10] World News Briefs

[01] Credit Suisse plans to merge with Winterthur, posts 70% profit jump

The merger would lead to a 'maximum of 500 job losses worldwide,' the statement said. It predicted there would be efficiency savings of 300-350 million Swiss francs within three years.

Credit Suisse Group also said it increased its net profit for the first six months of 1997 to 1.41billion Swiss francs, up 70% from 829.4 million francs in the same period of the previous year. This was largely due to buoyant financial markets, domestic restructuring and the weaker Swiss franc against other currencies.

The bank said its results corresponded to a profit per share of 7.25 francs. Yield on equity for the first semester 1997 was at 17%.

Shareholders of both companies will decide on the general principle of the merger at separate extraordinary general meetings Sept. 5. If the deal is given the go-ahead, then Credit Suisse will make Winterthur shareholders an exchange offer, under which Winterthur shares will be exchanged at a ratio of 1 to 7.3.

Winterthur would remain an autonomous society and keep its own name within the Credit Suisse group, while the new group would administer assets of about 700 billion francs - the same magnitude as its turnover - and have about 15 million clients. It would have a market capitalization value of 50 million francs.

The move was designed to meet new challenges on international financial markets and deregulation in the insurance industry, it said.

Winterthur is Switzerland's second biggest insurance company. It has been the subject of speculation for months - with a some form of takeover by Credit Suisse being frequently mentioned.

[02] United Utilities calls for special board meeting

'This company's shares are cheap, and if a board room row brings the United's grandoise ambitions back to earth then that's a good thing,' said an analyst at a US investment bank.

He said the company operates in fairly straight forward businesses, and while scuffles among the directors may cause short term problems, the fact that the company seems to be taking steps to sort them out is a positive signal. A spokeswoman for United Utilities would not comment on the meeting, but stressed that it was 'unscheduled' rather than emergency as reported in some newspapers.

'We cannot comment on the agenda of the meeting as we don't know what it is, ' said the spokeswoman.

Analysts speculated that the meeting was called in an attempt to pacify shareholders who have become increasingly impatient with board room squabbles, which may have resulted in the departure of Chief Executive Brian Staples in July.

His resignation sparked rumours that there were personal clashes among board members, and over the weekend the company played down reports that non-executive director Sir Peter Middleton, has been questioning top shareholders on their support for Pitcher.

At the company's annual meeting in July some shareholders called for Pitcher to step down after the company said the board had 'lost confidence' in him. At the meeting, one shareholder demanded that if Pitcher could not explain the reasons for Staples departure then he should not remain chairman.

Analysts said Pitcher is unlikely to depart immediately, but see little chance of him hanging on to his job until 2000, his official retirement date.

[03] Thailand to receive $16 billion financial aid from international donors

The IMF, which is leading the rescue, will contribute $4 billion. Its board is expected to approve the loans in the middle of next week, Sugisaki said.

Japan will also contribute $4 billion, while Australia, Malaysia, Hong Kong and Singapore will provide $1 billion each. South Korea and Indonesia will lend $500 million each.

The World Bank and the Asian Development Bank will contribute unspecified amounts, while China is 'actively considering' a contribution, Sugisaki said.

In addition, Thai finance minister Thanong Bidaya said, Thailand expects support from Japanese commercial banks. Thai officials are to meet with private Japanese bankers in Tokyo Tuesday.

Thanong didn't give details of the commercial banks' support, but Japanese media reports have said Japanese banks including Sakura Bank and Bank of Tokyo-Mitsubishi may extend as much as $2.5 billion to Thailand.

But it could all be in vain. With as much as $40 billion in private-sector foreign debt falling due within the next 12 months, the Thai government is going to need to scrape together up to $30 billion to stop its balance of payments from falling apart, according to research from UBS Securities Ltd.

And the bulk of the IMF deal's cash will be used to top up foreign reserves. Thailand's central bank last week said its top priority was to keep foreign reserves above the $25 billion figure. This was enough to cast widespread doubt on the official figures, the most recent of which was $32.4 billion for June.

[04] DASA chief calls for greater Airbus cooperation

Dasa chief executive Manfred Bischoff told business daily Handelsblatt it was 'absolutely necessary' France, Germany and Britain intensify cooperation as a first step towards closer European integration in the aerospace sector.

Bischoff also said Airbus partners were in talks with US companies for possible cooperation in the construction of the planned 600-seater Airbus A3XX airliner. He did not say which companies Airbus was talking to.

Airbus is made up of French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace, Daimler-Benz Aerospace, a unit of Daimler- Benz and Construcciones Aeronauticas of Spain.

The four companies and the governments of the member countries have agreed that Airbus should become a proper company with its own balance sheet and results. However, the participating companies still disagree about which assets to transfer to Airbus, and at what price. France's new Socialist-led government does not want to privatise Aerospatiale.

Bischoff has proposed shelving a decision on ownership but going ahead with plans to put the Airbus consortium under a single management. 'The French position is not finally fixed yet, we are all working hard to find a solution. I want to convince the French that an Airbus company that has everything and controls everything is the optimum model,' Bischoff said.

He added: 'I think it is absolutely necessary that we link up in Europe, trilaterally if possible. Airbus is the most important thing, other sectors must follow. We can't throw everything in one pot at the same time.'

[05] UK July producer price index rises 0.2%

A rise in producer output prices exceeded expectations, but the Office for National Statistics blamed this on increases in excise duties contained in the recent budget.

Nevertheless, July retail-price figures due tomorrow will be watched carefully by market participants for any signs that inflation risks are to the upside.

The ONS said the producer output-price index rose 0.2% on the month in July before seasonal adjustment, raising yearly growth in the index to 1.4% from 1.1% in June. Producer input prices fell a seasonally adjusted 0.4% on the month in July and 8.9% on the year, accelerating from June's 8.6% year-on- year decline.

The median forecast among economists surveyed by Dow Jones was for output prices to remain unchanged in July and for input prices to fall 0.5%. The ONS also said the adjusted core output-price index - which excludes food, beverages, tobacco and petroleum - was unchanged in July from June. It was expected to rise 0.1%.

'These figures confirm that pipeline inflation pressures are very subdued indeed,' said Jonathan Loynes, UK economist at HSBC Markets. 'Accordingly, while budget effects are likely to push RPIX (underlying retail-price inflation, which the government uses as its inflation target) higher over the next month or two, the medium-term inflation picture remains very favourable.'

[06] Republic makes bid for Eurodollar

Republic, headed by Blockbuster Video chain founder and billionaire H. Wayne Huizenga, has sped into the car rental industry in the past year, buying US chains National Car Rental System and Alamo Rent-A-Car, which also has European operations.

The offer represented a premium of 60% to EuroDollar's closing price of 118- 1/2 pence last Friday. The board of EuroDollar also announced an interim dividend of 2.5 pence a share subject to the offer becoming unconditional before November 20, 1997.

Republic Industries said it had received irrevocable undertakings to accept the offer from EuroDollar's chairman and executive directors in respect of their entire holdings representing 13% in EuroDollar's share capital.

The deal, which brings Eurodollar into the same fold as Alamo Rent-A-Car, marks Republic's first major inroad into Europe's car rental market.

'Eurodollar is close to being the jewel in the crown as far as Europe is concerned. It's a tremendous opportunity for us in terms of our global expansion into the car rental industry,' said Geoff Corbett, managing director of Republic's European car rental division.

Apart from automotive retailing and renting, Republic is also involved in automotive financial services, solid waste services and electronic security services.

[07] Yamaichi Securities says 11 top officials expected to resign

'We're moving in that direction,' a Yamaichi spokeman said. The resignations would make Yamaichi the third major financial institution in Japan recently to lose management to a scandal. Nomura Securities and Dai- Ichi Kangyo Bank saw executives resign amid similar disclosures earlier this year. The companies are now serving administrative punishments handed out by the Ministry of Finance.

Local media reports said Yamaichi's chairman, president and several vice presidents were expected to step down. Senior Managing Director Shoji Saotome was considered very likely to become the new chairman and Shohei Nozawa was expected to become the new president, the reports said. Yamaichi wouldn't confirm the details of the reports.

Yamaichi is suspected of paying off Ryuichi Koike, a suspected racketeer who was indicted in June for allegedly receiving payments from Nomura. He and his brother, Yoshinari Koike, are also at the heart of the investigation into payoffs from Dai-Ichi Kangyo Bank.

Investigators from the Tokyo prosecutor's office raided the offices of Yamaichi and the homes of top officials late last month. Yamaichi has said the investigation is aimed at determining whether it made payments to Messrs. Koike similar to those by Nomura and Dai-Ichi Kangyo.

Nomura and Dai-Ichi Kangyo last week shut down several businesses for as long as five months, part of the punishment ordered by the Ministry of Finance.

[08] Thyssen, Krupp consider broadening ties

The news magazine Der Spiegel reported that the two big German companies are on the road to a complete merger, but Thyssen spokesman Reiner Hochscheid said the areas that might be affected are still to be determined. They won't seriously consider the idea until after their shared steel subsidiary, Thyssen Krupp Stahl, is launched at the end of this month, he said.

According to Spiegel, the chairman of the Krupp Foundation, Berthold Beitz, and the honorary chairman of Thyssen's board of directors, Dieter Vogelsang, have agreed to a complete merger in which Thyssen would lead the combined operation.

Hochscheid said the merger of the companies' steel units earlier this year opened discussions of future cooperation between the two men. A Krupp spokesman, meanwhile, referred to statements from the two groups on the possiblity of further cooperation beyond their steel units.

Last March, Krupp launched a rare hostile takeover bid for Thyssen, sparking a wave of large-scale protests in the Ruhr Valley that forced Krupp to withdraw its bid and settle for the steel-unit merger.

A merger between Thyssen and Krupp could create Germany's fifth-largest industrial group. Thyssen reported sales of almost 39 billion marks ($20.87 billion) in its latest year and has a work force of about 124,000 people. Krupp had 1996 sales exceeding 24 billion marks.

[09] Corporate and Economic Briefs

Amscan Holdings said it signed a definitive agreement to merge with Confetti Acquisition Inc., a newly formed corporation affiliated with GS Capital Partners II L.P. fund, in a transaction valued at $315 million. Under the agreement, each Amscan share will be exchanged for either $16.50 in cash, or $9.33 in cash plus a retained interest in Amscan equal to one share for every 150,000 shares elected.

Protestors from the international environmental organization, Greenpeace, will not hold up oil production in the UK for British Petroleum, a company official told Dow Jones. Production from the west Sheltands region is expected to start at the end of the year or early next year, said the BP spokesman in a telephone interview from the company headquarters in Aberdeen, Scotland. Seven protestors earlier in the day sat on a fourth generation drilling rig flown in from Norway but by late Sunday only 'two of the univited guests' were still there, said the spokesman.

Poland's 1997 grain harvest will be between 24.5 million and 24.8 million metric tons, the Main Statistical Office (GUS) reported. The grain harvest in 1996 came to 24.9 million tons, GUS said . Among the factors lowering the grain harvest is the flood in southwestern Poland, GUS said. The flood caused the loss of between 500,000 and 700,000 tons of grain, GUS estimated.

Honda Motor Co. expects to meet its target of selling 800,000 vehicles in Japan this year despite a slump in auto demand following the April hike in the national sales tax, a senior executive said. 'I think we are doing quite well,' Satoshi Dobashi, a Honda director with responsibility for the domestic automobile division, said in an interview with Dow Jones late last week. He added that recent sales indicated the company was 'on-line' to meet the target for 1997.

Westar Financial Services signed an agreement in principal with an undisclosed major New York-based diversified financial services company for an investment of $10 million in subordinated debt and a substantial equity participation. In a press release, Westar said further details will be provided when the agreement is finalized, which is expected this fall. The company said proceeds will be used primarily for geographic expansion. Westar Financial provides prime-credit automobile financing services.

A fluid catalytic cracker at the Nerefco refinery near Rotterdam is now expected to return to full capacity on Thursday following an unscheduled stoppage, a spokesman for the Dutch plant said. The unit, which can process up to 56,000 barrels a day, was shut down on August 1 due to an unspecified fault but restarted a few days later. The spokesman said all problems are expected to be resolved by Thursday. A source at the plant told Dow Jones last week he expected the FCC to be at full capacity sometime over last weekend.

[10] World News Briefs

US federal agents are investigating when and where a software error was introduced into an airport radar system that might have prevented last week's deadly crash of a Korean Air jet. The system, called an FAA Radar Minimum Safe Altitude Warning, normally issues an alert if a jet is flying too low, and officials on the ground can then tell the pilot. This particular system -located at the island's Andersen Air Force Base - was modified recently and an error was apparently inserted into the software, federal agents said. Korean Air Flight 801 crashed into a hillside overlooking Guam International Airport on Wednesday morning, killing 225 people. Investigators are trying to figure out why the jet was flying so close to the ground.

After a weekend of fighting in Dushanbe the capital of Tajikistan, fresh clashes were reported today between rival government factions in an outlying town. Sporadic shootouts continued for the third day south of Dushanbe, where a rapid reaction brigade led by renegade Col. Makhmud Khudoberdiyev battled with presidential guards. Khudoberdiyev said Sunday that four presidential guards had been killed since the fighting began, and another 24 were injured, the Interfax news agency reported.

Iranian authorities announced that they have arrested four alleged spies recruited by Iraq. Iran's official Islamic Republic News Agency said the four men - two Iranians and two Iraqis - were arrested last week near the border between the two countries. It alleged that they were dispatched by Iraqi intelligence to smuggle two members of the Baghdad-based Iranian opposition group Mujahedeen Khalq out of Iran. The agency quoted Mehrab Rouz, an official in southern Khuzestan province, as saying that members of six other intelligence cells with links to Iraq also had been detained in the area recently. Rouz said the alleged spies, some disguised as fishermen, were seeking information on Iran's military and economic capabilities, IRNA said.

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

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