Monday, July 28, 2008


Unilever washes out US laundry products biz

Anglo-Dutch personal and home care giant Unilever announced it would sell its US detergent and laundry products business to equity company Vestar Capital Partners. The price is $1.45. The brands involve include such standbys as All. Surf, Snuggle, and Wisk.

The move is part of a long campaign by Unilever to simplify its product liens and cut out slow-growing lines of business, in the face of a 25% stock decline over the year. While it has chopped away in previous years, it has pledged a total of over $3 billion in sell-offs this year. (Just recently, the company sold off some olive oil brand Bertolli in Europe this month.) Unilever will keep selling detergent outside the US. Especially, Unilever is working in India and other emerging companies, where sales are growing fast.

According to an article in The Financial Times ('Unilever hangs on to European laundry list," 7/28/08)

Unilever has strong positions in emerging markets, controlling about 70 per cent of the laundry market in Brazil, 80 per cent in Argentina, 80 per cent in South Africa and 40 per cent in India. About two-thirds of its laundry sales now come from emerging markets.

We don't usually cover equity investments, but this is a little different. Among the 65 companies it has investments in, ranging from Birds Eye Food to Solo Cup Company, it also owns Huish, a US company that is the #1 maker of store-brand detergents in the US, as well as selling its own discount detergent under the Sun brand. Because of this, the acquisition begins more to look like a strategic move, building a detergent giant in the US to compete with #1 Procter & Gamble.

For Unilever and companies like it, hallowed brands that don't perform are simply ballast to be unloaded as quick as possible, even while it adds new brands and SKUs a at any amazing rate in growth areas.


9:10:07 PM    
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  Sunday, July 27, 2008


Drug oligopoly windfall

According to a report from Democratic congressional staff for the Oversight and Government Reform Committee in the US Congress, major drugmakers received a $3.7 windfall over the past two years, thanks to the way that their lobbyists wrote the rules for Medicare reimbursement.

The bonanza comes from a shift in laws passed in 2006, which shifted six million Medicaid (the health plan for poor people) to Medicare (the health care plan for people over 65), in its Part D prescription drug coverage. That program, passed at in 2003, was notorious in not allowing for price negotiation between the government (the biggest market for a number of pharmaceuticals) and the big drug companies, something Medicaid is allowed to do. The result was a cost increase to taxpayers of 30 percent.

Committee chairman Henry Waxman is quoted as saying: "The drug manufacturers have been paid billions more for the drugs used by the dual eligible beneficiaries than they would have been paid if the dual eligible had continued to receive their drug coverage through Medicaid."

The biggest gainers included drug giants Johnson &
Johnson, Abbot Laboratories, and Bristol-Myers Squibb, both of which took in hundreds of millions more than they had the previous year thanks to the changes.

Not surprisingly, committee Republicans, the Bush administration, and drug lobbyists all disagreed, praising the workings of the "free market." Free indeed, if you assume that buyers are not allowed to bargain with sellers by law.  It's the kind of thing on the best lobbying can buy.

(Source: "Medicare Part D a boon for drug companies, House report says" Los Angeles Times, 11/25/08)


7:26:55 PM    
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  Thursday, July 24, 2008


America for sale: Insurance department

Here's yet another major acquisition of an American company from a foreign country. Tokio Marine Holdings, the #1 casualty insurance company in Japan, announced its deal to buy out US casualty insurer Philadelphia Consolidated Holding. The deal is for $4.7 billion in an all-cash deal. It would be the largest acquisition ever by a Japanese insurance company.

The move is part of a trend of Japanese insurers to diversify out of Japan, where expansion opportunities are limited. Tokio Marine has spent about $2 billion buying insurers in China and the UK since 2002. The US casualty insurance market is currently quite unconsolidated with up to 2,000 companies in the business. But there's a lot of stress on that business, with lots of claims from recent climate-related disasters, so there may be come real pressure to consolidate.

Before the move, Tokio Marine was the world's 13th largest non-life insurance company. This move will push it up in the rankings.  This deal is not a very large one in the insurance industry, but it is indicative of the temptation at the relatively low cost of profitable US businesses.


10:01:08 PM    
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  Monday, July 21, 2008


UK grocery acquisition

The tight UK grocery market just got tighter. The Co-operative Group announced it will buy rival Sommerfield for $3.2 billion. The deal will add 900 stores in the current 2,200, all in the UK. It will also increase the new company's market share in the UK to 8%.

Co-op is in sad position of being #5 in a market dominated by foot top competitors, namely Tesco, Asda (Wal-Mart), Sainsbury, and William Morrison control about 75% of the market. Of those, Morrison is the closest to Co-op, with 11% market share.

The company has its work cut out for it. Its prices are significantly higher than Tesco and Asda. Just as food and energy prices are spiking. It is assumed that a larger size will give it more flexibility in prices.

Co-op is a different kind of company. As the name implies, it's based on a profit-sharing food cooperative founded in 1844 by weavers during the Industrial Revolution. That structure, called a mutual company in Britain, is still in effect, and the members get annual dividends. And it is more than a food market, according to an article in The Independent ("Co-op gears up for big 4 battle," 8/17/08).

Beyond its operation as a traditional food seller, the Co-op has the largest funeral services business and third largest pharmacy business in the UK. It also competes in the travel and legal markets, which all come under the umbrella of the Co-operative Trading Group.


8:09:48 PM    
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  Sunday, July 20, 2008


Israel's generics king strikes again

Israel-based Teva Pharmaceutical Industries, the world's #1 generic drug maker, announced the purchase of a big competitor, US-based Barr Pharmaceuticals. The deal is for $7.5 billion in cash and stock.

Barr allows Teva to expand in the growing Eastern European market and also is a maker of contraceptives. The deal will also boost Teva to 24% market share in generics in the US. Barr had bought Croatian drugmaker Pliva in 2006 for $2.5 billion.

The deal will be the second-largest generics deal, following Teva;s purchase of Ivax in 2006. It's another step in the steady consolidation of what is mostly a commodity business, but one that has growing returns as national health plans and insurers see more and more of the drugs they need to treat common chronic illnesses coming off patent. In generics, global presence and scale of operations are big factors, as the margin per prescription is low.

Other recent big generics deals include US-based Mylan bought Germany-based Merck KGaA's generics unit in 2007 for $6.9 billion. Japan's Daichi Snakyo recently bought India's Ranbaxy Laboratories for $4.6 billion. Sanofi-Aventis of is now trying to buy Czech-based Zentiva.


8:07:54 PM    
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  Saturday, July 19, 2008


Trash that waste deal!

 

 We recently wrote about the planned deal between the #2 and #3 solid waste companies in the USRepublic Services (#3) agreed to acquire Allied Waste Industries (#2), in an attempt to gain traction on the #1 company, Waste Management. The three companies together have over 50% of the market.

 

Now it turns out that Waste Management has stirred. It has made a hostile offer for Republic Services, offering $6.2 billion. The offer would give Republic shareholders 22% premium on stock value. It would also, most likely, would require divesting some `assets. Republic has rejected the initial offer.

 

According to a New York Times article (�Unsolicited, Waste Giant Seeks to Buy a Competitor�, 7/25/8), this move along with InBev�s acquisition of Anheuser-Busch  or Dow�s acquisition of Rohm & Haas is a sign of a growing trend of strategic buyouts:

 

�The offer shows the rising confidence of corporate buyers, who have picked up their deal-making even as the troubled credit markets have all but shut out their rivals, the private equity firms. The dearth of financing for buyout firms so far has not extended to these companies:�

 

There is some thought that Waste Management is just trying to play the spoiler. There is also the idea that Waste Management may be in a hurry to get the deal in while the Bush administration is still in power, expecting a more lenient antitrust stance than a possible Obama administration.

 


11:59:30 AM    
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  Thursday, July 17, 2008


Suez and Gaz de France finally come together

Just to show how slowly these things can go, the merger of French utility companies Suez and Gaz de France (GDF) was announced as likelihood two and a half years ago, in February 2006, as we reported.  The deal finally got shareholder approval last week. The new company will be the world's #2 utility, with holding in gas and electric. #1 is also a French company, EDF, and Germany's E.On slips to #3.

As we reported then "A $24 billion company, GDF is mostly government-owned. It has operations in France and in a number of other countries in Europe, Asia, Africa, and Latin America. According to an AP report ( "Suez, Gaz de France to Merge", 2/25/2006), French Prime Minister "Villepin said Suez and GDF, as Gas de France is known, had been discussing for months a deal to bring together their 'close and complementary' activities in energy production, transport and distribution."

The deal was arranged as xenophobic panic reaction to a threatened bid by Italy's leading utility company Enel to take over Suez. Suez is a 150-year old company, with its origins n building the Suez Canal. It spun off its water and waste division in 2007 as Suez Environnement  (though it still holds a large minority position). , Along with natural gas and liquefied natural gas, it has over 200 million customers worldwide.It is a major owner and operator of nuclear plants, and is starting to be a growing player in renewables.

The combined company, to be called GDF Suez, will be valued at over $85 billion.

It all comes down to setting costs and prices. A Guardian article ("Suez, GDF shareholders back birth of energy giant", 7/16/07) quotes a French spokesman as saying "In a market pegged to oil prices, it is important to secure your supplies and the bigger you are, the more secure your supplies will be... the better the prices you can negotiate."

We see the trend to concentration resuming, with ever larger utilities spreading risk between a number of sources of energy and having the capital available for developing alternatives.


8:57:28 PM    
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  Tuesday, July 15, 2008


Biggest cash acquisition ever

InBev has pretty much nailed down its buyout of Anheuser-Busch, a move that will make it by far the biggest brewer in the world, with 17% worldwide market share and 49% US market share. The deal ends up at $52 billion. What's really amazing is that this is an all cash deal, the largest one ever.

While Busch family themselves and Missouri politicians had tried to play on xenophobia and Bud's status as an American icon, they shareholders quickly caved when InBev came up with $5 more per share, along with some guarantees about reserving jobs and brands.. A hostile bid suddenly became friendly.

The previous record holder for a cash deal was Cingular Wireless's $40.8 billion purchase of AT&T
Wireless in 2004. Of course, all that is now part of the new AT&T (formerly SBC). The third largest all-cash deal was mining giant Rio Tinto's purchase of Alcan in 2007, for $37 billion.

Some other notes:

  • One biog factor in the deal has to be the continuing decline of the dollar against the euro, almost 30% in the past few years.
  • Strangely enough, Rolling Rock, which had been owned by InBev, was sold in 2006 to A-B. Now the brand will become part of InBev again. You have to wonder whether it will be sold off once more. (By the way, A-B closed the famous Latrobe, Pa. brewery and moved the brewing operations into its own (Bud-oriented) breweries. But Rolling Rock is still marketed as the "little guy" competitor to Bud and Miller.
  • Anheuser-Busch made InBev's inevitable cost-cutting job all the easier by announcing its own preemptive layoffs.
  • InBev, which has operations in Cuba, still has to deal with federal regulators on that score. Doubtless some kind of legal restructuring can be arrived at.
  • InBev needs to sell off $7 billion in assets in order to cover a bridge loan that is based on a quick turnaround. It is almost certain to sell off Anheuser-Busch's chain of theme parks. The ten US-based parks, including Sea World and Busch Gardens, are thought to be worth around $3 billion. Also possibly on the block are A-B's packaging manufacturing division (around $1.52 billion), which has almost a 25% market share in cans in the US, along with a presence in bottle caps and bottles. Also available is its real estate assets (around $200 million). It looks as if InBev may also have to sell a few of its non-core European beer brands.
  • Also on the table are A-B's shares in Mexico's Grupo Modelo, though those may be complicated by restrictions on A-B's ability to sell off those shares without Grupo Modelo's consent. More negotiations are needed.
  • InBev already has a global flagship brand, Stella Artois. No doubt Budweiser, which is relatively limited worldwide distribution, will join that brand on shelves across the world.
  • A-B also owns 27% of China's leading brewer, Tsingtao. If InBev holds on to it, it gives the firm a big presence in China, a growing beer market.


9:22:23 PM    
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  Sunday, July 13, 2008


Another day, another chemical acquisition

Dow Chemical's announced acquisition of Rohm &
Haas was followed quickly by an announced deal between two smaller, yet significant, US chemical companies. Ashland, the nation's largest chemical distributor and a major vendor of sealants, agreed to buy Hercules> the deal, including debt, is for $3.3 billion in cash and stock.

Hercules has sales in specialty chemicals used ion the paper business, along with water-based adhesives and products for the food and medical industries. It was established in 1912. It has some expertise in green technology and water treatment.

Ashland, founded in 1924, started life as an oil refining company. In 2006 (old timers might remember Ashland gas stations), it sold off its petroleum assets to its joint partner Marathon Oil. The company now provides chemicals and solvents to various businesses, including Automotive, Cleaning products, Coatings, Elastomers, Inks, Paints, Personal Care, and Plastics and Plastic Molding. It also sells various kinds of resins and adhesives. It owns the Valvoline brand name of consumer auto tune-up products.

According to a Bloomberg News story ("Ashland Buys Chemical Maker Hercules for $2.6 Billion", 8/11/08):  "Global chemical makers are caught between record oil prices and weakening economies as retail sales, car-manufacturing and construction industries falter."

The same article reports that there have been over $41 billion in mergers and acquisition in the chemical industry so far in 2008, with the year barely half over.

Pressure is strong on many chemical companies. DuPont shares have been weak performers. There is call to break up the company; another case of the parts (especially the Electronics, Performance Materials, and Safety and
Protection businesses,). It's also rumored that German chemcial giant BASF may be interested in swallowing the company (from Chemical Reactions: What Now for DuPont?', New York Times, Dealbook, 8/11/08).


6:11:36 PM    
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  Thursday, July 10, 2008


Dow to buy Rohm & Haas

US-based Dow Chemical, the #2 US chemical company, announced it would buy US-based Rohm &
Hass in a deal worth $19.7 billion, including assumed debt. It was Dow's biggest acquisition. Rohm & Haas specializes in chemical s used in electronics (such as those used in making computer chips), in adhesives, and in coatings (it is #1 in the chemicals in making acrylic paint).

The move comes as Dow has seen a drop in value thanks to the cost of petroleum used in many of its platstic and styrofoam products. In fact, Dow is selling a 50% interest in its commodity plastics unit to a Kuwait Petrochemical Industries, while Dow concentrates on higher-priced specialty plastics. Like many other companies, Dow is seeking rescue in high-priced products where it has more ability to set prices.

Dow beat out German-based BASF, the world's #1 chemical company and a company with many overlapping products with Rohm &
Haas. Some of the Dow cash is coming from loans from Berkshire Hathaway and the Kuwait Investment Authority. It is one of the biggest deals of the year in the US.


10:29:57 PM    
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  Wednesday, July 09, 2008


GE: Not easy being a conglomerate

General Electric has long been the counter-example. Whereas most other large companies have tried to specialize in adjacent areas and have gotten away from conglomerate status, GE has thrived on managing a wide variety of businesses, from light bulbs to jet engines to TV and movies (NBC Universal). The secret, or sp we were told, was a special GE management technique. It is a conglomerate.

In recent years, GE itself has tried to simplify operations, by shedding operations in areas like plastics, and insurance, and (in process) appliances. But never before has it become so apparent that GE split up would be far more valuable and manageable than GE the conglomerate.

A WSJ column ("Immelt Defends GE's Wide Reach", 7/7/08), reports that the company and CEO Jeffrey Immelt are under a lot of pressure. GE had an unexpected 5.9% drop in first-quarter earnings along we pre-announced flat second-quarter results, with low expectations for the rest of the year.

As the article puts it "In the past, GE's diverse businesses balanced one another to produce relatively smooth results. But that formula failed in the first quarter, when the credit crisis kept GE from completing real-estate sales and there were slowdowns in health care and appliances."

Aside from the appliance spin-off, it is thought that GE is n the way to selling its lighting business and its $30 billion credit-card business. But Immelt may have to do more, according to the article, "He also will have to convince investors that GE's vast portfolio, which includes everything from NBC Universal to biosciences, can be managed under one corporate roof and that the company doesn't need to be broken up or even dramatically streamlined."

The article notes that Healthcare division, which makes medical imaging equipment may need to be spun-off or sold-off, Aviation might be hit as airlines cut flights. And even the once thriving financial services division, so carefully assembled over the past decade, is threatened buy the credit crunch.

The column quotes one analysts as saying that "the gloss has come off the GE manager mystique." Indeed, the difficulty of managing such a wide variety of companies with different business cycles at a time when all companies are being stressed may change GE radically in the nest few years.

 


9:45:35 PM    
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  Monday, July 07, 2008


Weather Channel bought

Cable TV, which once promised to be this multiplicity of independent voices, has dwindled down to a half dozen owners, mostly the usual media suspects: Disney/ABC, GE.NBC, Viacom, Time-Warner, Comcast, News Corp. So it's significant when one of the few generally distributed basic cable channels gets bought out.

This time it is the Weather Channel, bought by NBC Universal, along with some private equity partners. The deal is for $3.5 billion - apparently this network has loyal fans and brings in a substantial ad revenue. The deal includes the Web site weather.com.

Actually, the price is down since the Weather's Channels owner, Landmark Communications, wanted to sell it for $5 billion earlier this year. NBC beat out Time warner.925 deal.

Last year NBC acquired women's channel Oxygen in a $925 million deal. It recently announced it would sell its share in the Sundance (independent movie) channel.

A side note on further consolidation comes from a Wall Street Journal article (" NBC-Led Group Will Buy The Weather Channel," 7/7/08):

Attention in the media industry is expected to turn to a long-awaited sale of the Scripps cable-television business, which includes HGTV and the Food Network. Several media companies have signaled that they would be interested if it went up for sale, a factor that may have made some bidders less willing to aggressively bid for the Weather Channel.

After it looked like media consolidation was on hold, it seems to be back on track, at least in a modest way.


9:56:41 PM    
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  Sunday, July 06, 2008


Odds and ends

Some notes and follow-ups on recent deals or non-deals.

1. Blockbuster finally gave up on its crazy idea to buy Circuit City - which we laughed at here.

2. Discover Financial Services, owner of the Discover card, completed its purchase of Diners Card International from Citigroup. The deal was for $195. It's a funny little move. Neither Discover nor Diners look likely to get nay traction, especially with the credit card business catching the flue from the subprime mortgage crisis. Discover stock is selling at 50% of its year high.

3. Microsoft is still trying to buy Yahoo, but in the meantime, it has bought Powerset, a search engine company. The deal was for $100 million. Powerset specializes in semantic searches, which involve analyzing so-called "natural language" search requests, such as "What is the best gas mileage for an SUV?", then returning URLs that might address the problem.

As Tom Foremski, a Ziff-Davis online columnist, notes ("MSFT's acquisition of Powerset is not about search", 7/4/08 notes, the reason for the deal is not for making the user search experience better so much as it is for improved advertising, so-called "context-sensitive" advertising. Right now, as he points out, Google is far ahead of both Yahoo and Microsoft, in delivering context-sensitive results. In fact, Yahoo now contracts out to Google for that very reason, a good motivation for Microsoft to develop a rival system.

4. IBM just acquired a threatening new innovator in the mainframe computing world. It bought Platform Solutions Inc., a small mainframe software developer that had sued IBM over anti-competitive actions. The company had made it possible to run IBM's z/OS operating system on Intel chips on far less expensive hardware.

After some suits and countersuits, IBM stepped in for an undisclosed sum (rumored to be in the hundreds of millions), reestablishing it virtual monopoly on the mainframe business. What this means is that IBM, according to Jeff Gould writing for Interops Systems ("IBM vs PSI; Goliath slays David" "cementing a monopoly that is now more complete than at any time since Amdahl launched the first plug-compatible mainframe in 1975."

This sounds like a case for antitrust measures, But as Gould notes, the buyout may be too small to get the regulators worked up:"IBM is saying that since they already own 99.9% of the market, squashing the one remaining competitor who has 0.1% is no big deal."
(thanks to reader Chris Brainard for the tip)



3:13:24 PM    
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  Monday, June 30, 2008


South Korean company now canned tuna king

South Korean food company Dongwon announced it would acquire the StarKist canned tuna company from Del Monte Foods,

The deal is for $363 million. Dongwon is already dominant in canned tuna in Korean, with a 75% market share. It also owns the world's largest tuna fishing fleet. The move will make the company #1 in tuna worldwide, with further expansion plans in Europe and South America.

Del Monte acquired StarKist in 2002, from Heinz Foods. The brand, with its famous "Sorry, Charlie" ads, is the #1 canned tuna brand in the US with 37% market share. As tuna costs have risen (due to scarcity), StarKist's margins have been reduced as well. Del Monte's other brands include College Inn broths, Meow Mix cat food, and Milk-Bone pet snacks.

Fish, like other food commodities, are becoming more valuable, and we've seen US #2 tuna canner Bumble Bee sold off in recent years as well. It's another step in the concentration of dwindling resources into fewer hands.


8:38:16 PM    
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  Sunday, June 29, 2008


Waste deal aims at market control

We've written earlier about the oligopoly in the highly corrupt solid waste industry. That oligopoly just got tighter.

Republic services, the #2 waste disposal company in the US announced the acquisition of Allied Waste Industries, the #3 player in that area in the US. The value of the deal is for $6.1 billion, in a stock swap.

The two companies combined own over 35,000 companies (employees), including waste haulers, landfills, and recycling companies/

The combined company will compete better with the #1 player in the field, Waste Management. That company has a 35% share of the US market, while the newly united company will have 17%.

One factor in the deal is said to be the high cost of fuel, which is eating into profits from haulage. The ability to direct trucks to closer landfills will save money.

As usual, the big factor will be priding power. With one less major competitor, the new big two will have more control over prices.


9:14:58 PM    
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  Thursday, June 26, 2008


Severstal buys Esmark

Severstal, Russia's #1 steelmaker, has struck again in the US. It announced that its has won a bidding war to buy Esmark, a US steel products company in a $775 million deal. It beat out India-based Essar Steel. Esmark was willing to be bought out, thanks to difficulties sin getting financing.

Severstal has been expanding: in the US, earlier this year, it bought ArcelorMittal's Sparrows Point steel plant near Baltimore for $950 million. ArcelorMittal was forced to divest the plant as part of antitrust agreement, following its 2006 merger. (Curiously, Esmark had bid for the plant unsuccessfully).

And in another iron-y, Arcelor had atempted to buy Severstal in 2006, to avoid Mittal's clutches.

Severstal in 2003 also acquired US-based Rouge Industries of Michigan.

Esmark also has been in an acquisition mode. Since 2003 it has bought over 10 US steelmakers, including North American Steel, Miami Valley Steel Services, and others.

Essar, though disappointed in this deal, has actively pursued North American companies. In 2007 it bought  Minnesota Steel Industries ($1.7 billion) and Canada's Algoma Steel ($1.6 billion).

You don't have to be a Lou Dobbs to have concern over non-US companies having such an important share of a strategic industry in the US, all based on cheap dollars. It also doesn't help that with steel prices sky-high, a number of those old rust-belt steel mills might have finally become profitable once morea.


10:11:21 PM    
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  Tuesday, June 24, 2008


Iron hand

Iron ore giants Rio Tinto and BHP Billiton announced that they had come to agreements with key Chinese steelmakers, agreements that hike the base price of iron ore by 86% over a year ago. The combination of ever increasing demand, especially from China and India, along with the power that the three-company iron oligopoly has over the much more competitive steel industry did the trick. Iron ore is a sellers market, and there are only a few sellers.

The price was the result of negotiations with Baosteel, China's #1 steelmaker, but will apparently apply to all other steel companies that buy from the two Australian iron giants. It will also apply retrospectively to all iron bought from those companies since April 1.

Brazil's Vale, the third member of the oligopoly made a deal earlier this year with the #1 steelmaker in the world, Arcelor-Mittal, for a mere 70% price rise. This is reportedly the first time that the three companies have not set prices in lock step. Of course, the cost of bringing iron from Brazil to China is far higher than bringing from Australia.

The combined negotiation makes for a new level of collusion between the iron miners. It also happens while BHP Billiton is still pursuing Rio Tinto in an attempt to shrink the field to a duopoly. Both companies will be worth a hell of a lot more now that this deal is signed. The thought is that the influx of cash will make the attempt to buy out Rio Tinto even harder.

Iron, oil, and corn, three of the staples of the world economy, are increasing in cost at unbelievable rates. While much is made of the big oil companies and the OPEC cartel, ever tighter and scarier cartels operate in iron and in corn processing.


10:17:26 PM    
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  Monday, June 23, 2008


King corn (syrup)

With corn prices reaching stratospheric levels, it's only natural that these should be consolidation among the world leaders in buying and processing corn. At $7 a bushel, corn costs twice as much as it did a year ago, and with much of Iowa under water, the prices might climb even more. So when food processor Bunge announced the purchase of US-based Corn Products International for $4.2 billion (in stock) the concentration the food processing oligonomy only got tighter.

While less well known than rivals ADM and Cargill, Bermuda/US-based Bunge is a close rival. It already is the dominant player in oilseeds world wide, and is one of the leaders in soy processing, and a player in corn and wheat..

Corn Products is a specialist in distilling high fructose corn syrup, the sweetener used in soft drinks and packaged foods. It is the #4 company in that field, after ADM, Cargill, and Tate &
Lyle. It has global manufacturing and sales. Aside from HFCS, the company sells corn starch, corn oil, and corn gluten for various food and non-food manufacturing uses. Clients include Coca-Cola and Kellogg. The company was part of Best foods until 1999.

Bunge was already a player in corn, but the Corn Products addition will make it a closer rival to the other food processing giants. The company has 450 plants worldwide.

It is these companies, now loaded with cash, more than the farmers, who are in a position to benefit the most from rising food prices and increased demand for processed foods in China, India, and other developing countries. Bunge's shares have gone up by nearly 50% over the past year. The more powerful and rich these companies are, the better they are in a position to set prices and costs, and above all to influence global trade policies in their favor.


8:56:13 PM    
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  Sunday, June 22, 2008


Chinese-Indian pharma deal

It is significant, I think, when a company from one major Asian company buys another, with no Western company involves as buyer of seller. That' shat happened last week when the #3 Japanese drug company, Daichi Sankyo, announced a deal to buy a controlling share in Indian drug company Ranbaxy Laboratories, the #1 Indian drug firm. The deal was for around $4.6 billion. Daichi Sankyo is the result itself of a 2005 merger Japanese drug companies.

Ranbaxy's specialty is generic drugs, while Daichi Sankyo specialized in patent drugs. The move is an important one, in that generic drugs are growing much faster than patent ones. Ranbaxy is growing fast, and hopes plans to be among the top five generics companies in a few years.

As a Bloomberg story ("Daiichi Sankyo to Buy Ranbaxy for as Much as $4.6 Bln", 8/11/08) notes, "Daiichi Sankyo is mimicking strategies pursued by the Swiss pharmaceuticals company [Novartis] and Johnson &
Johnson to weather turbulence in the branded-drug industry by diversifying into other markets. The acquisition also gives the Japanese company more reach in emerging regions including India, China and Eastern Europe."

The question is why the other giants of the pharmaceutical industry have ignored generics or even sold off their generic business. It is rumored, however, that US-based Pfizer might be considering a higher bid for Ranbaxy.

The interesting thing, according to a Wall Street Journal article, is the rise of India as a global power with firms worth billions. "The pharmaceutical sector is the latest example of India's and China's climb up the value chain. While China is working its way up the ladder from manufacturing and clinical trials, India is starting with high-level R&D.
As this happens, Indian and Chinese companies are becoming increasingly important players in the global mergers and acquisitions game, both as targets and as acquirers."

All this, the article ("Welcome, Global Pharma", 8/17/08) states, is a product of that growing fact that "Indian and Chinese scientists are rapidly developing the ability to create their own intellectual property."


8:15:41 PM    
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  Thursday, June 19, 2008


Copyright creeps

We have stated before that one of the trends of the last twenty years has been a frantic cycle of copyright extension. The major media companies have formed oligopolies and try to extend copyright protecting their materials. Technology is moving faster, so that the regulations are sidestepped and digital sharing grows. The content oligopolies then propose (and often get) ever more stringent laws, which create more resentment and even more copyright avoidance.

Once oligopolies in movie, TV, books, and music had managed to eliminate most of the competition, they thought that their income as toll keepers would be uninterrupted. Gigantic hoards of copyright materials, including film libraries and music libraries, have been marshaled by multinational giants. But in spite of their best efforts in shaping national and international law, that stream has, in some cases, slowed down to a trickle.

An excellent article by Rasmus Fleischer ("The Future of Copyright", 6/0/08) captures the paradox:

Contrast today's world with the golden age of copyright, roughly speaking between 1800 and 1950. Back then, enforcement was easy. The act of reading a book was far removed from the act of printing one. Record presses and gramophones were safely distinct machines." Burt standing with tape recorders and moving on the Internet, the difference between producing a film or book and consuming it has gotten blurred.

And the reaction has been a frantic pace of expanding copyrights, as Flesicher points out. "Every broken regulation brings a cry for at least one new regulation even more sweepingly worded than the last. Copyright law in the 21st century tends to be less concerned about concrete cases of infringement, and more about criminalizing entire technologies because of their potential uses."

More an more the content oligopolies want to have Internet service providers, search engines, and software companies, to take on the responsibility for the actions of their users, to spy on their customers, and be fines if they refuse. The prospect is chilling: a true Big Brother watching over each person's every keystroke, and taxing us for even mentioning or criticizing a company's copyrighted products.

The copyright oligopoly's real desire is to create an international police state dedicated to the protection of their rights. That's the purpose of ACTA (Anti-Counterfeiting Trade Agreement), currently being negotiated very quietly by the leading industrial nations.

As Fleishcer writes,

The proposed ACTA treaty would create international legislation turning border guards into copyright police, charged with checking laptops, iPods, and other devices for possibly infringing content, and given the authority to confiscate and destroy equipment without even requiring a complaint from a rights-holder.

It's a horrific scenario. I'm not always a fan of the libertarian Cato Institute, but on this issue they are dead on.


9:01:00 PM    
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