Judge shuts down firms accused of homeowner scams

NEW YORK | Mon Aug 15, 2011 6:22pm EDT

(Reuters) – A Long Island judge ordered the temporary shutdown on Monday of New York-based companies accused of using “fast-talking salespeople and masterfully deceptive websites” to defraud more than a thousand homeowners in a multimillion dollar mortgage loan modification scam.

The preliminary injunction granted by Nassau County Supreme Court Justice John Galasso freezes the operations of Homesafe America Inc and its successor, United Legal Solutions, and prevents the companies’ co-founders, Guy Samuel and Scott Schreiber, from taking part in any mortgage-assistance relief services while the case against them unfolds.

Fifteen homeowners filed suit in June against the companies, their chief officers and nearly two dozen employees, accusing them of fraud, deceptive practices and false advertising, among other claims.

The complaint alleged the defendants falsely promised to modify the mortgages of lower- and middle-class homeowners for an upfront payment of several thousand dollars.

But once the companies got their money, they offered little, if any, assistance to their customers, according to the complaint. Using a network of websites, Homesafe took in more than $2 million in 2010 alone and, as of February, had accepted money from about 1,000 families across the country, the plaintiffs said.

The lawsuit is one of several recently filed against mortgage-modification companies on behalf of homeowners by the Lawyers’ Committee for Civil Rights Under Law and attorneys from the law firm Davis Polk & Wardwell.

SIFTING THROUGH CUSTOMER FILES

The homeowners’ attorneys said they are currently sifting through more than 70,000 pages of customer files turned over by the defendants to determine the full scope of the companies’ operations.

The homeowners seek $1.5 million in damages from Homesafe and its successor. They are also asking the court for a permanent order shutting former Homesafe employees out of mortgage-related businesses.

Elliott Martin, the attorney representing Schreiber, Homesafe, and United Legal, said his clients would not comment on the ruling.

But in a July 25 court filing, Martin argued the plaintiffs were trying to “overwhelm” the defendants by demanding thousands of documents in a short time frame.

Schreiber is also attempting to point the finger at his former partner. In a sworn affidavit, Schreiber said Samuel took $180,000 from Homesafe in December, leaving it in “dire financial straits” and unable to recover. Schreiber said he did his best to refund customers’ money, but the company’s customer accounts were frozen in early 2011.

An attorney listed for Samuel did not return a call seeking comment. The dispute over the money transfer is the subject of ongoing litigation in Nassau County.

A trial date in the mortgage modification suit has not been set.

(Reporting by Jessica Dye; editing by Jerry Norton and Andre Grenon)

full story

Hackers protest peacefully in San Francisco subway

By Emmett Berg

SAN FRANCISCO | Mon Aug 15, 2011 9:55pm EDT

(Reuters) – A few dozen protesters turned out on Monday for a San Francisco rally organized by the hacker group Anonymous to protest alleged police brutality and what they called anti-free speech tactics by authorities.

Bay Area Rapid Transit, the commuter train service in the San Francisco area, shut down cell phone networks in some stations on Thursday to stop a demonstration over the fatal shooting of a man by police last month.

The cell phone shut-down drew a new wave of criticism, spurring the Monday rush hour action.

“This was a complete silencing of the people.” said Carlos Wilson, a 41-year-old gay rights activist who came to protest police brutality and the shut-down of the mobile phone network last week.

The Monday protest ended just before 5:30 p.m. local time, when authorities shut down the Civic Center station.

Police said there were no arrests, although officers arrived dressed in riot gear.

Cell phone service was left on in the station during the action, and some protesters took that as a sign of victory.

“I have more cell service now than usual on BART. I think what they did last time was an empty threat. I have full bars,” said Beck Simmons, a 21-year-old student, who was protesting the police shooting.

Anonymous, a loosely knit group that has attacked financial and government websites, had called for protesters to descend on the station at 5 p.m., and media widely publicized the plan.

Would-be protesters were encouraged to download software for short-range mobile-to-mobile messaging, in case the in-station networks are shut down again.

BART said that a website for its users, myBART.org, had been hacked over the weekend, and contact information from at least 2,400 people had been stolen.

(Writing by Peter Henderson; Editing by Dan Whitcomb and Jerry Norton)

full story

Romney, on rare visit to Iowa, rips Obama on economy

By John Whitesides

PELLA, Iowa | Wed Aug 10, 2011 9:24pm EDT

(Reuters) – Mitt Romney, on a rare visit to Iowa on Wednesday, said Americans were “fearful, but not panicked” about the economy and predicted voters would deny President Barack Obama a second term for his economic failures.

The Republican presidential front-runner said Obama would lose in Iowa and elsewhere in the general election in November next year because his policies had impeded economic growth and dented confidence.

“He is not up to the task of leading the country at a time of economic crisis,” Romney told reporters after a round-table

with 14 local business leaders in Pella, in southeastern Iowa, where he touted his business experience.

“The president’s policies have made it more difficult for enterprises to grow and thrive at a time when this economy is in trouble,” Romney said, adding Obama had created a sense of uncertainty amid fraught debt-ceiling negotiations in Washington and wild swings in the stock market.

“They’re fearful but not panicked,” Romney said of Americans. “They’re discouraged, but not so frightened that they can’t move forward.”

During an evening visit to a local party fund-raiser in Des Moines, Romney said the United States was in crisis. “You’ve got a lot of people in this country that are hurting, that are suffering, because of his policies,” he said.

Romney, making just his second visit to Iowa this year, promised to compete in the state’s 2012 nominating contest even though he is not participating in Saturday’s straw poll, a traditional but nonbinding test of candidate strength.

“You’ll see me plenty in Iowa,” said Romney, who has focused most of his time and resources on New Hampshire, Florida and other states that hold their contests after Iowa.

He will attend a fund-raiser, visit the state fair on Thursday and participate that night in a televised Republican presidential debate but leave before Saturday’s straw poll.

Iowa’s kickoff contest is dominated by the state party’s big bloc of social and religious conservatives, a group that is suspicious of the former governor of liberal Massachusetts and his views on issues like abortion and healthcare.

WANTS TO COMPETE IN REAL CONTESTS

Romney, who won the Iowa straw poll in 2007 but fell short in the caucuses after spending millions of dollars, said he will not compete in straw polls “because I want to use our financial resources to participate in actual election contests that generate delegates.”

He has fallen behind conservative rival Michele Bachmann in Iowa polls and has been a shaky national front-runner in the Republican race. His standing could face a new challenge this weekend when Texas Governor Rick Perry is expected to signal his intention to run.

Perry, a staunch social and religious conservative, has stressed his record of job growth in Texas and could compete with Romney for support from the party’s business wing. Romney refused to be drawn into a discussion of Perry.

“He’s a fine man and a fine governor. The record of Texas speaks for itself,” he said.

As he has throughout the campaign, Romney said his background running a company made him the best Republican for lifting the U.S. economy out of trouble. Romney headed a private equity firm and led the Salt Lake City Olympics.

He said he was not worried that Iowans would punish him next year for not participating in the straw poll or devoting enough attention to them.

“The people of Iowa are far less concerned with the process of politics and far more concerned about the future of America,” he said.

(Editing by Christopher Wilson)

full story

Gold at record $1,778; biggest 3-day rally since 2008

By Amanda Cooper

LONDON | Tue Aug 9, 2011 8:07am EDT

(Reuters) – Gold hit a record $1,778 an ounce on Tuesday, in its biggest three-day rally since the depths of the financial crisis in late 2008, as equities succumbed to investor fear over the threat to the global economy from the European and U.S. debt crises.

Gold has risen by about 8 percent this month, driven by flows of cash out of equities, bonds and currencies, after the United States lost its top-notch credit rating. Investors have lost confidence in the ability of European leaders to stem the spread of the debt crisis that has now engulfed the euro zone’s third- and fourth-largest economies, Italy and Spain.

European stocks lost over 5 percent, higher-yielding currencies slid, German government bonds and the Swiss franc rallied as investors ditched anything perceived to be risky.

Spot gold was last at $1,759.29 an ounce at 7:22 a.m. EDT, up 2.6 percent on the day, having hit a record $1778.30, earlier. In the last three days, the price has risen by more than 7 percent, its biggest move in this timeframe since November 2008.

“The market could come off from here, but it’s headed in a northerly direction,” said ANZ head of metal sales Peter Hillyard. “From where we are now, you might think we could see some sort of pull-back. But I’m talking about a momentary thing, a pull-back like the loading of a gun, which then fires away.”

Reflecting the rush into gold, holdings of metal in exchange-traded funds rose for a twelfth consecutive daily increase, rising to all-time highs close to 70 million ounces, or 2,177 tonnes, equivalent about half of total supply in 2010, based on World Gold Council data.

The European Central Bank bought Italian and Spanish bonds on Monday to try to stem the spread of the region’s debt crisis, but in doing so, found itself locked in full-blown conflict with the German central bank, which feels the ECB should stick to its mandate of fighting inflation.

Gold priced in euros hit an all-time peak above 1,240 euros an ounce and was set for its biggest two-day rally since May last year when the euro zone debt crisis first flared, while gold in sterling and yen also hit records.

The euro itself took heart from the ECB’s efforts, rallying 0.4 percent against the dollar, but held near record lows against the safe-haven Swiss franc.

Global equities .MIWD00000PUS were down by over 1.0 percent, having fallen by 14.5 percent so far in August and set for their worst monthly performance since late 2008.

“The stock market is plummeting, that is pretty much the only story out there. Bond yields are down and obviously there is the flight-to-safety argument,” said RBS analyst Daniel Major.

Gold’s upward progress has attracted some profit-taking from investors who have scrambled to plug holes in their portfolio from the rout across the stock markets.

Top asset manager BlackRock (BLK.N) will use profits it is making in gold and bond markets to seek out bargains in falling global equity markets, James Holt, investment strategist at the world’s largest money manager, said on Tuesday.

However, analysts said that the current push into gold appeared to be fairly solid.

“… the ingredients are all in place for a stronger gold price, as the metal is not subject to the risk of intervention or quantitative easing,” said UBS strategist Edel Tully in a note.

“This doesn’t mean that pullbacks won’t occur, and though some of these may be severe, we believe dips will be bought. Comex net longs may be at record levels, but current gold buying is very broad-based, with a strong physical bias which provides much support,” she added.

In other precious metals, silver fell 1.4 percent on the day to $38.51 an ounce, pushing the gold/silver ratio to 46.0, a six-month high in the outperformance of gold versus silver.

Platinum rose 1.4 percent to $1,735.99 an ounce, while palladium rose 2.6 percent to $733.00.

Of vital importance to markets later in the day will be the outcome of the meeting of the U.S. Federal Reserve’s policy-setting committee, which many hope will signal its intention to support the economy and restore some stability to markets.

(Reporting by Amanda Cooper; editing by Keiron Henderson; Editing by Alison Birrane)

full story

Gold hits record over $1,715/oz as risk assets slip

By Amanda Cooper

LONDON | Mon Aug 8, 2011 10:12am EDT

(Reuters) – Gold vaulted above $1,700 an ounce for the first time on Monday after pledges by the G7 and the European Central Bank to quell the turbulence in the financial markets did nothing to put investors at ease.

Traders said the ECB had made good on its promise to tackle the euro zone debt crisis by widening its bond-buying program to include paper from Spain and Italy but the move was not enough to allay deep concerns.

Friday’s downgrade to the quality of U.S. sovereign debt by ratings agency Standard & Poor’s had been widely anticipated, but its longer-term impact on anything from mortgage rates to theeconomy was unclear.

Spot gold was set for a second consecutive daily trading rally, up 2 percent from Friday at $1,696.56 an ounce by 9:42 a.m. EDT, having hit a record $1,715.01 earlier and having traded at all-time highs in sterling and euros.

“We are so much more reliant now on what our macroeconomists are telling us. They had a view that we wouldn’t be moving back into recession and that growth would accelerate into next year, but events are changing quite quickly,” said Deutsche Bank analyst Michael Lewis.

“The main beneficiary will continue to be gold,” he added.

Investors have bought more gold in the last month than in the prior six months, judging from the increase in open interest on COMEX for speculators and money managers, as well as inflows into exchange-traded products.

According to data from the Commodity Futures Trading Commission, which collects information on holdings of futures and options, and to exchange traded product collected by Reuters, investors bought more than 18 million ounces of gold in the last month alone.

This corresponds to around 30 percent of total identifiable investment demand in 2010, and compares with about 8.4 million ounces in the year to early July.

Saxo Bank senior manager Ole Hansen said the rise in gold could be jerky.

“There has been a huge build-up in speculative and long positions across the board over the last couple of weeks, but I suppose that central banks buying more bonds is not helping the overall worry about how the economies are going to do over the months ahead,” he said.

Finance chiefs from the world’s industrial powers pledged on Sunday to take whatever actions were needed to steady financial markets, spooked by the political wrangling in Europe and the United States over slashing their huge budget deficits.

FED MEETING AWAITED

Investors will be watching Tuesday’s meeting of the U.S. Federal Open Market Committee for any statement on whether the Fed will ease monetary policy further.

The Fed’s $600 billion quantitative easing program, which ended in June this year, has been instrumental in gold’s rise, even if adjusted for inflation, the bullion price remains well below the all-time highs above $2,000 in the early 1980s.

The prospect of an even longer period of low U.S. interest rates prompted Goldman Sachs (GS.N) to raise its longer-term forecast for the gold price. Goldman said it had lifted its forecasts to $1,645, $1,730 and $1,860 on a three-, six- and 12-month horizon. Goldman had previously forecast the gold price peaking at $1,600 an ounce in mid-2012.

Meanwhile, gold in euros hit a record 1,199.89 euros an ounce, bringing gains in the last month alone to over 12 percent, while gold in sterling hit a peak of 1,043.76 pounds, for a gain of 9.3 percent in the same period.

In other precious metals, silver got a lift from the strength in gold as it can sometimes act as a cheaper safe-haven proxy for investors.

Spot silver was last up 2.6 percent on the day at $39.30 an ounce, while platinum rose 0.3 percent to $1,717.49 an ounce. The ratio of gold to platinum earlier fell to around parity for the first time since late 2008.

Palladium was last down 1.25 percent at $730.47. The palladium price has fallen by more than 14 percent in the last 6 trading days, since hitting a five-month high.

(Additional reporting by Jan Harvey; editing by Anthony Barker)

full story

Analysis: Japan may lose out as Hitachi-Mitsubishi talks stall

By Junko Fujita

TOKYO | Fri Aug 5, 2011 10:00am EDT

(Reuters) – The crumbling of mega-merger talks between Japanese industrial behemoths Hitachi (6501.T) and Mitsubishi Heavy Industries (7011.T) threatens a rare opportunity for Japan to improve its global competitiveness by consolidating century-old companies.

Hitachi and Mitsubishi Heavy are ready to walk away from talks that would have created an industrial giant with more than $150 billion in sales, sources told Reuters on Friday, after preliminary discussions were thrown suddenly into the media spotlight and the companies turned cautious.

Traditionally seen as a last resort of failing firms, Japanese companies until recently have largely avoided strategic mergers.

A combination of two of Japan’s oldest, most established conglomerates would have sparked more, providing companies a tool squeeze costs, combat a surging yen and gain competitive scale.

“If this merger were to go through, competitors would start considering coming together so they could better compete with the merged entity,” said Atsushi Abe, managing partner at Sangyo Sosei Advisory, a Tokyo-based merger advisory firm.

“This consolidation would take place across several segments and that would be good for Japanese companies to boost their global competitiveness,” Abe said.

A wave of consolidation could engulf Hitachi’s main competitors, such as Toshiba (6502.T) and IHI (7013.T), which would compete directly with the combined conglomerate in the infrastructure sector, bankers said.

Mitsubishi Heavy has a global presence in manufacturing trains and subways, and competitors such as Kawasaki Heavy Industries (7012.T) could come under pressure to find a merger partner, they said.

Another sector to watch is autos, given Mitsubishi Heavy’s close ties with Mitsubishi Motors (7211.T), said Keiji Miyakawa, chairman of the Tokyo office for Lincoln International, an advisory firm for mergers and acquisitions.

Mitsubishi Heavy is the top stakeholder in Mitsubishi Motors.

CHANGING MINDSET

A merger between Mitusbishi Heavy and Hitachi could also signal a change of mindset among managers who are feeling the pinch of global competition and a strong yen.

The March 11 earthquake and tsunami added to their sense of crisis, helping to spark bolder decision-making, bankers said.

“This could be a very big first step for consolidation in the Japanese industry,” Miyakawa said.

Bolstering global competitiveness has become a more urgent task as Japanese companies lose market share to companies from elsewhere in Asia.

Their low profitability in particular makes it difficult for them to engage their Asian rivals in price competition.

Japan Inc’s profitability is among the weakest globally. On average, Japanese companies’ return on equity — a key measure of profitability — was 6.0 last year versus the global average of 11.9, placing Japan in the bottom league with Italy, data from Thomson Reuters StarMine data shows.

Japanese companies’ average operating or EBITDA margin stood at 11.5 percent last year, ranking only above Latvia and Ireland and compared with a global average of 18.4 percent, 19.3 percent for Italy and 18.8 percent for UK.

Many Japanese companies are trading far below their historical valuations, underscoring market expectations of sluggish growth.

Toshiba is trading at a forward price-earnings ratio of 10.8 versus its 10-year median of 20.3, while Mitsubishi Heavy trades at a price-earnings multiple of 23.7, versus a 10-year median of 37.4.

CORPORATE CULTURE

Bankers say mergers need to be executed effectively to help companies shape up.

Japanese companies often find it difficult to make hard choices about which businesses to divest, due in part to a corporate culture that emphasizes maintaining employment levels and control over operations.

Because of this, many merged entities will end up holding onto everything without any real consolidation, bankers said.

Mergers are also hindered in Japan by a reluctance to hand management control to a rival company, often rendering them a last resort for companies facing insolvency.

Hitachi, which boasts annual revenues of 9.3 trillion yen ($117.7 billion), counts telecommunications equipment, power systems and nuclear reactors among its core operations.

Mitsubishi Heavy, which traces its origins back to 1884, builds ships and trains, auto parts and defense systems, as well as power-generation systems.

Armed with a stronger yen and the need to expand overseas, Japanese firms have been swiftly snapping up foreign rivals.

Japanese companies made $41.7 billion worth of foreign acquisitions since the beginning of this year, up 53 percent from a year ago, while deals between Japanese companies grew a more modest 9 percent to $33 billion, according to Thomson Reuters data.

The creation of ArcelorMittal (ISPA.AS) and rising competition from South Korea and Chinaprompted Nippon Steel Corp (5401.T) to strike a deal this year with Sumitomo Metal Industries (5405.T) to combine into the world’s No.2 steel maker.

“Any sector, any companies that have a global presence could be another target,” said Keiichi Mitake, managing director at Global Advisory Japan, the Japanese associate of global advisory firm Rothschild.

“Because they need to go abroad to seek growth.”

($1 = 0.700 Euros)

($1 = 79.020 Japanese Yen)

(Additional reporting by Anshuman Daga in SINGAPORE; Editing by Vinu Pilakkott)

full story

UPDATE 1-EU deepens probe into D.Boerse-NYSE deal

Thu Aug 4, 2011 12:51pm EDT

* EU concerned about deal impact on derivatives, equities

* Says may have negative impact on innovation in derivatives

* Says rivals may find it more difficult to enter market

* NYSE Euronext, Deutsche Boerse still confident of EU okay

* EU sets Dec. 13 deadline whether to clear or block deal

(Adds companies’ comment, details)

By Foo Yun Chee

BRUSSELS, Aug 4 (Reuters) – EU antitrust regulators opened on Thursday an in-depth probe into the proposed merger of Deutsche Boerse (DB1Gn.DE) and NYSE Euronext , citing concerns about the impact on derivatives and equities trading.

EU Competition Commissioner Joaquin Almunia had flagged the move several times in the past couple of months. The investigation followed a month-long preliminary review which ended on Thursday.

Regulatory approval in Europe and the United States is the last part of the process before the companies can merge to become the world’s largest exchange operator.

“The proposed merger would remove a strong competitor from the market and would give the merged company by far the leading position in derivatives trading in Europe,” Almunia said in a statement.

NYSE Euronext and Deutsche Boerse said in a joint statement that they were confident the European Commission would clear the deal.

The Commission said the initial review indicated concerns in a number of areas, especially in derivatives trading and clearing.

“Due to the removal of an important competitor, the merger would have a negative impact on innovation in derivatives products and technology solutions,” the European Union executive said.

It said rivals may find it more difficult to enter the market which may lead to reduced fee competition affecting pension funds, mutual funds, retail and investment banks and brokers.

The Commission said the lack of access to the merged company’s enlarged post-trade clearing facilities due to its vertical silo model may hinder rival derivatives platforms seeking entry.

It also expressed concerns about the deal’s impact on equities trading and settlement and index licensing.

The Commission said it would decide by Dec. 13 whether to clear or block the deal.

NYSE Euronext and Deutsche Boerse said the benefits of the deal included a bigger player able to compete effectively with over-the-counter platforms, other exchanges and banks.

They also pointed to the $3 billion in capital efficiencies for customers. (Editing by Erica Billingham)

full story

Dealtalk: Cashed-up miners could turn more hostile on deals

By Sonali Paul

KALGOORLIE, Australia | Wed Aug 3, 2011 7:41am EDT

(Reuters) – Expect more hostile deals in resources as cashed-up miners turn desperate to snare targets, deal advisers say, following Peabody Energy (BTU.N) and ArcelorMittal’s (ISPA.AS) change of tack this week on their $5.3 billion bid for Macarthur Coal (MCC.AX).

The pace of resources deals has picked up in recent weeks, putting the sector on track to top a record $120 billion in transactions this year, Ernst & Young predicts.

Deals are being fueled by miners anxious to deploy the spoils from booming commodity markets, with some being forced to move into new sectors or regions, as the number of top tier assets available grows thin.

“There are fewer and fewer world class assets out there, so as people get more and more desperate, they may have no choice but to go hostile,” Tim Day, head of UBS’s Perth office, told Reuters.

Knowing that suitors are hungry, takeover targets with bullish expectations are holding out for strong offers, while weak equity markets have depressed their shares, making it harder for deals to be sealed.

To help close that valuation gap and get deals done, suitors may have to go hostile, like Peabody and top steel-maker ArcelorMittal in their chase for Australian coal miner Macarthur.

“With all the takeovers announced, pretty much all of them have been friendly. That could change,” Paul Murphy, Asia Pacific mining and metals transactions leader at Ernst & Young, told reporters.

NEW HORIZONS

Top miners digging for acquisitions are pushing into new sectors or geographies, partly to avoid competition hurdles, as BHP Billiton (BHP.AX)(BLT.L) has done with a $17 billion spree for U.S. shale gas producers and Barrick Gold (ABX.TO) did with its $7.7 billion takeover of copper miner Equinox Minerals.

“What we’re seeing now is they can’t afford to hoard the cash. Some are almost being forced to do M&A,” Murphy said.

Gold miners, riding record high gold prices, are looking for companies with resources outside Australia for takeover opportunities.

Australia is increasingly seen as over-explored and expensive to operate in. At the same time Africa is more and more seen as too risky, following unrest in countries like Burkina Faso and Ivory Coast, UBS’s Day said.

“South America is emerging as the new gold jurisdiction people are getting excited about,” he said.

Miners with gold resources in South America include Troy Resources (TRY.AX) and Mundo Minerals (MUN.AX).

Barrick Gold’s Asia-Pacific regional president Gary Halverson agreed that targets in Australia were “turning pricey.”

“We continue to look at other acquisitions and opportunities but we don’t feel compelled to jump into anything,” Halverson said at the annual Diggers & Dealers conference, attended by more than 2,000 mining and exploration firms, stock brokers, bankers, investors, financiers and mining service industries.

Day said Australia may still be attractive for Chinese gold investors, like Zijin Mining (2899.HK), China’s top gold producer, which has bought just under 17 percent of Norton Gold Fields (NGF.AX), potentially as a beachhead for further offshore expansion.

“Australia makes a lot of sense for Chinese investors from a time-zone perspective and offshore investment in gold assets aligns with their strategic diversification away from U.S. dollars,” he said.

He predicted there would be more cross-border deals in the gold sector, in contrast to the past year, dominated by deals done within Australia and Canada, like Kinross Gold’s (K.N) $7 billion takeover of Red Back Mining.

(Editing by Ed Davies and Frederik Richter)

full story

NYSE weighs in on Deutsche Boerse antitrust review

By Jonathan Spicer and Luke Jeffs

NEW YORK/LONDON | Tue Aug 2, 2011 11:38am EDT

(Reuters) – European regulators likely will not try to “make or break” Deutsche Boerse AG’s $9 billion merger with NYSE Euronext, NYSE Chief Executive Duncan Niederauer said on Tuesday.

Instead, the European Commission probably will consider demanding smaller changes to preserve competition before allowing the deal to buy NYSE to go through, he said.

Niederauer’s comments on a conference call discussing NYSE Euronext’s quarterly profit decline, come days before the commission is expected to enter a second and more in-depth phase of its antitrust review.

Regulators in Europe and the United States are all that stands between Deutsche Boerse and NYSE Euronext as they move to create the world’s largest exchange operator.

Some brokerages and rival exchanges, such as London Stock Exchange Group, have amplified their criticism of the deal, arguing it would hurt competition and concentrate European financial power in Frankfurt.

The European Commission is expected to issue a preliminary review this week, and then move on to a second phase that could last the rest of the year.

“My guess is that their focus will be on what conditions may be placed on us, not on how to make or break the deal,” said Niederauer, who would be CEO of the combined company.

He downplayed speculation — “not surprisingly, much of it driven by our competitors” — that the commission will ask the companies to dispose of derivatives businesses like the valuable Liffe or Eurex venues.

At issue is the hold that Deutsche Boerse and NYSE Euronext would have on exchange-based European futures trading. The companies have less overlapping business in the United States, where there has been little resistance to a foreign company trying to buy the New York Stock Exchange.

NYSE Euronext estimated on Tuesday that the combination would reduce capital requirements by about $3 billion for “end-users” of European futures contracts.

Shareholders last month endorsed the deal.

The takeover of NYSE Euronext, announced in February, capped a wave of bourse merger plans globally. Most other bids — including those from LSE, Singapore Exchange Ltd, and Nasdaq OMX Group — have since failed. (Exchange merger map: r.reuters.com/hav32s )

TRADING DRAGS INCOME DOWN

A slump in trading volumes across NYSE Euronext’s transatlantic markets led to a 16 percent second-quarter profit drop.

U.S. stock trading fell 36 percent and European futures trading dropped 20 percent, overshadowed on both counts by heavy volumes from last year’s unprecedented May “flash crash” and the onset of Europe’s debt crisis.

The Big Board parent said it earned $154 million, down from $184 million a year ago. Excluding one-time items such as costs associated with the merger, NYSE Euronext earned $160 million, or 61 cents per share. Revenue rose 1 percent to $661 million.

Analysts on average expected NYSE Euronext to earn 60 cents per share on $652.7 million in revenue, according to Thomson Reuters I/B/E/S.

Analysts credited a 2 percent slide in operating costs in part for the beat, while a boost in IPOs and technology contracts helped offset the trading slump.

Management did not reduce a 2011 cost estimate, as some expected. The stock price was off 1.9 percent at $32.37.

(Reporting by Luke Jeffs and Jonathan Spicer. Editing by Sophie Walker and Maureen Bavdek)

full story

HK tycoon Li to buy Northumbrian Water for $3.9 billion

By Farah Master and Adveith Nair

HONG KONG/LONDON | Tue Aug 2, 2011 9:54am EDT

(Reuters) – Hong Kong tycoon Li Ka-shing has agreed to buy British utility Northumbrian Water Group (NWG.L) for 2.4 billion pounds ($3.9 billion) in the biggest takeover this year of a British-listed company.

Li has been expanding his business empire buying utility assets in developed countries, especially Britain where regulations allow for foreign ownership and price controls ensure a steady and predictable income stream from dividends.

Shares of Li’s Cheung Kong Infrastructure Holdings (CKI) (1038.HK), which is leading the bid for Northumbrian Water, rose 3 percent to a record closing high. The stock has gained about 30 percent so far this year, driven by its acquisition strategy.

Analysts at UBS predicted that CKI and its 39-percent-owned associate, Power Assets (0006.HK) would seize other acquisition opportunities as cash-strapped investors and governments seek to cut their debt piles by selling infrastructure assets.

UBS upped its price target on CKI shares to HK$56 from HK$49 following the Northumbrian deal, repeating its “buy” rating.

Li, whose savvy deals earned him the nickname “superman” in local media, is a high-school drop out who built a plastic flower business into a global empire (0001.HK) that includes ports-to-telecoms conglomerate Hutchison Whampoa Ltd (0013.HK).

Analysts expect the deal to go ahead given Northumbrian’s board and its biggest shareholder, the Ontario Teachers’ Pension Plan, are backing it. CKI has sold its much smaller Cambridge Water investment to a division of HSBC (HSBA.L) (0005.HK) to sidestep any regulatory hurdles.

“With the disposal of Cambridge Water, the main obstacle to the rapid conclusion of the bid has been removed,” Investec analyst Angelos Anastasiou said. “This … should be reasonably positive for the rest of the (UK water companies).”

Shares in peers Severn Trent (SVT.L), Pennon Group (PNN.L) and United Utilities (UU.L) rose as much as 2 percent in London.

The Northumbrian deal would be CKI’s third investment in 18 months in the UK, boosting the value of its portfolio of gas, water and electricity assets there to HK$65 billion from HK$40 billion.

CKI has a 4.75 percent stake in Southern Water and last year agreed to buy the British electricity distribution network (EDN) of France’s EDF (EDF.PA) for 5.8 billion pounds.

CKI is offering to buy Northumbrian for 465 pence per share. Northumbrian shares, which closed at 449.4 pence on Monday, were up 4 percent at 468.6 pence at 1256 GMT. Northumbrian shareholders will also get a 9.57 pence a share final dividend, taking the total value of the bid to about 475 pence per share.

“It is a fair deal,” said Lorraine Tan, analyst at Standard & Poor’s Equity Research, Asia. “I think the bottom line impact to CKI holdings won’t be as much, as large as the UK power networks deal. I wouldn’t expect the same sort of uptick to its share price that we saw with that particular deal.”

Investec analyst Angelos Anastasiou said UK water companies, like electricity distribution networks recently sold by EDF and Germany’s E.ON, had regulated price controls in place until 2015, meaning they should attract broadly similar valuations.

“Today’s proposed bid level would be in-keeping with these bid premia,” he added.

CKI executives also noted that water tariff increases for the next 5 years have already been agreed with regulators.

RBC is lead financial adviser and HSBC is financial adviser to UK Water. Deutsche Bank is acting as exclusive financial adviser and corporate broker to Northumbrian Water.

CKI said it would contribute 879.5 million pounds to the Li-controlled consortium buying Northumbrian, funded with internal resources and a bridge loan of 600 million pounds.

($1=0.615 pounds)

(Additional reporting by Victoria Howley and Lee Chyenyee; Writing by Paul Hoskins and Charlie Zhu; Editing by Vinu Pilakkott)