City Republic: markets come out of gloom with A&L bid

LONDON - Despite the doom and gloom from the US, the UK markets have risen as Santander makes a £1.3bn offer for Alliance & Leicester, writes Stephen Foster.

Santander bid boosts UK market
Shares in London rose sharply this morning on a £1.3bn bid from Spanish banking giant Santander, which owns Abbey, for mortgage bank Alliance & Leicester.

A&L shares rose 40% to match the 317p offer price, suggesting that the market expects a counter-bidder to emerge, Lloyds TSB or HSBC being two of the favourites.

Troubled Bradford & Bingley also rose 25% in sympathy, manna from heaven for the underwriters trying to get a £400m rights issue away this week.

Santander, like Lloyds, has avoided the worst of the credit crunch. Its Abbey brand has already picked up mortgage market share this year as other lenders have cut back and everyone from the Chancellor to the Governor of the Bank of England will be hoping that it will inject more money into the mortgage market if the bid is successful.

A much larger Santander presence in the UK might also persuade some of the other banks to start lending.

Uncle Sam takes a pounding
The US government is to bail out the two big state-backed mortgage lenders Fannie Mae (Federal National Mortgage Association) and its younger brother Freddie Mac (Federal Home Loan Mortgage Corporation), after their shares plummeted on Friday.

These two entities are supposed to 'guarantee' about half of the US’s mortgages.
They don't, of course, the Government and the Federal Reserve do that on their behalf (or at least they are this time).

It's something of a mystery why these institutions are still supposedly owned by private shareholders anyway (Fanny Mae was launched by the Roosevelt government in the 1930s to counter the Depression).

Treasury Secretary Hank Paulson (formerly of Goldman Sachs) says the government and the Federal Reserve central bank will carpet bomb them with money to ensure, among other things, that they stay in the private sector. But really they should be nationalized, like the much smaller UK Northern Rock.

The move follows last week's rescue of Californian mortgage lender IndyMac (they used to love their Macs and Maes over there).

IndyMac could still see a run on deposits this week, which means this particular phase of the US mortgage crisis isn't over yet.

Belgians buys US beer giant
Here's another nasty turn-up for the once-mighty US economy.

The biggest US brewer Anheuser-Busch, maker of Budweiser, has agreed to be taken over by Belgian giant InBev, so it's Leuven 1, St Louis Missouri 0.

InBev, which makes Stella, is paying $50bn, of which it's borrowing a chunky $45bn.

Actually, InBev is as much a Brazilian company as a Belgian one, following a timely expansion into that huge market a couple of years ago.

The Americans are not best pleased at this development, not least because InBev employs a zero-based planning model which means that managers submit a whole new series of planning proposals each year, just the job if you want to reduce costs continually.

Sooner or later there'll be job cuts in St Louis.

IPA numbers add to doom and gloom
Most pundits expect the FTSE100 to bounce back a little today following a savage 145 point or 2.7% fall on Friday.

But the market seems to be headed for 5000, a huge fall from the 6700 level it tested just last year.

The doom and gloom will be accentuated by today's IPA Bellwether Report which, to no-one's great surprise, forecasts the biggest cuts in marketing budgets since the terrorist attacks on New York in 9/11 2001.

Even online, the spur of recent growth in the market, is forecast to slow. Are clients finally realizing that, if everyone's doing it, the diminishing returns factor comes into play?

The report won't go down very well at WPP Towers in Farm Street, as Sir Martin Sorrell needs to keep his shareholders onside as he bids £1.1bn for market researchers TNS.

Sir Martin may even be hoping that German rival GfK comes in with a counter-bid.

£1.1bn looks on the toppy side in today's media markets.

Yahoo! rejects new joint bid
Yahoo! has rejected a new bid for its search business from Microsoft and investor Carl Icahn.
This is hardly surprising as the duo want to replace the board (and only gave it 24 hours to mull over the offer).

Yahoo! now says it would prefer a bid for the whole company, which is exactly what Microsoft offered back in May.

If I were CEO Jerry Yang (heavens forfend) I'd sell them the search stuff and see if I could make the rest of Yahoo! fly.

It's quite possible that there's more value in that than there is in the search business.

As Carl Icahn seems to realize.

Endemol ups the ante on ITV
TV producer Endemol's founder John de Mol (now back in the saddle following a buyout from Telefonica) has done ITV's sagging share price a favour by suggesting that it's one of the few TV transmission businesses that's worth buying.

De Mol refused to rule Edemol out as a bidder (ITV's production business is in the share price for nothing).

Surely there must be some bid movement soon?

How to get a table at The Wolseley
Investment firm Dawnay Day has got itself into a tangle and brought in Ernst & Young to try to restructure the company.

Dawnay Day owns half of fashionable eaterie The Wolseley, launched by former owners of The Ivy, Jeremies King and Corbyn.

If there's anyone out there in adland who's still got any money this could be a great way to invest and make sure you get a table.

Stephen Foster is a former news editor of Campaign, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog www.editco.net and Politics of the Media for Brand Republic.

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