TheChek News Flow

Cable TV mogul looks to add Formula One to sports bag

If you can’t beat them, join them.

Cable TV mogul John Malone, who for years has railed against the skyrocketing costs of sports programming, is working through his Liberty Media company to buy a large minority stake in the firm that owns Formula One racing, The Post has learned.

Liberty Global, the international arm of Malone’s empire, and Discovery Communications are working alongside Liberty Media to purchase as much as 49 percent of Formula One Group from private equity powerhouse CVC Capital, sources said.

While the talks are in the early stages and could eventually fall apart, the purchase of the global open-wheel racing circuit would put Malone on the other side of the table when it comes to sports rights fees.

Formula One Group, which rings up annual revenues north of $1.5 billion from its 19 races on five continents, including its glittering A-list favorite, Monte Carlo Grand Prix, is valued at between $7 billion to $8 billion, sources said.

Bernie Ecclestone, 83, Formula One’s longtime chief executive, stepped down from the board of the racing group’s parent in January after he was indicted in Germany on bribery charges. His trial is set to begin in April.

The purchase of a large minority stake by Malone’s companies would deepen the mogul’s footprint in sports.

Liberty Media owns the Atlanta Braves and in January, Discovery, in which Malone controls 29 percent of the voting power, announced it was increasing its stake in EuroSport to 51 percent from 20 percent.

EuroSport is a pan-Europe television network that is seen in 54 countries and, according to comments by Discovery CEO David Zaslav at the time of that deal, is looking to grow by adding new sports rights.

“Formula One could be used to drive EuroSport,” said one person close to the situation.

In June last year, Liberty Global acquired pay-TV and internet provider Virgin Media for $16 billion and last week purchased the balance of Dutch cable operator Ziggo for $9.44 billion.

The acquisitions are part of a global plan by Liberty Media to consolidate the cable industry and cut costs in the process. In the US, Liberty-backed Charter Communications is hoping to persuade Time Warner Cable shareholders to agree to a buyout offer that would create a larger and more powerful television distributor that could push back harder against rising fees for sports rights.

Back in November 2012, Malone told the LA Times, “We’ve got runaway sports rights, runaway sports salaries and what is essentially a high tax on a lot of households that don’t have a lot of interest in sports.”

Malone said the consumer and the cable operator are “really getting squeezed.”

Meanwhile, CVC Capital has a keen interest in sports. Last year, it lost out on a chance to acquire sports and fashion agency IMG Worldwide when its bid was topped by WME. It has owned the racing group since March 2006.

Reps for the media bosses and for CVC Capital didn’t return calls for comment.

After rocky January, markets eye data and central banks

(Reuters) - This week will go a long way to determining whether the uncertainty hanging over the world economy and markets fades after a rocky January or lasts further into the year.

A raft of global business surveys, jobs data from the United States and central bank meetings in Europe should offer a clearer view on how well the global economy is faring at the start of 2014.

Most economists have been expecting a better 12 months after three years of slowing global growth, but the recent turmoil in emerging markets has given them pause for thought.

MSCI's global index .MIWD00000PUS posted its largest monthly decline since May 2012 in January, sliding 4 percent.

Emerging markets .MSCIEF were down 6.6 percent for the month - their worst January since 2009 - after another turbulent day on Friday, when the Russian rouble slid and bond yields rose sharply across the board.

"Markets in the major economies will continue to be subject to trends in emerging markets (this) week, both in terms of overall currency and stock market sentiment," said Philip Shaw, chief economist at Investec.

First up are purchasing managers' indexes (PMIs), which survey thousands of businessesworldwide. While the PMIs from Europe and the United States are expected to show more growth, particular attention will be paid to those from China.

"There are … potential flashpoints in the form of various Chinese PMI indices - signs of a slowdown in the pace of economic activity in China would result in the risk-off lights starting to flash again."

The other key data will be Friday's jobs report from the United States.

The world's No.1 economy added the fewest workers in nearly three years in December - just 74,000 non-farm jobs - although the consensus of economists polled by Reuters points to a rebound in January.

Still, there could be potential for another nasty surprise.

"As if forecasting the monthly change in nonfarm payrolls were not hard enough, the outlook for January payrolls is clouded by poor weather, difficult seasonal adjustment, annual benchmark revisions, and methodology changes," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Fears about emerging economies intensified after Turkey, South Africa and India failed to halt a wholesale capital flight by raising their interest rates. The Federal Reserve's decision to withdraw more of its monetary stimulus and weak Chinese data added to the concerns.

With Turkey and South Africa's hikes in particular aimed at countering steep currency depreciations, the pressure is on other emerging central banks to follow suit.

"One of the underlying issues is that the market believes that real rates are just too low in emerging markets in an environment of falling liquidity provision," said Ishitaa Sharma, global markets analyst at Citi, in a note to clients.

"Given that the Fed is likely going to continue tapering according to schedule, the market is likely going to continue to demand higher real interest rates from at least the more vulnerable emerging markets."

India's central bank governor, Raghuram Rajan, last week criticized what he called a breakdown in global monetary coordination, saying developed countries could not wash their hands of the turmoil their actions caused in emerging markets.

European Central Bank President Mario Draghi will have a chance to address the emerging market worries after the central bank's policy decision on Thursday.

Euro zone inflation fell to 0.7 percent in January, putting the ECB under further pressure to meet its target of keeping inflation below but close to 2 percent.

"This outcome clearly raises the chances of ECB policy action," said Nick Matthews, economist at Nomura, who raised the prospect of more interest rate cuts to record lows.

"While we recognize that the probability of further easing has risen significantly, on balance we believe that the ECB might want to accumulate a bit more information before taking such a decision."

The Bank of England, also meeting on Thursday, is not expected to announce any change to interest rates, although there is a small chance it might make a statement to clarify its forward guidance.

More likely, though, it will wait until its quarterly inflation report next week to reveal how it will conduct forward guidance from here.

Looking further ahead, Bank of Japan policymakers meet next week to set monetary policy. The sharp selloff in emerging markets plays into the hands of those at the BoJ who fear the pick-up in exports is lackluster and so may require extra monetary stimulus sooner rather than later.

Mercedes-Benz may be one of the world's most recognizable car brands, but it has had trouble getting noticed in China. Now, Mercedes is moving to change that.

Much will depend on how the German brand's China partner makes use of new capital. China's state-owned BAIC Motor plans later this year to raise about $2 billion in a Hong Kong share sale, according to The Wall Street Journal. Daimler, DAI.XE -0.59% which owns the Mercedes brand, manufactures and markets luxury cars through a joint venture with BAIC and owns 12% of the Chinese auto company.

Daimler has much to repair in China. Until recently, it was selling cars through two distribution networks that competed against one another. Its after-sales service scored poorly in surveys by J.D. Power, while analysts say the cars were too richly priced and then had to be heavily discounted. On top of it all, Mercedes is often viewed as an old person's car, unlike the more fashionable BMW BMW.XE 0.00% or Audi, NSU.XE -0.19% says Macquarie's Janet Lewis.

Mercedes sales were essentially flat in 2012 and increased only half as fast as rivals in 2013, otherwise a blockbuster year for Chinese autos. Its share of the luxury market slumped to 15.5% in 2013 from 20.3% in 2011, as Audi and BMW tightened their grip, according to LMC Automotive.

To change its stuffy image, Mercedes is set to launch 13 new or refurbished models in the next two years, including a sedan and a compact SUV that should attract younger consumers.

BAIC's IPO also will help. The Chinese car maker will use the share-sale proceeds to shore up its balance sheet, says a person familiar with the matter.

This may help BAIC put more money into the Daimler joint venture. That means localizing more production to bring down costs and boost Mercedes's China margins, which are about half those of BMW.

The good thing about coming from behind is that there is upside for Daimler investors. China's contribution to Daimler's overall revenue was just 9.4% in 2012. BMW generated double that.

Even getting halfway to its competitors' exposure to China will give Daimler investors a better ride.

Hedge funds file €1.8bn lawsuit against Porsche board members

Seven hedge funds have filed a €1.8bn lawsuit against Porsche’s chairman and another board member, in the latest legal tussle related to the carmaker’s failed takeover bid for Volkswagen.

The hedge funds accuse Porsche and its management of misleading the market in the run-up to its disclosure in late 2008 that it was seeking to take control of Volkswagen, its much larger peer.

Wolfgang Porsche and Ferdinand Piëch, who is also chairman of Volkswagen, face a civil claim in a Frankfurt court for €1.8bn in damages from the investment funds, the carmaker said in a statement.

The two automotive grandees, both grandsons of founder Ferdinand Porsche, will be supported by the company, which described the action as “a trial tactic” and “without merit”.

Porsche SE, a holding company, is already facing a suit filed in 2012 in Hanover from the same funds. Porsche said the new claim against the board members does not include any new content, adding that the company and the two men “will resort to all legal means to defend themselves against this lawsuit”.

“Porsche SE confirms that all press releases the company published during the period in dispute are truthful,” it said in a statement, which did not name the funds.

The Porsche-Volkswagen saga transfixed the automotive and business world in 2008, but enraged those investors who were wrongfooted and lost money.

Porsche secretly began acquiring options to buy shares in Volkswagen, but repeatedly dismissed speculation that it intended to take control of the company. On the strength of these denials, some investors short-sold Volkswagen shares, the investors claim.

When Porsche eventually revealed the extent of its options position in October 2008, Volkswagen shares rose as investors rushed to cover short positions. Volkswagen eventually took full control of Porsche’s carmaking operations.

Previous lawsuits from hedge funds have been thrown out. A New York court found in Porsche’s favour in a $1.4bn claim in 2012.

However Porsche’s former chief financial officer Holger Härter was found guilty of credit fraud during the takeover battle. Mr Härter and ‪Wendelin Wiedeking, the carmaker’s former chief executive, have been charged by German prosecutors with market manipulation. Both men deny wrongdoing.

UAE clashes with Qatar over Brotherhood leader

The United Arab Emirates has fired an unprecedented diplomatic broadside against Qatar as the two Gulf states clash over the role of political Islam in the Middle East.

The UAE said on Sunday it had summoned Qatar’s ambassador to protest against “insolent remarks” made by Sheikh Yusuf al-Qaradawi, based in the Qatari capital Doha, who is regarded as the spiritual leader of Egypt’s Muslim Brotherhood.

Mr Qaradawi, in a sermon broadcast on Qatar state media on Friday, reportedly criticised the UAE for being against the rule of Islamic government.

Anwar Gargash, the UAE’s minister of state for foreign affairs, said Abu Dhabi – rejecting such “seditious and hateful” speech – had taken this “unprecedented” step because Qatar had failed to prevent its religious and media platforms from insulting a “brotherly and neighbourly country.”

Bilateral tensions have risen in recent years after Doha promoted Islamist groups during the unrest of the Arab spring – tensions that came to a head in Egypt.

Saudi Arabia, the regional Arab superpower, and the UAE backed the military ouster of the elected Muslim Brotherhood government of Mohamed Morsi, who had been supported by Qatar. Abu Dhabi and Riyadh are the leading supporters of the interim Egyptian government.

Mr Qaradawi, meanwhile, has strongly criticised Abdel Fattah al-Sisi, Egypt’s defence minister and its most powerful figure, from his base in Doha.

“We have sought during the past few days to contain the issue through continuous top-level contacts between the two countries,” said Mr Gargash.

Mr Gargash, quoted by UAE’s official news agency, said an official statement from Qatar had not denounced the contents of the speech and did not “offer any guarantees that this will never happen again”.

Khaled al-Attiyah, Qatar’s foreign minister, said remarks made by the scholar did not represent the country’s foreign policy. In remarks carried by the Qatar News Agency, he said relations between Qatar and the UAE were “strategic”.

This is not the first time that Mr Qaradawi, who has lived in Doha for decades, has criticised the UAE. But previous spats have been confined to public disagreements via social media, rather than official complaints.

“The UAE is asking Qatar to put al-Qaradawi on a leash, but Qatar is not budging,” says Abdulkhaleq Abdullah, a political scientist in the UAE. “Qatar is being asked to either join the Gulf or play the maverick role, and it would appear that they think that being a maverick helps rather than hurts Qatar.”

Analysts had thought that Sheikh Tamim bin Hamad al-Thani, the ruler of Qatar who took over from his father last year, would introduce a more conciliatory approach after years of aggravating neighbours with its foreign policy.

The UAE has over the past couple of years cracked down on domestic Islamists, focusing its attentions on al-Islah, a group it has accused of being a branch of the Muslim Brotherhood.

Dr Mahmood al-Jaidah, a Qatari, was detained almost a year ago at Dubai airport and is set to be sentenced on Monday on charges of aiding al-Islah, which has been advocating for political reform in the UAE.

French business delegation aims for early bird advantage in Iran

Iranian workers weld parts of a car body at the Iran Khodro plant outside Tehran©AP

Iran desperately needs foreign investment to revive many industries, including car manufacturing

A delegation of more than 100 French companies is set to visit Tehran on Monday in the biggest demonstration of western business interest in Iran for more than a decade.

The three-day visit, which includes top French companies such as oil major Total, engineer Alstom, telecoms group Orange and carmaker Renault, has raised hopes in Iran that an interim deal on its nuclear programme could lead to a return of foreign investment. This was sharply curtailed after sanctions were imposed in retaliation for Tehran’s perceived bid to acquire nuclear weapons.

Although France has adopted a tough stance against Iran’s nuclear programme, it is also moving quickly to position French business to take advantage of last month’s potential opening up of a big new market for its companies. The French delegation includes government representatives but not France’s two big nuclear power companies, Areva and EDF.

Other countries are also preparing to seize opportunities which may be created if sanctions are eased. A German business delegation, comprised of specialised companies in the food industry, health, spare auto parts industries, as well as in urban planning and engineering, is due in late February. A Dutch delegation is also expected soon.

Meanwhile, rumours are rife in Tehran that American companies through their representatives in other countries are also negotiating with senior Iranian officials.

“When European businessmen walk out of their meetings with Iranians, they sometimes notice US companies’ representatives walk in,” said one western market analyst. “Americans can deprive Europeans of some opportunities but their presence is encouraging that sanctions may be lifted.”

Medef, the employers’ federation which is leading the French delegation, said it had received huge demand when it announced the trip after making a preliminary visit in December.

“Although the recent nuclear deal only offers limited lifting of sanctions, there is a new dynamic. The possibility of access to a market of 80m people is very attractive,” said a Medef official.

“Of course, European companies have to rush and be prepared before American companies come,” said one western diplomat in Tehran.

Companies on the trip include representatives from consulting, asset management, engineering services, the food industry, shipping, law, insurance, advertising, construction, pharmaceuticals and sports training, as well as one bank.

Organisers stress that the visit is exploratory and aimed at contact-making, with no contracts expected at this stage. “It is a prospective visit,” said a spokeswoman for Lafarge, the leading building materials supplier that has operations in neighbouring Iraq and Pakistan.

Many European companies, including from France, Germany and Italy, either left Iran or scaled back in recent years due to the imposition of sanctions and anti-western policies pursued by former president Mahmoud Ahmadi-Nejad, which resulted in unattractive investment terms.

But the victory of centrist president Hassan Rouhani last summer paved the way for the Islamic regime to strike an interim nuclear deal with six major powers – the US, UK, France, Russia, China and Germany – in November, which took effect in January.

Iran’s President Hassan Rouhani is looking to pursue a foreign policy of moderation after tough financial sanctions have brought the Islamic Republic’s economy to a standstill

Iran has since started restricting its uranium enrichment activities while sanctions have been suspended on certain sectors, such as petrochemicals and auto companies. Frozen Iranian funds worth $4.2bn will gradually be released over the next six months. However, oil and banking sanctions – the most crippling of all – will remain in force during this period.

“In recent years, the cold weather of sanctions was hitting our face, but now we feel warm weather is touching our back,” said Daniel Bernbeck, managing director of the German-Iranian Chamber of Industry and Commerce in Tehran.

Iran’s business community desperately needs foreign investment and technology to revive many industries, including car manufacturers and spare parts producers which were dependent on France’s Peugeot and Renault. Most domestic industries have either gone bankrupt or operate far below their capacity due to previous populist policies and sanctions.

Renault, which was selling nearly 100,000 cars a year in Iran before sanctions came into force, has already resumed shipments to Iran and expects its car production in the country to pick up in the first half of this year.

Rival French carmaker PSA Peugeot Citroën, which sold 458,000 cars in Iran in 2011, accounting for nearly a third of the total market, is also poised to return to the country, which was once its second largest market after France.

Jean-Baptiste de Chatillon, Peugeot’s chief financial officer, said last year that the sanctions had cut €10m a month from operating profit. Renault took a €512m writedown on its Iran operations last June.

Despite uncertainty whether the nuclear agreement will lead to a long-term solution, some Iranian businessmen say there is a high chance of tentative deals being agreed with visiting business delegations that they can turn into contracts as soon as a permanent deal is done.

London house prices show ‘bubble-like conditions’, report warns

London’s soaring house prices are pushing the market towards a bubble, an influential group of economists has warned.

The capital’s house prices are beginning to show signs of “bubble-like conditions”, according to a report by the EY Item Club. By contrast, prices in the rest of the UK give no cause for concern.

The average London house price rose by 11.6 per cent year on year, according to figures from the Office for National Statistics. This compares to 3.1 per cent in the rest of the country outside London and southeast England.

In response, the government should cap the amount housebuyers can borrow against any particular level of deposit, the Club said. This limit on income multiples would be more effective than cancelling the government’s flagship Help To Buy policy, which subsidises borrowing for house purchases. “The most likely source of a bubble is London, where the impact of Help to Buy is likely to be small,” the report noted.

Andrew Goodwin, the Club’s senior economic adviser, said the focus on Help To Buy was a “red herring”. He added: “The scheme has only a very limited impact on the capital and withdrawing it could risk choking off the recovery in housing transactions across the rest of the UK, without solving any of London’s issues.”

The Club also urged the government to borrow more in order to pay for a programme of public sector housebuilding. Mr Goodwin said: “Large public sector building programmes have been pursued in the past, but in recent years local authorities have built only a couple of thousand properties a year.”

The government could also relax planning rules in and around London and sell its brownfield land holdings off to housebuilders more quickly, the report said.

Antitrust officials deliver blow to Sprint/T-Mobile deal hopes

Investors’ hopes of a near-term merger between Sprint and T-Mobile US are fading following warnings from senior US antitrust officials that a deal between the third and fourth-largest US mobile operators could face strong government resistance.

Shares in both companies have fallen sharply in the past month. Sprint has fallen more than 23 per cent and T-Mobile US is down more than 9 per cent - bigger declines than at AT&T and Verizon Communications, the largest US wireless operators.

The share price decline at Sprint, which is majority owned by Japan’s SoftBank, has wiped out two-thirds of the gains it made in the last two months of 2013, when speculation that it could bid for T-Mobile US reached a crescendo.

But since then, US officials appear to have gone out of their way to dissuade the companies from formulating a deal with a series of thinly veiled warnings. Last week, William Baer, the Department of Justice’s top antitrust official, indicated that more consolidation among the big four US wireless operators would be unwelcome.

Mr Baer pushed home his point in a speech praising the Justice Department’s opposition to AT&T’s $37bn bid for T-Mobile, which AT&T abandoned in late 2011. He also lauded T-Mobile’s subsequent efforts to compete in the marketplace, which he said had “spearheaded increased competition” and benefited consumers.

“The business community, consumers, and antitrust enforcers are all better off if anti-competitive mergers die on the drawing board,” he said, without tying his remarks to a potential T-Mobile deal with Sprint.

His comments, and those by other antitrust officials in recent weeks, have been interpreted by analysts and investors as sending a clear signal to the two companies and to Softbank’s chief executive, Masayoshi Son, who bought more than 80 per cent of Sprint last year.

“If Sprint and T-Mobile try to merge and the DoJ opposes them, the companies will not be able to say they weren’t warned,” said Christopher King and David Kaut of Stifel Nicolaus, an investment bank. “DoJ comments this week bolster our belief that a potential Sprint/T-Mobile merger would likely face government resistance, and could well be aimed at dissuading the companies from even trying,” they said, adding that the Justice Department’s message had been getting “increasingly ominous” since last year about preferring a wireless market with four national carriers.

The share price declines – Softbank’s shares have fallen almost 18 per cent in the last month – suggests investors have also heard the message.

Intesa move reignites ‘bad bank’ debate

Intesa Sanpaolo is working on plans to become the first Italian lender since the financial crisis to set up an internal “bad bank” by setting aside a chunk of its €55bn of gross non-performing loans ahead of banking stress tests by the European regulator.

Carlo Messina, Intesa’s new chief executive, and chairman Giovanni Bazoli are expected to discuss the move with shareholders of Italy’s second-biggest bank by market capitalisation in the next few weeks, according to people familiar with the matter. They are due to present their new strategic plan alongside annual results on March 28. Intesa declined to comment.

Mr Messina, who was promoted from general manager last September, is expected to present the plan to work through non-performing loans and cut the bank’s leverage as a decision made from a position of strength, rather than weakness, according to people familiar with the matter.

The move would reignite debate in Italy about whether its banking system needs a state-sponsored “bad bank” - as introduced after the crisis by Ireland and Spain. The Bank of Italy and the IMF have ruled out the need for one, but some Italian officials privately say the issue is still being debated. Analysts have argued that Italy could do with a bad bank worth €9-12bn.

UniCredit and Intesa Sanpaolo, Italy’s two largest banks by assets, are considered to be securely capitalised ahead of the stress tests; Intesa recently repaid €36bn of crisis loans to the ECB, and has one of the highest tier one capital ratios of any European bank.

However, Italy’s smaller and midsized regional banks, hit hard by a deep recession, are regarded as more vulnerable. Gross non-performing loans in the Italian banking sector reached nearly €150bn in November, rising 22 per cent year on year, according to data published this month by Italy’s banking association.

Intesa’s new strategy is likely to draw parallels with Royal Bank of Scotland, the state-controlled UK lender that last year established an internal bad bank to house £38bn of its most risky and capital-draining assets.

Internal bad banks are designed to help wind down non-core assets while encouraging investors to focus on the strengths of the remaining operating business.

The new strategy is expected to be presented as a cleaning up of a bank that has fallen out of favour with investors; despite a share-price gain of 40 per cent over the past year, Intesa is still valued at less than two-thirds of its book value – one of the lowest multiples among European banks.

According to banking sources, Mr Messina is also expected to announce plans to cut long-held €2bn in minority stakes, including holdings in Telecom Italia and Alitalia, following the example of Milanese investment bank Mediobanca and insurer Generali.