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REWIND: International Business News #32

Posted on August 3rd, 2012 | Author: Oren M. Chaplin

  • Reports out of London have ING Groep NV reviewing the direction and future of its UK and Canadian direct banking businesses, which provides online banking services. Representing one of the largest internet banks in Canada, ING is reportedly looking to strengthen its balance sheet. Any transaction involving a sale of the Canadian unit alone could result in a purchase price of as much as $2.6 billion, according to a report by Credit Suisse Banking analysts. Although no sale is pending, if one were to occur, it would be a continuation of transactions involving the group, which sold ING Direct to Capital One for $600 million in February of this year.
  • Amid economic woes, the European Union has committed additional capital resources to further develop Kenyan infrastructure. The project commitment of €31.95 million will help the African nation to “build and rehabilitate rural roads, thus contributing to job creation” and will be coupled with a second project that “will enhance the competitiveness of Kenyan products through improved standards and regulations, as well as training of authorities, which will lead to more and better exports.” This funding project is one of many recent investments in the nation, with the World Bank having recently agreed to assist with $300 million in funding to further develop Kenya’s rapid bus transit and commuter rail systems.
  • As power outages in India continue, at least one investment group has turned to the legal system for relief. The Children’s Investment Fund, which is a hedge fund based in the United Kingdom, is the largest foreign investor in Coal India, the state-supported energy company. TCI argues that the government is engaged in a “pattern of political interference in Coal India’s management, which it says harms minority shareholders’ interests while [it does] little to increase electricity generation and cut power outages.” The triggering action by the state was a demand for a guarantee of fuel supplies to the state by Coal India to support new power projects in that nation, a move which some believe was associated with a 3% drop in the value of the company’s shares due to below market pricing. Opponents to the move, however, note that offering documents concerning investment in Coal India specifically communicate below-market pricing as a risk associated with the investment.
  • The Enterprise Turnaround Initiative Corporation plans to sell 175 million of the shares it holds in Japan Airlines for a per share proposed price of 3,790 yen. The move comes two years after ETIC took an equity position in the company after Japan Airlines filed for bankruptcy protection and was delisted from the Tokyo bourse. During those 2 years, ETIC focused on turning the airline around by committing additional capital, restructuring operations and reducing debt. The airline will also soon be relisted on the Tokyo bourse.
  • Venezuela has recently been admitted into Mercosur, a move that some believe erodes the credibility of the South American trading bloc. Formed in 1991, Mercosur had previously been comprised solely of Argentina, Brazil, Paraguay and Uruguay. Although Venezuela was provisionally admitted in 2006, Paraguay refused to ratify the country’s admission. Brazil, supported by Uruguay and Argentina, suspended Paraguay’s membership in Mercosur, and during that suspension was able to finalize Venezuela’s full membership in the bloc. “The benefits to Brazil of Venezuela’s Mercosur membership were made clear almost immediately when [Venezuela agreed to purchase] as many as 20 passenger jets from Embraer, the Brazilian aircraft manufacturer, in a deal potentially worth $900 million.”  Elsa Cardozo, political science professor at Central University in Venezuela, complains that Venezuela’s membership “sets a terrible example for the region.” In the opinion of Mario Marconini, a former Brazilian trade secretary, “[what] was once an economic bloc has now been reduced to a political sideshow [and Venezuela’s addition despite Paraguay’s veto] is a fatal blow to [Mercosur’s] economic credibility.”